Muluki Dewani Samhita Ain 2074 - Part 5

The Institute of Chartered Accountants of Nepal
Part-5
Provision relating to Contract and other Liabilities:
Chapter-1
General Provision of Liability:
493. Liability to be created: (1) If there exists legal liability for doing or not doing any work
there shall be creation of liability by not doing or doing the work as such.
(2) The liability to be created under sub-section (1) shall be established and prescribed under this
chapter.
494. Circumstances for the Creation of Liability: (1) Liability under section 493 shall be
created and established as follows:
(a) Law,
(b) Contract,
(c) Indirect or quasi contract,
(d) Unjust enrichment,
(e) Unilateral commitment of any person promising to take up liability,
(f) The work to be held tort as per law,
(g) The work to be held quasi tort under law.
(2) Of the sub-section (1):
(a) The liability under Section (a) shall be under this Act or the other prevalent law.
(b) The liability under Section (b) shall be established as per the contract held between
the parties.
(c) The liability under Section (c) shall be established as per indirect or quasi
contract as defined under chapter 15 of this part.
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(d) The liability under Section (d) shall be established as per the unjust enrichment as
defined under Chapter -16 of this part.
(e) The liability under Section (e) shall be established as per the provision of creation of
liability by law following the unilateral commitment of any person.
(f) The liability under Section (f) shall be established under tort as defined in Chapter -17
of this part.
(g) The liability under Section (g) shall be established under the defective product or the
other works to be considered as quasi tort under law as defined in Chapter -18.
495. Liability to be fulfilled: (1) Liability of any subject shall be fulfilled by the person for
whom the liability of any subject has been created for fulfillment or who has taken the liability.
(2) Before the fulfillment of liability under sub-section (1) in case the liable person dies or loses
sense the liability shall be fulfilled by the successor or his/her patron or guardian obtaining his/
her property or in case of being contract of guarantee the person rendering guarantee as such
shall fulfill the liability as such.
496. The liability to be fulfilled within the prescribed time: (1) In case any particular period
has been prescribed for the fulfillment of any liability the related person shall fulfill the liability
as such within the same period.
(2) In case any specific day or time has been prescribed for the fulfillment of any liability the
related person shall fulfill the liability as such within the said day or time.
Provided that, in case there has been particular day or time for the fulfillment of liability,
the liability may have been fulfilled prior to such day or time as well.
(3) In case period, day or time has not been fixed under sub-section (1) or (2) so as to fulfill any
liability, the liability shall be fulfilled within a reasonable period prescribing the period, day and
time to fulfill liability subject to the nature of liability.
(4) In case the liability has not been fulfilled as per sub-section (1), (2) or (3) it shall be held that
the person obliged to fulfill liability has not fulfilled liability or has been unable to fulfill
liability.
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497. Each person to fulfill the liability: (1) In case any liability has been taken by more than a
person or the liability has been created to him/ her, unless otherwise provided in the contract
each person shall fulfill the liability as such on equal basis.
(2) In case a person is to fulfill liability with more than a person, unless otherwise provided in
contract, he/ she shall equally fulfill liability to each person.
498. The liability to be divisible: (1) In case the liability is to be fulfilled to more than one
person or the circumstances prevail that more than one person to fulfill the liability towards such
persons or to be fulfilled by the persons as such seems divisible by its nature or to be divided into
parts the liability as such may be divided and accordingly the liability to each person or each
person shall fulfill the liability.
(2) In the circumstances under sub-section (1) each person or all the persons may seek for the
fulfillment of liability with each person to fulfill liability or all the persons.
499. The liability to be fulfilled in good faith: The liability created under section 494 shall be
fulfilled by the liable person in good faith
500. To bear compensation in case the liability is not fulfilled: (1) In case the person to fulfill
the liability has not fulfilled liability or delays to fulfill liability resulting in loss or damage to
any one he/ she shall bear compensation for the actual loss or damage.
(2) In case the loss or damage takes place because the person to fulfill liability has not fulfilled
liability by fraud or by ill intention or recklessness the person as such shall bear compensation
for the loss or damage as such.
501. Not to fulfill liability against law: Notwithstanding any matter contained anywhere in this
chapter in case the fulfillment of any liability appears to be opposite to law, public order or
public morality the liability as such shall not be fulfilled.
502. Not to fulfill impossible liability: (1) Notwithstanding any matter contained elsewhere in
this chapter if the liability of impossible nature that could not have been fulfilled which has been
created during the creation of liability, the liability as such shall not be fulfilled.
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(2) In case the fulfillment of liability was possible at the time of formation of liability but it
becomes impossible to fulfill liability subsequently the consequence of such liability shall be
prescribed as per law.
(3) Notwithstanding any matter contained in sub-section (1) or (2) in case any liability seems
appropriate for partial fulfillment and the remaining portion could not have been fulfilled the
liability shall be fulfilled to the extent possible for fulfillment.
503. Limitation: The aggrieved party of the work and action carried under this chapter may sue
within two years of arising the cause of action to file case.
Chapter- 2
Provision to Enter Contract
504. Contract to be deemed: (1) A contract shall be deemed to have been concluded when an
agreement enforceable by law is entered between two or more parties for performing or not
performing any work.
(2) A contract shall be deemed to have been concluded once the person to whom an offer has
been presented by another person communicates his/her acceptance thereof for the purpose of
sub-section (1).
(3) After entering the contract the obligatory legal relationship shall be established between the
parties.
Explanation: For the purpose of this Chapter:
(1) 'Offer' means an offer presented by one person to another with the intent of
obtaining his/her acceptance to do or not to do any work.
(2) 'Acceptance' means the acceptance given by the person to whom an offer has
been presented in the same meaning of that offer.
505. Contract to be implemented as per law: (1) The contract entered complying with the
following conditions shall be deemed to have been the contract entered with the possibility of
execution under the prevalent law.
(A) Acceptance expressed by the person entering contract so as to make it binding.
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(B) Capacity or Qualification of the contracting person to enter contract.
(C) The particular subject to create liability.
(D) Lawful liability.
(2) A contract may be made in writing or oral or by the conduct of the contracting persons as
well.
(3) Notwithstanding any matter contained in sub-section (2), in case the provision is made for
any contract to follow any specific procedure or formality the contract as such may not be
implemented until the procedure or formality as such has been fulfilled.
506. Person competent to conclude contracts: (1) Any person other than those mentioned
below may be competent for concluding a contract;
(a) Minor
(b) Not having sound mind.
Explanation:
(1) A person generally having unsound mind but having sound mind for some
time may enter contract at the time of having sound time.
(2) The person generally having sound mind but having unsound mind for some
time shall not be entitled to enter contract during the period of having unsound
mind.
(2) Notwithstanding anything contained in Sub-section (1) any person not qualified to enter into
a specific contract under the prevailing law shall be deemed to be incompetent to conclude that
contract.
(3) The patron or guardian of a person who is incompetent to conclude a contract may conclude a
contract.
(4) For the purpose of entering a contract on behalf of the legal person it shall be done by the
decision of director or directors deserving authority to manage or undertake such person or
his/her authorized person.
(5) Notwithstanding anything contained elsewhere in this Section, in case the prevailing law
provides for a provision even to persons who are incompetent under this Act to conclude a
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contract on any specific matter, they shall be deemed to be qualified to conclude a contract on
that matter accordingly.
507. Parties to be autonomous: The parties to contract, subject to this Act shall be free to
choose the form and content of contract and the conditions of the contract and the nature of the
remedy in the event of its breach, as well as to determine the measures for resolving disputes
under the contract.
508. Processes of offer and acceptance to be deemed completed: (1) The communication of
an offer shall be deemed to be completed when it comes to the knowledge of the person to whom
it is forwarded.
(2) In case the Offerer (proposer) receives a notice of acceptance sent to him/her by the person
to whom he/she had sent a offer, the process of receiving acceptance shall be deemed to have
been completed in the case of the offerer, (proposer) and in case the offerer (proposer) is
noticed that the acceptance has been given for the offer the process of giving acceptance shall be
deemed to have been completed in the case of the acceptor.
(3) The person who has been presented with an offer shall be deemed to have given his/her
acceptance to it even if he/she has not done it directly to the offer in case he/she compiles with
the term and conditions mentioned in the offer, or accepts any consideration, benefit or service
mentioned in the offer or expresses his/her acceptance in any other form.
(4) In case the offerer (proposer) has mentioned in the offer that he/she would deem the offer to
have been accepted unless he receives a notice of refusal within a specified period, the offer shall
not be deemed to have been accepted in case a notice of refusal has not been sent within that
period.
509. Offer or acceptance may be cancelled: (1) The offerer (proposer) may cancel his/her offer
through a notice.
Provided that, in case the offerer (proposer) has received from the person whom he has
presented an offer a notice to the effect that he/she has approved the offer before receiving a
notice of the cancellation of the offer, the offer shall not be deemed to be cancelled.
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(2) The person to whom, an offer has been presented may cancel offer through a notice.
Provided that, the acceptance shall not be cancelled in case the offerer (proposer) has
received the notice of acceptance before receiving the notice of cancellation of acceptance.
(3) The person who has sent a notice expressing his/her refusal of offer may again send a notice
expressing his/her acceptance to the offer.
Provided that, in case the notice of refusal reaches first out of the notices of refusal or acceptance
the contract shall not be deemed to have been concluded. In case the notice of acceptance
reaches first; the contract shall be deemed to have been concluded.
(4) In case the notice mentioned in Sub-section (1) has been sent after sending the offer, or the
notice mentioned in Sub-section (2) has been sent after sending a notice of acceptance, or in case
a notice has been sent under Sub-section (3) after sending a notice of refusal over the offer the
contract shall not be deemed to have been concluded if the concerned person receives such
notices at the same time.
(5) In case the offerer (proposer) accepts the offer sent by the offerer (proposer) conditionally or
making changes on some maters it shall be deemed that the offeree (proposer) has made counter
offer.
510. Offer to be deemed cancelled: An offer shall be deemed to be cancelled in any of the
following circumstances:
(a) In case the offerer (proposer) has proposed that the notice of acceptance to the offer be given
to him/her within a specified period, and the offerer ((proposer)) does not receive the notice of
acceptance given by the person to whom the offer has been presented within the period.
(b) In case the period for sending a notice of acceptance is not specified as mentioned in Section
(a), and the person to whom the offer has been presented does not furnish a notice to the
offerer(proposer) within a reasonable period.
(c) In case the offerer ((proposer) dies or loses his senses before receiving acceptance after
presenting the offer.
(d) In case the offer is cancelled as mentioned in Sub-section (5) Section 509.
(e) In case the person to whom the offer has been presented dies or loses his/her senses after
giving his/her acceptance but before the offerer (proposer) receives the acceptance.
(f) In case the offeree (proposer) sends counter offer under sub-section (5) of Section 509.
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(g) In case the offer has been presented subject to the condition that the person to whom the offer
has been presented has to do anything or fulfill any condition before accepting the offer, and
her/she accepts the offer without doing that work or fulfilling that condition.
511. Contract according to offer presented before the public: (1) In case any person, by
means of an advertisement, advances an offer in public to the effect that he/she will pay a
specific prize to any person for performing any work specified in the advertisement, and in case
any person performs the work as mentioned in the advertisement, the advertiser shall pay the
specific remuneration to that person.
Provided that, in case the work mentioned in advertisement has been done without
knowledge of advertisement, the person as such shall not be entitled to have remuneration.
(2) In case the work mentioned in Sub-section (1) is performed by one or more persons, only the
person who has performed the work first shall be paid prize.
Provided that, in case two or more persons have performed the work mentioned in the
offer at the same time, all of them may share the prize among themselves. In case the prize
cannot be shared, the proceeds of the sale of the same shall be equally distributed among them.
(3) In case a specific period has been prescribed for performing the work as per the
advertisement published under Sub-section (1), the offer, mentioned in the advertisement shall be
deemed to have been cancelled immediately after the expiry of that period.
(4) An offer advanced under Sub-section (1) may be cancelled through the medium through
which it was published.
(5) Notwithstanding anything contained in Sub-section (4), in case anyone has, performed the
work mentioned in the advertisement published under Sub - section (1) before the publication of
a notice of cancellation of the offer, he/she shall be paid the prize mentioned in the
advertisement.
Provided that, the person who has performed the work as mentioned in the advertisement must
have notified the advertiser about the completion of the work by the quickest possible means.
(6) In case any person has begun the work according to the advertisement published under Sub-
section (1) and furnished a notice thereof to the advertiser, he/she shall be paid an appropriate
remuneration for the work, performed by him/her before the cancellation of the advertisement.
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512. Place of contract: (1) The place where the person advances an offer expecting to receive
acceptance shall be deemed to be the place where the contract has been concluded
(2) In case the place has not been specified under Sub-section (1), the place where the offerer
(Proposer) received acceptance shall be deemed to be the place where the contract has been
concluded.
(3) Notwithstanding any matter contained in sub-section (1) and (2) in case the parties have
mentioned place of contract in the contract the same place shall be held as the place of contract.
513. Contingent contract: (1) In case a contract has been concluded to performing or not to
perform any work if any event happens in the future, the contract shall not create any liability
until such event takes place.
(2) In case a contract has been concluded subject to the condition that it shall be deemed to have
been concluded in case person performs any specified work in the future, no liability shall be
deemed to have created from that contract if such person does anything in such a manner as not
to perform that work or acts in such a manner that the work cannot be performed.
(3) In case a contract has been concluded to perform or not to perform any work if any uncertain
event does not happen in the future, liability under that contract shall emerge only after the
happening of that event becomes impossible.
(4) In case a contract has been concluded with a provision to perform or not to perform any work
if any event happens within a specified period in the future, the contract shall be deemed to have
become invalid after the happening of that event becomes impossible within the specified period
or after the expiry of that period. (5) In case a contract has been concluded with a provision to
perform or not to perform any work if any event does not happen within a specified period in the
future, liability under such contract shall emerge if that event does not happen within that period
or if it becomes certain that the event will not happen within that period.
514. General provisions of contract to be applicable: The provisions of this chapter and the
same under Chapters 3, 4 and 5 of this part shall be generally applicable to the other contracts to
be entered under this Act or law.
515. Interpretation of contract: (1) The interpretation of contract shall be held in accordance
with the collective desire of the parties of contract.
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(2) In case the intention under sub-section (1) could not have been established the contract shall
be interpreted in the manner of such intention that a person of common prudence may deserve in
the ordinary circumstance on the capacity of the party.
(3) In case the views or conduct of a party of contract have been known to the other party or the
circumstance prevails to presume the existence of knowledge the contract shall be interpreted as
per the intention of the party as such.
(4) The interpretation of the phrase and expression used in the contract shall be made on the
basis of the whole contract or the context of such phrase and expression.
(5) Interpretation shall be made making the entire phrases of contract effective without setting
aside any phrase from the other phrases used in the contract without giving effect only to any
phrase of contract.
516. Limitation: Interpretation shall the person being aggrieved by the work and activities
carried up under this chapter may sue within two years of creation of the cause of action.
Chapter- 3
Validity of Contract
517. Void contracts: (1)The contract not acceptable under law shall be held the void contract.
(2) The following contracts shall be void:
(a) A Contract preventing anyone from engaging him/herself in any occupation,

profession or trade which is not prohibited by prevailing law.
Provided that, a contract shall not be deemed to have been concluded in preventing
profession or trade in the following circumstances:
(1) A contract preventing the seller from engaging him/herself in a profession or

trade at the time and place as mentioned in the contract concluded between the
buyer and the seller on selling and buying of the goodwill of any trade;
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(2) A contract concluded among partners in preventing their engagement in any

