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Business law

  1. 1. BBA 5thFrom week 7 Business lawCONTRACT OF BAILMENT: the word bailment derived from French word “Bailer” means todeliver something to someone for a specific purpose. Purpose may be safe custody, disposed of,repairing etc .In these contracts 2 parties are involved. 1. Bailor:(owner of the goods) the person who delivered his goods to other person for specific purpose 2. Baillie: the person to whom we delivered our goods. Baillie may be a mechanic (when we deliver our car for repairing), tailor (when we deliver our clothes to tailor for sewing), shopkeeper (when we deliver some goods to shopkeeper/seller to sell them. it is called disposed of).Baillie will return the goods according to the instructions of the bailer. The ownership will remain with the bailor and give the temporary possession of his goods to the Baillie. ESSENTIALS OF CONTRACT OF BAILMENT 1. CONTRACT: it must be a legal contract 2. SPECIFIC PURPOSE: there must be a specific purpose like repairing, disposed of; safe custody means that for which purpose I am giving these goods. 3. DELIVERING OF GOODS: this is the main theme of contract of bailment. There must be a process of delivering of goods in contract of bailment. 4. NO CHANGE OF OWNERSHIP: There will be no change in the ownership in contract of bailment. Ownership will remain in the hand of bailor and if he gives the ownership then it will be called sale. 5. RETURN OF SAME GOODS: Baillie will provide same goods in same condition to the bailer. But in some cases like repairing Baillie will repair it according to the instructions of bailor. DUTIES OF BAILOR 1. Duty to disclose faults. It is the duty of bailor to disclose all faults in their goods and if he fails then will be liable to pay for such damages to the Baillie. 2. Duty to repay extra ordinary expenses. It is also called emergency. It is also the duty of bailor to repay extra ordinary expenses to the Baillie. E,g feeding expenses, medicine . 3. Duty to repay necessary expenses. It is the duty of bailor to repay necessary expenses to Baillie. The Baillie paid these expenses in order to maintain the asset then the whole payment is done by the bailor to Baillie. E,g feeding of horses by the Baillie then the bailor has to pay for feeding.Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 1
  2. 2. BBA 5th 4. Duty to indemnity for demand back. It is the duty of bailor to indemnify. If there is a contract between bailor and Baillie for three months so when the Baillie do expenses on any asset of bailor in order to get benefit from that assets but before the maturity the Baillie get loss, then the bailor has to indemnify (compensate) for the loss of Baillie. E,g when you give Bike to someone for three months and he repair it for himself and after 45 days you take the Bike then that expenses which other person spend on your bike you have to pay for these expenses. 5. Duty to indemnify for defective title: it is the responsibility of bailor to indemnify (compensate) for that loss of Baillie that is faced by Baillie due to worst title. WORST TITLE: if the bailor knows about the defect in assets and Baillie doesn’t know about that defect and the Baillie suffer any loss so the bailor have to compensate for that loss 6. Duty to receive back the goods: Bailor should receive goods from Baillie. DUTIES OF BAILLIE 1. Duty to take reasonable care: it is the duty of Baillie to take reasonable care of assets of bailor as take reasonable care of its own. 2. Duty not to make unauthorized use: if the bailor didn’t give authority to take action or to use something, so it is the duty of Baillie to follow the instructions of Bailor. If Baillie use it for personal use then it is unauthorized by Baillie. 3. Duty not to make goods mixed: it is also the duty of Baillie to take the goods of bailor in original form and return to bailor in original form. No addition, no reduction 4. Duty to return the goods: it is the duty of Baillie to return the goods to bailor when purpose is accomplished. Baillie will return the assets/goods in original form to the bailor. 5. Duty to return the increase: if there is any natural or artificial increase occur in the assets/goods so it is the duty of Baillie to return the goods along with profit/natural increase to the bailor. TERMINATION OF BAILMENT 1. Expiry of time: when the stipulated time comes to an end then termination of bailment occurs. 2. Accomplishment of purpose: when need/purpose is accomplished so contract of bailment terminates. 3. Death of bailor or Baillie: if any one of them dies (bailor/ Baillie) so contract of bailment terminated. 4. Unauthorized use: when the Baillie uses it for personal use after prohibiting by bailor so contract of bailment terminates. 5. Termination of bailor: the bailor can terminate the bailment before if it doesn’t provide any loss to Baillie. If he gives loss then the bailor will fulfill and then terminate the contract. 6. Destruction of subject matter: if the subject matter on which contract of bailment is done and that subject of matter destroys then the contract of bailment terminates.Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 2
  3. 3. BBA 5th CONTRACT OF AGENCY An Agent is the representative of owner/investor/ the principal or the person who facilitates the process. An agent is commission taker. Owner/principal hires the agent for the third party. The ultimate decision power is in the hands of principal/owner. The agent is just facilitator/ employee. If an agent don’t ask from his principal and make decision and loss occurs so that will be totally on the shoulders of an agent (broker). Here consultancy is must, disgracement is necessary. So being an agent we should ask from our principal and then we should make decisions. An agent works as a bridge between principal and third party. ESSENTIALS OF CONTRACT OF AGENCY 1. Contract: it must be valid contract like other contracts. All the essentials of a valid contract should be followed by both the parties. 2. Consideration not necessary: this is sufficient evidence that the principal is hiring an agent in order to represent him. 3. Contractual capacity: both the parties (principal & agent) will be eligible by age, mental soundness and should not be disqualified by any court of law. They must be sound minded. 