Indemnity Comments Surety s Liability Continuing Guarantee BAILMENT

Indemnity Comments Surety s Liability Continuing Guarantee BAILMENT - Transcript

Legal Aspects of Business
PGDM PT IIIrd Term February 25 2009 IMT Ghaziabad

Indemnity
Section 124 Definition of Contract of Indemnity A contract by which one party promises to save the other from loss caused to him by the conduct of the promiser 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

Comments
United Commercial Bank v B M Mahadev Babu AIR 1992 Kant 294 Acknowledgement of debt by principal debtor binds the guarantor in all respects as if he had given express consent

Rights of indemnity holder when sued
The promisee in a contract of indemnity acting within the scope of his authority is entitled to recover from the promisor
All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies 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

Rights of indemnity holder when sued
All sums which he may have paid under the terms of any compromise of any such suit if the compromise was not 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

Comments
Interior s India v Balmer Lawrie AIR 2007 Del 16 A bank guarantee is the common mode of securing payment of money in commercial dealings as the beneficiary under the guarantee is entitled to realize the whole of the amount under that guarantee in terms thereof irrespective of any pending dispute between the person on whose behalf the guarantee was given and the beneficiary

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

Illustration
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

Illustration 1
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 A sells and delivers goods to B C afterwards without consideration agrees to pay for them in default of B The agreement is void

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 dishonored by C A is liable not only for the amount of the bill but also for any interest and charges which may become due on it

Continuing Guarantee
A guarantee which extends to a series of transactions is called a continuing guarantee

Illustrations
A in consideration that B will employ C in collecting the rents of B s zamindari promises B to be responsible to the amount of 5000 rupees for the due collection and payment by C of those rents This is a continuing guarantee

Illustration 1
A guarantees payment to B a tea dealer to the amount of 100 for any tea he may from time to time supply to C B supplies C with tea of above the value of 100 and C pays B for it Afterwards B supplies C with tea of the value of 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 100

Illustration 2
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 not 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

BAILMENT
Section 148 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

BAILMENT
Explanation If a person is already in possession of the goods of other 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

Comments
Kavita Trehan v Balsara Hygiene Products Ltd AIR 1992 Del 103 One of the requirements of bailment is delivery of goods to the bailee Delivery of possession to the bailee is sine qua non of bailment In order to continue bailment change of possession is necessary

Section 150
Bailor s duty to disclose faults of 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 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 such 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 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 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

Pledge
Section 172 The bailment of goods as security for payment of a debt or performance of a promise is called pledge The bailor is in this case called the pawnor The bailee is called pawnee

Section 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 interests of the debt and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged

Agency
Section 182 An agent is a person employed to do any act for another or to represent another in dealings with third person The person for whom such act is done or who is so represented is called the principal

Comments
D E S U v Basanti Devi AIR 2000 SC 43

SALE OF GOODS ACT 1930

SECTION 4
SALE AND AGREEMENT TO SELL
1 A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price There may be a contract of sale between one partowner and another 2 A contract of sale may be absolute or conditional 3 Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell 4 An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred

Comments
State of Andhra Pradesh V Kone Elevators India Ltd 2005 3 SCC 389 In a contract of sale the main object is the transfer of property and delivery of possession of property whereas the main object in contract for work is not the transfer of property but it is one for work and labor In judging whether a contract is for a sale or for work or labor the essence of contract of the reality of transactions as a whole has to be taken into consideration The predominant object of the contract the circumstances of the case and the custom of trade provide a guide in deciding whether the transaction is a sale or a works contract It is well settled law that the substance and not the form of contract is material in determining the nature of transaction

Section 5
Contract of sale how made
1 A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer The contract may provide for the immediate delivery of the goods or immediate payment of the price or both or for the delivery or payment by installments or that the delivery or payment or both shall be postponed 2 Subject to the provisions of any law for the time being in force a contract of sale may be made in writing or by word of mouth or partly in writing and partly by word of mouth or may be implied from the conduct of the parties

Consumer Protection Act 1986

Introduction
The industrial revolution and the development in the international trade and commerce has led to the vast expansion of business and trade as a result of which a variety of consumer goods have appeared in the market to cater to the needs of the consumers and a host of services have been made available to the consumers like insurance transport electricity housing entertainment finance and banking

Introduction 1
A well organized sector of manufacturers and traders with better knowledge of markets has come into existence thereby affecting the relationship between the traders and the consumers making the principle of consumer sovereignty almost inapplicable The advertisements of goods and services in television newspapers and magazines influence the demand for the same by the consumers though they may be manufacturing defects or imperfections or short comings in the quality quantity and the purity of the goods or there may be deficiency in the services rendered

Introduction 2
In addition the production of the same item by many firms has led the consumers who have little time to make a selection to think before they can purchase the best For the welfare of the public the glut of adulterated and sub standard articles in the market have to be checked

Introduction 3
In spite of various procedures providing protection to the consumer and providing for stringent action against adulterated and sub standard articles in the different enactments like Code of Civil Procedure 1908 the Indian Contract Act 1872 the Sale of Goods Act 1930 the Indian Penal Code 1860 the Standards of Weights and Measures Act 1976 and the Motor Vehicles Act 1988 very little could be achieved in the field of Consumer Protection

