CONTRACT CASES MODULE 6

CHIKKAM AMMIRAJU AND ORS. VS CHIKKAM SESHAMMA

The defendants are the appellants. The only question in this case is whether the release-dead Ex.
A. was executed by the plaintiffs with their free consent or whether it was obtained from the two
plaintiffs (mother and son) through the exercise of coercion or undue influence or both, brought
to bear upon them by the defendants (the younger brothers of the 1st plaintiff's husband) and
their father Doraiyya through the 1st plaintiff's husband Swami who threatened to commit
suicide unless the plaintiffs executed the release deed (Ex-A) in respect of their reversionary
rights in certain lands which the 1st plaintiff's mother had sold without necessity to the
defendant's father's vendor.
The lower Courts found (a) that the 1st plaintiff's husband (the 2nd plaintiff's, father) did threaten
to commit suicide if the plaintiffs would not execute the release deed and that it was on account
of that threat working on their minds that the plaintiffs executed the deed; (b) that such a threat
was "coercion" and a deed brought about by such a threat is not a deed executed with free
consent and (c) that though the threat was not made by the defendants (the parties to the deed)
but by their brother, the document was voidable as "coercion" Used by a person who is not a
party to the deed also negatived free consent. On these findings the plaintiffs suit for cancellation
of the deed was decreed.
SH. KISHAN LAL KALRA VS N.D.M.C.
The plaintiff in this case claims himself to be a victim of Emergency era. He was given license
by the NDMC to run an open air restaurant in Connaught Circus, New Delhi which he started
under the name and style of 'Ramble Open Air Restaurant'. The lease was to expire on 31st May,
1978. However, the plaintiff was allegedly thrown out of the premises after taking forcible
possession thereof without due process of law by the defendant which sent its demolition squad
with police force on 7th August, 1976 for t his purpose. The plaintiff has filed the present suit
claiming damages to the tune of Rs. 10 lacs suffered allegedly by the plaintiff on this account.
The Court ruled that as the plaintiff had been dispossessed of the premises where he had been
running an open air restaurant in a central place in Delhi by threats of arrest and detention under
MISA, the act of the NDMC amounted to coercion.
PAO ON V LAU YIU LONG
The claimant had threatened not to complete the main contract for the purchase of shares unless
subsidiary agreements were met including a guarantee and an indemnity. The defendant was
anxious to complete the main contract as there had been a public announcement of the aquisition
of shares and did not want to undermine public confidence in the company and the consequent
affect on share prices. The defendant could have sued for specific performance of the agreement
but this would have delayed matters and damaged the company's reputation. The defendant had
taken legal advice on all these matters before agreeing to the guarantee and indemnity. The
claimant then sought to enforce the guarantee and the defendant sought to have the agreement set
aside for economic duress.
Held: There was no economic duress. The Privy Council identified 4 factors to consider in
assessing whether economic duress was present:
Did the person claiming to be coerced protest?
Did that person have any other available course of action?
Were they independently advised?
After entering into the contract, did they take steps to avoid it?
In the present case the defendant did not protest at the time. He also could have enforced the
contract of sale through specific performance and thus had another avenue of redress available to
him. He had taken legal advice and took no steps to avoid the agreement prior to the claimant
seeking to enforce the guarantee. Therefore no economic duress could be established. It was
simply commercial pressure far short of duress.
WORKMEN OF APPIN TEA ESTATE VS INDUSTRIAL TRIBUNAL
In Workmen of Appin Tea Estate Vs. Industrial Tribunal (1966) the demand of the workers for
bonus was accepted after a threat of strike. The question which had arisen was, whether such a
decision between the Union of the workers and the Indian Tea Association could be declared
void on the ground that there was coercion. It was held that because of the doctrine of collective
bargaining under the Industrial Dispute 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 it unlawful detaining or threatening to detain any property and hence it did not
amount to coercion, and as such the agreement was valid.
ATLAS EXPRESS V KAFCO [1989]
Facts
The claimants had a contract with the defendants to deliver baskets to Woolworths which the
defendants manufactured.The claimants underestimated the size of the baskets and subsequently
ordered the defendants to pay more.The defendants would have gone bankrupt if they had not
delivered to Woolworths, therefore agreed the higher price
Issue
Could Atlas Express enforce the agreement to pay a higher price
Decision
No, claim failed
Reasoning
Atlas had provided no consideration for Kafcos promise to pay extra. Kafco had agreed under
the presence of duress; they had no time to find another supplier so had no alternative options
and had protested by refusing to pay.
 DAI-ICHI KARKARIA PRIVATE LTD., ... VS OIL & NATURAL GAS COMMISSION
The plaintiff is a company incorporated under the provisions of the Companies Act, 1954
carrying on business, inter alia, of manufacture of speciality chemicals. The defendant No. 1 is a
statutory Corporation constituted under the provisions of the Oil and Natural Gas Commission
Act, 1959.
The plaintiff supplies Pour Point Depressant (PPD)/ Flow Improver to defendant No. 1, which,
according to the defendant No, 1, is a critical material successfully developed by the plaintiff to
meet the requirement of defendant No. 1 as an import substitution. At all material times, Customs
duty was payable on the raw material imported by the plaintiff which was required to be used in
manufacture of the said goods for supplying the same to defendant No. 1.
Later the plaintiff filed the present suit for a declaration that the impugned demand made by
defendant No. 1 on the 2nd defendant to make payment under the said bank guarantee was
fraudulent, void and illegal and of no effect whatsoever.
The plaintiff in the case of Daiichi Karkaria found itself in a totally helpless condition in view of
the plaintiff having gone far ahead in fulfilment of the contract and having blocked its major
resources relying on the representations made by the defendant.
In
Da-ichi Karkaria, it was also held that when allegations of economic duress and fraud are made,
all the facts and circumstances of the case will have to be considered together in perspective and
the necessary inference will have to be drawn by considering the cumulative effect of all the
facts and circumstances.
ALLCARD V SKINNER [1887]

I. FACTS

The claimant joined a religious sisterhood, and subsequently transferred all of her assets
to the sisterhood
A while after leaving, the claimant wished to recover the assets from the sisterhood

II. ISSUE

Was the claimant acting under undue influence as to recover the assets

III. DECISION

No recovery
IV. REASONING

Although there was undue influence as the transaction was unusually large as to be
accounted for, the lapse of time barred the claim from succeeding

SUBHAS CHANDRA DAS MUSHIB V. GANGA PRASAD DAS MUSHIB

FACTS
Plaintiff claimed that the will deed of his father conveying the entire property to defendant,
plaintiffs nephew, was brought about by exercising undue influence over the donor. To the
contrary, the deed details that the gift of the property was made out of natural love and affection
between the donor and defendant. Further, after the conveyance of the property to defendant,
when some suit arose on the independent settlement deeds executed upon the transferred
property (before the death of the plaintiffs father,i.e. donor), donor explicitly filed the statement
that he no longer holds any interest in the property. Nevertheless, High Court assumed the
presence of undue influence vitiating the deed on account of the relations between the donor and
defendant being of a grandparent and grandchild.
ISSUE
Whether the deed of gift was brought about by the undue influence?
HELD
Under Section 16 of the Indian Contract Act, the first thing to prove so as to claim undue
influence is the existence of such a relationship between the parties that one is in a position to
dominate the will of the other. But mere relationship of such a nature will not raise any
presumption of undue influence; for it must be further proved that the defendant had used such a
relation to obtain an unfair advantage over the plaintiff.
U/s 16(2)(a) the phrase real or apparent authority can be taken to mean relations of the parties
such that one naturally relied on the other for advise and the latter was in a position to dominate
the will of the first in giving it. The Court observed that no presumption of undue influence
arises in case of gift to a son, grandson, son-in-law, although made during the donors illness or
old age. Though, the relationship of solicitor-client, spiritual advisor and devotee, doctor-patient,
parent and child are those in which such a presumption arises.
The statement filed by donor that he no longer holds any interest in the property shows that he
was fully conscious and consented the transfer of property to the defendant. Further, the fact that
donor was actively involved in the management of his property clearly proves that no undue
influence was exercised over him.
Notes given in class:
1) The circumstance that a grandfather made a gift of a portion of his property tohis only
grandson on account of love and affection a few years before his death is not on the face
of it an unconscionable transaction.
 2) Merely because parties were related to each other, there is no presumption of undue
influence. What can be established is that one naturally relied on the other for advice and
the other was in a position to dominate the will of the first in such advice.
3) Till here, only position of undue influence is proved. It must also be essentially
established that one person is in a position to obtain the unfair advantage.

LADLI PRASAD JAISWAL VS KARNAL DISTILLERY CO., LTD

The appellant filed a suit in the Court of the Subordinate judge for a declaration that certain
resolutions of the directors and the shareholders in a private limited company passed on March
3 and 28, 1946, and at the meetings of the Directors held thereafter were illegal and void and
for a declaration that the resolutions of October 16, 1945, were operative and in force. The
respondents resisted the suit contesting that respondents 2 to 5 were coerced by the appellant
who took advantage of his dominating position, into passing the resolutions on October 16,
1945, and those resolutions were not binding on the company. This case then went to the district
court and then the High Court. A single Judge of the High Court found that the District judge had
'travelled far beyond the pleadings' and therefore his findings on issue of coercion and fraud
could not be upheld, In an appeal under cl. 10 of the Letters Patent a Division Bench of the
High Court found that the appellant was in a position to dominate and had obtained
unconscionable advantage and it was for him to prove that the resolutions of October 16,1945,
were not vitiated by coercion and fraud which burden he had failed to discharge.

