Assignment 2

BAILMENT AND PLEDGE
Bailment:
A contract of bailment refers to the transfer of goods from one person (bailor) to another (bailee) for a
specific purpose and for a limited period, after which the goods are returned or disposed of as per the
agreement.
Parties:
 Bailor: The person delivering the goods.
 Bailee: The person receiving the goods.
Essential Features of a Contract of Bailment:
1. Contract: There must be a valid contract between the bailor and bailee.
2. Specific Purpose: The goods are transferred for a specific purpose.
3. Delivery of Goods: Actual delivery of goods must take place.
4. No Change of Ownership: Ownership remains with the bailor.
5. Return of Same Goods: The bailee must return the same goods or their equivalent.
Kinds of Bailment:
 According to Benefit: Gratuitous and Gratuitous-for-Benefit.
 According to Reward: Bailment for Hire and Bailment for Reward.
Duties of Bailor:
 To disclose known faults in goods.
 To reimburse bailee for necessary expenses.
 To indemnify bailee for any loss due to defects in goods.
Duties of Bailee:
 To take reasonable care of the goods.
 To use the goods only for the agreed-upon purpose.
 To return the goods as per the bailment agreement.
Rights of Bailee:
 Right to receive compensation for necessary expenses incurred.
 Right to sue bailor for losses due to defects in goods.
Rights of Bailor:
 Right to receive back the goods or their equivalent.
 Right to claim compensation for any damage to the goods caused by the bailee's negligence.
Termination of Bailment:
 Expiry of agreed-upon period.
 Completion of purpose.
 Bailor's wrongful revocation.
 Destruction of the subject matter.
Finder of Lost Goods:
Duties of Finder:
 Take reasonable care of the goods.
 Try to locate the true owner.
 Surrender the goods to the true owner or authorities if not claimed.
Rights of Finder:
 Right to retain the goods until the true owner is found.
 Right to claim reasonable expenses incurred in preserving the goods.
Pledge or Pawn:
Pledge or pawn refers to the delivery of goods by a debtor (pawnor) to a creditor (pawnee) as security
for a debt.
Essentials of Pledge:
1. Delivery of possession of goods.
2. Intention to create a security.
3. Bailment of goods as security.
Rights of Pawnee:
 Right to retain the goods until the debt is repaid.
 Right to sell the goods after giving due notice to the pawnor in case of default.
Duties of Pawnee:
 To take reasonable care of the goods.
 To return the surplus amount to the pawnor after satisfying the debt.
Rights of Pawnor:
 Right to redeem the goods by repaying the debt.
 Right to surplus amount after the debt is satisfied.
Duties of Pawnor:
 To compensate the pawnee for any loss or damage to the goods.
 To complete any necessary formalities for redemption.
Pledge by Non-Owners:
A pledge can be made by a person who is not the owner of the goods, provided they have a valid title to
them.
CONTRACT OF AGENCY
In today's complex business environment, it's increasingly challenging for individuals to manage
businesses alone. They often need to delegate tasks to others for smooth operation. This delegation is
facilitated through contracts of agency, wherein an agent acts on behalf of a principal to establish
contracts with third parties. Once the contract is formed, the agent exits the arrangement, and the
principal and third party become bound by the contract.
ESSENTIALS OF AGENCY
To qualify as an agent, one must do more than offer advice or provide personal services; they must
represent another party in business dealings to create contractual relationships between that party and
third parties. The essentials of agency include an agreement, contractual capacity, and intention, with
consideration not always being necessary.
TEST OF AGENCY
The test of agency involves determining whether the individual can bind the principal and create legal
relations between the principal and third parties. Agencies are typically established for lawful purposes,
and contracts against the interests of society will not be enforced.
GENERAL RULES OF AGENCY
Agency rules dictate that acts performed by an agent are considered acts of the principal, except for
those requiring personal skills or qualifications. Both the principal and agent must be competent to
contract.
KINDS OF AGENTS
Agents can take various forms, including general agents appointed for all business acts, special agents
for specific tasks, and universal agents with broad authority. Other types include mercantile agents,
factors, commission agents, del credere agents, brokers, auctioneers, indenters, wholesalers, and
retailers.
CREATION OF AGENCY
Agencies can be created through express or implied agreements, estoppel, holding out, necessity, or
ratification.
DUTIES OF AGENT
Duties of an agent include following the principal's directions, working with skill and diligence, rendering
accounts, communicating in difficult situations, and avoiding dealing on their own account or making
secret profits.
RIGHTS OF AGENT
Agents have rights such as retaining property, receiving remuneration, exercising lien, being
indemnified, and receiving compensation for injuries.
RIGHTS OF PRINCIPAL
Principals have rights to recover damages, obtain secret profits, and refuse to indemnify agents for
certain actions.
DUTIES OF PRINCIPAL
Principals are obligated to indemnify agents for lawful acts, acts done in good faith, and injuries caused
by the principal's neglect.
TERMINATION OF AGENCY
Agencies can terminate by agreement, revocation, completion of business, expiration of tenure, death,
incapacity, insolvency, destruction of subject matter, or change in alien status.
INDEMNITY
A contract by which one party promises to save the other from loss caused by the conduct of the
promisor or any other person is termed as a contract of indemnity.
PARTIES
 Indemnifier: The person promising to compensate for the loss.
 Indemnity Holder: The person whose loss is to be compensated.
Rights of Indemnity Holder:
1. He can recover damages he's compelled to pay in a lawsuit against him.
2. He can recover expenses for a lawsuit filed by him with the indemnifier's authority.
3. He can recover expenses paid under a compromise of such a suit, with the indemnifier's
consent.
Rights of Indemnifier:
Upon making good the loss, the indemnifier is entitled to all means by which the indemnity holder could
have protected or reimbursed himself.
GUARANTEE
A contract to perform a promise or discharge the liability of a third person in case of default.
PARTIES
 Surety: The one providing the guarantee.
 Creditor: The recipient of the guarantee.
 Principal Debtor: The one for whom the guarantee is provided.
ESSENTIAL FEATURES
1. It's a secondary contract, with the principal contract between the debtor and creditor.
2. Consideration can be anything done for the benefit of the principal debtor.
3. Misrepresentation invalidates the guarantee if made by the creditor or with their knowledge.
4. Written form is not mandatory.
KINDS OF GUARANTEE
1. Specific Guarantee: For a single debt or transaction.
2. Continuing Guarantee: Extends to a series of transactions over time.
Rights of Surety:
1. Against the Creditor:
 Right to Securities.
 Right to Claim set off.
2. Against Principal Debtor:
 Right to Indemnity.
 Right of Subrogation.
3. Surety's right against co-sureties.
Discharge of Surety from Liability
 Notice of Revocation.
 Death of Surety.
 Change in Terms of Contract.
 Release or Discharge of Principal Debtor.
 Arrangement without Surety's Consent.
 Creditor’s Act or Omission.

