CHAPTER-1
Introduction to Business Law:
There are different types of activity in a society.
Business is also a part of social activity, regulated by the law. Business
refers to the economic activities in which goods and service are supplied in
exchange for some payment. It includes buying and selling, manufacturing
products, extracting natural resources. Business law is the law concerned with
business activity. Business law is an aggregate of those rules, which are connected
with trade, commerce and industry. It is also known as commercial or mercantile
law. It is the law which provides the different provisions to the commercial
community and regulates their activities relating to the trade and commerce.
Which includes the law relating to contract, sale of goods, agency, industry,
guarantee, insurance and banking, arbitration, foreign investment and
technology transfer etc. Business law is not separate discipline, it is a part
of civil law, which deals with the right and obligation of business firms that
arises from there business activity. There are different laws in which the
significant provisions are made to regulate the business related activities,
and these laws are known as business law.
According to N.D Kapoor: " Mercantile law is also used
to denote the aggregate body of those legal rules which are connected with
trade, industry and commerce."
Features of Business Law
i) Regulates industry, trade and commerce.
ii) Regulates every business activity of business community.
iii) It has no watertight demarcation with the other
branches of law.
iv) Promotes rights and interest of business community.
v) this is the most important means to create positive
environment for the prosperity of business.
With the increasing complexities and technologies of the
modern business, the scope of business law is automatically extended.
Importance of Business Law:
The business law leads the prosperity of a country. It
regulates......
and affect the business since before the establishment of business firm, while conducting the business and to its final stage. The role of business law is vital in the business sector, but it is guided by the economic policy of the state. A business person must know all the concerned laws. Such laws play vital role for the formation and commencement, running, adapting, establishing, giving dynamism and expansion of the business as well as fulfilling business goals and maintaining social responsibilities. The importance of business law can be viewed on the following grounds:
and affect the business since before the establishment of business firm, while conducting the business and to its final stage. The role of business law is vital in the business sector, but it is guided by the economic policy of the state. A business person must know all the concerned laws. Such laws play vital role for the formation and commencement, running, adapting, establishing, giving dynamism and expansion of the business as well as fulfilling business goals and maintaining social responsibilities. The importance of business law can be viewed on the following grounds:
a) protection of economic right
b) Regulation and Systematization of business
c) Commencement and development of business
d) Enforcement of business Contract
e) Delivery of Justics
( you can consult with your book for the brief explanation
of the above points)
Sources of Business Law
A source means an origin or resources or cause or place from
where law emanates. The term source of Nepalese business law denotes two
meaning. Firstly the place or point from where the law begins and secondly the
place from where the rules of business activities get legal authority. The main
sources of business law are discussed below:
a) Custom and Usage: The custom is known as particular way
of life or behavior. If such behavior is followed continuously by the people in
the society, it becomes a customs or usages which are important sources of law.
This types of custom should not oppose to statutory law, mortality and public
welfare. If there is no legislation, no precedents the matter is to be decided
by the custom or usage of that particular.
b) Statutes/ Legislation: The legislatory law come from
parliament or law making body of the nation. This types of law is the outcome
of demand of people and need of the time. It is made after fulfilling a series
of discussion by lawmakers. Now a days most of business activities are
regulated by the law made by parliament.
c) Judicial Decision: Judicial decision are known as
precedent. Precedent is a judicial decision which contains in itselfs a
principle. In other words it is the earlier decision of supreme court which is
taken as a rule while deciding the later cases. Where there is no law to deal
the problems in such cases the court can make decision in the light of justice
and equity such decision are treated as law for that matter. It is the one of
the major sources of modern business law.
Other Sources ( this should be included in your answer the
difference is that the above are the main sources)
d) English Mercantile law: business law was developed
in England. It is the pioneer of business law in the
world. Nepal is conjoind influenced by the British rule since year.
e) Professional Opinion of experts: Lawyers and critics may
play significant role creating good legal environment. The opinion and
explanation made by such professional may give proper instruction and better
contribution to the development of law.
f) Business Agreement, Conventions: Conventional law refers
to any rule or system of rule agreed upon by the parties to regulate their
business conduct. International business organization are more active in
national, region and world business nowdays. Examples: ( WTO, SAFTA) . And
bilateral agreement between the nations and conventions of business communities
are the main sources of national and international business law.
Legal Environment
Legal environment of business refer to the aggregate
of surrounding connected with the law that influence the business
activities and business firms. It refers to the aggregate of all types of law,
regulation. Acts and precedents intended to encourage, protect, guide the
business activities. Such law are made and enforced by the state for the
prosperity of every aspect of business.
