Problem to Solve

I. Ns son has forged B' s sigllature to a promissory note. B, under threat

pro secuti ng A's so n, ob tai ns a bo nd fro m A for the amount of the
of
no tice. bn A' s fai lur e to pay, B fil es a su it on the bond. Will
forged
A succeed? .
Solution:
s ob ·
tam ed under
Yes· A wi·11 succeed if he shows that the bond wa
pro sec uti ng A's son. Th rea t to prosec ute is an offence
tbe threat of . . - · . th .
· Penal Code and therefore coercion w1thi~ e mearung
Under Indian
 on 15 of the Co ntract Act. He nc e the co ns en t by A (for bond)
of Secti
nt within the me aning of Se ction 14 of the Co ntract
is not free conse
Ac t.
Proble.ms to solve
1. A's son has forged B's signature to a promissory note B, under threat of
prosecuting A's son, obtain a bond from A for the ~ount of forged notice.
On. A's failure to pay, B filed a suit on the bond. Will A succeed?
Solution:
Yes, A will succeed if he shows that the bond was obtained under the
threat of prosecuting A's s~n. Threat to prosecute is an offence under IPC
and therefore coercion within the meaning of Sec. 15 of the Contract Act.
Hence the consent by A is not free consent within the meaning of Sec. 14
of the Contract Act. Therefore, the bond was obtained without free consent
hence it is voidable at the option of A within the meaning of Sec. 19 of the
Contract Act.
2. A husband induced his wife to enter into contract· under a threat of
committing suicide. Can wife sue to set aside the contract?
Solation;
Yes. Taking the defence of coercion,_the wife can sue to set aside tbe
contract under Section 15 of the Contract Act as~the threat of swcide is
forbidden by JPC. So it is punishable under IPC.
Problems' to solve
l. A, a man enfeebled ,by .disease or age, is induced by B influence over hint
as his medical ,attendant to agree to .pay -B an unreasonable sum for his
profession~ service. A refuses to fulfill his promise. Can B enforce this
contract?
Solution:
No. B cannot succeed as the con trac t bet wee n the m is under undue
influence and there is no free consent. It is voi dab le und er Section 19 of
tbe Contract Act.
2. A applies to a banker for a loan at a time when Ind ia is passing -t
hrough a
period of recession. The banker agrees to make the loan only at an
unusually
high rate of interest. A accepts the Idan on these terms. Subsequently A
pleads that the contract has been procured by exercising undue influence
.
Wtll this plea succeed?
Solution:
No. This is a transaction in the ordinary course of business and the contract
is not induced by undue influence.
problems to solve

1. !A. agreed to purchase rice from B. The rice ·was stored up in place to
which A had access. A rescinds the contract on the ground that rice was
inferior in quality to what it was represented by B. Is the rescission valid?
Solution:
As._A had the means of discovering the truth, rescission would not be valid
\ '
as the misrepresentation is an innocent misrepresentation. It would be
covered by the exception to Section 19 of the Contract Act.
If, however, the misrepresentation is negligence, A can rescind the contract
as the exception to Section 19 applies only to innocent misrepresentation.
2. B obtained a loan of money by misrepresenting the purpose for which the
money was actually required.
~tion:
As B has to tell the real facts to the lender, B's act comes under fraud as
he did not reveal -the fact.
Problems to solve
1. A man by name of N called at a Jeweller's shop and choose a costly ring.
He tendered in payment a cheque which he signed in the name of G, a
person of credit. He took the ring and pledged it to B, who had no notice of
the fraud. Can the Jeweller recover the ring from B?
Solution:
The Jeweller cannot recover the ring from B. The reason for it is that it is
- a case of fraud, and so the contract is good unless it is rescinded by the
·aggrieved party. No one pawns the ring before the contract is rescinded
and hence the title of Bis good. So the Jeweller cannot recover the ring
from B.

