Contracts I - Cases Compilation

Compendium
On
LAW OF CONTRACTS - I
A COLLECTION OF CASES
Submitted To
Mr. Joshua Aston

Assistant Professor and ONGC Research Associate,
Gujarat National Law University
Submitted By
Mr. Vasu Jain
Mr. Vinay Narayan
Ms. Shruti Gupta
Ms Swetha V.
Ms. Sai Saranya
Ms Tanuja Aundhe
Gujarat National Law University, Gandhinagar

ACKNOWLEDGEMENTS
We take this opportunity to express our profound gratitude and deep regards to
our guide Mr. Joshua Aston, Assistant Professor and ONGC Research
Associate, Gujarat National Law University for his exemplary guidance,
monitoring and constant encouragement throughout the course of this
compendium project. The support, help and guidance given by him from time to
time shall take us a long way in the journey of life.
We also take this opportunity to express a deep sense of gratitude to Gujarat

National Law University for allocating this project to us and valuable information
and guidance, which helped us and our team in completing this task through
various stages.
We thank all our colleagues and friends for their constant encouragement without
which this assignment would not be possible.
Mr. Vasu Jain

Mr. Vinay Narayan
Ms. Shruti Gupta
Ms Swetha V.
Ms. Sai Saranya
Ms Tanuja Aundhe
Law of Contracts-I
TABLE OF CASES
1. MODULE 1 Formation of Contracts....................... .................1

2. Upton Rural District Council v Powell ...........................................1
3. Lalman Shukla v Gauri Datt.. .....................................................1
4. Williams v Carwardine ...............................................................2
5. Rose and Frank Co. v JR Crompton & Bros. Ltd. .........................3
6. Balfour v Balfour ........................................................................4
7. Jones v Padavatton ... .............. .............. ................ ..................4
8. Merritt v Merritt . .............. .............. .............. ..........................5
9. Mcgregor v Mcgregor .. .............. .............. .............. ..................6
10. Simpkins v Pays ... .............. .............. .............. ............. ..........6
11. CWT v Abdul Hussain Mulla Md Ali . .............. ................ ........6
12. Banwari Lal v Sukhdarshan Dayal ... .............. ................. ..........8
13. Weeks v Tybald .... .............. .............. ............... .............. ........8
14. Carlill v Carbolic Smoke Ball Co . .............. .............. .................9
15. Harbhajan Lal v Harcharan Lal ... .............. .............. ................10
16. Harvey v Facey ... .............. .............. .............. ............ ............11
17. Mc Pherson v Appana ... .............. .............. .............. ...............11
18. Adikanda Biswal v Bhubaneshwar Development Authority... ......12
19. Badri Prasad v State of MP .. .............. .............. .............. .........13
20. Pharmaceutical Society of Great Britain v
Boots Cash Chemists Ltd... .............. .............. .............. ..............13
21. Harris v Nickerson .............. .............. .............. .............. .........14
22. Brogden v Metropolitan Railway Co .. .............. .............. ..........15
23. Felthouse v Bindley.... .............. .............. .............. .......... .......16
24. Powell v Lee ..... .............. .............. .............. ...........................16
25. Adams v Lindsell .... .............. .............. .............. ............ ........17
26. Household Fire & Accident Insurance Co v Grant .......................18
27. Dunlop v Higgins .... .............. .............. .............. ............ .......18
28. Entores Ltd v Miles Far East Corporation .... ............ ..................19
29. Brinkbon Ltd v Stahag Stahl WG ..... .............. ............. .............19
30. Bhagwan Das Goverdhan Das Kedia v
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Girdharilal Parshottam Das & Co ... .............. .............. .............. ...20

31. Hyde v Wrench ... .............. .............. .............. .............. ...........21
32. Stevenson, Jacques & Co v McLean .... .............. .............. ..........21
33. LIC of India v R Vasireddy...... .............. .............. ............... ......22
34. State of MP v Goverdhan Dass ...... .............. .............. .............. ....23
35. Union of India v Gopal Chandra Misra .... .............. ............... .....24
36. Rajendra Kumar Verma v State of MP ..... .............. ............... ....25
37. Sharad Trading Co v State of MP..... .............. .............. ..............26
38. Mountford v Scott ..... .............. .............. .............. ............... ....27
39. Dickinson v Dodds ....... .............. .............. .............. .............. ..28
40. Home Chapelton v Barry Urban District Council .... .............. .......29
41. Henderson v Stevenson .......... .............. .............. .............. ........29
42. Parker v South Eastern Railway Co ..... .............. .............. ..........30
43. Thornton v Shoe Lane Parking Ltd ..... .............. .............. ...........31
44. Olley v Marlborough Court Hotel..... .............. .............. ..............31
45. Curtis v. Chemical Cleaning and Dyeing Co....... .............. ...........33
46. Central inland water transport corporation v Brojo Ganguly. .........34
47. Lily White v. Munuswamy.... .............. .............. .............. ..........35
48. R.S. Deboo v. M.V. Hindlekar...... .............. .............. ................. 36
49. Wallis, Son & Wells v. Pratt & Haynes........ .............. ................ .36
50. Union of India v Anglo (Indo) Afghan Agencies..... .............. .......37
51. Motilal Padampat Sugar Mills v State of UP.... .............. .............37
52. Union of India v Godfrey Philips India Ltd..... .............. ...............38
53. Pournami Oil Mills v State of Kerala.... .............. ................. .......39
54. Delhi Cloth and General Mills v Union of India..... .............. ........40
55. MODULE 2 Consideration ..........................................................41

56. Amrit Banaspati Co. Ltd. v State of Punjab.. .............. ............... ....41
57. Durga Prasad v. Baldeo.... .............. .............. .............. ............. .42
58. Kedarnath Bhattacharya v. Gauri Mohammed.... .............. ........ ...43
59. Doraswami Iyer v. Arunachala Ayyar.... .............. .........................43
60. Abdul Aziz v. Masum Ali.... .............. .............. .............. ............44
61. Errington v. Errington.... .............. .............. .............. .............. ..44
62. Chinnaya v. Venkataramayya.... .............. .............. .............. ......45
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63. Dutton v. Poole Court of Kings Bench. .............. ..................46

64. Tweddle v. Atkinson.. .............. .............. .............. ...............46
65. Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd ........ ....47
66. Jamna Das v. Ram Autar.... .............. .............. .............. ......48
67. Khwaja Muhammad Khan v. Husaini Begum .... .............. .....48
68. MC Chacko v. State Bank of Travancore.... .............. ..............49
69. Beswick v. Beswick... .............. .............. .............. ............. ..49
70. Rana Uma Nath Baksh Singh v. Jung Bahadur .... ................50
71. Gregory & Parker v. Williams... .............. .............. ................51
72. Daropti v. Jaspat Rai... .............. .............. .............. ...............51
73. Narayani Devi v. Tagore Commercial Corporation Ltd.... .........51
74. Tulk v. Moxhay.... .............. .............. .............. .............. .....52
75. Smith & Snipes Hall Farm Ltd v. River Douglas C. Board........52
76. Mc Ardle, In re... .............. .............. .............. .............. ........53
77. Lampleigh v. Brathwait... .............. .............. .............. ..........53
78. White v. Bluett... .............. .............. .............. .............. .......54
79. Ward v. Byham... .............. .............. .............. .............. .......54
80. Stilk v. Myrick.. .............. .............. .............. .............. .........55
81. Shadwell v. Shadwell ... .............. .............. .............. .............56
82. Gopal Co Ltd v. Hazarilal Co.... .............. .............. .................56
83. Thomas v. Thomas .... .............. .............. .............. ...............57
84. Pinnel v. Cole (Pinnels case). .............. .............. ................58
85. Rajlukhy Dabee v. Bhootnath Mookerjee............... ..............58
86. Bhiwa v. Shivaraman............... .............. .............. .............58
87. Pestonji v. Bai Meherbai............... .............. .............. .........59
88. Govind Nair v. Achutan Nair............... .............. ............... .59
89. Tulsi Ram v. Same Singh.............. .............. .............. ........59
90. Daulat Ram v. Som Nath.............. .............. ............. ......60
91. Debi Prasad v. Bhagwati Prasad.............. .............. ..............60
92. MODULE 3 CAPACITY .............. ...................... ...........61

93. Mohori Bibee v Dharmodas Ghosh.............. .............. ..........61
94. Arumugan v. Duraisinga............... .............. .............. .........61
95. Suraj Narain v. Sukhu Ahir............... .............. .............. .....61
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96. Kundan Bibi v. Sree Narayan.............. .............. .............. ...62

97. Leslie v. Sheill.............. .............. .............. .............. .........62
98. Khan Gul v. Lakha Singh.............. .............. .............. ........63
99. Ajudhia Prasad v. Chandan Lal.............. .............. .. .63
100. Kunwarlal v. Surajmal.............. .............. .................64
101. Sham Charan Mal v. Chowdhry Debya Singh......... ...64
102. Kidar Nath v. Ajudhia Persad.............. .............. .......64
103. Nash v. Inman.............. .............. .............. ..............64
104. Ryder v. Wombwell.............. .............. .............. ......65
105. Roberts v. Gray.. .............. .............. .............. .............65
106. Raj Rani v. Prem Adib.............. .............. ............... .65
107. Srikakulam Subrahmanyam v. Kurra Subba Rao 66
108. Great American Insurance Co. Ltd. v. Madan Lal66
109. Jennings v. Rundall.............. .............. .............. ......67
110. Burnard v. Haggis.............. .............. .............. .........67
111. Ballet v. Mingay.............. .............. .............. ...........67
112. Indar Singh v. Parmeshwardhari Singh.............. ........68
113. MODULE 4 CONSENT ............... .....................69

114. Chikam Ammiraju v. Chikkam Seshama............... ....69
115. Ranganayakamma v. Alwar Setti.............. ................69
116. Krishna Lal Kalra v. N.D.M.C.............. .................70
117. Workmen of Appin Tea Estate v. Industrial Tribunal..70
118. Andhra Sugars Ltd. v. State of A.P.............. .............71
119. Mannu Singh v. Umadat Pandey............... ................71
120. Phillip Lukka v. Franciscan Association.............. ......72
121. Allcord v. Skinner.............. .............. .............. ........72
122. Niko Devi v. Kirpa............... .............. .............. ......72
123. Takri Devi v. Rama Dogra.. .............. .............. ............73
124. Lakshmi Amma v. Telengala Narayana Bhatta.73
125. Wajid Khan v. Raja Ewaz Ali Khan.............. ............74
126. Raghunath Prasad v Sarju Prasad................ .............. 74
127. Shrimati and Ors. vs. Sudhakar R. Bhatkar and Ors. ..75
128. Lloyds Bank v Bundy ................ .............. ...............75
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129. Edgington v Fitzmaurice ................ .............. .76

130. V Srinivasa Pillai v LIC of India ................ ............77
131. P Sarojam v LIC of India ............... .............. ..77
132. Kiran Bala v Bhaire Prasad Srivastava ................ ....78
133. With v OFlanagan................ .............. ............... .78
134. Shri Krishan v Kurukshetra University................ ..79
135. Delhi Development Authority v Skipper
Construction Co (P) Ltd............... .. ..............80
136. Derry v Peek ................ .. ............... .. .....80
137. Bindu Sharma v Ram Prakash Sharma ............... .81
138. Attwood v Small................ .. ............... 81
139. Peek v Gurney ............... .. ............... 81
140. Shoshi Mohun Pal Chaudhary v Nobo Krishto Poddar 82
141. Oriental Bank Corporation v John Fleming ..............82
142. Car and Universal Finance Co Ltd v Caldwell..........83
143. Long v Lloyd ................. .. ............... .. .....83
144. Wallis v Pratt............... .. ............... .. ....84
145. Phillips v Brooks Ltd ................. .. ............... 84
146. Allcard v Skinner ............... .. ............... .. .85
147. Leaf v International Galleries ................ .. ........85
148. Raffles v Wichelhaus................. .. ............... 86
149. Haji Abdul Rehman Allarakhia v
The Bombay & Persia Steam Navigation Co..............86
150. Courturier v Hastie............... .. ............... ..87
151. Seikh Bros Ltd v Ochener ................ .. .............87
152. Smith v Hughes ............... .. ............... ..88
153. Bell v Lever Bros Ltd ................. .. ............... ...88
154. Boulton v Jones................ .. ............... .. ...89
155. Said v Butt ............... .. ............... .....89
156. Cundy v Lindsay ................ .. ............... ...90
157. Lewis v Averay ................. .. ............... .. ..90
158. Ingram v Little ................ .. ............... .. ....90
159. Hartog v Colin and Sheilds ................ .. ...........91
160. Kochavareed v Mariappa ................ .. ...............92
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161. State of Karnataka v Stellar Construction Co ..92
162. MODULE 5 Legality of Object .... .............. ....................93

163. Brij Mohan v MPSRTC ............... .. ............... ..93
164. Nandlal v Thomas J William................. .. .........93
165. Sujan Singh v Mohkam Chand............... .. ........93
166. Sundara Gownder v Balachandran............... .. ..94
167. Ram Sewak v Ram Charan................. .. ............95
168. Fateh Singh v Sanwal Singh ................ .. ..........95
169. Bai Vijli v Nansa Nagar .... .............. .............. .............. .......96
170. Pyare Mohan v Narayani ...... .............. .............. ................. 96
171. Gheru Lal Parekh v Mahadeodas Maiya .... .............. ........... 96
172. Ouseph Poulo v Catholic Union Bank ... .............. ................98
173. Union Carbide Corporation v Union of India ... .............. .....98
174. Central Inland Water Transport Corporation v
Brojo Nath Ganguly .... .............. .............. .............. ...........99
175. Alice Mary Hill v William Clark ... .............. .............. ........99
176. Madhub Chander v Raj Coomar Dass... .............. ................100
177. Nordenfelt v Maxim Nordenfelt Guns &
Ammunition Co Ltd... .............. .............. .............. ...........100
178. Gujarat Bottling Co Ltd v Coca Cola Co. .... .............. ........101
179. Esso Petroleum v Harper's Garage (Stourport) Ltd... .............101
180. Vancouver Malt & Sake Brewing Co v
Vancouver Breweries Ltd... .............. .............. .................. 103
181. S B Fraser & Co v Bombay Ice Mfg Co ..... ............... .........103
182. Charlesworth v Mac Donald ... .............. .............. ..............104
183. MODULE - 6 Contingent Contract.. .............. .......... ..........105

184. Harbaksh Singh Gill And Others v Ram Ratan......................105
185. Bashir Ahmad v Government of Andhra Pradesh ... .............105
186. MODULE - 7 Performance and Discharge of Contracts.. .......106

187. Bhudra Chund v Betts .... .............. .............. .....................106
188. Mahabir Prasad Rungta v Durga Dutt..... .............. ..............106
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189. China Cotton Exporters v BLR Cotton Mills Ltd... ...............107

190. Caltex (India) Ltd v Bhagwan Devi Marodia ...... ................ 107
191. Bismillah Begum v Rahmatullah Khan ... .............. .............108
192. Hind Construction Contractors v State of Maharashtra .........108
193. Paradine v Jane, Kings Bench .... .............. ........................109
194. Taylor v Caldwell... .............. .............. .............. ............... 110
195. Krell v Henry ... .............. .............. .............. .............. ......110
196. Alopi Parshad & Sons Ltd v Union of India...... .............. ....111
197. Tarapore & Co v Cochin Shipyard Ltd ........ .............. ........111
198. Robinson v Davison ....... .............. .............. .............. ......112
199. Man Singh v Khazan Singh ..... .............. .............. ............113
200. Metropolitan Water Board v Dick Kerr & Co Ltd ........... .....113
201. Satyabrata Ghose v Mugneeram Bangur & Co ......... ..........113
202. Fateh Chand vs. Balkrishan Das........ .............. ...................114
203. Gobind Ram vs Gian Chand......... .............. ......................115
204. Govindram Gordhandas Seksaria vs The State Of Gondal.....115
205. Jabalpur Cable Network Pvt. Ltd. vs
E.S.P.N. Software India Pvt. Ltd..... .............. ............... .....117
206. K. Narendra vs Riviera Apartments (P) Ltd...... ............ ...117
207. K.P. Choudhary vs State Of Madhya Pradesh And Ors.... ..118
208. Indu Mehta vs State Of U.P. And Ors........ .............. .......119
209. Laxminarayan And Anr. vs Sumitra Bai..... .............. .......120
210. Mahabir Auto Stores & Ors vs Indian Oil Corporation ....121
211. Maula Bux vs Union Of India.... .............. .............. ......122
212. Mulamchand vs State Of Madhya Pradesh...... ................122
213. Oil & Natural Gas Corporation Ltd vs Saw Pipes Ltd.......123
214. P.C. Wadhwa vs State Of Punjab..... .............. ............ ...124
215. Prema Korgaokar vs Mustak Ahmed.... .............. ........... 124
216. Raja Dhruv Dev Chand vs Harmohinder Singh & Anr......125
217. Ramana Dayaram Shetty vs The International Airport......126
218. Sales Tax Officer, Banaras vs Kanhaiya Lal Saraf.............127
219. Schiller And Ors. vs Sooltan Chand And Ors........ ..........127
220. Seth Bikhraj Jaipuria vs Union Of India...... .............. .....128
221. State Of West Bengal vs M/S. B. K. Mondal And Sons....129
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222. Sushila Devi And Anr vs Hari Singh And Ors....... ..........129
223. Tata Cellular vs Union Of India......... .............. ............. 130
224. The Naihati Jute Mills Ltd vs Hyaliram Jagannath .... ......131
225. Union Of India (Uoi) vs Rampur Distillery & Chemical....132
226. Union Of India vs A.L. Rallia Ram... .............. ...............133
227. Tsakiorglou & Co Ltd v Noblee & Thorl.... .............. ......134
228. Plinche v Colburn ... .............. .............. .............. .........134
229. Craven-Ellis v Canons Ltd ... .............. .............. ............135
230. Frost v. Knight... .............. .............. .............. ...............135
231. Victoria Laundry (Windsor) v Newman Industries.............136
232. Avery v Bowden.... .............. .............. .............. .............136
233. Koufos v. C Czarnikow Ltd (The Heron II).... .............. ....137
234. Anglia Television Ltd. v. Reed .... .............. .....................138
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MODULE 1 FORMATION OF CONTRACTS
1. Topic: Implied Contract

Name: Upton Rural District Council v Powell
Citation: (1942) 1 All ER 220
Court: N/A
Bench: N/A
Facts:
The appellant's farm was in the Upton police district, but in the Pershore fire district. A fire
broke out on the farm, and the appellant telephoned the police inspector at Upton and asked
for the fire brigade to be sent. The Upton fire brigade was informed, and it went in the form
at once. The appellant was entitled to the services of the Pershore fire brigade without charge,
but the Upton brigade, if it went to a fire outside its own area, was entitled to contract for
payment for its services. At the time when the brigade was summoned, all the parties
concerned were under the impression that the farm was in the Upton fire district.
Legal Issue:
Whether or not there existed an implied contract between the parties for rendering of services
by the Upton fire brigade in return for payment by the appellant.
Judgement:
The appellant must be treated as having asked for the Upton fire brigade to be sent to his
farm, and the fact that at the time the parties thought that the fire was in the Upton fire district
did not prevent there being a contractual relationship. The appellant was, therefore, liable
under an implied contract to pay for the brigade's services.
Further Information:
http://h2o.law.harvard.edu/cases/2186
2. Topic: Communication of offer and Acceptance of offer

Name: Lalman Shukla v Gauri Datt
Citation: (1913) 11 ALJ 489
Court: Allahabad High Court
Bench: Lord Greene, MR, Luxmoore, LJ, Goddard, LJ
Facts:
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Contracts Law-I
The nephew of the defendant absconded from home and no trace of him was found. The
defendant sent his servants to different places in search of the boy and among them was the
plaintiff who was the munim of his firm. After this the defendant issued handbills offering a
reward of Rs. 150 to anyone who might find out the boy. The plaintiff traced the boy to
Rishikesh and found him there. The plaintiff continued in the defendants service for about
six months when he was dismissed. He then brought a suit claiming Rs. 499 out of the
amount of the reward offered by the defendant under the handbills issued by him. The record
shows that the handbills were issued subsequently to the plaintiffs departure for Hardwar.
Legal Issue:
An offer cannot be accepted unless it is brought to the knowledge of the person to whom it is
made. Without acceptance of offer there can be no contract.
Judgement:
The plaintiff agreed to go to Hardwar in search of the boy and he undertook that particular
duty. Being under that obligation, which he had incurred before the reward in question was
offered, he cannot claim the reward. There was already a subsisting obligation and therefore,
the performance of the act cannot be regarded as a consideration for the defendants promise.
The defendant is not liable to pay the reward to the plaintiff.
http://www.indiancaselaw.com/lalman-shukla-v-gauri-datt-1913/
3. Topic: Relevance of Motive

Name: Williams v Carwardine
Citation: (1833) 4 B & Ad 621
Court: England and Wales High Court (Kings Bench Division)
Bench: Parke J
Facts:
Walter Carwardine was murdered in Hereford. The plaintiff, Mrs Williams, gave evidence at
the Hereford assizes against two suspects, but did not say all she knew. The suspects were
acquitted. On April 25, 1831, the victim's brother and defendant, Mr Carwardine, published a
handbill, stating there would be a 20 for whoever would give such information as would
lead to the discovery of the murder of Walter Carwardine. In August, 1831, the Mrs
Williams gave more information which led to the conviction of two men. She claimed the
reward. Mr Carwardine refused to pay. At the trial her motives were examined. It was found
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that she knew about the reward, but that she did not give information specifically to get the
reward.
Legal Issue:
Whether the motive behind the act is relevant or not.
Judgement:
The Court of Kings Bench, consisting of Lord Denman CJ, Littledale J and Patteson J held
that the plaintiff was entitled to recover the 20. The advertisement amounted to a general
promise or contract to pay the offered reward to any person who performed the condition
mentioned in it, namely, who gave the information. Two judges clearly stated that motives
were irrelevant. Littledale J said, "If the person knows of the handbill and does the thing, that
is quite enough." Patteson J said "We cannot go into the plaintiff's motives."
Parke J said, "The motive was the state of her own feelings. My opinion is, the motive is not
material."
http://www.bailii.org/ew/cases/EWHC/KB/1833/J44.html
4. Topic: Intention to create legal relation

Name: Rose and Frank Co. v JR Crompton & Bros. Ltd.
Citation: (1925) AC 445
Court: United Kingdom House of Lords Decisions
Bench: Scrutton, Bankes, and Atkin LJJ
Facts:
The claimants and defendants entered an agreement for the supply of some carbonised tissue
paper. Under the agreement the claimants were to be the defendant's sole agents in the US
until March 1920. The contract contained an honourable pledge clause which stated the
agreement was not a formal or legal agreement and shall not be subject to the jurisdiction of
the courts in neither England nor the US. The defendants terminated the agreement early and
the claimants brought an action for breach.
Legal Issue:
Whether there was an intention to create legal relations between the two parties.
Judgement:
The honourable pledge clause rebutted the presumption which normally exists in commercial
agreements that the parties intend to be legally bound by their agreements. The agreement
therefore had no legal affect and was not enforceable by the courts.
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Manupatra Citation: MANU/UKHL/0001/1924
5. Topic: Agreements between husband and wife

Name: Balfour v Balfour
Citation: (1919) 2 KB 571
Court: Court of Kings Bench
Bench: Warrington LJ, Duke LJ, Atkin LJ
Facts:
Mr. Balfour and his wife went to England for a vacation, and his wife became ill and needed
medical attention. They made an agreement that Mrs. Balfour was to remain behind in
England when the husband returned to Ceylon (Sri Lanka) and that Mr. Balfour would pay
her 30 a month until she returned. This understanding was made while their relationship was
fine; however the relationship later soured. The lower court found that there was sufficient
consideration in the consent of Mrs. Balfour and thus found the contract binding, which Mr.
Balfour appealed.
Legal Issue:
a. Was Mr. Balfour's offer intended to be legally binding?
b. Does the fact that they were husband and wife matter?
Judgement:
The agreement was a purely social and domestic agreement and therefore it was presumed
that the parties did not intend to be legally bound. Agreements between spouses are not
contracts because the parties did not intend that they should be attended by legal
consequences.
http://www.lawnix.com/cases/balfour-balfour.html
6. Topic: Agreements between mother and daughter

Name: Jones v Padavatton
Citation: (1969) All ER 616
Court: England and Wales Court of Appeal (Civil Division)
Bench: Danckwerts LJ, Salmon LJ, Fenton Atkinson LJ
Facts:
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A mother had persuaded her daughter to come to England to study for the Bar, promising to
allow her to stay in her house Several years later, the daughter had still not passed any Bar
examinations. They fell out, and the mother sought possession of the house. The daughter
said that there had been a contract.
Legal Issue:
Intention to create legal relation between the mother and her daughter.
Judgement:
The Court held that there was no binding contract. There was a presumption that cohabitants
would not intend to create enforceable contractual obligations between themselves. Fenton
Atkinson LJ: At the time when the first arrangement was made, the mother and daughter
were very close. I am satisfied that neither party at that time intended to enter into a legally
binding contract. The daughter was unable to establish that the mother had contracted to let
her to stay in the house until she finished her Bar studies.
http://www.bailii.org/ew/cases/EWCA/Civ/1968/4.html
7. Topic: Agreement between husband and wife

Name: Merritt v Merritt
Court: England and Wales Court of Appeal (Civil Division)
Bench: Lord Denning, Widgery LJ, Karminski LJ
Facts:
Mr. Merritt and his wife jointly owned a house. Mr. Merritt left to live with another woman.
They made an agreement (signed) that Mr. Merritt would pay Mrs. Merritt a 40 monthly
sum, and eventually transfer the house to her, if Mrs. Merritt kept up the monthly mortgage
payments. When the mortgage was paid Mr. Merritt refused to transfer the house.
Legal Issue:
a. Whether there was a legal relation created between the two parties.
b. Whether the rule laid down in Balfour v Balfour applied here.
Judgement:
The agreement was binding. The Court of Appeal distinguished the case of Balfour v
Balfour on the grounds that the parties were separated. Where spouses have separated it is
generally considered that they do intend to be bound by their agreements. The written
agreement signed was further evidence of an intention to be bound.
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http://archive.today/qCTg
8. Topic: Agreement between husband and wife

Name: Mcgregor v Mcgregor
Citation: (1888) 21 QBD 424
Court: N/A
Bench: N/A
Facts:
A husband and wife withdrew their complaints under an agreement by which the husband
promised to pay her an allowance and she was to refrain from pledging his credit. There was
a question as to the validity of the contract.
Legal Issue:
Whether an agreement between husband and wife was binding.
Judgement:
The agreement was held to be a binding contract.
9. Topic: Intention to create legal relationship

Name: Simpkins v Pays
Court: N/A
Bench: N/A
Facts:
Three women, two of them being mother and daughter and a third being a paying guest,
together made entries into a crossword puzzle in the name of the mother, the expenses being
met by one or the other, without any rules. The entry was successful, but the mother refused
to share the price. The lodger took her to court.
Legal Issue:
Whether there was intention to create legal relationship.
Judgement:
The court held that the mother was bound to share the prize as any reasonable man looking at
the conduct of the women would at once conclude that they must have intended to share the
prize.
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Name: CWT v Abdul Hussain Mulla Md Ali
Citation: (1988) 3 SCC 562
Court: Supreme Court of India
Bench: Venkatachalliah, M.N. (J)
Facts:
In the original-returns for the assessment year 1957-58 relevant to the valuation date
31.3.1957, the assesse filed a return of net wealth of Rs. 8,57,910 which included a sum of
Rs. 4,00,000 representing the principal value of the loan advanced by the assesse to a certain
Faizullabhai Mandlawala, Sidhpur. Both the assesse and the said Faizullabhai Mandlawala
were partners of a firm carrying on business under the name and style 'Rising Sun Flour and
Oil Mills' at Ujjain. The borrower had employed this sum as part of his capital in the firm. In
the revised return, filed by him, the assesse, however, sought to have the value of that loan
excluded from his wealth, on the claim that this loan was what was known to Muslim Law as
'Quaraza-e-Hasana'-a debt of good faith and goodwill carrying with it no legal obligation on
the part of the debtor to repay and correspondingly, no right on the part of the assesse to
expect, much less enforce a repayment. The claim for the non-inclusion of this asset in the
wealth of the assesse was sought to be supported by the declaration dated 26.3.1965 furnished
by the debtor that the sum was received by him 'without any obligation and without any rate
of interest and without any consideration'. Both the Wealth-tax Officer and the Appellate
Assistant Commissioner in the appeal found it difficult to accept this claim and brought this
sum of Rs. 4,00,000 to tax on the respective valuation dates. However, the Income-tax
Appellate Tribunal, Indore Bench, accepting the assessee's appeals held that the loan partook
of the character of 'Quaraza-e-Hasana' with its special incidents as known to Muslim Law;
that the transaction was one of good faith and goodwill and lacked the concomitants of a
legally enforceable claim for repayment and that, therefore, the amount was not a debt due to
the assesse.
Legal Issue:
Whether there was intention to create legal relation.
Judgement:
The High Court held that the admitted existence of a debt implied an obligation to repay and
therefore decided the case in favour of the Revenue.
MANU/SC/0108/1988
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Name: Banwari Lal v Sukhdarshan Dayal
Bench: J Shelat, Y Chandrachud
Facts:
In an auction sale of plots of land, a loudspeaker was spelling out certain dimensions would
be reserved for a Dharamshala. Subsequently, that plot was also sold for private purposes.
The purchasers sought to restrain this.
Legal Issue:
Intention to create legal obligation and whether it is a requirement for a valid contract.
Judgement:
The Supreme Court held that intention to create a legal obligation was an essential of a valid
contract and there was no intention to create a contract in the present case.
Chandrachud J said, Microphones have not yet acquired notoriety as carriers of binding
representations. Promises held over loudspeakers are often claptraps of politics. In the instant
case, the announcement was, if at all, a puffing up of property put up for sale.
http://indiankanoon.org/doc/12263/
Manupatra Citation: MANU/SC/0013/1972
12. Topic: Offer and acceptance

Name: Weeks v Tybald
Citation: (1605) 75 ER 982
Court: N/A
Bench: N/A
Facts:
Tybald, a father in 17th-century Britain, anxious to ensure his daughters future security,
made a statement publicly that he would give 100 to any man who would marry his
daughter, so long as he himself consented to the marriage. A young man, Weeks, and his
father heard the statement. Weeks, in due course, married the Tybald girl with her fathers
consent. Weeks then claimed the 100. Tybald would not pay.
Legal Issue:
Whether the offer made and the subsequent acceptance construed a valid contract.
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Judgement:
The decision was made in Tybalds favour. The judges reasons were rstly that Tybald had
not indicated the target of his remark. He had not directed his statement to anyone, nor
indicated to whom he was speaking. The second reason was that the words were general, and
vague. They were said to have been spoken to arouse the excitement of potential suitors.
The principle in this case was soon overruled with the modern position being that an offer
may be made to the world at large.
13. Topic: Unilateral Offer

Name: Carlill v Carbolic Smoke Ball Co
Citation: (1893) 1QB 256
Court: England and Wales Court of Appeal ( Civil Division)
Bench: Bowen LJ, Lindley LJ, A.L. Smith LJ
Facts:
The Carbolic Smoke Ball Co produced the 'Carbolic Smoke Ball' designed to prevent users
contracting influenza or similar illnesses. The company's advertised (in part) that: 100
pounds reward will be paid by the Carbolic Smoke Ball Company to any person who
contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after
having used the ball three times daily for two weeks according to the printed directions
supplied with each ball. 1,000 pounds is deposited with the Alliance Bank, Regent Street,
showing our sincerity in the matter. After seeing this advertisement Mrs Carlill bought one
of the balls and used it as directed. She subsequently caught the flu and claimed the reward.
The company refused to pay. Mrs Carlill sued for the reward.
Legal Issue:
Does one who makes a unilateral offer for the sale of goods by means of an advertisement
impliedly waive notification of acceptance, if his purpose is to sell as much product as
possible?
Judgement:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted
an offer of a unilateral contract which she had accepted by performing the conditions stated
in the offer. The court rejected all the arguments put forward by the defendants for the
following reasons:
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Contracts Law-I
a. The statement referring to the deposit of 1,000 demonstrated intent and therefore
it was not a mere sales puff.
b. It is quite possible to make an offer to the world.
c. In unilateral contracts there is no requirement that the offeree communicates an
intention to accept, since acceptance is through full performance.
d. Whilst there may be some ambiguity in the wording this was capable of being
resolved by applying a reasonable time limit or confining it to only those who
caught flu whilst still using the balls.
e. The defendants would have value in people using the balls even if they had not
been purchased by them directly.
Manupatra Citation: MANU/UKWA/0001/1892
14. Topic: Acceptance of contract

