The Indian Partnership Act, 1932, lays down the legal framework for forming and managing

partnership firms in India. It's a crucial piece of legislation for anyone looking to collaborate
in business.

Forms of Business Organization

Before diving into partnerships, it's important to understand the broader landscape of business
structures available in India. Some common forms include:

• Sole Proprietorship: Owned and run by one person, with unlimited liability.
• Hindu Undivided Family (HUF): A family-based business governed by Hindu law.
• Company: A separate legal entity, offering limited liability (can be private or public).
• Limited Liability Partnership (LLP): Combines features of a partnership and a company,
offering limited liability to partners.
• Cooperative Societies: Organizations formed with the aim of promoting the economic
interests of their members.

The choice of business organization significantly impacts aspects like liability, taxation,
management, and regulatory compliance.

Factors Taken into Consideration for Choice of Organization

Selecting the right form of business organization is a critical decision. Several factors come
into play, including:

• Liability: The extent to which the owners are personally liable for business debts.
• Capital Requirements: The amount of investment needed to start and run the business.
• Management and Control: Who makes the decisions and how the business is managed.
• Taxation: The tax implications for the business and its owners.
• Legal Formalities: The ease and cost of setting up and complying with regulations.
• Continuity: The stability and lifespan of the business.
• Scale of Operations: The current and future size and scope of the business.

Partnership often becomes an attractive option when individuals want to pool resources and
expertise, share risks and rewards, and have more flexibility than a company but desire a
more structured approach than a sole proprietorship.

Definition of Partnership & Essentials

Section 4 of the Indian Partnership Act, 1932, defines partnership as:

"the relation between persons who have agreed to share the profits of a business carried on
by1 all or any of them acting for all."

From this definition,2 we can derive the essential elements of a partnership:

1. Agreement: There must be a contract or agreement between two or more persons to form a
partnership. This agreement can be written or oral, although a written agreement (Partnership
Deed) is highly recommended.
2. Two or More Persons: A sole individual cannot form a partnership. There must be at least
two individuals (natural or legal persons) to constitute a partnership. The maximum number
of partners was previously limited but this limit has been removed following amendments to
the Companies Act, 2013, for partnerships not exceeding certain thresholds.
3. Business: The agreement must be for carrying on a lawful business. A partnership cannot be
formed for charitable or social purposes.
4. Sharing of Profits: The partners must agree to share the profits (and losses) of the business.
The ratio in which profits are to be shared is usually specified in the partnership agreement.
5. Mutual Agency: The business must be carried on by all the partners or any of them acting for
all. This implies a relationship of mutual agency, where each partner is both a principal and
an agent for the other partners and the firm. The act of one partner binds all other partners
and the firm.

Kinds of Partnership

Partnerships can be classified based on various factors:

• Based on Extent of Liability:

o General Partnership: All partners have unlimited liability, meaning they are personally liable
for the debts of the firm.
o Limited Partnership (Not very common in India after the introduction of LLPs): One or more
partners have limited liability, while at least one partner has unlimited liability.
• Based on Duration:
o Partnership at Will: No fixed period is agreed upon for the duration of the partnership. It can
be dissolved by any partner giving notice.
o Particular Partnership: Formed for a specific venture or for a fixed period. It dissolves upon
the completion of the venture or the expiry of the fixed period.
• Based on Legality:
o Lawful Partnership: Formed for a legal business purpose.
o Illegal Partnership: Formed for an unlawful business purpose or if the number of partners
exceeds the permissible limit (though this limit is largely removed now).

Partnership Property

Section 14 of the Act defines partnership property. It includes:

• All property and rights and interests in property originally brought into the stock of the firm
by the partners.
• All property and rights and interests in property acquired by the firm or for the purposes and
in the course of the business of the firm.
• Goodwill of the business.

Unless there is an agreement to the contrary, such property is held and used by the partners
exclusively for the purposes of the partnership. Individual partners cannot treat partnership
property as their own.

Rights and Duties of a Partner

 The Indian Partnership Act, 1932, outlines the rights and duties of partners, which can also be
modified by the partnership agreement.

Rights of a Partner:

• Right to take part in the conduct of the business: Every partner has the right to be involved in
the management and decision-making of the firm.
• Right to be consulted: Partners have the right to be consulted and express their opinion on
matters affecting the business.
• Right to access and inspect books of accounts: Every partner has the right to access, inspect,
and copy the firm's books of accounts.
• Right to share profits and losses: Partners are entitled to share in the profits and are liable to
contribute to the losses of the business in the agreed ratio.
• Right to interest on capital: A partner is entitled to interest on the capital contributed by them
if provided for in the partnership deed.
• Right to indemnity: A partner has the right to be indemnified by the firm for acts done by
them in the ordinary and proper conduct of the business or for acts done in an emergency for
the purpose of protecting the firm from loss.
• Right to retire: A partner has the right to retire from the firm as per the terms of the
partnership agreement or with the consent of all other partners. In the case of a partnership at
will, a partner can retire by giving notice.
• Right against expulsion: A partner cannot be expelled from the firm by any majority of the
partners unless a power to do so has been conferred by express agreement between the
partners and the power has been exercised in good faith.
• Right to sue for dissolution: In certain circumstances, a partner has the right to file a suit for
the dissolution of the firm.