occupation, trade or business, other than those of the partnership firm, similar to
those of the partnership firm or any other trade or business together with other
competitors belonging to the same kind of trade or business as long as the
partnership continues.
(3) A contract concluded among the partners preventing them from engaging in
an occupation, trade or business under the partnership firm for the specified time
or place after being separated from the partnership;
(4) A contract preventing any individual from receiving the service of any such
agency, company, firm, individual or competitor of such agency, company, firm,
or individual for the specified period of time after the retirement from service or
during the service of such agency, company, firm or individual pursuant to
contract concluded by any individual with any agency, company, firm or
individual.
(b) A contract restraining marriage other than those prohibited by the prevailing law.
(c) A contract preventing any one from enjoying the facilities already being
enjoyed by the general public.
(d) A contract seeking to prevent the legal rights of any person from being enforced by
any government office or court.
(e) A contract concluded in matters, contrary to or prohibited by the prevailing law.
(f) A contract concluded for immoral purpose or against Public morality or public order.
(g) A contract which cannot be performed because the parties thereto do not exactly
know about the matter in relation to which it has been concluded.
(h) A contract which is considered impossible to fulfill even at the time it is

concluded.
(i) A contract which is vague as it does not provide reasonable meaning thereof.
(j) A contract concluded by an incompetent person to conclude such contract.
(k) A contract concluded with an unlawful objective.
(l) Contract entered amidst the bilateral mistake over the essential matters of the
contract at the time of entering contract.
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(3) The void contract shall be held ipso facto void and no legal consequences and right and
liabilities of the parties shall be created by this.
(4) In case any part of the contract is declared void the remaining portion shall be enforceable
as per law.
518. Voidable Contracts: (1) A contract that may be declared void on the effort of the attempt
of the party of the contract form the court shall be held the voidable contract.
(2) The following contracts may be made void by the aggrieved party from the court:
(a) A contract concluded through coercion:
Explanation A person shall be deemed to have indulged in coercion if he/she, with

the objective of compelling any person, to accept any contract against his/her will,
withholds or threatens to withhold property belonging to him/her, or threatens to
defame him/her or life or body, or takes or threatens to take any other action in
contravention of prevailing law.
(b) A contract concluded by undue influence:
Explanation (1) Undue influence means influence exercised by a person upon another person
who is under his/her influence and is amenable to his/her personal benefit or interest.
(2) Without prejudice to the generality of Section (1), the following

persons shall be deemed to be under the influence of any person and amenable to
his/her wishes:
(i) A person living under his/her guardianship, protection or custody.
(ii) A person who cannot take care of his/her interest temporarily or permanently
by reason of old age, sickness or physical or mental weakness.
(iii) A person who can be subjected to under one's economic or ranking

influences.
(c) A contract concluded by fraud:
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Explanation A party to the contract or his/her agent shall be deemed to have committed
fraud if he/she, leads the other party or his/her agent to believe or takes any action to believe
the particular matter is true, although he/she knows that it is false, or suppresses any information
in his/her possession, or indulges in any other fraudulent act punishable under prevailing
law, with the intention of deceiving the opposite party or his/her agent.
(d) A contract concluded through deceit:
Explanation (1) Any of the following act shall be taken as deceit:
(i) Submission of false particulars on any matter without reasonable basis for
doing so;
(ii) Misleading any party so as to aggrieve him/her;
(iii) Causing any wrong deliberately on the matter of contract;
(iv) Contract is made for the different topic than that is brought into confidence.
(3) In a case of a voidable contract under this section, the following matters shall be dealt with as
prescribed below:
(i) The party caused to enter into a contract may, instead of making the contract
void, demand his/her position to be remained the same, as it was prior to
conclusion of the contract.
(ii) Burden of proof of innocence of undue influence shall be rest in the party who
claims that such contract is not concluded under an undue influence in case a
contract is concluded with the person who is under one's influence and amenable
to his/her wishes.
(4) The voidable contract shall be executed as the lawful contract before it has been declared
void.
(5) In case the voidable contract to be declared void under this section has been declared void by
the court the work performed before the declaration of void shall not be affected otherwise.
(6) By reason of declaration of any contract to be void under this section the lawful right or
interest of the innocent third party shall not be affected by reason of declaration of such contract
to be void.
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519. Unenforceable contract: (1) The contract that cannot be executed by the court shall be
called unenforceable contract.
(2) In spite the fact of compliance of formalities under Chapter-2 of this part the contract
under the following category shall be deemed to have been unenforceable contract.
(a) The contract supposed to be in writing under law but not has been
in writing.
(b) The contract that shall fulfill any specific formality, procedure under law
or there has been requirement to register before any body but the contract has not
fulfilled such formality, procedures or not been registered.
(c) In case where contract is entered on behalf of other person the contract is
entered over the subject that has not been authorized by such person or the
authority is excessively exercised than that has been provided with.
520. Limitation: The aggrieved person under the works and actions done or performed under
this Chapter may file case for all the time with regards to the void contract from the date of
arising cause to file case, within one year from the date of arising cause to get the contract
avoided for voidable contract and within two years from the date of arising cause to get the
contract avoided for other contracts.
Chapter- 4
Provision relating to performance of Contract
521. Liability under contract to be fulfilled: Each party to a contract shall fulfill his/her
liability under the contract.
522. Reciprocal compliance with contract: (1) In case a contract has been concluded with a
provision requiring both parties to simultaneously fulfill their respective liability, and in case one
party fundamentally shows a conduct or intention of not fulfilling his/her liability the other party
shall not be required to fulfill his/her promise.
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(2) In case the order of priority relating to fulfillment of any promise has been specified
in the contract itself, it shall be fulfilled accordingly, and in case no such order of priority has
been specified, the party who is required to do so first according to the nature of the contract
shall fulfill it.
(3) In case one promise cannot be fulfilled without fulfilling another promise under any
contract containing reciprocal promises, the party, which cannot execute the contract because of
the failure of the other party to fulfill its promise, may recover the loss or damage caused by the
failure of the other party to execute the contract.
(4) In case a contract of the category mentioned in Sub-section (1) has been concluded,
and any party obstructs the other party from executing the contract, the party which becomes
unable to execute the contract may cancel the contract and also recover any loss or damage
suffered by him/her from the cancellation of the contract in that manner.
523. Time and procedure of performing contract: (1) In case the time and procedure of
performing the contract has been mentioned in the contract, it shall be performed within the
specified time and according to the specified procedure.
(2) In case no time or procedure of performing the work mentioned in the contract has
been specified, whereas, in case the work can be performed only at any specific time or
according to any specific procedure, the contract shall be deemed to have been concluded so as
to perform the work at that time and according to that procedure.
(3) Except in the circumstances mentioned in Sub-section (2), in case the time and
procedure of performing the contract has not been mentioned in the contract, the contract shall be
performed within a reasonable time by following a reasonable procedure.
524. Place for performing contract: (1) In case any specific place has been specified in the
contract for performing the work, the work shall be performed at the same place.
(2) In case any party has to hand over or deliver goods to the other party under the
contract, and the place where those goods are to be handed over or delivered has not been
specified in the contract, the contract shall be deemed to have been concluded with a provision to
hand over or deliver the goods at the place where those goods are stored.
(3) In case the specific place where the work mentioned in the contract has to be
performed, has not been specified in the contract, and where as that work can be performed only
in a specific place, or in case the work needs to be performed in any specific place due to the
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general practice and custom or the nature of the work, the contract shall be deemed to have been
concluded with a provision to perform at such place.
(4) In circumstances other than those mentioned in Sub-sections (2) and (3), in case the
place for performing the work prescribed in the contract is not mentioned in the contract, the
party performing the work according to the contract shall inform the other party to specify a
reasonable place for performing the work, and the other party shall specify a reasonable place to
perform the work.
525. To be held performance of contract delayed: (1) In case any contract entered along with
the condition to execute at any specific time has not been performed on the time or within the
said time it shall be held that the performance of the contract has been delayed.
(2) In case the contract under section (1) could have been performed after the afore stated
time a party of contract shall grant reasonable time to the other party and notify to perform
contract.
(3) In case the notice has been served under sub-section (2) the other party shall perform
contract accordingly and he/she shall bear compensation for loss/ damage caused by delayed
performance of contract.
(4) In case the contract is not performed according to sub-section (3) the informing party
as such may cancel the contract
526. Time to be held substance of contract: (1) In case the contract is not performed within any
particular day, time or period as per the nature of contract, as per the intention shown by the
party at the time of entering contract, in case the purpose or objective of contract could not be
achieved, the time for the performance of such contract shall be considered to be the substance
of contract.
(2) In case the contract under sub-section (1) has not been fulfilled by any one party
within on the said day, time or period, the contract as such shall be held breached and the other
party may immediately cancel it.
527. Circumstances in which contract need not be performed: Work under a contract need
not be performed in any of the following circumstances:
(a) In case one party to the contract absolves the other party from fulfilling the
liabilities according to the contract;
(b) In case a voidable contract is made void by the party concerned;
(c) In case one cannot execute the contract due to its violation by the other party;
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(d) In case it becomes unnecessary to perform the work mentioned in the contract under
any provision of this Act;
(e) In case the contract could not have been executed under Section 531.
528. Devolution of rights and liabilities of contract: In case party to a contract dies or loses
his/her senses, the rights accruing from the contract shall devolve on the heir to his/her property,
and the heir shall also bear liability to the extent covered by the property received by him/her.
Provided that, the rights and liabilities accruing on the basis of personal skills and
qualification shall not devolve on such heir.
529. Person to execute contract: (1) Except when the person concluding contract is under the
obligation to execute the contract, he/she may have it executed by his agent or a person
appointed by him/her or any other person on his/her behalf may get the performance of the
contract on his/ her behalf get transferred the right and liabilities under the contract.
Provided that, no party to a contract may transfer the obligations under the contract to any
other person without the acceptance of the other party.
(2) The following condition shall be fulfilled so as to transfer rights or liability of

contract under sub-section (1).
(a) Unless otherwise provided for in contract, the transfer shall be in writing,
(b) The transfer shall be unconditional,
(c) There shall be no restriction by law or contract to transfer right or liabilities,
(d) In case the right or liabilities have been transferred the notice thereof shall be
provided to the party along with the time.
(3) Except when otherwise provided for in the contract, once a party accepts a work done
by a third person, he/she may not later claim that the work has to be done by the party signing
the contract.
(4) In case two or more person have jointly signed a contract with any other party, any of
or all persons jointly signing the contract shall fulfill or cause to do so for the fulfillment of the
liability under the contract, except when otherwise provided for in the contract.
(5) In case any person has fulfilled his/her liability under Sub-section (4), the person so
fulfilling the liability may recover compensation or loss on a proportionate basis from the other
persons jointly signing the contract.
17
(6) In a contract signed in the manner mentioned in Sub-section (4), in case any party
gives concession to any person belonging to the other party from the liabilities of his/her share,
the other person shall not be free from the remaining liabilities of the contract.
530. Only the party shall have right to execute the contract: (1) Only a person who is a party
to a contract may demand the execution of that contract from other party.
Provided that, in case the contract has been signed for the benefit of any person, such
beneficiary may demand the execution of that contract even if he/she is not a party to that
contract.
(2) In case two or more than two persons jointly agree upon to perform or not to perform
any work, except when otherwise provided for in the contract, all persons so entering - the
contract may demand the execution of that contract.
531. Contracts need not executed in the event of fundamental changes in the circumstances:
(1) In case it becomes impossible to execute a contract as a result of fundamental change in the
situation prevailing at the time of signing of the contract, the work under the contract need not be
performed.
(2) Without prejudice to the generality of Sub-section (1), fundamental change shall be
deemed to have come in the situation prevailing at the time of signing of the contract in any of
the following circumstances:
(a) In case the contract becomes illegal and it cannot be executed;
(b) In case it becomes impossible to execute the contract due to emergence of

such situations as war, floods landslides, fire, earthquakes, and volcanic
eruptions, which are beyond the control of human beings;
(c) In case anything essential for executing the contract is destroyed or damaged,
or no longer exists, or cannot be obtained;
(d) In case the contract has been signed with a provision to provide services on
the basis of efficiency, skill or talent, and the person providing such service dies
or loses his/her sense or becomes incapable of performing the contract because
of
physical or mental disability.
(3) Notwithstanding anything contained in Sub-section (2), fundamental changes shall

not be deemed to have appeared in the situation prevailing at the time of signing the contract in
any of the following circumstances:
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(a) In case it becomes difficult to perform the contract;
(b) In case profit margin is low or loss is the situation;
(c) In case any party to a contract is dependent upon any third party who is not a
party to the contract for performing the contract, if the third party commits a
mistake or becomes unfit;
(d) In the event of strikes and lockouts;
(e) In case it becomes necessary to pay additional tax, fee or other revenue;
(f) In case the contract has been signed with several objectives and only some of
them cannot be fulfilled.
(4) In case of emergence of the circumstances under sub-section (3) unless otherwise
provided in contract, the parties of the contract may discuss to review the conditions of the
contract or alter the same.
(5) In case it becomes impossible to execute a contract because of fundamental changes

in the situation as mentioned in Sub-section (2), the action in the following matters shall be taken
as follows;
(a) The amount paid by one party to the other in consideration of the contract
before such a change in the situation occurs shall be refunded to the other party.
(b) Payment to be made or due from one party to the other in consideration of the
contract shall not be made after such a change in the situation.
(c) In case any party has performed any work or paid any amount before such a
change in the situation, such work or amount shall be calculated and the amount
to be paid to each other should be determined, and reasonable expenses incurred
by
one party in consideration of the contract may be recovered from the other party.
(6) Notwithstanding anything contained in this Section, after the end of the situation
mentioned in Section (b) of Sub-section (2), the parties to a contract may agree to fulfill their
respective obligations by executing the contract.
532. Facilities to be provided: (1) The parties to a contract shall provide facilities needed for
executing the contract from their respective sides.
19
(2) In case the contract cannot be executed due to failure of providing such facilities, as
per Sub-section (1) the party failing to execute the contract in that manner shall not be held
responsible.
533. Contract may be suspended or altered: (1) In case the parties to a contract agree, all or
any of the portions of the work to be performed under the contract may be changed or amended,
the time-limit for performing any work under the contract extended, the contract suspended by
not making it obligatory to perform any work to be performed under the contract for some time,
the work mentioned in the contract may be replaced by another work, or a new contract may be
signed as a replacement of the original contract.
(2) In case any change or amendment is made in the contract under Sub section (1), a new
contract shall be deemed to have been signed, and the contract shall become effective
accordingly.
(3) In case a new contract is signed under Sub-section (2), liability under the initial
contract need not be borne except when otherwise provided for in the contract.
this Chapter may file case within two years from the date of arising cause to file case.
Chapter-5
Provision relating to Breach of Contract and Remedies
535. Breach of contract: (1) In case any party to a contract does not fulfill liability under the
contract, or gives a notice to the other party that he/she will not perform the work to be
performed under the contract, or in case his/her action or conduct shows that he/she is incapable
of performing the work under the contract, he shall be deemed to have breached the contract.
(2) In case a party has breached the contract under Sub-section (1), or in case his/her
action or conduct shows that he/she has not basically compiled with the contract, the other party
shall not be compelled to perform the contract, and may cancel the contract by furnishing a
notice thereof to the other party.
(3) In case the contract is cancelled under sub-section (2) the party making cancellation
of contract shall not be obliged to perform the contract.
536. Indivisible nature of the authority to cancel the contract: In case the contract includes
two or more than two parties in a side and the contract has been cancelled by all the parties
20
thereof or when the cancellation is made applying to the all the parties thereof only then the
contract shall be held cancelled.
537. Compensation on breach of contract: (1) In case a contract has been breached under
Section 535, the aggrieved party may realize from the party who has breached the contract, the
actual loss or damage suffered by him/her as a result of such breach of contract of the loss or
damage, that the contracting parties had anticipated at the time of signing the contract.
(2) In case the contract provides that any specific amount or compensation shall be paid
in the event of breach of contract, the aggrieved party may recover from the other party a
reasonable amount not exceeding that amount.
(3) In case the amount of compensation under Sub-section (2) is not mentioned in the
contract, the party making a claim for such compensation may realize a reasonable amount in
consideration of the direct and actual loss or damage that has resulted from the breach of
contract, or in consideration of the breach of contract, or in consideration of compensation.
Provided that, no compensation may be recovered for any indirect or imaginary loss or
damage.
(4) In case a contract has been signed for completing any work within a specific period,
and in case provision has been made for payment of compensation under Sub-section (1) for
failure to complete that work within the specific period, the party paying compensation may
request for extension of the period for completing the contract in proportion to the amount paid
by him/her as compensation.
(5) Only by reason of payment of amount of compensation under this section there shall
be no adverse effect to the party in the obtainment of the other legal remedies for the breach of
contract.
538. Compensation in the event of cancellation or termination of contract: (1) In case a

