THE INDIAN CONTRACT ACT,1872


ACT No.  9 OF 1872 1*


[25th April, 1872.]


     Preamble.WHEREAS  it  is expedient to define  and  amend  certain
parts  of  the  law relating to contracts ; It is  hereby  enacted  as
follows -

                             PRELIMINARY

1.


Short title.


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


Extent,  Commencements.-It extends to the whole of India 2*[except the
State  of  Jammu  and Kashmir];  and it shall come into force  on  the
first day of September, 1872.

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Statute,  Act  or Regulation not hereby expressly  repealed,  nor  any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


2.


Interpretation-clause.


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


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

               (b)  When  the  person  to whom the  proposal  is  made
              signifies his assent thereto, the proposal is said to be
              accepted.  A proposal, when accepted, becomes a promise:

               (c)  The  person  making the proposal is called  the  "
              promisor and the person accepting the proposal is called
              the It promisee ":

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


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     1 The chapters and sections of the Transfer of Property Act, 1882
(4  of 1882), which relate to contracts are, in places in  which  that
Act is in force, to be   taken as part of this Act-see Act 4 of  1882,
a. 4.

     It has been amended in C.P. by C.P. Act 1 of 1915 and in C.P. and
Berar by  C.P. and Berar Act 15 of 1938.

     2  Subs.  by Act 3 of 1951, s. 3 and Sch., for "  except  Part  B
States

     3 The words " The enactments mentioned in the schedule hereto are
repealed to    the extent specified in the third column thereof but  "
were rep. by Act 10 of   1914.

This Act shall come into force in the State of Sikkim on 1-9-1984 vide
Notifn. No. s.o. 641 (E), dated 24.8.1984 Gaz. of India, Exty.  Pt.II,
See. 3 (ii).

Extended  to and brought into force in Dadra and Nagar Haveli  (w.e.f.
1-7-65) by Reg. 6 of 1963, s.2 & Sch. I.

Extended to Goa, Daman and Diu by Reg. 11 of 1963, s.3 & Sch.

Extended to the Union territory of pondicherry by Act 26 of 1968,  s.3
and  Schedule.
Extended  to  Laccadive, Minicoy and Amindivi  Islands  (w.e.f.  1-10-
1967):vide Reg. 8 of 1965, s.3 & Sch.

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

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

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

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

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

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



CHAPTER I



OF THE  COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS




                              CHAPTER I

     OF THE  COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS


3.


Communication, acceptance and revocation of proposals.


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


4.


Communication when complete.


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

The communication of an acceptance is complete,--

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

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


The communication of a revocation is complete,--


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

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


                            Illustrations



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

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




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

          The  communication of the acceptance is complete,

          as against  A when the letter is posted

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

          (c)  A revokes his proposal by telegram.

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

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


5.


Revocation of proposals and acceptances.


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

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




                            Illustrations


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

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

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


6.


Revocation how made.


     6.Revocation how made.-A proposal is revoked-


          (1)  by the communication of notice of revocation by the pro
         poser to the other party

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

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

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



7.


Acceptance must be absolute.


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


     (1) be absolute and unqualified;


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



8.


Acceptance by performing conditions, or receiving consideration.


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


9.


Promises, express and implied.


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


CHAPTER II


OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS



                              CHAPTER II

     OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS



10.


What agreements are contracts.


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

     Nothing  herein  contained  shall  affect any  law  in  force  in
1*[India] and not hereby expressly repealed by which any  contract  is
required  to be made in writing2* or in the presence of witnesses,  or
any law relating to the registration of documents.


11.


Who are competent to contract.


   11.   Who  are competent to contract.-Every person is competent  to
contract  who is of the age of majority according to the law to  which
he  is  subject, 3*and who is of sound mind, and is  not  disqualified
from contracting by any law to which he is subject.

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     1 Subs. by Act 3 of 1951, for " Part A States and Part C States".

     2  See e.g., s. 25, infra; the Indian Copyright Act, 1914  (3  of
1914),  s. 5 of the First Schedule; the Apprentices Act, 1850  (19  of
1850),  s. 8 ; the Conveyance of Land Act, 1854 (31 of 1854),  ss.  14
and  18  ;  the  Carriers Act, 1865 (3 of 1865), ss. 6  and  7  ;  the
Merchant Shipping Act, 1894 (57 and 58 Vict., c. 60), s.   24   (poll.
Stat., Vol.  II).

     3 See the Indian Majority Act, 1875 (9 of 1875).
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12.


What is a sound mind for the purposes of contracting.


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

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

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



                         Illustrations


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

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



13.



"Consent" defined.


     13."Consent"  defined.-Two  or more persons are said  to  consent
when they agree upon the same thing in the same sense.


14.


"Free consent" defined.


     14."Free consent" defined.-Consent is said to be free when it  is
not caused by-


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

          (2)  undue influence, as defined in section 16, or
          (3)  fraud, as defined in section 17, or
          (4)  misrepresentation, as defined in section 18, or

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


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



15.


"Coercion"defined.


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

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


                         Illustration


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

     A afterwards sues B for breach of contract at Calcutta.




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


16.


"Undue influence" defined.


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

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


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

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


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

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


                         Illustrations


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

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

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

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


17.


"Fraud" defined.


     17."Fraud"  defined.-"Fraud"  means  and  includes  any   of  the
following  acts  committed  by  a party to a  contract,  or  with  his
connivance, or by his agent,2*

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     1 Subs. by Act 6 of 1899, s. 2, for the original s. 16.

     2 Cf. s. 238, infra;
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with  intent  to  deceive another party thereto of his  agent,  or  to
induce him to enter into the contract:-


         (1)   the  suggestion, as a fact, of that which is not  true,
         by one who does not believe it to be true ;

         (2)   the  active  concealment  of  a  fact  by  one   having
         knowledge or belief of the fact ;

         (3)   a promise made without any intention of performing it

         (4)   any other act fitted to deceive ;

         (5)   any such act or omission as the law specially  declares
         to be fraudulent.


