Contract Act_Practical Problems_54

An illiterate woman executes a sale deed on the assumption that it was a power of attorney and that the deed after it was executed, was not read over to the lady. Advise the lady.

In the present case, illiterate woman claims to have signed a power of attorney whereas she has actually signed a sale deed. Thus, there is a mistake as to the very nature of the contract itself. In such cases. Courts have held that inspite of the mistake being unilateral, contract shall be void because consent is a function of mind and, therefore, if a person has mentally not consented to something, he has actually not consented at all. So there is no consent to the sale deed and thus no contract at all. Thus, lady may be advised to proceed under mistake and the sale deed shall be set aside. Similar facts appeared before the Calcutta High Court in the case of Bala Devi v. Shantirnoy.

Contract Act_Practical Problems_53

A enters into a contract with B for the sale of goods to be delivered at a future date. Is it a wagering agreement? Give reasons.

The contract in question is not a wagering agreement. It only involves future consideration and is a valid, enforceable, common business transaction. A transaction, to be wagering, must make the performance of the transaction dependent upon the happening or non-happening of an uncertain future event. The performance in the given case being not so dependent, transaction is not wagering.

Contract Act_Practical Problems_52

fraudulently informs B that A's estate is free from encumbrance. B there- upon buys the estate. The estate is subject to a mortgage. Is it a void or voidable contract? State reasons.

The contract in question shall be voidable at the option of B. As per the given facts, the fact of the estate being subject to mortgage was actively concealed by A. Such an active concealment amount to fraud as per Section 17 state and Section 19 of the Indian Contract Act declares contract affected by fraud voidable at the option of the aggrieved party. Hence, contract in question is not void but voidable at the option of B.

Contract Act_Practical Problems_51

A tailor, expecting to make good profits at a place on the occasion of a festival there, sent through a railway company, a sewing machine and some cloth for carriage to the place of the festival. Due to the fault of the servants of the railway company, the machine and the cloth could not be delivered till the termination of the festival. Discuss the rights of the tailor.

In the given problem, it is apparent that the delay in delivering the machine and cloth was caused because of the fault of the servants of the Railway. Therefore, there is no doubt that the Railway company shall be subject to damages for the fault of its employees.

But the question is Which kind of damages. Can the tailor claim loss of profit or say only his fare, stay expenses, return fare for the goods, etc.? Loss of profit is a special loss, whereas other loses are ordinary damages. Ordinary damages shall no doubt be claimable. Regarding special damages, i.e., loss of profit, claim shall be acceptable only and only if the facts and the likely loss had been communicated to the Railway company.

This rule regarding special damages was laid down in the case of Hadley v. Baxendale and has been duly incorporated in Section 73 of the Indian Contract Act. Thus, communication of the special circumstances is a pre-requisite to the claim for special damages. Since in the facts given, there is no mention of the peculiar circumstances, i.e., of using the machine and cloth for the festival, having been communicated, the tailor may only claim ordinary damages.

Contract Act_Practical Problems_50

A Mohammedan lady asks for your advice whether she can sue her own father-in-taw to recover arrears of allowance payable to her by the father-in-law under an agreement between her own father and her father-in-law in consideration of her marriage. Give reasons for your answer.

Although the general rule of law is that a stranger to a contract cannot sue, it has been widely accepted that a beneficiary of a contract may do so. Similar facts appeared before the Court in the case of Kwaja Muhammad v. Haisaini Begum and the court allowed the lady, the daughter-in-law, to claim the arrears to allowance agreed to be payable under an agreement with his father in consideration of her marriage. Thus, in the present case, lady shall succeed in her case.

Contract Act_Practical Problems_49

A contract to purchase certain immovable properties had been made by a guardian on behalf of a minor and the minor sued the other party for a decree of specific performance to recover possession. State whether the suit will succeed.

Yes- Although the general rule of law is that a stranger to a contract cannot maintain a valid suit, it was recognised in Kwaja Mohd. v. Haisaini Begum, that a beneficiary can always claim the benefits and bring a suit directly against the promisor.

Moreover, the beneficiary being a minor, it shall make no difference because under the Indian Contract Act, a minor can always be beneficiary under the contract and validly enforce such benefits. Thus, minor, in the present case, shall succeed in his suit for specific performance.

NI Act_Practical Problems_11

A debtor transfers to his creditor a negotiable instrument held by the debtor in full and final satisfaction of a debt which is barred by limitation. Would the creditor be a holder in due course of the instrument ?

This problem primarily requires to establish whether in the given case the holder of negotiable instrument (creditor) has secured it against lawful consideration or not. Under Section 25(3), a written promise to pay a time-barred debt shall be valid.

Such a promise though without consideration (since the debt having become time- barred, it is legally not payable) is held enforceable as an exception. Thus, in the given case, the holder should be considered as a holder for consideration. Other conditions of a holder in due course, satisfied, he should also be considered as a holder in due course.

Contract Act_Practical Problems_48

A, B and C borrow Rs. 10,000 from X. All of them have executed a promissory note in favour of X. A dies. X sues B alone for Rs. 10,000. Is X entitled to do so? If so, what is the remedy, if any, to B ?

Section 43 of the Indian Contract Act, 1872 provides that when two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise. Thus, in the given case, X is entitled to claim performance from B alone.

B, of course, in turn, shall be allowed to claim contribution in excess of his share {i.e., 1/3] from C aswell as legal representative of A. In this regard. Section 43 again provides that each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract. Thus, B shall be entitled to claim Rs. 3,333.33 each from C and A's legal representative.

Contract Act_Practical Problems_47

A proposes by a letter sent by post to sell his house to B. B accepts the proposal by letter sent by post. State the legal position regarding revocation of offer and acceptance by A and B respectively.

The problem in question is based on the provisions of Section 5 of the Indian Contract Act. According to Section 5, a proposal may be revoked at any time before the communication of acceptance is complete as against the proposer as per Section 4. Communication of acceptance against the proposer is complete when the letter of acceptance is posted. Thus, B may revoke his proposal at any time before or at the moment when B posts his letter of acceptance but not afterwards.

Revocation of acceptance, as per Section 5, may be made at any time before the communication of the acceptance is complete as against the acceptor, but not after- wards. As per Section 4, communication of acceptance is complete as against the acceptor when it comes to the knowledge of the proposer. Thus, B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Companies Act_practical problems_4

A public limited Company has only seven shareholders, all the shares being paid in full. All the shares of one such shareholder are sold by the court in an auction and purchased by another shareholder. The Company continues to carry on its business thereafter. Discuss the liabilities of the shareholders of the Company.

The problem in question relates to reduction of membership below the statutory minimum. Section 12 of the Companies Act requires a public Company to have a minimum of seven members. If at any time the membership of a public Company falls below seven and it continues’ for more than six months, then according to Section 45 of the Companies Act, 1956, every such member who was aware of this fact, would be individually (personally) liable for the debts contracted after six months.

