Question Paper

Batch
Trimester
Legal Aspects of Business
Course code:

Part B – Case study or Problems ( 6 questions X 5 marks = 30 marks)

Solve the following cases by giving a decision and reason as per the underlying principle of the
Indian Contract Act, 1872.

X, a singer enters into a contract with Y, the manager of a theatre, to sing at his theatre two nights
every week during the next two months exclusively. Y handed over the wireless microphone to X
for singing during this tenure on a returnable basis.

X further agrees not to sing elsewhere on that day. Y agree to pay him/ her at the rate of Rs.
10,000 for each night on completion of the contract. State the legal position on breach of contract
in each of the following alternative cases:

Case (a) On sixth night if X willfully absents himself/ herself from the theatre and X wants to sing
on the seventh night but Y does not a allow her to sing on the seventh night. Can the contract be
rescinded or cancelled by Y or what is the remedy available to Y? Explain this with your
understanding of the terms “positive covenant” and order for “Specific Performance”.

Case (b) If Y rescinds or cancels the contract in the above Case (a), whether X is liable to receive
compensation? Explain this with your understanding of the term “Quantum Meruit”.

Case (c) On the sixth night if X willfully absents himself/ herself from the theatre and Y allows X
to sing on seventh night. Can the contract be rescinded or cancelled by Y or what is the remedy
available to Y? Explain this with your understanding of the law relating to damages by considering
the decision in the case of Hadley vs. Baxendale.

Hadley vs. Baxendale: Hadley was the owner of a mill. Baxendale was a carrier. The plaintiff’s mill
stopped owing to breakage of crank-shaft. He entrusted the broken shaft with Baxendale to be
delivered to him as a pattern for a new one. Due to some neglect on the part of Baxendale, the
delivery of the shaft was delayed. With the result, the mill remained idle. Hadley lost profit, which
he would otherwise have made. The question before the Court was whether the Hadley was
entitled for the loss of profit also in addition to damages?

Case (d) On sixth night, X claims is too ill to sing. But it is later found that X sung at Z’s place on
the sixth night. Can the contract be rescinded or cancelled by Y or what is the remedy available

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to Y? Explain this with your understanding of the terms “negative covenant” and order for
“injunction”.

Case (e) On sixth night, X dies before she sings. Can the contract be rescinded or cancelled or
what is the remedy? Explain this with your understanding of the terms “void contract” and
“contract becomes void”.

Case (f) On the sixth night if X willfully absents himself/ herself from the theatre and took over
the wireless mic handed over by Y. Can the contract be rescinded or cancelled by Y without paying
the remuneration to X? Explain this with your understanding of the terms “bailment” and
“bailee’s lien”.

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ANSWER

Decision and Reason:

Case (a): Y can rescind or cancel the contract and can claim the damages for the breach of contract. Thus,
any party rightly rescinding a contract is entitled to compensation/ damages.

An order for specific performance is an order enforcing the contract breaker to fulfil his obligation on the
terms of the contract breaker to fulfil his obligation on the terms of contract itself.

X to sing for Y is a positive covenant. Positive covenant cannot be specifically enforced. Y can only file a
suit against X for damages. Also, personal contracts cannot be specifically enforced. Hence, in the given
case if X refuses to sing, you cannot get an order for specific performance from the Court that he will be
forced to sing. For X may sing in the way he wants and not in the way you want.

Case (b) Quantum meruit means as much as earned. It should be a contract for the payment of lumpsum.
The contract should be severable. One party should have fulfilled part of his obligation. The other party
prevents him from performing the rest of the obligation. The first party is ready and willing to perform
the rest of the obligation. Now the first party can claim from the second party for the work, he has actually
performed.

Thus, in the given case X has fulfilled his part to the extent of performance till 5th day night and X is ready
to continue on 7th day night as well, hence X is entitled to get monies as per the concept of Quantum
Meruit.

Case (c) Y cannot rescind the contract but can claim the compensation for the damages sustained by him
through X’s failure to sing on the sixth night.

The purpose of awarding damages is to restore the parties to a position where they would have been if
the contract had been performed and not where they would have been if they never made the contract.

Hadley could not recover the loss of profit as recovery depends on foreseeability. In the given case,
Baxendale could not foresee loss of profit.

Case (d) X is discharged on the sixth night because of her incapability to sing and Y can claim injunction

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order to sing anywhere else on the sixth night. This is allowed as X not to sing elsewhere is a negative
covenant.

Thus, X can be restrained from singing elsewhere on that day. This is an order of injunction.

Case (e) X is discharged on the sixth night because of her incapability to sing and Y cannot claim the
compensation for the damages sustained by him through Y's failure to sing on the sixth night.

As in the given case, the contract has become void due to death of the parties. A void contract is a nullity
and not a contract at all. Both the parties can ignore a void contract as it is not binding upon them.

If a personal skill like singing is involved the contract will die with the person himself. Personal cause of
action dies with the person himself and thus the contract becomes void.

Case (f) Any party rightly rescinding a contract is entitled to compensation/ damages. Thus, X is entitled
to receive damages/ remuneration based on the principle of quantum meruit.

Bailment is the delivery of goods by one person to another, for some purpose, upon a contract that, when
the purpose is accomplished, the goods shall be returned according to the directions of the person
delivering the goods.

If Y fails to pay the remuneration, then X as a bailee can exercise the right to retain bailed goods until he/
she receives the remuneration for the services (singing 5 nights) rendered by him/ her. This right is called
particular lien of the bailee.