contract is terminated with the mutual consent of both parties or it is no longer necessary to
perform the contract under this Act or other prevailing laws, or in case the contract is made void
under the law or becomes void or cancelled under this Act, after one party has already received
some amount in cash or in kind or any other benefit from the other party as per the contract, the
cash or goods which have to be refunded after adjusting the accounts until the term of the
contract expires from the amount paid in cash or in kind shall be refunded. In case any service or
benefit other than cash or goods has been provided, the beneficiary must
pay a reasonable amount to the other party in consideration thereof.
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(2) In case besides the cash or in kind the other services or benefits have been extended in
consideration of such service or benefit the reasonable amount shall be given to the receiver of
such service or benefit to the other party.
(3) In case it becomes necessary to initiate legal action owing to the non-
re-fund of the amount paid in cash or kind or the non-payment of amount under Sub-section (1),
the concerned party may also realize reasonable expenses incurred for the said purpose.
539. Right to recover a reasonable amount for the performance of contract: The aggrieved
party may claim payment in proportion to the work performed or the amount paid by him/her in
cash or in kind in case any party breached the contract or the contract is terminated by any other
reason.
540. Specific performance of contract: (1) In case the cash compensation paid in consideration
of the actual loss or damage suffered by the aggrieved party as a result of breach of contract is
not reasonable or adequate, the aggrieved party may demand the execution of the contract as
stipulated specific performance instead of making a claim for compensation.
(2) Notwithstanding anything contained in Sub-section (1), no claims for specific

performance shall be instituted in any of the following circumstances;
(a) In case the amount paid in cash as compensation for breach of

contract is adequate;
(b) In case the court can not supervise whether or not the work to be
performed under the contract has been actually performed;
(c) In case the contract has been signed for providing services relating
to personal expertise, skill or knowledge;
(d) In case the situation is -such that the contract can not be executed
as stipulated;
(e) In case the party violating the contract him/herself demands that
the contract be executed as stipulated.
541. Court may issue order: (1) In case it becomes impossible to execute the contract because
any party about to take any action or behave in a manner contrary to the nature of the contract,
the party aggrieved by such action or conduct may file a complaint in Court to stay such action
or conduct.
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(2) In case a complaint is filed under Sub-section (1), the court may issue an appropriate
order to any party to immediately stop his/her specific action or conduct with a provision to settle
the dispute resulting from that contract according to the contract or prevailing law,
notwithstanding, anything contained in prevailing law.
(3) In case such order is issued, the aggrieved party may also realize the additional loss or
damage resulting from the failure of the other party to comply with the order issued under Sub-
section (1).
542. Compensation to be determined on monetary price: Unless otherwise provided in the

contract, in making evaluation for loss/damage under of this chapter, it shall be determined on
monetary value.
Provided that, the remedy under Section 540 shall be held accordingly.
543. Court may consider: In determining the compensation following the breach of contract the
court shall inter alia consider the contract is intentionally breached or recklessness not performed
such matter, in case how much money or what kind of benefit the innocent party was to obtain.
Chapter- 6
Provision relating Contract of Sale of Goods
545. Contract relating to sale of goods shall be deemed to have been concluded: (1) A
contract relating to sale of goods shall be deemed to have been concluded in case any seller
agrees to transfer any goods to the buyer immediately or in the future by receiving a price.
Explanation
For the purpose of this chapter, the term 'goods' means any type of movable property which may
have been purchased or sold except currently used currency, security or actionable claim .
(2) A contract relating to sale of goods may be conditional or unconditional.
(3) A contract may be concluded with a provision to sell goods owned or possessed by
the seller for the time being or those to be produced or acquired by him/her in the future.
546. Contract relating to sale of goods to be held void: In case a contract has been concluded
to sell specific goods, and in case the goods have suffered any loss or damage at the time of or
before concluding the contract and the seller had no knowledge thereon at the time of concluding
the contract, the contract shall be void.
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Explanation
For the purpose of this Section, 'Specific goods' refers to the specific goods mentioned in the
contract at the time of concluding the contract.
547. Determination of price of goods: (1) Except otherwise provided for in the contract, the
price of goods shall be determined on the basis of the procedure agreed upon through the terms
and conditions of the contract or by the sequence of transaction between the parties.
(2) In case the price of goods has been determined according to their weight and
measurement, the price of goods shall be determined on the basis of the net weight and
measurement of such goods, except otherwise provided for in the contract.
(3) In case the price of goods can not be determined under Sub-section (1) or (2), the
buyer shall pay to the seller a reasonable price in view of the related circumstances.
548. Price of goods to be paid: (1) Except otherwise provided for in the contract, the price of
goods must be fully paid as follows in the following circumstances:
(a) A buyer shall pay to the seller the price of goods bought by
him/her at the time of buying the goods.
(b) At the time of transfer of the goods.
(2) The price of the goods under Sub-section (1) shall be made in cash.
Explanation:
For the purpose of this Section, the term 'cash' includes cheques, traveler's cheques, promissory
notes, bills of exchange, letter of credit, bank draft, credit card and
telegraphic transfers as well payable through bank.
549. Particulars of goods: (1) In case the name, brand, trademark or specification of goods to be
sold are mentioned in the contract, the contract shall be deemed to have been concluded to sell
goods of the same name, brand, trade mark or specification.
(2) In case the name, brand, trademark or specification and sample goods to be sold have
been mentioned, the entire such goods shall correspond not only to the sample but also to their
name, brand, trademark or specification as mentioned in the contract.
550. The ownership to be deemed over the goods to be sold: (1) Except otherwise provided
for in the contract, the seller shall be deemed to have or is going to have ownership of the goods
24
agreed to sell in the future. The goods agreed to sell in the future shall be considered to be or is
going to be free from anybody's capture, control or possession.
(2) Except otherwise provided for in the contract, the seller shall be deemed to have the
right to sell the goods sold or to be sold by him/her.
551. Goods to be deemed to be of satisfactory quality: (1) Except otherwise provided for in
the contract, goods sold or to be sold shall be deemed to be of satisfactory quality.
(2) In case specific goods sold or to be sold for any specific purpose appears suitable for
that purpose, such sold or to be sold goods shall be considered to be of satisfactory quality.
(3) Notwithstanding any matter contained in Sub-section (2), in case any defect in the
goods has been mentioned in the contract itself or in case the buyer had become aware of any
defect before signing the contract or while inspecting the goods, those goods shall not be deemed
to be without or not comprising of satisfactory quality.
(4) In case the quality of specific goods has been mentioned in the contract, those goods
shall be deemed to be of the same quality and upon not being mentioned, the goods shall have
been qualitative as of the prevalent standard.
(5) Except otherwise provided in the contract, the seller shall not be deemed to have
given a warranty to the effect that the goods sold or to be sold has been of a specific quality.
552. The goods bearing different quality may be accepted or rejected: (1) In case the seller
delivers goods to the buyer in a different quality than that has been mentioned in the contract, the
buyer may accept and take the entire goods, reject the entire goods or accept some of the parts of
the goods and reject the remaining goods.
(2) In case the whole goods or some of its parts has been rejected as per sub-section (1),
the buyer may serve information to the seller so as to deliver the different goods as its alternative
or improve the quality in case the improvement of quality has been possible.
(3) In case the service of notice is made under sub-section (2), the seller shall deliver
different goods as alternative of the said goods or improve the quality of the goods as per the
notice of the buyer or as agreed between each other.
553. Contract shall be deemed to have been held for the sale through sample: (1) In case
provisions have been made in a contract to sell goods after inspecting their samples explicitly or
impliedly, it shall be deemed that the contract has been held for the sale of the goods after
inspecting samples of the goods.
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(2) In case a contract has been signed to sell goods after inspecting the sample, it shall be
deemed to include the following conditions, except otherwise provided for in the contract:
(a) The quality of the bulk of the goods shall correspond to the
samples in quality.
(b) The buyer shall have a reasonable opportunity to compare the

quality of the bulk of the goods with the sample.
(c) The goods sold or to be sold shall be free from any defect, and that
their satisfactory quality shall be seen while inspecting the goods at
the time of comparing them with the sample.
554. Provisions concerning transfer of ownership of goods: (1) In case a contract has been
concluded to sell specific or particular goods, the delivery of such goods shall be made as
provided for in the contract, if any, and if not, pursuant to the conditions of the contract, the
conduct of the parties and the intention of the parties expressed through the concerned
circumstances.
(2) Except otherwise provided for in the contract, in case a contract has been signed in
such a situation that specific goods can be delivered immediately, the parties shall be deemed to
have the intention of delivering them after concluding the contract or paying their price.
(3) In case a contract has been signed in such a situation that specific goods can be
delivered immediately, and in case the buyer has to weigh, measure, examine or execute any
function to determine the price of such goods, such goods shall not be delivered until such
functions are performed and information thereof is served to the seller within a reasonable
period.
(4) Except otherwise provided for in the contract, a contract shall be deemed to have been
concluded with the provision to deliver the goods at the very place where it has been sold or is
to be sold.
(5) Except otherwise provided for in the contract, the right or ownership of the buyer
shall be deemed to have been established over the goods from the very moment when the
delivery of the goods is made to him/her.
555. Risk to be borne: (1) Except otherwise provided for in the contract, the seller him/herself
shall bear the risk of any loss, damage to the concerned goods until the delivery of the goods is
made to the buyer.
26
(2) In case there has been a delay in the delivery of goods due to any reason concerning
the buyer or the seller, the party responsible for such delay shall bear the risk of loss, damage
under Sub-section (1).
(3) In case the seller has agreed to deliver goods from the place of purchase to the place
specified by the buyer, the seller him/herself shall bear the risk of any loss or damage to goods,
except otherwise provided for in the contract.
556. Buyer's right to ascertain goods: In case the delivery of the sold goods is made to the
buyer; the buyer shall have a reasonable opportunity to examine and ascertain whether or not
such goods has been in line with the contract and he/she shall not be deemed to have accepted
the goods until he/she ascertains accordingly.
557. Goods to be deemed to have been received : The buyer shall be deemed to have received
the goods in any of the following circumstances:
(a) In case the buyer or his/her representative has received the goods;
(b) In case a receipt or letter acknowledging the delivery of the goods has been issued;
(c) In case the buyer inspects the goods and ascertains that the goods has been in line
with the contract under Section 556, and accordingly keeps the goods in his/her storage;
(d) In case the goods reaches to the buyer and is retained by him/her, without
sending information about his/her refusal to accept the goods within a reasonable time
limit,
(e) In case he/she does something to prove his/her ownership and control over such
goods.
558. Time-limit for delivering goods: (1) In case the contract provides that goods to be
delivered at any specified time or within any specified period, the seller must deliver the same to
buyer at that very time or within that very period.
(2) Notwithstanding anything contained in Sub-section (1), in case the buyer accepts
goods delivered by the seller before the time or period prescribed in the contract, or after the time
or period prescribed in the contract, the seller shall be deemed to have delivered the goods.
559. Documents relating to sold goods to be handed over: Except otherwise provided for in
the contract, the ownership of goods shall not be deemed to have been transferred by mere
transfer of the goods after sale until basic documents related with the ownership or required for
the use is handed over.
27
560. The goods different from the contracted quantity shall not be delivered: (1) In case the
seller delivers goods to the buyer in a quantity less than the quantity mentioned in the contract,
the buyer may refuse to accept the goods.
Provided that, in case the buyer accepts goods even in the quantity as such, he/she shall be
required to pay the price of the quantity as such at the rate mentioned in the contract.
(2) In case the seller delivers goods to the buyer in a quantity higher than the quantity
mentioned in the contract, the buyer may accept the goods only in the quantity mentioned in the
contract, and reject the rest or the entire quantity.
Provided that, in case the buyer accepts the entire quantity of goods delivered as such, he/she
shall be required to pay for the entire quantity at the contract price.
(3) In case the seller delivers to the buyer the goods mixed with goods of a description
not included in the contract, the buyer may accept the goods mentioned in the contract and reject
the rest, or reject the entire quantity.
(4) Except otherwise provided for in the contract, the buyer shall not be obliged to accept
delivery of goods in installments.
(5) Except otherwise provided for in the contract, in case the buyer refuses to accept
goods brought by the seller for delivery, the buyer shall not be bound to return the refused goods
to the seller.
Provided that, the buyer shall inform the seller through the earliest possible means about his/her
refusal to receive the goods along with the reasons thereof.
561. Special provisions concerning with compensation: Notwithstanding anything contained

elsewhere in this Part, action in respect to compensation for contract under this chapter shall be
taken as follows:
(a) In case a buyer does not accept or refuses to accept or refuses to pay the price of
goods after once concluding the contract relating to sale of goods, the seller may, subject to the
contract, claim compensation from the buyer in consideration of the buyer's failure to accept or
refusal to accept the goods.
(b) While ascertaining the compensation under Section (a), in case goods not accepted or
rejected for acceptance by the buyer is available in the market, compensation shall be ascertained
on the basis of the difference between the price of goods mentioned in the contract and the
market or current price.
28
(c) In case the seller does not deliver or refuses to deliver goods according to the contract
after concluding the contract relating to sale of goods, the buyer may claim compensation from
the seller in consideration of his/her failure to deliver the goods.
(d) While determining Compensation under Section (c), in case the goods which the
seller has refused or failed to deliver to the buyer has been available in the market, compensation
shall be determined on the basis of difference between the price of the goods mentioned in the
contract and the market or current price.
Chapter- 7
Contract relating to Guarantee
563. Contract relating to guarantee: (1) A contract relating to guarantee shall be deemed to
have been concluded in case it provides that if any person defaults in the repayment of the loan
obtained by him/her or fulfillment of the obligation accepted by him/her, it shall be repaid or
fulfilled by a third person.
(2) In case a third party has provided guarantee under Sub-section (1) and in case the
person who has to repay the loan does not repay it or fulfill the obligation to be fulfilled, the
person providing guarantee for such loan or obligation shall repay the loan or fulfill the
condition according to the contract.
(3) The conditions of guarantee shall be held as determined in the contract.
(4) Contract relating to guarantee must have been made in writing.
564. Liability of Surety:
(1) Except when otherwise provided for in the contract, the surety's liability shall be as follows:
(a) Liability of the surety shall emerge from the very moment when
the person who has to meet the liability fails to meet it.
(b) Liability of a surety shall be similar to that of the person who has
to repay the loan or fulfill the liability and that the surety shall
remain responsible until the person becomes free from the
liability of repaying the loan or fulfilling the liability.
29
(c) The liability of a surety shall not terminate simply because the
person who has to repay the loan or fulfill the liability becomes free
from the liability by the mobilization of law.
(2) Notwithstanding any matter stated in sub-section (1), in case both security and
guarantee have been provided in consideration of any loan or liability, the surety shall have
no liability to the extent catered by the security so provided.
(3) Immediately after the default by the person who is under obligation to repay the loan
or fulfill the obligation in favor of the creditor the contract relating to guarantee shall be held
effective and the creditor may cause the surety to fulfill the liability as such.
Explanation For the purpose of this Part, the term 'creditor' shall refer a person who has
provided the loan and this term also includes a person who may derive any benefits from or have
any work done by the person who has to repay the loan or fulfill the liability.
(4) Notwithstanding any matter stated in sub-section (3), prior to make claim for the
amount or fulfillment of the liability from the surety as per the contract relating to guarantee the
creditor shall serve notice to the debtor for the fulfillment of the contract as per the terms and
condition of the contract.
565. Conditions in which surety shall be discharged from the liability: (1) Except otherwise
provided for in the contract, the surety shall be discharged from liability to the following extent
as mentioned in any of the following circumstances:
a) In case the person who has to repay a loan or fulfill a liability

