COURSE MANUAL

Law of Contracts II

Fall 2024
(AY 2024-25)

Name of the Course Coordinator(s)

Prof. Pallavi Goel

Name of Faculty Member(s)

Prof. Faiz Tajuddin
Prof. Chetna
Prof. Phil M Raju
Prof. Aditya Gandotra
Prof. Oishwarjya Basu
Prof. Saudamini Gupta
Prof. Mahima Balaji
Prof. Pragya Rakshita

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 CONTENTS

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

PART II

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

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

c. Intended Learning Outcomes……………………………………………………...Page 5

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

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

PART IV

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

b. Readings……………………………………………………………………………………Page 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 2023-24

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 2nd 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, B.A.
(Hons) Criminology and Criminal Justice; LL.B.; and 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
Leve
l: 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
» Partnership Law
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, The Partnership Act, 1932. 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
with 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

Course Intended Weightage Teaching and Assessment

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

To pass this course, students must obtain a minimum of 40% in the cumulative aspects
of coursework, i.e., internal assessment (including moot, mid-term exam, internal
assignment) and end term examination. 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:

PERCENTAGE GRADE
GRADE GRADE DESCRIPTION
OF MARKS VALUE
Outstanding – Exceptional knowledge
of the subject matter, thorough
understanding of issues; ability to
80 and above O 8
synthesize ideas, rules and principles and
extraordinary critical and analytical
ability
Excellent - Sound knowledge of the
subject matter, thorough understanding
75 – 79 A+ 7.5 of issues; ability to synthesize ideas, rules
and principles and critical and analytical
ability
Very Good - Sound knowledge of the
subject matter, excellent organizational
capacity, ability to synthesize ideas, rules
70 – 74 A 7
and principles, critically analyze existing
materials and originality in thinking and
presentation
Good - Good understanding of the
subject matter, ability to identify issues
65 – 69 A- 6 and provide balanced solutions to
problems and good critical and analytical
skills
Fair – Average understanding of the
subject matter, limited ability to identify
60 – 64 B+ 5 issues and provide solutions to problems
and reasonable critical and analytical
skills
55 – 59 B 4 Acceptable - Adequate knowledge of the
subject matter to go to the next level of
study and reasonable critical and

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PERCENTAGE GRADE
GRADE GRADE DESCRIPTION
OF MARKS VALUE
analytical skills.
Marginal - Limited knowledge of the
subject matter and irrelevant use of
50 – 54 B- 3
materials and, poor critical and analytical
skills
Pass 1 – Pass with basic understanding
45 – 49 P1 2
of the subject matter
Pass 2 – Pass with rudimentary
40 – 44 P2 1
understanding of the subject matter
Fail - Poor comprehension of the subject
matter; poor critical and analytical skills
Below 40 F 0 and marginal use of the relevant
materials. Will require repeating the
course
Absent - “Extenuating circumstances”
preventing the student from taking the
end- semester, or re-sit, examination as
the case may be; the Vice Dean
(Examinations) at their discretion assign
Absent Ab 0 the “Ab” grade. If an "Ab" grade is
assigned, the student would appear for
the end-semester, or re-sit examination,
as the case may be, as and when the
subsequent opportunity is provided by
the University.

PART III

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 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.

Law of Partnership – definition, nature, types, relationship between parties, duties and
liabilities, partner’s authority, registration and dissolution of partnership

b. Course/Class Policies

Cell Phones, Laptops and Similar Gadgets

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

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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.

Disability Support and Accommodation Requirements

JGU endeavours to make all its courses inclusive and accessible to students with
different abilities. In accordance with the Rights of Persons with Disabilities Act (2016),
the JGU Disability Support Committee (DSC) has identified conditions that could
hinder a student’s overall well-being. These include physical and mobility related
difficulties, visual and hearing impairment, mental health conditions and
intellectual/learning difficulties e.g., dyslexia, 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 before the deadline for registration ends, as
communicated by the DSC via email each semester. Those students who wish to
continue receiving support from the previous semester, must re-register every semester
prior to the deadline for re-registration as communicated by the DSC via email. Last
minute registrations and support are discouraged and 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. With due respect for confidentiality, faculty and students are
encouraged to have honest conversations about the needs of students with disabilities
and to discuss how a course may be better tailored to cater to a student with disability.

All general queries are to be addressed to disabilitysupportcommittee@jgu.edu.in

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

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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.

PART IV

a. Weekly Course Outline

Week 1 Indemnity

Week 2 Indemnity and Guarantee

Week 3 Guarantee

Week 4 Guarantee

Week 5 Bailment

Week 6 Bailment

Week 7 Pledge

Week 8 Agency

Week 9 Agency

Week 10 Agency and Sales of Goods

Week 11 Sales of Goods

Week 12 Sales of Goods

Week 13 Sales of Goods

Week 14 Negotiable Instruments

Week 15 Law of Partnership

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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)

4. Pollock & Mulla, The Indian Partnership Act, LexisNexis

5. Avtar Singh, The Law of Partnership (EBC)

Supplementary Reading

6. AVTAR SINGH, NEGOTIABLE INSTRUMENTS (EBC)

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

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

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

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

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

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

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

14. R.K. BANGIA, THE INDIAN PARTNERSHIP ACT (EBC)

15. UNIVERSAL’S CONCISE COMMENTARY, THE INDIAN PARTNERSHIP

ACT, 1932

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 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
4. The Indian Partnership Act, 1932

WEEK 1
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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WEEK 2 - 4
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

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Discharge of principal debtor

 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.]

WEEK 5-6
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
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  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

WEEK 7
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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WEEK 9-10
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

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Principal’s vicarious liability for agent’s actions

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

WEEK 10-13
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

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  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

Remedies

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

Sale of Goods Act, Sections 31 - 61

WEEK 14
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

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

WEEK 15
THE INDIAN PARTNERSHIP ACT

An agreement between two or more people who agree to run a business together and share its
profits and losses. The people who form the partnership are called partners, and they collectively
form a firm.

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 Partnership?

(2) What are the types of partnerships?
(3) What are the rights and duties of the partners – towards each other and third party?
(4) When are the liabilities of partners?
(5) What is the authority of the partner – in case of emergency?
(6) What is the effect of notice to a partner?
(7) How is a partnership registered and dissolved?

Statutory Provisions:

Sections 4, 5 and 30, 9, 14, 15, 18, 25, 29, 33, 69, 40-44 of the Indian Partnership Act

and broadly discuss the contents of a partnership deed, partnership vs. co-ownership, types of
partners, partnership vs. company, the authority of a partner, rights of outgoing partners, death or
insolvency of a partner, registration of a firm, dissolution of a firm, effect of dissolution, sale of
goodwill.

Cases:

Raghunath Sahu And Anr. vs. Trinath Das and Ors. AIR 1985 ORI 8
Avula Construction (P) Ltd. v. Senior Divisional Electrical Engineer, AIR 1999 AP 318

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