LAW OF CONTRACTS QUESTION ANSWERS

1. An offer can’t be accepted after it has been terminated. Explain when an offer ceases to be capable of acceptance.

Ans: Yes, an offer can’t be accepted after it has been terminated. An offer ceases to be capable of acceptance or offer lapses or comes to an end in the following circumstances:

1)  By communication of notice of termination of offer to the offree

2) By lapse of the specified or reasonable time

3) By death or insanity of the offer

4) By counter offer

5) By not being accepted according to the prescribed or usual mode.

6) By non-fulfillment of a condition precedent.

2. Whether a promise to pay time barred bet is valid and if so under what conditions?

Ans: An agreement without consideration is void. But to this rule, certain exceptions are recognized and amongst them promise to pay a time barred debt is one. It is set out u/s.25(3) of the Indian Contract Act,1872.  The conditions to be fulfilled for its maintainability in the court of law are: – It shall be in writing and signed by the person or by his agent to pay debt either in part or full, which the creditor might have enforced but for the law for the limitation of suits.

3. Doctrine of Quantum Meruit:

Ans: Quantum meruit literally means “as much as merited or earned”. When a person has done some work under a contract and the other party repudiates the contract or some event happens which makes the further performance of the contract impossible then the party who has performed the work can claim remuneration for the work he has already done.  The claim for quantum meruit arises in the following cases:- 1) When an agreement is discovered to be void u/S.65. 2) When something is done without any intention to do so gratuitously u/s.70 3) when there is an express or implied contract to render service but there is no agreement as to remuneration 4) When the completion of the contract has been prevented by the act of the other party to the contract 5) When a contract is divisible.  6) When an indivisible contract is completely but badly.

4. Write a note on Quasi Contracts?

Ans: Quasi Contracts: A Quasi contract is not a contract between two parties but a legal obligation imposed by court of law, which puts both parties in the same position as if there is a contract between them.

The concept of quasi contracts is dealt under S.68 to 72.

S.68: If a person under obligation or to a person who can’t enter into contract is supplied with Necessaries suited to his condition in life, the person who has furnished such supplied must be reimbursed from the property of that person.

S.69: Person who is interested in payment of money which another is bound to pay.

S.70: Obligation of person enjoying benefit of non-gratuitous act:  New Model car.

S.71: Responsibility of finder of goods.

5. Define “Contract of Guarantee”, Surety”,”Principal debtor”, and “Creditor”.What are the nature of liablities under Contracts of Indeminty and Guarantee?

Indeminty Contract: S.124 of the Contract Act, says “A contract by which one party promises to save the other from the loss caused to him by the conduct of the promisor himself or by the conduct of any other person”.

The person who gives the indeminty is called the indemnifier, the person for whose protection indemnity is called Indeminty holder.

Example: A contracts to indemnify B against consequences of any proceedings which C may take against B in respect of a certain sum of Rs 2000. This is called Contract of indeminty.

Contract of Guarantee: A contract of Guarantee is also known as Contract of surety ship. S.126 of the contract Act defines a contract of guarantee as “ a contract to perform the promise or discharge the liability of a third person in case of his default”.

Example:A advances a loan of Rs100 to B and c promises to A that if B doesnot repay loan, he will do so. This is a Contract of Guarntee.

6. Give the meaning of ‘Caveat Emptor’ What are the exceptions to it? Caveat Emptor – The principle termed as ‘caveat emptor’ means ‘buyer be aware’. It is based on the fundamental premise that once a buyer satisfies himself as to the suitability of the product for his use, he would subsequently have no right to reject the same. Generally, buyer is expected to be careful while purchasing the goods and seller is not liable for any defects in goods sold by him. This principle in basic form is embodied in section 16 that subject to provisions of Sale of Goods Act and any other law.

Exception-I: S.16 says when the buyer makes known to the seller, the particular purpose for which he wants goods and he relies on the seller’s skills and judgment, then there is an implied condition that the goods shall be reasonably fit for the purpose. However, there is no implied condition if the article is sold under a trade name.

Exception-II: Where the goods are purchased by description from a seller who deals in such goods then there is an implied condition that the goods shall be of merchantable quality.  A seller who is guilty of fraud shall not have protection of this rule.

7.What is the true test for Partnership?

Ans: Test of Partnership: In order to determine the existence of partnership one must look to the agreement between them if the agreement between them is to share the profits of a business carried on by all or any of them acting for all, there is a partnership (S.4).

The difficulty arises when there is no specific agreement. In such a case, we have to refer to S.6 which embodies the rule laid down in the case of Cox v. Hickman(1860) HLC268. “In determining whether a group of persons is or is not a firm or whether a person is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Ex: books of account, correspondence, evidence of employees etc.” Again, statement by the parties in a document that they are partners doesn’t necessarily constitute them partners in law.