According to Prem R Panta " The legal environment
refers to the framework of laws, regulation are court decision, intended to
encourage, guide and control business activities. “
Business law chapter 2- Contract( TU
BBS 2nd year)
CHAPTER2-
CONTRACT
(Define contract)
A
contract is an agreement enforceable by law. The law of contract is the basis
of business. Every business activity is determined and guided by the agreement
of the concerned parties. In fact, the law of contract is concerned with
everybody and every aspect of the business to perform any kind of act. And it
is concerned with the rights and obligation of the parties entering into it.
According
to A.J Salmond: "An agreement creating and defining obligation between two
or more parties is a contract.
Supreme
court of Nepal: "An agreement of two or more parties with condition
is contract.
In
short the contract includes the following:
-
two or more parties
-
an agreement on the ground of free consent
-
exchange of promise by meeting the minds
-
enforceable by law.
In
short the right and liabilities that are created reciprocally between the
concerned parties can be called contract.
Nature
of Contract:
A
contract is an agreement which is enforceable by the law. The above definition
have cleared that an agreement between two or more parties concluded with their
consent, creates rights and liabilities between them. Such consent of the
parties creates contract. An agreement is regarded as a contract where there
are the main characteristics of valid contract presented in it. There should be
the certain characteristics to be the contract determined by the law.
The
nature of law can be discussed in the following grounds:
1)
Agreement/ Promissory Nature: Contract is a private legislation,
which is formed and binding between the concerned parties on the ground of
their agreement. Agreement has two element one is there should be two parties
making an agreement, one can not enter into a contract alone. Another is.....
meeting of minds of concerning parties. An agreement is the outcomes of consenting minds of the parties. The contracting parties must meet their minds as regards the subject matter of the contract, in the same sense, upon the same thing and at the same time.
meeting of minds of concerning parties. An agreement is the outcomes of consenting minds of the parties. The contracting parties must meet their minds as regards the subject matter of the contract, in the same sense, upon the same thing and at the same time.
2)
Private legislation: A contract is a private legislation binding from
those parties who are involved in it. When any one breches the contract the
other party becomes victimize financially. Therefore, the victim party may
enforce by the court.
3)
Legal Obligation: There must be legal obligation in an agreement to become
a contract. Usually it is presumed that the parties entering into a commercial
agreement intend to create a legal relationship between them. The agreement
which do not establish a legal relationship are not contracts.
Contract
= legality + Obligation + Business Matter
4)
Freedom/ Autonomy of parties: The parties of contract must be autonomous
to deliver their genuine consent at the time of concluding contracts. It is
also known as a freedom of contracts. The concerning parties of the contract
should be free to choose the form of contract, its subject and determine
consideration and its extent as well as the term of condition.
5)
purity of Contract: Sanctiteness is another nature of contract. The common
law system protects contract from commission of fraud, mispresentation,
mistake, coercion and undue influence and effort to control the economic
exploitations of employee by the doctrine of restraint of trade.
6)
Function of Contract: Contract is a means for the achievement of purpose
of the parties. The following function are performed by nature through the
contract.
-
to facilitate forward planning of transaction and to make provision for future
contingencies.
-
to establish the respective responsibilities of the parties and performance to
be expected from them.
-
To enable the economic risks involved in the transaction to be allocated in
advance between the parties.
-
To provide alternative way or remedy if thing go wrong.
-
Creation of legal rights to protect own interest.
Essential
Elemnt of A valid Contract
(IQ) 20
Contract
and agreement:
In
general contract is an agreement between two or more parties. In fact such
agreement are not contract. Only those agreement which are enforceable by the
law are contract. In the agreement, the parties of it make promises about
something which is to be performed, when such promises or expectation of the parties
become an agreement and when this agreement is backed up by law it becomes a
contract which creates legally binding obligation between the parties.
The
scope of an agreement is wider than of contract because a contract must fulfill
some essential elements. It has limited scope which exists within the
limitation of legality. Thus all contract are agreements but all
agreement are not contract. Thus contract essentially consists
of two element first is agreement and second is its enforceability. Where certain
duties or obligation are created by agreement between the parties, contract law
deals with , where as an agreement which does not create obligation is not the
subject matter of contract law.
The
essential elements of a valid contract are as follows:
1)
Offer and Acceptance: There must be an agreement between two parties
to create a contract. The agreement involves a valid offer by one party and
valid acceptance of the offer by other party. Therefore the journey of contract
always starts with offer and acceptance.
2)
Consideration: Consideration means something in return. It has motivation
power to fulfill the promise. The agreement born when contracting parties are
giving and getting something in return. It is not necessary to be cash or kind,
it may be a promise to do or not to do something. But it must be real and
lawful, which may be in past, present and future.