Duties of a Partner:

• Duty to carry on the business to the greatest common advantage: Partners must act in the best
interest of the firm and their fellow partners.
• Duty to be just and faithful: Partners must be honest and fair in their dealings with each other.
• Duty to render true accounts and full information: Partners must provide true and accurate
accounts and disclose all relevant information affecting the firm to their co-partners.
• Duty to indemnify for loss caused by fraud: A partner is liable to indemnify the firm for any
loss caused to it by their fraud.
• Duty to attend diligently to their duties: Partners are expected to diligently perform their
responsibilities in the conduct of the business.
• Duty not to carry on competing business: Unless otherwise agreed, a partner must not carry
on any business that competes with that of the firm.
• Duty to account for profits derived privately: If a partner earns any profit for themselves from
any transaction of the firm or from the use of the firm's property or business connection or
goodwill, they must account for that profit to the firm.
• Duty to act within authority: Partners must act within the scope of their actual and implied
authority.

Implied Authority of a Partner

Section 22 of the Act defines the implied authority of a partner. Subject to any restrictions
imposed by the partnership agreement, the implied authority of a partner empowers them to
 do all such acts as are necessary for or usually done in carrying on the business of the kind
carried on by the firm.

However, a partner does not have implied authority to:

• Submit a dispute relating to the firm to arbitration.

• Open a banking account on behalf of the firm in their own name.
• Compromise or relinquish any claim or portion of a claim by the firm.
• Withdraw a suit or proceeding filed on behalf of the firm.
• Admit any liability in a suit or proceeding against the firm.3
• Acquire immovable property on behalf of the firm.
• Transfer immovable property belonging to the firm.
• Enter into a partnership on behalf of the4 firm.

Third parties dealing with a partner are protected if they act in good faith and without
knowledge of any restrictions on the partner's authority.

Minor Admitted to the Benefits of Partnership

Section 30 of the Act deals with the admission of a minor to the benefits of an existing
partnership. A minor cannot become a full-fledged partner because they lack the capacity to
contract. However, with the consent of all the existing partners, a minor can be admitted to
the benefits of the partnership.

The rights and liabilities of a minor admitted to the benefits of partnership are:

• Rights: The minor has a right to their agreed share of the profits and to access and inspect the
firm's accounts.
• Liabilities: The minor's liability is limited to their share in the partnership property and
profits. They are not personally liable for the firm's debts.
• Attaining Majority: Upon attaining majority, the minor has six months to decide whether to
become a full partner or not.
o If they choose to become a partner: They become liable for all the acts of the firm since they
were admitted to the benefits of the partnership.
o If they choose not to become a partner: They must give a public notice of their decision.
Their liability remains limited to their share up to the date of the public notice. If no public
notice is given, they become liable as a full partner after the expiry of six months.

Incoming and Outgoing Partner

• Incoming Partner (Section 31): A new partner can be introduced into an existing firm only
with the consent of all the existing partners, unless otherwise provided in the partnership
agreement. The liability of an incoming partner generally commences from the date they are
admitted into the firm, unless agreed otherwise.
• Outgoing Partner (Sections 32-36): A partner can cease to be a partner due to:
o Retirement: As per the partnership agreement or with the consent of all other partners, or by
giving notice in case of a partnership at will.
o Expulsion: Only if there is an express agreement to that effect and the expulsion is done in
good faith.
o Insolvency: If a partner is declared insolvent.
o Death: Upon the death of a partner.
o By agreement: Through a mutual agreement among the partners.

An outgoing partner remains liable for the acts of the firm done before their retirement, death,
or insolvency until a public notice of their ceasing to be a partner is given.

Registration of Partnership Firm

Registration of a partnership firm is not compulsory under the Indian Partnership Act, 1932.
However, non-registration comes with several disabilities for the firm and its partners
(Section 69):

• A non-registered firm cannot sue a third party for the enforcement of any right arising from a
contract.
• A partner of a non-registered firm cannot sue the firm or any other co-partner to enforce a
right arising from a contract or conferred by the Act.
• The firm or any of its partners cannot claim a set-off or other proceedings in a dispute with a
third party.

Despite these disabilities, a third party can sue a non-registered firm or its partners. It is
therefore highly advisable to register a partnership firm.

The process of registration involves filing an application with the Registrar of Firms,
providing details such as the name of the firm, the place of business, the names and addresses
of the partners, the date of joining of each partner, and the duration of the partnership (if any).

Dissolution of Partnership

Dissolution of partnership refers to the termination of the relationship between all the
partners of a firm. This leads to the winding up of the business. Dissolution can occur in
several ways (Section 40-44):

• By Agreement: All partners may agree to dissolve the firm.