changes the terms and conditions of the contract extending substantial
impact on the contract without having approval of the surety, in respect
to the transaction to be carried out after such changes.
(b) In case a contract is concluded to release from liability to the

person who has to fulfill the concerning matter in respect to which the
guarantee has been provided.
(c) In case the person who has to repay a loan or fulfill a liability is
released from liability, or in case the loan is waived, by the action of
the creditor.
(d) In case the creditor agrees to release the debtor from the liability
by collecting a sum less than what is due, or to provide additional time limit
for repaying the loan, or not to initiate a litigation.
30
(e) In case any action of the creditor causes an adverse impact to the
surety's right to have legal remedy against the person who is under
obligation to repay the loan or fulfill the liability.
(f) In case the creditor loses, damages or returns any security obtained
by him from the debtor, to the extent of the value of that security.
(g) To the extent to which the person who is under obligation to repay
a loan or fulfill a liability has repaid the loan or fulfilled the liability
according to the contract.
(2) Notwithstanding anything contained in Sub-section (1), the surety shall not be
deemed to have been released from the liability, except otherwise provided for in the contract,
merely because the creditor fails to initiate legal action against the surety or try to realize the
amount to be realized by him/her in time.
(3) In case there are two or more sureties, and in case the creditor releases any one of
them from the liability, the other surety/sureties shall not be free from his/her share in the
liability.
(4) In case the share in the liability of the surety/sureties can not be divisible, no surety
shall be deemed to have been released from his/her liability merely because the creditor has
released him/her from the liability.
(5) Except otherwise provided for in the contract, in respect to a contract relating to
guarantee which has been concerned with the fulfillment of a liability, the surety shall not be
deemed to have been released from the obligation of fulfilling the liability under the contract
merely because a dispute has arisen among the parties in relation to that contract creating
liability.
566. Relationship between the Surety and the Debtor: Except otherwise provided for in the
contract, the relationship between the surety and the debtor in respect to the following matters
shall be as follows:
(1) The surety shall cause to repay the loan or fulfill the liability according to the
contract to the person who is under obligation to repay the loan or fulfill the liability.
(2) In case the debtor has handed over any property or security to the surety in
consideration of the guarantee provided by him/her while obtaining the loan or accepting a
liability, the surety may not pledge, mortgage, sell or otherwise transfer such goods or security
without the consent of the debtor.
31
(3) In case the guarantee has been provided in consideration of any loan obtained or
liability accepted for any specific purpose, the objectives, nature or terms and conditions of that
loan or liability may not be changed without the consent of the surety.
(4) Notwithstanding any matter contained in other places of this Act, the matters relating
to the relationship of surety and debtor shall be held as written in the contract, if any.
567. Surety to substitute creditor: (1) After the surety repays the loan to be repaid by the
debtor or fulfills the liability to be fulfilled by the debtors under the contract to the creditor, the
surety shall substitute the creditor in regard to that loan or liability and he/she may initiate legal
action against the debtor as the creditor.
(2) Notwithstanding anything contained elsewhere in this chapter, the total amount and
interest due on that amount, or any other fee or amount payable on that, shall be paid by the
debtor to the surety in consideration of the loan that has been repaid or liability fulfilled by the
surety on behalf of the debtor.
(3) In case it seems essential to take legal action because of the default of the debtor to
pay the amount payable by him/her under Subsection (2), or in case it appears essential to spend
any other expenses in consideration of the same, the surety may recover such expenses from the
debtor.
568. Conditions to make contract of Guarantee to be void: The surety may cause to declare
void the contract relating to guarantee in any of the following circumstances:
(a) In case the creditor him/herself, or any other person with the consent of
creditor, has obtained the guarantee by serving false or misleading information or notice
to the surety in connection with the matter connected with the transaction in respect to
which the guarantee has been provided;
(b) In case the subject matter, property or facts relating to guarantee have been
concealed or not mentioned;
(c) In case the contract has been concluded with a provision placing the third person as
a surety, and the third person has not given his/her consent to provide the guarantee.
569. Equal liability of co-sureties: (1) In case two or more person have jointly or separately
provided joint guarantee for any loan or liability, and in case the debtor fails to repay the loan or
meet the liability, the co-sureties shall repay the loan or fulfill the liability or perform the
contract on an equal basis, except otherwise provided for in the contract.
32
(2) In case the guarantee has been provided on a sector wise basis while providing joint
guarantee under Sub-section (1), a surety shall be required to meet only the liability for that
sector for which he/she has provided the guarantee.
570. Continuous Guarantee: (1) In case the guarantee is issued for the series of transactions the
continuous guarantee shall be held to have been in existence.
(2) In case the guarantee under sub-section (1) has been provided for, irrespective to the
number of transactions held, the surety shall be held responsible for the entire period of existence
of the contract of guarantee to the extent of the amount of guarantee which has not been paid off.
(3) The creditor may, with the service of prior notice of at least three months, cancel the
continuous guarantee for future transactions.
(4) Unless otherwise provided for in the contract, in case the surety dies, the continuous
guarantee shall be held ipso facto void for the post transactions thereof.
571. Contract relating to indemnity shall be held to have been concluded: (1) A Contract
relating to indemnity shall be held to have been concluded in case a person promises to bear loss
damage by himself /herself while doing work under the direction of any party of the contract or
by the act and activity of the third party to him/her or such party or the third party.
(2) In case any contract under sub-section (1) has been held, subject to the contract as
such, such person may recover any or the entire following amount as the compensation.
(a) The indemnity amount mentioned in the contract;
(b) In case any loss or damage has been sustained to the third person,
the amount to be paid or borne in consideration thereof;
(c) The amount spent on the case filed or defended by him/her in

connection with the contract relating to indemnity;
(d) The amount spent for the legal action, if it had been essential to
initiate such action for failure to pay the amount mentioned in Section
(a) (b) or (c).
(3) Notwithstanding anything contained in Sub-section (2), in case any person, while
working under the direction of the other party, works with recklessness or with the intention of
causing any loss or damage to that party or a third person, and in case the concerned party or the
third person suffers a loss, damage as a result thereof, the doer of work of such work shall
him/herself be responsible for such loss or damage.
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572. Provision relating to subrogation: (1) In case any person has concluded a contract with
any other person against any loss or damage that could be caused by a third person toward
his/her property, facilities, rights or profits that could result from his/her business, the other
person who has signed the contract shall him/herself bear any such loss or damage irrespective of
the matter who is responsible.
Provided that, in case the contract has been concluded with a provision to have any such
loss or damage borne by any other person, such loss or damage shall be realized from that
person.
(2) In case the amount or compensation to be paid for any loss or damage under Sub-
section (1) has been mentioned in the contract, it shall be done accordingly and in case no such
provision has been made in the contract, a reasonable amount or compensation shall be paid, or
arrangements be made for payments, to the person affected by the loss or damage, or to his/her
heir in case he/she is dead.
(3) In case there has been any loss or damage as mentioned in Sub-section (1), the person
paying the amount or compensation under Subsection (2) shall be deemed to have subrogated the
person who has sustained the loss or damage, and, accordingly, the subrogator may have the
amount or compensation in consideration of such loss or damage recovered from the person
causing such loss or damage.
573. Rights of subrogator: The rights and liabilities of a subrogator shall be as mentioned in the
contract, if any, and if not, it shall be as follows:
(a) All the rights of the person who has sustained the loss or damage shall devolve with
the subrogator.
(b) The subrogator mentioned in Section (a) may realize from the person who has caused
the loss or damage, or from the party to a contract concluded in that connection, if any, the
amount or reasonable compensation paid by him/her to the person who has suffered the loss or
damage, as well as the expenses incurred in
contesting for legal remedy, if any.
Chapter-8
Contract relating to Bailment
34
575. Contract relating to Bailment: (1) A contract relating to bailment shall be deemed to
have been concluded in case a person delivers any goods to another person on a returnable basis
or for handing it over to any other person or selling it as ordered by him/her.
Explanation: For the purpose of this chapter, the term 'goods' refers any movable goods and
ownership over such goods except the money in practice.
2. While concluding the contract as per Sub-section (1), a deed shall be executed for the
bailment of the goods worth much than Rs. 25,000.00
576. Obtainment and handing over of bailment to be deemed completed: (1) The process of
bailment shall be deemed to have been completed after the bailee receives the bailed goods for
being kept as such.
(2) In case any goods has already been kept by any person or a person authorized by
him/her under his/her custody or control, the concerned goods shall be deemed to have been
taken by him/her as a bailed goods.
577. Particulars of bailed property to be mentioned: (1) In case the bailee knows that the
bailed goods must not be used due to any defect in it, or it may cause any loss or damage or
separate arrangements or provisions be made for its protection, he/she shall inform the bailee
about all such matters to the best of his/her knowledge.
(2) In case any information to be served under Sub-section (1) is not served even while
knowing about it, the bailer must bear the loss or damage caused by that goods or because of that
goods to the bailee.
(3) Notwithstanding anything contained in Sub-section (2), in case any goods given on
bailment causes any loss or damage while using it due to its defect, the bailer must bear such loss
or damage even if he/she has no knowledge about the defect in the goods.
578. Liability of Bailee: (1) A bailee shall take care and arrange for the safety of the goods
received by him/her as bailed goods as mentioned in the terms and conditions of the contract, or
as his/her own goods in case nothing has been mentioned in the contract.
(2) Except otherwise provided for in the contract, in case any bailed goods is lost, stolen,
damaged, destroyed, decreased or harmed because of natural calamities despite taking care and
arranging for its security under Sub-section (1), the bailee need not return such goods.
Provided that, in case the goods is lost, stolen, damaged, destroyed, decreased or harmed
because of the recklessness or mala fide intention of the bailee, or of his/her failure to take care
or ensure its safety according to the terms and conditions of the contract, he/she must return the
property or pay an equivalent amount to the bailer.
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(3) In case the bailee uses the bailed goods without having the right to do so under the
contract or in a manner contrary to the terms and conditions of the contract, and in case such use
causes any loss, damage, destruction, decreases or harm to the goods, the bailee shall pay for
compensation to the bailer.
(4) Except otherwise provided for in the contract, the bailee shall not mix-up the bailer's
goods with his/her own goods.
Provided that, in case the bailee has mixed-up his/her own goods with that of the bailer,
both parties shall have title on that goods, as well as to the income accruing there from, in
proportion to their respective shares.
(5) In case the bailee has mixed-up his/her own goods with the bailer's goods without
obtaining the consent of the bailer and the goods so mixed-up can be divisible, the two parties
shall have title to their respective goods so divided, and the expenses incurred for division the
goods so mixed and the loss, if any caused, to the bailer while mixing-up such goods in that
manner shall be borne by the bailee.
(6) In case the bailee has mixed-up his/her own goods with the bailer's goods without the
consent of the bailer and their goods cannot be divisible as mentioned in Sub-section (5), the title
of the bailer over such goods shall be established.
579. Bailed property to be returned: (1) After the expiry of the period prescribed while bailing
the goods or fulfillment of the objectives for which the goods has been bailed, the bailee shall
return the bailed goods to the bailer.
(2) In case the goods is not returned under Sub-section (1) within the prescribed period,
or within a reasonable period according to the nature of the goods where no such period has been
prescribed, or in case the bailer does not take it back and the property is lost, stolen, damaged,
destroyed or decreased after that date or bailer suffers any loss or damage due to that goods after
that date, the party because of whom, the loss or damage has resulted shall bear the loss or
damage.
(3) Except otherwise provided for in the contract, in the case of the bailed goods owned
by several persons, it may be handed over to any one of such owners or to the person ordered by
them, and such hand over of the goods in the manner as such shall be deemed to have been
properly done.
(4) In case the bailer does not maintain the goods as per the conditions of the contract the
bailer may take back such bailed goods at any time.
(5) Except otherwise provided for in the contract, the goods raised or earned through the
bailed goods shall also belong to the bailer.
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580. Person bailing other's goods to be held responsible: In case any person bails any property
on which he/she has no title, right or ownership to any other person to keep as a bailed goods,
and the bailee has to bear any claim of a third party or any loss, damage or any expenses for
accepting that bailment the bailer shall be required to bear such expenses as well.
581. The goods handed over for repair and maintenance shall be returned: (1) In case a
person hands over any goods for repair, improvement or reconstruction by any means such
person shall repair, improve or reconstruct such goods within the prescribed time of the contract
by taking the expenses incurred thereof or service charge to the concerned owner. In case it is not
returned within the prescribed time or additional loss, harm is extended during the reconstruction
or loss is extended making it unsuitable for reuse he/she shall bear as mentioned in the contract,
if any, and reasonable compensation, if not mentioned, to the concerned owner.
(2) Notwithstanding any matter contained in sub-section (2) until the payment of
expenses or service charges incurred for repair, improvement or reconstruction of any goods,
such goods may be kept by the person repairing, improving or reconstructing it and in case such
expenses or service charges have not been paid off in time the said person may sell such goods
and recover his/her expenses or service charge.
582. Expenses relating to care of the bailed goods: While bailing a property, expenses
incurred for taking care and safety of the of the bailed goods shall be borne by the bailer, except
otherwise provided for in the contract.
583. Contract relating to bailment to be held void: (1) In case it is proved that any property
has been bailed with the intension of avoiding a partition of property or payment of any
government charge or sum, any amount payable to anybody, or with any other illegal motives,
the contract relating to such bailment shall be held void.
Chapter -9
Contract relating to Pledge or Pawn
585. Contract relating to Pledge or Pawn: (1) In case any person has obtained a collateral
while supplying credit to anybody as a security for that credit there shall be contract relating to
pledge, or obtained any goods as a deposit in the form of a guarantee to perform the related work
while having any work performed a contract relating to Pawn (deposit) shall be deemed to have
been concluded.
Explanation: For the purpose of this Chapter, the term 'goods' shall refer to any property
and title or document establishing title to that property.
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(2) The contract of Pledge or Pawn may also be entered as per sub-section (1), in case a
collateral has been obtained while providing a credit, for the credit and interest thereon, and in
case any deposit has been obtained to perform any work the other expenses relating to that work,
for the expenses incurred for taking care the goods under Pledge or Pawn.
586. Pledge or Pawn to be returned: (1) Except otherwise provided for in the contract, the
collateral obtained for a credit shall be returned after the repayment of the credit, or the deposit
obtained for a work shall be refunded after the completion of that work to the pledger / pawner.
(2) In case the Pledge or Pawn kept under Sub-section (1) has been or can be divided into
different parts, the Pledge or Pawn may be returned to the extent incorporated by the portion of
the credit repaid or work performed.
587. Rights of person obtaining Pledge or Pawn: (1) In case a credit has been obtained by
pledging any property as collateral and the debtor fails to repay the credit or interest thereon, if
any, within the prescribed period, the person who has taken the collateral may initiate action as
per law and realize the amount to be realized in consideration of that credit by selling or
auctioning the collateral according to prevalent market price or transfer the title on its own name
to such collateral subject to law in case it can not be sold or auctioned.
(2) In case the property kept as collateral is sold at a price lesser than the amount to be
realized from the debtor by the person who has the collateral under Sub-section (1), the shortfall
may be recovered from other assets of the debtors and in case the collateral is sold at a price
higher than the amount to be recovered, the excess amount shall be refunded to the debtor.
(3) Notwithstanding anything contained in Sub-section (1) and (2), in case the property
kept as collateral has not yet been sold or the title to it has not been transferred, the person who
has pledged the property as collateral may get back his/her property by repaying the credit and
interest thereon and any other amount payable, at any time.
Provided that, the person pledging the property as collateral shall also bear the further
liability emerging on the property handed over as collateral owing to his failure to repay the
amount within the stipulated period.
(4) In case anyone has been entrusted with the responsibility of performing any work by
obtaining any property as deposit, and the concerned person fails to complete the concerned
work or the concerned work fails to be completed within the stipulated period, the property kept
as deposit may be used to complete the work or to recover the expenses incurred thereupon.
(5) In case the work can not be completed with the property kept as deposit, the amount
in shortfall may be recovered from the other assets of the person who has furnished the deposit.
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588. Consequences of pledging property without ownership as collateral or deposit: (1) In

