What is mercantile law?

Mercantile law is that branch of

law which comprises laws
concerning trade, industry and
commerce. Its scope is very
vast .IT consist of Law of
contract, sale of goods,
partnership, companies,
negotiable instruments,
insurance, insolvency, carriage
of goods and arbitration.

Define contract
Contract is an agreement enforceable by
law.
as every promise and every set of
promises, forming the consideration for
each other, is an agreement. Sec.2 (e)
A proposal when accepted becomes a
promise. Thus a promise contains two
elements i.e Offer and Acceptance.

 What is a Valid contract?

Valid contract is a an agreement
between two or more people having
capacity to enter into a contract after
proper offer and acceptance and
having lawful consideration and free
consent. Further the object must be
lawful and there must be an intention to
create legal relationship and there must
be a possibility of performance.

What are the essentials of a valid

Contract ?
proper offer and acceptance
capacity of parties
lawful object lawful consideration and
free consent
intention to create legal relationship
possibility of performance.
Agreements not expressly declared
void

 Voidable Contract
If a contract is enforceable at the
option of one of the parties. Unless
avoided / rescinded by the party
entitled to do so, it is a valid contract.
(sec2(1)) The contracts in which the
ascent is obtained by coercion, undue
influence , misrepresentation or fraud
are voidable contracts at the option of
the party whose consent was obtained
in such a manner.

 Void contracts
The word void means not enforceable by
law. If an agreement is not enforceable by
law then it can not become a contract.
However there are occasions when the
contract when made was a valid contract but
became void subsequently. The reasons for
a contract to become void are as under:
Supervening Subsequent illegality/
impossibility.
Repudiation of void able contract.
Contract contingent on happening of
impossible event.

Void Agreement
Agreements not meeting the essentials of
contract i.e
by minor or person of unsound mind
Under mutual mistake of material facts of the
agreement.
Agreement of which consideration or object
is unlawful
Partly unlawful but the illegal part can not be
separated
Agreement without consideration
Agreements where there is a mistake of
Foreign law
Agreements which are expressly declared
void

 Distinguish between void and

voidable contracts.
Void contract is a contract which
was valid when entered into but
became Void subsequently due
impossibility of performance.
A voidable contract is one which
can be set aside or repudiated or
avoided at the option of the
aggrieved party.

 What is the difference between an

agreement and a contract?

Every promise and every set of

promises forming the
consideration for each other is an
agreement. While an agreement
which meets all the essentials and
gives rise to legal obligation
becomes a contract. A contract is
an agreement enforceable by law.
Every agreement need not be a
contract while every contract is an
agreement.

 What is a contingent contract ?

A contingent contract to do or
not to do some thing if some
event collateral to such
contract, does or does not
happen. Insurance contracts
are examples of contingent
contracts.

 What is a Wagering Contract?

An agreement between two
persons under which money or
moneys worth is payable, by one
person to another on the
happening or non happening of a
future uncertain event is called a
wagering agreement . These
events are chance oriented and
hence completely uncertain.

When is the time essence of a contract?

The essence of contract means that it is
essential for the parties to a contract to
perform their respective promises
within specified time. Cases where time
is considered as essence
Where parties have expressly agreed to
do so.
Where non performance operates as an
injury to the party
Where nature and necessity of the
contract requires the performance of
the contract within the specified time.

 What are Quasi contracts?

Quasi contract is not a proper contract
because one or the other essential conditions
of contract is absent. It is an obligation which
is imposed by law and not outcome of an
agreement. The right of a party in it is right to
money and generally though not always to a
liquidated sum of money. The remedies for
breach are the same as are in the case of
contracts. Right to recover the price for
necessaries supplied (s 68),right to recover
money paid for another(S69right to recover
for the non gratuitous act(S70) responsibility
of finder of goods(S71)right to recover from a
person to whom money is paid or thing is
delivered by mistake or under coercions
(S72). Section72 covers both mistake of fact
and mistake of law. The meaning of coercion
is also wide including oppression, extortion
or such other means.

