Unpaid Seller Rights

Rights of unpaid seller:
(i) Rights of unpaid seller against goods.
(ii) Rights of unpaid seller against the buyer.

(I) Right of un paid seller against the goods:
Against the goods the unpaid seller has the following. Rights.
(a) Right of lien:
Lien is the right to retain possession and refuse to deliver them to the buyer until the price due in respect of them is paid to the buyer.
Circumstances when right can be exercised:
Following are the circumstances when right of lien can be exercised.
(i) Where the goods have been sold without any stipulation.
(ii) Where the goods have been sold on credit, but the term of the credit has expired.
(iii) Where the buyer becomes insolvent, even though the period of credit may not have yet expired.
Termination of right of lien:
Under the following circumstances unpaid seller loses his right of lien.
(i) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of goods.
(ii) When the possession of goods is obtained lawfully by the buyer or his agent.
(iii) When the seller waives his right of lien on goods.
(iv) When buyer further sells the goods.
(b) Right of stoppage of goods in transit:
Unpaid seller has right to stope the goods in transit.
Conditions:
Following are the conditions
(i) The seller must be unpaid.
(ii) Goods must be in transit.
(iii) Property has passed to the buyer.
(iv) Buyer is insolvent.
Modes of stoppage:
Following are the modes of stoppage:
(i) By taking possession of the goods.
(ii) By giving notice of his claim to the carried or other bailee in whose possession the goods are
(c) Right of resale:
Unpaid seller can resale the goods:
Conditions:
(a) Goods should be of perishable nature.
(b) Right of resale should be expressed in contract.
(c) Buyer has not paid.
(d) Buyer has received the notice from seller.

(II) Rights of unpaid seller against buyer:
He has right against buyer and have following remedies.
(i) Suit for price:
Where property has passed to the buyer, and the buyer wrongfully refuses or neglect to pay for the goods, the seller may sue him for the price of the goods.
(ii) Suit for repudiation:
If buyer repudiates the contract before the date of the delivery the seller may treat the contract as subsisting and wait till the date of delivery or may tread the contract as rescinded and sue for damages for breach.
(iii) Suit for damages for non-acceptance:
If buyer refused to accept and pay for the goods the seller has right to sue for damages for non-acceptance.
(iv) Suit for interest and special damages:
Unpaid seller can recover the interest on the unpaid price. He can also sue for special damages.

unpaid seller

1. Introduction:
Unpaid seller means a person who has sold the good for a price but price has not been paid to him unpaid seller has rights against the goods and buyer.
2. Definition of unpaid seller:
According to Sec 45, the seller of goods is deemed to be an unpaid seller.
(i) When the whole of the price has not paid or tendered.
(ii) When a bill of exchange or other negotiable instrument has been received as a condition payment, and the condition on which it has been received remains unfulfilled by reason of dishonor of the instrument or other wise.

3. Features of unpaid seller:
Following are the features of unpaid seller.
(i) He must sells the goods on cash basis and must be unpaid.
(ii) He must be unpaid either wholly or partly.
(iii) If the price is paid through a bill of exchange or other negotiable instruments, the same must be dishonoured.
(iv) He must not refuse to accept the payment when tendered.

Void Agreement

Literally: Void means having no legal value and agreement means Arrangement, promise or contract made with somebody.  So void agreement means an agreement that has no legal value.

Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]

LEGAL POSITION
A void agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is void. Void agreement confers no rights on any person and creates no obligation.

Example of void agreement: An agreement made by a minor, agreement without consideration, certain agreements against public policy etc.

Agreement which become void:
An agreement, which was legal and enforceable when it was entered in to, may subsequently become void due to impossibility of performance, change of law or other reason. When it become void the agreement ceases to have legal effect.

types of void agreements::

(1) Agreements in Restraint of Marriage-
Every individual enjoys the freedom to marry and so according to section 26 of the contract act “every agreement is restraint of the marriage of any person, other than a minor, is void.” The restraint may be general or partial but the agreement is void, and therefore, an agreement agreeing not to marry at all, or a certain person or, a class of persons, or for a fixed period, is void. However, an agreement restraint of the marriage of a minor is valid under the section.

(2) Agreement in Restraint of Trade-
The constitution of India guarantees that the freedom of trade and commerce to every citizen and therefore section 27 declares “every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.” Thus no person is at livery to deprive himself of the fruit of his labor, skill or talent, by any contracts that he enters into.

