1.Q.

Modes of Creation of Agency under the Indian

Contract Act, 1872 ?
An agency is defined under Section 182 of the Indian
Contract Act, 1872 as a relationship where one person, called
the agent, is employed to act on behalf of another, called the
principal. The principal is bound by the acts of the agent
within the scope of the agent’s authority. The Act recognizes
multiple modes by which such an agency relationship can be
created.
1. By Express Agreement (Section 187):
 Agency may be created expressly through written or oral
agreement.
 Example: A written power of attorney appointing a
person to sell property.
 Case: P. Krishna Bhatta v. Mundila Ganapathi Bhatta –
oral appointment upheld.
2. By Implied Agreement (Section 187):
 Implied from conduct, circumstances, or relationship of
the parties.
 Example: A servant regularly buying goods for the
master on credit.
 Case: State of Rajasthan v. Basant Nahata, AIR 2005 SC
3401 – conduct can imply agency.

1
3. Agency by Necessity (Section 189):
 Arises when an agent acts to protect the principal’s
interests in emergencies without prior authority.
 Example: A carrier selling perishable goods in transit to
prevent loss.
4. Agency by Estoppel (Section 237):
 When the principal’s words or conduct induce a third
party to believe that another person is his agent, the
principal is bound by that person’s acts.
 Case: Freeman & Lockyer v. Buckhurst Park Properties
Ltd. – representation binds principal.
5. Agency by Ratification (Sections 196–200):
 If an unauthorized act is done on behalf of the principal,
he may later ratify it, giving it the same effect as if
originally authorized.
 Ratification must be of the whole act and with full
knowledge.
6. Agency by Operation of Law:
 Certain relationships (e.g., partners in a firm under
Section 18 of the Partnership Act) create mutual agency
automatically.
 Example: One partner binding the firm in business
dealings.

2
Conclusion
The Indian Contract Act, 1872 allows agency to be created by
agreement—express or implied—or through legal principles
like estoppel, ratification, necessity, and operation of law.
These modes ensure flexibility in commercial dealings,
enabling principals to be bound by acts done on their behalf
while balancing the rights of third parties who rely on such
representations.
2.Q.Rights and Duties of an Agent under the Indian
Contract Act, 1872
--- An agent is defined in Section 182 of the Indian Contract
Act, 1872 as a person employed to do any act for another or
to represent another in dealings with third persons. The
person represented is called the principal. The Act grants
agents specific rights to protect their interests and imposes
duties to ensure faithful performance of their role.
Rights of an Agent:
1. Right to Remuneration (Section 219):
o Agent is entitled to agreed remuneration or
reasonable compensation if not agreed.
o Case: Pinnock v. Wilkins – agent can claim
remuneration even if principal benefits indirectly.
2. Right of Lien (Section 221):
o Agent can retain goods, papers, or property of the
principal till lawful dues are paid.

3
 3. Right to Indemnity (Sections 222–223):
o For acts done in the exercise of authority, the
principal must indemnify the agent against lawful
acts and even acts done in good faith which cause
injury to third parties.
4. Right to Retain Sums (Section 217):
o Agent may retain, from sums received on principal’s
behalf, amounts due to him.
o

Duties of an Agent:
1. Duty to Follow Instructions (Section 211):
o Must act according to the principal’s directions or,
in their absence, according to the prevailing
custom.
o Case: Keighley Maxsted & Co. v. Durant – deviation
from instructions made principal not liable.
2. Duty of Skill and Diligence (Section 212):
o Must conduct business with reasonable skill and
diligence.
3. Duty to Render Accounts (Section 213):
o Bound to give proper accounts to the principal.
4. Duty to Communicate (Section 214):
o Must inform principal of difficulties and obtain
instructions.

4
 5. Duty Not to Deal on Own Account (Sections 215–216):
o Cannot make secret profits; must disclose personal
interest in transactions.
6. Duty to Protect Principal’s Interests (Section 209):
o Must act to safeguard interests even after
termination in certain cases.
Conclusion
The rights under the Indian Contract Act protect agents from
unfair loss, while duties ensure loyalty, transparency, and
adherence to the principal’s directions. Case law emphasizes
that the agency relationship is built on trust, and any breach
of duty—such as making secret profits or deviating from
instructions—can render the agent liable for losses.

3.Q. Bailment – Features, Rights and Duties of Bailee,

and Liability in Case of Accidental Fire.
1. Features of Bailment
--- Bailment is defined under Section 148 of the Indian
Contract Act, 1872 as delivery of goods by one person
(bailor) to another (bailee) for a specific purpose, upon a
contract that they be returned after the purpose is
accomplished. Essential features include:
1. Delivery of goods (actual or constructive).
2. Delivery for a specific purpose.
3. Return of goods after purpose completion.
5
 4. Delivery based on consent.
5. Ownership remains with bailor.
6. Delivery without transfer of title.
Example: Leaving clothes at a dry cleaner’s shop.

2. Rights of a Bailee (Approx. 100 words)

Rights of a bailee include:
1. Right to compensation (Sec. 164): For losses due to
bailor’s defective title.
2. Right to expenses (Sec. 158): Reimbursement of
extraordinary expenses.
3. Right of lien (Sec. 170–171): Retain goods until dues are
paid.
4. Right to recover loss (Sec. 180): Sue third parties for
goods’ wrongful deprivation.
5. Right to indemnity (Sec. 159): If premature termination
causes loss.
Case: Calcutta Credit Corporation Ltd. v. Happy Homes
Pvt. Ltd. – recognized bailee’s lien.
3. Duties of a Bailee
A bailee must:
1. Take reasonable care (Sec. 151): As a prudent person
would of his goods.

6
 2. Not make unauthorized use (Sec. 154): Liable for
unauthorized use.
3. Return goods (Sec. 160): On expiry of time/purpose.
4. Return accretions (Sec. 163): Give back additions to
goods.
5. Not mix goods without consent (Sec. 155–157): If
mixed, follow rules for separation or compensation.
Case: Atul Mehra v. Bank of Maharashtra – bailee
liable for negligent storage.

4. Liability in Case of Accidental Fire (Approx. 100 words)

Under Sections 151 and 152, a bailee is not liable for loss or
destruction of goods if he has taken reasonable care, and
loss occurs due to unavoidable accident like accidental fire.
If negligence is proved, liability arises. In Union of India v.
United India Insurance Co., accidental fire without
negligence discharged bailee’s liability. However, if fire
results from improper storage or failure to follow
precautions, the bailee is responsible. Thus, liability
depends on whether reasonable care, as required under the
Act, was taken.
Conclusion
Bailment rests on trust, requiring the bailee to exercise
reasonable care and return goods after purpose completion.
In case of accidental fire, liability arises only if negligence is
proved. Sections 151–152 safeguard bailees who act

7
prudently, ensuring fairness by balancing the bailor’s interest
in goods with the bailee’s practical limitations.

4.Q. Extent of Surety’s Liability, Modes of Discharge,

and Rights of Surety
---Under Section 126 of the Indian Contract Act, 1872, a
contract of guarantee is a contract to perform the promise or
discharge the liability of a third person in case of his default.
The person who gives the guarantee is called the surety. The
scope of the surety’s liability, ways in which it may be
discharged, and the rights available to the surety are clearly
laid down in the Act.
Extent of Surety’s Liability
As per Section 128, the liability of a surety is co-extensive
with that of the principal debtor unless the contract provides
otherwise. This means the surety is liable to the same extent
as the debtor, for principal amount, interest, and costs.
Case: Bank of Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297
– creditor can proceed against surety without exhausting
remedies against the principal debtor.
Modes of Discharge of Surety (Sections 130–141):
1. By notice of revocation (Sec. 130) – for future
transactions in a continuing guarantee.
2. By death of surety (Sec. 131) – automatic revocation for
future transactions.

8
 3. By variance in contract terms (Sec. 133) – without
surety’s consent.
4. By release of principal debtor (Sec. 134).
5. By creditor’s act impairing surety’s remedy (Sec. 139).
6. By loss of security (Sec. 141).
Rights of Surety
Against Principal Debtor:
 Right of indemnity (Sec. 145): Recover all sums paid
rightfully.
 Right to securities (Sec. 141): Step into creditor’s place
for securities.
Against Creditor:
 Right to be relieved when principal debt is discharged.
 Can claim benefits of creditor’s securities.
Against Co-sureties:
 Right of contribution (Secs. 146–147): Share liability
equally unless agreed otherwise.
Case: State Bank of India v. Indexport Registered, AIR
1992 SC 1740 – co-sureties share liability
proportionately.
Conclusion
The surety’s liability under Section 128 is strict and generally
equal to that of the principal debtor, unless expressly limited.
However, the Act also provides multiple modes of discharge

9
to protect the surety. Rights against the debtor, creditor, and
co-sureties ensure fairness, preventing unjust enrichment of
any party and maintaining balance in guarantee contracts.

5.Q. Rights and Duties of a Pledgee & Legal Effects of

Unauthorized Sale
---A pledge is defined under Section 172 of the Indian
Contract Act, 1872 as the bailment of goods as security for
payment of a debt or performance of a promise. The bailor is
called the pawnor, and the bailee is the pawnee or pledgee.
The Act confers certain rights and imposes duties on a
pledgee, and it also regulates the consequences of an
unauthorized sale of pledged goods.