The remedies for breach are the same as are

in the case of contracts.
Right to recover the price for necessaries
supplied (s 68),
right to recover money paid for another(S69)
right to recover for the non gratuitous
act(S70) responsibility of finder of
goods(S71)
right to recover from a person to whom
money is paid or thing is delivered by
mistake or under coercions (S72).
Both mistake of fact and mistake of law. The
meaning of coercion is also wide including
oppression, extortion or such other means

What is general offer?

The person who makes the offer is known as
offer (proposer) and to whom the offer is made
is called the offeree (promise). When the offer is
made to no one specific it is called a general
offer.
Distinguish between offer and an invitation to
offer.
An offer is also called a proposal. A person said
to have made the proposal when he signifies to
another his willingness to do or to abstain from
doing any thing with a view to obtaining the
assent of that other to such act or abstinence.
The essential elements of offer are that it must
be made to some one else or it could a general
offer, it must be an expression of readiness or
willingness to do or to abstain from doing
something.

 What are the essentials of a valid offer?

The following conditions must be
fulfilled for an offer to be valid
Intention to create legal relationship
Certain and unambiguous terms
It should be different from a mere
declaration of intention
Different from an invitation to offer
Communication
No term the compliance of which
amounts to acceptance
Communication of special terms or
Standard form contracts

 What is an invitation of offer?

In case of invitation to an offer

the person making an offer
invites others to make an offer
to him. It is a prelude to offernegotiations or preliminary
discussions etc

 Sec2(b) defines acceptance as when

the person to whom the proposal (offer)
is made signifies his assent thereto,
the proposal is said to be accepted
Acceptance means giving consent to
offer. It is willingness of offeree to be
bound by the terms of the offer. A
proposal when accepted becomes a
promise.

 For a valid acceptance following conditions must

be met :
Acceptance must be given only by the person to
whom the offer is made
-It must be absolute and unqualified
-Acceptance must be expressed in some usual
and reasonable manner or in a manner as
prescribed in the offer.
-Acceptance must be communicated by the
acceptor
-Acceptance must be given before the offer is
revoked or within reasonable time or before the
elapse of the offer
-Acceptance must succeed the offer
Rejected offer can be accepted only, if renewed

 Communication, acceptance and

revocation
Communication of offer is complete
when it comes to the knowledge of
the person to whom it is made.
Communication of acceptance is
complete as against the proposer
when the letter of acceptance is put
in the mail, being out of power of
the accepter and as against the
acceptor when it is to the
knowledge of the proposer.

 Communication of Revocation
The communication of revocation is
complete as against the person who makes it
when it is put into the course of transmission
to the person to whom it is made. As against
the person to whom it is made when it comes
to the knowledge of the person to whom it is
made.
According to section 5 A proposal may be
revoked at any time before the
communication of its acceptance is complete
as against the proposer, but not afterwards .
An acceptance may be revoked at any time
before the communication of the acceptance
is complete as against the acceptor but not
later.

 Define consideration
The consideration means some thing in
return. A valuable consideration in the sense
of the law may consist either in some right,
interest profit or benefit accruing to the one
party or some forbearance, detriment, loss or
responsibility given, suffered or undertaken
by the other.Justice Lush J in a leading
English case Currie Vs Misa
What is a lawful consideration?
A consideration which is not forbidden by
law and if permitted it does not defeat the
provisions of any law for the time being in

 What is Past Consideration?

The consideration which has already moved
before forming of the contract.
No consideration no contract. Explain.
Consideration is an essential element of a
contract to be valid. There can not a valid
contract without a lawful consideration.
Except in the following cases

Agreement made on account of natural love

and affection( S 25(1) )
Promise to compensate (S 25 (2))
Promise to pay for time barred debts (S25(3))
Completed gifts (S 25 )
Agency (S 185 )

 Capacity of parties
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. Section 10
A person is considered to be a minor if he
has not obtained majority. Majority for a
person is 21 years where a guardian of a
minors person or property has been
appointed under the Guardians and Wards
Act,1890or where minors property has
passed under the superintendence of the
court of wards , in other cases it is 18 years.

