As per aktu syllabus MBA Business Law

1. Ajay Nath Dubey

2. Contingent Contract
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 (Sec 31)
Example: A contracts to pay B Rs 10,000 if B’s house is
burnt. This is a contingent contact.
The performance of such a contract depends on
contingency and such contingency is uncertain. The
test of determining whether the contract is contingent
or not, is uncertainty. If contingency is certain it is not
a contingent contract.

3. Rules Regarding Contingent
Contracts
 Enforcements of contracts contingent on
happening of a future uncertain event: (Sec32)
 Enforcement of contracts on the non-happening
of a future uncertain event: (Sec 33)
 Contracts contingent on future conduct of a living
person: (Sec 34)
 Contracts contingent on a specified event
happening within a fixed time: (Sec 35)

4. Quasi Contract
A quasi contract is a fictitious contract created
under legal obligations, similar to a valid
contract. What makes this different is that the
parties involved do not intend to create a
contract. A quasi contract is created by the
Court. For the same reason, there is no actual
offer or acceptance or an agreement between
the parties. Also, a quasi contract is based on the
principle of unjust enrichment. According to
this principle, a person is not allowed to draw
benefit at the cost of someone else.

5. Kinds of Quasi Contracts
 Supply of Necessaries to an Incompetent Person
(Sec 68):
Under section 68 of the Indian Contract Act, 1872, a
person, who supplies another person, who is incapable
to enter into a contract, with necessaries of life is
entitled to get a share from the property of the latter.
 Payment by an Interested Person (Sec 69)
Under section 69 of the Act, a person, who is
interested in payment of money which was supposed
to be paid by another but pays it, is entitled for
reimbursement from the said person.

6. Cont…
 Performance of Non-Gratuitous Act (Sec 70)
Section 70 provides that if a person has received lawful
services from another person, which the former had not
asked for but needed at that moment, the other person is
entitled to be compensated for the services that were
rendered.
 Becoming Finder of Lost Goods (Sec 71)
Under section 71 of the Act, a person who finds goods
belonging to another person and takes the custody of the
goods is subjected to the responsibilities of having the
possession of the property under bailment and cannot use
it for his own good. By implication, the finder has to
safeguard it.

7. Cont…
 Payment of Money by Mistake (sec 72)
Under section 72 of the Act, a person who
receives money or goods by mistake or under
compulsion is liable to return it.

8. Indemnity Contract
As per Section 124 of the Indian Contract Act, the
contract of indemnity is defined as, “a contract by
which one party promises to save other from loss
caused to him by the conduct of the promisor
himself, or by the conduct of any other person.”
A person who promises to bear the loss is known as
indemnifier (promisor) and the person whose loss is
covered is known as indemnified (promisee). These
types of contracts are mainly formed between
insurance companies and their customers.

9. Characteristics of a contract of
Indemnity
From the definition of a contact of indemnity, the
following characteristics can be noted:
 It is a contact between the two parties.
 By the contract one person promises to save the other
person from loss.
 Such loss can be caused by the promisor himself or any
other person.
 There is a sense of futurity or contingency- as the
saving from the loss will arise only if the loss has taken
place.

10. Guarantee Contract
Under Section 126, of the Act, a contract of guarantee
is defined as, “a contract to perform the promise, or
discharge the liability of a third person in case of
his default.” This type of contract is formed mainly to
facilitate borrowing and lending money.
The three parties involved in this type of contract are:
 Surety: is the person by whom the guarantee is given.
 Principal Debtor: is the person for whom the
assurance is given.
 Creditor: is the person to whom the guarantee is
given.

11. Differences between Contract of
Indemnity and Guarantee
 Number of Parties: In a contract of indemnity only
two parties are involved, whereas in a contract of
guarantee, three parties are involved.
 Purpose: A contract of indemnity is formed to provide
compensation of loss. A contract of guarantee is
formed to give assurance to the creditor in lieu for his
money.
 Nature of Liability: In a contract of indemnity, the
indemnifier is the sole person who is held liable. In a
contract of guarantee, the liability is shared by the
surety and principal debtor. The principal debtor owes
the primary liability and the surety owes the secondary
liability.

