#THE INDIAN CONTRACT ACT, 1872 
____________ 

##ARRANGEMENT OF SECTIONS 
____________ 

SECTIONS 
  PREAMBLE 

###PRELIMINARY 

1.  Short title. 
Extent. 
Commencement. 
Saving. 

2.  Interpretation-clause. 

##CHAPTER I 

###OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS 

3. Communication, acceptance and revocation of proposals. 
4. Communication when complete. 
5. Revocation of proposals and acceptances. 
6. Revocation how made. 
7. Acceptance must be absolute. 
8. Acceptance by performing conditions, or receiving consideration. 
9. Promises, express and implied. 

##CHAPTER II 

###OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS 

10.  What agreements are contracts. 
11.  Who are competent to contract. 
12.  What is a sound mind for the purposes of contracting. 
13.  “Consent” defined. 
14.  “Free consent” defined. 
15.  “Coercion” defined. 
16.  “Undue influence” defined. 
17.  “Fraud” defined. 
18.  “Misrepresentation” defined. 
19.  Voidability of agreements without free consent. 
19A. Power to set aside contract induced by undue influence. 
20.  Agreement void where both parties are under mistake as to matter of fact. 
21.  Effect of mistakes as to law. 
22.  Contract caused by mistake of one party as to matter of fact. 
23.  What considerations and objects are lawful, and what not. 

*Void agreements*
24. Agreement void, if considerations and objects unlawful in part. 
25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to 
compensate for something done, or is a promise to pay a debt barred by limitation law. 
26.  Agreement in restraint of marriage, void. 
27.  Agreement in restraint of trade, void. 
  Saving of agreement not to carry on business of which good-will is sold. 
28.  Agreements in restraint of legal proceeding void. 
  Saving of contract to refer to arbitration dispute that may arise. 
  Saving of contract to refer questions that have already arisen. 
  Saving of a guarantee agreement of a bank or a financial institution. 
29. Agreements void for uncertainty. 
30. Agreements by way of wager, void. 
  Exception in favour of certain prizes for horse-racing. 
  Section 294A of the Indian Penal Code not affected. 

##CHAPTER III 

###OF CONTINGENT CONTRACTS 

31. “Contingent contract” defined. 
32.  Enforcement of contracts contingent on an event happening. 
33.  Enforcement of contracts contingent on an event not happening. 
34.  When event on which contract is contingent to be deemed impossible, if it is the future conduct of 
a living person. 
35. When contracts become void which are contingent on happening of specified event within fixed 
time. 
When contracts may be enforced, which are contingent on specified event not happening within 
fixed time. 
36.  Agreement contingent on impossible events void. 

##CHAPTER IV 

###OF THE PERFORMANCE OF CONTRACTS 

*Contracts which must be performed*

37. Obligation of parties to contracts. 
38. Effect of refusal to accept offer of performance. 
39. Effect of refusal of party to perform promise wholly. 

*By whom contracts must be performed*

40. Person by whom promise is to be performed. 
41. Effect of accepting performance from third person. 
42. Devolution of joint liabilities. 
43. Any one of joint promisors may be compelled to perform. 
Each promisor may compel contribution. 
Sharing of loss by default in contribution. 
44. Effect of release of one joint promisor. 
45. Devolution of joint rights. 

*Time and place for performance*

46. Time for performance of promise, when no application is to be made and no time is specified. 
47. Time and place for performance of promise, where time is specified and no application to be 
made. 
48. Application for performance on certain day to be at proper time and place. 
49. Place for performance of promise, where no application to be made and no place fixed for 
performance. 
50. Performance in manner or at time prescribed or sanctioned by promisee. 
Performance of reciprocal promises 
51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform. 
52. Order of performance of reciprocal promises. 
53. Liability of party preventing event on which the contract is to take effect. 
54. Effect of default as to that promise which should be first performed, in contract consisting of 
reciprocal promises. 
55. Effect of failure to perform at fixed time, in contract in which time is essential. 
Effect of such failure when time is not essential. 
Effect of acceptance of performance at time other than that agreed upon. 
56.  Agreement to do impossible act. 
Contract to do an act afterwards becoming impossible or unlawful. 
Compensation for loss through non-performance of act known to be impossible or unlawful. 
57. Reciprocal promise to do things legal, and also other things illegal. 
58. Alternative promise, one branch being illegal. 

*Appropriation of payments*

59. Application of payment where debt to be discharged is indicated. 
60. Application of payment where debt to be discharged is not indicated. 
61. Application of payment where neither party appropriates. 

*Contracts which need not be performed*

62. Effect of novation, rescission, and alteration of contract. 
63. Promisee may dispense with or remit performance of promise. 
64. Consequences of rescission of voidable contract. 
65. Obligation of person who has received advantage under void agreement, or contract that becomes 
void. 
66. Mode of communicating or revoking rescission of voidable contract. 
67. Effect of neglect of promisee to afford promisor reasonable facilities for performance. 

##CHAPTER V 

###OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT 

68. Claim for necessaries supplied to person incapable of contracting, or on his account. 
69. Reimbursement of person paying money due by another, in payment of which he is interested. 
70.  Obligation of person enjoying benefit of non-gratuitous act. 
71.  Responsibility of finder of goods. 
72.  Liability of person to whom money is paid, or thing delivered, by mistake or under coercion. 

##CHAPTER VI 

###OF THE CONSEQUENCES OF BREACH OF CONTRACT 

73. Compensation for loss or damage caused by breach of contract. 
Compensation for failure to discharge obligation resembling those created by contract. 
74. Compensation for breach of contract where penalty stipulated for. 
75. Party rightfully rescinding contract, entitled to compensation. 

###[CHAPTER VII SALE OF GOODS.][Repealed.]. 

76.  [Repealed.]. 
77.  [Repealed.]. 
78.  [Repealed.]. 
79.  [Repealed.]. 
80.  [Repealed.]. 
81.  [Repealed.]. 
82.  [Repealed.]. 
83.  [Repealed.]. 
84.  [Repealed.]. 
85.  [Repealed.]. 
86.  [Repealed.]. 
87.  [Repealed.]. 
88.  [Repealed.]. 
89.  [Repealed.]. 

[DELIVERY.][Repealed.]. 

90.  Repealed.]. 
91.  [Repealed.]. 
92.  [Repealed.]. 
93.  [Repealed.]. 
94.  [Repealed.] 

[SELLER’S LIEN.][Repealed.]. 

95.  [Repealed.]. 
96.  [Repealed.]. 
97.  [Repealed.]. 
98.  [Repealed.] 

[STOPPAGE IN TRANSIT.][Repealed.]. 

99.  [Repealed.]. 
100. [Repealed.]. 
101. [Repealed.]. 
102. [Repealed.]. 
103. [Repealed.]. 
104. [Repealed.]. 
105. [Repealed.]. 
106. [Repealed.]. 

[RESALE.][Repealed.]. 

107.  [Repealed.]. 

[TITLE.][Repealed.]. 

108. [Repealed.]. 

[WARRANTY.]Repealed.]. 

109.  [Repealed.]. 
110.  [Repealed.]. 
111.  [Repealed.]. 
112.  [Repealed.]. 
113.  [Repealed.]. 
114.  [Repealed.]. 
115.  [Repealed.]. 
116.  [Repealed.]. 
117.  [Repealed.]. 
118.  [Repealed.]. 

[MISCELLANEOUS.][Repealed.]. 

119. [Repealed.]. 
120. [Repealed.]. 
121. [Repealed.]. 
122. [Repealed.]. 
123. [Repealed.]. 

##CHAPTER VIII 

###OF INDEMNITY AND GUARANTEE 

124. “Contract of indemnity” defined. 
125.  Rights of indemnity-holder when sued. 
126.  “Contract of guarantee”, “surety”, “principal debtor” and “creditor”. 
127.  Consideration for guarantee. 
128.  Surety’s liability. 
129.  “Continuing guarantee”. 
130.  Revocation of continuing guarantee. 
131.  Revocation of continuing guarantee by surety’s death. 
132.  Liability of two persons, primarily liable, not affected by arrangement between them that one shall be 
surety on other’s default. 
133.  Discharge of surety by variance in terms of contract. 
134.  Discharge of surety by release or discharge of principal debtor. 
135.  Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor. 
136.  Surety not discharged when agreement made with third person to give time to principal debtor. 
137.  Creditor’s forbearance to sue does not discharge surety. 
138. Release of one co-surety does not discharge others. 
139. Discharge of surety of creditor’s act or omission impairing surety’s eventual remedy. 
140. Rights of surety on payment or performance. 
141. Surety’s right to benefit of creditor’s securities. 
142. Guarantee obtained by misrepresentation invalid. 
143. Guarantee obtained by concealment invalid. 
144. Guarantee on contract that creditor shall not act on it until co-surety joins. 
145. Implied promise to indemnify surety. 
146. Co-sureties liable to contribute equally. 
147. Liability of co-sureties bound in different sums. 

##CHAPTER IX 

###OF BAILMENT 

148. “Bailment”, “bailor” and “bailee” defined. 
149. Delivery to bailee how made. 
150. Bailor’s duty to disclose faults in goods bailed. 
151. Care to be taken by bailee. 
152. Bailee when not liable for loss, etc., of thing bailed. 
153. Termination of bailment by bailee’s act inconsistent with conditions. 
154. Liability of bailee making unauthorized use of goods bailed. 
155. Effect of mixture, with bailor’s consent, of his goods with bailee’s. 
156. Effect of mixture, without bailor’s consent, when the goods can be separated. 
157. Effect of mixture, without bailor’s consent, when the goods cannot be separated. 
158. Repayment, by bailor, of necessary expenses. 
159. Restoration of goods lent gratuitously. 
160. Return of goods bailed on expiration of time or accomplishment of purpose. 
161. Bailee’s responsibility when goods are not duly returned. 
162. Termination of gratuitous bailment by death. 
163. Bailor entitled to increase or profit from goods bailed. 
164. Bailor’s responsibility to bailee. 
165. Bailment by several joint owners. 
166. Bailee not responsible on re-delivery to bailor without title. 
167. Right of third person claiming goods bailed. 
168. Right of finder of goods. 
May sue for specific reward offered. 
169. When finder of thing commonly on sale may sell it. 
170. Bailee’s particular lien. 
171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers. 

*Bailments of pledges*

172. “Pledge”, “Pawnor” and “Pawnee” defined. 
173. Pawnee’s right of retainer. 
174. Pawnee not to retain for debt or promise other than that for which goods pledged. 
Presumption in case of subsequent advances. 
175. Pawnee’s right as to extraordinary expenses incurred. 
176. Pawnee’s right where pawnor makes default. 
177. Defaulting pawnor’s right to redeem. 
178. Pledge by mercantile agent. 
178A. Pledge by person in possession under voidable contract. 
179. Pledge where pawnor has only a limited interest. 

*Suits by bailees or bailors against wrong-doers*

180. Suit by bailor or bailee against wrong-doer. 
181. Apportionment of relief or compensation obtained by such suits. 

##CHAPTER X 

###AGENCY 

*Appointment and authority of agents*

182. “Agent” and “principal” defined. 
183. Who may employ agent. 
184. Who may be an agent. 
185. Consideration not necessary. 
186. Agent’s authority may be expressed or implied. 
187. Definitions of express and implied authority. 
188. Extent of agent’s authority. 
189. Agent’s authority in an emergency. 

*Sub-agents*

190. When agent cannot delegate. 
191. “Sub-agent” defined. 
192. Representation of principal by sub-agent properly appointed. 
Agent’s responsibility for sub-agent. 
Sub-agent’s responsibility. 
193. Agent’s responsibility for sub-agent appointed without authority. 
194. Relation between principal and person duly appointed by agent to act in business of agency. 
195. Agent’s duty in naming such person. 

*Ratification*

196. Right of person as to acts done for him without his authority. 
Effect of ratification. 
197. Ratification may be expressed or implied. 
198. Knowledge requisite for valid ratification. 
199. Effect of ratifying unauthorized act forming part of a transaction. 
200. Ratification of unauthorized act cannot injure third person. 

*Revocation of authority*

201. Termination of agency. 
202. Termination of agency, where agent has an interest in subject-matter. 
203. When principal may revoke agent’s authority. 
204. Revocation where authority has been partly exercised. 
205. Compensation for revocation by principal, or renunciation by agent. 
206. Notice of revocation or renunciation. 
207. Revocation and renunciation may be expressed or implied. 
208. When termination of agent’s authority takes effect as to agent, and as to third persons. 
209. Agent’s duty on termination of agency by principal’s death or insanity. 
210. Termination of sub-agent’s authority. 

*Agent’s duty to principal*

211. Agent’s duty in conducting principal’s business. 
212. Skill and diligence required from agent. 
213. Agent’s accounts. 
214. Agent’s duty to communicate with principal. 
215. Right of principal when agent deals, on his own account, in business of agency without 
principal’s consent. 
216. Principal’s right to benefit gained by agent dealing on his own account in business of agency. 
217. Agent’s right of retainer out of sums received on principal’s account. 
218. Agent’s duty to pay sums received for principal. 
219. When agent’s remuneration becomes due. 
220. Agent not entitled to remuneration for business misconducted. 
221. Agent’s lien on principal’s property. 

*Principal’s duty to agent*

222. Agent to be indemnified against consequences of lawful acts. 
223. Agent to be indemnified against consequences of acts done in good faith. 
224. Non-liability of employer of agent to do a criminal act. 
225. Compensation to agent for injury caused by principal’s neglect. 

*Effect of agency on contracts with third persons*

226. Enforcement and consequences of agent’s contracts. 
227. Principal how far bound, when agent exceeds authority. 
228. Principal not bound when excess of agent’s authority is not separable. 
229. Consequences of notice given to agent. 
230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal. 
Presumption of contract to contrary.
231. Rights of parties to a contract made by agent not disclosed. 
232. Performance of contract with agent supposed to be principal. 
233. Right of person dealing with agent personally liable. 
234. Consequence of inducing agent or principal to act on belief that principal or agent will be held 
exclusively liable. 
235. Liability of pretended agent. 
236. Person falsely contracting as agent not entitled to performance. 
237. Liability of principal inducing belief that agent’s unauthorized acts were authorized. 
238. Effect, on agreement, of misrepresentation or fraud by agent. 

##CHAPTER XI 

###OF PARTNERSHIP 

239. [Repealed.]. 
240. [Repealed.]. 
241. [Repealed.]. 
242. [Repealed.]. 
243. [Repealed.]. 
244. [Repealed.]. 
245. [Repealed.]. 
246. [Repealed.]. 
247. [Repealed.]. 
248. [Repealed.]. 
249. [Repealed.]. 
250. [Repealed.]. 
251. [Repealed.]. 
252. [Repealed.]. 
253. [Repealed.]. 
254. [Repealed.]. 
255. [Repealed.]. 
256. [Repealed.]. 
257. [Repealed.]. 
258. [Repealed.]. 
259. [Repealed.]. 
260. [Repealed.]. 
261. [Repealed.]. 
262. [Repealed.]. 
263. [Repealed.]. 
264. [Repealed.]. 
265. [Repealed.]. 
266. [Repealed.]. 

SCHEDULE—[Repealed.] 

 

#THE INDIAN CONTRACT ACT, 1872 

ACT NO. 9 OF 18721 

[25th April, 1872.] 

**Preamble**—WHEREAS  it  is  expedient  to  define  and  amend  certain  parts  of  the  law  relating  to 
contracts; 

It is hereby enacted as follows:— 

###PRELIMINARY 

1. **Short title.**—This Act may be called the Indian Contract Act, 1872. 

**Extent, Commencement.**—It extends to the whole of India; and it shall come into force on 
the first day of September, 1872. 

**Saving**— Nothing herein contained shall affect the provisions of any Statute, Act or Regulation 
not  hereby  expressly  repealed,  nor  any  usage  or  custom  of  trade,  nor  any  incident  of  any  contract,  not 
inconsistent with the provisions of this Act. 

2. **Interpretation-clause.**—In this Act the following words and expressions are used in the following 
senses, unless a contrary intention appears from the context:— 

  (a) When one person signifies to another his willingness to do or to abstain from doing anything, 
with  a  view  to  obtaining  the  assent  of  that  other  to  such  act  or  abstinence,  he  is  said  to  make  a 
proposal; 

[^1].  For  the  Statement  of  Objects  and  Reasons  for  the  Bill  which  was  based  on  a  a  report  of  Her  Majesty’s  Commissioners 
appointed to prepare a body of substantive law for India, dated 6th July, 1866, see Gazette of India, 1867 Extraordinary, p. 34; for 
the Report of the Select Committee, see ibid., Extraordinary, dated 28th March, 1872; for discussions in Council, see ibid., 1867, 
Supplement, p. 1064; ibid., 1871, p. 313, and ibid., 1872, p. 527. It has been amended in C.P. by C.P. Act 1 of 1915 and in C.P. 
and Berar by C.P. and Berar Act 15 of 1938.  

