BUSINESS LAW

CIA 1
COMPONENT 2

Submitted to – Prof. Issac P. Elias

Yukta Bhatia (1720260)

Kushagra Thakur (1720218)
6 BBA B
 Lalman Shukla vs Gauri Dutta (17 April, 1913)

This landmark case from 1913 revolves around the examination of a contract’s validity if
there exists no acceptance.

Plaintiff – Lalman Shukla

Defendant – Gauri Dutta

Relationship between the parties – Gauri Dutta was the employer/master of Lalman Shukla,
who worked as a servant in his house.

Ruling by – High Court of Allahbad

Facts of the Case –

 In the January, 1913 defendant’s nephew had absconded from his house and in order to
find his nephew he sent all his servants (including Lalman Shukla) in search of his
nephew.
 He was sent to Haridwar from Cawnpore (Kanpur) where he found the child and for
this, he was awarded with two sovereigns and Rs. 20 when he returned to Cawnpore.
 In the meantime, while Lalman was in Haridwar in search of the child, defendant Gauri
Dutta advertised that a reward of Rs. 501 would be paid to a person who would find the
boy and defendant was completely uninformed of this reward.
 Later on, after 6 months of this incident plaintiff brought a suit against his master
claiming Rs. 499 and claimed that the master had not given him the reward he promised
to the person who will find his nephew. He alleged his master of not providing reward
for the specific performance of his promise.

Petitioners –

The petitioners strongly contended that performance of an act is sufficient for providing
rewards attached with such performance. They stated that it is immaterial that whether person
performing the act has knowledge of rewards associated with it or not.
He also argued that Section 8 of the Indian Contracts Act, 1872 states that performance of a
condition of proposal is an acceptance of proposal and in the present case the condition was
that the person who will find the missing child will be rewarded and thus as per this provision
he has fulfilled the condition, hence plaintiff is entitled to claim reward.

Respondents –

It was contended by the respondents that there must be an acceptance to offer in order to convert
it into a contract and assent is the basic essential in order to constitute a contract. At the time
he was tracing the boy he was unaware about this reward associated with child, so without
knowledge how can it create a contract between parties.

It was also argued by them that at the time of tracing the missing child he was acting as a
servant and thus fulfilling the responsibilities and obligations for which he was sent to Hardwar
from Cawnpore.

Judgment –

It was held by the High Court of Allahbad that knowledge and assent about a proposal is must
in order to convert a proposal into enforceable agreement and in the present case plaintiff
was neither aware nor has assent about the particular act. It was also said that the plaintiff was
merely fulfilling his obligations at the time when he was tracing the boy. So, the appeal was
dismissed and it was held that plaintiff was not entitled to claim reward for finding the
missing boy.

Key Concepts Highlighted –

In this case it was highlighted by the High Court of Allahabad that knowledge and acceptance
of a proposal are the basic essentials in order to constitute a valid contract. If the person
gives his assent and then performs the condition of proposal than only he is entitled to claim
rewards associated with such proposal.
Conclusion –

It can be concluded that through this case it was clearly established that firstly, acceptance or
assent is a must for converting a proposal into enforceable contract. Secondly, parties must
have knowledge about the proposal and without knowledge of the proposal it cannot converted
into agreement even if condition associated with such proposal is fulfilled.

Thus, in order to constitute a contract, there must be acceptance of an offer and there can be no
acceptance unless there is knowledge of the offer.

Damodara Mudaliar & Ors. vs. Secretary of State of India

In this case, the application of section 70 of the Indian Contract Act (1872) was in question.
The rule of law that nobody should benefit at the expense of another was upheld.

Plaintiff – Damodara Mudaliar and Ors

Defendant – Secretary of State of India

Ruling by – High Court of Madras

Facts of the case –

 The Parayankulattur tank irrigated eleven villages.

 Earlier, all the 11 villages were zamindari villages.
 Later, seven of those villages were severed from zamindari and became ordinary
ryotwari villages under the control of the Government.
 The tank needed repairs and the Government carried out the repairs for the preservation
of the tank.
 The Government sought proportional contribution from the appellant zamindars
towards the costs of the repair.
  The appellants denied their liability contending that the Government was bound to do
the repairs at its own expense and not entitled to charge the zamindars.
 The question in this case was whether the zamindars who were proprietors of the
villages irrigated by the tank could be held liable for the expenses of its repair incurred
by the Government.

Contention of Appellants –

 The Government was bound to do the repairs of the Parayankulattur tank at its own
expense and not entitled to charge the zamindars.
 There was no contract between the appellants and the respondents which could give
rise to any joint liability which could in turn give rise to an action for contributionas
held in Leigh v. Dickenson L.R. 15 Q.B.D. 60.
 The District Judge had not made a fair apportionment of the cost of the work, having
regard to the interests of the Government villages and zamindars’ villages in the
irrigation secured by the tank.

Contention of respondent –

 Under section 70 of the Indian Contract Act (1872), the appellants are liable to pay the
Government as they benefit from the repair of the tank as the tank irrigates the
zamindari villages as well.
 The act of repairing the tank was not intended to be a non-gratuitous act by the
Government.
 The appellants were aware of the repairs being executed and had not disapproved of the
same.
Judgment –

While deciding whether the appellants had enjoyed the benefits of the repair, the high Court
stated the need to ascertain the irrigable area of the villages owned by the Government and the
zamindars, respectively. Prima facie, it appeared that the Government derived more benefit
from the repair of the tank than the appellants as the majority of the villages irrigated by the
tank were ryotwari villages. The District Judge in his findings stated that the appellants had
undoubtedly enjoyed the benefits of the repair. The high Court accepted the findings and
dismissed the appeal with costs. The appellants were held liable to pay the necessary proportion
of the cost of the repair of the tank incurred by the respondent.

Key Concepts Highlighted –

The case revolves around Section 70 of the Indian contract act which establishes a right of
action. In order to establish this right of action at the suit of a person, three conditions must be
satisfied:
1. The thing must be done lawfully.
2. It must be done by a person not intending to act gratuitously.
3. The person for whom the act is done must enjoy the benefit of it.

Conclusion –

In this case, the court interpreted the application of section 70 of the Indian Contract Act (1872)
keeping in mind the rule of law that no person should benefit at the cost of another. This case
laid down the principle that while applying section 70, the fact that the party who committed
the non-gratuitous act had a personal interest in the matter would not render him ineligible to
recover proportional contribution from those who have enjoyed the benefits of his act. This
case also lay down that while applying section 70 it was not necessary for the party who did
the non-gratuitous act to prove that it was done under a situation of pressing emergency in
order to recover compensation for such act from the party who benefitted from it.