Sec.6 further enumerates in its two explanations cases where the partnership relation doesn’t exist. These cases are:

1. Joint owners sharing gross returns: Joint owners of some property sharing profits or gross returns arising from the property do not become partners. If, however, co-owners start a business with a view to share its profits they may become partners.
2. Sharing of Profits: The sharing of profits is prima facie evidence of partnership but the receipt by a person of a share of the profits of a business or of a payment contingent upon the earning of profits or varying with the profits earned by a business doesn’t of itself make him a partner with the persons carrying on the business. In particular, there is no partnership in the following cases: (a) where, a person has let money to persons engaged or about to engage in business and receives a rate of interest varying with the profits or a share of profits. (b) Where a servant or agent is engaged in a business and receives his remuneration as a share of profit. (c) Where a widow or child of a deceased partner receives a portion of profits. (d) Where a person has sold his business along with its good will and receives a portion of the profits in consideration of the sale.

To conclude, one can say that the true test of partnership is not the sharing of profits by a person or the contribution of capital or the holding of a particular property jointly but whether the business is carried on by him or by another o his account so that there is a mutual agency between them. If relation of principal and agent exists between the parties constituting a group, formed with view to earn profits of a business, we can say that there is partnership.

8.Agency doesn’t require consideration – Comment

Ans: S.185 says no consideration is necessary to create an agency.  The reason is as the affairs of the principal are placed in the hands of the agent, consideration in the sense of determent is enough to support the contract and as such no further consideration is necessary.   Therefore, an agent under a gratuitous contract of agency will be as much bound by his contract as a paid agent.

9. Holder in due course: – It is defined u/S.9 of the Negotiable Instruments Act, 1881. Holder in due course means any person who for consideration became the possessor of a Negotiable instrument if payable to bearer, or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

10. A minor issues a cheque in discharge of a liability and it was dishonored, whether he is liable to be prosecuted u/S.138 of the N.I Act.

Minor or unsound person is incompetent to enter into a contract as per S.11of the Indian Contract Act, 1872. However, S.26 of the Negotiable Instruments Act 1888 permits unsound or minor to draw, indorse, deliver and negotiate a negotiable instrument so as to bind all parties except himself.  Thus they are empowered to convey valid title and acquire rights over the negotiable instrument but can’t be burdened with liability.

11. What is meant by Material Alternation?

S.87 talks about Material alteration. Any alteration or changes in the instrument which changes the rights and liabilities of the parties to the instrument is called material alteration. Material alteration makes the instrument void. Material alteration discharges those who became parties prior to the alteration. It makes no differencec whether the alteration is beneficial or prejudicial. Ex: Alteration or Change of amount or interest rate in the instrument contrary to contract is a material alteration.

12. What are the essential ingredients of offence u/S.138 of N.I Act?

To constitute Civil Liability for recovery of cheque amount, mere non-payment of money upon demand is adequate. However, in order to constitute criminal liability the following conditions shall be fulfilled:

1. The cheque shall be issued for the discharge of any legally enforceable debt or other liability.
2. It shall have been presented within the period of six months or within the period of its validity whichever is earlier.
3. The cheque is returned by the bank unpaid due to insufficiency of funds in the accused bank account.
4. The payee has given a notice to the drawer claiming the amount within 30 days of the receipt of the information by the bank.
5. The drawer failed to pay within 15 days from the date of the receipt of notice.
6. If the accused didn’t pay the amount within fifteen days, his omission of non-payment amounts to offence on 16^th day.

The complaint should have been failed within one month from the date of expiry for the payment of amount before a Metropolitan Magistrate or JMFC.

13.What is an Inchoate Instrument?

Ans: An instrument which is incomplete in some respect is called an inchoate instrument. When a person signs and delivers to another, a stamp paper, either wholly blank or after having written thereon an incomplete NI, he thereby authorises that other person to make or complete upon it a negotiable instrument for any amount not exceeding the amount covered by the stamp. The person so signing is liable upon such instrument, in the capacity in which he signed the same, to a HDC, for such amount. However, a person other than HDC, can recover from the person signing that instrument only the amount intended by him to be paid thereon.

EVIDENCE ACT, 1872

14. Write a note on fact and fact in issue?

Fact: S.3 says Fact means and includes:-

(1) Anything, state of things, or relation of things, capable of being perceived by senses. (2) Any mental condition of which any person is conscious.

Ex: (a) That there are certain objects arranged in a certain order in a certain place.

(b) Any mental condition of which any person is conscious.

Fact in issue: S.3 of IEA defines fact in issue.