• Compulsory Dissolution: A firm is compulsorily dissolved:
o By the adjudication of all the partners or of all the partners but one as insolvent.
o By the happening of any event which makes it unlawful for the business of the firm to be
carried on or5 for the partners to carry it on in partnership.6
• On the happening of certain contingencies: Subject to any agreement between the partners, a
firm is dissolved:
o If constituted for a fixed term, by the expiry of that term.
o If constituted to carry out one or more adventures or undertakings, by the completion thereof.
o By the death of a partner.7
o By the adjudication of a partner as an insolvent.8
• By Notice: In the case of a partnership at will, any partner may dissolve the firm by giving
notice in writing to all the other partners of their intention to do so.
• By Order of Court: A court may order the dissolution of a firm on various grounds, such as:
o A partner has become of unsound mind.
o A partner has become permanently incapable of performing their duties.
o A partner is guilty of misconduct affecting the business.
o A partner willfully or persistently commits a breach of agreements relating to the
management of the firm.
o A partner has transferred the whole of their interest in the firm to a third party.
o The business of the firm cannot be carried on except at a loss.
o On any other ground which renders it just and equitable that the firm should be dissolved.9

Public Notice in case of Partnership

Public notice is crucial in various situations related to a partnership to inform third parties
about changes in the constitution of the firm and to limit the liability of outgoing partners.
Situations requiring public notice include:

• Retirement of a partner (Section 32).

• Expulsion of a partner (Section 33).
• Dissolution of the firm (Section 45).
• Election by a minor to become or not to become a partner on attaining majority (Section 30).

The public notice should be given in a widely circulated newspaper and should also be
notified to the Registrar of Firms. Failure to give public notice can result in an outgoing
partner continuing to be liable for the acts of the firm done after their severance.

This overview should provide a solid foundation for understanding the key aspects of the
Indian Partnership Act, 1932, as outlined in your Module 1 notes. Let me know if you have
any specific questions on any of these topics!
Alright, let's delve into the Limited Liability Partnership Act, 2008, as outlined in your
Module 2 notes. This Act introduced a hybrid business structure that combines the flexibility
of a partnership with the advantage of limited liability for its partners.

2.1 Limited Liability Partnership Act, 2008

The Limited Liability Partnership Act, 2008 (LLP Act) provides a legal framework for the
formation and operation of Limited Liability Partnerships in India. It aims to offer an
alternative corporate business vehicle that provides the benefits of limited liability of a
company and the flexibility of a partnership.

Nature of Limited Liability Partnership [Sections 2 – 10]

These sections lay the groundwork for understanding what an LLP is and its key
characteristics:

• Definition (Section 2(n)): An LLP is defined as a partnership formed and registered under the
LLP Act, 2008.
• Body Corporate (Section 3): An LLP is a body corporate and a legal entity separate from its
partners. This is a crucial distinction from a traditional partnership firm, where the partners
and the firm are not separate legal entities. As a body corporate, an LLP has perpetual
succession, meaning its existence is not affected by the death, retirement, or insolvency of
its partners. It can sue and be sued in its own name and hold property.
• Number of Partners (Section 6): An LLP must have at least two partners. There is no upper
limit on the number of partners.
• Designated Partners (Section 7 & 8): Every LLP must have at least two designated partners,
of whom at least one must be a resident in India. Designated partners are responsible for
compliance with the Act and are liable for penalties imposed for any contravention of the
Act. They are also responsible for doing all acts, matters, and things as are required to be
done by the LLP under the Act.
• Registered Office (Section 13): Every LLP must have a registered office in India to which all
communications and notices may be addressed and where they shall be received.
• Name (Section 15 & 16): Every LLP must have a name with the suffix "Limited Liability
Partnership" or "LLP". The name should not be undesirable or identical to an existing
company or LLP.

Incorporation of Limited Liability Partnership [Sections 11 – 21]

These sections detail the process of forming and registering an LLP:

• Incorporation Document (Section 11 & 12): To incorporate an LLP, an incorporation

document needs to be filed with the Registrar. This document must be signed by at least two
individuals who will be the initial partners and must contain details such as:
o The name of the LLP.
o The proposed business of the LLP.
o The address of the registered office of the LLP.
o The names and addresses of the partners.
o The names and addresses of the designated partners.
o Other information as prescribed.
• Registration (Section 12): Upon being satisfied that the incorporation document complies
with the requirements of the Act, the Registrar shall register the document and issue a
 certificate of incorporation. This certificate is conclusive evidence that the LLP is
incorporated.
• Name Reservation (Section 16): Before filing the incorporation document, applicants can
apply to the Registrar for the reservation of a name for their proposed LLP.
• Effect of Registration (Section 14): Upon registration, the LLP comes into existence as a
body corporate with perpetual succession.

Partners and their Relations [Sections 22 – 25]

These sections define who can be a partner and govern the relationship between partners:

• Eligibility to be a Partner (Section 22): Any individual or body corporate can be a partner in
an LLP, subject to certain conditions.
• Partners' Relations (Section 23): The mutual rights and duties of the partners of an LLP, and
the mutual rights and duties of an LLP and its partners, are governed by an agreement
between the partners or between the LLP and the partners. This agreement is often referred
to as the LLP Agreement. In the absence of such an agreement, the provisions of the First
Schedule to the LLP Act apply.
• Liability of Partner to LLP (Section 25): A partner is liable to the LLP for any loss caused to it
by their fraudulent act.