Introduction 4
Though the Monopolies and Restrictive Trade Practices Act 1969 and the Prevention of Food Adulteration Act 1954 have provided relief to the consumers yet it became necessary to protect the consumers from the exploitation and to save them from adulterated and substandard goods and services and to safe guard the interests of the consumers

Introduction 5
In order to provide for better protection of the interests of the consumer the Consumer protection Bill 1986 was introduced in the Lok Sabha on 5th December 1986

Object
The Consumer Protection Bill 1986 seeks to provide for better protection of the interests of consumers and for the purpose to make provision for the establishment of Consumer Councils and other authorities for the settlement of consumer disputes and for matter connected therewith

Rights of Consumers
The right to be protected against marketing of goods which are hazardous to life and property The right to be informed about the quality quantity potency purity standard and price of goods to protect the consumer against unfair trade practices The right to be assured wherever possible access to an authority of goods at competitive prices

Rights of Consumers
The right to be heard and to be assured that consumers interests will receive due consideration at appropriate forums The right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers Right to consumer education

Defect
Section 2 f Defect means any fault imperfection or shortcoming in the quality quantity potency purity or standard which is required to be maintained by or under any law for the time being in force or under any contract express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods

Deficiency
Section 2 g Deficiency means any fault imperfection shortcoming or inadequacy in the quality nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service

Consumer
Section 2 d Consumer means any person who
i buys any goods for a consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such use is made with the approval of such person but does not include a person who obtains such goods for resale or for any commercial purpose

Consumer 1
ii hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose

Unfair Trade Practice
Section 2 r Unfair trade practice means a trade practice which for the purpose of promoting the sale use or supply of any goods or for the provision of any service adopts any unfair method or unfair or deceptive practice including any of the following practices namely

Unfair Trade Practice
1 the practice of making any statement whether orally or in writing or by visible representation which Falsely represents that the goods are of particular standard quality grade composition style or model Falsely represents that the services are of a particular standard quality or grade Falsely represents any rebuilt second hand renovated reconditioned or old goods as new goods Represents that the goods or services have sponsorship approval performance characteristics accessories uses or benefits which such goods or services do not have

Unfair Trade Practice
1 Contd
Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have Makes a false or misleading representation concerning the need for or the usefulness of any goods or services Gives to the public any warranty or guarantee of the performance efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof Provided that where a defense is raised to the effect that such warranty or guarantee is based on adequate or proper test the burden of proof of such defense shall lie on the person raising such defense

Unfair Trade Practice
1 contd
Makes to the public a representation in a form that purports to be
A warranty or guarantee of a product or of any goods or services or A promise to replace maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result
If such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty guarantee or promise will be carried out

Unfair Trade Practice
1 contd
Materially misleads the public concerning the price at which a product or like products or goods or services have been or are ordinarily sold or provided and for this purpose a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made

Unfair Trade Practice
1 contd
Gives false or misleading facts disparaging the goods services or trade of another person Explanation For the purpose of clause 1 a statement that is
a expressed on an article offered or displayed for sale or on its wrapper or container b expressed on anything attached to inserted in or accompanying an article offered or displayed for sale or on anything on which the article is mounted for display or sale or c contained in or on anything that is sold sent delivered transmitted or in any other manner whatsoever made available to a member of the public
Shall be deemed to be a statement made to the public by and only by the person who had caused the statement to be so expressed made or contained

Unfair Trade Practice
2 permits the publication of any advertisement whether in any newspaper or otherwise for the sale or supply at a bargain price of goods or services that are not intended to be offered for sale or supply at the bargain price or for a period that is and in quantities that are reasonable having regard to the nature of the market in which the business is carried on the nature and size of the business and the nature of the advertisement

Unfair Trade Practice
2 Contd
Explanation For the purpose of clause 2 bargaining price means a a price that is stated in any advertisement to be a bargain price by reference to an ordinary price or otherwise or b a price that a person who reads hears or sees the advertisement would reasonably understand to be a bargain price having regard to the prices at which the product advertised or like products are ordinarily sold

Unfair Trade Practice
3 permits
a the offering of gifts prizes or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole b the conduct of any contest lottery game of chance or skill for the purpose of promoting directly or indirectly the sale use or supply of any product or any business interest

Unfair Trade Practice
4 permits the sale or supply of goods intended to be used or of a kind likely to be used by consumers knowing or having reason to believe that the goods do not comply with the standards prescribed by competent authority relating to performance composition contents design constructions finishing or packaging as are necessary to prevent or reduce the risk of injury to the person using the goods

Unfair Trade Practice
5 permits the hoarding or destruction of goods or refuses to sell the goods or to make them available for sale or to provide any service if such hoarding or destruction or refusal raises or tends to raise or is intended to raise the cost of those or other similar goods or services 6 manufacture of spurious goods or offering such goods for sale or adopting deceptive practices in the provision of services

Consumer Dispute Redressal Agencies The different objects of the Consumer Protection Act 1986 are sought to be promoted and protected by the Consumer Protection Council to be established at the Central and State level

Consumer Dispute Redressal Agencies
To provide speedy and simple redressal to consumer disputes a quasi judicial machinery is sought to be set up at the district State and Central levels These quasi judicial bodies will observe the principles of natural justice and have been empowered to give relief of a specific nature and to award wherever appropriate compensation to consumers Penalties for non compliance of the orders given by the quasi judicial bodies have also been provided

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