(3) Agreement in restraint of legal proceedings-
Every agreement, by which any party thereto is restricted absolutely from enforcing his right under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Section 28 declares the following two kinds of agreements void:
(a)    An agreement by which a party is restrained absolutely from taking usual legal
Proceeding, in respect of any rights arising from a contract.
(b)    An agreement which limits the time within which one may enforce his contract
Rights, without to the time allowed by the limitation act.

(4) Uncertain Agreements-
“Agreements, the meaning of which is not certain, or capable of being made certain, are void” (Sec-29). Through Sec-29 the law aims to ensure that the parties to a contract should be aware of the precise nature and scope of their mutual rights and obligation under the contract. Thus, if the word used by the parties are or indefinite, the law cannot enforce the agreement.

(5) Wagering Agreement-
Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Thus where A and B mutually agree that if it rains today A will pay B Tk.100 and if it does not rain B will pay A Tk.100 or C and D entered into agreement that on tossing up a coin, if it fall head upwards C will pay D Tk.50 and if falls tail upwards D will pay C Tk.50, there is a wagering agreement.

(6) Agreement Contingent on Impossible Events-
“Contingent agreements to do or not to do anything if an impossible event happens are void, whether the impossibility of the event is know on not to the parties to thr agreement at the time when it is made.” (Sec. 36)

(7) Agreements to do Impossible Act-
“An agreement to do an act impossible in itself is void.” (Sec, 56 Part-1)

What is free consent

Free consent is one of the most important essential elements of a valid contract. The term free consent refers to meeting of free and fresh minds of two parties of an agreement when two parties take and understand, purpose, subject matter and terms and conditions of the agreement in the same sense it is free consent. Both of them must take things in the same way. They must not understand it in different way. An agreement which is made freely it becomes a valid contract due to presence of free consent of both the parties. In any of the free consent of both there will no free consent in the agreement.
a.Coercion: - threading.
b.Undue influence: - pressure and misuse of power for unfair advantage.
c.Fraud, deceiving on cheating the other.
d.Misrepresentation: - false statement without an intention to deceive the other.
e.Mistake error

Rights of partners

Rights of a Partner:

The rights of a partner are as follows:

i. Right of the partner to take part in the day-to-day management of the firm.

ii. Right to be consulted and heard while taking any decision regarding the business.

iii. Right of access to books of accounts and call for the copy of the same.

iv. Right to share the profits equally or as agreed upon by the partners.

v. Right to get interest on capital contributed by the partners to the firm.

vi. Right to avail interest on advances paid by the partners for business purpose.

vii. Right to be indemnified in respect of payment made or liabilities incurred or for protecting the firm from losses.

viii. Right to the use of partnership property exclusively for partnership business only not himself.

ix. Right as agent of the firm and implied authority to bind the firm for any act done in carrying the business.

x. Right to prevent admission of new partners/expulsion of existing partners.

xi. Right to continue unless and otherwise he himself cease to become partner.

xii. Right to retire with the consent of other partners and according to the terms-and conditions of deed.

xiii. Right of outgoing partner/legal heirs of deceased partner.

Rights of Surety against the Creditor

1. Ask the creditor to sue the debtor: On the guaranteed debt having fallen due for payment, the surety may ask the creditor to sue the debtor to collect the due amount, but he cannot compel him to do so. But he must then indemnify the creditor against any risk or delay arising as a consequence.

2. Require the creditor to terminate the debtor’s services: In the case of the fidelity guarantee, if the principal debtor’s dishonesty comes to light, the surety can require the creditor to terminate the principal debtor’s services so as to save him from further loss.

3. Claim to any set off: The surety on being called upon to pay, can claim any set-off to which the principal debtor is entitled from the creditor.

4. Access to the securities of the debtor with the creditor: The surety can, after paying the guaranteed debt, compel the creditor to assign to him all the securities taken by the creditor either before or at the time of the contract of guarantee, whether the surety was aware of them or not.

5. Right to Share Reduction: On debtor’s insolvency the surety is entitled to claim the proportionate reduction of his liability by the amount of dividend claimed by the creditor (from the Official Receiver of the Principal debtor). Similarly, debtor’s debt obligation is scaled down by subsequent legislation; the creditor is entitled to claim proportionate reduction in his liability.

