THE CONTRACT ACT, 1872

(IX of 1872)
CONTENTS
SECTIONS
PRELIMINARY
1. Short title
Ete!t
Co""e!#e"e!t
E!$#t"e!t% re&e$le'
2. I!ter&ret$tio!(#l$)%e
CHAPTER I
O* THE COMM+NICATION, ACCEPTANCE AN, RE-OCATION O* PROPOSALS
3. Co"")!i#$tio!, $##e&t$!#e $!' re.o#$tio! of &ro&o%$l%
4. Co"")!i#$tio! /he! #o"&lete
5. Re.o#$tio! of &ro&o%$l% $!' $##e&t$!#e%
6. Re.o#$tio! ho/ "$'e
7. A##e&t$!#e ")%t 0e $0%ol)te
8. A##e&t$!#e 01 &erfor"i!2, #o!'itio!%, or re#ei.i!2 #o!%i'er$tio!
9. Pro"i%e%, e&re%% $!' i"&lie'
CHAPTER II
O* CONTRACTS, -OI,A3LE CONTRACTS AN, -OI, A4REEMENTS
10. 5h$t $2ree"e!t% $re #o!tr$#t%
11. 5ho $re #o"&ete!t to #o!tr$#t
12. 5h$t i% $ %o)!' "i!' for the &)r&o%e% of #o!tr$#ti!2
13. 6Co!%e!t7 'efi!e'
14. 6*ree #o!%e!t6 'efi!e'
15. 6Coer#io!6 'efi!e'
16. 6+!')e i!fl)e!#e6 'efi!e'
17. 6*r$)'6 'efi!e'
18. 6Mi%re&re%e!t$tio!6 'efi!e'
19. -io'$0ilit1 of $2ree"e!t% /itho)t free #o!%e!t
18A9 Po/er to %et $%i'e #o!tr$#t i!')#e' 01 )!')e i!fl)e!#e
20. A2ree"e!t .oi' /here 0oth &$rtie% $re )!'er "i%t$:e $% to "$tter of f$#t
21. Effe#t of "i%t$:e% $% to l$/
22. Co!tr$#t #$)%e' 01 "i%t$:e of o!e &$rt1 $% to "$tter of f$#t
23. 5h$t #o!%i'er$tio!% $!' o0;e#t% $re l$/f)l $!' /h$t !ot
Void Agreements
24. A2ree"e!t% .oi', if #o!%i'er$tio!% $!' o0;e#t% )!l$/f)l i! &$rt
25. A2ree"e!t /itho)t #o!%i'er$tio! .oi', )!le%% it i% i! /riti!2 $!'
re2i%tere', or i% $ &ro"i%e to #o"&e!%$te for %o"ethi!2 'o!e, or i% $
&ro"i%e to &$1 $ 'e0t 0$rre' 01 li"it$tio! l$/
26. A2ree"e!t i! re%tr$i!t of "$rri$2e .oi'
27. A2ree"e!t i! re%tr$i!t of tr$'e .oi' S$.i!2 of $2ree"e!t !ot to #$rr1 o!
0)%i!e%% of /hi#h 2oo'( /ill i% %ol'
28. A2ree"e!t% i! re%tr$i!t of le2$l &ro#ee'i!2% .oi' S$.i!2 of #o!tr$#t to
refer to $r0itr$tio! 'i%&)te th$t "$1 $ri%e S)it% 0$rre' 01 %)#h
#o!tr$#t% S$.i!2 of #o!tr$#t to refer <)e%tio!% th$t h$.e $lre$'1
$ri%e!
29. A2ree"e!t% .oi' for )!#ert$i!t1
30. A2ree"e!t% 01 /$1 of /$2er .oi' E#e&tio!% i! f$.o)r of #ert$i! &ri=e%
for hor%e(r$#i!29 Se#tio! 28>A of the Pe!$l Co'e !ot $ffe#te'
?@A9 A2ree"e!t% #oll$ter$l to /$2eri!2 $2ree"e!t% .oi'
?@39 No %)it for re#o.er1 of "o!e1, #o""i%%io! et#9, i! re%&e#t of .oi'
$2ree"e!t%
?@C9 P$1"e!t 01 2)$r'i$!, ee#)tor, et#9, i! re%&e#t of .oi' $2ree"e!t% !ot to
0e $llo/e' #re'it
CHAPTER III O* CONTIN4ENT CONTRACTS
31. 6Co!ti!2e!t #o!tr$#t6 'efi!e'
32. E!for#e"e!t of #o!tr$#t% #o!ti!2e!t o! $! e.e!t h$&&e!i!2
33. E!for#e"e!t of #o!tr$#t% #o!ti!2e!t o! $! e.e!t !ot h$&&e!i!2
34. 5he! e.e!t o! /hi#h #o!tr$#t i% #o!ti!2e!t to 0e 'ee"e' i"&o%%i0le, if it
i% the f)t)re #o!')#t of $ li.i!2 &er%o!
35. 5he! #o!tr$#t% 0e#o"e .oi' /hi#h $re #o!ti!2e!t o! h$&&e!i!2 of
%&e#ifie' e.e!t /ithi! fie' ti"e
5he! #o!tr$#t% "$1 0e e!for#e' /hi#h $re #o!ti!2e!t o! %&e#ifie' e.e!t
!ot h$&&e!i!2 /ithi! fie' ti"e
36. A2ree"e!t #o!ti!2e!t o! i"&o%%i0le e.e!t% .oi'
CHAPTER I-
O* THE PER*ORMANCE O* CONTRACTS
Contracts which must be performed
37. O0li2$tio! of &$rtie% to #o!tr$#t%9
38. Effe#t of ref)%$l to $##e&t offer of &erfor"$!#e
39. Effe#t of ref)%$l of &$rt1 to &erfor" &ro"i%e /holl1
By whom Contracts must be performed
40. Per%o! 01 /ho" &ro"i%e i% to 0e &erfor"e'
41. Effe#t of $##e&ti!2 &erfor"$!#e fro" thir' &er%o!
42. ,e.ol)tio! of ;oi!t li$0ilitie%
43. A!1 o!e of ;oi!t &ro"i%or% "$1 0e #o"&elle' to &erfor" E$#h
&ro"i%or "$1 #o"&el #o!tri0)tio! Sh$ri!2 of lo%% 01 'ef$)lt i!
#o!tri0)tio!
44. Effe#t of rele$%e of o!e ;oi!t &ro"i%or9
45. ,e.ol)tio! of ;oi!t ri2ht%
Time and Place for Performance
46. Ti"e for &erfor"$!#e of &ro"i%e /here !o $&&li#$tio! i% to 0e "$'e $!'
!o ti"e i% %&e#ifie'
47. Ti"e $!' &l$#e for &erfor"$!#e of &ro"i%e /here ti"e i% %&e#ifie' $!' !o
$&&li#$tio! to 0e "$'e
48. A&&li#$tio! for &erfor"$!#e o! #ert$i! '$1 to 0e $t &ro&er ti"e $!' &l$#e
49. Pl$#e for &erfor"$!#e of &ro"i%e /ere !o $&&li#$tio! to 0e "$'e $!' !o
&l$#e fie' for &erfor"$!#e
50. Perfor"$!#e i! "$!!er or $t ti"e &re%#ri0e' or %$!#tio!e' 01 &ro"i%ee
Performance of Reciprocal Promises
51. Pro"i%or !ot 0o)!' to &erfor", )!le%% re#i&ro#$l &ro"i%ee re$'1 $!'
/illi!2 to &erfor"
52. Or'er of &erfor"$!#e of re#i&ro#$l &ro"i%e%9
53. Li$0ilit1 of &$rt1 &re.e!ti!2 e.e!t o! /hi#h the #o!tr$#t i% to t$:e effe#t
54. Effe#t of 'ef$)lt $% to th$t &ro"i%e /hi#h %ho)l' 0e fir%t &erfor"e', i!
#o!tr$#t #o!%i%ti!2 of re#i&ro#$l &ro"i%e%
55. Effe#t of f$il)re to &erfor" $t fie' ti"e, i! #o!tr$#t i! /hi#h ti"e i%
e%%e!ti$l
Effe#t of %)#h f$il)re /he! ti"e i% !ot e%%e!ti$l
Effe#t of $##e&t$!#e of &erfor"$!#e $t ti"e other th$! th$t $2ree' )&o!
56. A2ree"e!t to 'o i"&o%%i0le $#t
Co!tr$#t to 'o $#t $fter/$r'% 0e#o"i!2 i"&o%%i0le or )!l$/f)l
Co"&e!%$tio! for lo%% thro)2h !o!(&erfor"$!#e of $#t :!o/! to 0e
i"&o%%i0le or )!l$/f)l
57. Re#i&ro#$l &ro"i%e to 'o thi!2% le2$l, $!' $l%o other thi!2% ille2$l
58. Alter!$ti.e &ro"i%e, o!e 0r$!#h 0ei!2 ille2$l
Appropriation of Payments
59. A&&li#$tio! of &$1"e!t, /here 'e0t to 0e 'i%#h$r2e' i% i!'i#$te'
60. A&&li#$tio! of &$1"e!t, /here 'e0t to 0e 'i%#h$r2e' i% !ot i!'i#$te'
61. A&&li#$tio! of &$1"e!t /here !either &$rt1 $&&ro&ri$te%
Contracts Which Need Not be Performed
62. Effe#t of !o.$tio!, re%#i%%io! $!' $lter$tio! of #o!tr$#t
63. Pro"i%ee "$1 'i%&e!%e /ith or re"it &erfor"$!#e of &ro"i%e
64. Co!%e<)e!#e% of re%#i%%io! of .oi'$0le #o!tr$#t
65. O0li2$tio! of &er%o! /ho h$% re#ei.e' $'.$!t$2e )!'er .oi' $2ree"e!t
or #o!tr$#t th$t 0e#o"e% .oi'
66. Mo'e of #o"")!i#$ti!2 or re.o:i!2 re%#i%%io! of .oi'$0le #o!tr$#t
67. Effe#t of !e2le#t of &ro"i%ee to $ffor' &ro"i%or re$%o!$0le f$#ilitie% for
&erfor"$!#e
CHAPTER -
O* CERTAIN RELATIONS RESEM3LIN4 THOSE CREATE, 3Y CONTRACT
68. Cl$i" for !e#e%%$rie% %)&&lie' to &er%o! i!#$&$0le of #o!tr$#ti!2 or o!
hi% $##o)!t
69. Rei"0)r%e"e!t of &er%o! &$1i!2 "o!e1 ')e 01 $!other i! &$1"e!t of
/hi#h he i% i!tere%te'
70. O0li2$tio! of &er%o! e!;o1i!2 0e!efit of !o!( 2r$t)ito)% $#t
71. Re%&o!%i0ilit1 of fi!'er of 2oo'%
72. Li$0ilit1 of &er%o! to /ho" "o!e1 i% &$i' or thi!2 'eli.ere' 01 "i%t$:e
or )!'er #oer#io!
CHAPTER -I
O* THE CONSEA+ENCES O* 3REACH O* CONTRACT
73. Co"&e!%$tio! for lo%% or '$"$2e #$)%e' 01 0re$#h of #o!tr$#t
Co"&e!%$tio! for f$il)re to 'i%#h$r2e o0li2$tio! re%e"0li!2 tho%e
#re$te' 01 #o!tr$#t
74. Co"&e!%$tio! for 0re$#h of #o!tr$#t /here &e!$lt1 %ti&)l$te' for
75. P$rt1 ri2htf)ll1 re%#i!'i!2 #o!tr$#t e!title' to #o"&e!%$tio!
CHAPTER -II
SALE O* 4OO,S
Re&e$le'
CHAPTER -III
O* IN,EMNITY AN, 4+ARANTEE
76. 6Co!tr$#t of i!'e"!it16 'efi!e'
77. Ri2ht% of i!'e"!it1( hol'er /he! %)e'
78. 6Co!tr$#t of 2)$r$!tee6, 6%)ret16, 6&ri!#i&$l 'e0tor6 $!' 6#re'itor6
79. Co!%i'er$tio! for 2)$r$!tee
80. S)ret1B% li$0ilit1
81. 6Co!ti!)i!2 2)$r$!tee6
82. Re.o#$tio! of #o!ti!)i!2 2)$r$!tee
83. Re.o#$tio! of #o!ti!)i!2 2)$r$!tee 01 %)ret1B% 'e$th
84. Li$0ilit1 of t/o &er%o!% &ri"$ril1 li$0le, !ot $ffe#te' 01 $rr$!2e"e!t
0et/ee! the" th$t o!e %h$ll 0e %)ret1 o! otherC% 'ef$)lt
85. ,i%#h$r2e of %)ret1 01 .$ri$!#e i! ter"% of #o!tr$#t
86. ,i%#h$r2e of %)ret1 01 rele$%e or 'i%#h$r2e of &ri!#i&$l 'e0tor
87. ,i%#h$r2e of %)ret1 /he! #re'itor #o"&o)!'% /ith, 2i.e% ti"e to, or
$2ree% !ot to %)e, &ri!#i&$l 'e0tor
88. S)ret1 !ot 'i%#h$r2e' /he! $2ree"e!t "$'e /ith thir' &er%o! to 2i.e ti"e
to &ri!#i&$l 'e0tor
89. Cre'itorB% for0e$r$!#e to %)e 'oe% !ot 'i%#h$r2e %)ret1
90. Rele$%e of o!e #o(%)ret1 'oe% !ot 'i%#h$r2e other%
91. ,i%#h$r2e of %)ret1 01 #re'itorB% $#t or o"i%%io! i"&$iri!2 %)ret1B%
e.e!t)$l re"e'1
92. Ri2ht% of %)ret1 o! &$1"e!t or &erfor"$!#e
93. S)ret1B% ri2ht to 0e!efit of #re'itorB% %e#)ritie%
94. 4)$r$!tee o0t$i!e' 01 "i%re&re%e!t$tio! i!.$li'
95. 4)$r$!tee o0t$i!e' 01 #o!#e$l"e!t i!.$li'
96. 4)$r$!tee o! #o!tr$#t th$t #re'itor %h$ll !ot $#t o! it )!til #o(%)ret1 ;oi!%
97. I"&lie' &ro"i%e to i!'e"!if1 %)ret1
98. Co(%)retie% li$0le to #o!tri0)te e<)$ll1
99. Li$0ilit1 of #o(%)retie% 0o)!' i! 'iffere!t %)"%
CHAPTER IX O* 3AILMENT
100. 63$il"e!t6, 60$ilor6, $!' 60$ilee6 'efi!e'
101. ,eli.er1 to 0$ilee ho/ "$'e
102. 3$ilorC% ')t1 to 'i%#lo%e f$)lt% i! 2oo'% 0$ile'
103. C$re to 0e t$:e! 01 0$ilee
104. 3$ilee /he! !ot li$0le for lo%%, et#9, of thi!2 0$ile'
105. Ter"i!$tio! of 0$il"e!t 01 0$ileeB% $#t i!#o!%i%te!t /ith #o!'itio!%
106. Li$0ilit1 of 0$ilee "$:i!2 )!$)thori%e' )%e of 2oo'% 0$ile'
107. Effe#t of "it)re, /ith 0$ilorB% #o!%e!t, of hi% 2oo'% /ith 0$ileeB%
108. Effe#t of "it)re, /itho)t 0$ilorB% #o!%e!t, /he! the 2oo'% #$! 0e
%e&$r$te'
109. Effe#t of "it)re, /itho)t 0$ilorB% #o!%e!t, /he! the 2oo'% #$!!ot 0e
%e&$r$te'
110. Re&$1"e!t 01 0$ilor of !e#e%%$r1 e&e!%e%
111. Re%tor$tio! of 2oo'% le!t 2r$t)ito)%l1
112. Ret)r! of 2oo'% 0$ile' o! e&ir$tio! of ti"e or $##o"&li%h"e!t of &)r&o%e
113. 3$ileeB% re%&o!%i0ilit1 /he! 2oo'% $re !ot ')l1 ret)r!e'
114. Ter"i!$tio! of 2r$t)ito)% 0$il"e!t 01 'e$th
115. 3$ilor e!title' to i!#re$%e or &rofit fro" 2oo'% 0$ile'
116. 3$ilorB% re%&o!%i0ilit1 to 0$ilee
117. 3$il"e!t 01 %e.er$l ;oi!t o/!er%
118. 3$ilee !ot re%&o!%i0le o! re('eli.er1 to 0$ilor /itho)t title
119. Ri2ht of thir' &er%o! #l$i"i!2 2oo'% 0$ile'
120. Ri2ht of fi!'er of 2oo'%D "$1 %)e for %&e#ifi# re/$r' offere'
121. 5he! fi!'er of thi!2 #o""o!l1 o! %$le "$1 %ell it
122. 3$ileeB% &$rti#)l$r lie!
123. 4e!er$l lie! of 0$!:er%, f$#tor%, /h$rfi!2er%, $ttor!e1% $!' &oli#1(
0ro:er%
Bailments Of Pledges
124. 6Ple'2e6, 6P$/!or6 $!' 6P$/!ee6 'efi!e'
125. P$/!eeB% ri2ht of ret$i!er
126. P$/!ee !ot to ret$i! for 'e0t or &ro"i%e other th$! th$t for /hi#h 2oo'%
&le'2e' Pre%)"&tio! i! #$%e of %)0%e<)e!t $'.$!#e%
127. P$/!eeB% ri2ht $% to etr$or'i!$r1 e&e!%e% i!#)rre'
128. P$/!eeC% ri2ht /here &$/!or "$:e% 'ef$)lt
129. ,ef$)lti!2 &$/!orB% ri2ht to re'ee"
130. Ple'2e 01 "er#$!tile $2e!t
1?29 Ple'2e 01 &er%o! i! &o%%e%%io! )!'er .oi'$0le #o!tr$#t
133. Ple'2e /here &$/!or h$% o!l1 $ li"ite' i!tere%t
uits by Bailees or Bailors against Wrong!doers
134. S)it 01 0$ilor or 0$ilee $2$i!%t /ro!2('oer
135. A&&ortio!"e!t of relief or #o"&e!%$tio! o0t$i!e' 01 %)#h %)it%
CHAPTER X
A4ENCY
Appointment and Authority of Agents
136. 6A2e!t6 $!' 6&ri!#i&$l6 'efi!e'
137. 5ho "$1 e"&lo1 $2e!t
138. 5ho "$1 0e $! $2e!t
139. Co!%i'er$tio! !ot !e#e%%$r1
140. A2e!tB% $)thorit1 "$1 0e e&re%%e' or i"&lie'
141. ,efi!itio!% of e&re%% $!' i"&lie' $)thorit1
142. Ete!t of $2e!tB% $)thorit1
143. A2e!tB% $)thorit1 i! $! e"er2e!#1
ub!Agents
144. 5he! $2e!t #$!!ot 'ele2$te
145. 6S)0($2e!t6 'efi!e'
146. Re&re%e!t$tio! of &ri!#i&$l 01 %)0($2e!t &ro&erl1 $&&oi!te'
A2e!tB% re%&o!%i0ilit1 for %)0($2e!t
S)0($2e!tB% re%&o!%i0ilit1
147. A2e!tB% re%&o!%i0ilit1 for %)0($2e!t $&&oi!te' /itho)t $)thorit1
148. Rel$tio! 0et/ee! &ri!#i&$l $!' &er%o! ')l1 $&&oi!te' 01 $2e!t to $#t i!
0)%i!e%% of $2e!#1
149. A2e!tB% ')t1 i! !$"i!2 %)#h &er%o!
Ratification
150. Ri2ht of &er%o! $% to $#t% 'o!e for hi" /itho)t hi% $)thorit19 Effe#t of
r$tifi#$tio!