 Loss of Security.
 Invalidation of the Contract of Guarantee.
partnership, characteristics of partnership, test of partnership (partners, firm, firm name),

advantages, disadvantages, kinds of partners , minor partners, rights and liabilities of
minor ,minimum number of partners in partnership, duration of partnership, mandatory
duties of partners, general duties of partners, rights of partners, implied authority of
partners, restrictions on implied authority, dissolution of firm/partners, rights of partners on
dissolution

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BAILMENT AND PLEDGE

 Bailor: The person delivering the goods.

 Bailee: The person receiving the goods.

Essential Features of a Contract of Bailment:

2. Specific Purpose: The goods are transferred for a specific purpose.

3. Delivery of Goods: Actual delivery of goods must take place.

4. No Change of Ownership: Ownership remains with the bailor.

 According to Benefit: Gratuitous and Gratuitous-for-Benefit.

 According to Reward: Bailment for Hire and Bailment for Reward.

 To disclose known faults in goods.

 To reimburse bailee for necessary expenses.

 To indemnify bailee for any loss due to defects in goods.

 To take reasonable care of the goods.

 To use the goods only for the agreed-upon purpose.

 To return the goods as per the bailment agreement.

 Right to receive compensation for necessary expenses incurred.

 Right to sue bailor for losses due to defects in goods.

 Expiry of agreed-upon period.

 Bailor's wrongful revocation.

 Destruction of the subject matter.

Finder of Lost Goods:

 Take reasonable care of the goods.

 Try to locate the true owner.

 Surrender the goods to the true owner or authorities if not claimed.

 Right to retain the goods until the true owner is found.

 Right to claim reasonable expenses incurred in preserving the goods.

1. Delivery of possession of goods.

2. Intention to create a security.

3. Bailment of goods as security.

 Right to retain the goods until the debt is repaid.

 To take reasonable care of the goods.

 Right to surplus amount after the debt is satisfied.

 To compensate the pawnee for any loss or damage to the goods.

 To complete any necessary formalities for redemption.

GENERAL RULES OF AGENCY

 Indemnifier: The person promising to compensate for the loss.

 Indemnity Holder: The person whose loss is to be compensated.

Rights of Indemnity Holder:

1. He can recover damages he's compelled to pay in a lawsuit against him.

 Surety: The one providing the guarantee.

 Creditor: The recipient of the guarantee.

 Principal Debtor: The one for whom the guarantee is provided.

4. Written form is not mandatory.

1. Specific Guarantee: For a single debt or transaction.

2. Continuing Guarantee: Extends to a series of transactions over time.

1. Against the Creditor:

 Right to Claim set off.

2. Against Principal Debtor:

3. Surety's right against co-sureties.

Discharge of Surety from Liability

 Change in Terms of Contract.

 Release or Discharge of Principal Debtor.

 Arrangement without Surety's Consent.

 Creditor’s Act or Omission.

 Invalidation of the Contract of Guarantee.

partnership, characteristics of partnership, test of partnership (partners, firm, firm name),

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