     Explanation.-Mere  silence  as  to facts  likely  to  affect  the
willingness of a person to enter into a contract is not fraud,  unless
the circumstances of the case are such that, regard being had to them,
it is the duty of the person keeping silence to speak,1* or unless his
silence is, in itself, equivalent to speech.


                         Illustrations

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

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

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

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



18.


"Misrepresentation" defined.


     18."Misrepresentation"  defined.-"Misrepresentation"   means  and
includes-


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

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

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

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     1 See s. 143, infra.
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19.


Voidability of agreements without free consent.


19.Voidability  of agreements without free consent.-When consent to an
agreement  is  caused by coercion,1* fraud or  misrepresentation,  the
agreement  is  a  contract voidable at the option of the  party  whose
consent was so caused.

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

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

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


                         Illustrations

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

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

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

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

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

2*[19A.  Power to set aside contract induced by undue influence.- When
consent to an agreement is caused by undue influence, the agreement is
a  contract  voidable at the option of the party whose consent was  so
caused.

     Any  such contract may be set aside either absolutely or, if  the
party  who  was  entitled  to  avoid  it  has  received  any   benefit
thereunder,  upon such terms and conditions as to the Court  may  seem
just.
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     1 The words " undue influence " were rep. by Act 6 of 1899, s. 3.

     2 Ins., ibid.
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27
                            Illustrations

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

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



20.


Agreement  void where both parties are under mistake as to  matter  of
fact.


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

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



                            Illustrations


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

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

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


21.


Effect of mistakes as to law.



21.   Effect of mistakes as to law.-A contract is not voidable because
it was caused by a mistake as to any law in force in 1*[India];  but a
mistake as to a law not in force in 1*[India] has the same effect as a
mistake of fact.

     2*        *         *         *         *         *    *.



                             Illustration


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


22.


Contract caused by mistake of one party as to matter of fact.


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

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     1  The  original words "British India "  have  successively  been
amended by the A.O. 1948 and the A.O. 1950 to read as above.

     2  Para. 2 ins. by the A.O. 1937 and as amended by the A.O.  1948
was rep. by the A.O. 1950,

     3  The second illustration Was rep. by Act 24 of 1917, s.  3  and
Sch.  II.

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28


23.


What considerations and objects are lawful and what not.


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

     it is forbidden by law1* ; or

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

     is fraudulent ; or

     involves  or implies injury to the person or property of  another
or ;
     the Court regards it as immoral, or opposed to public policy.

     In  each  of  these  cases, the consideration  or  object  of  an
agreement is said to be unlawful.  Every agreement of which the object
or consideration is unlawful is void.


                         Illustrations


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

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

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

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

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

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

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

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

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

---------------------------------------------------------------------
     1 See ss. 26, 27, 28 and 30, infra.
---------------------------------------------------------------------


29




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

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


                         Void agreements


24.


Agreement void, if considerations and objects unlawful in part.


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

                         Illustration


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



25.


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


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


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

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

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

     In any of these cases, such an agreement is a contract.

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

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

---------------------------------------------------------------------

     1 Subs. by Act 12 of 1891 for "assurances".

---------------------------------------------------------------------


30



                         Illustrations



     (a)  A  promises, for no consideration, to give to B  Rs.  1,000.
This is a void agreement.

     (b)  A, for natural love and affection, promises to give his son,
B, Rs. 1,000.  A puts his promise to B into writing and registers  it.
This is a contract.

     (c)  A finds B's purse and gives it to him.  B promises to give A
Rs. 50.  This is a contract.

     (d)  A  supports B's infant son.  B promises to pay A's  expenses
in so doing. This is a contract.

     (e)  A owes B Rs. 1,000, but the debt is barred by the Limitation
Act.   A  signs a written promise to pay B Rs. 500 on account  of  the
debt.  This is a contract.

     (f)  A  agrees to sell a horse worth Rs. 1,000 for Rs.  10.   A's
consent  to  the  agreement  was freely given.   The  agreement  is  a
contract notwithstanding the inadequacy of the consideration.

     (g)  A  agrees  to sell a horse worth Rs. 1,000 for  Rs.  10.   A
denies that his consent to the agreement was freely given.

     The  inadequacy  of the consideration is a fact which  the  Court
should take into account in considering whether or not A's consent was
freely given.


26.


Agreement in restraint of marriage void.


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


27.


Agreement in restraint of trade void.


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

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

     1*        *              *              *              *.



28.


Agreements in restraint of legal proceedings void.


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

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

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

is void to that extent.

     Saving  of  contract  of refer to arbitration  dispute  that  may
arise.-Exception 1.-This section shall not render illegal a  contract,
by  which two or more persons agree that any dispute which  may  arise
between them in respect of any subject or class of subjects shall be

---------------------------------------------------------------------

     1  Exceptions  2 and 3 relating to  agreements  between  partners
upon,  or  in anticipation of, dissolution of partnership  and  during
continuance  of partnership, respectively were rep. by Act 9 of  1932,
s. 73 and Sch.  II.  See now ss. 11 and 36 (2) of that Act.

     2* Ins. by Act, 1 of 1997, s.2. w.e.f. (8-1-1997).
---------------------------------------------------------------------



31



referred  to  arbitration, and that only the amount  awarded  in  such
arbitration  ?hall  be  recoverable  in  respect  of  the  dispute  so
referred.

Suits barred by such contracts.-1* When such a contract has been made,
a  suit  may be brought for its specific performance) and if  a  suit,
other  than for such specific performance, or for the recovery of  the
amount  so  awarded, is brought by one party to such contract  against
any  other  such party, in respect of any subject which they  have  so
agreed  to refer, the existence of such contract shall be a bar to the
suit.

Saving of contract to refer questions that have already arisen.

     Saving  of contract to refer questions that have already arisen.-
Exception  2.-Nor shall this section render, illegal any  contract  in
writing,  by which two or more persons agree to refer  to  arbitration
any  question  between them which has already arisen,  or  affect  any
provision  of any law in force for the time being as to references  to
arbitration.2*


29.


