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  "title": "CONTRACT ACT 1872",
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  "text": "THE CONTRACT ACT, 1872 \r\n(IX of 1872) \r\nCONTENTS \r\nPRELIMINARY \r\n1. Short title. \r\nExtent. \r\nCommencement.  \r\nEnactments repealed. \r\n2. Interpretation-clause. \r\nCHAPTER I \r\nOF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF \r\nPROPOSALS. \r\n3. Communication, acceptance and revocation of proposals. \r\n4. Communication when complete. \r\n5. Revocation of proposals and acceptances. \r\n6. Revocation how made. \r\n7. Acceptance must be absolute. \r\n8. Acceptance by performing, conditions, or receiving consideration. \r\n9. Promises, express and implied. \r\nCHAPTER II \r\nOF CONTRACTS, VOIDABLE CONTRACTSAND VOID AGREEMENTS. \r\n10. What agreements are contracts. \r\n11. Who are competent to contract. \r\n12. What is a sound mind for the purposes of contracting. \r\n13. \"Consent” defined. \r\n14. \"Free consent\" defined. \r\n \r\n15. \"Coercion\" defined. \r\n16. \"Undue influence\" defined. \r\n17. \"Fraud\" defined. \r\n18. \"Misrepresentation\" defined. \r\n19. Voidability of agreements without free consent. \r\n19A.  Power to set aside contract induced by undue influence. \r\n20. Agreement void where both parties are under mistake as to matter of \r\nfact. \r\n21. Effect of mistakes as to law. \r\n22. Contract caused by mistake of one party as to matter of fact. \r\n23. What considerations and objects are lawful and what not. \r\nVoid Agreements \r\n24. Agreements void, if considerations and objects unlawful in part. \r\n25. Agreement without consideration void, unless it is in writing and  \r\nregistered, or is a promise to compensate for something done, or is a \r\npromise to pay a debt barred by limitation law. \r\n26. Agreement in restraint of marriage void. \r\n27. Agreement in restraint of trade void . Saving of agreement not to carry \r\non business of which good- will is sold. \r\n28. Agreements in restraint of legal proceedings void. Saving of contract to \r\nrefer to arbitration dispute that may arise . Suits barred by such \r\ncontracts. Savings of contract s to refer questions that have already \r\narisen. \r\n29. Agreements void for uncertainty. \r\n30. Agreements by way of wager void . Exception in favour of certain prizes  \r\nfor horse-racing. Section 294A of the Pakistan Penal Code not affected. \r\n30A.  Agreements collateral to wagering agreements void. \r\n30B.  No suit for recovery of money, commission etc., in respect of void  \r\nagreements. \r\n30C. Payment by guardian, executor, etc., in respect of void agreements not \r\nto be allowed credit \r\n \r\nCHAPTER III \r\nOF CONTINGENT CONTRACTS \r\n31. \"Contingent contract\" defined. \r\n32. Enforcement of contracts contingent on an event happening. \r\n33. Enforcement of contracts contingent on an event not happening. \r\n34. When event on which contract is contingent to be deemed impossible, if \r\nit is the future conduct of a living person. \r\n35. When contracts become void which are contingent on happening of  \r\nspecified event within fixed time. \r\nWhen contracts may be enforced which are contingent on specified \r\nevent not happening within fixed time. \r\n36. Agreement contingent on impossible events void. \r\nCHAPTER IV \r\nOF THE PERFORMANCE OF CONTRACTS \r\nContracts which must be performed \r\n \r\n37. Obligation of parties to contracts. \r\n38. Effect of refusal to accept offer of performance. \r\n39. Effect of refusal of party to perform promise wholly. \r\nBy whom Contracts must be performed \r\n40. Person by whom promise is to be performed. \r\n41. Effect of accepting performance from third person. \r\n42. Devolution of joint liabilities. \r\n43. Any one of joint promisors may be compelled to perform. Each promisor  \r\nmay compel contribution. Sharing of loss by default in contribution. \r\n44. Effect of release of one joint promisor.  \r\n45. Devolution of joint rights. \r\nTime and Place for Performance \r\n46. Time for performance of promise where no application is to be made \r\nand no time is specified. \r\n47. Time and place for performance of promise where time is specified an d \r\nno application to be made. \r\n \r\n48. Application for performance on certain day to be at proper time and \r\nplace. \r\n49. Place for performance of promise w here no application to be made and \r\nno place fixed for performance. \r\n50. Performance in manner or at time prescribed or sanctioned by \r\npromisee. \r\nPerformance of Reciprocal Promises \r\n51. Promisor not bound to perform, unless reciprocal promisee ready and  \r\nwilling to perform. \r\n52. Order of performance of reciprocal promises. \r\n53. Liability of party preventing event on which the contract is to take effect. \r\n54. Effect of default as to that promise which should be first performed, in  \r\ncontract consisting of reciprocal promises. \r\n55. Effect of failure to perform at fixed time, in contract in which time is  \r\nessential. \r\nEffect of such failure when time is not essential.  \r\nEffect of acceptance of performance at time other than that agreed upon \r\n56. Agreement to do impossible act. \r\nContract to do act afterwards becoming impossible or unlawful.  \r\nCompensation for loss through non -performance of act known to be \r\nimpossible or unlawful. \r\n57. Reciprocal promise to do things legal, and also other things illegal. \r\n58. Alternative promise, one branch being illegal. \r\nAppropriation of Payments \r\n59. Application of payment, where debt to be discharged is indicated. \r\n60. Application of payment, where debt to be discharged is not indicated. \r\n61. Application of payment where neither party appropriates. \r\nContracts which need not be performed \r\n62. Effect of novation, rescission and alteration of contract. \r\n63. Promisee may dispense with or remit performance of promise. \r\n \r\n64. Consequences of rescission of voidable contract. \r\n65. Obligation of person who has received advantage under void agreement \r\nor contract that becomes void. \r\n66. Mode of communicating or revoking rescission of voidable contract. \r\n67. Effect of neglect of promisee to afford promisor reasonable faci lities for \r\nperformance. \r\nCHAPTER V \r\nOF CERTAIN RELATIONS RESEMBLING \r\nTHOSE CREATED BY CONTRACT \r\n68. Claim for necessaries supplied to person incapable of contracting, or on \r\nhis account. \r\n69. Reimbursement of person paying money due by another in payment of  \r\nwhich he is interested. \r\n70. Obligation of person enjoying benefit of non- gratuitous act. \r\n71. Responsibility of finder of goods. \r\n72. Liability of person to whom money is paid or thing delivered by mistake  \r\nor under coercion. \r\nCHAPTER VI \r\nOF THE CONSEQUENCES OF BREACH OF CONTRACT \r\n73. Compensation for loss or damage caused by breach of contract.  \r\nCompensation for failure to discharge obligation resembling those \r\ncreated by contract. \r\n74. Compensation for breach of contract where penalty stipulated for. \r\n75. Party rightfully rescinding contract entitled to compensation. \r\nCHAPTER VII \r\nSALE OF GOODS \r\n76 to 123. [Repealed]. \r\nCHAPTER VIII \r\nOF INDEMNITY AND GUARANTEE \r\n124. \"Contract of indemnity\" defined. \r\n125. Rights of indemnity- holder when sued. \r\n126. \"Contract of guarantee\", \"surety\", \"principal debtor\" and \"creditor\" \r\n \r\n127. Consideration for guarantee. \r\n128. Surety's liability. \r\n129. \"Continuing guarantee\". \r\n130. Revocation of continuing guarantee. \r\n131. Revocation of continuing guarantee by surety's death. \r\n132. Liability of two pe rsons primarily liable, not affected by arrangement  \r\nbetween them that one shall be surety on other’s default. \r\n133. Discharge of surety by variance in terms of contract. \r\n134. Discharge of surety by release or discharge of principal debtor. \r\n135. Discharge of surety when creditor compounds with, gives time to, or  \r\nagrees not to sue, principal debtor. \r\n136. Surety not discharged when agreement made with third perso n to give  \r\ntime to principal debtor. \r\n137. Creditor's forbearance to sue does not discharge surety. \r\n138. Release of one co-surety does not discharge others. \r\n139. Discharge of suret y by creditor's act or omission impairing surety's \r\neventual remedy. \r\n140. Rights of surety on payment or performance. \r\n141. Surety's right to benefit of creditor's securities. \r\n142. Guarantee obtained by misrepresentation invalid. \r\n143. Guarantee obtained by concealment invalid. \r\n144. Guarantee on contract that creditor shall not act on it until co -surety \r\njoins. \r\n145. Implied promise to indemnify surety. \r\n146. Co-sureties liable to contribute equally. \r\n147. Liability of co-sureties bound in different sums. \r\nCHAPTER  IX \r\nOF BAILMENT \r\n148. \"Bailment\", \"bailor\", and \"bailee\" defined. \r\n149. Delivery to bailee how made. \r\n \r\n150. Bailor’s duty to disclose faults in goods bailed. \r\n151. Care to be taken by bailee. \r\n152. Bailee when not liable for loss, etc., of thing bailed. \r\n153. Termination of bailment by bailee's act inconsistent with conditions. \r\n154. Liability of bailee making unauthorised use of goods bailed. \r\n155. Effect of mixture, with bailor's consent, of his goods with bailee's. \r\n156. Effect of mixture, without bailor's consent, when the goods can be \r\nseparated. \r\n157. Effect of mixture, without bailor's consent, when the goods cannot be  \r\nseparated. \r\n158. Repayment by bailor of necessary expenses. \r\n159. Restoration of goods lent gratuitously. \r\n160. Return of goods bailed on expiration of time or accomplishment of  \r\npurpose. \r\n161. Bailee's responsibility when goods are not duly returned. \r\n162. Termination of gratuitous bailment by death. \r\n163 Bailor entitled to increase or profit from goods bailed. \r\n164. Bailor's responsibility to bailee. \r\n165. Bailment by several joint owners. \r\n166. Bailee not responsible on re-delivery to bailor without title. \r\n167. Right of third person claiming goods bailed. \r\n168. Right of finder of goods; may sue for specific reward offered. \r\n169. When finder of thing commonly on sale may sell it. \r\n170. Bailee's particular lien. \r\n171. General lien of bankers, factors, wharfingers, attorneys and policy - \r\nbrokers. \r\nBailments Of Pledges \r\n172. \"Pledge\", \"Pawnor\" and \"Pawnee\" defined \r\n173. Pawnee's right of retainer \r\n \r\n174. Pawnee not to retain for debt or promise other than that for which goods \r\npledged                \r\nPresumption in case of subsequent advances \r\n175. Pawnee's right as to extraordinary expenses incurred \r\n176. Pawnee’s right where pawnor makes default \r\n177. Defaulting pawnor's right to redeem \r\n178. Pledge by mercantile agent \r\n178A Pledge by person in possession under voidable contract \r\n179. Pledge where pawnor has only a limited interest \r\nSuits by Bailees or Bailors against Wrong-doers \r\n180. Suit by bailor or bailee against wrong-doer. \r\n181. Apportionment of relief or compensation obtained by such suits. \r\nCHAPTER X \r\nAGENCY \r\nAppointment and Authority of Agents \r\n182. \"Agent\" and \"principal\" defined. \r\n183. Who may employ agent. \r\n184. Who may be an agent. \r\n185. Consideration not necessary. \r\n186. Agent's authority may be expressed or implied. \r\n187. Definitions of express and implied authority. \r\n188. Extent of agent's authority. \r\n189. Agent's authority in an emergency. \r\nSub-Agents \r\n190. When agent cannot delegate. \r\n191. \"Sub-agent\" defined. \r\n192. Representation of principal by sub-agent properly appointed  \r\nAgent's responsibility for sub-agent. \r\n \r\nSub-agent's responsibility \r\n193. Agent's responsibility for sub-agent appointed without authority. \r\n194. Relation between principal and person duly appointed by agent to act in \r\nbusiness of agency. \r\n195. Agent's duty in naming such person. \r\nRatification \r\n196. Right of person as to acts done for him without his authori ty. Effect of  \r\nratification \r\n197. Ratification may be expressed or implied \r\n198. Knowledge requisite for valid ratification \r\n199. Effect of ratifying unauthorized act forming part of a transaction \r\n200. Ratification of unauthorized act cannot injure third person \r\nRevocation of Authority \r\n201. Termination of agency \r\n202. Termination of agency where agent has an interest in subject-matter \r\n203. When principal may revoke agent's authority \r\n204. Revocation where authority has been partly exercised \r\n205. Compensation for revocation by principal or renunciation by agent \r\n206. Notice of revocation or renunciation \r\n207. Revocation and renunciation may be expressed or implied \r\n208. When termination of agent's authority takes effect as to agent, and as to \r\nthird persons \r\n209. Agent's duty on termination of agency by principal's death or insanity \r\n210. Termination of sub-agent's authority \r\nAgent's Duty to Principal \r\n211. Agent's duty in conducting principal's business \r\n212. Skill and diligence required from agent \r\n213. Agent's accounts \r\n \r\n214. Agent’s duty to communicate with principal \r\n215. Right of principal when agent deals, on his own account, in busi ness of \r\nagency without principal's consent \r\n216. Principal's right to benefit gained by agent dealing on his own account \r\nin business of agency \r\n217. Agent's right of retainer out of sums received on principal's account \r\n218. Agent's duty to pay sums received for principal \r\n219. When agent's remuneration becomes due \r\n220. Agent not entitled to remuneration for business misconducted \r\n221. Agent's lien on principal's property \r\nPrincipal’s Duty to Agent \r\n222. Agent to be indemnified against consequences of lawful acts \r\n223. Agent to be indemnified against consequences of acts done in good \r\nfaith \r\n224. Non-liability of employer of agent to do a criminal act \r\n225. Compensation to agent for injury caused by principal's neglect \r\nEffect of Agency on Contract with third persons \r\n226. Enforcement and consequences of agent's contracts \r\n227. Principal how far bound, when agent exceeds authority \r\n228. Principal not bound when excess of agent's authority is not separable \r\n229. Consequences of notice given to agent \r\n230. Agent cannot personally enforce, nor be bound by, contracts on behalf \r\nof principal \r\nPresumption of contract to contrary \r\n231. Rights of parties to a contract made by agent not disclosed \r\n232. Performance of contract with agent supposed to be principal \r\n233. Right of person dealing with agent personally liable \r\n234. Consequence of inducing agent or principal  to act on belief that \r\nprincipal or agent will be held exclusively liable \r\n \r\n235. Liability of pretended agent \r\n236. Person falsely contracting as agent not entitled to performance \r\n237. Liability of principal inducing belief that agent's unauthorized acts were \r\nauthorized \r\n238. Effect, on agreement, of misrepresentation or fraud by agent \r\nCHAPTER XI \r\nOF PARTNERSHIP \r\n239-266. Repealed \r\nSCHEDULE.–[Repealed] \r\n \r\nTEXT \r\nTHE CONTRACT ACT, 1872 \r\n1\r\n(IX of 1872) \r\n[25th April, 1872] \r\nPreamble.– WHEREAS it is expedient to define and amend certain parts of the law \r\nrelating to contracts; It is hereby enacted as follows:– \r\nPRELIMINARY \r\n1. Short title.– This Act may be called the 2[***] Contract Act, 1872. \r\nExtent.Commencement.– It extends to \r\n3\r\n[the whole of Pakistan]; and it \r\nshall come into force on the first day of September, 1872. \r\nEnactments repealed \r\n4\r\n[* * *].– Nothing herein contained shall affect \r\nthe provisions of any Statute, Act or  Regulation not hereby expressly \r\nrepealed, nor any usage or custom of trade, nor any incident of any contract, \r\nnot inconsistent with the provisions of this Act. \r\n2. Interpretation-clause.– In this Act the following words and expressions are \r\nused in the following senses, unless a contrary intention appears from the context:– \r\n(a) When one person signifies to another his willingness to do or to abstain \r\nfrom doing anything, with a view to obt aining the assent of that other to \r\n                                                 \r\n1For the Statement of Objects and Reasons for the Bill which was based on a report of Her Majesty‟s Commissioners appointed \r\nto prepare a body of substantive law for India, dated July 6 th, 1866, see Gazette of Indian, 1867, Ext., p. 34; for the Report of \r\nthe select committee, see ibid, Ext, dated 28th March, 1872; for discussions in Council, see ibid, 1867, supplement p. 1064; ibid, \r\n1871, p.313; and ibid, 1872 p.527. \r\nThe Chapter and Sections of the Transfer a Property Act, 1882 (IV of 1882), which relate to contract are, in places in which that \r\nAct is in force, to be taken as part of Act 9 of 1872-see Act IV of 1982, dated 18.02.1882, pages 127-148, s. 4. \r\nThis Act has been declared to be enforced in Baluchistan, see the British Baluchistan Laws, Regulation, 1913 (II of 1913), s. 3. \r\nIt has been applied to Phulera in the Excluded Area of Upper Tanawal to the  extent the Act is applicable in the N.W.F.P, \r\nsubject to certain modifications; and extended to the Excluded Area of Upper Tanawal (N.W.F.P) other the Phulera with effect \r\nfrom such date and subject to such modifications as may be notified, see N.W.F.P (Upp er Tanawal) (Excluded Area) Laws \r\nRegulation, 1950. \r\nThis Act has been extended to the Leased Areas of Baluchistan, see the Leased Areas (Laws) Order, 1950 (G.G.O. 3 of 1950); \r\nand also applied in the Federal Areas of Baluchistan, see Gazette of Indian, 1937, pt. I, p. 1499. \r\nThis Act, as in force in the North-West Frontier Province immediately befoe the commencement of N.W.F.P, Regulation no. II of \r\n1974, has been applied to the Provincially Administered Tribal Areas of Chitral, Dir, Kalam, Swat and Malakand Protected Area, \r\nby N.W.F.P. Regulation No. II of 1974, s.3. \r\n2The word “Indian” Omitted by the Adaptation of Central Acts and Ordinances Order, 1949 (G.G.O. 4); and published in the \r\nGazette of Pakistan (Extraordinary), dated 28.3.1949, pages 223-283, see Article 3 and the Schedule, at entry No 45. \r\n3Substituted for the words “all the Provinces and the Capital of the Federation” by the Central Laws (Status Reform) Ordinance, \r\n1960 (XXI of 1960); and published in the Gazette of Pakistan (Extraordinary), dated 9.6. 1960, pages 725 -845, s. 3 and 2 nd \r\nSchedule (w.e.f. 14th October, 1955), which had been substituted for the words “the whole of British India” by the Adaptation of \r\nCentral Acts and Ordinances Order , 1949 (G.G.O. 4); and published in the Gazette of Pakistan  (Extraordinary), dated \r\n28.3.1949, Pages 223-283, see Article. 3 (2) and 4. \r\n4The words “The enactment mentioned in the schedule hereto are repealed to the extent specified in the third column thereof \r\nbut‟ repealed by the repealing and Amending Act, 1914 (X  of 1914); and published in the Gazette of India, Part IV, dated \r\n21.3.1914, pages 47-59, section 3 and Second Schedule. \r\n \r\nsuch act or abstinence, he is said to make a proposal: \r\n(b) When the person to whom the proposal is made signifies his assent  \r\nthereto, the proposal is said to be accepted. A proposal, when \r\naccepted becomes a promise: \r\n(c) The perso n making the proposal is called the \"promisor\" , and the \r\nperson accepting the proposal is called the \"promisee\": \r\n(d) When, at the desire of the promisor, the promisee or any other person \r\nhas done or abstained from doing, or does or abstains from doing, or \r\npromises to do or to abstain from doing, something, such act or \r\nabstinence or promise is called a consideration for the promise: \r\n(e) Every promise and every set of promises, forming the consideration for  \r\neach other, is an agreement: \r\n(f) Promises which form the consider ation or part of the consideration for  \r\neach other are called reciprocal promises: \r\n(g) An agreement not enforceable by law is said to be void: \r\n(h) An agreement enforceable by law is a contract: \r\n(i) An agreement which is enforceable by law at the option of one or more \r\nof the parties thereto, but not at the option of the other or others, is a \r\nvoidable contract: \r\n(j) A contract which ceases to be enforceable by law becomes void when \r\nit ceases to be enforceable. \r\nCHAPTER I \r\nOF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF \r\nPROPOSALS \r\n3. Communication, acceptance and revocation of  proposals.– The \r\ncommunication of proposals, the acceptance of proposals, and the revocation of \r\nproposals and acceptances, respectively, are deemed to be made  by any act or \r\nomission of the party proposing, acc epting or revoking by which he intends to \r\ncommunicate such proposal, acceptance or revocation, or which has the effect of \r\ncommunicating it. \r\n4. Communication when complete .– The communication of a proposal is \r\ncomplete when it comes to the knowledge of the person to whom it is made.  \r\nThe communication of an acceptance is complete,– \r\nas against the proposer, when it is put in a course of transmission to him, so \r\nas to be out of the power of the acceptor; \r\nas against the acceptor, when it comes to the knowledge of the proposer.  \r\nThe communication of a revocation is complete,– \r\nas against the person who makes it, when it is put into a course of  \r\ntransmission to the person to whom it is made, so as to be out of the power of the \r\nperson who makes it;  \r\nas against the person to whom it is made, when it comes to his knowledge. \r\n \r\nIllustrations \r\n(a) A proposes, by letter, to sell a house to B at a certain price. \r\nThe communication of the proposal is complete when B receives the \r\nletter. \r\n(b) B accepts A's proposal by a letter sent by post.  \r\nThe communication of the acceptance is complete,–  \r\nas against A, when the letter is posted;  \r\nas against B, when the letter is received by A. \r\n(c) A revokes his proposal by telegram.  \r\nThe revocation is complete as against A when the telegram is \r\ndespatched. It is complete as against B when B receives it.  \r\nB revokes his acceptance by telegram. B's revocation is complete as \r\nagainst B when the telegram is dispatched, and as against A when it reaches \r\nhim. \r\n5. Revocation of proposals and acceptances.– A proposal may be revoked at \r\nany time before the communication of its acceptance is complete as against the \r\nproposer, but not afterwards.  \r\nAn acceptance may be revoked at any time before the communication of the \r\nacceptance is complete as against the acceptor, but not afterwards. \r\nIllustrations \r\nA proposes, by a letter sent by post, to sell his house to B. \r\nB accepts the proposal by a letter sent by post. \r\nA may revoke his proposal at any time before or at the moment  when B posts \r\nhis letter of acceptance, but not afterwards.  \r\nB may revoke his acceptance as any time before or at the moment when the \r\nletter communicating it reaches A, but not afterwards. \r\n6. Revocation how made.