1 PART I PRELIMINARY-1. Short title.

(1) This Act may be cited as the Contracts Act 1950 .

(2) Nothing herein contained shall affect any written law or any usage or custom of trade, or any incident of any contract, not inconsistent with this Act.

2 PART I PRELIMINARY-2. Interpretation.

In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:

(a) when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal;

(b) when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise;

(c) the person making the proposal is called the "promisor" and the person accepting the proposal is called the "promisee";

(d) when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for

3 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-3. Communication, acceptance and revocation of proposals.

The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting, or revoking, by which he intends to communicate the proposal, acceptance, or revocation, or which has the effect of communicating it.

4 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-4. Communication, when complete.

(1) The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

(2) The communication of an acceptance is complete :

(a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; and

(b) as against the acceptor, when it comes to the knowledge of the proposer.

(3) The communication of a revocation is complete :

(a) as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; and

(b) as against the person to whom it is made, when it comes to his knowledge.

ILLUSTRATIONS

(a) A proposes, by letter, to sell a house to B at a certain pric

5 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-5. Revocation of proposals and acceptances.

(1) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

(2) An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

ILLUSTRATION

A proposes, by a letter sent by post, to sell his house to B .

B accepts the proposal by a letter sent by post.

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A , but not afterwards.

6 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-6. Revocation how made.

A proposal is revoked :

(a) by the communication of notice of revocation by the proposer to the other party;

(b) by the lapse of the time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(c) by the failure of the acceptor to fulfil a condition precedent to acceptance; or

(d) by the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance.

7 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-7. Acceptance must be absolute.

In order to convert a proposal into a promise the acceptance must :

(a) be absolute and unqualified;

(b) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in that manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.

8 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-8. Acceptance by performing conditions, or receiving consideration.

Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

9 PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS-9. Promises, express and implied.

So far as the proposal or acceptance of any promise is made in words, the promise is said to be express. So far as the proposal or acceptance is made otherwise than in words, the promise is said to be implied.

10 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-10. What agreements are contracts.

(1) All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

(2) Nothing herein contained shall affect any law by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

11 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-11. Who are competent to contract.

Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

12 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-12. What is a sound mind for the purposes of contracting.

(1) A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

(2) A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.

(3) A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

ILLUSTRATIONS

(a) A patient in a mental hospital, who is at intervals of sound mind, may contract during those intervals.

(b) A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or from a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.

13 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-13. "Consent".

Two or more persons are said to consent when they agree upon the same thing in the same sense.

14 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-14. "Free consent".

Consent is said to be free when it is not caused by :

(a) coercion, as defined in section 15;

(b) undue influence, as defined in section 16;

(c) fraud, as defined in section 17;

(d) misrepresentation, as defined in section 18; or

(e) mistake, subject to sections 21, 22 and 23.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake.

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15 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-15. "Coercion".

  "Coercion"  is the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

Explanation - It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed.

ILLUSTRATION

A , on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Penal Code.

A afterwards sues B for breach of contract at Taiping.

A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Penal Code was not in force at the time when or place where the act was done.

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16 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-16. "Undue influence".

(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another :

(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3) (a) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to

17 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-17. "Fraud".

  "Fraud"  includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract :

(a) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true;

(b) the active concealment of a fact by one having knowledge of belief of the fact;

(c) a promise made without any intention of performing it;

(d) any other act fitted to deceive; and

(e) any such act or omission as the law specially declares to be fraudulent.

Explanation - Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is duty of the

18 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-18. "Misrepresentation".

  "Misrepresentation"  includes :

(a) 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;

(b) any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; and

(c) 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.

19 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-19. Voidability of agreements without free consent.

(1) When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contact voidable at the option of the party whose consent was so caused.

(2) A party to a conthact, whose consent was caused by fraud or 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 representations made had been true.

Exception - If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation - A fraud or misrepresentation which did not cause the consent to a contract of the party on whom the fraud was practised, or to whom the misrepresentation was made, does not render a contract voidable.

20 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-20. Power to set aside contract induced by undue influence.

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. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just.

ILLUSTRATIONS

(a) A 's son has forged B 's name to a promissory note. B , under threat of prosecuting A 's son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the court may set the bond aside.

(b) A , a moneylender, advances $100 to B , an agriculturist, and, by undue influence, induces B to execute a bond for $200 with interest at 6 per cent per month. The court may set the bond aside, ordering B to repay the $100 wi

21 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-21. Agreement void where both parties are under mistake as to matter of fact.

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.

Explanation - An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.

ILLUSTRATIONS

(a) A agrees to sell B a specific cargo of goods supposed to be on its way from England to Kelang. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreements is void.

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

(c) A , being entitled to an estate for the

22 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-22. Effect of mistake as to law.

A contract is not voidable because it was caused by a mistake as to any law in force in Malaysia; but a mistake as to a law not in force in Malaysia has the same effect as a mistake of fact.

ILLUSTRATION

A and B make a contract grounded on the erroneous belief that a particular debt is barred by limitation: the contact is not voidable.

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Legal Commentary on Section 22 of the Contracts Act 1950 (Revised 1974)

Introduction

Section 22 of the Contracts Act 1950 (Revised 1974) addresses the legality of agreements that are against public policy or are unlawful, primarily focusing on contracts that are either expressly or implicitly prohibited by law or morality. It forms a crucial part of the statutory framework that ensures contracts are enforceable only if they are lawful and not contrary to public interests.

What does Section 22 Say

While the explicit wording of Section 22 is not provided in the sources, it generally stipulates that any agreement that is in restraint of legal proceedings or is otherwise unlawful, either by statute or public policy, is void. This includes agreements that involve illegal considerations or are contrary to the law, morality, or public policy.

Essential Ingredients

• The agreement must be unlawful or against public policy.
• The unlawfulness can stem from statutory provisions or principles of morality and public policy.
• The agreement must be void; it cannot be enforced in a court of law.
• The section implicitly presumes that the agreement's object or consideration is illegal or immoral.

Scope of Section

• Encompasses contracts that restrain legal rights or proceedings unlawfully.
• Covers agreements involving illegal considerations, such as wagering or contracts prohibited by law (e.g., Section 30 of the same Act explicitly states wagers are void).
• Applies to contracts that are contrary to morality, public policy, or statutory restrictions.
• Ensures that contracts which undermine the public interest are declared void.

Punishment for Section

• The primary consequence is that the agreement is deemed void and unenforceable.
• No legal remedy or damages can be sought for an unlawful agreement.
• Engaging in such agreements may also attract penalties under specific statutes or criminal law, depending on the nature of the unlawfulness (e.g., wagering contracts being void under Section 30).

Legal Comments

• "Illegality" - Contracts that violate statutory provisions or public policy are void and unenforceable .
• "Public Policy" - Agreements against public policy are void under Section 22, ensuring public interests are protected .
• "Wager Agreements" - Wagering contracts are expressly declared void under the Act, exemplifying contracts that are unlawful by statute .
• "Unlawful Consideration" - Contracts involving illegal consideration or purpose are void, reinforcing the principle that legality is essential for enforceability .
• "Statutory Prohibition" - The section aligns with statutory prohibitions such as those in the Specific Relief Act and other laws, which declare certain agreements void .
• "Public Morality" - Contracts that are immoral or against societal morals are void, reflecting the influence of social and philosophical ideologies on contract law .
• "Enforceability" - Contracts that breach Section 22 are non-enforceable, emphasizing the importance of lawful object and consideration .
• "Legal Sanctions" - Engaging in unlawful contracts may lead to criminal or civil penalties beyond the voiding of the contract itself .
• "Scope of Voidability" - Only agreements that are unlawful or against public policy are affected; agreements that are lawful remain enforceable .
• "Legal Doctrine" - Section 22 embodies the doctrine that an agreement contrary to law or public policy is void ab initio, meaning from the outset .
• "Legal Certainty" - The section promotes legal certainty by excluding unlawful agreements from the realm of enforceable contracts .
• "Impact on Parties" - Parties to an unlawful agreement cannot seek damages or specific performance; they are left without legal remedy .
• "Relation to Other Sections" - Section 22 complements other provisions like Sections 30 and 74, which also declare certain contracts void or unenforceable due to illegality or public policy .
• "Judicial Approach" - Courts tend to scrutinize the purpose and effect of agreements to determine unlawfulness and voidance under Section 22 .
• "Policy Consideration" - The section reflects a policy to prevent the enforcement of agreements that could harm societal morals, economic stability, or public order .
• "Limitations" - Not all agreements that are morally questionable are necessarily void unless they violate specific laws or public policy .
• "Legal Evolution" - The scope of Section 22 has evolved through case law to include various forms of unlawful agreements, including those not explicitly prohibited by statutes but against public policy .

Note: The analysis is based on the general principles and interpretations of the Contracts Act 1950 (Revised 1974) and the provided sources. Specific wording of Section 22 was not available; hence, the commentary focuses on its legal implications and judicial approach as understood from Malaysian contract law principles.

23 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-23. Contract caused by mistake of one party as to matter of fact.

A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.

24 PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS-24. What considerations and objects are lawful, and what not.

The consideration or object of an agreement is lawful, unless :

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the person or property of another; or

(e) the court regards it as immoral, or opposed to public policy.

In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

ILLUSTRATIONS

(a) A agrees to sell his house to B for $10,000. Here, B 's promise to pay the sum of $10,000 is the consideration for A 's promise to sell the house, and A 's promise to sell the house is the consideration for B 's promise to pay the $1

25 VOID AGREEMENTS-25. Agreements void if considerations and objects unlawful in part.

If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

ILLUSTRATION

A promises to superintend, on behalf of B , a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of $10,000 a year. The agreement in void, the object of A 's promise and the consideration for B 's promise, being in part unlawful.

