Course Code- BUS301

Final Assessment

Submitted By

Tanzim Shahriar Alam

ID-201011102

Submitted To-

Ridoan Karim

Lecturer School of Business

East Delta University

Submission Deadline- 28/4/2021

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Answer to the Question 1

Whether there are any contracts binding between Suraj and Dr. Hari concerned depends on the

essential elements of the contract. We know a Contract is an agreement between two or more

parties that is enforceable by law. It states that either of the parties can approach to court and ask

for the remedy if there is any failure of the contract. The agreement becomes enforceable by law

when it fulfills certain conditions (essential elements of contract). It is an agreement creating and

explaining the obligations of the parties. Before entering into the contract offer and acceptance is

necessary without it the agreement cannot be enforceable by law. Here in the case of Suraj, we

can see that there is a fraudulent misinterpretation and negligent misstatement

Based on the following case Suraj went to the diving center to learn diving, there to be enrolled

in a diving course medical checkup is necessary so Dr. Hari checked Suraj, though Suraj has a

symptom of asthma doctor did not tell him anything and allowed him to be enrolled in the

driving course. Suraj thinks of himself as medically fit and starts to learn diving. Here in the

situation, we can see that the contract between Doctor Hari and Suraj is not valid. The contract is

not voidable and cannot be enforceable by law. To make a valid contract we know there are ten

essential elements of a contract among them free consent is necessary. According to the case

provided there is a lack of reality of the consent, because Doctor Hari did not communicate with

Suraj that he cannot be enrolled in the driving course as Suraj has the symptoms of asthma. It can

be an agreement enforceable by law when both parties Suraj and Doctor Hari both agreed about

the terms of the contract. It means it will contract when Doctor Hari will tell Suraj about the

symptom of asthma, here both parties agree to enter into the contract and each one of the parties

can ask for the remedy if any one of the parties cannot fulfill the terms of the contract. According

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to section 13, it is referred to as consent where two or more parties agree on the same thing in the

same sense. Based on section 10 of the Contract act 1950 states that all agreements are

contracted when there is free consent of the parties are capable to enter into the contract with a

lawful consideration and object the contract cannot be declared as void. Moreover, the consent is

claimed to be free when it is not caused by coercion sec 15, undue influence sec 16, fraud sec 17,

misinterpretation sec 18, and mistake sec 21,22, and 23. In this case, the consent is not free as it

is influenced by misinterpretation and fraud because Doctor Hari did not inform Suraj that he has

the symptoms of asthma, it is referred to as misinterpretation. Misinterpretation occurs when

there is a false statement of fact or law made by one party to another party, where another party

experiences a loss due to a false statement made by the other party. According to the Contract act

there are three types of misinterpretation 1) Fraudulent misinterpretation 2) Negligent

misinterpretation 3) Innocent misinterpretation. Based on the case, it is a fraudulent

misinterpretation that occurred between two parties. In the case of Derry V/s Peek (1889) where

a false statement was made knowingly or recklessly and carelessly. It is a statement created

dishonestly with an intention of fraud. 

In the case provided Doctor Hari did a fraudulent misinterpretation with Suraj because Doctor

Hari did not inform Suraj that he have the symptom asthma patient, as the doctor did not say

anything Suraj thought that he is medically fit, before getting enrolled in the course Suraj was

not sure he whether medically fit or not. It is a fraudulent misinterpretation as Doctor Hari

allowed Suraj to get enrolled in the course as his business was not performing well due to

Tsunami. According to the case as long there is a misinterpretation of a fact there was an intent

to deceive and Suraj ( Innocent Party) must have justified relied on the misinterpretation.

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Moreover, doctor Hari made a purposeful misinterpretation to get profits from the course.

