Format approved by the Academic Review Board, JGLS

COURSE MANUAL
Law of Contracts II

Fall 2022
(AY 2022-23)

Course instructors
Prof. Auroshikha Deka
Prof. Faiz Tajuddin
Prof. Chetna
Prof. Oishwarjya Basu
Prof. Pallavi Goel
Prof. Pooja Singh
Prof. Raushan Tara Jaswal
Prof. Yashmita Bhalla

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CONTENTS

PART I
General Information………………………………………………………………………………3

PART II

a. Course Description…………………………………………………………………………………4

b. Course Aims……………………………………………………………………………………..4

c. Intended Leaning Outcomes ……………………………………………………...........5

d. Grading of Student Achievement………………………………………………….......6

PART III
a. Keyword Syllabus……………………………………………………………………………8
b. Course Policies………………………………………………………………………………..8

PART IV

a. Weekly Course Outline ………………………………………………………….............10

b. Readings…………………………………………………………………………………………10
c. Topics outline………………………………………………………………………………….11

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PART I

General Information

General Information on Law of Contracts II offered by Jindal Global Law School

of the AY 2022-23

The information provided herein is by the Course Coordinator. The following information contains the
official record of the details of the course.

This information shall form part of the University database and may be uploaded to the
KOHA Library system and catalogued and may be distributed amongst 2 nd year Law
students for B.A.LL.B. (Hons), B.B.A.LL.B. (Hons); B.Com. LL.B. (Hons), B.A. (Hons)
Legal Studies, LL.B.; LL.M. courses if necessary.

Course
Title: Law of Contracts II
Course
Code: L-CT-0012
Course
Duration: One Semester
No. of Credit
Units: 4
Level: 2nd year
Medium of
Instruction: English

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PART II

a. Course Description

Welcome to Law of Contract II! In your first introduction to the world of contracts, you
studied the elements of a standard contract, how it is formed, its terms, the manner of
performance and what remedies are available for breach of contract. In this course, we will
build upon this understanding and present you with certain specific contracts and the
particular rules that govern their existence.

The contracts you will encounter this semester are the following:

» Indemnity
» Guarantee
» Bailment
» Pledge
» Agency
» Sale of Goods
» Negotiable Instruments
In studying these topics, you will be exposed to various legislations, other than the Indian
Contracts Act, 1872, such as the Sale of Goods Act, 1930 and the Negotiable Instruments Act,
1881. We will work together to break down the relevant statutory provisions, with the help of
case law and hypotheticals, into simple legal principles which will help you analyze various
complex commercial transactions with ease.

These specific contract subjects play a crucial role in commercial transactions and acquiring a
strong conceptual foundation in these areas is likely to be invaluable in your practice.

b. Course Aims

The course aims at providing an understanding of essential principles of commercial law

and explaining the basic underpinnings of significant facets of commercial law as it
considers the Common Law’s outlook to the commercial world. It will provide students
w ith the understanding to interpret complex and technical terms used in day-to-day
commercial contracts and a substantive conceptual knowledge of the law governing special
contract situations. It aims at aiding comprehension of various principles of drafting
commercial contracts and the ability to distinguish between various kinds of commercial
contracts by analysing relevant provisions of statutory law.

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c. Intended Learning Outcomes

Intended Learning Outcomes Weightage Teaching and Learning Assessment

Activities Tasks/Activities

By the end of the course, students should be able to:

(i) Demonstrate knowledge (i) Reading of relevant cases, Students’ ability to grasp
and understanding of the relevant statutes, and other legal and critically evaluate the
aspects of special contract law; 40% materials: topics/issues discussed in
state relevant rules and sources of the syllabus will be tested
law and be able to discuss their Students are expected to read
the wide range of materials
in the following ways:
effect (i) End-semester
included in the Course
Manual or in handouts. examination (50%).
(ii) Demonstrate an interest in the (ii) Internal assessment
operation of day- to-day 30% (ii) Lectures: (50%).
commercial transactions. Students
will be able to distinguish between Students will acquire basic
the operation of various types of knowledge on how to read
commercial contracts such as cases, statutes, scholarly
indemnity contracts, guarantee, writings and other legal
pledge, bailment, etc. material, and formulate
arguments for or against a
legal proposition.

Students will develop an

(iii) Apply the legal principles to 30% understanding of the complex
understand and appreciate legal world of business and
problems in the field of commerce and the role of
commercial contracts various commercial
contracts.