case anyone has obtained a credit or work by pledging as Pledge or Pawning any property to
which he/she has no title or ownership or any property received under a contract which is void
under this Act, and the person obtaining such Pledge or Pawn has no knowledge about the
matter, the person taking pledge or pawn may demand with the person handing over the property
as pledge or pawn the goods under his ownership equivalent to it as pledge or pawn and in case
of failure to hand over pledge or pawn the person taking pledge or pawn may get the contract as
such avoided.
(2) In case any goods received under a void contract as per this Chapter has been kept as
Pledge or Pawn, and such contract had become void before making such Pledge or Pawn or the
party receiving the Pledge or Pawn knows that the concerned goods did not fall under the
ownership of the person furnishing it as Pledge or Pawn, the person obtaining such property as
Pledge or Pawn shall have no right to it and may realize the amount to be realized by him/her or
have the work to be performed from the other property of the party furnishing the Pledge or
Pawn.
(3) In case the person furnishing the Pledge or Pawn has a partial or limited title to or
ownership of the property handed over as Pledge or Pawn, the person accepting such property as
Pledge or Pawn shall also have title to that property to the same extent.
589. Creditors to have equal status: (1) In case anyone has obtained credit from several
creditors in one or several installments by pledging his/her property as collateral, and the
property so pledged as collateral is not sufficient to repay the credit of all the creditors, all the
creditors who have used the property as collateral shall be deemed to have equal status in respect
to outstanding credit and all of them may make a proportionate claim on the property, except
otherwise provided for in the contract.
(2) In case any property which has already been pledged as collateral under Sub-section
(1) is again pledged as such with a provision to give priority to the next creditor in the future, the
concerned contract shall be void. In case the creditor has already realized his/her credit from the
collateral before the contract becomes void even while knowing that there are other creditors in
respect to the collateral, he/she shall refund the amount to the other creditors and realize his/her
credit from the other assets of the person who has pledged the property as collateral.
Chapter- 10
Contract Relating to Agency
39
591. Contract relating to Agency shall be deemed to have been held: Any person may appoint
any other person as his/her agent to do anything on his/her behalf, except something concerned
with his/her personal skills or to undertake business as his/her agent for transaction with a third
person on his/her behalf or to represent himself/herself to such person, or to establish any kind of
legal relation with the person appointing an agent (principal person) and a third person, and in
case an agent is so appointed, a contract relating to agency shall be deemed to have been held.
592. Recognition of transaction made or carried out by an agent: (1) A person is entitled to
do or get done any work to be done by himself/herself via agent subject to law.
Provided that, no work which shall be done by attending in person could be done via the
agent.
(2) The liability resulting from the contract concluded through an agent appointed under
Section 591 or from the action taken or work performed by the agent, shall be recognized as
resulting from a contract signed or work performed by the principal person, and implemented
accordingly.
Provided that, the principal person shall not be responsible for any action taken by the
agent beyond his/her authority except the work that has been accepted by the principal.
(3) Notwithstanding anything contained in Sub-section (1), among the actions taken
beyond the authority, in case some of them are within his/her authority and some beyond it, and
in case the action taken from within his/her authority can be separated, the principal person shall
be responsible for actions taken to the extent of his/her authority.
593. Sub-agents may be appointed: (1) In case it is necessary to appoint, a sub-agent according
to the nature of any trade, business or transaction, or in case a sub-agent can be appointed
according to provision contained or practice followed in the contract relating to agency, the agent
may, except otherwise provided for in the contract, appoint a sub-agent with the acceptance of
the principal person.
Provided that, an agent who has been appointed on the condition that he/she will
personally represent or personally execute any work may not be able to appoint a sub-agent.
(2) In case a sub-agent is appointed under Sub-section (1), the principal person shall be
informed accordingly, and a sub-agent so appointed in that manner shall have right and duty
equal to that of the agent appointed by the principal person.
(3) In case any agent appoints a sub-agent without the acceptance of the principal person,
the latter shall not be responsible for any action taken or work performed by the sub-agent.
40
(4) The agent appointing sub-agent as such shall be held personally responsible for the
works and actions under Sub-section (3).
594. Matters to be complied with by agent: (1) Except when otherwise provided for in the
contract, an agent shall comply with the following matters:
(a) Work shall be performed subject to the conditions of the contract relating to
agency and the directives issued by the principal person.
(b) In case no condition has been mentioned in the contract or the principal person
has issued no directive, the agent shall work as entrusted to him/her in the manner
in which it has to be performed according to the nature of the trade and business
and the laws and practices of the place of transaction, with good faith, full
dedication and necessary skills and efficiency.
Provided that, in case the principal person has knowledge in advance that
the agent has no skill or capability in respect to any subject, the agent shall not be
held responsible for any loss or damage resulting from such lack of skill or
capability.
(c) An agent who has been removed from his/her position shall not do anything on
the same subject, as before, in the capacity of an agent.
(d) The agent shall supply or show details of account and record relating to the
agency business when it is sought by the principal person.
(e) In case any obstruction, obstacle or difficulty arises in the course of

performing work relating to agency, the agent shall notify the principal person as
soon as possible and obtain necessary directives, and the principal person shall
him/herself be responsible for any action taken according to the directives so
issued.
(2) In case the principal person suffers any loss or damage because of the failure of the
agent to fulfill his/her duties under Section (a), (b) and (c), agent shall personally bear loss or
damage so incurred.
595. Agent to be held responsible: (1) Except when otherwise provided for in the contract, the
agent shall be held personally responsible for transactions entered by him/her on behalf of the
principal person in the following circumstances:
(a) In case he/she enters a contract with a third party in relation to any transaction
with provision for personal responsibility;
41
(b) In case any work has been done for or on behalf of an unidentified principal
person, in case the principal person is not disclosed;
(c) In case the principal person can not be sued for any reason;
(d) In case the contract has been signed in the agent's own name;
(e) In case anything has been done in contravention of the contract relating to the
appointment of agent or beyond his/her authority;
(f) In case any fraud or cheating has been committed in the course of the
transaction;
(g) In case the agent has to bear personal liability according to the nature of the
trade;
(h) In case the interest of the agent is also involved in the transaction;
(2) Except otherwise provided for in the contract concluded between the agent and a
third person, only the fact that the agent is personally responsible under Sub-section (1)
shall not be deemed to have prejudices the right of the third person to make any claim against
the principal person and legal action may be initiated against the principal person as well
for arrears due not recoverable from the agent.
(3) For the purpose of initiating legal action against the principal person under Sub-
section (2), the time limit shall be deemed to have begun from the date of the last payment
recovered from the agent.
596. The principal person shall be responsible upon impressing the grant of Authority: (1)
In case the principal person informs the third party that he/she has granted authority to the any
other person to do on his/her behalf or extends impression for the same the principal person shall
be held responsible for the works of agent done on his/ her behalf except where the third party
gains knowledge on the lack of authority as such or there prevails responsible cause to gain
knowledge as such.
(2) In the circumstance under sub-section (1) in spite the fact that the agent has done any
work exceeding the authority if there exists reasonable ground for belief of the third party that
the agent has been assigned authority the principal person shall be held responsible for the works
carried up by the agent.
597. Termination of agency: (1) Except when otherwise provided for in the contract, the agency
shall be deemed to have ipso facto terminated in the following circumstances:
42
(a) In case the agent voluntarily informs the principal person not to
continue agency;
(b) In case the principal person terminates the authority granted or

signed with the agent or gives a notice to the agent regarding the
impossibility of complying with the contract;
(c) In case the agent has been appointed for any specific work that
works is completed;
(d) In case the agent has been appointed for a specific period, after the
expiry of that period;
(e) In case the principal person or the agent dies or loses his/her
senses;
(f) In case the principal person is declared bankrupt;
(g) In case the subject regarding, which the agent has been appointed
no longer exists;
(h) In case an agent is appointed by a corporate body, if the corporate

body is liquidated.
(2) All or any of the power granted by the principal person to the agent may be
cancelled at any time before the agent exercises them and the information of cancellation as
such shall be promptly served to the agent.
Provided that, in case the agent has already exercised some of such powers, the
work performed regarding to those powers shall not be deemed to have been cancelled.
(3) Notwithstanding anything contained elsewhere in this Section, in case the agent has a
share in the property related with the main subject of the agency, the agent may not be dismissed,
in such a manner as to have a negative impact on such share.
598. Prohibition to remove agent: (1) Except when otherwise provided for in the contract, in
case an agent has been appointed for any specific period or work, the principal person shall not
remove him/her before that period or before the completion of that work without appropriate and
sufficient reasons.
(2) An agent who has been appointed without prescribing any specific period or work can
not be removed without a prior notice mentioning appropriate reasons;
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(3) In case the principal person removes any agent in a manner opposed to Sub-sections
(1) or (2), the principal person shall pay a reasonable compensation to the agent.
599. Agent prohibited from leaving agency: (1) Notwithstanding any matter stated in this
Chapter, except when otherwise provided for in the contract, the agent who has been appointed
for a specific period or work shall not stop working as an agent before the expiry of the specific
period or completion of the specified work without appropriate and sufficient reasons.
(2) An agent who has been appointed without specifying the period or work under Sub-
section (1) shall not leave that work without informing the principal person in advance along
with the reasons for doing so.
(3) In case any agent stops working in that capacity contrary to Sub-section (1) or (2), the
principal person may claim a reasonable compensation.
600. Sub-agent also to be removed if agent is removed: In case an agent no longer remains in
that capacity under this act, the sub-agent appointed by him/her shall also be deemed to have
automatically removed.
Chapter- 11
Contract Relating to Carriage of Goods
602. Contracts relating to Carriage shall be held: (1) A contract relating to carriage shall be
deemed to have been concluded if it provides for the carriage of goods from one place to another.
(2) Except otherwise provided for in the contract, the receipt to be issued by the Carrier
to the owner of goods for the carriage at the time of handing the goods for the purpose of
Carriage shall be recognized as proof of contract between the carrier and owner of the goods.
Explanation:
For the purpose of this Chapter, the term 'Carrier' means a person operating a transport service
other than air or marine transport, or a person operating a business for such operation and the
44
term also includes a person operating the transport business through internal Water way or Rope
way or by Animal or any other means.
Provided that, in case any person employed by the owner of goods on wage basis or
his/her agent or a person working under him/her transports goods, he/she shall not be recognized
as a Carrier for the purpose of this chapter.
603. Liability of Carrier: (1) It shall be the liability of the Carrier to transport goods received
from the owner of the goods for Carriage in proper condition at the prescribed place.
(2) In case goods received from the owner for Carriage is lost, destroyed, broken, broken,
harmed or damaged, or in case the goods is not brought to its destination in proper condition for
any other reason, the Carrier shall be held responsible.
(3) The Carrier shall carry goods within the period mentioned in the contract, and within
a reasonable period in case no period for carrying the same has been mentioned in the contract
and hand over the goods to the owner of the goods or his/her agent or a person prescribed by
him/her.
604. Carrier to be held responsible:
(1) In case it becomes essential to transport goods through more than one Carrier or
though more than one means of transport, the Carrier to whom the owner of goods has handed
over the goods shall be held personally responsible except otherwise provided for in the contract.
(2) In case the goods is stolen, lost, depreciated or gets destroyed before the carrier hands
over the goods by carriage to the concerned person the carrier shall be held responsible.
Provided that, in case the goods as such has been lost, depreciated or destroyed by disaster or
accident the carrier shall not be held responsible.
605. The goods may be sold without the consent of the Owner: (1) In case any goods could
not be brought to the destination during the transportation due to disaster or accident within the
prescribed time and that in case such goods could be destroyed or its price or quality could be
substantially decreased the carrier may sell the goods as such without having consent of the
owner as well.
606. Liability of Carrier to be limited: (1) Except when the owner of goods or his/her agent has
clearly declared at the time of concluding the contract that the goods to be transported is worth
more or except otherwise provided for in the contract, the amount of compensation to be paid by
a Carrier for any loss or damage to goods carried by him/her shall not exceed One Hundred
Thousand Rupees.
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(2) Notwithstanding anything contained in Sub-section (1), the Carrier shall not be held
liable for any loss or damage to gold, sliver, diamond jewels or goods made thereof, precious
stone, negotiable instruments, securities, documents registered by offices, certificates issued by
educational and other institutes, coins, bank notes, postal stamps, fish, meat, fresh fruits and
vegetables, insecticide and inflammable materials, petroleum products, precious art pieces, idols,
curio goods or fragile goods made by glass or the goods that could be easily broken, smashed or
damaged, wildlife and pets, birds, handicrafts materials, arms and ammunition, explosives,
electronics devices (radio, television, computer, mobile and similar other goods) and their spare
parts, machinery goods and specified in prevailing law as those which have to be declared by the
owner before their Carriage by the owner of the goods, except the owner or his agent has clearly
declared them at the time of concluding the contract or at the time of handing them over to the
Carrier for Carriage.
(3) For the purpose of bearing the risk involved in the Carriage of goods mentioned in
Sub-section (2), the Carrier may get insured against the risk through the owner or his/her agent
or by him/herself by collecting a separate fee for the purpose, or take other necessary
arrangement to avoid the risk.
607. Carrier to be responsible: A Carrier shall pay a reasonable compensation to the concerned
owner for any loss or damage in the process of Carriage of goods declared at the time of signing
the contract or handing over the goods to the Carrier for Carriage under this Chapter, or for
goods which need not be declared, as provided for in the contract, if any, and, if not,
reimbursement of the transported goods with the agreement of the owner of the goods, or in case
no such agreement is reached or can be reached, according to the current price of the goods, and
if the current price can not be determined, a reasonable compensation as well, subject to Chapter-
5 shall be given for loss/damage extended to the owner of the goods, be borne.
608. Carrier's liability to be terminated: Except otherwise provided for in the contract, the
liability of a Carrier shall be deemed to have terminated in any of the following circumstances:
`(a) In case the Carrier or his agent transports the goods and hands them over to the
owner or his/her agent, or a person assigned by him;
(b) In case the goods handed over to the Carrier is received back by the owner or
his/her agent before the carriage.
(c) In case the Carrier or his agent returns the goods to the owner or his/her agents
citing the reason of inability to carry the goods within the prescribed period in the
circumstances mentioned in Section (b) of Sub-section (2) of Section 531.
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Chapter-12
Provisions relating to lease contract
610. To deem lease contract made : (1) In case a contract is made by a person to let another
person use any goods remained under his/her right and ownership and use the profit
received from this for a certain period on condition to obtain regular rent, lease contract
shall be deemed to have been made.
Explanation : For this chapter, "goods" means any property from which profit may be
gained by consuming, using or utilizing without harming it.
(2) In case lease contract is made as per Sub-section (1), except the provision
made otherwise in such contract, the lesser shall have to ensure the lessee the following
things:
(a) To transfer a certain goods for use as per contract,
(b) To retain the goods transferred as per Section (a) in the usable or
utilizable condition at the time of transfer.
(c) To make an arrangement to use or utilize the goods transferred as

