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CONTRACT I – CASE LAWS

Contract I

Balfour vs. Balfour – Intention to Create Legal Relationship

Facts:

A husband promised to pay his wife a house hold allowance of £ 30


every month. Later the parties separated and the husband failed to
pay the promised amount. The wife sued for the promised allowance

Held:

The wife will not succeed as agreements such as this did not create
any legal obligations vis a vis legal relations.

Rose & Frank Co. VS Crompton Bros. Ltd. – Intention to Create


Legal Relationship

Facts:
There was an agreement between these two companies by means of
which rose and frank co. was appointed as the agent of Crompton
Bros. Ltd. One clause in the agreement stated that the agreement is
not entered into as legal and formal and shall not be subject to legal
jurisdiction in the law courts.

Held:

There was no binding and legally enforceable contract between the 2


companies as there was no intention to create legal relationship.

Upton Rural District Council VS Powell – Implied Contract

Facts:

A fire broke out in Powell’s farm. He called upon the fire brigade to put
out the fire which the latter did. Now Powell’s farm did not come under
fire service zone although he believed it to be so.

Held:
He was liable to pay for the service rendered as the services were
rendered by Upton Fire Brigade on an implied promise to pay.

Willkie vs. London passenger transport board – Implied


Agreement

When a transport company runs a bus there is an implied offer by the


transport company to carry passengers for certain fare. The
acceptance of the offer is complete as soon as a passenger boards a
bus – that is, implied acceptance.

Boulton Vs Jones (1857) – Offer made to a particular person

Facts :

Jones used to have business dealings with Brockle Hurst. He sent an


order (offer) to Brockle Hurst for the purchase of certain goods. By the
time the order reached Brockle Hurst, he had sold his business to
Boulton. Boulton receiving the order sent all the goods to Jones as per
the order without informing Jones of the changing of the hands of the
business. When Jones learnt that the goods were not supplied by
Brockle Hurst, he refused to pay for the goods. His contention was
that he had never placed an order to Boulton, the offer being made to
Brockle Hurst, and therefore had no intention to make a contract with
Boulton.

Held:

Jones was not liable to pay ( – Section 64 will also apply )

Carlill VS 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.

Note – This is the principle of English Law of contract and endorsed


by Section 8 of ICA. The effect of the decision in Carlill’s case is that
performance of stipulated condition of the proposal is not only
acceptance of the proposal but it is also sufficient communication of
the acceptance.
Lalman Shukla vs. Gauri Dutt (1913)

Facts :

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 didn’t amount to the acceptance of offer
and therefore he was not entitled to claim the reward.

Fitch vs. Smedabar

Held :

In this case the American Court has held that a reward cannot be
claimed by one who didn’t know that it had been offered.
Harbhajan Lal vs. Harcharan Lal

Facts :

In this case a young boy had run away from his father’s house. The
father had offered a reward of Rs. 55 to anyone who finds the boy and
brings him home. The plaintiff who was aware of the offer of
reward found the boy on a railway station and informed the father.
The plaintiff claimed the reward. the father contended that since the
plaintiff had not brought the boy; he is not entitled to the reward.

British judge means the( C.J of the privy council ) held that although
there is no strict compliance of the condition of the reward, the plaintiff
was however aware of the reward, the plaintiff was however aware of
the reward an there is substantial performance. The plaintiff was held
entitled to succeed.

{information was very much trust worthy based on which father.}

Harvy vs. Facey


Facts :

The defendants were the owners of the plot of land named ” Bumper
Hall Pen “. The plaintiff being interested in purchasing the same sent
a telegram to the defendants “will you sell us Bumper Hall Pen ?
Telegraph lowest cash price “.(1st telegram)

The defendants replied also by a telegram ” lowest price for BHP, £


900 asked by you”. (2nd telegram)

The plaintiff immediately sent another telegram to defendants – “we


agree to buy BHP for £ 900 as asked by you”. (3rd telegram)

The defendants subsequently refused to sell the plot of land at that


price. The plaintiffs contained that the telegram from the defendants
quoting lowest price was an offer and the same has been accepted by
the plaintiff and thus, the contract is complete.

The defendants contended that quoting the price was not an offer
which could be accepted.

Held:
The Judicial Committee of Privy Council held that the exchange of the
above telegrams have not resulted into a contract. It was observed
that the 1st telegram had asked two questions regarding willingness to
sell and the other regarding the lowest price. In reply only the lowest
price was quoted and this was not an offer but a mere supply of
information as desired by the other party.

The third telegram from the plaintiffs saying ” he agrees to buy” was
only an offer and not the acceptance of an offer. Since this offer of the
plaintiff had not been accepted, there was no binding contract
between the parties.

Fischer vs. Bell (1961) – Display of goods

Facts:

The defendant – Bell, exhibited in a show window in his shop, a knife


with a marked price. The question arose whether the exhibition of that
knife in the show window executed an offer for sale.