Extent and Limitation of Liability of Limited Liability Partnership and Partners [Sections 26 – 31]

This is a key aspect of LLPs, outlining the concept of limited liability:

• Liability of LLP (Section 26): The LLP is liable for its own obligations.
• Extent of Partner's Liability (Section 27 & 28): Generally, a partner is not personally liable,
directly or indirectly, for the obligations of the LLP solely by reason of being a partner. This
limited liability is a significant advantage over traditional partnerships. However, this
protection is not absolute.
• Partner's Liability for Wrongful Acts or Omissions (Section 28): A partner is liable for any
wrongful act or omission committed by them with the knowledge or authority of the LLP.
The LLP is also liable to the same extent.
• Partner's Liability in Case of Fraud (Section 30): If the wrongful act or omission of the LLP is
carried out with the intent to defraud creditors of the LLP or any other person, or for any
fraudulent purpose, every partner who was aware of and consented to such conduct is liable
without limitation.

Contributions [Sections 32 – 33]

These sections deal with the contributions that partners make to the LLP:

• Form of Contribution (Section 32): A partner's contribution to the LLP may consist of
tangible, movable or immovable property; intangible property; other benefit to the LLP; or
money, promissory notes, other agreements to contribute cash or property, and contracts
for services performed or to be performed.
• Obligation to Contribute (Section 33): Every partner has an obligation to contribute to the
LLP as specified in the LLP Agreement.
Assignment and Transfer of Partnership Rights [Section 42]

This section governs how a partner can transfer their rights in the LLP:

• Assignment of Partner's Rights: A partner's rights to a share in the profits and losses of the
LLP and to receive distributions cannot be assigned by the partner. However, the assignment
is valid as between the assignor and the assignee, but it does not entitle the assignee to
interfere in the management or affairs of the LLP or to require any information or account of
the LLP's transactions.

Conversion into a Limited Liability Partnership [Sections 55 – 58]

The LLP Act provides mechanisms for existing business entities to convert into LLPs:

• Conversion from Partnership Firm (Section 56): A partnership firm registered under the
Indian Partnership Act, 1932, can convert into an LLP.
• Conversion from Private Company (Section 57): A private company can convert into an LLP.
• Conversion from Unlisted Public Company (Section 58): An unlisted public company can
convert into an LLP.

These conversions involve specific procedures and compliance requirements to ensure a

smooth transition. The assets and liabilities of the converting entity are transferred to the
LLP.

Winding up and Dissolution [Sections 63 – 65]

These sections outline the processes for terminating the existence of an LLP:

• Winding up of LLP (Section 63): An LLP can be wound up either voluntarily or by the Tribunal
(National Company Law Tribunal).
• Voluntary Winding up (Section 64): A voluntary winding up can occur if the LLP decides to
do so or if a certain period for its duration has expired or a certain event has occurred as
specified in the LLP Agreement.
• Winding up by Tribunal (Section 65): The Tribunal may wind up an LLP under certain
circumstances, such as:
o If the LLP is unable to pay its debts.
o If the LLP has acted against the interests of the sovereignty and integrity of India, the
security of the State, or public order.
o If the LLP has made a default in filing with the Registrar the statement of account
and solvency or annual return for any five consecutive financial years.
o If the Tribunal is of the opinion that it is just and equitable that the LLP should be
wound up.

Difference between Limited Liability Partnership incorporated under Limited Liability Partnership Act,
2008 and a Partnership Firm incorporated under the Indian Partnership Act, 1932 and a Company
incorporated under Companies Act, 2013

Here's a comparison highlighting the key differences:

 Feature Limited Liability Partnership Firm Company (Private/Public)
Partnership (LLP)
Governing Law Limited Liability Indian Partnership Companies Act, 2013
Partnership Act, 2008 Act, 1932
Legal Entity Separate legal entity No separate legal Separate legal entity from its
from its partners entity from its shareholders/members
partners
Liability of Limited liability Unlimited liability Limited liability (generally)
Owners (generally)
Number of Minimum 2 partners, Minimum 2 Private: Min 2, Max 200;
Members no maximum limit partners, maximum Public: Min 7, No maximum
limit (subject to
rules)
Perpetual Yes No (existence Yes
Succession affected by
changes in
partners)
Compliance Lower than a company, Lowest Highest
Burden higher than a
partnership firm
Taxation Generally taxed as a Taxed as a Taxed as a separate entity
partnership firm partnership firm
Management Partners manage the Partners manage Board of Directors manages
business directly the business the company
directly
Transferability Generally restricted Requires consent of Shares are generally freely
of Interest all other partners transferable (for public
companies)
Audit Mandatory if turnover No mandatory Mandatory audit of accounts
Requirements exceeds ₹40 lakhs or audit requirement
total contribution
exceeds ₹25 lakhs
Formation Registration with the Registration is Incorporation with the
Registrar of LLPs optional Registrar of Companies (ROC)
Export to Sheets

This table summarizes the fundamental distinctions between these three forms of business
organization in India. The choice of which structure to adopt depends on various factors,
including the nature of the business, the desired level of liability protection, the scale of
operations, and the compliance capabilities.
Alright, let's dive into the Sale of Goods Act, 1930, as outlined in your Module 3 notes. This
Act governs the law relating to the sale of goods in India and is crucial for understanding
commercial transactions.