Name: Harbhajan Lal v Harcharan Lal
Citation: AIR 1925 All 539
Bench: Mears, CJ
Facts:
A young boy ran away from his fathers home. The father eventually issued a pamphlet,
offering a reward in these terms: Anybody who finds trace of the boy and brings him home,
will get Rs. 500. The plaintiff was at the Dharamshala railway station, there he saw a boy,
overheard part of the conversation, realized that the boy was the missing boy and promptly
took him to the Railway Police Station and sent a telegram to the boys father that he had
found his son.
Legal Issue:
Whether performing the conditions of an offer can be considered as acceptance.
Judgement:
It was held that the handbill was an offer open to the whole world and capable of acceptance
by any person who fulfilled the condition, and that the plaintiff substantially performed the
condition and was entitled to the amount offered.
http://www.indiankanoon.org/doc/174774/
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15. Topic: Offer and supply of information

Name: Harvey v Facey
Court: Judicial Committee of the Privy Council
Bench: Lord Watson, Lord Hobhouse, Lord Macnaghten, Lord Morris, Lord Shand.
Facts:
Harvey (P) sent Facey a telegram stating: Will you sell us Bumper Hall Pen? Telegraph
lowest cash price-answer paid. On the same day, Facey sent Harvey a reply by telegram
stating: Lowest price for Bumper Hall Pen 900. Harvey sent Facey another telegram
agreeing to purchase the property at the asking price. D refused to sell and P sued for specific
performance and an injunction to prevent Kingston from taking the property. The trial court
dismissed on the grounds that an enforceable contract had not been formed and P appealed.
The Supreme Court of Jamaica reversed and D appealed.
Legal Issue:
Is a statement of the minimum price at which a seller would sell an offer?
Judgement:
The Privy Council held that there was no contract concluded between the parties. Facey had
not directly answered the first question as to whether they would sell and the lowest price
stated was merely responding to a request for information not an offer. There was thus no
evidence of an intention that the telegram sent by Facey was to be an offer.
http://www.bailii.org/uk/cases/UKPC/1893/1.html
16. Topic: Offer and Counter offer

Name: Mc Pherson v Appana
Citation: AIR 1951 184, 1951 SCR 161
Bench: Fazal Ali, Saiyid
Facts:
On receiving an offer from A for the purchase of a house belonging to B, Y who was looking
after the house cabled to B that there was an offer of Rs. 6,000 for the house. B sent a cable in
reply on the 5th August, 1944, that he would not accept less than Rs. 10,000. Y conveyed this
information to A on the 9th and on the 14th A wrote a letter to Y stating that he thereby
confirmed the oral offer of Rs. 10,000 that he had made to Y on the 11th. On the 26th Y
cabled to B as follows: "Offered Rs. 10,000. May I sell". On the same day, W, another friend
11 | P a g e
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of B, with who also B was in correspondence, sent an offer for Rs. 11,000 and B accepted it.
A sued for specific performance alleging that B's cable of the 5th was a counter-offer and as
he had accepted it on the 14th, there was a concluded contract for sale in his favour on that
day.
Legal Issue:
Whether a statement of lowest price was a counter-offer?
Judgement:
Held that the cable sent by B on the 5th was a mere statement of the lowest price at which he
would sell and contained no implied contract to sell at that price. A's letter of the 14th was
under the circumstances only a fresh offer; and as B had not accepted it there was no
concluded contract in favour of A.
17. Topic: Invitation to treat

Name: Adikanda Biswal v Bhubaneshwar Development Authority
Citation: AIR 2006 Ori 36
Court: Orissa High Court
Bench: A Patnaik, M Das
Facts:
A Development Authority made an announcement for making an allotment of plots on first
come first served basis on payment of full consideration. An application in response to this
was made with full consideration. The applicants felt that a contract was made with the
Development Authority.
Legal Issue:
Whether the announcement was an Offer or an Invitation to treat.
Judgement:
It was held that the application was an offer and, therefore, there could be concluded contract
till the offer was accepted.
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18. Topic: Formation of valid contract

Name: Badri Prasad v State of MP
Citation: AIR 1970 SC 706
Bench: Sikri, S.M.
Facts:
The appellant (A) entered into a contract in respect of certain forests and became entitled to
cut teak trees with some specifications.[1]After a legislation[2]vesting the estate in the State,
A was prohibited from cutting timber in exercise of his rights under the contract. On Feb, 1,
the State said that As claim to cut trees would be considered only if he gave up his claim to
a sum of Rs. 17,000 which he had already paid under the contract and was willing to pay a
further sum of Rs. 17,000 to the state. On February 5, 1955, A expressed his willingness to
pay the additional sum but reserved his right to claim a refund of the first sum. The State
rejected As right to cut trees. A then filed a Suit claiming specific performance of the
contract.
Legal Issue:
Whether there was a contract formed or not.
Judgement:
Even if the letter of Feb 1 could be treated as an offer, there was no unconditional acceptance
of the offer, because, there was a reservation by the appellant of his right to claim refund in
his letter dated 5th Feb and hence there was no concluded contract.
19. Topic: Invitation to offer

Name: Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd
Citation: (1952) 2 QB 795
Court: Court of Appeal
Bench: Somervell LJ, Birkett LJ, Romer LJ
Facts:
Boots Cash Chemists had just instituted a new method for its customers to buy
certain medicines. The company would let shoppers pick drugs off the shelves in the chemist
and then pay for them at the till. Before then, all medicines were stored behind a counter and
an assistant had to get what was requested. The Pharmaceutical Society of Great Britain
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objected and argued that under the Pharmacy and Poisons Act 1933, that was an unlawful
practice. Under s 18(1), a pharmacist needed to supervise at the point where "the sale is
effected" when the product was one listed on the 1933 Act's schedule of poisons. The Society
argued that displays of goods were an "offer" and when a shopper selected and put the drugs
into their shopping basket that was an "acceptance". Therefore because no pharmacist had
supervised the transaction at this point, Boots was in breach of the Act. Boots argued that the
sale was affected only at the till.
Legal Issue:
Was the display of the drugs an offer or merely an invitation to offer?
Judgement:
Both the Queen's Bench Division of the High Court and the Court of Appeal sided with
Boots. They held that the display of goods was not an offer. Rather, by placing the goods into
the basket, it was the customer that made the offer to buy the goods. This offer could be
either accepted or rejected by the pharmacist at the cash desk. The moment of the completion
of contract was at the cash desk, in the presence of the supervising pharmacist. Therefore,
there was no violation of the Act.
http://www.thomsonreuters.com.au/product/AU/files/720502512/pharmaceutical_society_of_
great_britian_v_boots_cash_chemists.pdf
http://www.diprist.unimi.it/fonti/811.pdf
20. Topic: Invitation to offer

Name: Harris v Nickerson
Citation: (1873) LR 8 QB
Court: Queens Bench Division
Bench: Blackburn J, Quain J, Archibald J.
Facts:
The Defendant placed an advertisement in London papers that certain items would be placed
up for auction over three days in Bury St. Edmunds. The Plaintiff obtained a commission to
buy the office furniture and expended time and expense to travel to Bury St. Edmunds to bid
for the office furniture. On the third day, the lots for the office furniture were withdrawn. The
Plaintiff sued for loss of time and expense. The judge at first instance found in favour of the
Plaintiff. Leave was given to appeal to the High Court.
Legal Issue:
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Did the advertisement constitute a contract or was it merely an invitation to offer?

Judgement:
The court held unanimously that the advertisement did not constitute an offer, but rather was
a mere declaration of intent.
http://www.diprist.unimi.it/fonti/821.pdf
21. Topic: Implied Contract

Name: Brogden v Metropolitan Railway Co
Citation: (1877) 2 App Cas 666 HL
Court: House of Lords
Bench: Lord Cairns, Lord Hatherley, Lord Selborne, Lord Blackburn, and Lord Gordon
Facts:
Mr Brogden, the chief of a partnership of three, had supplied the Metropolitan Railway
Company with coals for a number of years. Brogden then suggested that a formal contract
should be entered into between them for longer term coal supply. Each side's agents met
together and negotiated. Metropolitan's agents drew up some terms of agreement and sent
them to Brogden. Brogden wrote in some parts which had been left blank and inserted an
arbitrator who would decide upon differences which might arise. He wrote "approved" at the
end and sent back the agreement documents. Metropolitan's agent filed the documents and
did nothing more. For a while, both acted according to the agreement document's terms. But
then some more serious disagreements arose, and Brogden argued that there had been no
formal contract actually established.
Legal Issue:
Was there a valid contract between the two parties by way of actions of the parties?
Judgement:
It was held that a contract had arisen by conduct and Brogden had been in clear breach, so he
must be liable. The word "approved" on the document with Brogden's name was binding on
all the partners, since Brogden was the chief partner, even though the standard signature of
B. & Sons was not used. A mere mental assent to the agreement's terms would not have
been enough, but having acted on the terms made it so.
http://www.thomsonreuters.com.au/product/AU/files/720502512/contract_p1_brogen_v_metr
opolitan.pdf
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22. Topic: Obligation to reject offer

Name: Felthouse v Bindley
Citation: (1863) 7 LT 835
Court: Court of Common Pleas
Bench: Willes J, Byles J, Keating J
Facts:
Uncle Paul Felthouse was a builder who lived in London. He wanted to buy the horse Sizing
Europe off his nephew, John Felthouse. After a letter from the nephew about a previous
discussion in buying the horse, the uncle replied saying,
"If I hear no more about him, I consider the horse mine at 30 and 15s."
The nephew did not reply. He was busy at auctions on his farm in Tamworth. He told the man
running the auctions, William Bindley, not to sell the horse. But by accident, Bindley did.
Uncle Felthouse then sued Bindley in the tort of conversion - using someone else's property
inconsistently with their rights. But for the Uncle to show the horse was his property, he had
to show there was a valid contract. Bindley argued there was not, since the nephew had never
communicated his acceptance of the uncle's offer.
Legal Issue:
Can one impose an obligation on another to reject one's offer?
Judgement:
The court ruled that Felthouse did not have ownership of the horse as there was no
acceptance of the contract. Acceptance must be communicated clearly and cannot be imposed
due to silence of one of the parties. The uncle had no right to impose a sale through silence
whereby the contract would only fail by repudiation.
23. Topic: Communication of acceptance of offer

Name: Powell v Lee
Citation: (1908) 24 TLR 606
Court: N/A
Bench: N/A
Facts:
Powell applied for a job as headmaster and the school managers decided to appoint him. One
of them, acting without authority, told Powell he had been accepted. Later the managers
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decided to appoint someone else. Then Powell brought an action alleging that by breach of a
contract to employ him he had suffered damages in loss of salary.
Legal Issue:
Who must communicate acceptance of offer?
Judgement:
The county court judge held that there was no contract as there had been no authorised
communication of intention to contract on the part of the body, that is, the managers, alleged
to be a party to the contract. This decision was upheld by the King's Bench Division.
24. Topic: Acceptance by post

Name: Adams v Lindsell
Citation: (1818) 106 ER 250 Court of Kings Bench
Court: Court of Kings Bench
Bench: Law J
Facts:
The case involved two parties in the sale of wool. On 2 September, the defendants wrote to
the plaintiffs offering to sell them certain fleeces of wool and requiring an answer in the
course of post. The defendants misdirected the letter so that the plaintiffs did not receive it
until 5 September. The plaintiffs posted their acceptance on the same day but it was not
received until 9 September. Meanwhile, on 8 September, the defendants, not having received
an answer by 7 September as they had expected, sold the wool to someone else.
Legal Issue:
When is acceptance complete when it comes to post?
Judgement:
Law J said that if that was true it would be impossible to complete any contract through the
post; if the defendants were not bound by their offer until the answer was received, then the
plaintiffs would not be bound until they had received word that the defendants had received
their acceptance, and this could go on indefinitely.[1] Instead it must be considered that the
offerors were making the offer to the plaintiffs during every moment that the letter was in the
post. Then when the Offeree has placed his acceptance in the post there is a fictional meeting
of minds, which concludes the offer and gives effect to the acceptance.
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25. Topic: Valid Acceptance

Name: Household Fire & Accident Insurance Co v Grant
Citation: (1879) LR 4 Ex Div 26 (CA)
Bench: Theseiger LJ, Baggallay LJ, Bramwell LJ
Facts:
Mr Grant applied for shares in the Household Fire and Carriage Accident Insurance
Company. The company allotted the shares to the defendant, and duly addressed to him,
posting a letter containing the notice of allotment. The letter was lost in the post and he never
received the acceptance. Later the company went bankrupt, and asked Mr Grant for the
outstanding payments on the shares, which he refused saying there was no binding contract.
The liquidator sued.
Legal Issue:
The question was whether Mr Grant's offer for shares had been validly accepted, and was he
legally bound to pay?
Judgement:
Thesiger LJ for the majority held that there was a valid contract, because the rule for the post
is that acceptance is effective even if the letter never arrives. He noted that anyone can opt
out of the rule, and that even if it sometimes causes hardship, it would cause even more
hardship to not have the rule. Once someone posts acceptance, he argued, there is a meeting
of minds, and by doing that decisive act a contract should come into effect.
26. Topic: Postal rule of acceptance

Name: Dunlop v Higgins
Citation: (1848) 1 HLC 381
Court: N/A
Bench: N/A
Facts:
Dunlop & Company offered by post to sell 2,000 tons of pig-Iron at some price. The offer
was sent on January 28, 1845. It reached Higgins on January 30, 1845. Higgins posted the
letter of acceptance on the same day. But, the defendant received it on February 1, 1845 with
some delay. The defendant refused to supply the goods, because the prices have increased.
Legal Issue:
When is acceptance complete when it comes to post?
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Judgement:
It was held that the acceptor was not responsible for any delay in the course of the transit.
Hence there was a binding contract. The posting of a letter accepting an offer constitutes a
binding contract even if the letter never arrives due to the fault of the post office.
http://www.commonlii.org/int/cases/EngR/1848/303.pdf
27. Topic: Acceptance for telex

Name: Entores Ltd v Miles Far East Corporation
Court: Court of Appeal of England and Wales
Bench: Denning LJ, Birkett LJ, Parker LJ
Facts:
Entores was a London-based trading company that sent an offer by telex for the purchase of
copper cathodes from a company based in Amsterdam. The Dutch company sent an
acceptance by telex. The contract was not fulfilled and so Entores attempted to sue the owner
of the Dutch company for damages. The controlling company, Miles Far East Corp, was
based in the UK and under English law Entores could only bring the action in the UK (serve
notice of writ outside the jurisdiction) if it could prove that the contract was formed within
the jurisdiction, i.e. in London rather than Amsterdam.
Legal Issue:
When is acceptance complete when it regards Telex?
Judgement:
It was held that the postal rule could not apply to instantaneous communications, such as
telephone or telex: if a phoneline "went dead" just before the offeree said "yes", it would be
absurd to assume that the contract was formed and the parties would not have to call each
other back. The same applied to telex. Since the contract was therefore only formed when and
where the telex was received, the place of formation was London.
28. Topic: Formation of Contract

Name: Brinkbon Ltd v Stahag Stahl WG
Citation: (1982) 2 WLR 264 HL
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Bench: Lords Wilberforce, Fraser of Tullybelton, Brandon of Oakbrook, Russell of

Killowen, and Bridge of Harwich
Facts:
Brinkibon was a London company that purchased steel from Stahag, a seller based in Austria.
Brinkibon sent their acceptance to a Stahag offer by Telex to Vienna. Brinkibon later wanted
to issue a writ against Stahag and applied to serve an out of jurisdiction party. They would
only be able to do so if the contract had been formed in England.
Legal Issue:
The question at issue was where the contract was formed.
Judgement:
The Judges decided that the contract was formed in Vienna. They accepted the principle
in Entores v Miles Far East Co where in the case of instantaneous communication, which
included telex, the formation generally, occurs in the place where the acceptance is received.
29. Topic: Communication of Acceptance

Name: Bhagwan Das Goverdhan Das Kedia v Girdharilal Parshottam Das & Co
Bench: Shah, J.C.
Facts:
Plaintiff offered to get certain goods supplied at Ahmedabad to defendants who accepted the
offer at Khamgaon. On defendants failure to supply requisite goods, plaintiff sued them at
Ahmedabad. Dispute arose as to where was contract formed- at Khamgaon where acceptance
was given by defendants or at Ahmedabad where acceptance was received by plaintiffs.
Legal Issue:
When is communication of acceptance complete?
Judgement:
An agreement does not result from mere intent to accept the offer: Acceptance must be by
some external manifestation (either by speech, writing, conduct in further negotiations, or any
other overt act) accompanied by its communication to the offeror unless expressly waived by
him or impliedly by the course of negotiation to the contrary
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Shah J said, An agreement does not result from a mere state of mind; intent to accept an
offer or even a mental resolve to accept an offer does not give rise to a contract. There must
be some external manifestation of that intent by speech, writing or other act.
30. Topic: Counter offer

Name: Hyde v Wrench
Citation: (1840) 3 Beav 334
Court: England and Wales High Court (Chancery Division)
Bench: Lord Langdale
Facts:
Wrench offered to sell his farm in Luddenham to Hyde for 1000, an offer which Hyde
declined. On 6 June 1840 Wrench wrote to Hyde's agent offering to sell the farm for 1000,
stating that it was the final offer and that he would not alter from it. Hyde offered 950 in his
letter by 8 June, and after examining the offer Wrench refused to accept, and informed Hyde
of this on 27 June. On the 29th Hyde agreed to buy the farm for 1000 without any additional
agreement from Wrench, and after Wrench refused to sell the farm to him he sued for breach
of contract.
Legal Issue:
Was there a valid contract formed between the two parties or was there merely counter
offers?
Judgement:
Hydes offer to buy for $950 constituted a counter offer; effectively a rejection of the original
offer and a new offer. Once rejected, an offer cannot be revived by subsequent acceptance.
http://www.bailii.org/ew/cases/EWHC/Ch/1840/J90.html
31. Topic: Counter offer

Name: Stevenson, Jacques & Co v McLean
Citation: (1880) 5 QBD 346
Court: High Court Queens Bench Division
Bench: Lush J
Facts:
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Plaintiff (P) was an iron merchant who purchased iron to sell on to third parties. Defendant
(D) was the holder of warrants (titles) for quantities of iron. By telegram (dated Saturday 27
September) D offered to sell iron to P for 40s. Nett cash, open till Monday (the original
offer) [348]. On Monday morning P sent telegram to D asking whether D would accept forty
for delivery over two months, or if not, longest limit you would allow [348] (Ps telegraphic
enquiry). D did not respond to the telegram and later that day sold all warrants to another
party. D sent a telegram to P at 1.25pm on the Monday advising all warrants had been sold
(Ds telegram of warrants sold). Prior to receiving that communication, P sent a telegram to
D at 1.34pm advising acceptance of offer (Ps acceptance of offer). P subsequently sued D
for non-delivery of iron warrants alleging breach of contract.
Legal Issue:
Whether Ps telegraphic enquiry constituted a counter offer, the effect of which would be to
extinguish Ds original offer.
Judgement:
Lush J held that the plaintiff's telegram at 9.42am was not a rejection of the offer but a mere
inquiry about whether the terms could be modified. Although McLean was at liberty to
revoke the offer before Monday finished, that was not effective until it reached the plaintiffs.
Lush J charged the defendant the amount of 1900 to be paid to the plaintiffs subject to any
reduction by subsequent ruling.
As to the first issue, having regard to the nature of the wording of Ps telegraphic inquiry and
the volatility of the iron market, the communication cannot be regarded as a counter-offer but
a mere inquiry to which the defendant should have responded.
http://www.thomsonreuters.com.au/product/AU/files/720502512/contract_p4_stevenson_v_
mclean.pdf
32. Topic: Existence of valid contract

Name: LIC of India v R Vasireddy
Bench: Mukharji, Sabyasachi (J)
Facts:
Raja Vasireddi Chandra Dhara Prasad had filled a proposal for insurance for Rs. 50,000 on
27th December, 1960. He had issued two cheques for Rs. 300 and Rs. 220 respectively in
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favour of the appellant as first premium. Cheque for Rs. 300 was encashed by the appellant
on 29th December, 1960. Cheque for Rs. 220 was dishonoured three times and finally
encashed on 11th January, 1961. Raja Vasireddi died on the day following i.e. on 12th
January, 1961. On 16th January, 1961, the widow of the deceased wrote to the appellant
intimating the death of the deceased and demanded payment of Rs. 50,000. The Divisional
Manager, Masulipatam Branch, denied liability on behalf of the appellant Corporation on
28th January, 1961.
Legal Issue:
Whether there was a contract in place or not?
Judgement:
It was held that when the insurer had received the proposal form along with the first premium
and it was still awaiting acceptance when the proposer died, no liability to pay arose. It was
immaterial that the groundwork for acceptance was under preparation and the agent had
assured that the proposal would be accepted.
33. Topic: Formation of Valid Contract

State of MP v Goverdhan Dass
Facts:
The Chief Conservator of Forests invited tenders for the purchase of certain lac and lac
products, the quantities whereof were set out therein. The conditions of sale, subject to which
the said tenders were to be made, were as follows:
xxx
5. 25 per cent of the purchase price shall be deposited in cash or G.C. notes immediately after
the close of sale.
6. The sanction of the Government of final bids will be given at the spot.
7. All lac purchased must be removed within one month and on full payment; credit will be
given on 25 per cent deposit. The lac will remain at the godowns at the risk of the purchasers
after the sales are finished.
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8. In case of default of payment of balance within one month the 25 per cent deposit shall be
forfeited and the Government may resell lac in which case loss not recovered by the deposit
will be recovered from defaulters....
These conditions were announced at the time of the sale. The respondent-firm submitted
tenders for two areas, for Rs. 3,80,000 relating to Umaria Division and Rs. 7000/- for
Chhatarpur Division. These tenders, being the highest, were accepted for and on behalf of the
Chief Conservator of Forests. Though the respondent-firm had to deposit 25 per cent of the
aforesaid two amounts, it deposited two sums only, namely, Rs. 7000/- and Rs. 500/- and
asked for a week's time to pay the balance of the said 25 per cent initial deposit. The
respondent-firm having failed to deposit the balance of the initial deposit of 25 per cent as
also the remaining 75 per cent of the purchase price within time, the Forest authorities served
a notice to the effect that the said goods would be resold, and the deficit, if any, would be
claimed from the firm. Since the respondent firm persisted in their said default and did not
take delivery of the said goods, the lots relating to the Umaria and Chhatarpur Divisions were
resold respectively for Rupees 1,88,000 and Rs. 3500. The difference between the price at
which the tenders were accepted and the price recovered as a result of the resale came to Rs.
139,000 and odd. The Forest authorities thereafter sent a certificate to the Collector of
Mirzapur to recover the said difference as arrears of land revenue, purporting to do so under
Section 82 of the Indian Forest Act, 1927, and the Rewa State Forest Contract Rules, 1935
relating to such tenders.
Legal Issue:
Whether a contract had concluded between the parties making the amount recoverable
Judgement:
It was held that the purported acceptance was not a valid one, there was no concluded
contract and therefore neither Conditions nor Rule 30(3)(e) became applicable. The said
amount of Rs. 1,39,000 and odd was not recoverable as arrears of land revenue.
34. Topic: Communication of Resignation

Name: Union of India v Gopal Chandra Misra
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Bench: Sarkaria, Ranjit Singh, Gupta, A.C., Untwalia, N.L., Fazalali, Syed Murtaza, Singh,
Jaswant
Facts:
Shri Satish Chandra wrote to the President of India, on May 7, 1977, intimating his
resignation from the office of Judge of the Allahabad High Court, with effect from August 1,
1977. On July 15, 1977, he again wrote to the President, revoking his earlier communication,
and commenced deciding matters in Court from July 16, 1977. On August 1, 1977 Shri
Misra, an advocate of the High Court filed a petition under Article 226 of the Constitution,
contending that the resignation of Shri Satish Chandra, having been duly communicated to
the President of India, in accordance with Article 217(1) Proviso (a) of the Constitution, was
final and irrevocable, and that the continuance of respondent as a High Court Judge
thereafter, was an usurpation of public office. The High Court allowed the petition holding
that Shri Satish Chandra was not competent to revoke his resignation letter. The decision was
appealed in the Supreme Court.
Legal Issue:
Was communication of resignation complete and if not can the revocation of resignation be
accepted?
Judgement:
It was held that there could be no doubt that Satish Chandra had in his letter dated 7th May,
1977 indicated his unequivocal intention to resign in the clearest possible terms to the
President with effect from 1st August, 1977 and the letter having been communicated to the
President and received by him, it was not open to Satish Chandra to withdraw or revoke that
letter. Consequently, the letter dated 15th July, 1977 addressed to the President by Satish
Chandra revoking-his resignation was null and void.
35. Topic: Withdrawal of Tender

Name: Rajendra Kumar Verma v State of MP
Citation: AIR 1972 MP 131
Court: Madhya Pradesh High Court
Bench: B Dayal, A Sen
Facts:
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The respondents advertised for receiving tenders for the sale of Tendu-Patta. (leaves) from
unit No. 7, Budni. The petitioner gave a tender in pursuance of the tender notice No. 1972-X.
69 dated 25-3-1969 at the rate of Rs. 38.25 p per standard bag. He also deposited some
amount as security. The tenders were to be opened on 9th April 1969 but before they were
actually opened, the petitioner made an application resiling from his tender and requested that
since he has withdrawn his tender it may not be opened at all. The tender was, however,
opened as this was the only tender submitted for that unit.
However subsequently the unit was also auctioned but since no offers were received, the
tender of the petitioner was sent to the Government for acceptance. The Government
accepted the tender and since the petitioner did not execute the purchaser's agreement,
proceedings were now being taken for recovery of Rs. 24,846.12 p. on the allegation that the
Tendu leaves of the unit were sold to somebody else later and the balance was recoverable
from the petitioner.
Legal Issue:
Did the plaintiff have a right to withdraw his tender?
Judgement:
The court held that a tenderer can withdraw his tender before its final acceptance by a work
or supply order even if there is a clause in the tender restricting his right to withdraw.
Manupatra Citation: MANU/MP/0038/1972
36. Topic: Existence of Valid Contract

Name: Sharad Trading Co v State of MP
Bench: Chief G.P. Singh, C.P Sen
Facts:
By notification issued in Madhya Pradesh Gazette dated 29th December 1972 tenders were
invited from persons or parties desirous of purchasing Tendu leaves in various Tendu Patta
units of Madhya Pradesh. This invitation of tenders for purchase of Tendu leaves was for the
season ending on 31st December 1973. The petitioner submitted its tender for Unit No. 38-
Kosmi. The tender of the petitioner was accepted and an agreement was executed between
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the petitioner and the Govt. under which the petitioner became purchaser of tendu leaves of
the aforesaid unit for the season ending on 31st December 1973. The petitioner submitted an
application for renewal as required by Sub-clause (3) of Clause 2 of the agreement. The
petitioner, however, withdrew that application by telegram dated 23rd October, 1973, before
the Government could accept or reject the offer for renewal contained in the application. The
Government acting under Sub-clause (5) of Clause 2 of the agreement forfeited the security
deposit. The security deposit was in the shape of a bank guarantee furnished by the State
Bank of Indore. The Divisional Forest Officer by letter dated 15th March 1974 called upon
the bank to pay the amount guaranteed by bank draft. The petitioner sought issuance of a writ
restraining the Government and the other respondents from enforcing the forfeiture of
security deposit furnished by the petitioner.
Legal Issue:
Whether there was valid contract between the two parties?
Judgement:
The Government's promise to sell the tendu leaves to the petitioner for the 1973 season in the
unit concerned was sufficient consideration to support all the terms and conditions of the
agreement including the promise not to withdraw an application for renewal of the
agreement. In our opinion, therefore, it is not correct to say that the petitioner was entitled to
withdraw the offer of renewal contained in his application before it was accepted, and the
Government was not entitled to forfeit the security deposit in terms of Sub-clause (5) of
Clause 2 of the agreement.
Manupatra Citation: MANU/MP/0017/1980
37. Topic: Revocation of offer

Name: Mountford v Scott
Court: N/A
Bench: N/A
Facts:
The plaintiff paid 1 for the option to buy the defendant's house for 10000, within six
months. The defendant attempted to revoke the offer before the end of the six months.
Legal Issue:
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Could the defendant revoke the offer?