151. R$tifi#$tio! "$1 0e e&re%%e' or i"&lie'
152. E!o/le'2e re<)i%ite for .$li' r$tifi#$tio!
153. Effe#t of r$tif1i!2 )!$)thori=e' $#t for"i!2 &$rt of $ tr$!%$#tio!
154. R$tifi#$tio! of )!$)thori=e' $#t #$!!ot i!;)re thir' &er%o!
Re"ocation of Authority
155. Ter"i!$tio! of $2e!#1
156. Ter"i!$tio! of $2e!#1 /here $2e!t h$% $! i!tere%t i! %)0;e#t("$tter
157. 5he! &ri!#i&$l "$1 re.o:e $2e!tB% $)thorit1
158. Re.o#$tio! /here $)thorit1 h$% 0ee! &$rtl1 eer#i%e'
159. Co"&e!%$tio! for re.o#$tio! 01 &ri!#i&$l or re!)!#i$tio! 01 $2e!t
160. Noti#e of re.o#$tio! or re!)!#i$tio!
161. Re.o#$tio! $!' re!)!#i$tio! "$1 0e e&re%%e' or i"&lie'
162. 5he! ter"i!$tio! of $2e!tB% $)thorit1 t$:e% effe#t $% to $2e!t, $!' $% to thir'
&er%o!%
163. A2e!tB% ')t1 o! ter"i!$tio! of $2e!#1 01 &ri!#i&$lB% 'e$th or i!%$!it1
164. Ter"i!$tio! of %)0($2e!tB% $)thorit1
Agent#s $uty to Principal
165. A2e!tB% ')t1 i! #o!')#ti!2 &ri!#i&$lB% 0)%i!e%%
166. S:ill $!' 'ili2e!#e re<)ire' fro" $2e!t
167. A2e!tB% $##o)!t%
168. A2e!tC% ')t1 to #o"")!i#$te /ith &ri!#i&le
169. Ri2ht of &ri!#i&$l /he! $2e!t 'e$l%, o! hi% o/! $##o)!t, i! 0)%i!e%% of
$2e!#1 /itho)t &ri!#i&$lB% #o!%e!t
170. Pri!#i&$lB% ri2ht to 0e!efit 2$i!e' 01 $2e!t 'e$li!2 o! hi% o/! $##o)!t i!
0)%i!e%% of $2e!#1
171. A2e!tB% ri2ht of ret$i!er o)t of %)"% re#ei.e' o! &ri!#i&$lB% $##o)!t
172. A2e!tB% ')t1 to &$1 %)"% re#ei.e' for &ri!#i&$l
173. 5he! $2e!tB% re")!er$tio! 0e#o"e% ')e
174. A2e!t !ot e!title' to re")!er$tio! for 0)%i!e%% "i%(#o!')#te'
175. A2e!tB% lie! o! &ri!#i&$lB% &ro&ert1
Principal%s $uty to Agent
176. A2e!t to 0e i!'e"!ifie' $2$i!%t #o!%e<)e!#e% of l$/f)l $#t%
177. A2e!t to 0e i!'e"!ifie' $2$i!%t #o!%e<)e!#e% of $#t% 'o!e i! 2oo' f$ith
178. No!(li$0ilit1 of e"&lo1er of $2e!t to 'o $ #ri"i!$l $#t
179. Co"&e!%$tio! to $2e!t for i!;)r1 #$)%e' 01 &ri!#i&$lB% !e2le#t
&ffect of agency on contract with third persons
180. E!for#e"e!t $!' #o!%e<)e!#e% of $2e!tB% #o!tr$#t%
181. Pri!#i&$l ho/ f$r 0o)!', /he! $2e!t e#ee'% $)thorit1
182. Pri!#i&$l !ot 0o)!' /he! e#e%% of $2e!tB% $)thorit1 i% !ot %e&$r$0le
183. Co!%e<)e!#e% of !oti#e 2i.e! to $2e!t
184. A2e!t #$!!ot &er%o!$ll1 e!for#e, !or 0e 0o)!' 01, #o!tr$#t% o! 0eh$lf of
&ri!#i&$l
185. Pre%)"&tio! of #o!tr$#t to #o!tr$r1
186. Ri2ht% of &$rtie% to $ #o!tr$#t "$'e 01 $2e!t !ot 'i%#lo%e'
187. Perfor"$!#e of #o!tr$#t /ith $2e!t %)&&o%e' to 0e &ri!#i&$l
188. Ri2ht of &er%o! 'e$li!2 /ith $2e!t &er%o!$ll1 li$0le
189. Co!%e<)e!#e of i!')#i!2 $2e!t or &ri!#i&$l to $#t o! 0elief th$t &ri!#i&$l or
$2e!t /ill 0e hel' e#l)%i.el1 li$0le
190. Li$0ilit1 of &rete!'e' $2e!t
191. Per%o! f$l%el1 #o!tr$#ti!2 $% $2e!t !ot e!title' to &erfor"$!#e
192. Li$0ilit1 of &ri!#i&$l i!')#i!2 0elief th$t $2e!tB% )!$)thori=e' $#t% /ere
$)thori=e'
193. Effe#t, o! $2ree"e!t, of "i%re&re%e!t$tio! or fr$)' 01 $2e!t
CHAPTER XI
O* PARTNERSHIP
194. Re&e$le'
TEXT
THE CONTRACT ACT, 1872
(IX of 1872)
[25
th
April, 1872]
Pre$"0le9(( 5here$% it is expedient to define and amend certain parts of the law
relating to contracts; It is hereby enacted as follows:-
PRELIMINARY
1. Short title9 This Act may be called the
1
[***] ontract Act ! 1"#$%
Ete!t Co""e!#e"e!t
It extends to
$
[the whole of &a'istan]; and it shall come into force on the first day
of (eptember! 1"#$%
E!$#t"e!t% re&e$le'
)othing herein contained shall affect the pro*isions of any (tat+te! Act or
,eg+lation not hereby expressly repealed! nor any +sage or c+stom of trade! nor any
incident of any contract! not inconsistent with the pro*isions of this Act%
I!ter&ret$tio!(#l$)%e9 In this Act the following words and expressions are +sed in the
following senses! +nless a contrary intention appears from the context:-
(a) -hen one person signifies to another his willingness to do or to abstain
from doing anything! with a *iew to obtaining the assent of that other to
s+ch act or abstinence! he is said to ma'e a proposal:
(b) -hen 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 ma'ing the proposal is called the .promisor. and the person
accepting the proposal is called the .promisee.:
(d) -hen! at the desire of the promisor! the promisee or any other person has
done or abstained from doing! or does or abstains from doing! or promises
to do or to abstain from doing! something! s+ch act or abstinence or
promise is called a consideration for the promise:
(e) /*ery promise and e*ery set of promises! forming the consideration for
each other! is an agreement:
(f) &romises 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 *oid:
(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! b+t not at the option of the other or others! is a
*oidable contract:
(j) A contract which ceases to be enforceable by law becomes *oid when
it ceases to be enforceable%
CHAPTER I
O* THE COMM+NICATION, ACCEPTANCE AN, RE-OCATION O* PROPOSALS
1
Omitted by A.O; 1949 Sch.
2
Subs. By the Centr! "#s $Sttus %e&'rm( Ordinnce) 1960 $21 '& 1960( S. 3 nd 2
nd
Sch. $#ith e&&ect &r'm the 14
th
Oct'ber) 1955() &'r *!! the +r',inces nd the C-it! '& the .ederti'n/ #hich hd been subs. By A.O/ 1949) Arts. 3
$2( nd 4) &'r * the #h'!e '& British 0ndi/.
2. Co"")!i#$tio!, $##e&t$!#e $!' re.o#$tio! of &ro&o%$l%9 The
comm+nication of proposals! the acceptance of proposals! and the re*ocation of
proposals and acceptances! respecti*ely! are deemed to be made by any act or
omission of the party proposing! accepting or re*o'ing by which he intends to
comm+nicate s+ch proposal! acceptance or re*ocation! or which has the effect of
comm+nicating it%
Co"")!i#$tio! /he! #o"&lete9 The comm+nication of a proposal is complete when
it comes to the 'nowledge of the person to whom it is made% The comm+nication of an
acceptance is complete!0 as against the proposer! when it is p+t in a co+rse of
transmission to him! so as to be o+t of the power of the acceptor; as against the
acceptor! when it comes to the 'nowledge of the proposer%
The comm+nication of a re*ocation is complete!-
as against the person who ma'es it! when it is p+t into a co+rse of
transmission to the person to whom it is made! so as to be o+t of the power of the
person who ma'es it;
as against the person to whom it is made! when it comes to his 'nowledge%
'llustrations
(a) A proposes! by letter! to sell a ho+se to 1 at a certain price% The
comm+nication of the proposal is complete when 1 recei*es the letter%
(b) 1 accepts A2s proposal by a letter sent post%
The comm+nication of the acceptance is complete!0
as against A! when the letter is posted;
as against 1! when the letters recei*ed by A
(c) A re*o'es his proposal telegram%
The re*ocation is complete as against A when the telegram is despatched%
It is complete as against 1 when 1 recei*es it%
1 re*o'es his acceptance by telegram% 12s re*ocation is complete as
against 1 when the telegram is dispatched! and as against A when it
reaches him%
Re.o#$tio! of &ro&o%$l% $!' $##e&t$!#e%9 A proposal may be re*o'ed at any time
before the comm+nication of its acceptance is complete as against the proposer! b+t
not afterwards%
An acceptance may be re*o'ed at any time before the comm+nication of the
acceptance is complete as against the acceptor! b+t not afterwards%
'llustrations
A proposes! by a letter sent by post! to sell his ho+se to 1% 1 accepts the proposal by a
letter sent by post% A may re*o'e his proposal at any time before or at the moment 1
posts his letter of acceptance! b+t not afterwards%
1 may re*o'e his acceptance as any time before or at the moment when the
letter comm+nicating it reaches A! b+t not afterwards%
3. Re.o#$tio! ho/ "$'e9 A proposal is re*o'ed 0
1. by the comm+nication of notice of re*ocation by the proposer to the other
party;
2. by the laps of the time prescribed in s+ch proposal for its acceptance! or! if
no time is so prescribed! by the lapse of a reasonable time! witho+t
comm+nication of the acceptance;
3. by the fail+re of the acceptor to f+lfil 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 'nowledge of the acceptor before acceptance%
A##e&t$!#e ")%t 0e $0%ol)te9 In order to con*ert a proposal into a promise! the
acceptance m+st-
be absol+te and +n3+alified;
29 be expressed in some +s+al and reasonable manner! +nless the
proposal prescribes the manner in which it is to be accepted% If the proposal prescribes
a manner in which it is to be accepted! and the acceptance is not made in s+ch manner!
the proposer may! within a reasonable time after the acceptance is comm+nicated to
him! insist that his proposal shall be accepted in the prescribed manner! and not
otherwise; b+t if he fails to do so! he accepts the acceptance%
A##e&t$!#e 01 &erfor"i!2, #o!'itio!%, or re#ei.i!2 #o!%i'er$tio!9 &erformance 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%
Pro"i%e%, e&re%% $!' i"&lie'9 In so far as the proposal or acceptance of any
promise is made in words! the promise is said to be express% In so far as s+ch proposal
or acceptance is made otherwise than in words! the promise is said to be implied%
CHAPTER II
O* CONTRACTS, -OI,A3LE CONTRACTS AN, -OI, A4REEMENTS
79 5h$t $2ree"e!t% $re #o!tr$#t%9 All agreements are contracts if they are made
by the free consent of parties competent to contract! for a lawf+l consideration and with
a lawf+l ob4ect! and are not hereby expressly declared to be *oid%
)othing herein contained shall affect any law in force in
5
[&a'istan]! and not
hereby expressly repealed! by which any contract is re3+ired to be made in writing or
in the presence of witnesses! or any law relating to the registration of doc+ments%
5ho $re #o"&ete!t to #o!tr$#t9 /*ery person is competent to contract who is of the
age of ma4ority according to the law to which he is s+b4ect! and who is of so+nd mind!
and is not dis3+alified from contracting by any law to which he is s+b4ect%
5h$t i% $ %o)!' "i!' for the &)r&o%e% of #o!tr$#ti!29 A person is said to be of
so+nd mind for the p+rpose of ma'ing a contract if! at the time when he ma'es it! he
is capable of +nderstanding it and of forming a rational 4+dgment as to its effect +pon
his interests%
A person who is +s+ally of +nso+nd mind! b+t occasionally of so+nd mind! may
ma'e a contract when he is of so+nd mind%
A person who is +s+ally of so+nd mind! b+t occasionally of +nso+nd mind! may
not ma'e a contract when he is of +nso+nd mind%
'llustrations
(a) A patient in a l+natic asyl+m! who is at inter*als of so+nd mind! may
contract d+ring those inter*als%
(b) A sane man! who is delirio+s from fe*er or who is so dr+n' that he cannot
+nderstand the terms of a contract or form a rational 4+dgment as to its
effect on his interests! cannot contract whilst s+ch deliri+m or dr+n'enness
lasts%
6Co!%e!t7 'efi!e'9 Two or more persons are said to consent when they agree +pon
3
Subs. By the Centr! "#s $Sttus %e&'rm( Ordinnce) 1960 $21 '& 1960( S. 3 nd 2
nd
Sch. $#ith e&&ect &r'm the 14
th
Oct'ber) 1955() &'r *!! the +r',inces nd the C-it! '& the .ederti'n/ #hich hd been subs. By A.O/ 1949) Arts. 3
$2( nd 4) &'r *the #h'!e '& British 0ndi/.
the same thing in the same sense%
6*ree #o!%e!t6 'efi!e'9 onsent is said to be free when it is not ca+sed by-
(1) coercion! as defined in section 16! or
(2) +nd+e infl+ence! as defined in section 17!or
(3) fra+d! as defined in section 1#! or
(4) misrepresentation! as defined in section 1"! or
(5) mista'e! s+b4ect to the pro*isions of sections $8! $1 and $$%
onsent is said to be so ca+sed when it wo+ld not ha*e been gi*en b+t for
the existence of s+ch coercion! +nd+e infl+ence! fra+d! misrepresentation
or mista'e%
6Coer#io!6 'efi!e'9 .oercion. is the committing! or threatening to commit! any act
forbidden by the &ena l od e or the +nlawf+l detaining or threatening to detain! any
property! to the pre4+dice of any person whate*er! with the intention of ca+sing any
person to enter into an agreement%
E&l$!$tio! - It is immaterial whether the &a'istan &ena l od e is or is not in force in
the place where the coercion is employed%
'llustration
A! on board an /nglish ship on the high seas! ca+ses 1 to enter into an
agreement by an act amo+nting to criminal intimidation +nder the & a ' i s t a n
&enal od e %
A afterwards s+es 1 for breach of contract at
9
[:arachi]% A has employed
coercion! altho+gh his act is not an offence by the law of /ngland! and altho+gh
section 687 of the &ena l od e was not in force at the time when or place where the
act was done%
F
[1G9 6+!')e i!fl)e!#e6 'efi!e'9 17%;1< A contract is said to be ind+ced by .+nd+e
infl+ence. where the relations s+bsisting between the parties are s+ch that one of the
parties is in a position to dominate the will of the other and +ses that position to obtain
an +nfair ad*antage o*er the other%
(2) In partic+lar and witho+t pre4+dice 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 a+thority o*er the other or
where he stands in a fid+ciary relation to the other; or
(b) where he ma'es a contract with a person whose mental capacity
is temporarily or permanently affected by reason of age! illness!
or mental or bodily distress%
(3) -here 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
e*idence add+ced! to be +nconscionable! the b+rden of pro*ing that s+ch contract
was not ind+ced by +nd+e infl+ence shall lie +pon the person in a position to
dominate the will of the other%
)othing in this s+b-section shall affect the pro*isions of section 111 of the
/*idence Ac t! 1"#$%]
'llustrations
(a) A ha*ing ad*anced money to his son! 1! d+ring his minority! +pon 12s
coming of age obtains! by mis+se of parental infl+ence! a bond from 1
for a greater amo+nt than the s+m d+e in respect of the ad*ance% A
4
Subs. by the .eder! "#s $%e,isi'n nd 1ec!rti'n( Ordinnce) 1981 $27 '& 1981() s. 3 nd 2
nd
Sch. .'r
*Chtt2'n2/ #hich hd been subs. by the Centr! "#s $Sttus %e&'rm( Ordinnce) 1960 $21 '& 1960() s. 3 nd 2
nd
Sch.) &'r * C!cutt/ $#ith e&&ect &r'm the 14
th
Oct'ber) 1955(.
5
Subs. by the 0ndin C'ntrct Act) Amdt. Act) 1899 $6 '& 1899( S.2) &'r the 'ri2in! s.16
employs +nd+e infl+ence%
(b) A! a man enfeebled by disease or age! is ind+ced! by 12s infl+ence o*er
him as his medical attendant! to agree to pay 1 an +nreasonable
s+m for his professional ser*ices% 1 employs +nd+e infl+ence%
(c) A! being in debt to 1! the money-lender of his *illage! contracts a fresh
loan on terms which appear to be +nconscionable% It lies on 1 to pro*e
that the contract was not ind+ced by +nd+e infl+ence%
(d) A applies to a ban'er for a loan at a time when there is stringency in
the money mar'et% The ban'er declines to ma'e the loan except at an
+n+s+ally high rate of interest% A accepts the loan on these terms% This is
a transaction in the ordinary co+rse of b+siness! and the contract is not
ind+ced by +nd+e infl+ence%
6*r$)'6 'efi!e'9 .=ra+d. means and incl+des any of the following acts committed
by a party to a contract! or with his conni*ance! or by his agent! with intent to
decei*e another party thereto or his agent! or to ind+ce him to enter into the contract:-
(1) the s+ggestion! as a fact! of that which is not tr+e! by one who does
not belie*e it to be tr+e;
(2) the acti*e concealment of a fact by one ha*ing 'nowledge or belief of
the fact;
(3) a promise made witho+t any intention of performing it;
(4) any other act fitted to decei*e;
(5) any s+ch act or omission as the law specially declares to be fra+d+lent%
E&l$!$tio! 0 >ere silence as to facts li'ely to affect the willingness of a person
to enter into a contract is not fra+d! +nless the circ+mstances of the case are s+ch
that! regard being had to them! it is the d+ty of the person 'eeping silence to
spea'! or +nless his silence is! in itself! e3+i*alent to speech%
'llustrations
(a) A sells! by a+ction! to 1! a horse which A 'nows to be +nso+nd% A says
nothing to 1 abo+t the horse2s +nso+ndness% This is not fra+d in A%
(b) 1 is A2s da+ghter and has 4+st come of age% ?ere! the relation between
the parties wo+ld ma'e it A2s d+ty to tell 1 if the horse is +nso+nd%
(c) 1 says to A-.If yo+ do not deny it! I shall ass+me that the horse is
so+nd%. A says nothing% ?ere! A2s silence is e3+i*alent to speech%
(d) A and 1! being traders! enter +pon a contract% A has pri*ate information of
a change in prices which wo+ld affect 12s willingness to proceed with
the contract% A is not bo+nd to inform 1%
6Mi%re&re%e!t$tio!6 'efi!e'9 @>isrepresentation. means and incl+des0
(1) the positi*e assertion! in a manner not warranted by the information of the
person ma'ing it! of that which is not tr+e! tho+gh he belie*es it to be tr+e;
(2) any breach of d+ty which! witho+t an intent to decei*e! gains an
ad*antage to the person committing it! or any one claiming +nder him! by misleading
another to his pre4+dice or to the pre4+dice of any one claiming +nder him;
(3) ca+sing! howe*er innocently! a party to an agreement to ma'e a mista'e
as to the s+bstance of the thing which is the s+b4ect of the agreement%
-oi'$0ilit1 of $2ree"e!t% /itho)t free #o!%e!t9 -hen consent to an agreement is
ca+sed by coercion!
G
[***] fra+d or misrepresentation! the agreement is a contract
*iodable at the option of the party whose consent was so ca+sed%
6
3he #'rds *undue in&!uence/ re- by the 0ndin C'ntrct ct) Amdt. 1899 $6 '& 1899(
A party to a contract! whose consent was ca+sed by fra+d or
misrepresentation! may! if he thin's fit! insist that the contract shall be performed! and
that he shall be p+t in the position in which he wo+ld ha*e been if the representations
made had been tr+e%
E#e&tio!9HIf s+ch consent was ca+sed by misrepresenta-tion or by silence!
fra+d+lent within the meaning of section 1#! the contract! ne*ertheless! is not *oidable!
if the party whose consent was so ca+sed had the means of disco*ering the tr+th with
ordinary diligence%
E&l$!$tio! 0 A fra+d or misrepresentation which did not ca+se the consent to a
contract of the party on whom s+ch fra+d was practised! or to whom s+ch
misrepresentation was made! does not render a contract *oidable%
'llustrations
(a) A! intending to decei*e 1! falsely represents that fi*e h+ndred ma+nds of
indigo are made ann+ally at A2s factory! and thereby ind+ces 1 to b+y
the factory% The contract is *oidable at the option of 1%
(b) A! by a misrepresentation! leads 1 erroneo+sly to belie*e that fi*e
h+ndred ma+nds of indigo are made ann+ally at A2s factory% 1 examines
the acco+nts of the factory! which show that only fo+r h+ndred ma+nds
of indigo ha*e been made% After this 1 b+ys the factory% The contract
is not *oidable on acco+nt of A2s misrepresentation%
(c) A fra+d+lently informs 1 that A2s estate is free from enc+mbrance% 1
there+pon b+ys the estate% The estate is s+b4ect to a mortgage% 1 may
either a*oid the contract! or may insist on its being carried o+t and the
mortgage- debt redeemed%
(d) 1! ha*ing disco*ered a *ein of ore on the estate of A! adopts means
to conceal! and does conceal! the existence of the ore from A%
Thro+gh A2s ignorance 1 is enabled to b+y the estate at an +nder-
*al+e% The contract is *oidable at the option of A%
(e) A is entitled to s+cceed to an estate at the death of 1; 1 dies: !
ha*ing recei*ed intelligence of 12s death! pre*ents the intelligence
reaching A! and th+s ind+ces A to sell him his interest in the estate% The
sale is *oidable at the option of A%
7
[189A Po/er to %et $%i'e #o!tr$#t i!')#e' 01 )!')e i!fl)e!#e9 1AA% -hen consent
to an agreement is ca+sed by +nd+e infl+ence! the agreement is a contract *oidable at
the option of the party whose consent was so ca+sed%
Any s+ch contract may be set aside either absol+tely or! if the party who was
entitled to a*oid it has recei*ed any benefit there+nder! +pon s+ch terms and
conditions as to the o+rt may seem 4+st%
(a) A2s son has forged 12s name to a promissory note% 1! +nder threat
of prosec+ting A2s son! obtains a bond from A for the amo+nt of the forged
note% If 1 s+es on this bond! the o+rt may set the bond aside%
(b) A! a money-lender! ad*ances ,+pees 188 to 1! an agric+lt+rist! and!
by +nd+e infl+ence! ind+ces 1 to exec+te a bond for ,+pees $88 with
interest at 7 per cent per month% The o+rt may set the bond aside!
ordering 1 to repay the ,+pees 188 with s+ch interest as may seem 4+st%]
A2ree"e!t .oi' /here 0oth &$rtie% $re )!'er "i%t$:e $% to "$tter of f$#t9 -here
both the parties to an agreement are +nder a mista'e as to a matter of fact essential
to the agreement! the agreement is *oid%
7
Secti'n 194A inserted by the 0ndin C'ntrct Act) Amdt. Act) 1899 $6 '& 1899(
E&l$!$tio! - An erroneo+s opinion as to the *al+e of the thing which forms the
s+b4ect-matter of the agreement is not to be deemed a mista'e as to a matter of fact%
$( A agrees to sell to 1 a specific cargo of goods s+pposed to be on its
way from /ngland to hittagong]% It t+rns o+t that! before the day of
the bargain! the ship con*eying the cargo had been cast away and the
goods lost% )either party was aware of the facts% The agreement is *oid%
$b( A agrees to b+y from 1 a certain horse% It t+rns o+t that the horse was
dead at the time of the bargain! tho+gh neither party was aware of the
fact% The agreement is *oid%
$c( A! being entitled to an estate for the life of 1! agrees to sell it to % 1 was
dead at the time of the agreement! b+t both parties were ignorant of the
fact% The agreement is *oid%
Effe#t of "i%t$:e% $% to l$/9 A contract is not *oidable beca+se it was ca+sed by a
mista'e as to any law in force in 1angladesh; b+t a mista'e as to a law not in force in
1angladesh has the same effect as a mista'e of fact%
8
566666667
'llustration
A and 1 ma'e a contract gro+nded on the erroneo+s belief that a partic+lar debt is
barred by the 1angladesh Baw of Bimitation: the contract is not *oidable%
A
[66666667
Co!tr$#t #$)%e' 01 "i%t$:e of o!e &$rt1 $% to "$tter of f$#t9 A contract is not
*oidable merely beca+se it was ca+sed by one of the parties to it being +nder a
mista'e as to a matter of fact%
5h$t #o!%i'er$tio!% $!' o0;e#t% $re l$/f)l $!' /h$t !ot9 The consideration or
ob4ect of an agreement is lawf+l! +nless- it is forbidden by law; or
is of s+ch a nat+re that! if permitted! it wo+ld defeat the pro*isions of any
law; or
is fra+d+lent; or
in*ol*es or implies in4+ry to the person or property of another; or
the o+rt regards it as immoral! or opposed to p+blic policy%
In each of these cases! the consideration or ob4ect of an agreement is
said to be +nlawf+l% /*ery agreement of which the ob4ect or consideration is
+nlawf+l is *oid%
'llustrations
(a) A agrees to sell his ho+se to 1 for 18!888 ,+pees% ?ere 12s promise to
pay the s+m of 18!888 ,+pees is the consideration for A2s promise to sell
the ho+se! and A2s promise to sell the ho+se is the consideration for 12s
promise to pay the 18!888 ,+pees% These are lawf+l considerations%
(b) A promises to pay 1 1!888 ,+pees at the end of six months; if ! who
owes that s+m to 1! fails to pay it% 1 promises to grant time to
accordingly% ?ere the promise of each party is the consideration for the
promise of the other party and they are lawf+l considerations%
(c) A promises! for a certain s+m paid to him by 1! to ma'e good to 1
the *al+e of his ship if it is wrec'ed on a certain *oyage% ?ere A2s
promise is the consideration for 12s payment and 12s payment is the
8
Sec'nd -r2r-h 'mitted by .eder! "#s $%e,is'n nd 1ec!rti'n( Ordinnce) 1981 $27 '& 1981() s.3 nd 2
nd
Sch.
