Course : GDM 2nd Sem Sub : Corporate Law

Q.1. In the following statements only one is correct statement. Explain

Briefly?

i) An invitation to negotiate is a good offer.ii) A quasi-contract is not a contract at all. iii) An agreement to agree is a valid contract.

Ans : i) Incorrect : - Its not an offer only an indication of a willingness to consider any offers and

counter offers.

ii) Correct : A quasi contract is a fictional contract created by courts for equilable,

not contractual purposes. A quasi – contract is not an actual contract, but is a

legal substitute for a conterformed to impose equity between two parties the

concept of a quasi – contract that show have been formed, even through in

actually it was net. It is used when a court finds it appropriate to credited an

obligation upon a non – contracting party to avoid infused to ensure fciwiness.

It is invoved in circumstances of unjust enrichment an is connected with the

concept of restitutes.

iii). Incorrect : All contracts are agreement to all agreement not contracts. A

contract is a legally binding agreement relationship that exist between two or

more parties to do obtain from perfoming certain acts. An agreement is form of

Ceils reference between different parties, which may be written, oral and lies

upon the no of the parties for its fulfillment rather the being in anyway

enforceable. It follows, therefore, that the loss of profit here cannot reasonnily

be considered such a consequence of the breach of contract as could have been

family and reasonably contemplated by both the parties when they made this

contract.

Q.2. A ship-owner agreed to carry to cargo of sugar belonging to A from Constanta to Busrah. He knew that there was a sugar market in Busrah and that A was a sugar merchant, but did not know that he intended to sell the cargo, immediately on its arrival. Owning to Shipment’s default, the voyage was delayed and sugar fetched a lower price than it would have done had it arrived on time. A claimed compensation for the full loss suffered by him because of the delay. Give your decision. Explain Briefly?

Ans : A can claim ordinary damages. Loss of profits is a special less and can be claimed

only if the other party was aware of the possibility of such a loss.

In the absence of any expiicit communication, we have to infer what could have

been in the contemplation of the parties from their actions. The court reasoned that

the carriers had no way of knowing that a would loose profits if the shipments was

delayed.

But it is obvious that, in the great multitude of cases of sending off sugar to third

person by career under ordinary circumstances such consequences would not, in all

probability have occurred..

Such compensation is not be given for any remote or indirect loss or damage

sustained by reason of the breach. Compensation for failure to discharge obligation

resembling those created by contract has been incurred and has not been

discharged (any person) injured by the failure to discharged it is entitled to receive

the some compensation from the party in default as if such person had contracted

to discharge it and had broken his contract .

Q.3. The proprietors of a medical preparation called the “Carbolic Smoke

Ball” published in several newspapers the following advertisement:-

“£ 1000 reward will be paid by the Carbolic Smoke Ball Co. to

any person who contracts the increasing epidemic influenza after

having used the Smoke Ball three times daily for two weeks

according to printed directions supplied with each ball. £ 1000 is

deposited with the Alliance Bank showing our sincerity in the

matter. .

On the faith in this advertisement, the plaintiff bought a Smoke

Ball and used it as directed. She was attacked by influenza. She

sued the company for the reward. Will she succeed? Explain

Briefly

Ans : She wire not succeed. The facts show that there was no binding contract between

the parties. The case is not like, Williams v carwardine H.B Ad 621 where the

money was to become payable on the performance of certain acts by the plantiff,

here the plantiff could not be any act of her own establish a claim for, two establish

her right to the money, it was necessary that she should be attacked by is fwenza –

an event over which she had no central. The words express an intention, but do not

amount to promise. The advertisement is too vaque to be the basis of contract, there

is no unit as to time, and no mens of chcking the ball anyone who had influenza

might come forward and depose that he had used the ball for a fortnight and it is

impossible to disprove it. Then it is contended that it is not binding . in the first

place, it is said that is not made with anybody in particular, now that point is

common to the words of advertisement and to the words of all other advertisements

offering rewards. They are offers to anybody who perfoms the condition named in

the advertisements and anybody who does performance the condition accepts the

offen. In point of law this advertisements is an offerto pay 100% anybody who will

perform these condition and the performance of the condition is the acceptance of

offer when an offer is made it is neccesaary in order to make a binding contract, not

only that should be notified. I apprehend that they are an exception to that rule.

