1. Mercantile Law – Points to Remember Pace2race Institute
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 Important Sections
The Indian Contract Act, 1872 The Sale of Goods Act, 1930
Sections Definitions Sections Definitions
Section 2(a) Proposal/Offer Section 2(1) Buyer
Section 2(b) Promise/Acceptance Section 2(2) Delivery
Section 2(d) Consideration Section 2(6) Future Goods
Section 2(e) Agreement Section 2(7) Goods
Section 2(h) Contract Section 2(8) Insolvent
Section 2(i) Voidable Contract Section 2(9) Mercantile Agent
Section 2(j) Void Contract Section 2(10) Price
Section 7 Valid Acceptance Section 2(11) Property
Section 10 Valid Contract Section 2(13) Seller
Section 11 Person competent to Contract Section 4(1) Contract of sale
Section 13 Free Consent Section 4(3) Sale
Section 15 Coercion Section 4(3) An agreement to sell
Section 16 Undue Influence Section 6 Existing Goods
Section 17 Fraud Section 9 Ascertainment of Price
Section 24 Consideration unlawful in part Section 12(3) Condition and Warranty
Section 31 Contingent Contract Section 16 Caveat Emptor
Partnership Act, 1932
Sections Definitions
Section 4 Partnership
Section 12(c) Right to be consulted
Section 12(d) Right of access to books
Section 30 Rights and Liabilities of minor partner
Section 58 Process of registration
Section 69 Consequences of non-registration
 Important dates
Particulars Dates
Indian Contract Act, 1872
- Formed on
- came into force on
- 25th April 1872
- 1st Sept 1872
Any contract made before 1st September 1872 Not governed by the Indian Contract Act, 1872
Sales of Goods Act, 1930
- came into force on - 1st July 1930
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2. Mercantile Law – Points to Remember Pace2race Institute
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- earlier was a part of Indian Contract Act, 1872 - Chapter VII of Indian Contract Act, 1872
Partnership Act, 1932 came into force on 1st Oct 1932
 Important Case Laws
Case Name Decision
Balfour v. Balfour Intention to create legal relationships (Page 1)
Carlill v. Carbolic Smoke Ball Co. General Offer (Page 4)
Lalman Shukla v. Gauri Dat General Offer (Page 2)
Bhagwandas v. Girdharilal Acceptance must be communicated to the offeror
Entores Ltd. v. Miles Far East Corporation Communication of Acceptance (Page 4)
Chinnayya v. Ramayya Consideration (Page 5)
Kadarnath v. Gorie Mohammad Charity (Page 4)
Mohiri Bibi v. Dharmodas Ghose Agreement with minor (Refer Book)
Khwaja Mohd. Khan v. Hussani Begum Contract by guardian (Page 6)
Cox v. Hickman True test of partnership is agency and not the sharing
of profits
Salomon v. Salomon A company is a separate legal entity distinct from its
members
 Different language terms
Sections Definitions
Ubi jus, ibi remedium Where there is a right there is a remedy
Ignorantia juris not excusat Ignorance of law is no excuse
Jus in rem Right against or in respect of a thing
Jus in personam Right against or in respect of a person
Rights in personam Right against or in respect of a specific person.
Quid pro quo Something in return
Consensus-ad-idem Agree upon the same thing in the same sense
Error in Consensus Mistake
Quicquid Solvitur, solvitur
secundum modum solventis
Whatever is paid, is paid according to the intention or manner of the
party paying
Quantum Meruit “As much as is earned” or “according to the quantity of work done”
Caveat Emptor Let the buyer beware
Nemo dat quod non habet No one can give what he has not got
Uberrimae Fidei Utmost good faith
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3. Mercantile Law – Points to Remember Pace2race Institute
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 Law of contract is neither the whole law of agreements nor the whole law of obligations.
Particulars Can be considered as
contract
Agreements
- Intention to create legal obligations e.g., business agreements
- No intention to create legal obligations e.g., social agreements
Yes
No
Obligation
- Arise out of agreements
- Do not arise out of contract
Yes
No
 Provision related to Minor
According to Section 3 of the Indian Majority Act, 1875 Completion age
Where a guardian of a minor’s person or property is appointed under
the Guardian and Wards Act, 1890
On completion of 21 years
Where minor’s property has passed under the superintendence of the
court of wards
On completion of 21 years
In other cases On completion of 18 years
 The Indian Contract Act, 1872
Provisions related to Indian Contract Act 1872
The Indian Contract Act applies to Whole of India except State of Jammu & Kashmir
Contract may appear to be completed at once but
its effects may continue.