Judgement:
The court found that the offer was irrevocable within the six month period. The plaintiff had
given consideration (paying nominal 1) for the offeror's promise to keep the offer open for
six months.
38. Topic: Revocation of offer

Name: Dickinson v Dodds
Citation: (1876) 2 Ch D 463
Court: Court of Appeal, Chancery Division
Bench: James and Mellish, L. JJ., Baggallay, J.A.
Facts:
On Wednesday, June 10, 1874 Dodds (D) sent Dickinson (P) a memorandum in which he
agreed to sell a specified piece of land for 800 pounds with the offer held open until 9AM the
following Friday. Dickinson alleged that he had decided to accept Dodds offer on Thursday
morning but did not contact him immediately because he thought he had until Friday morning
to accept. On Thursday afternoon Dickinson learned that Dodds had offered or agreed to sell
the land to a third party. Dickinson wrote a note accepting the offer and delivered it to his
home, leaving it with his mother-in-law who neglected to give the note to Dodds. On Friday
morning before the original deadline to accept the offer, both Dickinson and his agent gave
Dodds a written acceptance of the offer. Dodds stated that he had already sold the land to
another party the previous day. Dickinson sued for specific performance. The trial court
found in Dickinsons favour and ordered that Dodds convey the property to him and Dodds
appealed.
Legal Issue:
Whether a promise to hold an offer open is binding where the other party does not accept
until after he learns that the offeror has already conveyed the property.
Judgement:
The offer had been effectively revoked. Therefore no contract existed between the parties.
There was no obligation to keep the offer open until Friday since the claimant had provided
no consideration in exchange for the promise. The offeror is free to withdraw the offer at any
time before acceptance takes place unless a deposit has been paid.
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http://www.thomsonreuters.com.au/product/AU/files/720502512/contract_p2_dickinson_v_d
odds.pdf
39. Topic: Offer and Acceptance and Exclusion Clause

Home: Chapelton v Barry Urban District Council
Bench: Slesser LJ, Mackinnon LJ, Goddard LJ
Facts:
David Chapelton went to a beach with his friend, Miss Andrews, at Cold Knap. There was a
pile of deckchairs. A notice next to them said,
"Barry Urban District Council. Cold Knap. Hire of chairs $2. per session of 3 hours."
It also said tickets should be obtained from attendants. Mr Chapelton got two chairs from an
attendant, paid the money and got two tickets. He put them in his pocket. On the ticket was
written,
"Available for three hours. Time expires where indicated by cut-off and should be retained
and shown on request. The council will not be liable for any accident or damage arising from
the hire of the chair."
When Mr Chapelton sat on the chair it gave way, the canvas tearing from the top of the chair.
He was injured. The County Court judge held the council was negligent but that liability was
exempted by the ticket. Mr Chapelton appealed.
Legal Issue:
Was the exemption clause valid?
Judgement:
SLESSER, L.J. (Finding the Council liable for the plaintiffs injury):
"In my opinion, this ticket is no more than a receipt, and is quite different from a railway
ticket which contains upon it the terms upon which the railway company agrees to carry the
passenger".
40. Topic: Exclusion Clause

Name: Henderson v Stevenson
Citation: (1875) 2 HL (SC) APP 470
Court: N/A
Bench: N/A
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Facts:
A condition on the back of a steamer ticket excluded liability for loss of luggage. There was
nothing on the front of the ticket and Stevensons attention was not drawn to the conditions
on the back of the ticket. The steamer sank and Stevenson raised an action about his lost
luggage.
Legal Issue:
Was the exclusion clause valid?
Judgement:
The court held that the exclusion clause was not incorporated into the contract. The notice of
the clause was not adequate therefore it was not included in the contract.
41. Topic: Binding nature of exclusion clause

Name: Parker v South Eastern Railway Co
Citation: (1877) 2 CPD 416
Bench: Mellish LJ, Baggallay LJ, Bramwell LJ
Facts:
Mr Parker left a bag in the cloakroom of Charing Cross railway station, run by the South
Eastern Railway Company. On depositing his bag and paying two pence he received a ticket.
On the front it said "see back". On its back, it stated that the railway was excluded from
liability for items worth 10 or more. Mr Parker failed to read the clause as he thought the
ticket was only a receipt of payment. However, he admitted that he knew the ticket contained
writing. Mr Parker's bag, which was worth more than 10, was lost. He sued the company.
The question of law put to the court was whether the clause applied to Mr Parker. At trial the
jury found for Mr Parker as it was reasonable for him not to read the ticket.
Legal Issue:
Was P bound by the conditions on the ticket?
Judgement:
If he knew of the writing but did not know or believe there was conditions, he is still bound,
if when delivered to him he could see the writing and there was reasonable notice given of
these conditions if no reasonable notice given then not bound.
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42. Topic: Incorporation of clause after conclusion of contract

Name: Thornton v Shoe Lane Parking Ltd
Bench: Lord Denning, Megaw LJ, Sir Gordon Willmer
Facts:
Mr Thornton, "a free lance trumpeter of the highest quality", drove to the entrance of the
multi storey car park on Shoe Lane, before attending a performance atFarringdon Hall with
the BBC. He took a ticket from the machine and parked his car. It said
"this ticket is issued subject to the conditions of issue as displayed on the premises".
And on the car park pillars near the paying office there was a list, one excluding liability for
"injury to the Customer howsoever that loss, misdelivery, damage or injury shall be
caused".
Three hours later he had an accident before getting into his car. The car park argued that the
judge should have held the matter regulated by this contract, not tort.
Legal Issue:
Could a clause be incorporated after a contract has been concluded, without reasonable notice
before?
Judgement:
The Court of Appeal found that the exclusion clause did not form part of the contract and,
therefore, did not protect the defendant.
43. Topic: Intention to create a legal relationship

Name: Olley v Marlborough Court Hotel
Citation: [1949] 1 KB 532
Court: Court of Appeal.
Bench: Denning LJ, Singleton LJ and Bucknill LJ
Facts: Mrs Olley was a long staying resident of the Marlborough Court Hotel, Lancaster
Gate, London. As usual she left her room key on a rack behind the reception one day, but
when she came back it was gone. Inside her room, her fur coat had been stolen. (A witness
called Colonel Crerer, who was sitting in the lounge, saw a person go in and come out again
with a parcel fifteen minutes later.) The porter had apparently been cleaning a bust of
the Duke of Marlborough and failed to notice. Mrs Olley asked to be repaid for the cost of the
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coat. The Hotel pointed to an exclusion clause on a notice behind a door in the bedroom
leading to a washbasin, which said,
"The proprietors will not hold themselves responsible for articles lost or stolen, unless handed
to the manageress for safe custody."
Mrs Olley argued that the clause was not incorporated into the contract.
Held: Firstly, it is to be understood whether the notice formed part of the contract. Now
people who rely on a contract to exempt themselves from their common law liability must
prove that contract strictly. Not only must the terms of the contract be clearly proved, but also
the intention to create legal relations - the intention to be legally bound - must also be clearly
proved. It has been Held that mere notices put on receipts for money do not make a contract.
(See Chapelton v. Barry Urban District Council) So, also, in my opinion, notices put up in
bedrooms do not of themselves make a contract. As a rule, the guest does not see them until
after he has been accepted as a guest. The hotel company no doubt hope that the guest will be
Held bound by them, but the hope is vain unless they clearly show that he agreed to be bound
by them, which is rarely the case. Assuming, however, that Mrs. Olley did agree to be bound
by the terms of this notice, there remains the question whether on its true interpretation it
exempted the hotel company from liability for their own negligence. It is said, and, indeed,
with some support from the authorities, that this depends on whether the hotel was a common
inn with the liability at common law of an insurer, or a private hotel with liability only for
negligence. In cases where it is clearly a common inn or, indeed, where it is uncertain
whether it is a common inn or a private hotel, I am of opinion that a notice in these terms
would not exempt the hotel company from liability for negligence but only from any liability
as insurers. Indeed, even if it were clearly not a common inn but only a private hotel, I should
be of the same opinion. It is unnecessary to go further and to construe the notice as a
contractual exemption of the hotel company from their common law liability for negligence. I
agree that the appeal should be dismissed.
The notice was ineffective. The contract had already been made by the time the claimant had
seen the notice. It did not therefore form part of the contract.
Principle:
The intention to create a legal relationship.
Exclusion Clauses: A representation made by one party cannot become a term of a
contract if made after the agreement was made.
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44. Topic: Terms of a contract and Misrepresentation

Name: Curtis v. Chemical Cleaning and Dyeing Co.
Citation: [1951] 1 KB 805
Apeeal From: Westminster County Court
Bench: Somervell LJ, Singleton LJ, Denning LJ.
Facts: Mrs Curtis took a white satin wedding dress to the defendant's shop for cleaning. She
was handed a 'receipt' which she was asked to sign. She asked why she needed to sign and
was told that it was because Chemical Cleaning would not accept liability for certain risks,
including damage to beads and sequins. The plaintiff signed. In fact the receipt included the
following condition:
"This or these articles are accepted on condition that the company is not liable for any
damage howsoever arising, or delay."
The dress was returned with a stain and Mrs Curtis claimed damages. The defendants sought
to rely on the exclusion clause in the receipt.
Held: The Trial Court judge accepted that the receipt included exclusion from certain
specified risks. However, in the Court of Appeal, Lord Somervell stated that, what was
conveyed to the plaintiff by the statement of the assistant was that there were certain risks- in
this case beads and sequins, which the defendants were not prepared to, accept. ... That, I
think, plainly is a misrepresentation. The words on the document purported to exempt them
from all liability, howsoever arising. In those circumstances, I think owing to that
misrepresentation, this exception never became part of the contract between the parties.
Lord Singleton agreed with him and Lord Denning opined that, When one party puts
forward a printed form for signature, failure by him to draw attention to the existence or
extent of the exemption clause may in some circumstances convey the impression that there
is no exemption at all, or at any rate not so wide an exemption as that which is in fact
contained in the document. The present case is a good illustration. By failing to draw
attention to the width of the exemption clause, the assistant created the false impression that
the exemption only related to the beads and sequins, and that it did not extend to the material
of which the dress was made. It was done perfectly innocently, but nevertheless a false
impression was created. ... It was a sufficient misrepresentation to disentitle the cleaners from
relying on the exemption, except in regard to beads and sequins.
Principles:
Terms of a contract and the Exclusion Clauses
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Incorporation (receipt/signature)
Misrepresentation.
When a signature to a condition, purporting to exempt liability, is obtained as a result
of misrepresentation (innocent or otherwise) the party making that representation
cannot rely on the exemption.
45. Topic: Standard Form of a contract, Undue Influence

Name: Central inland water transport corporation v Brojo Nath Ganguly
Citation: AIR1986SC1571, (1986)3CompLJ1 (SC)
Bench: D.P.Madon, J.
Facts: Plaintiffs (Corporation) worked in a company which was dissolved by Courts order
and they were then inducted into defendant (Ganguly and others) Corporation upon latters
T&C. After years of serving Corporation, plaintiffs were arbitrarily kicked out of the
Corporation by virtue of Rule 9(i) of said T&C which provided for termination of employees
services on three months notice on either side upon which three months salary to be paid by
Corporation. Plaintiffs requested Court to quash Rule 9(i) on grounds of unconscionability.
Held:
When a bargain seems unconscionable or harsh, equity curtails freedom of contract in
order to protect the interests of the parties who entered into such contracts under
distress. This of little value when parties dont stand on equal footing and also not
every such contract is unconscionable: only when there is gross inequality of
bargaining power compounded with terms unreasonably favourable to stronger party
can the indication that weaker party had no meaningful choice except to consent to
the unfair and unreasonable terms, hold ground. Such contracts are called Adhesion
Contracts.
Such contracts are entered into by parties enjoying much superior bargaining power
with a large no. of people, hence, affect people at large and if unconscionable, unfair
and unreasonable are injurious to public interest. These bargains therefore must be
void on account of being opposed to public policy (S.23).
Further, if they were to be merely voidable on account of undue influence (S.16) it
would compel each victimized party to go to Court to get the contract adjudged as
voidable which would lead to multiplicity of litigations.
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In the present case, plaintiffs had much less bargaining power as compared to that of
Corporation, and it would have led to their termination from service and exposed
them to consequent anxiety, harassment and uncertainty of finding alternative
employment, if they would have refused to accept the said rule.
Rule 9(i) gave arbitrary and absolute power to the Corporation to dismiss its
employees without providing any guidelines to that effect. The rule was also a
violation of the principle of natural justice- audi alteram partem- as it neither
provided for any inquiry nor did it provide for any opportunity to accused employee
to be heard. It alongside was against the interests of public policy.
Principles:
Standard form of contract
Unconscionable contracts
Public Policy, Section 23
Void Contracts
Undue Influence, Section 16
An unfair or an unreasonable contract entered into between parties of unequal
bargaining power was void as unconscionable, under Section 23 of the Indian
Contract Act, 1872.
46. Topic: Unreasonable terms of a contract

Name: Lily White v. Munuswamy
Citation: AIR 1966 Mad 13 at pp. 13-14
Court: High Court of Madras
Bench: Ananatanarayanan, OCJ
Facts: A laundry receipt contained a condition that a customer would be entitled to claim
only fifteen percent of the market price or value of the market price or value of the article in
case of loss. The plaintiffs new sari was lost.
Held: The conditions printed on the reverse of a bill may govern or modify any simple
contractsubject to the obligation on the part of the businessman to perform the process
properly and to return the article safe and intact. But, if a condition is imposed which is in
flagrant infringement of the law relating to negligencethe court will not enforce such a
35 | P a g e
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term which is not in the interest of the public, and which is not in accordance with public
policy.
Principle: Unreasonable terms in contracts: A term is unreasonable if it defeats the very
purpose of the contract or if it is repugnant to public policy.
47. Topic: Unreasonable terms of a contract

Name: R.S. Deboo v. M.V. Hindlekar
Citation: AIR1995Bom68
Court: High Court of Bombay
Bench: D.R. Dhanuka, J.
Facts: Laundry receipt contained printed condition restricting liability for loss or damage to
20 time laundering charges or half the value of the garments, whichever was less.
Held:
It is necessary for the Court to consider in each case as to whether the alleged special term
was reasonably and properly communicated by the bailee to the bailer and as to whether the
bailer in fact assented thereto expressly or by necessary implication.
No bailee is entitled to unjustly enrich himself by retaining the insurance amount recovered
by the bailee in respect of his customers articles.
The condition was Held to be unreasonable.
Principle: Unreasonable terms: A term is unreasonable if it defeats the very purpose of the
contract or if it is repugnant to public policy.
48. Topic: Inability to restore goods

Name: Wallis, Son & Wells v. Pratt & Haynes
Citation: [1911] AC 394
Bench: N/A
Facts: Wallis bought seed from Pratt and Haynes described as common English sainfoin
subject to an exemption clause that the sellers give no warranty-express or implied; as to the
growth, description or any other matters. The seed turned out to be a giant sainfoin,
indistinguishable in seed, but inferior in quality and of less value. Wallis was forced to
compensate to whom it had subsequently sold the seed, and sued to recover the money lost.
Pratt and Haynes pleaded the exemption clause.
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Held: It was Held that the language of the contract is admittedly adequate to create the
obligation to deliver common English sainfoin, it follows of necessity that it brings with it the
legal consequence that if it is not performed the purchaser has a right of action for damages
for such non-performance. In this case, the clause only applied to a warranty, and the
description was actually a condition of the contract as
the contract creates the obligation to deliver a specific kind of seed making it an important
condition.
Principle: Exclusion clauses
49. Topic: Essentials to make any promise binding on the Government

Name: Union of India v Anglo (Indo) Afghan Agencies
Citation: AIR 1968 SC 718.
Bench: J. C. Shah, J.
Facts: the Government of India announced certain concessions with regard to the import of
certain raw materials in order to encourage export of woolen garments to Afghanistan.
Subsequently, only partial concessions and not full concessions were extended as announced.
Held: The Supreme Court Held that the Government was estopped by its promise. Thereafter
the courts have applied the doctrine of promissory estoppel even against the Government.
Principle: The following are the essentials to make any promise binding on the Government:
The State makes the promise within the ambit of law.
There is an intention to enter into a legal relationship.
The other party must do an act in furtherance of that promise or is forbidden to do
anything.
50. Topic: Law of Promissory Estoppel

Name: Motilal Padampat Sugar Mills v State of UP
Bench: P.N. Bhagwati, J.
Facts: Government of UP announced to give tax exemption from sales tax for three years to
all new industrial units of the state. Based on this, plaintiff sought confirmation from Director
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of Industries who reiterated the decision of UP govt. Further unequivocal assurance was
given by Chief Secretary of Govt., on behalf of UP Government, to plaintiff about the same.
Plaintiff on this categorical assurance, borrowed money from financial institutions, brought
plant and machinery and set up a new plant in UP. However, State govt. went back upon this
assurance and instead now promised to give partial concession to which plaintiff consented
and started production. Once again, however, State govt. went back even on this promise
denying any concession to be given. Plaintiff sued the government on account of promissory
estoppel.
Held:
Waiver as to a persons right can operate only when person granting it has full knowledge of
his right and intentionally abandons it, either expressly or impliedly.
The doctrine of Promissory Estoppel states that whenever an unequivocal promise is made
with the intention of creating legal relationship or affect a legal relationship to arise in the
future knowing or intending that it would be acted on by other party and is in fact acted
on then promisor will be abstained from going back on the promise if it will be inequitable
for him to do so.
Principle: Law of promissory estoppel was crystallized in this case as furnishing a cause of
action to a citizen, enforceable in a court, against the government if it or its officials in the
course of their authority extended a promise which created or was capable of creating a legal
relationship, and it was acted upon by the promisee, irrespective of any prejudice.
51. Topic: Scope of the doctrine of Promissory Estoppel

Name: Union of India v Godfrey Philips India Ltd.
Citation: 1986 AIR 806, 1985 SCR Supl. (3) 123
Bench: P.N. Bhagwati, J.
Facts: The respondents in the appeals were manufacturers of cigarettes. They manufactured
cigarettes in their factories and those were packed initially in paper/cardboard packets of 10
and 20 and these packets were then packed together in paper/cardboard cartons. These
cartons were then placed in corrugated fibre board containers and were then delivered to the
Wholesale dealers at the factory gate. The wholesale price charged by the respondents sold to
the dealers included not only the cost of primary packing in packets of 10 and 20, but also the
cost of secondary packing in cartons and the cost of final packing in corrugated fibre board
containers. On May 19, 1976 the Cigarette Manufactures Association made a representation
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to the Central Board of Excise and Customs pointing out that corrugated fibre board
containers "are not an Integral or essential requirement for the sale of cigarettes and are used
for the sole purpose of protecting cigarettes from any damage that may arise during
transportation , and that the cost of such corrugated fibre board containers should not
therefore be included in the value of goods for the purpose of excise duty. The Board
accepted this plea of the Association and by a letter dated May 24, 1976 intimated to the
Association that "Instructions have been issued to the Collectors of Central Excise that the
cost of corrugated fibre board containers in question does not form part of the value of
cigarettes for the purposes of excise duty". This representation contained in the letter dated
May 24, 1976 continued to hold the field until November 2, 1982 when the Central Board of
Excise and Customs addressed a circular to all Collectors of Central Excise, stating that the
matter had been re-examined and the earlier advice should be treated as cancelled. The issue
was whether the cost of packing is includible in the value of the cigarettes for the purpose of
assessment to excise duty.
Held: No duty of excise was assessable on cigarettes manufactured by the assessee by
including the cost of the fibre board containers when it was clearly represented by the CBEC
in response to the submission made by the Cigarette Manufacturers Association and the
representation was approved and accepted by the Central Government that the cost of the
containers would not be included in the value of cigarettes for the evaluation of the excise
duty.
Principle: The applicability of the doctrine of promissory estoppels has been explained.
52. Topic: The doctrine of Promissory Estoppel

Name: Pournami Oil Mills v State of Kerala
Citation: 1987 AIR 590, 1987 SCR (1) 654
Bench: Misra Rangnath, J.
Facts: Section 10 of the Kerala General Sales Tax Act, 1963 empowers the Government in
public interest to make an exemption or reduction in rates either prospectively or
retrospectively in respect of any tax payable under the Act. The State Government with a
view to boost industrialisation, offered incentive to Small Scale industries, to be set up
thereafter, in form of exemption from sales tax and purchase tax for a period of five years
from the date of commencement of production on 11th April, 1979. Another order dated 29th
September, 1980, was passed which showed that the Government withdrew the exemption
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relating to purchase tax and confined the exemption from sales tax to the limit specified. The
appellants who set up their industries after April 11, 1979, including those who did it after
21st October, 1980, claimed benefit of exemption from purchase tax and sales tax in terms of
the first order. They pleaded the rule of estoppel against the State Government in making the
second order. The High Court in dismissing their Writ Petitions proceeded on the footing that
the first order was not made in exercise of statutory power while the second order was issued
under S.10 of the Act.
Held: The appellants, who in response to the first order dated April 11, 1979 set up their
industries prior to 21st October, 1980 were entitled to exemption extended and/or promised.
Such exemption was to be continued for a period of five years from the date they started
production. New industries set up after 21st October, 1980 were not entitled to that benefit as
they had noticed of the curtailment in the exemption before they came to set up their
industries. They would be entitled to exemption from sales tax only to the limit specified in
the second order.
53. Topic: Promissory estoppel and government agencies.

Name: Delhi Cloth and General Mills v Union of India
Bench: Sinha J., Bhuvneshwar P.(CJ), Gajendragadkar, P.B., Wanchoo, K.N., Gupta, K.C.
Das, Shah, J.C
Facts: The facts alleged in the three separate petitions filed by the three petitioners the
manufacturers of Vanaspati, are practically the same. It is said that for the purpose of
manufacturing Vanaspati the petitioners purchased groundnut and (the respondents herein) til
oil from the open market or directly from the manufacturers of such oil. The oils thus
purchased are subjected to different processes in order to turn them into Vanaspati. It is their
case that the only finished product they manufacture from the raw materials thus purchased is
Vanaspati which is liable to exciseduty as a vegetable product. They, contend that at no stage
do they produce any new product which can come within the item described in the Schedule
as " vegetable non-essential, oils.. all sorts in or in relation to the manufacture of which any
process is ordinarily carried on with the aid of Power." Accordingly, it is, said, the demand
for excise duty on the ground that they produce from the raw oils purchased a product which
is liable., to duty under item 23 of the Schedule (now item 12) is illegal
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Held: The judgment read, All that is now required is that the party asserting the estoppels
must have acted upon the assurance given to him. He must have relied upon the
representation made to him. It means that the party has changed or altered his position by
relying on the assurance or representation. The alteration of the position by the party is the
only indispensable requirement of the contract. It is not necessary to prove further any
damage, detriment or prejudice to the party asserting the estoppel.
MODULE 2 CONSIDERATION
54. Topic: Scope and extent of a promissory estoppel and government agencies.
Name: Amrit Banaspati Co. Ltd. v State of Punjab
Citation: 1992 AIR 1075
Bench: R.M. Sahai, J.
Facts:
The Government of Punjab announced in December, 1966; its `New Policy' declaring that
incentives and concession, one of them being refund of sales-tax would be available to those
persons who were willing to set up selective large scale industries in the focal point. Attracted
by the concessions and incentives the Appellants Manager wrote a letter in June, 1968 to the
CM of Punjab expressing his willingness to set up a Vanaspati unit provided the concession
was made available to it. A response came by asserting the same from the Director of
Industries.
Thereafter there had been exchange of correspondence and various meetings between the
appellant's representative and officials of the Government. By a letter dated 25th October,
1968, the appellant requested for confirmation of the concession to which he finally got a
response on 16th June, 1969 which stated that the State Government had agreed to give the
concession and incentives. Acting on the assurance, the appellant purchased the land, which
by a notification issued by the Government was included in the focal point, and also invested
substantial amount in setting up the unit. Subsequently, the appellant claimed refund of sales
tax paid by it to the State Government on sale made by it of its finished products. On
respondents failure to refund the amount, the appellant filed a writ petition in the High Court
of Punjab and Haryana for a direction to refund the sales tax to the appellant who was
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allowed but the respondents sought an appeal with the Division bench which reversed the
earlier decision. An appeal was then filed in the Supreme Court which ended up dismissing it.
Held: The finding of the Division Bench was factually and legally incorrect. It was not
justified in holding that the Government officials had extended promise, unauthorised and
beyond scope of their authority. Promise to refund sales tax amounts already paid, was Held
to be not capable of creating an estoppel.
55. Topic: Consideration must be given at the desire of the promisor.

Name: Durga Prasad v. Baldeo
Citation: (1880) 3 All 221
Court: Delhi High Court
Bench: P.Bahri, J.
Facts: The plaintiff, Baldeo, at the desire and request of the collector of the town expanded
money in the construction of a market in the town. Subsequently, the defendants, - Durga
Prasad & Ors occupied the shops in the market. Since the plaintiff had spent money for the
construction of the market, the defendants in consideration thereof, promised to pay to
plaintiff, a commission on the articles sold through their (defendants) shops in that market.
Defendants however, failed to pay the promised commission; the plaintiff brought an action
to recover the promised commission.
Held: The plaintiff will not succeed since the agreement was void for the want of
consideration. It was observed in this case that the consideration of the promisor to pay the
commission was the construction of market by the plaintiff. But the expenses incurred by the
plaintiff in construction of the market was not there in the desire of the defendants
(promisors) but at the instance/ request of the 3rd party i.e., contractor of the town. It was
therefore, Held that since the consideration for the construction of market did not move at the
desire of the defendants, that is, the promisor ( D & Ors.). It did not constitute a valid / good
consideration. Hence the defendants were not liable in respect of the promise made by them,
following the first legal rule.
56. Topic: A contract cannot be valid until there exist certain consideration for each
party.
Name: Kedarnath Bhattacharya v. Gauri Mohammed
Citation: (1887) ILR 14 Cal 64
Court: Calcutta High Court
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Bench: W C Petheram, Beverley

Facts: The town planners of Howrah thought advisable to erect a town hall at Howrah
provided sufficient subscriptions were collected. With the object in view the commissioner of
Howrah municipality started to raise necessary fund by public subscription. One of the
subscribers of the defendant, of this fund, for Rs 100, signed his name in the subscription
book at that amount. On the faith of the promised subscription the plaintiff (commissioner of
the Howrah municipality) entered into a contract with a contractor for the purpose of the
building the town hall. Later the defendant subscriber referred to pay the amount upon the
promise to pay / subscribe. In other words, he contended that there would be no personal
benefit / significance by the construction of the hall.
Held: He was Held liable. It was observed that, in case the person was asked to knowingly
subscribe the purpose to which the money was to be applied / use. They also knew that on the
faith of their subscription and an obligation was to be incurred to pay the contractor for the
work. The Act of plaintiff is entering into contract with the contractor was done at the desire
of the promisor so as to constitute a good consideration within the meaning of the section
2(d) of ICA.
57. Name: Doraswami Iyer v. Arunachala Ayyar

Citation: AIR 1936 Mad 135
Court: Madras High Court
Bench: Cornish, J.
Facts: The repair of a temple was in progress. As the work proceeded, more money was
required and to raise that money, subscriptions were invited and a subscription list rose. The
defendant put himself down on the list for Rs. 125 and it was to recover this sum that the suit
was filed. The plaint found the consideration for the promise as a reliance on the promise of
the subscriber that they have incurred liabilities in repairing the temple.
Held: The learned judge Held that there was no evidence of any request by the subscriber to
the plaintiff to do the temple repairs. Since, the temple repairs were already in progress when
the subscriptions were invited. The action was not induced by the promise to subscribe but
was rather independent of it. Hence, no recovery was allowed.
Principle: A promise to contribute an amount for a charitable purpose may not be
enforceable because against this promise there may be no consideration. But a promise to pay
subscription becomes enforceable when definite steps have been taken on the faith of the
promised subscription.
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58. Topic: Consideration

Name: Abdul Aziz v. Masum Ali
Citation: AIR 1914 All 22.
Bench: N/A
Facts: The defendant promised to pay a sum of Rs. 500/- as donation for the repair and
reconstruction of a mosque. Nothing was done to carry the repairs and reconstruction of the
mosque. The defendant refused to pay the amount. The secretary of the mosque brought a suit
against the defendant.
Held: The defendant was not liable to pay the subscription promised by him. The secretary of
the committee to whom the promise was made, suffered no detriment as nothing had been
done to carry out repairs. Hence, the suit was dismissed.
Principle: Since nothing was done on the faith of the promise, there was no consideration in
this case which resulted in the defendant never gaining anything as such, and hence the
contract seized to exist.
59. Topic: An offeror can only revoke a unilateral contract if the offeree did not live up to
their side of the contract.
Name: Errington v. Errington
Bench: Denning, Somervell, and Hodson LJJ
Facts: Mr Errington in 1936 bought a house in Milvain Avenue, Newcastle upon Tyne, for
his son and daughter in law, paying 250, and the remaining 500 coming from a mortgage,
paid off with 15s a week by the newlyweds. Mr Errington promised them they could stay in
occupation as long as they paid the mortgage and that when all the instalments were paid it
would be theirs. He gave her the building society book and said, Don't part with this book.
The house will be your property when the mortgage is paid. He died and the son left to move
in with his mother. The mother sought possession from the daughter in law.
Held: Denning, for a unanimous court, Held there was no express promise by the son and
daughter-in-law to pay the installments and the court cannot imply those terms. He
characterizes the father's promise as a unilateral contract; the performative act paying for the
mortgage, and thus it would only be revocable if the couple did not make the payments. Once
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performance has started the offeror cannot revoke the offer. The father's implied intention
was to keep house in their possession if they paid the mortgage. The couple were on a
license, short of a tenancy but a contractual or at least equitable right to remain, which would
grow into good equitable title as soon as the mortgage was paid.
60. Topic: Promise and its scope

Name: Chinnaya v. Venkataramayya
Citation: (1882) 4 Mad 137
Bench: N/A
Facts: A, an old lady, granted / gifted an estate to her daughter the defendant, with the
direction / condition that the daughter should pay an annuity ( annual payment ) of Rs 653 to
As brother, the plaintiff. On the same day the defendant, daughter (promisor), made a
promise vis a vis an agreement with her uncle that she would pay the annuity as directed by
her mother, the old lady. Later the defendant refused to pay on the ground that her uncle
(promisee, plaintiff) has not given any consideration. She contended that her uncle was
stranger to this consideration and hence he cannot claim the money as a matter of right.
Held: It was Held that the deed of gift and the defendants promise to pay the annuity were
executed simultaneously and, therefore, they should be regarded as one transaction and there
was sufficient consideration for that transaction.
Principle: A promise is enforceable if there is some consideration for it and it is quite
immaterial whether it moves from the promisee or any other person.
61. Topic: Consideration and a Promise

Name: Dutton v. Poole Court of Kings Bench
Citation: (1677) 2 Lev 211
Bench: Lord Mansfield
Facts: A person had a daughter to marry and in order to provide her a marriage portion; he
intended to sell a wood of which he was possessed at the time. His son (the defendant)
promised that if the father would forbear to sell at his request he would pay the daughter
1000 . The father accordingly forbore but the defendant did not pay. The daughter and her
husband sued the defendant for the amount.
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Held: The court Held that if a man should say, Give me a horse, I will give your son 10 ,
the son may bring the action, because the gift was upon the consideration of a profit to the
son, and the father is obliged by natural affection to provide for his children. There was such
apparent consideration of affection from the father to his children, for whom nature obliges
him to provide, that the consideration and promise to the father may well extend to the
children.
The whole object of the agreement was to provide a portion to the plaintiff. It would have
been highly inequitable to allow the son to keep the wood and yet to deprive his sister of her
portion. He was accordingly Held liable.
Principle: As long as there is a consideration for a promise, it is immaterial who has
furnished it. It may move from the promisee, or, if the promisor has no objection, from any
other person.
62. Topic: Principle of privity of contract and consideration.