LLOYDS BANK V BUNDY [1975] QB 326 COURT OF APPEAL

A father secured the debts of his son's business on his farm which had been in the family for
generations. The father and son had both banked at the branch for many years and relied on
advice given. The son's company also banked at the same branch and the bank manager was
aware of the dire financial position of the company. The bank had allowed the son to run up an
overdraft exceeding security given thus far and was fearful that the company would go under
leaving them with an unsecured debt. The bank manager and the son called at the farm with the
forms already filled in. The father was told of the amount of the charge which was 11,000 and
exceeded the value of the farm and he was also required to give a guarantee. The father agreed to
sign in order to help his son. He was not given the opportunity to think it over or to obtain legal
advice.

Held:

There was a relationship of trust and confidence between the father and the bank manager giving
rise to a presumption of undue influence under class 2 b. The charge and guarantee were
therefore set aside.

NB the normal relationship between a banker and customer is not one of trust and confidence but
a business relationship whereby the bank is looking out for its own interest (See Natwest v
Morgan) however, the bank manager in giving evidence admitted that the father relied implicitly
and solely on the advice given by him and the father stated that he had trusted the bank and had a
long relationship with the bank and generally acted on advice given.
 CENTRAL INLAND WATER TRANSPORT CORPORATION V. BROJONATH GANGULY
Plaintiffs worked in a company which was dissolved by Courts order and they were then
inducted into defendant 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.
Whether an unconscionable term can be held to be void/ voidable under Indian Contract Act
(ICA)?
When the bargain is harsh or unconscionable, equity, grounded upon distributive justice curtails
the freedom of contract so as to protect the interests of party who entered into such bargain under
distress. Freedom of contract is of little value when parties dont stand on equal footing; party
with weaker bargaining power enjoys no realistic opportunity to bargain and party has no
alternative between accepting a set of terms proposed by other or doing without the goods or
services offered. These agreements are called as Adhesion Contracts, however 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.
Therefore Courts will strike down any unfair or unreasonable clause/ agreement entered into by
parties when there is gross inequality in their bargaining power, and the victimized party had no
meaningful choice but to give his assent to the contract, however unreasonable, unfair and
unconscionable a clause in that contract may be.
DERRY V. PEEK

(1889) LR 14 App Cas 337

(Misrepresentation or FraudCollateral Warranty)

FACTS:

A tramway companys prospectus stated that it had the right to use steam power for moving
carriages as an absolute right, though in actuality it was subject to condition of Board of Trade
(BoT). Plaintiff, on faith of that statement, took shares of the Co. When Board of Trade refused
its consent, and Co. got wound up, plaintiff brought an action for deceit against the Co. directors.

ISSUE: Whether any action for fraud can succeed against the defendants?

HELD:
Fraud is proved when it is shown that a false representation has been made knowingly, or
without belief in its truth, or recklessly without caring whether it is true or false. A false
statement made without reasonable grounds for believing it to be true, may be evidence of fraud
in light of plaintiffs contention that defendant had no actual belief in its truth; but such a
presumption is rebuttable. Such a statement, if made in the honest belief that it is true, is not
fraudulent and no action for deceit will lie. Fraud without damage and damage without fraud
doesnt give rise to an action for deceit which lies only when both fraud and damage converge,
i.e. when plaintiff relying upon the fraudulent statement acts upon it to his detriment.

The alleged statement was untrue in the sense that it was stated as an absolute right which was in
fact conditional on the approval of BoT. The directors honestly believed that it was the mere
question of formality to obtain BoT approval and the Co. having complied with the procedures
and requirements, the approval was due. Hence, they had honest belief in the truth of the
impugned statement and it never dwelled in their minds that BoT will refuse such consent. In
light of these observations, the honest belief was reasonable and defendants could not be held
liable for deceit.

R.C. THAKKAR V. GUJARAT HOUSING BOARD

False estimates of costs of construction given in a tender contractor agreed to some reduction
on the belief that the estimate was correct Held, representations contained in tender were
fraudulent no defence that plaintiff could have discovered the true costs by reasonable efforts.

MITHOOLAL NAYAK VS LIFE INSURANCE CORPORATION OF INDIA:

One M sent a proposal for the insurance of his life. He was examined by Dr. D who
submitted two reports, one with the proposal form and one confidential. The confidential report
showed that M was anaemic, had a dilated heart and his right lung showed indications of an old
attack of pneumonia or pleurisy and that he was a total physical wreck. Nothing came out
of this proposal and it lapsed. In 1943, M consulted and was treated by one Dr. L for
anaemia oedema of the feet, diarrhoea and panting on exertion. In 1944, M made a
second proposal for insurance of his life. Against the question in the proposal form
whether he had consulted any medical man for any ailment within the last five years,
he gave the answer, "Nor'. He also did not disclose any of his ailments. After medical
examination by one Dr. K the proposal was accepted and a policy for Rs. 25,000/- was
issued. In November, M died. His
assignee, the appellant, made a demand for Rs. 26,000/-but the Company repudiated it
on the ground that the policy had been obtained by deliberate mis-statement and
fraudulent suppression of material facts. Thereupon, the appellant filed a suit to
recover the amount of the policy contending that s. 45 Insurance Act, barred the company
from calling in question the policy after two years on the ground that any statement made in
the proposal was inaccurate or false.
Held, that the policy-holder was guilty of fraudulent suppression of material
facts relating to his health and the Company was entitled to avoid the contract.
 SMITH V HUGHES (1871) LR 6 QB 597
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.

Held: 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.

SAUNDERS V ANGLIA BUILDING SOCIETY (GALLIE V LEE) [1970] AC 1004- HOUSE OF

LORDS
Mrs Gallie, a woman of 78 years, signed a document which stated it was the sale of her interest
in her home to Mr Lee. Mr Lee then used that document to obtain a mortgage on the property for
2,000. He failed to keep up repayments on the mortgage and the building society sought
possession of the property mortgaged. Mr Lee was a friend of Mr Parkin who was Mrs Gallie's
nephew. Mrs Gallie knew that they wished to raise some money and she had agreed to help them.
She had told them she would assign her house to the nephew as a gift on condition that he
allowed her to remain there rent free for life. She had been told by the two men that the
document she signed gave effect to that agreement. She signed the document in both their
presence but could not find her glasses so had not been able to read it. The agreement between
Mr Lee and Mrs Gallie had been held to be voidable for misrepresentation. However, in the
action against the building society Mrs Gallie raised the plea of non est factum (its not my
deed).

Held: The House of Lords found against Mrs Gallie. The document was not radically different to
that which she believed it to be in that she believed that she was relinquishing her rights to the
property in any event. Furthermore the House of Lords stated that the plea of non est
factum should not be too widely applied and reserved for those who through no fault of their
own are unable to read the document eg blind, illiterate or incapacitated through age.

CUNDY V LINDSEY (1878) 3 APP CAS 459

A rogue, Blenkarn, hired a room at 37 Wood street, Cheapside. This was in the same street that a
highly reputable firm called Blenkiron & Son traded. The rogue ordered a quantity of
handkerchiefs from claimant disguising the signature to appear as Blenkiron. The goods were
dispatched to Blenkiron & co 37, Wood street but payment failed. Blenkarn sold a quantity the
handkerchiefs on to the defendant who purchased them in good faith and sold them on in the
course of their trade. The claimants brought an action based in the tort of conversion to recover
the value of the handkerchiefs. The success of the action depended upon the contract between the
Blenkarn and the claimant being void for mistake. If the contract was void, title in the goods
would not pass to the rogue so he would have no title to pass onto the defendants. Ownership of
the goods would remain with the claimant.

Held: 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.

LAKE V SIMMONS:
Ratio: A jeweller claimed on a policy of insurance. One Ellison had induced him, in face-to-face
dealings, to part with possession of two necklaces by pretending she was the wife of a local
gentleman called Van der Borgh, with whom she was living, and that he wanted a necklace on
approval as he was contemplating giving it to her. She further pretended that a Commander
Digby, who was engaged to her sister, wanted the other necklace on approval. There was no such
man. Miss Ellison disposed of the necklaces. Were the underwriters were exempted from liability
under an exclusion in respect of loss by theft or dishonesty committed by . . any customer in
respect of goods entrusted to the customer.

Held: They were not. When considering whether the goods were entrusted to Miss Ellison, the
test was whether the face-to-face dealings between her and the jeweller were capable of giving
rise to a contract. They were not because of the mistake as to her identity.
Haldane said: The latter was entirely deceived as to the identity of the person with whom he was
transacting. It was only on the footing and in the belief that she was Mrs.Van der Borgh that he
was willing to deal with her at all. In circumstances such as these, I think that there was no such
consensus ad idem as, for example, Lord Cairns, in his judgment in Cundy v. Lindsay, declared
to be requisite for the constitution of a contract. No doubt physically the woman entered the shop
and pretended to bargain in a particular capacity, but only on the footing of being a different
person from what she really was. There was never any contract which could afterwards become
voidable by reason of a false representation made in obtaining it, because there was no contract
at all, nothing excepting the result of a trick practised on the jeweller.

INGRAM V LITTLE [1961] 1 QB 31 COURT OF APPEAL

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 dishonoured and the car was sold on to Mr. Little. The
sisters brought an action to recover the car.

Held: 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.
 LEWIS V AVERY [1971] 3 WLR 603 COURT OF APPEAL
The claimant sold his mini cooper to a rogue claiming to be the actor Richard Greene (who
played Robin Hood in a series at the time). The rogue showed the claimant a Pinewood studio
pass which had Richard Greene's name and an address on it. The claimant then let him take the
car with the log book in exchange for a cheque for 430 which was later dishonoured. The rogue
sold the car on to Mr Avery for 200 claiming to be the claimant. The claimant sought return of
the car on the grounds that the contract was void for mistake.

Held: The contract was not void for mistake. The case of Ingram v Little was criticised by all of
the judges although not formally overruled. The presumption that the parties intend to deal with
the person in front of them was not displaced.

