Contract Act_Practicle Problems_74

Mr. Ahuja of Delhi engaged Mr. Singh as his agent to buy a house in West Extension area. Mr. Singh bought a house for Rs. 20 lakhs in the name of a nominee and then purchased it himself for Rs.24 lakhs. He then sold the same house to Mr. Ahuja for Rs 26 lakhs. Mr. Ahuja later comes to know the mischief of Mr. Singh and tries to recover the excess amount paid to Mr. Singh. Is he entitled to recover any amount from Mr. Singh? If so, how much explain.

Agent is not to deal on his own account. If the agent wants to do deal on his own account, he must disclose all the material facts to his principal and obtain his consent. The principal can rescind the contract, if any material facts were dishonestly concealed by the agent or the dealings of the agent on his own account have been disadvantageous to the principal.

Agent can not make any secret profit out of the business of agency. If the agent deals on his own account without disclosing it to the principal, the principal is entitled to claim from the agent any benefit received by him, out of such transaction. Mr. Ahuja engages Mr. Singh as his agent for purchase of a house. Mr. Singh purchases a house in the name of the nominee and then purchases the same house on behalf of Mr. Ahuja (his principal), thus making a profit of Rs. 4 lakhs. However, he does not disclose these facts to Mr. Ahuja. Non-disclosure of profit of Rs.4 lakhs made by Mr. Singh amounts to a beach of duty by Mr. Singh. Therefore, Mr. Ahuja is entitled to claim the secret profit of Rs. 4 lakhs made by Mr. Singh.

Contract Act_Practicle Problems_73

A hires a carriage enough of B and agrees to pay Rs. 500 as hire charges. The carriage is unsafe, though B is unaware of it. A is injured and claims compensation for injuries suffered by him. B refuses to pay. Discuss the liability of B.

In case of a non-gratuitous bailment, the bailor is liable to disclose all the faults whether known to him or not. Accordingly, the bailor shall be liable for damages for any loss caused to the bailee whether or not he was aware of the faults.

In the the given case the hire of carriage of B by A amounts to non-gratuitous bailment. Therefore, it was the duty of B to disclose to A that the carriage was unsafe. It is immaterial as to whether or not B was aware of the fact that the carriage was unsafe. A is entitled to claim compensation from B.

Contract Act_Practicle Problems_72

C, the holder of an over due bill of exchange drawn by A as surety for B, and accepted by B, contract with X to give time to B, Is A discharged from his liability?

Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surely is not discharged. Accordingly, A is not discharged from his liability.

Contract Act Practicle Problems_71

A contracts with B for a fixed price to construct a house for B within a stipulated time. B would supply the necessary material to be used in the construction/ C guarantee A’s performance of the contract. B does not supply the material as per the agreement. IS C discharged from his liability?


The surely is discharged by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Failure to supply the necessary material by B (i.e., the creditor) amounts to an omission on the part of the creditor resulting in discharge of A (i.e., the principal debtor), and consequently, C (i.e., the surety) is discharged.