Name: Tweddle v. Atkinson
Citation: (1861) 1 B&S 393
Court: England and Wales High Court (Queen's Bench Division) Decision
Bench: Wightman J, Crompton J, Blackburn J
Facts: William Tweddle was engaged to a Miss Guy. The groom's father entered into an
agreement with the bride's father, William Guy, to pay the groom, William Tweddle, 200 if
he paid the groom 100, all of which was recorded in a written contract. However, William
Guy subsequently died, and the estate would not pay. The groom then sued William Guy's
estate for the promised 200, namely the estate executor Mr Atkinson.
Held: His suit was not successful as it was held no stranger to the consideration can take
advantage of a contract, although made for his benefit. It was left unanswered if the groom's
father could have successfully sued the estate instead. The courts ruled that a promisee cannot
bring an action unless the consideration from the promise moved from him. Consideration
must move from party entitled to sue upon the contract. No legal entitlement is conferred on
third parties to an agreement. Third parties to a contract do not derive any rights from that
agreement nor are they subject to any burdens imposed by it.
63. Topic: Privity of contract

Name: Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd
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Bench: Viscount Haldane, Lord Dunedin, Lord Atkinson, Lord Sumner, Lord Parker, Lord
Parmoor.
Facts: Dunlop made tyres. It did not want them sold cheaply but to maintain a standard resale
price. It agreed with its dealers (in this case Dew & Co) not to sell them below its
recommended retail price. It also bargained for dealers to get the same undertaking from their
retailers (in this case Selfridge). If retailers did sell below the list price, they would have to
pay 5 a tyre in liquidated damages to Dunlop. Dunlop thus was a third party to a contract
between Selfridge and Dew. When Selfridge sold the tyres at below the agreed price, Dunlop
sued to enforce the contract by injunction and claimed damages. Selfridge argued it could not
enforce the burden of a contract between itself and Dew, which Selfridge had not agreed to.
At trial, the judge found in favour of Dunlop. In appeal the damages and injunction were
reversed, saying that Selfridge was not a principal or an agent and thus was not bound. The
issue put to the court was whether Dunlop could get damages from Selfridge without a
contractual relationship.
Held: Viscount Haldane based his argument on three fundamental principles in law. First,
the doctrine of privity requires that only a party to a contract can sue. Second, the doctrine of
consideration requires a person with whom a contract not under seal is made is only able to
enforce it if there is consideration from the promisee to the promisor. Third, the doctrine of
agency requires that the principal not named in the contract can only be sued if the promisor
was contracted as an agent.
In application to the Facts, Haldane could not find any consideration between Dunlop and
Selfridge, nor could he find any indication of an agency relationship between Dew and
Selfridge. Consequently, Dunlop's action must fail.
Principle: It established that an agreement for resale price maintenance was unenforceable as
a matter of privity of contract.
64. Topic: Doctrine of privity of contract

Name: Jamna Das v. Ram Autar
Citation: (1911) 39 IA 7: ILR 34 All 63.
Court: Bombay High Court
Bench: Macnaghtan J.
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Facts: A had mortgaged some property to X. A sold this property to B. B having agreed with
A to pay off the mortgage debt. X brought an action against B to recover the mortgage
money.
Held: It was Held by the Privy Council that since there was no contract between X and B, X
could not enforce the contract to recover the amount from B.
65. Topic: Exception to Privity of contract

Name: Khwaja Muhammad Khan v. Husaini Begum
Citation: (1910) 37 IA 152.
Bench: Macnaghten, Collins, A Wilson, A Ali
Facts: An agreement between the fathers of a boy and a girl that if the girl married a
particular boy, the boys father would pay certain personal allowance known as Kharch-i-
pandan (betel-box expense) or pin money to the plaintiff. It was also mentioned that a certain
property had been set aside by the defendant and this allowance would be paid out of the
income of that property. The plaintiff married the defendants son but the defendant failed to
pay the allowance agreed to by him. Plaintiff brought an action against the defendant.
Held: The basis of the plaintiffs claim being a specific charge on the immovable property in
her favour, she is entitled to claim the same as a beneficiary, and as such, the common law
rule of privity is not applicable.
Principle: Exception to privity of contract: Trust- While only party to a contract who can sue
on it and no such right is conferred on a third party, it was also stated that such a right may
be conferred by way of property, as, for example, under a trust.
66. Topic: Beneficiaries to a contract

Name: MC Chacko v. State Bank of Travancore
Bench: J.C. Shah, J.
Facts: H bank had an overdraft account with State Bank. MC Chacko was the manager of H
bank and his father K had guaranteed the repayment of debt. K gifted his properties to
members of his family. The gift deed provided that liability if any under the said guarantee
should be met either by MC personally or through property gifted to him under the said deed.
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State Bank sued all the heirs under the deed along with MC; albeit limitation period to sue on
letter of guarantee had already passed.
Held: In present case, no such charge was created in favor of State Bank-the deed merely set
out an internal arrangement between the donor and members of family which conferred a
right of indemnity upon them against M.C. Chacko and his inherited property. Since it was a
debt of K such that he was personally liable under the debt; after his death all his inheritors
were liable to satisfy the debt out of his estate, inherited by them. However, in such a case,
other members would have been indemnified by M.C. Chacko for any share of debt paid by
them. Even if charge would have been created in favour of State Bank, it wouldnt have been
able to enforce it since it is not a party to the deed and, was a complete stranger to it: it wasnt
a beneficiary under the contract.
Principle: A charge may be created on immovable property when either through express
words or implied from deed, it is clear that party intended to make a specified property or
fund, belonging to him, liable for debt due by him.
67. Topic: Privity of Contract

Name: Beswick v. Beswick
Citation: [1968] AC 58
Bench: Lords Reid, Pearce, Hodson, Guest, and Upjohn
Facts: Peter Beswick was a coal merchant. He agreed to sell his business to his nephew, the
respondent, if he paid him a certain sum of money for as long as he lived, and then to pay his
wife (the appellant) 5 per week for the rest of her life after he died. He died, and the nephew
only paid his aunt once before stating that no contract existed between them. She was also the
administratrix of her husband's will. Mrs. Beswick was unsuccessful at trial and successful at
appeal, which John Joseph Beswick appealed.
Held: The appeal was dismissed. The House of Lords decide that the aunt has no right to sue
her nephew in her own capacity as she was not a party to the contract. This overturns
Denning's findings in the lower court allowing third parties to sue for benefits that were
guaranteed to them under a contract. However, in her capacity as the administratrix she is
able to sue him for the specific performance of his promise that was made in the contract.
Principle:
Third parties cannot sue for breach of contract when they were not a party to the contract,
even if they were named as a benefactor of the contract.
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Executors of wills can sue for specific performance of promises made in contracts with the
deceased person.
68. Topic: Trust and its Scope

Name: Rana Uma Nath Baksh Singh v. Jung Bahadur
Citation: AIR 1938 PC 245
Bench: G Rankin, Romer, S Lal
Facts: The defendant Uma Nath was appointed by his father as his successor and was put in
possession of his entire estate. In consideration thereof the defendant Umanath agreed with
his father to pay a certain sum of money and to give a village to the plaintiff Jang Bahadur,
the illegitimate son of his father, on his attaining majority to which he later on refused.
Held: Privy Council Held that a trust was created in favour of the minor for the specified
amount and village. Hence, he was entitled to maintain the suit.
Principle: A trust is created by one person, maintained by another person for the benefit of
third person. Trust is one of the exceptions to the doctrine of contract.
69. Topic: Marriage settlement, Partition or other family Arrangement- An exception that
allows a stranger to the contract to file a suit.
Name: Gregory & Parker v. Williams
Citation: (1817) 3 Mer 582: 36 ER 224
Court: N/A
Bench: N/A
Facts: The defendants wife left him because of his cruelty. The husband then executed an
agreement with his father-in-law, promising to treat his daughter properly, and if he failed to
do so , to pay her monthly maintenance and to provide her with a dwelling . Subsequently,
she was again ill-treated by the defendant and also driven out.
Held: It was Held that the wife was entitled to enforce the contract bearing a promise made
by her husband to her father though she was not a party to that contract.
70. Topic: Beneficiary can sue for enforcement in case of Marriage settlement, partition
or other family arrangements.
Name: Daropti v. Jaspat Rai
Citation: (1904) P.R. No. 49 of 1905
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Court: Punjab Chief Court

Facts: Jaspats wife deserted him because of ill treatment. Jaspat entered into agreement with
his father-in-law to treat her properly or else pay monthly maintenance. Subsequently ill-
treated and driven out of house.
Held: Wife was entitled to enforce the promise made by Jaspat to her father.
71. Topic: Estoppel

Name: Narayani Devi v. Tagore Commercial Corporation Ltd
Citation: AIR 1963 Cal 401
Bench: Ramendra Mohan Datta, J.
Facts: In a contract between the plaintiffs husband, and defendant, Defendants agreed-
To pay certain amounts to the plaintiffs husband during his life time & thereafter to pay the
same to plaintiff for her life.
On suit for recovery of the same defendants take the plea of privity of contract
On death of plaintiffs husband, defendants, - made certain payments to the plaintiff, in
pursuance of the agreement, had asked for the extension of time to pay, and called the
plaintiff, to execute certain documents in this connection.
Held: Defendants, have created such privity with the plaintiff, by their conduct, by
acknowledgement and by admission, that the plaintiff, is entitled to her action even though
there was no privity of contract between the plaintiff, and the defendants, when the said
contract was entered into.
Principle: If a party by conduct, acknowledgement, or admission recognises the right of
other to sue him, he may be liable on the basis estoppels.
72. Topic: Restrictive covenant

Name: Tulk v. Moxhay
Court: Court of Chancery, England
Bench: N/A
Facts: In 1808, Charles Augustus Tulk, the owner of several parcels of land in Leicester
Square, sold a plot to another party, making a covenant to keep the Garden Square
"uncovered with buildings" such that it could remain a pleasure ground. Over the following
years the land was sold several times over to new parties, eventually to the defendant.
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The defendant, who was aware of the covenant at the time of purchase, refused to abide by
the covenant as he claimed he was not in privity of contract and so was not bound by it.
Held: Whether or not the covenant runs with the land, such an agreement could properly be
enforced in equity because the one who purchases the land from Tulk had notice of that
covenant. Defendant, Moxhal could not stand in a different situation from the owner from
whom he purchased the property.
Principle: Since a covenant is a contract between the vendor and the vendee, it may be
enforced against a subsequent purchaser who has notice of the contractual obligation of his
vendor, even though it does not run with the land.
73. Topic: Privity of Contract

Name: Smith & Snipes Hall Farm Ltd v. River Douglas Catchment Board
Bench: N/A
Facts: The River Douglas Catchment Board agreed with a number of landowners between
the River Douglas and the Leeds and Liverpool Canal) to carry out some work if some
contribution to the cost was given. In 1940 Mrs S, one of the covenantees, sold her land
("Low Meadows") to Smith, which incorporated Snipes Hall Farm Ltd in 1944. In autumn
1946 the Ellen Brook burst its banks and flooded Smith and Snipes Hall Farm land. They
made a claim against the Board for damages in tort and breach of contract. The question was
whether not having been privy to the original agreement was a bar to any recovery.
Held: Board was liable. Whole arrangement was to benefit the lands whoever be the owner.
Principle: A person purchasing a land with the notice that the owner of the land is bound by
certain duties created by an agreement affecting the land shall be bound by them, although he
was not a party to it.

Name: Mc Ardle, In re
Citation: (1951) 1 Ch 669
Facts: Majorie McArdle carried out certain improvements and repairs on a bungalow. The
bungalow formed part of the estate of her husband's father who had died leaving the property
to his wife for life and then on trust for Majorie's husband and his four siblings. After the
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work had been carried out the brothers and sisters signed a document stating in consideration
of you carrying out the repairs we agree that the executors pay you 480 from the proceeds of
sale. However, the payment was never made.
Held: The promise to make payment came after the consideration had been performed
therefore the promise to make payment was not binding. Past consideration is not valid.
Principle: Consideration must not be past.
75. Topic: Implied assumpsit and Past consideration

Name: Lampleigh v. Brathwait
Citation: (1615) 80 ER 255
Court: Kings Division Bench
Bench: Warburton J and others
Facts: Brathwait killed a man called Patrick Mahume unlawfully. He asked Lampleigh to
ride to the King and petition for a pardon. Lampleigh was successful. Brathwait promised
100 to Lampleigh. But he never paid up. Lampleigh sued. Brathwait said that because the
service had been performed in the past, there was no good consideration at the time for the
promise, regardless of the fact that Lampleigh was successful in securing a pardon.
Held: The Court of the King's Bench Held that there was an implied understanding (i.e.
implied assumption, or "assumption" of obligation) that a fee would be paid. Where a past
benefit was conferred at the beneficiary's request, and where a reward would reasonably be
expected, the promisor would be bound by his promise.
Principle: A promise made after performance can be enforced, only if it was understood by
the parties that there will have some kind of reward prior the performance.
Implied assumpsit is a form of action at common law for the recovery of damages caused by
the breach or non-performance of a simple contract.
76. Topic: Scope of consideration in English law

Name: White v. Bluett
Citation: (1853) 23 LJ Ex 36
Court: Exchequer Chamber
Bench: Pollock CB, Alderson B
Facts: Mr Bluett had lent his son some money. Mr Bluett died. The executor of Mr Bluett's
estate was Mr White. He sued the son to pay back the money. In his defense, the son argued
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that his father had said the son need not repay if the son would stop complaining about how
Mr Bluett would distribute his property in his will among the children.
Held: There must be valid consideration for a contract. Reciprocal exchange is a necessary
element of consideration.
Principle: No consideration he is not giving anything in return for something the father
was giving him.
Reciprocal exchange is necessary for consideration. Consideration is giving up something
you are able to do and there is no prohibition against it.
If you give up a freedom that you have that does have value and should be considered
consideration
No consideration when you give up something that you arent legally entitled to do

Name: Ward v. Byham
Citation: (1956) 1 WLR 496.
Bench: Denning MR, Morris LJ, Parker LJ
Facts: An unmarried couple had a child together and lived together for five years. The father
then turned the mother out of the house and sent the child to live with a neighbour and the
father paid the neighbour 1 per week. The mother then got a job as a live in house keeper
and wished to have the daughter live with her. The father agreed to allow the daughter live
with the mother and agreed to pay her 1 per week provided she ensured the child was well
looked after and happy. The father made payments but then when the mother remarried he
stopped making payments. The mother brought an action to enforce the agreement. The
father argued that the Mother was under an existing legal duty to look after and maintain the
child and therefore was not providing any consideration for the promise to make payment.
Held: By promising to ensure the child was well looked after and happy she had gone beyond
her existing legal duty and therefore had provided consideration. She was entitled to the
payment.
Principle: It was Held that notwithstanding the statutory duty imposed on the mother, she
could enforce the promise since the act of keeping the baby 'happy' provided additional
consideration.
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Name: Stilk v. Myrick
Citation: (1809) 2 Camp 317
Court: England and Wales High Court (King's Bench Division) Decisions
Bench: Lord Ellenborough
Facts: Before the start of a voyage, plaintiff contracted to work as one of 11 seaman for the
voyage for $5 a month. During the voyage 2 seamen deserted; Captain then made an
agreement with the rest of the crew that they should receive the wages of the deserters if they
continued to work the ship back to London.
Held:
The agreement was not enforceable because there was no consideration given by the plaintiff
for the promise to pay.
The remaining crew were already bound to work the vessel back to London. The desertions
were merely an emergency of the voyage and the rest of the crew remained bound by the
terms of the original contract to bring the ship back to London.
Principle:
This case is authority for the proposition that promising or performing a duty you are already
bound to the other party to perform is not good consideration for any promise he makes you.
One good reason for this rule is that it prevents contractual blackmail where a party
threatens not to perform his contractual obligations unless he gets more consideration than
was originally agreed to.

Name: Shadwell v. Shadwell
Citation: (1860) 9 CB (NS) 159
Bench: Erle CJ, Byles J, Keating J
Facts: P entered into an agreement to marry. His uncle, writing to congratulate him said, "I
will pay you 150 per year during my life until your income as a barrister shall reach 600
pa". When the uncle died, P sought to recover outstanding amounts. The deceased's personal
representatives argued that P was already under a contractual obligation to marry when the
uncle made the offer, and therefore P supplied no consideration.
Held: Earle CJ and Keating J:
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The marriage was an object of interest to the uncle and he benefited by its taking place, thus
there was consideration.
Dissenting: Byles, J.
The question is, was the marriage at the testator's request? Express request there was none.
Can any request be implied?" No request can be implied, and therefore there was no contract
between the parties.
Principle: It would be a valid consideration for the court to enforce a contract if a pre-existing
duty was performed, so long as it was for a third party.

Name: Gopal Co Ltd v. Hazarilal Co.
Bench: T. Shrivastava, P.Tare
Facts: The Facts alleged in the three separate petitions filed by the three petitioners the
manufacturers of Vanaspati, are practically the same. It is said that for the purpose of
manufacturing Vanaspati the petitioners purchased groundnut and (the respondents herein) til
oil from the open market or directly from the manufacturers of such oil. The oils thus
purchased are subjected to different processes in order to turn them into Vanaspati. It is their
case that the only finished product they manufacture from the raw materials thus purchased is
Vanaspati which is liable to exciseduty as a vegetable product. They, contend that at no stage
do they produce any new product which can come within the item described in the Schedule
as " vegetable non-essential, oils.. all sorts in or in relation to the manufacture of which any
process is ordinarily carried on with the aid of Power." Accordingly, it is, said, the demand
for excise duty on the ground that they produce from the raw oils purchased a product which
is liable., to duty under item 23 of the Schedule (now item 12) is illegal.
Held: The defendants were liable to pay a proportionate amount as such.
Principle: A performance of a pre-existing contract with a third party was Held a valid
consideration.

Name: Thomas v. Thomas
Citation: (1842) 2 QB 851, 859
Court: Queens Division Bench
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Bench: Denman J, Patteson J, Coleridge J.

Facts: John Thomas, shortly before dying, orally expressed a desire for his wife to have
either the house used as their residence and its contents or 100 in addition to the other
provisions made for her in his will. After his death the executors of his estate (Samuel
Thomas, his brother, and Benjamin Thomas) entered into an agreement with Eleanor (his
wife) in consideration of John's desires whereby Eleanor would take possession of the
house and in return maintain the house and pay 1/year for the "ground rent".
The respondent remained in the house for some time; however after the death of Samuel, the
appellant refused to complete the conveyance, claiming that consideration was lacking. The
lower court found for Eleanor and Benjamin appealed.
Held: The appeal made was dismissed. The reasons given were as follows:
In the court's findings Justice Patteson Held that motive is not the same as consideration;
consideration must be something which is of value in the eyes of the law.
The court found that the agreement entered into between the executors and Ms. Thomas
contained an agreement to pay 1 rent/year which showed this was not merely a voluntary
gift and was sufficient consideration.
Principle: Consideration must have value in the eyes of the law. Motive is not sufficient
consideration.
82. Name: Pinnel v. Cole (Pinnels case)

Defendant: Cole
Appellant: Pinnel
Citation: (1602) Co. Rep. 117a
Facts: A sum of 8-10 sh. was due to be paid on November 11, 1600 on the basis of a bond
executed by Cole in favor of Pinnel. On October 1, 1600 Cole paid 5-2 sh. 6d. to Pinnel,
and Pinnel accepted this smaller amount in full payment of the original debt. Subsequently,
Pinnel brought an action against Cole to enforce the payment of full amount on the basis of
the bond.
Judgment: It was held that Pinnel was entitled to succeed on the ground that mere partial
performance of the original contract would not discharge the original contract. It was,
however, stated that the original debt could be discharged only by introduction of a new
element in the contract at the creditors request.
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83. Name: Rajlukhy Dabee v. Bhootnath Mookerjee

Defendant: Bhootnath Mookerjee
Appellant: Rajlukhy Dabee
Citation: (1890-00) 4 CWN 488
Facts: The defendant promised to pay his wife a fixed sum of money every month for her
separate residence and maintenance. The agreement was contained in a registered document
which mentioned certain quarrels and disagreements between the two.
Judgment: It was held that near relation between the two parties does not necessarily imply
natural love and affection between them. It was held that from the recitals in the document, it
was apparent that the document had been executed not because of natural love and affection
between the parties but because of the absence of it, and therefore the wife was not entitled to
recover the sums mentioned in the document.
84. Name: Bhiwa v. Shivaraman

Plaintiff: Bhiwa
Defendant: Shivaraman
Citation: (1899) 1 Bom L.R.
Facts: A sued B, his brother, for a share in certain lands. But the suit was dismissed as B
solemnly affirmed that the property was not ancestral. B then agreed by registered writing to
give A, one-half of the same property. The present suit was brought to obtain the same.
Judgment: It was held that inspite of the brothers are in quarrels, the Sec. 25 (1) could be
applied as the defendant has such love for his brother that he is willing to give away his
property.
85. Name: Pestonji v. Bai Meherbai

Plaintiff: Pestonji
Defendant: Bai Meherbai
Citation: (1928) 30 Bom L.R. 1407
Judgment: The Bombay High Court expressed the view that the promise should be to pay
time-barred debt due from the promisor and not a promise to pay time-barred debts due from
other persons.
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86. Name: Govind Nair v. Achutan Nair

Plaintiff: Govind Nair
Defendant: Achutan Nair
Citation: A.I.R. 1940 Mad. 678
Judgment: A view different from that presented in Pestonji v. Bai Meherbai was expressed
by the Madras High Court and held that the words by the person to be charged therewith
are wide enough to cover the case of a person who agrees to become liable for the payment of
a debt due by another and need not to be limited to the person who was indebted from the
beginning.
87. Name: Tulsi Ram v. Same Singh

Plaintiff: Tulsi Ram
Defendant: Same Singh
Citation: A.I.R 1981 Delhi 65
Facts: After the expiry of a period of three years from the execution of the promissory note,
the defendant made the following endorsement on the back of the note itself:
I accept this pronote and it is valid for the next three years.
Judgment: It was held that these words simply mean an acknowledgment anout the existence
of the pronote and there were no words stating that the defendant intended to pay pr promised
to pay the time-barred debt. The said endorsement did not constitute a contract to pay the
time-barred debt under section 25(3) and the defendant therefore could not be made liable on
the basis of this endorsement.
88. Name: Daulat Ram v. Som Nath

Plaintiff: Daulat Ram
Defendant: Som Nath
Court: Delhi High Court
Facts: The landlord sent a notice to the tenant demanding the arrears of rent for a specified
period which included time-barred rent also. The tenant in reply said that the payment of rent
can also made in cash, or by cheque, or by draft as you think fit. It was also stated that the
payment could be received from any or more of the persons mentioned in the reply letter. The
reply letter, however, did not either mention the amount which was to be paid or the period
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for which the arrears were to be paid. The tenant subsequently deposited some amount of
arrears of rent which did not include the time barred rent.
Judgment: It was held that from the reply letter and the subsequent conduct of the tenant, it
was obvious that he had made no promise to pay the time-barred rent and therefore ho could
not be made liable to pay the same on the basis of the reply letter.
89. Name: Debi Prasad v. Bhagwati Prasad

Plaintiff: Debi Prasad
Defendant: Bhagwati Prasad
Citation: A.I.R 1943 All. 63
Judgment : It was held that when the acknowledgment of the time-barred debt is coupled
with an agreement to pay interest, it cannot be regarded as a mere acknowledgment and it
should be regarded as an agreement with a promise to pay the debt within the meaning of
Section 25(3).
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MODULE II .1.3 CAPACITY
90. Name: Mohori Bibee v Dharmodas Ghosh

Plaintiff: Dharmodas Ghosh
Defendant: Mohori Bibee
Citation: (1903) 30 L.A., 114 (P.C.)
Facts: The plaintiff, while he was a minor, mortgaged his property in favour of the defendant,
Brahmo Dutt, who was a money-lender to secure a loan. At the time of transaction the
attorney, who acted on behalf of the money-lender had the knowledge that the plaintiff was a
minor. The minor brought an action against the money-lender stating that he was a minor
when the mortgage was executed by him and, therefore, the mortgage was void and
inoperative and the same should be cancelled. By the time of Appeal to the Privy Council, the
defendant Brahmo Dutt died and the appeal was prosecuted by his executors.
The defendant contented that:
(1) The minor had fraudulently misrepresented his age, the law of estoppel should be applied
against him.
(2) If the mortgage is cancelled as requested by the minor, the minor should also be asked to
refund the loan which he had taken.
Judgment: The defendants contentions were rejected. Minors agreement was held void,
and it was held that the minor could not be asked to repay the loan taken by him.
91. Name: Arumugan v. Duraisinga

Plaintiff: Arumugan
Defendant: Duraisinga
Citation: I.L.R. (1914) 37 Mad. 38
Judgment:It was held that a promissory note to pay the sum received during minority is not
enforceable.
92. Name: Suraj Narain v. Sukhu Ahir

Plaintiff: Suraj Narain
Defendant: Sukhu Aheer
Citation: A.I.R. 1928 All. 440
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Facts: A person borrowed some money during his minority and then made a fresh promise
after attaining majority, to pay the sum plus interest thereon. The question before the
Allahabad High Court was, whether consideration received by a person during his minority
can be made good consideration for a fresh promise by him after attaining majority.
Judgment: It was held by a majority of 2:1 that the consideration received by a person during
his minority cannot be called good consideration received by a person in its strict term within
the definition of consideration in Section 2(d).
93. Name: Kundan Bibi v. Sree Narayan

Plaintiff: Kundan Bibi
Defendant: Sree Narayan
Citation: (1906-7), 11 Cal. W.N. 135
Facts: S, while he was a minor, received some goods from K in connection with his business
of piece-goods and he was thus indebted to K to the extent of Rs. 7,373/4/. On attaining the
majority S took further a sum of Rs 76/12/- and at that time executed a bond for paying the
total amount of Rs 7,450 to K. K brought an action against S to recover this amount where S
contended that he was not liable on the bond because the same purported to ratify debts
incurred during minority.
Judgment: It was held that S was liable for the whole debt secured by the bond because there
was a new consideration for the promise on which the defendant is sued.
94. Topic: Return of benefit secured by a fraudulent minor-Doctrine of Restitution

Name: Leslie v. Sheill
Plaintiff: Leslie
Defendant: Sheill
Facts: The defendant, a minor, falsely misrepresented himself to be a major and obtained two
loans of 200 each from the plaintiffs, who were money-lenders. The plaintiffs brought an
action to recover 475, being the amount of loan taken and the interest thereon.
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Judgment: It was held that the money could not be recovered. If that were allowed it would
amount to enforcing the agreement to repay the loan, which is void under the Infants Relief
act, 1874.
95. Topic: Capacity to Contract

Name: Khan Gul v. Lakha Singh
Plaintiff: Khan Gul
Defendant: Lakha Singh
Citation: A.I.R. 1928 Lahore 609
Court: Lahore High Court
Facts: The plaintiffs advanced a loan of Rs 17,500 to a mionr. The plaintiff brought an action
against the minor to recover the amount.
Judgment: The minor was held liable to refund the amount. According to the decision,
asking a minor to return the ill-gotten gain in the form of money is not the enforcement of
contract but it is only the restoration of parties to the pre-contract position.
96. Topic: Capacity to Contract

Name: Ajudhia Prasad v. Chandan Lal
Plaintiff: Ajudhia Prasad
Defendant: Chandan Lal
Citation: A.I.R. 1937 All. 610
Facts: A sum of money was borrowed by two minors under a mortgage deed. They were
more than 18 but less than 21 years of age, but fraudulently concealed the fact that a guardian
had been for them. The question was whether the money-lender could get a decree for the
principal money or sale of mortgaged property.
Judgment: It was held that a minor can be asked to pay compensation only if he comes to the
court to seek some relief as plaintiff and moreover the minor can be asked to restore back the
property if the same was traceable with him but he could not be asked to pay money
compensation.
97. Topic: Capacity to contract-Minors liability for necessaries

Name: Kunwarlal v. Surajmal
Plaintiff: Kunwarlal
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Defendant: Surajmal
Citation: A.I.R. 1963 M.P. 58
Judgment: It has been held that the house given to a minor on rent for living and continuing
his studies is deemed to be supply of necessaries suited to the minors condition in life and
the house rent can be recovered.

Name: Sham Charan Mal v. Chowdhry Debya Singh
Plaintiff: Sham Charan Mal
Defendant: Chowdhry Debya Singh
Citation: I.L.R. (1894) 21 Cal. 872
Facts: Certain money was advanced to a minor for defending himself in certain criminal
proceeding against him on a charge of dacoity. The minor executed a bond in respect of his
loan, and then used this amount for the purpose of his defense.
Judgment: It was held that the amount borrowed was in connection with his personal liberty
and it comes within the term necessaries of section 68 of the Contract Act.

Name: Kidar Nath v. Ajudhia Persad
Plaintiff: Kidar Nath
Defendant: Ajudhia Persad
Citation: (1883) Punjab Record, Case No. 165, p. 552
Facts: A loan was given to a minor on the mortgage of his property with a view to saving the
minors property from sale in execution of a decree.
Judgment: It was held that this loan was for necessaries suited to the minors condition in
life, and therefore, even though the mortgage was void, the mortgagee had still a right of lien
over the property mortgaged to him by the minor.

Name: Nash v. Inman
Plaintiff: Nash
Defendant: Inman
Citation: (1908) 2 K.B. 1
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Facts: A minor, who was already having sufficient supply of clothing suitable to his position,
was supplied further clothing by a tailor.
Judgment: It was held that the price of the clothes so supplied could not be recovered.
101. Topic: Capacity to contract-Minors liability for necessaries.

Name: Ryder v. Wombwell
Plaintiff: Ryder
Defendant: Wombwell
Citation: (1868) L.R., 3 Ex. 90. Affirmed (1869) L.R., 4 Ex. 32
Facts: The defendant, an infant, having an income of only 500 per year only was supplied a
pair of crystal, ruby and diamond solitaires and an antique goblet.
Judgment: It was held that certain things like ear-rings for a male, spectacles for a blind-
person, or a wild animal, cannot be considered as necessaries.
102. Topic: Contract of Apprenticeship.

Name: Roberts v. Gray
Plaintiff: Roberts
Defendant: Gray
Citation: (1913) 1 KB 520: (1911-13) All ER Rep 870 (CA)
Facts: The defendant, an infant, agreed with the plaintiff, a noted billiards player, to join him
in a billiards-playing tour of the world. The plaintiff spent time and money in making
arrangements for billiards matches, but the defendant repudiated the contract.
Judgment: The contract was held to be one for necessaries as it was for the infants good
teaching or instruction whereby he may not profit afterwards. Hence, the plaintiff
succeeded in recovering the damages for the breach of the contract.
103. Topic: Contract of service

Name: Raj Rani v. Prem Adib
Plaintiff: Raj Rani
Defendant: Prem Adib
Facts: The father of Raj Rani, who was a minor, entered into a contract on her behalf with
Prem Adib, a film producer. According to the contract, Raj Rani was to act as a film actress
in the defendants studio, on payment of a certain amount. Raj Rani was not given any work.
She sued the producer, Prem Adib for the breach of contract.
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Judgment: It was held that since the plaintiff was a minor, the contract was void. It was also
observed that the contract of service entered into by the father on behalf of his minor
daughter was void for another reason also, that is, a third party, who is a minor, is no
consideration.
104. Topic: Contracts of immovable property by the minors guardian

Name: Srikakulam Subrahmanyam v. Kurra Subba Rao
Plaintiff: Srikakulam Subrahmanyam
Defendant: Kurra Subba Rao
Citation: (1911) I.L.R. 39 Cal. 232; 39 I.A. 16
Court: Privy Council
Facts: The respondent, a minor agreed to sell through his guardian and mother certain land to
the appellants, for the purpose of liquidating a debt incurred by the minors father. The
possession of the land was also given to the appellant. The minor then filed a suit to recover
back the possession of the land.
Judgment: It was held that the minors contract entered into through his mother for the
purpose of discharging minors fathers debt was valid and the minor was, thereof, bound by
the transaction. It was also observed that if the mother and guardian had taken no part at all
in the transaction, the respondent could not have entered into a valid contract to sell the land
in suit to the appellants.
105. Topic: Contracts beneficial to a minor

Name: Great American Insurance Co. Ltd. v. Madan Lal
Plaintiff: Great American Insurance Co. Ltd.
Defendant: Madan Lal
Citation: A.I.R. 1935 Bom. 353.
Facts: The guardian of a minor affected and insurance against fire in respect of minors
property. The Insurance Company knew that the owner of the property was a minor.
Subsequently, the property insured got destroyed by fire. In an action by the minor against
the Insurance Company to claim compensation for the loss of property, it was pleaded that
since the plaintiff was a minor, the contract of insurance was void.
Judgment: It was held that the minor was entitled to claim the amount.
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106. Topic: Minors liability when the same act results in a tort as well as breach of
agreement.
Name: Jennings v. Rundall
Plaintiff: Jennings
Defendant: Rundall
Citation: (1799) 8 Term R. 335
Facts: A minor, who hired a mare for riding, injured her by over-riding.
Judgment: It was held that he could not be made liable for the tort of negligence because that
would mean making him liable for the breach of contract of bailment.
agreement.
Name: Burnard v. Haggis
Plaintiff: Burnard
Defendant: Haggis
Citation: (1863) 32 L.J.C.P. 189; (1863) 14 C.B.N.S. 45.
Facts: A minor hired a mare. It was expressly agreed that the mare will be used only for
riding and not for jumping and larking. The mare was made to jump over a fence. She was
impaled on it and killed.
Judgment: It was held that the minor was liable for negligently killing the mare as his act
was totally dependent of the contract made by him.
agreement.
Name: Ballet v. Mingay
Plaintiff: Ballet
Defendant: Mingay
Citation: (1943) K.B. 281
Facts: A minor hired a microphone and an amplifier. Instead of returning the same to the
owner, the minor passed it on to his friend.
Judgment: It was held that minors act of passing it on was altogether outside the purview of
bailment and therefore, the minor cold be made liable for detinue.
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109. Topic: Person of unsound mind.

Name: Indar Singh v. Parmeshwardhari Singh
Plaintiff: Indar Singh
Defendant: Parmeshwardhari Singh
Citation: A.I.R. 1957 Pat. 498
Facts: A property worth about Rs 25,000 was agreed to be sold by a person for Rs 7000 only.
His mother proved that he was a congenital idiot, incapable of understanding the transaction
and that he mostly wandered about.
Judgment: It was held that the contract was void because according to Section 12 the person
entering into a contract must be a person who understands what he is doing and is able to
form a rational judgment as to whether what he is about to do is to his interest or not. The
crucial point, therefore, is to find out whether he is entering into the contract after he has
understood it has decided to enter into that contract after forming a rational judgment in
regard to his interest.
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MODULE II .1.4 CONSENT
110. Topic: Free Consent-Coercion

Name: Chikam Ammiraju v. Chikkam Seshama
Appellant: Chikkam Ammiraju
Defendant: Chikkam Seshama
Citation: I.L.R (1918) 41 Mad. 33
Facts: In this case A, a Hindu, by a threat to commit suicide induced his wife and son to
execute a deed in favour of As brother in respect of certain properties claimed as their own
by the wife and son. The question before the court was whether a threat to commit suicide
could be considered to be an act forbidden by the Indian Penal Code.
Judgment: It was held by Wallis C.J. and Seshagiri Ayyar, J. that a threat to commit suicide
amounted to coercion within the meaning of section 15 of the Indian Contract Act and
therefore the release deed was voidable. It was observed that the threat to commit suicide
could be considered to be an act forbidden by the Indian Penal Code and also the threat to kill
oneself was an act where a person was acting to his own prejudice and also to the prejudice of
his wife and his son and thus the requirements of section 15 were satisfied.
Dissented: Oldfield J. who dissented was however of the view that suicide is not an act
forbidden by the Indian Penal Code, only an attempt to commit suicide is punishable under
section 309 of Indian Penal Code and a threat to do that could not be considered to be a threat
to do a forbidden act within the meaning of section 15 of the Contract Act.
111. Topic: Free Consent-Coercion

Name: Ranganayakamma v. Alwar Setti
Appellant: Ranganayakamma
Defendant: Alwar Setti
Citation: I.L.R (1889) 13 Mad. 214
Facts: On the death of husband of a 13 year old widow, the husbands dead body was not
allowed to be removed from her house for cremation, by the relatives of the adopted boy until
she adopted the boy.
Judgment: It was held that the adoption was not binding on the widow as her consent had
been obtained by coercion.
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112. Topic: Free consent-Coercion-Forcible dispossession of property under threat

is coercion.
Name: Krishna Lal Kalra v. N.D.M.C.
Plaintiff: Krishna Lal Kalra
Defendant: N.D.M.C.
Facts: In this case the plaintiff was given license by the N.D.M.C to run an open air
restaurant in Cannaught Circus, New Delhi. The lease was to expire on 31st May, 1978. The
plaintiff, who started running the Restaurant under the name and style Rumble Open Air
Restaurant, was allegedly thrown out of the premises after taking forcible possession thereof
without due process of law by the defendant who sent demolition squad with police force on
7th August 1976. There was also a threat that the plaintiff would be detained under MISA, if
he did not handover the possession of the property.
The plaintiff alleged that there was coercion and he filed the present suit claiming damages of
Rs. 10 Lacs.
Judgment: It was held that a person is not bound by any act done under duress or coercion.
In this case the threat that the plaintiff would be detained under MISA amounted to coercion.
The plaintiffs suit was decreed for a sum of Rs 9, 11,525.12 with cost as well interest @
12% w.e.f. 7th August, 1979, i.e., the date of filing the suit till the payment of the decreed
amount.
113. Topic: Free Consent-Coercion-Threat to strike is no coercion.