– A proposal is revoked– \r\n(1) by the communication of notice of revocation by the proposer to the \r\nother party;  \r\n(2) by the la ps of the time prescribed in such proposal for its acceptance, \r\nor, if no time is so prescribed, by the lapse of a reasonable time, \r\nwithout communication of the acceptance;  \r\n(3) by the failure of the acceptor to fulfil a condition precedent to \r\nacceptance; or  \r\n(4) by the death or insanity of the proposer, if the fact of his death or \r\ninsanity comes to the knowledge of the acceptor before acceptance. \r\n7. Acceptance must be absolute .– In order to convert a proposal into a \r\npromise, the acceptance must– \r\n \r\n(1) be absolute and unqualified;  \r\n(2) be expressed in some usual and reasonable manner, unless the \r\nproposal prescribes the manner in which it is to be accepted. If the \r\nproposal prescribes  a manner in which it is to be accepted, and the \r\nacceptance is not made in such  manner, the pro poser may, within a \r\nreasonable time after the acceptance is  communicated to him, insist \r\nthat his proposal shall be accepted in the prescribed manner, and not \r\notherwise; but if he fails to do so, he accepts the acceptance. \r\n8. Acceptance by performing, conditio ns, or  receiving consideration .– \r\nPerformance of the conditions of a proposal, or the acceptance of any consideration \r\nfor a reciprocal promise which may be offered with a proposal,  is an acceptance of \r\nthe proposal. \r\n9. Promises, express and implied.– In so far as the proposal or acceptance of \r\nany promise is made in words, the promise is said to be express. In so far as such \r\nproposal or acceptance is made  otherwise than in words, the promise is said to be \r\nimplied. \r\nCHAPTER II \r\nOF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS \r\n10. What agreements are contracts .– All agreements are contracts if they are \r\nmade by the free consent of parties competent to contract, for a lawful consideration \r\nand with a lawful object, and are not hereby expressly declared to be void.  \r\nNothing herein contained shall affect any law in force in \r\n5\r\n[Pakistan], and not \r\nhereby expressly repealed, by which any contract is required to be made in writing\r\n6\r\n \r\nor in the presence of witnesses, or any law relating to the registration of documents. \r\n11. Who are com petent to contract .– Every person is competent to contract \r\nwho is of the age of majority  according to the law to which he is subject\r\n7\r\n, and who is \r\nof sound mind, and is  not disqualified from contracting by any law to which he is \r\nsubject. \r\n12. What is a sound min d for the purposes of contracting .– A person is said \r\nto be of sound mind for the purpose of making a contract if, at the time when he \r\nmakes it, he is capable of understanding it and of  forming a rational judgment as to \r\nits effect upon his interests.  \r\nA per son who is usually of unsound mind, but occasionally of sound mind, \r\nmay make a contract when he is of sound mind.  \r\nA person who is usually of sound mind, but occasionally of unsound mind, \r\n                                                 \r\n5Substituted for the words “the Provinces and the Capital of the Federation” by the Central Laws (Status Reform) Ordinance, \r\n1960 (XXI of 1960); and published in the Gazette of Pakistan (Extraordinary) dated 9.6.1960, pages 724 -845, S. 3 and 2 nd \r\nSchedule (w.e.f. 14th October, 1955), which had been substituted for the words “the whole of British India” by the Adaptation of \r\nCentral Acts and O rdinances Order , 1949 (G.G.O. 4); and published in the Gazette of Pakistan (Extraordinary), dated \r\n28.3.1949, Pages 223-283, see Articles 3 (2) and 4.  \r\n6See e.g., s.25, infra; the Indian Copyright Act, 1914 ( III of 1914), s. 5, of the First Schedule; the A pprentices Act, 1850 (XIX of \r\n1850), s. 8; the Conveyance of Land Act, 1854 ( XXXI of 1854), ss. 14 and 18; the Carries Act, 1865 ( III of 1865), ss. 6 and 7; \r\nthe Merchant Shipping Act, 1894 (57 and 58 Vict., c. 60) s. 24; the Companies Act, 1913 (VII of 1913), ss. 5, 19, 35 and 88. \r\n7See the Majority Act, 1875 (IX of 1875). \r\n \r\nmay not make a contract when he is of unsound mind. \r\nIllustrations \r\n(a) A patient in a lunatic asylum, who is at intervals of sound mind, may  \r\ncontract during those intervals.  \r\n(b) A sane man, who is delirious from fever or who is so drunk that he \r\ncannot understand the terms of a contract or form a rational judgment as to its effect \r\non his interests, cannot contract whilst such delirium or drunkenness lasts. \r\n13. \"Consent” defined .– Two or more persons are said to consent when they \r\nagree upon the same thing in the same sense. \r\n14. \"Free consent\" defined .– Consent is said to be free when it is n ot caused \r\nby– \r\n(1) coercion, as defined in section 15, or \r\n(2) undue influence, as defined in section 16,or \r\n(3) fraud, as defined in section 17, or \r\n(4) misrepresentation, as defined in section 18, or \r\n(5) mistake, subject to the provisions of sections 20, 21 and 22. \r\nConsent is said to be so caused when it would not have been given but \r\nfor the existence of such coercion, undue influence, fraud, \r\nmisrepresentation or mistake. \r\n15. \"Coercion\" defined.– \"Coercion\" is the committing, or threatening to commit, \r\nany act forbidden  by the  Pakistan Penal Code  (XLV of 1860) 8 or the unlawful \r\ndetaining, or threatening to detain, any property, to the prejudice of any person \r\nwhatever, with the intention of causing any person to enter into an agreement. \r\nExplanation.– It is immaterial whether the Pakistan Penal Code (XLV of 1860)9 is or \r\nis not in force in the place where the coercion is employed. \r\nIllustration \r\nA, on board an English ship on the  high seas, causes B to enter into an \r\nagreement by  an act amounting to  criminal intimidation  under the Pakistan Penal \r\nCode\r\n10\r\n.  \r\nA afterwards sues B for breach of contract at \r\n11\r\n[Karachi].  \r\nA has employed coercion, although his act is not an offence by the law of  \r\n                                                 \r\n8XLV of 1860 \r\n9XLV of 1860 \r\n10XLV of 1860 \r\n11Substituted for the word “Chittagong” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981), and \r\npublished in the Gazette of  Pakistan (Extraordinary) dated. 8.7.1981, pages 345 -475, s. 3 and 2 nd Schedule, at entry No.12, \r\nwhich had been substituted for the word “Calcutta” by the Central Laws (Status Reform) Ordinance, 1960 ( XXI of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary), dated 9.6.1960, pages 725 -845, s. 3 and 2 nd Schedule (with effect from \r\nthe 14th October, 1955). \r\n \r\nEngland, and although section 506 of the Pakistan Penal Code (XLV of 1860) 12 was \r\nnot in force at the time when or place where the act was done. \r\n13\r\n[16. \"Undue influence\" defined .– (1) A contract is said to be induced by \"undue \r\ninfluence\" where the relations subsisting between the parties are such that one of the \r\nparties is in a position to  dominate the will of the other and uses that position to \r\nobtain an unfair advantage over the other. \r\n(2) In particular and without prejudice to the generality of the foregoing \r\nprinciple, a person is deemed to be in a position to dominate the will of another– \r\n(a) where he holds a real or apparent authority over the other , or where he \r\nstands in a fiduciary relation to the other; or \r\n(b) where he makes a contract with a person whose mental capacity is  \r\ntemporarily or permanently affected by reason of age, illness, or mental \r\nor bodily distress. \r\n(3) Where a person who is in a position to dominate the will of another, \r\nenters into a contract with him, and the transaction appears, on the face of it or on  \r\nthe evidence adduced, to be unconscionable, the burden of proving that such  \r\ncontract was not induced by undue influence shall lie upon the person in a position to \r\ndominate the will of the other.  \r\nNothing in this sub -section shall affect the provisions of section 111 of the \r\nEvidence Act, 1872\r\n14\r\n.] \r\nIllustrations \r\n(a) A having advanced money to his son, B, during his minority, upon B's  \r\ncoming of age obtains, by misuse of parental influence, a bond from B for a greater \r\namount than the sum due in respect of the advance. A employs undue influence.  \r\n(b) A, a man enfeebled by disease or age, is induced, by B's influence \r\nover him as his medical attendant, to agree to pay B an unreasonable sum for his  \r\nprofessional services. B employs undue influence. \r\n(c) A, being in debt to B, the money -lender of his village, contracts a fresh \r\nloan on terms which appear to be unconscionable. It lies on B to prove that the \r\ncontract was not induced by undue influence. \r\n(d) A applies to a banker for a loan at a time when there is stringency in \r\nthe money market. The banker declines  to make the loan except at an unusually \r\nhigh rate of interest. A accepts the loan on these terms. This is a transaction in the \r\nordinary course of business, and the contract is not induced by undue influence. \r\n17. \"Fraud\" defined .– \"Fraud\" means and includes an y of the following acts \r\ncommitted by a party to a contract, or with his connivance, or by his agent, with \r\nintent to deceive another party thereto or his agent, or to induce him to enter into the \r\ncontract:– \r\n(1) the suggestion, as a fact, of that which is not true, by one who does not \r\n                                                 \r\n12XLV of 1860 \r\n13Substituted for the original s.16, by the Indian Contract Act Amendment Act, 1899 (VI of 1899), S.2. \r\n14I of 1872 \r\n \r\nbelieve it to be true; \r\n(2) the active concealment of a fact by one having knowledge or belief of \r\nthe fact; \r\n(3) a promise made without any intention of performing it; \r\n(4) any other act fitted to deceive; \r\n(5) any such act or omission as the law specially declares to be fraudulent. \r\nExplanation.– Mere silence as to facts likely to affect the willingness of a person to \r\nenter into a contract is not fraud, unless the circumstances of the case are such that, \r\nregard being had to them, it is the duty of the p erson keeping silence to speak, or \r\nunless his silence is, in itself, equivalent to speech. \r\nIllustrations \r\n(a) A sells, by auction, to B, a horse which A knows to be unsound. A says  \r\nnothing to B about the horse's unsoundness. This is not fraud in A. \r\n(b) B is A's daughter and has just come of age. Here, the relation between \r\nthe parties would make it A's duty to tell B if the horse is unsound. \r\n(c) B says to A - \"If you do not deny it, I shall assume that the horse is \r\nsound.\" A says nothing. Here, A's silence is equivalent to speech.  \r\n(d) A and B, being traders, enter upon a contract. A has private information \r\nof a change in prices which would affect B's willingness to proceed with the contract. \r\nA is not bound to inform B. \r\n18. \"Misrepresentation\" defined.– “Misrepresentation\" means and includes– \r\n(1) the positive assertion, in a manner not warranted by the information of \r\nthe person making it, of that which is not true, though he believes it to \r\nbe true; \r\n(2) any breach of duty which, without an intent to deceive, gains an \r\nadvantage to the person  committing it, or any one claiming under him, \r\nby misleading another to his prejudice or to the prejudice of any one \r\nclaiming under him; \r\n(3) causing, however innocently, a party to an agreement to make a \r\nmistake as  to the substance of the thing which is the su bject of the \r\nagreement. \r\n19. Voidability of agreements without free consent .– When consent to an \r\nagreement is caused by coercion, \r\n15\r\n[***] fraud or misrepresentation, the agreement is \r\na contract viodable at the option of the party whose consent was so caused.  \r\nA party to a contract, whose consent was caused by fraud or \r\nmisrepresentation, may, if he thinks fit, insist that the contract shall be performed, \r\nand that he shall be put in the position in which he would have  been if the \r\nrepresentations made had been true. \r\n                                                 \r\n15The words “undue influence” repealed by the Indian Contract Act Amendment Act, 1899 (VI of 1899) , s.3. \r\n \r\nException.– If such consent was caused by misrepresentation or by silence, \r\nfraudulent within the meaning of section 17, the contract, nevertheless, is not \r\nvoidable, if the party whose consent was so caused had the means of  discovering \r\nthe truth with ordinary diligence. \r\nExplanation.– A fraud or misrepresentation which did not cause the consent  to a \r\ncontract of the party on whom such fraud was practised, or to whom such  \r\nmisrepresentation was made, does not render a contract voidable. \r\nIllustrations \r\n(a) A, intending to deceive B, falsely represents that five hundred maunds \r\nof indigo are made annually at A's factory, and thereby induces B to buy the factory. \r\nThe contract is voidable at the option of B. \r\n(b) A, by a misrepresentation, leads B erroneously to believe that f ive \r\nhundred maunds of indigo are made annually at A's factory. B examines the \r\naccounts of the factory, which show that only four hundred maunds of indigo have  \r\nbeen made. After this B buys the factory. The contract is not voidable on  account of \r\nA's misrepresentation. \r\n(c) A fraudulently informs B that A's estate is free from encumbrance. B  \r\nthereupon buys the estate. The estate is subject to a mortgage. B may either avoid \r\nthe contract, or may insist on its being carried out and the mortgage-debt redeemed. \r\n(d) B, having discovered a vein of ore on the estate of A, adopts means to \r\nconceal, and does conceal, the existence of the ore from A. Through A's ignorance B \r\nis enabled to buy the estate at an under -value. The contract is voidable at the option \r\nof A. \r\n(e) A is entitled to succeed to an estate at the death of B; B dies: C, having \r\nreceived intelligence of B's death, prevents the intelligence reaching A, and  thus \r\ninduces A to sell him his interest in the estate. The sale is voidable at the option of A. \r\n16\r\n[19.A Power to set asi de contract induced by undue influence .– When consent \r\nto an agreement is caused by undue influence, the agreement is a contract voidable \r\nat the option of the party whose consent was so caused.  \r\nAny such contract may be set aside either absolutely or, if th e party who was \r\nentitled to avoid it has received any benefit thereunder, upon such terms and  \r\nconditions as to the Court may seem just. \r\nIllustrations \r\n(a) A's son has forged B's name to a promissory note. B, under threat of  \r\nprosecuting A's son, obtains a bond f rom A for the amount of the forged note. If B \r\nsues on this bond, the Court may set the bond aside. \r\n(b) A, a money -lender, advances Rupees 100 to B, an agriculturist, and, \r\nby undue influence, induces B to execute a bond for Rupees 200 with interest at 6 \r\nper cen t. per month. The Court may set the bond aside, ordering B to repay the \r\nRupees 100 with such interest as may seem just.] \r\n                                                 \r\n16Section 19-A inserted by the Indian Contract Act Amendment Act, 1899 (VI of 1899), s.3. \r\n \r\n20. Agreement void where both parties are under mistake as to matter of \r\nfact.– Where both the parties to an agreement are under a mistake a s to a matter of \r\nfact essential to the agreement, the agreement is void. \r\nExplanation.– An erroneous opinion as to the value of the thing which forms the \r\nsubject-matter of the agreement is not to be deemed a mistake as to a matter of fact. \r\nIllustrations \r\n(a) A agrees to sell to B a specific cargo of goods supposed to be on its \r\nway from England to \r\n17\r\n[Karachi]. It turns out that, before the day of the bargain, the \r\nship conveying the cargo had been cast away and the goods lost. Neither party was \r\naware of the facts. The agreement is void. \r\n(b) A agrees to buy from B a certain horse. It turns out that the horse was \r\ndead at the time of the bargain, though neither party was aware of the fact. The \r\nagreement is void. \r\n(c) A, being entitled to an estate for the life of B, agrees to se ll it to C. B \r\nwas dead at the time of the agreement, but both parties were ignorant of the fact. \r\nThe agreement is void. \r\n21. Effect of mistakes as to law .– A contract is not voidable because it was \r\ncaused by a mistake as to any law in force in \r\n18\r\n[Pakistan]; but a mistake as to a law \r\nnot in force in \r\n19\r\n[Pakistan] has the same effect as a mistake of fact. \r\n20\r\n[*******] \r\nIllustration \r\nA and B make a contract grounded on the erroneous belief that a particular \r\ndebt is barred by the \r\n21\r\n[Pakistan] Law of Limitation: the contract is not voidable. \r\n22\r\n[*******] \r\n22. Contract caused by mistake of one party as to matter of fact .– A contract \r\nis not voidable merely because it was caused by one of the parties to it being under \r\na mistake as to a matter of fact. \r\n                                                 \r\n17Ssubstituted for the words “Bombay” by the Central Laws (Statute Reform) Ordin ance, 1960 (XXI of 1960); and published in \r\nthe Gazette of Pakistan (Extraordinary) dated 9.6.1960, pages 725-845, s.3 and 2nd Schedule (w.e.f. 14.10.1955). \r\n18The original words “British India” have successively been amended for “in any Province” by the Adaptation of Central Acts and \r\nOrdinances Order, 1949 (G.G.O. 4); and published in the Gazette of Pakistan (Extraordinary), dated 28.3.1949, Pages 223 -\r\n283, see Article 3 and the Schedule, at entry No 45, the Federal Laws (Revision and Declaration) Act, 1951(XXVI of 1951); and \r\npublished in the Gazette of Pakistan (Extraordinary), dated 12.5.1951, pages 340 -388, s.3 and Second Schedule, and \r\nsubstituted the words “any Province” occurring twice, by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 9.6.1960, pages 725-845, s.3 and 2nd Schedule (w.e.f. 14.10.1955).  \r\n19Substituted ibid.  \r\n20Second paragraph omitted by the Federal Laws ( Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and published \r\nin the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345-475, s.3 and 2nd Schedule, entry No.12. \r\n21The original words “British India” have successively been amended for “in any Province” by the Adaptation of Central Acts and \r\nOrdinances Order, 1949 (G.G.O. 4); and published in the Gazette of Pakistan (Extraordinary), dated 28.3.1949, Pages 223 -\r\n283, see Article 3 and the Schedule, at entry No 45, the Federal Laws (Revision and Declaration) Act, 1951(XXVI of 1951); and \r\npublished in the Gazette of Pakistan (Extraordinary), dated 12.5.1951, pages 340 -388, s.3 and Second Schedule, and \r\nsubstituted the words “any Province” occurring twice, by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 9.6.1960, pages 725-845, s.3 and 2nd Schedule (w.e.f. 14.10.1955).  \r\n22Second illustration o.s. 21, repealed by the Repealing and Amending Act, 1917 (XXIV of 1917), s.3 and Schedule II.  \r\n \r\n23. What considerations and objects ar e lawful and what not .– The \r\nconsideration or object of an agreement is lawful, unless- it is forbidden by law; or  \r\n is of such a nature that, if permitted, it would defeat the provisions of any law;  \r\nor \r\n is fraudulent; or  \r\n involves or implies injury to the person or property of another; or \r\n the Court regards it as immoral, or opposed to public policy. \r\n In each of these cases, the consideration or object of an agreement is said to \r\nbe unlawful. Every agreement of which the object or consideration is unlawful is void. \r\nIllustrations \r\n(a) A agrees to sell his house to B for 10,000 Rupees. Here B's promise to \r\npay the sum of 10,000 Rupees is the consideration for A's promise to sell the house, \r\nand A's promise to sell the house is the consideration for B's promise to pay  the \r\n10,000 Rupees. These are lawful considerations. \r\n(b) A promises to pay B 1,000 Rupees at the end of six months; if C, who \r\nowes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here \r\nthe promise of each party is the consideration fo r the promise of the other party and \r\nthey are lawful considerations. \r\n(c) A promises, for a certain sum paid to him by B, to make good to B the \r\nvalue of his ship if it is wrecked on a certain voyage. Here A's promise is the \r\nconsideration for B's payment and B's  payment is the consideration for A's  promise \r\nand these are lawful considerations. \r\n(d) A promises to maintain B's child and B's promises to pay A 1,000 \r\nRupees yearly for the purpose. Here the promise of each party is the consideration \r\nfor the promise of the other party. They are lawful considerations. \r\n(e) A, B and C enter into an agreement for the division among them of \r\ngains acquired, or to be acquired, by them by fraud. The agreement is void, as its \r\nobject is unlawful. \r\n(f) A promises to obtain for B an employment in the public service, and B  \r\npromises to pay 1,000 Rupees to A. The agreement is void, as the consideration  for \r\nit is unlawful. \r\n(g) A, being agent for a landed proprietor, agrees for money, without the \r\nknowledge of his principal, to obtain for B a lease of land b elonging to his principal. \r\nThe agreement between A and B is void, as it implies a fraud by concealment by A, \r\non his principal. \r\n(h) A promises B to drop a prosecution which he has instituted against B \r\nfor robbery, and B promises to restore the value of the thin gs taken. The agreement \r\nis void, as its object is unlawful. \r\n(i) A's estate is sold for arrears of revenue under the provisions of an Act \r\nof the Legislature, by which the defaulter is prohibited from purchasing the estate. B, \r\nupon an understanding with A, becom es the purchaser, and agrees to convey the \r\nestate to A upon receiving from him the price which B has paid. The agreement is \r\nvoid, as it renders the transaction, in effect, a purchase by the defaulter, and would \r\n \r\nso defeat the object of the law. \r\n(j) A, who is B's mukhtar, promises to exercise his influence, as such, with \r\nB in favour of C, and C promises to pay 1,000 Rupees to A. The agreement is void, \r\nbecause it is immoral. \r\n(k) A agrees to let her daughter to hire to B for concubinage. The \r\nagreement is void, because it is immoral, though the letting may not be punishable \r\nunder the Pakistan Penal Code.\r\n23\r\n \r\nVoid Agreements \r\n24. Agreements void, if considerations and objects unlawful in part .– If any \r\npart of a single consi deration for one or more objects, or any one or any part of any \r\none of several considerations for a single object, is unlawful, the agreement is void. \r\nIllustration \r\n A promises to superintend, on behalf of B, a legal manufacture of indigo, and  \r\nan illegal traffic in other articles. B promises to pay to A a salary of 10,000 Rupees a \r\nyear. The agreement is void, the object of A's promise and the considerations  for B's \r\npromise being in part unlawful. \r\n25. Agreement without consideration void, unless it is in  writing and \r\nregistered, or is a promise to compensate for something done, or is a promise \r\nto pay a debt barred by limitation law.