Students will learn how to

comprehend a legal issue and
to find and apply legal rules
to a given situation/case
through background readings
and case-law analysis.

(iii) Tutorials:
Each Course Instructor
will advise the students
separately as to the specific
tutorials that will be
conducted in class.

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d. Grading of Student Achievement1,2

Students will be assessed based on a common final examination, as well internal

assessment modes, determined by each instructor individually. The common final
examination will constitute of 50% of your overall grade. The remaining 50% will be
based on the internal assessments.

To pass this course, students must obtain a minimum of 40% in the cumulative aspects
of coursework. End of semester exam will carry 50 marks out of which students have to
obtain a minimum of 15 marks to fulfil the requirement of passing the course.

The details of the grades as well as the criteria for awarding such grades are provided
below.

Letter Percentage Grade Definitions

Grade Of marks
O 80% and above Outstanding Outstanding work
with strong evidence
of knowledge of the
subject matter,
excellent
organizational
capacity, ability to
synthesize and
critically analyse and
originality in
thinking and
presentation.
A+ 75 to 79.75% Excellent Sound knowledge of
the subject matter,
thorough
understanding of
issues; ability to
synthesize critically
and analyse
A 70 to 74.75% Good Good understanding
of the subject matter,
ability to identify
issues and provide
balanced solutions to
problems and good
critical and
analytical skills.
A- 65 to 69.75% Adequate Adequate knowledge
of the subject matter
1
Under extraordinary circumstances, the JGU Academic Council or the JGU Deans’ Council can suspend
Clause D or make it optional. If Clause D is suspended, the policy which will be framed by the School
based on the decision of the said bodies will supersede Clause D. However, whether a situation is
extraordinary or not will be decided by the said bodies only.
2
Due to the COVID 19 pandemic, the Office of Academic Affairs may suggest changes/amendments or
suspend certain policies relating to the number of assessments and other examination related policies.

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to go to the next level

of study and
reasonable critical
and analytical skills.
B+ 60 to 64.75% Marginal Limited knowledge
of the subject matter,
irrelevant use of
materials and poor
critical and
analytical skills.
B 55 to 59.75% Poor Poor comprehension
of the subject
matter; poor critical
and analytical skills
and marginal use of
the relevant
materials.
B- 50 to 54.75% Pass “Pass” in a pass-fail
course. “P” indicative
of at least the basic
understanding of the
subject matter.

NEW COURSE LETTER GRADES AND THEIR INTERPRETATION

Letter Percentage Grade
Interpretation
Grade of Marks Points
Pass 1: Pass with Basic understanding of the subject
P1 45 – 49% 2
matter.
Pass 2: Pass with Rudimentary understanding of the
P2 40 – 44% 1
subject matter.
Fail: Poor comprehension of the subject matter; poor
F Below 40% 0 critical and analytical skills and marginal use of the
relevant materials. Will require repeating the course.
‘P’ represents the option of choosing between Pass/Fail
grading system over the CGPA grading system in the
COVID 19 semester in Spring 2020. The option is
P Pass
provided when students attain a minimum of 40
percentage marks under the current grading structure in
a given subject.
Extenuating circumstances preventing the student from
completing coursework assessment, or taking the
examination; or where the Assessment Panel at its
I Incomplete discretion assigns this grade. If an "I" grade is
assigned, the Assessment Panel will suggest a schedule
for the completion of work, or a supplementary
examination.

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PART III

a. Keyword Syllabus

Contract of Indemnity – nature and its features; rights; liabilities; obligations;

duties; indemnity holder; indemnifier.

Guarantee - essentials; features; nature; surety; principal debtor; creditor; co-

sureties; continuing guarantee; revocation.

Bailment – definition and features; bailor; bailee; delivery; third party; rights and duties of
bailor and bailee; finder; types of lien.

Pledge - essentials; pawner; pawnee; rights and duties of pawner and pawnee.

Agency – agent and principal; agent and servant; authority; classification and types; rights,
duties and liabilities of agent and principal; ratification; termination.

Sale of goods - characteristics and definition; movable goods; conditions and warranties;
caveat emptor and its exceptions; implied warranties; transfer of title; performance and
delivery; rights and duties of sellers and buyers; caveat emptor.

