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.