Rights of Surety Against the Principal Debtor

1. Right of subrogation: After paying the guaranteed debt, the surety steps into the shoes of the creditor and acquires all the rights which the latter had against the principal debtor (i.e., he gets subrogated to all the rights and remedies available to the creditor) (Sec. 140). If the creditor has the right to stop goods in transit or has a lien, the surety, on payment of all he is liable for, will be entitled to exercise these rights.

2. Right as to securities with the creditor: The surety has the right to proceed against such securities of the principal debtor, as the creditor could himself proceed.

3. Right of indemnity: The surety is entitled to be indemnified by the principal debtor for all payments rightfully made by him (Sec. 145).

4. Compel the principal debtor to perform the promise: The surety has also the right to insist the principal debtor to perform the promise. The surety can, before making payment, compel the debtor to relieve him from liability by paying of the debt, provided that liability is an ascertained and subsisting one.

5. Prove the debt in case of bankruptcy of the debtor: In case of the bankruptcy of the principal debtor, the surety may prove the debt in respect of contingent ability even if he has not been called upon to pay a definite amount.

Rights of the Indemnity-holder

Rights of the Indemnity-holder

Section 125 of the Contract Act lays down that the indem­nity-holder is entitled to get from the indemnifier :

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

2. all costs which he may be compelled to pay in such suits (provided he acted prudently or with the authority of the indemnifier) ;

3. all sums which he may have paid upon compromise of such suit (provided the compromise was prudent or was authorized by the indemnifier).

RULES REGARDING AUCTION SALE

LEGAL RULES REGARDING AUCTION SALE
The legal rules regarding the auction sale are contained in various provisions of Section 64 of the Sale of Goods Act, which may be discussed under the following heads:
1. Completion of auction sale.
2. Retraction of bid.
3. Transfer of ownership.
4. Seller’s right to bid.
5. Fraudulent sale.

1. COMPLETION OF AUCTION SALE

An auction sale, at an appointed time and place, the auctioneer puts up the goods for sale to the intending buyers (bidders) by inviting biddings from them. The bidders after to pay the price by showing their willingness to pay the price. The auctioneer then accepts the highest bid by a tap with his hammer, or by any other customary manner. On such acceptance, the auction sale is complete. This rule is contained in Section 64(2) of the Sale of Goods Act. which provides that, the sale by auction is complete as soon as the auctioneer announces its completion (i.e., the acceptance of the bid) by the fall of the hammer, or in any other customary manner, e.g., by shouting one, two, three or by shouting going, going, gone, etc.

2. RETRACTION OF BID
The sale is complete as soon as the bid is accepted by the auctioneer. Before the completion of the sale, the bidder has the right to retract (i.e. withdraw) his bid. This rule is also contained in Section 64(2) of the Sale of Goods Act, which provides that, before the sale is completed by the fall of the hammer, any bidder may withdraw his bid. i.e., he has the right to say that he is not ready and willing to purchase the goods. This is based on the principle that a bid is an offer, and it can be revoked before it is accepted by the fall of the hammer.
Where the bidder withdraws his bid before the acceptance of his bid, his security amount cannot be forfeited. However, if the bidder withdraws his bid after the fall of the hammer, the amounts to a breach of contract and his security deposit will be liable to be forfeited

3. TRANSFER OF OWNERSHIP
On the completion of sale by the fall of hammer, the ownership of the goods is immediately transferred to the buyer (i.e., highest bidder) if the auction is of specific goods in a deliver state. Thus, once the hammer falls for the sale of specific goods in a deliverable state, the highest bidder becomes the owner of the goods, and he can deal with the goods as his own.
It may also be noted that after the fall of the hammer, the auctioneer cannot modify the terms of auction to prevent the ownership being passed to the buyer

4. SELLER’S RIGHT TO BID
Sometimes, in an auction sale, the seller apprehends that the bidders may enter into a knock-out agreement. (It is an agreement between the bidders not to bid against each other, with a view to prevent competition among them). In such cases, the seller has the right to bid in the auction, or to appoint a person to bid on his behalf. However, the seller can do so only if tie has expressly reserved his right to do so. And the sale has been notified subject to such a right of the seller. This rule is contained in Section 64(3) of the Sale of Goods Act, which provides that, the seller or any one person on his behalf may bid at the auction if seller’s right to bid is expressly reserved. It may however, be noted that the seller can appoint only one bidder to bid on his behalf. If he appoints more than one bidder the sale is voidable, because in such cases the intention of the seller is not to protect his interest, but to enhance the price.
As a matter of fact, if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer, and he can put an end to the contract of sale if he so chooses. [Section 64 (6)].