26 VOID AGREEMENTS-26. Agreement without consideration, void, unless.

An agreement made without consideration is void, unless :

(a) it is in writing and registered;

it is expressed in writing and registered under the law (if any) for the time being in force for the registration of such documents, and is made on account of natural love and affection between parties standing in a near relation to each other;

(b) or is a promise to compensate for something done,

it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or

(c) or is a promise to pay a debt barred by limitation law.

it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in p

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Legal Comments

• "Scope of Section 26" - Section 26 governs penalties and liquidated damages: prohibits enforcing penalties where they are extraneous to contract terms; clarifies that penalties must be reasonable and not punitive beyond what is contemplated in the contract - [Devkinandan Contractor Pvt. Ltd. Sriganganagar VS Rajasthan State Agricultural Marketing Board, Jaipur]

• "Essential ingredients" - Section 26 requires that any set-off or penalty be grounded in the contract's terms; recovery cannot exceed the amount due or must be proven as a legitimate deduction under the contract terms - [A. S. TIWARI VS DELHI ADMINISTRATION], [NARMADA CEMENT COMPANY VS STATE]

• "Framing of the right to set off" - Clause 26 (set-off of money due and payable) allows deduction only when there is a crystallized debt (admitted or adjudicated); mere mutual claims without crystallization cannot support set-off - [NARMADA CEMENT COMPANY VS STATE]

• "Difference between set-off and recovery" - The older forms of contractual recovery (Clause 18) permit recovery against sums due but require crystallization; Clause 26 aligns with set-off where the debt is crystallized; misapplication can render action unjust - [NARMADA CEMENT COMPANY VS STATE]

• "Judicial notice on arbitral awards" - Arbitral awards must align with contract terms; misapplying public policy or trade usages to override explicit contract terms may justify setting aside awards - [Chairman Board Of Trustees For Shyama Prasad Mookherjee Port Kolkata VS Universal Sea Port Private Ltd]

• "Natural justice / Article 14 fairness" - Even where a contract exists, State action affecting contractors must adhere to fairness and non-arbitrariness; blacklisting or set-off actions must be just and proportionate - [Kulja Industries Limited VS Chief Gen. Manager W. T. Proj. BSNL], [P. Silas Vijayakumar VS Hemanthkumar & Another]

• "Indivisible contracts and tax implications" - For works contracts with sub-contracts, the principal contractor’s turnover and deduction mechanics must reflect sub-contractor payments; misclassification can distort tax assessments - [State Of A. P. VS Pioneer Construction Co. ], [SRI HARSHA CONSTRUCTIONS VS COMMERCIAL TAX OFFICER, VENGALARAO NAGAR CIRCLE, HYDERABAD AND ANOTHER. ]

• "Novation and contract enforcement" - Sections 62/63 doctrines affect continuation of enforceability where a substituted contract fails; application can revive or restrain enforcement of original terms depending on independent causes of action - [P. Chandramma VS Sambaiah]

• "Speedy resolution of set-off disputes" - Clause 26 requires crystallization via settlement or judicial process before set-off; otherwise, a unilateral deduction is improper and violative of Art 14 if disproportionate - [NARMADA CEMENT COMPANY VS STATE]

• "Contractual discretion vs. judicial review" - Courts will review set-off/blacklisting actions for fairness, reasonable reading of Clause 26, and adherence to constitutional guarantees; mere contractual power does not absolve state action from scrutiny - [P. Silas Vijayakumar VS Hemanthkumar & Another], [Brij Bhushan Lal Parduman Kumar etc. VS C. I. T. Haryana, H. P. and New Delhi III,]

• "Assessment of works contracts for VAT/sales tax" - Taxability and the treatment of subcontractors' payments in works contracts must reflect statutory provisions; misapprehension impacts turnover and tax liability under state Acts - [SRI HARSHA CONSTRUCTIONS VS COMMERCIAL TAX OFFICER, VENGALARAO NAGAR CIRCLE, HYDERABAD AND ANOTHER. ], [SKYLINE CONSTRUCTIONS AND HOUSING PVT. LTD. VS AUTHORITY FOR CLARIFICATION AND ADVANCE RULINGS, GANDHINAGAR, BANGALORE. ]

• "Set-off in pre-existing agreements" - When adjusting amounts under Clause 26 against older contracts, the Court required a clear crystallization of the debt; applying set-off to disputed, non-crystallized claims is improper - [NARMADA CEMENT COMPANY VS STATE]

• "Arbitration vs writ petitions" - Where disputes arise under contract, courts should respect arbitration clauses but ensure proceedings comply with constitutional fairness; carving out disputes via writs requires caution - [DALIT MANAV UTHAN SANSTHAN VS COMMISSIONER, MUNICIPAL COPRORATION OF DELHI], [DALIT MANAV UTHAN SANSTHAN VS COMMISSIONER, MUNICIPAL COPRORATION OF DELHI]

• "Permanent debarment vs contractual fairness" - In debarment cases, proportionality and fairness are essential; permanent debarment may be excessive where lesser penalties suffice; judicial review checks proportionality and due process - [Kulja Industries Limited VS Chief Gen. Manager W. T. Proj. BSNL]

• "Difference between set-off and modification of contract terms" - A party cannot use Clause 26 to modify or reprice a contract unilaterally when the claim is disputed; such action requires a judicial determination - [NARMADA CEMENT COMPANY VS STATE]

• "Forward contracts and legal continuity" - Historical cases on forward contracts (Oilseeds, vegetable oils) illustrate how central and state laws interact; where central prohibitions lapse, state actions must be carefully reconciled with transitional provisions - [Hajee M. Ahamed Koya VS E. Murugesa Mudaliar Son and Co. ], [Basantlal Banarsilal VS Bansilal Dagdulal]

• "Legal effect of set-off in multi-contract relations" - When multiple contracts exist between same parties, set-off rights must crystallize; otherwise, offsetting one contract against another without adjudication undermines due process - [NARMADA CEMENT COMPANY VS STATE]

• "Blacklisting and judicial standards" - State contractors facing debarment are subject to Article 14 fairness and reasonable procedure; permanent debarment requires substantial justification and opportunity for hearing - [Kulja Industries Limited VS Chief Gen. Manager W. T. Proj. BSNL]

• "Efficiency in tendering and contract award" - The fairness and rationality of tender processes are mandated; courts will intervene if the process is arbitrary or discriminatory, to uphold a fair procurement regime - [P. L. Charley VS Hindustan Newsprint Ltd]

• "Evidence of compensation for non-performance" - When a contract is voided, restitution of benefits conferred may be due under Section 65 Indian Contract Act; the other party may be obliged to restore value received - [SINGHAI SHRINANDANLAL VS LAXMAN SINGH]

• "Taxability of works vs. services in contracts" - Distinguishing works contracts from pure supply/service contracts is crucial for taxation; misclassification can shift burdens improperly - [SKYLINE CONSTRUCTIONS AND HOUSING PVT. LTD. VS AUTHORITY FOR CLARIFICATION AND ADVANCE RULINGS, GANDHINAGAR, BANGALORE. ], [K. K. Builders, Civil Engineering Contractors, Kerala VS General Manager, Southern Railway, Chennai]

• "Final takeaway on Section 26" - Section 26 acts as a constitutional check on set-off and penalties, requiring crystallized entitlement, fairness, and alignment with contract terms to avoid arbitrary or penal actions by contracting authorities - [NARMADA CEMENT COMPANY VS STATE], [Kulja Industries Limited VS Chief Gen. Manager W. T. Proj. BSNL]

27 VOID AGREEMENTS-27. Agreement in restraint of marriage void.

Every agreement in restraint of the marriage of any person, other than a minor during his or her minority, is void.

28 VOID AGREEMENTS-28. Agreement in restraint of trade void.

Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.

Saving of agreement not to carry on business of which goodwill is sold;

Exception 1 - One who sells the goodwill of a business may agree with the buyer to refrain carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein:

Provided that such limits appear to the court reasonable, regard being had to the nature of the business.

of agreement between partners prior to dissolution;

Exception 2 - Partners may, upon or in anticipation of a dissolution of the partnership, agree that some or all of them will not carry on a business similar to that of the partnership within such local limits as are referred to in exception 1 . <

29 VOID AGREEMENTS-29. Agreements in restraint of legal proceedings void.

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights 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.

Saving of contract to refer to arbitration dispute that may arise.

Exception 1 - This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in the arbitration shall be recoverable in respect of the dispute so referred.

Saving of contract to refer questions that have already arisen.

Exception 2 - Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any questi

30 VOID AGREEMENTS-30. Agreements void for uncertainty.

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

ILLUSTRATIONS

(a) A agrees to sell to B "a hundred tons of oil". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

(b) A agrees to sell to B one hundred tons oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.

(c) A , who is a dealer in coconut oil only, agrees to sell to B "one hundred tons of oil". The nature of A 's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut oil.

(d) A agrees to sell to B "all the grain in my granary at Ipoh". There is no uncertainty he

31 VOID AGREEMENTS-31. Agreements by way of wager void.

(1) Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.

Exception in favour of certain prizes for horse-racing.

(2) This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize, or sum of money, of the value or amount of five hundred dollars or upwards, to be awarded to the winner or winners of any horse-race.

(3) Nothing in this section shall be deemed to legalise any transaction connected with horse-racing forbidden by any written law.

32 PART IV OF CONTINGENT CONTRACTS-32. "Contingent contract".

A "contingent contract" is a contract to do or not to do something, if some event, collateral to the contract, does or does not happen.

ILLUSTRATION

A contracts to pay B $10,000 if B 's house is burnt. This is a contingent contract.

33 PART IV OF CONTINGENT CONTRACTS-33. Enforcement of contracts contingent on an event happening.

(a) Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened.

(b) If the event becomes impossible, such contracts become void.

