Q1. A proposal, when accepted, result in an agreement. It is only after the acceptance of the proposal that a contract between the two parties can arise. Under sec 2(p) of the Indian Contract Act 1872, the acceptance has been defined as under:
"When the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted, a proposal when accepted becomes a promise"
Communication of Proposal:
Under Sec 4 of Indian Contract Act:
• when it comes to the knowledge of the person to whom the offer is made
• Communication of acceptance when complete as against the proposer when it is put in course of transmission to him so as to be out of power of the acceptor
Acceptance of Proposal:
• Acceptance must be made by the party to whom the offer in made
• Acceptance must be absolute and unqualified (Sec 7(1)
• The acceptance must be expressed in some usual or reasonable manner (Sec 7(2)
• Acceptance must be communicated within reasonable time (Sec 7(2)
• Acceptance cannot be made in ignorance of offer
• Acceptance must be communicated before the offer lapses or revoked
• Acceptance must be communicated to the offerer
• By word spoken
• By word written
• By conduct
• Mere mental acceptance is no acceptance
• Silence can be treated as acceptance
Revocation of Proposal:
Revocation (Sec 4.)
As against the person who makes it:
When it is in the course of transmission to the person to whom it is made so as to become out of the power of the person who makes it
When an acceptance may be revoked (Sec 5)
"An acceptance may be revoked at any time before the communication of
the acceptance is complete as against the acceptor, but not after words"
Q2. Agency:
By a contract of agency, a person employs another person to do any act for him or
to represent him in dealing with third persons so as to bind himself by the acts of
such another person.
Creation of Agency:
• Agency by Express Authority – Authority is given by words spoken or written.
• Agency by Implied Authority – An agency which has to be understood from the conduct and behaviour of the parties is called implied agency.
• Agency by Estoppel – Agency by estoppel arises where a person by his words or conducts induces third person to believe that a certain person is his agent.
• Agency by Holding out – Agency by holding out is almost similar to agency by estoppel. Such agency arises when person by his past affirmative or positive conduct leads third person to believe that person doing some act on his behalf is doing with authority.
• Agency by Necessity –Agency by necessity arises under the following conditions:-
• There is actual and necessary for acting on behalf of the principal and
• It is impossible to communicate with principal and obtain his consent.
• Agency by Ratification –Agency by ratification is said to arise when a person, on whose behalf the acts are done without his knowledge or authority, expressly or impliedly accepts such acts. It is also known as ex-post facto i.e. agency arising after such event.
• Agency by Operation of Law- Agency by operation of law arises where the law treats on person as an agent of another
Agent:
An agent is a person employed to do any act for another or to represent another in dealing with third person. The agent establishes a contract between such another person and third person.
Duties and Rights of an Agent:
• To act on behalf of and be subject to the control of the principal.
• To act within the scope of authority or power delegated by the principal.
• To discharge his or her duties with appropriate care and diligence.
• To avoid conflict between his or her personal interests and those of the principal.
• To promptly hand over to the principal all monies collected on principal's behalf.
Q3. Contract of Insurance:
Insurance is a contract in which one party, known as the insured or assured , insures with another person, known as the insurer, assures or underwriters his property or life, or the life of another person in whom he has a pecuniary interest, or property in which he is interested or against some risk or liability, by paying a sum of money as the premium.
General Principles of Insurance
Indemnity- Contracts of insurance (except life and personal accident insurance) are contracts of indemnity.
• A typical contract of insurance involves an obligation on the part of the insurer to pay a sum of money to the insured upon the happening of some event.
• In no case however, can insurer recover more than the amount insured.
• The amount of depreciation is to be deducted from the loss suffered by the insured property.
Good Faith – There must be utmost good faith and frankness between the insured and insurer.
• The withholding of any relevant information or misstatement of material fact may give the insurer the legal ground to declare the contract void.
• A new material fact which arises at any time during negotiations, or a fact which though earlier not material, becomes material owing to change of circumstances, must be disclosed as soon as the insured comes to know of it.
Insurable interest – Insurable interest means some proprietary or pecuniary (monetary) interest.
• A person is said to have an insurable interest when is so situated with regard to the thing that he would have benefit from its existence and loss from its destructions.
Examples; Like car, car hypothecated, self-insurance,
Causa proxima – In case of marine and fire insurance we have principle of ‘causa proxima’ i.e. proximate cause.
• When damage has rustled due to more causes, we have to look to the proximate or the nearest cause of damage, although the damage might not have taken place without the remote cause.
• Thus, in the event of loss. It is proximate and not the remote cause.
Example: Rats make holes into the bottom of the ship where from the seawater enters the ship, thereby destroying the whole cargo of sugar. Since the insurance was against sea peril because the proximate cause is sea water.
Mitigation of loss – Another principle of insurance is mitigation of loss by the insured.
• In the event of mishap, the insured must act as though he was uninsured; that is, he must take all measures to minimise the loss that he would have taken if the properties were uninsured.
Risk must attach – The nest principle is that a contract of insurance can be enforced only if the risk has attached.
• If the risk is not run, the consideration fails and therefore the premium received by the insurer must be returned.
Subrogation – The principle of subrogation is corollary to the principle of indemnity and therefore applied only to fire and marine insurance.
• Subrogation is the right of the insurers to enforce their own benefits all the rights and remedies which the insured possesses against third parties in respect of subject matter.
• It means after satisfying the claim of the insured, the insurer stand in his place.
• The principle applied when there is complete loss not the partial loss.
Q4. Negotiable Instrument:
The term negotiable instrument means a written document which entities a person to a sum of money. A negotiable instrument is transferable by delivery or by endorsement and delivery. The mere transfer entities a person to the sum of money mentioned therein. A person received it from true owner. The negotiable instrument thus is a document which is legally recognized by custom of trade or law, transferable by delivery or by endorsement. The negotiable instrument act 1881 recognizes three instruments one is promissory note, second is bill of exchange and third is cheques payable to order or to bearer as negotiable instrument.
Characteristics of a Negotiable Instrument:
• It is transferable from one person to another by delivery or by endorsement and delivery.
• The legal holder of the instrument is entitled to receive money mentioned in it.
• The holder of a negotiable instrument has the right to file a suit in his name for payment from all or any of the concerned parties.
• If the transferee has accepted the negotiable instrument in good faith then he is not affected by the defective title of the transferor in any way.
• The three negotiable instrument promissory note, bill of exchange and cheques payable either to order or bearer are called negotiable.
Q5. a) Dishonour for non-payment of Negotiable Instrument:
A promissory note, bill of exchange, cheque is said to be dishonoured by non-payment, when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same. When the presentation of an instrument for payment is excused and the instrument having becoming overdue remains unpaid the instrument is presumed to be dishonoured for non-payment.
b) Dishonour for Non-Acceptance:
A bill of exchange is said to be dishonoured by non-acceptance when the drawee, or one of several drawees not being partners, makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted. Where the drawee is incompetent to contract, or the acceptance is' qualified, the bill may be treated -as dishnoured.