per Section (a) or (b) peacefully and uninterruptedly.
(3) Despite whatever has been written elsewhere in this Section, the goods which
is spoilt by use or consumable may not be lent on lease.
611. Not to change the form of the goods lent on lease : The lessee may not bring change in
the original form of the goods lent on lease, without the approval of the owner,
throughout the period of lease contract.
Provided that, no matters written in this Section shall prevent from repairing,
maintaining, reforming or renovating the goods lent on lease.
612. To use the goods received on lease with good faith: (1) The lessee may use and utilize
the goods received on lease with good faith in wise manner, as equal as the goods of
his/her own ownership.
(2) While using and utilizing the goods received as per Sub-section (1),it
shall have to be done according to the objectives of lease contract.
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(3) In case it is proven that the goods received on lease have been used contrary
to Sub-section (1) or (2), the lesser may terminate the contract at any time.
613. To repair and maintain the goods lent on lease: (1) Except the provision made
otherwise in the lease contract, the lesser shall have to repair and maintain the goods lent
on lease.
(2) Despite whatever has been written in Sub-section (1), in case the goods lent on
lease cannot be used or utilized without instantly repairing, maintaining or reforming
such goods, the lessee may repair, maintain or reform such goods after informing the
lesser.
(3) The lesser shall have to compensate or adjust in the lease rent the amount
spent for the repair, maintenance or reformation as per Sub-section (2).
614. To inform the lesser in case the goods is not usable : (1) In case the goods or any of its
part received on lease is harmed, lost or damaged in any manner, is not usable or
utilizable due to some cause, in case any person lays claim or shows illegal possession
upon such goods or any of its part in any manner, in case obstruction, interruption is
caused in any manner by somebody while using, the lessee shall have to instantly inform
the lesser regarding this.
(2) When informed as per Sub-section(1), the lesser must carry out necessary
repair, maintenance, reformation or legal remedy, whatever is to be done to bring the
goods received on lease back to the previous condition according to the nature of such
goods, and such work shall have to be carried out within fifteen days.
(3) In case the goods received on lease cannot be brought to the previous
condition within the deadline as per Sub-section (2), such goods has been lost or
damaged, not usable or utilizable, and claim has been laid or obstruction or interruption
caused to what ration, lease rent amount shall have to be reduced to that ratio.
615. Lesser to be responsible : (1) In order to protect the goods received on lease from being
lost and damaged, the lessee shall have to use or utilize such goods by adopting
sufficient safety measures according to the nature of such goods.
(2) In case the goods received on lease is spoilt or destroyed during the validity
period of lease contract due to any cause, or in case price is to become less upon losing,
damaging such goods by any manner, or by the carelessness of the lessee, his/her family
member, his/her agent or the third party, the lessee shall be responsible for this, and
he/she shall have to bring such goods back to the previous condition, and pay
compensation for this if he/she cannot do so.
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(3) Despite whatever has been written in Sub-section (1) or (2), the lessee shall
not be responsible in case the goods received on lease is lost and damaged due to force
majeure event.
(4) In case the lesser does not or cannot bring the goods received on lease back to
the previous condition after it is partially lost and damaged due to force majeure event as
per Sub-section (3), such loss and damage is caused to what ration, the lesser shall have
to reduce lease rent to that ratio.
Explanation : For the purpose of this Section, "force majeure event" means any of the
condition as follows:-
(1) Storm, earthquake, volcano,
(2) Excessive rain, flood, landslide, soil erosion, lightening,
(3) Inferno caused by any manner, except it is caused due to ill-intention,

carelessness or negligence of the lessee or his/her family, staff, employee
or the third party,
(4) Terrorism, civil insurgency, civil war,
(5) Other natural disasters of similar kind beyond human control.
616. To pay lease rent : (1) The lessee shall have to submit the lease rent amount to the lesser
as per the condition mentioned in lease contract.
(2) In case the condition to submitting the lease rent is not mentioned as per Sub-
section (1), lease rent shall have to be submitted on the following day of the expiry of
every month in case it is movable property, and within fifteen days of the expiry of every
fiscal year in case it is land obtained for farming, servitude, industrial or infrastructure or
building construction, and within one week of expiry of every month if it is other goods.
(3) Despite whatever has been written elsewhere in this Section, in case anybody
completely prevents lessee from using the goods or some of its part lent on lease by
showing illegal possession of use of right, posing obstruction and interruption or laying
claim upon such goods or some of its part, the lessee may reduce the lease rent for this in
proportionate manner.
617. Validity period of lease contract : (1) The lease contract made regarding the following
goods may not be valid for more than following period:-
49
(a) Thirty-five years if it is house-land obtained to construct house or

house-land being in use upon constructing house,
(b) Thirty-five years if it is the land obtained for the purpose of

servitude,
(c) Forty years if it is a land obtained for the purpose of the

construction, development and operation of infrastructure such as
industrial structure or road, canal, power generation,
(d) Twenty years if it is the land for farming,
(e) Nineteen years if it is house-land obtained for the purpose other

than what is written in Sections (a), (b), (c) or (d),
(f) Fifteen years if it is a vehicle,
(g) Fifteen years if it is mechanical equipment other than

vehicles,
(h) Fifteen years if it is other equipment except what is written in

Section (f) or (g),
(i) Ten years if it is a domestic animal,
(j) Ten years if it is other goods, except what is written in this Section,
upon looking into the durability and nature of such goods.
(2) Despite whatever has been written in Sub-section(1), the parties may extend
the validity period of the contract, by remaining under the validity period of such
contract, prior to the expiry of such deadline mentioned in Sub-Section.
(3) Despite whatever has been written in Sub-section(2), the parties of the
contract may make decision to extend or not to extend the contract period considering
about the location of the house and land exchanged on lease contract and the nature of the
goods.
618. The lend the goods received on lease on sub-lease : (1) Upon obtaining prior approval
of the lesser, the lessee may lend the goods or some of its part received on lease once to
any other person on sub-lease by making another lease contract.
(2) The lessee shall not be free from the liability remained valid towards the lesser
due to lending on sub-lease as per Sub-section (1).
50
(3) The conditions of the sub-lease contract regarding the goods lent on such lease
as per Sub-section (2) shall not be different from the conditions of the first lease contract.
(4) While determining the conditions of lease contract as per Sub-section (3),
provision may be made to make the sub-lessee responsible directly towards the lesser
regarding the goods obtained on lease, and in case such provision is made he/she shall be
responsible towards the lesser to the extent of the sub-lease contract.
(5) The validity period of the lease contract made as per Sub-section (1) shall not
be more than the validity period of the contract made between the lesser and the lessee.
(6) In case the lesser demands any legal remedy or lays claim against the lessee as
per this Chapter, the sub-lessee shall not be responsible for it, except in the condition of
Sub-section (4).
(7) Despite whatever has been elsewhere in this Section, the right of the lesser to
exercise under the lease contract shall not be deemed to have been prevented in any
manner.
619. To return the goods obtained on lease : (1) Except mentioned otherwise in the lease
contract, in case the lease contract is terminated due to any reason, the lessee shall have
to submit to the lesser the goods received on lease as per this Chapter within thirty-five
days of such termination of contract.
Provided that, in case it is immovable property, the right of the lesser to ipso facto
use such goods shall be deemed to have been valid after thirty-five days of the
termination of lease contract.
(2) The lessee shall have to return the goods as per Sub-section (1), which was
received in what condition at the time of receiving, to the lesser in the same condition.
Provided that, in case of natural rust or reduction of the goods after using or
utilizing, the lessee shall not be responsible for this.
(3) In case an account of the goods or its accessories or parts received has been set
up during the time of receiving any goods on lease, while returning the goods received on
lease as per Sub-section (1) or (2), the goods or its accessories or parts shall also have to
be returned as per the same account.
Provided that, accessories or parts which are spoilt or destroyed or used up while
using, as per the nature of such goods, shall not have to be returned.
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620. Special provision relating to lease contract of immovable property : (1) Despite
whatever has been elsewhere in this Chapter, while making lease contract of the
immovable property, it shall have to be made in written form.
(2) While lending immovable property on lease for the period of more than ten
years, it shall have to get registered in front of the authorized body as per law by
mentioning such description.
(3) Despite whatever has been written elsewhere in this Chapter, immovable
property may not be lent on lease to the person, who is not allowed to acquire ownership
of immovable property within Nepal as per law, for the purpose of farming, house
construction or house-land development without permission of the Government of Nepal.
(4) While returning to the lesser the house, long one-storey hut or other structures
built by lessee in the land received under lease contract, or garden, forest or tree remained
in it, upon the expiry of the validity period of such contract, except the provision made
otherwise in the contract, it shall be deemed that right and ownership of the lessee shall
be valid on such house, long one-storey hut or other structure or the garden, forest or
trees as well, and he/she shall have to remove such house, lone one-storey hut or structure
or garden or forest and tree from such land accordingly.
(5) Despite whatever has been written in Sub-section (4), in case the lesser wants
to take such house, long one-storey hut, the garden, forest or tree remained in it, as they
are, he/she shall have to pay the cost consented mutually for these.
621. To terminate lease contract: (1) Lesser may terminate the lease contract on any of the
following conditions:-
(a) In case the lessee does not pay, except the permission granted
otherwise by the lesser, the lease rent amount until ninety days of
the expiry of the day of payment of the lease rent,
(b) In case the lessee uses or utilizes the goods received on lease
against Section 612,
(c) In case the lessee does not provide information on the issue as per
Sub-section (1) of Section 614,
(d) In case the lessee does not bring the goods received on lease back
to the previous condition within the reasonable time according to
its nature as per Sub-section (2) of Section 615,
(e) In case given on second lease without prior approval of the lesser.
52
(2) Lessee may terminate lease contract on any of the following

conditions:-
(a) In case the goods, which are received on lease have been received
for which purpose or objective, cannot be used or utilized for such
purpose or objective,
(b) In case the lesser does not adjust the amount of repair and
maintenance in the compensation or lease rent as per Sub-section
(3) of Section 613.
(c) In case the lesser does not reduce or consent to reduce the lease
rent amount as per Sub-section(3) of Section 614 or Sub-section(4)
of Section 615.
622. To enforce provision relating to house rent : Despite whatever has been written
elsewhere in this Chapter, the provision of Chapter-9 of Part-4 regarding house rent shall
be enforced.
623. Limitation: The aggrieved person under the works and actions done or performed
under this Chapter may file case within two years from the date of arising cause to file case.
Chapter-13
Provisions relating to hire purchase
624. To deem hire purchase contract made : (1) When anybody lends any goods to any
person on hire on following conditions, hire purchase contract shall be deemed to have
been made:-
(a) Upon the goods lent on hire by the goods owner to any person to
make payment in installment periodically, the person who receives
on hire shall have the right of use,
(b) The person who receives on hire may buy the goods lent on hire as
per the condition of the contract,
(c) After final installment amount is paid, the ownership of such goods
shall be transferred to the person who receives on hire,
(d) Before the transfer of the ownership as per Section (c), the person
who receives on hire may terminate the contract at any time.
53
(2) The contract as per Sub-section (1) shall have to be in written

form.
(3) Immediately after making the contract, the goods owner shall have to provide
the person who receives on hire with one copy of the contract made as per this Section,
without charge.
Explanation : For the purpose of this Chapter,-
(1) "Goods" means any movable property that can be lent on hire
for the use.
(2) "Person who receives on hire" means the person who receives any goods
on hire for the use as per hire purchase contract, and this phrase refers to
his/her heir or other third person as well, who obtains such goods as per
contract in case of his/her death.
625. Matters to be mentioned in hire purchase contract: (1) Following matters shall have
to be mentioned in hire purchase contract as per Section 624 :-
(a) Goods and its brief description,
(b) Hire purchase price of the goods,
(c) Cash price of the goods,
(d) Date of contract deemed to have commenced,
(e) Installment amount to be paid to the goods owner by the person,

who receives on hire, and its number,
(f) Date of submission of every installment and mode of payment,
(g) Person and place to be paid with amount as per Section (f).
(2) In case the installment amount as per Section (f) of Sub-section (1) can be
paid in the mode other than cash, its brief description shall have to be mentioned in the
hire purchase contract.
(3) In case hire purchase contract is made without mentioning any conditions as
per this Section, the person who receives on hire may furnish complaint to get such
contract rescinded, and in case it seems that the person who receives on hire shall be
affected due to any of such conditions not mentioned in the contract, the court may
rescind such contract, or issue any other order deemed appropriate.
54
Explanation: For the purpose of this Chapter,-
(1) "Hire purchase price" means total amount to be paid up by the person who
receives on hire to purchase or receive after paying total price of the
goods, and this phrase refers to security or the amount to be paid up as a
preliminary amount as well.
(2) "Cash price" means the price to buy any goods upon paying with cash by
the person who receives on hire.
626. To deem single contract for making more than one contract : (1) In case separate
contracts are made in course of making hire purchase contract between the person who
receives on hire and any goods owner, and between any person who bails or investor and
goods owner on condition to make hire purchase contract to pay the installment amount
of the hire purchase price of such goods, or between the person who receives any goods
on bailment or pawn and the person who keeps such goods on bailment or pawn in case
of any goods kept on bailment or pawn, single contract is considered to have been made
for the purpose of this Chapter.
(2) In case the contracts as per Sub-section (1) are made on different dates, the
latest date shall be considered to have been the contract made.
627. After concluding hire purchase contract, its consequence : (1) Despite being written
otherwise in the contract, following conditions shall be considered inherent in the hire
purchase contract made between the parties :-
(a) Having the right to use the goods received by the person on hire
uninterruptedly,
(b) Having no kind of charge incurred when the goods owner transfers
the goods to the person who receives on hire for the sake of use, or
having such goods free from the claim of anybody,
(c) Having assurance given to the person who receives on hire by the
goods owner that reasonable opportunity shall be available to
match such goods with sample,
(d) Having the right of goods owner, at the time of transfer of goods,
to sell such goods to the person, who receives on hire,
(e) Having satisfactory quality of the goods, as per clause (a), at the
time of transfer,
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(f) In case the person who receives any goods on hire inform the
goods owner with the matter of receiving such goods on hire for
any special purpose, having guarantee of the matter given by the
owner of such goods that such goods or its quality shall be
appropriate for such purpose,
(2) Despite whatever has been written in Section (e) of Sub-section (1), the goods
owner shall not be responsible for the quality of the goods on following conditions:-
(a) In case the goods owner cannot know about the defect of the goods
at the time of making such contract regarding which such hire
purchase contract has been made,
(b) In case it has been mentioned in the hire purchase contract itself
that quality of goods is less,
(c) When the quality of the goods is tested upon collecting any of its
sample by the person, who receives on hire, and in case the quality
of goods matches with such sample,
(d) Upon making hire purchase contract regarding the goods used, in
case of mentioning such matter in such contract.
(3) In case the person who receives on hire has obtained any goods on hire based
on sample, it shall be deemed that the owner of such goods has given assurance of the
matter that all of such goods match with the sample.
(4) After making contract as per this Chapter, in case the description of any goods
or its quality has been mentioned in the contract, it shall be deemed that the owner of
such goods has guaranteed that such goods or its quality is as per the contract.
Provided that, even if the sample also has been mentioned in the contract, in case
the goods transferred in lump sum matches with the quality of such goods, this shall not
be sufficient, and it shall have to be matched with the description of the contract.
628. Ownership transfer of the goods : The ownership of the goods related to hire purchase
contract shall have to be transferred to the person who receives on hire after concluding
the purchase according to hire purchase price fixed as per the contract made pursuant to
this Chapter.
Provided that, the right to use shall be deemed to have been fixed at the time of
such goods received by him/her.
56
Explanation: For the purpose of this Section, "concluding the purchase work" means the
work of submitting the final installment of the hire purchase price.
629. To look after and protect the goods received on hire: (1) The condition of the goods
received on hire as per hire purchase contract shall be as equal to bailment until the
ownership is transferred as per Section 628.
(2) Except the provision made otherwise in the hire purchase contract, the person
who receives on hire shall have to reasonably take care and protect the goods related to
such contract as equal as the goods remained under his/her own ownership.
(3) In case such loss and damage occurs due to not taking care and protecting as
per Sub-section (2), the person who receives on hire shall be responsible for this.
630. To pay the installment amount : The person who receives on hire shall have to pay the
installment amount determined for the goods received on hire as per hire purchase
contract within the period and as per mode determined in such contract.
631. To terminate the contract by paying installment amount: (1) Except mentioned
otherwise in the contract, at the time of hire purchase contract remained valid, the person
who receives on hire may terminate the hire purchase contract by providing the goods
owner with written notice before at least fifteen days and paying the hire purchase price
or installment amount remaining to be paid.
(2) In case the person who receives on hire can get any kind of exemption while
terminating the contract as per Sub-section (1), he/she can get such exemption as well.
632. To terminate contract by returning goods : (1) Except mentioned otherwise in the
contract, the person who receives on hire may terminate such contract at any time by
providing the goods owner with written notice fifteen days before paying the final
installment amount determined for the goods as per hire purchase contract.
(2) Before terminating the contract as per Sub-section (1), the person who
receives on hire shall have to submit or return the goods which has been received on hire
to the owner of such goods as per hire purchase contract, and in case any amount has
been remaining to pay or submit to the goods owner until the termination of the contract,
such amount shall also have to be paid off.
(3) Despite whatever has been written in Sub-section (2), the person who receives
on hire shall not have to submit to the goods owner any amount in case he/she has paid
more than a half amount of the hire purchase price until the termination of the hire
purchase contract, and in case less than a half amount of such price has been paid, he/she
shall have to pay up to a half amount.
57
(4) No matter written in Sub-section (3) shall be deemed to have exempted to the
person who receives on hire from paying any other amount, charge or payable to be paid
as per hire purchase contract.
633. To transfer own right and benefit by the person who receives on hire : (1) The person
who receives on hire may transfer to any other person the right, benefit or liability upon
the goods received by him/her as per hire purchase contract, and any other right, benefit
or liability that he/she can receive under such contract, by obtaining approval of the
owner of such goods.
(2) For the purpose of Sub-section (1), goods owner shall have to grant approval
or disapproval within fifteen days from the written request furnished by the person who
receives on hire with the purpose of getting approval to transfer his/her right, benefit or
liability, and in case the approval could not be obtained within such period, he is deemed
to have refused to grant approval.
(3) In case the goods owner has refused as per Sub-section (2), the person who
receives on hire may file complaint in the court within thirty-five days to get such refusal
revoked, and in case the court orders that such refusal is not reasonable, it shall be
deemed that approval has been obtained from the goods owner.
(4) In case the right, benefit or liability of the person who receives have been
transferred to another person by the mobilization of the law due to any matter written in
this Section, it shall not be deemed to have prevented to use or comply with such right,
benefit or liability.
634. To become responsible in case the goods used contrary to condition : In case the
person who receives on hire uses the goods related to hire purchase contract to become
contrary to the condition related to such contract, he/she shall be responsible for this.
635. To inform about the actual condition of the goods: In case the goods owner seeks
information of the place where the goods related to hire purchase contract is located and
regarding the condition of obtaining benefit from such goods, the person who uses such
goods shall have to provide him/her with the description relating to this within fifteen
days.
636. To terminate the contract by the goods owner: (1) In case the person who receives the
goods on hire cannot pay more than one installment amount of the hire purchase price to
be paid as per hire purchase contract, the goods owner may terminate the hire purchase
contract by providing such person with prior notice at any time as follows:-
58
(a) Of one week in case installment amount is to be paid in the interval