The Chapters and sections of the Transfer of Property Act, 1882 (4 of 1882), which relate to contracts are, in places in which 

that Act is in force, to be taken as part of this Act—see Act 4 of 1882, s. 4. 

This Act has been extended to Berar by the Berar Laws Act, 1941 (4 of 1941) to Dadra and Nagar Haveli by Reg. 6 of 1963,  
   s.  2  and  Sch.  I  to  Goa,  Daman  and  Diu  by  Reg.  11  of  1963,  s.  3  and  Sch.,  (w.e.f.  1-10-1965)  to  Laccadive,  Minicoy  and 
Amindivi 
by  
   Reg. 8 of 1965, s. 3 and Sch., to Pondicherry by Act 26 of 1968, s. 3 and Sch. and has been declared to be in force in— 

Islands 

the  Sonthal  Parganas—see  Sonthal  Parganas  Settlement  Regulation,  1872  (3  of  1872),  s.  3,  as  amended  by  the  Sonthal 
Parganas Justice and Laws Regulation, 1899 (3 of 1899), s. 3. 

Panth Piploda—see the Panth Piploda Law Regulation, 1929 (1 of 1929), s. 2. 

It has been declared, by notification under s. 3(a) of the Scheduled Districts Act, 1874 (14 of 1874), to be in force in— 

The Tarai of the Province of Agra—see Gazette of India, 1876, Pt. I, p. 505; 

the Districts of Hazari bagh, Lohardaga and Manbhum, and Pargana Dhalbhum and the Kolhan in the District of Singhbhum—
see Gazette of India, 1881, pt. I, p. 504.—The District of Lohardaga included at this time the present District of Palamau which 
was separated in 1894. The District of Lohardaga is now called the Ranchi District—see Calcutta Gazette, 1899, pt. I, p. 44. 
 
 
 
  (b) When  the  person to  whom  the  proposal is  made  signifies  his  assent thereto,  the  proposal is 
said to be accepted. A proposal, when accepted, becomes a promise; 

  (c) The  person  making  the  proposal  is  called  the  “promisor”,  and  the  person  accepting  the 
proposal is called the “promisee”; 

  (d) When, at the desire of the promisor, the promisee or any other person has done or abstained 
from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, 
such act or abstinence or promise is called a consideration for the promise; 

  (e) Every  promise  and  every  set  of  promises,  forming  the  consideration  for  each  other,  is  an 
agreement; 

  (f) Promises  which form the consideration or part  of the  consideration for each other are called 
reciprocal promises; 

  (g) An agreement not enforceable by law is said to be void; 

  (h) An agreement enforceable by law is a contract; 

  (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, 
but not at the option of the other or others, is a voidable contract; 

  (j) A  contract  which  ceases  to  be  enforceable  by  law  becomes  void  when  it  ceases  to  be 
enforceable. 

##CHAPTER I 

###OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS 

3. **Communication,  acceptance  and  revocation  of  proposals.**—The  communication  of  proposals, 
the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to 
be  made  by  any  act  or  omission  of  the  party  proposing,  accepting  or  revoking  by  which  he  intends  to 
communicate such proposal, acceptance or revocation, or which has the effect of communicating it. 

4. **Communication when complete.**—The communication of a proposal is complete when it comes 
to the knowledge of the person to whom it is made. 

The communication of an acceptance is complete,— 

  as against the proposer, when it is put in a course of transmission to him, so as to be out of the 
power of the acceptor; 

  as against the acceptor, when it comes to the knowledge of the proposer. 

The communication of a revocation is complete,— 

  as against the person who makes it, when it is put into a course of transmission to the person to 
whom it is made, so as to be out of the power of the person who makes it; 

  as against the person to whom it is made, when it comes to his knowledge. 

*Illustrations*

(a) A proposes, by letter, to sell a house to B at a certain price. 

The communication of the proposal is complete when B receives the letter. 

(b) B accepts A’s proposal by a letter sent by post. 

The communication of the acceptance is complete, 

  as against A when the letter is posted; 

  as against B, when the letter is received by A. 

(c) A revokes his proposal by telegram. 

The revocation is complete as against A when the telegram is despatched. It is complete as against B when B receives it. 

B  revokes  his  acceptance  by  telegram.  B’s  revocation  is  complete  as  against  B  when  the  telegram  is  despatched,  and  as 
against A when it reaches him. 

5. **Revocation of proposals and acceptances.**—A proposal may be revoked at any time before the 
communication of its acceptance is complete as against the proposer, but not afterwards. 

An acceptance may be revoked at any time before the communication of the acceptance is complete 
as against the acceptor, but not afterwards. 

*Illustration*

A proposes, by a letter sent by post, to sell his house to B. 

B accepts the proposal by a letter sent by post. 

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. 

B  may  revoke  his  acceptance  at  any  time  before  or  at  the  moment  when  the  letter  communicating  it  reaches  A,  but  not 
afterwards. 

###STATE AMENDMENT 

**Uttar Pradesh**

**Amendment of section 5 of Act (9 of 1872).**—In section 5 of Indian contract Act, 1872, hereinafter 
in this Chapter referred to as the principal Act, at the end of the first paragraph, the following explanation 
shall inserted, namely:-- 

“*Explanation*—Where  an  invitation  to  a  proposal  contains  a  condition  that  any  proposal  made  in 
response  to  such  invitation  shall  be  kept  open  for  a  specified  time  and  a  proposal  is  thereupon  made 
accepting such condition, such proposal may not be revoked within such time.” 

*[Vide* Uttar Pradesh Act, 57 of 1976, s. 2] 

6. **Revocation how made.**—A proposal is revoked— 

(1) by the communication of notice of revocation by the proposer to the other party; 

(2) by  the  lapse  of  the  time  prescribed  in  such  proposal  for  its  acceptance,  or,  if  no  time  is  so 
prescribed, by the lapse of a reasonable time, without communication of the acceptance; 

(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or 

(4) by  the  death  or  insanity  of  the  proposer,  if  the  fact  of  his  death  or  insanity  comes  to  the 
knowledge of the acceptor before acceptance. 

7. **Acceptance must be absolute.**—In  order  to  convert  a  proposal  into  a  promise,  the  acceptance 
must— 

  (1) be absolute and unqualified; 

  (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner 
in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the 
acceptance  is  not  made  in  such  manner,  the  proposer  may,  within  a  reasonable  time  after  the 
acceptance  is  communicated  to  him,  insist  that  his  proposal  shall  be  accepted  in  the  prescribed 
manner, and not otherwise; but if he fails to do so, he accepts the acceptance. 

8. **Acceptance by performing conditions, or receiving consideration.**—Performance  of  the 
conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be 
offered with a proposal, is an acceptance of the proposal. 

9. **Promises, express and implied.**—In so far as the proposal or acceptance of any promise is made 
in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise 
than in words, the promise is said to be implied. 

##CHAPTER II 

###OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS 

10. **What agreements are contracts.**—All  agreements  are  contracts  if  they  are  made  by  the  free 
consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not 
hereby expressly declared to be void. 

Nothing herein contained shall affect any law in force in India and not hereby expressly repealed 
by  which  any  contract  is  required  to  be  made  in writing or  in  the  presence  of  witnesses,  or  any  law 
relating to the registration of documents. 

11. **Who are competent to contract.**—Every person is competent to contract who is of the age of 
majority according to the law to which he is subject, and who is of sound mind, and is not disqualified 
from contracting by any law to which he is subject. 

12. **What is a sound mind for the purposes of contracting.**—A person is said to be of sound mind 
for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it 
and of forming a rational judgment as to its effect upon his interests. 

  A person  who  is  usually  of  unsound  mind,  but  occasionally  of  sound  mind,  may  make  a  contract 
when he is of sound mind. 

  A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract 
when he is of unsound mind. 

*Illustrations*

  (a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals. 

  (b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a 
rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. 

13. **“Consent” defined.**—Two or more persons are said to consent when they agree upon the same 
thing in the same sense. 

14. **“Free consent” defined.**—Consent is said to be free when it is not caused by— 

  (1) coercion, as defined in section 15, or 

  (2) undue influence, as defined in section 16, or 

  (3) fraud, as defined in section 17, or 

  (4) misrepresentation, as defined in section 18, or 

  (5) mistake, subject to the provisions of sections 20, 21 and 22. 

Consent  is  said  to  be  so  caused  when  it  would  not  have  been  given  but  for  the  existence  of  such 
coercion, undue influence, fraud, misrepresentation or mistake. 

15. **“Coercion” defined.**—“Coercion” is the committing, or threatening to commit, any act forbidden 
by the Indian Penal Code (45 of 1860)or the unlawful detaining, or threatening to detain, any property, to 
the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. 

*Explanation.*—It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the 
place where the coercion is employed. 

*Illustration*

A, on  board  an  English  ship  on  the  high  seas,  causes  B  to  enter  into  an  agreement  by  an  act  amounting  to  criminal 
intimidation under the Indian Penal Code (45 of 1860). 

A afterwards sues B for breach of contract at Calcutta. 

A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian 
Penal Code (45 of 1860) was not in force at the time when or place where the act was done. 

16. **“Undue influence” defined.**—(1) A contract is said to be induced by “undue influence” where 
the relations subsisting between the parties are such that one of the parties is in a position to dominate the 
will of the other and uses that position to obtain an unfair advantage over the other. 

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed 
to be in a position to dominate the will of another— 

  (a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary 
relation to the other; or 

  (b) where he makes a contract with a person whose mental capacity is temporarily or permanently 
affected by reason of age, illness, or mental or bodily distress. 

(3) Where a person who is in a position to dominate the will of another, enters into a contract with 
him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the 
burden of proving that such contract was not induced by undue influence shall lie upon the person in a 
position to dominate the will of the other. 

Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 
(1 of 1872). 

*Illustrations*

  (a) A having advanced money to his son, B, during his minority, upon B’s coming of age obtains, by misuse of parental influence, a bond 
from B for a greater amount than the sum due in respect of the advance. A employs undue influence. 

  (b) A, a man enfeebled by disease or age, is induced, by B’s influence over him as his medical attendant, to agree to pay B an unreasonable 
sum for his professional services. B employs undue influence. 

  (c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to 
prove that the contract was not induced by undue influence. 

(d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at 
an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of  business, and the contract is 
not induced by undue influence.

17. **“Fraud” defined.**—“Fraud” means and includes any of the following acts committed by a party 
to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his 
agent, or to induce him to enter into the contract:— 

  (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 
  (2) the active concealment of a fact by one having knowledge or belief of the fact; 
  (3) a promise made without any intention of performing it; 
  (4) any other act fitted to deceive; 
  (5) any such act or omission as the law specially declares to be fraudulent. 

*Explanation.*—Mere  silence  as  to  facts  likely  to  affect  the  willingness  of  a  person  to  enter  into  a 
contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the 
duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. 
 
*Illustrations*

  (a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. 
This is not fraud in A. 

  (b) B is A’s daughter and has just come of age. Here, the relation between the parties would make it A’s duty to tell B if the 
horse is unsound. 

  (c) B  says  to  A—“If  you  do  not  deny  it,  I  shall  assume  that  the  horse  is  sound.”  A  says  nothing.  Here,  A’s  silence  is 
equivalent to speech. 

  (d) A and B, being traders, enter upon a contract. A has private information of a  change in prices which would affect B’s 
willingness to proceed with the contract. A is not bound to inform B. 

18. **“Misrepresentation” defined.**—“Misrepresentation” means and includes— 

(1) the positive assertion, in a manner not warranted by the information of the person making it, 
of that which is not true, though he believes it to be true; 

(2)  any  breach  of  duty  which,  without  an  intent  to  deceive,  gains  an  advantage  to  the  person 
committing  it,  or  any  one  claiming  under  him;  by  misleading  another  to  his  prejudice,  or  to  the 
prejudice of any one claiming under him; 

(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance 
of the thing which is the subject of the agreement. 

19. **Voidability of agreements without free consent.**—When consent to an agreement is caused by 
coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party 
whose consent was so caused. 

A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, 
insist that the contract shall be performed, and that he shall be put in the position in which he would have 
been if the representations made had been true. 

*Exception.*—If  such  consent  was  caused  by  misrepresentation  or  by  silence,  fraudulent  within  the 
meaning  of  section  17,  the  contract,  nevertheless,  is  not  voidable,  if  the  party  whose  consent  was  so 
caused had the means of discovering the truth with ordinary diligence. 

*Explanation.*—A fraud or misrepresentation which did not cause the consent to a contract of the party 
on  whom  such  fraud  was  practised,  or  to  whom  such  misrepresentation  was  made,  does  not  render  a 
contract voidable. 

*Illustrations*

  (a) A, intending to deceive B, falsely represents that five hundred maunds of indigo are made annually at A’s factory, and 
thereby induces B to buy the factory. The contract is voidable at the option of B. 

  (b) A, by a misrepresentation, leads B erroneously to believe that, five hundred maunds of indigo are made annually at A’s 
factory. B examines the accounts of the factory, which show that only four hundred maunds of indigo have been made. After this 
B buys the factory. The contract is not voidable on account of A’s misrepresentation. 

  (c) A fraudulently informs B that A’s estate is free from in cumbrance. B thereupon buys the estate. The estate is subject to a 
mortgage. B may either avoid the contract, or may insist on its being carried out and the mortgage debt redeemed. 

  (d) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore 
from A. Through A’s ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A. 

  (e) A is entitled to succeed to an estate at the death of B; B dies: C, having received intelligence of B’s death, prevents the 
intelligence reaching A, and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A. 

19A. **Power to set aside contract induced by undue influence.**—When consent to an agreement is 
caused by undue influence, the agreement is a contract voidable at the option of the party whose consent 
was so caused. 

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has 
received any benefit thereunder, upon such terms and conditions as to the Court may seem just. 

*Illustrations*

  (a) A’s son has forged B’s name to a promissory note. B under threat of prosecuting A’s son, obtains a bond from A for the 
amount of the forged note. If B sues on this bond, the Court may set the bond aside. 

  (b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for 
Rs.  200  with  interest  at  6  per  cent.  per  month.  The  Court  may  set  the  bond  aside,  ordering  B  to  repay  the  Rs.  100  with  such 
interest as may seem just.

20. **Agreement void where both parties are under mistake as to matter of fact.**—Where both the 
parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement 
is void. 

*Explanation.*—An erroneous opinion as to the value of the thing which forms the subject-matter of 
the agreement, is not to be deemed a mistake as to a matter of fact. 

*Illustrations*

  (a) A agrees to sell to B a specific cargo of goods supposed to be on its way  from England to Bombay. It turns out that, 
before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the 
these facts. The agreement is void. 

  (b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither 
party was aware of the fact. The agreement is void. 

  (c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both 
parties were ignorant of the fact. The agreement is void. 

21. **Effect of mistakes as to law.**—A contract is not voidable because it was caused by a mistake as 
to any law in force in India; but a mistake as to a law not in force in India has the same effect as a 
mistake of fact. 

*Illustration*

  A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation: 
the contract is not voidable. 

22. **Contract  caused  by  mistake  of  one  party  as  to  matter  of  fact.**—A  contract  is  not  voidable 
merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. 

23. **What considerations and objects are lawful, and what not.**—The consideration or object of an 
agreement is lawful, unless— 

  it is forbidden by law; or 

  is of such a nature that if permitted, it would defeat the provisions of any law; or 

  is fraudulent ; or 

  involves or implies injury to the person or property of another; or 

  the Court regards it as immoral, or opposed to public policy. 
 
  In  each  of  these  cases,  the  consideration  or  object  of  an  agreement  is  said  to  be  unlawful.  Every 
agreement of which the object or consideration is unlawful is void. 

*Illustrations*

  (a) A agrees to sell his house to B for 10,000 rupees. Here B’s promise to pay the sum of 10,000 rupees is the consideration 
for A’s promise to sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay the 10,000 rupees. 
These are lawful considerations. 

  (b) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to 
grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are 
lawful considerations. 

  (c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain 
voyage. Here, A’s promise is the consideration for B’s payment and B’s payment is the consideration for A’s promise and these 
are lawful considerations. 

  (d) A promises to maintain B’s child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of 
each party is the consideration for the promise of the other party. They are lawful considerations. 

  (e) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. 
The agreement is void, as its object is unlawful. 

  (f) A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement 
is void, as the consideration for it is unlawful. 

  (g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease 
of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his 
principal. 

  (h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of 
the things taken. The agreement is void, as its object is unlawful. 

  (i) A’s  estate  is  sold  for  arrears  of  revenue  under  the  provisions  of  an  Act  of  the  Legislature,  by  which  the  defaulter  is 
prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate 
to  A  upon  receiving  from  him  the  price  which  B  has  paid.  The  agreement  is  void,  as  it  renders  the  transaction,  in  effect,  a 
purchase by the defaulter, and would so defeat the object of the law. 

  (j) A, who is B’s mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 
rupees to A. The agreement is void, because it is immoral. 