Rights of a Pledgee (Sections 173–176):

1. Right to retain goods (Sec. 173): Until payment of debt,
interest, and expenses.
2. Right to extraordinary expenses (Sec. 175): Recover
expenses incurred for preservation of goods.
3. Right to sue (Sec. 176): Either sue for debt while
retaining goods or sell them after giving reasonable
notice to pawnor.
4. Right to sale proceeds: Apply sale proceeds to debt and
return surplus to pawnor.
Case: Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 –
pledgee must return goods if debt is repaid.
10
Duties of a Pledgee:
 Duty to take reasonable care (Sec. 151).
 Duty not to use goods for unauthorized purposes.
 Duty to return goods on payment of debt (Sec. 160).
 Duty to return accretions (Sec. 163).
Legal Effects of Unauthorized Sale:
If a pledgee sells goods without giving reasonable notice (Sec.
176), such a sale is unauthorized and has the following
effects:
1. No transfer of ownership: The buyer gets no title unless
the pawnor consented.
2. Liability for damages: Pledgee is liable to compensate
the pawnor for loss.
3. Breach of duty: The pledgee may also be liable for
criminal breach of trust in certain cases.
Case: Syndicate Bank v. Vijay Kumar, AIR 1992 SC 1066 –
sale without statutory notice is invalid.
Example: Bank sells pledged jewelry without notifying
borrower — sale is voidable, and borrower may recover
goods or value.
Conclusion
A pledgee’s rights under the Contract Act allow lawful
retention and sale with notice, ensuring recovery of debt
while protecting the pawnor’s interest. Duties ensure goods
are preserved and returned upon repayment. An

11
unauthorized sale breaches Section 176, rendering the sale
invalid and exposing the pledgee to damages, thereby
balancing creditor’s recovery rights with debtor’s ownership
interests.
6.Q.Partnership and Its Essential Elements?
--- Partnership is defined under Section 4 of the Indian
Partnership Act, 1932 as “the relation between persons who
have agreed to share the profits of a business carried on by
all or any of them acting for all.” Persons forming a
partnership are called partners, and collectively they are a
firm. Partnership is based on mutual consent, profit-sharing,
and mutual agency, making it a vital form of business
organization in India.
Essential Elements of Partnership:
1. Agreement between persons –
Partnership arises from a contract, not from status. This
agreement may be oral or written (partnership deed).
Case: Chheda Lal v. Lala Durga Prasad, AIR 1935 All 495
– agreement is essential.
2. Number of partners –
Minimum is two; maximum is 10 for banking business
and 20 for other businesses (Sec. 11, Companies Act,
2013).
3. Business –
Partnership must be formed for carrying on a lawful
business. A mere co-ownership of property is not
partnership.
12
 Example: Two brothers owning land jointly is not
partnership unless they run a business.
4. Sharing of profits –
Agreement to share profits of the business is necessary;
sharing of losses is implied unless agreed otherwise
(Sec. 13(b)).
5. Mutual agency –
Every partner is both principal and agent; acts of one
bind all partners. This is the true test of partnership.
Case: Cox v. Hickman (1860) 8 HLC 268 – mutual agency
is conclusive proof.
6. Lawful business –
The object must be lawful; illegal activities cannot form
a valid partnership.
7. Consent of all partners –
Partnership is based on mutual consent, making it a
relationship of trust.
Conclusion
Partnership under Section 4 of the Indian Partnership Act
requires an agreement, a lawful business, profit-sharing, and
mutual agency. While profit-sharing indicates partnership,
mutual agency is the decisive test. A valid partnership
ensures that partners share not only gains but also
responsibilities, fostering cooperation and trust as the
foundation for conducting business together.

13
7.Q. Mutual Rights and Liabilities of Partners &
Methods of Dissolution of a Partnership Firm
--- Under the Indian Partnership Act, 1932, partnership is
based on mutual trust, profit-sharing, and mutual agency.
Sections 9 to 17 lay down the mutual rights and duties of
partners, which may be altered by agreement. Dissolution,
governed by Sections 39–55, marks the end of the
partnership relationship and may occur voluntarily,
compulsorily, or through court intervention.
Mutual Rights of Partners:
1. Right to take part in business (Sec. 12): All partners
have the right to participate in management.
2. Right to be consulted (Sec. 12): Decisions require
consent; ordinary matters by majority.
3. Right to share profits (Sec. 13(b)): As per agreement;
equal if unspecified.
4. Right to access books (Sec. 12(d)): Inspection at any
time.
5. Right to indemnity (Sec. 13(e)): For acts done in
ordinary course or emergency.
Mutual Liabilities of Partners:
1. Liability to share losses (Sec. 13(b)).
2. Liability for firm’s acts (Sec. 25): Partners are jointly and
severally liable.
3. Duty to act honestly (Sec. 9).

14
 4. Duty to render accounts (Sec. 9).
5. Duty not to compete (Sec. 11(2)).
Case: Cox v. Hickman (1860) – confirmed liability arises
from mutual agency.
Methods of Dissolution of a Partnership Firm:
1. Dissolution by Agreement (Sec. 40):
With consent of all partners or as per contract.
2. Compulsory Dissolution (Sec. 41):
By insolvency of all partners or illegality of business.
3. Dissolution by Notice (Sec. 43):
In partnership at will, by written notice from a partner.
4. Dissolution by Court (Sec. 44):
On grounds like insanity, misconduct, persistent breach, or
deadlock.
5. Automatic Dissolution:
Upon expiry of term or completion of venture (Sec. 42).
Case: Haji Mohd. Ishaq v. Mohd. Iqbal, AIR 1978 SC 798 –
dissolution upon completion of adventure upheld.
Conclusion
The mutual rights and liabilities of partners ensure fairness,
trust, and accountability within the firm. Dissolution ends the
partnership relationship and can occur through various
modes, including agreement, court order, or operation of law.
The Indian Partnership Act provides a balanced framework
safeguarding partners’ interests during both the functioning
and winding up of a firm.
15
8.Q. Limited Liability Partnership (LLP) – Meaning and
Key Features?
--- A Limited Liability Partnership (LLP) is defined under
Section 2(n) of the Limited Liability Partnership Act, 2008 as
a partnership formed and registered under the Act. It is a
body corporate having a separate legal entity, perpetual
succession, and formed by two or more persons for carrying
on a lawful business with a view to profit. It combines the
operational flexibility of a partnership with the limited
liability benefits of a company.
Key Features of LLP:
1. Separate Legal Entity (Sec. 3):
LLP is distinct from its partners, meaning it can own
property, sue, and be sued in its own name.
Example: An LLP holding property in its own name, not
in partners’ names.
2. Limited Liability of Partners (Sec. 26):
Partners’ liability is limited to their agreed contribution;
personal assets are generally not at risk.
Case: DKG Buildcon Pvt. Ltd. v. A.K. Jain (2016) –
recognized LLP’s independent status and limited liability.
3. Minimum Two Partners:
At least two partners are required to form an LLP, but
there is no maximum limit (Sec. 6).

16
 4. Perpetual Succession (Sec. 3(2)):
LLP continues irrespective of changes in partners; death,
insolvency, or retirement does not dissolve it.
5. Mutual Rights and Duties:
Governed by the LLP agreement; in absence of such
agreement, default provisions in First Schedule apply.
6. No Requirement of Minimum Capital:
There is no statutory minimum contribution required to
start an LLP.
7. Taxation Benefits:
LLP is taxed as a partnership firm under the Income Tax
Act, avoiding dividend distribution tax applicable to
companies.
8. Audit Requirement:
Mandatory only if turnover exceeds ₹40 lakhs or
contribution exceeds ₹25 lakhs.
9. Easy Conversion:
Existing partnership firms or private companies can
convert into LLP under the Act.
Conclusion
A Limited Liability Partnership under the LLP Act, 2008 offers
the flexibility of a partnership with the legal security of
limited liability and separate entity status. Its perpetual
succession, minimal compliance requirements, and partner-
friendly liability structure make it an attractive business
model for professionals and small enterprises, striking a
balance between operational ease and legal protection.
17
9.Q. Process of Registration of a Limited Liability
Partnership (LLP) in India
--- The registration of a Limited Liability Partnership (LLP) in
India is governed by the Limited Liability Partnership Act,
2008 and the LLP Rules, 2009. As per Section 11 of the LLP
Act, two or more persons, associated for carrying on a lawful
business with a view to profit, can incorporate an LLP. The
process is carried out online through the MCA (Ministry of
Corporate Affairs) portal.
Step 1: Obtain Digital Signature Certificate (DSC)
 All designated partners must obtain a DSC to sign
electronic forms.
 DSC is issued by government-recognized certifying
authorities.
Step 2: Apply for Director Identification Number (DIN or
DPIN)
 Under Section 7(6) of the LLP Act, each designated
partner must have a Designated Partner Identification
Number (DPIN), which can be obtained through the
MCA portal.
Step 3: Name Reservation (Form RUN-LLP)
 Apply through Reserve Unique Name – LLP service on
MCA portal.
 Name should comply with the Name Guidelines under
the LLP Rules, 2009.

18
  Two proposed names can be submitted, and MCA
approval is valid for 90 days.
Step 4: Filing of Incorporation Document (Form FiLLiP)
 File Form FiLLiP (Form for incorporation of LLP) with the
Registrar having jurisdiction.
 Required details: registered office address, business
activity, partner details, and subscription sheet.
 Attachments: Proof of address, identity proofs, and
subscriber’s consent.
Step 5: Incorporation Certificate
 Upon verification, the Registrar issues a Certificate of
Incorporation under Section 12, containing the LLP
Identification Number (LLPIN).
 The LLP comes into existence as a separate legal entity
from this date.
Step 6: Filing of LLP Agreement (Form 3)
 The LLP Agreement, governing mutual rights and duties
of partners, must be filed within 30 days of
incorporation.
 If no agreement is filed, the provisions of the First
Schedule of the LLP Act apply.
Conclusion
The LLP registration process in India is streamlined, fully
digital, and governed by the LLP Act, 2008. It involves
obtaining DSC and DIN, reserving the name, filing
19
incorporation forms, and executing an LLP agreement. Once
registered, the LLP enjoys the benefits of separate legal entity
status, perpetual succession, and limited liability for its
partners, making it an efficient and flexible business
structure.
10.Q. Doctrine of Caveat Emptor – Meaning and
Exceptions
--- The term “Caveat Emptor” is a Latin phrase meaning “Let
the buyer beware.” Under Section 16 of the Sale of Goods
Act, 1930, the general rule is that the seller is not bound to
disclose defects in the goods sold, and the buyer must
examine the goods before purchase. This doctrine aims to
place responsibility on the buyer to ensure that the goods
meet his needs.
Meaning of the Doctrine
The doctrine states that a buyer purchases goods at his own
risk concerning quality, fitness, or suitability, unless there is
an express warranty. The principle assumes that the buyer is
in a position to examine the goods or inquire about their
suitability.
Case: Ward v. Hobbs (1878) 4 AC 13 – seller not liable for
disease in pigs as no warranty was given.