4. Intention: the intention of an agent is to represent his principal/owner. He will think better for his principal/owner means that he will invest there where the principal can get maximum return/profit. CREATION OF AGENCY 1. By express agreement: it means that we can create agency by writing or mouth words. It may be written or oral. 2. By implied agreement: we can create agency by implied agreement. It is not by writing or by mouth words. It is just by conduct the actions of parties. 3. By necessity agreement: when there comes emergency so in that situation a person which is not an agent, but take decision to cooperate the principal or assists the principal so this is called agency by necessary. E,g a person (seller) sending some perishable goods like vegetables to somewhere like Islamabad but there is a strike on the way or some other situation occur which stops our goods to supply and the person takes these goods near to the market sell them for the profitability of owner/principal. This is agency by necessity. 4. By ratification: it means to accept an unauthorized act later on that has been done by an agent. Unauthorized act is that which is not permitted by principal, but an agent acts such thing & later on it is accepted by principal so the agency comes into being. E,g a person is advising or directing the agent that you should buy only the shares of PSO & SHELL. There are also some other companies but the prices of their shares decreasing in market and the agent buys their shares which is unauthorized so this is unauthorized action but later principal accept that so this is called agency by ratification. 5. By operations of law: we can create an agency by operations of law suppose we have a partnership business so in that business each partner is an agent for business soPrepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 3
  4. 4. BBA 5th dealing with each partner becomes an agency by operations of law. In corporation business, business is carried out by board of directors so every member of board of directors is an agent and the share holders are the real owners (principal) so the dealing between them is also called agency. DUTIES OF AN AGENT 1. Duty to follow principal’s directions: it is the duty of an agent that he will follow the orders and directions of his principal/owner. An agent can’t take any decision without the permission of his principal. If he does without informing his principal and loss occurs so he (agent) will be responsible for that loss. 2. Duty to work with reasonable skills: it means that an agent will use his proper/full skills to run the agency. If an agent done an act without using his full skills and loss occurs so he will be responsible for that loss. E,g credit worthiness. As a credit finance manager he should check the credit worthiness before giving credit (loan) to someone. If he doesn’t check and gives credit to some and loss occur so he will be responsible for that loss because he didn’t use his full skills. 3. Duty to render accounts: (true accounts) it means that an agent have to present the accounts when principal demands. There will be no excuses, no delaying tactics. 4. Duty to communicate in difficulty: if difficulty occur in agency (business) so an agent should communicate with his principal that what to do now? An agent should call his principal that here is this difficulty/ problem now what should I do? 5. Duty on termination of agency: it means that if principal dies so an agent will not leave the agency at the same time. He will help/guide the principal’s legal representatives for some time and he will help them on humanitarian basis. 6. Duty not to deal on his own account: an agent is just the representative of the principal’s business. He can’t perform for his own benefits. He will just think about the principal’s benefits and if an agent acts something like this so that will be illegal. 7. Duty not to make any secrete profits: an agent can’t take any illegal profits for himself. He is just entitled to receive salary/commission. 8. Duty not to delegate his authority: it means that an agent can’t give his authority to another person (sub agent) without the proper permission of his principal. In export and import we can hire sub agents but with the permission of principal. DUTIES OF PRINCIPAL/OWNER 1. Duty to indemnify (compensate) an agent for any law full act: it’s so simple if an agent is working according to the orders and directions of the principal andPrepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 4
  5. 5. BBA 5th loss occur so there is no mistake of an agent that’s why principal will compensate him. 2. Duty to indemnify an agent for acts done good faith: if principal tell the agent that you will buy shares only from these companies PSO, SHELL and agent buys another company’s shares because that company have rising future. In near future that shares will be high so here agent doesn’t inform his principal and buys that shares on good faith that principal will get high profit but due to some reasons (political crises) the company’s shares fall down and the principal suffers loss. Now the due to good faith principal will check the records of that company that is it true? If yes then principal will compensate him. 3. Duty to indemnify for injury caused due to principal’s neglect: if an agent acts/works according to the principal’s orders and directions and he becomes injured during that act/work so the principal will compensate him. Suppose principal says that do this work by this machine and agent tell him that this not fine means there is a fault in this machine but due to principal’s force he does that work and becomes injured due to that machine so the principal will compensate him. CONTRACT OF GOODS ACT This contract was initiated in 1930 and has 66 sections. ESSENTIALS OF A CONTRACT OF SALES 1. Buyers and sellers: there must buyer and seller for this contract. 2. Transfer of contract: property means ownership. Here the seller will transfer his ownership to buyer. We should not only transfer possession but also transfer ownership of goods. 3. Price: Barter system can’t be called sales. There should be a price on which both the parties will agree. 4. Goods: means moveable goods. Ownership of these goods can be transfer from one person to another person. 5. Sales & agreement to sell: when the ownership is transfer on the spot to someone is called sale. Future transfer of ownership of goods is called agreement. 6. Other formalities: all the essentials of a valid contract should be followed under the contract of sales.Prepared by; SAEED ULLAH JAN. SEC “B”. Roll#186 Page 5