CONTRACTS MODULE 7 CASES

MOSES V. MACFERLAN
Facts :
Jacob issued four promissory notes in favour of moses and moses endorsed them to
macferlan , excluding , by a written agreement , his personal liability on the endorsement
. Even so macferlan sued moses on the endorsement and he was held liable despite the
agreement . Moses was thus compelled to discharge a liability which he had excluded
and , therefore, sued to recover back from macferlan.
Held :
He was allowed to do so . After stating that such money cannot be recovered where the
person to whom it is given can retain it with safe conscience.

SINCLAIR V. BROUGHAM
Facts :
A building society undertook a banking business which was outside its objects, hence,
ultra vires. The society came to be wound up. After paying off all the creditors , a mixed
sum of money was left which represented partly all shareholders money and partly that
of the ultra vires depositors, but was not sufficient to pay both. The shareholders tried to
get priority by resorting to the quasi contractual action for recovery of money had and
received for the depositors benefit, for otherwise the shareholders would be unjustly
enriched.
Held :
The house of lords allowed the rateable distribution of the mixed fund among the
claimants , but did not allow any remedy under the quasi contract. Lord Wright pointed
out that the case turned upon the principle that it was against a public policy to allow the
recovery of an ultra vires deposit, whether the claim can be based upon contract or
quasi-contract.

GILBERT AND PARTNERS V. KNIGHT

Facts :
The appellant agreed to do certain work for the respondent at an agreed fee of 30. Later
additional work was requested by the respondent. However, no mention of extra payment
for the additional work was made by either party. On completion of the work the appellant
sent a bill for 140, being the original 30 plus additional work at scale rates, 110. The
respondent paid only 30. The appellant's suit for 1 10 failed at first instance.
Held :
The Court of Appeal felt that on its facts

NEW MARINE COAL CO. LTD.

Facts:
The appellant filed a suit on the Original Side of the Calcutta High Court against the
respondent for the recovery of a certain amount representing the price of coal supplied
to the respondent. The appellant's case was that if the contract under which the coal was
supplied was illegal by, reason of it being in contravention of s. 175 (3) of the Government of
India Act, 1935, the respondent was liable to pay compensation under s. 70 of the Indian
Contract Act, since the Coal was not supplied gratuitously and the respondent had enjoyed
the benefit thereof.

Held:
The contract is illegal and void. If in pursuance of the void contract, the appellant has
performed his part and the respondent has received the benefit of the performance of the
contract by the appellants . S.70 of the Contract Act would justify the claim made by the
appellant against the respondent.

BENGAL COAL CO. VS. HOMIE WADIA & CO.,

Facts:
The defendants(Bengal Coal Co.) agreed to supply coal to the plaintiff (Homie Wadia& C0. ) up
to a certain quantity at an agreed price for a period of 12months, as may be required by the
plaintiffs from time to time. The plaintiffs placed orders for the supply of coal and the same were
complied with. Before the expiry of 12 months, the defendantswithdrew their offer to supply
further coal, and refused to comply with the orders to supply further coal, and refused to comply
with the ordersplaced thereafter. They were sued for breach of contract.

Held:
There was simply a continuing offer to supply coal. They were bound to supply coal only as
regards orders which had already been placed, but were free to revoke their offer for supply of
coal thereafter.
ALOPI PARSHAD AND SONS V. UNION OF INDIA
Facts :
The plaintiffs were acting as a 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 kinds of work involved. The
performance was in progress when the Second World War intervened and the rates fixed in the
mean time were entirely superseded by the totally altered conditions obtaining in the war time.
The agents demanded revision of rates but received no replies. They kept up the supplies. The
govt terminated the contract in 1945 and the agents claimed payment on enhanced basis.
Held :
They could not succeed. ghee having been supplied by the agents under the terms of the
contract, the right of the agents was to receive remuneration under the terms of that contract.
PANNALAL CASE
Facts:
The work in respect of all these three hospitals was done by the appellant and the ownership of
the hospitals vests in one case with the Gondia Municipal Committee and in the other two cases
with the Government of Maharashtra, only two questions arise for decision, (i) what is the
amount due, and (ii) are the Municipal Committee of Gondia and the State of Maharashtra liable
either on the basis of the contracts or under Section 70 of the Contract Act.
Held:
This Court pointed out that the real basis of the liability under Section 70 is the fact that the
person for whom the work has been done, has accepted the work and has received the benefit
thereunder and that what Section 70 prevents is unjust enrichment and it applies as much to
individuals as to corporations and Government. There is no doubt that in this case the Dispensary
Fund Committee have accepted the buildings and they have also been accepted by the State of
Maharashtra when they took over the hospitals with their buildings which the appellant had
constructed. Thus, the Dispensary Fund Committee in two cases and the Municipal Committee of
Gondia in the third have received the benefit and the State of Maharashtra, having taken over the
two hospitals became liable to pay the suit amount as successors in interest of the Dispensary
Fund Committees.

MODULE 5
BELL V LEVER BROS [1932] AC 161 HOUSE OF LORDS
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 obaedr4r5ligation to pay compensation.
The House of Lords held that this was only a mistake as to quality and did not render the contract
essentially different from that which it was believed to be. The action therefore failed.
Mutual mistake is not related to the subject matter but to the quality of the service of the
contract.

SRI TARSEM SINGH VS SRI SUKHVINDER SINGH

The petitioner, who owned 48 kanals 11 marlas of agricultural land in village Panjetha, Tehsil
and District Patiala, entered into a contract for sale of that land with the respondent on 20.5.1988
@ Rs. 24,000/- per acre. At the time of the execution of the agreement, an amount of Rs.
77,000/- was paid to the petitioner as earnest money. The decree was modified in appeal by the
Additional District Judge who was of the opinion that the parties to the agreement, namely, the
petitioner and respondent both suffered from a mistake of fact as to the area of the land which
was proposed to be sold as also the price (sale-consideration) whether it was to be paid at the rate
of per "Bigha" or per "Kanal". The Lower Appellate Court also found that the respondent was
not ready and willing to perform his part of the contract.
We may point out that there are many facets of this question, as for example (and there are many
more examples), the agreement being void for any of the reasons set out in Section 23 and 24, in
which case even the refund of the amount already paid under that agreement may not be ordered.
But, as pointed out above, we are dealing only with a matter in which one party had received an
advantage under an agreement which was "discovered to be void" on account of Section 20 of
the Act. It is to this limited extent that we say that, on the principle contained in Section 65 of the
Act, the petitioner having received Rs. 77,000/- as earnest money from the respondent in
pursuance of that agreement, is bound to refund the said amount to the respondent. A decree for
refund of this amount was, therefore, rightly passed by the Lower Appellate Court.

COUTURIER V HASTIE (1856) 5 HLC 673

A cargo of corn was in transit being shipped from the Mediterranean to England. The owner of
the cargo sold the corn to a buyer in London. The cargo had however, perished and been
disposed of before the contract was made. The seller sought to enforce payment for the goods on
the grounds that the purchaser had attained title to the goods and therefore bore the risk of the
goods being damaged, lost or stolen.
The court held that the contract was void because the subject matter of the contract did not exist
at the time the contract was made.

OUSEPH PAULO V. CATHOLIC SYRIAN BANK

Some goods were placed with the bank and it was found that they were either fraudulently
overvalued or withdrawn in collusion with bank officials. The borrowers agreed to make up for it
by hypothecating more property. There was some delay in enforcing the agreement and the bank
filed a complaint in the court. But the complaint was withdrawn after the hypothecation was
complete.
It does not amount to stifling prosecution as the compromise arrangement was made before the
complaint was filed, though it was implemented after withdrawing of application.

CENTRAL INLAND WATER TRANSPORT CORPORATION V. BROJONATH GANGULY

FACTS:
Plaintiffs worked in a company which was dissolved by Courts order and they were then
inducted into defendant 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.
ISSUE: Whether an unconscionable term can be held to be void/ voidable under Indian Contract
Act (ICA)?
HELD:
When the bargain is harsh or unconscionable, equity, grounded upon distributive justice curtails
the freedom of contract so as to protect the interests of party who entered into such bargain under
distress. Freedom of contract is of little value when parties dont stand on equal footing; party
with weaker bargaining power enjoys no realistic opportunity to bargain and party has no
alternative between accepting a set of terms proposed by other or doing without the goods or
services offered. These agreements are called as Adhesion Contracts, however 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.
Therefore Courts will strike down any unfair or unreasonable clause/ agreement entered into by
parties when there is gross inequality in their bargaining power, and the victimized party had no
meaningful choice but to give his assent to the contract, however unreasonable, unfair and
unconscionable a clause in that contract may be.

M/S. SHYAM GAS COMPANY VS STATE OF U.P. AND OTHERS

The petitioner-firm obtained a Gas Agency from M/s. Bharat Petroleum Corpn. under scheduled
caste quota and an agreement was executed for the same between Messrs Bharat Petroleum
Corporation Ltd. and the petitioner. The petitioner-firm were appointed as the distributors at
Hathras in district Aligarh for the distribution of L.P.G. An FIR was lodged in their name. The
charges levelled in the FIR were that the distribution of the gas cylinders was not made to the
proper persons and the names of four persons were given to show that gas was alleged to have
been issued to them but they did not receive the same. Further, the rate board and stock board
were not properly maintained. Their godown was also sealed. The petitioner further urged that
the police investigation reached the conclusion that no case was made out against the petitioner-
firm or against its Proprietor or the Manager. Further, it was alleged that the aforesaid 1977
Order does not apply to the petitioner-firm as they are neither retailer or wholesaler but they are
only distributor and in any case the petitioner had not committed any offence under the aforesaid
Order. Thus, they sought for quashing of the aforesaid FIR
Court held:
"No counter affidavit has been filed although opp. party No. 3 has been served on 6th Feb. 1987.
In the circumstances, we admit this petition. We further direct opposite parties to hand over
possession of petitioners' godown and they may further nor interfere with petitioners' business
and release gases as has been done in the past."

