Commercial Law Case Briefs

Topics: Contract, Aval, Surety Pages: 43 (16515 words) Published: August 25, 2013
INDIAN CONTRACT ACT

1. S. 124 - Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri (Indemnity) (Plaintiff, at the request of the defendant, executed two mortgages in favour of Mohandas. Defendant wrote a letter promising to indemnify the plaintiff against any suits by the mortgagee, along with executing a third mortgage in place of the previous two. Plaintiff prays that the defendant obtains a release of liability from Mohandas; Issues: 1) Can the indemnified ask for performance of the contract of indemnity without suffering actual loss? 2) Whether the obligation of the plaintiff was absolute. Held: S 124,125 do not apply, as said sections do not cover the transaction. ICA is not exhaustive, and principles of equity will allow the indemnified to enforce said contract of indemnity without having suffered actual loss, when the obligation of the indemnity holder is absolute. Here, obligation is absolute. RATIO: There exist contracts of indemnity, which do not fall within the ambit of S 124,125. Contracts of indemnity can be enforced without the actual loss of the indemnified so long as there is an absolute liablity of the type covered by the contract of indemnity.)

2. S. 124 - Lala Shanti Swarup vs Munshi Singh & Others (Indemnity) (Vendor sold an encumbered land to vendee, who promised to make required payment against a mortgage to the mortgagee; Vendee fails to do so, vendor sustains loss in the form of ¾th of their property being sold; Vendor sues under implied contract of guarantee. Issue: Is there a contract of guarantee? Is the suit barred by limitation? Held: A conveyance which contains a covenant whereby th epurchaser promises to pay off encumberances on the sold property is nothing but an implied contract of indemnity, whose cause of action arises when ACTUALLY DAMNIFIED (Mortgage decree being passed does not amount to actual damnification))

3. S. 125 – Gray v Lewis & Parker v Lewis (Indemnity)

4. S. 126 – Mountstephen v Lakeman (Guarantee) (L, director of the Board, tells M to connect the sewer system with individual houses although the Board hasn’t asked M to do so, as a whole. L says that he will see M gets paid (“I will see you paid”). Issue: Does the above statement impose a primary of secondary obligation on L (ie is this a contract of indemnity or guarantee?) Held: Through his statement (when given its natural meaning), L placed a primary obligation on himself to indemnify M; Lack of a principal debtor also makes this a contract of indemnity )

5. S. 126 - Punjab National Bank Limited v Bikram Cotton Mills (Guarantee) ( The Company executed 3 documents (promissory note, hypothecation and a letter) in favour of its creditor, the bank; On the same day, the Managing Agent of the company executed an agreement of guarantee with the Bank; Issue: Is this an issue of guarantee or indemnity? Whether the suit filed was premature? Held: As all documents were executed on the same day, it can be inferred from the conduct and intention of the parties that the agent enetered into an agreement of guarantee. The bank was entitled to claim at any time the money due from PD as well as from G under the promissory note and the bond. The suit could not therefore be said to be premature. Also, the binding obligation created under the composition ‘between the company and its creditors does not affect the liability of the surety unless the contract of surety-ship otherwise provides. G is liable for “ultimate balance” which should be determined) (the nature of the bond of guarantee would be that of a continuing guarantee)

6. S. 126 - Ramchandra B. Loyalka v Shapurji N. Bhownagree (Guarantee) (D, a broker, forms a contract with P, to be a sub-broker reponsible for certain constituencies; Said constituencies default and owe D 16,000. P and D enter into a second agreement whereby P will be liable for the above amount; Note: Sub-broker is suing broker for his commission Issue: Was the agreement whereby P...
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