Exceptions to the Doctrine (Section 16 and Judicial

Interpretations):

20
 1. Fitness for a Particular Purpose (Sec. 16(1)):
If the buyer makes known the purpose, relies on the
seller’s skill, and goods are of a description the seller
supplies, there is an implied condition of fitness.
Case: Priest v. Last (1903) – hot water bottle burst; seller
liable.
2. Merchantable Quality (Sec. 16(2)):
Goods must be of merchantable quality when bought
from a seller dealing in such goods.
Case: Grant v. Australian Knitting Mills (1936) –
undergarments caused skin disease.
3. Sale by Description (Sec. 15):
Goods must correspond with their description.
4. Sale by Sample (Sec. 17):
Bulk must correspond with the sample, and be free from
latent defects.
5. Consent by Fraud or Misrepresentation (Sec. 19, ICA):
If the seller conceals defects or makes false statements,
the buyer can avoid the contract.
6. Usage of Trade:
Implied condition or warranty may arise from customary
trade practices.
Conclusion
The doctrine of Caveat Emptor under Section 16 promotes
buyer diligence, but its exceptions safeguard against unfair
practices by sellers. In modern commerce, courts increasingly
balance the principle with consumer protection laws,
21
ensuring that buyers are not left unprotected against defects
or misrepresentations beyond their reasonable ability to
detect.
11.Q. Rules for Transfer of Property in Goods
--- The transfer of property in goods refers to the passing of
ownership from the seller to the buyer. Under the Sale of
Goods Act, 1930, Sections 18 to 25 lay down the rules for
determining when this transfer takes place. The transfer of
property is crucial because it determines the passing of risk,
rights, and remedies between the parties in a contract of
sale.
1. Specific or Ascertained Goods (Sections 19–22):
 Section 19(1): Property passes when the parties intend
it to pass. Intention is gathered from the terms of the
contract, conduct, and circumstances.
 Sec. 20: If goods are in a deliverable state and the
contract is unconditional, property passes when the
contract is made.
 Sec. 21: If the seller must do something to put goods
into a deliverable state, property passes when that act is
done and the buyer is notified.
 Sec. 22: If goods need weighing, measuring, or testing
for price, property passes after such acts are done and
buyer informed.
Case: Rughunath Prasad v. Sarju Prasad, AIR 1924 All
666 – property passes when goods are in deliverable
state and agreed upon.
22
2. Unascertained or Future Goods (Section 18 & 23):
 Sec. 18: No property passes unless goods are
ascertained.
 Sec. 23: Property passes when goods of the agreed
description, in a deliverable state, are unconditionally
appropriated to the contract with mutual assent.
3. Goods Sent on Approval or “Sale or Return” (Section 24):
Property passes when:
 Buyer signifies approval, or
 Buyer adopts transaction by act (e.g., reselling goods), or
 Buyer retains goods beyond the fixed or reasonable
time.
4. Reservation of Right of Disposal (Section 25):
Seller can reserve ownership until conditions are fulfilled,
even if possession is transferred.
Conclusion
The Sale of Goods Act provides clear rules for when property
in goods passes from seller to buyer, focusing on intention,
ascertainment, and the goods being in a deliverable state.
These rules ensure clarity in commercial transactions, as the
passing of ownership determines not only who bears the risk
but also who holds enforceable rights over the goods.

23
12.Q.Rights of an Unpaid Seller – Including Lien and
Stoppage in Transit
--- An unpaid seller is defined in Section 45 of the Sale of
Goods Act, 1930 as a seller to whom the whole price has not
been paid, or a conditional payment (like a cheque) has
failed. The Act grants such a seller specific rights to protect
his interests. These include rights against the goods (like lien,
stoppage in transit, resale) and against the buyer personally
(like suing for price or damages).
Rights Against the Goods (Sections 46–54):
1. Right of Lien (Sections 47–49):
o The unpaid seller in possession of goods may retain
them until payment, if:
(a) No credit term is fixed,
(b) Credit period has expired, or
(c) Buyer becomes insolvent.
o Lien is lost if goods are delivered to a carrier
without reserving disposal rights.
Case: Ram Narain v. Simla Banking Co., AIR 1956 HP
1 – lien continues until payment.
2. Right of Stoppage in Transit (Sections 50–52):
o If goods are in transit and the buyer becomes
insolvent, the seller can regain possession before
delivery to the buyer.
o Transit ends when buyer or his agent takes delivery
from carrier.

24
 Case: Great Indian Peninsula Railway Co. v.
Hanmandas, ILR 14 Bom 453 – stoppage valid
before transit ended.
3. Right of Resale (Section 54):
o Available if goods are perishable, buyer delays
payment unreasonably, or if expressly reserved in
the contract.
Rights Against the Buyer Personally:
 Suit for Price (Section 55): If ownership has passed and
price is unpaid.
 Suit for Damages (Section 56): If buyer wrongfully
refuses to accept goods.
 Suit for Interest (Section 61): If agreed or under court
discretion.
Conclusion
The unpaid seller’s rights under the Sale of Goods Act balance
the buyer’s interest in receiving goods with the seller’s right
to secure payment. Lien protects possession until payment,
while stoppage in transit safeguards goods in transit upon
buyer’s insolvency. These rights ensure that sellers are not
left uncompensated when buyers default, thereby
maintaining fairness in commercial transactions.

25
13.Q. Cases in Which the Remedy of Specific
Performance is Enforceable
--- Specific performance is an equitable remedy provided
under Sections 10–14 of the Specific Relief Act, 1963,
compelling a party to perform their contractual obligations
rather than merely paying damages. This remedy is granted
when monetary compensation is inadequate, particularly in
contracts involving unique goods or immovable property.
Courts exercise discretion in granting this remedy, ensuring
fairness and preventing undue hardship.
When Specific Performance is Enforceable (Section 10, post-
2018 amendment):
1. When there exists no standard for ascertaining actual
damage:
o Applicable where subject matter is unique and
cannot be easily valued in money.
Example: Sale of rare artwork.
Case: Adcon Electronics Pvt. Ltd. v. Daulat, (2001) 7
SCC 698 – specific performance granted for unique
property.
2. When monetary compensation is inadequate:
o Most common in contracts for sale of immovable
property, as each piece of land is unique.
Case: K.S. Vidyanadam v. Vairavan, AIR 1997 SC
1751 – courts grant relief if contract terms are fair.

26
 3. Contracts involving immovable property (Section 10
Explanation):
o Presumption that breach cannot be adequately
relieved by damages.
4. Contracts involving goods that are not easily obtainable
in the market:
o Unique goods, rare commodities, heirlooms, or
items with special value to the plaintiff.
5. Performance of Continuous Duty (Section 12):
o If part performance is possible and unperformed
part is small and compensable.
6. Enforceable against Companies (Section 19):
o Binding on company successors if assets are
transferred with notice of contract.
When Courts May Refuse Specific Performance (Section 14):
 Contracts involving personal qualifications (e.g.,
employment).
 Contracts dependent on continuous supervision.
 Contracts with determinable nature.
Conclusion
Specific performance is enforceable when monetary
compensation cannot provide an adequate remedy,
particularly in contracts for immovable property, unique
goods, or where damages are unascertainable. Guided by
Sections 10–14 of the Specific Relief Act, the courts ensure
27
that granting such a remedy serves justice, prevents unjust
enrichment, and enforces the sanctity of contracts without
causing undue hardship to either party.

14.Q. Legal Provisions Relating to the Recovery of

Immovable Property
--- The Specific Relief Act, 1963 provides the legal framework
for the recovery of possession of immovable property. Under
Sections 5 to 8, the Act outlines who can recover possession,
the manner of recovery, and the protection available to
lawful possessors. The objective is to prevent unlawful
dispossession and ensure that only persons with legal
entitlement or possession can reclaim or retain immovable
property.
1. Recovery by Person Entitled to Possession (Section 5):
 A person with ownership title or the right to possession
can recover the property through a suit for possession.
 The suit must be filed in accordance with the Code of
Civil Procedure, 1908.
 Example: An owner suing a tenant holding over after
lease expiry.
 Case: Somnath Berman v. Dr. S.P. Raju, AIR 1970 SC 846 –
ownership right prevails over unlawful possession.
2. Recovery by Possessor Against Unlawful Dispossession
(Section 6):

28
  A person in lawful possession cannot be dispossessed
without due process, even if the other party has a better
title.
 No suit can be filed:
(a) After six months from dispossession.
(b) Against the Government.
 Case: Krishna Ram Mahale v. Shobha Venkat Rao, AIR
1989 SC 2097 – possession is protected even without
ownership if lawful.
3. Special Provisions for Tenants and Licensors:
 Tenants cannot be evicted without due process, even
after the tenancy period expires, unless lawful eviction
proceedings are followed.
 Licensees may claim possession until the license is
legally revoked.
4. Recovery of Specific Movable Property (Section 7 & 8):
 Though primarily about immovable property, the Act
also provides recovery rights for specific movable
property under certain conditions.
Conclusion
The Specific Relief Act, 1963 protects both ownership rights
and lawful possession of immovable property. Sections 5 and
6 ensure that no one is unlawfully dispossessed and that
recovery is possible only through proper legal channels.
These provisions uphold the rule of law, deter self-help

29
remedies, and provide a fair mechanism for resolving
disputes over immovable property.
It looks like your question “Discuss temporary with examples”
might be incomplete — I’m assuming you meant “Discuss
temporary injunction with examples” since this is a common
exam topic under the Specific Relief Act, 1963 and Civil
Procedure Code, 1908.