Thus, in the above problem the remaining members shall incur personal liability for the debts contracted by the Company:

a. If they continued to carry on the business of the Company with that reduced membership (i.e., 6) beyond six months period.

b. Only those members who knew this fact of reduced membership shall be liable, for instance, one of the members who was abroad and thus not aware of these developments, shall not be liable.

c. The liability shall extend only to the debts contracted after six months from the date of auction of that member’s shares.

Companies Act_Practical Problems_3

The number of members in a public Company became reduced to six on the 10th September, 1988, the Company incurs trade debts on 11th September, 1988, 2nd February, 1989 and 17th March, 1989. How far are the remaining six members liable for the debts?

The remaining six members are liable for the debts incurred after 6 months of the reduction in the number of members below the statutory minimum specified in Sec. 45 of the Companies Act, 1956 i.e., for debt contracted on 17th March, 1989.

Contract Act_Practical Problems_46

'A' applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. Whether the contract is induced by undue influence? Decide.

For relief on ground of undue-influence under Section 16, two requirements need to be satisfied, viz.,

(i) the party alleged must be in a position to dominate the will of the other; and
(ii) he must have exercised that domination to obtain an undue advantage.

In the given case, a bank cannot be said to be in a position to dominate the will of the borrower — the borrower having option to borrow from other banks or other sources.

Thus, contract cannot be said to be induced by undue influence.

Contract Act_Practical Problems_45

A offers to B his scooter for Rs. 6,000. B writes back agreeing to buy it for Rs. 5,500. Is there a concluded contract between A and B for sale of the scooter for Rs. 5,500?

No; For conclusion of a contract it is necessary that the offer of the party be accepted in absolute and without any qualifications or conditions. In the present case. B's agreeing to buy the scooter for Rs. 5,500 instead of the proposed amount of Rs. 6,000, only amounts to a fresh proposal or counter-proposal and doesn't constitute acceptance of the proposal or offer of A.

Contract Act_Practical Problems_44

Anil agrees with Gopal to let out the house under construction and obtains an advance for the purpose. The house is, however, requisitioned by Government and, therefore, Anil is unable to honour his promise. What are the rights of Gopal against Anil? Can Gopal recover damages for breach of contract?

No- Gopal cannot recover damages for breach of contract. The problem in question relates to Section 56 of the Indian Contract Act. According to Section 56, a contract becomes void in the event of supervening/subsequent impossibility as to its performance. As the house is requisitioned by the Government (assuming under the legitimate powers). Anil shall be excused of his obligations, the contract becoming void under Section 56. However, Gopal can claim refund of the advance made by him to Anil. Section 65, in this regard, provides that when an agreement becomes void, any person who has received any advantage under such agreement or contract is bound to restore it.

thought of day

"Not everything that can be counted counts, and not everything that counts can be counted."

Companies Act_practical problems_2

In a private Company, after the death of Mr.X entire capital of the company is held by his son Y. Decide, whether Y can continue business of the co. with single shareholder.

In such a situation, Y can continue to carry on the business of the Company but, in accordance with the provisions of Sec.45 of the Act, if the same position continues for more than six months, then y will become personally liable for all the liabilities of the Company contracted after six months from the date he becomes only shareholder.

Companies Act_practical problems_1

Both the shareholders of the Private Company died in a car accident. Decide whether Company’s existence also comes to an end.

The Company’s existence is not affected by the death of its shareholders, since the Company has separate legal entity. This is clearly established in Salomon Vs. Salomon & Co. Ltd, Lee Vs. Lee Air farming Ltd & Kandoli tea Co. Ltd. cases. Further the Company has having perpetual succession.

Bonus Act_Practical Problems_2

An employer had been paying to his employees every year at the time of Deepawali one month's basic wages as Deepawali bonus for the last 10 years in addition to the bonus payable under the Payment of Bonus Act, 1965. The bonus had been paid even in those years when there were losses. The employer now wants to adjust Deepawali bonus paid by him for the current accounting year against the bonus payable by him under the Act, for the current accounting year. State with reference to the provisions of the Payment of Bonus Act, 1965, whether it is possible for the employer to make the above adjustments.

Section 17 of the Payment of Bonus Act, 1965 provides that if in any accounting year, an employer has paid any Puja bonus or other customary bonus to any employee, then he (the employer) shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year. The employee shall be entitled to receive only the balance. Payment of customary bonus over a period of time is immaterial. It does not create a statutory right.

Hence, employer, in the given case, shall be entitled to adjust the Deepawali bonus against the bonus payable under the Act.

Bonus Act_Practical Problems_1

The Model Mills, Nagpur refused to pay bonus to its employees on the ground that its management was controlled by an authorised controller appointed by the Government and as such it was entitled to exemption from the liability to pay bonus. Decide.

Section 32 of the Payment of Bonus Act, 1965 provides that the Act shall not apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any Department of the Central Government or a State Government or a local authority.

However, in RMS vs. The Model Mills Hon. supreme court has held held that the exemption as aforesaid will not extend to cases contemplated in the given problem, i.e., where the establishment was not under the direct authority of the Central/State Government or local authority. Appointment of a controller may be a temporary phenomenon. The company was, therefore, held liable to pay bonus to its workmen. The claim of the company shall, therefore, be not tenable.

NI Act_Practical Problems_10

M draws a cheque in favour of N, a minor. N endorses it in favour of P. The cheque is dishonoured by the banker on the ground of insufficiency of funds? Discuss the rights of R

Section 26 of the Negotiable Instruments Act, 1881 provides that a minor may draw, endorse, deliver and negotiate instruments so as to bind all parties except himself.

Thus, in the given problem, P shall have a right to proceed against M only. N, the minor, cannot be held liable.

NI Act_Practical Problems_9

A promise to pay B Rs. 550 and all other sums which shall be due to him'. Is it a promissory note? State reasons.

It is not a promissory note since the amount payable is not a certain sum. The expression 'all other sums which shall be due to him' makes the amount indefinite or incapable of being made definite. Section 4 of the Negotiable Instruments Act which defines Promissory Note reads :

A 'promissory note' is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. Thus, to constitute a valid promissory note, the amount payable must be a certain sum or capable of being made certain. In fact, the problem in question is an illustration (d) to Section 4 stating that such an instrument is not a promissory note.

NI Act_Practical Problems_8

State whether the following instruments are valid promissory notes : --

(i) I promise to pay Rs. 5,000 to Bon the death of B's uncle provided that D, in his will, gives me a legacy sufficient for the promise of payment of the said sum.

(ii) I hereby acknowledge that I owe X Rs. 5,000 on account of rent due and I agree that the said sum will be paid by me in regular monthly instalments.

(iii) I acknowledge myself indebted to B in Rs. 5,000 to be paid on demand for value received.