9
Sec'nd illustration '.s. 21) re-. by the %e-e!in2 nd Amendin2 Act) 1917 $24 '& 1917() s.3 nd Sch. 00.
consideration for A2s promise and these are lawf+l considerations%
(d) A promises to maintain 12s child and 12s promises to pay A 1!888
,+pees yearly for the p+rpose% ?ere the promise of each party is the
consideration for the promise of the other party% They are lawf+l
considerations%
(e) A! 1 and enter into an agreement for the di*ision among them of gains
ac3+ired! or to be ac3+ired! by them by fra+d% The agreement is *oid!
as its ob4ect is +nlawf+l%
(f) A promises to obtain for 1 an employment in the p+blic ser*ice! and 1
promises to pay 1!888 ,+pees to A% The agreement is *oid! as the
consideration for it is +nlawf+l%
(g) A! being agent for a landed proprietor! agrees for money! witho+t the
'nowledge of his principal! to obtain for 1 a lease of land belonging to
his principal% The agreement between A and 1 is *oid! as it implies a
fra+d by concealment by A! on his principal%
(h) A promises 1 to drop a prosec+tion which he has instit+ted against 1 for
robbery! and 1 promises to restore the *al+e of the things ta'en% The
agreement is *oid! as its ob4ect is +nlawf+l%
(i) A2s estate is sold for arrears of re*en+e +nder the pro*isions of an Act
of the Begislat+re! by which the defa+lter is prohibited from
p+rchasing the estate% 1! +pon an +nderstanding with A! becomes the
p+rchaser! and agrees to con*ey the estate to A +pon recei*ing from him
the price which 1 has paid% The agreement is *oid! as it renders the
transaction! in effect! a p+rchase by the defa+lter! and wo+ld so defeat
the ob4ect of the law%
(j) A! who is 12s m+'htar! promises to exercise his infl+ence! as s+ch! with 1
in fa*o+r of ! and promises to pay 1!888 ,+pees to A% The
agreement is *oid! beca+se it is immoral%
(k) A agrees to let her da+ghter to hire to 1 for conc+binage% The agreement
is *oid! beca+se it is immoral! tho+gh the letting may not be p+nishable
+nder the &a'istan &ena l od e %
Void Agreements
A2ree"e!t% .oi', if #o!%i'er$tio!% $!' o0;e#t% )!l$/f)l i! &$rt9 If any part of a
single consideration for one or more ob4ects! or any one or any part of any one of
se*eral considerations for a single ob4ect is +nlawf+l! the agreement is *oid% A
promises to s+perintend! on behalf of 1! a legal man+fact+re of indigo! and an illegal
traffic in other articles% 1 promises to pay to A a salary of 18!888 ,+pees a year%
The agreement is *oid! the ob4ect of A2s promise and the considerations 12s promise
being in part +nlawf+l%
A2ree"e!t /itho)t #o!%i'er$tio! .oi', )!le%% it i% i! /riti!2 $!' re2i%tere', or
i% $ &ro"i%e to #o"&e!%$te for %o"ethi!2 'o!e, or i% $ &ro"i%e to &$1 $ 'e0t
0$rre' 01 li"it$tio! l$/9 An agreement made witho+t consideration is *oid! +nless0
(1) it is expressed in writing and registered +nder the law for the time being in
force for the registration of doc+ments! and is made on acco+nt of nat+ral lo*e and
affection between parties standing in a near relation to each other; or +nless
(2) it is a promise to compensate! wholly or in part! a person who has already
*ol+ntarily done something for the promisor! or something which the promisor was
legally compellable to do! or +nless
(3) it is a promise! made in writing and signed by the person to be charged
therewith! or by his agent generally or specially a+thoriCed in that behalf! to pay
wholly or in part a debt of which the creditor might ha*e enforced payment b+t for the
law for the limitation of s+its%
In any of these cases! s+ch an agreement is a contract%
E&l$!$tio! 1 0 )othing in this section shall affect the *alidity! as between the
donor and donee! of any gift act+ally made%
E&l$!$tio! $ 0 An agreement to which the consent of the promisor is freely gi*en is
not *oid merely beca+se the consideration is inade3+ate; b+t the inade3+acy of the
consideration may be ta'en into acco+nt by the o+rt in determining the 3+estion
whether the consent of the promisor was freely gi*en%
'llustrations
(a) A promises! for no consideration! to gi*e to 1 ,+pees 1!888% This is a
*oid agreement%
(b) A! for nat+ral lo*e and affection! promises to gi*e his son! 1! ,+pees
1!888% A p+ts his promise to 1 into writing and registers it% This is a
contract%
(c) A finds 12s p+rse and gi*es it to him% 1 promises to gi*e A ,+pees 68%
This is a contract%
(d) A s+pports 12s infant son% 1 promises to pay A2s expenses in so doing%
This is a contract%
(e) A owes 1 ,+pees 1!888! b+t the debt is barred by the B i mitatio n A c t% A
signs a written promise to pay 1 ,+pees 688 on acco+nt of the debt% This
is a contract%
(f) A agrees to sell a horse worth ,+pees 1!888 for ,+pees 18% A2s
consent to the agreement was freely gi*en% The agreement is a contract
notwithstanding the inade3+acy of the consideration%
(g) A agrees to sell a horse worth ,+pees 1!888 for ,+pees 18% A denies
that his consent to the agreement was freely gi*en%
The inade3+acy of the consideration is a fact which the o+rt sho+ld ta'e
into acco+nt in considering whether or not A2s consent was freely gi*en%
A2ree"e!t i! re%tr$i!t of "$rri$2e .oi'9 /*ery agreement in restrain of the
marriage of any person! other than a minor! is *oid%
A2ree"e!t i! re%tr$i!t of tr$'e .oi' S$.i!2 of $2ree"e!t !ot to #$rr1 o!
0)%i!e%% of /hi#h 2oo'( /ill i% %ol'9 /*ery agreement by which any one is
restrained from exercising a lawf+l profession! trade or b+siness of any 'ind! is to that
extent *oid%
E#e&tio! 19HDne who sells the good-will of a b+siness may agree with the b+yer
to refrain from carrying on a similar b+siness! within specified local limits! so long as
the b+yer! or any person deri*ing title to the good-will from him! carries on a li'e
b+siness therein: &ro*ided that s+ch limits appear to the o+rt reasonable! regard
being had to the nat+re of the b+siness%
E#e&tio! 2 $!' ?9 [,epealed by section #5 and $nd (ched+le of the &artnership
Act! 1A5$ ;Act )o% IE of 1A5$<%]
A2ree"e!t% i! re%tr$i!t of le2$l &ro#ee'i!2% .oi' S$.i!2 of #o!tr$#t to refer to
$r0itr$tio! 'i%&)te th$t "$1 $ri%e S)it% 0$rre' 01 %)#h #o!tr$#t% S$.i!2 of
#o!tr$#t to refer <)e%tio!% th$t h$.e $lre$'1 $ri%e!9 /*ery agreement! by which
any party thereto is restricted absol+tely from enforcing his rights +nder or in respect
of any contract! by the +s+al legal proceedings in the ordinary trib+nals! or which
limits the time within which he may th+s enforce his rights! is *oid to that extent%
E#e&tio! 19HThis section shall not render illegal a contract by which two or more
persons agree that any disp+te which may arise between them in respect of any
s+b4ect or class of s+b4ects shall be referred to arbitration! and that only the amo+nt
awarded in s+ch arbitration shall be reco*erable in respect of the disp+te so
referred%
E#e&tio! 29()or shall this section render illegal any contract in writing! by which two
or more persons agree to refer to arbitration any 3+estion between them which has
already arisen! or affect any pro*ision of any law in force for the time being as to
references to arbitration%
A2ree"e!t% .oi' for )!#ert$i!t19 Agreements! the meaning of which is not certain! or
capable of being made certain! are *oid%
'llustrations
(a) A agrees to sell to 1 .a h+ndred tons of oil.% There is nothing whate*er
to show what 'ind of oil was intended% The agreement is *oid for
+ncertainty%
(b) A agrees to sell to 1 one h+ndred tons of oil of a specified
description! 'nown as an article of commerce% There is no +ncertainty
here to ma'e the agreement *oid%
(c) A! who is a dealer in cocon+t-oil only! agrees to sell to 1 .one h+ndred
tons of oil.% The nat+re of A2s trade affords an indication of the
meaning of the words! and A has entered into a contract for the sale of
one h+ndred tons of ocon+t-oil%
(d) A agrees to sell 1 .all the grain in my granary at
6
[ ,angp+r].% There is
no +ncertainty here to ma'e the agreement *oid%
(e) A agrees to sell to 1 .one tho+sand mo+nds of rice at a price to be fixed
by .% As the price is capable of being made certain! there is no
+ncertainty here to ma'e the agreement *oid%
(f) A agrees to sell to 1 .my white horse for ,+pees fi*e h+ndred or
,+pees one tho+sand.% There is nothing to show which of the two prices
was to be gi*en% The agreement is *oid%
A2ree"e!t% 01 /$1 of /$2er .oi' E#e&tio!% i! f$.o)r of #ert$i! &ri=e% for
hor%e(r$#i!2 Se#tio! 28>A of the Pe!$l Co'e !ot $ffe#te'9 Agreements by way of
wager are *oid; and no s+it shall be bro+ght for reco*ering anything alleged to be
own on any wager! or entr+sted to any person to abide the res+lt of any game or
other +ncertain e*ent on which wager is made%
This section shall not be deemed to render +nlawf+l a s+bscription! or
contrib+tion! or agreement to s+bscribe or contrib+te! made or entered into for or
toward any plate! priCe or s+m of money! of the *al+e or amo+nt of fi*e h+ndred
,+pees or +pwards! to be awarded to the winner or winners of any horse race%
)othing in this section shall be deemed to legaliCe any transaction connected
with horse-racing! to which the pro*isions of section $A9A of the &a'istan &ena l
ode apply%
?@A9 A2ree"e!t% #oll$ter$l to /$2eri!2 $2ree"e!t% .oi'9 58A% All agreements
'nowingly made to f+rther or assist the entering into! effecting or carrying o+t! or to
sec+re or g+arantee the performance! of any agreement *oid +nder section 58! are
*oid%
?@39 No %)it for re#o.er1 of "o!e1, #o""i%%io! et#, i! re%&e#t of .oi'
$2ree"e!t%9
581% )o s+it or other proceeding shall lie for the reco*ery of0
a< any s+m of money paid or payable in respect of any agreement *oid
+nder section 58A! or
(b) any commission! bro'erage! fee! or reward in respect of 'nowingly
effecting or carrying o+t! or aiding in effecting or carrying o+t! of any
s+ch agreement or of any s+m of money otherwise claimed or claimable
in respect thereof! or
(c) any s+m of money 'nowingly paid or payable on acco+nt of any person by
way of commission! bro'erage! fee! reward or other claim in respect of
any s+ch agreement%
?@C9 P$1"e!t 01 2)$r'i$!, ee#)tor, et#, i! re%&e#t of .oi' $2ree"e!t% !ot to
0e $llo/e' #re'it9 )o g+ardian! exec+tor! administrator! heir or personal
representati*e of any minor or deceased person! as the case may be! shall be
entitled to or allowed any credit in his acco+nt for or in respect of any payment made
by him on behalf of s+ch minor or deceased person in respect of any s+ch agreement!
or any s+ch commission! bro'erage! fee! reward or claim as is referred to in
sections 58A and 581%]
CHAPTER III
O* CONTIN4ENT CONTRACTS
2F9 6Co!ti!2e!t #o!tr$#t6 'efi!e'9 A .contingent contract. is a contract to do or
not to do something! if some e*ent! collateral to s+ch contract! does or does not
happen%
'llustration
A contracts to pay 1 ,+pees 18!888 if 12s ho+se is b+rnt% This is a contingent
contract%
E!for#e"e!t of #o!tr$#t% #o!ti!2e!t o! $! e.e!t h$&&e!i!29 ontingent contracts
to do or not to do anything if an +ncertain f+t+re e*ent happens cannot be
enforced by law +nless and +ntil that e*ent has happened%
If the e*ent becomes impossible! s+ch contracts become *oid%
'llustration
(a) A ma'es a contract with 1 to b+y 12s horse if A s+r*i*es % This
contract cannot be enforced by law +nless and +ntil dies in A2s
lifetime%
(b) A ma'es a contract with 1 to sell a horse to 1 at a specified price! if !
to whom the horse has been offered! ref+ses to b+y him% The contract
cannot be enforced by law +nless and +ntil ref+ses to b+y the
horse%
(c) A contracts to pay 1 a s+m of money when 1 marries % dies
witho+t being married to 1% The contract becomes *oid%
E!for#e"e!t of #o!tr$#t% #o!ti!2e!t o! $! e.e!t !ot h$&&e!i!29 ontingent
contracts to do or not to do anything if an +ncertain f+t+re e*ent does not happen
can be enforced when the happening of that e*ent becomes impossible! and not
before%
'llustration
A agrees to pay 1 a s+m of money if a certain ship does not ret+rn% The ship is s+n'% The
contract can be enforced when the ship sin's%
5he! e.e!t o! /hi#h #o!tr$#t i% #o!ti!2e!t to 0e 'ee"e' i"&o%%i0le, if it i% the
f)t)re #o!')#t of $ li.i!2 &er%o!9 If the f+t+re e*ent on which a contract is
contingent is the way in which a person will act at an +nspecified time! the e*ent shall
be considered to become impossible when s+ch person does anything which renders it
impossible that he sho+ld so act within any definite time! or otherwise than +nder
f+rther contingencies%
'llustration
A agrees to pay 1 a s+m of money if 1 marries % marries F% The marriage of 1 to
m+st now be considered impossible! altho+gh it is possible that F may die and that
may afterwards marry 1%
5he! #o!tr$#t% 0e#o"e .oi' /hi#h $re #o!ti!2e!t o! h$&&e!i!2 of %&e#ifie'
e.e!t /ithi! fie' ti"e9 ontingent contracts to do or not to do anything if a
specified +ncertain e*ent happens within a fixed time become *oid if! at the expiration
of the time fixed! s+ch e*ent has not happened! or if! before the time fixed! s+ch
e*ent becomes impossible%
5he! #o!tr$#t% "$1 0e e!for#e' /hi#h $re #o!ti!2e!t o! %&e#ifie' e.e!t !ot
h$&&e!i!2 /ithi! fie' ti"e9 ontingent contracts to do or not to do anything if a
specified +ncertain e*ent does not happen within a fixed time may be enforced by law
when the time fixed has expired and s+ch e*ent has not happened or! before the time
fixed has expired! if it becomes certain that s+ch e*ent will not happen%
(a) A promises to pay 1 a s+m of money if a certain ship ret+rns within a
year% The contract may be enforced if the ship ret+rns within the year! and
becomes *oid if the ship is b+rnt within the year%
(b) A promises to pay 1 a s+m of money if a certain ship does not ret+rn
within a year% The contract may be enforced if the ship does not ret+rn
within the year! or is b+rnt within the year%
A2ree"e!t #o!ti!2e!t o! i"&o%%i0le e.e!t% .oi'9 ontingent agreements to do or
not to do anything! if an impossible e*ent happens! are *oid! whether the impossibility
of the e*ent is 'nown or not to the parties to the agreement at the time when it is
made%
'llustration
(a) A agrees to pay 1 1!888 ,+pees if two straight lines sho+ld enclose a
space% The agreement is *oid%
(b) A agrees to pay 1 1!888 ,+pees if 1 will marry A2s da+ghter % was
dead at the time of the agreement% The agreement is *oid%
CHAPTER I-
O* THE PER*ORMANCE O* CONTRACTS
Contracts which must be performed
O0li2$tio! of &$rtie% to #o!tr$#t%9 The parties to a contract m+st either perform! or
offer to perform! their respecti*e promises! +nless s+ch performance is dispensed
with or exc+sed +nder the pro*isions of this Act! or of any other law%
&romises bind the representati*es of the promisors in case of the death of
s+ch promisors before performance! +nless a contrary intention appears from the
contract%
'llustrations
(a) A promises to deli*er goods to 1 on a certain day on payment of
,+pees 1!888% A dies before that day% A2s representati*es are bo+nd
to deli*er the goods to 1! and 1 is bo+nd to pay the ,+pees 1!888
to A2s representati*es%
(b) A promises to paint a pict+re for 1 by a certain day! at a certain price% A
dies before the day% The contract cannot be enforced either by A2s
representati*es or by 1%
Effe#t of ref)%$l to $##e&t offer of &erfor"$!#e9 -here 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 +nder the contract%
/*ery s+ch offer m+st f+lfil the following conditions:0
(1) it m+st be +nconditional:
(2) it m+st be made at a proper time and place! and +nder s+ch
circ+mstances that the person to whom it is made may ha*e a reasonable
opport+nity 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 bo+nd by his promise to do:
(3) if the offer is an offer to deli*er anything to the promisee! the promisee
m+st ha*e a reasonable opport+nity of seeing that the thing offered is the thing
which the promisor is bo+nd by his promise to deli*er%
An offer to one of se*eral 4oint promisees has the same legal conse3+ences as
an offer to all of them%
'llustration
A contracts to deli*er to 1 at his wareho+se! on the 1st >arch! 1"#5! 188 bales of
cotton of a partic+lar 3+ality% In order to ma'e an offer of a performance with the
effect stated in this section! A m+st bring the cotton to 12s wareho+se! on the appointed
day! +nder s+ch circ+mstances that 1 may ha*e a reasonable opport+nity of satisfying
himself that the thing offered is cotton of the 3+ality contracted for! and that there are
188 bales%
Effe#t of ref)%$l of &$rt1 to &erfor" &ro"i%e /holl19 -hen a party to a contract
has ref+sed to perform! or disabled himself from performing his promise in its
entirety! the promisee may p+t an end to the contract! +nless he has signified! by
words or cond+ct! his ac3+iescence in its contin+ance%
'llustrations
(a) A! a singer! enters into a contract with 1! the manager of a theatre! to
sing at his theater two nights in e*ery wee' d+ring the next two
months! and 1 engages to pay her 188 ,+pees for each nights
performance% Dn the sixth night A wilf+lly absents herself from the
theatre% 1 is at liberty to p+t an end to the contract%
(b) A! a singer! enters into a contract with 1! the manager of a theatre! to
sing at his theatre two nights in e*ery wee' d+ring the next two
months! and 1 engages to pay her at the rate of 188 ,+pees for each
night% Dn the sixth night A wilf+lly absents herself% -ith the assent of 1! A
sings on the se*enth night% 1 has signified his ac3+iescence in the
contin+ance of the contract! and cannot now p+t an end to it! b+t is
entitled to compensation for the damage s+stained by him thro+gh A2s
fail+re to sing on the sixth night%
By whom Contracts must be performed
Per%o! 01 /ho" &ro"i%e i% to 0e &erfor"e'9 If it appears from the nat+re of the
case that it was the intention of the parties to any contract that any promise
contained in it sho+ld be performed by the promisor himself! s+ch promise m+st be
performed by the promisor% In other cases! the promisor or his representati*es may
employ a competent person to perform it%
'llustrations
(a) A promises to pay 1 a s+m of money% A may perform this promise! either
by personally paying the money to 1 or by ca+sing it to be paid to 1
by another; and! if A dies before the time appointed for payment! his
representati*es m+st perform the promise! or employ some proper
person to do so%
(b) A promises to paint a pict+re for 1% A m+st perform this promise
personally%
Effe#t of $##e&ti!2 &erfor"$!#e fro" thir' &er%o!9 -hen a promisee accepts
performance of the promise from a third person! he cannot afterwards enforce it against
the promisor%
,e.ol)tio! of ;oi!t li$0ilitie%9 -hen two or more persons ha*e made a 4oint
promise! then! +nless a contrary intention appears by the contract! all s+ch persons
d+ring their 4oint li*es! and after the death of any of them his representati*e 4ointly
with the s+r*i*or or s+r*i*ors! and after the death of the last s+r*i*or! the
representati*es of all 4ointly! m+st f+lfil the promise%
A!1 o!e of ;oi!t &ro"i%or% "$1 0e #o"&elle' to &erfor" E$#h &ro"i%or "$1
#o"&el #o!tri0)tio! Sh$ri!2 of lo%% 01 'ef$)lt i! #o!tri0)tio!9 -hen two or more
persons ma'e a 4oint promise! the promisee may! in the absence of express agreement
to the contrary! compel any one or more of s+ch 4oint promisors to perform the whole of
the promise%
/ach of two or more 4oint promisors may compel e*ery other 4oint promisor to
contrib+te e3+ally with himself to the performance of the promise! +nless a contrary
intention appears from the contract%
If any one of two or more 4oint promisors ma'es defa+lt in s+ch contrib+tion! the
remaining 4oint promisors m+st bear the loss arising from s+ch defa+lt in e3+al shares%
E&l$!$tio! 0 )othing in this section shall pre*ent a s+rety from reco*ering from his
principal! payments made by the s+rety on behalf of the principal! or entitle the principal
to reco*er anything from the s+rety on acco+nt of payments made by the principal%
'llustrations
(a) A! 1 and 4ointly promise to pay F 5!888 ,+pees% F may compel either
A or 1 or to pay him 5!888 ,+pees%
(b) A! 1 and 4ointly promise to pay F the s+m of 5!888 ,+pees% is
compelled to pay the whole% A is insol*ent! b+t his assets are s+fficient to
pay one-half of his debts% is entitled to recei*e 688 ,+pees from A2s
estate! and 1!$68 ,+pees from 1%
(c) A! 1 and are +nder a 4oint promise to pay F 5!888 ,+pees% is
+nable to pay anything! and A is compelled to pay the whole% A is
entitled to recei*e 1!688 ,+pees from 1%
(d) A! 1 and are +nder a 4oint promise to pay F 5!888 ,+pees! A and 1
being only s+reties for % fails to pay% A and 1 are compelled to pay
the whole s+m% They are entitled to reco*er it from %
Effe#t of rele$%e of o!e ;oi!t &ro"i%or9 -here two or more persons ha*e made a 4oint
promise! a release of one of s+ch 4oint promisors by the promisee does not discharge the
other 4oint promisor or 4oint promisors; neither does it free the 4oint promisors so released
from responsibility to the other 4oint promisor or 4oint promisors%
,e.ol)tio! of ;oi!t ri2ht%9 -hen a person has made a promise to two or more
persons 4ointly! then! +nless a contrary intention appears from the contract! the right to
claim performance rests! as between him and them! with them d+ring their 4oint li*es!