3)
Legal Relationship: At the time of entering into an agreement the parties
should have the intention to create legal relationship between them to avoid
all types of conflicts. This types of legal relationship helps victim party to
have legal remedy in case of failure of either party. Agreement without legal
relation can not be enforced. For example: The relationship between a loaner and
borrower can not attract the law of contract. The father promise his son to get
a cycle if he passed the exam. Son passed the exam, The son claims for his
prize. In such matter , father not bound to take cycle for his son, because
they had no such intention to create legal relationship while making the
promises. To be fallen in contract law the agreements parties must have the
intention to establish legal relationship between them.
4)
Free Consent: When the parties of contract agrees upon same thing in the
same sense, their consent must be free from oppression , under influence,
mispresentation, fraud and mistake of law. The consent must be made with
knowingly and freely. If the consent is not free the parties can avoid the
contract.
5)
Meeting of Minds: To be a contract, two or more than two persons must
agree upon same thing in the same sense. If 'A' want to purchase 'X' but B want
to sell 'Y' than there is no contract raised between 'A' and 'B' because there
is no meeting of minds.
6)
Competent ( Capable) parties: the parties who are involved in the
agreement must be competent to contract. If incompetent parties are in a
contract, it is not valid. The parties not capable to contract are minor person
of unsound mind and legally disqualified person.
7)
Lawful Objectives: The objectives of agreement must be lawful to be
a valid contract. If the subject matter of agreement are not lawful ( illegal,
immoral and oppose to public policy) are not contract, and the agreement having
this types of objectives are not enforced by law.
8)
Not declared to be void: Those agreements which are expressly declared
void by the contract and other law force are not the contract. Agreement to
kill the life of other or agreement to steal goods are illegal and void.
Similarly agreement in restraint marriage, or profession are void by NCA.
9)
Certainty: The objectives of an agreement must be certain and clear and
practical. The contract which is uncertain due to lack of providing reasonable
meaning is void. For example: A agrees B that he will purchase another car if
the first car becomes lucky to him. Such agreement can not enforce against A,
and B can not claim for another purchase by A. Because the term ' lucky' does
not have any certain and clear meaning in practical life.
10) Possibility of performance: The objectives or
the action to complete the agreement must be possible to perform. Any act which
can not be done or is non- performable does not create legal obligation to the
contracting parties.
Chapter-6
OFFER
AND ACCEPTANCE
Define
Offer:
To offer means to present something so that
it may be accepted or rejected. Offer is the proposal of the first party to
another parties. NCA defines offer as " An offer is a proposal presented
by one person to another with the intention of obtaining his assent for
performing any work" And this types of proposal creates a legal obligation
if it is accepted by the acceptance parties. A valid offer may be expressed or
implied.
i)
Specific and general offer: Where an offer is made to a particular person there
is a specific offer and where it is made to the general public there is a
general offer.
ii)
Cross and counter offer: Where both parties make their offer to each other at
the same time, there is a cross offer. Such types of offer is not a valid offer
for the contract because to create a contract there must be an offer from one
side and acceptance from other side.
Where
an offeree intends to accept the offer after alteration in any term of offer,
there is a counter offer.
Note : ( the above types of offer is just for
understanding purpose that may unnecessary for exam)
Rules Regarding the valid
offer
(important question)
i) Creating a legal relationship: the offerer must have
intention of creating legal relationship. After the acceptance of the offer it
must create some legal obligation.
ii) Offer should not be certain and should be made
to a definite person.
iii) Offer may be conditional: An offer may be made
subject to conditional and that must be clearely conveyed to the offeree. An
unreasonable treatment and ignorance of offeree to the conditions are not
valid.
iv) Offer and offree must be communicated.
v) The offer can be expressed in different for
written, spoken) and implied
vi) Offer is seeking acceptance of other party
vii) offer may be specific to the person or be to
general public or globally.
viii) Offer should not contain the term that
non-communication or rejection would amount to an acceptance.
ix) Invitation to offer is not an offer.
x) Advertisement is not the offer.
business law
chapter-7-9 (TU BBS 2nd year)
Chapter-7
Consideration
Define consideration and describe
rules regarding consideration?
Consideration
cab be defined as a price of promise, which is bought by the next parties
(promise). When a party to an agreement promises to do something he/she must
get something in return which must be valuable in the eye of law. This
‘something’ is defined as consideration which may be price, reward, payment or
value for which the promise of the other is carried.
According to
Justice palterson : consideration means something, which is of some value in
the eye of law, it may be some benefit to the planting or some detriment to the
defendant.
For example:
A agree to sell a house to B for Rs 2 lakh. For A’s promise, the consideration
is Rs. 2 lakh and for B’s promise, the consideration is the house.
