The Institute of Chartered Accountants of Bangladesh (ICAB)

Professional Stage (Knowledge Level)

Subject: Business & Commercial Law
Chapter: Contract and Agency

Contract
An agreement enforceable by law is called a contract. Therefore in a contract, there must
be-
1. an agreement;
2. the agreement must be enforceable by law.
There some agreements like an agreement to play cards or go to cinema, which cannot be
enforced through the courts of law, are not contract. So agreements, which can be
enforced through the courts of law, arent contract.

Elements of a Contract
i. Offer & Acceptance;
ii. Intention to create legal relationship;
iii. Lawful consideration;
iv. Capacity of the parties;
v. Free Consent;
vi. Legality of the object;
vii. Certainty;
viii. Possibility of performance;
ix. Void Agreement;
x. Writing, registration and legal formalities.

Proposal & Offer:
Proposal: 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.
Offer: A proposal is also called an offer. The promisor or the person making the offer is
called offer. The person to whom the offer is made is called the offeree. agreements like
an agreement to play cards or go to cinema, which cannot be enforced through the courts
of law, are not contract. So agreements, which can be enforced through the courts of law,
arent contract.

Elements of a Contract
i. Offer & Acceptance;
ii. Intention to create legal relationship;
iii. Lawful consideration;
iv. Capacity of the parties;
v. Free Consent;
vi. Legality of the object;
vii. Certainty;
viii. Possibility of performance;
ix. Void Agreement;
x. Writing, registration and legal formalities.




Proposal & Offer:

Proposal: 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.

Offer: A proposal is also called an offer. The promisor or the person making the offer is
called offer. The person to whom the offer is made is called the offeree.

Communication of proposal and acceptance complete

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

How and when a proposal and acceptance can be revoked?

Revocation of Proposal:
When the following conditions are met individually or aggregate:
1. by notice;
2. by lapse of time;
3. after expiry of reasonable time;
4. by failure of reasonable time;
5. by failure of a condition precedent;
6. by death or insanity;
7. counter offer;
8. by refusal.

Revocation of Acceptance:
An acceptance can be revoked any time before the acceptance comes to the knowledge of
the proposer but not afterwards.

Consideration
Consideration is an essential element in a contract. Something which receives and gives
by each party to an agreement is called consideration.

Types of a consideration
Three types:
1. Past;
2. Present and
3. Future.

Good consideration
i. it must be real;
i. reasonable;
ii. not illegal, immoral or opposed to public policy;
iii. present, past and future;
from the promisee of promisor.



Characteristics/ Rules/ Essential Factors of Consideration
i. Desire;
ii. public duty;
iii. promise to a stranger;
iv. reality;
v. not illegal, immoral or opposed to public policy;
vi. present, past and future;
vii. may move from promisee or from any other person.
Why a consideration is needed?
Or
In a formation of contract, consideration must be real but need not be
adequateexplain.
1. The consideration must have some value in the eye of law. It must not be sham or
illusory.
2. The impossible acts and illusory or non-existing goods cannot support a contract.
Therefore, real consideration comes from good consideration.
3. A contribution to charity is without consideration. Therefore, it is not real
consideration.

"No consideration no contract" - exceptions to the rule
OR
Can a contract be made without consideration?
Consideration is essential for validity of a contract. A promise without consideration
cannot create a legal obligation. So consideration is essential for a contract. But there are
exceptional cases where a contract is enforceable even though there is no consideration.

They are as follows:
1 Natural love and affection.
2 Voluntary compensation
3 Time bared debt
4 Agency
5 Completed gift.

Silence be fraudulent?
1. Mere silence is not fraud
2. Silence can be fraudulent in circumstances
3. Silence is farud where silence is in itself equivalent to speech.
Void and Voidable contract

Serial Number & Points Void Contract Voidable Contract

1.Defination An agreement not An agreement which is
enforceable by law is said enforceable by law at the

to be void. opinion of one or more of

the parties thereto, but not at

all the opinion of the other

or others is a voidable

2. Right and obligation
contract.

A void agreement confers But in case of voidable

no right on any person and agreement the rights and

creates no obligations. obligations of the parties

concerned are present

unless it becomes void.