15.Q. Temporary Injunction – Meaning, Provisions, and

Examples
--- A temporary injunction is a provisional remedy granted
by a court to maintain the status quo of the subject matter of
a dispute until the case is finally decided. Governed by
Section 37 of the Specific Relief Act, 1963 and Order XXXIX
Rules 1 and 2 of the Code of Civil Procedure, 1908, its
purpose is to prevent irreparable harm and preserve rights
during litigation.
Nature and Purpose
 Temporary injunctions are interim in nature.
 They can be granted at any stage of a suit.
 They ensure that no party suffers irreparable loss during
the pendency of the case.
When Granted – Order XXXIX, Rule 1 CPC:
The court may grant a temporary injunction when:

30
 1. Property in dispute is in danger of being wasted,
damaged, or alienated.
2. The defendant threatens to remove or dispose of
property to defraud creditors.
3. The defendant threatens to dispossess the plaintiff or
cause injury to the property.
Conditions for Granting Temporary Injunction:
Courts apply three main tests:
1. Prima facie case – The plaintiff shows a valid legal claim.
2. Balance of convenience – Greater hardship would be
caused by refusing the injunction.
3. Irreparable injury – Damage cannot be adequately
compensated in money.
Case: Dalpat Kumar v. Prahlad Singh, AIR 1993 SC 276 –
laid down these three essentials.
Duration:
A temporary injunction continues until a specified date or
until further orders of the court, and ceases on the disposal
of the suit.
Examples:
 Preventing the demolition of a disputed property until
the ownership dispute is resolved.
 Stopping the sale of unique goods in a contractual
dispute.

31
  Restricting a business partner from using the firm’s
trademark during a pending partnership dissolution suit.
Conclusion
A temporary injunction is a crucial equitable remedy to
prevent injustice during litigation. By preserving the status
quo, it ensures the final judgment is effective and
meaningful. Governed by Section 37 of the Specific Relief Act
and Order XXXIX CPC, its grant depends on a prima facie case,
balance of convenience, and irreparable injury, safeguarding
fairness between the parties.
16.Q. Permanent Injunction – Meaning, Provisions, and
Examples
--- A permanent injunction is a final court order restraining a
party from committing an act that infringes upon the rights of
another. It is governed by Section 37(2) and Section 38 of the
Specific Relief Act, 1963. Unlike a temporary injunction,
which is provisional, a permanent injunction is granted after a
full trial and becomes a final determination of the parties’
rights.
Nature and Purpose
 Permanent injunctions are issued by way of a decree
after hearing both parties and examining evidence.
 They permanently prohibit a defendant from doing
something that violates the plaintiff’s rights.
 The objective is to provide complete and lasting relief
where damages are inadequate.

32
When Granted – Section 38:
A permanent injunction may be granted:
1. To prevent breach of an obligation existing in favor of
the plaintiff, whether express or implied.
2. When the defendant invades or threatens to invade the
plaintiff’s right to property, in cases where:
o Compensation is not adequate relief.
o The injury is such that it cannot be quantified.
o Property is unique or has special value.
o The defendant is a trustee of the property.
Illustrations and Examples:
 Restraining a person from building on land that rightfully
belongs to another.
 Stopping the misuse of a trademark in violation of
intellectual property rights.
 Prohibiting a former employee from revealing trade
secrets.
Case Laws:
 Kuldip Singh v. Subhash Chander Jain, AIR 2000 SC 1410
– injunction granted to restrain construction that
violated building laws.
 Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC
545 – upheld injunction to enforce a negative covenant
in a franchise agreement.

33
Difference from Temporary Injunction:
 Temporary injunction preserves the status quo during
trial; permanent injunction conclusively determines
rights after trial.
 Temporary injunction is interim in nature; permanent
injunction is final.
Conclusion
A permanent injunction is a decisive remedy granted after
the merits of a case are fully examined, ensuring the
plaintiff’s rights are protected indefinitely. Under Section 38
of the Specific Relief Act, it is awarded when monetary
damages are inadequate, the injury is irreparable, and justice
demands a lasting prohibition on the defendant’s wrongful
acts.

17.Q. Grant of Perpetual Injunctions

--- A perpetual injunction is a form of permanent relief
granted by the court to prevent a party from committing an
act that infringes upon the legal rights of another. It is
governed by Sections 37(2) and 38 of the Specific Relief Act,
1963. Unlike temporary injunctions, which are interim
measures, a perpetual injunction is granted by way of a final
decree after the case is fully heard and decided on merits.
Nature of Perpetual Injunctions
 Granted permanently to restrain the defendant from
doing a specific act.

34
  Operates as a final adjudication of the parties’ rights.
 Enforceable like any other decree of the court.
When Granted – Section 38 of the Specific Relief Act, 1963:
The court may grant a perpetual injunction:
1. To prevent the breach of an obligation existing in favor
of the plaintiff. This includes contractual and statutory
obligations.
2. When the defendant invades or threatens to invade the
plaintiff’s right to property in cases where:
o Compensation is not adequate relief.
o There is no standard for ascertaining the actual
damage caused.
o The property is unique or has special value to the
plaintiff.
o The defendant is a trustee of the property.
Examples:
 Stopping a neighbor from encroaching on private land.
 Preventing unauthorized use of a registered trademark.
 Restraining the publication of confidential trade
information.
Case Laws:
 Kuldip Singh v. Subhash Chander Jain, AIR 2000 SC 1410
– injunction granted to stop construction violating laws.

35
  Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC
545 – upheld injunction to enforce negative covenants in
contracts.
Difference from Temporary Injunction:
 Temporary injunction is provisional, granted during
pendency of the suit.
 Perpetual injunction is final, granted as a decree after
trial.
Conclusion
A perpetual injunction under Section 38 of the Specific Relief
Act is a final protective remedy aimed at preventing
continuous or threatened violation of rights, particularly
where monetary compensation is inadequate. It ensures
lasting protection of legal and property rights and is a crucial
equitable remedy in situations demanding permanent
restraint on wrongful acts.
18.Q . Temporary and Permanent Injunctions –
Meaning, Provisions, and Examples
--- Introduction
The law relating to injunctions in India is governed by the
Specific Relief Act, 1963, particularly Sections 36 to 42. An
injunction is a judicial order restraining a person from doing
(prohibitory) or compelling a person to do (mandatory) a
particular act. Temporary injunctions are interim in nature
and granted to maintain the status quo during litigation,

36
while permanent injunctions are final orders granted as part
of the decree after a full trial.
1. Temporary Injunctions
Statutory Provision:
 Section 37(1) of the Specific Relief Act and Order XXXIX
Rules 1 and 2 of the Code of Civil Procedure, 1908.
 Granted at any stage of the suit to prevent irreparable
harm before the final disposal.
 Purpose:
 Maintain the status quo of the property or subject
matter.
 Prevent actions that may defeat the outcome of the suit.
Conditions for Grant (Dalpat Kumar v. Prahlad Singh, AIR
1993 SC 276):
1. Prima facie case – The plaintiff has a credible legal claim.
2. Balance of convenience – Greater hardship would result
if injunction is refused.
3. Irreparable injury – Damage cannot be adequately
compensated in money.
Example:
Stopping a party from demolishing a disputed building until
ownership is decided.
2. Permanent Injunctions
Statutory Provision:
37
  Section 37(2) and Section 38 of the Specific Relief Act.
 Granted by way of a final decree after hearing the
matter on merits.
When Granted (Sec. 38):
1. To prevent breach of an obligation existing in favour of
the plaintiff.
2. To protect property rights where:
o Compensation is not an adequate remedy.
o Damage is unquantifiable.
o The property is unique.
o The defendant is a trustee of the property.
Case Law:
 Kuldip Singh v. Subhash Chander Jain, AIR 2000 SC 1410
– Permanent injunction to prevent construction contrary
to building laws.
 Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC
545 – Upheld permanent injunction enforcing negative
covenants.
Example:
Restraining a company from using a trademark identical to
another’s registered mark to prevent confusion and protect
goodwill.

38
3. Difference Between Temporary and Permanent
Injunctions
Aspect Temporary Injunction Permanent Injunction
Interim; until suit
Duration Final; perpetual effect
disposal
Stage Any stage of
After final judgment
Granted proceedings
Final determination of
Purpose Maintain status quo
rights
Conclusion
Temporary and permanent injunctions serve distinct but
complementary purposes in protecting legal rights. While
temporary injunctions are preventive measures to avoid
irreparable harm during trial, permanent injunctions provide
lasting relief after the court has determined the parties’
rights. Together, they ensure justice by safeguarding interests
both before and after the final decision.