5. FRAUDULENT SALE
The seller or any one person on his behalf may bid at the auction if the sale is notified to be subject to such a right of the seller. If the seller has not reserved his right to bid at the auction, he cannot bid at the auction. Moreover, then he can not appoint any person to bid on his behalf. If he does so, the buyer may treat the sale as fraudulent. This rule is contained in Section 64(4) of the Sale of Goods Act, which provides that, where the seller’s right to bid at the auction is not notified, the buyer may treat the sale as fraudulent if the seller or any person on his behalf bids at the auction. And the buyer may refuse to take the goods sold to him. In such cases, the sale is also fraudulent if the auctioneer knowingly lakes any bid from the seller or any person on his behalf.

Rules regarding consideration

Consideration is an essential element of a valid contract. Without exchange of consideration an agreement never becomes a valid contract. Two parties from each other which is consideration for both agreements there are certain agreements which become a valid contract give and take some benefit from each other which is consideration for both of them but this rule doesn’t apply is some agreements. There are certain agreements which become a valid contract without exchange of consideration. In such agreements only a party gets benefit as consideration but another party gets benefit as consideration but another party will not get benefit. So such agreements are called exceptions to the rule of consideration. The agreements without exchange of consideration are as under.
a.Agreement with love and affection.
b.Agreement with love and affection.
c.Agreement regarding donation or financial assistance.
d.Agreement regarding gift or present.
e.Agreement between agent and principal (agency).
f.Agreement to pay time barred debt.

TERMINATION OF AGENCY

An agency may be terminated by any of the following modes.
1. Expiration of Period:

If agency is formed for a fixed period it may come to an end on the expiry of the period even if the business is not completed.

2. By Mutual Consent:

The agency can be dissolved at any time by the mutual consent between the principal and the Agent.

3. Death of Agent or Principal

The relation between an agent and a principal is entirely personal. So death of either dissolves the Agency.

4. Destruction of the Subject Matter:

The agency dissolves if the subject matter of the agency is destroyed.

Illustration

If an agent is employed to sell a house, the agency terminates if the house is destroyed by fire.

5. Completion of Particular Job:

If an agency is formed to carry on a particular under taking, it stands terminated on the completion of the particular job.

6. By Becoming Alien Enemy:

The contract between the agent and the principal may be terminated by illegality, as where the agency involves dealings with enemy aliens.

7. By Insanity:

When the principal has become insane the agency itself is automatically terminated, and the same is true where the agent becomes insane.

8. Revocation of Authority:

The principal may terminate the agent’s real or actual authority at any time so when the principal revokes his authority of the agent, the agency is terminated.

9. Bankruptcy of Principal:

The principal’s bankruptcy terminates the authority of the agent. This fact will thus dissolve the agency.

10. Winding up of Company:

The principal or agent may terminates the agency at the winding up of the company.

11. Termination of Authority:

When the agent gives up his authority, the agency is terminated
 

The Proposal or Offer

The words ‘offer’ and ‘proposal’ are synonymous and they mean one and the same thing. Offer is the first step in the formation of contract. When a valid offer is made and accepted, contract comes into existence, provided the other essential elements are present.

Essentials:
(i)    One person signifies to another; it must be an expression of the willingness to do or to abstain from doing something. According to section 3 to signify means that the proposal must be communicated to the other party.

(ii)   The expression of willingness to do or to abstain form doing some thing must be to another person. There can be no ‘proposal’ by a person to himself

(iii) The expression of willingness to do or to abstain from doing some-thing must be made with a view to obtaining the assent of the other person to such act or abstinence. Thus a casual enquiry “ do you intend to sell your motorcycle?” is not a ‘proposal’. Similarly, a mere statement of intention” I may sell my motorcycle if I can get Rs. 14,000 for it” is not a ‘proposal’. But if M says to N, “ will you buy my motorcycle fro Rs. 14,000,” or “ I am willing to sell my motorcycle to you for Rs. 14,000”, we have a ‘proposal’ as it has been made with the object of obtaining the assent of N.

Types of partnership

There are four kinds of partnership

1. General partnership

In a general partnership, the liability of each partner is unlimited. It means that the firm's creditors can realise their dues in full from any of the partners by attaching their personal property if the firm's assets are found to be inadequate to pay off its debts.