3. Declaration for voiding It is not necessary for the But incase of voidable

effected party to declare the agreement the effected party

agreement void. needs to call the agreement

void.

4.Refund In case of void agreement But incase of voidable

the party is not bound to agreement party may refund

refund the benefit received the benefit to the other

to other party. party, if the agreement

becomes void later on.

Contingent Contract and Wagering Agreement

The distinctions between contingent contract and wagering agreement are given below.

Subject Contingent contract Wagering agreement

1. Validity 1. A contingent contract is A wagering agreement is
valid. void.

2. Dependency 2. It depends on the 2. It is void.

happening or non-

happening of an event, but

the contract is valid.

3. Reciprocal promises 3. It may not contain 3. It consists of certain

reciprocal promises. reciprocal promises.


Supervening impossibility
When enter into contract it is good but subsequently impossible to perform. The
condition is called supervening impossibility of contract.









Frustration of contract by supervening impossibility
When the common object of a contract can no longer be carried out, the court may declare
the contract to be at an end. This is known as the doctrine of frustration.

Counter Offer. Give an example.
The acceptance shall be unconditional and absolute. If the acceptance is given with any
condition changing any portion of the original offer then it is known as counter offer.
Example: A offer to B to buy his car for Tk. 100,000 but B agree to pay tk 90,000 the
offer made by B is a counter offer.

In which cases a contract can be void?
OR, when is an agreement said to be void?

An agreement is said to be void because of mistake, lack of consideration, want of
capacity etc. A list of void agreements is given below:
1. Lack of capacity.
2. Mutual mistake of fact.
3. Unlawful consideration or object.
4. Consideration or object partly unlawful.
5. Agreements without Consideration.
6. Agreements in restraint of trade.
7. Agreements in restraint of legal proceedings.
8. Uncertain Agreement.
9. Agreements by way of wager.
10. Impossible acts.
11. Agreements contingent on impossible event.
12. Reciprocal promises where there are void promises.
13. Agreement is restraint of trade.

Indemnity and Guarantee

Subject Contract of indemnity Guarantee

1.Defination One party promises to save A contract of guarantee is a
the other party from loss contract to perform the
caused to him by the promise or discharge the
conduct of the promisor liability of a third person in
himself, or by the conduct case of his default.

of any other person.

2. Parties Two parties. Three parties

3. Number of contract In a contract of indemnity In a contract of guarantee
it is necessary to have only it is necessary to have three
one contract. contracts.
4. Sue In a contract of indemnity In a contract of guarantee


the indemnifier can sue only the surety can proceed
the indemnity holder for his against principal debtor.
loss.

Distinguish between a contract and an agreement.
Objective Contract Agreement
1.Defination An agreement enforceable
by law is contract.
Promise or every set of
promises forming the
consideration for each
other, is an agreement.
2. Similarity All contracts are
agreements
All agreements are not
contract.

An offer a reward to whosoever shall return his lost briefcase. B returns the lost
briefcase, not knowing of the advertisement reward. Is a bound to pay the reward to
B?

No. A is not bound to pay reward to B. As per contract act an offer must be
communicated to the offeree. If the offer does any act of acceptance without knowing, it
will not crate any legal acceptance or agreement.

What are the remedies for breach of contract?
1. Rescission of the contract.
2. Suit for damage.
3. Suit upon Quantum Meruit.
4. Specific performance of the contract.
5. Injunction.

Ignorance of law is no excuse to avoid a contract Discuss.
We all are working and exercising our right and obligation under the law. These laws are
unlikely to be known to all of us. So the ignorance of law is not a valid reason to avoid
contract. In this case, contract should be performed specifically.

Can a minor make a contract?
As per section 11 of contract act a minor is not competent to a contract. So he / she
cannot make a contract. If any contract is made by the minor, it will be a void agreement.

Express contract:

Express contract n. a contract in which all elements of a contract are specifically stated
(offer, acceptance, consideration), and the terms are stated, as compared to an "implied"
contract in which the existence of the contract is assumed by the circumstances.