Name: Workmen of Appin Tea Estate v. Industrial Tribunal
Plaintiff: Industrial Tribunal
Defendant: Workmen Of Appin Tea Estate
Citation: A.I.R. 1966 Assam 115
Facts: The demand of the workers for bonus was accepted after a threat to strike. The
question which had arisen was, whether such a decision between Union of the Workers and
the Indian Tea Association could be declared void on the ground that there was coercion.
Judgment: It was held that because of the doctrine of collective bargaining under the
Industrial Disputes Act, the demand of the workers could be backed by a threat of strike.
Such a threat was neither a threat to commit an offence under the Indian Penal Code, nor was
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it unlawful detaining or threatening to detain any property and hence it did not amount to
coercion and as such the agreement was valid.
114. Topic: Free Consent-Coercion-Statutory Compulsion is no coercion.

Name: Andhra Sugars Ltd. v. State of A.P.
Plaintiff: Andhra Sugars Ltd.
Defendant: State of A.P.
Citation: A.I.R. 1968 S.C. 599
Facts: If any cane-grower offered to sell his sugarcane to a factory in a certain zone, the
factory was bound to accept the offer under the Andhra Pradesh Sugarcane (Regulation of
Supply and Purchase) Act, 1961, and accordingly the agreement was entered into.
Judgment: It was held that in such a case even though there was a legal compulsion for the
factory to make the agreement, the agreement could not be said to be entered into by lack of
free consent and there was no coercion.
115. Topic: Free Consent-Undue Influence-Person in dominant position and

obtaining of unfair advantage.
Name: Mannu Singh v. Umadat Pandey
Plaintiff: Mannu Singh
Defendant: Umadat Pandey
Citation: (1890) 12 All. 523
Facts: The plaintiff, an aged person executed a deed of gift in respect of the whole of his
property in favour of the defendant, who was plaintiffs spiritual adviser. The only reason for
the gift was his desire to secure benefits to his soul in the next world and also in view of the
plaintiff having heard recitation of the holy book Bhagwat. Soon after the execution of the
said deed, the plaintiff applied for the cancellation of the same by a suit brought by him under
section 39 of the Specific Relief Act, 1877.
Judgment: It was held that because of the fiduciary relationship between the parties, and the
absurdity of the reason given by the plaintiff in the gift deed for executing the gift deed and in
view of the provision contained in the section 111, Indian Evidence Act, the defendant must
prove the absence of undue influence, and since he has failed to prove the same, the plaintiff
is entitled to obtain the cancellation of the deed.
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obtaining of unfair advantage
Name: Phillip Lukka v. Franciscan Association
Plaintiff: Phillip Lukka
Defendant: Franciscan Association
Citation: A.I.R. 1987 Ker. 204
Facts: The plaintiff was a congenital invalid suffering from indifferent health all through his
life. He had a deep religious bend, with high regard for religious superiors and a deep sense
of obedience to priesthood. A priest, Father Francis, who represented the defendant
Franciscan Association got his only property gifted to the association by assuring him of the
preparedness of the Association to look after him and his mother. The plaintiff was directed
to keep the matter secret. The registration of the gift deed was managed to be made at a
faraway place.
Judgment: It was held that the said gift of property was vitiated by undue influence and
fraud, and the plaintiff was allowed to recover back his property.
117. Topic: Right of Rescission.

Name: Allcord v. Skinner
Plaintiff: Allcord
Defendant: Skinner
Citation: (1887) 36 Ch. D. 145
Facts: A person transferred his property to another person while under a spiritual influence
but did not take steps to take back the property for 6 years after such influence has ceased.
Judgment: It was held that the right to retrieve the property had ended. A person having the
right to avoid the contract must do so within a reasonable time failing which may mean
affirmation of the contract.

obtaining of unfair advantage.
Name: Niko Devi v. Kirpa
Plaintiff: Niko Devi
Defendant: Kirpa
Citation: A.I.R. 1989 H.P. 51
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Facts: The plaintiff, who was an illiterate rustic girl, had started living with the defendant
ever since she was of 2 and 10 years of age respectively. The defendant was the cousin
brother of the plaintiff. The plaintiff was not only brought up by the defendant but the latter
also performed her marriage. The defendant managed all her movable and immovable
property, which she had inherited from her parents. He divested her of her entire property by
a gift deed. She contended that the impugned gift deed was a result of fraud, coercion and
undue influence by the defendant and the same was liable to be set aside.
Judgment: It was held that the defendant was not only in a position to dominate the will of
the plaintiff by virtue of his being loco-parentis to her, but the impugned transaction was
apparently unconscionable one as she stood divested of her entire property by virtue of the
gift deed. The burden of proof was, therefore, on the defendant to show that while making the
transaction, the plaintiff had an independent advice available to her and the impugned gift
deed was a voluntary act on her part with due understanding of the nature of the transaction.
The defendant having failed to prove the same, the plaintiff was held entitled to avoid the
transaction.
119. Topic: Free Consent-Undue Influence

Name: Takri Devi v. Rama Dogra
Plaintiff: Takri Devi
Defendant: Rama Dogra
Citation: A.I.R. 1984 H.P. 11
Facts: An illiterate old lady living separately from her husband gifted practically all her
property which included an apple orchard, valued at Rs. 2 Lacs to the donee, who was her
lawyer. There was no other relationship between the donor and the done.
Judgment: It was held that there was fiduciary relationship between the two; the donee was
in a position to dominate the will of the donor, the transaction was unconscionable and there
was presumption of undue influence.

Name: Lakshmi Amma v. Telengala Narayana Bhatta
Plaintiff: Lakshmi Amma
Defendant: Telengala Narayana Bhatta
Citation: A.I.R. 1970 S.C. 1367
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Facts: The executant of a deed was a person of advanced age and was suffering from diabetes
and other ailments and whose physical and mental condition was very weak. He executed a
deed settling his entire property in favor of one of his grandsons to the exclusion of his own
issues and other grandchildren. He did not make any provision for the residence of his wife in
the said residential house and also debarred himself from dealing with the property in his
lifetime. He subsequently applied for the cancellation of the deed on account of undue
influence.
Judgment: It was held by the Supreme Court (reversing the decision of the Kerala High
Court) that the facts and circumstances raised a grave suspicion as to the genuineness of the
execution of the document, and it was for the grandson, who is the settlee of the property, to
show that the said deed had been executed voluntarily and without any external pressure or
influence.

Name: Wajid Khan v. Raja Ewaz Ali Khan
Plaintiff: Wajid Khan
Defendant: Raja Ewaz Ali Khan
Citation: I.L.R (1891) 18 I.A., 144
Court: The Privy Council
Facts: An old, illiterate, pardanashin lady, who was herself incapable of transacting any
business conferred a grant of her substantial property without any valuable consideration in
favour of her confidential managing agent.
Judgment: The Privy Council held that it was incumbent on the grantee to show that he had
made proper use of confidence reposed in him by the lady and there was no undue influence.
122. Topic: Undue Influence

Name: Raghunath Prasad v Sarju Prasad
Citation: AIR 1924 PC 60, (1924) 26 BOMLR 595
Bench: Louis Addin Kershaw, Carson, John Edge, Syed Ameer Ali and Lawernce H.
Jenkins, JJ.
Facts: The defendant and his father were equal owners of a vast joint family property over
which they had quarreled. Consequently the father had instituted criminal proceedings against
the son. The defendant, in order to defend himself, mortgagaed his properties to the plaintiff
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and borrowed from him about ten thousand rupees on 24 % compound interest. In eleven
years this rate of interest had magnified the sum covered by the mortgage more than eleven-
fold. The defendant contended that the lender had , by exacting high rate of interest, taken
unconscionable advantage of his mental distress and, therefore, there should be presumption
of undue influence.
Judgment: In the first place the relations between the parties to each other must he such that
one is in a position to dominate the will of the other. Once that position is substantiated the
second stage has been reached, viz., the issue whether the contract has been induced by undue
influence. Upon the determination of this issue a third point emerges, which is that of the
onus probandi. The burden of proving that the contract was not induced by undue influence is
to lie upon the person who was in a position to dominate the will of the other.
The borrower failed to prove that the lender was in a position to dominate his will. The only
relation between the parties that was proved was simply that they were lender and borrower.

Name: Shrimati and Ors. vs. Sudhakar R. Bhatkar and Ors.
Citation: AIR 1988 Bom 122.
Bench:R.M. Lodha, J.
Facts: The only relationship between the parties was that the defendant was a tenant of a part
of the plaintiffs premises. The owner was an illiterate widow, but she had been managing her
agricultural property for over two decades. The tenant treated her as his mother and
persuaded him to gift him her entire property. The gift deed as duly executed by her was
registered.
Judgment: The court felt that it could not be said that the tenant was in a position to
dominate her will. The mere fact that the person in whose favor a property was gifted by
registered deed was the tenant of the owner was held to be not sufficient to shift the burden of
proof on the done.

Name: Lloyds Bank v Bundy
Citation: (1975) 1 QB 326.
Bench: Lord Denning, Sir Eric Sachs
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Facts: A guarantee was given to the bank by an elderly farmer, a customer of the bank, for
his son's debts. The guarantee was secured by a mortgage of Bundy's house in favour of the
bank. An assistant manager of the bank, with the son, later told the father that they would
only continue to support the son's company if he increased the guarantee and charge. The
father did so, the assistant manager appreciating that the father relied on him implicitly to
advise him about the transaction. The Court of Appeal set aside the guarantee and charge.
Judgment: It was held that the relationship between the bank and the father was one of trust
and confidence. The bank knew that the father relied on them implicitly to advise him about
the transaction. The father trusted the bank. This gave the bank much influence on the father.
Yet the bank failed in that trust. They allowed the father to charge the house to his ruin. There
was also a conflict of interest between the bank and the father, yet the bank did not realise it,
nor did they suggest that the father should get independent advice. If the father had gone to
his solicitor or any man of business there is no doubt that they would have advised him not to
enter the transaction as the house was his sole asset and the son's company was in a
dangerous state.
125. Topic: Misrepresentation

Name: Edgington v Fitzmaurice
Citation: (1885) 29 Ch D 459
Bench: Bowen LJ, Fry LJ
Facts: The plaintiff shareholder received a circular issued by the directors requesting loans to
the amount of 25,000 with interest. The circular stated that the company had bought a lease
of a valuable property. Money was needed for alterations of and additions to the property and
to transport fish from the coast for sale in London. The circular was challenged as being
misleading in certain respects. It was alleged, inter alia, that it was framed in such a way as to
lead to the belief that the debentures would be a charge on the property of the company, and
that the whole object of the issue was to pay off pressing liabilities of the company, not to
complete the alterations, etc. The plaintiff who had taken debentures, claimed repayment of
his money on the ground that it had been obtained from him by fraudulent misstatements.
Judgment: The Court of Appeal held that the statement of intention was a statement of fact
and amounted to a misrepresentation and that the plaintiff was entitled to rescind the contract.
Although the statement was a promise of intent the court held that the defendants had no
intention of keeping to such intent at the time they made the statement.
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126. Topic: Fraud

Name: V Srinivasa Pillai v LIC of India
Citation: AIR 1977 Mad 381
Bench: R Rao, R Pandian
Facts: The plaintiff and his wife late Ranganayagi took out a joint life endowment assurance
policy and paid the premium for the first quarter. Ranganayagi however died a few days later.
On information about the death, the Corporation made certain investigations and found that
the policy has to be repudiated since certain material facts which the insured have to furnish
were not given and certain other representations which were peculiarly within the personal
knowledge of the insured were incorrectly stated.
Judgment: A contract of insurance being one uberrima fides (utmost good faith) has certain
peculiar advantages and disadvantages depending upon the disclosure or non-disclosure of
material facts which form the foundation to create the consensus ad idem between the insurer
and the insured. It is normal to expect in a contract of insurance-utmost good faith, that is the
insured is expected to answer various queries and takes upon himself the responsibility to
give true and faithful information about himself and naturally he must be prompt and honest
in answering such questions and making such disclosures Intentional or willful concealment
or suppression of a fact material to the insurance constitutes fraud.
127. Topic: Fraud

Name: P Sarojam v LIC of India
Citation: AIR 1986 Ker 201
Court: Kerala High Court
Bench: P.C. Balakrishna Menon and K. Sukumaran, JJ.
Facts: The plaintiff-appellant is the widow of Neelakanta Pillai. He was a Local Fund
Auditor in the service of the State of Tamil Nadu. He had on 20-9-1973 made a proposal for
insurance on his life for a sum of Rs. 1,75,000/- to the defendant, the Life Insurance
Corporation of India. Since his salary was not commensurate with the premium payable, the
defendant-Corporation accepted the proposal for insurance on his life for a sum of Rs.
40,000/-. On the same day, his wife the plaintiff made another proposal for insurance on his
life for a sum of Rs. 1,35,000/-. This proposal was accepted by the defendant. In both the
policies the plaintiff is the nominee to receive payment when the policies mature.
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On the death of her husband, the plaintiff demanded payment of the amounts due under the
two policies. The defendant repudiated the policies as obtained by fraud and on suppression
of material facts relating to the life assured. Hence the plaintiff filed the suit for recovery of
the amounts due under the two policies.
Judgment: An insurance company knows nothing about the life or circumstances of the of
the assured. It is, therefore the duty of the assured to put the insurer in possession of all the
material facts affecting the risk covered. If false answers as to the state of health are given in
a proposal for life insurance the policy is voidable. The suit was dismissed.
128. Topic: Fraud

Name: Kiran Bala v Bhaire Prasad Srivastava
Bench: Deoki Nandan
Facts: The plaintiff filed this appeal against the decree dissolving her marriage with the
respondant by a decree of divorce under the Hindu marriage Act on the ground that she was
of an incurably unsound mind. Her husband, the respondent had filed an appeal in a lower
Court and had claimed the relief of declaration that their marriage was null and void.
Judgment: Since The facts regarding the nullity of the plaintiffs previous marriage on
grounds of unsoundness of mind had been concealed from the respondant. Concealment of
unsoundness of mind at the time of marriage amounts to fraud. Accordingly the marriage
between the parties was fit to be annulled.

Name: With v OFlanagan
Citation: (1936) 1 All ER 727.
Bench: Lord Wright MR
Facts: During the course of negotiations for the sale of a medical practice, the vendor made
representations to the purchaser that it was worth 2000 a year. By the time when the contract
was signed, they were untrue. The value of the practice had declined in the meantime (to
250) because of the vendor's inability to attend to it through illness.
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Judgment: If a statement has been made which is true at the time, but which during the
course of negotiations becomes untrue, then the person who knows that it has become untrue
is under an obligation to disclose to the other the change of circumstances.
Therefore, the failure of the vendor to disclose the state of affairs to the purchaser amounts to
a misrepresentation.
130. Topic: Fraud

Name: Shri Krishan v Kurukshetra University
Citation: AIR 1976 SC 376.
Bench: Fazalali, Syed Murtaza, P.N.Bhagwati
Facts: Under the statutes of the respondent (University) persons in service could take the
three-year degree course in law by attending the evening classes. A candidate who had failed
in some of the papers of one year could clear those papers before completing the three-year
course. According to the rules, a candidate should submit to the University an application
seeking permission to appear for an examination which should be signed by the Principal of
the College or the head of the department concerned certifying that the candidate had
attended a regular course of study for the prescribed number of academic years. But, this
certificate is provisional and could be withdrawn at any time before the examination if the
applicant failed to attend the prescribed course of lectures before the end of his term.
The appellant, a Government servant, joined the LL.B. I year class of the University. He
failed in three papers, but was promoted to the second year. Before appearing in the second
examination, however, he wrote to the University stating that if he was not able to get the
requisite permission from his employer to join the law classes he would abide by any order
that the University might pass. The appellant, however, wrote to the University later that this
condition was not at all necessary and requested that his result in the first year might be
announced. In reply the University wrote to the appellant that since his percentage of marks
in the first year was short, his candidature for second year examination stood cancelled.
Judgment: It was the duty of the University to scrutinize the form for admission to the
examination in order to find out whether it was in order. It was also the duty of the head of
the department of law, before submitting the form to the University, to see that the form
complied with all the requirements of law. If neither took care to scrutinize the admission
form, then the question of the appellant committing a fraud did not arise. Where a person on
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whom fraud is committed is in a position to discover the truth by due diligence, fraud is not
proved
131. Topic: Fraud

Name: Delhi Development Authority v Skipper Construction Co (P) Ltd
Citation: (2000) 10 SCC 130.
Bench: U.C.Banerjee, M.J.Rao
Facts: The defendant, a builder entered into a large no. of bookings, nearly three times the
available units of accommodation and collected money against the bookings.
Judgment: The case is one of fraud because the defendant should have known that he would
not be able to perform the contract with all the buyers.

Name: Derry v Peek
Citation: (1889) 14 App Cas 337
Bench: Lord Herschell
Facts: A special Act incorporating a tramway company provided that the carriages might be
moved by animal power and, with the consent of the Board of Trade, by steam power. The
directors issued a prospectus containing a statement that by this special Act the company had
the right to use steam instead of horses. The plaintiff bought shares on the strength of this
statement. The Board of Trade refused to consent to the use of steam and the company was
wound up. The plaintiff brought an action for deceit.
Judgment: It was held by the House of Lords that in an action for deceit, it is not enough to
establish misrepresentation alone; something more must be proved to cast liability on the
defendant. There is an essential difference between the case where the defendant honestly
believes in the truth of a statement although he is careless, and where he is careless with no
such honest belief. Fraud is established where it is proved that a false statement is made: (a)
knowingly; or (b) without belief in its truth; or (c) recklessly, careless as to whether it be true
or false. If fraud is proved, the motive of the person making the statement is irrelevant. It
matters not that there was no intention to cheat or injure the person to whom the statement
was made. The defendants were not fraudulent in this case. They made a careless statement
but they honestly believed in its truth.
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Name: Bindu Sharma v Ram Prakash Sharma
Bench: O Prakash, B K Sharma
Facts: The plaintiff was in possession of high academic qualifications and agreed to
matrimony because she was told that her match was in a attractive job whereas he was only
an apprentice in a factory.
Judgment: The qualification of a spouse is a material fact in regard to consent in a marriage
alliance.

Name: Attwood v Small
Citation: (1838) 6 C&F 232.
Bench: Lord Lyndhurst and Lord Wynford
Facts: The purchasers of a mine were told exaggerated statements as to its earning capacity
by the vendors. The purchasers had these statements checked by their own expert agents, who
in error reported them as correct. Six months after the sale was complete the plaintiffs found
the defendant's statement had been inaccurate and they sought to rescind on the ground of
misrepresentation.
Judgment: There was no misrepresentation as the plaintiff did not rely only on the
defendants word and had adequate means to verify the statements before the sale.

Name: Peek v Gurney
Citation: (1873) LR 6 HL 377
Bench: Lord Cairns
Facts: A prospectus for an intended company was issued by promoters who were aware of
the disastrous liabilities of the business of Overend & Gurney which the company was to
purchase. The prospectus made no mention of a deed of arrangement under which those
liabilities were, in effect, to be transferred to the company. The appellant bought shares in the
company and, when it was wound up, he was declared liable as a contributory and had to pay
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almost 100,000. He sought an indemnity against the directors, alleging misrepresentation

and concealment of facts by the directors in the prospectus.
Judgment: The action failed because he had not in fact relied on the prospectus but had
purchased the shares in the market. Lord Cairns expressed his agreement with the
observations of Lord Chelmsford and Lord Colonsay that mere silence could not be a
sufficient foundation for the proceedings: Mere non-disclosure of material facts, however
morally censurable, however that non-disclosure might be a ground in a proper proceeding at
a proper time for setting aside an allotment or a purchase of share, would in my opinion form
no ground for an action in the nature of an action for misrepresentation. There must, in my
opinion, be some active misstatement of fact, or, at all events, such a partial and fragmentary
statement of fact, as that the withholding of that which is not stated makes that which is stated
absolutely false.

Name: Shoshi Mohun Pal Chaudhary v Nobo Krishto Poddar
Citation: (1874) 5 Cal 801
Bench: Mitter and Prinsep
Facts: The plaintiff purchased a certain quantity of rice from the defendant.
The defendant stored rice in a unit near the plaintiffs house. On delivery of the rice he
alleged that the rice was not of the same quantity that he had ordered.
Judgment: The defendant cannot be held liable as the plaintiff was living near the place
where the goods were lying, and, therefore might have discovered the truth with ordinary
diligence.

Name: Oriental Bank Corporation v John Fleming
Citation: (1879) 3 Bom 242.
Bench: Newbould, Panton
Facts: The plaintiff, having no time to read the contents of a deed, signed it as he was given
the impression by the defendant that it contained nothing but formal matters already settled
between them. The deed, however, contained a release in favour of the defendants.
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Judgment: The defendant was under no obligation, legally or morally, to communicate the
contents of the deed. But the plaintiff placed confidence in the defendant and then it became
the duty of the defendant to state fully without concealment, all that was essential to
knowledge of the contents of a document.

Name: Car and Universal Finance Co Ltd v Caldwell
Citation: (1961) 1 QB 525.
Bench: Sellers, Upjohn, Davies LJJ
Facts: Caldwell sold his car to Norris. The cheque was dishonoured when it was presented
the next day. He immediately informed the police and the Automoblie Association of the
fraudulent transaction. Subsequently Norris sold the car to X who sold it to Y who sold it to Z
who sold it to the plaintiffs. In interpleader proceedings one of the issues to be tried was
whether the defendant's conduct and representations amounted to a rescission of the contract
of sale.
Judgment: It was held that the contract was voidable because of the fraudulent
misrepresentation and the owner had done everything he could in the circumstances to avoid
the contract. As it had been avoided before the sale to the third party, no title was passed to
them and the owner could reclaim the car.
139. Topic: Fraud

Name: Long v Lloyd
Citation: (1958) 1 WLR 753
Bench: Lord Justice Jenkins Lord, Justice Parker and Lord Justice Pearce
Facts: The defendant advertised for sale a lorry as being in 'exceptional condition' and he told
the plaintiff purchaser that it did 11 miles to the gallon and, after a trial run, all that was
wrong with the vehicle. The plaintiff purchase the lorry and, two days later, on a short run,
further faults developed and the plaintiff noticed that it did only about 5 miles to the gallon.
That evening he reported these things to the defendant and the plaintiff accepted the
defendant's offer to pay for some of the repairs. The next day the lorry set out on a longer
journey and broke down. The plaintiff wrote to the defendant asking for the return of his
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money. The lorry had not been in a roadworthy condition, but the defendant's representations
concerning it had been honestly made.
Judgment: The Court of Appeal held that the plaintiff was not entitled to rescission of the
contract as he had finally accepted the lorry before he had purported to rescind. The second
journey amounted to affirmation of the contract.
140. Topic: Mistake

Name: Wallis v Pratt
Citation: (1911) AC 394.
Facts: there was a contract for the sale of seeds described as common English Sanfoin. An
exclusion clause in the contract stated that the seller gave, no warranty express or implied as
to the growth, description, or any other matters. The seeds supplied were of a much inferior
variety. The supplier sought to rely on the exemption clause to avoid liability.
Judgment: The term describing the seeds was a condition of the contract. The exclusion
clause related only to warranties and not to conditions. Hence the supplier could not rely on
the exclusion clause.
141. Topic: Mistake

Name: Phillips v Brooks Ltd
Bench: Horridge J
Facts: a man named Mr. North entered Phillips jewellery shop and said I am Sir George
Bullough. He wrote a dud cheque for 3000 to pay for some pearls and a ring. He said he
lived in St. James's Square. Mr. Phillips checked the phone directory, and found there was
someone there by that name. Mr. Phillips asked if hed like to take the jewellery with him.
Mr. North said he would leave the pearls but take the ring for his wifes birthday tomorrow.
Mr. North then pawned the ring to Brooks Ltd for 350. When the false cheque was
dishonored, Phillips sued Brooks Ltd to get the ring back.
Judgment: The minds of the parties met and agreed upon all the terms of the sale, the thing
sold, the price and time of payment, the person selling and the person buying. The fact that
the seller was induced to sell by fraud of the buyer made the sale voidable, but not void. He
could not have supposed that he was selling to any other person; his intention was to sell to
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the person present, and identified by sight and hearing; it does not defeat the sale because the
buyer assumed a false name or practiced any other deceit to induce the vendor to sell.

Name: Allcard v Skinner
Citation: (1887) 36 Ch D 145
Bench: Lindley LJ, Cotton LJ
Facts: In 1867 an unmarried woman aged 27 sought a clergyman as a confessor. The
following year she became an associate of the sisterhood of which he was spiritual director
and in 1871 she was admitted a full member, taking vows of poverty, chastity and obedience.
Without independent advice, she made gifts of money and stock to the mother superior on
behalf of the sisterhood. She left the sisterhood in 1879 and in 1884 claimed the return of the
stock. Proceedings to recover the stock were commenced in 1885.
Judgment: It was held by the Court of Appeal that although the plaintiff's gifts were voidable
because of undue influence brought to bear upon the plaintiff through the training she had
received, she was disentitled to recover because of her conduct and the delay.
143. Topics: Misrepresentation, Mistake

Name: Leaf v International Galleries
Bench: Denning LJ, Jenkins LJ
Facts: "Salisbury Cathedral" by John Constable was what Ernest Louis Leaf thought he was
buying on 8 March 1944 from International Galleries. International Galleries said it was a
Constable. Leaf paid 85. Both parties believed that the painting was by the artist Constable.
Five years later when he tried to auction it, Leaf was told that it was not a Constable. He
claimed rescission of the contract against International Galleries, to get back his money.
Judgment: Denning LJ held that Mr Leaf was barred because too much time had lapsed. He
held that in the event of lapse of too much time between the making of the contract and the
decision to rescind, the right to rescind is lost. He held there was a mistake about the quality
of the Topic-matter, because both parties believed the picture to be a Constable; and that
mistake was fundamental. But that was not enough to avoid the contract, because there was
no mistake about the essential Topic matter (a painting). The painter's identity was a term of
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the contract, which could either be classified as a condition (breach of which allows recission
of the contract) or a warranty (which allows damages only). Here the painter's identity was a
condition, but after hanging it in one's house for five years it is far too late to reject the
painting for breach of condition.
144. Topic: Mistake

Name: Raffles v Wichelhaus
Citation: (1864) 2 H&C 906
Court: Court of Exchequer
Bench: Pollock CB, Martin B and Pigott B
Facts: Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods
were to be shipped from Bombay to Liverpool, England on the ship Peerless. Neither party
was aware that there were two ships names Peerless carrying cotton from Bombay to
Liverpool, one arriving in October and the other in December.
Wichelhaus thought he had purchased the cotton arriving on the October ship, but Raffles
sent his cotton on December ship. Wichelhaus refused to accept delivery of the cotton
arriving on the December ship and Raffles brought this lawsuit for breach of contract.
Judgment: A latent ambiguity appeared when the contract did not specify which Peerless
was intended. There is nothing on the face of the contract to show that any particular ship
called Peerless was meant but the moment it appears that two ships called the Peerless were
about to sail from Bombay, there is a latent ambiguity. Parol evidence will be admissible for
determining the actual meaning that each party assigned to that ambiguity. From the evidence
presented, each party attached a different meaning to that ambiguity. If different meanings
were intended on a material term of a contract, there is no mutual assent and there is no
contract.
145. Topic: Mistake

Name: Haji Abdul Rehman Allarakhia v The Bombay & Persia Steam Navigation Co
Citation: (1892) 16 Bom 561
Court: Bomaby High Court
Bench: Telang J
Facts: The plaintiffs chartered a steamer which was to sail from Jedda on 10 th August,
1892(15 days after the Haj. The plaintiffs believed that the date corresponding with the
fifteenth day after the Haj. The defendents had no such beliefs and contracted only with
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respect to the English date. The plaintiffs subsequently discovered that their belief was
mistaken inasmuch as fifteen days after the Haj fell on a different day and on the basis of this
they sued the defendants for rectification of the charter party.
Judgment: It was clearly a unilateral mistake and the plaintiffs were not entitled to any
relief.
146. Topic: Mistake

Name: Courturier v Hastie
Citation: (1856) 5 HL Cas 673.
Bench: Lindgren J
Facts: The plaintiff merchants shipped a cargo of Indian corn and sent the bill of lading to
their London agent, who employed the defendant to sell the cargo. On 15 May 1848, the
defendant sold the cargo to Challender on credit. The vessel had sailed on 23 February but
the cargo became so heated and fermented that it was unfit to be carried further and sold. On
May 23 Challender gave the plaintiff notice that he repudiated the contract on the ground that
at the time of the sale to him the cargo did not exist. The plaintiffs brought an action against
the defendant (who was a Del credere agent, i.e., guaranteed the performance of the contract)
to recover the purchase price.
Judgment: The contract imported that, at the time of sale, the corn was in existence as such
and capable of delivery, and that, as it had been sold, the plaintiffs could not recover.
147. Topic: Mistake

Name: Seikh Bros Ltd v Ochener
Citation: (1957) AC 136 (PC).
Bench: NA
Facts: The appellant- company, the lessor of a forest in Kenya, granted a license to the
respondent to cut, process and manufacture all sisal growing in the forest. The respondent, in
return, undertook to manufacture and deliver to the appellant 50 tons of sisal fiber per month.
But it turned out that the leaf potential and the respondent was sued for the breach.
Judgment: It the very basis of the contract that the sisal area should be capable of producing
an average of 50 tons a month throughout the term of the license, and the mistake was as to a
matter of fact essential to the agreement. The agreement is hence void.
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148. Topics: Mistake, Misrepresentation

Name: Smith v Hughes
Citation: (1871) LR 6 QB 597.
Court: Queen's Bench
Bench: Cockburn CJ, Blackburn J and Hannen J
Facts: The claimant had purchased a quantity of what he thought was old oats having been
shown a sample. In fact the oats were new oats. The claimant wanted the oats for horse feed
and new oats were of no use to him. The seller was aware of the mistake of the claimant but
said nothing. The claimant brought an action against the seller based on mistake and
misrepresentation.
Judgment: Both actions failed. The action based on misrepresentation failed as you cannot
have silence as a misrepresentation. The defendant had not mislead the claimant to believe
they were old oats. The action based on mistake failed as the mistake was not as to the
fundamental terms of the contract but only a mistake as to quality.
149. Topic: Mistake

Name: Bell v Lever Bros Ltd
Citation: (1932) AC 161.
Bench: Viscount Hailsham, Lord Blanesburgh, Lord Warrington of Clyffe, Lord Atkin and
Lord Thankerton
Facts: Lever bros appointed Mr. Bell and Mr. Snelling (the two defendants) as Chairman and
Vice Chairman to run a subsidiary company called Niger. Under the contract of employment
the appointments were to run 5 years. However, due to poor performance of the Niger
Company, Lever bros decided to merge Niger with another subsidiary and make the
defendants redundant. Lever bros drew up a contract providing for substantial payments to
each if they agreed to terminate their employment. The defendants accepted the offer and
received the payments. However, it later transpired that the two defendants had committed
serious breaches of duty which would have entitled Lever bros to end their employment
without notice and without compensation. Lever bros brought an action based on mistake in
that they entered the agreement thinking they were under a legal obligation to pay
compensation.
Judgment: Once the contract has been made i.e. once the parties have to all outward
appearances agreed with sufficient certainty in the same terms on the same Topic matter, then
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the contract is good unless there is a fraud. Neither party can rely on his own mistake which
to his mind was fundamental, and no matter that it was a mistake which to his own mind is
fundamental.
150. Topic: Mistake

