SPECIAL CONTRACT ACT

1872
 Contract Of Indemnity
{Sec. 124 & 125 }
 Contract Of Guarantee
{Sec. 126 To 147 }
 Contract Of Bailment
{Sec. 148 To 181 }
 Contract Of Pledge
 Contract of Agency
CONTRACT OF BAILMENT

Section 148 defines Bailment as:

“The delivery of goods by one to another person for
some purpose, when the purpose is accomplished,
goods to be returned or otherwise disposed of
according to the directions of the person delivering
them.” The person delivering the goods is called
the ‘Bailor’, and the person to whom goods are
delivered is called the ‘Bailee
ESSENTIALS

 Contract:
 Delivery of Goods:
 No Transfer of Ownership:
 Delivery of Goods for Some Purpose:
 Return of Specific Goods:
 Movable Goods:
Kinds OF Bailment
On the basis of benefit
 Bailment exclusive for Bailor’s benefit.
 Bailment exclusive for Bailee’s benefit
 Bailment for mutual benefit.

On the basis of willingness

 Voluntary Bailment
 Involuntary bailment

On the basis of Rewards

 Gratituous Bailment
 Non-Gratituous Bailment
 Rights Of Bailor
 Right of indemnity for losses due to negligence by bailee[S.152]
 Termination of bailment on inconsistent use by the bailee[S.153]
 Compensation for unauthorised use by the bailee[S.154]
 Compensation when the bailee mixes the goods bailed with own goods
[S.155]
 Right of return of goods back[S.160]
 Right to profit from goods bailed[S.163]

Duties Of Bailor
To Disclose faults in goods bailed [S.150]
To repay the necessary expenses [S.158]
To indemnify the bailee [S.164]
Liability on premature breach of bailment[S.159]
 Rights Of Bailee
Right to compensation for loss on account of fault in goods
bailed[S.150]
Right to receive necessary expenses[S.158]
Right against premature termination of bailment[S.159]
Right to compensation in case of defective title[S.164]
Delivery of goods to one of the joint owners[S.165]
Right against third parties

Duties Of Bailee
Take reasonable care of goods[S.151]
Not to make unauthorized use of goods[S.154]
Not to mix goods with his own goods[S.155-157]
Duty to return goods[S.160&161]
Not doing any act inconistent with terms of bailment[S.153]
Returning any profit [S.163]
CONTRACT OF INDEMNITY

Section 124 defines a contract of indemnity

as “A contract of indemnity is a contract
whereby 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.
 FEATURES OF INDEMNITY
 It must possess all ingredients of a valid agreement.
 It is a contingent agreement to make good the loss.
 The loss must be caused by human conduct only.
 Loss must have actually been suffered.

PARTIES TO CONTRACT OF INDEMNITY

INDEMNIFIER:
INDEMNITY HOLDER:

Examples:
Motor insurance
Marine insurance
Fire insurance
Life insurance is not the contract of indemnity
 RIGHTS OF INDEMNITY-HOLDER
WHEN SUED
 All Damages
 All Costs
 All Sums

RIGHTS OF INDEMNIFIER
The contract act is silent about the rights of
indemnifier.
Contract of Guarantee
 Meaning and Definition
A contract of guarantee is defined by the
Indian Contract Act, as “A contract to
perform the promise or discharge the
liability of a third person in case of his
default.” A guarantee may be either oral
or written. [section 126].
ESSENTIALS OF CONTRACT OF GUARANTEE:

Parties-creditor,debtor,surety
Tripartite Contract
Primary And Secondary Liability
Essentials Of Contract
TYPES OF GUARANTEE
 SPECIAL GUARANTEE
A guarantee is a “specific guarantee”, if it is intended
to be applicable to a particular debt and thus comes to
an end on its repayment.