Negotiable Instruments - essence and types; bills of exchange; promissory note;

cheque; holder and holder in due course; dishonour; liability; presumption.

b. Course policies

Academic Integrity and Plagiarism

Learning and knowledge production of any kind is a collaborative process. Collaboration

demands an ethical responsibility to acknowledge who we have learnt from, what we have
learned, and how reading and learning from others have helped us shape our own ideas. Even
our own ideas demand an acknowledgement of the sources and processes through which
those ideas have emerged. Thus, all ideas must be supported by citations. All ideas borrowed
from articles, books, journals, magazines, case laws, statutes, photographs, films, paintings,
etc., in print or online, must be credited with the original source. If the source or inspiration
of your idea is a friend, a casual chat, something that you overheard, or heard being discussed
at a conference or in class, even they must be duly credited. If you paraphrase or directly
quote from a web source in the examination, presentation or essays, the source must be
acknowledged. The university has a framework to deal with cases of plagiarism. All form of
plagiarism will be taken seriously by the University and prescribed sanctions will be imposed
on those who commit plagiarism.

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Disability Support

JGU endeavours to make all its courses accessible to students. The Disability Support
Committee (DSC) has identified conditions that could hinder a student’s overall well-being.
These include physical and mobility related difficulties, visual impairment, hearing
impairment, mental health conditions and intellectual/learning difficulties e.g., dyslexia and
dyscalculia. Students with any known disability needing academic and other support are
required to register with the Disability Support Committee (DSC) by following the procedure
specified at https://jgu.edu.in/disability-support-committee/

Students who need support may register any time during the semester up until a month before
the end semester exam begins. Those students who wish to continue receiving support from
the previous semester, must re-register within the first month of a semester. Last minute
registrations and support might not be possible as sufficient time is required to make the
arrangements for support.

The DSC maintains strict confidentiality about the identity of the student and the nature of
their disability and the same is requested from faculty members and staff as well. The DSC
takes a strong stance against in-class and out-of-class references made about a student’s
disability without their consent and disrespectful comments referring to a student’s disability.

All general queries are to be addressed to [email protected]

Safe Space Pledge

This course may discuss a range of issues and events that might result in distress for some
students. Discussions in the course might also provoke strong emotional responses. To make
sure that all students collectively benefit from the course, and do not feel disturbed due to
either the content of the course or the conduct of the discussions. Therefore, it is incumbent
upon all within the classroom to pledge to maintain respect towards our peers. This does not
mean that you need to feel restrained about what you feel and what you want to say.
Conversely, this is about creating a safe space where everyone can speak and learn without
inhibitions and fear. This responsibility lies not only with students, but also with the
instructor.

P.S. The course instructor, as part of introducing the course manual, will discuss the scope of
the Safe Space Pledge with the class.

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PART IV

a. Weekly Course Outline

Week 1 Introduction/Indemnity
Weeks 2 Indemnity
Week 3 Guarantee
Week 4 Guarantee
Week 5 Guarantee/Bailment
Week 6 Bailment
Week 7 Pledge
Week 8 Agency
Week 9 Agency
Week 10 Agency
Week 11 Sale of Goods
Week 12 Sale of Goods
Week 13 Sale of Goods
Week 14 Sale of Goods
Week 15 Negotiable Instruments

b. Readings

The following program is intended to be only a guide and is subject to variation as and
when circumstances may render necessary:

Essential reading (latest editions)

1. MULLA ON THE INDIAN CONTRACT ACT (LexisNexis/ BUTTERWORTHS)

(13th edition should suffice)

2. AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF (EBC) (7th edition)

3. Pollock & Mulla, The Indian Contract Act, 1872, LexisNexis (15th edition)

Supplementary Reading

4. AVTAR SINGH, NEGOTIABLE INSTRUMENTS (EBC)

5. H.K SAHARAY, DUTT ON CONTRACT (EASTERN LAW HOUSE)

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6. P. RAMANATH AIYAR, LAW OF SALE OF GOODS, (UNIVERSAL)

7. AG GUEST, BANJAMIN’S SALE OF GOODS (SWEET AND MAXWELL)

8. BEATSON, ANSON’S LAW OF CONTRACT 28TH EDITION (OUP)

9. MICHAEL BRIDGE, THE SALE OF GOODS (OXFORD)

10. CHESHIRE & FIFOOT, LAW OF CONTRACTS (BUTTERWORTHS)

11. AVTAR SINGH, BUSINESS LAW, 9TH EDITION (EBC)

Acts/Statutes/Ordinances

The students should familiarize with the following legislations during the progress of
this
Course.

