Contract Laws Business Regulations
Unit 2 CONTRACT LAWS 18 Hrs
A. Indian Contract Act, 1872: Definition of contract, essentials of valid contract, classification of contract, remedies for breach of contract Termination and Discharge of Contract; Indemnity and Guarantee; Bailment and Pledge; Law of Agency.
B. Sale of Goods Act, 1930: Definition of contract of sale, essentials of contract of sale, Conditions and warrantees, right and duties of buyer, right of unpaid seller
Indian Contract Act 1872: Part I
The Indian Contract Act came into effect on the 1st of September 1872 and is applicable to the whole of India with the exception of Jammu & Kashmir. Containing a total of 266 sections it is the principal law regulating contracts in India.
Contract Act is one of the central laws that regulate and oversee all the business wherever there is a case of a deal or an agreement.
The Indian Contract Act, 1872 defines the term “Contract” as “An agreement enforceable by law”. In other words a contract is anything that is an agreement and enforceable by the law of the land
Contract Meaning
A contract is a voluntary arrangement between two or more parties that is enforceable by law as a binding legal agreement. Contract law concerns the rights and duties that arise from agreements.
A contract is a legally enforceable agreement between two or more parties. It may be oral or written. A contract is essentially a set of promises. Typically, each party promises to do something for the other in exchange for a benefit.
This definition has two major elements in it viz – “agreement” and “enforceable by law”. A contract should consist of two elements
a. Agreement
b. Legal obligation (enforceable by law)
a.Agreement
The Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.
An agreement is defined u/s 2 (e) as ‘every promise and every set of promises, forming consideration for each other. When a proposal is accepted it becomes a promise. Thus, an agreement is an accepted proposal. Therefore, in order to form an agreement there must be a proposal or an offer by one party and its acceptance by other party.
In short Agreement = Proposal(offer) + Acceptance.
b. Legal obligation (enforceable by law)
An agreement to become a contract must give rise to legal obligation. The second part of the definition deals with enforceability by law. An agreement is enforceable if it is made by competent parties, out of their free consent and for lawful object and consideration.
Therefore, a Contract = Agreement + Enforceability.
Thus, all contracts are agreements but all agreements are not necessarily contracts.
So a contract is an accepted proposal (agreement) that is fully understood by the law and is legally defined or enforceable by the law.
So a contract is a legal document that bestows upon the party's special rights (defined by the contract itself) and also obligations that are introduced, defined, and agreed upon by all the parties of the contract.
Business Regulations Question Paper 2021
Essentials of a Valid Contract
A contract that is not a valid contract will have many problems for the parties involved. The Indian Contract Act, 1872 itself defines and lists the Essentials of a Contract either directly or through interpretation through various judgements of the Indian judiciary.
Other than these there are some we can interpret from the context of the contract which is also essential Let us see.
1] Two Parties
A Valid Contract must involve at least two parties identified by the contact. One of these parties will make the proposal and the other is the party that shall eventually accept it. Both the parties must have either what is known as a legal existence e.g. companies, schools, organisations, etc. or must be natural persons.
For Example: In the case State of Gujarat vs Ramanlal S & Co. – A business partnership was dissolved and assets were distributed among the partners as per the settlement. However, all transactions that fall under a contract are liable for taxation by the office of the State Sales Tax Officer. However, the court held that this transaction was not a sale because the parties involved were business partners and thus joint owners. For a sale, we need a buyer (party one) and a seller (party two) which must be different people.
2] Intent Of Legal Obligations
The parties that are subject to a contract must have clear intentions of creating a legal relationship between them. this means those agreements that are not enforceable by the law e.g. social or domestic agreements between relatives or neighbors are not enforceable in a court of law and thus any such agreement can’t become a valid contract.
3] Case Specific Contracts
Some contracts have special conditions that if not observed would render them invalid or void. For example, the Contract of Insurance is not a valid contract unless it is in the written form.