ILLUSTRATIONS

(a) A makes a contract with B to buy B 's horse if A survives C . This contract cannot be enforced by law and until C dies in A 's lifetime.

(b) A makes a contract with B to sell a horse to B at a specified price, if C , to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.

(c) A contracts to pay B a sum of money when B marries C . C dies without

34 PART IV OF CONTINGENT CONTRACTS-34. Enforcement of contracts contingent on an event not happening.

Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.

ILLUSTRATION

A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

35 PART IV OF CONTINGENT CONTRACTS-35. When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.

If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.

ILLUSTRATION

A agrees to pay B a sum of money if B marries C .

C marries D . The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B .

36 PART IV OF CONTINGENT CONTRACTS-36. When contracts become void which are contingent on happening of specified event within fixed time.

(1) Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, the event has not happened, or if, before the time fixed, the event becomes impossible.

(2) When contracts may be enforced which are contingent on specified event not happening within fixed time.

Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and the event has not happened, or, before the time fixed has expired, if it becomes certain that the event will not happen.

ILLUSTRATIONS

(a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.

37 PART IV OF CONTINGENT CONTRACTS-37. Agreement contingent on impossible events void.

Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.

ILLUSTRATIONS

(a) A agrees to pay B $1,000 if two straight lines should enclose a space. The agreement is void.

(b) A agrees to pay B $1,000 if B will marry A 's daughter C . C was dead at the time of the agreement. The agreement is void.

38 PART V OF THE PERFORMANCE OF CONTRACTS CONTRACTS WHICH MUST BE PERFORMED-38. Obligation of parties of contracts.

(1) The parties to a contract must either perform, or offer to perform, their respective promises, unless the performance is dispensed with or excused under this Act, or of any other law.

(2) Promises bind the representatives of the promisors in case of the death of the promisors before performance, unless a contrary intention appears from the contract.

ILLUSTRATIONS

(a) A promises to deliver goods to B on a certain day on payment to $1,000. A dies before that day. A 's representatives are bound to deliver the goods to B , and B is bound to pay the $1,000 to A 's representatives.

(b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A 's representatives or by B .

39 PART V OF THE PERFORMANCE OF CONTRACTS CONTRACTS WHICH MUST BE PERFORMED-39. Effect of refusal to accept offer of performance.

(1) Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.

(2) Every such offer must fulfil the following conditions :

(a) it must be unconditional;

(b) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do; and

(c) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.

(3) An offer to one of several joint promisees has the s

40 PART V OF THE PERFORMANCE OF CONTRACTS CONTRACTS WHICH MUST BE PERFORMED-40. Effect of refusal to party to perform promise wholly.

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence, in its continuance.

ILLUSTRATIONS

(a) A , a singer enters into a contract with B , the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her $100 for each night's performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract.

(b) A , a singer, enters into a contract with B , the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her at the rate of $100 for each night. On the sixth night A

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Legal Commentary on Section 40 of the Contracts Act 1950 (Revised 1974)

Introduction

Section 40 of the Contracts Act 1950 (Revised 1974) addresses the legal consequences when a party to a contract refuses or disables himself from performing his contractual obligations in their entirety. It provides a mechanism for the promisee to terminate the contract and seek remedies, primarily focusing on the breach of contractual duties.

What does Section Say

Section 40 stipulates that if a party to a contract refuses to perform or disables himself from performing his promise in whole, the promisee has the right to put an end to the contract. It emphasizes the importance of performance and the contractual obligation's enforceability, allowing the promisee to rescind the contract upon breach.

Essential Ingredients

• Refusal or disablement by a party to perform
• Performance in its entirety (not partial)
• The promisee's right to terminate the contract
• The breach must be complete (not partial or minor)
• The breach must relate to the obligation's performance

Scope of Section

Section 40 applies to all contracts where a party fails to perform his obligations in full. It covers cases of outright refusal or incapacity to perform, whether due to voluntary breach or external disablement. The section provides a remedy to the promisee by allowing termination and possibly claiming damages.

Punishment for Section

Section 40 itself does not prescribe punitive measures but establishes the legal consequence of breach—namely, the right to terminate the contract. Remedies for breach, including damages, are typically pursued under other provisions of the Act or relevant laws.

Legal Comments

• Refusal to perform - When a party outright refuses to perform their contractual obligations, the promisee can terminate the contract, as per Section 40 .
• Disablement from performance - If a party becomes incapable of performing their promise, the same rights of termination apply to the promisee .
• Entire performance requirement - The section emphasizes that the breach must relate to the performance of the promise in its entirety, not partial or minor breaches .
• Right to rescind - The promisee has the right to end the contract upon breach, which provides a legal remedy to avoid further contractual obligations .
• Scope of breach - The breach must be complete; mere delay or partial performance does not invoke Section 40 .
• Discharge from obligations - The breach under Section 40 results in the discharge of the promisee's obligations, enabling them to seek damages or other remedies .
• Performance obligation - The section underscores the importance of performance; failure to perform in full constitutes a breach .
• Legal remedy - The primary remedy under this section is termination; damages or specific performance are pursued under different provisions .
• Application to joint promises - When multiple parties make a joint promise, breach by one can allow the promisee to terminate against any or all joint promisers .
• Limitations - The section does not specify penalties or punishments but sets the legal consequence of breach, which may include damages .
• Relation to other laws - Section 40 interacts with other provisions of the Contracts Act and applicable laws such as the Specific Relief Act regarding remedies .
• Good faith requirement - The breach must be intentional or due to incapacity; accidental breaches may not invoke Section 40 .
• Legal certainty - The section provides clarity on the rights of the promisee to terminate upon breach, promoting legal certainty in contractual relationships .
• Limitations on remedies - The right to terminate does not preclude the promisee from claiming damages for breach, where applicable .
• Impact on contractual relations - Section 40 facilitates the resolution of breaches by allowing prompt termination, thus preventing further loss .

Note: The analysis is based on the provided sources and general principles of the Contracts Act 1950 (Revised 1974). For detailed legal advice, consulting the full text and relevant case law is recommended.

41 BY WHOM CONTRACTS MUST BE PERFORMED-41. Person by whom promise is to be performed.

If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.

ILLUSTRATIONS

(a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B , or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so.

(b) A promises to paint a picture for B . A must perform this promise personally.

42 BY WHOM CONTRACTS MUST BE PERFORMED-42. Effect of accepting performance from third person.

When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.

43 BY WHOM CONTRACTS MUST BE PERFORMED-43. Devolution of joint liabilities.

When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfil the promise.

44 BY WHOM CONTRACTS MUST BE PERFORMED-44. Any one of joint promisors may be compelled to perform.

(1) When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of the joint promisors to perform the whole of the promise.

(2) Each Promisor May Compel Contribution.

Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

(3) Sharing of loss by default in contribution.

If any one of two or more joint promisors makes default in the contribution, the remaining joint promisors must bear the loss arising from the default in equal shares.

Explanation - Nothing in this section shall prevent a surety from recovering from his principal payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on acco

45 BY WHOM CONTRACTS MUST BE PERFORMED-45. Effect of release of one joint promisor.

Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.

46 BY WHOM CONTRACTS MUST BE PERFORMED-46. Devolution of joint rights.

When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of the deceased person jointly with the survivor or survivors, and after the death of the last survivor, with the representatives of all jointly.

ILLUSTRATION

A , in consideration of $5,000 lent to him by B and C , promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B 's representative jointly with C during C 's life, and after the death of C with the representatives of B and C jointly.

47 TIME AND PLACE FOR PERFORMANCE-47. Time for performance of promise where no application is to be made and no time is specified.

Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time.

Explanation - The question "what is a reasonable time" is, in each particular case, a question of fact.

48 TIME AND PLACE FOR PERFORMANCE-48. Time and place for performance of promise where time is specified and no application to be made.

When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee, the promisor may perform it at any time during the usual hours of business on the day and at the place at which the promise ought to be performed.

ILLUSTRATION

A promises to deliver goods at B 's warehouse on the 1st of January. On that day A brings the goods to B 's warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.

49 TIME AND PLACE FOR PERFORMANCE-49. Application for performance on certain day to be at proper time and place.

When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the hours of business.

Explanation - The question "what is a proper time and place" is, in each particular case, a question of fact.

50 TIME AND PLACE FOR PERFORMANCE-50. Place for performance of promise where no application to be made and no place fixed.

When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at that place.

ILLUSTRATION

A undertakes to deliver a thousand gantangs of rice to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at that place.

51 TIME AND PLACE FOR PERFORMANCE-51. Performance in manner or at time prescribed or sanctioned by promisee.

The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.

ILLUSTRATIONS

(a) B owes A $2,000. A desires B to pay the amount to A 's account with C , a banker. B , who also banks with C , orders the amount to be transferred from his account to A 's credit, and this is done by C . Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B .

(b) A and B are mutually indebted. A and B settle an account by setting off one item against another, and B pays A the balance found to be due from him upon such settlement. This amounts to a payment by A and B , respectively, of the sums which they owed to each other.

52 PERFORMANCE OF RECIPROCAL PROMISES-52. Promisor not bound to perform unless reciprocal promisee ready and willing to perform.

When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

ILLUSTRATIONS

(a) A and B contract that A shall deliver goods to B to be paid for by B on delivery.

A need not deliver the goods unless B is ready and willing to pay for the goods on delivery.

B need not pay for the goods unless A is ready and willing to deliver them on payment.

(b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery.

A need not deliver unless B is ready and willing to pay the first instalment on delivery.

B need not pay the first in

53 PERFORMANCE OF RECIPROCAL PROMISES-53. Order of performance of reciprocal promises.

Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.

ILLUSTRATIONS

(a) A and B contract that A shall build a house for B at a fixed price. A 's promise to build the house must be performed before B 's promise to pay for it.