Fact in issue: Any fact from which, either by itself or in connection with other facts, the existence, non-existence, nature, or extent of any right, liability, or disability, asserted or denied in any suit or proceedings, necessary follows. It means matter under controversy.

15. Write a note on Proved, disproved and not proved?

Proved: S.3 of IEA defines proved. A fact is said to be proved when, after considering the matters before it, the court either believes it to exist or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.

Disproved: Fact is said to be disproved when, after considering the matters before it, the Court either believes it doesn‘t exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it doesn‘t exist.

Not proved: A fact is said not to be proved when it is neither proved nor disproved.

16. What is the use of facts like motive, occasion, cause, introductory or explanatory, inconsistent etc., as their proof does not determine fact in issue?

Ans: It is true to determine right or liability facts in issue shall be proved and proof of these facts doesn’t amount to proof of fact in issue. However, it shall be noted that every fact in issue has forward and backward linkages which help the court to arrive at conclusion with assertiveness. S. 6 to 11 IEA help parties to give forward and backward linkages for occurrence of fact in issue or any other relevant fact. a) If such fact form part of the same transaction(S.6) b) If it is the occasion, cause and effect of the fact in issue(S.7) c) Facts relating to motive, preparation and previous or subsequent conduct. However, conduct must be accompany and explain act(S.8) d) Facts necessary to explain or introduce relevant facts(S.9) e) If they are inconsistent with any fact in issue or relevant fact (S.11).

17. What is identification parade?

Ans: Identification Parade: Facts establishing the identity of person are relevant facts u/s 9 of IEA. When the accused person is arrested on the basis of physical features given by the eye witness, police arranges the test of identification parade The object of conducting Identification parade is to test the truthfulness of the witness and his capability to identify an unknown person whom the witness seen only once. The mode and manner of conducting test identification parade is spelled out under Rule.34 of A.P.Criminal rules of Practice.

1. Identification parade is conducted in the presence of judicial Magistrate and the police have to leave the scene to ensure the free and fair conducting of Identification Parade,
2. Suspected person will be placed among the other persons who have same physical characters of the accused as far as possible, 3.Then the Magistrate calls the witness to identify the accused person to whom he had seen while committing the offense, 4. If the eye witness identifies the accused and picks up the person to whom he had seen while committing the offense, the Magistrate records to that effect and he completes the proceedings. Later witness will be called by court at the time of trial to identify the accused person.

Evidentary value: It is not a substantive piece of evidence. It has only corroborative and contradictory value.

18. What are essentials of Dying Declaration and mode of recording it?
19. Meaning of Dying Declaration: It is a relevant fact in view of S.32 (1) of the Evidence Act 1872. Dying Declaration is a statement made by a person at the time or before the time of his death as to cause of his death or circumstances relating to cause of his death. As the person who made such Dying declaration is no longer available, the person in whose presence such statement was made can testify the facts about the death of the deceased even though he didn’t perceive actual incident with his own senses.  Thus Dying Declaration is one of the exceptions to the Hearsay rule of evidence.

Evidentiary Value of D.D: It’s a substantive piece of evidence. Once the court is satisfied that the D.D was voluntary and not influenced by any extraneous consideration, and inspires confidence about it truthfulness court convict a person solely on its basis without any corroboration. If the person didn’t die and he is alive his statement can be used for contradiction U/S.145 or corroboration U/S 157 of the IEA.

Mode of recording: The mode of recording D.D is spelled out under R.33 of Criminal rules of practice.

1. D.D may be oral or written. It can be recorded by any person including a police officer depending upon the urgency. If time permits it is always desirable to get the services of the Magistrate to record D.D as it has its own value. If it is in the hospital the certificate of the medical officer about the mental condition is necessary.
2. D.D must be of a person who is competent to testify as a witness, if alive.
3. There is no particular method of recording a D.D. It is desirable to record it in a question and answer and the answers be written in the words of the person making the declaration. It must be complete.
4. The statement must be read over and the signature or thumb impression has to be obtained .The time of recording shall be noted.
5. The court is obliged to rule out the possibility of the statement being the result of tutoring, prompting or vindictive or a product of the imagination.

19. Write a note on Expert Opinion?

Ans: It is dealt under S.45 & 46.  A case can be proved with the aid of expert opinion as it is declared as relevant fact under S.45 of the Evidence Act.  The opinion of a person who is an expert in any of the following subjects is a relevant fact. The subjects are like this: Opinion as to: a) Foreign law b) Science c) Art d) Identity of handwriting or finger impression. Expert opinion shall be supported by reasons. Expert opinion doesn’t bind the court, thus it is not a conclusive in nature. It shall be received like any other evidence and it is only an advisory opinion.