 Contract by Minor
A contract with minor is void ab-initio.
No estoppels, a minor is not estopped from setting
up the plea of minority.
In case of fraudulent representation of age by minor
to induce the other party to get into a contract, the
court may award compensation to the other party
An agreement with minor can not be ratified on
attainment of age of majority
Agreements made by a minor jointly with major are
void vis- a vis the minor but these can be enforced
against the major. A minor can share the profits
without the responsibility/liability.
A minor can not become a partner in a partnership
firm however, with the consent of all the partners for
the time being be admitted to the benefits of the
partnership. A minor can share the profits without the
responsibility/liability.
A minor can become a shareholder in a company if
the Article does not prohibit it and the shares are
fully paid up.

 A minor can not be declared as insolvent as he is not

competent to contract
A minor can be a promisee but not a promisor. He
can recover the price for selling the goods A
mortgage executed in favour of a minor who has
advanced the money can be executed can be
enforced.
Contracts entered into by the guardian/ manager of
the estate of a minor can be enforced by or against
the minor if it is within the scope of authority of the
manager / guardian and is for the benefit of the
minor.
A person who has supplied the necessaries to a
minor or to those who are dependent on him is
entitled to be reimbursed from the property of the
minor.(Sec68)
A minor can be held liable in Tort but in course of
doing what he is entitled to do negligently, he can not
be held liable in contract.

 Contracting party must be sound mind

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
judgement as to its effects upon his
interests.(Section 12)
Disqualified persons
Alien enemies
Foreign sovereigns and ambassadors
Convicts
Married Women
Insolvent
Joint stock co and incorporations
incorporated under special Act

 Can a stranger to a contract sue?

A stranger to a contract can not sue but

a stranger to consideration can sue.
This is so because consideration can
be supplied by any one whether he is
promise or not however a stranger to
contract can not sue due to absence of
privity of contract
Free consent
Consent can be defined as two or
more persons are said to consent
when they agree upon the same thing
in the same sense( sec.13)
Consent involves identity of minds adidem.

 Consent is suppose to be free when it

is not caused by the following (Section
14)

Coersion
Undue influence
Misrepresentation
Fraud
Mistake

 Distinguish between coercion and

under influence
Coercion means compelling a person
to get into a contract under a pressure
or a threat .A contract is said to be
caused when it is obtained by
Committing an act forbidden by IPC
Threatening to commit an act forbidden
by IPC
Threatening to detain any property

 How is contract affected by undue influence?

Undue influence means domination of will of
other person to obtain an unfair advantage
over the other. For presumption of domination
of will the following must be met
There must be real or apparent authority over
the other
Where he stands in a fiduciary relation to othe
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

 Define fraud and point out its effects on the

validity of a contract. Give suitable examples
to explain your answer.
False representation of fact made willfully with a
view to deceive the other party is termed as Fraud
It means and includes the following acts committed
by a party to a contract or with his connivance or by
his agent with intent to deceive another party there
to or his agent, or to induce him to enter into a
contract
The suggestion as to a fact, of that which is not true,
by one who does not believe it to be true.
The active concealment of fact by one having
knowledge or belief of the fact
A promise made without any intention of performing
Any such act or omission as the law specially
declares to be fraudulent
Any other act fitted to deceive.

 Mere silence to facts likely to affect the

willingness of a person to enter into a
contract is not fraud however in case where
it is the duty of the person to speak and he
does not or when the person is standing in
fiduciary relationship like principal and
agent, solicitor and client, guardian and
ward, trustee and beneficiary.
The effect of fraud are that the party
whose consent was caused by fraud can
rescind the contract but he can not do so in
case where silence amounts to fraud if he
had the means of discovering the truth with
ordinary diligence or where party gave the
consent in ignorance of fraud or party after
becoming aware of the fraud takes benefit
under the contract.

