Case 1: Pakistan steel mills agreed to supply steel for construction of housing colony in Lahore

that Paragon Construction Company was building. Both parties agreed on price of Rs 61,000 per

ton. The three sectors of colony were completed with this price. In the meanwhile, the government

increased tax by Rs. 5,000. In the market the price of steel jumped to Rs. 66,000. Both parties

agreed to enter into a new contract by stipulating the new price. Till the development of next two

sectors, the price remained the same as per second contract. However, the price of steel increased

to Rs. 70,000 in the market in the subsequent year due to imposition of new tax. Pakistan steel

mills approached to Paragon construction and agreed orally on the new price. For the next 6

months, paragon construction paid less then Rs. 70,000. Therefore, Pakistan steel mills prepared a

new written contract containing these prices however, Paragon construction rejected and continued

to pay less than the promised price. Pakistan steel mills took a legal action to recover the previous

payments. However, the court gave decision in the favor of Paragon Corporation. Explain why

court gave decision in the favor of defendant.

Solution: In the light of essentials of valid contract it is stated that A contract must be writing and

registered, though oral agreements are also considered as contract because oral agreements

contains consideration and legal obligation. Pakistan steel mills had an oral contract with Paragon

construction and bound him under the legal obligations that Paragon construction must have to

pay Pakistan steel mill Rs: 70,000. Their contract is legal and possess all the elements of a valid

contract despite of this fact Paragon constructions paid less amount for some period of time.

Pakistan steel mills tried to have another contract for unpaid prices. However Pakistan steel mills

rejected and continued their activities of not paying proper amount. It mean they have been voiding

contract by not fulfilling their promise. Pakistan steel mill sued them in the court but defendant

won the case possible reason for the winning of defendant could be Pakistan steel mills might have
not provided any evidence in court against contract because courts provides its judgements. A

major thing to consider that the both parties had previous contract of Rs: 66,000 which could be

strong and valid point for Paragon construction to pay less. Hence Pakistan steel mills had no proof

to defend their case. That is why Writing and registering is an essential of contract so that it will

be easy to prove any contract in the court.

Case 2: Smith attended auction sale but in a drunken state. All parties in the sale including the

auctioneer were aware of his condition. In such state he bid higher price on the property and was

declared a successful bidder. When he came to sober state, he was told of his purchase and price

and he affirmed the contract. However, after a while he changed his mind and repudiated the

contract on the basis that he was drunk at the time and that the auctioneer was aware of this

condition. When the case went to court, the decision came out in the favour of the auctioneer.

Identify which essential of the contract is violated and on what grounds the court decided against

smith.

Solution: Smith attended an auction sale but he was drunk and had a contract with auctioneer by

biding higher on a property, when he collected himself, he affirmed that agreement, after

sometimes he denied contract. This agreement contained a consideration which made it legally

obligatory contract. The court gave judgement in the favor of auctioneer when the case went into

the court. The essential of contract which had been violated was Capacity of Parties which states

that “An agreement is enforceable if it is made by parties who are competent to contract. In order

to be competent to contract, it is essential that the parties are of the age of majority, have sound

mind and are nit disqualified from contracting by law. An agreement with incompetent person is

not a valid contract”. Hence the person who was drunk was incompetent person for the contract so
it violates the Essential of Contract. In addition to this the courts gave judgement against Smith

because when he collected himself and with all his senses and affirmed the contract, which made

him a part of contract and it became legally obligatory for him to fulfil the contract, but he denies

and voids the contracts which lead the court to decide judgment against Smith.

Case 3: Frogson is a public limited company. In year 2016 the company hired new employees.

The employees were give a task to increase the productivity of the company up 5 percent in coming

2 years. It was stipulated in the contract that each employee will receive air ticket to USA for

vacations. However, the company dissolved in year 2017 due to incurring heavy losses. Suggest,

can the employees sue the company? What outcome are you expecting if the employees sue the

company?

Solution: Frogson a public Limited Company hired employees in 2016. Company gave a task to

increase productivity by 5% for coming 2 years and they will be rewarded with an air ticket to

USA for vacations. Hence it is a contract because it contains a consideration from both parties so

it became a legal obligation. Due to companies heavy losses companies couldn’t continue its

promise, the employees cannot sue him because Impossibility of Performance which states that “A

becomes void due to impossibility or performance. A contract becomes void before performance

when it becomes impossible to be performed by any party due to any reason” it means that the

contract is valid but due to certain reasons it became a void contract and both parties are not legally

responsible to fulfill the contract. So due to loss the company is not legally obligatory and

employees cannot sue company. If employees sues company in to the court the possible outcome

it could expect that company would pay them the Air ticket to USA then according to the Return

of Benefits of Void Contract the company is entitled to return the benefits which it has exchanged

during the contract.