A person buys a bun containing a stone and
subsequently breaks one of his teeth. He has a right
to recover damages from the seller. [Chaproniere
v. Mason (1905)]
Information received from unauthorized person Ineffective.
 Unit 1 – Nature of Contracts
Topics Description
Contract creates rights in personam Right against or in respect of a specific person.
Parties intention to create legal relations is a
usually presumed in
In commercial and business agreements
Contract Agreement + Enforceability of Law
Agreement Offer + Acceptance (or) accepted proposal
Contract
- Created by situation
- By conduct of the parties
- Created by law
- Implied contracts
- Tacit
- Implied/created by law
Void contract a. Cannot be void-ab-initio
b. Becomes void subsequent to its formation.
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4. Mercantile Law – Points to Remember Pace2race Institute
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Bilateral Contract a. Performance outstanding from both the parties
b. Contract with 4uthoriz consideration
Executory Contract a. Performance outstanding from the parties
b. Contract with executed consideration
Unilateral Contract Contract with executed consideration
An agreement the object or consideration of
which is unlawful
Illegal agreement
Collateral agreement in case of illegal
agreements
Becomes void
Essential elements of a valid offer 1. Willingness
2. Expression
3. Get consent of other
An offer is different from a mere declaration of
intention
Farine v. Fickar (property will)
An agreement contains a machinery or a
reference for ascertaining vague terms
The agreement is not void on the ground of its being
vague. [Foley v. Classique Coaches Ltd. (1934)]
Communication of special terms/standard form
contracts
Handerson v. Stevenson (ticket)
A statement of price Not an offer
Acceptance of an offer
- If the proposal does not prescribe the
manner in which it is to be accepted
- If the proposal prescribes the manner in
which it is to be accepted
Accepted in some usual and reasonable manner
Must be accepted in the prescribed manner
“Acceptance is to offer what a lighted match is
to a train of gunpowder” – Anson
It produces something which cannot be recalled or
undone.
Acceptance cannot precede an offer. e.g., shares allotted to a person who has not applied
for earlier.
 Unit 2 – Consideration
Topics Description
An agreement made without consideration Nudum pactum (a nude contract) and is void.
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5. Mercantile Law – Points to Remember Pace2race Institute
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Consideration may be In India – Past, Present or Future
In England – No past consideration
Fulfillment of consideration In India – From promise or from any other person
In England – Only from promisee
 Unit 3 – Other Essential Elements of a Valid Contract
Topics Description
Whether a party to a contract is of sound mind or
not
a. Question of fact and is decided by court.
b. Presumption is always in favor of sanity
Services rendered at the desire of the minor
expressed during minority and continued at the
same request after majority
A good consideration for a subsequent express
provisions in favor of person who rendered services
[Sindha v. Abraham (1895)]
Minor’s parents/guardian are/is not liable for the contract entered into by
him, even though the contract is for the supply of
necessaries to the minor. But if minor is acting as
an agent, they are liable under the contract.
Duress in English Law Equivalent to coercion, but does not involve threat
with regard to goods or property of the other party
Fiduciary relationship is not assumed Landlord and Tenant, Creditor and Debtor,
Husband and Wife
Misrepresentation Misstatement of facts which is material to the
contract
Wrong statement to third party with an intention
to communicate it to plaintiff
Treated as misrepresentation
Mistake of law of the country Valid
Mistake of law of foreign country, Bilateral Mistake Void
Unilateral Mistake Valid except mistake as to the i) identity of the
person contracted for and, ii) nature of contract
Uncertainty of meaning may be as to Existence, Quantity, Quality, Price or Title
Wagering agreement Event may be past or future
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6. Mercantile Law – Points to Remember Pace2race Institute
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 Unit 4 –Performance of Contracts
Topics Description
Partners, HUF members, Co-shares, Mortgagees Joint promises when a person makes a promise
in their favor
Effect of failure of performance of a contract where
- Time is essential
- Time is not essential
Voidable and if accepted, compensation for
delay can be claimed only when intention of
the same is given before
Not Voidable, can claim compensation
Clauses for contingencies, penalty and fine Does not mean time is fixed
Impossibility of performance due to reason in
control of the parties
No excuse for no performance
Impossibility of performance which is caused due to
reason beyond the control of the parties
Parties are discharged to perform
Supervening Impossibility Doctrine of Frustration or Post contractual
impossibility
Appropriation of payments when manner is
- Informed by the debtor
- Not informed by the debtor
As per Debtor’s intention
Appropriate to the debt first in time
Appropriation of payments when neither party has
intention to appropriate in any manner
- Debts are of different dates
- Debts are of same dates
- Discharge of debt in order of time
including time barred debt
- Payment shall be applied in discharge
of all debts of that particular date
proportionately
Original contract is not required to be performed in the following cases:
Novation Rescission Alteration Remission Waiver
1. Old contract is
cancelled and
2. New contract is
made
1. Old contract is
cancelled and thus need
not to be performed
2. No new contract is
made
Some changes in the
original contract i.e.,
original contract will
remain and has to be
performed
Acceptance of a
lesser
fulfillment of
promise made.