Implied contract:

An implied contract is an agreement created by actions of the parties involved, but it is
not written or spoken. This is a contract assumed to have been drawn. In this case, there
is neither written record nor any actual verbal agreement. A form of an implied contract
is an implied warranty provided automatically by law. An implied warranty means that
when a product is purchased, it is guaranteed to work for its ordinary purpose. For
example, a refrigerator is fit to keep food cool.

Quasi contract:
A quasi contract is a contract that exists by order of a court, not by agreement of the
parties. Courts create quasi contracts to avoid the unjust enrichment of a party in a
dispute over payment for a good or service. In some cases a party who has suffered a loss
in a business relationship may not be able to recover for the loss without evidence of a
contract or some legally recognized agreement. To avoid this unjust result, courts create a
fictitious agreement where no legally enforceable agreement exists.
To illustrate, assume that a homebuilder has built a house on A's property. However, the
homebuilder signed a contract with B, who claimed to be A's agent but, in fact, was not.
Although there is no binding contract between A and the homebuilder, most courts would
allow the homebuilder to recover the cost of the services and materials from A to avoid
an unjust result. A court would accomplish this by creating a fictitious agreement
between the homebuilder and A and holding A responsible for the cost of the builder's
services and materials.
Executed contract:
It is simply a contract that has been agreed to (which means signed for a written contract)
by all the parties to the contract. So if you make an offer on a house (which you sign) and
the seller signs it without changes the contract is executed.

Executory contract:

An executory contract is a contract which has not yet been fully performed, that is to say,
fully executed. To put it another way, it's a contract under which both sides still have
important performance remaining. However, an obligation to pay money, although such
obligation is material, does not usually make a contract executory. An obligation is
material if a breach of contract would result from the failure to satisfy the obligation.[1]
A contract that has been fully performed by one party but not by the other party is
classified as an executory contract.

Bilateral contract:
A bilateral contract is a contract which requires agreement and performance from both
parties to the contract. Most of what we think of as contracts are bilateral in nature. One
party promises to do X and the other party promises to do Y. Bilateral contracts may not
require negotiation but often this is a component.



Unilateral contract:
A legally enforceable promise - between legally competent parties - to do or refrain from
doing a specified, legal act or acts. In a unilateral contract, one party pays the other party
to perform a certain duty. If the duty is fulfilled, the party on the other side of the contract
is obligated to transfer the specified funds. Only this party is under obligation of the
contract, whereas the acting party is not legally obliged to perform the duty.

Valid contract:
A contract that complies with all the essentials of a contract and is binding and
enforceable on all parties.

Void contract:
A formal agreement that is illegitimate and unenforceable from the moment it is created.
A void contract could be considered void for a number of reasons. Common causes of a
void contract are contract terms that are illegal or become illegal due to changes in law;
one party to the contract lacks the capacity to enter into a contract because he is a minor
or mentally incapacitated; and it is legal but declared null by the courts because it violates
a fundamental principle.

Voidable contract:
A formal agreement between two parties that may be rendered unenforceable for a
number of legal reasons. Reasons that can make a contract voidable include failure by
one or both parties to disclose a material fact; a mistake, misrepresentation or fraud;
undue influence or duress; one party's legal incapacity to enter a contract; one or more
terms that are unconscionable; or a breach of contract.

Illegal contract:
Contract whose formation, object, or performance is so iniquitous, against the law of the
land, or contrary to public policy, that no court will entertain or enforce it. Technically, it
is a 'no contract.' In situations where two wrong doers enter into an illegal contract and
one of them takes advantage of the other, law normally will not intercede to rectify the
situation.

Unenforceable contract:
An unenforceable contract is a valid contract that cannot be fully enforced due to some
technical defect. Unenforceable contract has some legal consequences which may not be
enforced in an action for damages or specific performance in the face of certain defenses
including the statute of frauds. A contract may be good, but incapable of proof due to
lapse of time, want of written form, or failure to affix a revenue stamp. Courts are usually
in the habit of condemning the unenforceable agreement as illegal. In certain cases, the
conduct that renders the agreement unenforceable is a crime, however this is not usually
so.

Rules regarding an offer
1. An offer may be expressed or may be implied from the circumstances
2. An offer may be made to a definite person; to some definite class of persons; or to


the world at large.
3. Legal relationship is required.
4. The terms of the offer must be certain, definite, unambiguous and not vague.
5. A mere statement of intension is not an offer.
6. An offer must be communicated to the offer.