According to Indian Contract Act 

Misinterpretation includes positive assertion where a manner not warranted by the information of

the person making it, of that which is not true, though he believes it to be true exactly in case

Suraj was examined by doctor Hari whether he is capable or not to take the driving course. Hari

notified Suraj as medically fit and allowed to be enrolled in the course, here Suraj found the

statement to be true. On the other hand, any breach of duty where without an intent to deceive,

gives an advantage to the person committing it, or anyone claiming under him, by misleading

another to his prejudice, or to the prejudice of anyone claiming under him exactly in the case

Doctor Hari ( Duty of Care) failed to respond to Suraj about his asthma. The last one is causing,

however innocently, a party to an agreement to make a mistake as to the substance of the thing

which is the subject of the agreement.

In the case, we can see that due to fraudulent misinterpretation negligent misstatement occurs

where a party owes a duty of care to another party (claimant), who trust on the party’s statement

and hence later claimant may experience a loss as consequence. Here to run the business Hari

intentionally didn’t tell the claimant about his disease, he already spent in total taka fourteen

thousand and later on, he found that he has symptoms of Asthma. The claimant is affected

financially due to fraudulent misinterpretation. The damage is caused by fraud. Apart from

financial losses Suraj did not experience any physical damages. According to the law, the Suraj

cannot recover the damages for the fraud unless he has experienced damage or injury. There was

no injury of Suraj but he lost a total of taka fourteen thousand. The financial losses are only

recoverable in some special situations. Such as to identify the liability to the person to whom the

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responsibility was undertaken. In case there is no free consent the remedy of the defendant party

is given under Section 19 of the contract act. When the consent is caused by coercion, fraud,

misinterpretation, and undue influence the contract is voidable as to make the contract valid free

consent is necessary, both parties must have freely agreed. As there is misinterpretation there is

no free consent hence the contract is not referred to as valid. It would be valid when the doctor

would say to Suraj about his asthma. The contract would be performable when the party would

know that he is a patient of asthma it would state there would be no misinterpretation. if he

thinks fit, insist that the contract shall be performed and that he shall be put in the position in

which he would have been if the representations are made true. If there is no consent there is no

contract and no meeting of minds. Sometimes the remedy can be available for the

misinterpretation the court can award damages and the contract, fraudulent misrepresentation

occurs the court does have the choice to award damages instead of rescission. Hence there is no

free consent the contract is not enforceable by law, but the contract can be terminated.

After reading the case there was a misinterpretation from the diving center where doctor Hari

checked up Suraj and allowed him to take part in the course despite knowing he was an asthma

patient as his business was at a loss he allowed Suraj for the course so that he can earn some

profit. Here Hari has misinterpreted Suraj. Suraj can choose whether he can void the contract or

if he thinks he is fit for the course and insists that the contract can be performed then the contract

will be valid and the representation made had been true.

The answer would differ if Suraj already knew that he is an asthma patient, in the case provided

if Suraj know about the symptoms of asthma then his consent cannot be considered as an

avoidable contract by misinterpretation because Suraj already knew about his condition in the

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first place. As a result, the contract will be enforceable and perfectly valid as Suraj was ready to

give his free consent to the contract, hence he will legally be bounded with the terms and

conditions of the contract as both parties will agree upon the same thing on the same sense.

Overall then the contract will be referred to as valid and enforceable by law.

Answer to the question 2

Whether there is any agency relationship created between Sam and XYZ limited concerned

depends on the law of the agency. We know an agent is a person who is responsible to carry on

the acts or the responsibilities on behalf of another or to represent another party to deal with the

third person. The role of the agent is to bring his principal into the relationship of a contract with

the third party. The person for whom the work or act is done or represented is considered as

principal. The principal advises the agent to conduct his/her business on basis of his instruction

given by the principal to the agent. According to the commercial law, the Principal gives the

authority to an agent to represent on behalf of him to the third parties to enter into the contract.

The authority of the agent was expressed in Section186. However, the relationship between a

principal and an agent is considered as Law of the agency.