Can silence be fraudulent?

The next thing to understand is whether silence
could be fraudulent. Section 17 deals with those
cases when silence could be fraudulent. In the
explanation it is made clear that mere silence as to
facts likely to affect the willingness of person to
enter into contract is not fraud, unless
It is the duty of the person to speak keeping in mind
the totality of circumstances and he keeps
quite( like in contracts of good faith etc), in case of
fiduciary relationship in which it is the duty of the
person in whom confidence is reposed to disclose
all the material facts concerning the transaction;
these relations ships are between trustee and
beneficiary, principal and agent, solicitor and client,
guardian and ward or
when silence in itself is equivalent to speech.
Contracts of insurance.
Contract of marriage engagement .
Contract of family settlement .
Share allotment contracts (prospectus).

 Misrepresentation
Any representation made wrongly,
whether knowingly or innocently
is misrepresentation.
If it is innocently made then in law
we term it as misrepresentation but
if made intentionally or deliberately
with an intention to deceive then it
is called fraud.

Mistake
Erroneous belief about some thing.
--Mistake of Law
Ignorance of law is no excuse. Every
one is expected to know the laws of his
country and hence no plea can be
taken that I did not know the law.
According to section 21, a contract is
not voidable because it was caused by
a mistake as to any law in force in
India

 --Mistake of fact
Bilateral-In case of bilateral mistake of
essential facts, the contract is void abinitio. The mistake about the existence of
the subject matter or its identity are
examples of this type of bilateral mistake
about fact
Unilateral- In case of unilateral mistake the
contract is not voidable. The contract
remains valid unless it was caused by
misrepresentation or fraud, in which case
it becomes voidable.

 Legality of object and consideration

If either the object or consideration or both
are unlawful the contract is Void.
Consideration and object are unlawful if
It is forbidden by law
It is of such a nature that if permitted it would
defeat the provision of any law or
It is fraudulent
If it involves injury to thee person or property
of another
If the court regards it as immoral.
If the court regards it as opposed to public
policy.

 State briefly the various modes in which a

contract may be discharged.
Novation- Substitution of new contract for
the original. This could be between the same
parties or new parties. Consideration for the
contract is the discharge of the original
contract.
Rescission-cancellation of the contract by
any party or all the parties.
Alteration-change in the terms of the
contract by mutual consent. It discharges the
original contract and creates a new contract.
Parties to new contract remain the same.
Remission- acceptance of promise of lesser
fulfillment of the promise made. The promise
could be wholly or partly remitted.
Waiver- means intentional relinquishment of
right under the contract.

 A contract is discharged through

operation of law when
Promisor dies
Becomes insolvent
If there is unauthorized
material alteration in terms of
the contract without approval
of other party
By identity of promisor and
promisee

 What is the difference between

Novation and Alteration?
Novation means the substitution of a
new contract for the original contract
either the new contract is between the
same parties or between different
parties. Consideration for new contract
is the discharge of the old contract.
Alteration means a change in the terms
of a contract with mutual consent of
the parties. Alteration discharges the
original contract. In case of alteration
the parties must not change.

 What is part performance of

contract?
When the contract is not fully
performed only a part it was
performed. For example, if in a
contract of publishing a book in
a magazine in installments only
a few installments were
published but others were not. It
could be termed that the
contract was partly performed.

What is breach of contract?