19.Q . Grant of Perpetual Injunctions

--- Introduction
The concept of perpetual injunctions is dealt with in Sections
37(2) and 38 of the Specific Relief Act, 1963. A perpetual
injunction is a final order of the court, granted by way of a
decree after the merits of the case are fully heard. Unlike
temporary injunctions, which are provisional and operative

39
during the pendency of a suit, perpetual injunctions
permanently restrain the defendant from committing an act
that would infringe upon the plaintiff’s rights.
Nature and Purpose
A perpetual injunction is granted to ensure permanent
protection of the plaintiff’s legal or equitable rights. It is
usually granted in cases where monetary compensation is
either inadequate or cannot be measured with precision,
and where the injury is continuous or likely to be repeated.
Statutory Provision – Section 38 of the Specific Relief Act,
1963
Under Section 38, the court may grant a perpetual injunction
in the following situations:
1. To Prevent Breach of an Obligation:
o When the defendant is bound by an obligation,
contractual or otherwise, in favour of the plaintiff.
2. To Protect Property Rights:
o Where the defendant invades or threatens to
invade the plaintiff’s right to property and:
 Compensation is not an adequate relief.
 There is no standard to ascertain the actual
damage.
 The property is of a special or unique nature.
 The defendant is a trustee of the property.
Illustrations
40
  Stopping the unauthorized construction on another’s
land.
 Restraining infringement of a registered trademark.
 Preventing the publication of confidential business
information.
Case Laws
1. Kuldip Singh v. Subhash Chander Jain, AIR 2000 SC 1410
o Court granted a perpetual injunction to stop
construction in violation of municipal laws.
2. Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC
545
o Perpetual injunction upheld to enforce negative
covenants in a franchise agreement.
Difference from Temporary Injunction
 Temporary Injunction: Provisional, granted during the
pendency of proceedings to maintain the status quo.
 Perpetual Injunction: Final relief, granted after hearing
and deciding the case on merits.
Conclusion
A perpetual injunction under Sections 37(2) and 38 of the
Specific Relief Act is a permanent protective measure that
restrains a defendant from violating the plaintiff’s rights in
the future. It is granted only after thorough examination of
the facts and when damages are inadequate to remedy the

41
harm. This remedy ensures long-term enforcement of legal
rights and prevents recurring violations.

20.Q.Difference Between Bailment and Pledge

--- Statutory Basis
 Bailment: Defined under Section 148 of the Indian
Contract Act, 1872 – delivery of goods for a specific
purpose, to be returned after the purpose is completed.
 Pledge: Defined under Section 172 of the Indian
Contract Act, 1872 – bailment of goods as security for
payment of a debt or performance of a promise.
Comparison Table
Basis Bailment Pledge
Delivery of goods for
Delivery of goods as
safekeeping,
security for repayment
Purpose transport, repair, or
of debt or fulfillment of
other lawful
obligation.
purposes.
May or may not Always involves
involve consideration consideration, usually
Consideration
(e.g., gratuitous in the form of a loan or
bailment). credit facility.
Bailee may use goods
Right to Use Pawnee (pledgee) has
only if permitted by
Goods no right to use goods.
the bailor.

42
Basis Bailment Pledge
Pledgee can sell goods
Right to Sell Bailee has no right to on default by pawnor,
Goods sell goods. after giving notice (Sec.
176).
Ownership remains
with the pawnor;
Ownership remains
Ownership pledgee has a special
with the bailor.
interest until
repayment.
Leaving clothes with a Pledging gold
Example
dry cleaner. ornaments for a loan.
Rights of Parties
 Bailee: Right to lien (Sec. 170–171), right to
compensation for loss caused by bailor’s fault.
 Pledgee: Right to retain goods until debt is paid, right to
sell goods after due notice on default (Sec. 176).
Case Law
 Bailment: Atul Mehra v. Bank of Maharashtra – bailee
liable for negligence.
 Pledge: Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 –
pledgee must return goods if debt is repaid; cannot
retain without debt subsisting.
Conclusion

43
Bailment is a broader concept, covering all deliveries of
goods for a purpose, while pledge is a special type of
bailment where goods are delivered as security for
repayment of a debt. The key difference lies in the pledgee’s
legal right to sell goods on default, a power the bailee does
not have.

21.Q.Difference Between Indemnity and Guarantee

--- Statutory Basis
 Indemnity: Defined under Section 124 of the Indian
Contract Act, 1872 – a contract where one party
promises to save the other from loss caused by the
promisor or another person.
 Guarantee: Defined under Section 126 of the Indian
Contract Act, 1872 – a contract to perform the promise
or discharge the liability of a third person in case of their
default.
Comparison Table
Basis Indemnity Guarantee
Two parties – Three parties – Creditor,
Number of
Indemnifier and Principal Debtor, and
Parties
Indemnified. Surety.

Number of Only one contract Three contracts – between

Contracts between creditor & principal debtor,
indemnifier and creditor & surety, and

44
Basis Indemnity Guarantee
indemnified. implied contract between
surety & principal debtor.
Liability of Liability of surety is
Nature of
indemnifier is secondary, arising only on
Liability
primary. principal debtor’s default.
To ensure performance of a
To protect against
Purpose promise or repayment of a
loss.
debt.
Liability arises
only on Liability arises when the
Contingency
occurrence of a principal debtor defaults.
loss.
Anything done for the
benefit of the principal
For the benefit of
Consideration debtor is sufficient
indemnifier.
consideration for the
surety (Sec. 127).
Insurance Bank guarantee for
Example
contracts. repayment of a loan.

Case Laws
 Indemnity: Gajanan Moreshwar v. Moreshwar Madan,
AIR 1942 Bom 302 – indemnified party can compel
indemnifier to meet liability before actual loss.

45
  Guarantee: Bank of Bihar v. Damodar Prasad, AIR 1969
SC 297 – surety’s liability is immediate on principal
debtor’s default.
Conclusion
An indemnity contract involves two parties where one
safeguards the other from loss, with liability being primary. A
guarantee involves three parties, ensuring performance of a
third party’s obligation, with the surety’s liability being
secondary. The distinction lies mainly in the number of
parties, nature of liability, and the triggering event for
enforcing the obligation.

22.Q. Difference Between Partnership and Hindu Undivided

Family (HUF)
--- Statutory Basis
 Partnership: Defined under Section 4 of the Indian
Partnership Act, 1932 – a relation between persons who
agree to share profits of a business carried on by all or
any of them acting for all.
 HUF: A Hindu Undivided Family business is governed by
Hindu Law and Section 2(31) of the Income Tax Act,
1961; it arises by status and not by agreement.

Comparison Table
Basis Partnership HUF

46
Basis Partnership HUF
Created by an Created automatically by
Formation agreement between status of a Hindu joint
partners. family.
Governing Indian Partnership Hindu Law and relevant
Law Act, 1932. tax laws.
Any person
Only members of a
(including non-
Membership Hindu joint family can be
Hindus) can be a
part of HUF.
partner.
All partners may
Managed by Karta (head
participate;
Management of family) with supreme
management by
authority.
mutual consent.
Karta has unlimited
Partners have
liability; coparceners
unlimited liability,
Liability have liability limited to
including personal
their share in the HUF
assets.
property.
Membership is by birth
New partner can join
Entry of in the family (or by
only with consent of
Members marriage in case of
all partners.
females).
Dissolved on death,
Continuity Continues despite death
insolvency, or
of a member; only
retirement unless
47
Basis Partnership HUF
agreed otherwise. partition ends HUF.
Based on share in joint
Profit Sharing Based on agreement.
family property.
Examples
 Partnership: Two friends start a textile business by
agreement, sharing profits equally.
 HUF: A Hindu family running an ancestral grocery
business under the Karta’s control.
Case Law
 Lachhman Das v. CIT, AIR 1948 PC 8 – HUF is a separate
taxable entity under Income Tax law.
 Cox v. Hickman (1860) 8 HLC 268 – Defined essential
elements of partnership.
Conclusion
A partnership is a contractual relationship for profit-making,
whereas an HUF is a family business unit created by status
under Hindu law. Key distinctions lie in their formation,
management, liability, membership, and continuity. While
partnership is flexible and open to all, HUF is limited to
Hindus and based on joint family property.

48
23.Q. Difference Between Sale and Agreement to Sell
--- Statutory Basis
Both concepts are defined under Section 4 of the Sale of
Goods Act, 1930.
 Sale: A contract where the seller transfers the ownership
of goods to the buyer for a price immediately.
 Agreement to Sell: A contract where the seller agrees to
transfer the ownership of goods at a future time or on
fulfillment of a condition.
Comparison Table
Basis Sale Agreement to Sell
Ownership passes Ownership passes at a
Transfer of
immediately from seller future date or on
Ownership
to buyer. condition fulfillment.
Nature of
An executed contract. An executory contract.
Contract
Risk passes to buyer
immediately after sale, Risk remains with
Risk even if goods are in seller until ownership
seller’s possession (Sec. is transferred.
26).
Seller can sue for the Only damages can be
Remedies price, and buyer can sue claimed; specific
for Breach for damages and performance may be
recovery. sought.

49
Basis Sale Agreement to Sell
If buyer becomes
If buyer becomes
insolvent, seller must
insolvent, seller can
Insolvency deliver goods even if
refuse delivery unless
price unpaid (subject to
price is paid.
lien).
Immediate purchase of a Agreement to buy a
Example car with payment and car after one month
delivery. upon loan approval.
Case Law
 Gauri Shankar v. Chandra Kiran, AIR 1960 All 634 –
clarified that sale transfers ownership instantly, while
agreement to sell defers it.
 State of Gujarat v. Ramanlal & Co. – emphasized
difference in passing of property and risk between the
two concepts.
Key Distinction
The central difference lies in when the ownership passes:
 In sale, rights and risks shift instantly to the buyer.
 In agreement to sell, the seller retains ownership and
risk until the agreed date or condition is fulfilled.
Conclusion
A sale is an immediate transfer of ownership for a price,
making it a concluded contract, while an agreement to sell is
a promise to transfer ownership in the future or upon a
50
condition, making it an executory contract. This difference
affects risk allocation, remedies, and the parties’ rights upon
insolvency or breach.