(iv) 'X' promises to pay 'Y' a sum of Rs. 10,000 six months after Y's marriage with 'Z'

(i) It is not a promissory note because it does not contain an unconditional promise, the amount being payable only if uncle leaves sufficient legacy.
(ii) Again, it is not a valid promissory note because the amount of monthly instalment is not specified.
(iii) It is a valid promissory note since it fulfils all the requirements of a promissory note as per Section 4 of the Negotiable Instruments Act.
(iv) It is not a valid promissory note, the promise being conditional—the condition being Y's marriage with Z.

NI Act_Practical Problems_7

"I promise to pay B Rs. 500 and all other sums which shall be due to him." State whether it is promissory note even if the instrument is signed by A.

The instrument in question is not a promissory note since it fails to satisfy one of the essential requirements of a promissory note as per Section 4 of the Negotiable Instruments Act, that is, it should be a promise to pay a certain sum of money. Thus, the amount must be certain or capable of being made certain. Since, the instrument in question lacks this feature-- "Rs. 500 and all other sums which shall be due", the words "all other sums" make the amount indefinite.

Contract Act_Practical Problems_43

A took a bet of Rs. 500 with B that a certain horse would win a race. Under this agreement A had to deposit Rs. 100 with B. Since A had no money, he approached his friend C, who advanced the sum to him on the condition that A was to return Rs. 200, if A should win bet against B, but to return nothing, if A lost, A won his bet against B. Can C recover Rs. 200 from A?

No- C cannot recover Rs. 200 from A. Section 30 of the Indian Contract Act declares all wagering agreements as void ab inito. The contract between A and C is itself a wagering agreement as between A and B.

Contract Act_Practical Problems_42

A borrower grants a power of attorney to bank authorising the bank to sell a ertain property belonging to him and appropriate the sale proceeds towards his ndebtedness. He also agrees not to institute any legal proceedings against the bank challenging either the bank's actions or its statements of account. The property is sold for a low price and the bank calls upon the borrower to pay the balance. Can the borrower institute legal proceedings against the bank questioning the sale ?

Yes- The borrower can institute legal proceedings since the clause in the agreement restraining the borrower from legal proceedings is void as per Section 28 of the Indian Contract Act and thus unenforceable. Section 28 in this respect reads as :

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under the contract by the usual legal proceedings in the ordinary tribunals, is void to that extent.

Contract Act_Practical Problems_41

Anil was due to perform a contract on 20th Feb. 1989, but on 16th Feb., repudiated his obligation. On 23rd Feb., the contract became illegal through a change in law. Varun, the other party to the contract, filed a suit for breach of contract on 20th Feb. Decide the case with reasons.

Varun in this case will be held entitled to the remedies for breach of a contract. The case is not covered under Section 56 whereunder supervening illegality renders a contract void thereby relieving the promisor of his obligations. Section 56 covers those cases where supervening impossibility/illegality takes place before the time for performance is due. Since in the given case, performance was due on 20th Feb. 1989, the repudiation on 16th amounts to breach of contract and thereby entitles the aggrieved party, viz., Varun, to claim compensation (damages). He, however, will not be entitled to claim 'specific performance'—the transaction having become illegal.

Thus, the contract becoming illegal on 23rd Feb., will not affect Varun's right to claim damages.

attitude

The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than success, than what other people or say or do.

Contract Act_Practical Problems_40

A offers to sell a cannon to B. A knows that the cannon has a defect in it and puts a metal plug to conceal the defect. B accepts the cannon without examining it. The cannon bursts before it is paid for. Is B liable to pay the price ?

The facts of the given problem are similar to those of Horsefall v. Thomas, in which case it was held that a fraud that actually does not deceive is not fraud. The court held that there was no fraud because B would have bought it even if no deceptive plug had been put. He was in fact not deceived by it since he did not even care to examine the cannon. The decision seems to be based upon the feeling that law shall not protect those who are negligent about their interests.

Contract Act_Practical Problems_39

An artist offers to sell a painting to an industrialist for Rs. 10,000. The industrialist offers to buy it for Rs. 8,000, which is not accepted. The industrialist then sends a cheque for Rs. 10,000 and asks the artist to sell the painting to him. Comment on the legal position.

Section 7 of the Indian Contract Act requires that an acceptance to be valid must be absolute and unqualified. In other words, an offer should be accepted "as it is without any 'ifs' and 'buts'." An acceptance with a variation, however slight, is no acceptance, and amounts to a mere counter-offer which the offer or may or may not accept. Even where the offeree subsequently changes his mind and is prepared to accept the offer as per original terms, it shall be deemed as a fresh offer from him which may or may not be acceptable to the original offerer. Thus, in the given case, the artist shall have the option to accept or refuse the cheque for Rs. 10,000 since the sending of cheque for the original offer amount shall be deemed as a fresh proposal from the industrialist.

Contract Act_Practical Problems_38

A, in Bombay, bets with B and loses. A applies to C for a loan in order to pay B. C gives the loan to A to enable him to pay B. Can C recover the amount of loan from A? Would it make any difference if this transaction takes place in Hyderabad?

No- C cannot recover the amount of loan from A. The contract between the two is void being a collateral transaction to an illegal agreement. In Bombay, wagering agreements are not merely void; they are illegal. The consequence of an agreement being illegal is that if any collateral transaction is made by a person knowing the illegal object of the main transaction, the collateral transaction also becomes unenforceable.

If the aforesaid transaction had taken place in Hyderabad, it would have been a valid and enforceable contract since in Hyderabad betting transactions are only void and not illegal. Transactions collateral to a void agreement are valid.

Contract Act_Practical Problems_37

A, a minor, borrows Rs. 10,000 and executes a pronote for the amount in favour of B. After attaining the majority, A executes another pronote in settlement of the first pronote. Will B succeed in recovering money from A? Give reasons in support of your answer.

No-B will not succeed in recovering money from A. Although Section 2(d) recognises the concept of past consideration, but it must be something to which law attaches a value. A contract with a minor is void ab initio. The consideration for the second pronote is a void agreement and hence of no value. Besides, ratification by a minor of a contract, on attaining majority is not allowed.

Contract Act_Practical Problems_36

Peter Feraro offered to pay Rs. 10,000 to any person, who would swim a hundred yards on Bombay's sea coast on the New Year's Day of 1983. A fisherman, without any information about the offer, claimed Rs. 10,000 on swimming the distance to save his life after he was accidently thrown overboard by the rough sea waves. Can the fisherman claim the money ?

No- the fisherman or servant cannot claim the money. They acted without any information as to the offer. How can a person accept an offer unless he is aware of it ?

Therefore, the offer cannot be said to have been accepted thereby resulting in a contract. Similar decision was given in Lalman Shukla v. Gauri Dutt.

Contract Act_Practical Problems_35

A, a dealer in horses, sold a mare to B with the knowledge that the mare had a cracked hoof which A had filled up so as to prevent detection even after a diligent examination. Discuss the right of B when he subsequently detects it.