SETH GULABCHAND VS SETH KUDILAL AND OTHERS:

ACT:
Contract Act 1872, s. 23--Suit for specific performance of Agreement.
G was one of a number of partners in a firm which carried on the business of acting as Managing
Agents and Selling Agents of a company owning a textile mill in Indore. Serious disputes arose
between the partners and soon thereafter the Directors of the managed company appointed a
committee in November 1940, of which the appellant was a member, to inquire into certain
allegations made against G and two Other partners of the managing agency firm.
Upon G failing to transfer the share in the partnership as provided in the agreement of February
1941, the appellant filed a suit against the heirs and legal representatives of
G for specific performance of the agreement. Both the Division Bench and the Full Bench held
that the agreement to sell a share in the partnership was a bribe offered by G to the appellant to
write a report favourable to him.

NORDENFELT V. MAXIM NORDENFELT

Restraint of Trade Trader Covenant in Restraint of Trade General Restraint Partial
Restraint Time Space Public Policy.
A patentee and manufacturer of guns and ammunition for purposes of war covenanted with a
company to which his patents and business had been transferred that he would not for twenty-
five years engage except on behalf of the company either directly or indirectly in the business of
a manufacturer of guns or ammunition:
Held, affirming the decision of the Court of Appeal ([1893] 1 Ch. 630), that the covenant though
unrestricted as to space was not, having regard to the nature of the business and the limited
number of the customers (namely the Governments of this and other countries), wider than was
necessary for the protection of the company, nor injurious to the public interests of this country;
that it was therefore valid and might be enforced by injunction.

ESSO PETROLEUM CO LTD V HARPERS GARAGE (STOURPORT) LTD: HL 1968

The defendant ran two garages under solus(all purchases should be from the plaintiff)
agreements with the plaintiffs who complained when the defendants began to purchase petrol
from cheaper alternative sources. The House was asked whether the solus agreements were be
regarded in law as an agreement in restraint of trade.
Held: 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.

NIRANJAN SHANKAR GOLIKARI VS THE CENTURY SPINNING

The appellant joined the service of the respondent company as Shift Supervisor and was given
training in the manufacture of tyre cord yarn. The contract was for five years and it was
stipulated that during the said period the appellant would not work in similar capacity in any
other concern and would maintain secrecy as to the technical aspects of his work. However,
shortly after completing his training the appellant joined a rival concern at higher
emoluments. The respondent company thereupon filed a suit for an injunction against the
appellant restraining him from working elsewhere as a shift Supervisor. The injunction was
granted. His appeal before the High Court having failed, the appellant came to this Court
under Art. 136 of the Constitution. It was contended on his behalf that the covenant was
against public policy within the meaning of s. 27 of the Indian Contract Act, that it was
unreasonable, and that it was unnecessary for Safeguarding the trade interest of the company.

GUJARAT BOTTLING V. THE COCA COLA CO.

GBC entered into an agreement in 1993 with Coke for grant of franchisee to prepare, bottle, sell
brands of latter, but not to be concerned with the beverages of any other brand during the
subsistence of the agreement and of 1 year period notice for its termination (Para 14) Under the
agreement, GBC also had right to discontinue supplying syrup on effective transfer of control of
GBC by transfer of shares or any other indicia without the prior express consent of Coke (Para
19). In all, 1993 agreement was for grant of license to GBC under common law by Coke.
GBC, however entered into another agreement with Coke in 1994 where under it was required to
make an application to register the agreement under the statute as Registered User Agreement.
Though the period of termination notice was reduced to 90 days but no similar provision as that
of Para 14 of 1993 agreement was stipulated and neither was 1993 agreement expressly
substituted.
The shareholding of GBC was transferred subsequently to Pepsi and it served Coke with a notice
of 90 days to terminate 1994 agreement, and as a matter of abundant precaution, as 1 year notice
terminating 1993 agreement, notwithstanding the contention that 1993 stands replaced by 1994
agreement. Coke sought GBC to be refrained from dealing with the beverages of Pepsi for the
period of 1 yr. of termination notice.

JET AIRWAYS (I) LTD. VS MR. JAN PETER RAVI KARNIK

The plaintiff seeks an order of permanent injunction restraining the defendant from taking; up or
continuing any employment until 11th October, 2005. With any other Airline, including Sahara
Airlines for the purpose of operating aircraft on the basis of the endorsement of the licence
obtained as a result of the training provided by the plaintiff. The plaintiff also seeks an order
directing the defendant to return forthwith to the plaintiff the documents and articles set out in
Exhibit-1. The plaintiff also seeks a money, decree against the defendants in the sum of Rs. 6,
94,000/- together with interest at the rate of 24 per cent per annum from the date of the filing of
the suit until payment or realisation.
Notice of Motion No. 632 of 2000 has been taken out seeking an order of temporary injunction.
the Supreme Court has held that negative covenants during the period of contract of employment
when the employee is bound to serve his employer exclusively are generally not regarded as in
restraint of trade and, therefore, do not fall under section 27 of the Contract Act. In that case the
defendant had been trained by the plaintiffs on the post of Shift Supervisor. In this training the
defendant acquired knowledge of the technique, process and the machinery involved and certain
other confidential documents. This confidentiality was sought to, be breached by the defendant
by seeking employment with the rivals of the plaintiffs. Thus, the injunction is granted to protect
the interest of the plaintiff. It was held that the negative covenant was not unconscionable,
oppressive or unreasonable. It was also held to be not against the public policy.

PERCEPT DMARKR (INDIA) PVT. LTD. V. ZAHEER KHAN & ANR.

Defendant entered into a contract for management of his media affairs with the plaintiff company
on the term that prior to the completion of first negotiation period and thereafter, plaintiff will
have the right of first refusal in regard to any offer for services of management of media affairs
received by defendant; such that defendant cannot accept any third party offer without offering
plaintiff right to match the offer on same terms and in plaintiffs failing to do so. However,
defendant entered into an agreement with third party after the termination of the said agreement
and plaintiff claimed permanent injunction.
ISSUE: Whether the covenant was in restraint of trade u/s 27 and hence void?
CONTENTION (plaintiff):
If the plaintiff failed to match the third party offer, defendant was free to negotiate with the third
party; if the plaintiff however matched the offer, defendant suffered no detriment. In either case,
defendant was not restrained and was not suffering. Further, the contract was one of agency and
not of employer-employee relationship such that it was unaffected by inequality of bargaining
power.
HELD:
The contract of agency as one entered here between the parties is of personal in nature such that
forcing the negative covenant will mean compelling the defendant to get his affairs managed by
the plaintiff company even after the initial agreement has not been breached and has been
lawfully terminated; this will be in restrain of his right to trade with any person in any manner he
chooses. So long as it is sought to enforce the covenant while the subsisting of the agreement it is
valid, but the moment it is sought to be enforced after the contract has been terminated, it will be
violative of S.27 and hence, void and unenforceable.

GHERULAL PARAKH V. MAHADEODAS MAIYA AND ORS.

1959 AIR 781
(Wagering Agreement-Illegal?-Public Policy?-Immoral?-S.23 and S.30)
FACTS:
Plaintiff and defendant entered into Partnership agreement with object of entering into wagering
transactions with obligation to bear equal loss or profit arising out of such partnership. When
plaintiff asked for reimbursement of half of money paid by him to discharge losses of
partnership, defendant alleged that the agreement made between them was illegal and
unenforceable on account of S.23
ISSUE: Whether the alleged Partnership agreement was either forbidden by law, or opposed to
public policy or immoral so as to render it void ab initio?
HELD:
Void agreements cannot be equated with illegal agreements. The law may actually forbid an
agreement to be made or it may merely refuse to enforce an agreement. In former case, it is
illegal in latter it is merely void, in as much as all illegal agreements are void but not all void
agreements are illegal or forbidden by law.
In present case, parties had no interest to take delivery of the goods rather were only dealing with
difference in prices such that they mutually intended the transaction to be of the nature of wager.
Though wagers are void u/s 30 of ICA but cannot be considered as forbidden by law u/s 23 for a
person entering into wagering transactions does no legal wrong but only fails to get protection of
law in enforcing those transactions. Hence any collateral agreement with the object of wagering
cannot be declared to be void due to object forbidden by law u/s 23, and is subsisting between
the parties.
Since present case revolves around wagering which cannot be regarded as sexually immoral,
hence, it is not under realm of immorality as given u/s 23 of ICA.
Therefore partnership agreement formed with the object of entering into wagering transactions is
enforceable, valid and subsisting for its object of wagering isnt unlawful u/s 23 because it is
neither forbidden by law, nor opposed to public policy, and nor immoral.

DR. K.R. LAKSHMANAN VS STATE OF TAMIL NADU

The Madras Race Club (the club) is an Association registered as a company with limited liability
under the Companies Act, 1956. The club was formed in the year 1896 by taking over the assets
and liabilities of the erstwhile unincorporated club known as Madras Race Club. This was
primarily for horse racing events. While horse races are continuing in the rest of the country, the
Tamil Nadu Legislature, as back as 1949, enacted law by which horse racing was brought within
the definiting of "gaming". The said law, however, was not enforced till 1975, when it was
challenged by the club by way of a writ petition before the Madras High Court. The write
petition was dismissed by the High Court. These proceedings before us are sequel to the
chequered history of litigation, between the parties, over a period of two decades.

RAJ RANI VS. PREM ADIB MINOR AGREEMENTS VOID AB INITIO

Facts: The plaintiff, a minor, was allotted the role of an actress in a certain film by the defendant,
a film producer. The agreement was made with her father. Subsequent, the role was given to
another actress by the defendant and the agreement with the father was terminated.

Held: Neither the minor nor her father could sue on the promise. The contract, if with the minor,
was null and void. If the contract was with the father, it was without consideration and thus, void.
It was clarified that the promise of a minor to serve was not enforceable against her and thus,
could not have furnished any consideration for the defendants promise to pay her a salary.

