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Masters in Business Administration- International Business (MBA-IB)

Course: Legal Aspects of Business (LAB)


Faculty: Prof. Parul Gupta

GROUP CASE DISCUSSION: SESSION 3


Case 1: SN v GC

SN let certain premises to GC for a restaurant at somewhat higher rent. GC agreed to pay
high rent because the British troops were stationed in the town and a clause in the agreement
especially provided that the agreement remained in force so long as British troops would
remain in this town. After some months, the locality was declared out of bounds to the British
troops.

GC showed his inability to pay the higher rent in those circumstances where he had no
expectation of higher profit as the British troops had left that town. GC requested the court to
treat this case as a case of frustration and to be declared void.

Discussion Point
Could the defendant avoid the performance of the contract being a void contract on the
ground of frustration?
Judgment &Explanation
It was held that although it was possible that the defendant would not have paid such a high
rent apart from the expectation of deriving high profits from the British troops yet that was
not sufficient to make out a case of frustration. A situation like this can be described as one of
commercial hardship, which may make the performance unprofitable or more expensive or
dilatory, but is not sufficient to excuse performance on the ground of frustration. It does not
bring about a fundamentally different situation such as to frustrate the venture. Hence such
cases may not fall within the purview of Section 56.

Case 2: GBC Ltd v CCC

GBC Ltd entered into an agreement in 1993 with CCC for grant of franchisee to prepare,
bottle, sell brands of latter, but not to be concerned with the beverages of any other brand
during the subsistence of the agreement and of one year period notice for its termination as
mentioned under para 14 of the agreement. CCC also reserved the right to discontinue
supplying syrup on effective transfer of control of GBC by transfer of shares or any other
indicia without the prior express consent of CCC as mentioned in Para 19 of the agreement
between the two companies. In all, 1993 agreement was for grant of license to GBC Ltd
under common law by CCC.

GBC Ltd, however entered into another agreement with CCC in 1994 where under it was
required to make an application to register the agreement under the statute as Registered User
Agreement. Though the period of termination notice was reduced to three months (90 days)
in place of one year but no similar provision as that of Para 14 of 1993 agreement was
stipulated and neither was the old agreement (1993 agreement) expressly substituted.

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The shareholding of GBC Ltd was transferred subsequently to PEP. PEP served CCC with a
notice of 90 days to terminate 1994 agreement, as a matter of abundant precaution, as one
year notice terminating 1993 agreement, notwithstanding the contention that 1993 stands
replaced by 1994 agreement. CCC sought GBC Ltd to be refrained from dealing with the
beverages of PEP for the period of one year of termination notice as mentioned in 1993
agreement.

Discussion Points
Whether Para 14 of 1993 agreement was in restraint of trade under section 27 of Indian
Contract Act (ICA), hence void?
Judgment &Explanation
Since 1993 agreement was grant of license to Gujarat Bottling Co Ltd under common law
and 1994 agreement was executed under the requirements of statute for the purpose of
registration of Gujarat Bottling Co Ltd. as user under the relevant act, hence, the nature and
scope of two agreements was considerably different. The 1994 agreement could not be
considered as substituting 1993 agreement because the purpose of both the agreements was
different. Mutuality for substitution of agreement requires both consensus ad idem between
the parties and an intention to substitute the original agreement with the new one. No such
intention of the parties to substitute 1993 agreement could be construed from 1994
agreement.

Case 3: DT v. LP

LP was the owner of some shares and he sold 50 shares to the DT on 21st January, 1882. DT
stated that LP purchased the shares at the rate of Rs. 37 for each dividend. He alleged that,
when making the purchase on the 21st January, 1882, DT was under the impression that a
dividend would be declared after that date; whereas it had already been declared on the 17th
January, 1882. The dividend declared was at the rate of Rs. 25 for each share. This fact was
not shared DT at the time of sale of aforementioned shares.

DT sued to recover a sum of Rs. 100 paid to LP as a deposit, on account of the value of the
dividends on 50 shares in the original capital of the Empress Spinning and Weaving
Company, alleged to have been purchased DT for the period from the 1st June, 1880, to the
31st December, 1881. DT also claimed the damages amounting to Rs. 6 per share for the
wrongful detention of the money, on the ground that the contract of purchase must (on
account of his ignorance of the fact, that when it was made a dividend had been already
declared) be held to be "cancelled" or "void.

Discussion Point
Whether the contract between the parties was in the nature of a wagering contract?
Judgment & Explanation
It was held that the contract between the parties was not a wagering contract. It was further
observed that the way in which the issues were framed in this case, it appeared that plaintiff
really imputed to defendant a fraudulent concealment of facts, by which he was induced to
enter into an agreement with him, and make the deposit in respect of which this suit was
brought.