The facts of the above problem suggest that A has attempted to defraud B. But under Section 17 of the Indian Contract Act, mere silence as to the faults in the goods being sold, shall not ordinarily amount to fraud unless silence is either equivalent to speech or it was obligatory on the part of the party to disclose the facts. In the given case either of these exceptional situations not being present, the common rule of caveat emptor, i.e., let the buyer beware shall apply, that is, it is the duty of the buyer to satisfy himself about the goods he is buying. It is no duty of the seller to point out the defect of his goods. Thus, in the present case, when buyer later on detects the defect, he may not have any remedies against the seller.

Contract Act_Practical Problems_34

C with the intention of inducing D to enter into a contract with him, makes a statement to D, which is, in fact, untrue and thereby induces D to enter into the contract. What are D's rights, if the statement is made by C :

(i) knowing that it was untrue,
(ii) recklessly, without caring to know whether it was true or false,
(iii) in good faith but negligently,
(iv) in good faith and without negligence?

In the first two situations, i.e., where untrue statement has been made either knowingly or recklessly, it amounts to fraud and the rights of the party defrauded include not only rescission of the transaction but also a claim for damages. On the other hand, since in situations (iii) and (iv) mis-statement was made in good faith, i.e., innocently—without knowing it to be untrue, it amounts to misrepresentation. The effect in these cases shall be that D shall be entitled only to rescind the transaction. He cannot claim damages.

Contract Act_Practical Problems_33

A agrees with B to give a motor car to B's son in consideration of his marrying A's daughter. Can B's son sue A on the agreement?

Yes- B's son can sue. A stranger to the contract has no right to seek the performance. But, if the stranger happens to be a beneficiary under a transaction, he is permitted to seek its direct enforcement. Thus, in the given problem, although contract is between A and B and B's son, therefore, as a stranger to the contract, he shall, being beneficiary of it, be entitled to enforce it.

Contract Act_Practical Problems_32

X sells a horse to Y for Rs. 1,200, but unknown to both parties at the time of the transaction, the horse was dead. Discuss the rights and liabilities of X and Y. Would it make any difference to your answer if the horse was seriously ill at the time of transaction and died within a few hours after the transaction?

Agreement is void on account of mutual mistake of fact essential to the agreement (Section 20). In the alternative situation, however, X will be entitled to the price.

Contract Act_Practical Problems_31

A enters into a contract with B for supplying 800 tonnes of iron ore within 4 months. A fails to make delivery in time owing to difficulty in transport. But he admitted the availability of iron ore in the market at a higher price. Can A take the plea of impossibility of performance? Give reasons.

No-difficulty of performance and commercial impossibility should be distinguished from impossibility of performance. Section 56 of the Indian Contract Act declares only contracts void which become impossible of execution.

Contract Act_Practical Problems_30

Ram's son absconded from home. He sent his servant in search of the boy. When the servant had left, Ram, by handbills, offered to pay Rs. 500 to anybody discovering the boy. The servant came to know of this offer only when he had already traced the missing boy. He, however, brought an action to recover the reward. Will he succeed in his attempt? Give reasons.

No- since the servant was not aware of the offer. An offer, unless communicated, is not valid. The facts of the given problem are similar to the case of Lalman Shukla v. Gauri Dutt in which the identical decision was given.

Contract Act_Practical Problems_29

M/s Ganguly & Co., Calcutta, entered into a contract with the General Manager of the Indian Railways at Calcutta for the construction of a bridge and received an advance of Rs. 10 lakhs for the same. They did not complete the work within time and the Railways terminated the contract. This contract was found to be void from its inception'for not being in conformity with the Constitution of India". The Indian Railways want to recover the advantage given to the contractor. Will it succeed? Discuss.

"The problem is based on the provisions of Section 21 read with Section 24 and Section 65 of the Indian ContractAct. Section 21 and 24 read together, provide that a contract based on mistake as to any law in force in India is not voidable and where any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreements is void.

Thus, the agreement between M/s Ganguly & Co., Calcutta with the Indian Railways is void (and not voidable) being not in conformity with the Constitution of India and both the parties are under a common mistake of law.

A void agreement does not create any legal obligations or confer any rights. However, Section 65 provides for restitution. It reads "where an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it."

In view of the above, Indian Railways can recover the advance of Rs. 10 lakhs paid to M/s Ganguly & Co. [Jigi Bhai v. Nagji; Gulabchand v. Fulbai; State of Orissa v Raj Ballaie]

Contract Act_Practical Problems_28

A contracted to indemnify B & Co., a publishing firm, against the consequences of any libel which might appear in any of their publications. B & Co. were forced to pay damages for a statement published by them which they knew to be libellous. The firm sues A on the basis of the agreement. Is this agreement enforceable?

No- the agreement between A and B & Co. is unlawful (Section 23 of the Indian Contract Act). The consideration or object of an agreement is unlawful if it involves or implies injury to the person or property of another. Similar view on similar facts was given in Anthrop v. Neville and Shackel v. Rosier.

Contract Act_Practical Problems_27

A authorises B to sell a camera for him, and agrees to give B, a commission of 10 per cent of the sale price. A afterwards, by a telegram, revokes B's authority. B, after the telegram is sent, but before he receives it, sells the camera to C for Rs. 10,000. C is also not aware of the revocation of authority by A. A later refuses to deliver the camera to C and pay commission to B for the sale, on the ground that the sale was not binding upon him. Decide

(i) whether A's contention is valid ?
(ii) whether B is entitled to commission on the sale price ?
(iii) what are the provisions of the Indian Contract Act in this regard ?

(i) A's contention is not valid.
(ii) Yes, @ 10 per cent on Rs. 10,000.
(iii) Revocation of authority of an agent does not, insofar as the agent is concerned, take effect until it becomes known to him and insofar as third parties are concerned until it becomes known to them According to Sec. 208 of the Indian Contract Act.

NI Act_Practical Problems_6

Ascertain the date of maturity of a bill payable 100 days after sight and which is presented for sight on 4th May, 2000.

In case of bill payable after acertain period after sight, the date of maturity is calculated by adding three days of grace to the period after which the bill is payable. In case of bills payable after sight, the period is calculated from the date when the bill is presented for sight. In case the date of maturity happens to be a public holiday including Sunday, the bill falls due for payment on the day preceding the public holiday. In the given case, the bill is made payable 100 days after sight and the same was sighted on 4th May, 2000. 100 days from 4th of May, 2000 work out to 12th of August, 2000, adding three days of grace makes the bill due for payment on 15th of August, 2000 which happens to be a public holiday. Thus, the date of maturity of the bill shall be 14th of August, 2000 unless the same is also a public holiday (including Sunday).

NI Act_Practical Problems_5

A bill is dishonoured by non-acceptance. The bill is endorsed to 'A'. 'A' endorses it to 'B'. As between 'A' and 'B', the bill is subject to an agreement as to the discharge of 'A'. The bill is afterwards endorsed to 'C', who takes it with notice of dishonour. Decide, with reasons, whether 'C' is entitled to accept the bill in the capacity of a holder in due course.

