Mortgage.

Pledge.

"

promise, to the benefit of every remedy by which the person indemnified could have protected himself against, or reimbursed himself for the loss 1.

A policy of marine insurance, at least when it does not contain the words 'interest or no interest,' is construed as a contract of indemnity 2.

3. Security.

The chief contracts intended to create rights subsidiary to rights to receive a certain value from another are (a) Mortgage, (b) Pledge, (c) Lien, and (d) Hypothec. Of these in their order.

(a) Mortgage is defined as 'the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The different kinds of mortgages, and the respective rights and liabilities of mortgagors and mortagees, will be noticed when we come to deal with the Transfer of Property Act. There are no statutory provisions as to mortgages of movables.

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(b) Pawn. This is defined as 'the bailment of goods * as security for payment of a debt or performance of a promise.' Here the debtor (who is called the 'pawnor') is entitled not only to have the goods redelivered to him on due payment of the debt or performance of the promise, but also to have them preserved with the care described in sec. 151. On the other hand, the creditor (the 'pawnee ') is entitled to retain the goods for the payment of the debt, the interest thereon, and all necessary expenses' incurred in respect of the possession or preservation of the goods. This seems to include ordinary as well as extraordinary expenses. As to the latter the pawnee is given a right to sue the pawnor when they are incurred for the preservation of the goods. If the pawnor makes default, the pawnee has two remedies: he may sue the pawnor on the debt, retaining the goods as a collateral security; or he may sell them on giving the pawnor reasonable notice of the sale; but if he sells and the proceeds are greater than the amount

due he must pay the surplus to the pawnor. No such remedy is given by the Act where the pledge is to secure performance of a promise, and no time is fixed for such performance.

A pawnor who repledges the goods pledged to him may be guilty of criminal breach of trust 1. And when he wrongfully converts them to his own use the compensation for which he is liable is their value less the sum for which they were pledged 2.

As to the stamp or instruments of loan on the security of pledges see Act I of 1879, sec. 29(a) and Sched. I, No. 29; and as to the limitation of time for suits by pawnors, Act XV of 1877, Sched. II, Nos. 133, 145. There are in India no laws regulating the trade of lending money upon pledge such as the Pawnbrokers Acts in England.

(c) Lien. This is a right depending on possession, and is lost the Lien. moment that possession is parted with 3. Liens are special or general. A special lien is the right of retaining property till the retainer's claims in respect of it have been satisfied. A general lien is the right to retain bailed goods till the 'general balance of account' due to the bailee by the bailor has been satisfied.

Special liens exist in the following cases:—an unpaid seller of goods; a bailee who has, 'in accordance with the purpose of the bailment, rendered any services involving the exercise of labour or skill in respect of the goods bailed";' a finder of goods who has incurred trouble and expense in preserving the goods and finding out the owner; a finder of goods where the owner has offered a specific reward for their return "; an agent who has sold his principal's goods; an agent entitled to be paid for commission, disbursements and services; and, lastly, partners upon dissolution"; then each partner has a lien on the partnership property for the purpose of having it applied, first, in payment of the debts of the firm and then in payment of his separate debts.

Where a ship-captain, failing to raise funds on a bottomry bond to repair damage caused to a ship by stress of weather, sold a

16 Mad. H. C. Rulings, xxviii.

2 5 Bom. H. C., O. C. J. 140.

Donald v. Suckling. L. R., I Q. B. 612. 'A right of lien, properly so called, is a mere personal right of detention,' per Blackburn J.

* Contract Act, sec. 95. The unpaid vendor of immovable property has a charge on the property in the buyer's hands. Of course a creditor of the vendor has no such charge, 9 Cal. 167. • Contract Act, sec. 170. As to a VOL. I.

M m

Hypothec.

Warranty.

portion of the cargo for such purpose and repaired the ship, the owner of that portion has no maritime lien 1.

General liens exist only in the cases of bankers, factors, wharfingers, attorneys of a High Court, and policy-brokers".

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Various enactments have given the Government liens on land and crops for land-revenue, quit-rents, nazránás, road-cess; on forestproduce; and on goods imported or exported for unpaid duty". Some local Acts also give landholders a lien on the produce of land for rent due in respect thereof. And an under-tenant in the Lower Provinces advancing money to preserve a patni taluk from sale has a statutory lien for the amount.

The so-called charging-lien of a legal practitioner on a fund decreed to his client, is recognised in India both by the legislature' and the Courts. The plaintiff in a properly constituted interpleader suit has a similar lien for his costs on the fund in dispute.

Hypothec. There may be a security under which not only the ownership of a thing but its possession remains with the debtor". Thus the security called a simple mortgage' in the Transfer of Property Act, sec. 58, is a hypothec. So where a landlord distrains his tenants' goods they remain in the tenants' possession until the landlord exercises his power of sale. So where the master of a ship raises money on the security of the ship, which remains in his possession. Warranty is a term annexed expressly or by implication to a contract, but collateral to its main object. It may be broken and give rise to a right to sue for compensation, without producing any effect on the contract to which it is annexed 11.