Similarly, in the case of contracts like contracts for immovable properties, registration of contract is necessary under the law for these to be valid.
4] Certainty of Meaning
Consider the statement “I agree to pay Mr. A a desirable amount for his house at so and so location”.it can’t be as “desirable amount” is not well defined and has no certainty of meaning. Thus we say that a valid contract must have certainty of Meaning.
5] Possibility Of Performance Of an Agreement
Suppose two people decide to get into an agreement where a person A agrees to bring back the person B’s dead relative back to life. Even when all the parties agree and all other conditions of a contract are satisfied, this is not valid because bringing someone back from the dead is an impossible task. Thus the agreement is not possible to be enforced and the contract is not valid.
6] Free Consent
Consent is crucial for an agreement and thus for a valid contract. for a valid contract, free consent is a must ,which means that the two parties must have reached consent without either of them being influenced, coerced, misrepresented or tricked into it. If the consent of either of the parties is vitiated knowingly or by mistake, the contract between the parties is no longer valid.
7] Competency Of the Parties
Every person is competent to contract who is (1) of the age of majority according to the law to which he is subject, and who is (2) of sound mind and is (3) not disqualified from contracting by any law to which he is subject.”
8] Consideration
Quid Pro Quo means ‘something in return’ which means that the parties must accrue in the form of some profit, rights, interest, etc. or seem to have some form of valuable “consideration”.
For example, if you decide to sell your watch for Rs. 500 to your friend, then your promise to give the rights to the watch to your friend is a consideration for your friend. Also, your friend’s promise to pay Rs. 500 is a consideration for you.
9] Lawful Consideration
In Section 23 of the Act, the unlawful considerations are defined as all those which:
- it is forbidden by law.
- is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent.
- involves or implies, injury to the person or property of another
- the Court regards it as immoral or opposed to public policy
These conditions will render the agreement illegal.
Types of Contract –
I) Based on Formation
On the basis of the formation of a contract, there are four types of contracts.
i)Express Contract
If a proposal or a promise is expressed by listing the terms in words – in writing or orally is said to be an Express Contract as long as it gets acceptance from the other party.So the main aspect of the Express Contract is that the terms of the contract are expressed clearly.
For example,A person A sends a text from his phone to person B, proposing to sell their bike for a cost of Rs. 10,000/-. The person B calls the first person and agrees to the terms of the promise.
This is an Express Contract as the terms have been stated clearly in oral as well as written form.
ii)Implied Contracts
Going by the definition , a contract in which the terms of the agreement are not expressed in written or oral form is an implied contract. Let us see an example to understand this.
For example, you board a rickshaw and the driver starts to drive. You tell the driver the address where he has to drop you. The driver stops and you pay him.
this is a contract but you and the driver did not express any of the terms in written and oral form. The intent was implied by your conduct and thus there was an implied contract.
iii)Quasi-Contract
They are not contracts in the sense that no agreements are made between any of the parties. In fact, there is no contract prior to some court order.
For example, a bank mistakenly transfers a large amount of money into your account. Now there is no written or oral or any sort of agreement between you and the bank but the money doesn’t belong to you.
You will have to return the money even if you don’t want to. The bank will approach the court and the court will issue an order to return the money, which is becoming a quasi-contract.
So here we see that a quasi-contract is not agreed upon by the two parties but it comes into existence by a court order. It is thus enforced by the law which also creates it. Most of the times the quasi-contract is created to stop any of the parties from taking unfair advantage of the other.
II)Types of Contracts On The Basis Of Validity
On the basis of validity or enforceability, there are five different types of contracts as given below.
Valid Contracts
The Valid Contract is an agreement that is legally binding and enforceable. It must qualify all the essentials of a contract.
Void Contract Or Agreement
a void contract is defined as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. This makes all those contracts that are not enforceable by a court of law as void.
Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A dies of natural causes in 4 years. The contract is no longer valid and becomes void due to the non-enforceability of the agreed terms.
Voidable Contract
A voidable contract is a Valid Contract. In a voidable contract, at least one of the parties has to be bound to the terms of the contract.
For example suppose a person A agrees to pay a sum of Rs. 10,0000 to a person B for an antique chair. This contract would be valid, the only problem is that person B is a minor and can’t legally enter a contract.
So this contract is a valid contract from the point of view of A and a “voidable” contract from the point of view of B. As and when B becomes a major, he may or may not agree to the terms. Thus this is a voidable contract.
The other party is not bound and may choose to repudiate or accept the terms of the contract. If they so choose to repudiate the contract, the contract becomes void. Otherwise, a voidable contract is a valid contract.
Illegal Contract
An agreement that leads to one or all the parties breaking a law or not conforming to the norms of the society is deemed to be illegal by the court. A contract opposed to public policy is also illegal.
For example, A agrees to sell narcotics to B. Although this contract has all the essential elements of a valid contract, it is still illegal.
The illegal contracts are deemed as void and not enforceable by law. All the parties that are found to have agreed on an illegal promise are prosecuted in a court of law.
V Classification of Contracts according to performance
According to the extent of performance of contracts, contracts may be classified as
- Unilateral Contract, and
- Bilateral Contract.
1. Unilateral Contract
It is also called as one-sided contract. In a unilateral contract, only one party has to satisfy his obligation at the time of the formation of it, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence.
For example, A takes a public auto to go to Mount Road. A contract comes into existence as soon as A was dropped in Mount Road. By that time, auto man has fulfilled his obligation, only A has to fulfil his obligation i.e. paying the auto- man.
2. Bilateral Contract
A contract is said to be a bilateral contract where the obligations of both the parties to the contract are pending at the time of formation of the contract. In this type of contract, a promise on one side is exchanged for a promise on the other.
For example, A promises to stitch a blouse and 0 promises to pay Rs.30. Here A promises to stitch the blouse and 0 promises to pay. Thus each party is both a promisor and a promisee.
V)Classification of Contracts according to execution
According to the execution of the contracts, contracts are classified into 2 as
- Executed Contract, and
- Executory Contract.
1. Executed Contract
A contract is said to be executed contract when both the parties to contract have performed their share of obligation.
2. Executory Contract
An executory contract is one, which is either wholly unperformed, or something remains in there to be done by both the parties to contract. Sometimes, a contract may be partly executed and partly executory.
The rule in Hadley V. Baxendale :
When a contract has been broken, the injured party is entitled to -
a) such damages which naturally arose in the usual course of things from such breach. This relates to ordinary damages arising in the usual course things;
b) Such damages which the parties knew, when they made the contract, to be likely to result from the breach. This relates to special damages
c) Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach and
Kinds of Damages -Damages may be classified under the following heads namely
a) Ordinary Damages
It is also known as General damages or substantial damages. Ordinary damages are damages which actually arise in the usual course of things from the breach of a contract. Ordinary damages depend "on the knowledge which the parties are presumed to possess". for example, in Hadley V..Baxendale the only circumstances communicated by the plaintiffs defendants at the time of the contract were that the article to be carried was the broken shaft of a mill and that the plaintiffs were the Millers of that mill. Since the defendants had only this knowledge plaintiffs we are entitled to recover only the general damages from the breach of the contract.
(3) Suit upon Quantum Meruit :
Contract of Indemnity
A contract where one party tries to help and compensate the other party of the loss is indemnity. The person giving the indemnity is the indemnifier. Whereas the person receiving the the indemnity to pay the loss is the indemnity-holder or indemnified.