To constitute a holder in due course. Section 9 of the Negotiable Instruments Act requires the holder to have obtained the instrument in good faith. However, Section 53 provides that a holder of a negotiable instrument who derives title from a holder in due course, has the rights thereon of that of a holder in due course.

Accordingly, a title that has been cleansed of defects by passing through the hands of a holder in due course, remains immune from those defects not with standing that a subsequent holder may have notice that defects once existed provided that he was not a party to them. Thus, 'C' shall get a good title to the bill.

NI Act_Practical Problems_4

A is the payee of a Bill and endorses it in blank and delivers it to B. B endorses it to C or order. C, without any endorsement, transfers it to D. D presents it for payment. The Bill is ultimately dishonoured. Advise D on his legal rights and remedies.

As per Section 55 of the Negotiable Instruments Act, 1881, if in respect of a negotiable instrument an indorsement in blank is followed by an indorsement in full, the instrument still remains payable to bearer and negotiable by delivery as against all parties prior to the indorser in full, though the indorser in full is only liable to a holder who made title directly through his indorsement and persons deriving title through such holder.

Accordingly, in the given case, D, as the bearer, is entitled to receive payment or to sue the drawer, acceptor, or A, who endorsed the bill in blank, but he cannot sue B or C.

NI Act_Practical Problems_3

D draws a Hundi in favour of M and M endorsed it in favour of P. P claimed the amount of the Hundi from D, who contended that as between him and M there was no consideration, he was not liable. Examine the validity or otherwise of the contention.

Section 43 of the Negotiable Instruments Act provides that a negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration creates no obligation of payment between the parties to the transaction. But, if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder may recover the amount due on such instrument from the transferor for consideration or any prior party thereto. Thus, assuming P to be the holder for consideration he shall have the right to claim the amount of the Hundi from D. Contention of D is not valid.

NI Act_Practical Problems_2

H is the holder in due course of a bill of which A is the acceptor. D, the drawer of the bill, is fictitious. Can A escape from his liability to H ?

Section 42 of the Negotiable Instruments Act provides that, where a bill of exchange is drawn by a fictitious person and is payable to his order, the acceptor cannot be relieved from his liability to the holder in due course. Thus, H being the holder in due courseA cannot escape liability. However, H shall have to establish that the bill was endorsed by the same hand as drawer's signature.

NI Act_Practical Problems_1

"I promise to pay 6 Rs. 500 and all other sums which shall be due to him." State whether it is a promissory note even if the instrument is signed by A.

The instrument in question is not a promissory note since it fails to satisfy one of the essential requirements of a promissory note as per Section 4 of the Negotiable Instruments Act, that is, it should be to pay a certain sum of money. Thus, the amount must be certain or capable of being made certain. Since, the instrument in question lacks this feature—Rs. 500 and all other sums which shall be due, the words 'all other sums' make the amount indefinite.

Contract Act_Practical Problems_26

A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand." Is the agreement valid?

No-the agreement is not valid because the terms of the agreement are not certain. There is nothing to show which of the two prices was to be given. The agreement is, therefore, void because of uncertainty. Section 29 of the Indian Contract Act, specifically declares such agreements to be void.

Contract Act_Practical Problems_25

A, a minor and an undergraduate student of a university, buys on credit from B, a clothier, seven suit lengths for his own use. Is B entitled to any payment in respect of the goods ?

A contract with a minor is void ab-initio. Minor being incompetent of contracting as per Section 11 of the Indian Contract Act.

However, Section 68 recognises by way of quasi contractual obligation, contracts for the supply of necessaries of life to a minor or any of his dependants as validly enforceable against minor's properties, if any. Coats may be considered as necessity of life for a student coming from a reasonably good family. But it is doubtful, if seven coats at one time shall be considered as a necessity for a student even coming from a rich family. Thus, even the properties of the minor may not be held liable.

Contract Act_Practical Problems_24

A, a tradesman, leaves his goods at B's house by mistake. B treats the goods as his own and appropriates them. Can A file a suit against B for the price of such goods?

The problem relates to quasi-contracts and is based on Section 72 of the Indian Contract Act which provides that a person, to whom money has been paid or anything delivered by mistake, must repay or return it. Thus, in the present case, B should either return the goods to A or pay for it.

Contract Act_Practical Problems_23

A Hindu husband executed and registered a document in favour of his wife whereby, referring to quarrels and disagreement between the parties, he agreed to transfer one of his properties to her. Later, he refused to effect the transfer. Can the wife file a suit against the husband for enforcing the contract ?

No- Wife will not succeed.

The problem relates to the exception to the rule 'No consideration no contract'. Section 25 (1) of the Indian Contract Act provides that a contract without consideration shall be valid if made out of natural love and affection, between parties standing in a near relation to each other, and through a written and registered document. Thus, such a contract must be an outcome of natural love and affection between the parties. Mere nearness of relationship does not import natural love and affection. Thus, in the present case, since promise is made to transfer properties after reference to quarrels, natural love and affection being absent, contract shall not be enforceable. The same was the decision in the case of Rajhikhy Dohee v. Bhootnath on which the facts of the present problem have been based.

Contract Act_Practical Problems_22

A stationer agreed to supply white paper on rate contract for one year. Later, due to steep increase in market prices, the contractor stated that he would suffer very heavy loss by supplying at the contracted rates. Under the contract, the rates were tobe firm except for statutory levies. The stationer claimed that the contract had become commercially impossible of performance and that he was discharged. Comment on the legality of his plea.

Section 56 of the Indian Contract Act provides that a contract shall become void if the contracted act becomes, by reason of some event which the promisor could not prevent, impossible. However, impossibility contemplated under Section 56 is genuine or literal impossibility and shall not be deemed to include cases like failure to realise expected profits or the availability of raw materials at higher prices or with difficulty. Such situation may render a transaction commercially impossible but not really impossible. Thus, in the given case the stationer's plea shall not be acceptable and in the event of non-performance he will be held liable for breach and the consequential damages.

Contract Act_Practical Problems_21

A landlord agrees with a bank to lease to it space in a building under construction and obtains an advance for the purpose. The building is, however, requisitioned by Government and, therefore, the landlord is unable to honour his obligations. What are the rights of the bank as against the landlord? Can the bank recover damages for breach of contract?

The problem in question relates to supervening/subsequent impossibility. Section 56 of the Indian Contract Act exonerates a promisor from any liability if the transaction becomes impossible of performance because of some event which the promisor could not prevent. The contract in such cases becomes void. Thus, in the above case since the Government has requisitioned the premises, the agreement to lease out the same is naturally impossible. Hence, the landlord cannot be subjected to any damages for not honouring his obligations. Bank can only ask for the return of advance on grounds of failure of consideration.

Contract Act_Practical Problems_20

A owes B two debts of Rs. 2,000 and Rs. 550. B telephones to A saying that he is in urgent need of Rs. 550 and that A should at least pay Rs. 550. A merely sends a cheque for Rs. 550. B then finds that the other debt of Rs. 2,000 is about to get time-barred. So he applies the cheque in part payment of that debt. Discuss.