Who can accept an offer?
An offer can be accepted only by the person or persons for whom the offer is intended
which includes following.
1. An offer made to a particular person can only be accepted by him because he is
the only person to accept.
2. An offer made to a class of persons can be accepted by any member of the class.
3. An offer made to the world at large can be accepted by any person whatsoever.

How an offer to be communicated?
An offer may be communicated to the offeree or offerees by word of mouth, by writing
or by conduct.

How an acceptance to be communicated?
An acceptance to be communicated by the following:
1. Offer and acceptance by post.
2. Offer and acceptance through telephone.
3. Microphone.
4. E-Mail.
5. Internet.

Is a promise to make a contribution to charity enforceable by law?
No, a promise to make to charity is not enforceable because it is without
consideration.

Can a person who is not a party to a contract sue it?
A stranger to a contract, he, one who is not a party to it cannot file a suite enforce it. A
contract between P and Q cannot be enforced by R. But a stranger to the consideration
can sue to enforce if he is a party to the contract. A contract between P, Q and R whereby
P pays money to Q for delivering goods to R can be enforced by R; although he did not
pay any part of the consideration.

Rules regarding acceptance of an offer .
The acceptance of an offer to be legally effective must satisfy the following
requirements:
1. It must be an absolute and unqualified acceptance of all the terms of the offer.
2. Conditional acceptance / counter offer.
3. Contract subject to condition.
4. Clarification.
5. The acceptance must be expressed in some usual or reasonable manner.
6. Mental acceptance or un-communicated assent does not result in a contract.


7. The mode of acceptance.
8. Time of acceptance.
9. When acceptance is complete.
10. Before offer.
11. The acceptance must be made while the offer is in before.

What are the exceptions to sue upon a person who is not a party / a stranger to a
contract?

There are certain exceptions to the rule that a stranger to the contract cannot sue upon it.
They are as follow:
1. Beneficiaries in the case of trust.
2. Provision of marriage settlement of Minor.
3. Family settlement.
4. Acknowledgement of Estoppel.

What are the rights and liabilities of a stranger?

With the exception of the above cases, a contract cannot confer rights upon a person who
is not party to it. It also a contract cannot impose a liability upon a person who not party
to it.

What are types of agreements said to be void?

The following agreements are void from the beginning:
1. An agreement made by a minor.
2. Agreements without consideration.
3. Certain agreements against public policy.

What types of agreements become void?

An agreement, which was legal and enforceable when it was entered into, may
subsequently become void to impossibility of performance, change of law or other
reasons. When it becomes void the agreements cases to have legal effect.

What types of agreements are expressly declared void?

There are certain agreements, which are expressly declared to be void are summarized
hereunder:
1. Every agreement in restraint of marriage of any person, other than a minor, is
void.
2. Every agreement by which anyone is restrained from exercising a lawful
profession, trade or business of any kind, is to that extend void.
3. Agreements, the meaning of which is not certain, or capable of being made
certain, are void.
4. Agreement by way of wager is void.


5. Agreements to do and act impossible in it are void.
6. Agreements whose objects or consideration are unlawful are void.

What types of agreements are unenforceable by law?

An agreement which cannot be enforced in a court of law, one or both of the parties,
because of some technical defect e.g. want of registration or non- payment of the
requisite stamp duty is unenforceable by law.

What is meant by illegal agreement?
An illegal agreement is one, which is against a law in force.

Distinguish between void and illegal agreement.

Subject Void agreement Illegal agreement
1. Definition An agreement not
enforceable by law is said
to be void.
An illegal agreement is one,
which against a law in
force.

2. Nature A void agreement is not
necessarily illegal.
An illegal agreement is
void.

What do you mean by capacity?

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.

Under which circumstances a person is incapable of entering into contract?

A person is incapable of entering into contract under the following circumstances:
1. If he is not attained the age of majority according to the law to which he is
subject/Minor.
2. If he is unsound mind.
3. If he is disqualified from contracting by and any law to which he is subject.

Who is minor?

A minor is one who has not completed his or her 18
th
year of age.