  (k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting 
may not be punishable under the Indian Penal Code (45 of 1860). 

*Void agreements*

24. **Agreements  void,  if  considerations  and  objects  unlawful  in  part.**—If  any  part  of  a  single 
consideration for one or more objects, or any one or any part of any one of several considerations for a 
single object, is unlawful, the agreement is void. 

*Illustration*

  A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises 
to pay  to  A  a  salary  of  10,000  rupees  a  year.  The  agreement  is void,  the  object of  A’s  promise,  and the  consideration  for  B’s 
promise, being in part unlawful. 

25. **Agreement without consideration, void, unless it is in writing and registered,or is a promise 
to  compensate  for  something  done  or  is  a  promise  to  pay  a  debt  barred  by  limitation  law.**—An 
agreement made without consideration is void, unless— 

(1) it  is  expressed  in  writing  and  registered  under  the  law  for  the  time  being  in  force  for  the 
registration of documents, and  is  made  on  account  of  natural  love  and  affection  between  parties 
standing in a near relation to each other ; or unless 

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done 
something  for  the  promisor,  or  something  which  the  promisor  was  legally  compellable  to  do;  or 
unless; 

(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his 
agent  generally  or  specially  authorized  in  that  behalf,  to  pay  wholly  or  in  part a  debt  of  which  the 
creditor might have enforced payment but for the law for the limitation of suits. 
In any of these cases, such an agreement is a contract. 

*Explanation* 1.—Nothing in this section shall affect the validity, as between the donor and donee, of 
any gift actually made. 

*Explanation* 2.—An  agreement  to  which  the  consent  of  the  promisor  is  freely  given  is  not  void 
merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into 
account by the Court in determining the question whether the consent of the promisor was freely given. 

*Illustrations*

  (a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement. 
  (b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a 
contract. 
  (c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract. 
  (d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract. 
  (e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. 
This is a contract. 
  (f) A  agrees  to  sell  a  horse  worth  Rs.  1,000  for  Rs.  10.  A’s  consent  to  the  agreement  was  freely  given.  The  agreement  is  a  contract 
notwithstanding the inadequacy of the consideration. 
  (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given. 
  The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A’s consent was freely 
given. 

26. **Agreement in restraint of marriage, void.**—Every agreement in restraint of the marriage of any 
person, other than a minor, is void. 

27. **Agreement in restraint of trade, void.**—Every agreement by which any one is restrained from 
exercising a lawful profession, trade or business of any kind, is to that extent void. 

*Exception 1.*—**Saving of agreement not to carry on business of which good-will is sold.**—One 
who  sells  the  good-will  of  a  business  may  agree  with  the  buyer  to  refrain  from  carrying  on  a  similar 
business, within specified local limits, so long as the buyer, or any person deriving title to the good-will 
from  him,  carries  on  a  like  business  therein,  provided  that  such  limits  appear  to  the  Court  reasonable, 
regard being had to the nature of the business. 

28. **Agreements in restraint of legal proceedings, void.**— Every agreement,— 

  (a) by  which  any  party  thereto  is  restricted  absolutely  from  enforcing  his  rights  under  or  in 
respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the 
time within which he may thus enforce his rights; or 

  (b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any 
liability, under or in respect of any contract on the expiry of a specified period so as to restrict any 
party from enforcing his rights, 

is void to the extent.

*Exception 1.*—**Saving  of  contract  to  refer  to  arbitration  dispute  that  may  arise.**—This  section 
shall not render illegal a contract, by which two or more persons agree that any dispute which may arise 
between them in respect of any subject or class of subjects shall be referred to arbitration, and that only 
the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. 

*Exception* 2.—**Saving  of  contract  to  refer  questions  that  have  already  arisen.**—Nor  shall  this 
section render illegal any contract in writing, by which two or more persons agree to refer to arbitration 
any question between them which has already arisen, or affect any provision of any law in force for the 
time being as to references to arbitration.
 
*Exception* 3.—**Saving  of  a  guarantee  agreement  of  a  bank  or  a  financial  institution.**—This 
section shall not render illegal a contract in writing by which any bank or financial institution stipulate a 
term in a guarantee or any agreement making a provision for guarantee for extinguishment of the rights or 
discharge of any party thereto from any liability under or in respect of such guarantee or agreement on the 
expiry of a specified period which is not less than one year from the date of occurring or non-occurring of 
a specified event for extinguishment or discharge of such party from the said liability. 

*Explanation.*—(i) In *Exception* 3, the expression “bank” means— 

  (a) a  “banking  company”  as  defined  in  clause  (c)  of  section  5  of  the  Banking  Regulation 
Act, 1949(10 of 1949); 

  (b) “a corresponding new bank” as defined in clause (da) of section 5 of the Banking Regulation 
Act, 1949(10 of 1949); 

  (c) “State  Bank  of  India”  constituted  under  section  3  of  the  State  Bank  of  India  Act,  1955 
(23 of 1955); 

  (d) “a subsidiary bank” as defined in clause (k) of section 2 of the State Bank of India (Subsidiary 
Banks) Act, 1959(38 of 1959); 

  (e) “a  Regional  Rural  Bank”  established  under  section  3  of  the  Regional  Rural  Banks 
Act, 1976(21 of 1976); 

  (f) “a  Co-operative  Bank”  as  defined  in  clause  (cci)  of  section  5  of  the  Banking  Regulation 
Act, 1949(10 of 1949); 

  (g) “a  multi-State  co-operative  bank”  as  defined  in  clause  (cciiia)  of  section  5  of  the  Banking 
Regulation Act, 1949(10 of 1949); and 

 (ii) In  Exception  3,  the  expression  “a  financial  institution”  means  any  public  financial  institution 
within the meaning of section 4A of the Companies Act, 1956(1 of 1956).

29. **Agreements void for uncertainty.**—Agreements, the meaning of which is not certain, or capable 
of being made certain, are void. 

*Illustrations*

  (a) A  agrees  to  sell  to  B  “a  hundred  tons of  oil”.  There  is  nothing  whatever  to  show  what  kind of  oil  was  intended.  The 
agreement is void for uncertainty. 

  (b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no 
uncertainty here to make the agreement void. 

  (c) A, who is a dealer in cocoanut-oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an 
indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil. 

  (d) A agrees to sell to B “all the grain in my granary at Ramnagar”. There is no uncertainty here to make the agreement void. 

  (e) A  agrees  to  sell  B  “one  thousand  maunds  of  rice  at  a  price  to  be  fixed  by  C”.  As  the  price  is  capable  of  being  made 
certain, there is no uncertainty here to make the agreement void. 

  (f) A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand”. There is nothing to show which of 
the two prices was to be given. The agreement is void. 

30. **Agreements by way of wager void.**—Agreements by way of wager are void; and no suit shall be 
brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the 
result of any game or other uncertain event on which any wager is made. 

**Exception in favour of certain prizes for horse-racing.**—This  section  shall  not  be  deemed  to 
render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered 
into  for  or toward  any  plate,  prize  or  sum  of  money,  of the  value  or amount  of five  hundred  rupees  or 
upwards, to be awarded to the winner or winners of any horse-race. 

**Section 294A of the Indian Penal Code not affected.**—Nothing in this section shall be deemed to 
legalize  any  transaction  connected  with  horse-racing,  to  which  the  provisions  of  section  294A  of  the 
Indian Penal Code (45 of 1860) apply. 

##CHAPTER III 

###OF CONTINGENT CONTRACTS 

31. **“Contingent contract” defined.**—A  “contingent  contract  is  a  contract  to  do  or  not  to  do 
something, if some event, collateral to such contract, does or does not happen. 

*Illustration*

A contracts to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract. 

32. **Enforcement of contracts contingent on an event happening.**—Contingent contracts to do or 
not to do anything if an uncertain future event happens cannot be enforced by law unless and until that 
event has happened. 

If the event becomes impossible, such contracts become void. 

*Illustrations*

  (a) A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by law unless and until C 
dies in A’s lifetime. 

  (b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to 
buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse. 

  (c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void. 

33. **Enforcement of contracts contingent on an event not happening.**—Contingent contracts to do 
or not to do anything if an uncertain future event does not happen can be enforced when the happening of 
that event becomes impossible, and not before. 

*Illustration*

  A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the 
ship sinks. 

34. **When  event  on  which  contract  is  contingent  to  be  deemed  impossible,  if  it  is  the  future 
conduct of a living person.**—If the future event on which a contract is contingent is the way in which a 
person  will  act  at  an  unspecified  time,  the  event  shall  be  considered  to  become  impossible  when  such 
person  does  anything  which  renders  it  impossible  that  he  should  so  act  within  any  definite  time,  or 
otherwise than under further contingencies. 

*Illustration*

  A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must now be considered impossible, 
although it is possible that D may die and that C may afterwards marry B. 

35. **When  contracts  become  void  which  are  contingent  on  happening  of  specified  event  within 
fixed time.**—Contingent  contracts  to  do  or  not  to  do  anything  if  a  specified  uncertain  event  happens 
within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, 
before the time fixed, such event becomes impossible. 

When contracts may be enforced, which are contingent on specified event not happening within 
fixed time.**—Contingent  contracts  to  do  or  not  to  do  anything,  if  a  specified  uncertain  event  does  not 
happen within a fixed time may be enforced by law when the time fixed has expired and such event has 
not happened or, before the time fixed has expired, if it becomes certain that such event will not happen. 

*Illustrations*

  (a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship 
returns within the year, and becomes void if the ship is burnt within the year. 

  (b) A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the 
ship does not return within the year, or is burnt within the year. 

36. **Agreement contingent on impossible events void.**—Contingent agreements to do or not to do 
anything, if an impossible event happens, are void, whether the impossibility of the event is known or not 
to the parties to the agreement at the time when it is made. 

*Illustrations*

  (a) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void. 

  (b) A agrees to pay B 1,000 rupees if B will marry A’s daughter C. C was dead at the time of the agreement. The agreement 
is void. 

##CHAPTER IV 

###OF THE PERFORMANCE OF CONTRACTS 

*Contracts which must be performed*

37. **Obligation of parties to contracts.**—The parties to a  contract must either perform, or offer to 
perform,  their  respective  promises, unless  such  performance  is  dispensed  with  or  excused  under  the 
provisions of this Act, or of any other law. 

Promises  bind  the  representatives  of  the  promisors  in  case  of  the  death  of  such  promisors  before 
performance, unless a contrary intention appears from the contract. 

*Illustrations*

  (a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A’s representatives 
are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A’s representatives. 

  (b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be 
enforced either by A’s representatives or by B. 

38. **Effect of refusal to accept offer of performance.**—Where  a  promisor  has  made  an  offer  of 
performance  to  the  promisee,  and  the  offer  has  not  been  accepted,  the  promisor  is  not  responsible  for 
non-performance, nor does he thereby lose his rights under the contract. 

Every such offer must fulfil the following conditions:— 

  (1) it must be unconditional; 

  (2) it must be made at a proper time and place, and under such circumstances that the person to 
whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is 
able and willing there and then to do the whole of what he is bound by his promise to do; 

  (3) if  the  offer  is  an  offer  to  deliver  anything  to  the  promisee,  the  promisee  must  have  a 
reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his 
promise to deliver. 

An offer to one of several joint promisees has the same legal consequences as an offer to all of them. 

*Illustration*

  A contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to 
make an offer of a performance with the effect stated in this section, A must bring the cotton to B’s warehouse, on the appointed 
day, under such circumstances that B may have areasonable opportunity of satisfying himself that the thing offered is cotton of 
the quality contracted for, and that there are 100 bales. 

39. **Effect of refusal of party to perform promise wholly.**—When a party to a contract has refused 
to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end 
to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. 

*Illustrations*

  (a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during 
the next two months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night A wilfully absents 
herself from the theatre. B is at liberty to put an end to the contract. 

  (b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two night’s in every week during 
the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night,  A wilfully absents 
herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, 
and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A’s failure to sing on 
the sixth night. 

*By whom contracts must be performed*

40. **Person by whom promise is to be performed.**—If it appears from the nature of the case that it 
was the intention of the parties to any contract that any promise contained in it should be performed by 
the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or 
his representatives may employ a competent person to perform it. 

*Illustrations*

  (a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by 
causing it to be paid to B by another ; and, if A dies before the time appointed for payment, his representatives must perform the 
promise, or employ some proper person to do so. 

  (b) A promises to paint a picture for B. A must perform this promise personally. 

41. **Effect of accepting performance from third person.**—When a promisee accepts performance 
of the promise from a third person, he cannot afterwards enforce it against the promisor. 

42. **Devolution of joint liabilities.**—When  two  or  more  persons  have  made  a  joint  promise,  then, 
unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the 
death of any of them, his representative jointly with the survivor or survivors, and, after the death of the 
last survivor, the representatives of all jointly, must fulfil the promise. 

43. **Any one of joint promisors may be compelled to perform.**—When two or more persons make a 
joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or 
more of such joint promisors to perform the whole of the promise. 

**Each promisor may compel contribution.**—Each of two or more joint promisors may compel every 
other  joint  promisor  to  contribute  equally  with  himself  to  the  performance  of  the  promise,  unless  a 
contrary intention appears from the contract. 

**Sharing of loss by default in contribution.**—If  any  one  of  two  or  more  joint  promisors  makes 
default in such contribution, the remaining joint promisors must bear the loss arising from such default in 
equal shares. 

*Explanation.*—Nothing  in  this  section  shall  prevent  a  surety  from  recovering  from  his  principal, 
payments made by the surety on behalf of the principal, or entitle the principal to recover anything from 
the surety on account of payments made by the principal. 

*Illustrations*

  (a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay him 3,000 rupees. 

  (b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is compelled to pay the whole. A is insolvent, but his 
assets are sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from A’s estate, and 1,250 rupees from B. 

  (c) A, B and C are under a joint promise to pay D 3,000 rupees. C is unable to pay anything, and A is compelled to pay the 
whole. A is entitled to receive 1,500 rupees from B. 

  (d) A, B and C are under a joint promise to pay D 3,000 rupees, A and B being only sureties for C. C fails to pay. A and B 
are compelled to pay the whole sum. They are entitled to recover it from C. 

44. **Effect of release of one joint promisor.**—Where two or more persons have made a joint promise, 
a release of one of such joint promisors by the promisee does not discharge the other joint promisor or 
joint promisors; neither does it free the joint promisors so released from  responsibility to the other joint 
promisor or joint promisors.

45. **Devolution of joint rights.**—When a person has made a promise to two or more persons jointly, 
then,  unless  a  contrary  intention  appears  from  the  contract,  the  right  to  claim  performance  rests,  as 
between him and them, with them during their joint lives, and, after the death of any of them, with the 
representative of such deceased person jointly with the survivor or survivors, and, after the death of the 
last survivor, with the representatives of all jointly.

*Illustration*

  A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest 
on a day specified. B dies. The right to claim performance rests with B’s representative jointly with C during C’s life, and after 
the death of C with the representatives of B and C jointly. 

*Time and place for performance*

46. **Time for performance of promise, when no application is to be made  and  no  time  is 
specified.**—Where,  by  the  contract,  a  promisor  is  to  perform  his  promise  without  application  by  the 
promisee,  and  no  time  for  performance  is  specified,  the  engagement  must  be  performed  within  a 
reasonable time. 

*Explanation.*—The question “what is a reasonable time” is, in each particular case, a question of fact. 

47. **Time and place for performance of promise, where time is specified and no application to be 
made.**—When a promise is to be performed on a certain day, and the promisor has undertaken to perform 
it without application by the promisee, the promisor may perform it at any time during the usual hours of 
business on such day and at the place at which the promise ought to be performed. 

*Illustration*

  A promises to deliver goods at B’s warehouse on the first January. On that day A brings the goods to B’s warehouse, but 
after the usual hour for closing it, and they are not received. A has not performed his promise. 

48. **Application  for  performance  on  certain  day  to  be  at  proper  time  and  place.**—When  a 
promise is to be performed on a certain day, and the promisor has not undertaken to perform it without 
application by the promisee, it is the duty of the promisee to apply for performance at a proper place and 
within the usual hours of business. 

*Explanation.*—The question “what is a proper time and place” is, in each particular case, a question 
of fact. 

49. **Place for performance of promise, where no application to be made and  no place fixed for 
performance.**—When a promise is to be performed without application by the promisee, and no place is 
fixed  for  the  performance  of  it,  it  is  the  duty  of  the  promisor  to  apply  to  the  promisee  to  appoint  a 
reasonable place for the performance of the promise, and to perform it at such place. 

*Illustration*

  A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for 
the purpose of receiving it, and must deliver it to him at such place. 

50. **Performance in manner or at time prescribed or sanctioned by promisee.**—The performance 
of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions. 

*Illustrations*

  (a) B  owes  A  2,000  rupees.  A  desires  B  to  pay  the  amount  to  A’s  account  with  C,  a  banker.  B, who  also  banks  with  C, 
orders the amount to be transferred from his account to A’s credit, and this is done by C. Afterwards, and before A knows of the 
transfer, C fails. There has been a good payment by B. 

