NI Act_Practicle Problems_49

P, the holder of a bill of exchange, transfers it to Q without consideration. Q also transfers it to R without consideration. R transfers it to X for consideration. X transfers it to Y without consideration. State whether Y can recover the amount of such instrument from X or P.

NI Act_Practicle Problems_48

X obtains Y’s acceptance to bill by fraud. X endorses it to Z who takes it as holder in due course. Z endorses the bill to F who knows of the fraud. Can F recover from X?

NI Act_Practicle Problems_47

H is the holder in due course of a bill of which A is the acceptor. D, the drawer of the bill, is fictitious. Can A escape from his liability to H?

NI Act_Practicle Problems_46

A draws a cheque for Rs. 100 and hands it over to B by way of gift. Is B a holder in due course? Explain the nature of his title, interest and rights to receive the proceeds of the cheque.

One of the requirements of Section 9 of the Negotiable Instruments Act to constitute a holder, as holder in due course is that he must have received the instrument for consideration. There are no exceptions to this condition. Thus B can’t be treated as holder in due course. But he is certainly a holder with good title thereto and hence he will have every right to claim payment upon instrument.

Contract Act_Practical Problems_63

A’ stands surety for ‘B’ for any amount which ‘C’ may lend to B from time to time during the next three months subject to a maximum of Rs. 50,000. One month later A revokes the guarantee, when C had lent to B Rs. 5,000. Referring to the provisions of the Indian Contract Act, 1872 decide whether ‘A’ is discharged from all the liabilities to ‘C’ for any subsequent loan. What would be your answer in case ‘B’ makes a default in paying back to ‘C’ the money already borrowed i.e. Rs. 5,000?

The problem as asked in the question is based on the provisions of the Indian Contract Act 1872,
as contained in Section 130 relating to the revocation of a continuing guarantee as to future
transactions which can be done mainly in the following two ways:

1. By Notice: A continuing guarantee may at any time be revoked by the surety as to future
transactions, by notice to the creditor.

2. By death of surety: The death of the surety operates, in the absence of any contract to the
contrary, as a revocation of a continuing guarantee, so far as regards future transactions.
(Section 131).

The liability of the surety for previous transactions however remains.
Thus applying the above provisions in the given case, A is discharged from all the liabilities
to C for any subsequent loan.

Answer in the second case would differ i.e. A Is liable to C for Rs. 5,000 on default of B
since the loan was taken before the notice of revocation was given to C.

Contract Act_Practical Problems_62

‘A’ applies to a banker for a loan at a time where 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.

In the given problem, A applies to the 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. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence. As between parties on an equal footing, the court will not hold a bargain to be unconscionable merely on the ground of high interest. Only where the lender is in a position to dominate the will of the borrower, the relief is granted on the ground of undue influence. But this is not the situation in this problem, and therefore, there is no undue influence.

Contract Act_Practical Problems_61

Mr. Dubious textile enters into a contract with Retail Garments Show Room for supply of 1,000 pieces of Cotton Shirts at Rs. 300 per shirt to be supplied on or before 31st December, 2006. However, on 1st November, 2006 Dubious Textiles informs the Retail Garments Show Room that he is not willing to supply the goods as the price of Cotton shirts in the meantime has gone upto Rs. 350 per shirt. Examine the rights of the Retail Garments Show Room in this regard.

In the given problem Dubious Textiles has indicated its unwillingness to supply the cotton shirts
on 1st November 2006 itself when it has time upto 31st December 2006 for performance of the
contract of supply of goods. It is therefore called anticipatory breach of contract. Thus Retail
Garments show room can claim damages from Dubious Textiles immediately after 1st November, 2006, without waiting upto 31st December 2006. The damages will be calculated at the rate of Rs.50 per shirt i.e. the difference between Rs. 350/- (the price prevailing on 1st November) and Rs. 300/- the contracted price.