3.1 Sale of Goods Act, 1930

The Sale of Goods Act, 1930, defines and regulates contracts where the seller transfers or
agrees to transfer the property in goods to the buyer for a price.

Significance of Transfer of Property

The transfer of property (ownership) in goods from the seller to the buyer is the central aspect
of a contract of sale. Its significance lies in determining:

• Risk of Loss: Generally, the risk of loss or damage to the goods passes with the transfer of
property. So, if goods are damaged after the property has passed to the buyer, the buyer
bears the loss, even if the goods are still in the seller's possession. Conversely, if the damage
occurs before the transfer, the seller bears the loss.
• Rights and Liabilities: Ownership confers rights and liabilities related to the goods. For
example, the buyer can sue third parties for trespass or damage to the goods once they
become the owner.
• Suit for Price: The seller can sue the buyer for the price of the goods only after the property
in the goods has passed to the buyer, unless otherwise agreed.
• Insolvency: In case of insolvency of either the buyer or the seller, the question of who owns
the goods becomes crucial for the official receiver or assignee in bankruptcy.

Concept of Buyer and Seller

The Act defines "buyer" and "seller" in Section 2:

• Buyer (Section 2(1)): A person who buys or agrees to buy goods.

• Seller (Section 2(13)): A person who sells or agrees to sell goods.

These definitions are broad and encompass individuals, firms, companies, and other legal
entities. The existence of both a buyer and a seller is fundamental to a contract of sale.

Difference between Sale and Hire Purchase

While both involve the transfer of possession of goods, they differ significantly in the transfer
of ownership:

Feature Sale Hire Purchase

Property in the goods is transferred to Property in the goods passes to the hirer
Transfer of
the buyer at the time of the contract only upon the payment of the last
Property
or at a future agreed time. installment.

Nature of Agreement to hire with an option to

Contract of sale
Contract purchase
Position of Buyer becomes the owner; Seller Hirer is a bailee until the last installment is
Parties ceases to be the owner. paid; Owner remains the hire vendor.

Hirer can terminate the agreement at any

Buyer cannot terminate the contract time without being liable for future
Termination
and is bound to pay the price. installments (though past installments are
due).

Buyer can resell the goods as they are Hirer cannot resell the goods until they
Resale
the owner. become the owner.

Generally passes to the buyer with Remains with the hire vendor until the
Risk of Loss
the transfer of property. option to purchase is exercised.

Payment is made in installments, with

Price is often paid in installments, but
Installments ownership transferring upon the final
ownership transfers earlier.
payment.

Seller can sue for the price if Hire vendor can repossess the goods if there
Recovery
ownership has passed. is a default in payment.

Export to Sheets

Difference between Sale and Agreement to Sell

Section 4 of the Act distinguishes between a sale and an agreement to sell:

• Sale (Section 4(3)): Where under a contract of sale the property in the goods is transferred
from the seller to the buyer, the contract is called a sale. In a sale, the ownership passes
immediately at the time of the contract. It is an executed contract.
• Agreement to Sell (Section 4(3)): Where the transfer of the property in the goods is to take
place at a future time or subject to some condition thereafter to be fulfilled, the contract is
called an agreement to sell. In an agreement to sell, the ownership passes at a future date or
upon the fulfillment of a specified condition. It is an executory contract.

The key difference lies in the time of transfer of ownership. An agreement to sell becomes
a sale when the time elapses or the conditions are fulfilled.

Condition and Warranty

These terms relate to stipulations in a contract of sale with reference to the goods:

• Condition (Section 12(2)): A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives the buyer a right to repudiate the contract and reject the
goods, as well as to claim damages.
• Warranty (Section 12(3)): A warranty is a stipulation collateral to the main purpose of the
contract, the breach of which gives the buyer a right to claim damages but not to reject the
goods and treat the contract as repudiated.

Whether a stipulation is a condition or a warranty depends on the construction of the contract.

Implied Conditions and Warranties: The Act also implies certain conditions and
warranties in a contract of sale unless expressly excluded by the contract. Some important
implied conditions include:

• Condition as to title (Section 14(a)): The seller has the right to sell the goods.
• Sale by description (Section 15): The goods shall correspond with the description.
• Condition as to fitness for buyer's purpose (Section 16(1)): If the buyer makes known to the
seller the particular purpose for which the goods are required and relies on the seller's skill
or judgment, there is an implied condition that the goods shall be reasonably fit for such
purpose.
• Condition as to merchantable quality (Section 16(2)): Goods bought by description from a
seller who deals in goods of that description shall be of merchantable quality.
• Sale by sample (Section 17): The bulk shall correspond with the sample in quality.

Some important implied warranties include:

• Warranty as to quiet possession (Section 14(b)): The buyer shall have and enjoy quiet
possession of the goods.
• Warranty as to freedom from encumbrances (Section 14(c)): The goods shall be free from
any charge or encumbrance in favor of any third party not declared or known to the buyer.
• Warranty as to disclosure of dangerous nature of goods (Section 16(3)): In case of sale of
dangerous goods, the seller must warn the buyer of the probable danger.