and! after the death of any of them! with the representati*e of s+ch deceased
person 4ointly with the s+r*i*or or s+r*i*ors! and! after the death of the last s+r*i*or! with
the representati*es of all 4ointly%
'llustration
A! in consideration of 6!888 ,+pees lent to him by 1 and ! promises 1 and
4ointly to repay them that s+m with interest on a day specified% 1 dies% The right to
claim performance rests with 12s representati*e 4ointly with d+ring 2s life! and after
the death of with the representati*es of 1 and 4ointly%
Time and Place for Performance
Ti"e for &erfor"$!#e of &ro"i%e /here !o $&&li#$tio! i% to 0e "$'e $!' !o
ti"e i% %&e#ifie'9 -here! by the contract! a promisor is to perform his promise
witho+t application by the promisee! and no time for performance is specified! the
engagement m+st be performed within a reasonable time%
E&l$!$tio! H The 3+estion .what is a reasonable time. is! in each partic+lar case!
a 3+estion of fact%
Ti"e $!' &l$#e for &erfor"$!#e of &ro"i%e /here ti"e i% %&e#ifie' $!' !o
$&&li#$tio! to 0e "$'e9 -hen promise is to be performed on a certain day! and the
promisor has +nderta'en to perform it witho+t application by the promisee! the
promisor may perform it at any time d+ring the +s+al ho+rs of b+siness on s+ch day
and at the place at which the promise o+ght to be performed%
'llustration
A promises to deli*er goods at 12s wareho+se on the first Gan+ary% Dn that day A
brings the goods to 12s wareho+se! b+t after the +s+al ho+r for closing it! and they are
not recei*ed% A has not performed his promise%
A&&li#$tio! for &erfor"$!#e o! #ert$i! '$1 to 0e $t &ro&er ti"e $!' &l$#e9 -hen a
promise is to be performed on a certain day! and the promisor has not +nderta'en to
perform it witho+t application by the promisee! it is the d+ty of the promisee to apply
for performance at a proper place and within the +s+al ho+rs of b+siness%
E&l$!$tio! 0 The 3+estion .what is a proper time and place. is! in each
partic+lar case! a 3+estion of fact%
Pl$#e for &erfor"$!#e of &ro"i%e /ere !o $&&li#$tio! to 0e "$'e $!' !o
&l$#e fie' for &erfor"$!#e9 -hen a promise is to be performed witho+t application
by the promisee! and no place is fixed for the performance of it! it is the d+ty of the
promisor to apply to the promisee to appoint a reasonable place for the performance of
the promise! and to perform it at s+ch place%
'llustration
A +nderta'es to deli*er a tho+sand ma+nds of 4+te to 1 on a fixed day% A m+st
apply to 1 to appoint a reasonable place for the p+rpose of recei*ing it! and m+st
deli*er it to him at s+ch place%
Perfor"$!#e i! "$!!er or $t ti"e &re%#ri0e' or %$!#tio!e' 01 &ro"i%e9 The
performance of any promise may be made in any manner! or at any time which the
promisee prescribes or sanctions%
'llustrations
(a) 1 awes A $!888 ,+pees% A desires 1 to pay the amo+nt to A2s acco+nt
with ! a ban'er% 1! who also ban's with ! orders the amo+nt to be
transferred from his acco+nt to A2s credit! and this is done by %
Afterwards! and before A 'nows of the transfer! fails% There has
been a good payment by 1%
(b) A and 1 are m+t+ally indebted% A and 1 settle an acco+nt by setting off
one item against another! and 1 pays A the balance fo+nd to be d+e from
him +pon s+ch settlement% This amo+nts to a payment by A and 1!
respecti*ely! of the s+ms which they owed to each other%
(c) A owes 1 $!888 ,+pees% 1 accepts some of A2s goods in red+ction of the
debt% The deli*ery of the goods operates as a part payment%
(d) A desires 1! who owes him ,+pees 188! to send him a note for ,+pees
188 by post% The debt is discharged as soon as 1 p+ts into the post a
letter containing the note d+ly addressed to A%
Performance of Reciprocal Promises
Pro"i%or !ot 0o)!' to &erfor", )!le%% re#i&ro#$l &ro"i%ee re$'1 $!' /illi!2 to
&erfor"9 -hen a contract consists of reciprocal promises to be sim+ltaneo+sly
performed! no promisor need perform his promise +nless the promisee is ready and
willing to perform his reciprocal promise%
'llustrations
(a) A and 1 contract that A shall deli*er goods to 1 to be paid for by 1 on
deli*ery%
A need not deli*er the goods! +nless 1 is ready and willing to pay for
the goods on deli*ery%
1 need not pay for the goods! +nless A is ready and willing to deli*er them
on payment%
(b) A and 1 contract that A shall deli*er goods to 1 at a price to be paid by
installments! the first installment to be paid on deli*ery%
A need not deli*er! +nless 1 is ready and willing to pay the first
installment on deli*ery%
1 need not pay the first installment! +nless A is ready and willing to
deli*er the goods on payment of the first installment%
Or'er of &erfor"$!#e of re#i&ro#$l &ro"i%e%9 -here 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 nat+re of the transaction re3+ires%
'llustrations
(a) A and 1 contract that A shall b+ild a ho+se for 1 at a fixed price% A2s
promise to b+ild the ho+se m+st be performed before 12s promise to pay
for it%
(b) A and 1 contract that A shall ma'e o*er his stoc'-in-trade to 1 at a fixed
price! and 1 promises to gi*e sec+rity for the payment of the money%
A2s promise need not be performed +ntil the sec+rity is gi*en! for the
nat+re of the transaction re3+ires that A sho+ld ha*e sec+rity before he
deli*ers +p his stoc'%
Li$0ilit1 of &$rt1 &re.e!ti!2 e.e!t o! /hi#h the #o!tr$#t i% to t$:e effe#t9 -hen a
contract contains reciprocal promises! and one party to the contract pre*ents the other
from performing his promise! the contract becomes *oidable at the option of the party
so pre*ented; and he is entitled to compensation from the other party for any loss
which he may s+stain in conse3+ence of the non-performance of the contract%
'llustrations
A and 1 contract that 1 shall exec+te certain wor' for A for a tho+sand ,+pees% 1 is
ready and willing to exec+te the wor' accordingly! b+t A pre*ents him from doing so%
The contract is *oidable at the option of 1; and! if he elects to rescind it! he is entitled
to reco*er from A compensation for any loss which he has inc+rred by its non-
performance%
Effe#t of 'ef$)lt $% to th$t &ro"i%e /hi#h %ho)l' 0e fir%t &erfor"e', i!
#o!tr$#t #o!%i%ti!2 of re#i&ro#$l &ro"i%e%9 -hen a contract consists of reciprocal
promises! s+ch 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! s+ch promisor cannot claim the performance of the
reciprocal promise! and m+st ma'e compensation to the other party to the contract for
any loss which s+ch other party may s+stain by the non-performance of the contract%
'llustrations
(a) A hires 12s ship to ta'e in and con*ey! from hittagong to the >a+riti+s! a
cargo to be pro*ided by A! 1 recei*ing a certain freight for its
con*eyance% A does not pro*ide any cargo for the ship% A cannot claim
the performance of 12s promise! and m+st ma'e compensation to 1 for
the loss which 1 s+stains by the non-performance of the contract%
(b) A contracts with 1 to exec+te certain b+ilder2s wor' for a fixed price! 1
s+pplying the scaffolding and timber necessary for the wor'% 1
ref+ses to f+rnish any scaffolding or timber! and the wor' cannot be
exec+ted% A need not exec+te the wor'! and 1 is bo+nd to ma'e
compensation to A for any loss ca+sed to him by the non-performance of
the contract%
(c) A contracts with 1 to deli*er to him! at a specified price! certain
merchandise on board a ship which cannot arri*e for a month! and 1
engages to pay for the merchandise within a wee' from the date of the
contract% 1 does not pay within the wee'% A2s promise to deli*er need not
be performed! and 1 m+st ma'e compensation%
(d) A promises 1 to sell him one h+ndred bales of merchandise! to be
deli*ered next day! and 1 promises A to pay for them within a month% A
does not deli*er according to his promise% 12s promise to pay need not
be performed! and A m+st ma'e compensation%
Effe#t of f$il)re to &erfor" $t fie' ti"e, i! #o!tr$#t i! /hi#h ti"e i% e%%e!ti$l9
-hen a party to a contract promises to do a certain thing at or before a specified
time! or certain things at or before a specified times! and fails to do any s+ch thing at
or before the specified time! the contract! or so m+ch of it as has not been performed!
becomes *oidable at the option of the promisee! if the intention of the parties was
that time sho+ld be of the essence of the contract%
Effe#t of %)#h f$il)re /he! ti"e i% !ot e%%e!ti$l9 If it was not the intention of the
parties that time sho+ld be of the essence of the contract! the contract does not
become *oidable by the fail+re to do s+ch thing at or before the specified time; b+t
the promisee is entitled to compensation from the promisor for any loss occasioned
to him by s+ch fail+re%
Effe#t of $##e&t$!#e of &erfor"$!#e $t ti"e other th$! th$t $2ree' )&o!9 If! in
case of a contract *oidable on acco+nt of the promisor2s fail+re to perform his promise
at the time agreed! the promisee accepts performance of s+ch 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! +nless! at the
time of s+ch acceptance he gi*es notice to the promisor of his intention to do so%
A2ree"e!t to 'o i"&o%%i0le $#t9 An agreement to do an act impossible in itself is
*oid%
Co!tr$#t to 'o $#t $fter/$r'% 0e#o"i!2 i"&o%%i0le or )!l$/f)l9 A contract to do
an act which! after the contract is made! becomes impossible! or! by reason of some
e*ent which the promissor co+ld not pre*ent! +nlawf+l! becomes *oid when the act
becomes impossible or +nlawf+l%
Co"&e!%$tio! for lo%% thro)2h !o!(&erfor"$!#e of $#t :!o/! to 0e
i"&o%%i0le or )!l$/f)l9 -here one person has promised to do something which he
'new! or! with reasonable diligence! might ha*e 'nown! and which the promisee did
not 'now to be impossible or +nlawf+l! s+ch promisor m+st ma'e compensation to
s+ch promisee for any loss which s+ch promisee s+stains thro+gh the non-
performance of the promise%
'llustrations
(a) A agrees with 1 to disco*er treas+re by magic% The agreement is
*oid%
(b) A and 1 contract to marry each other% 1efore the time fixed for the
marriage! A goes mad% The contract becomes *oid%
(c) A contracts to marry 1! being already married to ! and being forbidden
by the law to which he is s+b4ect to practise polygamy% A m+st ma'e
compensation to 1 for the loss ca+sed to her by the non-performance
of his promise%
(d) A contracts to ta'e in cargo for 1 at a foreign port% A2s Ho*ernment
afterwards declares war against the co+ntry in which the port is sit+ated%
The contract becomes *oid when war is declared%
(e) A contracts to act at a theatre for six months in consideration of a
s+m! paid in ad*ance by 1% Dn se*eral occasions A is too ill to act% The
contract to act on those occasions becomes *oid%
Re#i&ro#$l &ro"i%e to 'o thi!2% le2$l, $!' $l%o other thi!2% ille2$l9 -here persons
reciprocally promise! firstly! to do certain things which are legal! and! secondly! +nder
specified circ+mstances! to do certain other things which are illegal! the first set of
promises is a contract! b+t the second is a *oid agreement%
'llustration
A and 1 agree that A shall sell 1 a ho+se for 18!888 ,+pees b+t that! if 1 +ses it as a
gambling ho+se! he shall pay A 68!888 r+pees for it%
The first set of reciprocal promises! namely! to sell the ho+se and to pay 18!888
r+pees for it! is a contract%
The second set is for an +nlawf+l ob4ect! namely! that 1 may +se the ho+se as a
gambling ho+se! and is a *oid agreement%
Alter!$ti.e &ro"i%e, o!e 0r$!#h 0ei!2 ille2$l9 In the case of an alternati*e promise!
one branch of which is legal and the other illegal! the legal branch alone can be
enforced%
'llustration
A and 1 agree that A shall pay 1 1!888 ,+pees for which 1 shall afterwards
deli*er to A either rice or sm+ggled opi+m% This is a *alid contract to deli*er rice! and a
*oid agreement as to the opi+m%
This is a *alid contract to deli*er rice! and a *oid agreement as to the opi+m%
Appropriation of Payments
A&&li#$tio! of &$1"e!t, /here 'e0t to 0e 'i%#h$r2e' i% i!'i#$te'9 -here a
debtor! owing se*eral distinct debts to one person! ma'es a payment to him! either
with express intimation! or +nder circ+mstances implying that the payment is to be
applied to the discharge of some partic+lar debt! the payment! if accepted! m+st be
applied accordingly%
'llustrations
(a) A owes 1! among other debts! 1!888 ,+pees +pon a promissory note
which falls d+e on the first G+ne% ?e owes 1 no other debt of that
amo+nt% Dn the first G+ne A pays to 1 1!888 ,+pees% The payment is to
be applied to the discharge of the promissory note%
(b) A owes to 1! among other debts the s+m of 67# ,+pees% 1 writes to A
and demands payment of this s+m% A sends to 1 67# ,+pees% This
payment is to be applied to the discharge of the debt of which 1 had
demanded payment%
A&&li#$tio! of &$1"e!t, /here 'e0t to 0e 'i%#h$r2e' i% !ot i!'i#$te'9 -here the
debtor has omitted to intimate and there are no other circ+mstances indicating to
which debt the payment is to be applied! the creditor may apply it at his discretion
to any lawf+l debt act+ally d+e and payable to him from the debtor! whether its
reco*ery is or is not barred by the law in force for the time being as to the limitation of
s+its%
A&&li#$tio! of &$1"e!t /here !either &$rt1 $&&ro&ri$te%9 -here neither party
ma'es 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 s+its% If the debts are of e3+al standing! the payment shall be
applied in discharge of each proportionally%
Contracts Which Need Not be Performed
Effe#t of !o.$tio!, re%#i%%io! $!' $lter$tio! of #o!tr$#t9 If the parties to a contract
agree to s+bstit+te a new contract for it! or to rescind or alter it! the original contract
need not be performed%
'llustrations
(a) A owes money to 1 +nder a contract% It is agreed between A! 1 and
that 1 shall thenceforth accept as his debtor! instead of A% The old debt
of A to 1 is at an end! and a new debt from to 1 has been contracted%
(b) A owes 1 18!888 ,+pees% A enters into an arrangement with 1! and
gi*es 1 a mortgage of his ;A2s< estate for 6!888 ,+pees! in place of the
debt of 18!888 ,+pees% This is a new contract and exting+ishes the old%
(c) A owes 1 1!888 ,+pees +nder a contract% 1 owes 1!888 ,+pees% 1
orders A to credit with 1!888 ,+pees in his boo's! b+t does not
assent to the arrangement% 1 still owes 1!888 ,+pees! and no new
contract has been entered into%
Pro"i%ee "$1 'i%&e!%e /ith or re"it &erfor"$!#e of &ro"i%e9 /*ery promisee
may dispense with or remit! wholly or in part! the performance of the promise made
to him or may extend the time for s+ch performance! or may accept instead of it any
satisfaction which he thin's fit%
'llustrations
(a) A promises to paint a pict+re for 1% 1 afterwards forbids him to do so% A is
no longer bo+nd to perform the promise%
(b) A owes 1 6!888 ,+pees% A pays to 1! and 1 accepts! in satisfaction
of the whole debt! $!888 ,+pees paid at the time and place at which
the 6!888 ,+pees were payable% The whole debt is discharged%
(c) A owes 1 6!888 ,+pees% pays to 1 1!888 ,+pees! and 1 accepts
them! in satisfaction of his claim on A% This payment is a discharge of the
whole claim%
(d) A owes 1! +nder a contract! a s+m of money! the amo+nt of which has not
been ascertained% A! witho+t ascertaining the amo+nt! gi*es to 1! and
1! in satisfaction thereof! accepts! the s+m of $!888 ,+pees% This is a
discharge of the whole debt! whate*er may be its amo+nt%
(e) A owes 1 $!888 ,+pees and is also indebted to other creditors% A
ma'es an arrangement with his creditors! incl+ding 1! to pay them a
composition of eight annas in the ,+pees +pon their respecti*e
demands% &ayment to be of 1!888 ,+pees is a discharge of 12s demand%
Co!%e<)e!#e% of re%#i%%io! of .oi'$0le #o!tr$#t9 -hen a person at whose option a
contract is *oidable rescinds it! the other party thereto need not perform any promise
therein contained in which he is promisor% The party rescinding a *oidable contract
shall! if he ha*e recei*ed any benefit there+nder from another party to s+ch contract!
restore s+ch benefit! so far as may be! to the person from whom it was recei*ed%
O0li2$tio! of &er%o! /ho h$% re#ei.e' $'.$!t$2e )!'er .oi' $2ree"e!t or
#o!tr$#t th$t 0e#o"e% .oi'9 -hen an agreement is disco*ered to be *oid! or when
a contact becomes *oid! any person who has recei*ed any ad*antage +nder s+ch
agreement or contract is bo+nd to restore it! or to ma'e compensation for it to the
person from whom he recei*ed it%
'llustrations
(a) A pays 1 1!888 ,+pees in consideration of 12s promising to marry !
