BL MAND MAP 1 and 2 - Vikas Bhusare

Unit 1 Mind Map — Indian Contracts Act 1872

Indian Contracts Act, 1872

Section 2(h) — "An agreement enforceable by law is a contract"

OFFER + ACCEPTANCE = AGREEMENT → + ENFORCEABILITY = CONTRACT

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10 Essentials of a Valid Contract

Section 10 — Must have ALL 10

① Offer + Acceptance Creates agreement. Acceptance must be absolute.

② Legal Intention Business = yes. Social/family = no.

③ Consideration Something in return. Past/present/future.

④ Capacity 18+ years, sound mind, not disqualified.

⑤ Free Consent No coercion/fraud/mistake/undue influence.

⑥ Lawful Object Not illegal/immoral/against public policy.

⑦ Not Void Not declared void by law (wagering, etc.).

⑧ Certainty Terms must be clear. Vague = void. §29

⑨ Possibility Act must be possible. Impossible = void. §56

⑩ Formalities Writing/stamp/registration where required.

Example

Ramesh (25, sound mind) offers to sell his car to Suresh (22) for Rs.3 lakhs. Suresh accepts freely. Rs.3L is lawful consideration. Selling car is lawful. All 10 essentials present → VALID CONTRACT ✓

🤝

Offer & Acceptance

Section 2(a) & 2(b)

Offer §2(a): Willingness to do/abstain to get assent

Acceptance §2(b): Absolute YES — no conditions added

Counter Offer: Acceptance with changes = NEW offer. Original dies.

General Offer: To world at large — anyone can accept

Specific Offer: To one person only

Classic Case

Carlill v. Carbolic Smoke Ball Co. (1893) — Company advertised Rs.100 reward to anyone who used their product and got flu. Mrs. Carlill used it, got flu, claimed reward. Held: General offer. Her performance = acceptance. She wins! ✓

🧠 Counter Offer = Old offer DIES. New offer is born.

💰

Consideration

Section 2(d) — "Something in return"

Rule: No consideration = No contract (general rule)

Types: Past / Present / Future — all valid

Need not be adequate — Rs.1 for Rs.1 lakh car is valid!

5 Exceptions §25: Natural love (written+registered), Past voluntary service, Time-barred debt (written+signed), Completed gifts, Agency

Example — Exception

Ratan registers a document giving his son Arjun his car worth Rs.8L out of love → Valid WITHOUT consideration! (Natural love & affection — written + registered) ✓

⚖️

Free Consent — What Vitiates It

Sections 13–22

Coercion §15 Threats/IPC crimes to force consent

VOIDABLE

Undue Influence §16 Dominant party exploits weaker

VOIDABLE

Fraud §17 Intentional deception

VOIDABLE + DAMAGES

Misrepresentation §18 Innocent false statement

VOIDABLE only

Bilateral Mistake §20 Both parties wrong on fact

VOID

Unilateral Mistake §22 Only one party mistaken

Generally VALID

Example — Coercion

Ravi, threatened by a gangster, signs land sale deed at low price → Coercion §15 → VOIDABLE. Ravi can go to court and cancel the contract ✓

👤

Capacity to Contract

Section 11 — Who can contract?

Can contract: 18+ years, sound mind, not disqualified

MINOR: Below 18. Contract = VOID AB INITIO (void from start!)

Unsound Mind §12: Lunatic/idiot/drunkard. Contract = VOID

Disqualified: Alien enemy, insolvent, convict = cannot contract

Minor CAN: Be beneficiary, accept gifts, guardian contracts for him

Landmark Case

Mohori Bibee v. Dharmodas Ghose (1903) — Ramesh age 16 borrows Rs.10,000 giving house as security. CONTRACT VOID. Moneylender gets nothing back. Minor's contract = Dead from day one! ✗

🧠 Minor + Contract = VOID AB INITIO — Mohori Bibee 1903

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Types of Contracts

Based on Validity & Performance

Valid: All 10 essentials present. Fully enforceable.

Void Agreement §2(g): No legal effect ever. Minor/wagering/unlawful object.

Void Contract §2(j): Was valid, later becomes unenforceable (impossibility).

