Page 28 - DMGT407Corporate and Business Laws

Unit 1: Laws of the Contract

Notes
prosecution by itself will not amount to coercion; but if this done on the basis of false
charge, it will amount to coercion as it is criminal in nature.
In the absence of any provision in the contract of guarantee in the contract, forbearance on
the part of creditor to sue the principal debtor does not discharge the surety.
Correct: According to Section 137, in the absence of any contract to the contrary, mere
forbearance on the part of the creditor to sue the principal debtor does not discharge the
surety. If there is a positive agreement by the creditor with the principal debtor not to sue,
then the surety will be discharged if he has not consented to such an arrangement.

A ‘contract of indemnity’ is not a ‘contingent contract’.
Incorrect: In the case of a contract of indemnity, the indemnifier promises to save the
indemnity holder from the loss caused to him by the conduct of the promisor himself or
by the conduct of any other person. This promise is contingent in nature, as it has to be
performed only when the loss is incurred.
Ratification of agency is valid even if knowledge of the principal is materially defective.
Incorrect: According to Section 198, no valid ratification can be made by a person whose
knowledge of the facts of the case is materially defective.
A seller of goods shall be called an ‘unpaid seller’ even when a part payment of the price
of goods sold has been made to him by a buyer.

Correct: As per Section 45(1) of the Sale of Goods Act, the seller is deemed to be an unpaid
seller if the whole of the price has not been paid or tendered.
‘Goods’ means every kind of property other than actionable claims and money.

Incorrect: Only moveable property is included in the definition of goods. So it is incorrect
to say that goods will mean every kind of property.
An unregistered firm may institute a suit if the value of the suit does not exceed ` 100.

Incorrect: An unregistered firm cannot institute any suit against a third party. It can,
however, avail of the right of set off to an amount not exceeding ` 100.
A partner making advance of money to the firm, beyond the amount of his agreed capital
is entitled to interest on such advanced money.
Correct: As per Section 13(c) of the Partnership Act, a partner is entitled to interest at the
rate of 6 per cent on the advance of money to the firm beyond the amount of his agreed
capital.
Contract Matters
Based on the extent to which the contracts have been performed, one may classify them as
executed or executory. Executed contract is one where both the parties to the contract have
fulfilled their respective obligations under the contract. Suppose a book is purchased from
a bookshop on payment of cash, the contract is called executed. On the other hand, executory
contract is one where both the parties and at least one of the parties are yet to perform the
respective obligations.
No consideration, no contract: According to Section 10 of the Indian Contract Act, one of
the essentials of a valid contract is lawful consideration. An agreement without
consideration is not a contract.

Contd...

LOVELY PROFESSIONAL UNIVERSITY 21