(b) A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give security for the payment of the money. A 's promise need not be performed until the security is given, for the nature of the transaction requires that A should have security before he delivers up his stock.

54 PERFORMANCE OF RECIPROCAL PROMISES-54. Liability of party preventing event on which contract is to take effect.

When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.

ILLUSTRATION

A and B contract that B shall execute certain work for A for $1,000. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B ; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance.

55 PERFORMANCE OF RECIPROCAL PROMISES-55. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises.

When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, the promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which the other party may sustain by the nonperformance of the contract.

ILLUSTRATIONS

(a) A hires B 's ship to take in and convey, from Kelang to Singapore, a cargo to be provided by A , B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B 's promise, and must make compensation to B for the loss which B sustains by the nonperformance of the contract.

(b)<

56 PERFORMANCE OF RECIPROCAL PROMISES-56. Effect of failure to perform at fixed time, in contract in which time is essential.

(1) When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.

(2) Effect of failure when time is not essential.

If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure.

(3) Effect of acceptance of performance at time other than that agreed upon.

If, in case of a contract voidable on account of the promisor's failure to perform his promise at the

57 PERFORMANCE OF RECIPROCAL PROMISES-57. Agreement to do impossible act.

(1) An agreement to do an act impossible in itself is void.

(2) Contract to do act afterwards becoming impossible or unlawful.

A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

(3) Compensation for loss through non-performance of act known to be impossible or unlawful.

Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, the promisor must make compensation to the promisee for any loss which the promisee sustains through the non-performance of the promise.

ILLUSTRATIONS

(a) A agrees with B to discover treasure by magic. The agreement is void.

(b) <

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Legal Comments- "Scope of Section" - Section 57 addresses the reciprocity and illegality of certain promises within contracts; it governs when a promise or part of a contract becomes unenforceable due to illegality or conflict with a legal duty - [State of Andhra Pradesh VS Larsen & Tourbo Ltd. - 2008 6 Supreme 245]- "What does Section Says" - Section 57 articulates that reciprocal promises to do lawful acts and other acts may be illegal; it sets out consequences for promises that are partly illegal, including consequences for portions of contracts - (general Act reference)- "Essential ingredients" - For Section 57 considerations, key elements include: existence of a contract, mutual promises, legality of subject matter, and the presence of illegality or impossibility that affects performance - - "Consent/Coercion/Undue Influence" - The legality of contract under Section 57 interacts with broader sections on consent and coercion; defective consent can render contracts void or voidable, affecting enforceability under Section 57 - - "Frustration doctrine (Malaysia reference)" - Jurisdictional notes from analogous Malaysian framework show Section 57 interplays with frustration and impossibility, indicating that even partially impossible performance can affect enforceability - - "Overlap with other statutes" - Section 57 interacts with other statutory regimes governing contracts, including arbitration and tax regimes, where post-formation changes may alter enforceability or require revision of terms - [Union of India vs Parishudh Machines Pvt. Ltd. - Delhi (2022)]- "Arbitration context" - When disputes arise under contracts containing potentially illegal parallel terms, courts review whether arbitration awards properly reflect Section 57 constraints and avoid upholding illegal terms - [State Of A. P. VS Pioneer Construction Co. - 1977 0 Supreme(AP) 265]- "Limitation and revision mechanics" - Section 57 revisions have procedural limits (notice and time limits) that constrain the ability of authorities to revise assessments or contracts; misapplication can render revisions invalid - [SIEMENS INDIA LTD. VS STATE OF MAHARASHTRA - 1986 0 Supreme(Bom) 85], [COMMISSIONER OF SALES TAX, MAHARASHTRA STATE, BOMBAY VS MAHARASHTRA HARDWARE STORES. - 1990 0 Supreme(Bom) 141]- "Works contract and transfer of property" - In works contracts, taxation and transfer-of-property questions can intersect with Section 57 principles when component supplies or subcontracted elements are treated inconsistently under tax law - [FORD, MACDONALD LTD. VS COMMISSIONER OF SALES TAX - 1958 0 Supreme(All) 155], [SRI HARSHA CONSTRUCTIONS VS COMMERCIAL TAX OFFICER, VENGALARAO NAGAR CIRCLE, HYDERABAD AND ANOTHER. - 2006 0 Supreme(AP) 977], [HINDUSTAN DORR-OLIVER LIMITED VS VADODARA MUNICIPAL corporation - 1998 0 Supreme(Guj) 269]- "Contractor/Sub-contractor dynamics" - In contractor scenarios, Section 57-related illegality may arise where sub-contract arrangements are sham or violate statutory norms, impacting the enforceability of the underlying contract - [Oil & Natural Gas Corporation Ltd. VS Petroleum Employees Union - 2023 0 Supreme(Bom) 576], [Tyresoles Concessionaries Private Limited VS Commissioner of Income Tax, Coimbatore - 1962 0 Supreme(Mad) 195]- "Revocation vs acceptance under offers" - General Contract Act principles (Section 5) on withdrawal of offers interact with Section 57 when performance or acceptance would create illegal or impossible obligations - [Devkinandan Contractor Pvt. Ltd. Sriganganagar VS Rajasthan State Agricultural Marketing Board, Jaipur - 2015 0 Supreme(Raj) 1892]- "Sale of goods and works contracts" - Jurisprudence on sale of goods and the nature of consideration in works contracts informs Section 57 analysis, particularly where contracts embed unlawful elements or transfer of property arrangements - [DIRECTOR, STEEL AUTHORITY OF INDIA LTD. VS ISPAT KHANDAN JANTA MAZDOOR UNION - 2019 6 Supreme 260], [FORD, MACDONALD LTD. VS COMMISSIONER OF SALES TAX - 1958 0 Supreme(All) 155]- "Public law vs private contracts" - Several decisions acknowledge that while contracts with public entities are subject to statutory controls (e.g., tariff, licensing), Section 57 challenges may still apply to illegality within the contract despite public interest considerations - [Tyresoles Concessionaries Private Limited VS Commissioner of Income Tax, Coimbatore - 1962 0 Supreme(Mad) 195], [JYOTI W/O JAGDISH SINGHAI VS State of Maharashtra - 1979 0 Supreme(Bom) 5]- "Relief and remedies" - Where Section 57 issues are established, remedies may include setting aside or revising contracts, quashing related orders, or directing restitution to preserve lawful commerce - [Oil & Natural Gas Corporation Ltd. VS Petroleum Employees Union - 2023 0 Supreme(Bom) 576], [GH Vijapura & Co. VS State of Assam - 2014 0 Supreme(Gau) 800]- "Relation to performance obligations" - Section 57 recognizes that partial illegality can taint the performance of the entire contract, potentially excusing or voiding performance to the extent of illegality - [Brij Bhushan: Bru Bhushan Lal, Ramesh Kumar VS Commissioner Of Income Tax, Haryana, H. P. And New Delhi Iii: Commissioner Of Income Tax, Haryana, H. P. And New Delhi Iii - 1978 0 Supreme(SC) 308]- "Judicial approach" - Courts consistently emphasize that Section 57 analyses require careful scrutiny of the contract terms, the nature of illegality, and the interplay with statutory overrides or regulatory schemes - [K. V. V. Constructions VS The Superintending Engineer Public Works Departmental Tamirabarani Basin Circle Water Resource Organisation Tirunelveli 2 & Others - 2009 0 Supreme(Mad) 4862]- "Coherence with other Statutory Schemes" - Section 57 analyses must be harmonized with related legislative schemes (e.g., tax, arbitration, municipal regulations) to avoid contradictory outcomes in contractual enforcement - [DALIT MANAV UTHAN SANSTHAN VS COMMISSIONER, MUNICIPAL COPRORATION OF DELHI - 2007 0 Supreme(Del) 1242]- "Practical guidance for contracts" - When drafting or renegotiating contracts, ensure clarity that cost components, taxes, and substitutions do not embed illegal terms; otherwise, Section 57 risks invalidating the contract or portions of it - [Rameshwar Mandal VS Ram Chand Roy - 1884 0 Supreme(Cal) 113]- "Arising issues from reforms" - Amendments to Section 57 over time (procedural and limitation tweaks) reflect evolving administrative controls; practitioners should verify current operative text before relying on prior doctrines - [SIEMENS INDIA LTD. VS STATE OF MAHARASHTRA - 1986 0 Supreme(Bom) 85]- "Role of equity and impossibility" - While Section 57 supports upholding fair dealing, it also permits avoiding enforcement where performance is rendered impossible or illegal, aligning with equitable contract principles - [BALACHANDRAN VS SALES TAX OFFICER - 1987 0 Supreme(Ker) 194]

Note: The compilation above cites directly available references from the provided sources. Where a source did not supply explicit detail for a listed subpoint, that item has been omitted.

58 PERFORMANCE OF RECIPROCAL PROMISES-58. Reciprocal promise to do things legal, and also other things illegal.

Where persons reciprocally promise, firstly, to do certain things which are legal, and, secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.

ILLUSTRATION

A and B agree that A shall sell B a house for $10,000, but that, if B uses it as a gambling house, he shall pay A $50,000 for it.

The first set of reciprocal promises, namely, to sell the house and to pay $10,000 for it, is a contract.

The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement.

59 PERFORMANCE OF RECIPROCAL PROMISES-59. Alternative promise, one branch being illegal.

In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

ILLUSTRATION

A and B agree that A shall pay B $1,000 for which B shall afterwards deliver to A either rice or smuggled opium.

This is a valid contract to deliver rice, and a void agreement as to the opium.

60 APPROPRIATION OF PAYMENTS-60. Application of payment where debt to be discharged is indicated.

Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

ILLUSTRATIONS

(a) A owes B , among other debts, $1,000 upon a promissory note, which falls due on the 1st of June. He owes B no other debt of that amount. On the 1st of June A pays to B $1,000. The payment is to be applied to the discharge of the promissory note.