An exception is made in the case of a minor partner whose liability is limited to the amount of his share in the capital and profits of the firm. In India all partnership firms are general partnerships.

Each partner of a general partnership is entitled to take active part in the management of the firm, unless otherwise decided by the other partners.

2. Limited partnership

A limited partnership is a partnership consisting of some partners whose liability is limited to the amount of capital contributed by each. The personal property of a limited partner is not liable for the firm's debts.

He cannot take part in the management of the firm. His retirement, insolvency, lunacy or death does not cause dissolution of the firm. There is at least one partner having unlimited liability. A limited partnership must be registered.

Limited partnership is now allowed in India under the Limited Liability Partnership Act. In England limited partnership can be formed under the Limited Partnership Act, 1907 and in the USA under the Partnership Act, 1890

The chief characteristics of a limited partnership are as follows

1. There must be at least one partner with unlimited liability. The liability of the remaining partners is limited to their capitals in the firm. Thus, a limited partnership consists of two types of partners, general partner and limited partner.

2. The limited partner cannot take part in the management of the firm. He has no implied authority to represent and bind the firm. However, he is allowed to inspect the books of accounts of the firm.

3. The limited or special partner cannot assign his share to an outsider without the consent of the general partner.

4. The limited partner cannot withdraw any part of his capital.

5. A limited partnership must be registered.

Advantages

Limited partnership offers the following benefits

i. It enables people to invest in a business without assuming unlimited risk and without devoting much time and attention in management of business.

ii. It permits the mobilisation of larger financial resources from cautious and conservative investors.

iii. It provides an opportunity to able and experienced persons to manage the business without any interference from other partners. Complete control and personal supervision help to ensure prompt decisions and uniform actions.

iv. It is more stable than general partnership because it is not dissolved by the insolvency, retirement, incapacity or death of limited partner.

Disadvantages

Limited partnership suffers from the following drawbacks

(i) The limited partners are deprived of the right to manage. They remain at the mercy of the general partner.

(ii) The general partner may misuse his power to exploit the limited partners.

(iii) A limited partnership enjoys little credit standing as the liability of some partners is limited. It has to be registered.

3. Partnership at will

It is a partnership formed for an indefinite period. The time period or the purpose of the firm is not mentioned at the time of its formation. It can continue for any length of time depending upon the will of the partners. It can be dissolved by any partner by giving a notice to the other partners of his desire to quit the firm.

4. Particular partnership

It is a partnership formed for a specific time period or to achieve a specified objective. It is automatically dissolved on the expiry of the specified period or on the completion of the specific purpose for which it was formed.

Types of Partners

There can be the following types of partners

1. Active or working partner

Such a partner contributes capital and also takes active part in the management of the firm. He bears an unlimited liability for the firm's debts. He is known to outsiders. He shares profits of the firm. He is a full-fledged partner.

2. Sleeping or dormant partner

A sleeping or inactive partner simply contributes capital. He does not take active part in the management of the firm. He shares in the profits or losses of the firm. His liability for the firm's debts is unlimited. He is not known to the outside world.

3. Secret partner

This type of partner contributes capital and takes active part in the management of the firm's business. He shares in the profits and losses of firm and his liability is unlimited. However, his connection with the firm is not known to the outside world.

4. Limited partner

The liability of such a partner is limited to the extent of his share in the capital and profits of the firm. He is not entitled to take active part in the management of the firm's business. The firm is not dissolved in the event of his death, lunacy or bankruptcy.

5. Partner in profits only

He shares in the profits of the firm but not in the losses. But his liability for the firm's debts is unlimited. He is not allowed to take part in the management of the firm. Such a partner is associated for his money and goodwill.

6. Nominal or ostensible or quasi partner

Such a partner neither contributes capital nor takes part in the management of business. He does not share in the profits or losses of the firm. He only lends his name and reputation for the benefit of the firm.

He represents himself or knowingly allows himself to be represented as a partner. He becomes liable to outsiders for the debts of the firm. A nominal partner can be of two types

(a) Partner by estoppels

A person who by his words (spoken or written) or conduct repre­sents himself as a partner becomes liable to those who advance money to the firm on the basis of such representation.

He cannot avoid the consequences of his previous act. Suppose a rich man, Mohan, is not a partner but he tells Sohan that he is a partner in a firm called Shipra Enterprises.