Name: Boulton v Jones
Citation: (1857) 27 LJ Ex 117
Bench: MURPHY J, DANHOF, C.J.
Facts: Jones used to have business dealings with Brockle Hurst. He sent an order (offer) to
Brockle Hurst for the purchase of certain goods. By the time the order reached Brockle Hurst,
he had sold his business to Boulton. Boulton receiving the order sent all the goods to Jones as
per the order without informing Jones of the changing of the hands of the business. When
Jones learnt that the goods were not supplied by Brockle Hurst, he refused to pay for the
goods. His contention was that he had never placed an order to Boulton, the offer being made
to Brockle Hurst, and therefore had no intention to make a contract with Boulton
Judgment: The rule of law is clear that if you propose to make a contract with A, the B
cannot substitute himself for A without your consent and to your disadvantage, securing to
himself all the benefit of the contract. When anyone makes a contract in which the
personality of the particular party contracted with is important, for any reason, no one else is
at liberty to step in and maintain that he is the party contracted with.
151. Topic: Mistake

Name: Said v Butt
Citation: (1920) 3 KB 497.
Bench: McCardy J
Facts: The plaintiff knew that on account of his adverse criticism of some members of the
theatre he was not allowed to be present at the first performance of a play at the theatre. A
ticket was obtained by one of his friends without disclosing that it was for him. But the
defendant, the managing director of the theatre, refused him admission on the night in
question. And the plaintiff sued him for inducing breach of contract.
Judgment: The non- disclosure of the fact that the ticket was bought for the plaintiff
prevented the sale of the ticket from constituting a contract, the identity of the plaintiff being
in the circumstances a material element in the formation of the contract.
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152. Topic: Mistake

Name: Cundy v Lindsay
Citation: (1878) 3 App Cas 459
Bench: Lords Cairns , Hatherly, Penzance, Gordan
Facts: Lindsay & Co were manufacturers of linen handkerchiefs, amongst other things. They
received correspondence from a man named Blenkarn. He had rented a room at 37 Wood
Street, Cheapside, but purported to be 'Blenkiron & Co'. Lindsay & Co knew of a reputable
business of this name which resided at 123 Wood Street. Believing the correspondence to be
from this company, Lindsay & Co delivered to Blankarn a large order of handkerchiefs.
Blenkarn then sold the goods 250 dozen linen handkerchiefs to an innocent third party,
Cundy. When Blenkarn failed to pay, Lindsay & Co sued Cundy for the goods.
Judgment: The contract was void for unilateral mistake as the claimant was able to
demonstrate an identifiable existing business with whom they intended to contract with.
153. Topic: Mistake

Name: Lewis v Averay
Bench: Denning MR
Facts: L decided to sell car. R gave L a cheque and wanted car right then. L wanted to wait
for cheque to clear. R convinced L he was a famous actor. L let R have car. Cheque bounced.
R had already sold to A in good faith.
Judgment: It was still a good contract under which good title can pass the contract was
voidable, but not after sold to a 3rd party in good faith. When two parties have come to a
contract or rather on the face appears to be a contract the fact that one party is mistaken as
to the identity of the other does not mean that there is no contract, or that the contract is void
from the beginning. It does mean the contract is voidable liable to be set aside as the
instance of the mistaken person, so long as he does so before 3rd parties have in good faith
acquired rights under it.
154. Topic: Mistake

Name: Ingram v Little
Citation: (1961) 1 QB 31
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Bench: Lord Justice Sellers, Lord Justice Pearce
Facts: Two sisters Hilda and Elsie Ingram sold their car to a rogue calling himself Mr.
Hutchinson. They agreed a price for cash, but when the rogue offered a cheque Elsie said the
deal was off. She wanted cash or no sale. The rogue then gave them his full name and address
and Hilda went to the post office, which was two minutes down the road, to check the details
out. When she returned she informed Elsie that the details checked out and the sisters agreed
to let Mr. Hutchinson take the car. The cheque was dishonored and the car was sold on to Mr.
Little. The sisters brought an action to recover the car.
Judgment: The contract was void for mistake. The Court of Appeal held that the sisters only
intended to deal with Mr. Hutchinson at the address given because they were not willing to
offer a sale for payment by cheque from anyone else. This case has received widespread
criticism and has not been followed since.
155. Topic: Mistake

Name: Hartog v Colin and Sheilds
Citation: (1939) 3 All ER 566.
Court: High Court
Bench: Singleton J
Facts: The defendants, Colin & Shields, were London hide merchants. Mr. Louis-Levie
Hartog was a Belgian furrier, living in Brussels. Colin & Shields discussed selling Mr.
Hartog 30,000 Argentinian hare skins at 10d per skin (which would have come to 1,250).
When they put the final offer in writing Colin & Shields mistakenly wrote 30,000 skins at
10d per lb. As hare skins weigh around 5oz, this was a third of the price previously
discussed and orally agreed upon.
Mr. Hartog tried to hold them to this very good offer. He claimed loss of profit, or, in the
alternative, the difference between the contract price and the market price at the time of the
breach. Colin & Shields pleaded that their offer was by mistake wrongly expressed. They
alleged that they had intended to offer the goods sold at certain prices per piece, and not at
those prices per pound, as their offer was expressed. They argued Mr Hartog was well aware
of this mistake on their part, and fraudulently accepted an offer which he well knew that the
defendants had never intended to make. In the circumstances, the defendants denied that any
binding contract was entered into, and, if there was, counterclaimed for its rescission.
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Judgment: The plaintiff could not reasonably have supposed that the offer expressed the real
intention of the persons making it and must have known that it would have been made by
mistake and that the plaintiff did not by his acceptance of the offer make a binding contract
with the defendants. If one party to a proposed contract knows or really ought to have known
that the offeror does not intend the terms of the offer to be those that the natural meaning of
the words would suggest, and that the terms offered were a mistake, he cannot, by purporting
to accept the offer, bind the offeror to a contract.
156. Topic: Mistake

Name: Kochavareed v Mariappa
Citation: AIR 1950 Trav-Cochin 10.
Court: Travancore- Cochin High Court
Bench: K. Sankaran and Joseph Vithayathil, JJ.
Facts: A property which was Topic to a subsisting lease was sold. The lessee had the right to
receive value of the improvements, but the agreement of sale was silent about this. The buyer
wanted to have the agreement set aside on the ground of mistake about this right.
Judgment: That there was no mistake and that even if there was a mistake it was not as to a
matter of essential to the agreement for sale. It could only be an erroneous opinion which the
parties had formed as to the real value of the Topic matter and would not be deemed to be a
mistake vitiating the agreement.
157. Topic: Mistake

Name: State of Karnataka v Stellar Construction Co
Citation: AIR 2003 Kant 6, ILR 2002 KAR 4367
Court: Karnataka High Court
Bench: B Padmaraj J, D S Kumar J
Facts: Stellar Construction Co, a a road building contractor entered into a contract with the
Karnataka Government to study the work site and availability of material for the construction
of a road. He claimed additional payment by reason of the fact that he was mistaken about the
distance from which the material had to be bought.
Judgment: The claim was rejected as it was merely an erroneous opinion on the part of the
company and hence does not amount to a mistake as to a matter of fact.
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Module 5: Legality of Object
158. Topic: Legality of Topic

Name: Brij Mohan v MPSRTC
Court: The Supreme Court of India
Bench: Venkataramiah, E.S. (J)
Facts: Under an agreement entered into with the respondent Corporation the petitioner was
permitted to ply his bus on a specified route as a nominee of the former for a period of five
years ending on December 23, 1982. Thereafter the respondent was issued temporary permits
and the petitioner was permitted by it to ply his motor vehicle on monthly basis. The
respondent through an advertisement dated August 12, 1984 invited tenders from private
operators for the grant of privilege of running buses as stage carriages as its nominees.
Aggrieved by the said advertisement the petitioner filed a writ petition in the High Court
assailing the decision to invite tenders as arbitrary and illegal, and for a writ in the nature of
mandamus directing the respondent Corporation to allow him to ply his motor vehicle as its
nominee for a further period of five years.
Judgment: The object of the contract (transfer of permit) is forbidden by law and therefore
the agreement is void.
159. Topic: Legality of object

Name: Nandlal v Thomas J William
Citation: 171 IC 948
Bench: Gruer, J.
Facts: The plaintiff was licensed under an Excise Act own a liquor shop. The act forbade the
sale, transfer or sub- lease of the license or the creation of a partnership to run the shop. The
plaintiff took the defendant into partnership.
Judgment: The partnership is void as it would defeat the policy of the law if unapproved
persons could find their way into working liquor shops.

Name: Sujan Singh v Mohkam Chand
Citation: AIR 1983 P&H 180.
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Court: Punjab- Haryana High Court

Bench: J Gupta
Facts: The parties contracted not to bid against each other with an understanding that the
successful bidder would convey half the property to the other. The defendant won the bid but
refused to comply to the terms of the contract.
Judgment: If both the parties agreed not that the defendant will convey half of the property
in favor of the plaintiff in case his bid was accepted and the sale deed was duly executed in
his favor could not be said to be against any public policy. Hence the contract is valid and the
defendants would have to part with an half of the property.

Name: Sundara Gownder v Balachandran
Citation: AIR 1990 Ker 324.
Court: Kerala High Court
Bench: M P Pillay
Facts: The case of the plaintiff is that he an Abkari Contractor from 1973-74 onwards was
not in a position to participate in the auction for 1977-78 on account of the statutory bar that a
defaulter to the Toddy Welfare Fund is not eligible to participate in the auction and to
circumvent it he reached an agreement with defendant that Shop Nos. 17, 19 and 20 out of
the 28 shops bid by the defendant will be transferred to him with the permission of the
authorities and that he paid Rs. 22,080/- to the defendant on 1-3-1977 immediately after the
auction and the defendant failed to perform his part of the agreement.
Judgment: The plaintiff that he is a defaulter to Toddy Welfare Fund. Rule 5(4A) of Abkari
Shops (Disposal in Auction) Rules interdicts any defaulter to the Toddy Worker's Welfare
Fund from participating in any auction for toddy shops unless he produces from the Welfare
Fund Inspector a certificate to the effect that he has remitted before the date of auction the
arrears of contributions payable up to the 31st day of December of the preceding year.
Having been fully aware of the statutory bar that he cannot participate in the auction he
entered into agreement with the defendant. This agreement can only be viewed as one with
the object of defeating the provisions of law. As the object of the agreement patently comes
within the mischief of Section 23, the agreement cannot be but void.
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Name: Ram Sewak v Ram Charan
Citation: AIR 1982 All 177.
Bench: Deoki Nandan, J.
Facts: Sundara (the plaintiff), an Abkari contractor was in default on the payment of Toddy
Welfare Fund so he was ineligible to participate in the auction where shops were being sold.
As he could not buy the shops in his own name so he entered into an agreement with
Balachandran (the defendant) where it was agreed that Balachandran would buy shops and
later transfer some of these to Sundara. Sundara also paid some consideration to
Balachandran. Balachandran failed to fulfill the promise and did not transfer the shops to
Sundara. Sundara claimed the consideration back from Balachandran.
Judgment: The agreement between the partners of the firm to conceal income in certain
respects so as to evade income tax is unlawful and hence the contract is void.
163. Topic: Legality of Contract

Name: Fateh Singh v Sanwal Singh
Citation: (1878) ILR All 751
Bench: Turner, Officiating C.J, Pearson
Facts: The appellant was required by the Magistrate to furnish two sureties for his good
behaviour, each in the sum of Rs. 600. The respondent agreed to become a surety on
condition that the appellant would deposit with him the sum in which he was required to go
bail. The deposit was made, the period of surety ship expired without any act having been
committed by the appellant to forfeit the security, and therefore the appellant applied to the
respondent to repay the deposit. The respondent refused, denying the deposit.
Judgment: The appellant brought this suit to recover the deposit, but failed to establish to the
satisfaction of the Court of First Instance that the deposit had been made. The lower
Appellate Court found that the deposit of the sum of Rs. 600 with the respondent on the terms
alleged was proved, but refused relief on the ground that the consideration of this agreement
was unlawful in that it defeated the object of the law.
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164. Bai Vijli v Nansa Nagar (1885) 10 Bom 152.

Bench: NA
Facts: Nansa Nagar was married to one Nagar. The plaintiff, Bai Vijli, wished to marry her.
He thus lent her money so that she could get a divorce, so that, later on, she could marry Bai
Vijli. At some later point of time, the dispute arose as Nansa Nagar refused to get a divorce
and would not return the money to the plaintiff.
Question of Law: Was the agreement between Nansa Nagar and Bai Vijli a valid contract?
Could the lender, Bai Vijli, recover the money?
Principle: Agreements which the court find to be immoral, void. Section 23.
Judgment: As it was interference with marital relation, the object of the agreement will be
held to be immoral and thus it will not be a valid contract. The object of the agreement was
held to be immoral and the Plaintiff was not entitled to recover the loan so advanced.
165. Pyare Mohan v Narayani AIR 1982 Raj 43.

Facts: Narayani was the mistress of Pyare Mohan. A gift deed was made by Pyare Mohan
with the intention of recompensating her for past cohabitation and other services rendered by
her as his mistress.
Question of Law: Was the gift deed enforceable? If the object of the contract was adulterous
cohabitation, was it immoral?
Principle: Legality of consideration and object (immorality). Section 23.
Bench: M Shrimal, M Bhushan. (Rajasthan High Court)
Judgment: Held that gift deed was enforceable and the word object; in Sec 23 means
purpose or design. Past cohabitation, even if adulterous, is no longer the object of the gift. It
only supplies the motive. Gift is a transfer without consideration. Hence no question of
unlawful consideration arise. Past cohabitation was a valid consideration or motive for gift
deed.
166. Gheru Lal Parekh v Mahadeodas Maiya AIR 1959 SC 781.

Facts: Gherulal Parekh and Mahadeodas Maiya had an agreement wherein they formed a
partnership for the purpose of entering into forward contracts for the purchase and sale of
wheat so as to engage in speculation in the future rise and fall in the price of wheat.
Question of Law: Whether this agreement consisted wagering and, if so, whether it was void
under sec 30 of ICA. Whether the object of this agreement was immoral if it involved
wagering.
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Principle: Agreement where object is forbidden by law, void. Section 23.

Bench: Subba Rao J. Supreme Court.
Judgment: The Supreme Court held that such a partnership was not illegal, although the
business for which the partnership was formed, was held to involve wagering.
Definition of law: Law in this connection means the law for the time being in force in
India, and therefore, includes Hindu and Mohammedan laws also principles of unwritten law.
Scope of immorality: Immorality to be limited to sex outside marriage. The case-law both
in England and India confines the operation of the doctrine to sexual immorality. Examples
are, settlements in consideration of concubinage, contracts of sale or hire of things to be used
in a brothel or by a prostitute for purposes incidental to her profession, agreements to pay
money for future illicit cohabitations, promises in regard to marriage for considerations or
contracts facilitating divorce are held to be void on the ground that the object is immoral. The
word immoral, being a very comprehensive one, must be given restricted meaning and it
has been restricted to mean sexual immorality. Accordingly, a wagering agreement cannot be
held as immoral.
The circumstances in which a contract is likely to be struck down as one opposed to public
policy: The ordinary function of the courts is to rely on the well-settled heads of public policy
and to apply them to varying situations.
Agreements by way of wager, void. Section 30.
Definition of the term wager: Sir William Ansons definition of wager as a promise to
give money or moneys worth upon the determination or ascertainment of an uncertain event,
brings out the concept of wager declared void by Section 30 of the Contract Act.
Transactions collateral to a wager: Though a wager is void and unenforceable, it is not
forbidden by law. Hence, a wagering agreement is not unlawful under Section 23 of the
Contract Act, and therefore, the transactions collateral to the main transaction are
enforceable.
For a partnership to enter into wagering transactions is not illegal under Section 23 of the Act
and therefore a partner who has paid the losses on wagering transactions may recover
proportionate indemnity from his co-partners.
Difference between illegal and void agreements:
Section 25-30 refer to cases in which the agreement is only void, though the consideration is
not necessarily unlawful. An illegal agreement is one which is actually forbidden by the law;
but a void agreement may not be forbidden, the law merely says that if it is made, the courts
will not enforce it.
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167. Ouseph Poulo v Catholic Union Bank AIR 1965 SC 166.

Facts: A bank found that the goods in a godown, which was pledged to it against a loan, were
either fraudulently overvalued or withdrawn in collusion with bank officials. The borrowers
agreed to make up for the deficiency by hypothecating more property. Some delay having
taken place in the hypothecation, the bank filed a complaint which was withdrawn after the
hypothecation was completed.
Principle: Legality of Object: Agreements which interfere with public policy, void. Section
23 . A contract to stifle prosecution is regarded as being against public policy under common
law.
Question of Law: Whether agreements which interfere with the administration of justice
constitute stifling of prosecution.
Bench: Gajendragadkar CJ.
Judgment: Where a compromise agreement is made before any complaint is filed, it would
not amount to stifling prosecution, even if it is implemented after the filing of a complaint
which is then withdrawn. The agreement did involve any idea of stifling prosecution. The
agreement was entered into before the complaint was filed, and so, it would be unreasonable
to suggest merely from the sequence of subsequent events that the documents in question
were executed with the object of stifling the criminal prosecution.
168. Union Carbide Corporation v Union of India AIR 1992 SC 248.

Facts: Following the Union Carbide gas leak tragedy at Bhopal, the Union Carbide company
paid 470 million USD to the Union of India, at the direction of the Supreme Court.
Question of Law: Whether the payment was made with the purpose of stifling prosecution
and was hence unlawful.
Principle: A contract to stifle prosecution is regarded as being against public policy under
common law. Non-compoundable offences, which are a matter of public concern, cannot be
subject matter of private bargains and administration of criminal justice should not be
allowed to pass from the hands of benches to private individuals. Where the offence is of
public nature, no agreement can be valid that is founded on the consideration of stifling of a
prosecution for it.
Bench: Misra, Rangnath (Cj), Singh, K.N. (J), Venkatachalliah, M.N. (J), Ahmadi, A.M. (J),
Ojha, N.D. (J) (Supreme Court)
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Judgment: Distinction between motive and consideration for withdrawing a prosecution:

Where dropping of the criminal proceedings is a motive for entering into the agreement and
not its consideration the doctrine of stifling of prosecution is not attracted. Where there is
also a pre-existing civil liability, the dropping of criminal proceedings need not necessarily be
a consideration for the agreement to satisfy that liability. Where withdrawal of a prosecution
is the motive but not the object or consideration of the contract, public policy is not affronted.
The settlement of the Bhopal Gas Disaster was, therefore, valid.
169. Central Inland Water Transport Corporation v Brojo Nath Ganguly
(1986) 3 SCC 156: AIR 1986 SC 1571.
Facts: A clause in the contract of employment empowered the employer, a Government
undertaking, to remove an employee by three months notice or pay in lieu. The employee
was removed by handing him over a three months pay packet. The employee decided to sue.
Question of Law: Whether the clause was valid.
Principle: Undue Influence, inequality of bargaining power between parties
unconscionable bargains. Section 16.
Bench: Madon, D.P. Supreme Court.
Judgment: An unfair or unreasonable contract entered into between parties of unequal
bargaining power is void as unconscionable, under Section 23 of the Act. A term in a contract
of employment being offered by a Government corporation providing for the removal of a
permanent employee without inquiry has been regarded as unreasonable. The clause is
constitutionally as well as contractually void. Any term which is so unfair and unreasonable
as to shock the conscience of the court is opposed to public policy and therefore also void
under Section 23. Here, the contract was also not based upon real consent but was rather an
imposition upon a needy person, and thus an exploitation. Thus, it was again opposed to
public policy. Thus, the Courts power extends towards relieving a party from the
consequences of his own contract.
170. Alice Mary Hill v William Clark (1905) 27 All 266.

Facts: Alice Mary Hill was cohabiting with William Clark, having an adulterous relationship.
She was also serving as his housekeeper and he would pay her wages for the same. The
dispute arose when William Clark refused to pay her wages.
Question of Law: Could the agreement between the two of them be enforced?
Principle: legality of object. Immoral object, Section 23.
Bench: N/A
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Judgment: The whole agreement is unlawful and void. The plaintiff could not sue even for
service rendered as housekeeper because it could not be ascertained as to what was due on
account of adulterous intercourse and what was due for housekeeping. Where cohabitation is
adulterous, that is to say, where either party is married, whether past or future, it will not
support a promise. Adultery is not merely immoral, it is also illegal.
171. Madhub Chander v Raj Coomar Dass (1874) XIV Bengal Law Reports
76.
Facts: The plaintiff and the defendant were rival shopkeepers in a locality in Calcutta. The
defendant agreed to pay a sum of money to the plaintiff if he would close his business in that
locality. The plaintiff accordingly did so, but the defendant refused to pay. The plaintiff sued
him for the money contending that the restraint in question was only partial as he was
restrained from exercising his profession only in one locality and that such restraints had been
upheld in English law.
Question of Law: Was the defendant legally bound to pay? Was their agreement a valid
contract?
Principle: Agreements in restraint of trade void. Section 27.
Bench: Couch J. Calcutta High Court.
Judgment: The words restrained from exercising a lawful profession, trade or business do
not mean an absolute restriction, and are intended to apply to a partial restriction, a restriction
limited to same particular place. An agreement whereby one of the parties agrees to close his
business in consideration of the promise by the other party to pay a certain sum of money is
void, being an agreement is restraint of trade, and the amount is not recoverable, if the other
party fails to pay the promised sum of money.
172. Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd (1894) AC

535.
Facts: Nordenfelt was a gun inventor and manufacturer. He sold his business to one Maxim,
on, who bought it on the condition that Nordenfelt would not practise the same trade for a
period of 25 years, and would not engage in any business that would harm Maxims profits or
compete with Maxims company, for the time being carried on by the company. Nordenfelt
violated this agreement by joining another company engaged in the manufacture of guns and
ammunition, thus lending the cause of action.
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Question of Law: Whether all the clauses of Nordenfelts and Maxims agreement were
valid.
Principle: Agreement in restraint of trade, void. Section 27.
Bench: House of Lords
Judgment: The first part of the agreement was valid, being reasonably necessary for the
protection of Maxims interest. However, the part of the agreement which tried to stop
Nordenfelt from competing with maxims business in any way was not valid as it was
unreasonable. Hence, the second part of the agreement was held to be void. The ideology
behind considering agreements which restrain trade as being void was explained, as they are
a restraint of individual liberty and hence opposed to public policy. But, they can be held
valid, considering the circumstances of a particular case. Restraint-of-trade-clauses are prima
facie void at common law, but they may be deemed valid if three conditions are met:
The terms seek to protect a legitimate interest.
The terms are reasonable in scope from the viewpoint of the parties involved.
The terms are reasonable in scope from the viewpoint of Public Policy.
173. Gujarat Bottling Co Ltd v Coca Cola Co (1995) 5 SCC 545: AIR 1995 SC
2372.
Facts: Coca Cola Co had granted a franchise to Gujarat Bottling Co to manufacture, bottle,
sell and distribute beverages under trademarks held by the franchiser. Their agreement
contained a condition which restrained the franchisee, Gujarat Bottling, from doing the same,
or otherwise being connected, with the products or beverages of any other brands or
trademarks or trade names, during the period in which the contract was valid. There was also
a stipulation for one years notice, again, in the duration of subsistence of the contract, which
was contested on the grounds of being restraint of trade.
Question of Law: Whether the stipulation of one years notice was restraint of trade or
simple promotion of trade.
Principle: Agreement in restraint of trade, void. Section 27.
Bench: NA. (Supreme Court)
Judgment: A contract in restraint of trade is one by which a party restricts his future liberty
to carry on his trade, business or profession in such manner and with such person as he
chooses, unless such a restriction is in furtherance or promotion of trade in which he is
presently voluntary engaged. The importance of reasonableness while deciding upon the
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validity of a contract in restraint of trade can never be forgotten. A stipulation in a contract,

by which trade shall be advanced for one of the parties, shall not be held as being in restraint
of trade. The doctrine of restraint of trade applies only in respect of a restriction which
operates after the termination of the contract. Franchise agreements containing conditions
restricting the right of the franchisee to deal with competing goods is for facilitating the
distribution of the goods of the franchiser and it cannot be regarded as restraint of trade.
174. Esso Petroleum v Harper's Garage (Stourport) Ltd [1968] 2 AC 269

Facts: The defendant ran two garages under solus agreements with the plaintiffs, under which
they would exclusively sell petrol for usage from the plaintiff. The defendants had agreed,
inter alia, to sell only Esso's petrol, in return for a rebate on the price per gallon. On one of
the garages, the period of the contract was nearly four and a half years and on the other it was
for 21 years, being contained in this case in a mortgage of the premises to Esso. The dispute
arose when the defendants began to purchase petrol from cheaper alternative sources.
Principle: Agreements in restraint of trade void. Section 27.
Question of Law: Whether the solus agreements were be regarded in law as an agreement in
restraint of trade.
Bench: Lord Pearce/House of Lords
Judgment: An agreement in restraint of trade is not generally unlawful if the parties choose
to abide by it: it is only unenforceable if a party chooses not to abide by it. It was necessary to
ascertain the legitimate interests of the landlords which they were entitled to protect and to
discover whether those restraints exceeded what was adequate for that purpose.
Definition of agreement in restraint of trade.
As long as the terms of a contract do not violate any laws, or harm the personal rights and
liberty of a person, the agreement is valid. A contract in restraint of trade is one in which a
party agrees with any other party to restrict his liberty in the future to carry on trade with
other persons not parties to the contract in such manner as he chooses. Hence, evidently, it is
void.
Exception to agreements in restraint of trade, void (section 27): protection of interests, in the
case of exclusive dealing agreements (solus agreements).
The House of Lords upheld the four and a half year agreement although the agreement for 21
years was held to be unreasonable and void as being longer than necessary to protect Esso's
interests i.e. the continuity and stability of their marketing operation.
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However, if a trader, when purchasing or leasing new premises, covenants with the vendor or
lessor (in the conveyance or lease) to buy only the latter's products, and then goes into
possession, the exclusive dealing tie is outside the restraint of trade doctrine. This would
apply to a person who buys or takes a lease of a public house or garage subject to a tie; the
reason is that the person has surrendered no freedom previously enjoyed.
175. Vancouver Malt & Sake Brewing Co v Vancouver Breweries Ltd AIR
1934 PC 101.
Facts: A company, Vancouver Malt, had a license under which they were allowed to
manufacture liquor and beer, but they confined themselves to the production of only sake, a
Japanese rice wine. Their only customer was the Government. They entered into an
agreement with another wine and beer manufacturing company under which they cold their
business and goodwill of manufacturing liquor and wine, but retained the right to produce
sake.
Question of Law: Whether the agreement could be enforced
Principle: agreements in restraint of trade protection of freedom of trade and commerce.
Section 27.
Bench: Lord Macmillan
Judgment: Every man should have unfettered liberty to exercise his powers and capacities
for his own and the communitys benefit. The agreement here was devoid of any content as,
the company retained their rights towards the only business engaged in by them. Thus, the
sale of a goodwill and business regarding liquor and beer was no sale at all as such goodwill
did not exist.
176. S B Fraser & Co v Bombay Ice Mfg Co (1904) 29 ILR Bom 107.
Facts: An agreement between certain rice manufacturers fixed the minimum price for sale of
ice, the proportion of the manufacture which each was to bear and of profits which each was
to receive, some of them were restrained from selling at specific locations.
Question of Law: Whether this was an agreement in restraint of trade.
Principle: Exceptions to agreements in restraint of trade, in the case of trade combinations.
Section 27.
Bench: Russel, J.
Judgment: An agreement in the nature of a business combination between traders or
manufacturers e.g., not to sell their goods below a certain price, to pool profits or output and
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to divide the same in an agreed proportion, does not amount to a restart of trade and is
perfectly valid. Regulations as to opening and closing of business in a market, licensing of
traders, supervisions and control of dealers and mode of dealing are valid, even though in
restraint of trade. The object of this agreement was not to restrain trade but to regulate it.
Hence, it was not within the terms of Section 27.
177. Charlesworth v Mac Donald ILR (1898) 23 Bom 103.

Facts: A agreed to become an assistant for three years to B who was a physician and surgeon
practising at Zanzibar. The appointment was subject to a clause, which forbade the assistant
from practising while the contract was in subsistence. The assistant left the service within a
year and began a practice on his own account. However, he was restrained from doing so for
a period of three years.
Question of Law: Whether the clause forbidding the employee from practising was valid.
Principle: Exceptions to agreements in restraint of trade, restraints upon employees.
Section27.
Bench: Farran CJ
Judgment: A servant may be restrained from taking part in any business in direct
competition with that of his employer. An agreement to serve exclusively for a week, a day,
or even for an hour, necessarily prevents the person so agreeing to serve from, exercising his
calling during that period for anyone else than the person with whom he so agrees.
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Module 6: Contingent Contracts
178. Harbaksh Singh Gill and Others v Ram Ratan And Another AIR 1988
P&H 60.
Facts: Sukhdev Singh, respondent No. 2, entered into a contingent contract with Ram Ratan,
respondent No. 1, to sell his one-half share in a property in dispute. He received Rs. 10,000/-
as earnest money and subsequently undertook to get his share of the property separated by
filing a suit. The deed was to be executed within one month of the passing of the final
judgment. If the suit was not disposed of within one year, he agreed to pay interest on the
earnest money at the rate of 3 per cent per annum. His suit for partition was dismissed, as was
his application for restoration of the suit. The day the suit for partition was dismissed, Ram
Ratan, respondent No. 1, filed a suit for permanent injunction restraining respondent No. 2
from committing the breach of the agreement and transferring his share to anyone except the
plaintiff. During the pendency of the suit, respondent No. 2 sold his share to the appellants
via a sale deed, whereupon the plaintiff converted the suit into one for specific performance.
Question of Law: whether the contract could be enforced.
Principle: Contingent contract. Section 30.
Bench: S Goyal
Judgment: A contract for the sale of an unspecified share in the property, the sale deed to be
executed on actual partition of the property is not a contingent contract, and is, therefore,
capable of specific enforcement.
179. Bashir Ahmad v Government of Andhra Pradesh AIR 1970 SC 1089.

Facts: The plaintiff filed a suit for the recovery of Rs.1,40,000 on the allegation that the
defendant, the Hyderabad State Government had agreed to take over a concern being run by
the plaintiff and a book of prescriptions, and in pursuance of that agreement Rs. 50,000 had
been paid to the plaintiff but the balance had remained outstanding. He further claimed
arrears of allowance which was due to him under the agreement.
Question of Law: Whether the government was liable to pay arrears, whether there was a
complete and concluded contract enforceable under law.
Principle: Performance of contingent contracts. Section 32-33.
Bench: S Sikri, G Mitter
Judgment: Where the contingency was neither pleaded nor put in argument at the trial stage,
the same was not allowed to be raised in appeal. The Government in part performance of the
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agreement took delivery of the book and accordingly must pay the price mentioned in the
agreement.
Module 7: Performance and Discharge of Contracts

180. Bhudra Chund v Betts (1915) 22 Cal LJ 566.
Facts: Bhudra Chund had an agreement with Betts for the engagement of his elephant for the
purpose of Kheda operations, that is, to round up wild elephants. Under their contract, the
elephant was to be delivered by a certain date. The defendant obtained an extension, but yet
again failed to deliver the elephant. Finally, when he did deliver the elephant, the plaintiff
refused to accept it. He sued for damages of breach.
Question of Law: Whether the plaintiff could recover damages.
Principle: Discharge of contracts, when time is the essence of contract. Section 55.
Bench: NA. (Calcutta High Court)
Judgment: The plaintiff was entitled to recover as it was evident that time would be essential
to the performance of the contract. This was because, firstly, a date had been set by which the
terms of the contract had to be fulfilled, and secondly, the defendant obtained an extension to
do the same.
181. Mahabir Prasad Rungta v Durga Dutt AIR 1961 SC 990.