Lastly it was said there was no consideration and that is was andum pactum. There

are 2 consideration here, one is the consideration of the incovience of having to use

this carbolic smake ball for 2 week 3 times day and the other more important

consideration is the money gain likely to accrue to the different by the enhanced of

the smoke balls, by reason of the planti use of them. This is simple consideration

to support this promise. I have only to add that as regard the policy and the wage

points in my judgement, there is nothing in either of them.

Q.6. In each set of statements, only one is correct. State the correct

statements &

Explain briefly?

A) i) A bailee has a general lien on the goods bailed.

ii) The ownership of goods pawned passes to the pawnee.

iii) A gratuitous bailment can be terminated by the bailor even

before the stated time.

B) i) A substituted agent is as good an agent of the agent as a sub-

agent.

ii) An ostensible agency is as effective as an express agency.

iii) A principal can always revoke an agent’s authority.

Ans : A i) A bailee has a general lien on the goods bailed is an incorrect

statement.

ii) The ownership of good pawnes passes to is incorrect statement. For

ownership to pass, goods must be specific ownership in goods

cannot pass

till the goods are curtained.

iii). A gratuitous bailment can be terminated by the bailer even before

the state

time is correct statement. Gratuitous bailment is one in which

neither the

bailer nor the bailee is entitled to any remuneration eg loan of

book tea

depositing of goods for safe cutody without and charge.

B i) A substituted agent is as good an agent of the agent as a sub

agent is

incorrect statement. The general rule is that an agent can’t

delegal his

authority and appoint another agent. An agent being delegates

cannot

transfer in authority or duties to another ; as per sec 19 an agent

can’t

lawfully employ another to perform acts which he has express

implied by

undertake to perform personally unless by the ordinary custom of

trade a

sub agent may of form the nature of agency the agent must be

appointed

section 191, a “sub agent” is a person employed by an acting under

the

control of the original agent in the business of agency .

ii) An ostensible agency is an effective as an ostensible authority exist where

the principles words or conduct would lead a reasonable person in a 3rd

party’s position to believe that the agent was authorized to act, even if the

principles and the purporated agent had never discussed such relationship

for example, where one person appoints a person to person to a position

which carries with agency like power, those who know of the appointment

are entitled to assume that there is ostensible authority to do the things

ordinarily entrusted it one occupying such a position . If a principal crecite

the impression that an agent is authorized but there is no actual authority,

third parties are protected so long as they have acted reasonably. This is

sometimes termed as agency by stopped where the principal will be stopped

from denying the grant of authority if 3rd parties have changed their

positions to their detriment in reliance on the represent ative made.

iii). A principal can always revoke an agents authority is incorrect statement.

However, principal cannot revoke agency coupled with interest to prejudice

of such interest such agency is coupled with interest. An agency is coupled

with interest. An agency is coupled with interest. An agency is coupled with

interest when agent himself has an interest in the subject matter of agency.

Q .8. X needs Rs. 10,000 but cannot raise this amount because his credit is not

good enough. Y whose credit is good accommodates. X by giving him a

pronote made out in favour of X, though Y owes no money to X. X endorses

the pronote to Z for value received. Z who is holder in due course the

pronote to Z for value received. Z who is holder in due course demands

payment from Y. Can refuse and plead the arrangement between him and X

Explain briefly?

Ans : According to sec 120 of the negotiable instrument act, e stoppets against

denying original validity of instrument, No maker of a promissory note, and no

drawer of a bill of exchange or cheque, & no acceptor of a bill of exchange for

the honor of the drawer shell, on proof of the protest, presums the fact of

dishonor, unless and until validity of the instrument as originally made or

drawn. Thus Z is entitled to receive payment on the instrument.

Q.10. A promissory note was made without mentioning any time for payment. The

holder added the words’ on demand on the face of the instrument. State

whether it amounted to material alteration and explain the effect of such

alteration. Explain briefly?