  (b) A  and  B  are  mutually  indebted.  A  and  B  settle  an  account by  setting  off  one  item  against  another,  and  B  pays  A  the 
balance found to be due from him upon such settlement. This amounts to a payment by A and B, respectively, of the sums which 
they owed to each other. 

  (c) A owes B 2,000 rupees. B accepts some of A’s goods in reduction of the debt. The delivery of goods operates as a part 
payment. 

  (d) A desires B, who owes him Rs. 100, to send him a note for Rs. 100 by post. The debt is discharged as soon as B puts into 
the post a letter containing the note duly addressed to A. 

*Performance of reciprocal promises*

51. **Promisor  not  bound  to  perform,  unless  reciprocal  promisee  ready  and  willing  to  
perform.**—When a contract consists of reciprocal promises to be simultaneously performed, no promisor 
need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. 

*Illustrations*

  (a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. 

A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. 

B need not pay for the goods, unless A is ready and willing to deliver them on payment. 

  (b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on 
delivery. 

A need not deliver, unless B is ready and willing to pay the first instalment on delivery. 

B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment. 

52. **Order of performance of reciprocal promises.**—Where the order in which reciprocal promises 
are to be performed is expressly fixed by the contract, they shall be performed in that order; and where the 
order is not expressly fixed by the contract, they shall be performed in that order which the nature of the 
transaction requires. 

*Illustrations*

  (a) A and B contract that A shall  build a house for B at a fixed price. A’s promise to build the house must be performed 
before B’s promise to pay for it. 

  (b) A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give security for the 
payment of the money. A’s promise need not be performed until the security is given, for the nature of the transaction requires 
that A should have security before he delivers up his stock. 

53. **Liability of party preventing event on which the contract is to take effect.**—When a contract 
contains  reciprocal  promises,  and  one  party  to  the  contract  prevents  the  other  from  performing  his 
promise,  the  contract  becomes  voidable  at  the  option  of  the  party  so  prevented;  and  he  is  entitled  to 
compensation  from  the  other  party  for  any  loss  which  he  may  sustain  in  consequence  of  the  non-
performance of the contract. 

*Illustration*

  A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work 
accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is 
entitled to recover from A compensation for any loss which he has incurred by its non-performance. 

54. **Effect of default as to that promise which should be first performed, in contract consisting 
of reciprocal promises.**—When a contract consists of reciprocal promises, such that one of them cannot 
be  performed,  or  that  its  performance  cannot  be  claimed  till  the  other  has  been  performed,  and  the 
promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of 
the reciprocal promise, and must make compensation to the other party to the contract for any loss which 
such other party may sustain by the non-performance of the contract. 

*Illustrations*

  (a) A hires B’s ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain 
freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B’s promise, and must 
make compensation to B for the loss which B sustains by the non-performance of the contract. 

  (b) A contracts with B to execute certain builder’s work for a fixed price, B supplying the scaffolding and timber necessary 
for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and 
B is bound to make compensation to A for any loss caused to him by the non-performance of the contract. 

  (c) A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a 
month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. 
A’s promise to deliver need not be performed, and B must make compensation. 

  (d) A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them 
within  a  month.  A  does  not  deliver  according  to  his  promise.  B’s  promise  to  pay  need  not  be  performed,  and  A  must  make 
compensation. 

55. **Effect  of  failure  to  perform  at  fixed  time,  in  contract  in  which  time  is  essential.**—When  a 
party  to  a  contract  promises  to  do  a  certain  thing  at  or  before  a  specified  time,  or  certain  things  at  or 
before specified times, and fails to do any such thing at or before the specified time, the contract, or so 
much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of 
the parties was that time should be of the essence of the contract. 

**Effect of such failure when time is not essential.**—If it was not the intention of the parties that time 
should be of the essence of the contract, the contract does not become voidable by the failure to do such 
thing at or before the specified time; but the promisee is entitled to compensation from the promisor for 
any loss occasioned to him by such failure. 

**Effect  of  acceptance  of  performance  at  time  other  than  that  agreed  upon.**—If,  in  case  of  a 
contract  voidable  on  account  of  the  promisor’s  failure  to  perform  his  promise  at  the  time  agreed,  the 
promisee  accepts  performance  of such  promise  at  any  time  other than that agreed, the  promisee  cannot 
claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, 
unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.

###STATE AMENDMENT 

**Uttar Pradesh**

**Amendment of section 55.**—In section 55 of the Principal Act, in the third paragraph, for the words 
“unless at the time of such acceptance he gives notice to the promiser of his intention to do so”, the words 
“where at the time of such acceptance he has waived his right to do so” shall be substituted.” 

*[Vide* Uttar Pradesh 57 of 1976, s. 26] 
 
56. **Agreement to do impossible act.**—An agreement to do an act impossible in itself is void. 

**Contract  to  do  an  act  afterwards  becoming  impossible  or  unlawful.**—A  contract  to  do  an  act 
which, after the contract is made, becomes impossible, or, by reason of some event which the  promisor 
could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

**Compensation for loss through non-performance of act known to be impossible or unlawful.**—
Where  one  person  has  promised  to  do  something  which  he  knew,  or,  with  reasonable  diligence,  might 
have  known,  and  which  the  promisee  did  not  know,  to  be  impossible  or  unlawful,  such  promisor  must 
make  compensation  to  such  promisee  for  any  loss  which  such  promisee  sustains  through  the  non-
performance of the promise. 

*Illustrations*

  (a) A agrees with B to discover treasure by magic. The agreement is void. 

  (b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void. 

  (c) A contracts to marry B, being already married to C, and being forbidden by the law to which he is subject to practise 
polygamy, A must make compensation to B for the loss caused to her by the non-performance of his promise. 

  (d) A contracts to take in cargo for B at a foreign port. A’s Government afterwards declares war against the country in which 
the port is situated. The contract becomes void when war is declared. 

  (e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is 
too ill to act. The contract to act on those occasions becomes void. 

57. **Reciprocal promise to do things legal, and also other things illegal.**—Where  persons 
reciprocally  promise,  firstly,  to  do  certain  things  which  are  legal,  and,  secondly,  under  specified 
circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the 
second is a void agreement. 

*Illustration*

  A and B agree that A shall sell B a house for 10,000 rupees, but that, if B uses it as a gambling house, he shall pay A 50,000 
rupees for it. 

  The first set of reciprocal promises, namely, to sell the house and to pay 10,000 rupees for it, is a contract. 

  The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement. 

58. **Alternative promise, one branch being illegal.**—In  the  case  of  an  alternative  promise,  one 
branch of which is legal and the other illegal, the legal branch alone can be enforced. 

*Illustration*

  A and B agree that A shall pay B 1,000 rupees, for which B shall afterwards deliver to A either rice or smuggled opium. 

  This is a valid contract to deliver rice, and a void agreement as to the opium. 

*Appropriation of payments*

59. **Application  of  payment  where  debt  to  be  discharged  is  indicated.**—Where  a  debtor,  owing 
several  distinct  debts  to  one  person,  makes  a  payment  to  him,  either  with  express  intimation,  or  under 
circumstances  implying,  that the  payment  is  to  be applied  to  the  discharge  of  some  particular debt,  the 
payment, if accepted, must be applied accordingly. 
 
*Illustrations*

  (a) A owes B, among other debts, 1,000 rupees upon a promissory note which falls due on the first June. He owes B no other debt of that 
amount. On the first June, A pays to B 1,000 rupees. The payment is to be applied to the discharge of the promissory note. 

  (b) A owes to B, among other debts, the sum of 567 rupees. B writes to A and demands payment of this sum. A sends to B 567 rupees. This 
payment is to be applied to the discharge of the debt of which B had demanded payment. 

60. **Application of payment where debt to be discharged is not indicated.**—Where the debtor has 
omitted to intimate and there are  no  other circumstances  indicating  to  which debt the  payment  is  to  be 
applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from 
the  debtor,  whether  its  recovery  is  or  is  not  barred  by  the  law  in  force  for  the  time  being  as  to  the 
limitation of suits. 

61. **Application of payment where neither party appropriates.**—Where neither party makes any 
appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or 
are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal 
standing, the payment shall be applied in discharge of each proportionably. 

*Contracts which need not be performed*

62. **Effect of novation, rescission, and alteration of contract.**—If the parties to a contract agree to 
substitute a new contract for it, or to rescind or alter it, the original contract, need not be performed. 

*Illustrations*

  (a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The 
old debt of A to B is at an end, and a new debt from C to B has been contracted. 

  (b) A owes B 10,000 rupees. A enters into an arrangement with B and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of the 
debt of 10,000 rupees. This is a new contract and extinguishes the old. 

  (c) A owes B 1,000 rupees under a contract. B owes C 1,000 rupees B orders A to credit C with 1,000 rupees in his books, but C does not 
assent to the arrangement. B still owes C 1,000 rupees, and no new contract has been entered into. 

63. **Promisee  may  dispense  with  or  remit  performance  of  promisee.**—Every  promisee  may 
dispense with or remit, wholly or in part, the performance of the promisee made to him, or may extend the 
time for such performance, or may accept instead of it any satisfaction which he thinks fit. 

*Illustrations*

  (a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise. 

  (b) A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which 
the 5,000 rupees were payable. The whole debt is discharged. 

  (c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of 
the whole claim.

  (d) A owes B, under. a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives 
to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount. 

  (e) A owes B 2,000 rupees, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a 
composition of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand. 

64. **Consequences of rescission of voidable contract.**—When a person at whose option a contract is 
voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is 
promisor. The party rescinding a voidable contract shall, if he have received any benefit thereunder from 
another  party  to  such  contract, restore  such  benefit,  so  far  as  may  be,  to  the  person  from  whom  it  was 
received.

65. **Obligation  of  person  who  has  received  advantage  under  void  agreement,  or  contract  that 
becomes  void.**—When  an  agreement  is  discovered  to  be  void,  or  when  a  contract  becomes  void,  any 
person  who  has  received  any  advantage  under  such  agreement  or  contract  is  bound  to  restore  it,  or  to 
make compensation for it to the person from whom he received it. 

*Illustrations*

  (a) A pays B 1,000 rupees in consideration of B’s promising to marry C, A’s daughter. C is dead at the time of the promise. 
The agreement is void, but B must repay A the 1,000 rupees. 

  (b) A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers 130 maunds only before that 
day,  and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them. 

  (c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next 
two  months,  and  B  engages  to  pay  her  a  hundred  rupees  for  each  night’s performance.  On  the  sixth  night,  A  wilfully  absents 
herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung. 

  (d) A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to 
make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 
1,000 rupees paid in advance. 

66. **Mode of communicating or revoking rescission of voidable contract.**—The  rescission  of  a 
voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as 
apply to the communication or revocation of a proposal1. 

67. **Effect of neglect of promisee to afford promisor reasonable facilities for performance.**—If 
any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his 
promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby. 

*Illustration*

  A contracts with B to repair B’s house. 

  B neglects or refuses to point out to A the places in which his house requires repair. 

  A is excused for the non-performance of the contract if it is caused by such neglector refusal. 

##CHAPTER V 

###OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT 

68. **Claim for necessaries supplied to person incapable of contracting, or on his account.**—If a 
person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied 
by  another  person  with  necessaries  suited  to  his  condition  in  life,  the  person  who  has  furnished  such 
supplies is entitled to be reimbursed from the property of such incapable person.[^2]

*Illustrations*

  (a) A  supplies  B,  a  lunatic,  with  necessaries  suitable  to  his  condition  in  life.  A  is  entitled  to  be  reimbursed  from  B’s 
property. 

  (b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be 
reimbursed from B’s property. 

69. **Reimbursement  of  person  paying  money  due  by  another,  in  payment  of  which  he  is 
interested.**—A person who is interested in the payment of money which another is bound by law to pay, 
and who therefore pays it, is entitled to be reimbursed by the other. 

[^2]. The property of a Government ward in Madhya Pradesh is not liable under this section, see the C.P. Court of Wards Act, 1899 
(24 of 1899), s. 31(1). 


 
*Illustration*

B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the Government being in arrear, 
his land is advertised for sale by the Government. Under the revenue law, the consequence of such sale will be the annulment  of 
B’s lease. B, to prevent the sale and the consequent annulment of his own lease, pays to the Government the sum due from A. A 
is bound to make good to B the amount so paid. 

70. **Obligation  of  person  enjoying  benefit  of  non-gratuitous  act.**—Where  a  person  lawfully  does 
anything  for  another  person,  or  delivers  anything  to  him,  not  intending  to  do  so  gratuitously,  and  such 
other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect 
of, or to restore, the thing so done or delivered.

*Illustrations*

  (a) A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A for them. 

  (b) A saves B’s property from fire. A is not entitled to compensation from B, if the circumstances show that he intended to 
act gratuitously. 

71. **Responsibility of finder of goods.**—A person who finds  goods belonging to another, and takes 
them into his custody, is subject to the same responsibility as a bailee.

72. **Liability  of  person  to  whom  money  is  paid,  or  thing  delivered,  by  mistake  or  under 
coercion.**—A person to whom money has been paid, or anything delivered, by mistake or under coercion, 
must repay or return it. 

*Illustrations*

  (a) A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over 
again to C. C is bound to repay the amount to B. 

  (b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for 
carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was 
illegally excessive. 

##CHAPTER VI 

###OF THE CONSEQUENCES OF BREACH OF CONTRACT 

73. **Compensation for loss or damage caused by breach of contract.**—When a contract has been 
broken,  the  party  who  suffers  by  such  breach  is  entitled to  receive,  from  the  party  who  has  broken the 
contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual 
course of things from such breach, or which the parties knew, when they made the contract, to be likely to 
result from the breach of it. 

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason 
of the breach. 

**Compensation for failure to discharge obligation resembling those created by contract.**—When 
an  obligation resembling  those  created  by  contract  has  been incurred  and  has  not  been  discharged, any 
person injured by the failure to discharge it is entitled to receive the same compensation from the party in 
default, as if such person had contracted to discharge it and had broken his contract. 

*Explanation.*—In estimating the loss or damage arising from a breach of contract, the means which 
existed of remedying the inconvenience caused by the non-performance of the contract must be taken into 
account. 
 
*Illustrations*

  (a) A contracts to sell and deliver 50 maunds of saltpetre to B, at a certain price to be paid on delivery. A breaks his promise. 
B is entitled to receive from A, by way of compensation, the sum, if any, by which the contract price falls short of the price for 
which B might have obtained 50 maunds of saltpetre of like quality at the time when the saltpetre ought to have been delivered. 

  (b) A hires B’s ship to go to Bombay, and there take on board, on the first of January, a cargo, which A is to provide, and to 
bring it to Calcutta, the freight to be paid when earned. B’s ship does not go to Bombay, but A has opportunities of procuring 
suitable conveyance for the cargo upon terms as advantageous as those on which he had chartered the ship. A avails himself of 
those opportunities, but is put to trouble and expense in doing so. A is entitled to receive compensation from B in respect of such 
trouble and expense. 

  (c) A contracts to buy of B, at a stated price, 50 maunds of rice, no time being fixed for delivery. A afterwards informs B that 
he will not accept the rice if tendered to him. B is entitled to receive from A, by way of compensation, the amount, if any, by 
which the contract price exceeds that which B can obtain for the rice at the time when A informs B that he will not accept it. 

  (d) A contracts to buy B’s ship for 60,000 rupees, but breaks his promise. A must pay to B, by way of compensation, the 
excess, if any, of the contract price over the price which B can obtain for the ship at the time of the breach of promise. 

  (e) A, the owner of a boat, contracts with B to take a cargo of jute to Mirzapur, for sale at that place, starting on a specified 
day. The boat, owing to some avoidable cause, does not start at the time appointed, whereby the arrival of the cargo at Mirzapur 
is delayed beyond the time when it would have arrived if the boat had sailed according to the contract. After that date, and before 
the arrival of the cargo, the price of jute falls. The measure of the compensation payable to B by A is the difference between the 
price which B could have obtained for the cargo at Mirzapur at the time when it would have arrived if forwarded in due course, 
and its market price at the time when it actually arrived. 

  (f) A  contracts  to  repair  B’s  house  in  a  certain  manner,  and  receives  payment  in  advance.  A  repairs  the  house,  but  not 
according to contract. B is entitled to recover from A the cost of making the repairs conform to the contract. 

  (g) A contracts to let his ship to B for a year, from the first of January, for a certain price. Freights rise, and, on the first of 
January, the hire obtainable for the ship is higher than the contract price. A breaks his promise.  He  must pay to B, by  way of 
compensation, a sum equal to the difference between the contract price and the price for which B could hire a  similar ship for a 
year on and from the first of January. 

  (h) A contracts to supply B with a certain quantity of iron at a fixed price, being a higher price than that for which A could 
procure and deliver the iron. B wrongfully refuses to receive the iron. B must pay to A, by way of compensation, the difference 
between the contract price of the iron and the sum for which A could have obtained and delivered it. 

