10 Solved Problems (IRAC Method) — KSLU Contract I

These ten problems are worked in the IRAC method — Issue, Rule, Analysis, Conclusion — exactly as a KSLU answer sheet expects. They span all five units; the full Question Bank has 40+ more.

Problem 1 — Promise Out of Natural Love & Affection (Unit I)

Problem: ‘A’, out of natural love and affection, promises in a registered document to give his son ‘B’ ₹1,000. A later refuses to pay. Is it a valid contract?

I — Issue. Is a promise made without any consideration, out of natural love and affection, enforceable as a contract?

R — Rule. The general rule (s.25) is that an agreement without consideration is void (nudum pactum). But s.25(1) is an exception: a promise made in writing and registered, on account of natural love and affection between parties standing in a near relation, is valid even without consideration. All three requirements — near relation, natural love and affection, and a registered writing — must be present together.

A — Analysis. A and B are father and son — a near relation. The promise is expressly made out of natural love and affection, and it is contained in a registered document. All three conditions of s.25(1) are satisfied, so the absence of consideration does not make the promise void.

C — Conclusion. The agreement is valid and enforceable under s.25(1); A is bound to pay B ₹1,000. Had the promise been oral, or between strangers, or not registered, it would have been a bare promise (nudum pactum) and void — so the presence of all three conditions of s.25(1) is decisive.

Problem 2 — The Self-Service Store (Unit I)

Problem: In a self-service store, a customer picks up an article and takes it to the cash counter, but the cashier refuses to sell it. Has the customer any right against the shop?

I — Issue. Does the display of goods in a self-service store amount to an offer, so that the customer’s selection completes a contract the shop must honour?

R — Rule. Goods displayed with a price are an invitation to offer, not an offer (s.2(a)). The customer makes the offer by presenting the goods at the counter, and the contract is complete only when the seller accepts it (Pharmaceutical Society v Boots, 1953). Until then no agreement exists and either side may withdraw.

A — Analysis. The display invited offers; by taking the article to the counter the customer made the offer, which the cashier was free to accept or decline. As the cashier refused, no acceptance — and hence no contract — came into being.

C — Conclusion. No contract was formed; the customer has no right to compel the sale. The rule lets the shop control its stock and pricing until it chooses to accept; the buyer’s only remedy, if any, lies outside contract (for instance, under consumer or anti-discrimination law), not in enforcing a sale the shop never agreed to. The display therefore binds no one until the shop accepts the customer’s offer.

Problem 3 — The Annuity to the Sister (Unit I)

Problem: An old lady gifts land to her daughter by a registered deed, on condition that the daughter pay an annuity to the lady’s sister. The daughter takes the land but refuses to pay. Can the sister sue?

I — Issue. Can the sister enforce the daughter’s promise, though the consideration (the gift) moved from the mother and the sister was not a party to the deed?

R — Rule. Under s.2(d) consideration may move from “any other person”, so a stranger to the consideration may sue; and a beneficiary of a family/marriage arrangement is a recognised exception to privity of contract (Chinnaya v Ramayya, 1882). Neither the absence of consideration from the claimant nor his not signing the deed defeats the claim.

A — Analysis. The gift was consideration furnished by the mother; the sister, though she gave nothing and did not sign, is the intended beneficiary of a family arrangement. She therefore falls squarely within both the s.2(d) rule and the family-arrangement exception.

C — Conclusion. The sister can sue the daughter to enforce the annuity. It is no defence that she furnished no consideration, because in India consideration may move from a third person; nor that she did not sign, because a beneficiary of a family arrangement is an established exception to privity of contract.

Problem 4 — The Minor Who Lied About His Age (Unit II)

Problem: ‘A’, a minor, falsely represents to ‘B’ that he is a major and purchases goods on credit (or executes a mortgage). B sues to recover the price/money. Decide.

I — Issue. Can a minor who lied about his age be held liable on the agreement, or be estopped from pleading minority?