– An agreement made without consideration \r\nis void, unless– \r\n(1) it is expressed in writing and registered under the law for the time being \r\nin force for the registration of \r\n24\r\n[documents], and is made on account of \r\nnatural love and affection between parties standing in a near relation to \r\neach other; or unless \r\n(2) it is a promise to compensate, wholly or in part, a person who has \r\nalready voluntarily d one something for the promisor, or something \r\nwhich the promisor was legally compellable to do; or unless \r\n(3) it is a promise, made in writing and signed by the person to be charged  \r\ntherewith, or by his agent generally or specially authorized in that \r\nbehalf, to pay wholly or in part a debt of which the creditor might have \r\nenforced payment but for the law for the limitation of suits. \r\nIn any of these cases, such an agreement is a contract. \r\nExplanation 1.– Nothing in this section shall affect the validity, as betwe en the \r\ndonor and donee, of any gift actually made. \r\nExplanation 2.– An agreement to which the consent of the promisor is freely given \r\nis not void merely because the consideration is inadequate; but the inadequacy of \r\nthe consideration may be taken into account by the Court in determining the question \r\nwhether the consent of the promisor was freely given. \r\n                                                 \r\n23XLV of 1860 \r\n24Substituted for the word “assu rance” by the Repealing and Amending Act, 1891 (XII of 1891); and published in the Government \r\nGazette, Punjab and its Dependencies, Part IV, dated 9.4.1891, pages 21-67, s.2 and Second Schedule \r\n \r\nIllustrations \r\n(a) A promises, for no consideration, to give to B Rupees 1,000. This is a \r\nvoid agreement. \r\n(b) A, for natural love and affection, promises to give his s on, B, Rupees \r\n1,000. A puts his promise to B into writing and registers it. This is a contract. \r\n(c) A finds B's purse and gives it to him. B promises to give A Rupees 50. \r\nThis is a contract. \r\n(d) A supports B's infant son. B promises to pay A's expenses in so doing . \r\nThis is a contract. \r\n(e) A owes B Rupees 1,000, but the debt is barred by the Limitation Act. A \r\nsigns a written promise to pay B Rupees 500 on account of the debt. This is a \r\ncontract. \r\n(f) A agrees to sell a  horse worth Rupees 1,000 for Rupees 10. A's \r\nconsent to the agreement was freely given. The agreement is a contract \r\nnotwithstanding the inadequacy of the consideration. \r\n(g) A agrees to sell a horse worth Rupees 1,000 for Rupees 10. A denies \r\nthat his consent to the agreement was freely given. \r\nThe inadequacy of the consideration is a fact which the Court should take into \r\naccount in considering whether or not A's consent was freely given. \r\n26. Agreement in restraint of marriage void .– Every agreement in restrain of \r\nthe marriage of any person, other than a minor, is void. \r\n27. Agreement in restraint of trade void . Saving of agreement not to carry \r\non business of which good -will is sold .– Every agreement by which any one is \r\nrestrained from exercising a lawful profession, trade or business of any kind, is to \r\nthat extent void. \r\nException 1.– One who sells the good -will of a business may agree with the \r\nbuyer to refrain from carrying on a similar business, within specified local  limits, so \r\nlong as the buyer, or any person deriving ti tle to the good -will from him, carries on a \r\nlike business therein:  Provided that such limits appear to the Court reasonable, \r\nregard being had to the nature of the business. \r\n25\r\n[*  * *  * * * * * * * * *   ] \r\n28. Agreements in restraint of legal proceedings void .– Every agreement, by \r\nwhich any party thereto is restricted absolutely from  enforcing his rights under or in \r\nrespect of any contract, by the usual legal proceedings in the ordinary tribunals, or \r\nwhich limits the time within which  he may thus enforce his rig hts, is void to that \r\nextent. \r\nException 1.– Saving of contract to refer to arbitration dispute that may arise.  \r\nThis section shall not render illegal a contract by which two or  more persons \r\n                                                 \r\n25Exception 2 and 3 relating to agreements between partners upo n, or in anticipation of, dissolution of partnership and during \r\ncontinuance of partnership, respectively, repealed by the Partnership Act, 1932 ( IX of 1932), s. 73 and Schedule II. See now \r\nss. 11 (2) and 36 (2) of that Act. \r\n \r\nagree that any dispute which may arise between them in respect of a ny subject or \r\nclass of subjects shall be referred to arbitration, and that only the amount awarded in \r\nsuch arbitration shall be recoverable in respect of the dispute so referred. \r\nSuits barred by such Contracts. \r\n26\r\nWhen such a contract has been made, a suit  may be brought for its specific \r\nperformance, and if a suit, other than for such specific performance, or for the \r\nrecovery of the amount so awarded, is brought by one party to such contract aga inst \r\nany other such party in respect of any subject which they ha ve so agreed to refer, \r\nthe existence of such contract shall be bar to the suit. \r\nException 2.– Saving of contract to refer questions that have already arisen. \r\nNor shall this section render illegal any contract in writing, by which two or \r\nmore persons agree to refer to arbitration any question between them which has \r\nalready arisen, or affect any provision of any law in force for  the time being as to \r\nreferences to arbitration\r\n27\r\n. \r\n29. Agreements void for uncertainty.– Agreements, the meaning of which is not \r\ncertain, or capable of being made certain, are void. \r\nIllustrations \r\n(a) A agrees to sell to B \"a hundred tons of oil\". There is nothing whatever \r\nto show what kind of oil was intended. The agreement is void for uncertainty. \r\n(b) A agrees to sell to B one hundred tons of oil o f a specified description, \r\nknown as an article of commerce. There is no uncertainty here to make the \r\nagreement void. \r\n(c) A, who is a dealer in coconut -oil only, agrees to sell to B \"one hundred \r\ntons of oil\". The nature of A's trade affords an indication of the meaning of the words, \r\nand A has entered into a contract for the sale of one hundred tons of Coconut-oil. \r\n(d) A agrees to sell B \"all the grain in my granary at \r\n28\r\n[Rahim Yar Khan]\". \r\nThere is no uncertainty here to make the agreement void. \r\n(e) A agrees to sell to B \"one thousand mounds of rice at a price to be \r\nfixed by C\". As the price is capable of being made certain, there is no uncertainty \r\nhere to make the agreement void. \r\n(f) A agrees to sell to B \"my white horse for Rupees five hundred or \r\nRupees one thousand\". There is nothing to show which of the two prices was to be \r\ngiven. The agreement is void. \r\n30. Agreements by way of wager void .– Agreements by way of wager are void; \r\nand no suit shall be brought for recovering anything alleged to be own on any wager, \r\n                                                 \r\n26The second clause Exception 1 t o section 28 was repealed by the Specific Relief Act, 1877 (I of 1877). The clause is, \r\nhowever, printed here in italics, because the Contract Act is in force in certain Scheduled Districts to which the Specific R elief \r\nAct does not apply. \r\n27Cf. The Arbitration Act, 1940 (X of 1940) and the Companies Act, 1913 (VII of 1913), s. 152. \r\n28Substituted for the words “Ramnagar” by the Central Laws (Statute Reform) Ordinance, 1960 ( XXI of 1960); and published in \r\nthe Gazette of Pakistan (Extraordinary) dated 9.6.1960, p ages 725 -845, s. 3 and 2 nd Schedule (with effect from the 14 th \r\nOctober, 1955). \r\n \r\nor entrusted to any person to abide the result of any game or other uncertain event \r\non which wager is made. \r\nException in favour of certain prices for horse -racing.– This section shall \r\nnot be deemed to render unlawful a subscription, or contribution, or agreement to \r\nsubscribe or contribute, made or entered into for or toward any plate, prize or sum of \r\nmoney, of the value or amount of five hundred Rupees or upwards, to be awarded to \r\nthe winner or winners of any horse race\r\n29\r\n.  \r\nSection 294 -A of the Pakistan Penal Code not affected. – Nothing in this \r\nsection shall be deemed to legalize any transaction connected  with horse-racing, to \r\nwhich the provisions of section 294-A of the Pakistan Penal Code apply. \r\n30\r\n[30A. Agreements collateral to wagering agreements void .– All agreements \r\nknowingly made to further or assist the entering into, effecting or carrying out, or to \r\nsecure or guarantee the p erformance, of any agreement void under section 30, are \r\nvoid. \r\n30B. No suit for recovery of money, commission etc ., in respect of void \r\nagreements.– No suit or other proceeding shall lie for the recovery of– \r\n(a) any sum of money paid or payable in respect of  any agreement void \r\nunder section 30A, or \r\n(b) any commission, brokerage, fee, or reward in respect of knowingly \r\neffecting or carrying out, or aiding in effecting or carrying out, of any \r\nsuch agreement or of any sum of money otherwise claimed or \r\nclaimable in respect thereof, or \r\n(c) any sum of money knowingly paid or payable on account of any person \r\nby way of commission, brokerage, fee, reward or other claim in respect \r\nof any such agreement. \r\n30C. Payment by guardian, executor, etc ., in respect of void agreements not \r\nto be  allowed credit .– No guardian, executor, administrator, heir or personal \r\nrepresentative of  any minor or deceased person, as the case may be, shall be \r\nentitled to or allowed any credit in his account for or in respect of any payment made \r\nby him on beha lf of such minor or deceased person in respect of any such  \r\nagreement, or any such commission, brokerage, fee, reward or claim as is  referred \r\nto in sections 30A and 30B.] \r\nCHAPTER III \r\nOF CONTINGENT CONTRACTS \r\n31. \"Contingent contract\" defined .– A \"contingent contract\" is a contract to do \r\nor not to do something, if some  event, collateral to such contract, does or does not \r\nhappen. \r\nIllustration \r\n                                                 \r\n29Cf. Gaming Act (8 and 9 Vict., c. 109), s. 18. \r\n30Ss. 30A, 30B, and 30C were inserted by the Contract Act (Amendment) Ordinance, 1960 (XLVII of 1960), s. 2. \r\n \r\nA contracts to pay B Rupees 10,000 if B's house is burnt. This is a contingent \r\ncontract. \r\n32. Enforcement of contracts contingent  on an event happening .– \r\nContingent contracts to do or not to do anything if an uncertain future event happens \r\ncannot be enforced by law unless and until that event has happened. \r\nIf the event becomes impossible, such contracts become void. \r\nIllustrations \r\n(a) A makes a contract with B to buy B's horse if A survives C. This \r\ncontract cannot be enforced by law unless and until C dies in A's lifetime. \r\n(b) A makes a contract with B to sell a horse to B at a specified price, if C, \r\nto whom the horse has been offered, refuse s to buy him. The contract cannot be \r\nenforced by law unless and until C refuses to buy the horse. \r\n(c) A contracts to pay B a sum of money when B marries C. C dies without \r\nbeing married to B. The contract becomes void. \r\n33. Enforcement of contracts contingent on an event not happening .– \r\nContingent contracts to do or not to do anything if an uncertain future event does not \r\nhappen can be enforced when the happening of that event becomes impossible, and \r\nnot before. \r\nIllustration \r\nA agrees to pay B a sum of money if a cert ain ship does not return. The ship \r\nis sunk. The contract can be enforced when the ship sinks. \r\n34. When event on which contract is contingent to be deemed impossible, if \r\nit is the future conduct of a living person .– If the future event on which a contract \r\nis contingent is the way in which a person will act at an unspecified time, the event \r\nshall be considered to become  impossible when such person does anything which \r\nrenders it impossible that he should so act within any definite time, or otherwise than \r\nunder further contingencies. \r\nIllustration \r\nA agrees to pay B a sum of money if B marries C. \r\nC marries D. The marriage of B to C must now be considered impossible,  \r\nalthough it is possible that D may die and that C may afterwards marry B. \r\n35. When contracts become void wh ich are contingent on happening of \r\nspecified event within fixed time.– Contingent contracts to do or not to do anything \r\nif a specified uncertain event happens within a fixed time become void if, at the \r\nexpiration of the time fixed, such event has not happened, or if, before the time fixed, \r\nsuch event becomes impossible. \r\n When contracts may be enforced which are contingent on specified \r\nevent not happening within fixed time .– Contingent contracts to do or not to do \r\nanything if a specified uncertain event does  not happen within a fixed time may be \r\nenforced by law when the time fixed has expired and such event has not happened \r\n \r\nor, before the time fixed  has expired, if it becomes certain that such event will not \r\nhappen. \r\nIllustrations \r\n(a) A promises to pay B a sum of money if a certain ship returns within a \r\nyear. The contract may be enforced if the ship returns within the year, and becomes  \r\nvoid if the ship is burnt within the year. \r\n(b) A promises to pay B a sum of money if a certain ship does not return \r\nwithin a year. The contract may be enforced if the ship does not return within the \r\nyear, or is burnt within the year. \r\n36. Agreement contingent on impossible events void .– Contingent \r\nagreements to do or not to do anything, if an impossible event happens, are void, \r\nwhether the impossibility of the event is known or not to the parties to the agreement \r\nat the time when it is made. \r\nIllustrations \r\n(a) A agrees to pay B 1,000 Rupees if two straight lines should enclose a \r\nspace. The agreement is void. \r\n(b) A agrees to pay B 1,000 Rupees if B will marry A's daughter C. C was \r\ndead at the time of the agreement. The agreement is void. \r\nCHAPTER IV \r\nOF THE PERFORMANCE OF CONTRACTS \r\nContracts which must be performed \r\n37. Obligation of parties to contracts .– The parties to a contract must either \r\nperform, or offer to perform, their respective promises, unless such performance is \r\ndispensed with or excused under the provisions of this Act, or of any other law. \r\nPromises bind the representatives of the promisors in case of the death of  \r\nsuch promisors before performance,  unless a contrary intention appears from  the \r\ncontract. \r\nIllustrations \r\n(a) A promises to deliver goods to B on a certain day on payment of \r\nRupees 1,000. A dies before that day. A's representatives are bound to deliver the \r\ngoods to B, and B is bound to pay the Rupees 1,000 to A's representatives. \r\n(b) A promises to paint a picture for B by a certain day, at a certain price. A \r\ndies before the day. The contract cannot be enforced either by A's representatives or \r\nby B. \r\n38. Effect of refusal to accept offer of performance .– Where a promisor has \r\nmade an offer of performance to the promisee, and  the offer has not been accepted, \r\nthe promisor is not responsible for non - performance, nor does he thereby lose his \r\nrights under the contract. \r\nEvery such offer must fulfil the following conditions:– \r\n \r\n(1) it must be unconditional: \r\n(2) it must be made at a proper time and place, and under such \r\ncircumstances that the person to whom it is made may have a \r\nreasonable opportunity of  ascertaining that the person by whom it is \r\nmade is able and willing ther e and then to do the whole of what he is \r\nbound by his promise to do: \r\n(3) if the offer is an offer to deliver anything to the promisee, the promisee  \r\nmust have a reasonable opportunity of seeing that the thing offered is \r\nthe thing which the promisor is bound by his promise to deliver.  \r\nAn offer to one of several joint promisees has the same legal consequences \r\nas an offer to all of them. \r\nIllustration \r\nA contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 \r\nbales of cotton of a particular quality. In order to make an offer of a performance with \r\nthe effect stated in this section, A must bring the cotton to B's warehouse,  on the \r\nappointed day, under such circumstances that B may have a reasonable opportunity \r\nof satisfying himself that the thing offere d is cotton of the quality contracted for, and \r\nthat there are 100 bales. \r\n39. Effect of refusal of party to perform promise wholly .– When a party to a \r\ncontract has refused to perform, or disabled himself  from performing his promise in \r\nits entirety, the promisee  may put an end to the contract, unless he has signified, by \r\nwords or conduct, his acquiescence in its continuance. \r\nIllustrations \r\n(a) A, a singer, enters into a contract with B, the manager of a theatre, to \r\nsing at his theater two nights in every week during t he next two months, and B  \r\nengages to pay her 100 Rupees for each nights performance. On the sixth night A \r\nwilfully absents herself from the theatre. B is at liberty to put an end to the contract. \r\n(b) A, a singer, enters into a contract with B, the manager of a  theatre, to \r\nsing at his theatre two nights in every week during the next two months, and B  \r\nengages to pay her at the rate of 100 Rupees for each night. On the sixth night A  \r\nwilfully absents herself. With the assent of B, A sings on the seventh night. B  has \r\nsignified his acquiescence in the continuance of the contract, and cannot now put an \r\nend to it, but is entitled to compensation for the damage sustained  by him through \r\nA's failure to sing on the sixth night. \r\nBy whom Contracts must be performed \r\n40. Person by whom promise is to be performed.– If it appears from the nature \r\nof the case that it was the intention of the parties to any contract that any promise \r\ncontained in it should be performed  by the promisor himself, such promise must be \r\nperformed by the promiso r. In other cases, the promisor or his representatives may \r\nemploy a competent person to perform it. \r\nIllustrations \r\n \r\n(a) A promises to pay B a sum of money. A may perform this promise, \r\neither by personally paying the money to B or by causing it to be paid to B by  \r\nanother; and, if A dies before the time appointed for payment, his  representatives \r\nmust perform the promise, or employ some proper person to do so. \r\n(b) A promises to paint a picture for B. A must perform this promise \r\npersonally. \r\n41. Effect of accepting performanc e from third person .– When a promisee \r\naccepts performance of the promise from a third person,  he cannot afterwards \r\nenforce it against the promisor. \r\n42. Devolution of joint liabilities .– When two or more persons have made a \r\njoint promise, then, unless a contrar y intention appears by the contract, all such \r\npersons during their joint lives, and after the death of any of them his representative \r\njointly with the survivor or survivors, and after the death of the last survivor, the \r\nrepresentatives of all jointly, must fulfil the promise. \r\n43. Any one of joint promisors may be compelled to perform .– When two or \r\nmore persons make a joint promise, the promisee may, in the absence of express \r\nagreement to the contrary, compel any \r\n31\r\n[one or more ] of such  joint promisors to \r\nperform the whole of the promise.  \r\nEach promiser may compel contribution. – Each of two or more joint \r\npromisors may compel every other joint promisor to contribute equally with himself to \r\nthe performance of the promise, unless a contrary intention appears from the  \r\ncontract. \r\nSharing of loss by default in contribution. – If any one of two or more joint \r\npromisors makes default in such contribution, the remaining joint promisors must \r\nbear the loss arising from such default in equal shares. \r\nExplanation.– Nothing in this section shall prevent a surety from recovering from his \r\nprincipal, payments made by the surety on behalf of the principal, or entitle the \r\nprincipal to recover anything from the surety on account of  payments made by the \r\nprincipal. \r\nIllustrations \r\n(a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either \r\nA or B or C to pay him 3,000 rupees. \r\n(b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is \r\ncompelled to pay the whole. A is insolvent, but his assets are sufficient to pay one -\r\nhalf of  his debts. C is entitled to receive 500 rupees from A's estate, and 1,250 \r\nrupees from B. \r\n(c) A, B and C are under a joint promise to pay D 3,000 rupees. C is \r\nunable to pay anything, and A is compelled to pay the whole. A is entitled to receive \r\n1,500 rupees from B. \r\n                                                 \r\n31Substituted for the word “one” by the Repealing and Amending Act, 1891 ( XII of 1891); and published in the Government \r\nGazette, Punjab and its Dependencies, Part IV, dated 9.4.1891, pages 21-67, s.2 and Second Schedule. \r\n \r\n(d) A, B and C are under a joint promise to pay D 3,000 rupees, A and B \r\nbeing only sureties for C. C fails to pay. A and B are compelled to pay the whole  \r\nsum. They are entitled to recover it from C. \r\n44. Effect of release of one joint promisor .– Where two or mor e persons have \r\nmade a joint promise, a release of one of  such joint promisors by the promisee does \r\nnot discharge the other joint promisor or joint promisors; neither does it free the joint \r\npromisors so  released from responsibility to the other joint promis or or joint \r\npromisors. \r\n45. Devolution of joint rights .– When a person has made a promise to two or \r\nmore persons jointly, then, unless a contrary intention appears from the contract, the \r\nright to claim  performance rests, as between him and them, with them durin g their \r\njoint lives, and, after the death of any of them, with the representative of such  \r\ndeceased person jointly with the survivor or survivors, and, after the death of  the last \r\nsurvivor, with the representatives of all jointly\r\n32\r\n. \r\nIllustration \r\nA, in consideration of 5,000 Rupees lent to him by B and C, promises B and C \r\njointly to repay them that sum with interest on a day specified. B dies. The  right to \r\nclaim performance rests with B's representative jointly with C during C's life, and \r\nafter the death of C with the representatives of B and C jointly. \r\nTime and Place for Performance \r\n46. Time for performance of promise where no application is to be made \r\nand no time is specified .– Where, by the contract, a promisor is to perform his \r\npromise without application by th e promisee, and no time for performance is \r\nspecified, the engagement must be performed within a reasonable time.  \r\nExplanation.– The question \"what is a reasonable time\" is, in each particular case, a \r\nquestion of fact. \r\n47. Time and place for performance of prom ise where time is specified and \r\nno application to be made .– When promise is to be performed on a certain day, \r\nand the promisor has  undertaken to perform it without application by the promisee, \r\nthe promisor may perform it at any time during the usual hours of business on such \r\nday and at the place at which the promise ought to be performed. \r\nIllustration \r\nA promises to deliver goods at B's warehouse on the first January. On that \r\nday A brings the goods to B's warehouse, but after the usual hour for closing it, a nd \r\nthey are not received. A has not performed his promise. \r\n48. Application for performance on certain day to be at proper time and \r\nplace.