Parties to
the
contract
agree to
no longer
be bound
by the
contract.
Any amount received under
voidable contract or, void agreement, or contract
becomes void afterwards
If benefit – should be refunded on termination
of the contract
If security – Not to be refunded
Communication of rescission In the same manner as communication of offer
Communication of revocation of rescission In the same manner as communication of
revocation of offer
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7. Mercantile Law – Points to Remember Pace2race Institute
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 Unit 5 – Breach of Contract
Topics Description
Actual breach of contract may be - At the time when performance is due, or,
- During the performance of the contract
Special damages Can be claimed as a matter of right
Penalty Disproportionate
Liquidated damages Fair and genuine pre-estimate of probable loss
Suit for specific performance Where damages cannot be claimed or where third
party acquires the same in good faith
 Unit 6 – Contingent and Quasi Contracts
Topics Description
Quasi – contracts Constructive Contracts
Finder of goods can sale the goods on the
following conditions
1. Goods are of perishable nature
2. Owner cannot be found out with reasonable
diligence
3. Owner found, but refuses to pay lawful charges of
finder
4. Lawful charges of finder is 2/3rd of value of thing
found
 The Sale of Goods Act, 1930
 Unit 1 – Formation of the Contract of Sale
Topics Description
If source of supply is identified Cannot be said as specific goods
Contingent Goods Acquisition by seller depends on contingency happen
or not
In case of non – procurement of continent goods Parties are discharged to perform the contract
In case of non – procurement of future goods Parties are not discharged to perform the contract
Constructive Delivery also known as Delivery by attornment
At the time of constructive delivery Goods may be in possession of buyer, seller or third
party
Document of title to goods Proof of possession / Control of goods
Share Certificate Cannot be transferred by mere endorsement on the
back of the certificate and the delivery of the
certificate
Barter Not a sale
Hire Purchase Condition that after certain payments, property in
the goods will pass to the buyer
Goods perished in case of agreement to sell Seller will bear the loss
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8. Mercantile Law – Points to Remember Pace2race Institute
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 Unit 2 – Conditions and Warranties
Topics Description
Condition once waive off Cannot insist afterwards
When contract is non – severable If buyer has accepted the goods or part thereof, then
condition is treated as warranty
An implied condition/ warranty may be negated
or waived by
(1)Express agreement b/w the parties (or) (2) in the
course of dealing (or), (3) custom or usage of trade
Sale by description a.Buyer has not seen; relies only on description given
by seller
b.Buyer has seen the goods but relies on seller and
deviation from the goods from the description is not
apparent.
c.Packing of goods as per description
Merchantability Commercially saleable under the description by
which they are known in the market at their full
value.