Voidable §2(i): Valid until aggrieved party cancels. Coercion/fraud/undue influence.

Illegal: Forbidden by law. Void + collateral agreements also void.

Quasi Contract §68–72: No real contract. Law imposes obligation. Prevents unjust enrichment.

Quasi Contract Example

Shweta pays for food. Restaurant delivers to WRONG customer Mohan by mistake. Mohan eats it. Under §70 & §72 — Mohan must pay. No contract between them but law imposes obligation!

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Breach of Contract & 5 Remedies

Sections 73–75

Actual Breach: Fails to perform on due date

Anticipatory Breach §39: Tells you IN ADVANCE he won't perform. Sue immediately!

① Damages §73Money for loss. Most common remedy.

② Quantum MeruitPay for part-work already done.

③ Specific PerformanceCourt forces actual performance. Unique goods/land.

④ InjunctionCourt ORDER to stop doing something.

⑤ Rescission §75Cancel contract. Go back to original position.

Leading Case — Damages

Hadley v. Baxendale (1854) — Only FORESEEABLE damages recoverable. Special damages only if defendant knew about special circumstances at time of contract.

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Quasi Contracts

Sections 68–72 — Prevent Unjust Enrichment

§68 — Necessaries to incapable person → Recover from their property

§69 — Pay another's due debt → Get reimbursed from them

§70 — Do something for another (not as gift) + they enjoy benefit → They MUST pay

§71 — Finder of goods → Must care for + find owner = Bailee's duty

§72 — Money paid by MISTAKE or coercion → Must be RETURNED

§72 Example

Ramesh accidentally pays Rs.10,000 to Ravi's account instead of Rohit's. Ravi MUST return the money even with no contract — §72!

🛡️

Indemnity vs Guarantee

§124–125 (Indemnity) · §126–147 (Guarantee)

INDEMNITY §124 2 parties. One SAVES other from loss. Indemnifier → Indemnified

GUARANTEE §126 3 parties. Surety pays if debtor defaults. Surety + Principal Debtor + Creditor

Subrogation §140: Surety pays → Steps into creditor's shoes → Recovers from debtor

Surety Discharged: Contract varied without consent, debtor released, creditor gives extra time without telling surety

Guarantee Example

Bank lends Rs.5L to Ramesh. Suresh promises: "If Ramesh doesn't repay, I will." Suresh = Surety. If bank changes loan terms without telling Suresh → Suresh is DISCHARGED!

📦

Bailment & Pledge

Sections 148–181

Bailment §148: Goods delivered for a PURPOSE + must be RETURNED. Bailor → Bailee.

Standard of Care §151: Ordinary prudent man's care of his OWN goods.

Bailee's Duties: Take care · No unauthorised use · Don't mix · Return goods + accretion

Pledge §172: Special bailment as SECURITY FOR LOAN. Pawnor → Pawnee.

Pawnee's right §176: Can SELL goods after giving reasonable notice if pawnor defaults

Examples

Bailment: Ravi gives car to mechanic for repair → must return after repair ✓
Pledge: Aarav pawns gold watch for Rs.20,000 loan. Watch returned on repayment. If default → pawnee sells after notice.

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Discharge of Contract

6 Modes — How Contract Ends

① By Performance: Both parties fully perform → Contract ends naturally ✓

② By Agreement: Novation (new contract replaces old), Rescission, Remission, Alteration

③ Impossibility §56: Performance becomes impossible — Frustration. Contract becomes void.

④ Lapse of Time: Limitation Act — 3 years. After that, contract is time-barred.

⑤ Operation of Law: Death (personal contracts), insolvency, material alteration.

⑥ By Breach: One party breaches → Other party discharged from further performance.

Novation Example

Ramesh owes Suresh Rs.50,000. All three agree Mahesh will pay Suresh instead. Original contract discharged! New contract between Mahesh & Suresh created.