NASH V. INMAN- MINOR AGREEMENTS VOID AB INITIO

Facts: Plaintiff was a tailor; the defendant, who was an undergraduate at the Cambridge
University, had ordered 11 fancy waistcoats. When the plaintiff sued for payment, the defendant
pleaded lack of capacity. Plaintiff argued that the waistcoats were in categories of necessities.

Held: There was no doubt that they were among the class of things (that is, clothing) capable of
being necessaries. It was up to the plaintiff to prove, however, that the defendant was not already
adequately supplied with the items of this kind, which he was unable to do. The plaintiff was
unable to enforce the contract.

MOHORI BIBEE V. DHARMODAS GHOSE (1903) MINORS AGREEMENT VOID AB

INITIO

Facts: The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favor
of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs.20,000. The actual
amount of loan given was less than Rs.20,000, an advance of 10,500. At the time of the
transaction the attorney (Kedar Nath), who acted onbehalfofthemoneylender(Principal-Agent
relationship), had the knowledgethattheplaintiffisaminor as he got a letter from another
attorney.

The plaintiff brought an action against the defendant stating that he was a minor when the
mortgage was executed by him and, therefore, 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, amongst other points, contended that the plaintiff had fraudulently
misrepresentedhisageand therefore no relief should be given to him, and that, if mortgage is
cancelled as requested by the plaintiff, the plaintiff should be asked to repay the sum of
Rs.10,500advancedto him.
Held: The defendants contention that the minor had falsely misstated his age, the law of
estoppelshould apply against him and he should not be allowed to contend that he was a minor,
was considered. The Privy Council found that the defendants agent knew the fact that the
plaintiff was a minor at the time making of the agreement. It was held that the law of estoppel as
stated in Section 115, Indian Evidence Act, was not applicable to the present case, where the
statement (about age) is made to a person who knows the real facts and is not misled by the
untrue statement. It was observed:

KHAN GUL V. LAKHA SINGH (1928)

Facts: The defendant while still a minor, fraudulently concealing his age, contracted to sell a plot
of land to plaintiff. He received the consideration of Rs. 17,500/- and then refused to perform
his33 part of bargain. The plaintiff prayed for recovery of possession or refund of consideration.

Held: The court said there could be no question of specific enforcement, the contract being void
abinitio. There is no real difference between restoring the property and refunding the money,
except that the property can be identified but cash cannot be traced. As per Section 33(1) of the
Specific Relief Act, 1963 if a minor comes to the Court as a plaintiff, he can be compelled to
disgorge (to surrender) his gains under the agreement. As per Section 33(2) if the minor is
brought before the court as a defendant, he can be compelled to account for such portion of
money or other benefits received by him has gone to benefit him personally, such as education or
training or has resulted as accretion to the estate. It must be remembered that while in India all
contracts made by infants are void and scope of application of the equitable doctrine of
restitution is comprehensive.

LESLIE V. SHEILL (1914)

Facts: Defendant obtained loans from plaintiff by fraudulently misrepresenting that he was of
full age at the time of contract. Defendant sued him to recover the money.Issues: 1) Whether
defendants are entitled to equitable restitution against loan given to minor?

2) Whether they could claim restitution either under action for tort arising out of contract, or of
quasi-contractual claim?

Held: 1) If an infant obtains property or goods by misrepresenting his age, he can be compelled
to restore it so long as the same is traceable in his possession. This is known as equitable doctrine
of restitution.

However, in present case, since the money was spent by the defendant, there was neither any
possibility of tracing it nor any possibility of restoring the thing got by fraud, for if the court will
ask defendant to pay the equivalent sum as that of loan received, it would amount to enforcing a
void contract. Restitution stops when repayment begins and equity does not enforce against
minor any contractual obligation.

2) Infant cant be held liable for a wrong when the cause of action is ex contract or is so directly
connected with the contract that it would be an indirect way of enforcing the contract. But, if the
wrongful act though connected with the subject matter of the contract, yet is independent of it in
the sense of not being an act contemplated by it, then infant can be liable.

In present case, since an action either on torts or on quasi contractual claim would be tantamount
to enforcing the contract by making defendant liable to pay the damages or restitution, hence, no
such action lies.

BALFOUR V. BALFOUR- INTENTION TO CONTRACT

Facts: Husband and wife stayed in Ceylon where the defendant worked and they went to
England for a vacation. On return of Defendant to Ceylon, the wife was advised to stay in
England due to health reasons.

The Husband doesnt send an allowance to the wife of 30 as support which he promised for the
health maintenance of the wife as the relationship deteriorated

Held: It cant be enforced in a court of law as there was no intention to enter into a contract with
legal consequences. There was no consideration offered by the wife to the husband.

Another reason being, it would open the floodgates of legislation if agreements between spouses
were considered contracts.

MERRITT V. MERRITT INTENTION TO CONTRACT

Facts: Husband and wife were legally separated. The husband was living with another woman
and had a written agreement stating that their jointly owned house would be transferred to the
wife after the monthly sum of 40 would be paid to her to complete the mortgage payments, if
she paid all of the payments on time. When payment was complete, Mr. Merritt refused to make
the transfer.

Held: it was binding on him to make the transfer of his share to his wife as the couple had
separated and had an agreement in a written form which proves their intention to create a legal
obligation.

The presumption in domestic agreements could be rebutted where there was an evidence of an
intention to create legal obligation.

EDWARDS V. SKYWAYS INTENTION TO CONTRACT

Facts: The claimant was an airline pilot working for the defendant. He was to be made
redundant. The defendants said that if he withdrew his contributions to the company pension
fund, they would pay him the equivalent of company contributions in an ex gratia payment
(some payment made voluntarily and had no legal obligation to pay it). The claimant agreed to
this and withdrew his contributions. The company then ran into further financial difficulty and
went back on their promise relating to the ex gratia payment.

Held: The agreement had been made in a business context which raised a strong presumption
that the agreement is legally binding. The claimant could therefore enforce the agreement and
was entitled to the money. Court also said that the promise to make the ex gratia payment was
made as a business matter. Therefore, it was held to be binding. The defendant couldnt prove
otherwise. The term ex gratia was used to show that there is no pre-existing obligation but
doesnt preclude the legal enforceability of the settlement

It was essential as the person had made his services redundant on the basis of it and had
withdrawn his pension fund.

ROSE AND FRANK CO. V. J.R. CROMPTON AND BROS. LTD. INTENTION TO
CONTRACT

Facts: Rose and Frank Co. was the exclusive American distributor for J.R. Cromptons new
carbonized tissue paper and were to remain the same till March 1920. In their agreement there
was a clause included stating that the arrangement was not intended to be a formal legal
agreement and would not be subject to legal jurisdiction of either the US or the UK. J.R
Crompton cancelled the agreement because they were unhappy with Rose and Frank Co.'s
proceedings and Rose and Frank Co. sued for breach. They were successful at trial, which J.R.
Crompton appealed.

Held:Scrutton, writing for the majority, stated that although in business relations, it is generally
assumed that a contract has been intended, here, there is a specific clause stating the intention of
the parties not to be bound in a legal contract. In contract law it is the intentions of the parties
that matters, and here they are clearly stated. As the parties did not intend to be bound, there is no
legally enforceable contract. (But in general, there cant be an agreement with such terms as this
is against public policy)

SIMPKINS V. PAYS INTENTION TO CONTRACT

Facts:A Grandmother, granddaughter and a lodger entered into a weekly competition run by the
Sunday Empire News. The coupon was sent in the Grandmothers name each week and all three
made forecasts and they took it in turns to pay. They had agreed (express agreement which
became the implied agreement) that if any of them won they would share the winnings between
them. The grandmother received 250 in prize money and refused to share it with the other two.
The lodger brought the action to claim one third of the prize money.

Held:There was a binding contract despite the family connection as the lodger was also party to
the contract (The presence of a third party proves the intention). This rebutted the presumption of
no intention to create legal relations.

UPTON RURAL DISTRICT COUNCIL V POWELL

Facts: A fire broke out in the defendants farm. He believed that he was entitled to the free
services of Upton Fire Brigade and, therefore, summoned it. The Brigade put out the fire. It then
turned out that the defendants farm was not within free service zone of the Upton, which
therefore, claimed compensation for the services and the defendant refused to pay them.

Held: The court said The truth of the matter is that the defendant wanted the services of Upton;
he asked for the services of Upton and Upton, in response to that request, provided the services.
Hence, the services were rendered on an implied promise to pay for them.

BHAGWAN DAS GOVARDHANDAS KEDIA V. GIRDHARI LAL PURUSHOTTAM DAS

(1966)

INSTANTCOMMUNICATION

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.

Contentions: Defendants contended that according to the section 2, 3 and 4 of ICA, the place
where the offer is accepted is the place where the contract is made and therefore Ahmedabad trial
court did not have the jurisdiction to try the suit.

Held: 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. Hence, as against cases of
correspondence by post or telegram, in present case where there was correspondence by
telephone, contract was formed when acceptance was duly communicated (not sent through in
transmission) to the offeror and hence, at Ahmedabad. It was held that Ahmedabad was the place
of contract (the place where it comes to the knowledge of the offeror).

ENTORES LTD V MILES FAR EAST CORP (1955) INSTANTANEOUS RULE OF

COMMUNICATION

Facts: Entores was a London based trading company. The plaintiff sent a telex (instantaneous)
message from England offering to purchase 100 tons of Copper Cathodes from the defendants in
Holland. The defendant sent back a telex from Holland to the London office accepting that offer.
The contract was not fulfilled and so Entores attempted to sue the owner of the Dutch company
for damages. The question for the court was at what point the contract came into existence. If the
acceptance was effective from the time the telex was sent the contract was made in Holland and
Dutch law would apply. If the acceptance took place when the telex was received in London then
the contract would be governed by English law.