1. The Indian Contracts Act, 1872

2. The Sale of Goods Act, 1930
3. The Negotiable Instruments Act, 1881

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c. Topics outlines

INDEMNITY

A Contract of Indemnity is whereby one party to the contract (indemnifier or indemnitor)

promises to save the other party to the contract (indemnitee or indemnity-holder) from loss
caused to him by the actions of the indemnifier himself or of a third party.

It is, simply put, a promise to be liable for another’s loss.

Illustration: You are looking for a contractor to do some repairs on your house to fix water
leakage problems. Contractor A gives you a quote and tells you that if after the repairs are
completed you find that the water leakage returns, he will return all your money. Contractor A
is the indemnifier and you are the indemnity-holder.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is a contract for indemnity?

(2) When is an indemnifier liable to the indemnified?
(3) What are the rights of the indemnified?

Statutory Provisions:

Sections 124-125 of the Contract Act

Cases:

Rights of the indemnity-holder

 Gajanan Moreshwar v. Moreshwar Madan, A.I.R. 1942 Bom, 302

 Shanti Swarup v. Munshi Singh, AIR 1967 SC 1315

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GUARANTEE

A Contract of Guarantee is one where a person (guarantor) undertakes to be answerable to

another (creditor) for the debt, default, or miscarriage of another person (principal debtor), who
has an existing liability to the creditor.

Illustration: You apply for a car loan to HDFC Bank. However, HDFC requires a guarantee to be
signed by one of your parents, stating that if you default on a payment, they undertake to pay
HDFC the unpaid amount. You are the principal debtor. HDFC is the creditor. Your parent is the
guarantor. The contract between your parent and HDFC is the Contract of Guarantee.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is a guarantee, and what are the differences between an indemnity and a
guarantee?
(2) What is the extent of a surety’s/co-surety’s liability, and how does it get discharged?
(3) What are the rights of a surety against (i) the principal debtor, (ii) the creditor, and (iii)
co-sureties?
(4) What is a continuing guarantee?
(5) What is a bank guarantee? When can a beneficiary invoke a bank guarantee, and under
what circumstances can a party move to enjoin encashment of a bank guarantee?

Statutory Provisions:

Sections 126-147 of the Contract Act

Cases:

Surety’s liability

 Bank of Bihar v. Damodar Prasad, (1969) 1 SCR 620

Effect of variance on discharge of surety’s liability

 Anirudhan v. Thomco’s Bank, AIR 1963 SC 746

Surety’s right of subrogation

 Amrit Lal v. State Bank of Travancore, AIR 1968 SC 1432

Discharge of principal debtor

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 Subramania Chettiar v. Narayanswami, AIR 1951 Mad 48

Bank guarantee

 Hindustan Steel Work Corp. v. Tarapore & Co., (1996) 5 SCC 34

[Note that in a bank guarantee, banks’ established practice is to provide a guarantee that is
independent of any dispute between the creditor and principal debtor. This is a result of the
specific language used in the bank guarantee, not a creation of law. Consider broadly why banks
would voluntarily assume such risk.]

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BAILMENT

A Contract of Bailment is created when one person (bailor) delivers goods to another (bailee),
for whatever purpose, but with the understanding that once the purpose is served, the goods will
be returned or disposed of in accordance with the bailor’s instructions.

Illustration: Your friend asks for your contracts book in order to read a couple of chapters. You
lend it to him, but ask that it be returned in a week. This is a bailment.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is bailment?

(2) What are the rights and duties of the bailor and the bailee?
(3) What is a lien? What is the difference between a specific and a general lien?

Statutory Provisions:

Sections 148-171, 180-181 of the Contract Act

Cases:

Creation of a bailment

 State of Gujarat v. Memon, AIR 1967 SC 1885

Delivery

 Kaliaperumal Pillai v. Visalakshmi, AIR 1938 Mad 32

Lien

 R D Saxena v. Balram Prasad Sharma, (2000) 7 SCC 264

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PLEDGE

A Contract of Pledge is formed when one person (the pawnor) delivers goods to another party
(the pawnee) to serve as security that the pawnor will repay a debt or perform a specific act
under the contract. In a Contract of Pledge, temporary possession of property is given to another
party.