(b) A owes to B , among other debts, the sum of $567. B writes to A and demands the payment of this sum. A sends to B $567. This payment is to be applied to the discharge of the debt of which B had demanded payment.

61 APPROPRIATION OF PAYMENTS-61. Application of payment where debt to be discharged is not indicated.

Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

62 APPROPRIATION OF PAYMENTS-62. Application of payment where neither party appropriates.

Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law relating to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably.

63 CONTRACTS WHICH NEED NOT BE PERFORMED-63. Effect of novation, rescission and alteration of contract.

If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

ILLUSTRATIONS

(a) A owes money to B under a contract. It is agreed between A , B and C that B shall henceforth accept C as his debtor, instead of A . The old debt of A to B is at an end, and a new debt from C to B has been contracted.

(b) A owes B $10,000. A enters into an arrangement with B , and gives B a mortgage of his ( A 's) estate for $5,000 in place of the debt of $10,000. This is a new contract and extinguishes the old.

(c) A owes B $1,000 under a contract. B owes C $1,000. B orders A to credit C with $1

64 CONTRACTS WHICH NEED NOT BE PERFORMED-64. Promisee may dispense with or remit performance of promise.

Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.

ILLUSTRATIONS

(a) A promises to paint a picture for B . B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b) A owes B $5,000. A pays to B , and B accepts, in satisfaction of the whole debt, $2,000 paid at the time and place at which the $5,000 were payable. The whole debt is discharged.

(c) A owes B $5,000. C pays to B $1,000 and B accepts them, in satisfaction of his claim on A . This payment is a discharge of the whole claim.

(d) A owes B under a contra

65 CONTRACTS WHICH NEED NOT BE PERFORMED-65. Consequences of rescission of voidable contract.

When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore the benefit, so far as may be, to the person from whom it was received.

66 CONTRACTS WHICH NEED NOT BE PERFORMED-66. Obligation of person who has received advantage under void agreement, or contract that becomes void.

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.

ILLUSTRATIONS

(a) A pays B $1,000 in consideration of B 's promising to marry C , A 's daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the $1,000.

(b) A contracts with B to deliver to him 250 gantangs of rice before the 1st of May. A delivers 130 gantangs only before that day, and none later. B retains the 130 gantangs after the 1st of May. He is bound to pay A for them.

(c) A , a singer, contracts with B , the manager of a theatre, to sing at his th

67 CONTRACTS WHICH NEED NOT BE PERFORMED-67. Mode of communicating or revoking rescission of voidable contract.

The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal.

68 CONTRACTS WHICH NEED NOT BE PERFORMED-68. Effect of neglect of promisee to afford promisor reasonable facilities for performance.

If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by the neglect or refusal as to any non-performance caused thereby.

ILLUSTRATION

A contracts with B to repair B 's house.

B neglects or refuses to point out to A the places in which his house requires repair.

A is excused for the non-performance of the contract if it is caused by such neglect or refusal.

69 PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT-69. Claim for necessaries supplied to person incapable of contracting, or on his account.

If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

ILLUSTRATIONS

(a) A supplies B , a mentally disordered person, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B 's property.

(b) A supplies the wife and children of B , a mentally disordered person, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B 's property.

70 PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT-70. Reimbursement of person paying money due by another, in payment of which he is interested.

A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

ILLUSTRATION

A , the owner of a holding situated within a Town Board area, allows the assessment due thereon to fall into arrear. The Chairman of the Town Board seizes movable property found on the holding with a view to its sale by public auction under the Town Boards Enactment (F.M.S. Cap. 137). B having an interest in the movable property pays the arrear. A is bound to make good to B the amount so paid.

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71 PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT-71. Obligation of person enjoying benefit of non-gratuitous act.

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

ILLUSTRATIONS

(a) A , a tradesman, leaves goods at B 's house by mistake B treats the goods as his own. He is bound to pay A for them.

(b) A saves B 's property from fire. A is not entitled to compensation from B , if the circumstances show that he intended to act gratuitously.

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72 PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT-72. Responsibility of finder of goods.

A person who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee.

73 PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT-73. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

ILLUSTRATIONS

(a) A and B jointly owe $100 to C . A alone pays the amount to C , and B , not knowing this fact, pays $100 over again to C . C is bound to repay the amount to B .

(b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.

74 PART VII OF THE CONSEQUENCES OF BREACH OF CONTRACT-74. Compensation for loss or damage caused by breach of contract.

(1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

(2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

(3) Compensation for failure to discharge obligation resembling those created by contract.

When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default as if the person had contracted to discharge it and had broken his contract.

Explanation - In estimating the loss or dam

75 PART VII OF THE CONSEQUENCES OF BREACH OF CONTRACT-75. Compensation for breach of contract where penalty stipulated for.

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

Explanation - A stipulation for increased interest from the date of default may be a stipulation by way of penalty.

Exception - When any person enters into any bail-bond, recognizance, or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Federal Government or the Government of any State, gives any bond for the performance of any public duty or act in which the public are interested, he shall be

76 PART VII OF THE CONSEQUENCES OF BREACH OF CONTRACT-76. Party rightfully rescinding contract entitled to compensation.

A person who rightly rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract.

ILLUSTRATION

A , a singer, contracts with B , the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her $100 for each night's performance. On the sixth night A wilfully absents herself from the theatre, and B , in consequence, rescinds the contract. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

77 PART VIII OF INDEMNITY AND GUARANTEE-77. "Contract of indemnity".

A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a "contract of indemnity".

ILLUSTRATION

A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of $200. This is a contract of indemnity.

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78 PART VIII OF INDEMNITY AND GUARANTEE-78. Rights of indemnity-holder when sued.

The promisee in the contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor :

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

(b) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit; and

(c) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.

79 PART VIII OF INDEMNITY AND GUARANTEE-79. "Contract of guarantee", "surety", "principal debtor", and "creditor".

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 person in respect of which default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.

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80 PART VIII OF INDEMNITY AND GUARANTEE-80. Consideration for guarantee.

Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.

ILLUSTRATIONS

(a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods, C promises to guarantee the payment in consideration of A 's promise to deliver the goods. This is a sufficient consideration for C 's promise.

(b) A sells and delivers goods to B . C afterwards requests A to forbear to sue B for debt for a year, and promises that, if he does so, C will pay for them in default of payment by B . A agrees to forbear as requested. This is a sufficient consideration for C 's promise.

(c)

81 PART VIII OF INDEMNITY AND GUARANTEE-81. Surety's liability.

The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

ILLUSTRATION

A guarantees to B the payment of a bill of exchange by C , the accepter. The bill is dishonoured by C . A is liable, not only for the amount of the bill, but also for any interest and charges which may have become due on it.

82 PART VIII OF INDEMNITY AND GUARANTEE-82. "Continuing guarantee".

A guarantee which extends to a series of transactions is called a "continuing guarantee".

ILLUSTRATIONS

(a) A , in consideration that B will employ C in collecting the rents of B 's estate, promises B to be responsible to the amount of $5,000, for the due collection and payment by C of those rents. This is a continuing guarantee.

(b) A guarantees payment to B , a tea-dealer, to the amount of $1,000 for any tea he may from time to time supply to C . B supplies C with tea to above the value of $1,000, and C pays B for it. Afterwards, B supplies C with tea to the value of $2,000. C fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of $1,000.

(c)

83 PART VIII OF INDEMNITY AND GUARANTEE-83. Revocation of continuing guarantee.

A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.

ILLUSTRATIONS

(a) A , in consideration of B 's discounting, at A 's request, bills of exchange for C , guarantees to B , for twelve months, the due payment of all such bills to the extent of $5,000. B discounts bills for C to the extent of $2,000. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the $2,000 on default of C .

(b) A guarantees to B , to the extent of $10,000, that C shall pay all the bills that B shall draw upon him. B draws upon C . C accepts the bill.

84 PART VIII OF INDEMNITY AND GUARANTEE-84. Revocation of continuing guarantee by surety's death.

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions.

85 PART VIII OF INDEMNITY AND GUARANTEE-85. Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other's default.

Where two persons contract with a third person to undertake a certain liability, and also contract with each other that one of them shall be liable only on the default of the other, the third person not being a party to the contract, the liability of each of the two persons to the third person under the first contract is not affected by the existence of the second contract, although the third person may have been aware of its existence.

ILLUSTRATION

A and B make a joint and several promissory note to C . A makes it, in fact, as surety for B , and C knows this at the time when the note is made. The fact that A , to the knowledge of C , made the note as surety for B , is no answer to a suit by C against A upon the note.

86 PART VIII OF INDEMNITY AND GUARANTEE-86. Discharge of surety by variance in terms of contract.

Any variance, made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.

ILLUSTRATIONS

(a) A becomes surety to C for B 's conduct as a manager in C 's bank. Afterwards, B and C contract, without A 's consent, that B 's salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and the bank loses a sum of money. A is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss.

(b) A guarantees C against the misconduct of B in an office to which B is appointed by C , and of which the duties are defined by l

87 PART VIII OF INDEMNITY AND GUARANTEE-87. Discharge of surety by release or discharge of principal debtor.

The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.

ILLUSTRATIONS

(a) A gives a guarantee to C for goods to be supplied by C to B . C supplies goods to B , and afterwards B becomes embarrassed and contracts with his creditors (including C ) to assign to them his property in consideration of their releasing him from their demands. Here B is released from his debt by the contract with C , and A is discharged from his suretyship.

(b) A contracts with B to grow a crop of indigo on A 's land and to deliver it to B at a fixed rate, and C guarantees A<

88 PART VIII OF INDEMNITY AND GUARANTEE-88. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue principal debtor.

A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.