24.Q. Difference Between Bailment and Pledge

--- Statutory Basis
 Bailment: Defined under Section 148 of the Indian
Contract Act, 1872 – delivery of goods by one person
(bailor) to another (bailee) for a specific purpose, upon a
contract that they shall be returned once the purpose is
accomplished.
 Pledge: Defined under Section 172 of the Indian
Contract Act, 1872 – bailment of goods as security for
payment of a debt or performance of a promise.
Comparison Table
Basis Bailment Pledge
Delivery of goods for Delivery of goods as
safekeeping, security for repayment
Purpose
transport, repair, or of a debt or fulfillment
other lawful purposes. of an obligation.
Bailee may use goods
Right to Use Pledgee (pawnee) has
only if authorized by
Goods no right to use goods.
the bailor.
Right to Sell Bailee cannot sell Pledgee can sell goods
51
Basis Bailment Pledge
Goods goods; must return on default by pawnor
them after purpose is after giving due notice
served. (Sec. 176).
May or may not Always for
involve consideration consideration in the
Consideration
(e.g., gratuitous form of a loan or
bailment). obligation.
Ownership remains
Ownership remains
with pawnor; pledgee
Ownership with bailor; bailee has
has a special interest
possession only.
till repayment.
Pledging gold
Leaving clothes at a
Example ornaments for a bank
dry cleaner’s shop.
loan.
Case Law
 Bailment: Atul Mehra v. Bank of Maharashtra – bailee
held liable for negligence in safeguarding goods.
 Pledge: Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 –
pledgee must return goods on repayment; cannot retain
without a subsisting debt.
Key Distinction
While all pledges are bailments, not all bailments are pledges.
Pledge is a special category of bailment where goods are
delivered strictly as security for a debt, accompanied by the

52
pledgee’s statutory right to sell on default, which a bailee
does not have.
Conclusion
Bailment is a broad concept involving delivery of goods for a
specific lawful purpose, whereas pledge is a special type of
bailment created as security for repayment or performance.
The legal distinction is most apparent in the rights granted to
the pledgee—especially the right to sell—which is absent in
an ordinary bailment.
25.Q. Difference Between Agent and Servant
Statutory Basis
 Agent: Defined under Section 182 of the Indian
Contract Act, 1872 – a person employed to do any act
for another or to represent another in dealings with
third parties.
 Servant: Not expressly defined in the Indian Contract
Act; under common law, a servant is a person employed
by a master to do work under the master’s direct control
and supervision.
Comparison Table
Basis Agent Servant
Represents the Works under the
principal and can master’s control;
Authority create contractual generally cannot bind
relations with third the master in
parties on the contractual relations
53
Basis Agent Servant
principal’s behalf. (unless expressly
authorized).
Relationship of Relationship of
Relationship
principal and agent. master and servant.
Agent has discretion in Servant works under
how to perform tasks, direct control and
Control subject to the supervision of the
principal’s master in both
instructions. manner and method.
Servant cannot
Agent may delegate
delegate work unless
Delegation authority if permitted
authorized by the
under law (Sec. 190).
master.
Servant does not
Agent acts as a
represent master in
Representation representative of the
legal capacity unless
principal in law.
specially authorized.
Usually paid
Remuneration Paid wages or salary.
commission or fees.
A broker negotiating A driver employed by
Example contracts for a a company to drive its
company. vehicles.

54
Case Law
 Agent: P. Krishna Bhatta v. Mundila Ganapathi Bhatta –
agent acts on behalf of principal and can bind him in
transactions.
 Servant: Lakshminarayan Ram Gopal & Son Ltd. v.
Hyderabad Govt., AIR 1954 SC 364 – servant works
under complete control of the master.
Key Distinction
An agent’s role is representative and independent within the
scope of authority, binding the principal in legal dealings. A
servant’s role is subordinate and controlled, primarily to
perform work without creating legal obligations for the
master unless expressly authorized.
Conclusion
The primary difference lies in scope of authority and level of
control. An agent operates with a degree of independence
and legal authority to bind the principal, whereas a servant
functions under close supervision without inherent authority
to contract on the master’s behalf.

55
26.Q. Define a Contract of Guarantee. Distinguish
between a Contract of Indemnity and a Contract of
Guarantee
--- Introduction
A Contract of Guarantee is defined under Section 126 of the
Indian Contract Act, 1872 as a contract to perform the
promise or discharge the liability of a third person in case of
their default. It involves three parties – the creditor, the
principal debtor, and the surety. The surety gives assurance
to the creditor that if the principal debtor fails to fulfill the
obligation, the surety will perform it.
A Contract of Indemnity, under Section 124, is an agreement
where one party promises to save the other from loss caused
by the promisor or another person.
Contract of Guarantee – Key Features
1. Three parties: Principal debtor, creditor, and surety.
2. Three contracts:
o Between principal debtor and creditor.
o Between surety and creditor.
o Implied contract between surety and principal
debtor.
3. Liability: Surety’s liability is secondary; it arises only on
default of the principal debtor.

56
 4. Consideration: Anything done for the benefit of the
principal debtor is sufficient consideration for the surety
(Section 127).
Example: If A takes a loan from B, and C promises to repay if
A defaults, C is the surety, A is the principal debtor, and B is
the creditor.
Difference Between Indemnity and Guarantee
Basis Indemnity (Sec. 124) Guarantee (Sec. 126)
Two – indemnifier Three – principal debtor,
Parties
and indemnified. creditor, and surety.
Contracts One contract. Three contracts.
Primary liability on
Liability Secondary liability on surety.
indemnifier.
To protect against To ensure performance of a
Purpose
loss. third person’s obligation.
Loss must occur Default must occur before
Trigger
before claim. claim.
Bank guarantee for
Example Fire insurance policy.
repayment of loan.
Case Laws
 Gajanan Moreshwar v. Moreshwar Madan, AIR 1942
Bom 302 – In indemnity, liability can be enforced before
actual loss if indemnified party has become liable.

57
  Bank of Bihar v. Damodar Prasad, AIR 1969 SC 297 –
Surety’s liability begins immediately upon default of
principal debtor; creditor need not exhaust remedies
against debtor first.
Conclusion
A contract of guarantee provides security to creditors by
making a surety liable on default of the principal debtor,
whereas a contract of indemnity focuses on protection from
loss. The distinction lies in the number of parties, nature of
liability, and the event triggering the obligation. Both are
important commercial tools ensuring trust in transactions,
but they serve different legal purposes under the Indian
Contract Act.
27.Q. Nature and Extent of a Surety’s Liability and
Modes of Discharge
--- Introduction
A surety’s liability is governed by Sections 128 to 147 of the
Indian Contract Act, 1872. According to Section 128, the
liability of the surety is co-extensive with that of the principal
debtor unless otherwise provided by the contract. This means
the surety is liable to the same extent as the principal debtor
for the debt or obligation guaranteed. However, the liability
arises only on the default of the principal debtor.
Nature of Surety’s Liability
1. Co-extensive Liability (Sec. 128)

58
 o The surety is liable for the entire debt or obligation
of the principal debtor unless the contract limits it.
o Case: Bank of Bihar v. Damodar Prasad, AIR 1969
SC 297 – Surety’s liability arises immediately on
debtor’s default; creditor need not first sue the
principal debtor.
2. Secondary Liability
o Surety’s liability is secondary, contingent upon the
principal debtor’s default.
3. Immediate Liability
o Once default occurs, the creditor can directly sue
the surety without exhausting remedies against the
principal debtor.
4. Limitation by Agreement
o The surety may limit his liability by specifying an
amount or duration in the guarantee agreement.
o

Modes of Discharge of Surety (Secs. 130–139)

1. By Revocation of Guarantee (Sec. 130–131)
o For future transactions, the surety may revoke by
notice.
o Death of surety automatically revokes a continuing
guarantee for future dealings.
2. By Performance

59
 o If the principal debtor fulfills the obligation, the
surety is discharged.
3. By Variance in Contract (Sec. 133)
o Any change in contract terms without surety’s
consent discharges him.
o Case: M.S. Anirudhan v. Thomco’s Bank Ltd. –
Unconsented variation releases surety.
4. By Release of Principal Debtor (Sec. 134)
o If creditor releases principal debtor or acts to
discharge him, the surety is also discharged.
5. By Creditor’s Act or Omission (Sec. 139)
o If the creditor’s conduct impairs the surety’s
eventual remedy against the principal debtor.
6. By Invalidation
o Guarantee obtained by misrepresentation (Sec.
142) or concealment (Sec. 143) is invalid.
Example
If A guarantees B’s loan from C, promising to repay if B
defaults, A’s liability is equal to B’s. If B repays fully, A is
discharged; if C alters loan terms without A’s consent, A is
also discharged.
Conclusion
A surety’s liability is equal to and dependent upon the
principal debtor’s liability but subject to any contractual
limitations. The Indian Contract Act provides multiple
60
safeguards for the surety, such as discharge on contract
variation or creditor’s fault. This balance ensures fairness
between commercial security for creditors and protection for
sureties.
28.Q. Distinguish between a Partnership Firm and a
Company
--- Introduction
A Partnership Firm is defined under Section 4 of the Indian
Partnership Act, 1932 as a relationship between persons who
agree to share the profits of a business carried on by all or
any of them acting for all. A Company, as per Section 2(20) of
the Companies Act, 2013, means a company incorporated
under this Act or any previous company law, having a
separate legal personality distinct from its members. Both are
forms of business organizations but differ fundamentally in
legal status, liability, management, and compliance.