  (i) A delivers to B, a common carrier, a machine, to be conveyed, without delay, to A’s mill  informing B that his mill is 
stopped for want of the machine. B unreasonably delays the delivery of the machine, and A, in consequence, loses a profitable 
contract  with  the  Government.  A  is  entitled  to  receive  from  B,  by  way  of  compensation,  the  average  amount  of  profit  which 
would  have  been  made  by  the  working  of  the  mill  during  the  time  that  delivery  of  it  was  delayed,  but  not  the  loss  sustained 
through the loss of the Government contract. 

  (j) A, having  contracted with B to supply B  with 1,000 tons of iron at 100 rupees a ton, to be delivered at a  stated time, 
contracts with C for the purchase of 1,000 tons of iron at 80 rupees a ton, telling C that he does so for the purpose of performing 
his contract with B. C fails to perform his contract with A, who cannot procure other iron, and B, in consequence, rescinds  the 
contract. C must pay to A 20,000 rupees, being the profit which A would have made by the performance of his contract with B. 

  (k) A contracts with B to make and deliver to B, by a fixed day, for a specified price, a certain piece of machinery. A does 
not deliver the piece of machinery at the time specified, and in consequence of this, B is obliged to procure another at a higher 
price  than  that  which  he  was  to  have  paid  to  A,  and  is  prevented  from  performing  a  contract  which  B  had  made  with  a  third 
person  at  the  time  of  his  contract  with  A  (but  which  had  not  been  then  communicated  to  A),  and  is  compelled  to  make 
compensation for breach of that contract. A must pay to B, by way of compensation, the difference between the contract price of 
the piece of machinery and the sum paid by B for another, but not the sum paid by B to the third person by way of compensation. 

  (l) A, a builder, contracts to erect and finish a house by the first of January, in order that B may give possession of it at that 
time to C, to whom B has contracted to let it. A is informed of the contract between B and C. A builds the house so badly that, 
before the first of January, it falls down and has to be re-built by B, who, in consequence, loses the rent which he was to have 
received from C, and is obliged to make compensation to C for the breach of his contract. A must make compensation to B for 
the cost of rebuilding the house, for the rent lost, and for the compensation made to C. 

  (m) A sells certain merchandise to B, warranting it to be of a particular quality, and B, in reliance upon this warranty, sells it 
to  C  with  a  similar  warranty.  The  goods  prove  to  be  not  according  to  the  warranty,  and  B  becomes  liable  to  pay  C  a  sum  of 
money by way of compensation. B is entitled to be reimbursed this sum by A. 

  (n) A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day, B, in consequence of 
not receiving the money on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything 
except the principal sum he contracted to pay, together with interest up to the day of payment. 

  (o) A contracts to deliver 50 maunds of saltpetre to B on the first of January, at a certain price. B afterwards, before the first 
of January, contracts to sell the saltpetre to C at a price higher than the market price of the first of January. A breaks his promise. 

  In estimating the compensation payable by A to B, the market price of the first of January, and not the profit which would 
have arisen to B from the sale to C, is to be taken into account. 

  (p) A contracts to sell and deliver 500 bales of cotton to B on a fixed day. A knows nothing of B’s mode of conducting his 
business. A breaks his promise, and B, having no cotton, is obliged to close his mill. A is not responsible to B for the loss caused 
to B by the closing of the mill. 

  (q) A contracts to sell and deliver to B, on the first of January, certain cloth which B intends to manufacture into caps of a 
particular kind, for which there is no demand, except at that season. The cloth is not delivered till after the appointed time, and 
too late to be used that year in making caps. B is entitled to receive from A, by way of compensation, the difference between the 
contract price of the cloth and its market price at the time of delivery, but not the profits which he expected to obtain by  making 
caps, nor the expenses which he has been put to in making preparation for the manufacture. 

  (r) A, a ship-owner, contracts with B to convey him from Calcutta to Sydney in A’s ship, sailing on the first of January, and 
B pays to A, by way of deposit, one-half of his passage-money. The ship does not sail on the first of January, and B, after being 
in consequence detained in Calcutta for some time and thereby put to some expense, proceeds to Sydney in another vessel, and, 
in consequence, arriving too late in Sydney, loses a sum of money. A is liable to repay to B his deposit,  with interest, and the 
expense to which he is put by his detention in Calcutta, and the excess, if any, of the passage-money paid for the second ship over 
that agreed upon for the first, but not the sum of money which B lost by arriving in Sydney too late. 

74. **Compensation for breach of contract where penalty stipulated for.**—When a contract has 
been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the 
contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, 
whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who 
has broken the contract reasonable compensation not exceeding the amount so named or, as the case may 
be, the penalty stipulated for. 

*Explanation.*—A  stipulation  for  increased  interest  from  the  date  of  default  may  be  a  stipulation  by 
way of penalty.

*Exception.*—When  any  person  enters  into  any  bail-bond,  recognizance  or  other  instrument  of  the 
same nature, or, under the provisions of any law, or under the orders of the Central Government or of 
any State Government, gives  any  bond  for  the  performance  of  any  public  duty  or  act  in  which  the 
public are interested, he shall be liable, upon breach of the condition of  any such instrument, to pay the 
whole sum mentioned therein. 

*Explanation.*—A  person  who  enters  into  a  contract  with  Government  does  not  necessarily  thereby 
undertake any public duty, or promise to do an act in which the public are interested. 

*Illustrations*

  (a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B 
is entitled to recover from A such compensation, not exceeding Rs. 1,000, as the Court considers reasonable. 

  (b) A contracts with B that, if Apractises as a surgeon within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in 
Calcutta. B is entitled to such compensation; not exceeding Rs. 5,000, as the Court considers reasonable. 

  (c) A  gives  a  recognizance  binding  him  in  a  penalty  of  Rs.  500  to  appear  in  Court  on  a  certain  day.  He  forfeits  his 
recognizance. He is liable to pay the whole penalty. 

  (d)A gives B a bond for the repayment of Rs. 1,000 with interest at 12 per cent. at the end of six months, with a stipulation 
that, in case of default, interest shall be payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of 
penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable. 

  (e) A, who owes money to B a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain 
date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 
20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable compensation in case of breach. 

  (f) A  undertakes  to  repay  B  a  loan  of  Rs.  1,000  by  five  equal  monthly  instalments,  with  a  stipulation  that  in  default  of 
payment  of  any  instalment,  the  whole  shall  become  due.  This  stipulation  is  not  by  way  of  penalty,  and  the  contract  may  be 
enforced according to its terms. 

  (g) A  borrows  Rs.  100  from  B  and  gives  him  a  bond  for  Rs.  200  payable  by  five  yearly  instalments  of  Rs.  40,  with  a 
stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty.

75. **Party  rightfully  rescinding  contract,  entitled  to  compensation.**—A  person  who  rightfully 
rescinds  a  contract  is  entitled  to  compensation  for  any  damage  which  he  has  sustained  through  the 
non-fulfilment of the contract. 

*Illustration*

  A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two 
months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night, A wilfully absents herself from 
the  theatre,  and  B,  in  consequence,  rescinds  the  contract.  B  is  entitled  to  claim  compensation  for  the  damage  which  he  has 
sustained through the non-fulfilment of the contract. 

*[CHAPTER VII.—SALES OF GOODS.] Rep.by the Indian Sale of Goods Act*, 1930 (3 of 1930), s. 65. 

76.*[‘Goods’ of defined.] Rep. by s.* 65,ibid. 

77.*[‘Sale defined.] Rep. by s.* 65,ibid. 

78.*[Sale how effected.] Rep. by s.* 65,ibid. 

79.*[Transferofownershipofthingsold,whichhasyettobeascertained,madeorfinished.]Rep.bys.* 65, ibid. 

80. *[Completion of sale of goods which the seller is to put into state in which buyer is to take them.] 
Rep. by s.* 65,ibid. 

81. *[Completion  of  sale  of  goods,  when  seller  has  to  do  anything  thereto  in  order  to  as  certain 
price.] Rep. by s.* 65,ibid. 

82. *[Completion of sale, when goods are uncertained at date of contract.] Rep. by s.* 65,ibid. 

83. *[Ascertainment of goods by subsequent appropriation.] Rep. by s.* 65,ibid. 

84. *[Ascertainment of goods by seller’s selection.] Rep. by s.* 65,ibid. 

85. *[Transfer  of  ownership  of  moveable  property,  when  sold  together  with  immoveable.]  Rep.  by*
s. 65, ibid. 

86. *[Buyer to bear loss after good have become his property.] Rep. by s.* 65,ibid. 

87. *[Transfer of ownership of goods agreed to be sold while non existent.] Rep. by s.* 65,ibid. 

88. *[Contract  to  sell  and  deliver,  at  a  future  day,  goods  not  in  seller’s  possession  at  date  of 
contract.] Rep. by s.* 65,ibid. 

89. *[Determination of price not fixed by contract.] Rep. by s.* 65,ibid. 

*[DELIVERY.]Rep. by s.* 65, ibid. 

90. *[Delivery how made.] Rep. by s.* 65,ibid. 

91. *[Effect of delivery to wharfinger or carrier.] Rep. by s.* 65,ibid. 

92. *[Effect of part-delivery.] Rep. by s.* 65,ibid. 

93. *[Seller not bound to deliver until buyer applies for delivery.] Rep. by s.* 65,ibid. 

94.*[Place of delivery.] Rep.by the Indian Sale of Goods Act*, 1930 (3 of 1930), s.65. 

*[SELLER’S LIEN.]Rep. by s.* 65, ibid. 

95.*[Seller’s lien.]Rep. by s.* 65,ibid. 

96. *[Lien where payment to be made at a future day, but no time fixed for delivery.] Rep. by s.* 65, 
ibid. 

97. *[Seller’s lien where payment to be made at future day, and buyer allows goods to remain in 
seller’s possession.] Rep. by s.* 65,ibid. 

98. *[Seller’s lien against subsequent buyer.] Rep. by s.* 65,ibid. 

*[STOPPAGE IN TRANSIT.] Rep. by s.* 65, ibid. 

99. *[Power of seller to stop in transit.] Rep. by s.* 65,ibid. 

100. *[When goods are to be deemed in transit.] Rep. by s.* 65,ibid. 

101. *[Continuance of right of stoppage.] Rep. by s.* 65,ibid. 

102. *[Cessation of right on assignment, by buyer, of document showing title.] Rep. by s.* 65,ibid. 

103. *[How seller may stop where instrument of title assigned to secure specific advance.] Rep. by s.* 
65, ibid. 

104. *[Stoppage how effected.] Rep. by s.* 65,ibid. 

105. *[Notice of seller’s claim.] Rep. by s.* 65, ibid. 

106. *[Right of seller on stoppage.] Rep. by s.* 65,ibid. 

*[RESALE.] Rep. by s.* 65, ibid. 

107. *[Resale on buyer’s failure to perform.] Rep. by s.* 65,ibid. 

*[TITLE.] Rep. by s.* 65, ibid. 

108. *[Title conveyed by seller of goods to buyer.] Rep. by s.* 65,ibid. 

*[WARRANTY.] Rep. by s.* 65, ibid. 

109. *[Seller’s responsibility for badness of title.] Rep. by s.* 65,ibid. 

110. *[Establishment of implied warranty of goodness or quality.] Rep. by s.* 65,ibid. 

111. *[Warranty of soundness implied on sale of provisions.] Rep. by s.* 65,ibid. 

112. *[Warranty of bulk implied on sale of goods by sample.] Rep. by s.* 65,ibid. 

113. *[Warranty implied where goods are sold as being of a certain denomination.] Rep. by s.* 65,ibid. 

114. *[Warranty where goods ordered for a specified purpose.] Rep. by s.* 65,ibid. 

115. *[Warranty on sale of article of well known ascertained kind.] Rep. by s.* 65,ibid. 

116. *[Seller when not responsible for latent defects.] Rep. by s.* 65,ibid. 

117. *[Buyer’s right on breach of warranty.] Rep. by s.* 65,ibid. 

118. *[Right of buyer on breach of warranty in respect of goods not ascertained.] Rep. by s.* 65,ibid. 

*[MISCELLANEOUS.] Rep. by s.* 65, ibid. 

119. *[When buyer may refused to accept, if goods not ordered are sent with goods ordered.]Rep. by 
s. 65, ibid.*

120. *[Effect of wrongful refusal to accept.] Rep. by s.* 65,ibid. 

121. *[Right  of  seller  as  to  rescission,  on  failure  of  buyer  to  pay  price  at  time  fixed.]  Rep.by  the 
Indian Sale of Goods Act, 1930 (3 of 1930), s.*65. 

122. *[Sale and transfer of lots sold by auction.] Rep. by s. 65,ibid.*

123. *[Effect of use, by seller, of pretended biddings to raise price.] Rep. by s. 65,ibid.*

##CHAPTER VIII 

###OF INDEMNITY AND GUARANTEE 

124. **“Contract of indemnity” defined.**—A contract by which one party promises to save the other 
from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is 
called a “contract of indemnity”. 

*Illustration*

A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain 
sum of 200 rupees. This is a contract of indemnity. 

125. **Rights of indemnity-holder when sued.**—The  promisee  in  a  contract  of  indemnity,  acting 
within the scope of his authority, is entitled to recover from the promisor— 

  (1) all damages which he may be compelled to pay in any suit in respect of any matter to which 
the promise to indemnify applies; 

  (2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he 
did not contravene the orders of the promisor, and acted as it would have been prudent for him to act 
in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the 
suit; 

  (3) all sums which he may have paid under the terms of any compromise of any such suit, if the 
compromise was not contrary to the orders of the promisor, and was one which it would have been 
prudent  for  the  promisee  to  make  in  the  absence  of  any  contract  of  indemnity,  or  if  the  promisor 
authorized him to compromise the suit. 

126. **“Contract  of  guarantee”,  “surety”,  “principal  debtor”  and  “creditor”.**—A  “contract  of 
guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his 
default. The person who gives the guarantee is called the “surety”; the person in respect of whose default 
the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is 
called the “creditor”. A guarantee may be either oral or written. 

127. **Consideration for guarantee.**—Anything  done,  or  any  promise  made,  for  the  benefit  of  the 
principal debtor, may be a sufficient consideration to the surety for giving the guarantee. 

*Illustrations*

  (a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the 
price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is a sufficient 
consideration for C’s promise. 

  (b) A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if 
he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for 
C’s promise. 

  (c) A  sells  and  delivers  goods  to  B.  C  afterwards,  without  consideration,  agrees  to  pay  for  them  in  default  of  B.  The 
agreement is void. 

128. **Surety’s liability.**—The liability of the surety is co- extensive with that of the principal debtor, 
unless it is otherwise provided by the contract. 

*Illustration*

  A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not only 
for the amount of the bill, but also for any interest and charges which may have become due on it. 

129. **“Continuing  guarantee”.**—A  guarantee  which  extends  to  a  series  of  transactions,  is  called  a 
“continuing guarantee”. 

*Illustrations*

  (a) A, in consideration that B will employ C in collecting the rent of B’s zamindari, promises B to be responsible, to the 
amount of 5,000 rupees, for the due collection and payment by C of those rents. This is a continuing guarantee. 

  (b) A guarantees payment to B, a tea-dealer, to the amount of £100, for any tea he may from time to time supply to C. B 
supplies C with tea to above the value of £100, and C pays B for it. Afterwards, B supplies C with tea to the value of £200. C 
fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of £100. 

  (c) A guarantees payment to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B 
delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does riot pay for. The guarantee given 
by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks. 

130. **Revocation of continuing guarantee.**—A continuing guarantee may at any time be revoked by 
the surety, as to future transactions, by notice to the creditor. 

*Illustrations*

  (a) A, in consideration of B’s discounting, at A’s request, bills of exchange for C, guarantees to B, for twelve months, the 
due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the 
end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. 
But A is liable to B for the 2,000 rupees, on default of C. 

  (b) A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon 
C. C accepts the bill. A gives notice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee. 

131. **Revocation of continuing guarantee by surety’s death.**—The death of the surety operates, in 
the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as  regards 
future transactions. 

132. **Liability of two persons, primarily liable, not affected by arrangement between them that 
one shall be surety on other’s default.**—Where two persons contract with a third person to undertake a 
certain liability, and also contract with each other that one of them shall be liable only on the default of 
the other, the third person not being a party to such contract, the liability of each of such two persons to 
the third person under the first contract is not affected by the existence of the second contract, although 
such third person may have been aware of its existence. 

*Illustration*

  A and B make a joint and several promissory note to C. A makes it, in fact, as surety for B, and C knows this at the time 
when the note is made. The fact that A, to the knowledge of C, made the note as surety for B, is no answer to a suit by C against 
A upon the note. 

133. **Discharge  of  surety  by  variance  in  terms  of  contract.**—Any  variance,  made  without  the 
surety’s consent, in the terms of the contract between the principal debtor and the creditor, discharges 
the surety as to transactions subsequent to the variance. 