When the contract is not performed by
the time it is due it is called breach of
contract.
An anticipatory breach occurs when
the party declare his intentions of not
performing the contract before the
performance is due. The remedies for
anticipatory breach are:
Rescind the contract and claim
damages
May treat the contract as operative and
claim damages once the time or the
due date for performance is over and

 The various remedies in case of

breach of contract available to an
aggrieved party are
Rescission of contract
Suite for damages
Compensation for loss or damage
caused by breach of contract
Suite for specific performances
Suite for injunction
Suite for quantum Meruit

 What are remedies available for breach

of contract?
The various remedies available to an
aggrieved party are
Rescission of contract
Suit for damages
Compensation for loss or damage
caused by breach of contract
Suite for specific performances
Suite for injunction
Suite for quantum Meruit

contract? What are the rights and obligations of

parties in case of an anticipatory breach of contract?
When a party declares his intention of not
performing the contract before the performance
date, it is called anticipatory breach of contract.
This intention can be declared in two ways i.e by
refusing to perform and by disabling oneself from
performing his promise in its entirety. (implied
repudiation)
The following options are available to the aggrieved
party
Contract can be rescinded and damages claimed
without waiting for due date of performance. The
amount of damage will be calculated by the
difference between the price at contract date and the
date of breach.
Treat the contract as operative and wait for the due
date of performance. The amount of damage will be
calculated by the difference between the price at
contract date and the due date of performance.

 Impossibility of performance is, as a rule, but an

excuse for non-performance of a contract. Discuss.
Cases when a contract is discharged on grounds of
supervening impossibility
Destruction of subject matter
Death or personal incapacity
Declaration of war
Change of law
Non existence or non occurrence of a particular
state of things necessary for performance
The contract can not be considered to be discharged
on supervening impossibility under the following
conditions
Difficulty of performance
Commercial impossibility
Default of a third party
Strikes lock outs and civil disturbances

 The rules which guide the court in the assessment of

damages

Ordinary damages aggrieved party must

suffer due to breach and it must be proximate
consequence of the breach
Special damages- special circumstances which
would result in a special loss in case of breach
of contract are communicated to the promisor
e.g loss of profits on account of default by the
other party to the contract can be claimed only
when an advance notice of such damages
Exemplary damages- punitive or vindictive
damages-these are in the nature of
punishment; these are awarded in cases like
breach of promise to marry, dishonor of cheque
etc
Nominal damages- Awarded in cases of
technical violation where there is in fact no loss
suffered by the other party

 Damages for inconvenience and discomfort Liquidated damage and penalty- specified a
particular sum during the contract in case of
breach. It is called liquidated damages if the
sum is fair and penalty in case the sum is
disproportionate to the damages likely to
result due to breach
Stipulation of interest- may or may not be
penalty depends whether the interest is fair
or is at increased rate
Forfeiture of security deposit or earnest
money-The contract may include a clause in
the contract , in such cases the court may
award reasonable compensation only.

 What are the remedies available for a breach of contract?

Rescission of contract- a promise may put an end

to the contract and discharge the other party from
obligation of performing. The aggrieved party is
entitled to compensation or damages.
Suit for damages -to make good the financial loss
suffered by the aggrieved party due to breach of
contract
Suit for specific performance- not maintainable
where damages are considered to be adequate
remedy, when the contract is of personal nature,
where the contract is made by the co beyond its
power i.e MOA, where the court can not supervise
the performance of the contract, where one of the
party is minor and where the contract is
inequitable to either party.

 Suit for injunction -demanding courts

stay order
Suite for quantum meruit- as much as is
earned, claiming the compensation for the
work finished. Offer and acceptance of
work done must be there, secondly the
injured party has the option to take or
refuse the benefit of the work partly
performed.

 What is Quantum Meruit?

Quantum Meruit means as

much as is earned. Cases for
damages in quantum meruit
arise in the case of Void
agreement or Void contracts;
any person who has received
some advantage under these is
bound to restore it to the
person from whom he received
such advantage or compensate
him for the same.