Rules Regarding consideration
a)
Consideration must be real and something of valuable in the eye of law.
b)
Consideration must move at the desire of the promisor: The act must be done at
the desire of the promisor. Without the desire of the promisor no consideration
can be valuable. It regards that the consideration must be moved from promise
only not from other or stranger to contract.
c)
Consideration may move from the promise or third persons: The act which
constitutes a consideration may be moved by the promise or any other person on
his behalf to enforce a promise. But in English law it must be from the promise
not from other.
d)
Consideration may be of past, present or future.
e)
Consideration must be lawful: When a party to an agreement promises to do
something the acceptors must get something in return which must be legal and
have the values in the eye of law. An illegal consideration is not supposed to
be a contract. It is void.
f)
Consideration need not be adequate(satisfactory) : Consideration need not be
adequate to the promise. The contract .......
is depend upon consideration. So quantum of the consideration is decided by the parties to the contract. The adequacy of consideration is determined by the facts, circumstances and necessities and nature of cases.
is depend upon consideration. So quantum of the consideration is decided by the parties to the contract. The adequacy of consideration is determined by the facts, circumstances and necessities and nature of cases.
Chapter-9
( Free Consent )
Define free consent
Consent
means agree to do something. Two or more parties are said to consent when
they agree upon the same thing in the same sense. It is the meeting of mind.
The agreement without any control is ‘free consent’. Only meeting of minds are
not sufficient to be the contract whether there must be the real and free
consent of the parties. It is obtained by free and pure will of the parties
from their own accord, consent is said to be free when it is not caused by
coercion, fraud, undue influence, mispresentation and mistake. If there is no
free consent then there will not be any contract, so it is created for the sake
of due and lawful consideration, not to lose anything. Free consent provides
meeting of minds, enforceability and legal remedy for the contracting parties
on their agreement.
Define Coercion
Coercion is
the act of forcing or threatening someone to do something against law. It is a
threat or force used by one party against another for compelling to enter
into an agreement. In such condition the consent is not free. NCA states that
" When somebody has detained or threatened to detain property or has
threatened to commit any act forbidden by the law for causing any person
to enter into contract against his will, the person is said to have caused
coercion." If A compels B to enter into an agreement by causing harm or
treating to commit harm as against the life and property of B or his
persons or third person. The contract between A and B is caused by coercion.
Chapter-12
Contingent Contract.
Define contingent contract and describes the rules regarding
contingent contract.
A
contingent contract can be defined as conditional contract. Such a contract
depends on a future uncertain event. A contingent contract is a contract
to do or not to do something, if some event, collateral to such contract, does
or does not happen. The example of contingent contract is Insurance contract. A
contract to pay Rs. 1000000 if X’s death. But expiry of a fixed time, can not
be contingent contract, because these events are of certain nature.
Rules
Regarding Contingent Contract.
i)
On the happening of a future un-certain event: A contract to do or not to
do something, if an uncertain future event happen, can not be enforced by law
unless until the event has happened. If the ground event becomes impossible
that contracts becomes void.
ii)
On the non happening of future uncertain event: The contingent contract is to
be performed if a particular event does not happens, it’s performance can be
enforced when the happening of that event becomes impossible. For ex: A agree
to pay certain sum of money if a ship does not return to port. The ship return
back. The contract becomes void. Rather the ship sinks in the sea, now the ship
could not return forever, the contract is enforceable.
iii)
On the event linked with human conduct, or demand .......
impossible: a contract contingent on the act or conduct of specified man if that things becomes impossible by his denial or inability, can no create any liability. For ex: A agree to pay B a certain sum of money. If B construct the house and is certified by Y an engineer, here certification of the house by Y is contingent event. The liability is not created because the house is not certified by Y.
impossible: a contract contingent on the act or conduct of specified man if that things becomes impossible by his denial or inability, can no create any liability. For ex: A agree to pay B a certain sum of money. If B construct the house and is certified by Y an engineer, here certification of the house by Y is contingent event. The liability is not created because the house is not certified by Y.
iv)
On the event’s happening within a fixed time: A contract contingent upon
the happening of an event within a fixed time becomes void. If the event
becomes impossible. For ex: A agree to purchase certain amount of goods if A’s
ship comes within one month. Now the ship has not returned within that time.
The contract becomes void.
v)
if the contract depends upon the future uncertain event if that does not
happen within the fixed time, the contract may be enforced.
vi)
If the future event is illegal or certain the contract becomes void.
Remedies for Breach of Contract
What does mean by breach of contract define various
remedies for Breach of contract.