89 PART VIII OF INDEMNITY AND GUARANTEE-89. Surety not discharged when agreement made with third person to give time to principal debtor.

Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.

ILLUSTRATION

C , the holder of an overdue bill of exchange drawn by A as surety for B , and accepted by B , contracts with M to give time to B . A is not discharged.

90 PART VIII OF INDEMNITY AND GUARANTEE-90. Creditor's forbearance to sue does not discharge surety.

Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.

ILLUSTRATION

B owes to C a debt guaranteed by A . The debt becomes payable. C does not sue B for a year after the debt has become payable. A is not discharged from his suretyship.

91 PART VIII OF INDEMNITY AND GUARANTEE-91. Release of one co-surety does not discharge others.

Where there are co-sureties, a release by the creditor of one of them does not discharge the others; neither does it free the surety so released from his responsibility to the other sureties.

92 PART VIII OF INDEMNITY AND GUARANTEE-92. Discharge of surety by creditor's act or omission impairing surety's eventual remedy.

If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

ILLUSTRATIONS

(a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B 's due performance of the contract. C , without the knowledge of A , prepays to B the last two instalments. A is discharged by this prepayment.

(b) C lends money to B on the security of a joint and several promissory note made in C 's favour by B , and by A as surety for B , together with a bill of sale of B 's furn

93 PART VIII OF INDEMNITY AND GUARANTEE-93. Rights of surety on payment or performance.

Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

94 PART VIII OF INDEMNITY AND GUARANTEE-94. Surety's right to benefit of creditor's securities.

A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with the security, the surety is discharged to the extent of the value of the security.

ILLUSTRATIONS

(a) C advances to B , his tenant, $2,000 on the guarantee of A , C has also a further security for the $2,000 by a mortgage of B 's furniture. C cancels the mortgage. B becomes insolvent, and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture.

(b) C , a creditor, whose advance to B is secured by a decree, receives also a gua

95 PART VIII OF INDEMNITY AND GUARANTEE-95. Guarantee obtained by misrepresentation invalid.

Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.

96 PART VIII OF INDEMNITY AND GUARANTEE-96. Guarantee obtained by concealment invalid.

Any guarantee which the creditor has obtained by means of keeping silence as to material circumstance is invalid.

ILLUSTRATIONS

(a) A engages B as clerk to collect money for him. B fails to account for some of his receipts, and A in consequence calls upon him to furnish security for his duly accounting. C gives his guarantee for B 's duly accounting. A does not acquaint C with B 's previous conduct. B afterwards makes default. The guarantee is invalid.

(b) A guarantees to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B and C have privately agreed that B should pay five dollars per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is concealed from A . A i

97 PART VIII OF INDEMNITY AND GUARANTEE-97. Guarantee on contract that creditor shall not act on it until cosurety joins.

Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join.

98 PART VIII OF INDEMNITY AND GUARANTEE-98. Implied promise to indemnify surety.

In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but not sums which he has paid wrongfully.

ILLUSTRATIONS

(a) B is indebted to C , and A is surety for the debt. C demands payment from A , and on his refusal sues him for the amount. A defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from B the amount paid by him for costs, as well as the principal debt.

(b) C lends B a sum of money, and A , at the request of B accepts a bill of exchange drawn by B upon A to secure the amount. C , the holder of the bi

99 PART VIII OF INDEMNITY AND GUARANTEE-99. Co-sureties liable to contribute equally.

Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

ILLUSTRATIONS

(a) A , B and C are sureties to D for the sum of $3,000 lent to E . E makes default in payment. A , B and C are liable, as between themselves, to pay $1,000 each.

(b) A , B and C are sureties to D for the sum of $1,000 lent to E , and there is a contract between A , B and C that A is to be responsi

100 PART VIII OF INDEMNITY AND GUARANTEE-100. Liability of co-sureties bound in different sums.

Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

ILLUSTRATIONS

(a) A , B and C , as sureties for D , enter into three several bonds, each in a different penalty - namely, A in the penalty of $10,000, B in that of $20,000, C in that of $40,000, conditioned for D 's duly accounting to E . D makes default to the extent of $30,000. A , B and C are each liable to pay $10,000.

(b) A , B and C , as sureties for D , enter into three several bonds, each in a different penalty - namely, A in the penalty of $10,000, B in that of $20,000, C in that of $40,000, conditioned for D 's duly accounting to E . D makes defa

101 PART IX OF BAILMENT-101. "Bailment", "bailor" and "bailee".

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 disposed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor". The person to whom they are delivered is called the "bailee".

Explanation - If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor, of such goods, although they may not have been delivered by way of bailment.

102 PART IX OF BAILMENT-102. Delivery to bailee how made.

The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorized to hold them on his behalf.

103 PART IX OF BAILMENT-103. Bailor's duty to disclose faults in goods bailed.

The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware, and which materially interfere with the use of them, or expose the bailee to extraordinary risks; and, if he does not make the disclosure, he is responsible for damage arising to the bailee directly from those faults.

If the goods are bailed for hire, the bailor is responsible for the damage, whether he was or was not aware of the existence of the faults in the goods bailed.

ILLUSTRATIONS

(a) A lends a horse, which he knows to be vicious, to B . He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.

(b) A hires a carriage of B . The carriage is unsafe, though B is not aware of it, and A is injured.

104 PART IX OF BAILMENT-104. Care to be taken by bailee.

In all cases of bailment the bailee is bound to take as much are of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality, and value as the goods bailed.

105 PART IX OF BAILMENT-105. Bailee when not liable for loss, etc., of thing bailed.

The bailee, in the absence of any special contract, is not responsible for the loss, destruction, or deterioration of the thing bailed, if he has taken the amount of care of it described in section 104.

106 PART IX OF BAILMENT-106. Termination of bailment by bailee's act inconsistent with conditions.

A contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment.

ILLUSTRATION

A lets to B , for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A , a termination of the bailment.

107 PART IX OF BAILMENT-107. Liability of bailee making unauthorized use of goods bailed.

If the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.

ILLUSTRATIONS

(a) A lends a horse to B for his own riding only. B allows C , a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

(b) A hires a horse in Taiping from B expressly to march to Kuala Kangsar. A rides with due care, but marches to Parit Buntar instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.

108 PART IX OF BAILMENT-108. Effect of mixture, with bailor's consent, of his goods with bailee's.

If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture thus produced.

109 PART IX OF BAILMENT-109. Effect of mixture, without bailor's consent, when the goods can be separated.

If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture.

ILLUSTRATION

A bails 100 bales of cotton marked with a particular mark to B . B , without A 's consent, mixes the 100 bales with other bales of his own, bearing a different mark. A is entitled to have his 100 bales returned, and B is bound to bear all the expenses incurred in the separation of the bales, and any other incidental damage.

110 PART IX OF BAILMENT-110. Effect of mixture, without bailor's consent, when the goods cannot be separated.

If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, in such a manner that it is impossible to separate the goods bailed from the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.

ILLUSTRATION

A bails a barrel of Cape flour, worth $45, to B . B , without A 's consent, mixes the flour with country flour of his own, worth only $25 a barrel. B must compensate A for the loss of his flour.

111 PART IX OF BAILMENT-111. Repayment by bailor of necessary expenses.

Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.

112 PART IX OF BAILMENT-112. Restoration of goods lent gratuitously.

The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose. But if, on the faith of the loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels and return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived.

113 PART IX OF BAILMENT-113. Return of goods bailed, on expiration of time or accomplishment of purpose.

It is the duty of the bailee to return, or deliver according to the bailor's directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.

114 PART IX OF BAILMENT-114. Bailee's responsibility when goods are not duly returned.

If, by the fault of the bailee, the goods are not returned, delivered, or tendered at the proper time, he is responsible to the bailor for any loss, destruction, or deterioration of the goods from that time.

115 PART IX OF BAILMENT-115. Termination of gratuitous bailment by death.

A gratuitous bailment is terminated by the death either of the bailor or of the bailee.

116 PART IX OF BAILMENT-116. Bailor entitled to increase or profit from goods bailed.

In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.

ILLUSTRATION

A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A .

117 PART IX OF BAILMENT-117. Bailor's responsibility to bailee.

The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that he bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.

118 PART IX OF BAILMENT-118. Bailment by several joint owners.

If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary.

119 PART IX OF BAILMENT-119. Bailee not responsible on redelivery to bailor without title.

If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of the delivery.

120 PART IX OF BAILMENT-120. Right of third person claiming goods bailed.

If a person, other than the bailor, claims goods bailed, he may apply to the court to stop the delivery of the goods to the bailor, and to decide the title to the goods.

121 PART IX OF BAILMENT-121. Right of finder of goods; may sue for specific reward offered.

The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and, where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it.

122 PART IX OF BAILMENT-122. When finder of thing commonly on sale may sell it.

When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of the finder, the finder may sell it :

(a) when the thing is in danger of perishing or of losing the greater part of its value; or

(b) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

123 PART IX OF BAILMENT-123. Bailee's particular lien.

Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain the goods until he receives due remuneration for the services he has rendered in respect of them.

ILLUSTRATIONS

(a) A delivers a rough diamond to B , a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.

(b) A gives cloth to B , a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months' credit for the price. B is not entitled to retain the coat until he is paid.

124 PART IX OF BAILMENT-124. General lien of bankers, factors, wharfingers, advocates and policybrokers.

Bankers, factors, wharfingers, advocates and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

125 BAILMENTS OF PLEDGES-125. "Pledge", "pawnor" and "pawnee".

The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is in this case called the "pawnor". The bailee is called the "pawnee".

126 BAILMENTS OF PLEDGES-126. Pawnee's right of retainer.

The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged.

127 BAILMENTS OF PLEDGES-127. Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances.

The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.

128 BAILMENTS OF PLEDGES-128. Pawnee's right as to extraordinary expenses incurred.

The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged.