Agreements void for uncertainty.


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


                         Illustrations


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

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

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

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

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

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



30.


Agreements by way of wager void.


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

---------------------------------------------------------------------

     1 The second clause of exception I to section 28 was rep. by  Act
1  of 1877.  The clause is, however. printed here in italics,  because
the  Contract Act is in force in certain Scheduled Districts to  which
the Specific Relief Act does not apply.

     2 Cf. the Arbitration Act, 1940 (10 of 1940).
---------------------------------------------------------------------


32



Exception  in favour of certain prizes for horse-racing.-This  section
shall not be deemed to render unlawful a subscription or contribution,
or  agreement to subscribe or contribute, made or entered into for  or
toward  any  plate, prize or sum of money, of the value or  amount  of
five hundred rupees or upwards, to be awarded to the winner or winners
of any horse-race.1*


--


Section 294A of the Indian Penal Code not affected.


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


CHAPTER III



OF CONTINGENT CONTRACTS



                         CHAPTER III

                    OF CONTINGENT CONTRACTS

31.


"Contingent contract" defined.


     31."Contingent contract" defined.-A " contingent contract " is  a
contract  to do or not to do something, if some event,  collateral  to
such contract, does or does not happen.

                         Illustration

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


32.


Enforcement of contracts contingent on an event happening.


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

     If the event becomes impossible, such contracts become void.


                         Illustrations


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

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

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



33.


Enforcement of contracts contingent on an event not happening.


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


                         Illustration

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



34.



When event on which contract is contingent to be deemed impossible, if
it is the future conduct of a living person.


     34.When  event  on  which contract is  contingent  to  be  deemed
impossible,  if  it is the future conduct of a living  person.-If  the
future event  on which a contract is contingent is the way in which  a
person will act at an unspecified time,the event shall
---------------------------------------------------------------------

     1 Cf. the Gaming Act (8 and 9 Vict., c. 109),s. 18,
---------------------------------------------------------------------


33



be  considered  to become impossible when such  person  does  anything
which renders it impossible that he should so act within any  definite
time, or otherwise than under further contingencies.


                    Illustration


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


35.


When  contracts  become  void which are  contingent  on  happening  of
specified event within fixed time.


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

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


                    Illustrations


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

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



36.


Agreement contingent on impossible events void.


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


                    Illustrations


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

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



CHAPTER IV.


OF THE PERFORMANCE OF CONTRACTS




                         CHAPTER IV.

               OF THE PERFORMANCE OF CONTRACTS

               Contracts which must be performed




37.


Obligation of parties to contracts.


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




34




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


                         Illustrations

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

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



38.


Effect of refusal to accept offer of performance.


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

     Every such offer must fulfil the following conditions:-


          (1)  it must be unconditional;

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

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


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


                         Illustration

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



39.


Effect of refusal of party to perform promise wholly.


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




35



                         Illustrations

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

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


          By whom contracts must be performed



40.


Person by whom promise is to be performed.


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


                         Illustrations

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

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



41.


Effect of accepting performance from third person.


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



42.


Devolution of joint liabilities.


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



43.


Any one of joint promisors may be compelled to perform.


     43.Any  one of joint promisors may be compelled to  perform.-When
two  or; more persons make a joint promise, the promisee may,  in  the
absence  of  express agreement to the contrary, compel  any 1*[one  or
more] of such joint promisors,to perform the whole of the promise.

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

---------------------------------------------------------------------

     1 Subs. by Act 12 of 1891 for "one".
---------------------------------------------------------------------



36


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

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


                         Illustrations

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

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

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

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



44.


Effect of release of one joint promisor.


     44.Effect  of  release of one joint promisor.-Where two  or  more
persons  have  made a joint promise, a release of one  of  such  joint
promisors by the promisee does not discharge the other joint  promisor
or  joint  promisors  ; neither does it free the  joint  promisors  so
released  from  responsibility to the other joint  promisor  or  joint
promisors.1*



45.


Devolution of joint rights.


     45.Devolution  of joint rights.-When a person has made a  promise
to  two  or more persons jointly, then, unless  a  contrary  intention
appears  from the contract, the right to claim performance  rests,  as
between  him and them, with them during their joint lives, and,  after
the  death  of any of them, with the representative of  such  deceased
person.  Jointly with the survivor or survivors, and, after the  death
of the last survivor, with the representatives of all jointly.2*


                         Illustration


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

---------------------------------------------------------------------
     1    See s. 138, infra.

     2 For an exception to s.45 in case of Government securities,  see
the Indian Securities Act, 1920 (10 of 1920), s. 4.
---------------------------------------------------------------------


37.




                    Time and place for performance


46.


Time for performance of promise, when no application is to be made and
no time is specified.


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

     Explanation.-The  question " what is a reasonable time "  is,  in
each particular case, a question of fact.



47.


Time and place for performance of promise, where time is specified and
no application to be made.


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


                             Illustration

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



48.


Application  for performance on certain day to be at proper  time  and
place.


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

     Explanation.-The  question " what is a proper time and place.   "
is, in each particular case, a question of fact.



49.


Place for performance of promise, where no application to be made  and
no place fixed for performance.


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

                         Illustration


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



50.


Performance in manner or at time prescribed or sanctioned by promisee.


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


                         Illustrations


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

     (b)  A and B are mutually indebted.  A and B settle an account by
setting  off one item against another, and B pays A the balance  found
to be due from him



38



upon  such  settlement.   This  amounts  to a  payment  by  A  and  B,
respectively, of the sums which they owed to each other.

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

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


               Performance of reciprocal promises



51.


Promisor  not bound to perform, unless reciprocal promisee  ready  and
willing to perform.


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


                         Illustrations


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

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

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

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

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

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



52.


Order of performance of reciprocal promises.


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

                         Illustrations

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

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



53.


Liability  of party preventing event on which the contract is to  take
effect.