A
breach of contract means failing to do something which is in the contract. A
‘breach’ means to an act of breaking a rule or an agreement. The parties to a
contract must fulfill their respective obligation because they are agreed upon
at the time of creation of the contract. If any party does not fulfill his
liability, another party becomes victimize. The nature of breach of contract may
be actual or anticipatory. The contract can be terminated by the breach of
terms and condition of the contract agreed, and the breach of the law of
contract made by the legislature or the statutory law of contract.
Remedies
for the breach of contract: When any party to contract breaches a contract the
victimized party should take the legal remedies. An important characteristics
of a contract is the availability of remedies to the aggrieved party. The
remedies, which are enforced by the law are as follow:
i)
Rescission or cancellation of the contract: When one party breaches the
contract, the other party can revocate or cancel the further performance that
are agreed to do in the contract. The victim party can cancel the contract
after giving a reasonable notice to the breacher party. The victim party has a
right of demanding compensesation for their loss that are being through the
breach of contract.
ii)
Restitution: Restitution means ‘ returning every thing to the state as it was
before. The parties to a contract have to return the binifit to each other
which was received under the contract. The injure party have the remedies to
restitute the changes, activities, losses as it was before.
iii)
Damages: If any party breaches the contract, the victimized party should be
paid the financial compensation, awarded by the court for his/her loss through
the breacher. To pay for the damage is just to pay some money for the purpose
of his recovery. The losses can be recorved from breacher as per law or terms
and condition that was implied during the time of making the contract.
iv)
Specific performance: When any party breaches a contract, the injured
party may demand a specific performance by suit. The court may order the
breacher party for a specific performance, such order is made by the court when
other types of compensation do not seem to be adequate.
v)
Injuction: Injuction is a court order that restraints the breacher party from
doing wrong or continuing the wrongful act, complained. Such remedy is
appropriate where there is a kind of preventive relief to the aggrieved party.
For
ex: A promise to sell his car to X for 5 lakh, rather that giving it to A, X
intends to sell the car for 6 lakh to Y. In such condition the court can order
restraining X to sell his car to C when it is claimed by A.
vi)
Suit upon Quantum Meruit: ‘Quantum meruit’ means ‘payment in proportion
to the amount of work done.’ A injured party has the right to sue an quantum
meruit arises where a contract, partly performed by one party, has become
discharged by the breach of another party. Such type of remedy is based on the
implied agreement to payment for what has been done or competed.
Quasi Contract
Define Quasi contract.
Generally
the agreement, which fulfills certain essential elements is called contract .
But certain cases create a contract without any essential elements of a valid
contract, it is called “ quasi contract’. In such contract there is no meeting
of mind, no offer and acceptance, no free consent, no intention to create legal
relation and even parties have no intention to enter into a contract. It comes
into existence when one of the parties act activates the law. The parties of a
quasi contract, sometimes are unknown to each other however they have some
right and liabilities under some circumstance. Duty is more important and
promise is less important in such contract. NCA termed it as ‘ indirect
contract. The basis of quasi contract is the doctrine of injust enrichment that
is, a person shall not allowed to enrich himself unjustly at the expense of
another.
Define
bailment and describes the essentials factors of bailment.
Bailment
is a kind of special contract, caused by the delivery of goods. However it’s
not a transfer of ownership of goods rather it is the delivery of goods on a
returnable basis.
NCA defines
bailment as “ A contract relating to bailment shall be deemed to have been
concluded in case any person delivers any property to another person on a
returnable basis or for handing it over to any other person or selling it as
ordered by him. For eg: “ A gives his house to B on a rent for Rs. 2000
monthly, it is the bailment of building for hire,” X gives his car to repair to
Z. It is the bailment of a goods for repair.
Essential
factor of Bailment:
i) Delivery
of goods: Delivery of goods can be defined as the change of possession of goods
from one person to another, but the ownership of the good remain same. It must
be made on the ground of free consent. The delivery of goods may be actual and
constructive. A gives his bike to B on hire for one day, B takes the bike
immediately. It is an actual delivery of goods, however constructive delivery
is not a change of the physical possession of goods. The goods remain in the
same place but something is done that causes a change of its possession to the
bailee. For example delivery of key of store or vehicles is the constructive
delivery.
ii) Delivery
for some special purpose: Delivery of goods must be made for some purpose
through which the Bailee is bound to return the goods when the purpose is
achieved. If goods are delivered by mistake than there is no contract of
bailment.
iii)
Creation of Contract: The relationship between a bailor and a bailee is the
creation of a contract. There must be a written document if delivery of good worth
more than 200. Thus the both bailee and bailor are bound to create a contract
and also they should be competent to create a contract.
iv) The good
must be return.
v) No
transfer of ownership
vi)
Consideration is not necessary: the contract of bailment may be gratuitous or
non- gratuitous. If bailment is made for the benefit of a bailor or of a bailee
it is gratuitous. For ex: X lets his bike to A just for 10 minutes.