Section 59 of the Indian Contract Act, 1872 gives us the rule regarding appropriation of payments. It says, where a debtor, owing several distinct debts to oneperson, makes a payment to him, either with express intimation or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

In the given question, it seems that the payment has been directed to pay off the outstanding debt of Rs. 550 and must, therefore, have been applied towards the same.

Its application to the other debt of Rs. 2,000 is not valid.

Corporate Announcement_5

Scrip Code:513250 Company Name:JYOTI STRUCT

Jyoti Structures Ltd has informed BSE that Compensation Committee of the Board of Directors by Circulatory resolution dated October 08, 2007 has allotted 2,97,600 Equity Shares of Rs 2 each to the employees pursuant to the Stock Options granted under the Company's Employees Stock Option Scheme (ESOS).Consequent to the aforesaid allotment, the paid up share capital of the Company has increased to 8,09,93,490 Equity Shares of Rs 2 each aggregating to Rs 16,19,86,980.

Corporate Announcement_4

Scrip Code:532615 Company Name:ETC NETWORK

ETC Network Ltd has informed BSE that pursuant to the Order made by the Hon'ble High Court of Judicature at Bombay, a meeting of Equity Shareholders of the Company will be held on November 02, 2007, for the purpose of considering and if thought fit, to approve with or without modification(s) the arrangement embodied in the Scheme of Amalgamation ("the Scheme") of ETC Networks Ltd (the Applicant / the Transferor Company) with Zee Interactive Learning Systems Ltd (the Transferee Company) and their respective shareholders.

Corporate Announcement_3

Scrip Code:532174 Company Name:ICICI BANK

ICICI Bank Ltd has announced BSE that the Bank has received Reserve Bank of India’s approval for establishing new branches and additional off-site ATMs broadly in tine with its application to Reserve Bank of India.

Corporate Announcement_2

Scrip Code:500890 Company Name:MODI RUBER

Modi Rubber Ltd has informed BSE that the Register of Members & Share Transfer Books of the Company will remain closed from November 01, 2007 to November 03, 2007 (both days inclusive) for the purpose of 35th Annual General Meeting (AGM) of the members of the Company to be held on November 03, 2007.

Corporate Announcement_1

Scrip Code:532347 Company Name:HELIOS MAT I

Helios & Matheson Information Technology Ltd has informed BSE that in accordance with the Offering Circular dated July 07, 2006 for issue of US$ 20 million with an over allotment option of upto USD 5 million 2.00 per cent Foreign Currency Convertible Bonds due 2011 (FCCBs), the Company has received conversion notice in respect of 10 Bonds aggregating to US$ 1,000,000 from the bond holder. The Committee of Directors of the Company at its meeting held on October 05, 2007 has allotted 354384 equity shares of Rs 10/- each, on conversion of 10 Bonds. Consequent upon the allotment, the total paid up equity capital of the Company stands increased to Rs 21,50,53,320 divided into 2,15,05,332 equity shares of Rs 10 each.

Contract Act_Practical Problems_19

A bank sanctions an overdraft limit against the security of a continuing guarantee. The surety dies. Can the bank proceed against the heirs of the surety under the guarantee and, if so, to what extent ?

The death of the surety operates, in the absence of a contract to the contrary, as a revocation of a continuing guarantee as regards future transactions. It may, however, be noted that the estate of the surety shall be liable for all transactions entered into between the creditor and the principle debtor prior to the death of the surety, unless there was a contract to the contrary. However, his estate shall not be liable for the transactions entered into after his death, even if the creditor has no notice of the death.

Thus, in the given problem, since there is nothing against attachment of surety's properties after his death, the heirs of the surety shall be liable for the debit balance in the overdraft account but this liability shall be limited to the higher of the following two:

1. The amount of debit balance in the overdraft account as on the date of surety's death;
and
2. The value of the surety's estate acquired by the heirs.

Contract Act_Practical Problems_18

'A' applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. Whether the contract is induced by undue influence? Decide.

For relief on ground of undue-influence under Section 16, two requirements need to be satisfied, viz.,

(i) the party alleged must be in a position to dominate the will of the other; and
(ii) he must have exercised that domination to obtain an undue advantage.

In the given case, a bank cannot be said to be in a position to dominate the will of the borrower — the borrower having option to borrow from other banks or other sources. Thus, contract cannot be said to be induced by undue influence.

Contract Act_Practical Problems_17

A is a minor aged seventeen years, who broke his right leg in a football match. He engaged B, a doctor, to set it. Does the doctor have a valid claim for his services? Give reasons.

Under Section 68, minor's properties, if any, can be held liable for necessaries supplied or necessary service rendered to a minor or to any of his dependents. Medical service of the nature under reference can well be considered as necessary and, therefore, the doctor shall have claim only against the properties of the minor, if any i.e., he can sue for attachment of minor's properties. Money cannot be recovered from the minor personally.

Contract Act_Practical Problems_16

A owes B rupees ten thousand, C, who is a friend of A, pays to B rupees five thousand in full satisfaction of B's claim on A which B accepts. Can B now recover the balance from A? Given reasons.

No. B cannot recover the balance from A. The problem is based on the statutory illustration to Section 63 of the Indian Contract Act, 1872. The Section provides, inter alid, that the promisee may, instead of performance of the promise made to him, accept any satisfaction which he thinks fit. Thus, having accepted payment from C, in full satisfaction of his claim againstA, B ceases to have any rights against A.

Parternship Act_Practical Problems_5

A, B and C are partners in a firm called ABC. A, with the intention of deceiving D, a supplier of office stationery, buys certain stationery on behalf of the ABC firm. The stationery is of use in the ordinary course of the firm's business. A does not give the stationery to the firm, instead brings it to his own use. The supplier D, who is unaware of the private use of stationery by A, claims the price from the firm. The firm refuses to pay for the price, on the ground that the stationery was never received by it. Decide

(i) Whether the firm's contention is tenable?
(ii) What would be your answer if a part of the stationery so bought by A was delivered to the firm by him, and the rest of the stationery was used by him for private use, for which neither the firm nor the supplier D was aware?
(iii) Explain the provisions of the Indian Partnership Act in this regard.

The given problem relates to 'implied authority' of a partner. Sections 19 and 22 of the Partnership Act deal with the subject of implied authority of a partner. The two Sections when read together provide that the act of a partner which is done to carry on, in the usual way business of the kind carried on by the firm, binds the firm, provided the act is done in the firm's name, or in any manner expressing or implying an intention to bind the firm.

Besides, every partner is in contemplation of law the general and accredited agent of the partnership and may consequently bind all the other partners by his acts in all matters which are within the scope and objects of the partners. Considering the aforesaid provisions and explanation, the questions asked in the problem may be answered as under:

(i) The firm's contention is not tenable, for the reason that the partner in the usual course of the business has an implied authority to bind the firm. The firm is, therefore, liable for the price of the goods.