     53. Liability of party preventing event on which the contract  is
to take effect.-When a contract contains reciprocal promises, and  one
party to the contract prevents the other from performing his  promise,
the contract becomes voidable at the option of the party so prevented;
and he is entitled to compensation 1* from

---------------------------------------------------------------------
     1 See s. 73, infra.
---------------------------------------------------------------------


39



the  other party for any loss which he may sustain in  consequence  of
the non-performance of the contract.


                    Illustration

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



54.


Effect of default as to that promise which should be first  performed,
in contract consisting of reciprocal promises.


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


                    Illustrations

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

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

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

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



55.


Effect of failure to perform at fixed time, in contract in which  time
is essential.


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

Effect of such failure when time is not essential.

     Effect of such failure when time is not  essential.-If it was not
the intention of the parties that time should be of the essence of the
contract,  the contract does not become voidable by the failure to  do
such thing at or before the specified time ; but the



40

promisee  is entitled to compensation from the promisor for  any  loss
occasioned to him by such failure.

     Effect  of  acceptance  of performance at time  other  than  that
agreed  upon.  If, in case of a contract voidable on  account  of  the
promisor's  failure  to perform his promise at the  time  agreed,  the
promisee  accepts performance of such promise at any time  other  than
that  agreed,  the  promisee cannot claim compensation  for  any  loss
occasioned  by the non-performance of the promise at the time  agreed,
unless, at the time of such acceptance he gives notice to the promisor
of his intention to do so.1*



56.

Agreement to do impossible act.


     56.  Agreement  to do impossible act. An agreement to do  an  act
impossible in itself is void.

     Contract to do act afterwards becoming impossible or  unlawful.-A
contract  to  do  an act which, after the contract  is  made,  becomes
impossible,  or, by reason of some event which the Promisor could  not
prevent,  unlawful,  becomes void when the act becomes  impossible  or
unlawful.2*

     Compensation for loss through non-performance of act known to  be
impossible or unlawful.-Where one person has promised to do  something

which  he knew, or, with reasonable diligence, might have  known,  and
which  the promisee did not know, to be impossible or  unlawful,  such
promisor  must make compensation to such promisee for any  loss  which
such promisee sustains through the non-performance of the promise.


                         Illustrations

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

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

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

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

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



57.


Reciprocal promise to do things legal, and also other things illegal.


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

---------------------------------------------------------------------
     1 Cf. ss. 62 and 63, infra.

     2 See s. 65, infra.  See also the Specific Relief Act, 1877 (I of
1877), s. 13.
---------------------------------------------------------------------



41



                         Illustration

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

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

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



58.


Alternative promise, one branch being illegal.


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


                         Illustration

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

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


                      Appropriation of payments


59.


Application of payment where debt to be discharged is indicated.


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


                            Illustrations

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

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



60.


Application of payment where debt to be discharged is not indicated.


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


61.


Application of payment where neither party appropriates.


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




42


               Contracts which need not be performed



62.


Effect of novation, rescission, and alteration of contract.


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

                         Illustrations


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

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

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



63.


Promisee may dispense with or remit performance of promise.



63.Promisee  may dispense with or remit performance of promise.- Every
promisee  may  dispense  with  or remit, wholly or in  part,  the  the
performance  of  the promise made to him, or may extend the  time  for
such performance,1* or may accept instead of it any satisfaction which
he thinks fit.


                         Illustrations

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

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

     (c)  A  owes  B 5,000 rupees.  C pays to B 1,000  rupees,  and  B
accepts  them,  in satisfaction of his claim on A. This payment  is  a
discharge of the whole claim.2*

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

     (e)  A  owes  B  2,000  rupees, and is  also  indebted  to  other
creditors.  A makes an arrangement with his creditors, including B, to
pay  them  a 3*[composition] of eight annas in the  rupee  upon  their
respective  demands.  Payment to B of 1,000 rupees is a  discharge  of
B's demand.



64.


Consequences of rescission of voidable contract.


     64.  Consequences  of  rescission of  voidable  contract.-When  a
person  at whose option a contract is voidable rescinds it, the  other
party thereto need not perform any promise therein contained in  which
he is promisor.  The party rescinding a voidable contract shall, if he
have received any benefit thereunder from another

---------------------------------------------------------------------

     1 But see s. 135, infra.
     2 See s. 41, supra.
     3  Subs.  by  Act  12  of  1891,  s.  2  and  Sch.   II,  for   "
compensation".
---------------------------------------------------------------------



43


party to such contract, restore such benefit, so far as may be, to the
person from whom it was received.'



65.


Obligation of person who has received advantage under void  agreement,
or contract that becomes void.


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


                            Illustrations

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

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

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

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



66.


Mode  of communicating or revoking rescission of voidable contract.


     66.Mode   of  communicating or revoking  rescission  of  voidable
contract.-The rescission of a voidable contract may be communicated or
revoked in the same manner, and subject to the same rules, as apply to
the communication or revocation of a proposal.2*



67.


Effect of neglect of promisee to afford promisor reasonable facilities
for performance.


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

                         Illustration


     A contracts with B to repair B's house.

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

     A  is  excused for the nonperformance of the contract  if  it  is
caused by such neglector refusal.


CHAPTER V.


OF CERTAIN RELATIONS RESEMBLING THOSE CREATED) BY CONTRACT




                              CHAPTER V

       OF CERTAIN RELATIONS RESEMBLING THOSE CREATED) BY CONTRACT


68.


Claim for necessaries supplied to person incapable of contracting,  or
on his account.


     68.Claim   for  necessaries  supplied  to  person  incapable   of
contracting,  or  on his account. If a person, incapable  of  entering
into  a contract, or any one whom he is legally bound to  support,  is
supplied by another, person

---------------------------------------------------------------------
     1 See s. 75, infra.

     2 See ss. 3 and 5, supra.
---------------------------------------------------------------------



44


with  necessaries suited to his condition in life, the person who  has
furnished such supplies is entitled to be reimbursed from the property
of such incapable person.1*


                            Illustrations

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

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


69.