 Are service contracts covered by agreements

in restraint of trade?
Any agreement by which anyone is
restrained from exercising a lawful
profession, trade or business of any kind, is
to that extent void According to Art 19(g)
freedom of trade and commerce is a
fundamental right. There are a few
exceptions to this rule
Sale of goodwill
Partners agreement
Trade combinations formed to regulate the
business or to fix prices are not void but
incase these form monopolies which are
against public policy then it is void
Sole dealing agreements to deal in the
products of single manufacturer or to sell the
whole produce to a single dealer are valid

 Is promise to pay a time barred debt

enforceable.
Yes, it can be enforced as this falls
under exceptions to the rule that no
consideration no contract.
It must be made in writing
Must be signed by debtor or his agent
It should relate to debt which could not
be recovered due to limitation

 What is the difference between pledge and

bailment?
Bailment according to section 148 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 off according to the directions of
the person delivering them.
Bailment of goods as security for
payment of debts or performance of a
promise is called pledge or pawn.

 The essence of a contract of a sale is

the transfer of general property in
goods.
A mortgage is transfer of interest in the
goods from the mortgagor to a
mortgagee to secure a debt.
A pledge is a bailment of goods by one
person to another to secure payment of
a debt. A hypothecation is an equitable charge
on goods without possession, but not
amounting to mortgage.

 What is the difference between

bailment and sale?
Bailment according to section 148 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 off according
to the directions of the person delivering
them.
The essential elements of bailment are
agreement, delivery of goods, purpose and
return of specific goods. In sale there is
transfer of ownership while in the case of
bailment it is only the possession, there need
not be any consideration in case of bailment
while it is essential in sale, in case of sale
there is no return of goods while in bailment
goods are to be returned.

 What is a contract of guarantee? What are its

special features / distinguish between a
contract of guarantee and a contract of
indemnity
The term indemnity means to make good the
loss or to compensate the party who has
suffered some loss.
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 one else is called a contract
of indemnity. Contracts of insurance are
covered as per rulings of the court, following
the rulings of English courts. There are two
parties in a contract of indemnity i.e
indemnity holder and indemnifier.

 A contract of guarantee is a contract to perform a

promise or discharge the liability of a third person in
case of his default.

There are three parties in a contract of

Guarantee i.e Principal debtor, creditor
surety.
Essential features
Tripartite
Consent of three parties
Existence of a liability
Essentials of a valid contract
Guarantee not to be obtained by
misrepresentation
Guarantee not to be obtained by concealment
Not a contract of Uberrimae

 What is indemnity , warranty and

guarantee?
A contract of indemnity is 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 There
are two parties to this contract
indemnifier and indemnity holder.
Contract of indemnity includes contract
of insurance
Guarantee

 The term warrantee and condition are found in

the law of sale of goods.
A condition is a stipulation essential to the
main purpose of the contract, the breach of
which gives rise to a right to treat the contract
as repudiated.
A warranty is a stipulation collateral to the
main purpose of the contract, the breach of
which gives rise to a claim for damages but not
to the right to reject the goods and treat the
contract as repudiated. In a contract of sale
the following implied warrantees are there:
Warrantee as to quite possession (Sec14(b))
Warrantee of freedom from encumbrances
[(Sec 14 ( c )]
Warrantee as to quality or fitness for a
particular purpose annexed by usage of trade
[Sec16(3)]

 Define Actual Authority and Ostensible

Authority of an agent and explain the
extent of an agents authority. Can an
agent delegate his authority to another. If
so, under what circumstances?
An agent having an authority to do an act
has authority to do every lawful thing
which is necessary in order to do such
act. In emergency an agent has authority
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.

 A delegate cannot further delegate. There are

however some exceptions
Where the custom of trade permit delegationArticle clerks employed by chartered
accountant
Where the nature of agency require
delegation
Where the principal permits delegation
Where the principal knows that agent intends
to delegate but does not object
Where an emergency require delegation
Where the duties of an agent do not require
any personalized skills, confidence or
discretion and the work involved is of routine
nature.