(ii) In the second case also the answer would be the same as above, i.e., the implied authority of the partner binds the firm.

(iii) It is explained above.

Contract Act_Practical Problems_15

A enters into a contract with B for the sale of goods to be delivered at a future date. Is it a wagering agreement? Give reasons.

The contract in question is not a wagering agreement. It only involves future consideration and is a valid, enforceable, common business transaction. A transaction, to be wagering, must make the performance of the transaction dependent upon the happening or non-happening of an uncertain future event. The performance in the given case being not so dependent, transaction is not wagering.

Contract Act_Practical Problems_14

A contract to purchase certain immovable properties had been made by a guardian on behalf of a minor and the minor sued the other party for a decree of specific performance to recover possession. State whether the suit will succeed.

Yes-Although the general rule of law is that a stranger to a contract cannot maintain a valid suit, it was recognised in Kwaja Mohd. v. Haisaini Begum, that a beneficiary can always claim the benefits and bring a suit directly against the promisor.

Moreover, the beneficiary being a minor, it shall make no difference because under the Indian Contract Act, a minor can always be beneficiary under the contract and validly enforce such benefits. Thus, minor, in the present case, shall succeed in his suit for specific performance.

Contract Act_Practical Problems_13

K agreed to sing at the Star Theatre for a period of three months beginning 1 st January 1996. She further agreed not to sing at any other theatre during this period. Is this contract enforceable against her?

Restraint of trade is considered against public policy and, therefore, is bad in the eyes of the law. Section 27 of the Indian Contract Act declares it void. However, with regard to service agreements, restraints of the nature mentioned in the given problem shall bevalid, if reasonable. The facts of the given problem are based on the case of Lumley v. Wagner in which the Court held this restraint of 3 months to be reasonable and thus enforceable. Thus, K can be restrained from singing elsewhere during the period of 3 months.

Contract Act_Practical Problems_12

A, a minor, borrowed Rs. 5,000 on loan from B, staling that he was a major and executed a receipt in his favour. Discuss the remedies available to B to recover the money lent by him.

A minor is always allowed to plead minority and is not estopped to do so even where he had procured a loan or entered into some other contract by falsely representing that he was of full age. In Leslie v. Shiell, S, a minor, borrowed £ 400 from L, a money lender, by fraudulently misrepresenting that he was of full age. On default to pay by S, L sued for return of the £ 400 and damages for the tort of deceit. Held, L could not recover £ 400 and his claim for damages also failed. The Court did not grant relief, otherwise it would have been an indirect way of enforcing a void contract. Even on equitable grounds, the minor could not be asked to refund £ 400, as the money was not traceable and the minor had already spent the same.

Thus, in the given case, the agreement being void, B shall not be allowed to recover the money. However, if the money can be traced with A, the minor shall be liable, on equitable grounds, to restore the same since a minor cannot be given a liberty to cheat.

Contract Act_Practical Problems_11

The lessor let out his premises to the lessee on a fixed rent. The deed recited that "if the company did not vacate the premises by a specific date, the company shall commence paying the then prevalent market rent." Does this provision in the lease deed make the contract void for uncertainty?

Yes- such an agreement shall be void as per Section 29 of the Indian Contract Act being uncertain in terms of the rent payable. The expression 'market rent' lends uncertainty to the amount of rent chargeable since rent might vary from location to location, premises to premises. Hence the clause in the lease deed suggesting payment of rent at market rate shall be void and unenforceable.

Parternship Act_Practical Problems_4

A and B purchased a taxi to ply in partnership. They plied the taxi for a year when A, without the consent of B, disposed of the taxi. B brought an action to recover his share in the sale proceeds. A resisted B's claim on the ground that the firm was not registered. Will B succeed in his claim?

Yes- B will succeed in his claim. Although under Section 69 of the Partnership Act, a partner of an unregistered firm cannot enforce any of his contractual or legal rights against any other partner but non registration of a firm does not affect a partner's right to seek settlement of accounts of a dissolved firm. In this given case, the taxi having been sold, the business of the firm has already been dissolved. B shall thus, be entitled to claim his share in the sale proceeds.

Parternship Act_Practical Problems_3

Anand and Ravi are carrying on business in partnership. In the partnershipdeed, it is provided that none of the partners should borrow money except with theconsent of both. Anand borrowed a sum of Rs. 1,000 from Suresh for the business ofthe firm without the consent of Ravi. Is the firm liable? Give reasons for your answer.

The problem relates to the authority of a partner. According to Section 19 of the Partnership Act, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. Now, the question that may arise is that where a specific restraint has been put on a partner's authority, will such a restraint affect the partner's implied authority to bind the firm.

In this regard. Section 20 provides that the partners in a firm may, by contract between themselves, extend or restrict the implied authority of any partner. But, in so far as third parties are concerned, the firm continues to be liable to him for any such act which falls within the scope of the implied authority of a partner unless the person, with whom the partner is dealing, knows the lack of authority of the partner. Thus, in the given case, since Anand borrowed money for business purposes (and in a trading firm, power to borrow money falls within the usual course of business and hence implied power of a partner), the firm shall be held liable to Suresh.

Parternship Act_Practical Problems_2

D, J and A are only partners in a firm. They decide to dissolve the partnership with effect from 1st April, 1988. The partners do not give a public notice of the dissolution, but continue the business. During the course of business, D, J and A endorse certain Bills of Exchange of the partnership to a third party M, who was not aware of the dissolution. M, the third party, had supplied certain stationery to the firm. The Bills of Exchange are dishonoured. The third party M wants to claim the money. Decide:

(i) Whether the firm will be liable to pay for the bills of exchange?
(ii) What are the provisions of the Indian Partnership Act in this regard?

The problem is based on the provisions of Section 45 of the Indian Partnership Act. The Section provides that notwithstanding the dissolution of a firm, the partners continue to be liable as much to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until Public Notice of the dissolution is given.

Therefore, the firm shall be liable on the bills, as no public notice was given by the partners regarding dissolution of the firm. Similar view was expressed in Robinson's case also.

Parternship Act_Practical Problems_1

A and B, co-owners of a house, let it to a paying guest. They divide the net rents between them. Are they partners?

No-A and B, are not partners since a very essential element that the partners must be engaged in carrying some business is lacking. They could be partners if they make it their business to acquire houses jointly to rent out and share the net gains. Since it is the only house, they are the co-owners only—not partners.

Contract Act_Practical Problems_10

A customer entrusts certain G.P. Notes for safe custody to his bank. The bank keeps the G.P. Notes in a wooden box. Later, it is found that the Notes are destroyed by white ants. What is the bank's liability to the customer?

Section 151 of the Indian Contract Act, 1872 charges a bailee (which the bank is in the present case) to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed.

Further, Section 152 provides that if the bailee has taken reasonable amount of care which a man of ordinary prudence would take, then in the absence of any special contract, he will not be responsible for the loss, destruction or deterioration of the goods bailed.