*Illustrations*

  (a) A becomes surety to C for B’s conduct as a manager in C’s bank. Afterwards, B and C contract, without A’s consent, 
that B’s salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to 
overdraw, and the bank loses a sum of money. A is discharged from his suretyship by the variance made without his consent, and 
is not liable to make good this loss. 

  (b) A  guarantees  C  against  the  misconduct  of  B  in  an  office  to  which  B  is  appointed  by  C,  and  of  which  the  duties  are 
defined  by  an  Act  of  the  Legislature.  By  a  subsequent  Act,  the  nature  of  the  office  is  materially  altered.  Afterwards,  B 
misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in 
respect of a duty not affected by the later Act. 

  (c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting 
for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid 
by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B. 

  (d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit. Afterwards B 
becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready 
money, and that the payments shall be applied to the then, existing debts between B and C. A is not liable on his guarantee for 
any goods supplied after: this new arrangement. 

  (e) C contracts to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the 5,000 rupees to B on the 1st 
January. A is discharged from his liability, as the contract has been varied, inasmuch as C might sue B for the money before the 
1st of March. 

134. **Discharge of surety by release or discharge of principal debtor.**—The surety is discharged by 
any contract between the creditor and the principal debtor, by which the principal debtor is released, or by 
any  act  or  omission  of  the  creditor,  the  legal  consequence  of  which  is  the  discharge  of  the  principal 
debtor. 

*Illustrations*

  (a) A  gives  a  guarantee  to  C  for  goods  to  be  supplied  by  C  to  B.  C  supplies  goods  to  B,  and  afterwards  B  becomes 
embarrassed and contracts with his creditors (including C) to assign to them his property in consideration of their releasing him 
from their demands. Here B is released from his debt by the contract with C, and A is discharged from his suretyship. 

  (b) A  contracts  with  B  to  grow  a  crop  of  indigo on  A’s  land  and  to  deliver  it  to  B  at  a  fixed  rate,  and  C  guarantees  A’s 
performance of this contract. B diverts a stream of water which is necessary for the irrigation of A’s land and thereby prevents 
him from raising the indigo. C is no longer liable on his guarantee. 

  (c) A contracts with B for a fixed price to build a house for B within a stipulated time, B supplying the necessary timber. C 
guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship. 

135. **Discharge  of  surety  when  creditor  compounds  with,  gives  time  to,  or  agrees  not  to  sue, 
principal debtor.**—A contract between the creditor and the principal debtor, by which the creditor makes 
a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, 
unless the surety assents to such contract. 

136. **Surety  not  discharged when  agreement made with  third  person to  give  time to  principal 
debtor.**—Where  a  contract  to  give  time  to  the  principal  debtor  is  made  by  the  creditor  with  a  third 
person, and not with the principal debtor, the surety is not discharged. 

*Illustration*

  C, the holder of an overdue bill of exchange drawn by A as surety for B, and accepted by B, contracts with M to give time to 
B. A is not discharged. 

137. **Creditor’s forbearance to  sue does not discharge surety.**—Mere forbearance on the part of 
the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence 
of any provision in the guarantee to the contrary, discharge the surety. 

*Illustration*

  B owes  to  C  a debt  guaranteed by  A.  The  debt becomes  payable.  C does not  sue  B  for  a  year  after  the  debt has  become 
payable. A is not discharged from his suretyship. 

138. **Release of one co-surety does not discharge others.**—Where there are co-sureties, a release by 
the creditor of one of them does not discharge the others; neither does it free the surety so released from 
his responsibility to the other sureties.

139. **Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy.**—If 
the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which 
his  duty  to  the  surety  requires  him  to  do,  and  the  eventual  remedy  of  the  surety  himself  against  the 
principal debtor is thereby impaired, the surety is discharged. 

*Illustrations*

  (a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes 
surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is 
discharged by this prepayment. 

  (b) C lends money to B on the security of a joint and several promissory note made in C’s favour by B, and by A as surety 
for  B,  together  with  a  bill  of  sale  of  B’s  furniture,  which  gives  power  to  C  to  sell  the  furniture,  and  apply  the  proceeds  in 
discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and wilful negligence, only a small price 
is realized. A is discharged from liability on the note. 

  (c) A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part that he will, at least once 
a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee. 

140. **Rights of surety on payment or performance.**—Where a guaranteed debt has become due, or 
default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or 
performance of all that he is liable for, is invested with all the rights which the creditor had against the 
principal debtor. 

141. **Surety’s right to benefit of creditor’s securities.**—A surety is entitled to the benefit of every 
security which the creditor has against the principal debtor at the time when the contract of suretyship is 
entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, 
or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the 
value of the security. 

*Illustrations*

  (a) C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a 
mortgage of B’s furniture. C cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from 
liability to the amount of the value of the furniture. 

  (b) C, a creditor, whose advance to B is secured by a decree, receives also a guarantee for that advance from A. C afterwards 
takes B’s goods in execution under the decree, and then, without the knowledge of A, withdraws the execution. A is discharged. 

  (c) A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B. Afterwards, C obtains from B a further 
security for the same debt. Subsequently, C gives up the further security. A is not discharged. 

142. **Guarantee obtained by misrepresentation invalid.**—Any guarantee which has been obtained 
by  means  of  misrepresentation  made  by  the  creditor,  or  with  his  knowledge  and  assent,  concerning  a 
material part of the transaction, is invalid. 

143. **Guarantee obtained by concealment invalid.**—Any guarantee which the creditor has obtained 
by means of keeping silence as to material circumstances, is invalid. 

*Illustrations*

  (a) A engages B as clerk to collect money for him. B fails to account for some of his receipts, and A  in consequence calls 
upon him to furnish security for his duly accounting. C gives his guarantee for B’s duly accounting. A does not acquaint C with 
B’s previous conduct. B afterwards makes default. The guarantee is invalid. 
 
  (b) A  guarantees  to  C  payment  for  iron  to  be  supplied  by  him  to  B  to  the  amount  of  2,000  tons.  B  and  C  have  privately 
agreed that B should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This 
agreement is concealed from A. A is not liable as a surety. 

144. **Guarantee  on  contract  that  creditor  shall  not  act  on  it  until  co-surety  joins.**—Where  a 
person gives a guarantee upon a contract that the creditor shall not act upon it until another person has 
joined in it as co-surety, the guarantee is not valid if that other person does not join. 

145. **Implied  promise  to  indemnify  surety.**—In  every  contract  of  guarantee  there  is  an  implied 
promise  by  the  principal  debtor  to  indemnify  the  surety,  and  the  surety  is  entitled  to  recover  from  the 
principal debtor whatever sum he has rightfully paid under the guarantee, but, no sums which he has paid 
wrongfully. 

*Illustrations*

  (a) B is indebted to C, and A is surety for the debt. C demands payment from A, and on his refusal sues him for the amount. 
A defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can 
recover from B the amount paid by him for costs, as well as the principal debt. 

  (b) C  lends  B  a  sum  of  money,  and  A,  at  the  request  of  B,  accepts  a  bill  of  exchange  drawn  by  B  upon  A  to  secure  the 
amount. C, the holder of the bill, demands payment of it from A, and, on A’s refusal to pay, sues him upon the bill. A, not having 
reasonable grounds for so doing, defends the suit, and has to pay the amount of the bill and costs. He can recover from B the 
amount of the bill, but not the sum paid for costs, as there was no real ground for defending the action. 

  (c) A guarantees to C, to the extent of 2,000 rupees, payment for rice to be supplied by C to B. C supplies to B rice to a less 
amount  than  2,000  rupees,  but  obtains  from  A  payment  of  the  sum  of  2,000  rupees  in  respect  of  the  rice  supplied.  A  cannot 
recover from B more than the price of the rice actually supplied. 

146. **Co-sureties liable to contribute equally.**—Where two or more persons are co-sureties for the 
same  debt  or  duty,  either  jointly  or  severally,  and  whether  under  the  same  or  different  contracts,  and 
whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the 
contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of 
it which remains unpaid by the principal debtor. 

*Illustrations*

  (a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in payment. A, B and C are liable, as 
between themselves, to pay 1,000 rupees each. 

  (b) A, B and C are sureties to D for the sum of 1,000 rupees lent to E, and there is a contract between A, B and C that A is to 
be responsible to the extent of one-quarter, B to the extent of one- quarter, and C to the extent of one-half. E makes default in 
payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees. 

147. **Liability of co-sureties bound in different sums.**—Co-sureties who are bound in different sums 
are liable to pay equally as far as the limits of their respective obligations permit. 

*Illustrations*

  (a) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of each 
10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default 
to the extent of 30,000 rupees. A, B and C are each liable to pay 10,000 rupees. 

  (b) A,  B  and  C,  as  sureties  for  D,  enter  into  three  several  bonds,  each  in  a  different  penalty,  namely,  A  in  the  penalty  of 
10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default 
to the extent of 40,000 rupees. A is liable to pay 10,000 rupees, and B and C 15,000 rupees each. 

  (c) A,  B  and  C,  as  sureties  for  D,  enter  into  three  several  bonds,  each  in  a  different  penalty,  namely,  A  in  the  penalty  of 
10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default 
to the extent of 70,000 rupees. A, B and C have to pay each the full penalty of his bond. 

##CHAPTER IX 

###OF BAILMENT 

148. **“Bailment”“bailor”  and  “bailee”  defined.**—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”. 

*Explanation.*—If a person already in possession of the goods of another contracts to hold them as a 
bailee,  he  thereby  becomes  the  bailee,  and  the  owner  becomes  the  bailor  of  such  goods,  although  they 
may not have been delivered by way of bailment. 

149. **Delivery to bailee how  made.**—The  delivery  to  the  bailee  may  be  made  by  doing  anything 
which  has  the  effect  of  putting  the  goods  in  the  possession  of  the  intended  bailee  or  of  any  person 
authorized to hold them on his behalf. 

150. **Bailor’s duty to disclose faults in goods bailed.**—The bailor is bound to disclose to the bailee 
faults  in  the  goods  bailed,  of  which  the  bailor  is  aware,  and  which  materially  interfere  with  the  use  of 
them,  or  expose  the  bailee  to  extraordinary  risks;  and  if  he  does  not  make  such  disclosure,  he  is 
responsible for damage arising to the bailee directly from such faults. 

  If the goods are bailed for hire, the bailor is responsible for such damage, whether he was or was not 
aware of the existence of such faults in the goods bailed. 

*Illustrations*

  (a) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse 
runs away. B is thrown and injured. A is responsible to B for damage sustained. 

  (b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the 
injury. 

[^1]151. **Care to be taken by bailee.**—In all cases of bailment the bailee is bound to take as much care 
of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his 
own goods of the same bulk, quality and value as the goods bailed[^2].

152. **Bailee when not liable for loss, etc., of thing bailed.**—The bailee, in the absence of any special 
contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the 
amount of care of it described in section 151. 

153. **Termination  of  bailment  by  bailee’s  act  inconsistent  with  conditions.**—A  contract  of 
bailment is avoidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, 
inconsistent with the conditions of the bailment. 

*Illustration*

  A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the ‘option of A, a termination 
of the bailment. 

154. **Liability of bailee making unauthorized use of goods bailed.**—If the bailee makes any use of 
the  goods  bailed  which  is  not  according  to  the  conditions  of  the  bailment,  he  is  liable  to  make 
compensation to the bailor for any damage arising to the goods from or during such use of them. 

[^1]. The  responsibility  of  the  Trustees  of  the  Port  of  Madras  constituted  under  the  Madras  Port  Trust  Act,  1905  (Madras  Act  
2 of 1905), in regard to goods has been declared to be that of a bailee under these sections, without the qualifying words “in the 
absence of any special contract” in s. 152, see s. 40(1) of that Act. 

[^2].As to railway contracts  see the Indian Railways  Act, 1890 (9 of 1890), s. 72. As to the liability of common carriers,  see the 
Carriers Act, 1865 (3 of 1865), s. 8. 

 
*Illustrations*

  (a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but 
the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse. 

  (b) A hires a horse in Calcutta from B expressly to march to Benares. A rides with due care, but marches to Cuttack instead. 
The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse. 

155. **Effect of mixture, with bailor’s consent, of his goods with bailee’s.**—If the bailee, with the 
consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall 
have an interest, in proportion to their respective shares, in the mixture thus produced. 

156. **Effect of mixture without bailor’s consent, when the goods can be separated.**—If the bailee, 
without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be 
separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound 
to bear the expense of separation or division, and any damage arising from the mixture. 

*Illustration*

  A bails 100 bales of cotton marked with a particular mark to B. B, without A’s consent, mixes the 100 bales with other bales 
of his own, bearing a different mark: A is entitled to have his 100 bales returned, and B is bound to bear all the expense incurred 
in the separation of the bales, and any other incidental damage. 

157. **Effect  of  mixture,  without  bailor’s  consent,  when  the  goods  cannot  be  separated.**—If  the 
bailee,  without  the  consent  of  the  bailor,  mixes  the  goods  of  the  bailor  with  his  own  goods,  in  such  a 
manner that it is impossible to separate the goods bailed from the other goods, and deliver them back, the 
bailor is entitled to be compensated by the bailee for the loss of the goods. 

*Illustration*

  A  bails  a  barrel  of  Cape  flour  worth  Rs.  45  to  B.  B,  without  A’s  consent,  mixes  the  flour  with  country  flour  of  his own, 
worth only Rs. 25 a barrel. B must compensate A for the loss of his flour. 

158. **Repayment, by bailor, of necessary expenses.**—Where, by the conditions of the bailment, the 
goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the 
bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred 
by him for the purpose of the bailment. 

159. **Restoration of goods lent gratuitously.**—The lender of a thing for use may at any time require 
its return, if the loan was gratuitous, even though he lent it for a specified time or purpose. But if, on the 
faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the 
return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually 
derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the 
amount in which the loss so occasioned exceeds the benefit so derived. 

160. **Return of goods bailed, on expiration of time or accomplishment of purpose.**—It is the duty 
of the bailee to return, or deliver according to the bailor’s directions, the goods bailed, without demand, as 
soon as the time for which they were bailed has expired, or the purpose for which they were bailed has 
been accomplished. 

[^1]161. **Bailee’s responsibility when goods are not duly returned.**—If, by the default of the bailee, 
the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any 
loss, destruction or deterioration of the goods from that time.[^2]

[^1]. S. 161 has been declared to apply to the responsibility of the Trustees of the Port of Madras as to goods in their possession 
seethe Madras Port Trust Act, 1905 (Madras Act 2 of 1905). 

[^2]. As to Railway contracts, see the Indian Railways Act, 1890 (9 of 1890), s. 72. 



162. **Termination of gratuitous bailment by death.**—A  gratuitous  bailment  is  terminated  by  the 
death either of the bailor or of the bailee. 

163. **Bailor entitled to increase or profit from goods bailed.**—In the absence of any contract to the 
contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit 
which may have accrued from the goods bailed. 

*Illustration*

  A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow 
to A. 

164. **Bailor’s responsibility to bailee.**—The bailor is responsible to the bailee for any loss which the 
bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the 
goods, or to give directions respecting them. 

165. **Bailment by several joint owners.**—If several joint owners of goods bail them, the bailee may 
deliver them back to, or according to the directions of, one joint owner without the consent of all in the 
absence of any agreement to the contrary. 

166. **Bailee not responsible on re-delivery to bailor without title.**—If the bailor has no title to the 
goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the 
bailee is not responsible to the owner in respect of such delivery.

167. **Right of third person claiming goods bailed.**—If a person, other than the bailor, claims goods 
bailed he may apply to the Court to stop the delivery of the goods to the bailor, and to decide the title to 
the goods. 

168. **Right of finder of goods,  may sue for specific reward offered.**—The finder of goods has no 
right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve 
the goods and to find out the owner; but he may retain the goods against the owner until he receives such 
compensation; and, where the owner has offered a specific reward for the return of goods lost, the finder 
may sue for such reward, and may retain the goods until he receives it. 

169. **When finder of thing commonly on sale may sell it.**—When a thing which is commonly the 
subject  of  sale  is  lost,  if  the  owner  cannot  with  reasonable  diligence  be  found,  or  if  he  refuses,  upon 
demand, to pay the lawful charges of the finder, the finder may sell it— 

  (1) when the thing is in danger of perishing or of losing the greater part of its value, or, 

  (2) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of 
its value. 

170. **Bailee’s particular lien.**—Where  the  bailee  has,  in  accordance  with  the  purpose  of  the 
bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he 
has,  in  the  absence  of  a  contract  to  the  contrary,  a  right  to  retain  such  goods  until  he  receives  due 
remuneration for the services he has rendered in respect of them. 

*Illustrations*

  (a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the 
stone till he is paid for the services he has rendered. 

  (b) A gives, cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a 
three months’ credit for the price. B is not entitled to retain the coat until he is paid. 