12. Kinds of Guarantee
 Specific Guarantee: Means a guarantee given
for one specific transaction. In this case the
liability of the surety extends only to a single
transaction.
 Continuing Guarantee: According to Sec 129,
“A guarantee which extends to a series of
transactions is called a continuing guarantee”.
This type of guarantee is not limited to a single
transaction but is intended to cover a number of
transactions over a period of time.

13. Discharge of Surety
When the liability of the surety is extinguished,
he is said to be discharged. A surety may be
discharged:
(i) By revocation.
(ii) By the act or conduct of the creditor.
(iii) By invalidation of the contract of guarantee.

14. I. Discharge of surety by
revocation
 Revocation by notice (Sec. 130)
 Revocation by death (Sec. 131)
 Discharge of surety by novation (Sec. 62)

15. II. Discharge of surety by the act
or conduct of the creditor
 By variation in terms of contract (Sec. 133)
 By release or discharge of principal-debtor (Sec.
134)
 By creditor's act or omission impairing surety's
eventual remedy (Sec. 139)
Ex: A employs B as a cashier on the guarantee of C. A
promises to check up the cash of the cashier at least
once a month. He does not check the cash for 2
months. The cashier misappropriates the funds, C is
not liable to A on his guarantee.

16. III. Discharge of Surety by
Invalidation of the Contract
 By obtaining guarantee by misrepresentation (Sec.
142)
 By obtaining guarantee by concealment (Sec. 143)
Ex: A engaged B as a cashier. B misappropriates some cash.
Thereupon, A asks B to bring some surety who can
guarantee his good conduct. C give his guarantee for B's
good conduct. A does not inform C about B's previous
misconduct. B again misappropriates cash. C is not liable
as a surety.
 By the failure of the co-surety to join (Sec. 144)
Where a person gives guarantee upon a contract that the
creditor shall not act upon it until the other co-surety has
joined, the guarantee is not valid if the other person does
not join.

17. Bailment Contract
In contact, a bailment is the delivery of goods from
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,
and the person to whom the goods are delivered is the
bailee.

18. Essentials of contract of bailment
 Agreement: There is an agreement for delivery of
goods.
 Moveable property: The property must be moveable.
 Specific purpose: There is some specific purpose for
which the property is delivered.
 Change of possession: The possession of property is
changed from one person to another person.
 Parties: There are two parties to the contract of
bailment.
 Ownership is not changed: Ownership of the
property is not changed.
 Returnable: The goods must be return able to owner.

19. Kinds of bailment
 According to benefit:
(a) For the benefit of bailor: Where goods are
delivered for safe custody a neighbor, relative or
friend without any compensation to be paid.
(b) For the benefit of bailee: Where goods are
delivered to the bailee to be used by him without any
compensation to be charged from him.
(c) For the benefit of bailor and bailee: Where
the goods are delivered for the benefit of both the
bailor and bailee.

20. Cont…
 According to reward:
(a) Bailment without reward: It is bailment in
which neither the bailor nor the bailee entitled
remuneration. For example: A lends his book to his
friend B. The bailment is gratuitous.
(b) Bailment for reward: It is a bailment where the
bailor or bailee is entitled for remuneration. It is also
called non-gratuitous bailment. For example A
gives his watch to a watchmaker for repairs.

21. Duties and Liabilities of Bailor
 To disclose Facts
 Payment of Extraordinary Expenses
 To Indemnity Bailee
 Warning to the Bailee

22. Duties and Responsibilities of
Bailee
 To take care of goods bailed
 The unauthorize use of goods
 Not to mix bailor’s goods
 To return the goods
 To return any profit from the goods

23. Rights of Bailor
 Rights of taking back the goods bailed
 Right in case of unauthorized use of goods
 Right to goods bailed before stated period
 Right to Dissolution of contract
 Right in share of Profit

24. Right of Bailee
 Right to recover damages
 Right to receive compensation
 Right of Legal Action
 Right to recover Bailment Expenses

25. Termination of bailment
 Expiry of time
 Accomplishment of purpose
 Unauthorized use
 Death of either party
 Termination by bailor
 Destruction of subject matter

26. LIEN
The right to retain the lawful possession of the
property of another until the owner fulfills a legal duty
to the person holding the property, such as the
payment of lawful charges for work done on the
property.
The right of lien generally arises by operation of law,
but in some cases it is created by express contract.
There are two kinds of lien:
 Particular lien, and
 General lien.