On this impression, Sohan sells good worth Rs. 20,000 to the firm. Later on the firm is unable to pay the amount. Sohan can recover the amount from Mohan. Here, Mohan is a partner by estoppels.

(b) Partner by holding out

When a person is declared as a partner and he does not deny this even after becoming aware of it, he becomes liable to third parties who lent money or credit to the firm on the basis of such a declaration.

Suppose, Shipra tells Sohan in the presence of Mohan that Mohan is a partner in the firm of Shipra Enterprises.

Mohan does not deny it. Later on Sohan gives a loan of Rs. 20,000 to Shipra Enterprises on the basis of the impression that Mohan is a partner in the firm. The firm fails to repay the loan to Sohan. Mohan is liable to pay Rs. 20,000 to Sohan. Here, Mohan is a partner by holding out.

7. Minor as a partner

A minor is a person who has not completed 18 years of age. A minor cannot become a partner because he is not qualified to enter into a contract. But he may be admitted to the benefits of partnership with the mutual consent of all the partners.

On being so admitted, a minor becomes entitled to a share in the profits of the firm. He can inspect and copy the books of account of the firm but he cannot take active part in the firm's management.

His liability is limited to the extent of his share in the capital and profits of the firm. He cannot file a suit against the firm or its partners to get his share except when he wants to disassociate himself from the firm.

After becoming a major, the minor must give a public notice within six months if he wants to break off his connections with the partnership firm.

If he does not give such a notice within six months or if he decides to remain in the firm, he becomes liable to an unlimited extent for the debts of the firm from the date he was admitted to the benefits of partnership. He also becomes entitled to take active part in the management of the firm's business.

8. Sub partner

He is a third person with whom a partner agrees to share his profits desired from the firm. He does not take part in the management of the firm. He is not liable for the firm's debts.

Rights and Obligations of Partners

The rights and obligations of partners are generally laid down in the partnership deed. In case the partnership deed does not specify them, then the partners will have rights and obligations prescribed in the Partnership Act. These are given below

Rights of Partners

1. Every partner has a right to take part in the conduct and management of the firm's business.

2. Every partner has a right to be consulted and express his opinion on any matter related to the firm. In case of difference of opinion, the decision has ordinarily to be taken by a majority.

But vital issues like admission of a new partner, change in the firm's business, alteration of profit- sharing ratio, etc., must be decided by unanimous consent of all the partners.

3. Every partner has a right to have access to, inspect and copy any books of accounts and records of the firm.

4. Every partner has the right to an equal share in the profits of the firm, unless otherwise agreed by the partners.

5. Every partner has the right to receive interest on loans and advances made by him to the firm. The rate of interest should be 6 per cent unless otherwise agreed by the partners.

6. Every partner has the right to be indemnified for the expenses incurred and losses sus­tained by him in the ordinary conduct of the firm's business.

7. Every partner has a right to continue in the firm unless expelled in accordance with the terms of the partnership agreement.

8. Every partner has a right to retire in accordance with the terms of the partnership agree­ment or with the consent of other partners.

UNDUE INFLUENCE

UNDUE INFLUENCE:
Meaning of Undue influence[section 16(1)]: The term 'undue influence' means dominating the will of the other person to obtain an unfair advantage over the other. According to section 16(1), a contract is said to be induced by undue influence

where the relations subsisting between the parties are such that one of them is in a position to dominate the will of the other, and
the dominant party uses that position to obtain an unfair advantage over the other.

Effect of undue influence [section 19A]: when consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Comparison between coercion and undue influence:
Similarities: In case of both coercion and undue influence, the consent is not free and the contract is voidable at the option of the aggrieved party.

UNFULFILLED EXPECTATION OF CONSIDERATION

Individual who, because of their personal relationship to another (e.g. relatives, affianced), perform work without any remuneration being agreed for it may nevertheless be entitled to remuneration or deferred payment of remuneration. Although there are no statutory provisions on the matter, by the process of judicial further development of the law the Federal Labour Court has established such an entitlement, subject to the following conditions. Firstly, either no remuneration must have been paid for the work performed or only modest remuneration that is in obvious disproportion to the performance provided. Secondly, there must be or have been an expectation that the work performance provided would be recompensed in the future by the handover of property or assets. Lastly, there must be a factual connection between these conditions. If the expected handover of assets then fails to materialize, the entitlement to remuneration or entitlement to deferred payment corresponds to the usual level of pay for the type of work concerned.