Unit 2 Mind Map — Sale of Goods Act 1930 & NI Act 1881

PART A — Sale of Goods Act, 1930

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Sale vs Agreement to Sell — Section 4

Most Important Distinction in Sale of Goods Act

SALE §4(3) ✅ Ownership transfers IMMEDIATELY ✅ EXECUTED contract ✅ Risk passes to BUYER right away ✅ Goods destroyed → BUYER's loss ✅ Seller can sue for PRICE ✅ Buyer safe if seller goes insolvent

AGREEMENT TO SELL §4(4) ⏳ Ownership transfers in FUTURE ⏳ EXECUTORY contract ⏳ Risk stays with SELLER ⏳ Goods destroyed → SELLER's loss ⏳ Seller can sue for DAMAGES only ⏳ Buyer gets rateable dividend if seller insolvent

Examples

SALE → Ramesh walks into shop, buys pen for Rs.50, pays, takes it. Ownership NOW.
AGREEMENT TO SELL → Ramesh agrees to buy 500kg wheat next week. Ownership transfers NEXT WEEK when delivered. Agreement to Sell → becomes Sale on delivery.

🧠 Risk follows Property. Before property passes = Seller's risk. After = Buyer's risk.

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Types of Goods

Section 6 & 2(6)

Specific Goods: Identified at contract time. "THIS red Honda City."

Ascertained: Identified AFTER contract. 50 mangoes separated from a bag of 100.

Unascertained/Generic: Not identified yet. "100 kg Basmati rice." Which 100 kg? Unknown.

Future Goods §2(6): To be manufactured/grown in future. Next season's crop.

Contingent: Depend on uncertain future event. "If the ship arrives, I'll sell you goods."

Example

Suresh contracts to sell 500 bicycles yet to be manufactured → FUTURE GOODS. This is Agreement to Sell — ownership can't transfer before goods exist!

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Conditions vs Warranties

Sections 11–17 — Exam Favourite!

CONDITION §12(2) ESSENTIAL term of contract

Reject Goods + Damages

WARRANTY §12(3) SECONDARY / collateral term

Damages ONLY

Implied Condition — Title §14(a): Seller must have RIGHT to sell. No title → buyer gets full price back.

By Description §15: Goods must MATCH description. Order Darjeeling tea, get ordinary tea → REJECT!

Merchantability §16(2): Goods fit for ORDINARY purpose. Defective goods → seller liable.

Fitness for Purpose §16(1): Buyer states PURPOSE + relies on seller's skill → goods must be fit.

By Sample §17: Bulk must match sample quality. Hidden defects = seller responsible.

Example

Ramesh orders 2000cc engine car. Dealer sends 1500cc → Breach of CONDITION → Reject car + claim damages ✓
Rowland v. Divall (1923): Stolen car sold → No title → Buyer gets FULL price back!

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Caveat Emptor

Section 16 — "Let the Buyer Beware"

Basic Rule: Buyer must check goods BEFORE buying. Seller NOT responsible for defects buyer could find.

5 Exceptions — Seller IS liable:

① Buyer states specific PURPOSE + relies on seller §16(1)

② Goods sold by DESCRIPTION §15

③ Goods sold by SAMPLE §17

④ Seller CONCEALS defect by fraud

⑤ Merchantable quality implied §16(2)

Example

Ramesh buys second-hand TV without testing → doesn't work → CANNOT sue (Caveat Emptor). BUT if Ramesh told seller "for hotel business" and seller said fine — seller IS liable (Exception ①)!

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Transfer of Property (Ownership)

Sections 19–26 — When does ownership pass?

§19: Property passes when PARTIES INTEND it to pass

§20 — Specific goods, deliverable state: Property passes when CONTRACT IS MADE

§21 — Seller must do something first: Passes when work DONE + buyer INFORMED

§22 — Need to weigh/measure for price: Passes when measured + buyer INFORMED

§23 — Unascertained goods: Passes only when goods APPROPRIATED (separated) with both parties' assent

§24 — Goods on approval: Passes when buyer ACCEPTS, acts on it, or keeps beyond time limit

§26 — Risk follows property: Before passing = Seller's risk. After = Buyer's risk.

§23 Example

Ramesh orders 100 kg rice from Suresh's 500 kg stock. Property passes ONLY when Suresh separates 100 kg and both agree "this is Ramesh's rice." Before that → Suresh bears any loss!