Ans : This is not note material alteration as a promissory note where no data of

payment is specified will be treated as payable on demand. Hence adding the

word “ on demand “ does not alter the business effect of the instrument.

Q.11. State whether the following instruments are valid promissory

notes:

i) I promise to pay Rs. 5000 to B on the dearth of ‘B’s uncle

provided that D in his will gives me a legacy sufficient for the

promise of payment of the said sum.

ii) I hereby acknowledge that I owe X Rs. 5,000 on account of rent

due and I agree that the said sum will be paid be me in regular

installments.

I acknowledge myself indebted to B in Rs. 5000 to be paid on demand for

value received.

Ans : i) It is not a promissory note because it does not contain an unconditional

promise; the amount being payable only if uncle gives sufficient legacy.

ii) Again its not a valid promissory note because it does not specified the

amount of monthly installment.

iii). It is valid promissory note since it fulfill all the requirements of a

promissory not as per section 4 of negotiable instrument act.

Q.12. A Payee holder of a bill of exchange. He endorses it in blank and delivers it

to B. B endorses in full to C or order. C without endorsement transfers the

bill to D. State giving reasons whether D as bearer of the bill of exchange is

entitled to recover the payment from A or B or C. Explain briefly?

Ans : D is the bearer and the holder of the bill in case of dishounour of the bill, D is

entitled to receive payment or recover the money by suit from the drawer,

acceptor and A who have endorsed the bill in blank. But D canno sue B or C

as sec 55. Provide the once the instrument is endorsed in blank and

subsequent endorsed in fall, the amount cannot be claimed from the

endorsen in full except by the person to whom it has been endorsed in full. In

this case, the bill has been endorsed in blank by A. even through B has

endorsed the bill, holder D cannot claim the money from B as B as has not

endorsed the bill in his favour C is also not liable as has not made any

endorsement.

Q.13. Write a short note on the Doctrine of Indoor Management? Explain briefly?

Ans : Memorandum of association and articles of association are two most

important document needed for the incorporation of a company. The

memorandum of a company is the constitution of that company. It sets out

the (A) Object (B) Name Clause (C) Registered office clauses (D) Liability

Clauses (E) Capital Clauses whereas the articles of association enumerate

the internal rules of the company under which it will be governed.

Undoubtly , both memorandum of association and the articleos association

are public documents in the sense that any person under section 6/0 of Indian

company act, 1956 may inspect any document which will include the

memorandum and articles of the company kept by the registrar of companies

in accordance with the rules need under the distruction of records act 1917

being document field registrar in pursuance of the act.

The doctrine of indoor management is an exception to the rule of constructive

notice. It imposes an important limitation on the doctrine of constructive

notice. According to this doctrine : person dealing with the company are

entitled to presume the internal requirements prescribed in memorandum

and articles have been properly absorbed. A transaction has two aspects,

namely substantive and procedural. An outside dealing with the company can

only find out the substantive aspect by reading the memorandum and

articles. Even through he may find out the procedural aspect, he cannot find

out wheather the procedure has been followed or note.

Q.14. The shareholders at an annual general meeting passed a resolution for the

payment of dividend at a rate higher than that recommended by the Board

of Directors. Examine the validity of the resolution. Explain briefly?

Ans : Dividend : According to regulation 85 of Table A of the companies Act 1956,

a company in general meeting may declare dividend recommended by the

board of the director of the company. The share holders at an annual general

meeting may reduce the amount of dividend , recommended by the board of

direction of the of the company, but they cannot increase it. Hence the

resolution passed at the annual general meeting for payment of dividend at a

rate higher than that recommended by the board of directors is not valid.