Delivery of Goods and its Rules

Delivery means the voluntary transfer of possession of goods from one person to another
(Section 2(2)). Rules regarding the delivery of goods are specified in Sections 31 to 41 of the
Act, unless otherwise agreed in the contract:

• Seller's duty to deliver (Section 31): It is the duty of the seller to deliver the goods in
accordance with the contract of sale.
• Buyer's duty to accept and pay (Section 31): It is the duty of the buyer to accept and pay for
the goods in accordance with the contract of sale.
• Rules as to delivery (Section 32-39): These sections cover aspects like:
o Mode of delivery (actual or constructive).
o Place of delivery.
o Time of delivery.
o Demand for delivery.
o Delivery of wrong quantity.
o Installment deliveries.
o Delivery to carrier or wharfinger.
o Risk where goods are delivered at distant place.
o Buyer's right to examine the goods.
o Acceptance of delivery.
o Buyer not bound to return rejected goods.
o Liability of buyer for neglecting or refusing delivery.

Rules relating to Passing of the Property

Sections 19 to 25 of the Act lay down specific rules for determining when the property in
goods passes from the seller to the buyer:
 • Specific or ascertained goods (Section 19): Property passes to the buyer at such time as the
parties to the contract intend it to be transferred. The intention can be inferred from the
terms of the contract, the conduct of the parties, and the circumstances of the case.
• Rules for ascertaining intention (Section 20-24): Unless a different intention appears, the
following rules apply to specific goods in a deliverable state, specific goods to be put into a
deliverable state, specific goods in a deliverable state when the seller has to do something to
ascertain the price, and goods sent on approval or "on sale or return."
• Unascertained goods (Section 25): In the case of unascertained goods, property does not
pass to the buyer until the goods are ascertained and appropriated to the contract.
Appropriation involves the selection of goods with the intention of using them for the
contract and with the mutual consent of the buyer and seller.

Unpaid Seller – Rights and Remedies

Section 45 defines an "unpaid seller" as a seller to whom the whole of the price has not been
paid or tendered, or who has received a bill of exchange or other negotiable instrument as
conditional payment, and the condition on which it was received has not been fulfilled by
reason of the dishonor of the instrument or otherwise.

An unpaid seller has certain rights against the goods and against the buyer personally:

Rights against the Goods:

• Right of lien (Section 47-49): The right to retain possession of the goods until payment of
the price, even if the property has passed to the buyer, under certain circumstances (e.g.,
sale without credit, expiry of credit period, buyer becomes insolvent).
• Right of stoppage in transit (Section 50-52): The right to stop the goods while they are in
transit to the buyer if the buyer becomes insolvent. This involves retaking possession of the
goods.
• Right of resale (Section 54): The right to resell the goods under certain conditions, such as
where the goods are perishable, or where the seller has expressly reserved a right of resale,
or where the seller has given notice of his intention to resell to the buyer and the buyer does
not pay within a reasonable time.

Rights against the Buyer Personally:

• Suit for price (Section 55): The seller can sue the buyer for the price if the property in the
goods has passed to the buyer or if the price is payable on a certain day irrespective of
delivery.
• Suit for damages for non-acceptance (Section 56): If the buyer wrongfully refuses or
neglects to accept and pay for the goods, the seller can sue for damages for non-acceptance.
• Suit for interest (Section 61): The seller can recover interest from the buyer from the date
on which the price was due.

Auction Sale

Section 64 of the Act deals with the rules governing auction sales:

• Sale by lots: Goods are put up for sale in lots, and each lot is the subject of a separate
contract of sale.
 • Completion of sale: The sale is complete when the auctioneer announces its completion by
the fall of the hammer or in other customary manner.
• Right to bid: The seller or any one person on their behalf may bid at the auction, provided
the right to do so is expressly reserved.
• Sale without reserve: If the sale is announced to be without reserve, the seller cannot bid
themselves or employ any person to bid on their behalf.
• Pretended bidding: If the seller uses pretended bidding to raise the price, the sale is
voidable at the option of the buyer.

This overview covers the main aspects of the Sale of Goods Act, 1930, as per your Module 3
notes. Understanding these concepts is essential for navigating commercial transactions
involving the sale of goods. Let me know if you have any specific questions on any of these
topics!
 Alright, let's dive into the details of LLB notes for Module 4, focusing on those special
contracts under the Indian Contract Act, 1872. Here's a breakdown of each topic:

1. Indemnity [Sections 123 – 125]

Think of indemnity as a promise to protect someone from loss. It's like having a shield
against potential harm caused by a specific event or the conduct of another person.