💸

Rights of Unpaid Seller

Sections 45–61

Unpaid Seller §45: Full price not paid OR cheque bounced

RIGHTS AGAINST GOODS

① Lien §47: RETAIN goods till paid. Refuse delivery. Lost if goods given to carrier.

② Stoppage in Transit §50: Buyer goes INSOLVENT + goods still with carrier → STOP and recall goods!

③ Resale §54: Perishables = sell immediately. Others = give NOTICE first. Keep profit or recover loss.

RIGHTS AGAINST BUYER

Sue for Price §55 · Sue for Damages §56 · Sue for Interest §61

Example

Goods in truck going to buyer. Buyer goes bankrupt → Seller calls truck driver: "Bring goods back!" → Stoppage in Transit ✓. Vegetables? Perishable → Resell immediately without notice!

PART B — Negotiable Instruments Act, 1881

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3 Negotiable Instruments — Side by Side Comparison

Section 13 NI Act 1881 — Promissory Note §4 · Bill of Exchange §5 · Cheque §6

PROMISSORY NOTE §4 📝 Unconditional PROMISE to pay 👥 2 parties: Maker + Payee 💰 Maker is primarily LIABLE ✍️ NO acceptance needed 🔖 Stamp duty REQUIRED ❌ Can't be bearer on demand

"I, Ramesh, PROMISE TO PAY Suresh Rs.10,000 on 15th Aug. Signed: Ramesh"

BILL OF EXCHANGE §5 📋 Unconditional ORDER to pay 👥 3 parties: Drawer + Drawee + Payee 💰 Drawee/Acceptor primarily LIABLE ✅ ACCEPTANCE by drawee needed 🔖 Stamp duty REQUIRED ✅ Can be bearer on demand

"To: Suresh. PAY Mahesh Rs.25,000 sixty days after date. Signed: Ramesh"

CHEQUE §6 🏦 Bill drawn on a BANK ONLY 👥 3 parties: Drawer + Bank + Payee 💰 Bank (drawee) pays ❌ NO acceptance required ✅ NO stamp duty needed ⚡ ALWAYS payable on DEMAND

Standard bank cheque with date, amount, payee, drawer signature

🧠 PN = PROMISE, 2 parties | BOE = ORDER, 3 parties, needs acceptance | Cheque = BOE on Bank, on demand, no stamp

✏️

Crossing of Cheques

Sections 123–131A — 4 Types

General Crossing §123 Two || lines. Collect through ANY bank. Cannot cash at counter.

Special Crossing §124 Bank NAME between lines. Only through THAT specific bank.

Account Payee Credited ONLY to named payee's account. SAFEST form.

Not Negotiable §130 No one gets better title than transferor. Protects true owner.

Not Negotiable Example

Ramesh's "Not Negotiable" cheque is STOLEN by Suresh. Suresh gives it to Mohan (innocent). Even Mohan gets NO better title than Ramesh. Ramesh can recover from Mohan! True owner ALWAYS protected.

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Holder in Due Course (HDC)

Section 9 — King of NI Act!

4 conditions for HDC: Paid consideration + Before maturity + Good faith + No notice of defect

Privilege ①: BETTER TITLE — gets clean title even if transferor was a thief!

Privilege ②: ALL prior parties liable to him (drawer, all endorsers)

Privilege ③: Prior parties CANNOT say "no consideration"

Privilege ④: Instrument PURGED of defects — even subsequent holders benefit

Presumption §118: Every holder is PRESUMED to be HDC

Example

Ram gives cheque to Shyam (fraud). Shyam endorses to Mohan (HDC — paid value, good faith). Ram claims fraud. RAM CANNOT stop payment to Mohan! HDC always wins! ✓

🧠 HDC = Clean Title Always. Prior fraud doesn't affect HDC.

✍️

Types of Endorsement

Section 15 — Signing to Transfer

Blank/General: Just signs name. Instrument becomes BEARER — anyone can cash!

Special/Full: "Pay to Ramesh." Named person only can cash.

Restrictive: "Pay to Ramesh ONLY." No further transfer allowed.

Conditional: "Pay to Ramesh IF he delivers goods." Condition added.