A2s da+ghter% is dead at the time of promise% The agreement is *oid! b+t
1 m+st repay A the 1!888 ,+pees%
(b) A contracts with 1 to deli*er to him $68 ma+nds of rice before the first of
>ay% A deli*ers 158 ma+nds only before that day! and none after% 1
retains the 158 ma+nds after the first of >ay% ?e is bo+nd to pay A for
them%
(c) A! a singer! contracts with 1! the manager of a theatre! to sing at his
theatre for two nights in e*ery wee' d+ring the next two months! and 1
engages to pay her a h+ndred ,+pees for each night2s performance% Dn
the sixth night! A wilf+lly absents herself from the theatre! and 1! in
conse3+ence! rescinds the contract% 1 m+st pay A for the fi*e nights
on which she had s+ng%
(d) A contracts to sing for 1 at a concert for 1!888 ,+pees which are
paid in ad*ance% A is too ill to sing% A is not bo+nd to ma'e compensation
to 1 for the loss of the profits which 1 wo+ld ha*e made if A had been
able to sing! b+t m+st ref+nd to 1 the 1!888 ,+pees paid in ad*ance%
Mo'e of #o"")!i#$ti!2 or re.o:i!2 re%#i%%io! of .oi'$0le #o!tr$#t9 The
rescission of a *oidable contract may be comm+nicated or re*o'ed in the same
manner! and s+b4ect to the same r+les! as apply to the comm+nication or re*ocation of
a proposal%
Effe#t of !e2le#t of &ro"i%ee to $ffor' &ro"i%or re$%o!$0le f$#ilitie% for
&erfor"$!#e9 If any promisee neglects or ref+ses to afford the promisor
reasonable facilities for the performance of his promise! the promisor is exc+sed by
s+ch neglect or ref+sal as to any non-performance ca+sed thereby%
'llustration
A contracts with 1 to repair 12s ho+se%
1 neglects or ref+ses to point o+t to A the places in which his ho+se re3+ires
repair%
A is exc+sed for the non-performance of the contract if it is ca+sed by s+ch
neglect or ref+sal%
CHAPTER -
O* CERTAIN RELATIONS RESEM3LIN4 THOSE CREATE, 3Y
CONTRACT
2G9 Cl$i" for !e#e%%$rie% %)&&lie' to &er%o! i!#$&$0le of #o!tr$#ti!2 or o!
hi% $##o)!t9 If a person! incapable of entering into a contract! or any one whom he
is legally bo+nd to s+pport! is s+pplied by another person with necessaries s+ited
to his condition in life! the person who has f+rnished s+ch s+pplies is entitled to be
reimb+rsed from the property of s+ch incapable person%
'llustration
(a) A s+pplies 1! a l+natic! with necessaries s+itable to his condition in life%
A is entitled to be reimb+rsed from 12s property%
(b) A s+pplies the wife and children of 1! a l+natic! with necessaries s+itable
to their condition in life% A is entitled to be reimb+rsed from 12s property%
Rei"0)r%e"e!t of &er%o! &$1i!2 "o!e1 ')e 01 $!other i! &$1"e!t of /hi#h
he i% i!tere%te'9 A person who is interested in the payment of money which
another is bo+nd by law to pay! and who therefore pays it! is entitled to be reimb+rsed
by the other%
'llustration
1 holds land in
1 8
[ (ind!] on a lease granted by A! the Camindar% The re*en+e
payable by A to the Ho*ernment being in arrear! his lands is ad*ertised for sale by
the Ho*ernment% Inder the re*en+e law! the conse3+ence of s+ch sale will be the
ann+lment of 12s lease% 1! to pre*ent the sale and the conse3+ent ann+lment of his
own lease! pays to the Ho*ernment the s+m d+e from A% A is bo+nd to ma'e good
to 1 the amo+nt so paid%
10
Subs. by the .eder! "#s $%e,isi'n nd 1ec!rti'n() Ordinnce) 1981 $27 '& 1981() s. 3 2
nd
Sch.) &'r *8st
+9istn/ #hich #s subs. by A.O.) 1961) Art.2
O0li2$tio! of &er%o! e!;o1i!2 0e!efit of !o!( 2r$t)ito)% $#t9 -here a person
lawf+lly does anything for another person! or deli*ers anything to him! not intending
to do so grat+ito+sly! and s+ch other person en4oys the benefit thereof! the latter is
bo+nd to ma'e compensation to the former in respect of! or to restore! the thing so
done or deli*ered%
'llustrations
(a) A! a tradesman! lea*es goods at 12s ho+se by mista'e% 1 treats the goods
as his own% ?e is bo+nd to pay A for them%
(b) A sa*es 12s property from fire% A is not entitled to compensation from 1! if
the circ+mstances show that he intended to act grat+ito+sly%
Re%&o!%i0ilit1 of fi!'er of 2oo'%9 A person who finds goods belonging to another
and ta'es them into his c+stody! is s+b4ect to the same responsibility as a bailee%
Li$0ilit1 of &er%o! to /ho" "o!e1 i% &$i' or thi!2 'eli.ere' 01 "i%t$:e or )!'er
#oer#io!9 A person to whom money has been paid or any thing deli*ered by mista'e or
+nder coercion! m+st repay or ret+rn it%
'llustrations
(a) A and 1 4ointly owe 188 ,+pees to % A alone pays the amo+nt to ! and
1! not 'nowing this fact! pays 188 ,+pees o*er again to % is bo+nd to
repay the amo+nt to 1%
(b) A railway company ref+ses to deli*er +p certain goods to the consignee!
except +pon the payment of an illegal charge for carriage% The
consignee pays the s+m charged in order to obtain the goods% ?e is
entitled to reco*er so m+ch of the charge as was illegally excessi*e%
CHAPTER -I
O* THE CONSEA+ENCES O* 3REACH O* CONTRACT
279 Co"&e!%$tio! for lo%% or '$"$2e #$)%e' 01 0re$#h of #o!tr$#t9 -hen a
contract has been bro'en! the party who s+ffers by s+ch breach is entitled to recei*e!
from the party who has bro'en the contract! compensation for any loss or damage
ca+sed to him thereby! which nat+rally arose in the +s+al co+rse of things from s+ch
breach! or which the parties 'new! when they made the contract! to be li'ely to
res+lt from the breach of it%
(+ch compensation is not to be gi*en for any remote and indirect loss or
damage s+stained by reason of the breach%
Co"&e!%$tio! for f$il)re to 'i%#h$r2e o0li2$tio! re%e"0li!2 tho%e #re$te' 01
#o!tr$#t9 -hen an obligation resembling those created by contract has been
inc+rred and has not been discharged! any person in4+red by the fail+re to discharge it
is entitled to recei*e the same compensation from the party in defa+lt! as if s+ch
person had contracted to discharge it and had bro'en his contract%
E&l$!$tio! 0 In estimating the loss or damage arising from a breach of contract!
the means which existed of remedying the incon*enience ca+sed by the non-
performance of the contract m+st be ta'en into acco+nt%
'llustrations
(a) A contracts to sell and deli*er 68 ma+nds of saltpetre to 1! at a
certain price to be paid on deli*ery% A brea's his promise% 1 is entitled
to recei*e from A! by way of compensation! the s+m! if any! by which the
contract price falls short of the price for which 1 might ha*e obtained 68
ma+nds of saltpetre of li'e 3+ality at the time when the saltpetre o+ght
to ha*e been deli*ered%
(b) A hires 12s ship to go to halna! and there ta'e on board! on the first
of Gan+ary! a cargo which A is to pro*ide and to bring it to
hittagong! the freight to be paid when earned% 12s ship does not go
to halna! b+t A has opport+nities of proc+ring s+itable con*eyance for
the cargo +pon terms as ad*antageo+s as those on which he had
chartered the ship% A a*ails himself of those opport+nities! b+t is p+t to
tro+ble and expense in doing so% A is entitled to recei*e compensation
from 1 in respect of s+ch tro+ble and expense%
(c) A contracts to b+y of 1! at a stated price! 68 ma+nds of rice! no time
being fixed for deli*ery% A afterwards informs 1 that he will not accept
the rice if tendered to him% 1 is entitled to recei*e from A! by way
of compensation! the amo+nt! if any! by which the contract price exceeds
that which 1 can obtain for the rice at the time when A informs 1 that he
will not accept it%
(d) A contracts to b+y 12s ship for 78!888 ,+pees! b+t brea's his promise% A
m+st pay to 1! by way of compensation! the excess! if any! of the contract
price o*er the price which 1 can obtain for the ship at the time of the
breach of the promise%
(e) A! the owner of a boat! contracts with 1 to ta'e a cargo of 4+te to
>ymensingh! for sale at that place! starting on a specified day% The
boat owing to some a*oidable ca+se! does not start at the time
appointed! where by the arri*al of the cargo at >ymensingh is delayed
beyond the time when it wo+ld ha*e arri*ed if the boat had sailed
according to the contract% After that date! and before the arri*al of the
cargo! the price of 4+te falls% The meas+re of the compensation payable to
1 by A is the difference between the price which 1 co+ld ha*e obtained
for the cargo at >ymensingh at the time when it wo+ld ha*e arri*ed if
forwarded in d+e co+rse! and its mar'et price at the time when it
act+ally arri*ed%
(f) A contracts to repair 12s ho+se in a certain manner! and recei*es
payment in ad*ance% A repairs the ho+se! b+t not according to contract% 1
is entitled to reco*er from A the cost of ma'ing the repairs conform
to the contract%
(g) A contracts to let his ship to 1 for a year! from the first of Gan+ary! for a
certain price% =reights rise! and! on the first of Gan+ary! the hire
obtainable for the ship is higher than the contract price% A brea's his
promise% ?e m+st pay to 1! by way of compensation! a s+m e3+al to
the difference between the contract price and the price for which 1 co+ld
hire a similar ship for a year on and from the first of Gan+ary%
(h) A contracts to s+pply 1 with a certain 3+antity of iron at a fixed price!
being a higher price than that for which A co+ld proc+re and deli*er the
iron% 1 wrongf+lly ref+ses to recei*e the iron% 1 m+st pay to A! by way of
compensation! the difference between the contract price of the iron and
the s+m for which A co+ld ha*e obtained and deli*ered it%
(i) A deli*ers to 1! a common carrier! a machine! to be con*eyed!
witho+t delay! to A2s mill informing 1 that his mill is stopped for want of the
machine% 1 +nreasonably delays the deli*ery of the machine! and A! in
conse3+ence! losses a profitable contract with the Ho*ernment% A is
entitled to recei*e from 1! by way of compensation! the a*erage amo+nt
of profit which wo+ld ha*e been made by the wor'ing of the mill d+ring
the time that deli*ery of it was delayed! b+t not the loss s+stained
thro+gh the loss of the Ho*ernment contract%
(j) A! ha*ing contracted with 1 to s+pply 1 with 1!888 tons of iron at 188
,+pees a ton! to be deli*ered at a stated time! contracts with for the
p+rchase of 1!888 tons of iron at "8 ,+pees a ton! telling that he does
so for the p+rpose of performing his contract with 1% fails to perform
his contract with A! who cannot proc+re other iron! and 1! in
conse3+ence! rescinds the contract% m+st pay to A $8!888 ,+pees!
being the profit which A wo+ld ha*e made by the performance of his
contract with 1%
(k) A contracts with 1 to ma'e and deli*er to 1! by a fixed day! for a specified
price! a certain piece of machinery% A does not deli*er the piece of
machinery at the time specified! and! in conse3+ence of this! 1 is
obliged to proc+re another at a higher price than that which he was to
ha*e paid to A! and is pre*ented from performing a contract which 1
had made with a third person at the time of his contract with A ;b+t which
had not been then comm+nicated to A<! and is compelled to ma'e
compensation for breach of that contract% A m+st pay to 1! by way of
compensation! the difference between the contract price of the piece of
machinery and the s+m paid by 1 for another! b+t not the s+m paid by 1
to the third person by way of compensation%
(l) A! a b+ilder! contracts to erect and finish a ho+se by the first of Gan+ary!
in order that 1 may gi*e possession of it at that time to ! to whom
1 has contracted to let it% A is informed of the contract between 1 and
% A b+ilds the ho+se so badly that! before the first of Gan+ary! if falls
down and has to be reb+ilt by 1! who! in conse3+ence! losses the
rent which he was to ha*e recei*ed from ! and is obliged to ma'e
compensation to for the breach of his contract% A m+st ma'e
compensation to 1 for the cost of reb+ilding the ho+se! for the rent lost!
and for the compensation made to %
(m) A sells certain merchandise to 1! warranting it to be of a partic+lar 3+ality!
and 1! in reliance +pon this warranty! sells it to with a similar
warranty% The goods pro*e to be not according to the warranty! and 1
becomes liable to pay a s+m of money by way of compensation% 1 is
entitled to be reimb+rsed this s+m by A%
(n) A contracts to pay a s+m of money to 1 on a day specified% A does not
pay the money on that day; 1! in conse3+ence of not recei*ing the
money on that day! is +nable to pay his debts! and is totally r+ined% A is
not liable to ma'e good to 1 anything except the principal s+m he
contracted to pay! together with interest +p to the day of payment%
(o) A contracts to deli*er 68 ma+nds of saltpetre to 1 on the first of Gan+ary!
at a certain price% 1 afterwards! before the first of Gan+ary! contracts to
sell the saltpetre to at a price higher than the mar'et price of the first of
Gan+ary% A brea's his promise% In estimating the compensation payable
by A to 1! the mar'et price of the first of Gan+ary! and not the profit
which wo+ld ha*e arisen to 1 from the sale to ! is to be ta'en into
acco+nt%
(p) A contracts to sell and deli*er 688 bales of cotton to 1 on a fixed day!
A :nows nothing of 12s mode of cond+cting his b+siness% A brea's his
promise! and 1! ha*ing no cotton! is obliged to close his mill% A is not
responsible to 1 for the loss ca+sed to 1 by the closing of the mill%
(q) A contracts to sell and deli*er to 1! on the first of Gan+ary! certain cloth
which 1 intends to man+fact+re into caps of a partic+lar 'ind! for which
there is no demand! except at that season% The cloth is not deli*ered
till after the appointed time! and too late to be +sed that year in ma'ing
caps% 1 is entitled to recei*e from A! by way of compensation! the
difference between the contract price of the cloth and its mar'et price at
the time of deli*ery! b+t not the profits which he expected to obtain by
ma'ing caps! nor the expenses which he has been p+t to in
mar'ing preparation for the man+fact+re%
(r) A! a ship-owner! contracts with 1 to con*ey him from hittagong to
(ydney in A2s ship! sailing on the first of Gan+ary! and 1 pays to A! by
way of deposit! one-half of his passage-money% The ship does not sail
on the first of Gan+ary! and 1! after being! in conse3+ence! detained in
hittagong for some time! and thereby p+t to some expense! proceeds to
(ydney in another *essel! and! in conse3+ence! arri*ing too late in
(ydney! loses a s+m of money% A is liable to repay to 1 his deposit! with
interest! and the expense to which he is p+t by his detention in
hittagong! and the excess! if any! of the passage- money paid for the
second ship o*er that agreed +pon for the first! b+t not the s+m of money
which 1 lost by arri*ing in (ydney too late%
11
[Co"&e!%$tio! for 0re$#h of #o!tr$#t /here &e!$lt1 %ti&)l$te' for9 -hen a
contract has been bro'en! if a s+m is named in the contract as the amo+nt to be paid
in case of s+ch breach! or if the contract contains any other stip+lation by way of
penalty! the party complaining of the breach is entitled! whether or not act+al damage
or loss is pro*ed to ha*e been ca+sed thereby! to recei*e from the party who has
bro'en the contract reasonable compensation not exceeding the amo+nt so named or!
as the case may be! the penalty stip+lated for%
E&l$!$tio! 0 A stip+lation for increased interest from the date of defa+lt may be
stip+lation by way of penalty%]
E#e&tio!90-hen any person enters into any bail-bond! recogniCance or other
instr+ment of the same nat+re! or! +nder the pro*isions of any law! or +nder the
orders of the
1 $
[ =eder al Ho*ernment]! or of any
15
[&ro*incial Ho*ernment] gi*es
any bond for the performance of any p+blic d+ty or act in which the p+blic are
interested! he shall be liable! +pon breach of the condition of any s+ch instr+ment! to
pay the whole s+m mentioned therein%
E&l$!$tio! -A person who enters into a contract with Ho*ernment does not
necessarily thereby +nderta'e any p+blic d+ty! or promise to do an act in which the
p+blic are interested%
'llustrations
(a) A contracts with 1 to pay 1 ,+pees 1!888! if he fails to pay 1 ,+pees
688 on a gi*en day% A fails pay 1 ,+pees 688 on that day% 1 is entitled to
reco*er from A s+ch compensation! not exceeding ,+pees 1!888! as
the o+rt considers reasonable%
(b) A contracts with 1 that! if A practices as a s+rgeon within hittagong! he
will pay 1 ,+pees 6!888% A practices as a s+rgeon in hittagong% 1 is
entitled to s+ch compensation! not exceeding ,+pees 6!888! as the
o+rt considers reasonable%
(c) A gi*es a recogniCance binding him in a penalty of ,+pees 688 to
appear in co+rt on a certain day% ?e forfeits his recogniCance% ?e is
liable to pay the whole penalty%
(d) A gi*es 1 a bond for the repayment of ,+pees 1!888 with interest at 1$
per cent% at the end of six months! with a stip+lation that in case of
defa+lt! interest shall be payable at the rate of #6 per cent% from the
date of defa+lt% This is a stip+lation by way of penalty! and 1 is only
entitled to reco*er from A s+ch compensation as the o+rt considers
reasonable%
(e) A! who owes money to 1! a money-lender! +nderta'es to repay him by
11
Subs. by s) 4 '& the 0ndin C'ntrct Act Amdt. Act) 1899 $6 '& 1899() &'r the &irst -r '& s. 74.
12
Subs. by ..A.O.) 1975) Art. 2 nd 3b!e) &'r *Centr! :',ernment/ #hich hd been subs. by A.O.) 1937) &'r *:. '&
0./
13
Subs. by A.O.) 1937 &'r *".:./
deli*ering to him 18 ma+nds of grain on a certain date! and stip+lates
that! in the e*ent of his not deli*ering the stip+lated amo+nt by the
stip+lated date! he shall be liable to deli*er $8 ma+nds% This is a
stip+lation by way of penalty! and 1 is only entitled to reasonable
compensation in case of breach%
(f) A +nderta'es to repay 1 a loan of ,+pees 1!888 by fi*e e3+al monthly
instalments with a stip+lation that! in defa+lt of payment of any
installment! the whole shall become d+e% This stip+lation is not by way of
penalty! and the contract may be enforced according to its terms%
(g) A borrows ,+pees 188 from 1 and gi*es him a bond for ,+pees $88
payable by fi*e yearly instalments of ,+pees 98! with a stip+lation that! in
defa+lt of payment of any installment! the whole shall become d+e% This
is a stip+lation by way of penalty%
P$rt1 ri2htf)ll1 re%#i!'i!2 #o!tr$#t e!title' to #o"&e!%$tio!9 A person who rightly
rescinds a contract is entitled to compensation for any damage which he has
s+stained thro+gh the non-f+lfilment of the contract%
'llustration
A! a singer! contract with 1! the manager of a theatre! to sing at his theatre for two
nights in e*ery wee' d+ring the next two months! and 1 engages to pay her 188
,+pees for each night2s performance% Dn the sixth night! A wilf+lly absents herself
from the theatre! and 1! in conse3+ence! rescinds the contract% 1 is entitled to claim
compensation for the damage which he has s+stained thro+gh the non-f+lfilment of
the contract%
CHAPTER -II SALE O* 4OO,S
289 IRe&e$le'J [,epealed by the (ale of Hoods Act! 1A58 ;Act )o% III of 1A58<!
CHAPTER -III
O* IN,EMNITY AN, 4+ARANTEE
289 6Co!tr$#t of i!'e"!it16 'efi!e'9 A contract by which one party promises to
sa*e the other from loss ca+sed to him by the cond+ct of the promisor himself! or
by the cond+ct of any other person! is called a .contract of indemnity.%
'llustration
A contracts to indemnify 1 against the conse3+ences of any proceedings which may
ta'e against 1 in respect of a certain s+m of $88 ,+pees% This is a contract of
indemnity%
Ri2ht% of i!'e"!it1( hol'er /he! %)e'9 The promisee in a contract of indemnity!
acting within the scope of his a+thority! is entitled to reco*er from the promisor-
(1) all damages which he may be compelled to pay in any s+it in respect of
any matter to which the promise to indemnify applies;
(2) all costs which he may be compelled to pay in any s+ch s+it if! in bringing
or defending it! he did not contra*ene the orders of the promisor! and acted as it wo+ld
ha*e been pr+dent for him to act in the absence of any contract of indemnity! or if the
promisor a+thoriCed him to bring or defend the s+it;
(3) all s+ms which he may ha*e paid +nder the terms of any compromise of
any s+ch s+it! if the compromise was not contrary to the orders of the promisor! and
was one which it wo+ld ha*e been pr+dent for the promisee to ma'e in the absence of
any contract of indemnity! or if the promisor a+thoriCed him to compromise the s+it%
6Co!tr$#t of 2)$r$!tee6, 6%)ret16, 6&ri!#i&$l 'e0tor6 $!' 6#re'itor6 A .contract of
g+arantee. is a contract to perform the promise! or discharge the liability! of a third
person in case of his defa+lt% The person who gi*es the g+arantee is called the
.s+rety.: the person in respect of whose defa+lt the g+arantee is gi*en is called the
.principal debtor.! and the person to whom the g+arantee is gi*en is called the
.creditor.% A g+arantee may be either oral or written%
Co!%i'er$tio! for 2)$r$!tee9 Anything done! or any promise made! for the benefit
of the principal debtor may be a s+fficient consideration to the s+rety for gi*ing the
g+arantee%
'llustrations
(a) 1 re3+ests A to sell and deli*er to him goods on credit% A agrees to do
so! pro*ided will g+arantee the payment of the price of the goods%
promises to g+arantee the payment in consideration of A2s promise to
deli*er the goods% This is a s+fficient consideration for 2s promise%
(b) A sells and deli*ers goods to 1% afterwards re3+ests A to forbear to s+e
1 for the debt for a year! and promises that if he does so! will pay for
them in defa+lts of payment by 1% A agrees to forbear as re3+ested% This
is a s+fficient consideration for 2s promise%
(c) A sells and deli*ers goods to 1% afterwards! witho+t consideration!
agrees to pay for them in defa+lt of 1% The agreement is *oid%
S)ret1B% li$0ilit19 The liability of the s+rety is co-extensi*e with that of the principal
debtor! +nless it is otherwise pro*ided by the contract%
'llustration
A g+arantees to 1 the payment of a bill of exchange by ! the acceptor% The bill is
dishono+red by % A is liable not only for the amo+nt of the bill b+t also for any interest
and charges which may ha*e become d+e on it%
6Co!ti!)i!2 2)$r$!tee69 A g+arantee which extends to a series of transactions is
called a .contin+ing g+arantee.%
'llustrations
(a) A! in consideration that 1 will employ in collecting the rent of 12s
Camindari! promises 1 to be responsible! to the amo+nt of 6!888 ,+pees!
