Advance Contract Act, 1872.

By :
Dr. Vilas Kulkarni.
1
INDEX
Contracts of Indemnity.
Contracts of Gaurantee.
Surety & Co Surety.
Agency.
2
Contracts of Indemnity.(Sec
124)
A contract by which one
party promises to save the other from
loss caused to him by the
conduct of the promisor himself, or by
the conduct of any other person, is
called as the " Contract of Indemnity".
Eg - Ramesh contract to indemnify
Suresh against the consequences of
any proceedings which Dinesh may
take against Suresh in respect of a
certain sum of 120000/- rupees. This is
a contract of indemnity. 3
Essentials of Contract of Indemnity.
It must contain all the essentials of
any valid contract.
• The promisee or the Indemnity holder
must have suffered loss.
• There must be minimum two parties
at actual. a) Indemnity Holder(Who
has suffered the losses)
• b)Indemnifier.( Due to whom
Indemnity holder has suffered losses)
4
Rights of indemnity holder
1) All damages which he may be compelled
to pay in any suit in respect of any matter
to which the promise to indemnify
applies.( Right of Recovery of damage
cost)
2) All costs which he may be compelled to
pay in any such suit if, in bringing or
defending it to compensate damage(Right
of Recovery of all costs).
5
Continued…
3) All sums which he may have paid
under the terms of any compromise of
any such suit, if the compromise was
not contrary to the orders of the
promisor. ( Right of recovery of the
cost of Compromised). It is also called
the out of the court settlement with
support of third person.
6
Salient Features of this Contract
Meaning of Contract.
Nature of Contract.
Parties involved.
Liabilities.
Contingency.
Objective of the contract.
No of Contracts.
Right to Sue.
7
.
Contracts of Guarantee
A "contract of guarantee" is a contract

to perform the promise, or discharge
the liability, of a third person in case
of his default.
Eg – A lends money to B and C

promises A that if B fails to repay he
will pay the money.
8
Continued…
• The person who gives the guarantee
is called the "surety“.
• The person in respect of whose
default the guarantee is given is
called the "principal debtor “.
• The person to whom the guarantee is
given is called the "creditor“.
• A guarantee may be either oral or
written.
9
Essentials of a Guarantee
1. There must be a debt existing,

which should be recoverable.
2. Existence of 3 parties ie. Principal
debtor, creditor & surety person..
3. There should be some consideration
4. The liability must be legally
enforceable.
10
Continued…
5. The principal debtor must be

primarily liable. Surety’s liability is
secondary.
6. There must be a distinct promise,
oral or written by the surety to pay
the debt in case of default by
principal debtor.
7. All essentials of a contract.
11
Surety and Co Surety
Surety person: When the guarantee

to the contract is given by one
suitable person for principle debtor to
creditor.
Co Surety Person: when the loan is
guaranteed to creditor by more than
one surety person against principle
debtor.
12
Rights of Surety
• Rights of Subrogation (Right of surety
against principal debtor).-
When the surety pays gauranted sum
to creditor on behalf of principal debtor,
he owns all the rights of the Creditor.
• Rights to indemnity - Surety is entitled
to recover money from the principal
debtor whatever sum he has rightfully
paid under the guarantee, but, no sums
which he has paid wrongfully 13
Continued…
• Rights to benefit of Creditors Securities

A surety is entitled to the benefit of
every security which the creditor has
against the principal debtor
• Right of equal contribution: To be
contributed equally in case where two
or more persons are co-sureties in this
contract.
14
Agency
An "agent" is a person employed to

do any act for another or to represent
another in dealings with third
persons.
The person for whom such act is
done, or who is so represented, is
called the "principal".
15
Creation of Agency.
Agency can be created as under:

1. Agency by agreement.
2. Agency by necessity.
3. Agency by estoppel or by holding
out.
4. Agency by operation of Law.
5. Agency by ratification.
16
Ratification of Agency
Ratification is adopting or accepting

subsequently a past act of an agent
done on behalf of another without
authority.
Rules governing ratification.

The act must be done by one person
on behalf of another.
17
Continued…
Ratification may be expressed or may

be implied in the conduct of the
person on whose behalf the acts are
done.
No valid ratification can be made by
a person whose knowledge of the
facts of the case is materially
defective.
18
Continued…
Ratification must be communicated.

Ratification can be for whole contract
and not part of it.
Ratification should not put a third
party to damages.
Ratification must be done within
reasonable time.
19
Classification of Agents.
Specific or particular agent.

General agent.
Mercantile agent.
Sub-Agent.
Co-Agent.
Substitute Agent.
International Agent.
20
Agent's authority (3)
The authority of an agent may be expressed
or implied.
An agent having an authority to do an act
has authority to do every lawful thing which is
necessary in order to do such act.
An agent has authority, in an emergency, to
do all such acts for the purpose of protecting
his principal from loss as would be done by a
person of ordinary prudence, in his own case,
under similar circumstances.
21
Revocation of Agents
Authority(2).
The principal may
revoke the authority given to his
agent at any time before the
authority has been exercised so as to
bind the principal.
Revocation of authority terminates the
agents authority.
22
Continued...
The principal cannot revoke the

authority in following (3)cases –
• When agent has partly exercised the
authority.
• Where agency is coupled with
interest.
• When agent is personally liable.
23
Termination of agency
An agency is terminated by six methods.

1.The principal revoking his authority.
2. By the agent renouncing the
business of the agency.
3.By the business of the agency being
completed.
4.By either the principal or agent died.
5.By becoming of unsound mind.
6.The principal being adjudicated an
insolvent under the provisions of any Act
24
for the time being in force.
Agent's (6)Duties to principal
An agent is bound to conduct the

business of his principal according
to the directions given by the principal
An agent is bound to conduct the
business of the agency with
as much skill as is generally
possessed by persons engaged in
similar business.
25
Continued…
To render proper accounts.

To pay sums to principal received for
him.
To communicate with principal the
detail status of business .
Not to make secret profits from
agency.
26
Rights of Agent.(5)
To retain out of any sums received on

account of the principal, all moneys
due to himself.
To lien.
To indemnity.
To receive compensation in respect of
injury caused to him by the principal's
neglect or want of skill.
To appoint substitute agent. 27
Principal’s Rights.(5)
To repudiate Contract.
To demand accounts.
To refuse remuneration to agent who
is guilty for misconduct.
To claim loss of profit sustained by
him.
To revoke agents authority.
28
THANK YOU !!!
29

Advance Contract Act, 1872.

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Advance Contract Act, 1872.

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By :

Dr. Vilas Kulkarni.

A "contract of guarantee" is a contract

Eg – A lends money to B and C

1. There must be a debt existing,

5. The principal debtor must be

Surety person: When the guarantee

• Rights to benefit of Creditors Securities

An "agent" is a person employed to

Agency can be created as under:

Ratification is adopting or accepting

Rules governing ratification.

Ratification may be expressed or may

Ratification must be communicated.

Specific or particular agent.

The principal cannot revoke the

An agency is terminated by six methods.

An agent is bound to conduct the

To render proper accounts.

To retain out of any sums received on

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