Contract Act_Practical Problems_51

A tailor, expecting to make good profits at a place on the occasion of a festival there, sent through a railway company, a sewing machine and some cloth for carriage to the place of the festival. Due to the fault of the servants of the railway company, the machine and the cloth could not be delivered till the termination of the festival. Discuss the rights of the tailor.

In the given problem, it is apparent that the delay in delivering the machine and cloth was caused because of the fault of the servants of the Railway. Therefore, there is no doubt that the Railway company shall be subject to damages for the fault of its employees.

But the question is Which kind of damages. Can the tailor claim loss of profit or say only his fare, stay expenses, return fare for the goods, etc.? Loss of profit is a special loss, whereas other loses are ordinary damages. Ordinary damages shall no doubt be claimable. Regarding special damages, i.e., loss of profit, claim shall be acceptable only and only if the facts and the likely loss had been communicated to the Railway company.

This rule regarding special damages was laid down in the case of Hadley v. Baxendale and has been duly incorporated in Section 73 of the Indian Contract Act. Thus, communication of the special circumstances is a pre-requisite to the claim for special damages. Since in the facts given, there is no mention of the peculiar circumstances, i.e., of using the machine and cloth for the festival, having been communicated, the tailor may only claim ordinary damages.

Contract Act_Practical Problems_50

A Mohammedan lady asks for your advice whether she can sue her own father-in-taw to recover arrears of allowance payable to her by the father-in-law under an agreement between her own father and her father-in-law in consideration of her marriage. Give reasons for your answer.

Although the general rule of law is that a stranger to a contract cannot sue, it has been widely accepted that a beneficiary of a contract may do so. Similar facts appeared before the Court in the case of Kwaja Muhammad v. Haisaini Begum and the court allowed the lady, the daughter-in-law, to claim the arrears to allowance agreed to be payable under an agreement with his father in consideration of her marriage. Thus, in the present case, lady shall succeed in her case.

Contract Act_Practical Problems_49

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.

NI Act_Practical Problems_11

A debtor transfers to his creditor a negotiable instrument held by the debtor in full and final satisfaction of a debt which is barred by limitation. Would the creditor be a holder in due course of the instrument ?

This problem primarily requires to establish whether in the given case the holder of negotiable instrument (creditor) has secured it against lawful consideration or not. Under Section 25(3), a written promise to pay a time-barred debt shall be valid.

Such a promise though without consideration (since the debt having become time- barred, it is legally not payable) is held enforceable as an exception. Thus, in the given case, the holder should be considered as a holder for consideration. Other conditions of a holder in due course, satisfied, he should also be considered as a holder in due course.

Contract Act_Practical Problems_48

A, B and C borrow Rs. 10,000 from X. All of them have executed a promissory note in favour of X. A dies. X sues B alone for Rs. 10,000. Is X entitled to do so? If so, what is the remedy, if any, to B ?

Section 43 of the Indian Contract Act, 1872 provides that when two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise. Thus, in the given case, X is entitled to claim performance from B alone.

B, of course, in turn, shall be allowed to claim contribution in excess of his share {i.e., 1/3] from C aswell as legal representative of A. In this regard. Section 43 again provides that each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract. Thus, B shall be entitled to claim Rs. 3,333.33 each from C and A's legal representative.

Contract Act_Practical Problems_47

A proposes by a letter sent by post to sell his house to B. B accepts the proposal by letter sent by post. State the legal position regarding revocation of offer and acceptance by A and B respectively.

The problem in question is based on the provisions of Section 5 of the Indian Contract Act. According to Section 5, a proposal may be revoked at any time before the communication of acceptance is complete as against the proposer as per Section 4. Communication of acceptance against the proposer is complete when the letter of acceptance is posted. Thus, B may revoke his proposal at any time before or at the moment when B posts his letter of acceptance but not afterwards.

Revocation of acceptance, as per Section 5, may be made at any time before the communication of the acceptance is complete as against the acceptor, but not after- wards. As per Section 4, communication of acceptance is complete as against the acceptor when it comes to the knowledge of the proposer. Thus, B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Companies Act_practical problems_4

A public limited Company has only seven shareholders, all the shares being paid in full. All the shares of one such shareholder are sold by the court in an auction and purchased by another shareholder. The Company continues to carry on its business thereafter. Discuss the liabilities of the shareholders of the Company.

The problem in question relates to reduction of membership below the statutory minimum. Section 12 of the Companies Act requires a public Company to have a minimum of seven members. If at any time the membership of a public Company falls below seven and it continues’ for more than six months, then according to Section 45 of the Companies Act, 1956, every such member who was aware of this fact, would be individually (personally) liable for the debts contracted after six months.

Thus, in the above problem the remaining members shall incur personal liability for the debts contracted by the Company:

a. If they continued to carry on the business of the Company with that reduced membership (i.e., 6) beyond six months period.

b. Only those members who knew this fact of reduced membership shall be liable, for instance, one of the members who was abroad and thus not aware of these developments, shall not be liable.

c. The liability shall extend only to the debts contracted after six months from the date of auction of that member’s shares.