Key Differences Between Partnership Firm and Company

Basis Partnership Firm Company
No separate legal Separate legal entity
Legal Status entity distinct from distinct from
partners. shareholders.
Governing Indian Partnership Act,
Companies Act, 2013.
Law 1932.
Formation Formed by agreement Formed by

61
Basis Partnership Firm Company
between partners; incorporation under
registration is optional the Companies Act;
(but non-registration registration is
limits rights under Sec. compulsory.
69).
Minimum: 2 for private
Minimum 2; maximum company, 7 for public
Minimum 50 (as per Companies company; maximum:
Members Rules, 2014 for 200 for private
partnership). company, unlimited for
public.
Unlimited liability of
Limited liability of
partners; personal
Liability members to extent of
assets can be used to
unpaid share capital.
settle debts.
Managed by partners Managed by a board of
Management directly; all partners directors elected by
are agents of the firm. shareholders.
Shares are freely
Transfer of Restricted; requires transferable in public
Interest consent of all partners. companies (restricted
in private companies).

Dissolved on death, Perpetual succession;

Continuity insolvency, or unaffected by changes
retirement of a partner in membership.
62
Basis Partnership Firm Company
unless otherwise
agreed.
Can raise funds by
Limited to partners’
Raising issuing shares,
contributions or
Capital debentures, or public
borrowings.
deposits.
No compulsory audit
Audit Statutory audit is
unless required by tax
Requirement mandatory.
laws.

Examples
 Partnership: A and B form a firm to run a garment shop.
 Company: ABC Pvt. Ltd. incorporated to operate a chain
of restaurants.
Case Law
 Cox v. Hickman (1860) 8 HLC 268 – clarified that sharing
of profits alone does not constitute partnership without
mutual agency.
 Salomon v. Salomon & Co. Ltd. [1897] AC 22 –
established the principle of separate legal personality of
a company.

63
  Conclusion
A partnership is a mutual agency-based business without a
distinct legal identity, where partners have unlimited liability.
A company is a separate legal entity with limited liability and
perpetual succession. While partnerships are easier to form
and operate, companies offer greater fundraising capacity,
investor protection, and continuity, making them more
suitable for larger enterprises.

29.Q. Who is an Unpaid Seller? Rights under the Sale

of Goods Act, 1930
--- Introduction
The term unpaid seller is defined under Section 45 of the
Sale of Goods Act, 1930. A seller of goods is deemed to be an
unpaid seller when:
1. The whole of the price has not been paid or tendered, or
2. A bill of exchange or other negotiable instrument given
as conditional payment has been dishonoured.
The concept safeguards sellers by granting them certain
rights to recover goods or price when the buyer defaults.
When a Seller Becomes “Unpaid”
 Price wholly unpaid.
 Partly paid but balance remains due.
 Payment by cheque or bill dishonoured.

64
Example: If A sells goods to B for ₹1,00,000, and B pays
₹50,000 but fails to pay the balance, A is an unpaid seller.
Rights of an Unpaid Seller
A. Rights Against the Goods (Secs. 46–54)
1. Right of Lien (Sec. 47–49)
o Retain possession of goods until payment is made.
o Lost if goods are delivered to carrier without
reserving right of disposal.
o Case: Valpy v. Gibson – seller can retain goods until
full payment.
2. Right of Stoppage in Transit (Sec. 50–52)
o If buyer becomes insolvent, seller can resume
possession while goods are in transit.
o Transit ends when buyer or his agent takes delivery.
o Case: Schotsmans v. Lancashire & Yorkshire Railway
Co. – stoppage possible only before buyer gets
possession.
3. Right of Resale (Sec. 54)
o Seller can resell goods if buyer defaults, especially
in perishable goods or when notice is given.
B. Rights Against the Buyer Personally (Sec. 55–61)
1. Suit for Price (Sec. 55) – if ownership has passed and
buyer fails to pay.
2. Suit for Damages for Non-Acceptance (Sec. 56).
65
 3. Suit for Damages for Repudiation (Sec. 60) – in
anticipatory breach.
4. Suit for Interest (Sec. 61) – if provided by contract or
usage.
Case Law
 Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 – rights of
lien and stoppage in transit are statutory and can be
enforced against buyer’s insolvency.
 M/S Karsandas H. Thacker v. M/S Saran Engineering Co.,
AIR 1965 SC 1981 – explained the scope of an unpaid
seller’s right to resell goods.
Conclusion
An unpaid seller under the Sale of Goods Act enjoys dual
protection: rights against the goods (lien, stoppage, resale)
and rights against the buyer personally (suit for price,
damages, interest). These provisions strike a balance
between the rights of sellers to secure payment and buyers’
commercial interests, ensuring fairness in trade transactions.

30.Q. Guarantee – Meaning, Revocation, and

Discharge
--- Introduction
A continuing guarantee is defined under Section 129 of the
Indian Contract Act, 1872 as a guarantee which extends to a
series of transactions. Unlike a specific guarantee (which

66
applies to a single debt or transaction), a continuing
guarantee remains in force for future dealings until it is
revoked. It ensures creditors have continuous assurance for
multiple or ongoing obligations.
Example: A guarantees B’s shop purchases from C up to
₹50,000 over 12 months. This covers all transactions until
revoked.

Features of a Continuing Guarantee

1. Covers Multiple Transactions: Applies to future dealings
until revoked.
2. Binding Nature: Remains enforceable for subsequent
transactions unless expressly revoked.
3. Parties Involved: Creditor, principal debtor, and surety.
4. Revocable: Can be revoked for future transactions but
not for past ones.
Circumstances for Revocation or Discharge
A. By Notice of Revocation (Sec. 130)
 Surety may revoke the continuing guarantee for future
transactions by written notice to the creditor.
 Transactions already completed remain binding.
 Case: Offord v. Davies (1862) – notice revokes future
liabilities but not past.
B. By Death of Surety (Sec. 131)

67
  Death of the surety automatically revokes the guarantee
for future transactions unless there is an agreement to
the contrary.
 Past transactions remain unaffected.
C. By Variance in Terms of Contract (Sec. 133)
 Any change in the terms of the contract without the
surety’s consent discharges him from future liability.
 Case: M.S. Anirudhan v. Thomco’s Bank Ltd. – variation
without consent releases surety.
D. By Release or Discharge of Principal Debtor (Sec. 134)
 If the creditor releases the principal debtor or acts to
discharge him, the surety is also discharged.
E. By Creditor’s Conduct Impairing Surety’s Remedy (Sec.
139)
 Any act or omission by the creditor that prejudices the
surety’s eventual remedy against the principal debtor
results in discharge.
F. By Novation (Sec. 62)
 If the parties agree to substitute a new contract, the
original guarantee is discharged.
G. By Misrepresentation or Concealment (Secs. 142 & 143)
 Guarantee obtained by misrepresentation or
concealment of material facts is void.
Case Laws

68
  Bonar v. Macdonald – continuing guarantee extends to
all transactions within the agreed limit until revoked.
 State Bank of India v. Premco Saw Mill, AIR 1984 SC 1020
– continuing guarantee can be enforced for multiple
advances until expressly revoked.
Conclusion
A continuing guarantee provides ongoing security to creditors
for multiple transactions, making it crucial in commercial
dealings. However, the Indian Contract Act safeguards
sureties by allowing revocation for future liabilities through
notice, death, or changes in contract terms. This balance
maintains fairness between creditor protection and surety
rights.
31.Q. Pledge – Meaning, Rights, and Duties of a
Pledgee
---- Introduction
A pledge is defined under Section 172 of the Indian Contract
Act, 1872 as the bailment of goods as security for the
payment of a debt or performance of a promise. The bailor in
this case is called the pawnor and the bailee is called the
pawnee or pledgee. The pledgee holds the goods as security
until the debt is repaid or the promise fulfilled.
Example: A borrows ₹50,000 from B and pledges his gold
ornaments as security.
Rights of a Pledgee (Secs. 173–176)
1. Right of Retainer (Sec. 173)
69
 o The pledgee can retain the pledged goods until
payment of the debt, interest, and expenses
incurred in preservation of goods.
2. Right to Recover Extraordinary Expenses (Sec. 175)
o The pledgee may recover from the pawnor any
extraordinary expenses incurred for preservation of
the goods.
3. Right in Case of Default (Sec. 176)
o On default by the pawnor, the pledgee may:
a) Sue for the debt and retain goods as collateral, or
b) Sell the goods after giving reasonable notice to
the pawnor.
4. Right to Retain for Subsequent Advances (Sec. 174)
o Unless otherwise agreed, the pledgee may retain
goods for subsequent advances made to the
pawnor.
Duties of a Pledgee
1. Duty of Reasonable Care (Sec. 151 & 152)
o Must take reasonable care of pledged goods as an
ordinary prudent man would take of his own goods.
o Case: Morvi Mercantile Bank Ltd. v. Union of India,
AIR 1965 SC 1954 – failure to take proper care
renders pledgee liable for loss.
2. Duty Not to Use Goods

70
 o Cannot use the pledged goods for personal
purposes without the pawnor’s consent.
3. Duty Not to Mix Goods
o Must not mix pledged goods with his own; if mixed
without consent, the pledgee bears risk and cost of
separation.
4. Duty to Return Goods
o Must return goods when the debt is repaid or
promise performed.
5. Duty to Deliver Accretions
o If goods produce any increase or profit (e.g.,
pledged cattle give birth), such accretion must be
delivered to the pawnor.
Case Law
 Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 – pledgee
cannot sue for debt and also retain goods; must choose
between retaining goods or suing.
 Syed Abdul Khader v. Rami Reddy, AIR 1979 SC 553 –
pledgee must act in good faith and give reasonable
notice before sale.
Conclusion
A pledge offers security to creditors while protecting debtors’
ownership rights. The pledgee enjoys rights such as retention
and sale on default but is bound by duties of care, non-usage,
and proper return. These provisions ensure a fair balance

71
between creditor security and debtor protection under the
Indian Contract Act, 1872.