Rights
and duties of Bailor
What
is bailor describes the right and duties of bailor.
Bailor is a
party or person on who agree to de4liver his goods to the bailee for some
purpose for some period of time on a condition that the bailee shall ultimately
return the goods to the bailor. For ex: If A delivers his car to B for a week,
here A is bailor and the car may be delivered gratuitously or non-
gratuitously.
The rights
of bailor are given below:
1)
enforcement of a bailee’s duties: Bailor can enforce the duties of bailee as
his own right by suit in the following circumstances.
i) To demand
compensation, in case of damage of goods.
ii) To
demand damage in case of an unauthorized use of goods or breach of the terms,
and unauthorized mixing of goods with other goods.
iii) To
return goods in the prescribed time.
iv) To
demand natural increment or profit in goods.
2) right to
avoid or terminate the contract: The bailor has a right to terminate the
contract........
at any time in the following circumstances:
at any time in the following circumstances:
i) If the
objectives of the contract can not be fulfilled.
ii) if the
contract has an illegal object.
iii) If the
the bailee breac hes the terms of contract.
iv) If the
bailment is gratuitous.
3)
restoration of goods lent gratuitously: Where goods are lent gratuitously the
bailor can demand their return at any time.
4) Right to
receive compensation from wrong doer.
The
following are the duties of bailor:
i) Duty to
disclose the known defects of good: a bailor has to disclose the known defects
of the......
goods for bailment. If the bailor does not do so, he will be responsible for the harm or the loss to bailee, but not for unknown defects.
goods for bailment. If the bailor does not do so, he will be responsible for the harm or the loss to bailee, but not for unknown defects.
ii) Duty to
bear extraordinary expenses: The bailor is responsible to bear the
extraordinary expenses of goods eg: medical treatment of sick animals, or the
expenses made for keeping the good safe.
iii) Duty to
indemnify the bailee: the bailor is responsible to the bailee for any loss due
to his/ her imperfect or defective title of the goods and premature termination
of the contract.
iv) Duty to
receive back the goods.
Define
Bailee and describes the right and duties of bailee.
Bailee is
the party of a bailment contract to whom goods is delivered by bailor on the
condition that after the completion of purpose of contract, or some period of
time the bailee should return the goods to the bailor. If X gives his house on
rent to Y. The Y is bailee.
The right of
bailee is given below:
i) Right to
be indemnified for the loss caused by lack of information about the goods,
defective titles of good.
ii) Right to
deliver goods to one of the several(joint owners): If the bailment contract is
concluded by several joint owner the bailee may deliver the goods back to one
of the joint owners, without consent of other owner in the absence of any
agreement to the contary.
iii) Right
of special lien: Special right is the right of a bailee that can keep the goods
bailed in his/ her custody until the bailor does not pay all the necessary
charges. The bailee even can recover the charge by selling the property.
iv) Right to
deliver the goods to bailor even though the real owner of goods is not the
bailor.
The duties
of bailee is given below:
i) Duty not
to make unauthorized use of the good bailed.
ii) Not to
mix the bailed goods with other goods.
iii) duty to
take reasonable care of the goods bailed.
iv) Duty to
return the goods to the bailor in time.
v) To return
the goods with their natural profit or increments.
vi) To
follow the terms and the instruction of the bailor.
vii) Duty to
compensate the loss or damage caused by him/ her.
Finder
of Lost goods
Define
finder of lost goods and write the right and duties of finder.
Finder of
lost goods is the person who finds and keep the lost goods of another person in
his own possession, the law implies that there is a contract of bailment
between the owner and finder of the lost goods. By the law the finder is
treated as the bailee who had agreed to keep the goods of bailor(the person
whose good is lost) safely and promised to return back to the owner.
The right
and duties of finder of lost good is given below:
Rights:
i) Right of
possession: a finder of lost goods has the right to keep it in his possession
until the true owner is found.
ii) Right of
lien : the finder has the right to keep the goods in his custody until the
owner pays the expenses ;incurred in keeping them safe, in repairing the goods
and in searching the true owner.
iii) Right
to sue for reward: The finder can sue for any specific reward which the owner
has offered for the return of the goods. He/She may also retain the goods until
he received such reward.
iv) Right to
sell the goods: A finder of lost good can sell those dgoods in the
following circumstance:
- If the
true owner can not be found.
- If the
bailor does not pay the expenses within a reasonable time.
- If the
goods naturally decrease or are destroyed within specific time.
- If the
lawful charges of the finder in respect of the goods found amount to 2/3
of the value of good.