Revelation of deedbred dividend

Ordinary a dividend once declared at annual general meeting, cannot be

resolved, except, with the consent of shave holders, for a declaration of

dividend creates a dbt to the share holders in whose favour it is declared if

dividend creates a debt to the share holders in whose favour it is declared if

divident it declared and the amount paid or credited to the share holders as

dividend. The character of the credit as payment as dividend cannot be

altered by a subsequent resolution.,

But where a dividend has been it legally declared as where, desk to events

interveuring after the declaration, such as fire destroying the company

property as the out breach of a war, as the imposition of new heavy tax triden

on ther causes diminishing the assets of the company males it adviseable to

conserve the remaining assets, the board of directors will be justified in

revoliens the declaration of dividend.

Q.18. A insured his house against fire. Later while insure, A killed his wife,

severely injured his only son, set fire to the house and died in the fire. The

son survived and sued the insurer for the fire loss, advice the insurer.

Explain briefly?

Ans : Because the fire was set deliberately they would not cover the cost. It as not

accidental and as the son did not insure himself, if the insurance company will not

pay out and I believe they would not because it was not a tenant, therefore, they

would not cover any lost of property or life but if the son had his own personal

insurance to cover himself for any injury. Loss of property, they would have paid

out.

I thinks its because he lives in the same house and a relative and the fire was

arson, they will not pay, then again it depends on the insurance policy..

Q.21. Avinash booked his goods with Superfast Freight Carriers at Delhi for being

carried to Ferozabad. The goods receipt note mentioned that all the disputes

would be subject to jurisdiction of the Mumbai Court. Avinash lodged a complaint

for certain deficiency in service against the transporter in the District Forum at

Delhi. Superfast Carriers contested that District Forum at Delhi had no

jurisdiction to entertain the complaint as the head office of the transporter was at

Mumbai and the jurisdiction has been clearly stated in the goods receipt not. Is

the contet nation of the transporter tenable? Explain briefly?

Ans : The contention of the transporter is not tenable. This is based on the facts in the

paras vs Roshan freight carrier case, where in the national commission has ruled

that the parties could not confer jurisdiction on a Court which had no jurisdiction.

The agreement signed between the parties conferring exclusion jurisdiction on a

particular court was of no avail. In the case at hand, Avinash had booked his

goods with superfast freight carriers in delhi for being carried to ferozabad. As

per sec 11 (2) ©, a complain shall be instituted with in the local limits of whose

jurisdiction the cause of action arises, wholly or in part. In case of deficiency in

service, Avinash is competent to lodge a complain in delhi.

Q.22. With reference to the provisions of the Consumer Protection Act,

1986, decide the

following giving reasons in support of your answer.

i) Sukh Dukh Ltd. dispatched certain consignments of goods by road

through Fastrack Roadways Ltd. The goods were unloaded and

stored in a godown enroute on the suggestion of consignee. A

fire broke out in the neighbouring godown spread to the godown

and goods were destroyed. The Fastrack Roadways Ltd. claimed

that there was neither negligence nor deficiency in service on

their part and goods were being carried at “Owner risk” and since

no special premium was paid, they were not responsible for the

loss caused by fire. Whether Fastrack Roadways Ltd. is liable to

pay damages to consignor?

ii) Life Insurance Corporation (LIC) formulated a scheme called

‘salary saving scheme’ under which employees of an organisation

could buy an insurance policy. Premium due on each policy was

collected by the employer from the salary of the employees nor

did it issue any premium notice. When the widow of the deceased

employee made a claim to LIC on the death of her husband, the

LIC repudiated the claim on the ground that four installments of

premium had not been paid. The widow was approached the

consumer forum for redressal. Is the LIC liable for deficiency in

service? Explain?

iii). Raman booked a ticket from Delhi to New York by Lufthansa Airlines. The

airport authorities in New Delhi did not find any fault in his visa and other

documents. However, at Frankfurt airport authorities instituted proceedings of

verification because of which Raman missed his flight to New York. After

necessary verification, Raman was able to reach New York by the next flight. The

airline authorities’ tendered apology to Raman for the inconvenience caused to

him and also paid as goodwill gesture a sum of Rs. 5,000. Raman intends to

institute proceedings under the Consumer Protection Act, 1986 against Lufthansa

Airlines for deficiency in service. Will he succeed?