Rights of Indemnity-holder
The Indemnity-holder has the rights to enforce the following from the Indemnifier’s a contract:
- Pay for the damages of any suit irrespective of any manner
- Pay for all the cost that requires for defending the suit against him legally
- Amount to the sums for the compromise of any suit
Commencement of Liability
The Indemnity is not given just for the repayment after the payment. It requires that the indemnified party shall never come up to pay. Major courts state that as soon as the liability to pay is precise and clear by the indemnity-holder, then he has the right to put the indemnifier in a position to meet the claims of repayment.
Indemnity Bond
The indemnity bond permits an employee to withdraw from the employment prior to the agreed period. This withdrawal is applicable only at the forfeiture cost of the bond money, which is valid only when the bond money and the period of restriction are reasonable. It retains only that part of the bond money to indemnify for the loss of the employer.
Contract of Guarantee
A contract where a third person discharges the liability of the debtor to the creditor. The person who gives a guarantee is the surety. A person who receives the guarantee to repay his debt is the principal debtor. The person to whom the principal debtor has to pay the guarantee is the creditor.. A guarantee is either in the format of writing or of oral. This contract lets the principal debtor to avail employment, loan or goods on credit and the surety would ensure repayment in case of any default in the part of the debtor.
Salient Features of Guarantee
Principal Debtor
The guarantee or the surety is only for securing the debt. It is necessary for the existence of the recoverable debt. The contract of guarantee should contain the essentials of the valid contract. The guarantee is valid even when the principal debtor is incompetent. But if the surety is incompetent, then the contract stands void.
Consideration
For a contract to be valid, there should be a valid consideration. The consideration of the principal debtor should be a sufficient consideration for the surety to give a guarantee.
Contract of guarantee and contract of indemnity perform similar commercial functions in providing compensation to the creditor for failure of a third party to perform their obligation. However, there are some major differences between the two.
Meaning of Indemnity
The dictionary meaning of the term ‘indemnity’ is protection against future loss. Indemnity is the protection against loss in the form of a promise to pay for loss of money, goods, etc. It is security against or compensation for loss incurred.
According to Halsbury, indemnity refers to an express or implied contract that protects a person who has entered or is going to enter into a contract or incur any other duty from loss, irrespective of the default incurred by a third person.
As per the Oxford Dictionary of Law, indemnity is an agreement by one person to pay to another, a sum that is owed or which may be owed, to him by a third person. It is not conditional on the third person defaulting on the payment.
Guarantee
Guarantee enables a person to get a loan, to get goods on credit, etc. Guarantee means to give surety or assume responsibility. It is an agreement to answer for the debt of another in case he makes default.
The Oxford Dictionary of Law defines guarantee as a secondary agreement in which a person (guarantor) is liable for a debt or default of another (principal debtor) who is the party primarily liable for the debt. A guarantor who has paid out on his guarantee has a right to be indemnified by the principal debtor.
Contract of Indemnity
Section 124 : Contract of indemnity
It defines a contract of indemnity as a contract wherein 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.
A contract of indemnity can provide protection against loss caused—
- By the conduct of promisor, or
- By the conduct of any other person.
Under Indian law, a contract of indemnity can only provide for losses caused by human agency whereas in England, it includes a promise to save the other person from loss caused whether by acts of promisor or of any other person or any other event like fire, accident, etc.
Indemnifier
The person who makes a promise to indemnify against the loss or to make good the loss (promisor) is called an indemnifier.
Indemnity-holder
The person in whose favour such a promise to indemnify is made (promisee) is called indemnity-holder.
For example, Anil enters into a contract with Swapnil to indemnify him against the consequences of any proceedings which Mrinal may initiate against Swapnil in respect of a certain sum of Rs. 2000/-. In this contract, Anil is the indemnifier and Swapnil is the indemnity-holder.
Main features
- It involves two parties i.e. promisor being the indemnifier and promisee being the indemnity holder.
- Object of the contract of indemnity is to protect from a loss.
- As per the Indian Contract Act, the contract of indemnity must be to indemnify against a loss caused by any act or conduct of the promisor himself or by the conduct of any other person.
- It is not contingent on the default of some third person.
