Given below is the statement of Legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.
LEGAL PRINCIPLE: A judgment which binds only the parties to a suit in which the judgment was passed is called judgment in personam; whereas a judgment which binds all men irrespective of whether they were party to suit or not is known as a judgment in rem.
FACTUAL SITUATION: "Judgment of a competent court determining contractual obligations of the parties to a contract is an example of judgment in personam, but a judgment of a competent court declaring a party to be insolvent is an example of judgment in rem."
Comment on the correctness of this statement.
DECISION:
Options
The statement is incorrect because a judgment relating to contract is a judgment in rem as it binds both the parties to the suit as well as the strangers. But a judgment relating to insolvency applies only to the person who has been adjudged to be insolvent; hence it is a judgment in personam.
The Statement is wrong as both the judgments are judgments in rem as both binds not only the parties to the suit but also others.
The Statement is wrong as both the judgments are judgments in personam as both the judgments bind not only the parties to the suit but not the others.
The statement is correct.
Solution
The statement is correct.