– When a promise is to be performed on a certain day, and the promisor has  \r\nnot undertaken to perform it without application  by the promisee, it is the duty of the \r\npromisee to apply for performance at a proper place and within the usual hours of \r\nbusiness. \r\n                                                 \r\n \r\n \r\nExplanation.– The question \"what is a proper time and place\" is, in each  particular \r\ncase, a question of fact. \r\n49. Place for perf ormance of promise w here no application to be made and \r\nno place fixed for performance .– When a promise is to be performed without \r\napplication by the promisee,  and no place is fixed for the performance of it, it is the \r\nduty of the promisor to apply to the p romisee to appoint a reasonable place for the \r\nperformance of the promise, and to perform it at such place. \r\nIllustration \r\nA undertakes to deliver a thousand maunds of jute to B on a fixed day. A must \r\napply to B to appoint a reasonable place for the purpose o f receiving it, and must \r\ndeliver it to him at such place. \r\n50. Performance in manner or at time prescribed or sanctioned by \r\npromisee.– The performance of any promise may be made in any manner, or at any \r\ntime which the promisee prescribes or sanctions. \r\nIllustrations \r\n(a) B owes A 2,000 Rupees. A desires B to pay the amount to A's account \r\nwith C, a banker. B, who also banks with C, orders the amount to be transferred from \r\nhis account to A's credit, and this is done by C. Afterwards, and before A  knows of \r\nthe transfer, C fails. There has been a good payment by B. \r\n(b) A and B are mutually indebted. A and B settle an account by setting off  \r\none item against another, and B pays A the balance found to be due from him  upon \r\nsuch settlement. This amounts to a payment by A and B, res pectively, of the sums \r\nwhich they owed to each other. \r\n(c) A owes B 2,000 Rupees. B accepts some of A's goods in reduction of \r\nthe debt. The delivery of the goods operates as a part payment. \r\n(d) A desires B, who owes him Rupees 100, to send him a note for \r\nRupees 100 by post. The debt is discharged as soon as B puts into the post a letter \r\ncontaining the note duly addressed to A. \r\nPerformance of Reciprocal Promises \r\n51. Promisor not bound to perform, unless reciprocal promisee ready and  \r\nwilling to perform .– When a contract c onsists of reciprocal promises to be \r\nsimultaneously performed, no promisor need perform his promise unless the \r\npromisee is ready and willing to perform his reciprocal promise. \r\nIllustrations \r\n(a) A and B contract that A shall deliver goods to B to be paid for by  B on \r\ndelivery. A need not deliver the goods, unless B is ready and willing to pay for the \r\ngoods on delivery.  \r\nB need not pay for the goods, unless A is ready and willing to deliver them on  \r\npayment. \r\n(b) A and B contract that A shall deliver goods to B at a pri ce to be paid by \r\n \r\ninstallments, the first installment to be paid on delivery. \r\nA need not deliver, unless B is ready and willing to pay the first installment on \r\ndelivery. \r\nB need not pay the first installment, unless A is ready and willing to deliver the \r\ngoods on payment of the first instalment. \r\n52. Order of performance of reciprocal promises .– Where the order in which \r\nreciprocal promises are to be performed is  expressly fixed by the contract, they shall \r\nbe performed in that order; and,  where the order is not expr essly fixed by the \r\ncontract, they shall be performed  in that order which the nature of the transaction \r\nrequires. \r\nIllustrations \r\n(a) A and B contract that A shall build a house for B at a fixed price. A's  \r\npromise to build the house must be performed before B's promise to pay for it. \r\n(b) A and B contract that A shall make over his stock -in-trade to B at a \r\nfixed price, and B promises to give security for the payment of the money. A's  \r\npromise need not be performed until the security is given, for the nature of  the \r\ntransaction requires that A should have security before he delivers up his stock. \r\n53. Liability of party preventing event on which the contract is to take \r\neffect.– When a contract contains reciprocal promises, and one party to the contract \r\nprevents the other from p erforming his promise, the contract  becomes voidable at \r\nthe option of the party so prevented; and he is entitled to compensation \r\n33\r\nfrom the \r\nother party for any loss which he may sustain in consequence of the non -\r\nperformance of the contract. \r\nIllustration \r\nA a nd B contract that B shall execute certain work for A for a thousand \r\nRupees. B is ready and willing to execute the work accordingly, but A prevents him  \r\nfrom doing so. The contract is voidable at the option of B; and, if he elects to rescind \r\nit, he is entit led to recover from A compensation for any loss which he has incurred \r\nby its non-performance. \r\n54. Effect of default as to that promise which should be first performed, in  \r\ncontract consisting of reciprocal promises .– When a contract consists of \r\nreciprocal promi ses, such that one of them cannot be performed, or that its \r\nperformance cannot be claimed till the other has been performed, and the promisor \r\nof the promise last mentioned fails to perform it, such promisor cannot claim the \r\nperformance of the reciprocal  promise, and must make compensation to the other \r\nparty to the contract for  any loss which such other party may sustain by the non -\r\nperformance of the contract. \r\nIllustrations \r\n(a) A hires B's ship to take in and convey, from \r\n34\r\n[Kararchi] to the Mauritius, \r\n                                                 \r\n33See section 73, infra. \r\n34Substituted for the words “Chittagong” by the Federal Laws (Revison and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\n \r\na cargo to be provided by A, B receiving a certain freight for its conveyance. A  does \r\nnot provide any cargo for the ship. A cannot claim the performance of  B's promise, \r\nand must make compensation to B for the loss which B sustains  by the non -\r\nperformance of the contract. \r\n(b) A contracts with B to execute certain builder's work for a fixed price, B  \r\nsupplying the scaffolding and timber necessary for the work. B refuses to  furnish any \r\nscaffolding or timber, and the work cannot be executed. A need  not execute the \r\nwork, and B is bound to make compensation to A for any loss  caused to him by the \r\nnon-performance of the contract. \r\n(c) A contracts with B to deliver to him, at a specified price, certain \r\nmerchandise on board a ship which cannot arrive for a month, and B engages to pay \r\nfor the merchandise within a week from the date of the contract. B does  not pay \r\nwithin the week. A's promise to deliver need not be performed, and B  must make \r\ncompensation. \r\n(d) A promises B to sell him one hundred bales of merchandise, to be \r\ndelivered next day, an d B promises A to pay for them within a month. A does  not \r\ndeliver according to his promise. B's promise to pay need not be performed, and A \r\nmust make compensation. \r\n55. Effect of failure to perform at fixed time, in contract in which time is  \r\nessential.– When a party to a contract promises to do a certain thing at or before a \r\nspecified time, or certain things at or before a specified times, and fails to do  any \r\nsuch thing at or before the specified time, the contract, or so much of it as  has not \r\nbeen performed, be comes voidable at the option of the promisee, if the intention of \r\nthe parties was that time should be of the essence of the contract. \r\nEffect of such failure when time is not essential.– If it was not the intention \r\nof the parties that time should be of the essence of the contract, the contract does \r\nnot become voidable by the failure to do such  thing at or before the specified time; \r\nbut the promisee is entitled to compensation from the promisor for any loss \r\noccasioned to him by such failure. \r\n Effect of accept ance of performance at time other than that agreed \r\nupon.– If, in case of a contract voidable on account of the promisor's failure to  \r\nperform his promise at the time agreed, the promisee accepts performance of such \r\npromise at any time other than that agreed, the promisee cannot claim compensation \r\nfor any loss occasioned by the non -performance of the promise  at the time agreed, \r\nunless, at the time of such acceptance he gives notice to the promisor of his \r\nintention to do so\r\n35\r\n. \r\n56. Agreement to do impossible act .– An agreement to do an act impossible in \r\nitself is void. \r\nContract to do act afterwards becoming impossible or unlawful .– A \r\ncontract to do an act which, after the contract is made, becomes impossible,  or, by \r\nreason of some event which the promissor could not prevent, unlawful, becomes \r\n                                                                                                                                                        \r\nwhich was substituted for “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary) dated 9.6.1960, pages 725-845, s.3 and 2nd Schedule (w.e.f.14.10.1955). \r\n35Compare ss. 62 and 63, infra. \r\n \r\nvoid when the act becomes impossible or unlawful. \r\n Compensation for loss through non -performance of act known to be  \r\nimpossible or unlawful .– Where one person has promised to do something which \r\nhe knew, or, with reasonable diligen ce, might have known, and which the promisee \r\ndid not know to be impossible or unlawful, such promisor must make compensation  \r\nto such promisee for any loss which such promisee sustains through the non - \r\nperformance of the promise. \r\nIllustrations \r\n(a) A agrees with B to discover treasure by magic. The agreement is void. \r\n(b) A and B contract to marry each other. Before the time fixed for the \r\nmarriage, A goes mad. The contract becomes void. \r\n(c) A contracts to marry B, being already married to C, and being \r\nforbidden by the law  to which he is subject to practise polygamy. A must make  \r\ncompensation to B for the loss caused to her by the non-performance of his promise. \r\n(d) A contracts to take in cargo for B at a foreign port. A's Government \r\nafterwards declares war against the country i n which the port is situated. The  \r\ncontract becomes void when war is declared. \r\n(e) A contracts to act at a theatre for six months in consideration of a sum,  \r\npaid in advance by B. On several occasions A is too ill to act. The contract to act on \r\nthose occasions becomes void. \r\n57. Reciprocal promise to do things legal, and also other things illegal .– \r\nWhere persons reciprocally promise, firstly, to do certain things which are legal, and, \r\nsecondly, under specified circumstances, to do certain other things which are illega l, \r\nthe first set of promises is a contract, but the second is a void agreement. \r\nIllustration \r\nA and B agree that A shall sell B a house for 10,000 Rupees but that, if B \r\nuses it as a gambling house, he shall pay A 50,000 rupees for it.  \r\nThe first set of reci procal promises, namely, to sell the house and to pay \r\n10,000 rupees for it, is a contract.  \r\nThe second set is for an unlawful object, namely, that B may use the house as \r\na gambling house, and is a void agreement. \r\n58. Alternative promise, one branch being illeg al.– In the case of an \r\nalternative promise, one branch of which is legal and the other illegal, the legal \r\nbranch alone can be enforced. \r\nIllustration \r\nA and B agree that A shall pay B 1,000 Rupees for which B shall afterwards  \r\ndeliver to A either rice or smuggled opium.  \r\nThis is a valid contract to deliver rice, and a void agreement as to the opium. \r\nAppropriation of Payments \r\n \r\n59. Application of payment, where debt to be discharged is indicated .– \r\nWhere a debtor, owing several distinct debts to one person, makes a pa yment to \r\nhim, either with express intimation, or under circumstances  implying that the \r\npayment is to be applied to the discharge of some particular debt, the payment, if \r\naccepted, must be applied accordingly. \r\nIllustrations \r\n(a) A owes B, among other debts, 1,00 0 Rupees upon a promissory note \r\nwhich falls due on the first June. He owes B no other debt of that amount. On the \r\nfirst June A pays to B 1,000 Rupees. The payment is to be applied to the discharge \r\nof the promissory note. \r\n(b) A owes to B, among other debts the sum of 567 Rupees. B writes to A \r\nand demands payment of this sum. A sends to B 567 Rupees. This payment is to be \r\napplied to the discharge of the debt of which B had demanded payment. \r\n60. Application of payment, where debt to be discharged is not indicated .– \r\nWhere the debtor has omitted to intimate and there are no other circumstances \r\nindicating to which debt the payment is to be applied, the creditor may apply it at his \r\ndiscretion to any lawful debt actually due and  payable to him from the debtor, \r\nwhether its recovery is or is not barred by the law in force for the time being as to the \r\nlimitation of suits. \r\n61. Application of payment where neither party appropriates .– Where neither \r\nparty makes any appropriation the payment shall be applied in discharge of the \r\ndebts in order of time, whether they are or are not barred by the law in force for the \r\ntime being as to the limitation of suits. If the debts are of equal standing, the payment \r\nshall be applied in discharge of each proportionately. \r\nContracts which need not be performed \r\n62. Effect of novation, rescission and alteration of contract .– If the parties to \r\na contract agree to substitute a new contract for it, or to rescind or alter it, the original \r\ncontract need not be performed. \r\nIllustrations \r\n(a) A owes money to B under a contr act. It is agreed between A, B and C \r\nthat B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is \r\nat an end, and a new debt from C to B has been contracted. \r\n(b) A owes B 10,000 Rupees. A enters into an arrangement with B, and \r\ngives B a mortgage of his (A's) estate for 5,000 Rupees, in place of the debt of \r\n10,000 Rupees. This is a new contract and extinguishes the old. \r\n(c) A owes B 1,000 Rupees under a contract. B owes C 1,000 Rupees. B \r\norders A to credit C with 1,000 Rupees in his books,  but C does not assent to the \r\narrangement. B still owes C 1,000 Rupees, and no new contract has been entered \r\ninto. \r\n63. Promisee may dispense with or remit performance of promise .– Every \r\npromisee may dispense with or remit, wholly or in part, the performance of  the \r\n \r\npromise made to him or may extend the time for such  performance\r\n36\r\n, or may accept \r\ninstead of it any satisfaction which he thinks fit. \r\nIllustrations \r\n(a) A promises to paint a picture for B. B afterwards forbids him to do so. A \r\nis no longer bound to perform the promise. \r\n(b) A owes B 5,000 Rupees. A pays to B, and B accepts, in satisfaction of \r\nthe whole debt, 2,000 Rupees paid at the time and place at which the 5,000 Rupees \r\nwere payable. The whole debt is discharged. \r\n(c) A owes B 5,000 Rupees. C pays to B 1,000 Rupees, and B accepts \r\nthem, in satisfaction of his claim on A. This payment is a discharge of the whole \r\nclaim\r\n37\r\n. \r\n(d) A owes B, under a contract, a sum of money, the amount of which has \r\nnot been ascertained. A, without ascertaining the amount, gives to B, and B, in \r\nsatisfaction thereof, accepts, the sum of 2,000 Rupees. This is a discharge of the \r\nwhole debt, whatever may be its amount. \r\n(e) A owes B 2,000 Rupees and is also indebted to other creditors. A \r\nmakes an arrangement with his creditors, including B, to pay them a  \r\n38\r\n[composition] \r\nof eight annas in the Rupees upon their respective demands. Payment to be of 1,000 \r\nRupees is a discharge of B's demand. \r\n64. Consequences of rescission of voidable contract .– When a person at \r\nwhose option a contract is voidable rescinds it, the othe r party thereto need not \r\nperform any promise therein contained in which he is  promisor. The party rescinding \r\na voidable contract shall, if he have received  any benefit thereunder from another \r\nparty to such contract, restore such  benefit, so far as may be, to the person from \r\nwhom it was received\r\n39\r\n. \r\n65. Obligation of person who has received advantage under void agreement \r\nor contract that becomes void .– When an agreement is discovered to be void, or \r\nwhen a contact becomes  void, any person who has received any advan tage under \r\nsuch agreement or  contract is bound to restore it, or to make compensation for it to \r\nthe person from whom he received it. \r\nIllustrations \r\n(a) A pays B 1,000 rupees in consideration of B's promising to marry C, \r\nA's daughter. C is dead at the time of pr omise. The agreement is void, but B must  \r\nrepay A the 1,000 rupees. \r\n(b) A contracts with B to deliver to him 250 maunds of rice before the first \r\nof May. A delivers 130 maunds only before that day, and none after. B retains th e \r\n130 maunds after the first of May. He is bound to pay A for them. \r\n                                                 \r\n36But see s. 135, infra. \r\n37See s. 41, supra. \r\n38Substituted for the word “compensation” by the Repealing and Amending Act 1891 ( XII of 1891) ; and published in the \r\nGovernment Gazette, Punjab and its Dependencies, Part IV, dated 9.4.1891, pages 21-67, s.2 and Second Schedule.  \r\n39See s, 75, infra. \r\n \r\n(c) A, a singer, contracts with B, the manager of a theatre, to sing at his \r\ntheatre for two nights in every week during the next two months, and B engages to  \r\npay her a hundred rupees for each night's performance. On the sixth ni ght, A wilfully \r\nabsents herself from the theatre, and B, in consequence, rescinds the contract . B \r\nmust pay A for the five nights on which she had sung. \r\n(d) A contracts to sing for B at a concert for 1,000 rupees which are paid in \r\nadvance. A is too ill to sing. A is not bound to make compensation to B for the loss of \r\nthe profits which B would have made if A had been able to sing, but must refund to B \r\nthe 1,000 rupees paid in advance. \r\n66. Mode of communicating or revoking rescission of voidable contract .– \r\nThe rescission of a voidable contract may be communicated or revoked in the same \r\nmanner, and subject to the same rules, as apply to the communication or revocation \r\nof a proposal\r\n40\r\n. \r\n67. Effect of neglect of promisee to afford promisor reasonable facilities for \r\nperformance.– If any promisee neglects or refuses to afford the promisor \r\nreasonable facilities for the performance of his promise, the promisor is excused by \r\nsuch neglect or refusal as to any non-performance caused thereby. \r\nIllustration \r\nA contracts with B to repair B's house.  \r\nB neglects or refuses to point out to A the places in which his house requires  \r\nrepair. \r\nA is excused for the non -performance of the contract if it is caused by such  \r\nneglect or refusal. \r\nCHAPTER V \r\nOF CERTAIN RELATIONS RESEMBLING \r\nTHOSE CREATED BY CONTRACT \r\n68. Claim for necessaries supplied to person incapable of contracting, or on \r\nhis account.– If a person, incapable of entering into a contract, or any one whom he \r\nis legally bound to support, is supplied by another person with necessaries  suited to \r\nhis co ndition in life, the person who has furnished such supplies is  entitled to be \r\nreimbursed from the property of such incapable person. \r\nIllustrations \r\n(a) A supplies B, a lunatic, with necessaries suitable to his condition in life. \r\nA is entitled to be reimbursed from B's property. \r\n(b) A supplies the wife and children of B, a lunatic, with necessaries \r\nsuitable to their condition in life. A is entitled to be reimbursed from B's property. \r\n69. Reimbursement of person paying money due by another in payment of \r\nwhich he is interested.– A person who is interested in the payment of money which \r\n                                                 \r\n40See s. 3 and 5, supra. \r\n \r\nanother is  bound by law to pay, and who therefore pays it, is entitled to be \r\nreimbursed by the other. \r\nIllustration \r\nB holds land in \r\n41\r\n[Sind,] on a lease granted by A, the zamindar. The  revenue \r\npayable by A to the Government being in arrear, his lands is  advertised for sale by \r\nthe Government. Under the revenue law, the consequence of such sale will be the \r\nannulment of B's lease.  B, to prevent the sale and the consequent annulment of his \r\nown lease, pays to the Government the sum due from A. A is bound to make good to \r\nB the amount so paid. \r\n70. Obligation of person enjoying benefit of non -gratuitous act .– Where a \r\nperson lawfully does anything for another person, or delivers  anything to him, not \r\nintending to do so gratuitously, and such other person  enjoys the benefit thereof, the \r\nlatter is bound to make compensation to the former in respect of, or to restore, the \r\nthing so done or delivered. \r\nIllustrations \r\n(a) A, a tradesman, leaves goods at B's house by mistake . B treats the \r\ngoods as his own. He is bound to pay A for them. \r\n(b) A saves B's property from fire. A is not entitled to compensation from B, \r\nif the circumstances show that he intended to act gratuitously. \r\n71. Responsibility of finder of goods .– A person who finds  goods belonging to \r\nanother and takes them into his  custody, is subject to the same responsibility as a \r\nbailee. \r\n72. Liability of person to whom money is paid or thing delivered by mistake \r\nor under coercion.– A person to whom money has been paid or any thing de livered \r\nby mistake or under coercion, must repay or return it. \r\nIllustrations \r\n(a) A and B jointly owe 100 rupees to C. A alone pays the amount to  C, \r\nand B, not knowing this fact, pays 100 rupees over again to C. C is  bound to repay \r\nthe amount to B. \r\n(b) A railway co mpany refuses to deliver up certain goods to the  \r\nconsignee, except upon the payment of an illegal charge for carriage. The consignee \r\npays the sum charged in order to obtain the goods. He is entitled to recover so much \r\nof the charge as was illegally excessive. \r\nCHAPTER VI \r\nOF THE CONSEQUENCES OF BREACH OF CONTRACT \r\n73. Compensation for loss or damage caused by breach of contract .– When \r\n                                                 \r\n41Substituted for the words for “East Pakistan” by the Federal Laws (Revison and Declaration) Ordinance, 1981 ( XXVII of \r\n1981); and published in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2nd Schedule, at entry \r\nNo.12, which was substituted for “East Bangal” by A.O., 1961, Art.2 w.e.f 23.3.1956, which was substituted for the word \r\n“Bangal” by the Central Laws (Statute Reform) Ordinance, 1960 ( XXI of 1960); and published in the Gazette of Pakistan  \r\n(Extraordinary) dated 9.6.1960, pages 725-845, s.3, 2nd Schedule (w.e.f. 14.10.1955). \r\n \r\na contract has been broken, the party who suffers by such breach is  entitled to \r\nreceive, from the party who has broken the contract , compensation for any loss or \r\ndamage caused to him thereby, which naturally arose in the usual course of things \r\nfrom such breach, or which the parties knew, when they made the contract, to be \r\nlikely to result from the breach of it.  \r\nSuch compensation is n ot to be given for any remote and indirect loss or \r\ndamage sustained by reason of the breach. \r\n Compensation for failure to discharge obligation resembling those \r\ncreated by contract.– When an obligation resembling those created by contract has \r\nbeen incurred  and has not been discharged, any person injured by the failure to \r\ndischarge it is entitled to receive the same compensation from the party in default, as \r\nif such person had contracted to discharge it and had broken his contract. \r\nExplanation.– In estimating the loss or damage arising from a breach of  contract, \r\nthe means which existed of remedying the inconvenience caused by the non -\r\nperformance of the contract must be taken into account. \r\nIllustrations \r\n(a) A contracts to sell and deliver 50 maunds of saltpetre to B, at a certain \r\nprice to be paid on delivery. A breaks his promise. B is entitled to receive  from A, by \r\nway of compensation, the sum, if any, by which the contract price  falls short of the \r\nprice for which B might have obtained 50 maunds of  saltpetre of lik e quality at the \r\ntime when the saltpetre ought to have been delivered. \r\n(b) A hires B's ship to go to \r\n42\r\n[Karachi,] and there take on board, on the first \r\nof January, a cargo which A is to provide and to bring it to \r\n43\r\n[Chittagong,] the freight \r\nto be paid when earne d. B's ship does not go to \r\n44\r\n[Karachi,] but A has opportunities \r\nof procuring suitable conveyance for the cargo upon terms as  advantageous as \r\nthose on which he had chartered the ship. A avails himself of those opportunities, but \r\nis put to trouble and expense  in doing so. A is  entitled to receive compensation from \r\nB in respect of such trouble and expense. \r\n(c) A contracts to buy of B, at a stated price, 50 maunds of rice, no time \r\nbeing fixed for delivery. A afterwards informs B that he will not accept the rice if \r\ntendered to him. B is entitled to receive from A, by way  of compensation, the \r\namount, if any, by which the contract price exceeds that which B can obtain for the \r\nrice at the time when A informs B that he will not accept it. \r\n(d) A contracts to buy B's ship for 6 0,000 Rupees, but breaks his promise. \r\nA must pay to B, by way of compensation, the excess, if any, of the contract price \r\nover the price which B can obtain for the ship at the time of the breach of the \r\npromise. \r\n(e) A, the owner of a boat, contracts with B to ta ke a cargo of jute to \r\n                                                 \r\n42Substituted for the word “Bombay” by the Central Laws (Statue Reform) Ordinance, 1960 ( XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary), pages 725-845., s. 3 and 2nd Schedule, for (with effect from the 14th October 1955).  \r\n43Substituted ibid, for the word “Calcutta” (with effect from the 14th October 1955). \r\n44Substituted for the word “Bombay” by the Central Laws (Statue Reform) Ordinance, 1960 ( XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary), pages 725-845, s. 3 and 2nd Schedule, (with effect from the 14th October 1955).  \r\n \r\n45\r\n[Mymensingh,] for sale at that place, starting on a specified day. The boat owing to \r\nsome avoidable cause, does not start at the time appointed, where by the arrival of \r\nthe cargo at \r\n46\r\n[Mymensingh,] is delayed beyond the time when it would have arrived if \r\nthe boat had sailed according to the contract. After that date, and before the arrival \r\nof the cargo, the price of jute falls. The measure of  the compensation payable to B \r\nby A is the difference between the price which B could have obtained for the cargo at \r\n47\r\n[Mymensingh,] at the time when it would  have arrived if forwarded in due course, \r\nand its market price at the time when it actually arrived. \r\n(f) A contracts to repair B's house in a certain manner, and receives \r\npayment in advance. A repai rs the house, but not according to contract. B is entitled \r\nto recover from A the cost of making the repairs conform to the contract. \r\n(g) A contracts to let his ship to B for a year, from the first of January, for a \r\ncertain price. Freights rise, and, on the fir st of January, the hire obtainable for  the \r\nship is higher than the contract price. A breaks his promise. He must pay to B, by \r\nway of compensation, a sum equal to the difference between the contract price and \r\nthe price for which B could hire a similar ship for a year on and from the first of \r\nJanuary. \r\n(h) A contracts to supply B with a certain quantity of iron at a fixed price,  \r\nbeing a higher price than that for which A could procure and deliver the iron.  B \r\nwrongfully refuses to receive the iron. B must pay to A,  by way of compensation, the \r\ndifference between the contract price of the iron and the sum for which A could have \r\nobtained and delivered it. \r\n(i) A delivers to B, a common carrier, a machine, to be conveyed, without \r\ndelay, to A's mill informing B that his mill is stopped for want of the machine. B \r\nunreasonably delays the delivery of the machine, and A, in consequence,  losses a \r\nprofitable contract with the Government. A is entitled to receive from  B, by way of \r\ncompensation, the average amount of profit which woul d have  been made by the \r\nworking of the mill during the time that delivery of it was  delayed, but not the loss \r\nsustained through the loss of the Government contract. \r\n(j) A, having contracted with B to supply B with 1,000 tons of iron at 100 \r\nRupees a ton, to be delivered at a stated time, contracts with C for the purchase of  \r\n1,000 tons of iron at 80 Rupees a ton, telling C that he does so for the purpose of  \r\nperforming his contract with B. C fails to perform his contract with A, who  cannot \r\nprocure other iron, and B, in consequence, rescinds the contract. C  must pay to A \r\n20,000 Rupees, being the profit which A would have made by the performance of his \r\ncontract with B. \r\n(k) A contracts with B to make and deliver to B, by a fixed day, for a \r\nspecified price, a certain piece  of machinery. A does not deliver the piece of \r\nmachinery at the time specified, and, in consequence of this, B is obliged to procure  \r\nanother at a higher price than that which he was to have paid to A, and is  prevented \r\nfrom performing a contract which B had  made with a third person  at the time of his \r\ncontract with A (but which had not been then communicated  to A), and is compelled \r\nto make compensation for breach of that contract. A  must pay to B, by way of \r\n                                                 \r\n45Substituted ibid, for the word “Mirzapur” (with effect from the 14th October 1955). \r\n46Substituted ibid, for the word “Mirzapur” (with effect from the 14th October 1955). \r\n47Substituted ibid, for the word “Mirzapur” (with effect from the 14th October 1955). \r\n \r\ncompensation, the difference between the contract pr ice of the piece of machinery \r\nand the sum paid by B for another, but not the sum paid by B to the third person by \r\nway of compensation. \r\n(l) A, a builder, contracts to erect and finish a house by the first of \r\nJanuary, in order that B may give possession of it at  that time to C, to whom B has  \r\ncontracted to let it. A is informed of the contract between B and C. A builds  the \r\nhouse so badly that, before the first of January, if falls down and has to be rebuilt by \r\nB, who, in consequence, losses the rent which he was t o have received from C, and \r\nis obliged to make compensation to C for the breach of  his contract. A must make \r\ncompensation to B for the cost of rebuilding the house, for the rent lost, and for the \r\ncompensation made to C. \r\n(m) A sells certain merchandise to B, wa rranting it to be of a particular \r\nquality, and B, in reliance upon this warranty, sells it to C with a similar warranty. The \r\ngoods prove to be not according to the warranty, and B  becomes liable to pay C a \r\nsum of money by way of compensation. B is entitled to be reimbursed this sum by A. \r\n(n) A contracts to pay a sum of money to B on a day specified. A does not \r\npay the money on that day; B, in consequence of not receiving the money on that \r\nday, is unable to pay his debts, and is totally ruined. A is not liable to make good to B \r\nanything except the principal sum he contracted to pay, together with interest up to \r\nthe day of payment. \r\n(o) A contracts to deliver 50 maunds of saltpetre to B on the first of \r\nJanuary, at a certain price. B afterwards, before the first of Janu ary, contracts to sell \r\nthe saltpetre to C at a price higher than the market price of the first of January. A  \r\nbreaks his promise. In estimating the compensation payable by A to B, the market \r\nprice of the first of January, and not the profit which would have  arisen to B from the \r\nsale to C, is to be taken into account. \r\n(p) A contracts to sell and deliver 500 bales of cotton to B on a fixed day, A \r\nknows nothing of B's mode of conducting his business. A breaks his promise,  and B, \r\nhaving no cotton, is obliged to clos e his mill. A is not responsible to B  for the loss \r\ncaused to B by the closing of the mill. \r\n(q) A contracts to sell and deliver to B, on the first of January, certain cloth  \r\nwhich B intends to manufacture into caps of a particular kind, for which there is no \r\ndemand, except at that season. The cloth is not delivered till after the appointed \r\ntime, and too late to be used that year in making caps. B is entitled to receive from A, \r\nby way of compensation, the difference between the contract price of the cloth and \r\nits market price at the time of delivery, but not the profits which he expected to obtain \r\nby making caps, nor the expenses  which he has been put to in making preparation \r\nfor the manufacture. \r\n(r) A, a ship -owner, contracts with B to convey him from \r\n48\r\n[Karachi] to \r\nSydney in A's ship, sailing on the first of January, and B pays to A, by way of deposit, \r\none-half of his passage-money. The ship does not sail on the first of  January, and B, \r\nafter being, in consequence, detained in \r\n49\r\n[Karachi] for some time, and thereby put to \r\nsome expense, proceeds to Sydney in another vessel,  and, in consequence, arriving \r\n                                                 \r\n48Substituted for the words “Chittagong” by the Federal Laws (Revison and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345-475, s.3 and 2nd Schedule, at entry No.12. \r\n49Substituted ibid. \r\n \r\ntoo late in Sydney, loses a sum of money. A is  liable to repay to B his deposit, with \r\ninterest, and the expense to which he is  put by his detention in  \r\n50\r\n[Karachi] and the \r\nexcess, if any, of the passage-money paid for the second ship over that agreed upon \r\nfor the first, but not the sum of money which B lost by arriving in Sydney too late. \r\n74. \r\n51\r\n[Compensation for breach of contract where penalty stipulated for .–\r\nWhen a contract has been broken, if a sum is named in the contract as the amount \r\nto be paid in case of such breach, or if the contract contains any other stipulation by \r\nway of penalty, the party complaining of the breach is entitled,  whether or not actual \r\ndamage or loss is pr oved to have been caused thereby, to receive from the party \r\nwho has broken the contract reasonable compensation not exceeding the amount so \r\nnamed or, as the case may be, the penalty stipulated for. \r\nExplanation.– A stipulation for increased interest from th e date of default may be \r\nstipulation by way of penalty.] \r\nException.– When any person enters into any bail -bond, recognizance or \r\nother instrument of the same nature, or, under the provisions of any law, or under the \r\norders of the \r\n52\r\n[Federal Government], or of any \r\n53\r\n[Provincial Government] gives any \r\nbond for the performance of any public duty or act in which the public are interested, \r\nhe shall be liable, upon breach of the condition of any such instrument, to pay the \r\nwhole sum mentioned therein. \r\nExplanation.– A person who enters into a contract with Government does not \r\nnecessarily thereby undertake any public duty, or promise to do an act in which the \r\npublic are interested. \r\nIllustrations \r\n(a) A contracts with B to pay B Rupees 1,000, if he fails to pay B Rupees \r\n500 on a given day. A fails pay B Rupees 500 on that day. B is entitled to recover \r\nfrom A  such compensation, not exceeding Rupees 1,000, as the Court considers  \r\nreasonable. \r\n(b) A contracts with B that, if A practices as a surgeon within \r\n54\r\n[Peshawar] \r\nhe will pay B Rupees 5,000. A practices as a surgeon in \r\n55\r\n[Peshawar]. B is entitled to \r\nsuch compensation, not exceeding Rupees 5,000, as the Court considers  \r\nreasonable. \r\n                                                 \r\n50Substituted ibid. \r\n51Substituted for the first para of s.74, by the Indian Contract Act Amendment Act, 1899 (VI of 1899), s. 4(1).  \r\n52Substituted for the words “Central Government” by the Federal Adaptation of Laws Order 1975 ( IV of 1975); and published in \r\nthe Gazette of Pakistan (Extraordinary) dated 1.8.1975, pages 435 -467, see Art. 2 and Table of General Adapt ations, which \r\nhad been substituted for the words “Government of India” by the Government of India (Adaptation of Indian Laws) Order, 1937; \r\nand published in the Gazette of India (Extraordinary), dated 1.4.1937, pages 75 -344, see Article 4 and Table of Gener al \r\nAdaptations. \r\n53Substituted for the words “Local Government” by the Government of Indian (Adaptation of Indian Laws) Order, 1937; and \r\npublished in the Gazette of India (Extraordinary), dated 1.4.1937, pages 75 -344, see Article 4 and Table of General \r\nAdaptations. \r\n54Substituted for the words for “Chittagong” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); \r\nand published in the Gazette of Pakistan (Extraordinary), pages 345-475, dated 8.7.1981. s.3 and 2nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Calcutta” by the by the Central Laws (Statue Reform) Ordinance, 1960 ( XXI of 1960), s. 3 \r\nand 2nd Schedule, (with effect from the 14 th October 1955) ; and published in the Gazette of Pakistan (Extraordinary), pages \r\n725-845.  \r\n55Substituted ibid. \r\n \r\n(c) A gives a recognizance binding him in a penalty of Rupees 500 to \r\nappear in court on a certain day. He for feits his recognizance. He is liable to pay the \r\nwhole penalty. \r\n(d) \r\n56\r\n[A gives B a bond for the repayment of Rupees 1,000 with interest at \r\n12 per cent. at the end of six months, with a stipulation that in case of default, \r\ninterest shall be payable at the rate of  75 per cent. from the date of default. This is a \r\nstipulation by way of penalty, and B is only entitled to recover from  A such \r\ncompensation as the Court considers reasonable. \r\n(e) A, who owes money to B, a money -lender, undertakes to repay him by \r\ndelivering to him 10 maunds of grain on a certain date, and stipulates that, in the \r\nevent of his not delivering the stipulated amount by the stipulated date, he shall be \r\nliable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only \r\nentitled to reasonable compensation in case of breach. \r\n(f) A undertakes to repay B a loan of Rupees 1,000 by five equal monthly \r\ninstalments with a stipulation that, in default of payment of any installment, the whole \r\nshall become due. This stipulation is not by way of penalty , and the contract may be \r\nenforced according to its terms. \r\n(g) A borrows Rupees 100 from B and gives him a bond for Rupees 200 \r\npayable by five yearly instalments of Rupees 40, with a stipulation that, in default of \r\npayment of any installment, the whole shall b ecome due. This is a stipulation by way \r\nof penalty.] \r\n75. Party rightfully rescinding contract entitled to compensation .– A person \r\nwho rightly rescinds a contract is entitled to compensation for  any damage which he \r\nhas sustained through the non-fulfilment of the contract. \r\nIllustration \r\nA, a singer, contract with B, the manager of a theatre, to sing at his theatre for  \r\ntwo nights in every week during the next two months, and B engages to pay her 100 \r\nRupees for each night's performance. On the sixth night, A wilfull y absents herself \r\nfrom the theatre, and B, in consequence, rescinds the contract. B is entitled to claim \r\ncompensation for the damage which he has sustained  through the non -fulfilment of \r\nthe contract. \r\nCHAPTER VII \r\n57\r\n[SALE OF GOODS] \r\nCHAPTER VIII \r\nOF INDEMNITY AND GUARANTEE \r\n124. \"Contract of indemnity\" defined .– A contract by which one party promises \r\nto save the other from loss  caused to him by the conduct of the promisor himself, or \r\nby the conduct of any other person, is called a \"contract of indemnity\". \r\nIllustration \r\n                                                 \r\n56Inserted by the Indian Contract Act Amendment Act, 1899 (VI of 1899), s.4(2). \r\n57Repealed by the Sale of Goods Act, 1930 (III of 1930), s.65. \r\n \r\nA contracts to indemnify B against the consequences of an y proceedings \r\nwhich C may take against B in respect of a certain sum of 200 Rupees. This is a \r\ncontract of indemnity. \r\n125. Rights of indemnity -holder when sued .– The promisee in a contract of \r\nindemnity, acting within the scope of his  authority, is entitled to recover from the \r\npromisor– \r\n(1) all damages which he may be compelled to pay in any suit in respect of \r\nany matter to which the promise to indemnify applies; \r\n(2) all costs which he may be compelled to pay in any such suit if, in \r\nbringing or defending it, he did not contravene the orders of the \r\npromisor, and acted as it would have been prudent for him to act in the \r\nabsence of any contract of  indemnity, or if the promisor authorized him \r\nto bring or defend the suit; \r\n(3) all sums which he may have paid under the terms of any compromise \r\nof any such suit, if the compromise was not contrary to the orders of \r\nthe promisor, and was one which it would have been prudent for the \r\npromisee to make in the absence of any contrac t of indemnity, or if the \r\npromisor authorized him to compromise the suit. \r\n126. \"Contract of guarantee\", \"surety\", \"principal debtor\" and \"creditor\" .– A \r\n\"contract of guarantee\" is a contract to perform the promise, or discharge the liability, \r\nof a third person in case of his default. The person who gives the guarantee is called \r\nthe \"surety\": the person in respect of whose  default the guarantee is given is called \r\nthe \"principal debtor\", and the person  to whom the guarantee is given is called the \r\n\"creditor\". A guarantee may be either oral or written. \r\n127. Consideration for guarantee.– Anything done, or any promise made, for the \r\nbenefit of the principal debtor may be a sufficient consideration to the surety for \r\ngiving the guarantee. \r\nIllustrations \r\n(a) B requests A to sell and deliver to him goods on credit. A agrees to do \r\nso, provided C will guarantee the payment of the price of the goods. C promises  to \r\nguarantee the payment in consideration of A's promise to deliver the goods. This is a \r\nsufficient consideration for C's promise. \r\n(b) A sells and delivers goods to B. C afterwards requests A to forbear to \r\nsue B for the debt for a year, and promises that if he does so, C will pay for them in \r\ndefaults of payment by B. A agrees to forbear as requested. This is a sufficient  \r\nconsideration for C's promise. \r\n(c) A sells and delivers goods to B. C afterwards, without consideration,  \r\nagrees to pay for them in default of B. The agreement is void. \r\n128. Surety's liability.– The liability of the surety is co -extensive with that of the \r\nprincipal debtor, unless it is otherwise provided by the contract. \r\nIllustration \r\n \r\nA guarantees to B the payment of a bill of exchange by C, the acceptor. The  \r\nbill is dishonoured by C. A is liable not only for the amount of the bill but also  for any \r\ninterest and charges which may have become due on it. \r\n129. \"Continuing guarantee\" .– A guarantee which extends to a series of \r\ntransactions is called a \"continuing guarantee\". \r\nIllustrations \r\n(a) A, in consideration that B will employ C in collecting the rent of B's  \r\nzamindari, promises B to be responsible, to the amount of 5,000 Rupees, for the due \r\ncollection and payment by C of those rents. This is a continuing guarantee. \r\n(b) A guarantees payment to B, a tea -dealer, to the amount of £ 100, for \r\nany tea he may from time to time supply to C. B supplies C with  tea to above the \r\nvalue of £ 100, and C pay B for it. Afterwards B supplies C with tea to the value of £ \r\n200. C fails to pay. The guarantee given by A was a continuing guarantee , and he is \r\naccordingly liable to B to the extent of £ 100. \r\n(c) A guarantees paymen t to B of the price of five sacks of flour to be \r\ndelivered by B to C and to be paid for in a month. B delivers five sacks to C. C  pays \r\nfor them. Afterwards B delivers four sacks to C, which C does not pay for. The \r\nguarantee given by A was not a continuing guarantee, and  accordingly he is not \r\nliable for the price of the four sacks. \r\n130. Revocation of continuing guarantee . A continuing guarantee may at any \r\ntime be revoked by the surety, as to future transactions, by notice to the creditor. \r\nIllustrations \r\n(a) A, in consideration of B's discounting, at A's request, bills of exchange \r\nfor C, guarantees to B, for twelve months, the due payment of all such bills to the \r\nextent of  5,000 Rupees. B discounts bills for C to the extent of 2,000 Rupees. \r\nAfterwards, at the end of thr ee months, A revokes the guarantee. This  revocation \r\ndischarges A from all liability to B for any subsequent discount. But A is liable to B for \r\nthe 2,000 Rupees, on default of C. \r\n(b) A guarantees to B, to the extent of 10,000 Rupees, that C shall pay all \r\nthe bi lls that B shall draw upon him. B draws upon C. C accepts the bill. A gives \r\nnotice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee. \r\n131. Revocation of continuing guarantee by surety's death .– The death of the \r\nsurety operates, in the absence of any contract to the contrary, as a revocation of a \r\ncontinuing guarantee, so far as regards future transactions. \r\n132. Liability of two persons primarily liable, not affected by arrangement \r\nbetween them that one shall be surety on other’s default .– Where two persons \r\ncontract with a third person to undertake a certain liability, and also contract with \r\neach other that one of them shall be liable only on the default of the other, the third \r\nperson not being a party to such contract,  the liability of each of such two persons to \r\nthe third person under the first contract is not affected by the existence of the second \r\ncontract, although such third person may have been aware of its existence. \r\nIllustration \r\n \r\nA and B make a joint and several promissory note to C . A makes it, in fact, as \r\nsurety for B, and C knows this at the time when the note is made. The fact that A, to \r\nthe knowledge of C, made the note as surety for B, is no answers to a suit by C \r\nagainst A upon the note. \r\n133. Discharge of surety by variance in term s of contract .