129 BAILMENTS OF PLEDGES-129. Pawnee's right where pawnor makes default.

If the pawnor makes default in payment of the debt, or performance, at the stipulated time, of the promise in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.

130 BAILMENTS OF PLEDGES-130. Defaulting pawnor's right to redeem.

If a time is stipulated for the payment of the debt, or performance of the promise, for which the pledge is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before they are actually sold; but he must in that case, pay, in addition, any expenses which have arisen from his default.

131 BAILMENTS OF PLEDGES-131. Pledge by possessor of goods, or of documentary title to goods.

A person who is in possession of any goods, or of any bill of lading, dock-warrant, warehouse-keeper's certificate, wharfinger's certificate, or warrant or order for delivery, or any other document of title to goods, may make a valid pledge of the goods or documents:

Provided that :

(a) the pawnee acts in good faith, and under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improperly; and

(b) the goods or documents have not been obtained from their lawful owner, or from any person in lawful custody of them, by means of an offence or fraud.

132 BAILMENTS OF PLEDGES-132. Pledge where pawnor has only a limited interest.

Where a person pledges goods in which he has only a limited interest, the pledge is valid to the extent of that interest.

133 SUITS BY BAILEES OR BAILORS AGAINST WRONG-DOERS-133. Suit by bailor or bailee against wrong-doer.

If a third person wrongfully deprives the bailee of the use of possession of the goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury.

134 SUITS BY BAILEES OR BAILORS AGAINST WRONG-DOERS-134. Apportionment of relief or compensation obtained by such suits.

Whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.

135 PART X APPOINTMENT AND AUTHORITY OF AGENTS-135. "Agent" and "principal".

An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal".

136 PART X APPOINTMENT AND AUTHORITY OF AGENTS-136. Who may employ agent.

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

137 PART X APPOINTMENT AND AUTHORITY OF AGENTS-137. Who may be an agent.

As between the principal and third persons, any person may become an agent; but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions in that behalf herein contained.

138 PART X APPOINTMENT AND AUTHORITY OF AGENTS-138. Consideration not necessary.

No consideration is necessary to create an agency.

139 PART X APPOINTMENT AND AUTHORITY OF AGENTS-139. Agent's authority may be expressed or implied.

The authority of an agent may be expressed or implied.

140 PART X APPOINTMENT AND AUTHORITY OF AGENTS-140. DEFINITIONs of express and implied authority.

An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.

ILLUSTRATION

A owns a shop in Kajang, living himself in Kuala Lumpur, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purpose of the shop, and of paying for them out of A 's funds with A 's knowledge. B has an implied authority from A to order goods from C in the name of A for the purposes of the shop.

141 PART X APPOINTMENT AND AUTHORITY OF AGENTS-141. Extent of agent's authority.

(1) An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do the act.

(2) An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business.

ILLUSTRATIONS

(a) A is employed by B , residing in London, to recover at Telok Anson a debt due to B . A may adopt any legal process necessary for the purpose of recovering the debt, and may give a valid discharge for the same.

(b) A constitutes B his agent to carry on his business of a shipbuilder. B may purchase timber and other materials, and hire workmen, for the purpose of carrying on the business.

142 PART X APPOINTMENT AND AUTHORITY OF AGENTS-142. Agent's authority in an emergency.

An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.

ILLUSTRATIONS

(a) An agent for sale may have goods repaired if it be necessary.

(b) A consigns provisions to B at Taiping, with directions to send them immediately to C at Parit Buntar. B may sell the provisions at Taiping, if they will not bear the journey to Parit Buntar without spoiling.

143 SUB-AGENTS-143. When agent cannot delegate.

An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency, a sub-agent must, be employed.

144 SUB-AGENTS-144. "Sub-agent".

A "sub-agent" is a person employed by, and acting under the control of, the original agent in the business of the agency.

145 SUB-AGENTS-145. Representation of principal by sub-agent properly appointed.

(1) Where a sub-agent is properly appointed, the principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent originally appointed by the principal.

(2) Agent's responsibility for sub-agent.

An agent is responsible to the principal for the acts of the subagent.

(3) Sub-agent's responsibility.

A sub-agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or wilful wrong.

146 SUB-AGENTS-146. Agent's responsibility for sub-agent appointed without authority.

Where an agent, without having authority to do so, has appointed a person to act as a sub-agent, the agent stands towards that person in the relation of a principal to an agent, and is responsible for his acts both to the principal and to third persons; the principal is not represented by or responsible for the acts of the person so employed, nor is that person responsible to the principal.

147 SUB-AGENTS-147. Relation between principal and person duly appointed by agent to act in business of agency.

Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, that person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.

ILLUSTRATIONS

(a) A directs B , his advocate, to sell his estate by auction, and to employ an auctioneer for the purpose. B names C , an auctioneer, to conduct the sale. C is not a sub-agent, but is A 's agent for the conduct of the sale.

(b) A authorizes B , a merchant in Taiping, to recover the moneys due to A from C & Co. B instructs D , an advocate, to take legal proceedings against C & Co. for the recovery of the money. D is not a sub-agent, but is advocat

148 SUB-AGENTS-148. Agent's duty in naming such person.

In selecting such an agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case; and, if he does this, he is not responsible to the principal for the acts or negligence of the agent so selected.

ILLUSTRATIONS

(a) A instructs B , a merchant, to buy a ship for him. B employs a ship surveyor of good reputation to choose a ship for A . The surveyor makes the choice negligently and the ship turns out to be unseaworthy and is lost. B is not, but the surveyor is, responsible to A .

(b) A consigns goods to B , a merchant, for sale. B , in due course, employs an auctioneer in good credit to sell the goods of A , and allows the auctioneer to receive the proceeds of the sale. The auctioneer afterwards becomes insolvent

149 RATIFICATION-149. Right of person as to acts done for him without his authority. Effect of ratification.

Where acts are done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or to disown the acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.

150 RATIFICATION-150. Ratification may be expressed or implied.

Ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts are done.

ILLUSTRATIONS

(a) A , without authority, buys goods for B . Afterwards B sells them to C on his own account; B 's conduct implies a ratification of the purchase made for him by A .

(b) A , without B 's authority, lends B 's money to C . Afterwards B accepts interest on the money from C . B 's conduct implies a ratification of the loan.

151 RATIFICATION-151. Knowledge requisite to valid ratification.

No valid ratification can be made by a person whose knowledge of the facts of the case is materially defective.

152 RATIFICATION-152. Effect of ratifying unauthorized act forming part of a transaction.

A person ratifying any unauthorized act done on his behalf ratifies the whole of the transaction of which the act formed a part.

153 RATIFICATION-153. Ratification of unauthorized act cannot injure third person.

An act done by one person on behalf of another, without that other person's authority, which, if done with authority, would have the effect of subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have that effect.

ILLUSTRATIONS

(a) A , not being authorized thereto by B , demands on behalf of B , the delivery of a chattel, the property of B , from C , who is in possession of it. This demand cannot be ratified by B , so as to make C liable for damages for his refusal to deliver.

(b) A holds a lease from B , terminable on three months' notice. C , an unauthorized person, gives notice of termination to A . The notice cannot be ratified by B , so as to be binding on A .

154 REVOCATION OF AUTHORITY-154. Termination of agency.

An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated or declared a bankrupt or an insolvent.

155 REVOCATION OF AUTHORITY-155. Termination of agency, where agent has an interest in subjectmatter.

Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

ILLUSTRATIONS

(a) A gives authority to B to sell A 's land, and to pay himself, out of the proceeds, the debts due to him from A . A cannot revoke this authority, nor can it be terminated by his unsoundness of mind or death.

(b) A consigns 1,000 bales of cotton to B , who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A cannot revoke this authority nor is it terminated by his unsoundness of mind or death.

156 REVOCATION OF AUTHORITY-156. When principal may revoke agent's authority.

The principal may, save as is otherwise provided by the last preceding section, revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal.

157 REVOCATION OF AUTHORITY-157. Revocation where authority has been partly exercised.

The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency.

ILLUSTRATIONS

(a) A authorizes B to buy 1,000 bales of cotton on account of A , and to pay for it out of A 's money remaining in B 's hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B 's authority so far as regards payment for the cotton.

(b) A authorizes B to buy 1,000 bales of cotton on account of A , and to pay for it out of A 's money remaining in B 's hands. B buys 1,000 bales of cotton in A 's name, and so as not to render himself personally liable for the price. A ca

158 REVOCATION OF AUTHORITY-158. Compensation for revocation by principal or renunciation by agent.

Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.

159 REVOCATION OF AUTHORITY-159. Notice of revocation or renunciation.

Reasonable notice must be given of such revocation or renunciation; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other.

160 REVOCATION OF AUTHORITY-160. Revocation and renunciation may be expressed or implied.

Revocation and Renunciation may be expressed or may be implied in the conduct of the principal or agent, respectively.

ILLUSTRATION

A empowers B to let A 's house. Afterwards A lets it himself. This is an implied revocation of B 's authority.

161 REVOCATION OF AUTHORITY-161. When termination of agent's authority takes effect as to agent, and as to third persons.

The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

ILLUSTRATIONS

(a) A directs B to sell goods for him, and agrees to give B 5 per cent. commission on the price fetched by the goods. A afterwards, by letter, revokes B 's authority. B , after the letter is sent, but before he receives it, sells the goods for $100. The sale is binding on A , and B is entitled to $5 as his commission.

(b) A , at Port Dickson, by letter directs B to sell for him some cotton lying in a warehouse in Kelang, and afterwards, by letter, revokes his authority to sell, and directs B to send the cotton to Port Dickson. B , after receiving the second letter, en

162 REVOCATION OF AUTHORITY-162. Agent's duty on termination of agency by principal's death or insanity.

When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

163 REVOCATION OF AUTHORITY-163. Termination of sub-agent's authority.

The Termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent's authority) of the authority of all sub-agents appointed by him.