Duties:
i) To search
the real owner of the goods found.
ii) Not to
mix the found goods with other goods.
iii) To
return the goods to the real owner after receiving the necessary expenses.
iv) To take
care of good and not to make an unauthorized use of such goods.
Pledge
or Pawn
Define
pledge and write the right and duties of pawaner.
Pledge is a
kind of bailment where the transfer of goods or bailment of goods are made as a
security for the payment of debt, or performance of a promise. In such case,
the person who gives goods as a security is called pledger or pawnor (bailor),
and the person who receive the goods as a security is called ‘pledgee’ or
‘pawnee’ (bailee). The pledge is bound to return the pledged goods on the
fulfillment of his debt or pledgor’s promise. Thus the contract, by which the
possession of goods is transferred as a security is known as pledge.
For ex: X borrows
Rs. 50000 from Y and keep his gold as a security for the payment of that loan.
Essentialities
of pledge:
i) Delivery
of goods.
ii) Delivery
for security.
iii) Lawful
purpose.
iv) Return
of goods.
v) The goods
must be long lasting.
Right
and Duties of a pawner
Rights:
i) A pledgor
has a right to enforce the following duties upon a pledge by a suit.
ii) for
reasonable care of goods.
iii) for
redemption of goods.
iv) to
receive the goods with accretion.
v) To stop
selling the goods by depositing dues.
vi) Right to
get surplus after the sale of goods bailed by the pledge.
vii) Right
to return the goods after the full payment of dues.
Duties:
i) to
compensate the extraordinary expenses incurred for necessary care of goods
pledged.
ii) to
receive the goods after the full payment as per contract.
iii) to pay
the rest of the dues, if it is insufficient by the sale of the goods pledged.
iv) to
dispose the facts or defects and goodness of the goods pledged.
Business
law chapter 19- Indemnity & Gurentee
Indemnity and Guarantee
Introduction/ Definition of Indemnity
Define Indemnity and write down the right and duties of
Indemnity holder.
Indemnify
means to compensate or to make good of the loss and contract of indemnity means
a promise or statement of liability to pay compensation for a loss or for a
wrong in transaction. In the law of contract indemnity is the obligation,
undertaken by one party to cover the loss or debt incurred by another.
Indemnity is an assurance given by the promisor to promisee that he/ she will
make good or save from loss which is raised from their contract for example:
'Samsung' company agreed to make hardware for 'Apple' company, and it will be
responsible for the loss and make it for apple. If 'Samsung' sell the product
made for apple. In such transaction, if any loss caused to 'Apple' , whatever
may be the reason, 'Samsung' is bound to pay the compensation to 'Apple' and
Insurance contract. Who gives such assurance known as indemnifier and to whom
that assurance is given is known as indemnity holder or indemnified.
Right and Duties of Indemnity Holder
Indemnity
holder is the party who has been assured of recovery of a loss by the
indemnifier. NCA 2056 has made the provision regarding the rights of an
indemnifier. The rights and duties of Indemnity holder is given below:
#
Rights:
a)
Indemnity holder can claim for compensation for damages suffered from the
transaction. The indemnity..
holder can recover any or all of the amounts of compensation under the contract.
holder can recover any or all of the amounts of compensation under the contract.
b)
He/She can recover all damages which he/ she may be compelled to pay in any
suit in respect of any matter to which the promise to indemnity applies.
c)
All the cost spent on the case filed or defended by him in connection relating
to indemnity.
d)
He/ She can recover all the cost of legal action, if it becomes necessary to
initiate such an action for a failure to pay the amount mentioned in all the
above causes.
Along
with such rights But the indemnifier will not be liable for the loss in the
following circumstances.
#
Duties:
a)
If He/ She works negligently.
b)
If he/she is acting with the intention of causing any loss or damage.
c)
If the indemnity holder is acting against the instruction of other
party(Promisor) .
note:
he/she means indemnity holder. ( when writing duties you must write eg.
Indemnity holder mustn't act and work negligently or something like that.)
#Rights
and Duties of an Indemnifier
The
above duties or liability of indemnity holder is the right of indemnifier. Thus
the duties of indemnifier arises in the following circumstances:
i)
There must be a loss in accordance with the contract to make the indemnifier
liable.
ii)
There must be an occurrence of the anticipated event. Without any occurrence of
the prescribed contingent event, there is no indemnity by the indemnifier.
iii)
Where the right of indemnity is used by the indemnity holder prudently and the
instruction of the indemnifier is not contravened or when there is no breach of
contract.
iv)
If the cost demanded by the indemnifier are not caused by negligence, haphazard
behavior.
Contract
of agency
Definition:
A contract of agency is one that creates a legal relationship
between the principal and an agent. The person who has been delegated the
authority to act on behalf of another is called ' an agent', and the person who
authorizes another to carry out some responsibility is called ' a principal'.