Illustration: You borrow Rs. 1,000 from a friend to tide you over till your pocket money arrives.
However, your friend asks for your watch as security, which she will return once you repay her.
This is a pledge.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is a pledge?

(2) What is the distinction between a bailment and a pledge?
(3) What are the duties and rights of the pawnor and the pawnee?

Statutory Provisions:

Sections 172-179 of the Contract Act

Rights of a pawnee

 Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322

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AGENCY

When one person or party (the principal) engages another (the agent) to act for him, e.g. to do his
work, to sell his goods, to manage his business, a legal relationship of agency is established. The
agreement between the agent and the principal may be express or implied.

The law of agency governs the legal relationships between the principal, the agent, and the third
parties they deal with.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is an agency and how is it created?

(2) How can an agent bind a principal?
(3) What is ratification?
(4) What are sub-agents and substitute agents, and what is the difference between them?
(5) What are the duties and rights of the agent and the principal vis-à-vis each other?
(6) What is the extent of the principal’s vicarious liability, and the agent’s personal liability,
to third parties?
(7) How is an agency terminated?

Statutory Provisions:

Sections 182-238 of the Contract Act

Cases:

Agent vs. independent contractor

 Lakshminarayan Ram Gopal v. Gov’t of Hyderabad, AIR 1954 SC 364

Apparent authority

 Harshad Shah v. LIC, (1997) 5 SCC 64

Rights and duties of agent

 Kelly v. Cooper, [1993] AC 205

Principal’s vicarious liability for agent’s actions

 State Bank of India v. Shyama Devi, AIR 1978 SC 1263

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SALE OF GOODS

A contract whose subject matter involves the sale of movable goods (as opposed to services), has
certain specific considerations that are codified in the Indian Sale of Goods Act, 1930. This
section will deal with these considerations.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is a contract of sale of goods? What is the distinction between a contract of sale
and one of hire-purchase?
(2) What are conditions and warranties?
(3) What is caveat emptor, and what are its exceptions?
(4) When does property, and risk, pass from seller to the buyer?
(5) What are the rights and duties of the seller and buyer?
(6) What are the seller’s remedies against the buyer, and vice versa?
(7) How can a party to a contract exclude implied terms and conditions?
(8) How does one execute a valid auction sale?

Statutory Provisions:

Sale of Goods Act (in its entirety, paying special attention to provisions mentioned below)

Cases:

Sale contract vs. works contract

 Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu and Ors., (2014) 7 SCC 1
 TV Sunderam Iyengar v. State of Madras, AIR 1974 SC 424

Sale of Goods Act, Sections 1-11

Sale of Goods Act, Sections 12-17, 62

Transfer of property and its significance

 CST v Husenali Adamnji & Co., AIR 1959 SC 887

 Mahabir Commercial Co. Ltd. v. CIT West Bengal, AIR 1973 SC 430

Sale of Goods Act, Sections 18-26, 29-30

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Remedies

 P.S.N.S. Ambalavana Chettiar v. Express Newspapers Ltd., AIR 1968 SC 741

Sale of Goods Act, Sections 31 - 61

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NEGOTIABLE INSTRUMENTS

Very simply put, a negotiable instrument is a document (instrument) evidencing a debt, that can
be validly transferred to another (negotiable).

Illustration: You borrow Rs. 1,000 from your friend and sign a piece of paper (instrument) that
lays out the parties involved, the amount of debt, and that you will pay in a week. Your friend in
turn owes another person Rs. 1,000. Your friend can give the instrument to this other person in
satisfaction of her debt (negotiation). The result is that you will owe this other person the Rs.
1,000.

Please keep the following questions in the back of your mind as you go through your reading.
This will help you glean the most pertinent information from your reading materials:

(1) What is a negotiable instrument?

(2) What is a promissory note, a bill of exchange, and a cheque?
(3) What is a holder, and a holder in due course?
(4) When is a cheque deemed to be dishonoured, and what is the liability of the drawer?
(5) What are the notice requirements after a cheque is dishonoured?
(6) When, and how, can a person institute a cause of action on a dishonoured cheque?

Statutory Provisions:

Sections 138-142 of the Negotiable Instruments Act

Cases:

Criminal liability for dishonour of cheques

Laxmi Dyechem v. State of Gujarat, (2013) 1 CompLJ 137 (SC

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