What are exceptions regarding the rules to minor?

To the minors rule, there are two exceptions which are given below:
1. When a guardian of the minors person or property is appointed by a court of law
and
2. When a minors property is taken over by the court of wards for management.



In either case minority continues up to the completion of the 21
st
year.

What do mean by sound mind?

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 forming a rational judgment as to
it effects upon his interest.

In which case an unsound mind may make a contract?

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

In which case a sound mind may not make a contract?

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

What is the test of unsoundness of mind?
The test of unsoundness of mind is given hereunder:
1. Capacity to understand the business concerned.
2. Ability to form a rational judgment.

How may the unsoundness of mind arise?

Unsoundness of mind arises from:
1. Insanity or lunacy.
2. Idiocy.
3. Drunkenness.
4. Similar factors.

What are the effects on agreements made by persons of unsound mind?

The effects on agreements made by persons of unsound mind are describing hereunder:
1. Agreements made by a person of unsound mind are void.
2. But agreements for supply of necessaries for unsound himself or for persons
whom he is sound to support is valid as quasi contracts.

What do you mean by idiocy?

Idiocy is a congenital defect caused by lack of development of the brain. The term idiot is
applied to a person whose mental powers are completely absent.





What do you mean by lunacy or insanity?

A lunatic is one whose mental powers are damaged so that he cannot form a rational
judgment on any subject.

What do you mean by aliens?

An alien means citizens of foreign state. Contract with alien are valid.

In which situation consent is not free?

The consent is not free if it caused by-
1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake.

What do you mean by coercion?

Coercion is the committing or threatening to commit, any act forbidden by penal code, or
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.

What are the consequences of coercion?

The consequences of coercion are given blow:
1. is voidable at the option of the party whose consent was so caused.
2. The aggrieved party can have the contract set aside or he can refuse to perform it
and take the defense of coercion if the other party sought to inforce it.
3. The aggrieved party may if he so desires abide by the contract and insist on its
performance by the other party.

What do mean by undue influence?

A contract is said to be induced by undue influence where-
i) One of the parties is in position to dominate the will of the other.
ii) He uses the position to obtain an unfair advantage over the other.

What are the presumption to exist undue influence?

Undue influence may be presumed to exist in the following cases:
i) Real or apparent authority or fiduciary relationship stands.
ii) Contract makes with a mentally incapable person.




What do you mean fiduciary relationship?

Fiduciary relationship means a relationship of mutual trust and confidence. Such a
relationship is supposed to exist in the following cases:

i) Father and son
ii) Guardian and ward
iii) Solicitor and client
iv) Doctor and patient

v) Preceptor and disciple
vi) Trustee and beneficiary

How is an undue influence suspected?

An undue influence is suspected in the following cases:
Inadequacy of consideration.
Fiduciary relationship.
Inequality between the parties as regard age, intelligence, social status etc.
Absence of independent advisors for the weaker party.

What are the difference between undue influence and coercion?

Uudue influence Coercion
1. The influence arises from the domination
of the will of one person over another.
1. The influence arises from committing or
threating to commit punishable offence or
detaining or threating to detain property
unlawfully.
2. undue influence is mental pressure. 2. Coercion are mostly cases of the use of
physical force.

What do you mean by misrepresentation?

Misrepresentation arises when the representation made in inaccuracy is not to any desire
to defraud the other party. There is no intension to deceive.

What are the causes of misrepresentation?

The causes of misrepresentation are-
1. Breach of duty.
2. Innocent mistake.







What is the consequences of misrepresentation?

The consequences of misrepresentation are-

1. The aggrieved party can terminate the agreement.
2. The aggrieved party can insist that the contract be performed and he shall be put
in the position in which he would have been if the representation made had been true.

What is fraud?

The term fraud generally means an act of deception, forgery, extortion, theft,
misappropriation, false representation, conspiracy, corruption, collusion, embezzlement, or
intentional concealment or the omission of material facts. Fraud is a violation of trust that, in
general, refers to an intentional act committed to secure personal or business advantage.

What type of matters to be considered as fraud?

1. False statement
2. Active concealment
3. Intentional non-performance
4. Deception
5. Fraudulent act of omission

What are the consequences of fraud?

