INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE

Post Gradu EPGP

END-TERM EXAMINATION

Name: Roll No.:

Course Title Business Laws

Instructor Prof. Deva Prasad M and Prof. Shannu Narayan
Duration and Mode 1 hour 30 minutes
Maximum marks 50 marks
Term & Year Quarter 2 EPGP 09 Batch & 2022-2023

Instructions

1. Mention your name and roll number clearly on the answer script.
2. This is a closed-book exam.
3. Marks will be awarded for the most appropriate answers.
All the best for the exam!

Question 1 (12.5 marks)

ONGC has entered into a contract with Saw Pipes for procuring casing pipes. Saw Pipes was
not in a position to deliver the casing pipes on time. The steel material supplier to Saw Pipes was
affected by Steel Mill strikes in Europe. Hence Saw Pipes could not provide the casing pipe on
time to ONGC and requested an extension of time of contract. Saw Pipes requested for an
extension of 45 days’ time for the execution of the order in view of the reasons beyond its control.
By a letter, the time for delivery of the pipes was extended by ONGC with a specific statement
that the amount equivalent to liquidated damages for delay in supply of pipes as per the contract
would be recovered from the Saw Pipes. Saw Pipes was against the recovery of liquidated
damages. Saw Pipes was trying to argue that unless the exact monetary loss could be determined,
the damages cannot be claimed.
The relevant clause of contract is provided below:

“11. Failure and Termination Clause/Liquidated Damages: -

Time and date of delivery shall be essence of the contract. If the contractor fails to deliver
the stores, or any installment thereof within the period fixed for such delivery in the schedule
or at any time repudiates the contract before the expiry of such period, the purchaser may,
without prejudice to any other right or remedy, available to him to recover damages for
breach of the contract: -

(a) Recovery from the contractor as agreed liquidated damages are not by way of penalty, a
sum equivalent to 1% (one percent) of the contract price of the whole unit per week for such
delay or part thereof (this is an agreed, genuine pre- estimate of damages duly agreed by the
parties) which the contractor has failed to deliver within the period fixed for delivery in the
schedule, where delivery thereof is accepted after expiry of the aforesaid period. It may be
noted that such recovery of liquidated damages may be up to 10% of the contract price of
whole unit of stores which the contractor has failed to deliver within the period fixed for
delivery, or

(b) It may further be noted that clause (a) provides for recovery of liquidated damages on the
cost of contract price of delayed supplies (whole unit) at the rate of 1% of the contract price
of the whole unit per week for such delay or part thereof upto a ceiling of 10% of the
contract price of delayed supplies (whole unit). Liquidated damages for delay in supplies
thus accrued will be recovered by the paying authorities of the purchaser specified in the
supply order, from the bill for payment of the cost of material submitted by the contractor or
his foreign principals in accordance with the terms of supply order or otherwise.

Answer the following:

 What are damages and liquidated damages in a contract?
 Is the argument of Saw Pipes valid?
 Can Saw Pipes claim for force majeure event in the above contractual situation?

Question 2 (12.5 marks)

The Memorandum of Association (MoA) of Delicacy Fantasy World Limited has listed only
one objective: ‘to trade in food grain and food products.’ The company was not financially
sound. One of the directors of the company suggested that since the price of gold was going
to increase, the company could make significant gains by buying gold, holding it for a month
and selling it. The Director’s suggestion was followed by the Company and ordered gold
from the vendor for Rs.20 Lakhs. Before the seller could deliver the gold, the price of gold
went up by 10%. The seller refused to deliver the goods at the said price. The company is
claiming damages for breach of the contract. The seller claims that the contract is void as it is
beyond the capacity of the company to trade in gold. With reference to this, explore the
following questions.

 Relevance of incorporating documents under Companies Act, 2013?

 While testing with the doctrines on incorporating documents, whether the claim of
the seller is valid?

Question 3 (12.5 marks)

A house construction company stated in the standard form of the ‘builder-apartment buyer’
contract that the company need not pay any amount for delay in handing over of the
completed apartment. The house construction company delayed handing over of the
apartment for more than two years from the date of promised delivery. Mr.X who bought the
apartment wants to claim compensation for the delay.

Based on the situation, analyze the following:

Is this a one-sided contract? Analyze from the Indian context whether one sided contract is
legal? Elaborate on the regulator’s and consumer courts role in case of one-sided contracts
and impact on business organizations. Can Mr.X claim compensation and damages in this
case?

Question 4 (12.5 marks)

Mr. Khadij and spouse had booked a hotel presidential suite room for 2 days and 1 night with
River Backwaters Resorts Pvt. Ltd. During the second day of stay, his spouse slipped at the
one of the slippery staircase in their compound/premises and fell down injuring her head and
back. His spouse was rushed to hospital. Mr. Khadij sued the company and their directors for
negligence and corporate criminal liability. In the light of these circumstances, answer the
following questions:
 Discuss what are the directors’ responsibilities under Companies Act, 2013 and other
allied rules and regulations.
 Whether directors of the company can be held liable in the above circumstances, if
so, why?
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