171. **General  lien  of  bankers,  factors,  wharfingers,  attorneys  and  policy-brokers.**—Bankers, 
factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the 
contrary,  retain  as  a  security  for  a  general  balance  of  account,  any  goods  bailed  to  them;  but  no  other 
persons  have  a  right  to  retain,  as  a  security  for  such  balance,  goods  bailed  to  them,  unless  there  is  an 
express contract to that effect.

*Bailments of Pledges*

172. **“Pledge”“pawnor”,and “pawnee” defined.**—The bailment of goods as security for payment of 
a debt or performance of a promise is called “pledge”. The bailor is in this case called the “pawnor”. The 
bailee is called the “pawnee”. 

173. **Pawnee’s right of retainer.**—Thepawnee may retain the goods pledged, not only for payment of 
the debt  or the  performance  of  the  promise, but  for the  interest  of  the  debt,  and  all  necessary  expenses 
incurred by him in respect of the possession or for the preservation of the goods pledged. 

174. **Pawnee  not  to  retain  for  debt  or  promise  other  than  that  for  which  goods  pledged. 
Presumption in case of subsequent advances.**—The pawnee shall not, in the absence of a contract to 
that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they 
are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to 
subsequent advances made by the pawnee. 

175. **Pawnee’s right as to extraordinary expenses incurred.**—Thepawnee  is  entitled  to  receive 
from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged. 

176. **Pawnee’s right where pawnor makes default.**—If the pawnor makes default in payment of the 
debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, 
the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as 
a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. 

  If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor 
is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee 
shall pay over the surplus to the pawnor. 

177. **Defaulting pawner’s right to redeem.**—If a time is stipulated for the payment of the debt, or 
performance of the promise, for which the pledge is made, and the pawnor makes default in payment of 
the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any 
subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expenses 
which have arisen from his default. 

178. **Pledge by mercantile agent.**—Where a mercantile agent is, with the consent of the owner, in 
possession  of  goods  or  the  document  of  title  to  goods,  any  pledge  made  by  him,  when  acting  in  the 
ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by 
the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at the 
time of the pledge notice that the pawnor has not authority to pledge. 

*Explanation.*—In this section, the expressions “mercantile agent” and “documents of title” shall have 
the meanings assigned to them in the Indian Sale of Goods Act, 1930 (3 of 1930). 

178A. **Pledge by person in possession under voidable contract.**—When the pawnor has obtained 
possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but 
the  contract  has  not  been  rescinded  at  the  time  of  the  pledge,  the  pawnee  acquires  a  good  title  to  the 
goods, provided he acts in good faith and without notice of the pawnor’s defect of title.

179. **Pledge where pawnor has only a limited interest.**—Where a person pledges goods in which 
he has only a limited interest, the pledge is valid to the extent of that interest. 

*Suits by bailees or bailors against wrong-doers*

180. **Suit by bailor or bailee against wrong-doer.**—If a third person wrongfully deprives the bailee 
of the use or possession of the goods bailed, or does them any injury, the bailee is entitled to use such 
remedies  as  the  owner  might  have  used  in  the  like  case  if  no  bailment  had  been  made;  and  either  the 
bailor or the bailee may bring a suit against a third person for such deprivation or injury. 

181. **Apportionment of relief or compensation obtained by such suits.**—Whatever is obtained by 
way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with 
according to their respective interests. 

##CHAPTER X 

###AGENCY 

*Appointment and authority of agents*

182. **“Agent” and “principal” defined.**—An “agent” is a person employed to do any act for another, 
or to represent another in dealings with third persons. The person for whom such act is done, or who is so 
represented, is called the “principal”. 

183. **Who may employ agent.**—Any person who is of the age of majority according to the law to 
which he is subject, and who is of sound mind, may employ an agent. 

184. **Who may be an agent.**—As between the principal and third persons, any person may become 
an agent, but no person who is not of the age of majority and of sound mind can become an agent, so as to 
be responsible to his principal according to the provisions in that behalf herein contained. 

185. **Consideration not necessary.**—No consideration is necessary to create an agency. 

186. **Agent’s authority may be expressed or implied.**—The authority of an agent may be expressed 
or implied.

187. **Definitions of express and implied authority.**—An authority is said to be express when it is 
given by words spoken or written. An authority is said to be  implied when it is to be inferred from the 
circumstances  of  the  case;  and  things  spoken  or  written,  or  the  ordinary  course  of  dealing,  may  be 
accounted circumstances of the case. 

*Illustration*

  A owns a shop in Serampore, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B, and 
he is in the habit of ordering goods from C in the name of A for the purposes of the shop, and of paying for them out of A’s funds 
with A’s knowledge. B has an implied authority from A to order goods from C in the name of A for the purposes of the shop. 

188. **Extent of agent’s authority.**—An agent, having an authority to do an act, has authority to do 
every lawful thing which is necessary in order to do such act. 

  An agent having an authority to carry on a business, has authority to do every lawful thing necessary 
for the purpose, or usually done in the course, of conducting such business. 
 
*Illustrations*

  (a) A is employed by B, residing in London, to recover at Bombay a debt due to B. A may adopt any legal process necessary 
for the purpose of recovering the debt, and may give a valid discharge for the same. 

  (b) A constitutes B his agent to carry on his business of a ship-builder. B may purchase timber and other materials, and hire 
workmen, for the purpose of carrying on the business. 

189. **Agent’s authority in an emergency.**—An agent has authority, in an emergency, to do all such 
acts  for  the  purpose  of  protecting  his  principal  from  loss  as  would  be  done  by  a  person  of  ordinary 
prudence, in his own case, under similar circumstances. 

*Illustrations*

  (a) An agent for sale may have goods repaired if it be necessary. 

  (b) A  consigns  provisions  to  B  at  Calcutta,  with  directions  to  send  them  immediately  to  C,  at  Cuttack.  B  may  sell  the 
provisions at Calcutta, if they will not bear the journey to Cuttack without spoiling. 

*Sub-Agents*

190. **When agent cannot delegate.**—An  agent  cannot  lawfully  employ  another  to  perform  acts 
which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of 
trade a sub-agent may, or, from the nature of the agency, a sub-agent must, be employed. 

191. **“Sub-agent” defined.**—A “sub-agent” is a person employed by, and acting under the control of, 
the original agent in the business of the agency. 

192. **Representation of principal by sub-agent properly appointed.**—Where  a  sub-agent  is 
properly appointed, the principal is, so far as regards third persons, represented by the sub-agent, and is 
bound by and responsible for his acts, as if he were an agent originally appointed by the principal. 

**Agent’s responsibility for sub-agent.**—The agent is responsible to the principal for the acts of the 
sub-agent. 

**Sub-agent’s responsibility.**—The  sub-agent  is  responsible  for  his  acts  to  the  agent,  but  not to the 
principal, except in cases of fraud or wilful wrong. 

193. **Agent’s responsibility for sub-agent appointed without authority.**—Where an agent, without 
having  authority  to  do  so,  has  appointed  a  person  to  act  as  a  sub-agent,  the  agent  stands  towards  such 
person in the relation of a principal to an agent, and is responsible for his acts both to the principal and to 
third persons; the principal is not represented, by or responsible for the acts of the person so employed, 
nor is that person responsible to the principal. 

194. **Relation  between  principal  and  person  duly  appointed  by  agent  to  act  in  business  of 
agency.**—Where an agent, holding an express or implied authority to name another person to act for the 
principal  in  the  business  of  the  agency,  has  named  another  person  accordingly,  such  person  is  not  a 
sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him. 

*Illustrations*

  (a) A  directs  B,  his  solicitor,  to  sell  his  estate  by  auction,  and  to  employ  an  auctioneer  for  the  purpose.  B  names  C,  an 
auctioneer, to conduct the sale. C is not a sub-agent, but is A’s agent for the conduct of the sale. 

  (b) A authorizes B, a merchant in Calcutta, to recover the moneys due to A from C & Co. B instructs D, a solicitor, to take 
legal proceedings against C & Co. for the recovery of the money. D is not a sub-agent, but is solicitor for A. 

195. **Agent’s duty in naming such person.**—In  selecting  such  agent for  his  principal,  an  agent  is 
bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own 
case; and, if he does this, he is not responsible to the principal for the acts or negligence of the agent so 
selected. 

*Illustrations*

  (a) A instructs B, a merchant, to buy a ship for him. B employs a ship-surveyor of good reputation to choose a ship for A. 
The surveyor  makes the choice  negligently and the ship turns out to be unseaworthy and is lost. B is not, but the surveyor is, 
responsible to A. 

  (b) A consigns goods to B, a merchant, for sale. B, in due course, employs an auctioneer in good credit to sell the goods of A, 
and  allows  the  auctioneer  to  receive  the  proceeds  of  the  sale.  The  auctioneer  afterwards  becomes  insolvent  without  having 
accounted for the proceeds. B is not responsible to A for the proceeds. 

*Ratification*

196. **Right of person as to acts done for him without his authority. Effect of ratification.**—
Where acts are done by one person on behalf of another, but without his knowledge or authority, he may 
elect to ratify or to disown such acts. If he ratify them, the same effects will follow as if they had been 
performed by his authority. 

197. **Ratification may be expressed or implied.**—Ratification may be expressed or may be implied 
in the conduct of the person on whose behalf the acts are done. 

*Illustrations*

  (a) A,  without  authority,  buys  goods  for  B.  Afterwards  B  sells  them  to  C  on  his  own  account;  B’s  conduct  implies  a 
ratification of the purchase made for him by A. 

  (b) A, without B’s authority, lends B’s money to C. Afterwards B accepts interest on the money from C. B’s conduct implies 
a ratification of the loan. 

198. **Knowledge  requisite  for  valid  ratification.**—No  valid  ratification  can  be  made  by  a  person 
whose knowledge of the facts of the case is materially defective. 

199. **Effect of ratifying unauthorized act forming part of a transaction.**—A person ratifying any 
unauthorized act done on his behalf ratifies the whole of the transaction of which such act formed a part. 

200. **Ratification of unauthorized act cannot injure third person.**—An act done by one person on 
behalf of another, without such other person’s authority, which, if done with authority, would have the 
effect of subjecting a third person to damages, or of terminating any right or interest of a third person, 
cannot, by ratification, be made to have such effect. 

*Illustrations*

  (a) A, not being authorized thereto by B, demands, on behalf of B, the delivery of a chattel, the property of B, from C, who is 
in possession of it. This demand cannot be ratified by B, so as to make C liable for damages for his refusal to deliver. 

  (b) A holds a lease from B, terminable on three months’ notice. C, an unauthorized person, gives notice of termination to A. 
The notice cannot be ratified by B, so as to be binding on A. 

*Revocation of Authority*

201. **Termination of agency.**—An agency is terminated by the principal revoking his authority; or 
by the agent renouncing the business of the agency; or by the business of the agency being completed; or 
by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated 
an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors. 

202. **Termination of agency, where agent has an interest in subject-matter.**—Where the agent has 
himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the 
absence of an express contract, be terminated to the prejudice of such interest. 

*Illustrations*

  (a) A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot 
revoke this authority, nor can it be terminated by his insanity or death. 

  (b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, 
and to repay himself out of the price, the amount of his own advances. A cannot revoke this authority, nor is it terminated by his 
insanity or death. 

203. **When principal may revoke agent’s authority.**—The  principal  may,  save  as  is  otherwise 
provided  by  the  last  preceding  section,  revoke  the  authority  given  to  his  agent  at  any  time  before  the 
authority has been exercised so as to bind the principal. 

204. **Revocation  where  authority  has  been  partly  exercised.**—The  principal  cannot  revoke  the 
authority given to his agent after the authority has been partly exercised, so far as regards such acts and 
obligations as arise from acts already done in the agency. 

*Illustrations*

  (a) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s moneys remaining in B’s hands. 
B  buys  1,000  bales  of  cotton  in  his  own  name,  so  as  to  make  himself  personally  liable  for  the  price.  A  cannot  revoke  B’s 
authority so far as regards payment for the cotton. 

  (b) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s moneys remaining in B’s hands. 
B  buys  1,000  bales  of  cotton  in  A’s  name,  and  so  as  not  to  render  himself  personally  liable  for  the  price.  A  can  revoke  B’s 
authority to pay for the cotton. 

205. **Compensation for revocation by principal, or renunciation by agent.**—Where  there  is  an 
express or implied contract that the agency should be continued for any period of time, the principal must 
make  compensation  to  the  agent,  or  the  agent  to  the  principal,  as  the  case  may  be,  for  any  previous 
revocation or renunciation of the agency without sufficient cause. 

206. **Notice of revocation or renunciation.**—Reasonable notice must be given of such revocation or 
renunciation,  otherwise  the  damage  thereby  resulting  to  the  principal  or  the  agent,  as  the  case  may  be, 
must be made good to the one by the other. 

207. **Revocation and renunciation may be expressed or implied.**—Revocation  and  renunciation 
may be expressed or may be implied in the conduct of the principal or agent respectively. 

*Illustration*

  A empowers B to let  A’s  house.  Afterwards  A lets it  himself.  This is  an implied revocation  of 
B’s authority. 

208. **When termination of agent’s authority takes effect as to  agent, and as to third persons.**—
The  termination  of  the  authority  of  an  agent  does  not,  so  far  as  regards  the  agent,  take  effect  before  it 
becomes known to him, or, so far as regards third persons, before it becomes known to them. 

*Illustrations*

  (a) A directs B to sell goods for him, and agrees to give B five per cent. commission on the price fetched by the goods. A 
afterwards, by letter, revoke B’s authority. B, after the letter is sent, but before he receives it, sells the goods for 100 rupees. The 
sale is binding on A, and B is entitled to five rupees as his commission. 

  (b) A, at Madras, by letter, directs B to sell for him some cotton lying in a warehouse in Bombay, and afterwards, by letter, 
revokes his authority to sell, and directs B to send the cotton to Madras. B, after receiving the second letter, enters into a contract 
with C, who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B the money, with which B 
absconds. C’s payment is good as against A. 

  (c) A directs B, his agent, to pay certain money to C. A dies, and D takes out probate to his will. B, after  A’s death, but 
before hearing of it, pays the money to C. The payment is good as against D, the executor. 

209. **Agent’s duty on termination of agency by principal’s death or insanity.**—When an agency is 
terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of 
the  representatives  of  his  late  principal,  all  reasonable  steps  for  the  protection  and  preservation  of  the 
interests entrusted to him. 

210. **Termination of sub-agent’s authority.**—The  termination  of the authority  of  an  agent causes 
the termination (subject to the rules herein contained regarding the termination of an agent’s authority) of 
the authority of all sub-agents appointed by him. 

*Agent’s duty to principal*

211. **Agent’s duty in conducting principal’s business.**—An agent is bound to conduct the business 
of  his  principal  according  to  the  directions  given  by  the  principal,  or,  in  the  absence  of  any  such 
directions, according to the custom which prevails in doing business of the same kind at the place where 
the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it 
good to his principal, and if any profit accrues, he must account for it. 

*Illustrations*

  (a) A, an agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the 
moneys  which  may be in hand, omits to make such investment. A  must  make good to B the interest usually obtained by such 
investments. 

  (b) B, a broker, in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the 
time was very high. C, before payment, becomes insolvent. B must make good the loss to A. 

212. **Skill and diligence required from agent.**—An agent is bound to conduct the business of the 
agency  with as  much  skill  as is  generally  possessed by  persons  engaged  in  similar  business,  unless the 
principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and 
to  use  such  skill  as  he  possesses;  and  to  make  compensation  to  his  principal  in  respect  of  the  direct 
consequences of his own neglect, want of skill, or misconduct, but not in respect of loss or damage which 
are indirectly or remotely caused by such neglect, want of skill, or misconduct. 

*Illustrations*

  (a) A, a merchant in Calcutta, has an agent, B, in London, to whom a sum of money is paid on A’s account, with orders to 
remit. B retains the money for a considerable time. A, in consequence of not receiving the money, becomes insolvent. B is liable 
for  the  money  and  interest  from  the  day  on  which  it ought  to  have  been  paid,  according  to  the usual  rate,  and  for  any  further 
direct loss-as, e.g., by variation of rate of exchange-but not further. 

  (b) A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and 
usual enquiries as to the solvency of B. B, at the time of such sale, is insolvent. A must make compensation to his principal in 
respect of any loss thereby sustained. 

  (c) A, an insurance-broker employed by B to effect an insurance on a ship, omits to see that the usual clauses are inserted in 
the  policy.  The  ship  is  after  wards  lost.  In  consequence  of  the  omission  of  the  clauses  nothing  can  be  recovered  from  the 
underwriters. A is bound to make good the loss to B. 

  (d) A, a merchant in England, directs B, his agent at Bombay, who accepts the agency, to send him 100 bales of cotton by a 
certain ship. B, having it in his power to send the cotton, omits to do so. The ship arrives safely in England. Soon after her arrival 
the price of cotton rises. B is bound to make good to A the profit which he might have made by the 100 bales of cotton at the time 
the ship arrived, but not any profit he might have made by the subsequent rise. 