The rights of an indemnity holder
The rights of the indemnity holder are-
- Right to recover from the promisor, the damages that he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies.
- Right to recover from the promisor all the costs that he may be compelled to pay in any suit, provided—
- that he did not contravene any of the orders of the promisor in filing or defending such suit, and
- that he acted in a manner as would have been prudent for him to act in the absence of any such contract of indemnity, or
- that the promisor had authorised him to file or defend such a suit.
- Right to recover from the promisor all such sums that he paid under the terms of any compromise of any such suit, provided-
- the compromise was not contrary to orders of the promisor, and
- such compromise is one as the promisee would have made while acting in a prudent manner even if such contract of indemnity did not exist, or
- that the promisor had authorised the promisee to compromise the suit.
When liability commences
A pertinent question that arises with regard to a contract of indemnity is, ‘when does the liability to indemnify commence/arise’. Originally, under English law, the rule was that the indemnity holder cannot recover the amount unless he had suffered actual loss i.e. ‘you must be damnified before you can claim to be indemnified’. However, this position of the law changed. In Richardson Re, Ex parte the Governors of St. Thomas’s Hospital (1911), it was held that indemnity is not necessarily given by repayment after payment, but it requires that the party to be indemnified shall never have to pay.
Contract of guarantee
Section 126 of the Indian Contract Act defines the term contract of guarantee, surety, principal debtor and creditor. The purpose behind a contract of guarantee is to give additional security to the creditor that his money will be paid back by the surety if the debtor makes a default.
Contract of guarantee : Section 126
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 contract of guarantee has three parties involved, namely, the principal debtor, the creditor, and the surety.
Surety
The person who gives the guarantee is called the Surety. The liability of the surety is secondary, i.e., he has to pay only if the principal debtor fails to discharge his obligation to pay.
Principal debtor
The person in respect of whose default the guarantee is given is the Principal debtor. The principal debtor has the primary liability to pay.
Creditor
The person to whom the guarantee is given is called the creditor.
For example, Anil orders certain goods of the value of Rs. 2000/- from Swapnil on credit. Mrinal guarantees that, if Anil will not pay for the goods, she will. This is a contract of guarantee. Here, Rs. 2000 is the principal debt, Anil is the principal debtor, Mrinal is surety and Swapnil is the creditor.
Main features
- A contract of guarantee may be oral or written: According to Section 126, a contract of guarantee may be oral or in writing. However, under English law, for a contract of guarantee to be valid, it has to be in writing and signed.
- There must be a principal debt: The existence of a principal debt is necessary for a contract of guarantee. If there is no principal debt, then there is no existing obligation to pay. As a result of the absence of such obligation to pay, there cannot be any promise/guarantee. If there is a promise to pay for compensating some loss without there being any principal debt, such a contract will become a contract of indemnity.
- Contract of guarantee is tripartite in nature: There being three parties involved in a contract of guarantee, three contracts take place in a contract of guarantee-
- The principal debtor promises to make payment to the creditor.
- Surety undertakes to pay the creditor in event of default of payment by the principal debtor.
- An implied promise by the principal debtor in favour of surety to indemnify him in case he discharges the liability of the principal debtor.
- There is a promise to pay upon default of payment by the debtor: In a contract of guarantee, the surety’s promise to pay is dependent on the default of the debtor i.e. surety pays only when the debtor defaults.
- The consideration is the benefit to the debtor: As per Section 127, anything done or promise made for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee. For example, Anil sells and delivers certain goods worth Rs. 5000 to Swapnil. Mrinal afterward requests Anil to refrain from suing Swapnil for a year and promises that if he does so, she will pay for the goods in default of payment by Swapnil. Anil agrees. The forbearance by Anil to sue is of benefit to Swapnil (the debtor) and that constitutes sufficient consideration for Mrinal (surety) for giving the guarantee.