Held: Acceptance on receipt of notice principle. However, it was ruled that it would make no
sense for an instantaneous reply to an offer to be deemed to be accepted at the place of
origination of acceptance, because this will conflict with the law as regards acceptance by
telephone, etc. To amount to an effective acceptance the acceptance needed to be communicated
to the offeree. Therefore the contract was made in England.

CARLILL V. CARBOLIC SMOKE BALL CO. (1893) GENERAL OFFER

Facts:The defendant company advertised in several newspapers that a reward of 100 would be
paid to any person who contracted influenza, cold, or any other disease associated with cold even
after using the smoke balls of the company a preventive remedy, 3 times a day, for 2 weeks in
accordance with the printed directions. They also announced that a sum of 1000 had been
deposited with the Alliance Bank as a proof of their sincerity.

The plaintiff, Mrs. Carlill had seen the advertisement, used the smoke balls according to the
printed directions and for a period as specified, but still contracted influenza. She sued the
defending company to claim the reward of 100 as advertised by the company.

The defendants argued inter alia that it was impossible to contract with the whole world and that
she should have notified / communicated to them of her acceptance of the offer.

Held:Rejecting the argument, the Court held that the advertisement constituted the offer to the
whole world at large (general offer) which was accepted by the plaintiff by conduct (by using
smoke balls). Therefore she was justified to the reward of 100.

The Court observed that by performing the required act and complying with the necessary
conditions attached to the offer of this kind (general offer) the offeree has sufficiently
accepted the offer and there is no need for any formal notification/communication of her
acceptance to the offer.

LALMAN SHUKLA VS. GAURI DUTT (1913) COMMUNICATION WHEN COMPLETE

Facts: In this case, the defandants nephew absconded from home. The plaintiff who was the
defendants servant was sent to search the missing boy. After the plaintiff had left, the defendant
issued handbills of 501 rupees to anyone who would have found the boy. The plaintiff came to
know of this offer only when he had already traced and informed the defendant about the boy.
The plaintiff brought an action for to claim this reward.

In this case, G (defendant) sent his servant L (plaintiff) in search of his missing nephew. G
afterwards announced a reward for information concerning the missing boy. It traced the boy in
ignorance of any such announcement. Subsequently when he came to know of this reward, he
claimed it.

Held: It was held that since the plaintiff was ignorant of the offer of reward, his Act of bringing
the lost boy didnt amount to the acceptance of offer and therefore he was not entitled to claim
the reward. There can be no acceptance of the offer until and unless, there is knowledge about
the offer.

ADAMS VS LINDSELL (1818)

Facts:Defendants mailed their offer to sell on the 2nd of September, 1817. . The Defendants
letter was misdirected due to the defendants mistakes and did not reach the plaintiffs until 7:00
p.m., Friday the 5th. That night, Plaintiffs accepted Defendants offer, and mailed it directly back
in a timely manner. It was received by Defendant on the 9th, but they expected to receive it on
th
the 7th and, in the meanwhile, had offered and sold their wool to another person on 8
September. Plaintiffs brought suit for the losses they sustained by not receiving the fleeces.
Issue: This case considers when mutual assent to an agreement occurs in the particular
circumstance of a mail contract.

Held:The Court of Kings Bench upheld the rule of the trial court- While forming contracts by
mail, acceptance is valid from the time of mailing a letter containing language of same. Because
Defendants, in their offer, notified the Plaintiffs of their terms, that they would await acceptance
in the course of post, they were bound by the terms of their offer until it was accepted or until the
terms of the offer had expired. Plaintiffs accepted within the course of post, by mailing same, and
therefore manifested a valid assent.

HARVEY V. FACEY (1893) VALID ACCEPTANCE

Facts:Will you sell us Bummer Hall Pen? Telegraph lowest cash prize. Complainant: Lowest

prize for Bummer is 900. Plaintiff: I agree to buy the pen for 900.

Facey was in negotiations with Mayors Council of Kingston to sell a piece of property to City of
Kingston.

1. Trial Court ruled in favor of Plaintiff

2. Court of Appeal: Defendant

3. SC: Plaintiff (Harvey)

4. Privy Council: (Defendant)

Held:There were two questions asked and the response was made for only one. Mere quotation
of price does not amount to offer to sell.

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN VS. BOOTS CASH CHEMIST

LTD. (1952) DISPLAY OF GOODS

Facts: Medicines were displayed with price tags. Plaintiff picked up the medicines and brought
to the cashier. But the cashier rejected to sell that medicine. Plaintiff filed a suit for the
enforcement of the contract. PSGB contended that display of the medicine was offer and putting
medicine in basket was acceptance

Queens Division Bench of HC and Court of Appeals sided with defendant.

Held: The display of articles on shelves in a self-service shop / store merely amounts to
invitation to offer. The offer is made when the customer places goods in the basket and then at
the counter, the shopkeeper/cashier has the right to reject/accept the offer.

DICKINSON VS DODDS (1876)

Facts:Dodds delivered an offer to sell a house and land to Dickinson on Wednesday, stating that
the offer was to stay open until 9 a.m. on Friday. Dickinson apparently decided to accept the
offer on Thursday, but said nothing to Dodds because he thought he had until Friday morning.
However, he was informed that Dodds had sold the property to someone else on Thursday
evening and tried to reach Dodds, leaving a letter with Dodds' mother-in-law where he was
staying. An agent of Dickinson found Dodds on Friday morning at around 7am, but was
informed that the property had already been sold. Dickinson brought an action of specific
performance. (In India, there cant be a third party to communicate the facts of the deal done
[Doctrine of privity of contract] unless there is revocation by the offeror or his authorized agent/
revocation by the acceptor/ authorized agent)

Held:The offer to be held open until Friday 9 oclock was only an offer that was not supported
by consideration or acceptance by Plaintiff. There was no binding agreement to keep the property
unsold until 9 oclock Friday morning. The other party was free to make a more favorable offer
to Defendant, which he was free to accept. There was no binding agreement between Defendant
and Plaintiff since Plaintiff had not accepted the offer. In addition, it was questionable whether
Plaintiff could accept at all once he had knowledge that the person had sold the property to
someone else.

BROGDEN V. METROPOLITAN RAILWAY CO. (1877)

Facts:The plaintiffs supplied coal to the defendant railway company for a number of years. The
parties decided to formalize the agreement in a written contract. The defendant sent a draft
contract to the plaintiff. The plaintiff made some minor adjustments and completed some blanks
and returned it to the defendant, marked approved. Without further communication, the
defendant filed the document. For a further two years the plaintiff continued to supply the coal,
then a dispute arose.

Held:There was a valid agreement. The amendments made by the plaintiff constituted a counter
offer, which was clearly accepted by the defendant, by continuing to receive the coal. Conduct
could amount to acceptance. However, it was unclear when the defendant had in fact accepted
the offer. It was sufficient that a valid contract was found to exist so it was not necessary for the
House of Lords to determine if the acceptance occurred when the defendant first ordered coal,
after receipt of the offer, or when it took delivery of the coal.

FELTHOUSE VS. BINDLEY (1862) ACCEPTANCE COMMUNICATION NECESSARY

Facts: F (uncle) offered to buy his nephews horse for 30 saying if I hear no more about it I
shall consider the horse mine at 30. (offer must not thrust the burden of acceptance.) The
nephew did not write / reply to F at all. He told his auctioneer, B to keep the particular horse out
of sale of his farm stock as he intended to reserve it for his uncle, F. B the auctioneer,
inadvertently, sold the horse. F sued him, B, for conversion of his property.

Held: F has no right of action against the auctioneer since the horse was not sold to him. This
offer of 30 having not been properly accepted, since the nephew had not properly
communicated the acceptance to F.

The Court observed that it was clear that the nephew had in his mind the intention to sell his
horse to his uncle. But an unconditional assent to accept unaccompanied by any external
inclination will not suffice. Normally the person to whom the proposal is sent need not reply and
the general rule acceptance of offer will not be implied, intended from the mere silence on
the part of the offeree.

The acceptance of an offer should be communicated to the offerer himself or his authorized
agent.

An offerer cannot impose on the offeree the burden of refusal or duty to reply. Mere silence or
mental assent cannot be regarded as acceptance of the offer.

Offer should be communicated to the offeror himself or to the person he has authorized to
receive the acceptance. A communication to a stranger, like the auctioneer in the case, would not
do.

Secondly, an offeror cannot impose upon the offeree the burden of refusal. if I receive no
answer, I shall.... is invalid and silence cant be equivalent to acceptance.

BOULTON V. JONES (1857) OFFER MADE TO A PARTICULAR PERSON

Facts: Jones used to have business dealings with Brocklehurst. He sent an order (offer) to
Brocklhurst for the purchase of certain goods. By the time the order reached Brocklehurst, 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 Brocklehurst, he refused to pay for the goods which he
had already consumed. His contention was that he had never placed an order to Boulton, the
offer being made to Brocklehurst, and therefore had no intention to make a contract with
Boulton.

Held: Jones was not liable to pay.

Brambell B has stated: When anyone makes a contract in which the personality, so to speak, of
the particular party contracted with is important, for any reason whether beacuase it is to write a
book or paint a picture or to do any work of personal skill, or whether because there is a set-off
due from that party, no one else is at liberty to step in and maintain that he is the party contracted
with.

DUTTON V. POOLE

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 bear 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.

Held:The plaintiff was neither privy to the contract nor interested in the consideration. 1. But
the whole objective of the agreement was to provide a portion to the plaintiff.
2. It would have been highly inequitable to allow son to keep wood and yet to deprive his sister
of her portion. He was held liable.

She can also file the suit as there was direct dependency of the right of the daughter on the
agreement and there was also a blood relation.

In Dutton v. Poole, the consideration moved indirectly from the plaintiff to the defendant and the
action of the defendant operated to shut out the plaintiff from a certain benefit. Therefore, the
plaintiff could sue. Also, in case of Chinnaya v. Ramayya, the failure to keep up the promise had
deprived the plaintiff of a certain benefit. It is a legal commonplace that if a promise causes some
loss to the promisee, that is sufficient consideration for the promise.

