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.

Companies Act_Practical Problems_3

The number of members in a public Company became reduced to six on the 10th September, 1988, the Company incurs trade debts on 11th September, 1988, 2nd February, 1989 and 17th March, 1989. How far are the remaining six members liable for the debts?

The remaining six members are liable for the debts incurred after 6 months of the reduction in the number of members below the statutory minimum specified in Sec. 45 of the Companies Act, 1956 i.e., for debt contracted on 17th March, 1989.

Contract Act_Practical Problems_46

'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_45

A offers to B his scooter for Rs. 6,000. B writes back agreeing to buy it for Rs. 5,500. Is there a concluded contract between A and B for sale of the scooter for Rs. 5,500?

No; For conclusion of a contract it is necessary that the offer of the party be accepted in absolute and without any qualifications or conditions. In the present case. B's agreeing to buy the scooter for Rs. 5,500 instead of the proposed amount of Rs. 6,000, only amounts to a fresh proposal or counter-proposal and doesn't constitute acceptance of the proposal or offer of A.