R — Rule. A minor’s agreement is void ab initio (Mohori Bibee v Dharmodas Ghose, 1903). There is no estoppel against a minor even where he obtained the goods or loan by misrepresenting his age (Leslie v Sheill, 1914), and he cannot be sued in contract. A court may, on equitable principles, order restoration of identifiable property still traceable in the minor’s hands, but will not enforce repayment of money spent.

A — Analysis. The agreement A made is void from the outset; B cannot enforce it and A is not estopped by his false statement of age, because the protection of minority exists for the minor’s benefit and cannot be defeated by his own misrepresentation. If the goods (or property) are still identifiable with A, B may seek their return, but he cannot recover the price or the money advanced as a debt.

C — Conclusion. B cannot recover the price/money from A; the agreement is void and A is not estopped. B’s only possible relief is restitution of goods still traceable with the minor.

Problem 5 — The Spiritual Adviser’s Gift (Unit II)

Problem: ‘A’, a spiritual adviser, induces his devotee ‘B’, an old man, to gift away the whole of his property to secure benefits in the next world. Can the gift be set aside?

I — Issue. Is a gift by a devotee to his spiritual adviser liable to be set aside for undue influence?

R — Rule. Under s.16, where one party is in a position to dominate the will of the other and obtains an unfair advantage, the contract is voidable. A guru-disciple relationship is one of trust in which domination is presumed, and where the transaction is unconscionable the burden shifts to the dominant party to prove it was free and informed (Allcard v Skinner, 1887).

A — Analysis. A stands in a fiduciary, spiritual relationship of influence over B, an old and dependent devotee, and the gift of the whole of B’s property is manifestly improvident. Undue influence is presumed, and A cannot show that B acted freely, with full understanding and independent advice.

C — Conclusion. The gift is voidable and may be set aside for undue influence (s.19A); the court may grant relief absolutely or on just terms. The result would be the same for any relationship of active trust and confidence — advocate and client, doctor and patient, or trustee and beneficiary — where an improvident benefit passes to the dominant party.

Problem 6 — The Destroyed Music Hall (Unit III)

Problem: ‘A’ agrees to let a music hall to ‘B’ for a concert on a fixed day. Before that day, the hall is destroyed by fire without the fault of either party. Is A liable for breach?

I — Issue. Is A liable for breach of contract when the subject-matter — the hall — is destroyed by fire, without fault, before the day of performance?

R — Rule. Under s.56, a contract to do an act which afterwards becomes impossible by an event the promisor could not prevent becomes void when the act becomes impossible — the doctrine of frustration. Destruction of the subject-matter on which performance depends is a recognised ground of frustration (Taylor v Caldwell, 1863), and any advance money is returnable (s.65).

A — Analysis. The hall was the very thing on which performance depended. Its destruction by fire, without the fault of either party, made performance impossible after the contract was made. The contract is therefore discharged by frustration, not broken; A is not at fault and is excused from performance. Any rent B paid in advance is returnable under s.65.

C — Conclusion. A is not liable for breach: the contract became void by frustration (s.56; Taylor v Caldwell) when the hall was destroyed, and the promisor is absolved, with advance money returnable.

Problem 7 — Appropriation of a Lump-Sum Payment (Unit III)

Problem: A debtor owes his creditor three separate debts and pays a lump sum without stating which debt it is to discharge; the creditor also makes no appropriation. To which debt is the payment applied?

I — Issue. Where neither the debtor nor the creditor appropriates a payment made on several debts, which debt does the payment discharge?

R — Rule. The debtor may appropriate (s.59); failing him, the creditor may apply the payment to any lawful debt, even a time-barred one (s.60); failing both, the law applies it to the debts in order of time — the earliest first — and, if the debts are of equal date, proportionately (s.61; and in a running account, first-in-first-out per Clayton’s Case).

A — Analysis. Here the debtor gave no direction and the creditor made no appropriation, so the choice falls to the law under s.61. The payment must therefore be applied to the earliest debt first, then to the next in time, until the sum is exhausted, regardless of which debt the creditor might have preferred.

