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.