Sans Recourse: "Pay to Ramesh, sans recourse." Endorser NOT liable if dishonoured.

Partial: Only part of amount endorsed. ❌ NOT VALID!

Example

Ramesh signs "Pay to Suresh. Signed Ramesh" on back → Special Endorsement → Only Suresh can cash. Ramesh just signs "Ramesh" on back → Blank → ANYONE can cash it now!

🧠 Partial endorsement = NOT VALID!

⚠️

Section 138 — Cheque Bounce = Criminal Offence!

NI Act — Added 1988 — Most Practical Topic

WHEN IS IT AN OFFENCE?

Cheque issued for LEGALLY ENFORCEABLE DEBT

Cheque bounces — insufficient funds OR exceeds overdraft

NOT applicable for gifts, illegal debts, or stolen cheques

⚡ PUNISHMENT

🔒 Imprisonment up to 2 YEARS

💰 Fine up to TWICE the cheque amount

⚖️ OR BOTH imprisonment + fine

📋 STEP-BY-STEP PROCEDURE

STEP 1 — Present cheque → Bank returns dishonoured memo

STEP 2 — Payee sends WRITTEN LEGAL NOTICE to drawer within 30 DAYS of memo

STEP 3 — Drawer has 15 DAYS after notice to make payment

STEP 4 — If not paid → File complaint in court within 30 DAYS of expiry of 15-day period

Example with Dates

Ramesh issues Rs.2L cheque to Suresh. Bounces. Suresh gets bank memo on 1st Jan → Send notice by 31st Jan → Ramesh has till 15th Feb to pay → If unpaid, Suresh MUST file case by 17th March. Miss this → Case time-barred!

🧠 30 days (notice) + 15 days (pay) + 30 days (file case) = The golden rule of Section 138!

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Dishonour & Presumptions

Sections 91–98 · Section 118

Dishonour by Non-Acceptance §91: Drawee refuses to accept within 48 hours

Dishonour by Non-Payment §92: Refuses to pay or defaults on due date

Notice of Dishonour §93: Must inform ALL prior parties. Without notice → they are DISCHARGED from liability.

Noting & Protest §99: Notary Public records dishonour. Formal protest certificate obtained.

PRESUMPTIONS §118 — Law ASSUMES:

✓ Every instrument was made FOR CONSIDERATION
✓ Made ON THE DATE it bears
✓ Acceptance before MATURITY
✓ Transfer before MATURITY
✓ Endorsements in ORDER they appear
✓ Every holder is HDC (until proved otherwise)

⚡

Unit 2 — Rapid Revision Cheat Sheet

Read this last before your exam!

SALE OF GOODS ACT

📌 Sale = Immediate ownership
📌 Agreement to Sell = Future ownership
📌 Risk = Follows Property (§26)
📌 Condition = Reject + Damages
📌 Warranty = Damages only
📌 Caveat Emptor + 5 exceptions
📌 Unpaid Seller: Lien → Transit → Resale
📌 §20: Specific goods → passes at contract
📌 §23: Unascertained → passes at appropriation

NI ACT — KEY POINTS

📌 PN = Promise | BOE = Order | Cheque = Bank
📌 Cheque: No stamp, on demand, no acceptance
📌 HDC: Value + Good faith + Before maturity
📌 HDC always gets CLEAN TITLE
📌 Blank endorsement = Anyone can cash
📌 Partial endorsement = NOT VALID
📌 Not Negotiable = No better title
📌 Account Payee = Safest crossing

SECTION 138 — CHEAT CODE

🔴 Offence: Cheque bounce for legal debt
🔴 Punishment: 2 yrs jail OR 2x fine OR both
🔴 Step 1: Bank returns cheque
🔴 Step 2: Notice within 30 days of memo
🔴 Step 3: Drawer pays in 15 days
🔴 Step 4: File case within 30 days after
⚡ Formula: 30 + 15 + 30 days!

Unit 1 Mind Map

The Indian Contracts Act, 1872

Indian Contracts Act, 1872

Unit 2 Mind Map

Sale of Goods Act, 1930 & Negotiable Instruments Act, 1881