According to the case provided Sam is the accountant (employee) of a company name XYZ

limited. His duty was to take care to see the internal company issues and along with he controls

his accounting department. As he was acting as a temporary acting manager, he bought land on

behalf of the company in an auction. Here we can see that Sam is considered as an agency, XYZ

is considered as principal and TP is a third party. Sam the agent purchased land on behalf of his

principal XYZ from a Third Party named TP. The contractual relation is established between TP

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and XYZ through the agent Sam. In this case, there is an agency relationship between Sam and

XYZ Ltd. Sam is considered as an agent because along with the accountant he was also

temporary acting manager when the companies Managing directors and Senior Employees are

absent. Here XYZ company gave the authority to Sam to represent him as a temporary acting

manager on behalf of XYZ. So, Sam has some responsibilities to work as a position of manager

temporary. An agent must act solely for the benefit of his principal, and not in the interest of the

agent or third party. In addition, any information or knowledge obtained in the course of the

agency is confidential. The authority of the agent is written in section 186. Generally, there

should be no conflict of the interest between two. If there is a conflict then it creates a principal-

agent problem. 

According to the Contract Act, an agent is appointed by the Principal by establishing Power of

Attorney. Section 140 contract act 1950 states that authority is expressed when it is done by

words, spoken or by written. Authority is implied when it is implied from the outcome of the

case and things are spoken or written in dealings may be considered as an outcome of the case

Basically, there are two types of Power Attorney one is general and another is a special attorney.

The general attorney says that the agent is given a general power to do act on a general objective

for example managing a business. On the other hand, the special attorney says that the agent is

given specialized power to do act on a specific objective for example to sell a car. Based on the

case Sam was provided with a general attorney as he was given a general authority to act on

general matters Sam is given the authority to fulfill the roles and responsibilities of a manager.

According to the power of attorney, Sam did not follow the instruction of the principal because

he was only given to be a temporary manager for a while when the senior employees are present,

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he was not given a special attorney to buy any land on behalf of XYZ. However, Sam did not act

with the authority. According to the law, the agent is bound and authorized to do act under the

instruction given by the principal. Sam was only bound to see the manager's roles and

responsibilities along with overseeing his accounting department and internal company issues.

Section 206 of the contract act states that agents create contracts and obligations arising from

acts will have the same legal consequences as there is a contractual relationship and the acts are

carried down by the principal in person. In the consequences of the agency contracts, the act of

the agent is the act of the principal. As Sam purchased land for TP. TP considered itself of

selling the land to Sam as he is the representative of principal XYZ. Here XYZ cannot ask for

the remedy or cannot terminate the contract from TP because Sam already purchase the land on

behalf of XYZ hence the contract is valid, but as Sam did not follow the instruction given by the

principal, the principal has the right to ask for the remedy for Sam, the agent is the liable for the

contract. There are many varieties of agents like Auctioneer, Broker, Factor, Commission agent,

and general agent. Here Sam is the general agent as he is authorized to see the particular position

of the business.

Section 237 of the contract act state that when the agent has done act without the authority given

by the principal to the third party on behalf of his principal, then the principal is bound by the

acts if he has his words third person to believe that the acts or obligations were in the agent’s

authority. Here as Sam bought the land from TP on behalf of XYZ. Here XYZ is bound by the

contract as Sam is represented as XYZ to the Third-party TP. XYZ is liable for Sam’s act. In the

case Chan Yin Tee v William Jacks & Co where Chan and Yong were partners, it states that

Yong has implied usual authority to act on behalf of Chan in purchasing goods for business.

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Yond bought goods from William but did not pay hence Chan is liable for Yong’s act. There are

many types of authority of the agency. According to section 186 Here in the case, Sam’s actual

authority was to take care of the company’s matters and controlling his accounting department as

well. He was given specified power on a specified objective. But when Sam approached to

purchase the land it was referred to as apparent authority where the third part will understand that

an agent has the power to act. The principal will be bound by the agent’s action. In the same

case, Sam was representing the acting manager of XYZ towards the Third Party. As he is an

acting manager the third party should think that he has the power to purchase land for Taka 1

million on behalf of the company. Sam’s action does not bind the company's uncles XYZ ratifies

his actions. XYZ will be bound by Sam’s action as he represented himself as an acting manager

of XYZ to the third party. 

