The Contract Act-1872

Termination of contracts

1. Discharge of contracts:

When the obligation create by contract come to an end, the contract is said to be discharged or terminated.

(i) A contract may be terminated by the following ways:

i)(ii) By performance

ii)(iii) By mutual agreement

iii)(iv) Supervening impossibility

iv)(v) By operation of law

v)(vi) Lapse of time

vi)(vii) By material alteration 

 

2. Termination by mutual agreement:

A is indebted to B and B to C. By mutual agreement B’s debt to C and A’s debt to B is cancelled and C accepts A as his debtor. This is example of Novation.

Remission may be defined as the acceptance of less than what was contracted for. A owes B Tk 500. A pays to B and B accepts in full satisfaction for the whole debt Tk 400. The old debt is discharged. 

 

Contracts of indemnity

 

Sec-124: in a contracts of indemnity, one party promises to save the other party from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.

P contracts to indemnify Q against the consequences of any proceeding which R may take against Q in respect of a certain sum of Tk 200. This is a contract of indemnity.

P is Indemnifier and Q is Indemnity-holder 

Contracts of guarantee

A contract of guarantee is a contract to perform the promise or discharge the liability, of a third person in case of his default.-Sec-126

P lends Tk 5,000 to Q and R promises to P that if Q does not pay the money R will do so. This is a contract of guarantee.

Q is principal debtor, P is creditor, and R is the grantor or the Surety. 

 

Bailment and Pledge

A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished be returned or otherwise disposes of according to the directions of the persons delivering them.

The person delivering the goods is called Bailor. The person to whom they are delivered is called the Bailee. The transaction is called Bailment. 

 

In a bailment the Bailor continues to be the owner of the goods. Bailment is concerned with only movable goods.

i)(i) P lends his book to Q.

ii)(ii) P delivers a pen to Q for repair.

iii)(iii) P gives Q his watch as security for a loan.

In all these cases P is the Bailor and Q is the Bailee.

 

The Bailment of goods as security for payment of a debt or performance of a promise is called Pledge or Pawn.

The Bailor in this case called Pledgor or Pawnor. The Bailee is called Pledgee or Pawnee.

Pledge is a particular type of bailment. The purpose of pledge is to provide security for a debt or the performance of a promise. 

 

Law of Agency

 

Nature of Agency:

An agent is a person employed to do any act for another or to represent another in dealing with third party.-Sec-182. The person for whom such act is done, or who is so represented, is called the Principal.

P appoints X to buy 50 bales of cotton on his behalf. P is the principal and X is his agent. The relationship between P and X is called Agency. 

 

Power of Attorney:

An agent may be appointed by the principal, executing a written and stamped document. Such document is called ‘Power of Attorney’.

There are 2 kinds of power of attorney:

i)General-the agent is given the authority to do certain general objectives.

ii)Special-the agent is given the authority to do a specific things. 

 

3. Enforcement of agent’s contracts:

Contracts entered into  through an agent, will have the same legal consequences as it is done by the principal.

A buys goods from B, knowing that he is an agent for their sale, but not knowing who is the principal. B’s principal is the person entitled to claim from A the price of the goods, and A can not in a suit by the principal, set off against that claim a debt due to himself from B. 

 

Agent and servant:

Agency exists when a person can bind another by acts done on his behalf. When this power does not exists the relationship is not one of agency.

i)(i) An agent is not subject to the principal’s direct control. A servant has to act according to the orders of the master in every particle.

ii)(ii) An agent can bind the principal to the third parties. A servant can not do so. 

 

Agent and principal:

Any person who is the age of majority according to the law to which he is subject, and who is he sound mind, may employ an agent-Sec 183.

Any person may be an agent, even a minor. A minor acting as agent can bind the principal to third parties. But a minor is not himself liable to his principal. Sec-184.