of one week or less than this period,
(b) Of fifteen days in condition other than what is written in

Section (a).
(2) Despite whatever has been written in Sub-section(1), prior to the expiry of the
period of providing the notice as per that Sub-Section, in case the person, who receives
on hire, pays to the goods owner the installment amount to be paid to such goods owner
by him/her as well as the interest if incurred upon this as per hire purchase contract, the
hire purchase contract may not be terminated.
(3) In case the person who does not comply with the hire purchase contract or the
condition of Section 629 or 635, the goods owner concerned may terminate the hire
purchase contract by providing notice of at least fifteen days.
(4) When the contract is terminated as per Sub-section(1) or (3), the goods owner
may exercise following power regarding the goods lent on hire-
(a) To regain such goods wherever and in whichever condition such

goods is, and to confiscate in case it could not be regained thus,
(b) To inform the person who receives on hire to regain the excess
amount of the amount paid up for such goods, after fixing the
amount, which he/she can obtain for hire,
(c) To confiscate any deposit amount in case it is obtained from the

person who receives on hire at the time of lending the goods on
hire,
(d) To enter into the house, with the help of the police, where the
goods are remaining in course of confiscation of the goods
received on hire,
(e) To recover compensation or lay such claim out of the paid amount
for the loss and damage inflicted due to not submitting the goods
received on hire on time or by not complying with the contract or
the condition of Section 629 or 635.
(5) Despite whatever has been written elsewhere in this Section, in case the
person who receives on hire, the person who bails or who invests has paid at lease basic
price of the goods received on hire, the goods owner cannot terminate hire purchase
contract as per this Section.
59
Explanation: For the purpose of this Section, "basic price" means three-fourth up to fifty
thousand rupees and in case of having hire purchase price more than this, at least half of
the amount of such price.
(6) In case goods owner terminates hire purchase contract being contrary to Sub-
section(5), the person who receives on hire or who bails shall be free from all the liability
to be fulfilled as per hire purchase contract, and he/she shall regain all the amount paid
for the goods received on hire.
Provided that, he/she has to return the goods received on hire to the goods owner
concerned.
(7) Despite whatever has been written in Sub-section (5), it shall not be deemed to
have prevented from the right to claim the hire purchase price to be obtained from the
person who receives on hire as per such contract, due to being unable to terminate the
contract.
(8) Despite whatever has been written elsewhere in this Section, the hire purchase
contract made with the person who does not provide the description as per Section 635
may be terminated by the owner of such goods, and in case such goods has been lost and
damaged by any manner, such loss and damage may also be claimed.
637. Right of the person who receives on hire in case of confiscation of goods: (1) In case
of the goods which is lent on hire as per Section (a) of Sub-section (4) of Section 636
confiscated by the owner of such goods, the person who receives on hire shall regain
from such person the amount paid up to the day of confiscation regarding hire purchase
price and the amount equal to the price of the goods up to the day of confiscation.
Explanation : For the purpose of this Section, "price up to the day of confiscation" means
the amount remained upon deducting following expenses or amount from the amount that
can be obtained while selling the confiscated goods :-
(1) Reasonable expenses spent while confiscating the goods,
(2) Reasonable expenses for storage, repair and maintenance up to

selling of the goods,
(3) Reasonable expenses spent while transferring the goods upon

selling or in any other manner,
(4) The amount paid for tax, charge, fee or any payable in case it is
remaining to be paid by the person who receives on hire for the
goods as per prevailing law.
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(2) The amount as per Sub-section(1) shall have to be submitted to the person
who receives on hire within thirty days from the date of confiscation of goods, and for
paying after such period, interest amount by ten percent annually shall also be paid.
638. Condition of the goods received on hire in case the person who receives on hire falls
into insolvency: (1) In case the court decides during the validity period of hire purchase
contract that the person who receives on hire has fallen or about to fall into insolvency as
per prevailing law, as a result of this, liquidator who takes the property of such person
under control or any other authorized person equal to him/her shall exercise the authority
equal to the person who receives on hire and fulfill the liability regarding the goods
related to hire purchase contract.
(2) After the person who receives on hire falls into insolvency, and in case its
procedure is sub judice at any court, the liquidator or the person exercising the authority
equal to him/her as per Sub-section(1) may transfer, upon getting permission of such
court, the goods related to hire purchase contract to any other person by any manner, and
when such goods is transferred, the person, who receives the goods upon being
transferred, shall have to exercise the right and fulfill the liability as per hire purchase
contract as equal as the person who receives on hire.
639. Limitation : The aggrieved person under the works and actions done or
performed under this Chapter may file case within two years from the date of
arising cause to file case.
Chapter-14
Provisions relating to wages and labor
640. To engage in work : (1) Any person who has passed at least fourteen years of age may
be engaged in work upon getting his/her consent.
Provided that, the person, who has not passed sixteen years of age cannot be
engaged in risky occupation or work.
(2) While engaging in work as per Sub-section (1), one shall have to comply or
get the provisions of this Chapter complied with.
641. To give wages: (1) When anybody is engaged in any work as per Section 640, except the
worker himself/herself has consented to work without wages, the employer shall have to
give wages in the ratio of the work.
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(2) While giving wages as per Sub-section (1), wages shall have to be given as per
accordingly in case the employer and the worker have fixed any wages, and as per the
rate practiced at the place of work in case it is not fixed.
(3) While giving wages as per Sub-section (1) or (2), except agreement made
otherwise between the employer and the worker, the wages shall have to be given after
the work is accomplished.
(4) While determining the wages as per this Section, except the agreement made
between the worker and employer, wages shall have to be determined basing every day of
the work done.
642. To make arrangement for safety while engaging in work : When anybody is engaged
in work by any person, he/shall have to be engaged in work only after making sufficient
arrangement for safety, according to the nature of work, to prevent the risk and danger
that are likely to occur while working.
643. Not to engage in work for more than eight hours : (1) While anybody engages any
person in work, he/she may not be generally engaged in work for more than eight hours
in one day.
(2) In case somebody is to be engaged in work for more than the period written in
Sub-section (1), there shall be consent of the worker, and while engaged thus in work,
additional wages shall have to be given accordingly for every hour of the work done,
assuming one day of eight hours as a base.
(3) Despite whatever has been written in Sub-section (2), the provision of that
Sub-section shall not be applied while engaging domestic helper in work.
Explanation : For the purpose of this Chapter, "domestic helper" means the person
engaged in work so that he/she can be engaged in the work of domestic affairs at any
time as necessary.
644. Special provisions relating to domestic helper : (1) In case anybody engages anyone in
work as a domestic helper, the employer, in case of him/her, shall have to abide by the
following conditions as well :-
(a) Wages shall have to be determined and paid monthly or

yearly,
(b) Three times foods, in the morning, in the day and in the evening,
and clothes to be worn as per weather shall have to be provided as
per the status of the employer,
62
(c) Facility to use appropriate house, toilet and bathroom shall have to
be provided as per own status,
(d) In case he/she is below eighteen years of age, arrangement shall

have to be made for studies in appropriate time if he/she wants,
after looking after the work of domestic affairs,
(e) Arrangement of health treatment shall have to be made if he/she

falls sick,
Provided that, the expenses for this cannot be reduced from

his/her monthly or yearly wages.
(f) He/she must not be engaged in work at the time of being sick, and
nor be engaged in work beyond his/her age, capacity or condition
in other circumstances,
(g) Expenses, which is to be spent for the sake of his cremation and
general funeral rites, shall have to be borne if he/she is dead,
(h) Inhuman, disrespectful domestic violence shall not be executed,
(i) Other conditions consented by him/her with the domestic helper

shall have to be abided by.
(2) The expenses to be spent as per Sections (b), (c) and (d) of Sub-section(1) may
not be reduced from the monthly or yearly wages of the domestic helper.
(3) In case anybody engages any person as a domestic helper, the related Ward
Committee of the Local Level concerned shall have to be informed within one month
from the date of engaging in work thus.
645. Not to leave work taken by one unfinished : (1) After somebody takes responsibility or
promises to do any work, such work must not be left unfinished, without reasonable
cause.
(2) In case anybody leaves the work unfinished as per Sub-section (1), the person
who leaves the work shall have to bear its liability.
646. To give wages to worker : (1) The employer shall have to give the wages to be given for
engaging in work to the worker or any other person to whom he/she has consented.
(2) In case the worker is dead before the wage is paid as per Sub-section (1), the
wages to be obtained by him/her shall be obtained by his closest heir.
63
647. Limitation : The aggrieved person under this Chapter may file case within three
months from the date of arising cause to file case and may file case within thirty-five days
in case of other matters.
Chapter-15
Provisions relating to indirect or Quasi contract
648. To deem indirect or quasi contract made: (1) Despite whatever has been written in
Chapter-1 of this Part, in case anybody has done any certain, legal, voluntary or unilateral
work that can keep juridical relation, it shall be deemed to have been made indirect
contract or quasi contract.
(2) In case indirect or quasi contract is made as per Sub-section (1), liability shall
be created by the same fact, as per this Chapter.
649. Not to leave unfinished negotiorum gestio which is taken by will: In case anybody
manages or operates the business or property of any person without information or
authority of such person, at his/her will, it must not be left unfinished so far as such
business or property exists, without giving it under the responsibility of such person or
his/her heir or representative or until such person dismisses.
650. To look after or manage by one who take responsibility of property : (1) In case
anybody takes any kind of responsibility to look after or manage someone's property,
he/she shall have to look after or manage in good faith as equal as his/her own property.
(2) In case the person, who takes responsibility of the property as per Sub-section
(1), inflicts loss and damages with carelessness, plotting ill-intention, he/she shall have to
bear its compensation.
651. The power delegator not be free from liability: In case somebody has taken
responsibility from any person to do any work, because of his/her delegation of all or
some of his/her power to do such work by not making contrary to the liability towards
such person, he/she shall not be free from his/her liability.
652. To give reasonable expenses for saving property during disaster : In case anybody
saves or protects the property without the information of the owner, when disasters such
as inferno, floods, landslide, storm occurs, the property owner shall have to compensate
such person with reasonable expenses spent while saving or protecting such property.
653. To claim reimbursement: (1) Though a person has not been compelled by any law to
fulfill any liability, due to the reason of fulfilling such liability in his/her own expenses or
due to any other reason, in case anything or benefit is received by another person, the
64
person who has fulfilled the liability can claim reimbursement of the amount spent for
this from the person who receives anything or benefit thus.
(2) Despite whatever has been written in Sub-section (1), in case somebody has
fulfilled any liability with any illegal purpose, compensation must not be claimed for this.
654. To claim for nurture: Without information of the person who has the responsibility to
nurture somebody, in case somebody nurtures such person, the person who nurtures thus
may claim the amount for this from such person.
Provided that, in case he/she has nurtured showing affection and patronage on
nurtured person or has nurtured with an intention not to claim the amount for this, such
amount may not be claimed.
655. To compensate the expenses spent on funeral of the dead by the heir: After somebody
is dead, and in case any other person, without the information of the heir or close relative
of the dead, carries out funeral to be performed as per his/her custom, tradition and ritual,
and if such person claims the expenses spent while carrying out funeral, his/her heir and
in case he/she is not available, his/her relative shall have to compensate him/her with
such expenses.
656. To bear the expenses of nurture of disabled person by relative: When the person, who
has liability to nurture refuses to nurture or look after insane, physically handicapped or
any helpless minor who does not have his/her own income generation, such person and in
case any other person nurtures or looks after such person, he/she may claim
compensation of the expenses for this from the person who has such liability.
657. To reimburse the expenses of treatment: In case any person becomes seriously sick
upon meeting with any accident or any other cause, if he/she is treated or got treated at
will by a person other than his/her joint heir, kin, relative, the heir, kin or relative shall
have to reimburse the person who treats or got him/her treated thus.
Provided that, if treated or got him/her treated with an intention of not claiming
treatment expenses, reimbursement shall not have to be done.
658. To bear expenses spent by public body: When anybody does not comply with
necessary measures relating to health or safety to be complied with at will as per law for
the sake of safety of his/her own body, life or property, and in case any governmental or
public body complies with or has got it complied with, he/she shall have to bear
reasonable expenses spent for this even if he/she does not have consent to comply or get
such measure complied with.
65
659. To reimburse the amount paid by stakeholder: When contract has been made to pay
the amount to be paid by any person as per law by another person, and in case he/she has
not paid such amount but it has been paid by the person who has to pay such amount,
he/she shall have to be reimbursed by the person who has made contract with him/her.
660. To pay price or remuneration: When any person has given another person any goods or
engaged him/her in any work, price as per such goods or service or remuneration as per
work shall have to be paid.
661. To get price of goods or service paid: When anybody provides any goods or service to a
person ineligible to make contract as per law or to any person having responsibility to
nurture such person, he/she may get the price of such goods or service paid by the person
who has received such goods or service.
662. To keep the property under control as equal as deposit: In case anybody keeps the
property of other under his/her own control by any manner, which can be kept as per law,
he/she shall have to keep it as equal as bailment.
663. Limitation : The aggrieved person under the works and actions done or performed
Chapter-16
Provision relating to unjust enrichment
664. To deem unjust enrichment made: (1) In case anybody receives any benefit or facility,
without the cause of work to be done or liability to be fulfilled by any person pursuant to
law, the person who receives benefit or facility thus shall be deemed to have received
unjust enrichment.
(2) The unjust enrichment shall be deemed to have been received on following
conditions:-
(a) In case there is increment in his/her property or reduction