Reimbursement  of  person paying money due by another, in  payment  of
which he is interested.


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


                             Illustration

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



70.


Obligation of person enjoying benefit of non-gratuitous act.


     70.Obligation  of person enjoying benefit of non-gratuitous act.-
Where a person lawfully does anything for another person, or  delivers
anything  to him, not intending to do so gratuitously, and such  other
person  enjoys  the  benefit  thereof, the latter  is  bound  to  make
compensation to the former in respect of, or to restore, the thing  so
done or delivered.2*

                           Illustrations


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

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



71.


Responsibility of finder of goods.


     71.Responsibility  of finder of goods.-A person who  finds  goods
belonging  to another, and takes them into his custody, is subject  to
the same responsibility as a bailee.3*



72.


Liability  of  person  to whom money is paid  or  thing  delivered  by
mistake or under coercion.


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

---------------------------------------------------------------------

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

     2  As  to suits by minors under s. 70 in Presidency  Small  Cause
Courts, see the Presidency Small Cause Courts Act, 1882 (15 of  1882),
s. 32.

     3 See ss. 151 and 152, infra.

---------------------------------------------------------------------


45


                         Illustrations

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

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


CHAPTER VI.


OF THE CONSEQUENCES OF BREACH OF CONTRACT




                         CHAPTER VI

          OF THE CONSEQUENCES OF BREACH OF CONTRACT



73.


Compensation for loss or damage caused by breach of contract.


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

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

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

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

                         Illustrations


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

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

     (c)A contracts to buy of B, at a stated price, 50 maunds of rice,
no time being fixed for delivery.  A afterwards informs B that he will
not accept the



46


rice  if tendered to him.  B is entitled to receive from A, by way  of
compensation, the amount, if any, by which the contract price  exceeds
that which B can obtain for the rice at the time when A informs B that
he will not accept it.

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

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

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

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

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

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

     (j)  A,-having  contracted with B to supply B with 1,000 tons  of
iron at 100 rupees a ton, to be delivered at a stated time,  contracts
with  C  for the purchase of 1,000 tons of iron at 180 rupees  a  ton,
telling  C that he does so for the purpose of performing his  contract
with  B.  C fails to perform his contract with A, who  cannot  procure
other iron, and B, in consequence, rescinds the contract.  C must  pay
to  A 20,000 rupees, being the profit which A would have made  by  the
performance of his contract with B.

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



47



of  the piece of machinery and the sum paid by B for another, but  not
the sum paid by B to the third person by way of compensation.

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

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

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

     (o)A  contracts  to deliver 50 maunds of saltpetre to  B  on  the
first of January, at a certain price.  B afterwards, before the  first
of  January,  contracts to sell the saltpetre to C at a  price  higher
than the market price of the first of January.  A breaks his  promise.
In estimating the compensation payable by A to B, the market price  of
the first of January, and not the profit which would have arisen to  B
from the sale to C, is to be taken into account.

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

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

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



74.


Compensation for  breach of contract where penalty stipulated for.


     74. Compensation for  breach of contract where penalty stipulated
for.-1*[When  a  contract has been broken, if a sum is  named  in  the
contract  as the amount to be paid in case of such breach, or  if  the
contract contains any other stipulation by way of penalty, the party

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     1 Subs. by Act 6 of 1899, s. 4, for the first para. of s. 74.
---------------------------------------------------------------------




48.



complaining of the breach is entitled, whether or not actual damage or
loss is proved to have been caused thereby, to receive from the  party
who has broken the contract reasonable compensation not exceeding  the
amount so named or, as the case may be, the penalty stipulated for.

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

Exception.-When  any person enters into any bail-bond, recogni-  zance
or  other  instrument of the same nature, or, under the provisions  of
any  law, or under the orders of the 1*[Central Government] or of  any
State  Government,  gives any bond for the performance of  any  public
duty  or  act in which the public are interested, he shall be  liable,
upon  breach of the condition of any such instrument, to pay the whole
sum mentioned therein.

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


                            Illustrations

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

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

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

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

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

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

2*[(g)  A  borrows Rs.  100 from B and gives him a bond for  Rs.   200
payable  by  five  yearly instalments of Rs.  40, with  a  stipulation
that, in default of payment

---------------------------------------------------------------------
     1 Subs. by the A.O. 1937 for "G. of I.".
     2 Ins. by Act 6 of 1899, s. 4(2).
---------------------------------------------------------------------



49



of any instalment, the whole shall become due.  This is a  stipulation
by way of penalty.]



75.


Party rightfully rescinding contract entitled to compensation.


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



                             Illustration

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



CHAPTER VII.


Sale of goods.



     CHAPTER  VII.-[Sale of goods.] Rep. by the Indian Sale  of  Goods
Act 1930 (3 of 1930), s. 65.



CHAPTER VIII.


OF INDEMNITY AND GUARANTEE



                             CHAPTER VIII

                    OF INDEMNITY AND GUARANTEE


124.


"Contract of indemnity" defined.


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

                              Illustration

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



125.


Rights of indemnityholder when sued.


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


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

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

         (3)   all sums which he may have paid under the terms of  any
         compromise of any such suit, if the compromise was not





50



          contrary to the orders of the promisor, and was one which it
         would  have  been  prudent for the promisee to  make  in  the
         absence  of  any contract of indemnity, or  if  the  promisor
         authorized him to compromise the suit.




126.


"Contract of guarantee", "surety", principal debtor" and "creditor".


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



127.


Consideration for guarantee.


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


                            Illustrations


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

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

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



128.


Surety's liability.


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


                         Illustration

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



129.


"Continuing guarantee".


     129."Continuing guarantee".-A guarantee which extends to a series
series of transactions is called a "continuing guarantee".


                         Illustrations


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

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




51



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



130.


Revocation of continuing guarantee.


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

                         Illustrations


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

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



131.