A party who has been induced to enter into an agreement by fraud has the following
remedies open to him:
1. Avoidance of performance of the contract.
2. Insistence of performance of the contract.
3. Sue for damage.

When can the relief for fraud be obtained?

Relief for fraud can be obtained only if the following conditions are satisfied:

1. Act committed by a party or agent
2. Act must have been done with the intension to deceive and must actually be
deceived.
3. Consent obtained by the act complained of.

What are the difference between fraud and misrepresentation?
Subject of Difference Fraud Misrepresentation
1. Intension 1. Here implies an intension
to deceive.
1. No intension to deceive.
2. Belief 2. Statement is dishonest. 2. Statement is wrong
though it is dishonesty.


3. Sue for damage 3. The aggrieved party can
sue for damage.
3. The aggrieved party cant
sue for any damage.

What is meant by the uberrimae fidei contracts?

Uberrimae fidei contracts are contracts where law imposes upon the parties the duty of
making a full disclosure of all material facts.

What type of contract come within the class of uberrimae fidei contracts?

The following types of contract come within the class uberrimae fidei:
1. Contracts of insurance.
2. Fiduciary relationship.
3. Contracts for the sale of immovable property.
4. Allotment of shares of companies.
5. Family settlement.

What do you mean by mistake?

An erroneous belief concerning something is called mistake.

How many classes of mistakes?

1. Mistake of law.
2. Mistake as to a law not in force in Bangladesh.
3. Mistake of fact.

What is meant by bilateral mistake?

When both the parties of the contract make mistake, is called bilateral mistake.

What is meant by unilateral mistake?

When one of the parties of the contract makes mistake, is called unilateral mistake.

What are the rules regarding mistake?

1. Mistakes of law.
2. Mistakes of fact.
3. Opinion.
4. Unilateral mistake.







When are the consideration and the object of an agreement unlawful?

The consideration and the object of an agreement are unlawful in the following cases:
1. If it is forbidden by law.
2. If it is of such a nature that, if permitted, it would defeat the provision of any law.
3. If it is fraudulent
4. If it involves or implies injury to the person or property of another:
5. If the court regards it as immoral
6. If the court regards it as opposed to public policy.

Which are the agreements said to be against public policy:

1. Trading enemy.
2. Interfering with the course of justice.
3. Traffic in public offices.
4. An interest opposed to public duty.
5. Interfering personal freedom.
6. Interfering with parental duties.
7. Interfering with marital duties.

What do you mean by wager?

A wager is an agreement by which money is payable by one person to another on the
happening or non happening of a future, uncertain event.

What are the characteristics of a wager agreement?

The characteristics of a wager agreement are given below:
1. to pay or get money.
2. the money is payable on the happening or the non-happening of an event.
3. the agreement depends on a future and uncertain event.
4. no party has control over the event.

Which transactions are not wagers?

1. Shares
2. Games of skill
3. A statutory exception
4. Contract of insurance.

What do you mean by contingent contract?

A contingent contract is a contract to do or not to do something, is some event, collateral
such contract does or does not happen.




What are the characteristics of contingent contracts?

1. The performance of such contract depends on a contingency, i. e. on the
happening or non happening of the future event.
2. The event must be collateral i. e. incidental to the contract.
3. The contingency is uncertain.

What are methods of termination of a contract?
1. By performance of the promise tender.
2. By mutual consent canceling the agreement or substitute in a agreement in place
of the old.
3. By subsequent impossibility of performance.
4. By lapse of time.
5. By material alteration without the consent of the other parties.
6. By breach made by other parties.

What do you mean by accord and satisfaction?

Accord means the promise to accept less than what due under the old contract.
Satisfaction means the payment or the fulfillment of the smaller obligation.

How the supervening impossibility occurs?

When the common object of a contract can no longer be carried out, the court may
declare the contract to at an end. This is known as doctrine of frustration.

What are the grounds of frustration?
Supervening impossibility may occur in many ways, some of which are explained below:
1. Destruction of an object.
2. Change of law.
3. Failure of precondition.
4. Death or incapacity of personal services.

What are the exceptions of the principle of supervening impossibility?