Nepal
Agency Act 2014 states " An agent is one who works for any domestic or
foreign business firm all over Nepal or in any part of
the kingdom of Nepal, and the term "agent" may mean a
distributor , stockiest, nominee or a representative."
Thus
agency is a relationship where one agree to represent of other to do some act
on behalf of other.
Procedures of Registration of agency business
in Nepal
(frequently asked and important from exam point of view)
In Nepal,
the law of agency is governed by two act, namely, Agency act 2014 and Rules
2019 and Contract Act 2056. Agency act 20145 and Rules 2019 are relating to the
procedures of registration, renewal and punishment. The procedure for
registering an agency in Nepal is as follow:
a)
Application: Any person willing to take agency is required to submit
application to the director/ Controller of the dept. of commerce for the
registration of agency. The application should contain the name and address of
agent and he/ she should make commitment to furnish description of transaction
within every three month with fee for registration.
b)
Registration: On receiving application, the controller makes the necessary
investigation and register the agency.
Modes of Creating Agency:
1)
By express agreement: Normally, the authority given by principal to his
agent is an express authority. It is the most usual and natural way to appoint
an agent, by executing the
formal power of attorney in a written stamped and signed document.
formal power of attorney in a written stamped and signed document.
2)
By Implied Agreement: In implied agreement agency arises under certain
circumstances from the behavioural conduct of the parties or relationship
between them. The circumstances are as follows:
a)
Agency by estoppel: If a person represents by words or conduct that the
another person is his agent and third party reasonably believes on such
representation and enters into an agreement, the person who represent. So, is
bound by the act of other, this is known as agency by estoppel.
b)
Agency by holding Out: Like wise agency by estoppel the agency is created but
in holding out ' the principal himself holds out the words that somebody is his
agent and there is holding out.
c)
Agency by necessity: In certain urgent circumstances the law confers an
authority on a person to act as an agent for the benefit of another. Such
agency is called an agency of necessity. In such case, the agent must act in
good faith and to protect and preserve the interest of the principle.
'X'
a transporter, carries Meat product of 'Y' from Nuwakot to Kathmandu.
Because of strike, 'X' sold all meat product in 'Kakani', otherwise, there was a
danger of damage of all the product. In such case 'Y' can't sue against 'X'
because of want of authority. Here 'X' is treated as an agent of 'Y' by
necessity.
3)
By Ratification: Where an agent does an act for his principal without consent
or knowledge, and the act is accepted by the principal after wards , it is
called agency by ratification. Thus, the act of performing and the act of
ratifying by the principal may create an agency. Such types of agency occurs in
two ways:
i)
The person acting on behalf other has no authority and enters an agreement on
behalf of principal and if the transaction is adopted by principal.
ii)
The agent when he exceeds his authority and enters an agreement on behalf of
principal, and the principal accept the transaction.
For
e.g: A is a insurance agent of B. 'B' is a business man. 'A' insures the goods
of B without consent of 'B'. If 'B' ratifies the act of 'A', the policy of
insurance is valid with retrospective effect.
Note: rules regarding valid ratification is also the important
question.
4.
By Operation of law: In some certain circumstances an agency is created by
operation of law.
-
when a company is formed as a legal person it cannot run itself. It's promoters
run its business. They are its agent or representative by operation of law. The
company is responsible for their acts.
-
a partner is an agent of a business firm for the purpose of running the
business. Thus the act of the partner performed to carry out the firm's
business binds the firm legally.
-
a carrier of goods acting as an agent, the carrier is created as an agency by
operation of law.
Write down the rights and duties of an Agent.
#
Duties:
\i)Duty
to obey lawful directions of principal or customs: An agent must follow
all the lawful instruction given by the principal. In the absence of such
instruction, the agent has to act in accordance with the customs of the
business.
ii)
Duty to render an account : an agent is bound to render proper account of the
transaction done by him/herself on demand of principal.
iii)
To carry out the work with reasonable care, skill, and diligence.
iv)
Duty to act in good faith and is the interest of the principal.
v)
Duty to communicate with principal.
vi)
Not to make any secret profit beyond the commission.
vii)
Not to delegate work or authority given by the principal.
ix)
Duty to protect and pursue the interest of the principal in particular
circumstances.
#
Rights:
i)
Right to receive remuneration.
ii)
Right to retain money.
iii)
Right of lien: Except otherwise agreed, an agent has a right to retain goods,
papers or other property of the principal received by him/her until the
rightful/agreed amount of commission/ payment is recovered.
iv)
Right to indemnification of cost incurred in a lawful act.
v)
Right to receive compensation of loss.
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