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.