Some points are given below of cases which do not come within the principle of
supervening impossibility:
1. Difficulty of performance.
2. Commercial impossibility.
3. Strikes, lock-outs, civil disturbances and hortal/danga.
4. Failure of one of the object.

What are the effects of supervening impossibility?

When the performance of contract becomes subsequently impossible or illegal, the
contract becomes void.



When does a contract terminated by law?
A contract terminates by operation of law in case of the following cases:
1. By death.
2. By insolvency.
3. By merger.

How may the breach of contract arise?

Breach of contract may arise in two ways:
1. By anticipatory.
2. By actual breach / present breach.

What are the remedies for breach of contract?

1. Rescission of the contract
2. Suit for damage
3. Suit upon quantum Meruit
4. Specific performance of the contract
5. Injunction

What are the types of damage?

1. Compensatory damages.
2. Special damage
3. Nominal / contemptuous damage.
4. Exemplary, punitive or vindictive damages.

What do you mean by quantum meruit?

Quantum Meruit means as much as merited. A person can, under certain circumstances, claim
payme for work done or goods supplied without any contract and in cases where the original
contract has terminated by breach of contract by one party or has become void for some reason.
This is known as doctrine of quantum meruit.

Describe the cases which are to be deemed to be quasi contract.

The cases which are to be deemed to be quasi contract are describing below:
1. Necessaries for incapable person
2. Reimbursement of interested person.
3. Benefit of non-gratuitous act.
4. Finder of goods.
5. Delivery by mistake or under coercion.

What do you mean by contract of indemnity?

A contract of indemnity is a contract by which one party promises to save the other party from
loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.




What are the characteristics of contracts of indemnity?

The characteristics of contracts of indemnity are given hereunder:
1. A contract of indemnity must satisfy all the essential elements of a contract.
2. The contract may be expressed or implied.

What are the rights of the indemnity holder?

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 such suits.
3. All sums which he may have paid upon compromise of such suit.

What do you mean by contract of guarantee?

A contract to perform the promise or discharge the liability, of a third person in case of his
default.

How many types of contracts of guarantee?

1. For payment to the creditor in favor the principal debtor by the guarantor.
2. Payment of price for goods sold.
3. Fidelity guarantee.

What are the essentials of valid guarantee?

1. Must satisfy all the essential elements of a contract.
2. May be oral or written.
3. There must be three parties.
4. The primary liability is that of principal debtor.
5. Minor.
6. Consideration.

Which are the invalid contracts of guarantee?

1. Misrepresentation.
2. Concealment.
3. When co-surety does not join.
4. Lack of essential element.

What do you mean by continuing guarantee?

A guarantee which extends to a series of transaction is called continuing guarantee.


How is a continuing guarantee revoked?

1. By notice of revocation by the surety.
2. By the death of the surety.




What do you mean by bailment?

A bailment is the delivery of goods by one person to another for some purpose, upon a contract
that they have, when the purpose is accomplished be returned or otherwise disposed of according
to the direction of the person delivering them.

Who are bailor, baile?

Bailor: The person delivering the goods is called the bailor.
Bailee: The person to whom they are delivered is called the bailee.
Bailment: The transaction is called bailment.

What are the characteristics of Bailment?

The characteristics of bailment are given below:
1. Delivery
2. Purpose
3. Return
4. Contract
5. Movable goods
6. Possession.

What are kinds of bailment?
1. Gratuitous Bailmen: A gratuitous bailment is one in which neither the bailor, nor the
bailee is entitled to an remuneration.
2. Bailment for reward: A bailment for reward is one where either the bailer or the bailor
is entitled to a remuneration.

What are duties of the bailee?

The duties of the bailee are given below:
1. Duty of reasonable care.
2. Bailees liability for negligence of servants.
3. Unauthorized use of goods.
4. Mixture of Bailors goods with the Bailees.
5. Duty of returning goods
6. Accretion to the goods bailed.
7. Liabilities of innkeeper and Hotelkeepers.
8. Liabilities of carrier.

What are the duties of the bailor?

The duties of the bailor are given below:
1. Bailors duty to disclose faults in goods bailed.
2. Payment of expenses in gratuitous Bailment.
3. Enforcement of rights.
4. Restoration of goods lent gratuitously in time.