 All agreements are not contracts but all contracts

are agreements. Discuss the statement
explaining the essential elements of a valid
contract.
An agreement enforceable by law is a contract.
Therefore a contract has to be an agreement first.
Every promise and every set of promises forming
the consideration for each other is an agreement.
While an agreement which meets all the essentials
and gives rise to legal obligation becomes a
contract. A contract is an agreement enforceable
by law. Every agreement need not be a contract
while every contract is an agreement. Only those
agreements which contain all the essential
elements necessary for legal enforcement are
termed as contracts. It must meet the
requirements of Sec10,13,14 23 ,25 29 and 56

 What do you understand by the term

acceptance? What are the
essentials of
a valid acceptance?
Acceptance means giving consent to offer.
It is willingness of offeree to be bound by
the terms of the offer. A proposal when
accepted becomes a promise. For a valid
acceptance following conditions must be
met:
Absolute and unqualified-.
Manner By whom
To Whom It May Concern Time limit Before lapse of offer-

 What are the characteristics of a valid offer

and acceptance?

The following conditions must be

fulfilled for an offer to be valid
Intention to create legal relationship
Certain and unambiguous terms
It should be different from a mere declaration
of intention
Different from an invitation to offer
Communication
No term the compliance of which amounts to
acceptance
Communication of special terms or Standard
form contracts

 Discuss the doctrine of frustration and its

applicability with reference to the provisions
of Indian Contract Act.
The doctrine of frustration is part of the law
of supervening impossibility or illegality of
the act agreed to be done and hence comes
under Sec.56 of the Act. A contract which
after it is made becomes impossible or by
reason of some event which the promisor
could not prevent, becomes unlawful or
becomes void.
Impossible by law.(change of law)
The subject matter of the contract
accidentally destroyed.
The person who is to perform dies or
becomes so ill as to be unable to perform.
Failure of ultimate purpose
Outbreak of war

 The following are not included in

supervening impossibility;
Commercial impossibility is not included in
supervening impossibility.
Strike and lockouts
Impossibility due to default of a third person
Failure of one of the objects
Section.56 deals in legal and physical
impossibility
Where one person knows that something is
impossible but still promises the other to, he
is to compensate the other in case of non
performance

 Define agency
In a contract of agency a person
employs another to do any act for him
or to represent him in dealings with
third parties so as to bind himself by
the act of such third person.
Who is an agent?

An agent is a person
employed to do any act for another or
to represent another in dealings with
third persons. The person for such act
is done, or who is represented, is
called the principal.[Sec182]

 Types of agents
General Agent Person like manager of
the particular business can bind his
master for all aspects of the business;
these are termed as general agent.
Special agent- Person employed for
doing a particular act or transaction is
called special agent.
Universal Agent Universal agent is
the person who has been authorized to
all acts which the principal can legally
do. His authority is unlimited.

 Agents may be also be classified into the following based

on nature of work
Mercantile agent
Factor - sells goods in his own name and can have any
terms, can also pledge the goods.
Commission agent He also sells and buys goods in his
own name on best possible terms and gets commission for
it. He mayor may not be given the possession of the goods.
Del Credere agent He guarantees the payment from the
ultimate buyer on little extra commission. He is surety as
well as agent
Broker He is employed to make contracts for the
purchase and sale of goods, he does not given the
possession of the goods. He charges brokerage for
bringing the two parties together.
Non Mercantile agents - People like wife, attorneys,
advocate, insurance agent etc are the examples of non
mercantile agents.

 Agents Authority
Actual authority an agent an agent can
bind his principal by doing all the acts
which has been assigned to him either
expressly or impliedly.
Ostensible/apparent authority If the third
party acts bonafide and without the
knowledge of the fact that the agent is
exceeding his authority i.e the act is beyond
his actual authority.
Authority in emergency- In emergency an
agent can do all such acts which are
necessary to protect his principal beyond
his actual authority.

 When is the authority of an agent

irrevocable ?
An agency which can not be terminated
by principal is known as irrevocable. The
circumstances when the agency is
irrevocable
Where the agency is coupled with
interest
Where the agent has partly exercised his
authority
Where the agent has incurred a personal
liability