C — Conclusion. The payment is applied to the oldest debt first under s.61; neither party having appropriated, the law discharges the debts in order of time. The creditor’s preference is irrelevant once he has failed to appropriate, and the mechanical order-of-time rule governs the discharge.

Problem 8 — The Delayed Mill-Shaft (Unit IV)

Problem: A carrier delays delivering ‘A’s mill-shaft; the mill stands idle and ‘A’ loses profits which he never mentioned to the carrier. Can A recover the lost profits?

I — Issue. Can A recover the profits lost during the delay, where the special circumstance — that the mill was stopped for want of the shaft — was not communicated to the carrier?

R — Rule. Under s.73, the injured party recovers loss arising naturally from the breach, or loss from special circumstances known to both parties, but not remote loss (Hadley v Baxendale, 1854). Special (extraordinary) loss is recoverable only if the special circumstances were communicated to the party in breach.

A — Analysis. The lost profits arose from the special fact that the mill was wholly stopped until the shaft returned. A did not communicate that fact to the carrier, so it was not in the carrier’s contemplation. The loss is therefore too remote and falls outside both limbs of the rule; A is confined to ordinary damages naturally flowing from the delay, and must in any event mitigate his loss.

C — Conclusion. A cannot recover the lost profits, the special circumstance not having been communicated; he recovers only ordinary damages under s.73 (Hadley v Baxendale). The rule protects the party in breach from open-ended liability for losses he had no reason to foresee, and squarely places on the injured party the burden of communicating any special circumstance in advance.

Problem 9 — Fruits Consumed by Mistake (Unit IV)

Problem: ‘A’, a dealer in fruits, leaves a packet of fruits at ‘B’s house by mistake. B consumes the fruits. Can A recover their price, though there was no contract?

I — Issue. Can A recover the price of the fruits from B, where there was no contract of sale, but B knowingly consumed the fruits delivered by mistake?

R — Rule. Under s.70, where a person lawfully does anything for another, or delivers anything to him, not intending to do so gratuitously, and the other person enjoys the benefit thereof, the latter must compensate the former or restore the thing. This is a quasi-contract resting on the principle against unjust enrichment (Moses v Macferlan, 1760).

A — Analysis. A delivered the fruits not as a gift but in the course of his business, and B, instead of returning them, consumed them and so took the benefit. All the ingredients of s.70 are present — a lawful, non-gratuitous delivery whose benefit the other enjoyed — so B is bound to pay the reasonable value, notwithstanding the absence of a contract of sale.

C — Conclusion. A can recover the reasonable value of the fruits from B under s.70; B, having enjoyed the benefit of a non-gratuitous delivery, cannot retain it without paying. It is immaterial that no offer or acceptance ever passed between them; the obligation is imposed by law to prevent B’s unjust enrichment.

Problem 10 — The Singer’s Negative Covenant (Unit V)

Problem: A famous singer agrees to sing only at ‘B’s theatre for a season and not to sing elsewhere. She then agrees to sing for a rival. Can B prevent her from singing elsewhere?

I — Issue. Can the court, which will not compel a singer to perform (personal service), nevertheless restrain her by injunction from singing for a rival in breach of her negative promise?

R — Rule. A contract of personal service cannot be specifically enforced (s.14). But where a contract contains an express negative stipulation, the court may restrain its breach by injunction even though it cannot compel the positive act (s.42; Lumley v Wagner, 1852). An injunction is discretionary and is refused only in the cases in s.41.

A — Analysis. The singer’s promise has two parts — a positive promise to sing at B’s theatre (which the court will not enforce) and a negative promise not to sing elsewhere during the season. The court may enforce the negative promise by injunction, restraining her from singing for the rival, without compelling her to sing for B. This does not amount to indirectly forcing personal service, since she remains free simply not to sing at all.

C — Conclusion. B can obtain an injunction restraining the singer from performing elsewhere during the season (s.42; Lumley v Wagner), though he cannot compel her to sing for him.

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