Un-lawful consideration and object

Un-lawful consideration:
According to sec. 10 of the contract act.
“An agreement is a contract enforceable only if it is made for a lawful consideration and which a lawful object.”

Causes of unlawful consideration:
According to sec 23. The consideration or object of an agreement is unlawful in the following cases.
(I) Prohibited by law:
If the object of a agreement is prohibited by law agreement will be void.
(II) Element of fraud:
If there is element of fraud in the object of agreement, the consideration will be unlawful.
(III) Immoral:
If case of immoral, the consideration will be unlawful.
(Iv) against public policy:
If the object of consideration of an agreement as opposed to public policy, the consideration will be unlawful.
(v) Injury to other person or property:
If the object or consideration of agreement is to cause an injury to the person or property of another is illegal and void.

Liabilities Of Partners to others

Liabilities of a Partner to Third Parties:

The following are the liabilities of a partner to third parties:

i. Liability of a partner for acts of the firm:

Every partner is jointly and severally liable for all acts of the firm done while he is a partner. Because of this liability, the creditor of the firm can sue all the partners jointly or individually.

ii. Liability of the firm for wrongful act of a partner:

If any loss or injury is caused to any third party or any penalty is imposed because of wrongful act or omission of a partner, the firm is liable to the same extent as the partner. However, the partner must act in the ordinary course of business of the firm or with authority of his partners.

iii. Liability of the firm for misutilisation by partners:

Where a partner acting within his apparent authority receives money or property from a third party and misutilises it or a firm receives money or property from a third party in the course of its business and any of the partners misutilises such money or property, then the firm is liable to make good the loss.

iv. Liability of an incoming partner:

An incoming partner is liable for the debts and acts of the firm from the date of his admission into the firm. However, the incoming partner may agree to be liable for debts prior to his admission. Such agreeing will not empower the prior creditor to sue the incoming partner. He will be liable only to the other co-partners.

v. Liability of a retiring partner:

A retiring partner is liable for the acts of the firm done before his retirement. But a retiring partner may not be liable for the debts incurred before his retirement if an agreement is reached between the third parties and the remaining partners of the firm discharging the retiring partner from all liabilities. After retirement the retiring partner shall be liable unless a public notice of his retirement is given. No such notice is required in case of retirement of a sleeping or dormant partner.

Misrepresentation

Misrepresentation
The term "misrepresentation" means a false representation of fact made innocently or non-disclosure of a material fact without any intention to deceive the other party. Section 18 defines the term "misrepresentation" as follows
"Misrepresentation" means and includes-

    The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
    Any breach of duly which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading an other to his prejudice or to the prejudice of anyone claiming under him;
    Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.

Effect of misrepresentation[section 19]
The effects of misrepresentation are as follows:

    Right to rescind the contract The party whose consent was caused by misrepresentation can rescind (cancel) the contract but he cannot do so in the following cases:

    where the party whose consent was caused by misrepresentation had the means of discovering the truth with ordinary diligence;
    where the party gave the consent in ignorance of misrepresentation;
    where the party after becoming aware of the misrepresentation, takes a benefit under the contract;
    where an innocent third party, before the contract is rescinded, acquires for consideration some interest in the property passing under the contract;
    where the parties cannot be restored to their original position.


(b) Right to insist upon performance The party whose consent was caused by misrepresentation may if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made had been true.
Comparison between fraud and misrepresentation
Similarities: There are basically two similarities in case of fraud and misrepresentation as follows:

    In both the cases, a false representation is made by a party;
    In both the cases, the contract is voidable at the option of the party whose consent is obtained by fraud or misrepresentation.

Mistake

Mistake
Meaning of mistake [section 20]
A mistake is said to have occurred where the parties intending to do one thing by error do something else. Mistake is "erroneous belief" concerning something.
Classification of Mistake of Law:
(a) Mistake of Indian Law(In sense of penalty): The contract is not voidable because everyone is supposed to know the law of his country. e.g. disobeying traffic rules"
(b) Mistake of Foreign Law(void-ab-initio): A mistake of foreign law is treated as mistake of fact, i.e. the contract is void if both the parties are under a mistake as to a foreign law because one cannot be expected to know the law of other country.