– Any variance, \r\nmade without the surety's consents, in the terms of the contract between the \r\nprincipal \r\n58\r\n[debtor] and the creditor, discharges the surety as to transactions \r\nsubsequent to the variance. \r\nIllustrations \r\n(a) A becomes surety to C for B' s conduct as a manager in C's bank. \r\nAfterwards, B and C contract, without A's consent, that B's salary shall be raised, \r\nand that he shall become liable for one -fourth of the losses on overdrafts. B allows a \r\ncustomer to overdraw, and the bank loses a sum of  money. A is discharged from his \r\nsuretyship by the variance made without his  consent, and is not liable to make good \r\nthis loss. \r\n(b) A guarantees C against the misconduct of B in an office to which B is  \r\nappointed by C, and of which the duties are defined by an Act of the Legislature. By \r\na subsequent Act, the nature of the office is materially altered. Afterwards, B \r\nmisconducts himself. A is discharged by the change from  future liability under his \r\nguarantee, though the misconduct of B is in respect  of a duty not affected by the \r\nlater Act. \r\n(c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon \r\nA's becoming surety to C for B's duly accounting for moneys received by him as  \r\nsuch clerk. Afterwards, without A's knowledge or consent, C and B agree that  B \r\nshould be paid by a commission on the goods sold by him and not by a fixed salary. \r\nA is not liable for subsequent misconduct of B. \r\n(d) A gives to C a continuing guarantee to the extent of 3,000 Rupees for \r\nany oil  supplied by C to B on credit. Afterwards B b ecomes embarrassed, and, \r\nwithout the knowledge of A, B and C contract that C shall continue to supply B with \r\noil for ready money, and that the payments shall be applied to the then existing debts \r\nbetween B and C. A is not liable on his guarantee for any go ods supplied after this \r\nnew arrangement. \r\n(e) C contracts to lend B 5,000 Rupees on the 1st March. A guarantees \r\nrepayment. C pays the 5,000 Rupees to B on the 1st January. A is discharged  from \r\nhis liability, as the contract has been varied inasmuch as C might s ue B  for the \r\nmoney before the 1st of March. \r\n134. Discharge of surety by release or discharge of principal debtor .– The \r\nsurety is discharged by any contract between the creditor and the principal debtor, \r\nby which the principal debtor is released, or by any act o r omission of the creditor, \r\nthe legal consequence of which is the discharge of the principal debtor. \r\nIllustrations \r\n(a) A gives a guarantee to C for goods to be supplied by C to B. C supplies \r\n                                                 \r\n58Inserted by the Repealing and Amending Act, 1917 (XXIV of 1917), dated 27.11.1917, s. 2 and Schedule I. \r\n \r\ngoods to B, and afterwards B becomes embarrassed and contracts with h is creditors \r\n(including C) to assign to them his property in consideration of their releasing him \r\nfrom their demands. Here B is released from his debt by the contract with C, and A is \r\ndischarged from his surety ship. \r\n(b) A contracts with B to grow a crop of in digo on A's land and to deliver it \r\nto B at a fixed rate, and C guarantees A's performance of this contract. B diverts  a \r\nstream of water which is necessary for irrigation of A's land and thereby prevents him \r\nfrom raising the indigo. C is no longer liable on his guarantee. \r\n(c) A contracts with B for a fixed price to build a house for B within a \r\nstipulated time, B supplying the necessary timber. C guarantees A's  performance of \r\nthe contract. B omits to supply the timber. C is discharged from his suretyship. \r\n135. Discharge of surety when creditor compounds with, gives time to, or \r\nagrees not to sue, principal debtor .– A contract between the creditor and the \r\nprincipal debtor, by which the creditor makes a composition with, or promises to give \r\ntime to, or not to sue,  the principal debtor discharges the surety, unless the surety \r\nassents to such contract. \r\n136. Surety not discharged when agreement made with third person to give \r\ntime to principal debtor .– Where a contract to give time to the principal debtor is \r\nmade by the creditor with a third person, and not with the principal debtor, the surety \r\nis not discharged. \r\nIllustration \r\nC, the holder of an overdue bill of exchange drawn by A as surety for B, and  \r\naccepted by B, contracts with M to give time to B. A is not discharged. \r\n137. Creditor's forbearance to sue does not discharge surety .– Mere \r\nforbearance on the part of the creditor to sue the principal debtor or  to enforce any \r\nother remedy against him does not, in the absence of any provision in the guarantee \r\nto the contrary, discharge the surety. \r\nIllustration \r\nB owes to C a debt guaranteed by A. The debt becomes payable. C does not \r\nsue B for year after the debt has become payable. A is not discharged from his  \r\nsuretyship. \r\n138. Release of one co -surety does not discharge others .– Where there are \r\nco-sureties, a release by the creditor of one of them does  not discharge the others; \r\nneither does it free the surety so released from his  responsibility to the other \r\nsureties\r\n59\r\n. \r\n139. Discharge of surety by creditor's act or omission impairing surety's  \r\neventual remedy.– If the creditor does any act which is inconsistent with the rights \r\nof the surety, or omits to do any act which his duty to the surety requires him to do, \r\nand the eventual remedy of the surety himself against the principal debtor is  thereby \r\nimpaired, the surety is discharged. \r\n                                                 \r\n59See s. 44, supra. \r\n \r\nIllustrations \r\n(a) B contracts to build a ship for C for a given sum, to be paid by \r\ninstalments as the work reaches certain stages. A becomes surety to C for B's due  \r\nperformance of the contract. C, without the knowledge of A, prepays to B the last two \r\ninstalments. A is discharged by this prepayment. \r\n(b) C lends money to B on the security of a joint and several promissory \r\nnote made in C's favour by B, and by A as surety for B, together with a bill of sale  of \r\nB's furniture, which gives power to  C to sell the furniture, and apply the proceeds in \r\ndischarge of the note. Subsequently, C sells the furniture, but, owing to his \r\nmisconduct and wilful negligence, only a small price is realized.  A is discharged from \r\nliability on the note. \r\n(c) A puts M as apprentice to B, and gives a guarantee to B for M's fidelity. \r\nB promises on his part that he will, at least once a month, see M make up the cash. \r\nB omits to see this done as promised, and M embezzles. A is not liable to B on his \r\nguarantee. \r\n140. Rights of surety on payment or performance .– Where a guaranteed debt \r\nhas become due, or default of the principal debtor to perform a guaranteed duty has \r\ntaken place, the surety, upon payment or performance of all that he is liable for, is \r\ninvested with all the rights which the creditor had against the principal debtor. \r\n141. Surety's right to benefit of creditor's securities .– A surety is entitled to the \r\nbenefit of every security which the creditor has  against the principal debtor at the \r\ntime when the contract of suretyship is  entered into, whether the surety knows of the \r\nexistence of such security or not; and, if the creditor loses, or, without the consent of \r\nthe surety, parts with such security, the surety is discharged to the extent of the \r\nvalue of the security. \r\nIllustrations \r\n(a) C ad vances to B, his tenant, 2,000 Rupees on the guarantee of A.C \r\nhas also, a further security for the 2,000 Rupees by a mortgage of B's furniture. C \r\ncancels the mortgage. B becomes insolvent, and C sues A on his guarantee. A is  \r\ndischarged from liability to the amount of the value of the furniture. \r\n(b) C, a creditor, whose advance to B is secured by a decree, receives \r\nalso a guarantee for that advance from A. C afterwards takes B's goods in execution \r\nunder the decree, and  then, without the knowledge of A, withdraws the execution. A \r\nis discharged. \r\n(c) A, as surety for B, makes a bond jointly with B to C, to secure a loan \r\nfrom C to B. Afterwards, C obtains from B a further security for the same debt. \r\nSubsequently, C gives up the further security. A is not discharged. \r\n142. Guarantee obtained by misrepresentation invalid .– Any guarantee which \r\nhas been obtained by means of misrepresentation  made by the creditor, or with his \r\nknowledge and assent, concerning a material part of the transaction, is invalid. \r\n143. Guarantee obtained by conce alment invalid .– Any guarantee which the \r\ncreditor has obtained by means of keeping silence as to material circumstances is \r\ninvalid. \r\n \r\nIllustrations \r\n(a) A engages B as clerk to collect money for him. B fails to account for \r\nsome of his receipts, and A in consequen ce calls upon him to furnish security his  \r\nduly accounting. C gives his guarantee for B's duly accounting. A does not acquaint \r\nC with B's previous conduct. B afterwards makes default. The guarantee is invalid. \r\n(b) A guarantees to C payment for iron to be suppli ed by him to B to the \r\namount of 2,000 tons. B and C have privately agreed that B should pay five  Rupees \r\nper ton beyond the market price, such excess to be applied in liquidation of an old \r\ndebt. This agreement is concealed from A. A is not liable as a surety. \r\n144. Guarantee on contract that creditor shall not act on it until co -surety \r\njoins.– Where a person gives a guarantee upon a contract that the creditor shall  not \r\nact upon it until another person has joined in it as co -surety, the guarantee is not \r\nvalid if that other person does not join. \r\n145. Implied promise to indemnify surety .– In every contract of guarantee there \r\nis an implied promise by the principal debtor to indemnify the surety; and the surety \r\nis entitled to recover from the principal debtor whatever sum he  has rightfully paid \r\nunder the guarantee, but no sums which he has paid wrongfully. \r\nIllustrations \r\n(a) B is indebted to C, and A is surety for the debt. C demands payment \r\nfrom A, and on his refusal sues him for the amount. A defends the suit, having \r\nreasonable grounds for doing so, but is compelled to pay the amount of the debt with \r\ncosts. He can recover from B the amount paid by him for costs, as  well as the \r\nprincipal debt. \r\n(b) C lends B a sum of money, and A, at the request of B, accepts a bill of  \r\nexchange drawn b y B upon A to secure the amount. C, the holder of the bill, \r\ndemands payment of it from A, and, on A's refusal to pay, sues him upon the bill. A, \r\nnot having reasonable grounds for so doing, defends the suit, and has  to pay the \r\namount of the bill and costs. He can recover from B the amount of the bill, but not the \r\nsum paid for costs, as there was no real ground for defending the action. \r\n(c) A guarantees to C, to the extent of 2,000 Rupees, payment for rice to \r\nbe supplied by C to B. C supplies to B rice to a less amount than 2,000 Rupees, but \r\nobtains from A payment of the sum of 2,000 Rupees in respect of the rice  supplied. \r\nA cannot recover from B more than the price of the rice actually supplied. \r\n146. Co-sureties liable to contribute equally .– Where two or more persons  are \r\nco-sureties for the same debt or duty, either jointly or severally, and whether under \r\nthe same or different contracts,  and whether with or without the knowledge of each \r\nother, the co -sureties, in the absence of any contract to the contrary, are liable , as \r\nbetween themselves, to pay each an equal share of the whole debt, or of that part of \r\nit which remains unpaid by the principal debtor\r\n60\r\n. \r\nIllustrations \r\n(a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E \r\n                                                 \r\n60See s. 43, supra. \r\n \r\nmakes default in payment. A, B a nd C are liable, as between themselves, to pay \r\n1,000 rupees each. \r\n(b) A, B and C are sureties to D for the sum of 1,000 rupees lent to E, and \r\nthere is a contract between A, B and C that A is to be responsible to the extent of  \r\none-quarter, B to the extent of on e-quarter and C to the extent of one -half. E makes \r\ndefault in payment. As between the sureties, A is liable to pay 250 rupees, B 250 \r\nrupees, and C 500 rupees. \r\n147. Liability of co -sureties bound in different sums .– Co-sureties who are \r\nbound in different sums ar e liable to pay equally as  far as the limits of their \r\nrespective obligations permit. \r\nIllustrations \r\n(a) A, B and C, as sureties for D, enter into three several bonds, each in a \r\ndifferent penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 \r\nrupees, C in that of 40,000 Rupees, conditioned for D's duly accounting to E. D \r\nmakes default to the extent  of 30,000 rupees. A, B and C are each liable to pay \r\n10,000 rupees. \r\n(b) A, B and C, as sureties for D, enter into three several bonds, each in a \r\ndifferent penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 \r\nrupees, C in that of 40,000 rupees, conditioned for D's duly accounting to E.  D \r\nmakes default to the extent of 40,000 rupees. A is liable to pay 10,000 rupees, and B \r\nand C 15,000 rupees each. \r\n(c) A, B and C, as sureties for D, enter into three several bonds, each in a \r\ndifferent penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 \r\nrupees, C in that of 40,000 rupees, conditioned for D's duly accounting to E. D \r\nmakes default to the extent of 70,000 rupees. A, B and C have to pay each the full \r\npenalty of his bond. \r\nCHAPTER IX \r\nOF BAILMENT \r\n148. \"Bailment\", \"bailor\", and \"bailee\" defined .– A \"bailment\" is the delivery of \r\ngoods by one person to another for some  purpose, upon a contract that they shall, \r\nwhen the purpose is accomplished,  be returned or otherwise disposed of according \r\nto the directions of the person  delivering them. The person delivering the goods is \r\ncalled the \"bailor\". The person to whom they are delivered is called the \"bailee\". \r\nExplanation.– If a person already in possession of the goods of another contracts to \r\nhold them as a bailee, he thereby becomes the bailee, and the owner becomes the \r\nbailor, of such goods although they may not have been delivered by way of bailment. \r\n149. Delivery to bailee how made .– The delivery to the bailee may be made by \r\ndoing anything which has the effect of putting the goods in the possession of the \r\nintended bailee or of any person authorized to hold them on his behalf. \r\n150. Bailor’s duty to disclose fa ults in goods bailed .– The bailor is bound to \r\ndisclose to the bailee faults in the goods bailed, of  which the bailor is aware, and \r\nwhich materially interfere with the use of  them, or expose the bailee to extraordinary \r\n \r\nrisks; and if he does not make  such disclosure, he is responsible for damage arising \r\nto the bailee directly from such faults.  \r\nIf the goods are bailed for hire, the bailor is responsible for such damage,  \r\nwhether he was or was not aware of the existence of such faults in the goods bailed. \r\nIllustrations \r\n(a) A lends a horse, which he knows to be vicious, to B. He does not \r\ndisclose the fact that the horse is vicious. The horse runs away. B is thrown and \r\ninjured. A is responsible to B for damage sustained. \r\n(b) A hires a carriage of B. The carriage is unsafe , though B is not aware \r\nof it, and A is injured. B is responsible to A for the injury. \r\n151. Care to be taken by bailee .– In all cases of bailment the bailee is bound to \r\ntake as much care of the goods bailed to him as a man of ordinary prudence would, \r\nunder simi lar circumstances, take of his own goods of the same bulk, quality and \r\nvalue as the goods bailed\r\n61\r\n. \r\n152. Bailee when not liable for loss, etc ., of thing bailed .– The bailee, in the \r\nabsence of any special contract, is not responsible for  the loss, destruction or \r\ndeterioration of the thing bailed, if he has taken the amount of care of it described in \r\nsection 151. \r\n153. Termination of bailment by bailee's act inconsistent with conditions .– A \r\ncontract of bailment is avoidable at the option of the bailor, if the bailee does  any act \r\nwith regard to the goods bailed, inconsistent with the conditions of the bailment. \r\nIllustration \r\nA lets to B, for hire, a horse for his own riding. B drives the horse in his  \r\ncarriage. This is, at the option of A, a termination of the bailment. \r\n154. Liability of bailee making unauthorised use of goods bailed.– If the bailee \r\nmakes any use of the goods bailed, which is not according to the conditions of the \r\nbailment, he is liable to make compensation to the bailor  for any damage arising to \r\nthe goods from or during such use of them. \r\nIllustrations \r\n(a) A lends a horse to B for his own riding only. B allows C, a member of \r\nhis family, to ride the horse. C rides with care, but the horse accidentally falls and  is \r\ninjured. B is liable to make compensation to A for the injury done to the horse. \r\n(b) A hires a horse in \r\n62\r\n[Karachi] from B expressly to march to  \r\n63\r\n[Hyderabad]. A rides  with due care, but marches to \r\n64\r\n[Khairpur] instead. The horse \r\n                                                 \r\n61As to railway contracts, see the Railways Act, 1890 ( IX of 1890), s. 72. As to the liability of common carries, see the Carries \r\nAct, 1865 (III of 1865), s. 8. \r\n62Substituted for the word “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary), pages 725-845. s. 3 and 2nd Schedule (with effect from 14th October 1955). \r\n63Substituted ibid., for “Benares” (with effect from the 14th October, 1955). \r\n64Substituted ibid., for “Cuttack” (with effect from the 14th October, 1955). \r\n \r\naccidentally falls and is injured. A is liable to make compensation to B for the injury \r\nto the horse. \r\n155. Effect of mixture, with bailor's consent, of his goods with bailee's .– If the \r\nbailee, with the consent of the bailor, mixes the goods of the bailor with his own \r\ngoods, the bailor and the bailee shall have an interest, in proportion to their \r\nrespective shares, in the mixture thus produced. \r\n156. Effect of mixture, without bailor's consent, when the goods can be  \r\nseparated.– If the bailee, without the consent of the bailor, mixes the goods of the \r\nbailor with his own goods, and the goods can be separated  or divided, the property \r\nin the goods remains in the parties respectively; but the bailee is  bound to bear the \r\nexpense of separation or division, and any damage arising from the mixture. \r\nIllustration \r\nA bails 100 bales of cotton marked with a particular ma rk to B. B, without A's  \r\nconsent, mixes the 100 bales with other bales of his own, bearing a different mark. A \r\nis entitled to have his 100 bales returned, and B is bound to bear all the expense \r\nincurred in the separation of the bales, and any other incidental damage. \r\n157. Effect of mixture, without bailor's consent, when the goods cannot be  \r\nseparated.– If the bailee, without the consent of the bailor, mixes the goods of the \r\nbailor with his own goods, in such a manner that it is impossible to separate the \r\ngoods bailed from the other goods and deliver them back, the bailor is  entitled to be \r\ncompensated by the bailee for the loss of the goods. \r\nIllustration \r\nA bails a barrel of Cape flour worth Rupees 45 to B. B, without A's consent,  \r\nmixes the flour with country flour of his own, worth only Rupees 25 a barrel. B  must \r\ncompensate A for the loss of his flour. \r\n158. Repayment by bailor of necessary expenses .– Where, by the conditions of \r\nthe bailment, the goods are to be kept or to be carried, or to have work done upon \r\nthem by the  bailee for the bailor, and  the bailee is to receive no remuneration, the \r\nbailor shall repay to the bailee the necessary expenses incurred by him for the \r\npurpose of the bailment. \r\n159. Restoration of goods lent gratuitously .– The lender of a thing for use may \r\nat any time require its return, if the loan  was gratuitous, even though he lent it for a \r\nspecified time or purpose. But, if, on the faith of such loan made for a specified time \r\nor purpose, the borrower has acted in such a manner that the return of the thing lent \r\nbefore the time  agreed upon would cause him loss exceeding the benefit actually \r\nderived by him from the loan, the lender must, if he compels the return, indemnify the \r\nborrower for the amount in which the loss so occasioned exceeds the benefit so \r\nderived. \r\n160. Return of goods bailed on expiration of time or accomplishment of \r\npurpose.– It is the duty of the bailee to return, or deliver according to the bailor's \r\ndirections, the goods bailed, without demand, as soon as the time for which  they \r\nwere bailed has ex pired, or the purpose for which they were bailed has  \r\n \r\naccomplished. \r\n161. Bailee's responsibility when goods are not duly returned .– If, by the \r\ndefault of the bailee, the goods are not returned, delivered or  tendered at the proper \r\ntime, he is responsible to the b ailor for any loss,  destruction or deterioration of the \r\ngoods from that time\r\n65\r\n. \r\n162. Termination of gratuitous bailment by death .– A gratuitous bailment is \r\nterminated by the death either of the bailor or of the bailee. \r\n163. Bailor entitled to increase or profit from goods bailed.– In the absence of \r\nany contract to the contrary, the bailee is bound to deliver to the bailor, or according \r\nto his directions, any increase or profit which may have accrued from the goods \r\nbailed. \r\nIllustration \r\nA leaves a cow in the custody of B to be taken care of. The cow has a calf. B \r\nis bound to deliver the calf as well as the cow to A. \r\n164. Bailor's responsibility to bailee .– The bailor is responsible to the bailee for \r\nany loss which the bailee may  sustain by reason that the bailor was not entit led to \r\nmake the bailment, or to receive back the goods or to give directions, respecting \r\nthem. \r\n165. Bailment by several joint owners .– If several joint owners of goods bail \r\nthem, the bailee may deliver them back to, or according to the directions of, one joint \r\nowner without the consent of all, in the absence of any agreement to the contrary. \r\n166. Bailee not responsible on re -delivery to bailor without title .– If the bailor \r\nhas no title to the goods, and the bailee, in good faith, delivers them back to, or \r\naccording to the directions of, the bailor, the bailee is  not responsible to the owner in \r\nrespect of such delivery\r\n66\r\n. \r\n167. Right of third person claiming goods bailed .– If a person, other than the \r\nbailor, claims goods bailed, he may apply to the Court to stop the delivery of the \r\ngoods to the bailor, and to decide the title to the goods. \r\n168. Right of finder of goods; may sue for specific reward offered .