for the d+e collection and payment by of those rents% This is a
contin+ing g+arantee%
(b) A g+arantees payment to 1! a tea-dealer! to the amo+nt of J 188! for
any tea he may from time to time s+pply to % 1 s+pplies with tea to
abo*e the *al+e of J 188! and pay 1 for it% Afterwards 1 s+pplies
with tea to the *al+e of J $88% fails to pay% The g+arantee gi*en by
A was a contin+ing g+arantee! and he is accordingly liable to 1 to the
extent of J 188%
(c) A g+arantees payment to 1 of the price of fi*e sac's of flo+r to be
deli*ered by 1 to and to be paid for in a month% 1 deli*ers fi*e sac's to
% pays for them% Afterwards 1 deli*ers fo+r sac's to ! which does
not pay for% The g+arantee gi*en by A was not a contin+ing
g+arantee! and accordingly he is not liable for the price of the fo+r sac's%
Re.o#$tio! of #o!ti!)i!2 2)$r$!tee9 A contin+ing g+arantee may at any time be
re*o'ed by the s+rety! as to f+t+re transactions! by notice to the creditor%
'llustrations
(a) A! in consideration of 12s disco+nting! at A2s re3+est! bills of exchange for
! g+arantees to 1! for twel*e months! the d+e payment of all s+ch bills to
the extent of 6!888 ,+pees% 1 disco+nts bills for to the extent of
$!888 ,+pees% Afterwards! at the end of three months! A re*o'es the
g+arantee% This re*ocation discharges A from all liability to 1 for any
s+bse3+ent disco+nt% 1+t A is liable to 1 for the $!888 ,+pees! on defa+lt
of %
(b) A g+arantees to 1! to the extent of 18!888 ,+pees! that shall pay all the
bills that 1 shall draw +pon him% 1 draws +pon % accepts the bill% A
gi*es notice of re*ocation% dishono+rs the bill at mat+rity% A is liable
+pon his g+arantee%
Re.o#$tio! of #o!ti!)i!2 2)$r$!tee 01 %)ret1B% 'e$th9 The death of the s+rety
operates! in the absence of any contract to the contrary! as a re*ocation of a
contin+ing g+arantee! so far as regards f+t+re transactions%
Li$0ilit1 of t/o &er%o!% &ri"$ril1 li$0le, !ot $ffe#te' 01 $rr$!2e"e!t 0et/ee!
the" th$t o!e %h$ll 0e %)ret1 o! otherC% 'ef$)lt9 -here two persons contract with
a third person to +nderta'e a certain liability! and also contract with each other that
one of them shall be liable only on the defa+lt of the other! the third person not being a
party to s+ch contract! the liability of each of s+ch two persons to the third person
+nder the first contract is not affected by the existence of the second contract!
altho+gh s+ch third person may ha*e been aware of its existence%
'llustration
A and 1 ma'e a 4oint and se*eral promissory note to % A ma'es it! in fact! as s+rety
for 1! and 'nows this at the time when the note is made% The fact that A! to the
'nowledge of ! made the note as s+rety for 1! is no answers to a s+it by against
A +pon the note%
,i%#h$r2e of %)ret1 01 .$ri$!#e i! ter"% of #o!tr$#t9 Any *ariance! made witho+t
the s+rety2s consents! in the terms of the contract between the principal debtor and
the creditor! discharges the s+rety as to transactions s+bse3+ent to the *ariance%
'llustrations
(a) A becomes s+rety to for 12s cond+ct as a manager in 2s ban'%
Afterwards! 1 and contract! witho+t A2s consent! that 12s salary shall
be raised! and that he shall become liable for one-fo+rth of the losses
on o*erdrafts% 1 allows a c+stomer to o*erdraw! and the ban' loses a
s+m of money% A is discharged from his s+retyship by the *ariance made
witho+t his consent! and is not liable to ma'e good this loss%
(b) A g+arantees against the miscond+ct of 1 in an office to which 1
is appointed by ! and of which the d+ties are defined by an Act of the
Begislat+re% 1y a s+bse3+ent Act! the nat+re of the office is materially
altered% Afterwards! 1 miscond+cts himself% A is discharged by the
change from f+t+re liability +nder his g+arantee! tho+gh the miscond+ct
of 1 is in respect of a d+ty not affected by the later Act%
(c) agrees to appoint 1 as his cler' to sell goods at a yearly salary! +pon
A2s becoming s+rety to for 12s d+ly acco+nting for moneys recei*ed by
him as s+ch cler'% Afterwards! witho+t A2s 'nowledge or consent! and 1
agree that 1 sho+ld be paid by a commission on the goods sold by
him and not by a fixed salary% A is not liable for s+bse3+ent miscond+ct
of 1%
(d) A gi*es to a contin+ing g+arantee to the extent of 5!888 ,+pees for
any oil s+pplied by to 1 on credit% Afterwards 1 becomes
embarrassed! and ! witho+t the 'nowledge of A! 1 and contract that
shall contin+e to s+pply 1 with oil for ready money! and that the payments
shall be applied to the then existing debts between 1 and % A is not liable
on his g+arantee for any goods s+pplied after this new arrangement%
(e) contracts to lend 1 6!888 ,+pees on the 1st >arch% A g+arantees
repayment% pays the 6!888 ,+pees to 1 on the 1st Gan+ary% A is
discharged from his liability! as the contract has been *aried inasm+ch
as might s+e 1 for the money before the 1st of >arch%
,i%#h$r2e of %)ret1 01 rele$%e or 'i%#h$r2e of &ri!#i&$l 'e0tor9 The s+rety is
discharged by any contract between the creditor and the principal debtor! by which the
principal debtor is released! or by any act or omission of the creditor! the legal
conse3+ence of which is the discharge of the principal debtor%
'llustrations
(a) A gi*es a g+arantee to for goods to be s+pplied by to 1%
s+pplies goods to 1! and afterwards 1 becomes embarrassed and
contracts with his creditors ;incl+ding < to assign to them his property in
consideration of their releasing him from their demands% ?ere 1 is
released from his debt by the contract with ! and A is discharged from
his s+retyship%
(b) A contracts with 1 to grow a crop of indigo on A2s land and to deli*er it to
1 at a fixed rate! and g+arantees A2s performance of this contracts% 1
di*erts a stream of water which is necessary for irrigation of A2s land
and thereby pre*ents him from raising the indigo% is no longer liable
on his g+arantee%
(c) A contracts with 1 for a fixed price to b+ild a ho+se for 1 within a
stip+lated time! 1 s+pplying the necessary timber% g+arantees A2s
performance of the contract% 1 omits to s+pply the timber% is
discharged from his s+retyship%
,i%#h$r2e of %)ret1 /he! #re'itor #o"&o)!'% /ith, 2i.e% ti"e to, or $2ree% !ot
to %)e, &ri!#i&$l 'e0tor9 A contract between the creditor and the principal debtor! by
which the creditor ma'es a composition with! or promises to gi*e time to! or not to s+e!
the principal debtor discharges the s+rety! +nless the s+rety assents to s+ch
contract%
S)ret1 !ot 'i%#h$r2e' /he! $2ree"e!t "$'e /ith thir' &er%o! to 2i.e ti"e to
&ri!#i&$l 'e0tor9 -here a contract to gi*e time to the principal debtor is made by
the creditor with a third person! and not with the principal debtor! the s+rety is not
discharged%
'llustrations
! the holder of an o*erd+e bill of exchange drawn by A as s+rety for 1! and accepted
by 1! contracts with > to gi*e time to 1% A is not discharged%
?@9 Cre'itorB% for0e$r$!#e to %)e 'oe% !ot 'i%#h$r2e %)ret19 >ere forbearance
on the part of the creditor to s+e the principal debtor or to enforce any other remedy
against him does not! in the absence of any pro*ision in the g+arantee to the
contrary! discharge the s+rety%
'llustrations
1 owes to a debt g+aranteed by A% The debt becomes payable% does not s+e 1
for year after the debt has become payable% A is not discharged from his s+retyship%
Rele$%e of o!e #o(%)ret1 'oe% !ot 'i%#h$r2e other%9 -here there are co-s+reties! a
release by the creditor of one of them does not discharge the others; neither does it
free the s+rety so released from his responsibility to the other s+reties%
,i%#h$r2e of %)ret1 01 #re'itorB% $#t or o"i%%io! i"&$iri!2 %)ret1B% e.e!t)$l
re"e'19 If the creditor does any act which is inconsistent with the rights of the
s+rety! or omits to do any act which his d+ty to the s+rety re3+ires him to do! and the
e*ent+al remedy of the s+rety himself against the principal debtor is thereby impaired!
the s+rety is discharged%
'llustrations
(a) 1 contracts to b+ild a ship for for a gi*en s+m! to be paid by instalments
as the wor' reaches certain stages% A becomes s+rety to for 12s d+e
performance of the contract% ! witho+t the 'nowledge of A! prepays to 1
the last two instalments% A is discharged by this prepayment%
(b) lends money to 1 on the sec+rity of a 4oint and se*eral promissory note
made in 2s fa*o+r by 1! and by A as s+rety for 1! together with a bill of
sale of 12s f+rnit+re! which gi*es power to to sell the f+rnit+re! and
apply the proceeds in discharge of the note% (+bse3+ently! sells the
f+rnit+re! b+t! owing to his miscond+ct and wilf+l negligence! only a small
price is realiCed% A is discharged from liability on the note%
(c) A p+ts > as apprentice to 1! and gi*es a g+arantee to 1 for >2s fidelity%
1 promises on his part that he will! at least once a month! see > ma'e
+p the cash% 1 omits to see this done as promised! and > embeCCles% A is
not liable to 1 on his g+arantee%
Ri2ht% of %)ret1 o! &$1"e!t or &erfor"$!#e9 -here a g+aranteed debt has
become d+e! or defa+lt of the principal debtor to perform a g+aranteed d+ty has
ta'en place! the s+rety! +pon payment or performance of all that he is liable for! is
in*ested with all the rights which the creditor had against the principal debtor%
S)ret1B% ri2ht to 0e!efit of #re'itorB% %e#)ritie%9 A s+rety is entitled to the benefit of
e*ery sec+rity which the creditor has against the principal debtor at the time when
the contract of s+retyship is entered into! whether the s+rety 'nows of the existence
of s+ch sec+rity or not; and! if the creditor loses! or! witho+t the consent of the s+rety!
parts with s+ch sec+rity! the s+rety is discharged to the extent of the *al+e of the
sec+rity%
'llustrations
(a) ad*ances to 1! his tenant! $!888 ,+pees on the g+arantee of A% has
also! a f+rther sec+rity for the $!888 ,+pees by a mortgage of 12s
f+rnit+re% cancels the mortgage% 1 becomes insol*ent! and s+es
A on his g+arantee% A is discharged from liability to the amo+nt of
the *al+e of the f+rnit+re%
(b) ! a creditor! whose ad*ance to 1 is sec+red by a decree! recei*es
also a g+arantee for that ad*ance from A% afterwards ta'es 12s goods
in exec+tion +nder the decree! and then! witho+t the 'nowledge of A!
withdraws the exec+tion% A is discharged%
(c) A! as s+rety for 1! ma'es a bond 4ointly with 1 to ! to sec+re a loan
from to 1% Afterwards! obtains from 1 a f+rther sec+rity for the
same debt% (+bse3+ently! gi*es +p the f+rther sec+rity% A is not
discharged%
4)$r$!tee o0t$i!e' 01 "i%re&re%e!t$tio! i!.$li'9 Any g+arantee which has been
obtained by means of misrepresentation made by the creditor! or with his 'nowledge
and assent! concerning a material part of the transaction! is in*alid%
4)$r$!tee o0t$i!e' 01 #o!#e$l"e!t i!.$li'9 Any g+arantee which the creditor has
obtained by means of 'eeping silence as to material circ+mstances is in*alid%
'llustrations
(a) A engages 1 as cler' to collect money for him% 1 fails to acco+nt for
some of his receipts! and A in conse3+ence calls +pon him to f+rnish
sec+rity his d+ly acco+nting% gi*es his g+arantee for 12s d+ly
acco+nting% A does not ac3+aint with 12s pre*io+s cond+ct% 1
afterwards ma'es defa+lt% The g+arantee is in*alid%
(b) A g+arantees to payment for iron to be s+pplied by him to 1 to the
amo+nt of $!888 tons% 1 and ha*e pri*ately agreed that 1 sho+ld pay
fi*e ,+pees per ton beyond the mar'et price! s+ch excess to be applied in
li3+idation of an old debt% This agreement is concealed from A% A is not
liable as a s+rety%
4)$r$!tee o! #o!tr$#t th$t #re'itor %h$ll !ot $#t o! it )!til #o(%)ret1 ;oi!%9 -here
a person gi*es a g+arantee +pon a contract that the creditor shall not act +pon it +ntil
another person has 4oined in it as co-s+rety! the g+arantee is not *alid if that other
person does not 4oin%
I"&lie' &ro"i%e to i!'e"!if1 %)ret19 In e*ery contract of g+arantee there is an
implied promise by the principal debtor to indemnify the s+rety; and the s+rety is
entitled to reco*er from the principal debtor whate*er s+m he has rightf+lly paid
+nder the g+arantee! b+t no s+ms which he has paid wrongf+lly%
'llustrations
(a) 1 is indebted to ! and A is s+rety for the debt% demands payment
from A! and on his ref+sal s+es him for the amo+nt% A defends the
s+it! ha*ing reasonable gro+nds for doing so! b+t is compelled to pay
the amo+nt of the debt with costs% ?e can reco*er from 1 the amo+nt
paid by him for costs! as well as the principal debt%
(b) lends 1 a s+m of money! and A! at the re3+est of 1! accepts a bill
of exchange drawn by 1 +pon A to sec+re the amo+nt% ! the holder of
the bill! demands payment of it from A! and! on A2s ref+sal to pay! s+es
him +pon the bill% A! not ha*ing reasonable gro+nds for so doing! defends
the s+it! and has to pay the amo+nt of the bill and costs% ?e can reco*er
from 1 the amo+nt of the bill! b+t not the s+m paid for costs! as there
was no real gro+nd for defending the action%
(c) A g+arantees to ! to the extent of $!888 ,+pees! payment for rice
to be s+pplied by to 1% s+pplies to 1 rice to a less amo+nt than
$!888 ,+pees! b+t obtains from A payment of the s+m of $!888
,+pees in respect of the rice s+pplied% A cannot reco*er from 1 more
than the price of the rice act+ally s+pplied%
Co(%)retie% li$0le to #o!tri0)te e<)$ll19 -here two or more persons are co-
s+reties for the same debt or d+ty! either 4ointly or se*erally! and whether +nder the
same or different contracts! and whether with or witho+t the 'nowledge of each other!
the co-s+reties! in the absence of any contract to the contrary! are liable! as between
themsel*es! to pay each an e3+al share of the whole debt! or of that part of it
which remains +npaid by the principal debtor%
'llustrations
(a) A! 1 and are s+reties to F for the s+m of 5!888 ,+pees lent to /% /
ma'es defa+lt in payment% A! 1 and are liable! as between themsel*es!
to pay 1!888 ,+pees each%
(b) A! 1 and are s+reties to F for the s+m of 1!888 ,+pees lent to /! and
there is a contract between A! 1 and that A is to be responsible to
the extent of one-3+arter! 1 to the extent of one-3+arter and to the
extent of one-half% / ma'es defa+lt in payment% As between the
s+reties! A is liable to pay $68 ,+pees! 1 $68 ,+pees and 688
,+pees%
Li$0ilit1 of #o(%)retie% 0o)!' i! 'iffere!t %)"%9 o-s+reties who are bo+nd in
different s+ms are liable to pay e3+ally as far as the limits of their respecti*e obligations
permit%
'llustrations
$( A! 1 and ! as s+reties for F! enter into three se*eral bonds! each in a
different penalty! namely! A in the penalty of 18!888 ,+pees! 1 in that of
$8!888 ,+pees! in that of 98!888 ,+pees! conditioned for F2s d+ly
acco+nting to /% F ma'es defa+lt to the extent of 58!888 ,+pees%
A! 1 and are each liable to pay 18!888 ,+pees%
$b( A! 1 and ! as s+reties for F! enter into three se*eral bonds! each in a
different penalty! namely! A in the penalty of 18!888 ,+pees! 1 in that of
$8!888 ,+pees! in that of 98!888 ,+pees! conditioned for F2s d+ly
acco+nting to /%F ma'es defa+lt to the extent of 98!888 ,+pees% A is
liable to pay 18!888 ,+pees! and 1 and 16!888 ,+pees each%
$c( A! 1 and ! as s+reties for F! enter into three se*eral bonds! each in a
different penalty! namely! A in the penalty of 18!888 ,+pees! 1 in that of
$8!888 ,+pees! in that of 98!888 ,+pees! conditioned for F2s d+ly
acco+nting to /% F ma'es defa+lt to the extent of #8!888 ,+pees% A! 1
and ha*e to pay each the f+ll penalty of his bond%
CHAPTER IX O* 3AILMENT
?19 63$il"e!t6, 60$ilor6, $!' 60$ilee6 'efi!e'9 A .bailment. is the deli*ery of
goods by one person to another for some p+rpose! +pon a contract that they shall!
when the p+rpose is accomplished! be ret+rned or otherwise disposed of according to
the directions of the person deli*ering them% The person deli*ering the goods is called
the .bailor.% The person to whom they are deli*ered is called the .bailee.%
E&l$!$tio! 0 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 s+ch goods altho+gh they may not ha*e been deli*ered by way of bailment%
,eli.er1 to 0$ilee ho/ "$'e9 The deli*ery to the bailee may be made by doing
anything which has the effect of p+tting the goods in the possession of the intended
bailee or of any person a+thoriCed to hold them on his behalf%
3$ilorC% ')t1 to 'i%#lo%e f$)lt% i! 2oo'% 0$ile'9 The bailor is bo+nd to disclose to
the bailee fa+lts in the goods bailed! of which the bailor is aware! and which
materially interfere with the +se of them! or expose the bailee to extraordinary ris's;
and if he does not ma'e s+ch disclos+re! he is responsible for damage arising to
the bailee directly from s+ch fa+lts%
If the goods are bailed for hire! the bailor is responsible for s+ch damage!
whether he was or was not aware of the existence of s+ch fa+lts in the goods bailed%
'llustrations
$( A lends a horse! which he 'nows to be *icio+s! to 1% ?e does not
disclose the fact that the horse is *icio+s% The horse r+ns away% 1 is
thrown and in4+red% A is responsible to 1 for damage s+stained%
$b( A hires a carriage of 1% The carriage is +nsafe! tho+gh 1 is not aware of
it! and A is in4+red% 1 is responsible to A for the in4+ry%
C$re to 0e t$:e! 01 0$ilee9 In all cases of bailment the bailee is bo+nd to ta'e as
m+ch care of the goods bailed to him as a man of ordinary pr+dence wo+ld! +nder
similar circ+mstances! ta'e of his own goods of the same b+l'! 3+ality and *al+e as
the goods bailed%
3$ilee /he! !ot li$0le for lo%%, et#, of thi!2 0$ile'9 The bailee! in the absence of
any special contract! is not responsible for the loss! destr+ction or deterioration of the
thing bailed! if he has ta'en the amo+nt of care of it described in section 161%
Ter"i!$tio! of 0$il"e!t 01 0$ileeB% $#t i!#o!%i%te!t /ith #o!'itio!%9 A contract of
bailment is a*oidable at the option of the bailor! if the bailee does any act with regard to
the goods bailed! inconsistent with the conditions of the bailment%
'llustration
A lets to 1! for hire! a horse for his own riding% 1 dri*es the horse in his carriage%
This is! at the option of A! a termination of the bailment%
Li$0ilit1 of 0$ilee "$:i!2 )!$)thori%e' )%e of 2oo'% 0$ile'9 If the bailee ma'es
any +se of the goods bailed! which is not according to the conditions of the bailment! he
is liable to ma'e compensation to the bailor for any damage arising to the goods from
or d+ring s+ch +se of them%
'llustrations
(a) A lends a horse to 1 for his own riding only% 1 allows ! a member of his
family! to ride the horse% rides with care! b+t the horse accidentally falls
and is in4+red% 1 is liable to ma'e compensation to A for the in4+ry
done to the horse%
(b) A hires a horse in Fha'a] from 1 expressly to march to Tangail% A rides
with d+e care! b+t marches to )arayangan4] instead% The horse
accidentally falls and is in4+red% A is liable to ma'e compensation to 1 for
the in4+ry to the horse%
Effe#t of "it)re, /ith 0$ilorB% #o!%e!t, of hi% 2oo'% /ith 0$ileeB%9 If the bailee!
with the consent of the bailor! mixes the goods of the bailor with his own goods! the
bailor and the bailee shall ha*e an interest! in proportion to their respecti*e shares! in
the mixt+re th+s prod+ced%
Effe#t of "it)re, /itho)t 0$ilorB% #o!%e!t, /he! the 2oo'% #$! 0e %e&$r$te'9
If the bailee! witho+t the consent of the bailor! mixes the goods of the bailor with
his own goods! and the goods can be separated or di*ided! the property in the
goods remains in the parties respecti*ely; b+t the bailee is bo+nd to bear the
expense of separation or di*ision! and any damage arising from the mixt+re%
'llustration
A bails 188 bales of cotton mar'ed with a partic+lar mar' to 1% 1! witho+t A2s consent!