164 AGENTS DUTY TO PRINCIPAL-164. Agent's duty in conducting principal's business.

An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts the business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it.

ILLUSTRATIONS

(a) A , an agent engaged in carrying on for B a business, the which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make the investment. A must make good to B the interest usually obtained by such investments.

(b) B , a broker, in whose business it is not the custom to sell on credit, sells goods of A on credit to C , whose credit a

165 AGENTS DUTY TO PRINCIPAL-165. Skill and diligence required from agent.

An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill, or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill, or misconduct.

ILLUSTRATIONS

(a) A , a merchant in Kuala Lumpur, has an agent, B , in London, to whom a sum of money is paid on A 's account, with orders to remit. B retains the money for a considerable time. A , in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest from the

166 AGENTS DUTY TO PRINCIPAL-166. Agent's accounts.

An agent is bound to render proper accounts to his principal on demand.

167 AGENTS DUTY TO PRINCIPAL-167. Agent's duty to communicate with principal.

It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.

168 AGENTS DUTY TO PRINCIPAL-168. Right of principal when agent deals, on his own account, in business of agency without principal's consent.

If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.

ILLUSTRATIONS

(a) A directs B to sell A 's estate. B buys the estate for himself in the name of C . A , on discovering that B has bought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material fact, or that the sale has been disadvantageous to him.

(b) A directs B to sell A 's estate. B , on

169 AGENTS DUTY TO PRINCIPAL-169. Principal's right to benefit gained by agent dealing on his own account in business of agency.

If an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent by benefit which may have resulted to him from the transaction.

ILLUSTRATION

A directs B , his agent, to buy a certain house for him. B tells A it cannot be bought, and buys the house for himself. A may, on discovering that B has bought the house, compel him to sell it to A at the price he gave for it.

170 AGENTS DUTY TO PRINCIPAL-170. Agent's right of retainer out of sums received on principal's account.

An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.

171 AGENTS DUTY TO PRINCIPAL-171. Agent's duty to pay sums received for principal.

Subject to the deductions specified in section 170, the agent is bound to pay to his principal all sums received on his account.

172 AGENTS DUTY TO PRINCIPAL-172. When agent's remunerations becomes due.

In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of the act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold or although the sale may not be actually complete.

173 AGENTS DUTY TO PRINCIPAL-173. Agent not entitled to remuneration for business misconducted.

An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.

ILLUSTRATIONS

(a) A employs B to recover $100,000 from C , and to lay it out on good security. B recovers the $100,000 and lays out $90,000 on good security, but lays out $10,000 on security which he ought to have known to be bad, whereby A loses $2,000. B is entitled to remuneration for recovering the $100,000 and for investing the $90,000. He is not entitled to any remuneration for investing the $10,000, and he must make good the $2,000 to A .

(b) A employs B to recover $1,000 from C . Through B 's misconduct the money is not recovered. B is entitled to no remuneration for his services, and must make good the loss.

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174 AGENTS DUTY TO PRINCIPAL-174. Agent's lien on principal's property.

In the absence of any contract to the contrary, an agent is entitled to retain goods, papers, and other property, whether movable or immovable, of the principal received by him, until the amount due to himself for commission, disbursements, and services in respect of the same has been paid or accounted for to him.

175 PRINCIPAL'S DUTY TO AGENT-175. Agent to be indemnified against consequences of lawful acts.

The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by the agent in exercise of the authority conferred upon him.

ILLUSTRATIONS

(a) B , at Kelang, under instructions from A , of Taiping, contracts with C to deliver certain goods to him. A does not send the goods to B , and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses.

(b) B , a broker at Taiping, by the orders of A , a merchant there, contracts with C for the purchase of 10 casks of oil for A . Afterwards A refuses to receive the oil, and

176 PRINCIPAL'S DUTY TO AGENT-176. Agent to be indemnified against consequences of acts done in good faith.

Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it cause an injury to the rights of third persons.

ILLUSTRATIONS

(a) A , a decree-holder and entitled to execution of B 's goods, requires the officer of the court to seize certain goods, representing them to be the goods of B . The officer seizes the goods, and is sued by C , the true owner of the goods. A is liable to indemnify the officer for the sum which he is compelled to pay to C , in consequence of obeying A 's directions.

(b) B , at the request of A , sells goods in the possession of A , but which A had no right to dispose of. B does not know this, and hands over the proceeds of the sale to

177 PRINCIPAL'S DUTY TO AGENT-177. Non-liability of employer of agent to do a criminal act.

Where one person employs another to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied promise, to indemnify him against the consequences of that act.

ILLUSTRATIONS

(a) A employs B to beat C , and agrees to indemnify him against all consequences of the act. B thereupon beats C , and has to pay damages to C for so doing. A is not liable to indemnify B for those damages.

(b) B , the proprietor of a newspaper, publishes, at A 's request, a libel upon C in the paper, and A agrees to indemnify B against the consequences of the publication, and all costs and damages of any action in respect thereof. B is sued by C and has to pay damages, and also incurs expenses. A is not liable to B

178 PRINCIPAL'S DUTY TO AGENT-178. Compensation to agent for injury caused by principal's neglect.

The principal must make compensation to his agent in respect of injury caused to the agent by the principal's neglect or want of skill.

ILLUSTRATION

A employs B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskilfully put up, and B is in consequence hurt. A must make compensation to B .

179 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-179. Enforcement and consequences of agent's contracts.

Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.

ILLUSTRATIONS

(a) 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 cannot, in a suit by the principal, set-off against that claim a debt due to himself from B .

(b) A , being B 's agent, with authority to receive money on his behalf, receives from C a sum of money due to B . C is discharged of his obligation to pay the sum in question to B .

180 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-180. Principal how far bound when agent exceeds authority.

When an agent does more than he is authorized to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal.

ILLUSTRATION

A , being owner of a ship and cargo, authorizes B to procure an insurance for $4,000 on the ship. B procures a policy for $4,000 on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo.

181 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-181. Principal not bound when excess of agent's authority is not separable.

Where an agent does more than he is authorized to do, and what he does beyond the scope of his authority cannot be separated from what is within it, the principal is not bound to recognise the transaction.

ILLUSTRATION

A authorizes B to buy 500 sheep for him. B buys 500 sheep and 200 lambs for one sum of $6,000. A may repudiate the whole transaction.

182 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-182. Consequences of notice given to agent.

Any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequence as if it had been given to or obtained by the principal.

ILLUSTRATIONS

(a) A is employed by B to buy from C certain goods, of which C is the apparent owner, and buys them accordingly. In the course of the treaty for the sale, A learns that the goods really belonged to D , but B is ignorant of that fact. B is not entitled to set-off a debt owing to him from C against the price of the goods.

(b) A is employed by B to buy from C goods of which C is the apparent owner. A was, before he was so employed, a servant of C<

183 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-183. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.

In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

Such a contract shall be presumed to exist in the following cases :

(a) Presumption of contract to contrary.

where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;

(b) where the agent does not disclose the name of his principal; and

(c) where the principal, though disclosed, cannot be sued.

184 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-184. Rights of parties to a contract made by agent not disclosed.

(a) If an agent makes a contract with a person who neither knows, nor has reason to suspect, that he is an agent, his principal may require the performance of the contract; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been principal.

(b) If the principal discloses himself before the contract is completed, the other contracting party may refuse to fulfil the contract, if he can show that, if he had known who was the principal in the contract, or if he had known that the agent was not a principal, he would not have entered into the contract.

185 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-185. Performance of contract with agent supposed to be principal.

Where one man makes a contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, the principal, if he requires the performance of the contract, can only obtain the performance subject to the rights and obligations subsisting between the agent and the other party to the contract.

ILLUSTRATION

A , who owes $500 to B , sells $1,000 worth of rice to B . A is acting as agent for C , in the transaction, but B has no knowledge nor reasonable ground of suspicion that that is the case. C cannot compel B to take the rice without allowing him to set-off A 's debt.

186 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-186. Right of person dealing with agent personally liable.

In cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of them, liable.

ILLUSTRATION

A enters into a contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C . A may sue either B or C , or both, for the price of the cotton.

187 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-187. Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable.

When a person who has made a contract with an agent induces the agent to act upon the belief that the principal only will be held liable, or induces the principal to act upon the belief that the agent only will be held liable, he cannot afterwards hold liable the agent or principal, respectively.

188 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-188. Liability of pretended agent.

A person untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.

189 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-189. Person falsely contracting as agent not entitled to performance.

A person with whom a contract has been entered into in the character of agent is not entitled to require the performance of it if he was in reality acting, not as agent, but on his own account.

190 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-190. Liability of principal inducing belief that agent's unauthorized acts were authorized.

When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by those acts or obligations if he has by his words or conduct induced such third persons to believe that those acts and obligations were within the scope of the agent's authority.

ILLUSTRATIONS

(a) A consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C , being ignorant of B 's instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.

(b) A entrusts B with negotiable instruments endorsed in blank. B sells them to C in violation of private orders from A . The sale is good.

191 EFFECT OF AGENCY ON CONTRACT WITH THIRD PERSONS-191. Effects, on agreement, of misrepresentation or fraud by agent.

Misrepresentations made, or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals; but misrepresentations made, or frauds committed, by agents, in matters which do not fall within their authority, do not affect their principals.

ILLUSTRATIONS

(a) A , being B 's agent for the sale of goods, induces C to buy them by a misrepresentation, which he was not authorized by B to make. The contract is voidable, as between B and C , at the option of C .

(b) A , the captain of B 's ship, signs bills of lading without having received on board the goods mentioned therein. The bills of lading are void as between B and the pretended consignor.