 CONTINUING GUARANTEE
A guarantee which extends to a series of transactions
is called a “continuing guarantee”, e.g., (i) fidelity
guarantee, (ii) overdraft.
RIGHTS OF SURETY

AGAINST THE PRINCIPAL DEBTOR

Right of subrogation
Right to indemnity
AGAINST THE CREDITOR
Right Of Securities
Right To Claim Set Off
AGAINST THE CO-SURETIES
When several co-sureties have given guarantee for the same debt
with their maximum limits, they are liable to pay equally but subject to
the limits they have fixed
DISCHARGE OF SURETY
Revocation by notice.
Revocation by death.
Discharge of surety by variance in terms of contract.
Discharge of surety by release or discharge of principal debtor.
Discharge of surety when creditor compounds with, gives time
to, or agrees not to sue, principal debtor.
Creditor's forbearance to sue does not discharge surety.
Discharge of surety by creditor's act or omission impairing
surety's eventual remedy.
By the creditor losing his security.
By concealment or misrepresentation.
CONTRACT OF PLEDGE OF PAWN
 Section 172

“Pledge is the bailment of goods as security for

payment of debt or performance of a promise.”
Bailment of goods as a security for payment of
debts or performance of promise is called
pledge. The bailor is called pledgor or pawnor
and the bailee is called Pawnee.
ESSENTIALS OF PLEDGE:
Delivery of Goods:
Delivery of goods should be by way of security..
Goods must be movable.

RIGHTS AND DUTIES OF PAWNEE

Right of retainer {S.173}:
Right of particular lien
Right to extraordinary expenses {S.175}
Right in case of default of the pawnor

RIGHTS AND DUTIES OF PAWNOR

Right of redemption
Right to take back the goods.
 DEFINITION OF AGENT AND PRINCIPAL
AGENT
An ‘AGENT’ is a person employed to do any act for another or to represent

another in dealings with third persons. The function of an agent is to bring

his principal Into contractual relations with third persons.

PRINCIPAL
A person for whom the above act is done or who is so represented is called
. ‘PRINCIPAL’
the

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WHO CAN EMPLOY AN AGENT?
Acc. To sec 183 of ICA any person who is of age of majority
according to law to which is a subject, and who is of sound min
may employ an agent.

WHO MAY BE AN AGENT?

Acc to sec 184 of ICA any person who is authorized to act

such a person may be an agent. As the agent does not make
contracts on his own behalf it is not necessary that he should
have contractual capacity.

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 CREATION OF AGENCY

1. By express agreement

2. By implied agreement
Agency by ESTOPPLE.
Agency by Holding out.
Agency by necessity.

3. By ratification

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 DUTIES OF AGENT
1. To carry out the work undertaken according to the directions given
by the
principal.

2. To carry out the work with reasonable care, skill and diligence.

3. To communicate with the principal in the case of difficulty.

4. To pay sums received for the principal.

5. To protect and preserve the interests of the principal in the case of

his death or insolvency.

6. Not to make secret profit from agency .

7. Not to set up an adverse title.

8. Not to use information obtained in the course of the agency against

the
principal.
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 RIGHTS OF AGENT

1. Right of retainer.

2. Right to receive
remuneration.

3. Right of lien.

4. Right of indemnification.

5. Right of compensation.

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 DUTIES OF PRINCIPAL

1. To indemnify the agent against the consequences of all lawful acts

2. To indemnify the agent against the consequences of acts done in good fa

3. To indemnify the agent for injury caused by principal’s neglect.

4. To pay the agent the commission other remuneration agreed.

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 RIGHTS OF PRINCIPAL

1)To recover damages.

2)To obtain an account of secret profits and recover them and

resist a
claim for remuneration.

3) To resist agent’s claim for indemnity against liability

incurred.

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 TERMINATION OF AGENCY

1. By act of the parties

 Agreement

 Revocation by the principal

Revocation by the agent

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 TERMINATION OF AGENCY
 Performance of the contract

 Expiry of the time

 Death of either party

 Insanity of either party

 Insolvency of either party

 Destruction of the subject matter

 Principal becoming an alien enemy

 Dissolution of a company