– The finder \r\nof goods has no right to sue the owner for compensation  for trouble and expense \r\nvoluntarily incurred by him to pres erve the goods and to find out the owner; but he \r\nmay retain the goods against the owner until he receives such compensation; and, \r\nwhere the owner has offered a specific  reward for the return of goods lost, the finder \r\nmay sue for such reward, and may retain the goods until he receives it. \r\n169. When finder of thing commonly on sale may sell it .– When a thing which \r\nis commonly the subject of sale is lost, if the owner  cannot with reasonable diligence \r\nbe found, or if he refuses, upon demand, to pay the lawful charge s of the finder, the \r\nfinder may sell it– \r\n                                                 \r\n65As to railway contracts, see the Railways Act, 1890 (IX of 1890), s. 72. \r\n66See s. 117 of the Evidence Act, 1872 (1 of 1872). \r\n \r\n(1) when the thing is in danger of perishing or of losing the greater part of \r\nits value, or, \r\n(2) when the lawful charges  of the finder,  in respect of the  thing found,  \r\namount to two-thirds of its value. \r\n170. Bailee's particular l ien.– Where the bailee has, in accordance with the \r\npurpose of the bailment, rendered any service involving the exercise of labour or skill \r\nin respect of the goods bailed, he has, in the absence of a contract to the contrary, a \r\nright to retain such goods un til he receives due remuneration for the services he has  \r\nrendered in respect of them. \r\nIllustrations \r\n(a) A delivers a rough diamond to B, A jeweller, to be cut and polished, \r\nwhich is accordingly done. B is entitled to retain the stone till he is paid for the \r\nservices he has rendered. \r\n(b) A gives cloth to B, a tailor, to make into a coat. B promises A to deliver \r\nthe coat as soon as it is finished, and to give a three months' credit for the price. B  is \r\nnot entitled to retain the coat until he is paid. \r\n171. General lien of bankers, factors, wharfingers, attorneys and policy - \r\nbrokers.– Bankers, factors, wharfingers, advocate of a High  Court and  policy-\r\nbrokers may, in the absence of a contract to the contrary, retain, as a security for a \r\ngeneral balance of account, any goods b ailed to them; but no  other persons have a \r\nright to retain, as a security for such balance, goods  bailed to them, unless there is \r\nan express contract to that effect\r\n67\r\n. \r\nBailments Of Pledges \r\n172. \"Pledge\", \"pawnor\" and \"pawnee\" defined .– The bailment of goods as \r\nsecurity for payment of a debt or performance of a promise is called \"pledge\". The \r\nbailor is in this case called the \"pawnor\". The bailee is called the \"pawnee\". \r\n173. Pawnee's right of retainer.– The pawnee may retain the goods pledged, not \r\nonly for payment of the debt or the performance of the promise, but for the interest of \r\nthe debt, and all necessary expenses incurred by him in respect of the possession or \r\nfor the preservation of the goods pledged. \r\n174. Pawnee not to retain for debt or promise other than that for which goods \r\npledged.– Presumption in case of subsequent advances.– The pawnee shall not, \r\nin the absence of a contract to that effect retain the goods pledged for any debt or \r\npromise other than the debt or promise for  which they are pledged; but such \r\ncontract, in the absence of anything to the contrary, shall be presumed in regard to \r\nsubsequent advances made by the pawnee. \r\n175. Pawnee's right as to extraordinary expenses incurred .– The pawnee is \r\nentitled to receive from the pawnor extraordinary expenses incurred by him for the \r\npreservation of the goods pledged. \r\n                                                 \r\n67As to lien of an agent, see s. 221, infra. As to lien of Railway Administration, see the Railways Act, 1890 (IX of 1890), s. 55. \r\n \r\n176. Pawnee’s right where pawnor makes default.– If the pawnor makes default \r\nin payment of the debt, or performance, at the stipulated time of the promise, in \r\nrespect of which the goods were pledged, the pawnee may bring a suit against the \r\npawnor upon the debt or promise, and retain the goods pledged as a collateral \r\nsecurity; or he may sell the thing pledged, on giving the pawnor reasonable notice of \r\nthe sale. \r\nIf the proceeds of such sale are less than the amount  due in respect of the \r\ndebt or promise, the pawnor is still liable to pay the balance. If the proceeds of the \r\nsale are greater than the amount so due, the pawnee shall pay over the surplus to \r\nthe pawnor. \r\n177. Defaulting pawnor's right to redeem.– If a time is stipulated for the payment \r\nof the debt, or performance of the promise, for which the pledge is made, and the \r\npawnor makes default in payment of the debt or performance of the promise at the \r\nstipulated time, he may redeem the goods pledged at any subsequent time before \r\nthe actual sale of them\r\n68\r\n; but he must, in that case, pay, in addition, any expenses \r\nwhich have arisen from his default. \r\n178. \r\n69\r\n[Pledge by mercantile agent .– Where a mercantile agent is, with the \r\nconsent of the owner, in possession of goods or the documents of title to goods, any \r\npledge made by him, when acting in the ordinary course of business of a mercantile \r\nagent, shall be as valid as if he were expressly authorized by the owner of the goods \r\nto make the same; provided that the pawnee acts in good f aith and has not at the \r\ntime of the pledge notice that the pawnor has not authority to pledge. \r\nExplanation.– In this section, the expressions „mercantile agent' and  „documents of \r\ntitle' shall have the meanings assigned to them in the Sale of Goods Act, 1930\r\n70\r\n. \r\n178A. Pledge by person in possession under voidable contract .– When the \r\npawnor has obtained possession of the goods p ledged by him under  a contract \r\nvoidable under section 19 or section 19A, but the contract has not been rescinded at \r\nthe time of the pledge, the pawnee acquires a good title to the goods, provided he \r\nacts in good faith and without notice of the panwnor‟s defect title.] \r\n179. Pledge where pawnor has only a limited interest .– Where a person \r\npledges goods in which he has only a limited interest, the pledge is valid to the \r\nextent of that interest. \r\nSuit by Bailors or Bailees against Wrong-doers \r\n180. Suit by bailor or bailee against wrong -doer.– If a third person wrongfully \r\ndeprives the bailee of the use or possession  of the goods bailed, or does them any \r\ninjury, the baliee is entitled to use such  remedies as the owner might have used in \r\nthe like case if no bailment had  been made; and either th e bailor or the bailee may \r\nbring a suit against a third person for such deprivation or injury. \r\n                                                 \r\n68For limitation, see the Limitation Act, 1908 (IX of 1908), Schedule I, No. 145. \r\n69Ss. 178 and 178A were substituted for the original s. 178 by the Indian Contract (Amendment) Act, 1930 (IV of 1930), s. 2. \r\n70III of 1930 \r\n \r\n181. Apportionment of relief or compensation obtained by such suits .– \r\nWhatever is obtained by way of relief or compensation in any such suit shall, as \r\nbetween the bai lor and the bailee, be dealt with according to their respective \r\ninterests. \r\nCHAPTER X \r\nAGENCY \r\nAppointment and Authority of Agents \r\n182. \"Agent\" and \"principal\" defined .– An \"agent\" is a person employed to do \r\nany act for another or to represent another in dealings with third persons. The person \r\nfor whom such act is done, or who is so represented, is called the \"principal\". \r\n183. Who may employ agent .– Any person who is of the age of majority \r\naccording to the law to which he is subject, and who is of sound mind, may employ  \r\nan agent. \r\n184. Who may be an agent .– As between the principal and third persons any \r\nperson may become an agent, but no person who is not of the age of majority and of \r\nsound mind can become an agent, so as to be responsible to his principal according \r\nto the provisions in that behalf herein contained. \r\n185. Consideration not necessary .– No consideration is necessary to create an \r\nagency. \r\n186. Agent's authority may be expressed or implied.– The authority of an agent \r\nmay be expressed or implied\r\n71\r\n. \r\n187. Definitions of express and imp lied authority .– An authority is said to be \r\nexpress when it is given by words spoken or  written. An authority is said to be \r\nimplied when it is to be inferred from the circumstances of the case; and things \r\nspoken or written, or the ordinary  course of dealin g, may be accounted \r\ncircumstances of the case. \r\nIllustration \r\nA owns a shop in \r\n72\r\n[Quetta], living himself in \r\n73\r\n[Karachi], and visiting the shop  \r\noccasionally. The shop is managed by B, and he is in the habit of ordering  goods \r\nfrom C in the name of A for the pur poses of the shop, and of paying for  them out of \r\nA's funds with A's knowledge. B has an implied authority from A  to order goods from \r\nC in the name of A for the purposes of the shop. \r\n                                                 \r\n71See, however, s. 33 of the Registration Act, 1908 ( XVI of 1908). See also the Code of Civil Procedure, 1908 (Act 5 of 1908), \r\nSchedule I, Order III. Rule 4. \r\n72Substituted for the words “Mymentingh” by t he Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); \r\nand published in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345-475, s.3 and 2nd Schedule, at entry No.12, \r\nwhich had been substituted for the word “Serampur” by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary) pages 725 -845, s. 3 and 2 nd Schedule, (with effect from the 14 th October \r\n1955).  \r\n73Substituted for the words for “Dacca” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Calcutta” by the Central Laws  (Statute Reform) Ordinance (XXI of 1960); and published in \r\nthe Gazette of Pakistan (Extraordinary) pages 725-845, s. 3 and 2nd Schedule (w.e.f. 14-10-1955). \r\n \r\n188. Extent of agent's authority .– An agent having an authority to do an act ha s \r\nauthority to do every lawful thing which is necessary in order to do such act. \r\nAn agent having an authority to carry on a business has authority to do every \r\nlawful thing necessary for th e purpose, or usually done in the course of  conducting \r\nsuch business. \r\nIllustrations \r\n(a) A is employed by B, residing in London, to recover at  \r\n74\r\n[Karachi] a debt \r\ndue to B. A may adopt any legal process necessary for the purpose of recovering the \r\ndebt, and may give a valid discharge for the same. \r\n(b) A constitutes B his agent to carr y on his business of a ship -builder. B \r\nmay purchase timber and other materials, and hire workmen, for the purposes of \r\ncarrying on the business. \r\n189. Agent's authority in an emergency .– An agent has authority, in an \r\nemergency, to do all such acts for the purpose of protecting his principal from loss as \r\nwould be done by a person of  ordinary prudence, in his own case, under similar \r\ncircumstances. \r\nIllustrations \r\n(a) An agent for sale may have goods repaired if it be necessary. \r\n(b) A consigns provisions to B at \r\n75\r\n[Lahore], with directions to send them \r\nimmediately to C  at \r\n76\r\n[Rawalpindi] B may sell the provisions at \r\n77\r\n[Rawalpindi], if they \r\nwill not bear the journey to \r\n78\r\n[Rawalpindi] without spoiling. \r\nSub-Agents \r\n190. When agent cannot delegate .– An agent cannot lawfully employ another to \r\nperform acts which he has  expressly or impliedly undertaken to perform personally, \r\nunless by the ordinary custom of trade a sub -agent may, or, from the nature of the \r\nagency, a sub-agent must, be employed. \r\n191. \"Sub-agent\" defined .– A \"sub -agent\" is a person emp loyed by, and acting \r\nunder the control of, the original agent in the business of the agency. \r\n192. Representation of principal by sub -agent properly appointed .– Where a \r\n                                                 \r\n74Substituted for the word “Bombay” by the Central Laws (Statute Reform) Ordinance ( XXI of 1960); a nd published in the \r\nGazette of Pakistan (Extraordinary) pages 725-845, s. 3 and 2nd Schedule (w.e.f. 14-10-1955). \r\n75Substituted for the words “Chittagong” by the Federal Laws (Revision and Declaration) Ordinance, 1981 (XXVII of 1981); and \r\npublished in the G azette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary), pages 725-845, s. 3 and 2nd Schedule. \r\n76Substituted for the word “Dacca” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12 , \r\nwhich was substituted for “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960); and published in the \r\nGazette of Pakistan (Extraordinary) pages 725-845, s. 3 and 2nd Schedule. \r\n77Substituted for  the word “Dacca” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12,  \r\nwhich was substituted for “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary) pages 725-845, s. 3 and 2nd Schedule. \r\n78Substituted ibid. \r\n \r\nsub-agent is properly appointed, the principal is, so far as  regards third persons, \r\nrepresented by the sub-agent, and is bound by and  responsible for his acts, as if he \r\nwere an agent originally appointed by the principal. \r\nAgent's responsibility for sub -agent.– The agent is responsible to the \r\nprincipal for the acts of the sub-agent. \r\nSub-agent's responsibility.– The sub-agent is responsible for his acts to the \r\nagent, but not to the principal, except in case of fraud or wilful wrong. \r\n193. Agent's responsibility for sub-agent appointed without authority.– Where \r\nan agent, without having authority to do so, h as appointed a person to act as a sub -\r\nagent, the agent stands towards such person in the relation of a principal to an \r\nagent, and is responsible for his acts both to the principal and to third persons; the \r\nprincipal is not represented by or responsible for the acts of the person so employed, \r\nnor is that person responsible to the principal. \r\n194. Relation between principal and person duly appointed by agent to act in  \r\nbusiness of agency .– Where an agent, holding an express or implied authority to \r\nname another perso n to act for the principal in the business of the agency, has \r\nnamed another person accordingly, such person is not a sub -agent, but an agent of  \r\nthe principal for such part of the business of the agency as is entrusted to him. \r\nIllustrations \r\n(a) A directs B, his solicitor, to sell his estate by auction, and to employ an \r\nauctioneer for the purpose.– B names C, an auctioneer, to conduct the sale. C is  not \r\na sub-agent, but is A's agent for the conduct of the sale. \r\n(b) A authorises B, a merchant in \r\n79\r\n[Chittagong,] to reco ver the moneys \r\ndue to A from C & Co. B instructs D, a solicitor, to take legal proceedings against C \r\n& Co. for the recovery of the money. D is not a sub-agent, but is solicitor for A. \r\n195. Agent's duty in naming such person .– In selecting such agent for his \r\nprincipal, an agent is bound to exercise the same amount of discretion as a man of \r\nordinary prudence would exercise in his own case; and, if he does this, he is not \r\nresponsible to the principal for the acts or negligence of the agent so selected. \r\nIllustrations \r\n(a) A instructs B, a merchant, to buy a ship for him. B employs a ship \r\nsurveyor of good reputation to choose a ship for A. The surveyor makes the choice  \r\nnegligently and the ship turns out to be unseaworthy and is lost. B is not, but the \r\nsurveyor is, responsible to A. \r\n(b) A consigns goods to B, a merchant, for sale. B in due course, employs \r\nan auctioneer in good credit to sell the goods of A, and allows the auctioneer to \r\nreceive the proceeds of the sale. The auctioneer afterwards becomes insolvent  \r\nwithout having a ccounted for the proceeds. B is not responsible to A for the \r\nproceeds. \r\n                                                 \r\n79Substituted for the word “Calcutta” by the central Laws (Statute Ref orm) Ordinance, 1960 (XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary), pages 725-845, s. 3 and 2nd Schedule, (with effect from 14th October 1955). \r\n \r\nRatification \r\n196. Right of person as to acts done for him without his authority . Effect of \r\nratification.– Where acts are done by one person on behalf of another, but without \r\nhis knowledge or authority, he may elect to ratify or to disown such acts. If he ratify \r\nthem, the same effects will follow as if they had been performed by his authority. \r\n197. Ratification may be expressed or implied .– Ratification may be expressed \r\nor may be implied in the conduct of the person on whose behalf the acts are done. \r\nIllustrations \r\n(a) A, without authority, buys goods for B. Afterwards B sells them to C on  \r\nhis own account; B's conduct implies a ratification of the purchase made for him by \r\nA. \r\n(b) A, without B's authority, len ds B's money to C. Afterwards B accepts  \r\ninterest on the money from C. B's conduct implies a ratification of the loan. \r\n198. Knowledge requisite for valid ratification .– No valid ratification can be \r\nmade by a person whose knowledge of the facts of the case is materially defective. \r\n199. Effect of ratifying unauthorized act forming part of a transaction .– A \r\nperson ratifying any unauthorized act done on his behalf ratifies the whole of the \r\ntransaction of which such act formed a part. \r\n200. Ratification of unauthorized act canno t injure third person .– An act done \r\nby one person on behalf of another, without such other person's authority, which, if \r\ndone with authority, would have the effect of  subjecting a third person to damages, \r\nor of terminating any right or interest of  a third person, cannot, by ratification, be \r\nmade to have such effect. \r\nIllustrations \r\n(a) A, not being authorized thereto by B, demands, on behalf of B, the \r\ndelivery of a chattle, the property of B, from C, who is in possession of it. This \r\ndemand cannot be ratified by B, so as to make C liable for damages for his refusal to \r\ndeliver. \r\n(b) A holds a lease from B, terminable on three months' notice. C, an \r\nunauthorized person, gives notice of termination to A. The notice cannot be ratified \r\nby B, so as to be binding on A. \r\nRevocation of Authority \r\n201. Termination of agency .– An agency is terminated by the principal revoking \r\nhis authority; or by the agent renouncing the business of the agency; or by the \r\nbusiness of the agency being completed; or by either the principal or agent dying or  \r\nbecoming of unsound mind; or by the principal being adjudicated an insolvent under \r\nthe provisions of any Act for the time being in force for the relief of insolvent debtors. \r\n202. Termination of agency where agent has an interest in subject -matter.– \r\nWhere the age nt has himself an interest in the property which forms the subject -\r\nmatter of the agency, the agency cannot, in the absence of an express  contract, be \r\n \r\nterminated to the prejudice of such interest. \r\nIllustrations \r\n(a) A gives authority to B to sell A's land, and t o pay himself, out of the \r\nproceeds, the debts due to him from A. A cannot revoke this authority nor can  it be \r\nterminated by his insanity or death. \r\n(b) A consigns 1,000 bales of cotton to B, who has made advances to him \r\non such cotton, and desires B to sell the  cotton, and to repay himself, out of the \r\nprice, the amount of his own advances. A cannot revoke this authority, nor is  it \r\nterminated by his insanity or death. \r\n203. When principal may revoke agent's authority .– The principal may, save as \r\nis otherwise provided b y the last preceding  section, revoke the authority given to his \r\nagent at any time before the authority has been exercised so as to bind the principal. \r\n204. Revocation where authority has been partly exercised .– The principal \r\ncannot revoke the authority given to  his agent after the authority has been partly \r\nexercised so far as regards such acts and obligations as arise from acts already \r\ndone in the agency. \r\nIllustrations \r\n(a) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay \r\nfor it out of A's mone y remaining in B's hands. B buys 1,000 bales of cotton in his  \r\nown name, so as to make himself personally liable for the price. A cannot revoke B's \r\nauthority so far as regards payment for the cotton. \r\n(b) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay \r\nfor it out of A's money remaining in B's hands. B buys 1,000 bales of cotton in A's  \r\nname and so as not to render himself personally liable for the price. A can revoke B's \r\nauthority to pay for the cotton. \r\n205. Compensation for revocation by princi pal or renunciation by agent .– \r\nWhere there is an express or implied contract that the agency should be continued \r\nfor any period of time, the principal must make compensation to the agent, or the \r\nagent to the principal, as the case may be, for any previous  revocation or \r\nrenunciation of the agency without sufficient cause. \r\n206. Notice of revocation or renunciation .– Reasonable notice must be given of \r\nsuch revocation or renunciation; otherwise the damage thereby resulting to the \r\nprincipal or the agent, as the case may be, must be made good to the one by the \r\nother. \r\n207. Revocation and renunciation may be expressed or implied .– Revocation \r\nand renunciation may be expressed or may be implied in the conduct of the principal \r\nor agent respectively. \r\nIllustration \r\nA empowers B to let A's house. Afterwards A lets it himself. This is an implied \r\nrevocation of B's authority. \r\n \r\n208. When termination of agent's authority takes effect as to agent, and as to \r\nthird persons .– The termination of the authority of an agent does not, so far as \r\nregards the agent, take effect before it becomes known to him, or, so far as regards  \r\nthird persons, before it becomes known to them. \r\nIllustrations \r\n(a) A directs B to sell goods for him, and agrees to give B five per cent. \r\ncommission on the price fetched by the goods. A afterwards, by letter, revokes B's \r\nauthority. B, after the letter is sent, but before he receives it, sells  the goods for 100 \r\nRupees. The sale is binding on A, and B is entitled to five Rupees as his \r\ncommission. \r\n(b) A, at \r\n80\r\n[Quetta], by letter, directs B to s ell from him some cotton lying in \r\na warehouse in \r\n81\r\n[Karachi], and afterwards, by letter, revokes his authority to sell, and \r\ndirects B to send the cotton to \r\n82\r\n[Quetta]. B, after receiving the second letter, enters \r\ninto a contract with C, who knows of the first letter, but not of the second, for the sale \r\nto him of the cotton. C pays B the money, with which B  absconds. C's payment is \r\ngood as against A. \r\n(c) A directs B, his agent, to pay certain money to C. A dies, and D takes \r\nout probate to his will. B, after A's de ath, but before hearing of it, pays the money  to \r\nC. The payment is good as against D, the executor. \r\n209. Agent's duty on termination of agency by principal's death or insanity .