Page 51 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes The rights of a surety may be against the creditor, the principal debtor; and co-sureties.
The liability of surety under a contract of guarantee comes to an end under certain
circumstances.

A contract of indemnity is a contract whereby one party promises to save the other from
loss caused to him the promise by the conduct of the promisor himself or by the conduct
of any other person.
In a contract of indemnity, there are only two parties, indemnifier and indemnified.

2.11 Keywords

Coercion: It is (i) the committing or threatening to commit any act forbidden by the Indian Penal
Code, or (ii) the unlawful detaining or threatening to detain any property to the prejudice of any
person whether with the intention of causing any person to enter into an agreement.
Continuing Guarantee: It is a guarantee which extends to a series of transactions.

Contract of Indemnity: It is that contract whereby one party promises to save the other from
loss caused to him by the conduct of the promisor himself or by the conduct of any other person.
Specific Guarantee: It is a guarantee which is intended to be applicable to a particular debt; and
comes to an end on its repayment.
Undue Influence: A contract is said to be induced by undue influence where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will of the
other, and uses that position to obtain an unfair advantage over the other.

2.12 Review Questions

1. A advances to B, a minor, ` 500 on the guarantee of C. On demand for repayment B pleads
minority. Can A recover that amount from C? Justify.
2. “The liability of a surety is secondary and co-extensive with that of principal debtor.”
Comment.
3. “An attempt to deceive which does not deceive is no fraud.” Comment.
4. P contracts to indemnify R against the consequences of the proceedings which S might
take against R in respect of a debt due by R. S obtains judgement against R for the amount.
Without paying any portion of the decreed amount, R sues P for its recovery. Comment.
5. B, the proprietor of a newspaper, publishes at A’s request libel upon C, in the paper. A
promise to indemnify B against the consequences of the publication and all costs and
damages of any action in respect thereof. B is sued by C and has to pay damages and also
incur expenses. Is A liable to make the loss to B? Justify.
6. “Indemnity is not necessarily given by repayment after payment. Indemnity requires that
the party to be indemnified shall never be called upon to pay.” Discuss.
7. Analyse the situations where the bilateral mistakes may result in making the contract
invalid.

8. A company issues a prospectus giving the false information about the unbounded wealth
of Nevada. A shareholder buys shares on the faith of such information. He wants to avoid
the contract. Can he do so? Comment.
9. “It is not only the consent but free consent of the parties which is necessary for making the
contract binding.” Comment.

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