Revocation of continuing guarantee by surety's death.


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



132.


Liability   of  two  persons,  primarily  liable,  not   affected   by
arrangement between them that one shall be surety on other's default.


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


                             Illustration

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


133.


Discharge of surety by variance in terms of contract.


     133.Discharge  of  surety by variance in terms  of  contract.-Any
variance,  made  without  the surety's consent, in the  terms  of  the
contract between the principal 1[debtor] and the creditor,  discharges
the surety as to transactions subsequent to the variance.

                            Illustrations


     (a)  A  becomes surety to C for B's conduct as a manager  in  C's
bank.   Afterwards  B and C contract, without A's  consent,  that  B's
salary shall be raised, and that he shall become liable for one-fourth
of the losses on overdrafts.  B allows a customer to overdraw, and the
bank loses a sum of money.  A is

---------------------------------------------------------------------
     1 Ins. by Act 24 of 1917, s. 2 and Sch. I.
---------------------------------------------------------------------


52


discharged  from  his  suretyship by the  variance  made  without  his
consent, and is not liable to make good this loss.

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

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

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

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



134.


Discharge of surety by release or discharge of principal debtor.


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


                            Illustrations

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

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

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



135.



Discharge  of surety when  creditor compounds with, gives time to,  or
agrees not to sue, principal debtor.



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




53




136.


Surety  not discharged when agreement made with third person  to  give
time to principal debtor.


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

                             Illustration

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



137.


Creditor's forbearance to sue does not discharge surety.


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


                             Illustration

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



138.


Release of one co-surety does not discharge others.


     138.Release  of  one co-surety does not  discharge  others.-Where
there  are co-sureties, a release by the creditor of one of them  does
not discharge the others; neither does it free the surety so  released
from his responsibility to the other sureties1.



139.


Discharge  of surety by creditor's act or omission impairing  surety's
eventual remedy.


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


                            Illustrations


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

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

     (c)  A puts M as apprentice to B, and gives a guarantee to B  for
M's  fidelity.  B promises on his part that he will, at least  once  a
month, see M make up the

---------------------------------------------------------------------
     1 See s. 44, supra.
---------------------------------------------------------------------



54


cash.   B omits to see this done as promised, and M embezzles.   A  is
not liable to B on his guarantee.



140.


Rights of surety on payment or performance.


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



141.


Surety's right to benefit of creditor's securities.


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


                         Illustrations

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

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

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



142.


Guarantee obtained by misrepresentation invalid.


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



143.


Guarantee obtained by concealment invalid.


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


                          Illustrations


     (a)A  engages  B as clerk to collect money for him.  B  fails  to
account for some of his receipts, and A in consequence calls upon  him
to  furnish security for his duly accounting.  C gives  his  guarantee
for  B's  duly accounting.  A does not acquaint C  with  B's  previous
conduct.  B afterwards makes default.  The guarantee is invalid.

     (b)A guarantees to C payment for iron to be supplied by him to  B
to  the  amount of 2,000 tons.  B and C have privately agreed  that  B
should pay five rupees per ton beyond the market price, such excess to
be applied in liquidation of an old debt.  This agreement is concealed
from A. A is not liable as a surety.



55




144.


Guarantee  on  contract that creditor shall not act on  it  until  co-
surety joins.


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



145.


implid promise to indemnify surety.


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


                         Illustrations

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

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

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



146.


Co-sureties liable to contribute equally.


     146. Co-sureties liable to contribute equally. Where two or  more
persons  are CO-sureties for the same debt or duty, either jointly  or
severally,  and  whether under the same or  different  contracts,  and
whether with or without the knowledge of each other, the  co-sureties,
in the absence of any contract to the contrary, are liable, as between
themselves, to pay each an equal share of the whole debt, or of  that
part of it which remains unpaid by the principal debtor1*.


                            Illustraticns

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

     (b)A, B and C are sureties to D for the sum of 1,000 rupees  lent
to  E,  and  there is a contract between A, B and C that A  is  to  be
responsible  to  the extent of one-quarter, B to the  extent  of  one-
quarter, and C to the extent of

---------------------------------------------------------------------
     1 See s. 43 supra.
---------------------------------------------------------------------



56




     one-half.  E makes default in payment.  As between the  sureties,
A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees.



147.


Liability of co-sureties bound in different sums.


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


                            Illustrations

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


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

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



CHAPTER IX


OF BAILMENT


                             CHAPTER IX

                             OF BAILMENT


148.


"Bailment" "bailor",and "bailee" defined.


148."Bailment"  "bailor",and "bailee" defined.  A " bailment " is  the
delivery  of  goods by one person to another for some purpose, upon  a
contract  that  they  shall,  when the  purpose  is  accomplished,  be
returned  or otherwise disposed of according to the directions of  the
person delivering them.  The person delivering the goods is called the
"bailor".   The  person  to whom they are delivered is called,  the  "
bailee ".

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



149.


Delivery to bailee how made.


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



150.


Bailor's duty to disclose faults in goods bailed.


     150.Bailor's duty to disclose faults in goods bailed. The  bailor
is  bound  to disclose to the bailee faults in the  goods  bailed,  of
which the bailor is aware, and which materially



57



interfere with the use of them, or expose the bailee to  extraordinary
risks; and if he does not make such disclosure, he is responsible  for
damage arising to the bailee directly from such faults.

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



                            Illustrations


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

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


1*151.


Care to be taken by bailee.


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



1*152.


Bailee when not liable for loss,etc., of thing bailed.


     1*152.Bailee when not liable for loss,etc., of thing  bailed.-The
bailee, in the absence of any special contract, is not responsible for
the loss, destruction or deterioration of the thing bailed, if he  has
taken the amount of care of it described in section 151.



153.


Termination  of bailment by bailee's act inconsistent with conditions.


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



                             Illustration

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



154.


Liability of bailee making unauthorized  use of goods bailed.