32.Q. Different Modes of Dissolution of a Partnership

Firm
--- Introduction
Under the Indian Partnership Act, 1932, dissolution of a
partnership firm refers to the termination of the partnership
relationship between all partners, resulting in the winding up
of the firm’s business. As per Section 39, dissolution means
that the firm ceases to exist, and assets are realized to pay
liabilities. The Act provides various modes for dissolution,
either voluntary or compulsory.
Modes of Dissolution
1. Dissolution by Agreement (Sec. 40)
 A firm may be dissolved with the consent of all partners
or in accordance with the terms of the partnership
agreement.
 Example: If partners mutually agree to close the
business due to retirement or change in business
interest.
2. Compulsory Dissolution (Sec. 41)
 Occurs when:
a) All partners are declared insolvent.
b) Business becomes unlawful due to changes in law.

72
  Case: If a firm trading in a particular good is banned by
the government, the firm must dissolve.
3. Dissolution on the Happening of Certain Contingencies
(Sec. 42)
 Dissolution occurs on:
a) Expiry of the fixed term in a partnership for a fixed
duration.
b) Completion of the venture for which the firm was
formed.
c) Death of a partner, unless otherwise agreed.
d) Insolvency of a partner.
4. Dissolution by Notice in Partnership at Will (Sec. 43)
 In a partnership at will, any partner may dissolve the
firm by giving written notice to all partners of his
intention to dissolve.
5. Dissolution by Court (Sec. 44)
The court may order dissolution on:
a) Partner’s insanity.
b) Permanent incapacity of a partner.
c) Misconduct of a partner affecting business.
d) Persistent breach of the partnership agreement.
e) Transfer of a partner’s interest to a third party.
f) Business running at a loss.
g) Any just and equitable ground.
 Case: Suresh Kumar Sanghi v. Amrit Kumar Sanghi, AIR
1982 Del 131 – court dissolved firm due to irretrievable
breakdown in mutual trust.
73
Consequences of Dissolution
 Assets are realized and liabilities paid in the order
specified in Section 48.
 Surplus, if any, is distributed among partners according
to profit-sharing ratio.
Conclusion
The Indian Partnership Act provides for multiple modes of
dissolution, ensuring flexibility for voluntary exit, legal
safeguards in compulsory situations, and judicial intervention
where necessary. Understanding these modes is essential for
partners to dissolve firms legally and fairly, protecting the
rights and obligations of all parties involved.

33.Q . Specific Performance – Concept and

Enforceable Cases
--- Introduction
Specific performance is an equitable remedy under the
Specific Relief Act, 1963, where the court directs a party to
perform their contractual obligations rather than simply
paying damages. As per Section 10, specific performance is
granted when:
 Monetary compensation is inadequate to remedy the
breach.
 The subject matter of the contract is unique (e.g.,
immovable property).

74
It is a discretionary remedy, meaning the court may refuse it
in certain cases.
Nature of Specific Performance
 Compels actual performance of contract terms.
 Ensures the aggrieved party gets the exact benefit
promised.
 More common in contracts involving immovable
property, rare goods, or unique works of art.
Example: A contracts to sell his ancestral house to B. If A
refuses, B can seek specific performance as the house is
unique and damages are inadequate.
Cases in Which Specific Performance is Enforceable (Sec.
10–14)
1. Contracts Involving Immovable Property
 Since each piece of land is unique, monetary damages
are often inadequate.
 Case: Durga Prasad v. Deep Chand, AIR 1954 SC 75 –
enforced specific performance for sale of immovable
property.
2. Contracts for Movable Property in Certain Cases (Sec. 10)
 Where goods are unique or have special value (e.g., rare
art, heirlooms).
 Example: Sale of a vintage car model that is no longer
manufactured.
3. Contracts Where Damages Are Not Adequate
75
  Monetary compensation fails to put the aggrieved party
in the same position as if the contract were performed.
4. Performance of Part of a Contract (Sec. 12)
 Allowed in limited circumstances where the
unperformed part is small and compensation can be
given for it.
5. Contracts Made by Trustees (Sec. 11)
 Contracts by trustees in excess of their powers may be
enforced if for beneficiary’s benefit.
Cases Where Specific Performance is Not Enforceable (Sec.
14)
 Contracts dependent on personal qualifications or skill.
 Contracts of a determinable nature.
 Contracts involving continuous duties which the court
cannot supervise.
 Contracts where substituted performance has already
been obtained under Sec. 20.
Case Laws
 K. Narendra v. Riviera Apartments (P) Ltd., (1999) 5 SCC
77 – courts may refuse specific performance if
inequitable to enforce.
 M.L. Devender Singh v. Syed Khaja, AIR 1973 SC 2457 –
damages inadequate in immovable property sale;
specific performance granted.
Conclusion
76
Specific performance ensures that the aggrieved party
receives the exact contractual benefit, particularly where
monetary compensation falls short. The remedy is especially
significant in transactions involving unique goods or
immovable property. However, the court exercises discretion,
granting it only when fair, just, and in line with statutory
provisions under the Specific Relief Act.

34.Q. Rights of a Surety against the Principal Debtor,

Creditor, and Co-sureties
---- Introduction
Under the Indian Contract Act, 1872 (Sections 140–147), a
surety is the person who guarantees the performance of a
promise or discharge of liability by the principal debtor. Upon
fulfilling his obligation due to the principal debtor’s default,
the surety is entitled to certain rights against the principal
debtor, the creditor, and co-sureties. These rights protect the
surety from undue loss and ensure fairness in guarantee
arrangements.
A. Rights against the Principal Debtor
1. Right of Subrogation (Sec. 140)
o When the surety pays the debt, he is invested with
all the rights of the creditor against the principal
debtor.

77
 o Case: Babu Rao Ram Chandra Rao v. Anant Laxman
Kamat, AIR 1964 Bom 8 – surety steps into the
shoes of the creditor.
2. Right of Indemnity (Sec. 145)
o The principal debtor must indemnify the surety for
all lawful payments made by him under the
guarantee.
3. Right to Recover Amount Paid
o Surety can sue the principal debtor immediately
after making payment on his behalf.
B. Rights against the Creditor
1. Right to Security (Sec. 141)
o Surety is entitled to every security the creditor has
against the principal debtor, whether known to the
surety or not.
o Case: State of Madhya Pradesh v. Kaluram, AIR
1967 SC 1105 – loss of security without surety’s
consent discharges him to that extent.
2. Right to be Discharged
o If the creditor alters contract terms without
consent (Sec. 133) or releases the debtor (Sec.
134), the surety is discharged.
3. Right to Require Creditor to Sue Principal Debtor

78
 o Though not statutory, the surety can request the
creditor to proceed against the debtor first;
however, the creditor is not bound unless agreed.
C. Rights against Co-sureties
1. Right to Contribution (Sec. 146)
o Co-sureties are liable to contribute equally when
the principal debtor defaults, unless agreed
otherwise.
2. Liability in Different Sums (Sec. 147)
o If co-sureties are bound in different amounts, they
contribute equally up to their respective limits.
Example: A, B, and C are co-sureties for ₹90,000. If A pays the
entire debt, he can recover ₹30,000 each from B and C.
Conclusion
The Indian Contract Act provides a balanced framework for
surety rights, ensuring they are not left burdened after
fulfilling the debtor’s obligations. Rights against the principal
debtor (subrogation, indemnity), against the creditor
(security, discharge), and against co-sureties (contribution)
uphold the principle of equity, protecting the surety from
unfair loss and ensuring that responsibility is fairly shared.

79
35.Q. Concept of Lien and Rights of a Bailee in Respect
of Lien
--- Introduction
The term lien refers to the right of a person to retain
possession of goods belonging to another until certain lawful
charges due in respect of those goods are paid. Under the
Indian Contract Act, 1872, lien is a legal right available to
bailees, sellers, and others in possession of goods.
For a bailee, lien is governed by Sections 170 and 171 of the
Act. Lien protects bailees by ensuring that they are
compensated for services rendered in relation to goods
before having to return them.

Types of Lien under the Indian Contract Act

1. Particular Lien (Sec. 170)
o Right to retain goods for charges due in respect of
those particular goods.
o Conditions:
a) Bailee must have exercised skill or labour on the
goods.
b) Work must be in accordance with the bailor’s
directions.
c) Work must be completed and payment due.
o Example: A tailor can retain clothes until sewing
charges are paid.

80
 o Case: Scarf v. Gardiner – bailee entitled to retain
goods until charges paid.
2. General Lien (Sec. 171)
o Right to retain goods for a general balance of
account, not restricted to charges on those goods
only.
o Available only to certain classes: bankers, factors,
wharfingers, attorneys of High Courts, and policy
brokers.
o Can be excluded by an express contract.
o Case: Brandao v. Barnett – bankers entitled to
retain goods until general balance due is settled.

Rights of a Bailee in Respect of Lien

1. Right to Retain Possession
o Bailee can retain goods until payment for services
rendered is made (Sec. 170).
2. Right to Retain for General Balance
o Applicable to classes under Sec. 171 unless
expressly excluded.
3. Right to Recover Expenses
o Bailee can recover necessary expenses incurred for
preservation of goods.
4. Right to Sell Goods in Certain Cases

81
 o If goods are perishable or bailor defaults after
notice, bailee may sell goods to recover charges
(Sec. 171 read with general principles of bailment).
Termination of Lien
Lien is lost if:
 Possession is voluntarily given up.
 Debt is paid.
 Goods are delivered to a third party without reserving
lien rights.
Conclusion
Lien under the Indian Contract Act protects bailees by
ensuring they are compensated before returning goods.
Particular lien secures charges related to specific goods, while
general lien extends to overall dues in limited cases. These
provisions ensure fairness and commercial security, balancing
the interests of bailees and bailors.

82