Facts: A transporter contracted with Rungta, who owned a colliery (a coal mine, with
associated buildings and equipment) to transport coal to and from the colliery and the railway
station. The colliery owner would ensure that the road was kept in repair, and would pay fuel
charges. He also paid for the transportation, on a certain date every month. The dispute arose
when, allegedly, these things were not done by Rungta and the transporter suspended his
service. The transporter then rescinded the contract and brought an action for damages.
Question of Law: whether Rungta was liable to pay and whether the transporter was entitled
to rescind the contract.
Principle: discharge of contracts, when time is the essence of contract. Section 55.
Bench: Hidayatullah, M.
Judgment: In commercial transactions, time is generally or ordinarily the essence of the
contract. In this contract the time element was of particular importance, being for both the
payment of consideration and also for other arrangements necessary for the performance of
the contract. Hence, the aggrieved party could invoke Section 55 and could rescind the
contract. Rungta was liable to pay.
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182. China Cotton Exporters v Behari Lal Ramcharan Cotton Mills Ltd AIR
1961 SC 1295.
Equivalent Citations: 1961 AIR 1295, 1961 SCR (3) 845
Facts: The appellant who had an import business in Bombay made a contract with their
suppliers for 200,000 lbs. of cotton fibre for a shipment in August, 1950 and another for
300,000 lbs. to be shipped in November/December of the same year. On July 22, 1950, the
appellant entered into a contract with the respondent for the sale Of 40,000 lbs. of fibre, to be
taken from the August shipment. On August 9, 1950, it entered into another contract with the
respondent for sale of 50,000 lbs. of fibre, to be taken from October/November 1950
shipment. In the remarks column of the second contract it was mentioned: "This contract is
subject to import licence and therefore the shipment date is not guaranteed". In October,
1950, a part of the goods were supplied and accepted, but the rest was were not supplied in
the time mentioned. The respondent filed a suit for breach of contract.
Question of Law: Whether the appellant was liable for breach of contract.
Bench: Gupta, K.C. Das
Judgment: In commercial contracts, time is ordinarily of the essence of the contract. In spite
of the remark that shipment date was not guaranteed, time was of the essence and buyer was
entitled to avoid the contract. The delay in this case was due to the failure of the sellers own
supplier who did not supply in time. This cannot be a defence unless it was a condition of the
contract that the goods would be supplied only when received from the sources of supply.
183. Caltex (India) Ltd v Bhagwan Devi Marodia AIR 1969 SC 405.
Facts: The respondent leased to the appellant, Caltex, a plot of land for a certain period. It
was stipulated in the lease deed that the appellant would give notice of renewal of the lease
within a certain time, or by a certain date. The appellant made the request for renewal of the
lease 12 days after the time fixed, by which time the period of subsistence of the contract had
elapsed. The respondent refused to renew and asked the appellant to vacate the premises,
stating that the request was ineffective as it was made out of time. The appellant filed a suit
for a declaration that he was entitled to the renewal.
Question of Law: Whether the appellant was entitled to renewal.
Principle: discharge of contracts, when time is the essence of contract. Section 55.
Bench: Bachawat, R.S., Sikri, S. M.
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Judgment: Time so fixed was of essence to the bargain. Equity would not relieve him of the
consequences of his own neglect. Any option for renewal of an agreement, or reconveyance,
must be exercised strictly within the time limited for the purpose, otherwise it will elapse.
The renewal is a privilege, which if the tenant wants to claim, he must do so within the limit
set for the purpose. Save upon circumstances out of the control of the tenant, equity will not
give relief.
184. Bismillah Begum v Rahmatullah Khan AIR 1998 SC 970.

Facts: Bismillah Begum owned a house in Kanpur and executed a registered sale deed dated
8.2.1955 for Rs. 2.000\- in favour of the sole defendant and also simultaneously obtained an
agreement of reconveyance from the defendant on the same day. That particular agreement
stipulated that in case the seller was able to pay back the consideration within a period of
three years and certain expenses and costs borne by the purchaser towards repairs, she would
be entitled to get back the property. Since the agreement was made, both the parties died and
the action was instituted by their legal heirs.
Question of Law: Whether the right of reconveyance was still present.
Bench: S.B. Majmudar, M. Jagannadha Rao.
Judgment: The right to seek reconveyance was lost because of the expiry of time. In
contracts relating to reconveyance of property, time factor has always been held to be the
essence of the contract.
185. Hind Construction Contractors v State of Maharashtra (1979) 2 SCC 70.

Facts: The contractors entered into a contract with the state for the execution of a work the
essential term of which was that the contract should be completed in 12 months from the
commencement of the work. However, the contractor was allowed to seek extensions of time
in advance on reasonable grounds, failing which a penalty was paid for default. The
contractor applied several times for extensions, claiming several difficulties caused by
reasons beyond his control, but his applications were rejected. Once the period of 12 months
was completed, on the grounds that the appellant had not completed the work within the
stipulated time the respondent rescinded the contract. The contractor sued for damages and
wrongful rescission of the contract.
Question of Law: whether the contract had been wrongfully discharged and whether time
was indeed the essence of the contract.
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Bench: V. D. Tulzapurkar, Y. V. Chandrachud (CJI), A. P. Sen
Judgment: The court regarded the stipulations in the contract permitting the appellant to
request for extensions of time, as not making time to be the essence of the contract. Hence,
the rescission was not approved. Some further period should have been allowed to the
contractor telling him that the extended time was of essence and that time would not be
extended nor excusable on payment of fine. Then only would rescission be valid.
186. Paradine v Jane, Kings Bench (1647) Aleyn 26: 82 ER 897.

Facts: The defendant, Jane, had taken an estate on lease from the plaintiff, Paradine. At the
time, a civil war started in England, wherein forces often invaded and occupied land in
enemy territory. For three years during the period of rent, there was an invasion by enemy
forces and Jane, the lessor, was removed from the land. Jane refused to pay the rent for that
time period, claiming that as he could not use the land or earn any profits for those three
years (meaning that he could not perform his duties as under the lease), he was not liable to
pay.
Question of Law: Whether Jane had to pay the rent for the period of time he was not
occupying or using the land under question
Principle: Absolute liability for contractual debts. Section 56, discharge of contract
Bench: NA. (Kings Bench)
Judgment: Subsequent happenings should not affect a contract already made. When the
party by his own contract creates a duty, he is bound to make it good, if he may,
notwithstanding any accident by inevitable necessity, because he might have provided against
it by his contract, though the land be surrounded or gained by the seas, or made barren by
wildfire, yet the lessor will have his whole rent. If the law rather than a party creates a duty
and the party is unable to perform due to frustration of purpose, that duty will be excused.
However if the party creates the duty and becomes unable to perform due to frustration of
purpose, the law will not protect the party in his own agreement and performance will not be
excused. The court held that in this case the lessee would have gained the advantage of the
profits and therefore he must bear the risk of the losses.
Ratio Decidendi: When a party, by his own contract, creates a duty upon himself, he is bound
to make it good notwithstanding any accident that he could have provided against in the
contract.
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187. Taylor v Caldwell, Queens Bench (1863) 3 B&S 826: 122 ER 309.
Facts: Caldwell owned a music hall in Surrey, England. Taylor wanted to hold a series of
music concerts and social events, and for that purpose, rented out the hall from Caldwell, for
some certain dates. Under the agreement, the plaintiffs would organize all the entertainments
and hand over the rent for the hall on the day of the event itself. One week before the first
concert was to be held, the hall burned down to the ground, without the fault of either party.
Taylor sued Caldwell for the loss they had incurred.
Question of Law: whether the defendant was liable for the plaintiffs expenses and losses,
under the doctrine of common law impossibility.
Principle: Section 56, agreement to do impossible act. General principle of judicial non
interference. Impossibility, impracticability and frustration of purpose.
Bench: Blackburn J.
Judgment: The rule in Paradine v Jane is only applicable when the contract is positive and
absolute, and not subject to any condition either express or implied. The contract in this case
was not absolute, as its performance depended upon the continued existence of the hall. It
was, therefore, subject to an implied condition that the parties shall be excused in case, before
breach, performance becomes impossible from the perishing of the object without default of
the contractors. A contract shall be discharged when the shared contractual assumption has
been destroyed by change of circumstances. This contract is analogous to one between two
parties requiring a personal performance and/or usage of special skills. In this case, when the
party dies, the contract is discharged and the partys executors are not held liable. Thus, both
parties are excused from their obligations under the contract.
Ratio Decidendi: In contracts in which performance depends on the continued existence of a
given person or thing, there is an implied condition that impossibility of performance arising
from the destruction of the person or thing excuses performance.
188. Krell v Henry (1903) 2 KB 740 CA.

Facts: The plaintiff rented his flat to the defendant, for certain days when it was known that a
royal procession was going to pass through the place. The flat was thus rented with the
intention of having a view of it. The defendant paid part of the rent in advance. But the royal
procession was cancelled, owing to the Kings illness. The defendant refused to pay the
balance amount.
Question of Law: whether the defendant was liable to pay the balance amount, when the
object of the contract could not be achieved?
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Principle: Doctrine of frustration of purpose in contract law. Impossibility of performance

and frustration. Section 56.
Bench: Vaughan Williams LJ, Romer LJ and Stirling LJ
Judgment: The real object of the contract was to have a view of the royal procession. Thus,
the procession, and its actual happening, was necessary for the contract to be discharged
successfully, and hence was the foundation of the contract. The object of the contract was
frustrated by non-happening of the coronation. Hence, the contract became void and the
plaintiff was not entitled to recover the balance of the interest. However, the rent which had
been paid before the contract became void by reason of frustration was not recoverable.
189. Alopi Parshad & Sons Ltd v Union of India AIR 1960 SC 588: (1960) 2
SCR 793.
Facts: The plaintiffs were acting as the agent to the Government of India for purchasing
Ghee for the use of army personnel. They were to be paid on cost basis for different items of
work involved. The performance was in progress when the Second World War intervened
and the rates fixed in peace time were entirely superseded by the totally altered conditions
obtaining in war time. The agents demanded revision of rates but received no replies. They
kept up the supplies. The Government terminated the contract in 1945 and the agents claimed
payment on enhanced rates.
Question of Law: Whether the Government was liable to pay.
Principle: Impossibility of performance and frustration. Section 56.
Bench: Shah, J. C.
Judgment: The agents could not succeed because they had continued supplying the Ghee
under the provisions of the contract. Hence, they had the right to receive remuneration only
under the terms of that contract.
190. Tarapore & Co v Cochin Shipyard Ltd (1984) 2 SCC 680.

Facts: The appellant and the respondents entered into a contract for the construction of
Building Dock. Clause 40 of the General Conditions of Contract entered into between the
parties, provided that "all questions and disputes relating to the meaning of the Specifications
Estimates Instructions, Designs, Drawing and the quality of the workmanship or materials
used in the work or as to another questions, claim, right, matter or thing whatsoever in any
way arising out of or relating to the contract or otherwise concerning the execution whether
arising during the progress of the work or after completion shall be referred to the Sole
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Arbitrator etc," During the implementation of the works contract. disputes arose between the
parties in respect of a claim for compensation on account of the increase in the cost of
imported pile-driving equipment and technical know- how fees. Correspondence was
exchanged between the Appellant and Respondent No. 1 and the dispute was referred to the
Sole Arbitrator.
Question of Law: The point referred were: (1) Whether the claim of compensation for
increase in the cost of imported pile driving equipment and technical know-how fees would
fall within the purview of the first para of clause 40 of the General Conditions of Contract;
and (2) if it does, the quantum of compensation, if any, to which the appellant would be
entitled to.
Principle: Impossibility of performance and frustration, Section 56.
Bench: Desai, D. A.
Judgment: Law has to adapt itself to economic changes. Marginal price rise may be ignored.
But when prices escalate out of all proportion from what could have been reasonably
expected by the parties and making performance so crushing to the contractor as to border
virtually on impossibility, the law has to offer relief to the contractor in terms of price
revision.
191. Robinson v Davison (1871) LR 6 Exch 269.

Facts: Davison contracted with Robinson to the effect that Davison would procure a concert
to be performed by his wife. Davison said if Robinson paid Davison, his wife would perform.
His wife became seriously ill on the specified date. Had she gone on with the recital, her life
would've been in serious danger. Robinson suffered losses and sued Davison.
Point of action: whether Davison was liable to pay Robinson for his losses
Legal Principle: doctrine of frustration of purpose in contract law. Impossibility of
performance and frustration, due to death or incapacity of a party. Section 56.
Bench: NA
Judgement: A party to a contract is excused from performance if it depends upon the
existence of a given person, if that person perishes or becomes too ill to perform. Thus, where
the nature or terms of a contract require personal performance by the promisor, his death or
incapacity puts an end to the contract. Hence, under the circumstances, Mrs Davison was not
only excused from playing, she was not free so. As her continuing life and health were the
very foundation of the contract, upon which the object of the contract depended, if the
foundation failed, it was obvious that the contract would become void.
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192. Man Singh v Khazan Singh AIR 1961 Raj 277.

Facts: Man Singh and Khazan Singh had a contract for the sale of trees growing in a certain
forest. When the Rajasthan government forbade the cutting of trees there, Man Singh sued
Khazan Singh for breach of contract and demanded damages.
Point of action: Whether Khazan Singh had to pay damages.
Principle: doctrine of frustration of purpose in contract law. Impossibility of performance
and frustration, due to government, administrative or legislative intervention. Section 56.
Bench: C. B. Bhargava, J.
Judgement: The contract between certain parties for the sale of the trees of a forest was
discharged when the State of Rajasthan forbade the cutting of trees in the area.
193. Metropolitan Water Board v Dick Kerr & Co Ltd (1918) AC 119
Facts: Kerr agreed to build a reservoir for the Water Board within six years. After two years,
Kerr were required by a wartime statute, and were accordingly issued a notice, to cease work
on the contract and to sell their plant.
Point of action: whether the contract between the Board and Kerr had been breached.
Principle: doctrine of frustration of purpose in contract law. Impossibility of performance
and frustration, due to government, administrative or legislative intervention. Section 56.
Bench: House of Lords
Judgement: The contract was frustrated because the interruption was of such a nature (both
character and duration) as to make the contract, if resumed, a different contract from when it
was broken off. Hence, due to this substantive change, the contract ceased to be operative.
194. Satyabrata Ghose v Mugneeram Bangur & Co AIR 1954 SC 44

Facts: The defendant company started a scheme for the development of a tract of land into a
housing colony. The plaintiff paid earnest money and thus was granted a plot of land on the
same. The company started constructing facilities and utilities such as roads and drains, to
make the land suitable for building and habitation. Once this construction was over, the
balance of the purchase money was to be paid by the plaintiff and the conveyance of the land
was to be completed. But before anything could be completed, the State took over a large
portion of the land for military purposes during the Second World War.
Point of action: Whether, due to supervening events, performance of the contract by the
company was impossible.
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Principle: Impossibility may be in law or in fact. Impossibility of performance and

frustration, due to government, administrative or legislative intervention. Section 56.
Bench: B. K. Mukherjea J.
Judgement:
The essential idea upon which doctrine of frustration is based is that of impossibility of
performance of contract.
The doctrine of frustration is really an aspect or part of the law of discharge of contract by
reason of supervening impossibility or illegality of the act agreed to be done and hence comes
within the purview of Section 56.
195. Topic: Quasi Contract

Name: Fateh Chand vs. Balkrishan Das
Petitioner: Fateh Chand
Respondent: Balkrishan Das
Citation: AIR 1963 SC 1405, 1964 SCR (1) 515
Bench: Sinha, Bhuvneshwar P.(Cj), Gajendragadkar, P.B., Wanchoo, K.N., Gupta, K.C. Das,
Shah, J.C.
Facts: An agreement for sale of certain land and bungalow for Rs. 1,12,500 provided that the
buyer was to pay Rs. 1,000 as earnest money and Rs 24,000 on delivery of possession. The
buyer made these agreement and was put in possession. The agreement further provided that
if the buyer failed to pay the balance price and get the sale deed registered by a certain date,
he sum of Rs. 25,000 would stand fortified, the agreement cancelled and the buyer shall
return possession of the bungalow to the seller. The buyer defaulted and the seller fortified
the above sum and brought an action to recover possession and compensation for occupation
and use. Trial Court decided in favour of respondent and High Court reversed that decision.
Judgment: The seller was allowed to forfeit Rs. 1,000 being earnest money and to retain the
sum of Rs.24,000 also not by virtue of his right to forfeit but as representing use value.
Held: It is false to say that Section 74 of ICA applies only to cases where the aggrieved party
is seeking to recover a fixed amount of breach of contract and not to cases where an amount
received under a contract is sought to be fortified. The expression the contract contains any
other stipulation by way of penalty comprehensively applies to every covenant involving a
penalty whether it is for payment on breach of contract of money or delivery of property in
future or forfeiture of money or other property already delivered.
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196. Name: Gobind Ram vs Gian Chand

Petitioner: Gobind Ram
Respondent: Gian Chand
Bench: V.N.Khare, S.N. Phukan
Facts: a appellant agreed to sale the disputed property situated at Lajpat Nagar, New Delhi
for a consideration of Rs.16,000/- to the respondent and accordingly on 24 January. 1973 an
agreement to sale was executed and a sum of Rs. 1,000/- was paid as earnest money to the
appellant. Respondent filed the suit for specific performance of the contract as the appellant
failed to execute the sale deed within time. On 6/10/1976 the suit was decreed and the
respondent deposited balance consideration of Rs.15,000/- in the Trial Court. The appeal
filed by the appellant in the High Court was also dismissed by the impugned judgment dated
20h December, 1991. However, to mitigate the hardship to the appellant and as the
respondent agreed to pay more sum, High Court directed the respondent to deposit a further
sum of Rs.1,00,000/- which was to be released to the appellant on giving possession of the
suit property. The said sum was also deposited in the registry of the High Court by the
respondent and it is being kept in interest bearing fixed deposit.
Held: The grant of a decree for specific performance of contract is not automatic and is one
of the discretion of court and court has to consider whether it will be fair, just and equitable.
197. Name: Govindram Gordhandas Seksaria vs The State Of Gondal

Appellant: Govindram Gordhandas Seksaria
Respondent: The State of Gondal
Citation: (1950) 52 BOMLR 450, AIR 1950 PC 99.
Bench: Greene, Oaksey, Radcliffe, L Leach
Facts: On October 1, 1926, a limited company called The Currimbhoy Mills Co., Ltd.,
executed a debenture trust deed mortgaging two mills known as the Currimbhoy Mill and the
Mahomedbhoy Mill together with certain plant thereon to trustees for debenture holders to
secure an issue of debentures. By October, 1933, the trustees, in exercise of their powers
under the deed, had entered into possession of the mills which, it seems, lay within the
municipal limits of the City of Bombay, and remained in possession until September 9, 1937,
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when the mills were handed over to Mr. Seksaria whose legal personal representatives are the
first appellants. At that date Mr. Seksaria had just become the purchaser of the mills for a
sum of Rs. 12,50,000 under a contract between the Maharajah and himself. On November 29,
1937, Mr. Seksaria entered into an agreement by way of sub-sale with the appellant company
under which he agreed to sell the mills to the company for the same price of Rs. 12,50,000.
But on October 7, the Assessor and Collector of Municipal Taxes, Bombay, addressed a letter
to Mr. Seksaria informing him that bills amounting to Rs. 1,24,092-1-0 were outstanding in
respect of municipal taxes on the mills, and that, as such taxes were a first charge on the
properties, subject always to Government land revenue, payment "at a very early date" was
requested. He maintained from first to last that so much of the taxes as related to the period
before September 9, 1937, was for the vendor's not the purchaser's account and asked for it to
be discharged accordingly. the Municipality were becoming increasingly insistent that the
unpaid taxes should be paid by one or other of the parties and as early as May, 1938, they
declined to give the appellant company or Mr. Seksaria a connection for the supply of water
to the mills until the dues were paid. By July the Municipality were threatening action and on
October 31 of the same year their solicitors wrote to Mr. Seksaria stating that they were
instructed to institute legal proceedings to enforce the statutory charge upon the property.
Eventually, on February 23, 1939, after further requests for payment by the Maharajah or the
trustees had proved unavailing, the appellant company paid the Municipality the sum of Rs.
78,466-12-0 in full satisfaction of the claim against the mills. Mr. Seksaria and the appellant
company instituted the present suit as joint plaintiffs claiming that the respondents should be
ordered to pay to them the sum of Rs. 77,522-6-0 (being so much of the sum of Rs. 78,466-
12-0 paid as related to the period up to September 9, 1937) with interest.
Judgment: The Maharaja is bound to pay to appellant for the taxes they pay on his part.
Held: It is no doubt true that there have been decisions which have tested whether a person
was interested in a payment by ascertaining whether he had such a proprietary interest. It may
be a good test in appropriate circumstances. But it would be a sad fallacy to deduce from the
circumstance that a person may be interested in a payment because he has an interest in the
property to which it relates the conclusion that no one who has not an interest in a property
can be interested in a payment made in respect of that property. In truth Section 69 invites no
such judicial limitation. The general purport of the section is reasonably clear: to afford to a
person who pays money in furtherance of some existing interest an indemnity in respect of
the payment against any other person who, rather than he, could have been made liable at law
to make the payment.
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198. Name: Jabalpur Cable Network Pvt. Ltd. vs E.S.P.N. Software India Pvt.
Ltd
Appellant: Jabalpur Cable Network Pvt. Ltd
Respondent: E.S.P.N. Software India Pvt. Ltd
Bench: S Pandey
Facts: Under a contractual arrangement the plaintiff- respondent was to supply to the other
defendant-appellant TV signals and the appellant was to supply them to cable operators after
decoding. The appellant informed the supplier that it was discontinuing he service to cable
operators because of non-payment of them and it would also not be able to pay to the
supplier. Because of this the supplier stops ending signal. The supplier subsequently brought
an action for damages for the unexpired period of the agreement which was not used by
appellant.
Judgment: Section 54 of ICA would not help the supplier. He acquiesced in the act of
appellant and stop sending signals. He had full rights to rescind the contract and bring an
action for breach, but he did not adopt this course.
199. Name: K. Narendra vs Riviera Apartments (P) Ltd

Appellant: K. Narendra
Respondent: Riviera Apartments (P) Ltd
Citation: AIR 1999 SC 2309, AIR 1999SCW 2378
Bench: Sujata V.Manohar, R.C.Lahoti
Facts: The property in suit consists of a plot of Nazul Land known as 6, Tolstoy Marg, New
Delhi wherein lease hold rights were vested by the President of India in favour of M/s. Shiv
Ram, Mahashaya Krishna and K. Narendra (the appellant herein) in terms of a perpetual lease
commencing from 29th May, 1956. On 25th July, 1972, the appellant entered into an
agreement to sell, transfer and assign all his rights, title and interest in the said property along
with all structures out houses plants etc. in favour of the respondents in consideration of a
sum of Rs. 8,97,740/- for the purpose of constructing a multi-storeyed building by the
respondents on the said property. On 26th July 1972, the parties entered into an agreement
supplementary to the agreement dated 25.7.72 and to some extent modified the terms and
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conditions of the original agreement. According to the supplementary agreement, the parties
agreed that instead of the balance consideration of Rs. 5,72,740/- being paid in cash, the
respondent would give to the appellant flats on 2nd, 3rd and 4th floors measuring 8,182 sq. ft.
at the rate of Rs. 70/- per sq.ft. valued at Rs.5,72,740/-. On 7/11-9-72 the respondent
submitted to the N.D.M.C. building plans for bringing up a Group Housing Project by the
name of "Girnar" on the said property but were rejected. On 31.10.72 the Government of
India served a notice on the appellant calling upon him to show cause as to why the lease be
not cancelled followed by re-entry upon the premises by the lessor in view of the appellant
having sold the property to the respondents without obtaining prior approval of the lessor and
thereby having committed a breach of clause II (13) of the lease deed.
Judgment: Contract becomes frustrated because of repeated rejection of necessary
permissions and approvals.
Mere inadequacy of consideration or mere fact that the contract is onerous to the defendant or
improvident in its nature shall not constitute an unfair advantage to the plaintiff over the
defendant or unforeseeable hardship to the defendant.
200. Name: K.P. Choudhary vs State Of Madhya Pradesh And Ors.

Petitioner: K.P. Choudhary
Respondent: State Of Madhya Pradesh And Ors
Bench: P Dixit, K Pandey, N Golwalker
Facts: The petitioner's bids at an auction of two parts of a coupe were accepted by the Chief
Conservator of Forests. Thereafter some dispute arose between the petitioner and the Forest
Department about the marking of the trees according to the 'material notified' at the time of
the auction. The dispute was not settled to the satisfaction of the petitioner. The petitioner
aVers that on account of this dispute he refused to complete the contract or to pay the first
instalment in respect of the forest contract. The Divisional Forest Officer informed him on
29th July 1959 that if he did not complete these "formalities" within a week, action as per
condition 14 of the auction sale notice would be taken and the earnest money deposited by
him would be forfeited to the State. The applicant was also told that the coupe would be
reauctioned and any deficiency occurring on such resale would be recoverable from him as
arrears of land revenue. The applicant did not pay the balance amount of the instalment due
from him and did not complete the formalities. He was again asked in August 1959 to pay the
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instalment amount and complete the formalities. He again failed. Ultimately on 25th
November 1959, the petitioner was informed that the Chief Conservator of Forests had
cancelled the acceptance of his bids and that the coupe would be reauctioned at the
petitioner's risk in January 1960. The reauction resulted in a loss of Rs. 51,500/- to the Forest
Department. The applicant was asked to remit this amount to the Department. When he failed
to do so, the Divisional Forest Officer, Jabalpur, addressed a letter to the Tahsildar, Jabalpur,
for recovering Rs. 51,500/- as arrears of land revenue from the applicant.
Question of Law: whether in the absence of a written contract the State was entitled under
Rule 29 of the Forest Contract Rules to recover from the petitioner the difference between the
amount of the bid accepted at the re-auction and the amount of the bids offered by the
applicant in the first auction.
Judgment: When, therefore, the petitioner was allowed to offer his bids at the auction, there
was an implied contract between him and the Department conducting the auction that he
would be bound by those conditions. It follows, therefore, that there was an implied contract
between the petitioner and the opponents that he would pay the deficit on a re-auction of the
coupe and the said amount would be recoverable from him as arrears of land revenue.
Whereas conditions 13 and 14 apply to the failure on the part of the successful bidder before
the execution of a valid contract in writing to pay the amount of the first instalment or to
furnish security or to complete the formalities necessary for a valid contract in writing and to
pay the deficit occurring on a re-auction, Rules 28 and 29 of the Forest Contract Rules deal
with his failure after the contract in writing is executed. The present case is clearly one of
failure before the execution of a valid contract in writing.
It must be noted that the implied contract of being bound by the conditions of auction that
results when a person is allowed to bid at the auction subject to those conditions is not a
contract to which Article 299 of the Constitution can be made applicable. That Article plainly
applies to contracts which are required to be reduced to writing. An implied contract in its
very nature is not such a contract. A contract is implied when the facts warrant the conclusion
that the parties have actually agreed to enter into a legal obligation containing certain
stipulations.
201. Name: Indu Mehta vs State Of U.P. And Ors

Petitioner: Indu Mehta
Respondent: State Of U.P.
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Bench: S Dhaon, D Sinha
Facts: The petitioner was appointed Assistant District Government Counsel (Criminal) for
Kanpur Dehat by District Magistrate. She worked on hat post for almost 2 and a half years
and then the Government of UP questioned her appointment to that post being illegal as it
was beyond the powers of District Magistrate to appoint Assistant District Government
Counsel (Criminal) and removed her. Government also demanded the excess salary paid to
her during that time. She filed a petition against this order.
Judgment: when the petitioner accepted the request and acting upon it rendered her services
as Assistant District Government Counsel (Criminal), Kanpur Dehat, an implied contract
imposing upon the State of Uttar Pradesh an obligation to pay to her the remuneration for the
service rendered by her as Assistant District Government Counsel (Crl.), Kanpur Dehat came
into existence. Thus, for the service rendered by her as Assistant District Government
Counsel (Criminal), Kanpur Dehat during the period 1st Feb., 1983 and 30th April, 1986 the
petitioner became entitled to such fee as was admissible to the holder of the office of the post
of Assistant District Government Counsel (Criminal).
Government is also liable to pay her under the principle of Quantum Meritt.
202. Name: Laxminarayan And Anr. vs Sumitra Bai

Petitioner: Laxminarayan
Respondent: Sumitra Bai
Citation: AIR 1995 MP 86, 1995 (0) MPLJ 148
Bench: M Tamaskar
Facts: Laxminaran s/o Chandanlal, the srapach promises Sumitra Bai to marry her and then
they both made sexual relationship with each other which resulted in Sumitra Bai becoming
pregnant. Laxminarayn later denied any such promise.
Judgment: Merely because the appellants have been acquitted in the criminal case, it does
not mean that no suit for damages can lie in Tort.
where under the garb of promise to marry, the girl is lured and subjected to physical criminal
conversation, resulting in pregnancy, the extent of damages will differ, on various counts,
such as : physical pain, indignity, chances of marriage becoming dim, social stigma.
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203. Name: Mahabir Auto Stores & Ors vs Indian Oil Corporation & Ors
Petitioner: Mahabir auto stores & ors.
Respondent: Indian Oil Corporation & ors.
Citation: 1990 AIR 1031, 1990 SCR (1) 818
Bench: Mukharji, Sabyasachi (Cj)
Facts: The appellant-firm had been carrying on the business of distribution and sale of all
kinds of lubricants received from the respondent, a statutory corporation, since 1965. It is the
case of the appellant that it acted as Lube distributor of the respondent corporation and that it
had been given the Customer No. during the course of business. The appellant claimed that
from Feb. 1965 to 27th May, 1983, it had received and uplifted the supply of lubricants/goods
each year and the total quantity, of lubricants/goods thus lifted had gone upto the extent of
1,11,34854 litres or kgs. The respondent suddenly stopped the supply of lubricants to the
appellant-firm on 27.5.1983. The appellant-firm made several representations to the
respondent against the aforesaid action of the respondent but to no use. The appellant there-
upon filed a writ petition in the High Court praying for a writ of mandamns directing the
respondent to desist from denying or discontinuing the supply of lubricants and thereby save
the appellant from being ousted from the business; claim for damages from the date the
supply was discontinued was also made.
Judgment: The state acts in its executive power under Art.298 of the Constitution in entering
or not entering in contracts with individual parties. Art. 14 of the Constitution would be
applicable to such exercise of power. The action of state organ can be tested under Art. 14.
Every action of state executive authority must be subject to the Rule of Law and must be
informed of reason. So, whatever be the activity of the public authority, it should met with
the test of Article 14 of the constitution. If a government action even in the matters of
entering or not entering into the contacts, fail to satisfy the teat of reasonableness, the same
would be unreasonable. Rule of reason, rule against arbitration and discrimination and rule of
fair play and justice are all part of rule of law applicable to dealing with citizens. Even where
the rights of citizens are in nature of contractual rights, the manner, the motive and method of
decision of entering or not entering into a contract, are subject to judicial review on the
touchstone on reasonableness, relevance, fair play, equity, natural justice and non-
discrimination.
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204. Name: Maula Bux vs Union Of India

Petitioner: Maula bux
Respondent: Union of India
Citation: 1970 AIR 1955, 1970 SCR (1) 928
Bench: Shah, J.C. (Cj)
Facts: The appellant entered into a contract with the respondent to supply some goods and
deposited a certain amount as security for due performance of the contract. It was stipulated
that the amounts we're to stand forfeited in case the appellant neglected to perform his part of
the contract. When the appellant made defaults in the supply, the respondent rescinded the
contract and forfeited the amount deposited. The appellant filed a suit for recovery of the
amount with interest. The trial court decreed the suit, holding that the respondent was
justified in rescinding the contracts, but could not 'forfeit the deposit, for, it had not suffered
any loss in consequence of the default committed by the appellant. The High Court modified
the decree and awarded the 'respondent a major portion of the amount deposited as damages.
The High Court took the view that the forfeiture of a sum deposited by way of security for
due performance of a contract, where the amount forfeited was not unreasonable s. 74 of the
Contract Act had no. application and that the deposits so made could be regarded as earnest
money.
Judgment: Where under the terms of the contract the party in breach has undertaken to pay a
sum of money or to forfeit a sum of money which he has already paid to the party
complaining of a breach of contract, the undertaking is in the nature of a penalty and, s. 74
applied thereto.
205. Name: Mulamchand vs State Of Madhya Pradesh