liability,
(b) In case he/she receives the service of other or gets work done by
anybody,
(c) In case the property of other is used for him/her.
66
(3) Despite whatever has been written in Sub-section (1) or (2), except in the
following conditions, even if anybody receives any goods, service, benefit or facility in
any manner, unjust enrichment shall be deemed to have been received :-
(a) In case he/she is likely to receive any goods, service, benefit or

facility from any person as per law or contract,
(b) In case received with free consent of the person from whom any
goods, service, benefit or facility has been received, without asking
for return or compensation by such person.
(4) Any person has or has not received unjust enrichment or received to what
extent, while determining this, benefit or loss and damage occurred by the reason of the
same to such person shall not be considered after the unjust enrichment is received.
(5) In case anybody has received unjust enrichment as per this Section, he/she
shall have to bear the liability as per this Chapter.
665. To return solutio indebiti: In case anybody takes or receives any goods by mistake
which he/she is not supposed to take, he/she shall have to return such goods to the person
from whom he has taken or received it.
666. To return the loan paid by mistake: Thinking of being indebted to anybody, in case
somebody pays anybody any loan amount not to be paid, the person who receives such
amount shall have to return such amount to him/her in case he/she proves that such loan
is not supposed to be paid.
667. To return the goods or amount and its benefit received with ill- intention : (1) In case
anybody ill-intentionally receives any amount or goods on which his/her claim is
insufficient, he/she shall have to return such amount or goods including the interest
incurred upon such amount up to the day of returning from the day of receiving such
amount or goods as per law, or the benefit or return obtained from such goods as well.
(2) In case loss and damage is inflicted upon the amount or goods received as per
Sub-section (1), he/she shall have to submit the compensation for it as well.
668. To pay up the loan paid by the third person: In case the loan to be paid by any person
is paid by any other third person without his/her information, the loan paid by him/her
shall have to be paid to the person who has paid thus.
669. To claim reimbursement in case the tax to be paid is paid by another: In case the tax
to be paid by any person has been paid by another person, reimbursement may be claimed
from the person who has the duty to pay such tax.
67
Explanation: For the purpose of this Chapter, "tax" means any kind of governmental
tariff, charge, fee, fine and this word refers to the local tax as well.
670. To keep the goods found by informing the police: (1) In case anybody finds any goods
in any way, he/she may keep such goods with him/herself until the owner concerned is
traced, by informing the police along with its actual description.
(2) The owner concerned shall have to bear the expenses spent for the sake of
searching for the goods owner and keeping such goods, and the finder of such goods may
keep it until such expenses is paid off.
(3) In case nobody arrives even up to three years to lay claim upon the goods kept
as per Sub-section(1), such goods shall belong to the finder.
671. Limitation: The aggrieved person under the works and actions done or performed
Chapter-17
Provision relating to Torts
672. To deem torts committed : (1) Nobody shall have to inflict loss and damage in any way
upon the body, life or property or right or benefit protected as per law due to any
commission or omission of any work performed with his/her her own or anybody else's
error, carelessness or negligence or whatever, of whose liability is to be borne by
him/herself as per this Chapter.
(2) In case there is no previous contract relation established between the parties
regarding the commission or omission as per Sub-section (1), the loss and damage
consequently caused by such commission or carelessness shall be deemed to have been
committed torts.
Explanation: For the purpose of this Chapter "Omission" means the condition of not
doing the work which is to be done by somebody.
(3) In case tort is committed as per Sub-section (2), the person who commits such
act shall have to bear the liability as per this Chapter.
(4) While bearing liability as per Sub-section(3), liabilities shall have to be borne
accordingly in case separate liabilities can be determined in proportion of the extent of
torts, and if not, in equal manner by all the persons responsible for the torts.
68
673. To bear liability by parents: For the torts committed by the minor below fourteen years
of age, his/her parents, in case father or mother is not available, the person who exercises
maternal or paternal authority upon him/her shall have to bear the liability.
674. To bear liability by patron or the reliable: For the loss and harm inflicted by an insane
person, his/her patron or the reliable shall be responsible, and he/she shall have to bear
the liability accordingly.
675. To bear liability by the employer : (1) In case loss and damage is inflicted to somebody
from the work carried out in good faith by domestic helper, other worker or staff
employed by him/her in course of such work, the person, firm, company or institution
who/which employs thus shall have to bear its liability.
(2) Despite whatever has been written in Sub-section (1), the liability for the work
performed with carelessness or ill-intention of the worker or staff shall have to be borne
by such worker or staff.
676. To bear liability by the animal owner for the loss and damage inflicted by animal:
The liability of the loss and harm inflicted to anybody by the animal raised by or
remained under control of the animal owner shall have to be borne by him/her.
Provided that, in case loss and damage is inflicted as per the nature of such animal
even while being kept under control appropriately by the animal owner, adopting
sufficient safety measures, or loss and harm is inflicted due to the act, error or
carelessness of the person to whom loss and harm is inflicted, the animal owner shall not
have to bear the liability.
Explanation: For the purpose of this Section, "animal" means domestic or any kind of
wild animal or bird remained under one's control, and this word refers to domestic, reptile
animal or wild bird as well.
677. To bear liability by the house owner for the loss and damage caused due to house
collapse: In case loss and damage is caused, during the construction of the house or after
construction completed or whatever, by the collapse of such house fully or partially, or if
any of its part inflicts loss and damage upon anybody, the house owner concerned shall
have to bear the liability.
678. To bear liability by property owner : In case anybody is inflicted with loss and damage
due to any of the following causes, the property owner concerned shall bear the liability :-
(a) In case explosion takes place in any machine, equipment or device

due to not adopting safety measures appropriately as per its nature,
69
(b) In case inflammatory or explosive material catches fire or its

explosion takes place due to not adopting safety measures
appropriately as per its nature,
(c) In case any industrial institution emits smoke, produces noise to

become contrary to standard determined,
(d) In case a tree falls down or fell down on any highway, road, street,
lane due to disaster or by the work of any third person,
(e) In case polluted, toxic or the substance that causes communicable

disease comes openly out of canal, channel, pipe or sewerage
without adopting precautious measures appropriately, becoming
contrary to the standard determined.
679. To bear liability by head of the family : In case loss and damage is inflicted to anybody
due to any kind of garbage or goods thrown out of any house, the head of the family
concerned shall have to bear the liability.
Explanation : For the purpose of this Section,-
(a) "House" means the house or hut, and this word refers to the structure of
the house as well,
(b) "Head of the family" means the person who works being the chief of the
family, and in case of the person living someone else's house on rent, this
phrase refers to the person working being the chief of the family of the
tenant as well.
680. To bear the liability for trespassing : For the loss and harm inflicted due to trespassing
into property of anybody, the trespasser shall have to bear the liability.
Explanation : For the purpose of this Section, "trespass" means, in case it is immovable
property, illegal entry into the property remained under the right, use or ownership of
others; occupancy, unauthorized damage, interference or illegal possession of its
manufacture; and in case it is movable property, to forcefully occupy, take away the
property of others, snatch or pose obstruction or to oppose the use of the benefit obtained
from this, and this word refers to the act of taking any kind of property under control in
an unauthorized manner as well.
681. To bear liability jointly : (1) In case the act which is deemed torts as per this Chapter
has been committed by more than one person, except proven otherwise, everyone of such
70
persons shall be personally or jointly responsible for the damage caused by such act in
proportion of the extent of torts committed by them.
(2) As per Sub-section (1), liabilities shall have to be borne accordingly in case
separate liabilities can be determined in proportion of the extent of torts, and if not, in
equal manner by all the persons responsible for the torts.
682. To bear compensation for liability: (1) While bearing the liability for the torts
committed as per this Chapter, the one who commits torts shall have to bear the
compensation.
(2) Despite whatever has been written in Sub-section (1), in case any torts have
been committed due to omission, error, carelessness or negligence of including any
person himself/herself as per this Chapter, the extent of such compensation shall be
reduced.
(3) The compensation as per Sub-section (1) shall have to be limited to the matter
of loss and damage actually caused, and imaginary or unreal compensation shall not have
to be borne.
(4) Compensation shall be of any kind - cash, property or service,
(5) In case loss and damage is caused as per this Chapter, the person inflicted with
such loss and damage may claim for compensation by remaining under this chapter.
(6) When compensation is claimed as per Sub-section (5), the court may issue
order to get reasonable compensation paid.
683. Not to bear liability in case of separate provision made: (1) Despite whatever has been
written elsewhere in this Chapter, in case the torts to bear liability as per this Chapter is
deemed as criminal offence as per law or if there is separate provision or separate
provision of legal remedy in this Code or other laws regarding such torts, the liability as
per this Chapter shall not have to be borne.
(2) Subject to Sub-section (1) in case if it is proved that the tort for which liability it to
be borne under this Chapter has been committed not by negligence, recklessness, error or
omission of the person presented as committing the tort but caused by the other reasons,
he/she shall be released from the liability for tort.
684. Limitation : The aggrieved person under the works and actions done or performed under
this Chapter may file case within six months from the date of arising cause to file case.
Chapter-18
71
Provisions relating to liability for defective production
685. To bear liability for defective production : (1) Nobody is allowed to sell, distribute or
get goods or service sold or distributed by defective production.
(2) By selling or distributing the defective production by anybody as per Sub-

section (1), in case loss and damage is inflicted upon the body, life or property while
consuming such goods, the manufacturer shall have to bear the liability for this as per this
Chapter.
Explanation : For the purpose of this Chapter :-
(1) "Defective production" means any goods or service not having minimum
safety measures due to any of the following reasons, which are reasonably
expected by common people while consuming any manufacture :-
(a) Defective design, construction, refinement or

installation,
(b) Defective packaging, conservation or storage,
(c) Defective presentation,
(d) Lack of sufficient measures or precaution to control potential risk

or danger as per the nature of the goods or service produced.
(2) "Producer" means the producer who sells and distributes by finally
producing erroneous goods or service, and this word refers to the
following the persons as well :-
(a) Distributor or retailer who sells or distributes when the

manufacturer is not traced,
(b) Importer of the defective goods in case the goods is imported, or

the distributor or the retailer who distributes such goods.
(3) "Goods" means any industrial production that the common people
consume.
686. To prove defective production : In case anybody claims that damage has been inflicted
upon his/her body, life or property due to any erroneously produced goods or service and
its consumption, he/she shall have to prove that such damage has been caused due to the
connection of such defective production and consumption of such manufacture.
72
687. To get freedom from liability : Despite whatever has been written in Section 685, the
manufacturer shall not have to bear the liability in case the following matters are
justified :-
(a) He/she has not produced, sold or distributed the defective

production,
(b) The production, import or sale and distribution of goods or service

produced by him/her were not defective at the time of manufacture, import
or sale or distribution, or became defective after the sale or distribution
was complete,
(c) The goods or service produced by him/her has not been on sale or
distribution, nor sold,
(d) Damage was caused because the consumer did not abide by the directives
to be followed while consuming the goods or service produced,
(e) Damage was caused because the consumer did not consume the
production properly or consumed in a way which was prevented,
(f) There was no scientific and technical knowledge at the time of production
or distribution of the goods or service that such goods or service was
defective.
(g) It was informed at the time of sale that damage might be caused in case
the production, from which damage caused, were not consumed properly,
(h) Goods or service was consumed even upon knowing or having reasonable
cause to know that there might be damage and injury.
688. To lessen the extent of liability : Despite whatever has been written elsewhere in this
Chapter, in case it is justified that damage has been caused due to both the person who
produces defective production and the person who consumes, the liability may be less in
proportionate manner.
Provided that, in case the third party has been inflicted with harm and loss due to
the damage caused thus, the extent of liability may not be less in case of such party.
689. Not to deem defective production : Simply because the goods or service with the
quality higher than any goods or service consumed by any person is available in the
market, such goods or service shall not be deemed defective production.
73
690. Not have contrary effect upon other rights : No matter written in this Chapter shall
have contrary effect, as per law or contract, upon the right, benefit or claim of the person
affected upon the body, life or property due to defective production.
691. Limitation : The aggrieved person under the works and actions done or performed under
this Chapter may file case within one year from the date of arising cause to file case.
-------------------------------------------------- The End-----------------------------------------------------
Disclaimer: The unofficial translation of the Muluki Dewani Samhita Ain 2074 above is provided for
information only for which the Institute of Chartered Accountants of Nepal shall not be held liable for
any loss or damage incurred thereby and shall not be held otherwise liable
74

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The Institute of Chartered Accountants of Nepal

Provision relating to Contract and other Liabilities:

General Provision of Liability:

(c) Indirect or quasi contract,

(d) Unjust enrichment,

(e) Unilateral commitment of any person promising to take up liability,

(f) The work to be held tort as per law,

(g) The work to be held quasi tort under law.

(2) Of the sub-section (1):

Provision to Enter Contract

Explanation: For the purpose of this Chapter:

(A) Acceptance expressed by the person entering contract so as to make it binding.

(B) Capacity or Qualification of the contracting person to enter contract.

(C) The particular subject to create liability.

(D) Lawful liability.

(b) Not having sound mind.

(2) The following contracts shall be void:

(a) A Contract preventing anyone from engaging him/herself in any occupation,

(1) A contract preventing the seller from engaging him/herself in a profession or

(2) A contract concluded among partners in preventing their engagement in any

(e) A contract concluded in matters, contrary to or prohibited by the prevailing law.

(h) A contract which is considered impossible to fulfill even at the time it is

(j) A contract concluded by an incompetent person to conclude such contract.

(k) A contract concluded with an unlawful objective.

(a) A contract concluded through coercion:

Explanation A person shall be deemed to have indulged in coercion if he/she, with

(b) A contract concluded by undue influence:

(2) Without prejudice to the generality of Section (1), the following

(i) A person living under his/her guardianship, protection or custody.

(iii) A person who can be subjected to under one's economic or ranking

(c) A contract concluded by fraud:

(d) A contract concluded through deceit:

Explanation (1) Any of the following act shall be taken as deceit:

(ii) Misleading any party so as to aggrieve him/her;

(iii) Causing any wrong deliberately on the matter of contract;

Provision relating to performance of Contract

(b) In case a voidable contract is made void by the party concerned;

(2) The following condition shall be fulfilled so as to transfer rights or liability of

(b) The transfer shall be unconditional,

(c) There shall be no restriction by law or contract to transfer right or liabilities,

(a) In case the contract becomes illegal and it cannot be executed;

(b) In case it becomes impossible to execute the contract due to emergence of

physical or mental disability.

(3) Notwithstanding anything contained in Sub-section (2), fundamental changes shall

(a) In case it becomes difficult to perform the contract;

(b) In case profit margin is low or loss is the situation;

(d) In the event of strikes and lockouts;

(5) In case it becomes impossible to execute a contract because of fundamental changes

Provision relating to Breach of Contract and Remedies

538. Compensation in the event of cancellation or termination of contract: (1) In case a

pay a reasonable amount to the other party in consideration thereof.

(2) Notwithstanding anything contained in Sub-section (1), no claims for specific

(a) In case the amount paid in cash as compensation for breach of

542. Compensation to be determined on monetary price: Unless otherwise provided in the

Provision relating Contract of Sale of Goods

(2) A contract relating to sale of goods may be conditional or unconditional.

(b) At the time of transfer of the goods.

telegraphic transfers as well payable through bank.

(b) The buyer shall have a reasonable opportunity to compare the