mixes the 188 bales with other bales of his own! bearing a different mar'% A is
entitled to ha*e his 188 bales ret+rned! and 1 is bo+nd to bear all the expense
inc+rred in the separation of the bales! and any other incidental damage%
Effe#t of "it)re, /itho)t 0$ilorB% #o!%e!t, /he! the 2oo'% #$!!ot 0e %e&$r$te'9
If the bailee! witho+t the consent of the bailor! mixes the goods of the bailor with his
own goods! in s+ch a manner that it is impossible to separate the goods bailed from
the other goods and deli*er them bac'! the bailor is entitled to be compensated by
the bailee for the loss of the goods%
'llustration
A bails a barrel of ape flo+r worth ,+pees 96 to 1% 1! witho+t A2s consent! mixes
the flo+r with co+ntry flo+r of his own! worth only ,+pees $6 a barrel% 1 m+st
compensate A for the loss of his flo+r%
Re&$1"e!t 01 0$ilor of !e#e%%$r1 e&e!%e%9 -here! by the conditions of the
bailment! the goods are to be 'ept or to be carried! or to ha*e wor' done +pon them
by the bailee for the bailor! and the bailee is to recei*e no rem+neration! the bailor shall
repay to the bailee the necessary expenses inc+rred by him for the p+rpose of the
bailment%
Re%tor$tio! of 2oo'% le!t 2r$t)ito)%l19 The lender of a thing for +se may at any time
re3+ire its ret+rn! if the loan was grat+ito+s! e*en tho+gh he lent it for a specified time
or p+rpose% 1+t! if! on the faith of s+ch loan made for a specified time or p+rpose! the
borrower has acted in s+ch a manner that the ret+rn of the thing lent before the time
agreed +pon wo+ld ca+se him loss exceeding the benefit act+ally deri*ed by him from
the loan! the lender m+st! if he compels the ret+rn! indemnify the borrower for the
amo+nt in which the loss so occasioned exceeds the benefit so deri*ed%
Ret)r! of 2oo'% 0$ile' o! e&ir$tio! of ti"e or $##o"&li%h"e!t of &)r&o%e9 It is
the d+ty of the bailee to ret+rn! or deli*er according to the bailor2s direction! the
goods bailed! witho+t demand! as soon as the time for which they were bailed has
expired! or the p+rpose for which they were bailed has accomplished%
3$ileeB% re%&o!%i0ilit1 /he! 2oo'% $re !ot ')l1 ret)r!e'9 If! by the defa+lt of the
bailee! the goods are not ret+rned! deli*ered or tendered at the proper time! he is
responsible to the bailor for any loss! destr+ction or deterioration of the goods from that
time%
Ter"i!$tio! of 2r$t)ito)% 0$il"e!t 01 'e$th9 A grat+ito+s bailment is terminated by
the death either of the bailor or of the bailee%
3$ilor e!title' to i!#re$%e or &rofit fro" 2oo'% 0$ile'9 In the absence of any
contract to the contrary! the bailee is bo+nd to deli*er to the bailor! or according to
his directions! any increase or profit which may ha*e accr+ed from the goods bailed%
'llustration
A lea*es a cow in the c+stody of 1 to be ta'en care of% The cow has a calf% 1 is
bo+nd to deli*er the calf as well as the cow to A%
3$ilorB% re%&o!%i0ilit1 to 0$ilee9 The bailor is responsible to the bailee for any loss
which the bailee may s+stain by reason that the bailor was not entitled to ma'e the
bailment! or to recei*e bac' the goods or to gi*e directions! respecting them%
3$il"e!t 01 %e.er$l ;oi!t o/!er%9 If se*eral 4oint owners of goods bail them! the
bailee may deli*er them bac' to! or according to the directions of! one 4oint owner
witho+t the consent of all! in the absence of any agreement to the contrary%
3$ilee !ot re%&o!%i0le o! re('eli.er1 to 0$ilor /itho)t title9 If the bailor has no
title to the goods! and the bailee! in good faith! deli*ers them bac' to! or according
to the directions of! the bailor! the bailee is not responsible to the owner in respect of
s+ch deli*ery%
Ri2ht of thir' &er%o! #l$i"i!2 2oo'% 0$ile'9 If the person! other than the bailor!
claims goods bailed! he may apply to the o+rt to stop the deli*ery of the goods to the
bailor! and to decide the title to the goods%
Ri2ht of fi!'er of 2oo'%D "$1 %)e for %&e#ifi# re/$r' offere'9 The finder of goods
has no right to s+e the owner for compensation for tro+ble and expense *ol+ntarily
inc+rred by him to preser*e the goods and to find o+t the owner; b+t he may retain the
goods against the owner +ntil he recei*es s+ch compensation; and! where the
owner has offered a specific reward for the ret+rn of goods lost! the finder may s+e
for s+ch reward! and may retain the goods +ntil he recei*es it%
5he! fi!'er of thi!2 #o""o!l1 o! %$le "$1 %ell it9 -hen a thing which is
commonly the s+b4ect of sale is lost! if the owner cannot with reasonable diligence be
fo+nd! or if he ref+ses! +pon demand! to pay the lawf+l charges of the finder! the finder
may sell it0
(1) when the thing is in danger of perishing or of losing the greater part of its
*al+e! or!
(2) when the lawf+l charges of the finder! in respect of the thing fo+nd!
amo+nt to two-thirds of its *al+e%
3$ileeB% &$rti#)l$r lie!9 -here the bailee has! in accordance with the p+rpose of
the bailment! rendered any ser*ice in*ol*ing the exercise of labo+r or s'ill in respect of
the goods bailed! he has! in the absence of a contract to the contrary! a right to
retain s+ch goods +ntil he recei*es d+e rem+neration for the ser*ices he has rendered
in respect of them%
'llustrations
(a) A deli*ers a ro+gh diamond to 1! A 4eweller! to be c+t and polished! which
is accordingly done% 1 is entitled to retain the stone till he is paid for
the ser*ices he has rendered%
(b) A gi*es cloth to 1! a tailor! to ma'e into a coat% 1 promises A to deli*er
the coat as soon as it is finished! and to gi*e a three months2 credit for the
price% 1 is not entitled to retain the coat +ntil he is paid%
4e!er$l lie! of 0$!:er%, f$#tor%, /h$rfi!2er%, $ttor!e1% $!' &oli#1( 0ro:er%9
1an'ers! factors! wharfingers! ad*ocate of the (+preme o+rt] and policy-bro'ers
may! in the absence of a contract to the contrary! retain! as a sec+rity for a general
balance of acco+nt! any goods bailed to them; b+t no other persons ha*e a right to
retain! as a sec+rity for s+ch balance! goods bailed to them! +nless there is an
express contract to that effect%
Bailments Of Pledges
6Ple'2e6, 6P$/!or6 $!' 6P$/!ee6 'efi!e'9 The bailment of goods as sec+rity 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.%
P$/!eeB% ri2ht of ret$i!er9 The pawnee may retain the goods pledged! not only for
payment of the debt or the performance of the promise! b+t for the interest of the debt!
and all necessary expenses inc+rred by him in respect of the possession or for the
preser*ation of the goods pledged%
P$/!ee !ot to ret$i! for 'e0t or &ro"i%e other th$! th$t for /hi#h 2oo'%
&le'2e' Pre%)"&tio! i! #$%e of %)0%e<)e!t $'.$!#e%9 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; b+t s+ch
contract! in the absence of anything to the contrary! shall be pres+med in regard to
s+bse3+ent ad*ances made by the pawnee%
P$/!eeB% ri2ht $% to etr$or'i!$r1 e&e!%e% i!#)rre'9 The pawnee is entitled to
recei*e from the pawnor extraordinary expenses inc+rred by him for the preser*ation of
the goods pledged%
P$/!eeC% ri2ht /here &$/!or "$:e% 'ef$)lt9 If the pawnor ma'es defa+lt in
payment of the debt! or performance! at the stip+lated time of the promise! in respect
of which the goods were pledged! the pawnee may bring a s+it against the pawnor
+pon the debt or promise! and retain the goods pledged as a collateral sec+rity; or he
may sell the thing pledged! on gi*ing the pawnor reasonable notice of the sale%
If the proceeds of s+ch sale are less than the amo+nt d+e in respect of the debt
or promise! the pawnor is still liable to pay the balance% If the proceeds of the sale are
greater than the amo+nt so d+e! the pawnee shall pay o*er the s+rpl+s to the pawnor%
,ef$)lti!2 &$/!orB% ri2ht to re'ee"9 If a time is stip+lated for the payment of the
debt! or performance of the promise! for which the pledge is made! and the pawnor
ma'es defa+lt in payment of the debt or performance of the promise at the stip+lated
time! he may redeem the goods pledged at any s+bse3+ent time before the act+al sale
of them; b+t he m+st! in that case! pay! in addition! any expenses which ha*e arisen
from his defa+lt%
Ple'2e 01 "er#$!tile $2e!t9 -here a mercantile agent is! with the consent of the
owner! in possession of goods or the doc+ments of title to goods! any pledge made
by him! when acting in the ordinary co+rse of b+siness of a mercantile agent! shall
be as *alid as if he were expressly a+thoriCed by the owner of the goods to ma'e
the same; pro*ided that the pawnee acts in good faith and has not at the time of the
pledge notice that the pawnor has not a+thority to pledge%
E&l$!$tio! 0 In this section! the expressions Kmercantile agent2 and
Kdoc+ments of title2 shall ha*e the meanings assigned to them in the (al e of Hoods
Ac t! 1A58%
Ple'2e 01 &er%o! i! &o%%e%%io! )!'er .oi'$0le #o!tr$#t9 -hen the pawnor has
obtained possession of the goods pledged by him +nder a contract *oidable +nder
section 1A or section 1AA! b+t the contract has not been rescinded at the time of the
pledge! the pawnee ac3+ires a good title to the goods! pro*ided he acts in good faith
and witho+t notice of the pawnor2s defect of title%]
Ple'2e /here &$/!or h$% o!l1 $ li"ite' i!tere%t9 -here a person pledges goods in
which he has only a limited interest! the pledge is *alid to the extent of that interest%
uit by bailor or bailee against wrong!doer
S)it 01 0$ilor or 0$ilee $2$i!%t /ro!2('oer9 If a third person wrongf+lly depri*es the
bailee of the +se or possession of the goods bailed! or does them any in4+ry! the baliee
is entitled to +se s+ch remedies as the owner might ha*e +sed in the li'e case if no
bailment had been made; and either the bailor or the bailee may bring a s+it against a
third person for s+ch depri*ation or in4+ry%
A&&ortio!"e!t of relief or #o"&e!%$tio! o0t$i!e' 01 %)#h %)it%9 -hate*er is
obtained by way of relief or compensation in any s+ch s+it shall! as between the
bailor and the bailee! be dealt with according to their respecti*e interests%
CHAPTER X A4ENCY
Appointment and Authority of Agents
6A2e!t6 $!' 6&ri!#i&$l6 'efi!e'9 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
s+ch act is done! or who is so represented! is called the .principal.%
5ho "$1 e"&lo1 $2e!t9 Any person who is of the age of ma4ority according to the
law to which he is s+b4ect! and who is of so+nd mind! may employ an agent%
5ho "$1 0e $! $2e!t9 As between the principal and third persons any person may
become an agent! b+t no person who is not of the age of ma4ority and of so+nd mind
can become an agent! so as to be responsible to his principal according to the
pro*isions in that behalf herein contained%
Co!%i'er$tio! !ot !e#e%%$r19 )o consideration is necessary to create an agency%
A2e!tB% $)thorit1 "$1 0e e&re%%e' or i"&lie'9 The a+thority of an agent may be
expressed or implied%
,efi!itio!% of e&re%% $!' i"&lie' $)thorit19 An a+thority is said to be express
when it is gi*en by words spo'en or written% An a+thority is said to be implied when it
is to be inferred from the circ+mstances of the case; and things spo'en or written! or
the ordinary co+rse of dealing! may be acco+nted circ+mstances of the case%
'llustrations
A owns a shop in >ymensingh! li*ing himself in Fha'a! and *isiting the shop
occasionally% The shop is managed by 1! and he is in the habit of ordering goods
from in the name of A for the p+rposes of the shop! and of paying for them o+t of A2s
f+nds with A2s 'nowledge% 1 has an implied a+thority from A to order goods from in
the name of A for the p+rposes of the shop%
Ete!t of $2e!tB% $)thorit19 An agent ha*ing an a+thority to do an act has
a+thority to do e*ery lawf+l thing which is necessary in order to do s+ch act%
An agent ha*ing an a+thority to carry on a b+siness has a+thority to do e*ery
lawf+l thing necessary for the p+rpose! or +s+ally done in the co+rse of
cond+cting s+ch b+siness%
'llustrations
(a) A is employed by 1! residing in Bondon! to reco*er at hittagong a debt
d+e to 1% A may adopt any legal process necessary for the p+rpose of
reco*ering the debt! and may gi*e a *alid discharge for the same%
(b) A constit+tes 1 his agent to carry on his b+siness of a ship-b+ilder% 1
may p+rchase timber and other materials! and hire wor'men! for the
p+rposes of carrying on the b+siness%
A2e!tB% $)thorit1 i! $! e"er2e!#19 An agent has a+thority! in an emergency! to
do all s+ch acts for the p+rpose of protecting his principal from loss as wo+ld be done
by a person of ordinary pr+dence! in his own case! +nder similar circ+mstances%
'llustrations
(a) An agent for sale may ha*e goods repaired if it be necessary%
(b) A consigns pro*isions to 1 at hittagong! with directions to send them
immediately to at Fha'a% 1 may sell the pro*isions at hittagong! if
they will not bear the 4o+rney to Fha'a witho+t spoiling%
ub!Agents
5he! $2e!t #$!!ot 'ele2$te9 An agent cannot lawf+lly employ another to perform
acts which he has expressly or impliedly +nderta'en to perform personally! +nless by
the ordinary c+stom of trade a s+b-agent may! or! from the nat+re of the agency! a s+b-
agent m+st! be employed%
6S)0($2e!t6 'efi!e'9 A .s+b-agent. is a person employed by! and acting +nder the
control of! the original agent in the b+siness of the agency%
Re&re%e!t$tio! of &ri!#i&$l 01 %)0($2e!t &ro&erl1 $&&oi!te'9 -here a s+b-agent is
properly appointed! the principal is! so far as regards third persons! represented by
the s+b-agent! and is bo+nd by and responsible for his acts! as if he were an
agent originally appointed by the principal%
A2e!tB% re%&o!%i0ilit1 for %)0($2e!t9 The agent is responsible to the principal for the
acts of the s+b-agent%
S)0($2e!tB% re%&o!%i0ilit19 The s+b-agent is responsible for his acts to the agent! b+t
not to the principal! except in case of fra+d or wilf+l wrong%
A2e!tB% re%&o!%i0ilit1 for %)0($2e!t $&&oi!te' /itho)t $)thorit19 -here an agent!
witho+t ha*ing a+thority to do so! has appointed a person to act as a s+b-agent!
the agent stands towards s+ch person in the relation of a principal to an agent! and
is responsible for his acts both to the principal and to third persons; the principal is
not represented by or responsible for the acts of the person so employed! nor is that
person responsible to the principal%
Rel$tio! 0et/ee! &ri!#i&$l $!' &er%o! ')l1 $&&oi!te' 01 $2e!t to $#t i!
0)%i!e%% of $2e!#19 -here an agent! holding an express or implied a+thority to name
another person to act for the principal in the b+siness of the agency! has named
another person accordingly! s+ch person is not a s+b-agent! b+t an agent of the
principal for s+ch part of the b+siness of the agency as is entr+sted to him%
(a) A directs 1! his solicitor! to sell his estate by a+ction! and to employ
an a+ctioneer for the p+rpose% 1 names ! an a+ctioneer! to cond+ct the
sale% is not a s+b-agent! b+t is A2s agent for the cond+ct of the sale%
(b) A a+thoriCes 1! a merchant in hittagong! to reco*er the moneys d+e to
A from L o% 1 instr+cts F! a solicitor! to ta'e legal proceedings
against L o% for the reco*ery of the money% F is not a s+b-agent! b+t is
solicitor for A%
A2e!tB% ')t1 i! !$"i!2 %)#h &er%o!9 In selecting s+ch agent for his principal! an
agent is bo+nd to exercise the same amo+nt of discretion as a man of ordinary
pr+dence wo+ld 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%
'llustrations
(a) A instr+cts 1! a merchant! to b+y a ship for him% 1 employs a ship
s+r*eyor of good rep+tation to choose a ship for A% The s+r*eyor
ma'es the choice negligently and the ship t+rns o+t to be +nseaworthy
and is lost% 1 is not! b+t the s+r*eyor is! responsible to A%
(b) A consigns goods to 1! a merchant! for sale% 1 in d+e co+rse! employs
an a+ctioneer in good credit to sell the goods of A! and allows the
a+ctioneer to recei*e the proceeds of the sale% The a+ctioneer afterwards
becomes insol*ent witho+t ha*ing acco+nted for the proceeds% 1 is not
responsible to A for the proceeds%
Ratification
Ri2ht of &er%o! $% to $#t% 'o!e for hi" /itho)t hi% $)thorit1 Effe#t of
r$tifi#$tio!9 -here acts are done by one person on behalf of another! b+t witho+t his
'nowledge or a+thority! he may elect to ratify or to disown s+ch acts% If he ratify
them! the same effects will follow as if they had been performed by his a+thority%
R$tifi#$tio! "$1 0e e&re%%e' or i"&lie'9 ,atification may be expressed or may be
implied in the cond+ct of the person on whose behalf the acts are done%
'llustrations
(a) A! witho+t a+thority! b+ys goods for 1% Afterwards 1 sells them to on
his own acco+nt; 12s cond+ct implies a ratification of the p+rchase made
for him by A%
(b) A! witho+t 12s a+thority! lends 12s money to % Afterwards 1 accepts
interest on the money from % 12s cond+ct implies a ratification of the loan%
E!o/le'2e re<)i%ite for .$li' r$tifi#$tio!9 )o *alid ratification can be made by a
person whose 'nowledge of the facts of the case is materially defecti*e%
Effe#t of r$tif1i!2 )!$)thori=e' $#t for"i!2 &$rt of $ tr$!%$#tio!9 A person ratifying
any +na+thoriCed act done on his behalf ratifies the whole of the transaction of which
s+ch act formed a part%
R$tifi#$tio! of )!$)thori=e' $#t #$!!ot i!;)re thir' &er%o!9 An act done by one
person on behalf of another! witho+t s+ch other person2s a+thority! which! if done
with a+thority! wo+ld ha*e the effect of s+b4ecting a third person to damages! or of
terminating any right or interest of a third person! cannot! by ratification! be made to
ha*e s+ch effect%
'llustrations
(a) A! not being a+thoriCed thereto by 1! demands! on behalf of 1! the
deli*ery of a chattle! the property of 1! from ! who is in possession of it%
This demand cannot be ratified by 1! so as to ma'e liable for
damages for his ref+sal to deli*er%
(b) A holds a lease from 1! terminable on three months2 notice% ! an
+na+thoriCed person! gi*es notice of termination to A% The notice cannot
be ratified by 1! so as to be binding on A%
Re"ocation of Authority
Ter"i!$tio! of $2e!#19 An agency is terminated by the principal re*o'ing his
a+thority; or by the agent reno+ncing the b+siness of the agency; or by the
b+siness of the agency being completed; or by either the principal or agent dying or
becoming of +nso+nd mind; or by the principal being ad4+dicated an insol*ent +nder
the pro*isions of any Act for the time being in force for the relief of insol*ent debtors%
Ter"i!$tio! of $2e!#1 /here $2e!t h$% $! i!tere%t i! %)0;e#t("$tter9 -here the
agent has himself an interest in the property which forms the s+b4ect-matter of the
agency! the agency cannot! in the absence of an express contract! be terminated to
the pre4+dice of s+ch interest%
illustrations
(a) A gi*es a+thority to 1 to sell A2s land! and to pay himself! o+t of the
proceeds! the debts d+e to him from A% A cannot re*o'e this a+thority nor
can it be terminated by his insanity or death%
(b) A consigns 1!888 bales of cotton to 1! who has made ad*ances to him
on s+ch cotton! and desires 1 to sell the cotton! and to repay himself!
o+t of the price! the amo+nt of his own ad*ances% A cannot re*o'e this
a+thority! nor is it terminated by his insanity or death%
5he! &ri!#i&$l "$1 re.o:e $2e!tB% $)thorit19 The principal may! sa*e as is
otherwise pro*ided by the last preceding section! re*o'e the a+thority gi*en to his
agent at any time before the a+thority has been exercised so as to bind the principal%
Re.o#$tio! /here $)thorit1 h$% 0ee! &$rtl1 eer#i%e'9 The principal cannot
re*o'e the a+thority gi*en to his agent after the a+thority has been partly exercised
so far as regards s+ch acts and obligations as arise from acts already done in the
agency%
'llustrations
(a) A a+thoriCes 1 to b+y 1!888 bales of cotton on acco+nt of A! and to pay
for it o+t of A2s money remaining in 12s hands% 1 b+ys 1!888 bales of
cotton in his own name! so as to ma'e himself personally liable for the
price% A cannot re*o'e 12s a+thority so far as regards payment for the
cotton%
(b) A a+thoriCes 1 to b+y 1!888 bales of cotton on acco+nt of A! and to pay
for it o+t of A2s money remaining in 12s hands% 1 b+ys 1!888 bales of
cotton in A2s name and so as not to render himself personally liable for
the price% A can re*o'e 12s a+thority to pay for the cotton%
Co"&e!%$tio! for re.o#$tio! 01 &ri!#i&$l or re!)!#i$tio! 01 $2e!t9 -here there is
an express or implied contract that the agency sho+ld be contin+ed for any period of
time! the principal m+st ma'e compensation to the agent! or the agent to the
principal! as the case may be! for any pre*io+s re*ocation or ren+nciation of the
agency witho+t s+fficient ca+se%
Noti#e of re.o#$tio! or re!)!#i$tio!9 ,easonable notice m+st be gi*en of s+ch
re*ocation or ren+nciation; otherwise the damage thereby res+lting to the principal or
the agent! as the case may be! m+st be made good to the one by the other%
Re.o#$tio! $!' re!)!#i$tio! "$1 0e e&re%%e' or i"&lie'9 ,e*ocation and
ren+nciation may be expressed or may be implied in the cond+ct of the principal or
agent respecti*ely%
'llustrations
A empowers 1 to let A2s ho+se% Afterwards A lets it himself% This is an implied
re*ocation of 12s a+thority%
5he! ter"i!$tio! of $2e!tB% $)thorit1 t$:e% effe#t $% to $2e!t, $!' $% to thir'
&er%o!%9 The termination of the a+thority of an agent does not! so far as regards the
agent! ta'e effect before it becomes 'nown to him! or! so far as regards third
persons! before it becomes 'nown to them%
'llustrations
(a) A directs 1 to sell goods for him! and agrees to gi*e 1 fi*e per
cent% commission on the price fetched by the goods% A afterwards! by
letter! re*o'es 12s a+thority% 1! after the letter is sent! b+t before he
recei*es it! sells the goods for 188 ,+pees% The sale is binding on A! and
1 is entitled to fi*e ,+pees as his commission%
(b) A! at
1 9
[M+etta]! by letter! directs 1 to sell from him some cotton lying
in a wareho+se in
16
[:arachi]! and afterwards! by letter! re*o'es his
a+thority to sell! and directs 1 to send the cotton to Fha'a% 1! after
recei*ing the second letter! enters into a contract with ! who 'nows of
the first letter! b+t not of the second! for the sale to him of the cotton%
pays 1 the money! with which 1 absconds% 2s payment is good as
against A%
(c) A directs 1! his agent! to pay certain money to % A dies! and F ta'es
o+t probate to his will% 1! after A2s death! b+t before hearing of it! pays the
money to % The payment is good as against F! the exec+tor%
A2e!tB% ')t1 o! ter"i!$tio! of $2e!#1 01 &ri!#i&$lB% 'e$th or i!%$!it19 -hen an
agency is terminated by the principal dying or becoming of +nso+nd mind! the agent
is bo+nd to ta'e! on behalf of the representati*es of his late principal! all reasonable
steps for the protection and preser*ation of the interests entr+sted to him%
Ter"i!$tio! of %)0($2e!tB% $)thorit19 The termination of the a+thority of an agent
ca+ses the termination ;s+b4ect to the r+les herein contained regarding the termination
of an agent2s a+thority< of the a+thority of all s+b-agents appointed by him%
Agent#s $uty to Principal
A2e!tB% ')t1 i! #o!')#ti!2 &ri!#i&$lB% 0)%i!e%%9 An agent is bo+nd to cond+ct the
b+siness of his principal according to the directions gi*en by the principal! or! in the
absence of any s+ch directions! according to the c+stom which pre*ails in doing
b+siness of the same 'ind at the place where the agent cond+cts s+ch b+siness% -hen
the agent acts otherwise! if any loss be s+stained! he m+st ma'e it good to his principal!
