This document summarizes key concepts related to contracts of bailment, agency, and sales. It defines a bailment as a contract where one party (the bailor) delivers goods to another (the bailee) for a specific purpose, such as safekeeping or repair. The bailor retains ownership and expects return of the same goods. It outlines duties of bailors and bailees. It also defines agency as a contract where one person acts on behalf of another, discusses creation of agencies, and duties of agents and principals. Finally, it notes a sales contract requires a buyer, seller, agreed price, transfer of ownership of movable goods, and satisfaction of general contract requirements.

1. BBA 5th
From week 7 Business law
CONTRACT OF BAILMENT: the word bailment derived from French word “Bailer” means to
deliver something to someone for a specific purpose. Purpose may be safe custody, disposed of,
repairing etc .In these contracts 2 parties are involved.
1. Bailor:(owner of the goods) the person who delivered his goods to other person for specific
purpose
2. Baillie: the person to whom we delivered our goods. Baillie may be a mechanic (when we
deliver our car for repairing), tailor (when we deliver our clothes to tailor for sewing),
shopkeeper (when we deliver some goods to shopkeeper/seller to sell them. it is called
disposed of).Baillie will return the goods according to the instructions of the bailer.
The ownership will remain with the bailor and give the temporary possession of his goods to the
Baillie.
ESSENTIALS OF CONTRACT OF BAILMENT
1. CONTRACT: it must be a legal contract
2. SPECIFIC PURPOSE: there must be a specific purpose like repairing, disposed of; safe custody
means that for which purpose I am giving these goods.
3. DELIVERING OF GOODS: this is the main theme of contract of bailment. There must be a process
of delivering of goods in contract of bailment.
4. NO CHANGE OF OWNERSHIP: There will be no change in the ownership in contract of bailment.
Ownership will remain in the hand of bailor and if he gives the ownership then it will be called
sale.
5. RETURN OF SAME GOODS: Baillie will provide same goods in same condition to the bailer. But
in some cases like repairing Baillie will repair it according to the instructions of bailor.
DUTIES OF BAILOR
1. Duty to disclose faults. It is the duty of bailor to disclose all faults in their goods and if he fails
then will be liable to pay for such damages to the Baillie.
2. Duty to repay extra ordinary expenses. It is also called emergency. It is also the duty of bailor
to repay extra ordinary expenses to the Baillie. E,g feeding expenses, medicine .
3. Duty to repay necessary expenses. It is the duty of bailor to repay necessary expenses to
Baillie. The Baillie paid these expenses in order to maintain the asset then the whole payment
is done by the bailor to Baillie. E,g feeding of horses by the Baillie then the bailor has to pay
for feeding.
Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 1

2. BBA 5th
4. Duty to indemnity for demand back. It is the duty of bailor to indemnify. If there is a contract
between bailor and Baillie for three months so when the Baillie do expenses on any asset of
bailor in order to get benefit from that assets but before the maturity the Baillie get loss, then
the bailor has to indemnify (compensate) for the loss of Baillie. E,g when you give Bike to
someone for three months and he repair it for himself and after 45 days you take the Bike
then that expenses which other person spend on your bike you have to pay for these
expenses.
5. Duty to indemnify for defective title: it is the responsibility of bailor to indemnify
(compensate) for that loss of Baillie that is faced by Baillie due to worst title.
WORST TITLE: if the bailor knows about the defect in assets and Baillie doesn’t know
about that defect and the Baillie suffer any loss so the bailor have to compensate for
that loss
6. Duty to receive back the goods: Bailor should receive goods from Baillie.
DUTIES OF BAILLIE
1. Duty to take reasonable care: it is the duty of Baillie to take reasonable care of assets of bailor
as take reasonable care of its own.
2. Duty not to make unauthorized use: if the bailor didn’t give authority to take action or to use
something, so it is the duty of Baillie to follow the instructions of Bailor. If Baillie use it for
personal use then it is unauthorized by Baillie.
3. Duty not to make goods mixed: it is also the duty of Baillie to take the goods of bailor in
original form and return to bailor in original form. No addition, no reduction
4. Duty to return the goods: it is the duty of Baillie to return the goods to bailor when purpose is
accomplished. Baillie will return the assets/goods in original form to the bailor.
5. Duty to return the increase: if there is any natural or artificial increase occur in the
assets/goods so it is the duty of Baillie to return the goods along with profit/natural increase
to the bailor.
TERMINATION OF BAILMENT
1. Expiry of time: when the stipulated time comes to an end then termination of bailment
occurs.
2. Accomplishment of purpose: when need/purpose is accomplished so contract of bailment
terminates.
3. Death of bailor or Baillie: if any one of them dies (bailor/ Baillie) so contract of bailment
terminated.
4. Unauthorized use: when the Baillie uses it for personal use after prohibiting by bailor so
contract of bailment terminates.
5. Termination of bailor: the bailor can terminate the bailment before if it doesn’t provide any
loss to Baillie. If he gives loss then the bailor will fulfill and then terminate the contract.
6. Destruction of subject matter: if the subject matter on which contract of bailment is done and
that subject of matter destroys then the contract of bailment terminates.
Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 2