What are the rights and duties of finder of goods?

1. Possession
2. Compensation and Lien
3. Reward
4. Sale.

What are the duties and obligations of finder of goods?

1. He must take reasonable care of the goods.
2. He must not mix the finders goods with his own goods.
3. The goods must be returned to the real owner.
4. He must not use the goods for his purpose.
5. He must try to find out the true owner of the goods.

When does a bailment terminate?

1. Lapse of time.
2. Fulfillment of purpose.
3. Act inconsistent with the term.
4. Contract with minor.
5. Death.

What do you mean by pledge or pawn?

The bailment of goods as security of payment of a debt or performance of a promise is
called pledge or pawn.

What are the difference between Bailment and pledge?

The difference between pledge and other kind of bailment lies in the purpose or
objectives of the transaction.
1. The purpose of a pledge is to provide security for a debtor or the performance of a
promise. But in cases of bailment there are other purposes for example repair,
safe custody etc.
2. Pledge is a particular kind of bailment.

When can a non owner make a valid pledge?

1. Mercantile agent.
2. Possession under a voidable contract.
3. Possessior with co-owner.






What do you mean by Agent, principal and agency?

Agent: An agent is a person employed to do any act for another or to represent another in
dealings with third person.
Agency: The relationship is called agency.

What are the differences between agent and servant?

The differences between agent and servant are given below:


Subject Agent Servant
1. Authority 1. An agent is to exercise
his authority in accordance
with the principals
instructions.
1. A servant has to act
according to the orders of
the master in every
particular.
2. Relationship 2. An agent is appointed
and employed to bring the
principal into contractual
relationship with third
parties.
2. A servant cannot do that.
3. Binding 3. An agent can bind the
principal to the third parties.
3. A servant cannot do so.
4. Remuneration 4. The mode of
remuneration of an agent
may vary, including a
commission on the basis of
the work done.
4. A servant is generally
paid through wages.
6. Number of principal 6. An agent may work for
several principals.
6. Serves for only one
master.



What are differences between Bailee & Agent?

Subject Bailee Agent
1. Possession 1. The bailee has possession
of goods of the bailor
1. An agent may not have
possession of any goods or
property of the principal.
2. Relationship 2. The bailee has no power
to create any contractual
relationship with the third
party.
2. An agent has that
authority.
3. Act on behalf 3. Under certain
circumstances a bailee may
act as an agent.
3. An agent cant.



What are the different classes of Agent?

1. Broker.
2. Factor.
3. A commission Agent.
4. Auctioneer.
5. A Del credere agent.
6. General agent.

What are the methods of creating Agency?

1. Agency by express Agreement.
2. Agency by implied Agreement.
3. Agency by Estoppel or by Holding out.
4. Agency of necessity.
5. Agency by ratification.

Is a wife an agent of her husband? Or, can a wife bind her husband?

A wife is an agent of necessity, having power to pledge her husbands credit for
necessaries of life, when she is not properly provided from him or when she has been
deserted by the husband. But if the husband gives her a sufficient allowance, she has no
authority to pledge his credit and can never be the agent of necessity.

What do you mean by sub-agent?

An agent appointed by an agent is called a sub-agent. A sub-agent is a person employed
by, and acting under the control of, the original agent in the business of agency.

What are the exceptions regarding the appointment of an agent by an agent?

1. When it is permitted by the custom of the trade.
2. When it is necessary because of the nature of the agency.

How does an agency terminate?

1. Termination by act of parties.
2. Termination by operation of law.
3. Efflux of time.
4. Performance of the object.
5. Death and insanity of the principal or agent.
6. Insolvency of the principal.





What are duties of agents to the principals?

1. Agents duty in conducting principals business.
2. Skill and diligence required from agent.
3. Agents duty to render accounts.
4. Agents duty to communicate to principal.
5. Agents not to deal own his own account.
6. Principal to get benefit of agents dealings.
7. Agents duty to pay sums received for principal.
8. Principals death or insanity.
9. Miscellaneous

What are duties of principals to agents?

1. Agent to be indemnified against consequences of lawful acts.
2. Agent to be indemnified against consequences of acts done in good faith.
3. Compensation for principals neglect.