EXAM CODE: 5336

COURSE NAME: LAW OF CONTRACTS-I

EXAM DATE: 28/04/22

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 PART-A

Answer- 1 (a)

Before we move on to the analysis of the question in hand, we must know that this case is
concerned with the Performance of a Contract and not its creation, therefore the principles
that will be applied will be dealing with the performance of the contract. Presuming the
jurisdiction of Indian Contract Act, 1872.

The issue here is whether there has been a breach of contract, and, if yes, then how will the
damages be decided? Here, we can see that the quality of the T-Shirts was drastically inferior
from the export quality. In the case of Sorabji Hormusha Joshi and Co. vs V.M. Ismail And
Anr. it was held that “goods cease to be merchantable if their quality renders them unfit for
the purpose for which they are sold”, and the court held the party liable for the breach of
contract by delivering goods that did not match the requirements of the contract. Therefore,
we can establish that S, is liable for breaching the contract by supplying inferior quality
goods. Further, in the case of Robinson v Harman, it was held that in case of a breach, the
party should be awarded damages so as if it reaches an economic position had the contract
been duly performed. Further, in the case of CNP Haulage v Middleton it was held that for
damages to be provided there should be an actual loss suffered as a consequence of the
breach, which P suffered in this case. Therefore, we can conclude that P must be granted
damages amounting to what he would have profited by re-selling sold the T-Shirts had they
been of Export Quality.

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Answer- 1 (b)

Before we move on to the analysis of the question in hand, we must know that this case is
concerned with the Performance of a Contract and not its creation, therefore the principles
that will be applied will be dealing with the performance of the contract.

The primary principle that this answer is concerned with is that of Discharge of a Contract
by Mutual Agreement by the way of Novation of the said agreement. The primary issue
here is that whether there was a breach of the agreement to buy/sell formal shirts? In the case
in hand, when on June 10th S wrote to P that he will not be able to perform the contract, it was
an initiation of Anticipatory Breach of the contract. However, as it was held in the case of
Hochster v De La Tour, the parties can only be discharged from the performance when the
other party to the contract accepts its repudiation. Otherwise, the contract stands alive till the
date of performance. Therefore, there was no discharge by breach since the party here (Mr. P)
never accepted the repudiation. On June 20 th, the date of performance, after a failed attempt
of Remission of the contract, by extending the timeline, the contract was novated. Novation
of the contract happened when the agreement was formed to deliver Export Quality T-shirts
in place of the formal shirt on June 30 th. Now, is there an obligation to perform the contract of
formal shirts? Section 62 of the Indian contract act provides for a superseding effect of the
new agreement over the previous one. In the case of Manohar Koyal v Thkaurdas Naskar, it
was held that the general rule of novation is, when a new principal agreement substitutes the
old agreement, the old agreement is not enforceable. The same was held in the case of Young
Achievers v IMS Learning Resources. Therefore, we can safely conclude that P’s claim for
the breach of contract of the formal shirts is invalid, and subsequently the question of
damages does not arise.

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 PART-B

Answer- 2)

The primary issue here is whether the contract can be declared void on the account of mistake
with respect to the subject matter of the agreement? Section 20 of the Indian Contract Act
provides for mistake of fact as a vitiating factor, which renders the contract void. It provides
that the mistake should be – by both the parties, of a fact, which is essential to the contract.

Now, in the current case, we can see that Mr. X bought the guitar and paid such a hefty price
for it because it was thought to be used by Mr. SRK in the movie DDLJ. However, it is later
realized that it was not that guitar. In the case of Krell v Henry it was held by the court that
because the rooms were booked to see the coronation, on the account of coronation being
cancelled prior to the creation of contract, the contract stands void on the account of mistake
with respect to subject matter of the contract, the same was held in another coronation case
called Griffith v Brymer. Moreover, we can note that the mistake regarding the originality of
guitar was by both the parties to the contract, which was a fact, and it is clear from the facts
that, the originality of the guitar was the substance of the agreement (thus, essential) as
required in Smith v Hughes. This fulfils the five points laid down in Great Peace v Tsavliries,
and thus, the contract is void on the account of mistake of fact with respect to the subject
matter of the agreement.

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Answer- 3)

Section 27 of the Indian Contract Act regards agreements in restraint of trade to be void.
Such agreements go against the Public Policy and impugn upon one’s freedom to practice a
trade and/or profession as enshrined under Article 19(1)(g) of the Indian Constitution.
These agreements violate not just individual but also societal interests, and prevent
competitive market economies, leading to monopolies.

While the doctrine of reasonableness is the exception in the English courts. In India, such
agreements are permissible when there is a Statutory or Judicially created exception. For
example- the exception in the Partnership act and the Corporate Societies act. These
exceptions provide for the state to enact its policies, and for the judiciary to do complete
justice.

Further, the agreements of Sale of Goodwill fall under this exception. These agreements will
be considered valid for the reason that its sole purpose is to preserve the interest of the buyer,
for which buyer has paid the consideration.

Moreover, Solus Agreements, which provide for exclusive dealing with one party are also
valid provided they are reasonable. For example- in the case of Esso Petroleum v Harper’s
Garage it was held that a solus agreement of 21 years is unreasonably long.

Trade combination – in these agreements the parties arrange their business in a manner
which avoids the competition. For example- the case of, Bhola Nath Shankar Das v Lachmi
Narain.

Lastly, in the cases of restraint on employment the restrictions are enforceable as long as
they are reasonable. They operate in two ways – during the course of employment, and after.
While the former is valid the latter is void (subject to exceptions). In the latter case, there
must be a legitimate interest and the time limit imposed on the employee must be reasonable
as held in the case of Niranjan shankar Golikari v centuries spinning.

It needs to be noted that such exceptions are available only when they are reasonable, In
public interest, don’t prevent competition. And this reasonableness is determined on a factual
matrix, based on the geographical and temporal limits of the circumstance.

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