and! if any profit accr+es! he m+st acco+nt for it%
'llustrations
(a) A! an agent engaged in carrying on for 1 a b+siness! in which it is
the c+stom to in*est from time to time! at interest! the moneys which
may be in hand! omits to ma'e s+ch in*estment% A m+st ma'e good to
1 the interest +s+ally obtained by s+ch in*estments%
(b) 1! a bro'er! in whose b+siness it is not the c+stom to sell on credit!
sells goods of A on credit to ! whose credit at the time was *ery high%
! before payment! becomes insol*ent% 1 m+st ma'e good the loss to A%
S:ill $!' 'ili2e!#e re<)ire' fro" $2e!t9 An agent is bo+nd to cond+ct the b+siness
of the agency with as m+ch s'ill as is generally possessed by persons engaged in
similar b+siness! +nless the principal has notice of his want of s'ill% The agent is
14
Subs. by the .eder! "#s $%e,isi'n nd 1ec!rti'n( Ordinnce) 1981 $27 '& 1981() s. 3 nd 2
nd
Sch.) &'r *1cc/
#hich #s subs. by the Centr! "#s $Sttus %e&'rm( Ordinnce) 1960 $21 '& 1960() s. 3 nd 2
nd
sch.) &'r *;drs/
$#ith e&&ect &r'm the 14
th
Oct'ber) 1955(
15
Subs. by Ord. 21 '& 1960) s. 3 nd 2
nd
Sch.) &'r *B'mby/ $#ith e&&ect &r'm the 14
th
Oct'ber) 1955(
always bo+nd to act with reasonable diligence! and to +se s+ch s'ill as he possesses;
and to ma'e compensation to his principal in respect of the direct conse3+ences of his
own neglect! want of s'ill or miscond+ct! b+t not in respect of loss or damage
which are indirectly or remotely ca+sed by s+ch neglect! want of s'ill or
miscond+ct%
'llustrations
(a) A! a merchant in hittagong has an agent! 1! in Bondon to whom a s+m
of money is paid on A2s acco+nt! with orders to remit% 1 retains the
money for a considerable time% A! in conse3+ence of not recei*ing the
money! becomes insol*ent% 1 is liable for the money and interest from
the day on which it o+ght Nto ha*e been paid! according to the +s+al
rate! and for any f+rther direct loss--- as e%g%! by *ariation of rate of
exchange--- b+t not f+rther%
(b) A! an agent for the sale of goods! ha*ing a+thority to sell on credit! sells
to 1 on credit! witho+t ma'ing the proper and +s+al en3+iries as to the
sol*ency of 1% 1! at the time of s+ch sale! is insol*ent% A m+st ma'e
compensation to his principal in respect of any loss thereby s+stained%
(c) A! an ins+rance-bro'er employed by 1 to effect an ins+rance on a
ship! omits to see that the +s+al cla+ses are inserted in the policy%
The ship is afterwards lost% In conse3+ence of the omission of the
cla+ses nothing can be reco*ered from the +nderwriters% A is bo+nd to
ma'e good the loss to 1%
(d) A! a merchant in /ngland! directs 1! his agent at hittagong! who
accepts the agency! to send him 188 bales of cotton by a certain ship%
1! ha*ing it in his power to send the cotton! omits to do so% The ship
arri*es safely in /ngland% (oon after her arri*al the price of cotton rises%
1 is bo+nd to ma'e good to A the profit which he might ha*e made by
the 188 bales of cotton at the time the ship arri*ed! b+t not any profit
he might ha*e made by the s+bse3+ent rise%
A2e!tB% $##o)!t%9 An agent is bo+nd to render proper acco+nts to his principal on
demand%
?29 A2e!tC% ')t1 to #o"")!i#$te /ith &ri!#i&le9 It is the d+ty of agent! in cases of
diffic+lty! to +se all reasonable diligence in comm+nication with his principle! and in
see'ing to obtain his instr+ction%
Ri2ht of &ri!#i&$l /he! $2e!t 'e$l%, o! hi% o/! $##o)!t, i! 0)%i!e%% of
$2e!#1 /itho)t &ri!#i&$lB% #o!%e!t9 If an agent deals on his own acco+nt in the
b+siness of the agency! witho+t first obtaining the consent of his principal and
ac3+ainting him with all material circ+mstances which ha*e come to his own
'nowledge on the s+b4ect! the principal may rep+diate 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 ha*e been disad*antageo+s to him%
'llustrations
(a) A directs 1 to sell A2s estate% 1 b+ys the estate for himself in the name of
% A! on disco*ering that 1 has bo+ght the estate for himself! may
rep+diate the sale! if he can show that 1 has dishonestly concealed any
material fact! or that the sale has been disad*antageo+s to him%
(b) A directs 1 to sell A2s estate% 1! on loo'ing o*er the estate before selling
it! finds a mine on the estate which is +n'nown to A% 1 informs A that he
wishes to b+y the estate for himself! b+t conceals the disco*ery of the
mine% A allows 1 to b+y in ignorance of the existence of the mine% A! on
disco*ering that 1 'new of the mine at the time he bo+ght the estate!
may either rep+diate or adopt the sale at his option%
Pri!#i&$lB% ri2ht to 0e!efit 2$i!e' 01 $2e!t 'e$li!2 o! hi% o/! $##o)!t i!
0)%i!e%% of $2e!#19 If an agent! witho+t the 'nowledge of his principal! deals in the
b+siness of the agency on his own acco+nt instead of on acco+nt of his principal! the
principal is entitled to claim from the agent any benefit which may ha*e res+lted to
him from the transaction%
'llustrations
A directs 1! his agent! to b+y a certain ho+se for him% 1 tells A it cannot be bo+ght!
and b+ys the ho+se for himself% A may! on disco*ering that 1 has bo+ght the ho+se!
compel him to sell it to A at the price he ga*e for it%
A2e!tB% ri2ht of ret$i!er o)t of %)"% re#ei.e' o! &ri!#i&$lB% $##o)!t9 An agent
may retain! o+t of any s+ms recei*ed on acco+nt of the principal in the b+siness of the
agency! all moneys d+e to himself in respect of ad*ances made or expenses properly
inc+rred by him in cond+cting s+ch b+siness! and also s+ch rem+neration as may be
payable to him for acting as agent%
A2e!tB% ')t1 to &$1 %)"% re#ei.e' for &ri!#i&$l9 (+b4ect to s+ch ded+ctions! the
agent is bo+nd to pay to his principal all s+ms recei*ed on his acco+nt%
5he! $2e!tB% re")!er$tio! 0e#o"e% ')e9 In the absence of any special contract!
payment for the performance of any act is not d+e to the agent +ntil the completion of
s+ch act; b+t an agent may detain moneys recei*ed by him on acco+nt of goods sold!
altho+gh the whole of the goods consigned to him for sale may not ha*e been sold!
or altho+gh the sale may not be act+ally complete%
A2e!t !ot e!title' to re")!er$tio! for 0)%i!e%% "i%(#o!')#te'9 An agent who is
g+ilty of miscond+ct in the b+siness of the agency is not entitled to any rem+neration in
respect of that part of the b+siness which he has miscond+cted%
'llustrations
(a) A employs 1 to reco*er 1!88!888 ,+pees from ! and to lay it o+t on
good sec+rity% 1 reco*ers the 1!88!888 ,+pees and lays o+t A8!888
,+pees on good sec+rity! b+t lays o+t 18!888 ,+pees on sec+rity which
he o+ght to ha*e 'nown to be bad! whereby A loses $!888 ,+pees% 1
is entitled to rem+neration for reco*ering the 1!88!888 ,+pees and for
in*esting the A8!888 ,+pees% ?e is not entitled to any rem+neration for
in*esting the 18!888 ,+pees! and he m+st ma'e good the $!888 ,+pees
to 1%
(b) A employs 1 to reco*er 1!888 ,+pees from % Thro+gh 12s miscond+ct
the money is not reco*ered% 1 is entitled to no rem+neration for his
ser*ices! and m+st ma'e good the loss%
A2e!tB% lie! o! &ri!#i&$lB% &ro&ert19 In the absence of any contract to the
contrary! an agent is entitled to retain goods! papers and other property! whether
mo*eable or immo*eable! of the principal recei*ed by him! +ntil the amo+nt d+e to
himself for commission! disb+rsements and ser*ices in respect of the same has been
paid or acco+nted for to him%
Principal%s $uty to Agent
A2e!t to 0e i!'e"!ifie' $2$i!%t #o!%e<)e!#e% of l$/f)l $#t%9The employer of an
agent is bo+nd to indemnify him against the conse3+ences of all lawf+l acts done by
s+ch agent in exercise of the a+thority conferred +pon him%
'llustrations
(a) 1! at (ingap+r! +nder instr+ctions from A of hittagong! contracts with
to deli*er certain goods to him% A does not send the goods to 1! and
s+es 1 for breach of contract% 1 informs A of the s+it! and A a+thoriCes
him to defend the s+it% 1 defends the s+it! and is compelled to pay
damages and costs! and inc+rs expenses% A is liable to 1 for s+ch
damages! costs and expenses%
(b) 1! a bro'er at hittagong! by the orders of A! a merchant there
contracts with for the p+rchases of 18 cas's of oil for A% Afterwards
A ref+ses to recei*e the oil! and s+es 1% 1 informs A! who rep+diates
the contract altogether% 1 defends! b+t +ns+ccessf+lly! and has to pay
damages and costs and inc+rs expenses% A is liable to 1 for s+ch
damages! costs and expenses%
A2e!t to 0e i!'e"!ifie' $2$i!%t #o!%e<)e!#e% of $#t% 'o!e i! 2oo' f$ith9 -here
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 conse3+ences of that act!
tho+gh it ca+se an in4+ry to the rights of third persons%
'llustrations
(a) A! a decree-holder and entitled to exec+tion of 12s goods! re3+ires
the officer of the o+rt to seiCe certain goods! representing them to be
the goods of 1% The officer seiCes the goods! and is s+ed by ! the
tr+e owner of the goods% A is liable to indemnify the officer for the s+m
which he is compelled to pay to ! in conse3+ence of obeying A2s
directions%
(b) 1! at the re3+est of A! sells goods in the possession of A! b+t which A
had no right to dispose of% 1 does not 'now this! and hands o*er the
proceeds of the sale to A% Afterwards ! the tr+e owner of the goods!
s+es 1 and reco*ers the *al+e of the goods and costs% A is liable to
indemnify 1 for what he has been compelled to pay to and for 12s own
expenses%
No!(li$0ilit1 of e"&lo1er of $2e!t to 'o $ #ri"i!$l $#t9 -here one person employs
another to do an act which is criminal! the employer is not liable to the agent!
either +pon an express or an implied promise! to indemnify him against the
conse3+ences of that Act%
'llustrations
(a) A employs 1 to beat ! and agrees to indemnify him against all
conse3+ences of act% 1 there+pon beats ! and has to pay damages to
for so doing% A is not liable to indemnify 1 for those damages%
(b) 1! the proprietor of a newspaper! p+blishes! at A2s re3+est! liable +pon
in the paper! and A agrees to indemnify 1 against the conse3+ences
of the p+blication! and all costs and damages of any action in respect
thereof% 1 is s+ed by and has to pay damages! and also inc+rs
expenses% A is not liable to 1 +pon the indemnity%
Co"&e!%$tio! to $2e!t for i!;)r1 #$)%e' 01 &ri!#i&$lB% !e2le#t9 The principal m+st
ma'e compensation to his agent in respect of in4+ry ca+sed to s+ch agent by the
principal2s neglect or want of s'ill%
'llustration
A employs 1 as a bric'layer in b+ilding a ho+se! and p+ts +p the scaffolding himself%
The scaffolding is +ns'ilf+lly p+t +p! and 1 is in conse3+ence h+rt% A m+st ma'e
compensation to 1%
&ffect of agency on contract with third persons
E!for#e"e!t $!' #o!%e<)e!#e% of $2e!tB% #o!tr$#t%9 ontracts entered into
thro+gh an agent! and obligations arising from acts done by an agent! may be
enforced in the same manner! and will ha*e the same legal conse3+ences! as if the
contracts had been entered into and the acts done by the principal in person%
'llustrations
(a) A b+ys goods from 1! 'nowing that he is an agent for their sale! b+t not
'nowing who is the principal% 12s principal is the person entitled to
claim from A the price of the goods! and A cannot! in a s+it by the
principal! set off against that claim a debt d+e to himself from 1%
(b) A! being 12s agent with a+thority to recei*e money on his behalf!
recei*es from a s+m of money d+e to 1% is discharged of his
obligation to pay the s+m in 3+estion to 1%
Pri!#i&$l ho/ f$r 0o)!', /he! $2e!t e#ee'% $)thorit19 -hen an agent does more
than he is a+thoriCed to do! and when the part of what he does! which is within his
a+thority! can be separated from the part which is beyond his a+thority! so m+ch only
of what he does as is within his a+thority is binding as between him and his principal%
'llustrations
A! being owner of a ship and cargo! a+thoriCes 1 to proc+re an ins+rance for 9!888
,+pees on the ship% 1 proc+res a policy for 9!888 ,+pees on the ship! and another
for the li'e s+m on the cargo% A is bo+nd to pay the premi+m for the policy on the ship!
b+t not the premi+m for the policy on the cargo%
Pri!#i&$l !ot 0o)!' /he! e#e%% of $2e!tB% $)thorit1 i% !ot %e&$r$0le9 -here an
agent does more than he is a+thoriCed to do! and what does beyond the scope of his
a+thority cannot be separated from what is within it! the principal is not bo+nd to
recogniCe the transaction%
'llustrations
A a+thoriCes 1 to b+y 688 sheep for him% 1 b+ys 688 sheep and $88 lambs for one
s+m of 7!888 ,+pees% A may rep+diate the whole transaction%
Co!%e<)e!#e% of !oti#e 2i.e! to $2e!t9 Any notice gi*en to or information obtained
by the agent! pro*ided it be gi*en or obtained in the co+rse of the b+siness
transacted by him for the principal! shall! as between the principal and third parties!
ha*e the same legal conse3+ences as if it had been gi*en to or obtained by the
principal%
'llustrations
(a) A is employed by 1 to b+y from certain goods! of which is the
apparent owner! and b+ys them accordingly% In the co+rse of the treaty for
the sale! A learns that the goods really belonged to F! b+t 1 is
ignorant of that fact! 1 is not entitled to set off a debt owing to him from
against the price of the goods%
(b) A is employed by 1 to b+y from goods of which is the apparent
owner% A was! before he was so employed! a ser*ant of ! and then learnt
that goods really belonged to F! b+t 1 is ignorant of that fact% In
spite of the 'nowledge of his agent! 1 may set off against the price of
the goods a debt owing to him from %
A2e!t #$!!ot &er%o!$ll1 e!for#e, !or 0e 0o)!' 01, #o!tr$#t% o! 0eh$lf of
&ri!#i&$l9 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 bo+nd by them%
Pre%)"&tio! of #o!tr$#t to #o!tr$r19 (+ch a contract shall be pres+med to exist in
the following cases:0
(1) where the contract is made by an agent for the sale or p+rchase of
goods for a merchant resident abroad:
(2) where the agent does not disclose the name of his principal:
(3) where the principal! tho+gh disclosed! cannot be s+ed%
Ri2ht% of &$rtie% to $ #o!tr$#t "$'e 01 $2e!t !ot 'i%#lo%e'9 If an agent ma'es a
contract with a person who neither 'nows! nor has reason to s+spect! that he is an
agent! his principal may re3+ire the performance of the contract; b+t the other
contracting party has! as against the principal! the same rights as he wo+ld ha*e had
as against the agent if the agent had been principal%
If the principal discloses himself before the contract is completed! the other
contracting party may ref+se to f+lfil the contract! if he can show that! if he had 'nown
who was the principal in the contract! or if he had 'nown that the agent was not a
principal! he wo+ld not ha*e entered into the contract%
Perfor"$!#e of #o!tr$#t /ith $2e!t %)&&o%e' to 0e &ri!#i&$l9 -here one man
ma'es a contract with another! neither 'nowing nor ha*ing reasonable gro+nd to
s+spect that the other is an agent! the principal! if he re3+ires the performance of the
contract! can only obtain s+ch performance s+b4ect to the rights and obligations
s+bsisting between the agent and the other party to the contract%
'llustrations
A! who owes 688 ,+pees to 1! sells 1!888 ,+pees worth of rice to 1% A is acting as
agent for in the transaction! b+t 1 has no 'nowledge nor reasonable gro+nd of
s+spicion that s+ch is the case% cannot compel 1 to ta'e the rice witho+t allowing
him to set off A2s debt%
Ri2ht of &er%o! 'e$li!2 /ith $2e!t &er%o!$ll1 li$0le9 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%
'llustrations
A enters into a contract with 1 to sell him 188 bales of cotton! and afterwards
disco*ers that 1 was acting as agent for % A may s+e either 1 or ! or both! for the
price of the cotton%
Co!%e<)e!#e of i!')#i!2 $2e!t or &ri!#i&$l to $#t o! 0elief th$t &ri!#i&$l or
$2e!t /ill 0e hel' e#l)%i.el1 li$0le9 -hen a person who has made a contract with
an agent ind+ces the agent to act +pon the belief that the principal only will be held
liable! or ind+ces the principal to act +pon the belief that the agent only will be
held liable! he cannot afterwards hold liable the agent or principal respecti*ely%
Li$0ilit1 of &rete!'e' $2e!t9 A person +ntr+ly representing himself to be the
a+thoriCed agent of another! and thereby ind+cing a third person to deal with him as
s+ch agent! is liable! if his alleged employer does not ratify his acts! to ma'e
compensation to the other in respect of any loss or damage which he has inc+rred
by so dealing%
Per%o! f$l%el1 #o!tr$#ti!2 $% $2e!t !ot e!title' to &erfor"$!#e9 A person with
whom a contract has been entered into in the character of agent is not entitled to
re3+ire the performance of it if he was in reality acting! not as agent! b+t on his own
acco+nt%
Li$0ilit1 of &ri!#i&$l i!')#i!2 0elief th$t $2e!tB% )!$)thori=e' $#t% /ere
$)thori=e'9 -hen an agent has! witho+t a+thority! done acts or inc+rred obligations to
third persons on behalf of his principal! the principal is bo+nd by s+ch acts or
obligations if he has by his words or cond+ct ind+ced s+ch third persons to belie*e that
s+ch acts and obligations were within the scope of the agent2s a+thority%
'llustrations
(a) A consigns goods to 1 for sale! and gi*es him instr+ctions not to sell +nder
a fixed price% ! being ignorant of 12s instr+ctions! enters into a contract
with 1 to b+y the goods at a price lower than the reser*ed price% A is
bo+nd by the contract%
(b) A entr+sts 1 with negotiable instr+ments endorsed in blan'% 1 sells them
to in *iolation of pri*ate orders from A% The sale is good%
Effe#t, o! $2ree"e!t, of "i%re&re%e!t$tio! or fr$)' 01 $2e!t9 >isrepresentations
made! or fra+ds committed! by agents acting in the co+rse of their b+siness for their
principals! ha*e the same effect on agreements made by s+ch agents as if s+ch
misrepresentations or fra+ds had been made or committed by the principals; b+t
misrepresentations made! or fra+ds committed! by agents! in matters which do not fall
within their a+thority! do not affect their principals%
'llustrations
(a) A! being 12s agent for the sale of goods! ind+ces to b+y them by
a misrepresentation! which he was not a+thoriCed by 1 to ma'e% The
contract is *oidable! as between 1 and ! at the option of %
(b) A! the captain of 12s ship! signs bills of lading witho+t ha*ing recei*ed on
board the goods mentioned therein% The bills of lading are *oid as
between 1 and the pretended consignor%
CHAPTER XI O* PARTNERSHIP
??9 IRe&e$le'J [,epealed by section #5 and (ched+le 11 of the &artnership Act!
1A5$ ;Act )o% IE of 1A5$<%]