Contract-II Notes

The notes cover five areas: indemnity, guarantee, bailment and pledge under the Indian Contract Act; the contract of agency; the Sale of Goods Act, 1930 (conditions, warranties and caveat emptor); transfer of property, the nemo dat rule and the rights of an unpaid seller; and the Indian Partnership Act, 1932, including a minor as partner and dissolution.

Year tags in the notes show indemnity vs guarantee (2019), rights of a surety (2023), kinds and essentials of bailment (2024), indemnity and pledge essentials (2025), modes of creating agency (2024), ratification (2023), caveat emptor and its exceptions (2022), unpaid seller's rights (2023), the nemo dat rule (2019) and the doctrine of holding out (2024).

A contract of indemnity (Sec. 124) is one by which one party promises to save the other from loss, so it involves two parties. A contract of guarantee (Sec. 126) promises to perform or discharge the liability of a third person on his default, so it involves three: the creditor, the principal debtor and the surety, whose liability is co-extensive with the principal debtor's under Sec. 128.

Caveat emptor, 'let the buyer beware', is in Sec. 16: the seller generally gives no implied condition about quality or fitness. The notes explain its exceptions and the shift towards caveat venditor, using Ward v Hobbes, Priest v Last and Rekha Sahu v UCO Bank.

A minor cannot become a full partner, but under Sec. 30 of the Indian Partnership Act he can be admitted to the benefits of partnership with the consent of all partners. In Commissioner Income Tax v Dwarkadas & Co., the Supreme Court held that a firm cannot consist of minors alone.

The notes cite Bank of Bihar Ltd. v Damodar Prasad on a surety's liability, Lloyd v Grace Smith & Co. on a principal's liability for an agent's fraud, Sims & Co. v Midland Railway Co. on agency by necessity, Ward v Hobbes and Priest v Last on caveat emptor, and Bevan v National Bank Ltd on holding out.