Petitioner: Mulamchand
Respondent: State of Madhya Pradesh
Citation: 1968 AIR 1218, 1968 SCR (3) 214
Bench: Ramaswami, V.
Facts: Before the coming into force on April 1, 1951 of the Madhya Pradesh Abolition of
Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Act 1 of 1951), the
appellant had purchased from certain proprietors of land the right to collect forest produce
from the said land during the years 1951, 1952 and 1953. The right was to be enjoyed after
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April 1, 1951 on which date under the aforesaid Act, the proprietary rights came to vest in the
State of Madhya Pradesh. The Deputy Commissioner acting under s. 7 of the Act prevented
the appellant from enjoying the rights he had acquired from the proprietors, and in April 1951
auctioned the right to collect forest produce from the land. The appellant deposited Rs.
10,000 to acquire the right of collecting lac from the said land during 1951, 1952 and 1953.
He collected some lac but thereafter filed a suit claiming refund of the deposit of Rs. 10,000
on the basis that there was no. valid contract between him and the State of Madhya Pradesh
as the provisions of Art. 299 of the Constitution were not complied with and the contract was
void. The trial court granted him a decree but the High Court decreed against him. With
certificate the appellant came to this Court
Judgment: The provisions of Art. 299(1) of the Constitution like the provisions of s. 175(3)
of the Government of India Act, 1935 have not been enacted for the sake of mete form but
they have been enacted for safeguarding the Government against unauthorised contracts. The
formalities which are embodied therein on grounds of public policy cannot be waved or
dispensed with. The appellant was right in his contention that the Contract entered into by
him was void because Art. 299 had not been complied with.
However the refund of Rs. 10,000 claimed by the appellant could not be allowed as he did
not satisfy the conditions of s. 70 of the Indian Contract Act. The person who seeks
restitution has a duty to account to the defendant for what he has received in the transaction
from which his right to restitution arises.
206. Name: Oil & Natural Gas Corporation Ltd vs Saw Pipes Ltd
Petitioner: Oil & Natural Gas Corporation Ltd
Respondent: Saw Pipes Ltd
Citation: (2003) 5 SCC 705, AIR 2003 SC 2629
Bench: M.B. Shah, Arun Kumar.
Facts: Oil and Natural Gas Commission had placed an order on Saw Pipes for supply of
equipment for off shore exploration, to be procured from approved European manufacturers.
The delivery was delayed due to general strike of steel mill workers in Europe. Timely
delivery was the essence of the contract. ONGC granted extension of time, but it invoked the
clause for recovery of Liquidated Damages by withholding the amount from the payment to
the supplier. ONGC deducted from the payment $3,04,970.20 and Rs 15,75,557 towards
customs duty, sales tax and freight charges.
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Judgment: Proof of loss not necessary when a genuine pre-estimate of the loss is stipulated
in the contract. If the parties had agreed upon a sum as being pre- estimated genuine
liquidated damages there was no reason for the tribunal to ask the purchaser to prove his loss.
It further opined that when the court concludes that stipulation for damages is by way of
penalty, it can grant reasonable compensation upon proof of damage. However, where an
agreement has been executed by experts in the field, the court should be slow to construe a
clause providing for liquidated damages as penalty.
207. Name: P.C. Wadhwa vs State Of Punjab

Petitioner: P.C. Wadhwa
Respondent: State Of Punjab
Citation: AIR 1987 P H 117
Court: Punjab-Haryana High Court
Bench: R N Mittal
Facts: The defendant applied for the post Stipendiary Probationers for the Superior Forest
Course at the Indian Forest College, Dehra Dun and was selected by the Commission. He
joined the Forest Department for preliminary practical training on 20-11-1951 and underwent
the training until l7th March, 1952. On completion of the training he joined the Indian Forest
College at Dehra Dun on 1st April, 1952. After successful completion of the training, he was
to be appointed as PFS Class I Officer: It is averred that according to the conditions, the
selected candidates were required to sign an agreement to the effect that they would serve the
Department for not less than 5 years and in case they failed to do so, they would required all
the monies spent by the Government on their training and education. The bond, however,
could not be got signed from the defendant. In September, 1952, he left the College without
sanction of the Government and joined the Central Police Training College at Abu as he had
been selected in I.P.S. The defendant was requested to return the amount of Rs. 3250/- spent
by the plaintiff on him but he did not do so.
Judgment: The petitioner is entitled to pay those expenses as he had voluntarily accepted the
course and the government was not conducting that course gratuitously, hence Section 70
would apply and he had pay those.
208. Name: Prema Korgaokar vs Mustak Ahmed

Appellant: Prema Korgaokar
Respondent: Mustak Ahmed
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Citation: AIR 1987 Guj 106, (1987) 1 GLR 462

Court: Gujarat High Court
Bench: R Mankad, R Mehta
Facts: The appellant was working as a part time typist in a typing institution Good luck
Typing Centre in Santacruz (East) Bombay which was run by the respondent-defendant. The
defendant was also working as a Stenotypist in Indian Oil Corporation at Bombay. The
respondent-defendant developed friendly relations with the appellant-plaintiff. In 1980, the
defendant was transferred from Bombay to Rajkot office of Indian Oil Corporation. The
appellant-plaintiff accompanied the respondent-defendant to Rajkot on promise to find out a
job for her. Relying on him, she came to Rajkot on 23-3-1981 and stayed with the
respondent-defendant in Ashok Hotel for three days. The respondent-defendant being a
Muslim, although married, stated to the appellant-plaintiff that his wife was unable to
conceive and bear a child and, therefore, he had to adopt the child of his sister-in-law. But the
respondent-defendant was very much desirous of having his own child and, therefore, the
defendant who could have another wife under his personal law, proposed and promised to
marry her and give her the status of wife. The respondent-defendant also changed the name of
the appellant-plaintiff from Prema Koregaonkar to Parvin Ahmad. The respondent-defendant
took her to a building 'Rafik Manzil' from Ashok Hotel in Rajkot and thereafter, live with the
appellant-plaintiff as husband and wife. However, when the appellant-plaintiff insisted on
marriage, the respondent-defendant started harassing has and the appellant-plaintiff was put
into a very awkward position. Ultimately, she was deserted by the respondent at Rajkot a
faraway place from her relations. She submitted that she had lost everything in her life and all
chances of happiness in life and of finding out a suitable life partner in her caste or society
and that the respondent has ruined her by committing, breach of promise to marry her and she
claimed compensation for the same amounting to Rs. One lakh with interest at 18% from the
date of the suit.
Judgment: The breach of promise of marriage is not only actionable and there is no bar of
public policy operating against the same but even exemplary damages apart from the normal
damages would be awarded.
In case of injury to the feelings of the disappointed party due to breach of contract, the court
may take this into account in the assessment of damages.
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209. Name: Raja Dhruv Dev Chand vs Harmohinder Singh & Anr
Petitioner: Raja Dhruv Dev Chand
Respondent: Harmohinder Singh & Anr
Citation: 1968 AIR 1024, 1968 SCR (3) 339
Bench: Shah, J.C
Facts: The appellant obtained lease of a land in the undivided Punjab and carried on
agricultural operations in it. Following the partition of India and allotment of the territory in
which the lands were situate to Pakistan the appellant migrated to India. The appellant
commenced an action for a decree for refund of the rent on the plea that the consideration for
the lease failed, because the covenants of the lease had become impossible of performance as
a result of communal riots in that locality and the inability of non-muslims to continue to
reside in that area.
Judgment: Authorities in the courts in India Have taken the view that section 54 of Contacts
Act is not applicable when the rights and obligations of parties arise under transfer of
property under a lease.
In the present case the relation between the appellant and the respondents did not rest in
contract. The rights of the parties did not after the lease was granted rest in contract. Section
4 of Transfer of Property Act however cannot be read as enacting that the provisions of the
Contract Act are to be read into the Transfer of Property Act. There is a clear distinction
between a completed conveyance and an executory contract, and events which discharge a
contract do not invalidate a concluded transfer. Inability of the appellant to cultivate the land
or to collect the crops because of widespread riots cannot in the event that transpired clothe
him with the right to claim refund of the rent paid.
210. Name: Ramana Dayaram Shetty vs The International Airport

Petitioner: Ramana Dayaram Shetty
Respondent: The International Airport
Citation: 1979 AIR 1628, 1979 SCR (3)1014
Bench: Bhagwati, P.N
Facts: The first respondent, by a public notice, invited tenders for putting up and running a
second class restaurant and two snack bars at the International Air port, Bombay. the notice
stated in Paragraph (1) that sealed tenders in the prescribed form were invited from registered
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second class hoteliers having at least five years' experience for putting up and running a
second class restaurant and two snack bars at the Bombay Airport. A total of 6 tenders were
received but all were rejected except that one of the 4th respondent due to incomplete forms.
But the 4th respondent too lacked the 5 year experience but was given the tender. Hence,
petition filed by the appellant.
Judgment: The action of the first respondent in accepting the tender of the fourth
respondents, who did not satisfy the standard or norm, was clearly discriminatory since it
excluded other persons similarly situate from tendering for the contract and it was arbitrary
and without reason. Acceptance of the tender was invalid as being violative of the equality
clause of the Constitution as also of administrative law inhibiting arbitrary action.
Every action of the executive Government must be informed with reason and should be free
from arbitrariness. That is the very essence of the rule of law and its bare minimal
requirement. And to the application of this principle it makes no difference whether the
exercise of the power involves affectation of some right or denial of some privilege.
211. Name: Sales Tax Officer, Banaras & ... vs Kanhaiya Lal Mukundlal Saraf
Petitioner: Sales Tax Officer, Banaras & others
Respondent: Kanhaiya Lal Mukundlal Saraf
Citation: 1959 AIR 135, 1959 SCR Supl. (1)1350
Bench: Das, Sudhi Ranjan (Cj), Bhagwati, Natwarlal H., Sinha, Bhuvneshwar P., Subbarao,
K., Wanchoo, K.N
Facts: The respondent, a registered firm, paid sales tax in respect of its forward transactions
in pursuance of the assessment orders passed by the sales tax officer for the years 1949- 51,
but in 1952, the Allahabad High Court having held in Messrs. Budh Prakash jai Prakash v.
Sales Tax Officer, Kanpuy, 1952 A. L. J. 332, that the levy of sales tax on forward
transactions was ultra vires, the respondent applied for a refund of the amounts paid, by a writ
petition under Art.226 of the Constitution.
Judgment: The term "mistake " in s. 72 Of the Indian Con- tract Act comprises within its
scope a mistake of law as well as a mistake of fact and that, under that section a party is
entitled to recover money paid by mistake or under coercion, and if it is established that the
payment, even though it be of a tax, has been made by the party labouring under a mistake of
law, the party receiving the money is bound to repay or return it though it might have been
paid voluntarily, subject, however, to questions of estoppel, waiver, limitation or the like.
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212. Name: Schiller and Ors. vs Sooltan Chand And Ors

Petitioner: Schiller and Ors.
Respondent: Sooltan Chand and Ors
Citation: (1879) ILR 4 Cal 252
Bench: R Garth, Markby
Facts: A contract between the parties for delivery of seeds where the buyer abstains from
making payment on the due date but not completely and promises to pay later. The seller
rescinds the contract.
Judgment: the defendants cannot say that the failure to pay on delivery strictly in accordance
with the contract justified them in refusing to go on with it
213. Name: Seth Bikhraj Jaipuria vs Union Of India

Petitioner: Seth Bikhraj Jaipuria
Respondent: Union Of India
Citations: 1962 AIR 113, 1962 SCR (2) 880
Bench: Kapur, J.L., Subbarao, K., Hidayatullah, M., Shah, J.C., Dayal, Raghubar
Facts: the Divisional Superintendent, East Indian Railway placed certain purchase orders
with the appellant for the supply of foodgrains for the employees of the East Indian Railway.
The orders were not expressed to be made in the name of the Governor-General and were not
"executed on behalf of the Governor-General as required by S. 175 (3) of the Government of
India Act, 1935. They were signed by the Divisional Superintendent either in his own hand or
in the hand of his Personal Assistant. Some deliveries of food-grain s were made under these
orders and were accepted and paid for by the Railway Administration. But the Railway
Administration declined to accept further deliveries of food-grains. The appellant sold the
balance of foodgrains under the purchase orders and filed a suit to recover the difference
between the price realised by sale and the contract price.
Judgment: that the contracts were not binding on the respondent and it was not liable for
damages for breach of the contracts.
The provisions of s. 175(3) of the Government of India Act, 1935 were mandatory. The
object of enacting these provisions was that the State should not be saddled with liability for
unauthorised contracts and hence it was provided that the contracts trust show on their face
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that they were made by the Governor- General and executed on his behalf in the manner
prescribed by the person authorised.
214. Name: State Of West Bengal vs M/S. B. K. Mondal And Sons

Petitioner: State Of West Bengal
Respondent: M/S. B. K. Mondal And Sons
Citations: 1962 AIR 779, 1962 SCR Supl. (1) 876
Bench: Gajendragadkar, P.B., Sarkar, A.K., Wanchoo, K.N., Gupta, K.C. Das, Ayyangar, N.
Rajagopala
Facts: The respondent, a firm of building contractors doing construction works for the
Provincial Government did certain additional construction on the request of its officers. Its
bills for these latter works were not paid and it sued the government basing its claim on
contract and in the alternative on s. 70 of the Contract Act. The defence of the Provincial
Government, inter alia, was that there was no valid and binding contract and s. 70 had no
application.
Judgment: Whether a mandatory provision in a statute is merely directory or obligatory
should be decided on a careful examination of the scope of the statute and the object of the
particular provision. (In enacting s.175(3) of the Government of India Act, 1935, the
intention of the parliament was that the state should not be burdened with liability based on
unauthorised contracts. The provision made was in public interest and so the word 'shall' used
therein must be held to make it obligatory and not directory.)
The word 'lawfully' in s. 70 of the Contract Act means that after something is done or
delivered by one person to another and is voluntarily accepted and enjoyed by the latter, a
lawful relationship arises between the two which attracts s.70 of the Contract Act. In cases
falling under the section, there cannot, therefore be any scope for claims for specific
performance or for damages for breach of contract, the claim for compensation under the
section being on the footing that there has been no contract and the conduct of parties has
created a relationship resembling that arising out of a contract.
215. Name: Sushila Devi And Anr vs Hari Singh And Ors
Citations: 1971 AIR 1756, 1971 SCR 671
Petitioner: Sushila Devi And Anr
Respondent: Hari Singh And Ors
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Bench: Hegde, K.S.
Facts: The appellants were legal representatives of the owner of a village. In January, 1947,
the previous owner called for tenders for taking the property on lease for a period of three
years. The respondents' tender was accepted and they deposited along with the tender earnest
money and security for the payment of rent. The terms of the tender required that the lease
deed should be got registered by the lessee and that the lessee alone would be personally
responsible for taking possession of the lands.
As a result of the partition of India the village became a part of Pakistan. Even before actual
partition, because of serious communal troubles, it was not possible for the respondents to go
to the village either to cultivate the lands or to collect the rent from those who were
cultivating. No lease deed- was executed or registered. Under those circumstances the
respondents filed a suit claiming a decree for the refund of the amounts deposited and
damages.
Judgment: The law of frustration as embodied in s. 56 of the Contract Act applies only to a
contract that is, an agreement to lease, and does not apply to leases.
The impossibility contemplated by s. 56 is not confined to something which is not humanly
possible. If the performance of a contract becomes impracticable or useless having regard to
the object and purpose of the parties then it must be held that the performance of the contract
became impossible. But the supervening events should take away the very basis of the
contract and it should be of such a character that it strikes at the root of the contract.
216. Name: Tata Cellular vs Union Of India

Petitioner: Tata Cellular
Respondent: Union Of India
Citations: 1996 AIR 11, 1994 SCC (6) 651
Bench: Mohan, S. (J)
Facts: The Department of Telecommunications, Government of India, invited tenders from
Indian Companies with a view to license the operation of "Cellular Mobile Telephone
Service" in four metropolitan cities of India, namely, Delhi, Bombay, Calcutta and Madras.
The tender process was in two stages. First stage involved technical evaluation and the
second involved financial evaluation. Those who were short-listed at the first stage were
invited for the second stage. The telecom commission short-listed 16 companies, 12 of which
130 | P a g e
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were eligible without any defect. However, in the case of 4 the Committee recommended
condonation of certain defects. the recommendations were submitted to the Telecom
Commission. The matter came up for discussion among the members of the Commission. On
27-5- 1992 the Telecom Commission accepted the recommendations. Meanwhile, Mr B.R.
Nair, a Member (Budget) of Telecom Commission came to be appointed as Member
(Services) on 29-5-1992. It appears the Selection Committee met a number of times and
discussed the matter with the Minister. He submitted an interim report on 16-7-1992. During
this time the Committee not only de novo exercised but also modified the short-list prepared
by the Technical Evaluation Committee and approved 14 companies. Two bidders, namely,
M/s Ashok Leyland Ltd. and M/s Vam Organics Ltd. were dropped from the short-list of 16
bidders. On 29- 7-1992, Mr Nair was appointed as Director General of Telecommunications.
He was authorised to exercise all powers of Telecom Authority under Section 3 of the
Telegraph Act. The Minister approved the issue of financial bids with modification to the
short-listed companies as recommended by the Selection Committee on 29-7-1992. The
approval took place on 30-7-1992. On 10-10-1992, the list was recast. Sterling Cellular
was provisionally selected for the city of Madras. On 12-10-1992, the selected bidders
were notified of their provisional selection subject to the acceptance of rentals and other
terms as might be advised. It is under these circumstances, four writ petitions were filed.
Judgment: It cannot be denied that the principle of judicial review would apply to the
exercise of contractual powers by the government bodies in order to prevent arbitrariness.
However, it must be clearly stated that there are inherent limitations on exercise of that
powers of judicial review. Government is the guardian of the finance of state. The right to
refuse the lowest or any other tender is always available to government. But, the principle
stated in Article 14 have kept to be in view while accepting or refusing a tender. There can be
no question on infringement of Article 14 if government tries to get the best person or the
best quotation. The right to choose cannot be considered an arbitrary power. Of course, of the
power is exercised for any collateral purpose the exercise will be struck down.
217. Name: The Naihati Jute Mills Ltd vs Hyaliram Jagannath

Petitioner: The Naihati Jute Mills Ltd
Respondent: Hyaliram Jagannath
Bench: Shelat, J.M.
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Facts: The appellant entered into a contract on July 7, 1958 with the respondent to purchase
from him 2000 bales of jute to be imported from Pakistan. The contract, inter alia. provided
that shipment of the consignment would be made; during August-November, 1958, that the
buyers would obtain the necessary import licence, that if they failed to obtain the licence by
November 1958, the period of shipment would be extended upto December 1958 and that if it
was not obtained by. December 1958, the contract would be settled at the market price
prevailing on January 24, 1959. The appellants applied to the Jute Commissioner on August 8
for an import licence but this was refused on the ground that the appellants had sufficient
stock to carry on for some months more. 'They applied again on Nov-ember 29, 1958 when
their stock was reduced but the Jute Commissioner refused to issue the licence and ,asked
them to meet their requirements from purchases of Indian jute. The respondents thereafter
claimed damages from the appellants on the ground that the appellants had failed to furnish,
the import licence as provided in the contract.
Judgment: Since under the Contract Act a promise may be express or implied, in cases
where the court gathers as a matter of construction that the contract itself contains impliedly
or expressly a term according to which it would stand discharged on the happening of certain
circumstances, the dissolution of the contract would take place under the terms of the contract
itself and such cases would be outside the purview of s. 56.
218. Name: Union Of India (Uoi) vs Rampur Distillery And Chemical

Petitioner: Union Of India (Uoi)
Respondent: Rampur Distillery And Chemical
Citations: AIR 1973 SC 1098, (1973) 1 SCC 649, 1973 (5) UJ 560 SC
Facts: The respondents-Rampur Distillery and Chemical Co. Ltd., supplied to the appellants-
union of India a large quantity of rum (presumably, for the use of Defence personnel). The
rum was found not to conform to the quality stipulated and was therefore rejected by the
appellants. The appellants then cancelled the contract and forfeited the entire security deposit
of Rs. 18, 332/- which was kept by the respondents disputing the right of the appellants to
forfeit the security deposit, the dispute was referred to an arbitrator who held that the
appellants were entitled under Section 74 of the Indian Contract Act to the award of
reasonable compensation only, which the arbitrator fixed at Rs. 7,332/- He directed the
appellants to refund the balance viz. Rs. 11,000/- to the respondents.
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Judgment: Forfeiture of earnest money under a contract for sale of property does not fall
within Section 70 of the Contract Act, if the amount is reasonable, because the forfeiture of a
reasonable sum paid as earnest money does not amount to the imposition of a penalty. Hence,
they are entitled to forfeit the security deposit.
219. Name: Union Of India vs A.L. Rallia Ram

Petitioner: Union Of India
Respondent: A.L. Rallia Ram
Bench: Shah, J.C.
Facts: The Chief Director of Purchases (Disposals), Food Department, Government of India,
invited tenders for purchasing war surplus American Cigarettes. The respondent submitted a
tender offering to purchase the entire stock- This tender was accepted by a letter with which
was enclosed a Form containing the general conditions of contract including a clause for
arbitration. The respondent took delivery of 29,93, 597 packets and p. aid Rs. 17,78,573/6/4
for them. On inspection some of the cigarettes were found to be mildewed and unfit for use.
Ultimately, the Government decided to cancel the contract with respect to the undelivered
cigarettes and offered to take back from the respondent cigarettes which "were in their
original packing and could be identified, subject to the condition that no claim will be made
by the respondent in respect of freight, storage, rents, charges or any other expenses incurred
by him in respect of the cigarettes taken back." The respondent accepted this offer reserving
his right to claim incidental expenses. He returned 24,13,500 packets and Government
refunded Rs. 14,54,21517/, to him. Arbitrators could not arrive at a decision and an umpire
was appointed. The umpire gave an award awarding to the respondent Rs. 1,32,417/10/- for
loss suffered in respect of cigarettes not returned, Rs. 1,25,000/- for incidental expenses and
Rs. 68,833/l2/3 as interest.
Judgment: An arbitration agreement would not be binding if in violation of statutory
provisions. In the absence of any usage, contract, express or implied, or of any provision of
law to justify the award of interest, interest cannot be awarded by way of damages. In respect
of that part of the contract which was abandoned, if any liability to pay interest had arisen it
was for the respondent to claim it in settling the terms of cancellation of the contract. Interest
could not be awarded on equitable grounds.
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220. Name: Tsakiorglou & Co Ltd v Noblee & Thorl.

Petitioner: Tsakiorglou & Co Ltd
Respondent: Noblee & Thorl
Citation: (1961) 2 All ER 179, (1961) 2 WLR 633, (1962) AC 93
Court: N/A
Bench: Lord Reid
Facts: The appellant agreed to sell to respondents 300 tons of Sudan groundnuts c.i.f.
Hamburg. The usual and normal route at the date of contract was via Suez Canal. Shipment
was to be in November December, 1956 but on November 2, 1956, the canal was closed to
traffic and it was not to be opened till April 1957. It is stated that appellant could have
transported the goods via the Cape of Good Hope. The appellant refused to send goods via
Cape.
Question of Fact: Whether it amount to frustration of contract.
Judgment: There was no implied contract that the goods to be transported via Suez Canal.
The usual route being closed, the appellate was bound to ship them by reasonable and
practical route and the appellants might be put to grater expense by shipping via the Cape but
that did not render the contract fundamentally or radically different and there was not,
therefore, frustration of contract.
221. Name: Plinche v Colburn

Plaintiff: Plinche
Defendant: Colburn
Citation: (1831) 8 Bing, 14: (1831) 5 C&P 58.
Court: N/A
Bench: N/A
Facts: The plaintiff was author of several dramatic entertainments. He was engaged by the
defendants, who were publisher of the work called The Juvenile Library to write for that
work an article to illustrate the history of armour and costumes from earliest times. The
plaintiff made various drawings and prepared a considerable portion of manuscript when the
defendant discontinued the Juvenile Library. The plaintiff claimed the sum of 50 guineas for
the part he had prepared.
Judgment: The principle of Quantum Meruit applies and the plaintiff is entitled to get the
claimed amount.
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222. Name: Craven-Ellis v Canons Ltd

Plaintiff: Craven-Ellis
Defendant: Canons Ltd
Court: N/A
Bench:N/A
Citation: (1936) 2 KB 403: (1936) 2 All ER 1066, CA.
Facts: On August 15, 1928, the plaintiff was employed as an estate agent by Pard Estate,
Ltd., and was devoting himself to a building estate vested in that company, known as Canon
Park estate. On the date of Canon, Ltd., the defendant company, purchased Canons Park
estate and plaintiff continued to work for that company. Although it was the intention of the
parties that a new agreement should be entered into, this was not done until April 14, 1931
and in the meantime the plaintiff rendered services to the defendant in capacity of an estate
agent. The agreement of April 14, 1931, purported to appoint the plaintiff as managing
director and the plaintiff acted as such up until the time of action. The court found that this
agreement was void.
Question of Fact: Whether the company was liable for the services rendered by the plaintiff
under the agreement.
Judgment: The court re-establishes the principle of Quantum Meruit and hence the
company was directed to pay the plaintiff.
223. Name: Frost v. Knight

Plaintiff: Frost
Defendant: Knight
Citation: (1871-72) L.R. 7 Ex. 111
Court: Court of Exchequer Chamber
Bench: Cockburn, C.J., and Byles, J.
Facts: The defendant promised to marry the plaintiff so soon as his (defendant's) father
should die. During the father's lifetime the defendant refused absolutely to marry the plaintiff.
The plaintiff sued for breach of the promise, the defendant's father being still alive.
Judgment: The law with reference to a contract to be performed at a future time, where the
party bound to performance announces prior to the time his intention not to perform it,
may be thus stated. The promisee, if he pleases, may treat the notice of intention as
inoperative, and await the time when the contract is to be executed, and then hold the other
party responsible for all the consequences of non-performance: but in that case he keeps the
135 | P a g e
Contracts Law-I
contract alive for the benefit of the other party as well as his own; he remains subject to all
the obligations and liabilities under it, and enables the other party not only to complete the
contract, if so advised, notwithstanding his previous repudiation of it, but also to take
advantage of any supervening circumstance which would justify him in declining to complete
it. On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other
party as a wrongful putting an end to the contract, and may at once bring his action as on a
breach of it; and in such action he will be entitled to such damages as would have arisen from
non-performance of the contract at the appointed time, subject, however, to abatement in
respect of any circumstances which may have afforded him the means of mitigating his loss.
224. Name: Victoria Laundry (Windsor) v Newman Industries

Plaintiff: Victoria Laundry (Windsor)
Defendant: Newman Indutries
Citations: [1949] 2 K.B. 528; [1949] 1 All E.R. 997; 65 T.L.R. 274; (1949) 93 S.J. 371
Bench: Asquith, L.J.
Facts: Newman Industries Ltd was meant to deliver a boiler for Victoria Laundry (Windsor)
Ltd. The delivery was five months late. As a result of not having enough laundry capacity,
Victoria Laundry lost a lucrative cleaning contract from the Ministry of Supply. Victoria
Laundry sued for the ordinary profit that it had forgone through not having the boiler on time.
Question of Fact: The question was whether it could also claim the extraordinary profit it
would have made, had it been able to take advantage of the lucrative Ministry of Supply
contract.
Judgment: Newman Industries only had to compensate for the ordinary, not the
extraordinary loss of profits. He distinguished (at p 543) losses from particularly lucrative
dyeing contracts as a different type of loss which would only be recoverable if the defendant
had sufficient knowledge of them to make it reasonable to attribute to him acceptance of
liability for such losses. The vendor of the boilers would have regarded the profits on these
contracts as a different and higher form of risk than the general risk of loss of profits by the
laundry.
225. Name: Avery v Bowden

Appellant: Avery
Defendant: Bowden
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Citation: (1855) 5 E & B 714

Court:N/A
Bench: N/A
Facts: B chartered A's ship and agreed to load her with cargo at Odessa within 45 days. After
a while B told A that he had no cargo and advised him to leave. Instead, A waited at Odessa
hoping B would find a cargo. Before the end of the 45 days the Crimean War broke out
between England and Russia and performance of the contract became illegal.
Judgment: The refusal by B to provide a cargo was an anticipatory breach and A could have
sued immediately. When he chose not to do so the contract remained on foot until performed.
However, in the meantime both parties were discharged from the contract by frustration
(subsequent illegality in this case) due to the outbreak of war. Thus, B was not liable to A for
breach of contract.
226. Name: Koufos v. C Czarnikow Ltd (The Heron II)

Plaintiff: Koufos
Defendant: Czarnikow Ltd.
Citation: [1967] 3 All E.R. 686
Bench: N/A
Facts: Koufos chartered a ship (the Heron II) from Czarnikow to bring 3,000 tons of sugar to
Basra. It was nine days late. The sugar price had dropped from 32 10s to 31 2s 9d. Koufos
claimed the difference in the loss of profit. Czarkinow knew there was a sugar market, but not
that Koufos intended to sell it straight away.
Judgment: The House of Lords held that the loss was not too remote. They stated that the
test for remoteness in contract is narrower than it is in tort. While in tort any damage of a type
which is reasonably foreseeable can be claimed, Lord Reid ruled that, in contract, the
defendant must ought to have realised that the loss was 'not unlikely to result from the breach
of contract'. A higher degree of probability is needed for the loss to be in the contemplation
of the parties.
227. Name: Anglia Television Ltd. v. Reed

Plaintiff: Anglia Television Ltd
Defendant: Reed
Citation: [1971] 3 All E.R. 690.
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Contracts Law-I
Court: N/A
Facts: Anglia (P) made preparations to produce a play for television titled The Man in the
Wood. Anglia contracted with Robert Reed (D) to star in the production. Reed agreed to
come to England and be available from September 9-October 11, 1968 to rehearse and act in
the film in exchange for 1,050 pounds, a living expense of 100 pounds per week, and first
class air fare between England and the United States.
D repudiated the contract and informed P that he was booked for another play and would not
be available for Ps film. P sued D and sought wasted expenditure but not lost profits. The
trial court allowed P to recover all of its damages from both before and after D repudiated the
contract and D appealed.
Question of Fact: What damages are available to a plaintiff in a claim for wasted
expenditure arising from breach of contract?
Judgment: A plaintiff is not limited only to expenditures incurred after the formation of the
contract in a claim for wasted expenditure from a breach of contract.
The court held that if the expenditures incurred before the parties entered into the contract
were reasonably within the contemplation of the parties as likely to be wasted if the contract
were to be broken, that expenditure is recoverable. The court held that in this case D knew or
should have known that if he repudiated the contract, fees incurred for directors and other
expenses would be wasted.
138 | P a g e

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Compendium

Mr. Joshua Aston

Gujarat National Law University, Gandhinagar

We also take this opportunity to express a deep sense of gratitude to Gujarat

Mr. Vasu Jain

1. MODULE 1 Formation of Contracts....................... .................1

Girdharilal Parshottam Das & Co ... .............. .............. .............. ...20

55. MODULE 2 Consideration ..........................................................41

63. Dutton v. Poole Court of Kings Bench. .............. ..................46

92. MODULE 3 CAPACITY .............. ...................... ...........61

96. Kundan Bibi v. Sree Narayan.............. .............. .............. ...62

113. MODULE 4 CONSENT ............... .....................69

129. Edgington v Fitzmaurice ................ .............. .76

161. State of Karnataka v Stellar Construction Co ..92

162. MODULE 5 Legality of Object .... .............. ....................93

183. MODULE - 6 Contingent Contract.. .............. .......... ..........105

186. MODULE - 7 Performance and Discharge of Contracts.. .......106

189. China Cotton Exporters v BLR Cotton Mills Ltd... ...............107

MODULE 1 FORMATION OF CONTRACTS

1. Topic: Implied Contract

2. Topic: Communication of offer and Acceptance of offer

3. Topic: Relevance of Motive

4. Topic: Intention to create legal relation

5. Topic: Agreements between husband and wife

6. Topic: Agreements between mother and daughter

7. Topic: Agreement between husband and wife

8. Topic: Agreement between husband and wife

9. Topic: Intention to create legal relationship

10. Topic: Intention to create legal relation

11. Topic: Intention to create legal relation

12. Topic: Offer and acceptance

13. Topic: Unilateral Offer

14. Topic: Acceptance of contract

15. Topic: Offer and supply of information

16. Topic: Offer and Counter offer

17. Topic: Invitation to treat

18. Topic: Formation of valid contract

19. Topic: Invitation to offer

20. Topic: Invitation to offer

Did the advertisement constitute a contract or was it merely an invitation to offer?

21. Topic: Implied Contract

22. Topic: Obligation to reject offer

23. Topic: Communication of acceptance of offer

24. Topic: Acceptance by post

25. Topic: Valid Acceptance

26. Topic: Postal rule of acceptance

27. Topic: Acceptance for telex

28. Topic: Formation of Contract

Bench: Lords Wilberforce, Fraser of Tullybelton, Brandon of Oakbrook, Russell of

29. Topic: Communication of Acceptance

30. Topic: Counter offer

31. Topic: Counter offer

32. Topic: Existence of valid contract

33. Topic: Formation of Valid Contract

34. Topic: Communication of Resignation

Court: Supreme Court of India

35. Topic: Withdrawal of Tender

36. Topic: Existence of Valid Contract

37. Topic: Revocation of offer

Could the defendant revoke the offer?

38. Topic: Revocation of offer

39. Topic: Offer and Acceptance and Exclusion Clause

40. Topic: Exclusion Clause