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Mercantile Laws-I
Notes resides voluntarily or who is carrying on business in a hostile territory, would be treated as an
alien enemy.
However, an alien friend, whose country is at peace with the Republic of India, has usually, the
full contractual capacity of a natural born Indian subject. But he cannot acquire property on any
Indian Ship, and also cannot be employed a Master or any other Chief Officer of such a ship.
3.1.5 Foreign Sovereigns and Ambassadors (Political Status)
Foreign sovereigns and accredited representatives of a foreign state or Ambassadors can enter
into contracts and enforce those contracts in our courts. However, they enjoy some special
privileges. They cannot be sued in our courts unless they choose to submit themselves to the
jurisdiction of our courts. In fact they cannot be proceeded against in Indian courts without the
sanction of the Central Government.
A company incorporated under the Companies Act, 1956, or a statutory corporation brought
into existence by passing a Special Act of Parliament (corporate status). A company cannot
go beyond its objects mentioned in its memorandum of association. The company’s activities
are confi ned strictly to the objects mentioned in its memorandum, and if they go beyond these
objects, then such activities are ultra vires and void, and cannot be ratified even by the assent
of the whole body of shareholders. Also, a statutory corporation cannot go beyond the objects
mentioned in the Special Act of Parliament. Similarly, Municipal Corporations (local bodies) are
disqualified from entering into contracts which are not within their statutory powers.
Insolvent persons (legal status). A person adjudicated as insolvent is incompetent to contract
until he obtains a certificate of discharge from the court.
3.2 Meaning of Consideration
One of the essential elements of a valid contract is that it must be supported by consideration.
In simple terms consideration is what a promisor demands as the price for his promise. The
term consideration is used in the sense of quid pro que, i.e., “something in return”. This
something or consideration need not be in terms of money. This “something” may even be some
benefit, right, interest or profit accruing to one party, or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the other party. Also a promise by one party
may be consideration for the promise of other party. Thus, a person who makes a promise to do
something usually does so as a return of equivalent of some loss, damage or inconvenience that
may have been occasioned to the other party in respect of the promise. The benefit so received,
or the loss, damage or inconvenience so caused is regarded, in law, as the consideration for the
promise.
Section 2 (d) defines consideration as: “When at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does or abstains from doing, or promises to do
or to abstain from doing, something, such act or abstinence or promise is called a consideration
for the promise”.
Example: A agrees to sell his motorcycle to B for ` 20,000. Here B’s promise to pay the sum
of ` 20,000 is the consideration for A’s promise to deliver the motorcycle, and A’s promise to
deliver the motorcycle is the consideration for B’s promise to pay ` 20,000.
“No Consideration, No Contract” [Ss.10 and 25]
A promise without consideration cannot create a legal obligation. A person who makes a promise
to do or abstain from doing something usually does so as a return of equivalent of some loss,
damage, or inconvenience that may have or may have been occasioned to the other party in
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