Personal Law

B. Jain, Ahmedabad

From the available information it appears that it may be difficult for you to stop the encashment of the bank guarantee. Under Section 126 of the Indian Contract Act, 1872, a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.

It is an act of trust with full faith to facilitate free flow of trade and commerce in internal or international trade or business. The rule is well established that a contract of bank guarantee between the bank and the beneficiary is independent of the primary contract between the party furnishing the bank guarantee and the beneficiary.

The duty of the bank is created only by the bank guarantee itself. Thus, in your case, as it appears, the bank would be liable to pay to the buyer, as you have not fulfilled your delivery obligations.

Only in exceptional cases, the court would interfere in the enforcement of a bank guarantee. The Hon8217;ble Supreme Court has decided that such cases are limited to fraud or irretrievable injustice.

Broadly speaking, fraud includes acts committed with intent to deceive or to induce the other party to enter into the contract in question. There are no suggestions in your query that the buyer deceived or induced you to enter into the contract.

Contract of bank guarantee is vitiated by fraud and it would be necessary to prove that the bank had knowledge about such fraud. For a case of irretrievable injustice, exceptional circumstances, which make it impossible for the guarantor to reimburse himself if he ultimately succeeds, need to be decisively established.

A mere apprehension that the other party will not be able to pay is not enough. Generally speaking, it may be difficult to prove the existence of such circumstances, nor are there any such suggestions in your query.

Even though it may be difficult to prevent the invocation of the bank guarantee, if a dispute on the contract is raised in a court of law and in the event of it being decided in your favour, you may be entitled to damages or other consequential reliefs.

8226;I entered into an agreement with a builder in 1996 regarding the construction of a house. As per my understanding, the construction was to be completed in 1999. However, there is no particular date fixed in the agreement. The construction work is still unfinished. I want my house now, but fear I am too late to file a case. Please advise.

Ramni Puri, New Delhi

As per the Limitation Act, 1963, the period of limitation for specific performance of a contract is three years. The time from which the period begins to run is the date fixed for the performance in the contract, or, if no such date is fixed, when the plaintiff has notice that performance is refused.

The term 8216;the date fixed for the performance8217; must be not only an identifiable date but also a date which the parties intended should be the date when the contract should be performed.

On perusal of your documents, if there appears to be no fixed date in your agreement or if the same cannot be inferred from the intention of the parties, the courts may follow the three-year period of limitation, which begins to run from the time you received notice that the builder has refused his performance.

8226; My father is the owner of a manufacturing business. Since he is very old, he has given me an irrevocable power of attorney, through which I am operating all his business. He has made all nominations in my name.

Should my father do some more legal documentation so that I do not face any problems in conducting the business in case of his death?

Sanjay

8226; A power of attorney is an instrument whereby one person, as principal, empowers a specified person to act for and on behalf of the principal to do certain acts.

The power is revoked/determined on the death of the principal by operation of law. Therefore, you will not be able to run the business of your father after his death on the basis of the power of attorney.

It is good that he has made you a nominee in all his business. However, to ensure the smooth running of your business, it is also advisable that your father makes a will specifying all his assets and stating unequivocally that upon his demise, the assets and business shall devolve upon you.