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


                            Illustrations

     (a)A  lends a horse to B for his own riding only.  B allows C,  a
member  of his family, to ride the horse.  C rides with care, but  the
horse accidentally

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

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


58


falls  and is injured.  B is liable to make compensation to A for  the
injury done to the horse.

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



155.


Effect of mixture, with bailor's consent, of his goods with bailee's.


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



156.


Effect  of  mixture without bailor's consent, when the  goods  can  be
separated.


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


                             Illustration

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



157.


Effect of mixture, without bailor's consent, when the goods cannot  be
separated.


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


                             Illustration

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



158.


Repayment, by bailor, of necessary expenses.


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



159.


Restoration of goods lent gratuitously.



     159.Restoration of goods lent gratuitously.-The lender of a thing
for  use  may  at  any  time require  its  return,  if  the  loan  was
gratuitous,  even though he lent it for a specified time  or  purpose.
But,  if,  on  the faith of such loan made for  a  specified  time  or
purpose, the borrower has acted in such a manner



59



that  the return of the thing lent before the time agreed  upon  would
cause him loss exceeding the benefit actually derived by him from  the
loan,  the  lender  must,  if he compels  the  return,  indemnify  the
borrower  for the amount in which the loss so occasioned  exceeds  the
benefit so derived.



160.


Return  of  goods bailed on expiration of time  or  accomplishment  of
purpose.


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



1*161.


Bailee's responsibility when goods are not duly returned.


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



162.


Termination of gratuitous bailment by death.

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



163.


Bailor entitled to increase or profit from goods bailed.


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


                             Illustrdtion

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




164.


Bailor's responsibility to bailee.


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



165.


Bailment by several joint owners.


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



166.


Bailee not responsible on re-delivery to bailor without title.


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

---------------------------------------------------------------------
     1 S. 161 has been declared to apply to the responsibility of  the
Trustees  of the Port of Madras as to goods in their  possession,  see
the Madras Port Trust Act, 1905 (Mad. 2 of 1905).

     2  As to railway contracts, see the Indian Railways Act, 1890  (9
of 1890), s. 72.

---------------------------------------------------------------------


60


bailor, the bailee is not responsible to the owner in respect of  such
delivery1*.



167.


Right of third person claiming goods bailed.


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



168.


Right of finder of goods; may sue for specific reward  offered.


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



169.


When finder of thing commonly on sale may sell it.


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

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

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




170.


Bailee's particular line.

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

                         Illustrations


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

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



171.


General   line  of   bankers,  factors,  wharfingers,  attorneys   and
policybrokers.


     171.General line of  bankers, factors, wharfingers, attorneys and
policybrokers.-Bankers,  factors,  wharfingers, attorneys  of  a  High
Court  and  policy-brokers may, in the absence of a  contract  to  the
contrary,

---------------------------------------------------------------------
     1 See the Indian Evidence Act, 1872 (1 of 1872), s. 117.
---------------------------------------------------------------------



61


retain  as  a  security for a general balance of  account,  any  goods
bailed  to  them ; but no other persons have a right to retain,  as  a
security  for such balance, goods bailed to them, unless there  is  an
express contract to that effect.1*



                         Bailments of Pledges



172.


"Pledge" "pawnor",and "pawnee" defined.


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



173.


Pawnee's right of retainer.


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



174.


Pawnee  not  to retain for debt or promise other than that  for  which
goods pledged. Presumption in case of subsequent advances.


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



175.


Pawnee's right as to extraordinary expenses incurred.


     175.Pawnee's  right  as to extraordinary expenses  incurred.  The
pawnee  is entitled to receive from the pawnor extraordinary  expenses
incurred by him for the preservation of the goods pledged.



176.


Pawnee's right where pawnor makes default.


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

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

---------------------------------------------------------------------
     1  As to lien of an agent, see s. 22 1, infra.  As to lien  of  a
Railway Administration, see the Indian Railways Act, 1890 (9 of 1890),
s. 55.
---------------------------------------------------------------------



62




177.


Defaulting pawnor's right to redeem.


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



178.


Pledge by mercantile agent.


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

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

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



179.


Pledge where pawnor has only a limited interest.


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


          Suits by bailees or bailors against wrong-doers



180.


Suit by bailor or bailee against wrong-doer.


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

---------------------------------------------------------------------
     1  For  limitation.  see the Indian Limitation Act,  1908  (9  of
1908), Sch. 1, Article 145.

     2  Ss.  178 and 178A were subs. by Act 4 of 1930, s. 2,  for  the
original s. 178.
---------------------------------------------------------------------



63




181.


Apportionment of relief or compensation obtained by such suits.


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


CHAPTER X.


AGENCY. Appointment and authority of agents.



                              CHAPTER X

                               AGENCY

               Appointment and authority of agents


182.


"Agent" and "principal" defined.


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



183.



Who may employ agent.


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



184.


Who may be an agent.


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



185.


Consideration not necessary.


     185.Consideration not necessary.-No consideration is necessary to
create an agency,



186.


Agent's authority may be expressed or implied.


     186. Agent's authority may be expressed or implied.-The authority
of an agent may be expressed or implied.1*



187.


Definitions of express and implied authority.


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


                         Illustration


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

---------------------------------------------------------------------
     1 See, however. the Indian Registration, Act, 1908. (16 of 1908),
s.  33.  See also the Code of Civil Procedure, 1908 (Act 5  of  1908).
Sch.  I, Order III, rule 4.
---------------------------------------------------------------------



64




188.


Extent of agent's authority.


     188. Extent of agent's authority.-An agent having an authority to
do an act has authority to do every lawful thing which is necessary in
order to do such act.

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

                         Illustrations

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

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



189.


Agent's authority in an emergency.


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


                            Illustrations

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

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


                           Sub-Agents



190.


When agent cannot delegate.


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



191.


"Sub-agent" defined.


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



192.


Representation of principal by sub-agent properly appointed.


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

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

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




65




193.


Agent's responsibility for sub-agent appointed without authority.


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



194.


Relation  between principal and person duly appointed by agent to  act
in business of agency.