- The consent of the surety should not have been obtained by misrepresentation or concealment of material facts:Section 142 of the ICA, 1872 provides that a guarantee obtained using misrepresentation made by the creditor or with his knowledge or assent, concerning a material part of the transaction is invalid.
Bailment
Bailment has been defined under the Section 148 of the Indian Contract Act, 1872,according to which Bailment involves the delivery of goods from one person to another for a specific purpose and upon a contract, when the purpose is fulfilled, the good has to be returned or dealt with on the direction of the person who has delivered the goods.
The person who is the owner and delivers the good is called ‘bailor’ while the person to whom the goods are delivered is called ‘bailee’.
Pledge or Pawn; .
Contract of pledge is a subset of a contract of bailment. Here, the goods bailed are kept as a security for a debt or a performance of a promise.Pledge is defined in Section 172 of the Indian Contract Act,1872 as “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 ‘pawnee’.”
Law of Agency
When one party delegates some authority to another party whereby the latter performs his actions in a more or less independent fashion, on behalf of the first party, the relationship between them is called an agency.Relationships relating to principal and agent involve three main parties: The Principal, the Agent, and a Third Party.
Sale of Goods Act, 1930
Definition of Contract of Sale
Section 4 of Sale of Goods Act defines a contract of sale as follows:“ A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part owner and another”
- Absolute
- Conditional
Absolute – goods passes from the seller to the buyer immediately and
nothing remains to be done by the seller. Sale in a shop counter is an
absolute sale.
Conditional – the property in the goods do not pass to the buyer absolutely
until a certain condition is fulfilled.
Sale and Agreement to sell
When the right of ownership in the goods is transferred from the seller to
the buyer, the contract is called a sale.
When transfer of ownership in goods is to take place at a future time it is an
agreement to sell.
An agreement to sell becomes sale when time elapses or fulfilled subject to
which property in the goods is to be transferred.
Comparison of Sale and Agreement to sell
Immediate effect of transferring goods whereas in agreement to sell the goods are to pass at some future time
Risk ‘prima facie’ passes to the buyer Seller remains the owner the risk has to be borne till the sale happens
Executed contract is a contract in which the promises are made and completed immediately, like in the purchase of a product or service.
an executory contract means that the promises of the contract are not fully performed immediately. An example of an executory contract would be an apartment lease.
Condition and Warranty
The term condition is defined in section 12 (2) of the sale of Goods Act as “A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated”
The term warranty is defined in section 12 (3) of the sale of Goods Act as “ A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.”
Express conditions and warranties
Agreed upon between the parties at the time of contract and are expressly provided in the contract.
Implied conditions
- Condition as to title
- Sale by description
- Sale by sample
- Sale by sample and description
- Condition as to quality and fitness
- Condition of wholesomeness (eatables)
Implied warranty
- Non existence of encumbrances
- Disclosure of dangerous nature of goods
Caveat Emptor
Let the buyer beware
When goods are displayed in open market , it is the buyers responsibility to choose wisely.
Rights and duties of buyer
- Right to have delivery as per contract
- Right to reject (inappropriate quantity, quality) of goods
- Right to examine goods
- Right to verify with sample
- Right to repudiate the contract
- Duty to pay the agreed price
- Duty to accept the goods
- Duty to intimate the seller when rejecting goods.
- Duty to pay tax
- Duty to pay damages for non acceptance
Rights and duties of seller
- Right to receive price of goods
- Right to demand application for delivery.
- Right to get price for excess delivery
Duties of seller
- Duty to deliver goods in Time
- Duty to make proper supply
- Duty to supply the goods within specified time
- Duty to give notice to the buyer to get goods insured in case of sea transit
Unpaid seller : When the seller of goods did not receive its whole price or receives part payment of its price then he is called an unpaid seller.
Definition:
A seller or his agent is called as unpaid seller when
a) The full price has not been paid
b) A bill of exchange or any other negotiable instrument has been given as a
conditional
payment but it has been dishonoured.