XYZ can ratify his actions because according to section 196 contract act when the acts are done

by a person on behalf of another without following the instruction of the principal, XYZ may

elect to ratify or disown such acts. The ratification can be implied or express, written or by

conduct. Here the company is bound only if the action of Sam fell within the same authority

here, but he did not follow the same type of authority here he followed actual authority and

apparent authority. His actual authority was to see the company matters and control his

accounting department which does not include purchasing the taka 1 million land from the

auction. The purchasing land from the auction from TP was an apparent authority. However,

XYZ should withdraw Sam from the contract on the ground as he has acted outside the

authority. 

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Answer to the question 3

Before explaining the contractual and non-contractual liability let me explain what is

Partnership? According to Section 4 of the Partnership act, it is one of the legal forms of

business. It occurs when a business is formed by two or more people to run the business together

with the shared capital investment and shared responsibilities. The partners also take part in

decision-making and other operational activities. It is a contract between those involved and the

rights of the partners are controlled by the terms and conditions of the agreement between them.

The agreement of partnership does not create a separate legal unit, it is only of making groups

with the individuals, most importantly it is formed to overcome the disadvantages of being a sole

trader. There are four types of partnership general, limited, limited liabilities partnerships, and

joint venture.

In Partnership, there is an unlimited liability which is a drawback of the Partnership. The assets

of all the owners will be at risk. In partnership, every partner will be responsible for unlimited

liability. Every partner of the business will have unlimited liability for all the debts of the

partnership. After the debt of a partner, his estate will be also liable due to such debts. However,

in partnership, the partners are liable for all the debts of the partners in the business. For

example-four persons are partners, and each invests Tk 35,000 into the new business. Over one

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year, the company has Tk 25,000 in liabilities. If the company cannot repay these debts, all four

partners are equally liable for repayment.

In contrast, if we look at the liabilities of the company’s shareholders the shareholders have

limited liability. It means it’s the only liability a shareholder has if the company fails to perform

well is the amount invested in the company, not the total wealth of the company, partnership the

all the partners are liable for all the debts of partners in the business, but here the scenario is

different. If the company fails the shareholder’s private assets will be not at risk. In public

limited companies, there is a separate legal identity where the company can buy or sell the shares

for finance which may also encourage investment. But in partnership, if there is any investment

required for the business, the partners have to take the loan, if the company fails to repay the loan

then all the partners present in the business will be liable to pay the loan. An example of limited

liability is that A agrees to join a public limited company, his investment of TK 20,000 is his

total liability. In other words, he can potentially lose all of this and no more. He won't be liable

for any liability beyond this initial Tk20,000. The Partnership has unlimited liability and the

shareholders have limited liability.

The concept of contractual liability is limited to Partnership. It cannot be sued personally.

Contractual liability is one type of promise which is enforceable by law. Because in Partnership

the partner act as an agent and a partner may bind himself contractually on behalf of all partners

if the Partner has Actual or Express Authority. In the law of agency, we learned that the agent

can make a contract on behalf of the principal under three types of authority which include

Actual, Express, and apparent. According to Section 11 of the partnership act, each of the

partners will be liable to pay the debts of the business if the partner cannot repay properly. If the

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partner dies his/her asset/estate will be liable to pay debts. Moreover, If the partner retires still

the partner will be liable unless the partner has given notice that he is no longer a partner. The

contractual liability state that any partner of the business can bind other partners into a deal

unless the partners have the authority to do so. For example, if a partner signs a contract with a

supplier to supply fruits, if the business cannot pay, the individual partner will be liable to pay

the money that the partner owed. The test of the partnership was first laid down by the House of

Lords. In the case of Cox V/s Hickman where a debtor transferred the business to the trustees to

run the business and to pay the creditors from the profits. It was stated that the creditors are not

considered as a partner of the business. In the case Ranghunandan V/S Hormasji it was held that

the partners may agree one or more of them shall not be responsible for losses. In basic

partnership, contract liability is joint and severe wherein Joint Hindu family the liability is

limited to the extent of their share in their property, assets of the family. As a result, all the

partners will be responsible to the third parties for the loan of the business.