 Unit 3 – Transfer of ownership and delivery of Goods
Topics Description
Performance of contract of sale of goods by seller
in three stages
1.Transfer of property in the goods
2.Transfer of possession of the goods
3.Passing of risk
It is essential to know the time at which property
passes to the buyer
1.Risk follows ownership
2.Action against third parties
3.Insolvency of buyer and seller
4.Suit for price by seller only when property passes to
the buyer
Non owner can transfer better title to bonafide
purchaser of goods
Sale by a person in possession of goods under
- voidable contract – Yes
- void contract – No
Sale by person obtaining possession before the
property in the goods has vested in him can give
better title to bonafide purchaser
Person selling the goods is
Buyer – Yes
Hire purchaser (not exercised the option to
purchase) – No
Where place is specified The goods must be delivered at that place during
business hours on a working day
All expenses of and incidental to obtaining of
delivery
Borne by the buyer
Rejection of goods Does not mean cancellation of contract
Delivery of goods to the carrier for transmission to
the buyer
Is prima facie deemed to be delivery to the buyer
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9. Mercantile Law – Points to Remember Pace2race Institute
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 Unit 4 – Unpaid Seller
Topics Description
Conditions of waiver of right of lien 1. Expressly written in the agreement
2. Seller has already given assent for
subsequent sale
3. Accept bills receivable
4. Increase the credit limit
Amount not received for part delivery Can exercise the right of lien till the amount
received for whole goods
On exercising of right of lien or stoppage in transit Contract is rescinded in case of – Agreement to sell
Contract is not rescinded in case of – Sale
Transit does not come to an end where Both buyer and seller refuses to take delivery of
goods
Cases where Liability of carrier Loss is borne
by
- Carrier does not deliver the goods to the buyer Yes Buyer
- Carrier does not deliver the goods to the seller on
exercising of right of stoppage in transit
Yes Seller
- Carrier delivers the goods to the buyer despite of
exercising of right of stoppage in transit by seller
Yes Seller
On re-sale of durable goods Notice is given Notice is not
given
- Loss on re – sale Claim from buyer Cannot claim
- Profit on re – sale Not bound to give Bound to give
 Partnership Act, 1932
 Unit 1 – General Nature of Partnership
Topics Description
Company can be a partner in a partnership firm If authorized by its Memorandum of Association
Partnership Firm Cannot be a partner in a partnership firm
As per section 11 of the Companies Act, 1956 Maximum no. of partners in a firm
Banking business – 10
Other then banking business – 20
If number of partners exceed the maximum no. It becomes illegal association
Partnership does not come from law
True test of partnership / Cardinal principle of
partnership
Mutual Agency (Principal and Agent relationship)
CASE: Cox v. Hickman True test of partnership is agency and not the
sharing of profits
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10. Mercantile Law – Points to Remember Pace2race Institute
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Prima Facie evidence of partnership Sharing of profits of the business
Prima Facie evidence can be rebutted by Proving that there is no mutual agency
Types of partnership
1. Fixed Term Partnership
2. Specific/Particular Partnership
3. Partnership at will
- For some fixed term
- For completion of some project
- As per the intention of the partners
Types of Partners
- Active or
Ostensible Partner
- Sleeping or
Dormant Partner
- Nominal Partner
- Partner in Profits only
- Sub – Partner
- Incoming Partner
- Outgoing Partner
- Partner by Holding Out
Features:
- Partner by an agreement, actively participates in
business
- Partner by an agreement, does not actively
participate in business, share profits/losses, liable
to third parties
- Neither invest nor takes part in business, lends his
name, liable to third parties
- Share profits only, liable to third parties for all
acts of profits only
- Share other partner’s share of profits, no rights
and debts
- Admitted as a partner in an existing firm
- Leaves a firm and rest of the partners continue
- Refer Book
New partnership can be formed by Minor No
Minor can inspect and copy accounts of the firm But not books
 Unit 2 – Relations of Partners
Topics Description
Right to be consulted In case of change in the nature, place or sale of
business
Partnership is a contract of Uberrimae Fidei
A partner cannot assign to any outsider
A partner can assign to any outsider
His rights and interest in the firm
Share of profits and assets in the firm
Private property used for partnership business Does not become partnership property unless
partner shows an intention to make it so.
A firm is said to be reconstituted on: Addition/Separation of partners, Change in the
nature of the business, continuation of business after
expiry of fixed term
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11. Mercantile Law – Points to Remember Pace2race Institute
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 Unit 3 – Registration and Dissolution of a Firm
Topics Description
Object of the firm
- unlawful
- becomes unlawful afterwards
- One of the object becomes unlawful
- It is void-ab-initio, question of dissolution does
not arise
- Compulsory dissolution
- Compulsory dissolution for unlawful object only
Partners right cannot be changed In respect of filing of suit for dissolution of firm
A court may dissolve the firm in case of
misconduct of a partner
Misconduct includes gambling, fraudulent breach
by a partner, persistent refusal or neglect to attend
business by a partner, taking away of books by a
partner
Consequences of not giving public notice 1.Minor will be deemed to be a partner of the firm
2.Retiring partner is responsible for acts done after
retirement
3.Dissolution will not be affected
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