Mistake of fact
Mistake of fact be either Unilateral mistake or Bilateral mistake.
Unilateral mistake [section 22]: The term 'unilateral mistake' means where only one party to the agreement is under a mistake. According to section 22, "A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact."
Bilateral mistake [section 22]: The term 'bilateral mistake' means where both the parties to the agreement are under a mistake. According to section 20, "where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void." thus, the following three conditions must be satisfied before declaring a contract void under this section:

    Both the parties must be under a mistake
    Mistake must be of fact but not of law.


According to explanation to section 20. "An erroneous opinion as to the value of the thing which forms the subject matter of agreement is not to be deemed a mistake as to a matter of fact."
Note: Mistake about price is valid.

Nature of minor agreement

1. Introduction:
The age of majority is different in various parts of the world. In Pakistan the person of 18 years is consideration major. Contract act requires that the contracting parties must be competent to contract.
2. Definition of minor:
According to majority act.
“A minor is a person who has not completed 18 years of age. Where a guardian of minor’s person or property has been appointed under the guardian and wards act or court of wards has taken charge of minor’s property a minor will attain the age of majority after 21 years of age.
3. Nature of minor agreement:
(I) Agreement with a minor is void:
Agreement with a minor is void because minor has no capacity to enter into a contract. A minor is not liable to perform any act which he has promised to perform.
(II) Doctrine of estoppels is not applicable:
Meaning of estoppels:
Estoppels, means when a person makes a false representation, and the other person believe it to be true and acts accordingly. Later on the person who has made false representation is stopped from the denying the truth of that representation. The doctrine of estoppels is not applicable to a minor.
Illustration:
A, a minor fraudulently shows that he is major and enters into a contract with B. to sell his land. A refuses to perform the contract on attaining the age of majority that at the time of entering into contract he was minor B has no legal right against A.
(III) Minor and restitution:
(a) Meaning:
It means restoring back to the owner that which has been taken away.
(b) General rule:
It is a general rule that A minor can not be compelled to any back money received by him under an agreement which is void.
(c ) Exception:
According to sec. 41 specific relief act 1887. If any thing is traceable in hands of minor, out of the proceeds of the contract made by fraudulently representing that he was of full age, the court may compel the minor to restore the amount to the other party when minor himself brings a suit against the other party.
(IV) Necessaries of minor:
A person who provides the necessaries to the minor is entitled to recover from the property of minor.
Illustration:
A provides necessaries to B, A minor for his life. A can recover from the property of B.
(V) Agreement of guardian on behalf of minor:
A contract which is made on behalf of minor by his guardian is binding on the minor.
(VI) Minor can be a promise or beneficiary:
Any contract which is for the benefit of a minor and under which the minor and under which the minor is not required to bear any obligation is valid.
Property can be mortgaged in favour of a minor.
(VII) Rules about agent:
A minor can be an agent but he can not be held personally liable for negligence.
(VIII) Rules about partnership:
(a) General rule:
A minor can not become partner of a firm.
(b) Exception:
A minor can be partner of a firm through his guardian with the consent of all other partners.
(c ) Liability of a minor:
The liability of a minor is limited to his investment in the business.
(IX) Surety for a minor:
In case of contract of guarantee an adult stands surety for minor. Minor is not responsible but adult is liable under the contract.
(X) Minor as a member of a company:
In case of fully paid-up shares the minor can become share holder of a company but not otherwise.
(XI) Minor can not be declared insolvent:
Under law a minor cannot be declared insolvent because he cannot enter into contract.
(XII) Contract by minor and adult jointly:
If an minor and an adult jointly enter into an agreement with another person, the minor is not liable but only the adult is liable.
(XIII) Position of minor’s parents:
The parents of a minor are not liable for agreement made by a minor.
Case law
1990 CLC 1200
It was held that a minor has no legal capacity to authorize any person to make contract on his behalf, even when that person in his ‘Father’.
(XIV) Minor and negotiable instruments:
A minor can draw and deliver the negotiable instrument. He is not liable but all other parties to the instrument would be liable.
Illustration:
A minor draws a bill of exchange on B. A accepts the bill A endorses it to C. The B/E is valid.
4. Conclusion:
To conclusion it can be said that, a minor is not capable to enter into contract. His agreement is absolutely void and an agreement entered into by a minor is not enforceable at law. Minor can always plead minority. Law protects a minor from contractual liability. A minor has no legal competency to authorize any person to enter into contract on his behalf.