3. BBA 5th
CONTRACT OF AGENCY
An Agent is the representative of owner/investor/ the principal or the person who facilitates
the process. An agent is commission taker. Owner/principal hires the agent for the third
party. The ultimate decision power is in the hands of principal/owner. The agent is just
facilitator/ employee. If an agent don’t ask from his principal and make decision and loss
occurs so that will be totally on the shoulders of an agent (broker). Here consultancy is must,
disgracement is necessary. So being an agent we should ask from our principal and then we
should make decisions. An agent works as a bridge between principal and third party.
ESSENTIALS OF CONTRACT OF AGENCY
1. Contract: it must be valid contract like other contracts. All the essentials of a valid contract
should be followed by both the parties.
2. Consideration not necessary: this is sufficient evidence that the principal is hiring an agent
in order to represent him.
3. Contractual capacity: both the parties (principal & agent) will be eligible by age, mental
soundness and should not be disqualified by any court of law. They must be sound
minded.
4. Intention: the intention of an agent is to represent his principal/owner. He will think
better for his principal/owner means that he will invest there where the principal can get
maximum return/profit.
CREATION OF AGENCY
1. By express agreement: it means that we can create agency by writing or mouth words.
It may be written or oral.
2. By implied agreement: we can create agency by implied agreement. It is not by writing
or by mouth words. It is just by conduct the actions of parties.
3. By necessity agreement: when there comes emergency so in that situation a person
which is not an agent, but take decision to cooperate the principal or assists the
principal so this is called agency by necessary. E,g a person (seller) sending some
perishable goods like vegetables to somewhere like Islamabad but there is a strike on
the way or some other situation occur which stops our goods to supply and the person
takes these goods near to the market sell them for the profitability of
owner/principal. This is agency by necessity.
4. By ratification: it means to accept an unauthorized act later on that has been done by
an agent. Unauthorized act is that which is not permitted by principal, but an agent
acts such thing & later on it is accepted by principal so the agency comes into being.
E,g a person is advising or directing the agent that you should buy only the shares of
PSO & SHELL. There are also some other companies but the prices of their shares
decreasing in market and the agent buys their shares which is unauthorized so this is
unauthorized action but later principal accept that so this is called agency by
ratification.
5. By operations of law: we can create an agency by operations of law suppose we have
a partnership business so in that business each partner is an agent for business so
Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 3

4. BBA 5th
dealing with each partner becomes an agency by operations of law. In corporation
business, business is carried out by board of directors so every member of board of
directors is an agent and the share holders are the real owners (principal) so the
dealing between them is also called agency.
DUTIES OF AN AGENT
1. Duty to follow principal’s directions: it is the duty of an agent that he will follow
the orders and directions of his principal/owner. An agent can’t take any decision
without the permission of his principal. If he does without informing his principal
and loss occurs so he (agent) will be responsible for that loss.
2. Duty to work with reasonable skills: it means that an agent will use his
proper/full skills to run the agency. If an agent done an act without using his full
skills and loss occurs so he will be responsible for that loss. E,g credit worthiness.
As a credit finance manager he should check the credit worthiness before giving
credit (loan) to someone. If he doesn’t check and gives credit to some and loss
occur so he will be responsible for that loss because he didn’t use his full skills.
3. Duty to render accounts: (true accounts) it means that an agent have to present
the accounts when principal demands. There will be no excuses, no delaying
tactics.
4. Duty to communicate in difficulty: if difficulty occur in agency (business) so an
agent should communicate with his principal that what to do now? An agent
should call his principal that here is this difficulty/ problem now what should I do?
5. Duty on termination of agency: it means that if principal dies so an agent will not
leave the agency at the same time. He will help/guide the principal’s legal
representatives for some time and he will help them on humanitarian basis.
6. Duty not to deal on his own account: an agent is just the representative of the
principal’s business. He can’t perform for his own benefits. He will just think about
the principal’s benefits and if an agent acts something like this so that will be
illegal.
7. Duty not to make any secrete profits: an agent can’t take any illegal profits for
himself. He is just entitled to receive salary/commission.
8. Duty not to delegate his authority: it means that an agent can’t give his authority
to another person (sub agent) without the proper permission of his principal. In
export and import we can hire sub agents but with the permission of principal.
DUTIES OF PRINCIPAL/OWNER
1. Duty to indemnify (compensate) an agent for any law full act: it’s so simple if
an agent is working according to the orders and directions of the principal and
Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 4

5. BBA 5th
loss occur so there is no mistake of an agent that’s why principal will
compensate him.
2. Duty to indemnify an agent for acts done good faith: if principal tell the agent
that you will buy shares only from these companies PSO, SHELL and agent
buys another company’s shares because that company have rising future. In
near future that shares will be high so here agent doesn’t inform his principal
and buys that shares on good faith that principal will get high profit but due to
some reasons (political crises) the company’s shares fall down and the
principal suffers loss. Now the due to good faith principal will check the
records of that company that is it true? If yes then principal will compensate
him.
3. Duty to indemnify for injury caused due to principal’s neglect: if an agent
acts/works according to the principal’s orders and directions and he becomes
injured during that act/work so the principal will compensate him. Suppose
principal says that do this work by this machine and agent tell him that this
not fine means there is a fault in this machine but due to principal’s force he
does that work and becomes injured due to that machine so the principal will
compensate him.
CONTRACT OF GOODS ACT
This contract was initiated in 1930 and has 66 sections.
ESSENTIALS OF A CONTRACT OF SALES
1. Buyers and sellers: there must buyer and seller for this contract.
2. Transfer of contract: property means ownership. Here the seller will
transfer his ownership to buyer. We should not only transfer
possession but also transfer ownership of goods.
3. Price: Barter system can’t be called sales. There should be a price on
which both the parties will agree.
4. Goods: means moveable goods. Ownership of these goods can be
transfer from one person to another person.
5. Sales & agreement to sell: when the ownership is transfer on the spot
to someone is called sale. Future transfer of ownership of goods is
called agreement.
6. Other formalities: all the essentials of a valid contract should be
followed under the contract of sales.
Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 5