VENKATA CHINNAYA RAO VS VENKATA RAMAYYA GARU (1882)

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 sister, the
plaintiff.

On the same day the defendant, daughter (promisor), made a promise via an agreement
(Iqrarnama) with her aunt 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 (promise/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: The Madras HC held that in this agreement between the defendant and plaintiff the
consideration has been furnished on behalf of the plaintiff (uncle) by his own sister (defendants
mother). Although the plaintiff was stranger to the consideration but since she was a party to the
contract she could enforce the promise of the promisor, since under Indian law, consideration
may be given by the promisee or anyone on his behalf vide Section 2 (d) of ICA.

The main consideration has moved from the mother to the daughter on the transfer of property.
The old lady had been taking annuity as a matter of right earlier and had waived off that payment
from her sister. This payment and its waiver was a consideration for the contract. The
consideration is moving. By signing Iqrarnama (a valid contract), the consideration has moved
from defendant to plaintiff. (READ THE DIFFERENT CONSIDERATIONS)

Thus, consideration furnished by the old lady constitutes sufficient consideration for the plaintiff
to sue the defendant on her promise. Held, the brother / uncle was entitled to a decree for
payment of the annual sum of money.

Innes J tried to equate the situation with Dutton v. Poole Stems from the section from the
promise...

Intentional beneficiary: If parties entering for the benefit for the third person, that person is the
intentional beneficiary. These persons can also sue in the contract breach cases.
Incidental beneficiary: Not exactly meant to happen but happens.

Privity of Contract: The Doctrine of Privity of Contract means that a contract remains a contract
between the parties only and no third party that is a stranger to the contract can sue upon it even
if there was an indirect benefit to him from the contract.

TWEDDLE V. ATKINSON

Fact:A couple was getting married. The father of the bride entered an agreement with the father
of the groom that they would each pay the couple a sum of money. The father of the bride died
without having paid. The father of the son also died so was unable to sue on the agreement. The
groom made a claim against the executor of the will.

Held: Whitman J stated in the judgment No stranger to the consideration can take advantage of
a contract although made for his benefit. Although the contract was made for the sole purpose for
securing benefit to the plaintiff, he was not allowed to sue as the contract was made with his
father and not him.

The case laid down the foundations of privity of contract- the contract is a contract between
the parties only and no third person can sue upon it even if it is avowedly made for his benefit.

There was no detriment to the plaintiff. There was only a benefit which was deprived.

KEDARNATH V. GORIE MOHMAD

Facts: Plaintiff being the commissioner of Howrah and one of the trustees of the Howrah town
hall fund, contemplated that if the necessary amount is raised by the way of subscription, they
would build the town hall.

The subscribers of the fund, while promising the money, undertook that in pursuance of the
commissioner entering into a contract for erecting the building, they are paying a certain amount.

After certain amount was raised, the plaintiff entered into a contract with the contractors for
building the hall. (It is the consideration of the contract as a persons position has been altered
because of the non-payment) One of the subscribers, who had promised to pay Rs.100 refused to
pay and plaintiff sued.

Issues:

1. Whether the plaintiff and all other persons interested can sue the defendant for payment of the
amount subscribed?

2. Whether the amount subscribed by the defendants can be claimed in event of no consideration
for the defendants?

Held: In an ordinary situation, if somebody puts his name for a subscription for a charitable
object it cannot be recovered as there is no consideration.
However, in this particular case, persons subscribing knew the purpose for which the money was
applied and was also aware that on the account of their subscription, the plaintiff entered into the
contract. The court considered this a perfectly valid contract and with good consideration.

Hence, it was held that plaintiff and other persons interested could sue for the amount subscribed
and defendant has to pay the money promised.

The high court ordered the judge of small cause court to decree the suit for the amount claimed.

Theplaintiffsactinenteringintoacontractwiththecontractorwasdoneatthedesireof
thedefendantwhowasthepromisorsoastoconstituteconsiderationwithinthemeaningof
section2(d).

DORASWAMI IYER V ARUNACHALA AYYAR

Facts: The repair of a temple was in progress. As the work proceeded, more money was
required and to raise these money subscriptions were invited and a subscription list was raised.
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.

Judgment: 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.

1. The repairs are in progress no new and significant act (enough to be considered a
consideration) is being performed at the behest of the promisor.

Difference: In Kedarnath Case, the construction of the hall began on the faith of the promised
subscriptions. But in the present case, 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.

BESWICK V. BESWICK

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
administrator of her husband's will. Mrs. Beswick was unsuccessful at trial and successful at
appeal, which John Joseph Beswick appealed.

Issue: Is Mrs. Beswick able to sue her nephew either in her own personal capacity, as the
executrix of the will, or both?

Held: Appeal dismissed. Held, the House of Lords decided 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 administrator she is able to sue him for the
specific performance of his promise that was made in the contract.

She is the intentional beneficiary.

Ratio:

1. Third parties cannot sue for breach of contract when they were not a party to the contract,
even if they were named as a beneficiary of the contract.

2. Executors of wills can sue for specific performance of promises made in contracts with
the deceased.

DUNLOP TYRE CO. V. SELFRIDGE & CO.

Issue: Is it possible for one party to sue another even though no contractual relationship exists

between them?

Facts: Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for
tyres at a discounted price on condition that they would not resell the tyres at less than the listed
price and that any reseller who wanted to buy them from Dew had to agree not to sell at the
lower price either. Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not
to sell at a lower price either and that they would pay 5 in damages if they violated this
agreement. Selfridge proceeded to sell the tires below the price he promised to sell them for.
Dunlop brought action and was successful at trial but this was overturned by the Court of
Appeal.

If there is another rival selling the tyres at a lower price, the demand of Dunlop would reduce in
the market.

Issue: Is it lawful for Dunlop to sue Selfridge even though no contractual relationship exists
between them?

Held: Appeal dismissed. The Lords agree fundamentally with the decision of the Court of
Appeal; there was no contract between Dunlop and Selfridge and therefore Dunlop cannot sue.
There are a few fundamental principles of law underpinning this decision:

a) the doctrine of privity, which states that only a party to a contract can sue in breach of the
contract;

Doctrine of privity is based in the idea of equity- the essentials for a contract are fulfilled and the
parties which are a part of the contract and it is a private agreement between the parties.

b) the doctrine of consideration would require the promisee (Dunlop) to give consideration to
Selfridge for the contract to be completed, and this did not occur as Dunlop did not give anything
to Selfridge here (Selfridge made a promise to Dunlop to only sell at a certain price but it was
gratuitous because Dunlop gave no consideration in return); Dunlop was an incidental
beneficiary.

c) the only way that a principal not named in a contract can be sued is if he acted as an agent on
behalf of one of the parties privy to the contract. Dew was not acting as an agent for Dunlop,
therefore this does not apply in this case. If Dew were Dunlop's agent, then the effect of the two
deals would really be one deal. In an agency agreement, the Agent disappears and the contract is
between the principal (Dunlop) and the third party (Selfridges) The principal gives tires and the
third party gives money. This did not happen here. The court held that the tires belonged to Dew,
not Dunlop. They had already sold them.

Ratio: Only parties to a contract can sue for a breach of the contract. The only exception to this
rule is if a party named in the contract was acting as an agent of an unnamed party; in this case,
the unnamed party can be sued.

M/S MOTILAL PADAMPAT SUGAR MILLS V. STATE OF UTTAR PRADESH & ORS.
(PROMISSORY ESTOPPEL)

Facts: Government of UP announced to give tax exemption from sales tax for three years to all
new industrial units of the state. The plaintiff sought confirmation from Director of Industries
and

He reiterated the governments statement. Also, 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.

Issues: Whether plaintiff waived his right to have a cause of action by accepting partial
exemption?

1) Whether plaintiff can have a cause of action on grounds of promissory estoppel?

2) Whether any such action against government acting in governmental, sovereign or

administrative capacity can lie?

3) Whether in present case, plaintiffs action is bound to succeed?

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 Supreme Court held that the Government was bound by its promise and was liable to exempt
the appellants from sales tax for a period of three years commencing from the date of production.

However, in present case, there was no such waiver of rights by plaintiff: he didnt have any full
knowledge of his rights to exemption under the assurance given by Chief Secretary. Firstly, the
doctrine of promissory estoppel is not so well defined in scope and ambit and so free from
uncertainty that plaintiff must have had full knowledge of his rights. Secondly, there is no
presumption that every person knows the law; there is the rule that ignorance of law is not an
excuse which is altogether different in its scope and application.

KHAWAJA MUHAMMAD KHAN VS HUSSAINI BEGUM (1910)

Facts:Khawaja Muhammad Khan was the father of bridegroom. Hussaini Begum was the bride.
Both the bride and bridegroom were minors at the time at the time of marriage. The plaintiff and
defendants father entered into an agreement at the time of marriage. (According to Muslim law,
Marriage are contracts) The plaintiff executed an agreement with the defendants father that in
consideration of the respondents marriage with his son, he would pay to her a sum of Rs.500
every month in perpetuity for the betel-leaf expenses (kharchipandaan). He also charged certain
properties with the payment giving the power to the defendant (in her favor) to enforce it. The
marriage took place. After some years, the defendant and her husband separated. She sued the
plaintiff for the recovery of the arrears of annuity @ Rs.500 per month. The appellant argued that
Hussaini Begum was not a party to the contract entered by him with the father of Hussaini
Begum.

Held:The Privy Council gave the judgment in favor of the defendant. It was held that Hussaini
Begum, although was not a party to the agreement, she was clearly entitled to proceed in equity.
She, being the beneficiary of the contract, could enforce her claim. The Privy Council held that a
stranger to a contract is different from a stranger to consideration. Here the defendant was a
stranger to the contract, but she was concerned with the consideration. Hence the famous rule A
stranger to a contract cannot sue would not apply in her case.