2. A fraudulently informs B that A's house is free from encumbrances. B

there upon buys the h~use. The house is subject to a mortgage. What are
the rights of B? ..
Solution:
B may either avoid the contract or may insist on its being carried out and
the mortgage debt redeemed.
3. A receives some money from J to be paid over to P. A admits of the receipt
to P. Can P recover due amount from A?
 Solution:
A should have returned money to P if he had good intention. It becomes
fraud if A does not return as he has ill intention to keep the amount with
him. Then, P can recover the amount from A.
A soap powder advertisement says: ''It washes whiter than white".
4.
Comment.
Solution:
If the soap powder performs well, the advertisement cannot be treated as
fraud. However, if the soap powder does not function, so and does not
make wash whiter, than the company is held responsible for making
misrepresen tati()n.
Problems to solve
0

l. A agrees to buy a motor car from B for Rs. 15,000/- and pays half the
purchase price in advance. Unknown to both the parties at the ti,me of
making contract, the car had been destroyed by an accident. Advise A.
'Solution:
A is advised to treat the contract as void. He has a right to take back Rs.
7,500, the advance he paid. According to Section 20 of the Contract Act,
 an agreement is void jf both the parties to it are under a mistake a.,
matter of fact essential to the agreement. a

z. ~==t:e~;;;:~:: 0 1
~:~ ;1 :~ ~~:
1
~i:! i:!~~~~:ei
area was found to be Jess. Under the municipal regulations a building ~g
. h s SJte
was to have an area of not less than five B tg as. tate whether A can
enforce the contract against B?
Solution:
The mistake relates to a question of fact. If both the parties know that th
Jand was intended for building purposes and that it would be fit for tha~
purpose only if it was not less than five Bighas, the fact would be essential
to the agreement. So A cannot enforce the contract against B.
3. B, the managing director of a theatre gave instructions that a ticket was
not be sold to San art critic. S knew this, and asked a friend to buy a ticket
for him. With this ticket S went to the theatre but was refused the admission.
So S files a suit against the theatre company. Will be succeed?
Solution:
S 's suit will not succeed since the theatre company never intended to contract
with hirn. S, with the full knowledge that he could not get a ticket under his
own name and got it through his friend and hence there was no liability for
damages [Said v. Butt (( 1920) 3 KB 497).

4. X offers to sell Y a painting which X knows is a copy of a well known

masterpiece. Y thinking that the painting is an original one and that X must
be unaware of this, immediately accepts X's offer. Does this result in a
contract?
Solution:
Y.es. There is a valid contract. The rule of Caveat Emptor applies in case
of unilateral mistake as to the quality of the subject-matter of contract.

5. A uses a telephone and purchases goods on credit from B, a merchant,

who supplies under the mistaken belief that he was contracting with a man
of credit. A reselling a goods to C who is a bona fide purchaser for value.
Can B recover the goods from C ?
Solution:
B cannot recover the goods from C~ T hough there is a mistaken belief, B
h-ad identified the person with whom he was dealing by hearing and was
 intending to deal with the person at the other end of the telephone. As
between A and C, A will have to bear the consequences of the mistake
though both are innocent parties. The mistake is one not in consensus but
in causa and so B cannot recover the goods from C.
'HalJen & Co.,' and under that name wrote a
6. A assumed a false name
letter to the plaintiff, metal manufacturer, ordering for metal wire. The
letter head contained a picture of a large factory with list of overseas
depots. The plaintiff believing that he was dealing with a respectable
company supplied the wire. A sold the wire to defendant. Can the plaintjff
succeed in recovery of wire as his property?

Solution:
A mistake as to identity of the other party prevents the formation of contract.
Here the mistake is only as to the attributes and not as to the identity. The
contract might be voidable on the ground of fraud practised by A. It would
not, however, be void. So third parties can acquire rights under such a
contract. Hence the suit is liable to be dismissed.
7. A, an old man of feeble sight, endorsed a bill of exchange thinking it was a
guarantee. There was no negligence on the part of A. Is A liable?
Solution:
As A thought that the document was a guarantee and endorsed a bill of
exchange due to feeble sight, A is not liable as it was not a case of fact.
8. A signed a document guaranteeing B's account with a Bank thinking that
he was signing a proposal for insurance. Is A liable on the guarantee if he
was negligent in signing?
Solution:
A. is liable, for he cannot plead non est factum successfully since the
nustake relates to the character of the document as not as to its contents.