 The Concept of Noncontractual liability is known as tort liability. The partners of the

partnership are liable for the torts of the partnership. For instance, the partner will be liable to the

third party who is affected or injured by tort done by the partner while he/she is under the

partnership. The liability arises when someone violates a person’s rights.

On the other hand, “A company is a person separate from its members and its directors” the

sentence state that Company is different from the Partnership or sole trader. Here Company is a

corporation which is formed under certain prescribed method commonly it is registered under

Companies Act 1985. It is created by the group of shareholders by holding their common stock

under the laws of the state as a separate legal entity that has privileges and liabilities which are

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distinct from the members. Under the companies act 2013, the members are the owners of the

company, I mean the shareholders who are holding shares in a company. The Partnership is

created by two or more people to run the business together with shared capital. On the other

hand, sole trader occurs when one person invests, controls the business and has full control of the

business, and can keep all the profits. In this legal form, there is unlimited liability and a lack of

continuity and difficulty to raise capital. To form a partnership does not need any formalities but

a written agreement is necessary. A company is a voluntary association that is created for some

specific purpose with a capital divisible part known as shares and has limited liability. There are

two types of companies Private and Public limited companies. In a private limited company, they

can raise capital by selling shares to family and friends but not to the public, in contrast, in a

public limited company the shareholders can sell the shares to the public. Both types of

companies have separate legal identities and have continuity even after the death of the

shareholder. Most importantly the shareholders will have limited liability where it is the only

liability a shareholder has if the company fails is the amount that is invested in the company but

not the total wealth of the company. A company has a legal identity it acts only through a person

to run its affairs who are considered as directors, they are professionals hired by the shareholder's

company to control its affairs and instruct the activities of the business. The corporation is

recognized by law to have rights and responsibilities like a natural person. In Partnership or Sole

trader, they cannot raise capital by selling shares both forms of business have unlimited liability

where all the partners will be liable to pay the debts of a partner if the company fails to repay the

debts. In sole trader and partnership, there is no continuity of the business after the death of one

of the partners, then the partnership has to reform. There is no maximum limit of members in the

company wherein partnership there must be at least 2 members and 20 members maximum in

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some exceptional cases. In a company, the shares can be transferred in a public company but in

partnership, a partner cannot transfer the ownership without taking the consent from all the

partners. The members of the company are not entitled to take part in the management of the

company though they are directors of it. In partnership, every partner is entitled to take part in

the management of the company. As a result, Company is a person different from members and

directors. The company infrastructure is different from the other legal forms of the business-like

Partnership and Sole Trader.

    

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References
Apparent Authority. (n.d.). Retrieved from LII / Legal Information Institute:
https://www.law.cornell.edu/wex/apparent_authority

Business Law: The Principal-Agent Relationship. (n.d.). Retrieved from Lawshelf.com:

https://lawshelf.com/shortvideoscontentview/business-law-the-principal-agent-relationship/

Creation of a Partnership Firm | A complete guide | Law Help BD. (n.d.). Retrieved from Law Help BD:
https://lawhelpbd.com/business/partnership/

INTRODUCTION TO COMPANY LAW | . (n.d.). Retrieved from Lawexplores.com:

https://lawexplores.com/introduction-to-company-law/

Lexisnexis.com. (n.d.). Retrieved from

https://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/393747/567M-26H1-
F18B-71BK-00000-00: Actionable_misrepresentation_and_negligent_misstatement_overview

The Basics: Negotiating a contract? Misrepresentation or just exaggeration? (n.d.). Retrieved from
Gowling WLG: https://gowlingwlg.com/en/insights-resources/articles/2018/the-basics-
negotiating-a-contract/

What Is Contractual Liability? (n.d.). Retrieved from The Balance Small Business:
https://www.thebalancesmb.com/what-is-contractual-liability-462636

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