– \r\nWhen an agency is terminated by the principal dying or becoming of  unsound mind, \r\nthe agent is bound to take, on behalf of the representatives of  his late principal, all \r\nreasonable steps for the protection and preservation of  the interests entrusted to \r\nhim. \r\n210. Termination of sub -agent's authority.– The termination of the authority of \r\nan agent causes the termination (subject to the rules herein contained regarding the \r\ntermination of an agent's authority) of the authority of all sub -agents appointed by \r\nhim. \r\nAgent's Duty to Principal \r\n211. Agent's duty in conducting principal's business .– An agent is bound to \r\nconduct the business of his principal according to the directions given by the \r\nprincipal, or, in the absence of any such directions,  according to the custom which \r\nprevails in doing business of the same kind at the place where the agent conducts \r\nsuch business. When the agent acts  otherwise, if any loss be sustained, he must \r\n                                                 \r\n80Substituted for the word “Dacca” by the Federal Laws (Revision and Declaration) Ordin ance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Madras” ,by the Central Laws (Status Reform) Ordinance, 1960 ( XXI of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary), pages, 725 -845, s. 3 and 2 nd Schedule (with effect from the 14 th October, \r\n1955). \r\n81Substituted for the word “Bombay” by the Central Laws (Statute Reform) Ordinance 1960 ( XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary), pages 725-845, s. 3 and 2nd Schedule (with effect from the 14th October, 1955). \r\n82Substituted for the word “Dacca” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8.7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Madras” by the Central Laws (Status Reform) Ordinance, 1960 ( XXI of 1960); and \r\npublished in the Gazette  of Pakistan (Extraordinary) pages 725 -845 s. 3 and 2 nd Schedule (with effect from the 14 th October, \r\n1955). \r\n \r\nmake it good to his principal, and, if any profit accrues, he must account for it. \r\nIllustrations \r\n(a) A, an agent engaged in carrying on for B a business, in which it is the \r\ncustom to invest from time to time, at interest, the moneys which may be in hand, \r\nomits to make such investment. A must make good to B the interest usually obtained \r\nby such investments. \r\n(b) B, a broker, in whose business it is not the custom to sell on credit, \r\nsells goods of A on credit to C, whose credit at the time was very high. C, before \r\npayment, becomes insolvent. B must make good the loss to A. \r\n212. Skill and diligence required from agent .– An agent is bound to conduct the \r\nbusiness of the agency with as much  skill as i s generally possessed by persons \r\nengaged in similar business, unless  the principal has notice of his want of skill. The \r\nagent is always bound to act with reasonable diligence, and to use such skill as he \r\npossesses; and to make  compensation to his principal  in respect of the direct \r\nconsequences of his own  neglect, want of skill or misconduct, but not in respect of \r\nloss or damage which are indirectly or remotely caused by such neglect, want of skill \r\nor misconduct. \r\nIllustrations \r\n(a) A, a merchant in \r\n83\r\n[Islamabad] has an agent, B, in London to whom a \r\nsum of money is paid on A's account, with orders to remit. B retains the money for a \r\nconsiderable time. A, in consequence of not receiving the money, becomes  \r\ninsolvent. B is liable for the money and interest from the day  on which it ought  to \r\nhave been paid, according to the usual rate, and for any further direct loss – as e.g., \r\nby variation of rate of exchange– but not further. \r\n(b) A, an agent for the sale of goods, having authority to sell on credit, \r\nsells to B on credit, without making the proper and usual enquiries as to the solvency \r\nof B. B, at the time of such sale, is insolvent. A must make compensation to hi s \r\nprincipal in respect of any loss thereby sustained. \r\n(c) A, an insurance-broker employed by B to effect an insurance on a ship, \r\nomits to see that the usual clauses are inserted in the policy. The ship is  afterwards \r\nlost. In consequence of the omission of the clauses nothing can be recovered from \r\nthe underwriters. A is bound to make good the loss to B. \r\n(d) A, a merchant in Eng land, directs B, his agent at \r\n84\r\n[Karachi], who \r\naccepts the agency, to send him 100 bales of cotton by a certain ship. B, having it in \r\nhis power to send the cotton, omits to do so. The ship arrives safely in England. \r\nSoon after her arrival the price of cotto n rises. B is bound to make  good to A the \r\nprofit which he might have made by the 100 bales of cotton at the time the ship \r\narrived, but not any profit he might have made by the subsequent rise. \r\n                                                 \r\n83Substituted for the words “Dacca” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of P akistan (Extraordinary) dated 8.7.1981. s.3 and 2 nd Schedule, at entry No.12,  which was \r\nsubstituted for the word “Calcutta” by the Central Laws (Status Reform) Ordinance, 1960 ( XXI of 1960); and published in the \r\nGazette of Pakistan (Extraordinary) pages 725-845, s. 3 and 2nd Schedule (with effect from the 14th October, 1955). \r\n84Substituted for the word “Bombay” by the Central Laws (Status Reform) Ordinance, 1960 ( XXI of 1960), s. 3 and 2 nd \r\nSchedule, for “Calcutta” (with effect from the 14 th October, 1955); a nd published in the Gazette of Pakistan (Extraordinary), \r\npages 725-845. \r\n \r\n213. Agent's accounts .– An agent is bound to render proper accounts to his \r\nprincipal on demand. \r\n214. Agent’s duty to communicate with principal.– It is the duty of an agent, in \r\ncases of difficulty, to use all reasonable diligence in communication with his principal, \r\nand in seeking to obtain his instructions. \r\n215. Right of principal when agent deals, on his own account, in business of \r\nagency without principal's consent .– If an agent deals on his own account in the \r\nbusiness of the agency, without first obtaining the consent of his principal and \r\nacquainting him with all material circums tances which have come to his own \r\nknowledge on the subject, the principal may repudiate the transaction, if the case \r\nshows either that any material fact has been dishonestly concealed from him by the \r\nagent, or that the dealings of the agent have been disadvantageous to him. \r\nIllustrations \r\n(a) A directs B to sell A's estate. B buys the estate for himself in the name \r\nof C. A, on discovering that B has bought the estate for himself, may repudiate the \r\nsale, if he can show that B has dishonestly concealed any materia l fact, or that the \r\nsale has been disadvantageous to him. \r\n(b) A directs B to sell A's estate. B, on looking over the estate before \r\nselling it, finds a mine on the estate which is unknown to A. B informs A that he \r\nwishes to buy the estate for himself, but conceals the discovery of the mine. A allows \r\nB to buy in ignorance of the existence of the mine. A, on discovering that B  knew of \r\nthe mine at the time he bought the estate, may either repudiate or  adopt the sale at \r\nhis option. \r\n216. Principal's right to benefit gaine d by agent dealing on his own account \r\nin business of agency.– If an agent, without the knowledge of his principal, deals in \r\nthe business of the agency on his own account instead of on account of his principal, \r\nthe principal is entitled to claim from the ag ent any benefit which may have  resulted \r\nto him from the transaction. \r\nIllustration \r\nA directs B, his agent, to buy a certain house for him. B tells A it cannot be \r\nbought, and buys the house for himself. A may, on discovering that B has  bought the \r\nhouse, compel him to sell it to A at the price he gave for it. \r\n217. Agent's right of retainer out of sums received on principal's account .– \r\nAn agent may retain, out of any sums received on account of the principal in the \r\nbusiness of the agency, all moneys due to himself i n respect of  advances made or \r\nexpenses properly incurred by him in conducting such  business, and also such \r\nremuneration as may be payable to him for acting as agent. \r\n218. Agent's duty to pay sums received for principal .– Subject to such \r\ndeductions, the agent is  bound to pay to his principal all sums received on his \r\naccount. \r\n219. When agent's remuneration becomes due .– In the absence of any special \r\ncontract, payment for the performance of  any act is not due to the agent until the \r\n \r\ncompletion of such act; but an agent may detain moneys received by him on account \r\nof goods sold, although the whole of the goods consigned to him for sale may not \r\nhave been sold, or although the sale may not be actually complete. \r\n220. Agent not entitled to remuneration for business misconducted .– An \r\nagent who is guilty of misconduct in the business of the agency is not entitled to any \r\nremuneration in respect of that part of the business which he has misconducted. \r\nIllustrations \r\n(a) A employs B to recover 1,00,000 Rupees from C, and to lay it out on \r\ngood security. B recovers the 1,00,000 Rupees and lays out 90,000 Rupees on good \r\nsecurity, but lays out 10,000 Rupees on security which he ought to have known to be \r\nbad, whereby A loses 2,000 Rupees. B is entitled to remuneration for  recovering the \r\n1,00,000 Rupees and for investing the 90,000 Rupees. He is not entitled to any \r\nremuneration for investing the 10,000 Rupees, and he must make  good the 2,000 \r\nRupees to B. \r\n(b) A employs B to recover 1,000 Rupees from C. Through B's misconduct \r\nthe money is not recovered. B i s entitled to no remuneration for his services, and  \r\nmust make good the loss. \r\n221. Agent's lien on principal's property .– In the absence of any contract to the \r\ncontrary, an agent is entitled to retain goods, papers and other property, whether \r\nmoveable or immovea ble, of the principal received by him, until the amount due to \r\nhimself for  commission, disbursements and services in respect of the same has \r\nbeen paid or accounted for to him. \r\nPrincipal’s Duty to Agent \r\n222. Agent to be indemnified against consequences of lawful  acts.– The \r\nemployer of an agent is bound to indemnify him against the consequences of all \r\nlawful acts done by such agent in exercise of the authority conferred upon him. \r\nIllustrations \r\n(a) B, at Singapur, under instructions from A of \r\n85\r\n[Karachi], contracts with C \r\nto deliver certain goods to him. A does not send the goods to B, and C sues B  for \r\nbreach of contract. B informs A of the suit, and A authorizes him to defend the suit. B \r\ndefends the suit, and is compelled to pay damages and costs, and  incurs expenses. \r\nA is liable to B for such damages, costs and expenses. \r\n(b) B, a broker at \r\n86\r\n[Karachi] by the orders of A, a merchant there contracts  \r\nwith C for the purchases of 10 casks of oil for A. Afterwards A refuses to  receive the \r\noil, and C sues B. B informs A, who repudi ates the contract  altogether. B defends, \r\nbut unsuccessfully, and has to pay damages and costs  and incurs expenses. A is \r\nliable to B for such damages, costs and expenses. \r\n                                                 \r\n85Substituted for the word “Chittagong” by the Federal Laws (Revision and Declaration) Ordinance, 1981 ( XXVII of 1981); and \r\npublished in the Gazette of Pakistan (Extraordinary) dated 8. 7.1981, pages 345 -475, s.3 and 2 nd Schedule, at entry No.12, \r\nwhich was substituted for the word “Calcutta” by the Central Laws (Statute Reform) Ordinance, 1960 (XXI of 1960); and \r\npublished in the Gazette of Pakistan (Extraordinary), pages 725 -845, s. 3 and  2nd Schedule (with effect from the 14 th October, \r\n1955). \r\n86Substituted ibid. \r\n \r\n223. Agent to be indemnified against consequences of acts done in good \r\nfaith.– Where one person employs another to do an act, and the agent does the act \r\nin good faith, the employer is liable to indemnify the agent against the consequences \r\nof that act, though it cause an injury to the rights of third persons. \r\nIllustrations \r\n(a) A, a decree-holder and entitled to execution of B's goods, requires the \r\nofficer of the Court to seize certain goods, representing them to be the goods  of B. \r\nThe officer seizes the goods, and is sued by C, the true owner of the goods. A is \r\nliable to indemnify the officer for the sum which he is compelled  to pay to C, in \r\nconsequence of obeying A's directions. \r\n(b) B, at the request of A, sells goods in the possession of A, but which A \r\nhad no right to dispose of. B does not know this, and hands over the proceeds of  the \r\nsale to A. Afterwards C, the true owner of the goods, sues B and recovers  the value \r\nof the goods and costs. A is liable to indemnify B for what he has  been compelled to \r\npay to C and for B's own expenses. \r\n224. Non-liability of employer of agent to do a criminal act.– Where one person \r\nemploys another to do an act which is criminal, the employer is not liable to the \r\nagent, either upon an express or an implied  promise, to indemnify him against the \r\nconsequences of that Act\r\n87\r\n. \r\nIllustrations \r\n(a) A employs B to beat C, and agrees to indemnify  him against all \r\nconsequences of act. B thereupon beats C, and has to pay damages to C for so  \r\ndoing. A is not liable to indemnify B for those damages. \r\n(b) B, the proprietor of a newspaper, publishes, at A's request, liable upon \r\nC in the paper, and A agrees to indemnify B against the consequences of the \r\npublication, and all costs and damages of any action in respect thereof. B is  sued by \r\nC and has to pay damages, and also incurs expenses. A is not liable to B upon the \r\nindemnity. \r\n225. Compensation to agent for injury caused by principal's neglect .– The \r\nprincipal must make compensation to his agent in respect of injury \r\n88\r\ncaused to such \r\nagent by the principal's neglect or want of skill. \r\nIllustration \r\nA employs B as a bricklayer in building a house, and puts up the scaffold ing \r\nhimself. The scaffolding is unskilfully put up, and B is in consequence hurt. A  must \r\nmake compensation to B. \r\nEffect of agency on contract with third persons \r\n226. Enforcement and consequences of agent's contracts .– Contracts entered \r\ninto through an agent, an d obligations arising from  acts done by an agent, may be \r\nenforced in the same manner, and will have the same legal consequences, as if the \r\n                                                 \r\n87See s. 24, supra. \r\n88Cf. the Fatal Accidents Act, 1855 (XIII of 1855). \r\n \r\ncontracts had been entered into and the acts done by the principal in person. \r\nIllustrations \r\n(a) A buys goods from B, knowing that he is an agent for their sale, but not \r\nknowing who is the principal. B's principal is the person entitled to claim  from A the \r\nprice of the goods, and A cannot, in a suit by the principal, set off against that claim a \r\ndebt due to himself from B. \r\n(b) A, being B's agent with authority to receive money on his behalf, \r\nreceives from C a sum of money due to B. C is discharged of his obligation to pay \r\nthe sum in question to B. \r\n227. Principal how far bound, when agent exceeds authority .– When an agent \r\ndoes more than he is authorized to do, and when the part of what he does, which is \r\nwithin his authority, can be separated from the part which is beyond his authority, so \r\nmuch only of what he does as is within his  authority is binding as between him and \r\nhis principal. \r\nIllustration \r\nA, being owner of a ship and cargo, authorizes B to procure an insurance for  \r\n4,000 Rupees on the ship. B procures a policy for 4,000 Rupees on the ship, and  \r\nanother for the like sum on the cargo. A is bound to pay the premium for the policy \r\non the ship, but not the premium for the policy on the cargo. \r\n228. Principal not bound when excess of agent's authority is not separable .– \r\nWhere an agent does more than he is authorized to do, and what he does beyond \r\nthe scope of his authority cannot be separated f rom what is within it, the principal is \r\nnot bound to recognize the transaction. \r\nIllustration \r\nA authorizes B to buy 500 sheep for him. B buys 500 sheep and 200 lambs \r\nfor one sum of 6,000 Rupees. A may repudiate the whole transaction. \r\n229. Consequences of notice given to agent.– Any notice given to or information \r\nobtained by the agent, provided it be given or obtained in the course of the business \r\ntransacted by him for the principal, shall, as between the principal and third parties, \r\nhave the same  legal consequenc es as if it had been given to or obtained by the \r\nprincipal. \r\nIllustrations \r\n(a) A is employed by B to buy from C certain goods, of which C is the \r\napparent owner, and buys them accordingly. In the course of the treaty for the sale, \r\nA learns that the goods really belonged to D, but B is ignorant of that fact, B is not \r\nentitled to set off a debt owing to him from C against the price of the goods. \r\n(b) A is employed by B to buy from C goods of which C is the apparent \r\nowner. A was, before he was so employed, a servant of C , and then learnt that \r\ngoods really belonged to D, but B is ignorant of that fact. In spite of the knowledge of \r\nhis agent, B may set off against the price of the goods a debt owing to him from C. \r\n230. Agent cannot personally enforce, nor be bound by, contracts on behalf \r\n \r\nof principal .– In the absence of any contract to that effect, an agent cannot \r\npersonally enforce contracts entered into by him on behalf of his principal, nor is he \r\npersonally bound by them. \r\nPresumption of contract to contrary .– Such a contract s hall be presumed \r\nto exist in the following cases:– \r\n(1) where the contract is made by an agent for the sale or purchase of \r\ngoods for a merchant resident abroad: \r\n(2) where the agent does not disclose the name of his principal: \r\n(3) where the principal, though disclosed, cannot be sued. \r\n231. Rights of parties to a contract made by agent not disclosed .– If an agent \r\nmakes a contract with a person who neither knows, nor has  reason to suspect, that \r\nhe is an agent, his principal may require the performance of the contract; but the \r\nother contracting party has, as against the principal, the same rights as he would \r\nhave had as against the agent if the agent had been principal.  \r\nIf the principal discloses himself before the contract  is completed, the other \r\ncontracting party may refuse to  fulfil the contract, if he can show that, if he had \r\nknown who was the principal in the contract, or if he had known that the agent was \r\nnot a principal, he would not have entered into the contract. \r\n232. Performance of contract with agent supposed to be principa l.– Where \r\none man makes a contract with another, neither knowing nor  having reasonable \r\nground to suspect that the other is an agent, the principal, if he requires the \r\nperformance of the contract, can only obtain such  performance subject to the rights \r\nand obligations subsisting between the agent and the other party to the contract. \r\nIllustration \r\nA, who owes 500 Rupees to B, sells 1,000 Rupees, worth of rice to B. A is \r\nacting as  agent for C in the transaction, but B has no knowledge nor reasonable \r\nground of suspicion that such is the case. C cannot compel B to take the rice without \r\nallowing him to set off A's debt. \r\n233. Right of person dealing with agent personally liable .– In cases where the \r\nagent is personally liable, a person dealing with him  may hold either him or his \r\nprincipal, or both of them, liable. \r\nIllustration \r\nA enters into a contract with B to sell him 100 bales of cotton, and afterwards  \r\ndiscovers that B was acting as agent for C. A may sue either B or C, or both, for the \r\nprice of the cotton. \r\n234. Consequence o f inducing agent or principal to act on belief that \r\nprincipal or agent will be held exclusively liable .– When a person who has made \r\na contract with an agent induces the agent to act upon the belief that the principal \r\nonly will be held liable, or induces th e principal to act upon the belief that the agent \r\nonly will be held liable, he cannot afterwards hold liable the agent or principal \r\nrespectively. \r\n \r\n235. Liability of pretended agent .– A person untruly representing himself to be \r\nthe authorized agent of another, and thereby inducing a third person to deal with him \r\nas such agent, is liable, if his alleged employer does not ratify his acts, to  make \r\ncompensation to the other in respect of any loss or damage which he has  incurred \r\nby so dealing. \r\n236. Person falsely contractin g as agent not entitled to performance .– A \r\nperson with whom a contract has been entered into in the character of  agent is not \r\nentitled to require the performance of it if he was in reality acting, not as agent, but \r\non his own account. \r\n237. Liability of principal inducing belief that agent's unauthorized acts were \r\nauthorized.– When an agent has, without authority, done acts or incurred \r\nobligations to third persons on behalf of his principal, the principal is bound by such \r\nacts or obligations if he has by his word s or conduct induced such third persons to \r\nbelieve that such acts and obligations were within the scope of the agent's authority. \r\nIllustrations \r\n(a) A consigns goods to B for sale, and gives him instructions not to sell \r\nunder a fixed price.– C, being ignorant of B's instructions, enters into a contract with \r\nB to buy the goods at a price lower than the reserved price. A is bound by the \r\ncontract. \r\n(b) A entrusts B with negotiable instruments endorsed in blank. B sells \r\nthem to C in violation of private orders from A. The sale is good. \r\n238. Effect, on agreement, of  misrepresentation or fraud by agent .– \r\nMisrepresentations made, or frauds committed, by agents acting in the course of \r\ntheir business for their principals, have the same effect on  agreements made by \r\nsuch agents as if such misrepresentations or frauds had been made or committed by \r\nthe principals; but misrepresentations made, or frauds committed, by agents, in \r\nmatters which do not fall within their authority, do not affect their principals. \r\nIllustrations \r\n(a) A, being B's ag ent for the sale of goods, induces C to buy them by a \r\nmisrepresentation, which he was not authorized by B to make. The contract is  \r\nvoidable, as between B and C, at the option of C. \r\n(b) A, the captain of B's ship, signs bills of lading without having received \r\non board the goods mentioned therein. The bills of lading are void as between B  and \r\nthe pretended consignor. \r\nCHAPTER XI \r\n \r\n89\r\n[Of Partnership]  \r\n90\r\n[SCHEDULE *****] \r\n                                                 \r\n89Repealed by the Partnership Act, 1932 (IX of 1932), S.73 and Schedule II. \r\n90Repealed by the Repealing and Amen ding Act, 1914 (X of 1914)  ; and published in the Gazette of India, Part IV, dated \r\n21.3.1914, pages 47-59, s. 3 and Second Schedule.",
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