213. **Agent’s accounts.**—An agent is bound to render proper accounts to his principal on demand. 

214. **Agent’s duty to communicate with principal.**—It is the duty of an agent, in cases of difficulty, 
to  use  all  reasonable  diligence  in  communicating  with  his  principal,  and  in  seeking  to  obtain  his 
instructions. 

215. **Right  of  principal  when  agent  deals,  on  his  own  account,  in  business  of  agency  without 
principal’s consent.**—If an agent deals on his own account in the business of the agency, without first 
obtaining  the  consent  of  his  principal  and  acquainting  him  with  all  material  circumstances  which  have 
come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows, 
either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of 
the agent have been disadvantageous to him. 

*Illustrations*

  (a) A directs B to sell A’s estate. B buys the estate for himself in the name of C. A, on discovering that B has bought the 
estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material fact, or that the sale has 
been disadvantageous to him. 

  (b) A directs B to sell A’s estate B, on looking over the estate before selling it, finds a mine on the estate which is unknown 
to A. B informs  A that he wishes to buy the estate  for himself, but conceals the discovery of the mine.  A allows B to buy, in 
ignorance of the existence of the mine. A, on discovering that  B knew of the mine at the time he bought the estate, may either 
repudiate or adopt the sale at his option. 

216. **Principal’s  right  to  benefit  gained  by  agent  dealing  on  his  own  account  in  business  of 
agency.**—If an agent, without the knowledge of his principal, deals in the business of the agency on his 
own account instead of on account of his principal, the principal is entitled to claim from the agent any 
benefit which may have resulted to him from the transaction. 

*Illustration*

  A directs B, his agent, to buy a certain house for him. B tells A it cannot be bought, and buys the house for himself. A may, 
on discovering that B has bought the house, compel him to sell it to A at the price he gave for it. 

217. **Agent’s right of retainer out of sums received on principal’s account.**—An agent may retain, 
out  of  any  sums  received  on  account  of  the  principal  in  the  business  of  the  agency,  all  moneys  due  to 
himself in respect of advances made or expenses properly incurred by him in conducting such business, 
and also such remuneration as may be payable to him for acting as agent. 

218. **Agent’s duty to pay sums received for principal.**—Subject  to  such  deductions, the  agent is 
bound to pay to his principal all sums received on his account. 

219. **When agent’s remuneration becomes due.**—In  the  absence  of any  special  contract,  payment 
for the performance of any act is not due to the agent until the completion of such act; but an agent may 
detain moneys received by him on account of goods sold, although the whole of the goods consigned to 
him for sale may not have been sold, or although the sale may not be actually complete. 

220. **Agent  not  entitled  to  remuneration for  business misconducted.**—An  agent  who is  guilty  of 
misconduct in the business of the agency, is not entitled to any remuneration in respect of that part of the 
business which he has misconducted. 

*Illustrations*

  (a) A employs B to recover, 1,00,000 rupees from C, and to lay it out on good security. B recovers the 1,00,000 rupees; and 
lays  out  90,000  rupees  on  good  security,  but  lays  out  10,000  rupees  on  security  which  he  ought  to  have  known  to  be  bad, 
whereby  A  loses  2,000  rupees.  B  is  entitled  to  remuneration  for  recovering  the  1,00,000  rupees  and  for  investing  the  90,000 
rupees. He is not entitled to any remuneration for investing the 10,000 rupees, and he must make good the 2,000 rupees to B. 

  (b) A employs B to recover 1,000 rupees from C. Through B’s misconduct the money is not recovered. B is entitled to no 
remuneration for his services, and must make good the loss. 

221. **Agent’s lien on principal’s property.**—In the absence of any contract to the contrary, an agent 
is  entitled  to  retain  goods,  papers  and  other  property,  whether  movable  or  immovable  of  the  principal 
received by him, until the amount due to himself for commission, disbursements and services in respect 
of the same has been paid or accounted for to him. 

*Principal’s duty to agent*

222. **Agent to be indemnified against consequences of lawful acts.**—The employer of an agent is 
bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the 
authority conferred upon him. 

*Illustrations*

  (a) B, at Singapur, under instructions from A of Calcutta, contracts with C to deliver certain goods to  him. A does not send 
the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit. B defends 
the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses. 

  (b) B, a broker at Calcutta, by the orders of A, a merchant there, contracts with C for the purchase of 10 casks of oil for A. 
Afterwards  A  refuses  to  receive  the  oil,  and  C  sues  B.  B  informs  A,  who  repudiates  the  contract  altogether.  B  defends,  but 
unsuccessfully, and has to pay damages and costs and incurs expenses. A is liable to B for such damages, costs and expenses. 

223. **Agent to be indemnified against consequences of acts done in good faith.**—Where one person 
employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify 
the agent against the consequences of that act, though it cause an injury to the rights of third persons. 

*Illustrations*

  (a) A,  a  decree-holder  and  entitled  to  execution  of  B’s  goods,  requires  the  officer  of  the  Court  to  seize  certain  goods, 
representing them to be the goods of B. The officer seizes the goods, and is sued by C, the true owner of the goods. A is liable to 
indemnify the officer for the sum which he is compelled to pay to C, in consequence of obeying A’s directions. 

  (b) B, at the request of A, sells goods in the possession of A, but which A had no right to dispose of,  B does not know this, 
and hands over the proceeds of the sale to A. Afterwards C, the true owner of the goods, sues B and recovers the value of the 
goods and costs. A is liable to indemnify B for what he has been compelled to pay to C, and for B’s own expenses. 

224. **Non-liability of employer of agent to do a criminal act.**—Where one person employs another 
to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied 
promise, to indemnify him against the consequences of that Act. 

*Illustrations*

  (a) A employs B to beat C, and agrees to indemnify him against all consequences of the act. B thereupon beats C, and has to 
pay damages to C for so doing. A is not liable to indemnify B for those damages. 

  (b) B,  the proprietor of  a  newspaper,  publishes,  at  A’s  request,  a  libel  upon  C  in  the  paper,  and  A  agrees  to  indemnify  B 
against the consequences of the publication, and all costs and damages of any action in respect thereof. B is sued by C and has to 
pay damages, and also incurs expenses. A is not liable to B upon the indemnity. 

225. **Compensation to agent for injury caused by principal’s neglect.**—The principal must make 
compensation to his agent in respect of injury caused to such agent by the principal’s neglect or want of 
skill. 

*Illustration*

  A employs B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskilfully put up, 
and B is in consequence hurt. A must make compensation to B. 

*Effect of agency on contracts with third persons*

226. **Enforcement and consequences of agent’s contracts.**—Contracts  entered  into  through  an 
agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will 
have  the  same  legal  consequences,  as  if  the  contracts  had  been  entered  into  and  the  acts  done  by  the 
principal in person. 

*Illustrations*

  (a) A buys goods from B, knowing that he is an agent for their sale, but not knowing who is the principal. B’s principal is the 
person entitled to claim from A the price of the goods, and A cannot, in a suit by the principal, set-off against that claim a debt 
due to himself from B. 
 
  (b) A, being  B’s  agent,  with  authority  to  receive  money  on  his  behalf,  receives  from  C  a  sum  of  money  due  to  B.  C  is 
discharged of his obligation to pay the sum in question to B. 

227. **Principal how far bound, when agent exceeds authority.**—When an agent does more than he 
is authorized to do, and when the part of what he does, which is within his authority, can be separated 
from the part which is beyond his authority, so much only of what he does as is within his authority is 
binding as between him and his principal. 

*Illustration*

  A, being owner of a ship and cargo, authorizes B to procure an insurance for 4,000 rupees on the ship. B procures a policy 
for 4,000 rupees on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, 
but not the premium for the policy on the cargo. 

228. **Principal  not  bound when excess of agent’s authority is not separable.**—Where  an  agent 
does  more  than  he  is  authorized  to  do,  and  what  he  does  beyond  the  scope  of  his  authority  cannot  be 
separated from what is within it, the principal is not bound to recognize the transaction. 

*Illustration*

  A authorizes B to buy 500 sheep for him. B buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A may repudiate 
the whole transaction. 

229. **Consequences of notice given to agent.**—Any notice  given  to  or  information obtained  by the 
agent, provided it be given or obtained in the course of the business transacted by him for the principal, 
shall, as between the principal and third parties, have the same legal consequences as if it had been given 
to or obtained by the principal. 

*Illustrations*

  (a) A is employed by B to buy from C certain goods, of which C is the apparent owner, and buys them accordingly. In the 
course of the treaty for the sale, A learns that the goods really belonged to D, but B is ignorant of that fact. B is not entitled to  
set-off a debt owing to him from C against the price of the goods. 

  (b) A is employed by B to buy from C goods of which C is the apparent owner. A was, before he was so employed, a servant 
of C, and then learnt that the goods really belonged to D, but B is ignorant of that fact. In spite of the knowledge of his agent, B 
may set-off against the price of the goods a debt owing to him from C. 

230. **Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.**—In the 
absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on 
behalf of his principal, nor is he personally bound by them. 

**Presumption of contract to contrary**—Such a contract shall be presumed to exist in the following 
cases:— 

  (1)  where  the  contract  is  made  by  an  agent  for  the  sale  or  purchase  of  goods  for  a  merchant 
resident abroad; 

  (2) where the agent does not disclose the name of his principal; 

  (3) where the principal, though disclosed, cannot be sued. 

231. **Rights  of  parties  to  a  contract  made  by  agent not  disclosed.**—If  an  agent  makes  a  contract 
with a person who neither knows, nor has reason to suspect, that he is an agent, his principal may require 
the  performance  of  the  contract;  but  the  other  contracting  party  has,  as  against  the  principal,  the  same 
rights as he would have had as against the agent if the agent had been principal. 

If  the  principal  discloses  himself  before  the  contract  is  completed,  the  other  contracting  party  may 
refuse to fulfil the contract, if he can show that, if he had known who was the principal in the contract, or 
if he had known that the agent was not a principal, he would not have entered into the contract. 

232. **Performance  of  contract  with  agent  supposed  to  be  principal.**—Where  one  man  makes  a 
contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, 
the principal, if he requires the performance of the contract, can only obtain such performance subject to 
the rights and obligations subsisting between the agent and the other party to the contract. 

*Illustration*

  A, who owes 500 rupees to B, sells 1,000 rupees worth of rice to B. A is acting as agent for C in the transaction, but B has 
no knowledge nor reasonable ground of suspicion that such is the case. C cannot compel B to take the rice without allowing him 
to set-off A’s debt. 

233. **Right of person dealing with agent personally liable.**—In cases where the agent is personally 
liable, a person dealing with him may hold either him or his principal, or both of them, liable. 

*Illustration*

  A enters into a contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C. A 
may sue either B or C, or both, for the price of the cotton. 

234. **Consequence of inducing agent or principal to act on belief that principal or agent will be 
held exclusively liable.**—When a person who has made a contract with an agent induces the agent to act 
upon the belief that the principal only will be held liable, or induces the principal to act upon the belief 
that the agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively. 

235. **Liability of pretended agent.**—A  person  untruly  representing  himself  to  be  the  authorized 
agent  of  another,  and  thereby  inducing  a  third  person  to  deal  with  him  as  such  agent,  is  liable,  if  his 
alleged  employer  does  not  ratify  his  acts,  to  make  compensation  to  the  other  in  respect  of  any  loss  or 
damage which he has incurred by so dealing. 

236. **Person  falsely  contracting  as  agent  not  entitled  to  performance.**—A  person  with  whom  a 
contract has been entered into in the character of agent, is not entitled to require the performance of it, if 
he was in reality acting, not as agent, but on his own account. 

237. **Liability  of  principal  inducing  belief  that  agent’s  unauthorized  acts  were  authorized.**—
When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his 
principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced 
such third persons to believe that such acts and obligations were within the scope of the agent’s authority. 

*Illustrations*

  (a) A  consigns  goods  to  B  for  sale,  and  gives  him  instructions  not  to  sell  under  a  fixed  price.  C,  being  ignorant  of  B’s 
instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract. 

  (b) A entrusts B with negotiable instruments endorsed in blank. B sells them to C in violation of private orders from A. The 
sale is good. 

238. **Effect, on agreement, of misrepresentation of fraud, by agent.**—Misrepresentation made, or 
frauds  committed,  by  agents  acting  in  the  course  of  their  business  for  their  principals,  have  the  same 
effect  on  agreements  made  by  such  agents  as  if  such  misrepresentations  or  frauds  had  been  made  or 
committed  by  the  principals;  but  misrepresentations  made,  or  frauds  committed,  by  agents,  in  matters 
which do not fall within their authority, do not affect their principals. 

*Illustrations*

  (a) A, being B’s agent for the sale of goods, induces C to buy them by a misrepresentation, which he was not authorized by 
B to make. The contract is voidable, as between B and C, at the option of C. 

  (b) A, the captain of B’s ship, signs bills of lading without having received on board the goods mentioned therein. The bills 
of lading are void as between B and the pretended cosignor. 


CHAPTER XI.—*[OF PARTNERSHIP.]Rep. by the Indian Partnership Act, 1932 (9  of 1932), s.  73 
and the Second Schedule.*

239. [‘Partnership’ defined.] Rep. by s. 73 and the Second Schedule, ibid. 

240. [Lender not a partner by advancing money for share of profits.] Rep. by s. 73 and the Second 
Schedule, ibid. 

241. [Property left in business by retiring partner, or decreased partner’s preventative.] Rep. by s. 73 
and the Second Schedule, ibid. 

242. [Servant or agent remunerated by share of profits, not a partner.] Rep. by s. 73 and the Second 
Schedule, ibid. 

243. [Widow or child of deceased partner receiving annuity out of profits, not a partner.] Rep. by s. 
73 and the Second Schedule, ibid. 

244. [Person receiving portion of profits for sale of good-will, no a partner.] Rep. by s. 73 and the 
Second Schedule, ibid. 

245. [Responsibility of person leading another to believe him a partner.] Rep. by s. 73 and the Second 
Schedule, ibid. 

246. [Liability of person permitting him self to be represented as a partner.] Rep. by s. 73 and the 
Second Schedule, ibid. 

247. [Minor partner not personally liable, but his share is.] Rep. by s. 73 and the Second Schedule, 
ibid. 

248. [Liability of minor partner on attaining majority.] Rep. by s. 73 and the Second Schedule, ibid 

249. [Partner’s liability for debts of partnership.] Rep. bys. 73 and the Second Schedule, ibid. 

250.  [Partner’s  liability  to  third  person  for  neglect  or  fraud  of  co-partner.]  Rep.  by  s.  73  and  the 
Second Schedule, ibid. 

251. [Partner’s power to bind co-partners.] Rep. by s. 73 and the Second Schedule, ibid. 

252. [Annulment of contract defining partner’s rights and obligations.] Rep. by s. 73 and the Second 
Schedule, ibid. 

253. [Rules determining partner’s mutual relations, where no contract to contrary.] Rep. by s. 73 and 
the Second Schedule, ibid. 

254. [When Court may dissolve partnership.] Rep. by s. 73 and the Second Schedule, ibid. 

255. [Dissolution of partnership by prohibition of business.] Rep. by s. 73 and the Second Schedule, 
ibid. 

256. [Rights and obligations of partners in partnership continued after expiry of term for which it was 
entered into.] Rep. by s. 73 and the Second Schedule, ibid. 

257. [General duties of partners.] Rep. by s. 73 and the Second Schedule, ibid 

258. [Account, to firm, of benefit derived from transaction affecting partnership.]Rep. by s. 73 and the 
Second Schedule, ibid. 

259. [Obligations, to firm, of partner carrying on business.] Rep. by s. 73 and the Second Schedule, 
ibid. 

260.  [Revocation  of  continuing  guarantee  by  charge  by  change  in  firm.]  Rep.  by  the  Indian 
Partnership Act, 1932 (9 of 1932), s. 73 and the Second Schedule. 

261.  [Non-liability  of  deceased  partner’s  estate  for  subsequent  obligations.]  Rep.  by  s.  73  and  the 
Second Schedule, ibid. 

262. [Payment of partnership debts, and of separate debts.] Rep. by s. 73and the Second Schedule, 
ibid. 

263. [Continuance, of partners rights and obligations after dissolution.] Rep. by s. 73and the Second 
Schedule, ibid. 

264. [Notice of dissolution.] Rep. by s. 73and the Second Schedule, ibid. 

265. [Right of partners to apply for winding-up after termination of partnership.] Rep. by s. 73 and 
the Second Schedule, ibid. 

266. [Limited-liability partnerships, incorporate partnerships, and joint-stock companies.] Rep. by s. 
73and the Second Schedule, ibid. 

SCHEDULE.—[Enactments repealed.] Rep. by the Repealing and Amending Act, 1914 (10 of 1914), 
s. 3 and the Second Schedule. 