It refers, in the Contract Act, either to title or to quality:

To title, where the buyer of goods or any one claiming under him is deprived of them by reason of the invalidity of the seller's title 12 where the bailee of goods sustains loss because the bailor

1 5 Mad. 336, following Hussey v. Christie, 9 East, 426, 432.

2 4 Bom. 353 (lien on translations made by the Court's interpreters).

3 Ibid. 171. This does not give the attorney an absolute lien, available even if he ceases to act for his client. If, then, a firm of attorneys dissolve partnership this operates as a cessation, and the attorneys must hand over a client's papers to him or his representative, 6 Cal. 1.

* Mad. Act II of 1864, secs. 2, 17, 32: Bom. Acts II of 1863, sec. 15, VII of 1863, sec. 30, and V of 1879,

secs. 138, 143: Ben. Act X of 1871, sec. 23, etc.

5 Mad. Act V of 1882, sec. 67. • VIII of 1875, sec. 9.

Mad. Act VIII of 18 65, sec. 32: Act XIII of 1881, secs. 56, 83(e), etc. 8 Civ. Proc. Code, sec. 111.

9 1 Mad. H. C. 361: Code of Civil Proc., sec. 475.

10 For a definition of hypothecation, see 2 Mad. H. C. 51, followed in 3 Mad. H. C. 92. As to the Muhammadan law, 6 Ben. 54.

11 Holland, 252.
12 Sec. 109.

was not entitled to make the bailment bail them, or receive them back, or give directions respecting them1: where the interest in immovable property which the seller, or mortgagor, or exchanger professes to transfer does not subsist, or he has no power to transfer the same 2: To quality, where provisions are sold; where goods are sold by sample, or as being of a certain denomination, or where goods have been ordered for a specified purpose, for which goods of the denomination mentioned in the order are usually sold: where goods are bailed for hire, the bailor is responsible to the bailee for damage arising to the latter from faults in the goods bailed, which 'materially interfere' with the use of them, or expose the bailee to extraordinary risks; and this whether the bailor was or was not aware of such faults".

Where money is exchanged each party warrants the genuineness of the money given by him o.

When the transferor of a debt warrants the solvency of the debtor, the warranty (in the absence of a contract to the contrary) applies only to his solvency at the time of the contract, and is limited, where the transfer is made for consideration to the amount or value of such consideration".

These are the statutory provisions as to warranty in force in India. Other cases of implied warranty are where a man purporting to act as an agent warrants his authority 10; where a carrier of passengers warrants that his carriage is safe; where persons offering accommodation for persons or goods warrant the safety and sufficiency of that accommodation "; and where a professional man, employed for reward, warrants that he is reasonably skilful and competent 12.

Ratification is treated by the Contract Act as only the adoption Ratificaby a person as binding upon himself of an act done by another tion. having at the time no authority to act as his agent. The rules on this matter are contained in secs. 196-200 13. Nothing is expressly said as to the ratification which takes place when a person adopts

1 Sec. 164.

2 Act IV of 1882, secs. 55 (2), 66 (a), 120. There is no implied warranty of title on an execution sale, 4 Bom. H. C., A. C. J. 114; 6 ibid. 258. And even in the case of a private sale there is no implied contract, by Hindú law, that a vendor must show a good title, 2 Bom. H. C., O. C. J. 406. This is important in places in which the Transfer of Property Act is not in force.

Account stated.

as binding upon himself an act previously done by him when he was not competent to contract or when his contract has become void. But instances of this kind of ratification are in sec. 25, cl. 3, which contemplates the ratification of a contract which from lapse of time cannot be enforced, and in sec. 248, which contemplates the ratification by a partner, who had while a minor been admitted to the benefits of the partnership, of the debts incurred by the firm since his admission. Another instance is to be found in the Transfer of Property Act, sec. 127, which declares that a donee not competent to contract and accepting property burdened by an obligation is not bound by his acceptance. But if, after becoming competent to contract and being aware of the obligation, he retains the property given, he becomes so bound.

There is no law in India requiring writing and signature to the ratification of a contract which from lapse of time cannot be enforced'. Nor is there anything like 37 & 38 Vic. c. 62, which makes of no effect any promise made by a person of full age to pay any debt contracted by him during infancy, or any ratification made after majority of any promise or contract made during infancy.

The ratification by a company of particular acts done by its directors in excess of the authority given them by the articles of the company does not extend the powers of the directors so as to validate similar acts done afterwards 2.

Account stated. The promise of repayment implied on what is called an account stated' is recognised in the Indian Limitation Act, XV of 1877, Sched. II, No. 64. An account is stated' when several items of claims are brought into account on either side, and being set against one another, a balance is struck, and the consideration for this payment of the balance is the discharge on each side. In other words, each party resigns his own rights on the sums he can claim in consideration of a similar abandonment on the other side, and of an agreement to pay, and to receive in discharge, the balance found due. It may be made by word of mouth. It is akin to ratification, for the contract is superadded to a pre-existing contract by way of strengthening it; so that the creditor may rely either upon his original claim, or upon the new claim thus created, but can in no case receive more than the sum originally due. The subject has been learnedly dealt by the Madras High Court".