Key Aspects:

• Definition (Section 124): 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 other1 person.
• Parties:
o Indemnifier: The person who promises to indemnify or make good the loss.
o Indemnified/Indemnity-holder: The person whose loss is to be made good or who is promised
to be saved from loss.
• Essentials of a Contract of Indemnity:
o There must be a valid contract.
o The promise must be to save the other party from loss.
o The loss must be caused by the promisor's conduct or the conduct of any other person.
• Rights of the Indemnity-holder (Section 125): When sued, the indemnity-holder has the right
to recover from the indemnifier:
o All damages he may be compelled to pay in any suit in respect of any matter to which the
promise to indemnify applies.
o All costs he may be compelled to pay in any such suit if he brought or defended it with the
authority of the promisor, or if 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 authorized2 him to bring or defend the suit.
o All sums which he may have paid under the terms of any compromise of any such suit, if the
compromise was3 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 authorized4 him to compromise the suit.
• Commencement of Indemnifier's Liability:5 There's often debate on when the indemnifier's
liability commences. Generally, it's argued that the liability arises when the indemnity-holder
has actually incurred the loss, but there can be agreements for contingent liability as well.
• Distinction from Guarantee: It's crucial to differentiate indemnity from guarantee. In
indemnity, there are two parties, and the liability of the indemnifier is primary. In guarantee,
there are three parties, and the liability of the surety is secondary.

2. Guarantee [Sections 126 – 147]

A contract of guarantee involves a promise to answer for the debt, default, or misconduct of
another person. It's a way to provide security to a creditor.

Key Aspects:

• Definition (Section 126): A contract to perform the promise, or discharge the liability, of a
third person in case of his default.
• Parties:
o Surety: The person who gives the guarantee.
o Principal Debtor: The person for whose default the guarantee is given.
o Creditor: The person to whom the guarantee is given.
• Essentials of a Contract of Guarantee:
o There must be a principal debt or obligation.
o Consideration is necessary, but any benefit conferred on the principal debtor is sufficient
consideration for the surety's promise.
o All essential elements of a valid contract must be present.
o The liability of the surety is co-extensive with that of the principal debtor unless otherwise
provided in the contract6 (Section 128).
• Types of Guarantee:
o Specific Guarantee: Given for a single specific debt or transaction and comes to an end when
the debt is discharged or the transaction is completed.
o Continuing Guarantee (Section 129): Extends to a series of transactions. The surety's liability
continues until the guarantee is revoked.
• Rights of a Surety:
o Rights against the Principal Debtor:
▪ Right of Subrogation (Section 140): After paying the creditor, the surety steps into the shoes
of the creditor and has all the rights that the creditor had against the principal debtor.
▪ Right to Indemnity (Section 145): The surety has a right to be indemnified by the principal
debtor for any sum rightfully paid under the guarantee.
o Rights against the Creditor:
▪ Right to Securities (Section 141): The surety is entitled to the benefit of every security which
the creditor has against the principal debtor7 at the time when the contract of suretyship is
entered into, whether the surety knows of the existence of such security or not.8
o Rights against Co-sureties (Sections 146 & 147): Co-sureties are liable to contribute equally
to the debt or default, subject to the limit of their respective guarantees.
• Discharge of Surety: A surety can be discharged from liability under various circumstances:
o By Revocation of Guarantee:
▪ By notice of revocation in the case of a continuing guarantee (Section 130).
▪ By the death of the surety (Section 131), for future transactions in a continuing guarantee.
o By Conduct of the Creditor:
▪ Variance in the terms of the contract without the surety's consent (Section 133).
▪ Release or discharge of the principal debtor (Section 134).
▪ Compounding with, or giving time to, or agreeing not to sue the principal debtor (Section
135), unless the surety consents.
▪ Creditor's act or omission impairing the surety's eventual remedy (Section 139).
o By Invalidating the Contract of Guarantee:
▪ Guarantee obtained by misrepresentation (Section 142) or concealment (Section 143).
▪ Failure of a co-surety to join (Section 144).

3. Bailment [Sections 148 – 181]

 Bailment involves the temporary transfer of possession of goods from one person to another
for a specific purpose. Once the purpose is accomplished, the goods are to be returned or
disposed of according to the bailor's directions.

Key Aspects:

• Definition (Section 148): 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.9
• Parties:
o Bailor: The person delivering the goods.
o Bailee: The person to whom the goods are delivered.
• Essentials of Bailment:
o Delivery of possession of goods.
o Delivery is for a specific purpose.
o There is a contract between the bailor and the bailee.
o The goods are to be returned or disposed of as directed by the bailor.
o Ownership remains with the bailor.
• Duties of a Bailor:
o To disclose known faults in the goods (Section 150).
o To bear extraordinary expenses of bailment (Section 158).
o To indemnify the bailee for any loss suffered due to the defective title of the bailor (Section
164).
o To take back the goods when the bailee returns them according to the terms of the bailment.
• Duties of a Bailee:
o To take reasonable care of the goods bailed (Section 151 & 152). The standard of care is that
of a person of ordinary prudence.
o Not to make unauthorized use of the goods (Section 154).
o Not to mix the bailor's goods with his own goods (Sections 155-157).
o To return the goods when the purpose of bailment is accomplished (Section 160).
o To deliver any increase or profit accruing from the goods bailed (Section 163).
• Rights of a Bailor:
o To enforce the duties of the bailee.
o To claim damages for any loss or damage to the goods due to the bailee's negligence or
wrongful act.
o To demand the return of the goods according to the terms of the bailment.
• Rights of a Bailee:
o Right to compensation for necessary expenses incurred in respect of the goods bailed
(Section 158).
o Right of lien:
▪ Particular Lien (Section 170): The bailee has a right to retain the specific goods bailed until
he receives due remuneration for the service he has rendered in respect of those goods.
▪ General Lien (Section 171): Certain bailees (like bankers, factors, wharfingers, attorneys of a
High Court, and policy-brokers) have a right to retain any goods bailed to them as security
for a general balance of account.
o Right to sue a wrongdoer (Section 180).
• Termination of Bailment:
o On the expiry of the stipulated period.
o On the accomplishment of the purpose of bailment.
o By the bailee's act inconsistent with the conditions of the bailment.
o By the death of the bailor or bailee (in some cases).
• Pledge or Pawn (Special kind of Bailment - Sections 172 – 181): Bailment of goods as
security for the payment of a debt or the performance of a promise.
o Pawnor/Pledgor: The person who pledges the goods.
o Pawnee/Pledgee: The person to whom the goods are pledged.
o Rights of Pawnee: Right to retain the goods until payment of debt and expenses, right to sell
the goods on default after giving reasonable notice.
o Rights of Pawnor: Right to redeem the goods on payment of the debt.