CENTRAL LONDON PROPERTY TRUST LTD. V. HIGH TREES HOUSE LTD (1956)

Facts: High Trees (HT) in this case had leased out a new block of flats from Central London
Property Trust (CLP) at a ground rent of 2,500 in 1937 for 99 years. HT faced difficulty in
getting tenants for all the flats and the ground rent left HT with no profit. Even after three years
in the year 1940 many of the flats remained unoccupied. Furthermore, there were conditions of
the war looming large around that time. To HT, it did not look as if there was to going to be any
change to the situation in the near future. CLP thus agreed to reduce the rent to 1,250 during the
war times. The agreement was put in writing and HT paid the reduced rent from the year 1941.
When the war was over the flats became fully occupied and the claimant sought to return to the
originally agreed rent. It was not explicitly stated that what would be the time limit of the
reduced rent. But it was contended that such arrangement was due to war-time situation and full
rent would be recoverable from the CLP.

Issue: The issue was whether Landlord is entitled to the full rent for the quarters and also the full
time arrears.
Held: The promise of a reduction of rent was intended to be legally binding and was actually
acted upon by HT. Thus, it was binding on CLP to the extent that they would not be allowed to
act inconsistently with it, although it was not the subject of estoppel at common law. The
promise was for a reduction of rent which was temporary and was to endure so long only as the
block of flats was not substantially let, and, since the block of flats was substantially let early in
1945, the landlords were entitled to the full rent for the quarters ending Sept. 29 and Dec. 25,
1945.

CENTRAL LONDON PROPERTY TRUST LIMITED V. HIGH TREES HOUSE LTD.

Facts: The plaintiffs gave the defendants a tenancy of a block of flats at a ground rent of 2500
pounds a year for a period of 10 years. As a result of WW II, the flats could not be fully let and
the plaintiffs agreed to reduce the rent by half the amount. In 1945, the war conditions ceased to
exist and the flats began to get occupied, but the defendants continued to pay reduced rent. The
plaintiffs brought an action to recover full rent for the second half of the year in 1945 as well as
the arrears.

Held: One of the questions that the defendants raised was the consideration for the agreements to
reduce the rent. There was apparently no consideration for them to do so, but DENNING J.
stated that there was no need for there to be any form of consideration in a case like this where
the promise is not to set up as a course of action, but only as a defense. The plaintiffs had agreed
to forego the rent and the defendants had acted upon that promise up to the time of action, the
plaintiffs were estopped from alleging that there was no consideration for the promise.

1.KAPURCHAND V. HIMAYATALIKHAN
Facts: A Hyderabad prince owned a large sum of money to a jeweler. The liability was over
twenty seven lakhs. Hyderabad having been taken over a committee was appointed to clear
matters. The accountant general of the state paid a lesser sum of 20 lakhs to the jeweler in felt
satisfaction of the claim which was accepted by the creditor afterwards he sued for the balance.
Held: 1. The claim was disallowed under section 41 which provides that when a person accepts
performance from a third person he cannot afterwards sue the promisor.
2. Also, under section 63 illustration (c) the facts of the case stand completely covered the
appellant having accepted a lessen amount in field satisfaction of the claim was not allowed to
sue.
2.HOCHSTER V. DE LA TOUR
Facts:The plaintiff was a courier he was engaged by the defendant to accompany him on a tour to
commence on June 1, 1852 nearby a month before the date the defendant wrote to the plaintiff
that he had changed his mind and declined his services the plaintiff sued him for damages for
breach of the agreement before the day when the performance was due.
Held: The objection was ruled out and it was recongnized that anticipatory breach gives the
inferred party an immediate right of action.
Anticipatory breach it is an announcement by contracting party of his intention not to fulfill the
contract and that he will no longer be bound by it prior to the promised date of performance.
3. FROST V. KNIGHT
Facts;The defendant promised to marry the plaintiff on the death of his father the father still
living the defendant announced his intention of not fulfilling his promise on his fathers death and
broke of the engagement the plaintiff without waiting for the fathers death at once brought an
action for breach. The defendant contend that a breach could only arise on the happening of the
contingency.
Held: the present action is well brought the promissee had a option to treat the repudiation of the
other party as wrongful putting an end to the contract and at once bring an action for damages.
4. AVERY V. BOWDEN
Facts: The defendant charted the plaintiffs ship and agreed to load it with a cargo at odissa within
45 days on arrival of the ship there the defendant told the caption that he had no cargo for him
the captain however stayed there in the hope that the defendant would fulfill his contract but
before the expiry of 45 days a war broke out which rendered the performance illegal the plaintiff
sued.
Held: The contract had ended by frustration and not by breach it was open to the captain to
accept the renunciation and in that case he would had the right to recover damages but he
continued to insist upon haizre cargo in fulfillment of contract and therefore the contract was still
open when war intervened.
Frustration:(sec.56)
There are some aspect under which object become frustrated like, Physical impossibility, mental
impossibility, practical impossibility. Event should be of such nature that it renders the object
impossible and contract void, and time should not be essence of the contract it would not render
the contract void, importance of time in some cases like in case of buying of shares.
Types of frustration or specific ground of frustration:
Destruction of subject matter, change of circumstances, non occurrence of contemplated event,
death or incapacity of the party, government or legislative intervention, intervention of war.

5. TAYLOR V. CALDWELL:
Doctrine of frustration, its development in the English law. The plaintiff had sued the defendant
for damages for breach of a contract and where the music hall hired by the plaintiff was
destroyed by fire before the date of performance arrives, the defendant was held not liable to pay,
the court did not construe the contract as a positive contract but as subject to an implied
condition that the parties shall be excused in case before breach performance becomes
impossible from the perishing of the thing without default of the contracters.
6. DAVIS CONTRACTORS LTD V. FAREHAM URBAN DISTRICT COUNCIL:
Davis contractor agreed with fareham udcto build 78 houses over 8 months for $ 92,425 it ended
up taking 22 months because davis was short of labour and materials it costs $115,223 davis
submitted the contract was frustrated void and therefore they were entitled to quantum merit for
the value of work done.
Held:it was held that although the performance of the case had become more onerous it was not
frustrated.
7. KRELL V. HENRY:
The defendant agree to hire rooms from the plaintiff to watch the procession, in London on 26
and 27 june 1902 for the purpose of seeing the intened coronation procession by reason of the
kings illness no procession took place on either of those days, after 4 days of the agreement the
kings doctor decided to perform an operation which would involve the abandonment of the
procession .
It was held that the agreement was discharged by frustration.
8. F A TAMPLIN STEAMSHIP CO LTD V. ANGLO MEXICON PETROLEUM PRODUCTS
CO LTD

The steamship was chartered for 5 years from December 1912-1917 in feburary 1915 the
government requisitioned the ship for use as a troopship artering her slightly for the purpose the
charters were willing to continue to provide the freight the owners however claimed frustration
hoping to get greater compensation from the crown.
Held: deemed no frustration the ship could be available again before five years.
9. ALOPI PARSHAD AND SONS LTD V. UNION OF INDIA

The plaintiff was acting as agent to govt. 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 2 world war intervened and the rates fixed in peace time
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 govt. terminated the
contract in 1945 and the agents claimed payment on enhanced rates.
Held:they could not succeed because frustration not happened because they continued the
contract without changing the terms of contract.they could not get any renumeration under the
terms of the contract they can only get which are left.
10. ROBINSON V. DAVISON

A piano player was to perform at a concert he fell ill and could not play on the appointed date the
court held that it was not her fault that she was unable to perform the contract was frustrated.
11. SATYABRATA GHOSE V. MUNGI RAM BANGUR

The defendant company started a scheme for the development of a tract of land into a housing
colony. The plaintiff was granted plot on payment of earnest money. The company undertook to
construct the roads and drains necessary for making the lands suitable for building and
residential purposes and so as soon as they were completed the purchaser was to be called upon
to complete the conyenance by payment of the balance of the purchase of money. But before
anything could be done a considerable portion of the land was requisitioned by the state during
the second world war for the military purposes.
The company attempted to cancel the contract on grounds of supervening impossibility or
frustration but the court held otherwise( contract was not frustrated) and said that there was a
mere delay in the commencement of work.

This case shows that an intervention of temporary nature which does not approve the
foundation of the contract will not have a dissolving effect. Further doctrine of frustration
does not apply where there is a likely a delay in the performance of the contract, the
doctrine as recgonised in english law comes in the perview of sec6 of contract act in this
case the contract was not frustrated in view of the facts there was not absolute time limit
fixed in which contract has to be completed in roads have to be made and that the
requisition of the land was of temporary nature had there been a definite time limit and
indefinite delay would render the performance of the contract impossible. The doctrine of
supervening impossibility under the indian law is similar to doctrine of frustration under
the English law however is founder is wider than later and covers both physical
impossibility saw el as failure of object, the word impossibility as under sec 56 is not
restricited physical or literal impossibility it also extends to performance of the contract
being rendered impossible and useless so if an event or change in circumstances totally
upset the foundation of the contract it can be very well said that the contract become
impossible to perform.
12. FIBROSA SPOLKA ARCYINA V. FAIRBAIRN LAWSON COMBE BARBOUR LTD

Facts: An English company which manufactured textile machinery agreed by contract dated 12
july 1939 to supply some machines to a polish company the machines were to be delivered in 3-4
months $ 1600 was payable upfront and balance of $3200 payable on delivery the polish
company paid $1000on 18 july on account of the initial payment due on 1 sept. germany invaded
Poland and on 3 sept. great Britain declared war on germany on 23 sept. orders in council made
Poland an enemy territory making it illegal for british companies to trade with Poland.
Held: the contract was frustrated as it was no longer possible to perform the contract because of
the supervening impossibility or impossibility.