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.