Ans : i) The present problem is based on nath bros exis international ltd. V best

roadways ltd 2000 (2) scale 5ft, where the national commission dismissed the

claim. The supreme court allowed the appeal and held that the liability of the

carrier is that of an insuner and is absolute in terms in the sense that the carrier

has to deliver the good, at destination indicated by the consignor safe, without

causing any damage and without any loss to theme. So long as the goods were in

the custody of the carrier it would be his duty to take care as he would have

taken of his own goods. Even if the goods had been carried at owner risk the

carried visk the carrier would not fully absolved of its liability if the loss or

damage was occasioned on account of its negligence or that of its agent and

seewants.

Based on t he above state case, it can be inferred that fast track Roadways ltd. Is

liable to pay damages to sukh dukh ltd.

iii) LIC is liable for deficiency in services. In the instant case the employer had

implied authority to called premium on behalf of the corporation. There is no

gain saying the fact that if the employer had, after deduction the stipulated

amount from the employees salary failed to remit the premium to the corporation

it was clearly the fault of the agent of the corporation so, LIC has wrongly

discharged its liability under the policy.

The present problem is similar to delhi electric supply undertaking V Basant

devi 1999 (6) scale 236. Where it was held that since the burden of collection the

premium and remitting it to the corporation was on the employer, it was net the

responsibilities of the employee to intimate the corporation about non –

remitiance of premium of premium.

iii). The present problem is similar to ravneet singh bagged and KLM royal dutch

Airlines 1999 (7) scale 47. In the present problem lefthansa airlines could not

be held to be quality of clerifency in service. Although roman had been

subjected to harassment, it is equally true that none of respondents would be

held quality of deficiency in service. The airline authorities tender apology to

raman for inconvience caused to him $ also paid him taken of compensation.

Deficiency of semue could not be alleged without attributing fault,

imperfection or shouteoming or inadequately in the quality nature & manner of

performance which is required to be performed by a person in persurance of a

CONTRACT or otherwise in relation to any service. S. Raman will not succed if

the institute proceeding under consumer protective act.

Q.23. With reference to the provisions of the Consumer Protection

Act, 1986, decide t

he following giving reasons in support of your answer.

i) Sohn sent all relevant documents in an envelope regarding

consignment of goods to a buyer in the USA through Fast Service

Couriers. The documents did not reach the buyer as a consequence

of which the buyer could not take delivery of the goods. By the time

the duplicate copies of the document had been received by the

buyer, the season of the goods was over. He claimed that he had

suffered a loss of US $ 5,000 as a result of the negligence of the

courier. The State Commission ordered the payment to be made by

the Fast Service Couriers, but the National Commission in appeal

reversed the order and ordered payment of US $ 100 only as per the

receipt issued by the Fast Service Courier to the consignor at the

time of the dispatch of the latter. Advise Sohan.

ii) Mahesh purchased a machine from Astute Ltd. to operate it himself

for earning his liverhood. He took the assistance of a person to

assist him in operating the machine. The machine developed fault

during the warranty period. He filed a claim in the consumer forum

against the company for deficiency in service. Astute Ltd. alleged

that Mahesh did not operate the machine himself but had appointed

a person exclusively to operate the machine. Will Mahesh succeed?

iii) Pillai purchased a car by taking a loan from Kerala cooperative Bank

Ltd. and gave post-dated cheques to the bank not only in respect of

repayment of loan instalments but also of premium of insurance

policy for two succeeding years. On the expiry of the policy. Pillai’s

car met with an accident. Will Pillai succeed in getting a claim

against the Bank ?

Ans : Sohan sent all relevant documents in an envelop regarding consignment of

goods

to a tryer in the U.S through fast service couriers. The documents did not

reach

the tryer as a consequence of which the buyer could not delivery of the

goods. By

the time duplicate copies of the documents had been received by the

buyer, the

reason of goods was over. He claimed that he had suffer a loss of US

$5000 as the

result of the negligence of the courier.

The state commission order the payment to

the made

by first so much courier, but the national commission in appeal reversed

the

order amd ordered payment of $100 only as per the receipt issue by fast

service to

the consigner at the time of dispatch of the letter.