Posts Selected From the Category "Mercantile Law"

Damages are a monetary compensation allowed to the injured party by the Court for the loss or injury suffered by him by the breach of a contract. The object of awarding damages for the breach of a contract is to put the injured party in the same position, so far as money can do it, as if he had not been injured, i.e. in the position in which he would have been had there been performance and not breach. This is called the doctrine of restitution.

The rules relating to damages may be considered as under:

1. Damages arising naturally – Ordinary damages

When a contract has been broken, the injured party can recover from the other party such damages as naturally and directly arose in the usual course of things from the breach. This means that the damages must be the proximate consequence of the breach of contract. These damages are known as ordinary damages.

Example: A contracts to sell and deliver 5 tonnes of Farm Wheat to B at Rs.1000 per tonne, the price to be paid at the time of delivery.…

‘Contingent’ means that which is dependent on something else. A ‘Contingent Contract’ is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. For example, goods are sent on approval, the contract is a contingent contract depending on the act of the buyer to accept or reject the goods.

There are three essential characteristics of a contingent contract:

1. Its performance depends upon the happening or non-happening in future of some event. It is this dependence on a future event which distinguishes a contingent contract from other contracts.
2. The event must be uncertain. If the event is bound to happen, and the contract has got to be performed in any case it is not a contingent contract.
3. The event must be collateral, i.e. incidental to the contract.

Contracts of insurance, indemnity and guarantee are the commonest instances of a contingent contract.

Rules Regarding Contingent Contracts

1. Contingent contracts dependent on the happening of an uncertain future event cannot be enforced until the event has happened.

…

One of the early steps in the formation of contract lies in arriving at an agreement between the contracting parties by means of offer and acceptance. One party makes a definite proposal to the other, and that other accepts it in its entirety.

Offer

An offer is also called a proposal. Sec.2 (a) of the Indian Contract Act defines a proposal as,

“When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”.

The person making the proposal is called the “proposer”, or “offeror” and the person to whom the proposal is made is called the “offeree”.

Essentials of Valid Offer

1. It must contain definite, unambiguous and certain and not loose and vague terms.
2. It must intend to give rise to legal relationship. A social invitation, even if it is accepted does not create legal relationship, because it is not so intended.

…

‘Quantum meruit’ literally means ‘as much as earned’ or ‘as much as is merited’. When a person has done some work under a contract, and the other party repudiates the contract, or some event happens which makes the further performance of the contract impossible, then the party who has performed the work can claim remuneration for the work he has already done. Likewise, where one person has expressly or impliedly requested another to render him a service without specifying any remuneration, but the circumstances of the request imply that the service is to be paid for, there is implied a promise to pay quantum meruit, i.e. so much as the party rendering the service deserves. The right to claim quantum meruit does not arise out of contract as the right to damages does; it is a claim on the quasi-contractual obligation which the law implies in the circumstances.

The claim for quantum meruit arises only when the original contract is discharged. If the original contract exists, the party not in default cannot have quantum meruit remedy; he has to take resort to remedy in damages.…