List of top Legal Studies Questions on Laws of Contract

Food Corporation of India (“FCI” or “Corporation”), the Appellant herein, procures and distributes foodgrains across the length and breadth of the country as a part of its statutory duties. In the process, it enters into many contracts with transport contractors. In one such contract, the subject matter of present appeals, the Corporation empowered itself (under clause XII (a)) to recover damages, losses, charges, costs and other expenses suffered due to the contractors’ negligence from the sums payable to them. The short question arising for consideration is whether the demurrages imposed on the Corporation by the Railways can be, in turn, recovered by the Corporation from the contractors as “charges” recoverable under clause XII (a) of the contract. In other words, does contractors’ liability for “charges”, if any, include demurrages?
“XII [Road Transport Contract]. Recovery of losses suffered by the Corporation (a) The Corporation shall be at liberty to reimburse themselves for any damages, losses, charges, costs or expenses suffered or incurred by them, or any amount payable by the Contractor as Liquidated Damages as provided in Clauses X above….”
Interpretation of contracts concerns the discernment of the true and correct intention of the parties to it. Words and expressions used in the contract are principal tools to ascertain such intention. While interpreting the words, courts look at the expressions falling for interpretation in the context of other provisions of the contract and also in the context of the contract as a whole. These are intrinsic tools for interpreting a contract. As a principle of interpretation, courts do not resort to materials external to the contract for construing the intention of the parties. There are, however, certain exceptions to the rule excluding reference or reliance on external sources to interpret a contract. One such exception is in the case of a latent ambiguity, which cannot be resolved without reference to extrinsic evidence. Latent ambiguity exists when words in a contract appear to be free from ambiguity; however, when they are sought to be applied to a particular context or question, they are amenable to multiple outcomes….”. It observed that “….Extrinsic evidence, in cases of latent ambiguity, is admissible both to ascertain where necessary, the meaning of the words used, and to identify the objects to which they are to be applied.
The Corporation in the present contract has chosen not to include the power to recover demurrages and as such the expression “charges” cannot be interpreted to include demurrages. Demurrage is undoubtedly a charge, however, such a textual understanding would not help us decipher the true and correct intention of the parties to the present contract”. After examining the contract in its entirety, including its nature and scope, the Court concluded that the contractors’ liability in the present contract was clearly distinguishable from other contracts entered into by the Corporation in 2010 and 2018, which included loading and unloading of foodgrains from the railway wagons within the scope of contractors’ duties, thereby necessitating the inclusion of demurrages as a penalty for non-performance of contractual duties.
[Extracted from: Food Corporation of India v. Abhijit Paul, (CA 8572-8573/2022). Judgment of Justices A.S. Bopanna and P.S. Narasimha, 18 November 2022]

Match List I with List II

List I		List II
A.	Waiver	I.	Cancellation of all of some terms of contract
B.	Alteration	II.	Substitution of a new contract for an old contract
C.	Rescission	III.	Parties to a contract abandon their mutual rights
D.	Novation	IV.	Modification of terms of contract

Choose the correct answer from the options given below :

A’ without the request of anybody, extinguishes the fire of B’s Godown. ‘A’ suffers injury thereby. If ‘B’ promises to compensate ‘A’ for the full amount he has spent for his treatment then, the contract is

Mark the correct statement.

The first case on the ‘doctrine of frustration’ as decided by the Supreme Court of India is:

A buyer has a right to claim interest on the amount of price, when under a contract of sale, the buyer has paid the price, however, the seller neglects to deliver goods. The interest can be claimed by the buyer

A continuing guarantee is applicable to

‘A’ took an electric tandoor from B & Co. on rent. In the rent agreement there was a clause to the effect that the company shall not be liable for any personal injury to the hirer or to any other person while using it. However, due to the defect in the tandoor, his wife was injured. She brought an action against B & Co. Which one of the following is correct ?

In respect of a Limited Liability Partnership firm, which one of the following is not a requisite feature ?

The statement “an offer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person” was made by

The effect of insolvency of a partner in the absence of a contract to the contrary, is that

For the purpose of taking cognizance of an offence under Section 138 of the Negotiable Instruments Act, who should make a complaint to the court ?

The juristic concept of contract consists of

Which of the following is a bailment plus agreement to sell ?

A Memorandum which contains the salient features that may be specified by the Securities and Exchange Board by making Regulations in this behalf is known as

In pretended bidding, sale is

If a tax is ultra vires or unconstitutional then the party is entitled to have a refund of it from the government whether it has been paid under protest or not. This Court has held that the payment of tax which is without authority of law is payment made under a mistake within the meaning of Section 72 of the Indian Contract Act. Then, in such a case, question would arise, whether the government to whom the payment had been made by mistake must repay it. Thus, the principle of restitution or repayment of the tax simpliciter has been considered in light of the doctrine of unlawful enrichment. The doctrine envisages that when the State collects a tax from the tax-payer without authority of law, but if the taxpayer has already passed on the burden of the tax money paid by him to the State to someone else and has recouped the money then the taxpayer is not entitled to ask for the restitution from the State the money paid by him as unauthorized tax. In such circumstances, the State cannot be asked to refund the tax money to the taxpayer on the principle of unlawful enrichment.

Sections 31 to 35 of Chapter III of the Indian Contract Act, 1872 deals with contingent contracts and Section 36 deals with contingent agreements. A contingent contract is one where the liability to perform the promise depends upon some collateral event which may or may not happen. A contract of insurance is an example of a contingent contract, where the liability of the insurer depends upon the occurrence of the event, viz. damage or destruction arising out of fire. Life insurance in a broader sense comprises any contract in which one party agrees to pay a given sum upon happening of a particular event contingent upon duration of human life, in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments by another. The event may be certain but it’s happening in a specific manner or within a particular time would be uncertain. A contract of indemnity to make good the loss arising out of the conduct of the promisor is a contract contingent upon the act of a party. Such condition may be express or may also be implied into a contract. A contract for storage of potatoes in a cold storage cooling system was held subject to an implied condition that it could be performed only when there was continuous electric supply. But where there is a document embodying the terms of a contract, it is not permissible to imply therein a condition if that will be inconsistent with its express terms.

The Supreme Court of India, in South East Asia Marine Engineering & Constructions Ltd. (SEAMEC LTD.) v. Oil India Ltd.,(2020) 5 SCC 164, noted that, under the Indian contract law, the consequences of a force majeure event are provided for under Section 56 of the Indian Contract Act, 1872 which deals with a contract to do an Act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the Act becomes impossible or unlawful. When the parties have not provided for what would take place when an event which renders the performance of the contract impossible, then Section 56 applies. When the Act contracted for becomes impossible, then under Section 56, the parties are exempted from further performance and the contract becomes void. The Court has further held that in Section 56, the word ‘impossible’ is to be taken in its practical and not literal sense. It must be borne in mind, however, that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. However, there is no doubt that the parties may instead choose the consequences that would flow on the happening of an uncertain future event, under Section 32 of the Indian Contract Act, 1872.

A party is said to be discharged from his liability when

The following is not correct about ‘misrepresentation’ in a contract

The following is true about partnership firms

The Bill of exchange must contain the following

Pick the true statement from the following

Select the most appropriate statement that applies to impossibility of performance or doctrine of frustration