Rights of an unpaid seller
1.RIGHTS against the goods
2.RIGHTS aganst the buyer personally
Rights against the goods:can be discussed under two heads:
1.WHEN property in goods has passed
2.when property in goods has not passed
When property in goods has passed: following 3 rights r avaiable to the unpaid seller if property in goods has passed to the buyer;
(a)RIGHT OF LIEN
(b)RIGHT OF STOPPAGE IN TRANSIT
(C)RIGHT OF RESALE RIGHT OF LIEN:
Right of lien : is the right to retain the goods until whole of theprice of goods is paid or tendered.
Right of lien can be excercised: where goods have been sold without any stipulation to credit.
WHERE goods have been sold on credit but period of credit has expired.
Where buyer has become insolvent, even though the period of credit has not yet expired
RULES regarding lien:
1 lien can be excercised if the seller is in possession of goods.unpaid seller can excercise the right of lien even if the documents of tittle or property in goods have been transferred.if part delivery of goods is made,the seller can excercise the right of lien on the remainder.however if the seller has delivered part of goods so asto show an intension to wave the lien.
2.THE UNPAID SELLER can excercise the right of lien only for price and not for any othr charges
3. right of lien can be excercised by seller only
4. UNPAID seller can ecercise the right of lien even if he is in possession of goods as bailee or agent
5. UNPAID seller cannot excercise the right of lien if he has expressly waived his right f lien.
6.UNPAID seller does not loses the right of lien even where unpaid seller has obtained decree for the price of goods
2 RIGHT OF STOPPAGE IN TRANSIT:
Right of stoppage in transit is a right of stopping the goods in transit after the unpaid seller has parted with the goods.if the goods r in transit he has aright to resume the possessin of goods as long as they are in the course of transit .this right is available to the unpaid seller only when the buyer become insolvent and when the goods r in transit.
UNPAID seller can excercise the right of lien either- BY taking actual possession of goods. BY GIVING notice of claim to the carrier or other bailee in possession of goods.And notice can be given either to the principal or to the person in possession of goods.
DURATION OF TRANSIT:
GOODS are deemed to be in course of transit from the time they r delivered to carrier or other bailee for the purpose of transmission to the buyer. the carrier may hold the goods as
1. BUYER' S AGENT 2. Seller's agent 3.AS AN INDEPENDENT .IN 2 AND 3 HE CAN EXERCISE THE right of stoppage in transit.BUT the transit comes to an end
1 if buyer or his agent obtain the delivery before they arrive at the destination
2 if after arrival at the appointed destination the carrier acknowledge the buyer or his agent that he hold the goods on his behalf
3 where carrier wrongfully refuse to deliver the goods to buyer .
3 RIGHT OF RESALE:
unpaid seller can resell the goods
if the goods r of perishable nature
if seller give the notice to buyer of his intention to resell and the buyer does not pay within the reasonable time
if on resale there is loss ti seller he can recover from the buyerand
if profit must handover to the buyer
RIGHTS OF WITHHOLDING DELIVERY: WHEN PROPERTY IN GOODS HAS NOT PASSED to the buyer,
unpaid seller in addition to other remedies has a right of withholding delivery similar coextensive with the right of lien
RIGHTS OF AN UNPAID SELLER AGAINST THE BUYER PERSONALLY
1SUIT FOR PRICES: WHERE property has passed, the seller can sue for the price
2 SUIT FOR DAMAGES FOR NON ACCEPTANCE:WHERE The buyer wrongfully refuse to accept and pay for goods, seller may sue him for non acceptance
3 Repudiation of the contract due date by buyer: the seller can treat the contract as subsisting and wait till delivery or he may treat the contract as rescindded and sue for damages
4 suit for interest:where there is a specific agreement between seller and buyer as tto interest on the price of the goods from the date the payment become due ,seller can recover the interest from the buyer
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