27. Pledge
The bailment of goods as security for payment of a
debt or performance of a promise is called Pledge or
Pawn. The bailor in this case is called the. Pledgor or,
the pawnor. The bailee is called the Pledgee or the
Pawnee.-Sec. 172.
Example: A is in need of money. He borrows Rs 500
from B & gives his costly ring as security for payment
of the debt. It is a contract of pledge, A is the pledgor &
B is the pledgee.

28. Agency Contract
Agency is a special type of contract. The
concept of agency was developed as one man
cannot possibly do every transaction
himself. Hence, he should have opportunity or
facility to transact business through others like
an agent.
The contract which creates the relationship of
‘Principal’ and ‘Agent’ is called an agency.

29. Cont…
The principles of contract of agency are –
(a) Excepting matters of a personal nature, what a
person can do himself, he can also do it through agent
(e.g. a person cannot marry through an agent, as it is a
matter of personal nature)
(b) A person acting through an agent is acting himself,
i.e. act of agent is act of Principal.
Since agency is a contract, all usual requirements of a
valid contract are applicable to agency contract also,
except to the extent excluded in the Act. One
important distinction is that as per section 185, no
consideration is necessary to create an agency.

30. Cont…
 Who can employ an 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. [section 183]. - - Thus, any person
competent to contract can appoint an agent.
 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. [section 184].

31. Creation of Agency
 Agency by express Agreement
 Agency by implied Agreement
 Agency by Ratification: A person may act on behalf
of another without his knowledge or consent. For
example, A may act as P’s agent though he has no prior
authority from P. In such a case P may subsequently
either accept the act of A or reject it. If he accepts the
act of A, done without his consent, he is said to have
ratified that act & it places the parties in the same
position in which they would have been if A had P’s
authority at the time he made the contract.

32. Duties of Agent
 To carry out the work undertaken according to the
directions given by the principal. (Sec. 211)
 To carry out the work with reasonable care, skill &
diligence. (Sec. 212)
 To render proper accounts to his principal(Sec. 213)
 To communicate with the principal in case of
difficulty. (Sec. 214)
 Not to deal on his own account. (Sec. 215)
 To pay sums received for the principal. (Sec. 218)
 Not to delegate authority (Sec. 190)
 Not to make secret profit from agency.

33. Rights of Agent
 Right of retainer. (Sec. 217)
 Right to receive remuneration. (Sec. 219)
 Right of Lien. (Sec. 221)
 Right of indemnification (Sec. 222)
 Right of compensation. (Sec. 225)

34. Duties of Principal
 To indemnify the agent against the consequences of all
lawful acts. (Sec. 222)
 To indemnify the agent against the consequences of
acts done in good faith. (Sec. 223)
 To indemnify agent for injury caused by principal’s
neglect. (Sec. 225)
 To pay the agent the commission or other
remuneration agreed.

35. Rights of Principal
 To recover damages from agent if he disregards
directions of Principal.
 To obtain an account of secret profits & recover them
and resist a claim for remuneration.
 Recover moneys collected by Agent on behalf of
Principal.
 Obtain accounts from Agent.

36. Termination of Agency
1) By act of the parties:
 By agreement
 Revocation by the Principal
 Revocation by the Agent
2) By operation of law
 Completion of business of agency
 Expiry of time
 Death of the Principal or the Agent
 Insanity of the Principal or the Agent
 Insolvency of the Principal
 Destruction of the subject matter
 Dissolution of a Company
 Becoming an alien enemy