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


                         Illustrations

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

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



195.


Agent's duty in naming such person.


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


                         Illustrations

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

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


                             Ratification



196.


Right of person as to acts done for him without his authority.  Effect
of ratification.


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




66





197.


Ratification may be expressed or implied.


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

                            Illustrations

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

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



198.


Knowledge requisite for valid ratification.


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



199.


Effect of ratifying unauthorized act forming part of a transaction.


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



200.


Ratification of  unauthorized act cannot injure third person.


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


                            Illustrations


     (a)A, not being authorized thereto by B, demands, on behalf of B,
the  delivery of  a chatte1*, the property of B, from  C,  who  is  in
possession of it.  This demand cannot be ratified by B, so as to  make
C liable for damages for his refusal to deliver.

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

                       Revocation of Authority




201.


Termination of agency.


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



202.


Termination of agency where agent has an interest in subject-matter.


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




67




                            Illustrations

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

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



203.


When principal may revoke agent's authority.


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



204.


Revocation where authority has been partly exercised.


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


                         Illustrations

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

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



205.


Compensation for revocation by principal, or renunciation by agent.


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



206.


Notice of revocation or renunciation.


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



207.


Revocation and renunciation may be expressed or implied.


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


                             Illustration

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

68




208.


When termination of agent's authority takes effect as to agent, and as
to third persons.


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


                            Illustrations


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

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


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


209.


Agent's  duty  on  termination  of  agency  by  principal's  death  or
insanity.


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



210.


Termination of subagent's authority.


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


                      Agent's duty to principal



211.


Agent's duty in conducting principal's business.


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



                            Illustrations

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

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





69




212.


Skill and diligence required from agent.


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


                            Illustrations

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

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

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

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



213.


Agent's accounts.


     213.Agent's accounts.-An agent is bound to render proper accounts
to his principal on demand.



214.


Agent's duty to communicate with principal.


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



215.


Right  of principal when agent deals, on his own account, in  business
of agency without principal's consent.


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



70




                            Illustrations


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

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



216.


Principal's  right  to  benefit gained by agent  dealing  on  his  own
account in business of agency.


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


                         Illustration

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



217.


Agent's right of retainer out of sums received on principal's account.


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




218.


Agent's duty to pay sums received for principal.


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



219.


When agent's remuneration becomes due.


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




220.


Agent not entitled to remuneration for business misconducted.


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


                            Illustrations


     (a) A employs  B to  recover, 1,00,000 rupees from C, and to  lay
it out on good security.  B recovers the 1,00,000 rupees; and lays out
90,000 rupees on




71



good  security, but lays out 10,000 rupees on security which he  ought
to have known to be bad, whereby A loses 2,000 rupees.  B is  entitled
to  remuneration for recovering the 1,00,000 rupees and for  investing
the  90,000  rupees.   He  is not entitled  to  any  remuneration  for
investing the 10,000 rupees, and he must make good the 2,000 rupees to
B.

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



221.


Agent's line on principal's property.


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



                      Principal's duty to agent



222.


Agent to be indemnified against consequences of lawful acts.


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


                            Illustrations

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

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



223.


Agent  to  be indemnified against consequences of acts  done  in  good
faith.


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


                         Illustrations

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

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



72



224.


Non-liability of employer of agent to do a criminal act.


     224.Non-liability of  employer of agent to do  a  criminal  act.-
Where  one person employs another to do an act which is criminal,  the
employer  is  not liable to the agent, either upon an  express  or  an
implied  promise,  to indemnify him against the consequences  of  that
Act.1*



                            Illustrations

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

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


225.


Compensation to agent for injury caused by principal's neglect.


225.Compensation   to   agent  for   injury  caused   by   principal's
neglect.-The  principal must make compensation to his agent in respect
of injury2* caused to such agent by the principal's neglect or want of
skill.


                             Illustration

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

          Effect of agency on contracts with third persons


226.


Enforcement and consequences of agent's contracts.


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


                              Illustrations

     (a)A  buys  goods from B, knowing that he is an agent  for  their
sale,  but  not knowing who is the principal.  B's  principal  is  the
person entitled to claim from A the price of the goods, and A  cannot,
in a. suit by the principal, set-off against that claim a debt due  to
himself from B.

     (b)A,  being  B's agent with authority to receive  money  on  his
behalf,  receives from C a sum of money due to B. C is  discharged  of
his obligation to pay the sum in question to B.



227.


Principal how far bound, when agent exceeds authority.


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

---------------------------------------------------------------------
     1 See s. 24, supra.
     2 Cf. the Indian Fatal Accidents Act, 1855 (13 of 1855).
---------------------------------------------------------------------


73



                             Illustration

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



228.


Principal not bound when excess of agent's authority is not separable.


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


                         Illustration


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


229.


Consequences of notice given to agent.


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


                         Illustrations

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

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


230.


Agent cannot personally enforce, nor be bound by, contracts on  behalf
of principal.


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

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


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

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

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




74



231.


Rights of parties to a contract made by agent not disclosed.


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

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


232.


Performance of contract with agent supposed to be principal.


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



                             Illustration


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


233.


Right of person dealing with agent personally liable.


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


                             Illustration

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



234.


Consequence  of  inducing  agent or principal to act  on  belief  that
principal or agent will be held exclusively liable.


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


235.


Liability of pretended agent.


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



75


236.


Person falsely contracting as agent not entitled to performance.


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


237.


Liability of principal inducing belief that agent's unauthorized  acts
were authorized.

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

                            Illustrations

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

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


238.


Effect, on agreement, of misrepresentation of fraud by agent.



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

                            Illustrations

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

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

CHAPTER  XI.-[Of  Partnership.] Rep.  by the Indian  Partnership  Act,
1932 (9 of 1932), s.  73 and Schh.  II.

SCHEDULE.-[Enactments  repealed.] Rep.  by the Repealing and  Amending
Act, 1914 (10 of 1914), s.  3 and Sch.  II.