4. Agency [Sections 182 – 238]

Agency deals with the relationship where one person (the agent) is authorized to act on behalf
of another (the principal) and create legal relations with third parties.

Key Aspects:

• Definition (Section 182): 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.10
• Parties:
o Principal: The person who employs the agent and for whom the agent acts.
o Agent: The person employed to act on behalf of the principal.
• Essentials of Agency:
o Agreement between the principal and the agent.
o The agent has the authority to act on behalf of the principal.
o The agent acts with the intention of binding the principal.
• Creation of Agency:
o Express Agreement (Section 186): By words spoken or written.
o Implied Agreement (Section 187): Inferred from the conduct of the parties or the
circumstances of the case.
o Agency by Estoppel (Section 237): When the principal, by his conduct, leads a third person
to believe that someone is his agent, he is estopped from denying the agency.
o Agency by Necessity: Arises in situations where it becomes necessary for a person to act on
behalf of another to prevent loss or damage, even without express authority.
o Ratification (Sections 196 – 200): When an act is done by a person on behalf of another
without their authority, the principal can subsequently ratify or adopt the act, making it
binding.
• Types of Agents:
o Mercantile Agents: Factors, brokers, auctioneers, commission agents, etc.
o Non-Mercantile Agents: Solicitors, friends, relatives acting gratuitously, etc.
o Special Agent: Appointed to perform a specific act.
o General Agent: Authorized to do anything within the scope of their employment.
o Sub-agent (Sections 191 – 193): A person employed and acting under the control of the
original agent in the business of the agency.
o Substituted Agent (Section 194): A person named by the original agent on the express or
implied authority of the principal to do an act of the agency. There's privity of contract
between the principal and the substituted agent.
• Duties of an Agent (Sections 211 – 218):
o To act according to the principal's directions.
o To carry out the work with reasonable skill and diligence.
o To render proper accounts to the principal.
o To communicate with the principal in case of difficulty.
o Not to deal on his own account without the principal's consent.
o Not to make any secret profit.
o To pay sums received for the principal.
o To protect the principal's interests.
o Not to delegate his authority (Delegatus non potest delegare - a delegate cannot further
delegate), with certain exceptions.
• Rights of an Agent (Sections 219 – 221):
o Right to receive remuneration.
o Right of retainer (Section 221) - to retain money due to him from the principal out of any
sums received on the principal's account.
o Right of lien on the principal's property.
o Right to be indemnified against the consequences of lawful acts.
o Right to compensation for injury caused by the principal's neglect.
• Principal's Liability for the Acts of the Agent (Sections 226 – 238):
o The principal is bound by the acts of the agent done within the scope of his actual or apparent
authority.
o Apparent Authority: Authority that a third party reasonably believes the agent to possess
based on the principal's conduct.
o Liability for Torts of the Agent (Section 238): The principal is liable for the agent's torts
committed within the scope of his authority.
• Effect of Agent's Contracts with Third Parties (Sections 226 – 230): Generally, the principal
is bound by the contracts entered into by the agent on his behalf.
• Undisclosed Principal (Sections 230 – 232): When the agent contracts with a third party
without disclosing the existence of the principal, the third party can sue either the agent or the
principal.
• Termination of Agency (Sections 201 – 210):
o By the act of the parties:
▪ By agreement between the principal and the agent.
▪ By revocation by the principal.
▪ By renunciation by the agent.
o By operation of law:
▪ By the death of the principal or agent.
▪ By the insanity of the principal or agent.
▪ By the insolvency of the principal.
▪ By the destruction of the subject-matter.
▪ By the expiry of the fixed period.
▪ By the dissolution of a company or firm (if the principal or agent is one).

These notes should provide a good foundation for your understanding of Module 4 on Special
Contracts under the Indian Contract Act, 1872. Remember to refer to the specific sections in
the Act and relevant case laws for a more in-depth understanding. Good luck with your
studies!