In the present case, if to the knowledge of the bank manager, the premises were infested with white ants, it would certainly be considered negligence on his part to have stored valuable documents like G.P. Notes in a wooden box. Otherwise, i.e., not being aware, keeping G.P. Notes in wooden box is not likely to be considered as improper and hence bank may not be subjected to any liability.

Contract Act_Practical Problems_9

The manager of a cinema theatre gave instructions that no tickets were to be sold to R. R, knowing this, asked his friend to buy a ticket for him. With this ticket R went to the theatre but was refused admission. He filed a suit for damages for breach of contract, against the theatre. Would he succeed? Decide giving the provisions of the Indian Contract Act in this regard.

R would not succeed. Section 22 of the Indian Contract Act provides that a contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact essential to the agreement. However, in certain exceptional cases, a unilateral mistake renders a contract unenforceable. One such circumstance may be 'mistake with regard to the identity of the person contracted with'. A large number of a legal decisions are available on this point including those of Candy v. Lindsey.

The facts of the given problem are similar to those of Said v. Butt in which the contract was declared void on ground of mistake. Manager of the theatre having issued instructions not to sell ticket to R, suggests that he had no intentions to make contract with R. Thus, had it been known that the ticket was being purchased for R, it would have been refused. There is thus absence of consent altogether and hence no valid agreement. R would, therefore, not succeed in his suit for damages.

Contract Act_Practical Problems_8

X, an old lady, by a deed of gift made over certain property to her daughter D, with the specific directions that she should pay P, who is the sister of the old lady, a sum of Rs. 100 per month. The same day D entered into an agreement with P to pay her the agreed amount. D now refuses to pay her aunt P, the above amount on the plea that no consideration had moved from P to D. P, therefore, sues D. Is the suit maintainable and can D be held liable to pay the amount? Decide.

Yes-D can be held liable to pay the amount to P. Consideration may move from a stranger [Section 2(d) of the Indian ContractAct]. The facts of the given problem are based on the case of Chinnaya v. Ramaya in which a similar decision was given.

Contract Act_Practical Problems_7

A & Co., through a newspaper advertisement, announced a reduction sale of ready-made woollen garments and exhibited articles in their showroom with the original and reduced prices marked on them. B, who has read the advertisement, picks up a woollen suit marked Rs. 500 as the original price and Rs. 200 as the reduced price. But when B offers Rs. 200 to the salesman of A & Co., he refuses to accept the amount and handover the suit to B. Discuss the rights of B against -A & Co.

Price quotations and price-tags do not amount to an offer but are only an invitation to an offer. "Therefore, B's picking up the woollen suit with a price tag of Rs. 200 as the reduced price amounts to an offer by B to purchase the same at that price. It remains to be accepted by the seller—the salesman of A & Co. to result in a concluded contract. The salesman has every right to refuse or to accept the offer. Thus, B shall have no remedies.

Contract Act_Practical Problems_6

A, seeing a watch in B's shop, marked for sale for Rs. 200, entered the shop, placed Rs. 200 on the counter and asks for the watch. Is B bound to sell the watch ? Give reasons.

No- B is not bound to sell the watch. Price labels on articles only amount to an 'invitation to offer' and not an 'offer'. Placing of Rs. 200 by A amounts to an offer which may or may not be accepted by B. In Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd., it was observed that in such cases, there is nothing to prevent a shopkeeper from saying, "I am sorry I cannot let you have this article, it is the only piece I have got and I have already promised it to another customer or there has been a mistake in writing its price or prices have been revised since then."

Contract Act_Practical Problems_5

M agreed on Monday to sell his property to N by a written agreement which stated "that this offer to be left open until Saturday 10 a.m." In the meantime on Wednesday, M enters into a contract to sell the property to 0. N, who was sitting in the next room, hears about the deal between M and 0. On Friday, N accepts the offer and delivers to M the letter of acceptance. Is N's acceptance valid? Give reasons.

N's acceptance is valid, the acceptance being made before revocation of the offer by M. The overhearing by N does not amount to a valid revocation. The situation would have been different if, before acceptance by N, M had formally communicated his revocation to him.

Contract Act_Practical Problems_4

A executes a guarantee in favour of a bank as security for a loan to B. Later, A contends that the guarantee is not enforceable as it is not supported by consideration as he was not paid any guarantee commission. Is A's stand correct in law?

A contract of guarantee must also be supported by lawful consideration. However, it is not necessary that something must have been done for the benefit of the

guarantor. Anything done for the benefit of the principal debtor is a sufficient consideration to support the promise of the guarantor.

Section 127 of the Indian Contract Act, 1872 lays down that, "Anything done, or any promise made for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee." Thus, A's stand shall not be upheld as correct.

Contract Act_Practical Problems_1

A bank sanctions to an oil merchant a loan against the security of groundnut oil and an agreement is entered into between the bank and the borrower. Before the loan is disbursed, the Reserve Bank issues a statutory directive to all banks prohibiting grant of advances against the security of groundnut oil and, therefore, the bank cancels the loan. Can the customer sue the bank for damages for breach of contract ?

No- In the given problem, the customer shall not be entitled to claim damages from the bank for breach of contract. The relief to the bank shall be available under Section 56 of the Indian Contract Act, 1872. Section 56 provides that a contract to do an act which, after the contract is made, becomes impossible, or by reason of some event, which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

In the present case, performance by the bank after receipt of statutory directive from the Reserve Bank shall naturally be unlawful on its part. The contract shall, therefore, become void exonerating the bank of performance.

Contract Act_Practical Problems_2

A minor, who wanted to become a professional cricket player, entered into a contract with a coach and agreed to pay him certain amount to learn the game. Is the minor liable to pay the amount?

Yes- minor shall be held liable to pay the amount provided he has properties existing in his name. Education in India has been held as a necessity of life and as per Section 68 of the Indian Contract Act, the properties of a person incompetent to contract may be attached for necessaries supplied to him or to his dependants. The facts of the given problem are similar to the case of Roberts v. Gray in which the aforesaid view was taken.

what a trust and love.....!!!!!.....

Contract Act_Practical Problems_3

A woman fraudulently represented to a firm of jewellers that she was the wife of a certain minister and thus obtained two pearl necklaces on credit on the pretend of buying them. She subsequently sold those necklaces to a third party. Can the jeweler recover the necklaces from the third party ?

Yes, the jeweller can recover the necklaces from the third party. It is because, consent is a mental phenomenon and absence of it renders a contract void ab initio. In the present case, since the woman introduced herself as the wife of a minister thereby leading the jeweller to believe that he was contracting not with the lady physically present in the shop but with the wife of the suggested minister. Hence, not that the contract is voidable on ground of fraud but because of mistake as to the person contracted with, there is no contract at all, there being absence of consent altogether.

The woman, therefore, got no title. And a person who has no title can obviously confer none. Thus, third party can claim no rights on those necklaces even though purchased in good faith and for value. Similar decision was given in the case of Lake v. Simmons on which the facts of this problem are based.

Motivation

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Zig Ziglar