Held:
Lord Parker, the chief justice, stated that the display of an article in a
shop window is merely an invitation to treat. It is in sense an offer for
sale, the acceptance of which constitutes a contract. It is quite
impossible to say that an exhibition of goods in a shop window in itself
an offer for sale.

Pharmaceutical Society of Great Britain vs. Boots Cast Chemist


Ltd. (1952) – Display of Goods

Held :

The display of articles on shelves in a self-service shop / store merely


amounts to invitation to treat.

Ramsgate Victoria Hotel Company vs. Montefeire (1866) – if time


not stipulated

Facts :

On 8th June, M offered to take shares in R company. He received a


letter of allotment on 23rd November. M refused to take the shares.
Held:

M was entitled to refuse as the offer had lost by the delay of


acceptance since the period of 5 months was not a reasonable one.

Hyde vs. Wrench (1840) – Counter offer

Facts :

W, the defendant, had offered to sell his farm to H, the plaintiff, for £
1000. upon the defendant’s refusal to sell the farm, the plaintiff
brought an action for specific performance.

Held:

The Court held that an offer to buy for £ 950 was not an acceptance of
the offer to buy because the offer to sale was for £ 1000. it was a
counter offer and a counter offer to a proposal amounts to its rejection.
As such no contract had come into existence between the parties.
Neale vs. Merret – Counter offer

Note – this case law also highlights that the offeree must not deviate
from the terms and conditions of the original offer as laid down by the
offerer.

Facts :

M, the defendant offered to sell land to N the plaintiff at £ 280. N


accepted and enclosed #80 with a promise to pay the balance by
monthly installments of £ 50 each.

Held:

There was no contract between M and N as the acceptance was not


qualified ( unconditional). Thus, an offer once rejected is dead and
cannot be revived by its subsequent acceptance.

Brogden vs. Metropolitan Railway Co. (1877) – Acceptance


communication necessary
Facts :

A draft agreement relating to supply of coal was sent to the manager


of a railway company viz. Metropolitan Railway company. For his
acceptance the manager wrote the words, approved and put the draft
in his drawer of his table intending to sent it to the companies
solicitors for a formal contract to be drawn up. Through oversight the
contract remained in the drawer.

Held:

There was no contract because there was no communication of


acceptance.

Felthouse vs. Bindley (1862) – Acceptance communication


necessary

Facts :
F (uncle) offered to buy his nephew’s 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.

Adams vs. Mindsell (1818) – Acceptance by non-instantaneous


methods

Note – this was the first case in which the rule of acceptance by non –
instantaneous methods was propagated.
Household Fire & Carriage Accident Insurance Co. Ltd vs. Grant

Note – one of the more obvious consequence of the postal


acceptance rule is that the offerer must bear the price of the letter of
acceptance being delayed or lost. This based on the fact that posting
the acceptance makes it invariably out of the offeree’s control.

Held:

In household fire case, the Court of appeal held that the defendant,
Grant, was the offerer who had applied for shares in the company and
to whom a letter of allotment ( acceptance letter, hence the company
is the acceptor) had been posted but which had not reached him was
nevertheless, liable as a share holder. The legal defects of the Court’s
decision is that acceptance is complete as against the offerer, that is,
the offerer will be bound as soon as the letter is posted. A binding
contract takes place between the parties even if the letter of
acceptance is delayed due to postal strike or loss in transit.

Where however, the delay or loss is due to the fault of the acceptor,
as in the case of an acceptance, which is incorrectly addressed, or
insufficiently stamped. The rule is that it will take effect of and when it
is received by the offerer, provided the offer is still enforced by them or
is received within a reasonable time.
Durga Prasad vs Baldeo (1880) – Consideration must be given at
the desire of the promisor.

Facts :

The plaintiff, baldeo, at the desire and requset of the elecotr of the
town expanded money in the construcvtion of a marjet in the town.
Subsequently the defendants, Durga Prasad & Ors. Occupied the
shops in the market. Since the plaintff had spent money for the
constructoin of the market, the defendants in consideratoin thereof,
promised to pay to plaintiff, a commission on the articles ssold throuhg
their (defendants) shops in that market. Defendants however, failed to
pay the promised commission, the plaintiff brought an action to
recover the promised commission.

Held:

The plaintiff will not succeed since the agreement was void for the
want of consideration.

It was observed in this case that the consideration of the promisre to


pay the commission was the construction of market by the plaintiff. But
the expenses incuurred by the plaintiff in construction of the market
was not there in the desire of the defendants (promisors) but at the
instance/ request of the 3rd party ie, contractor of the town.
It was therefore, held that since the consideraion for the construction
of markeet did not move at the desire of the defendants., that is, the
promisor ( D & Ors.). It did not constitute a valid / good consideration.
Hence the defendants were not liable in respect of the promise made
by them, following the first legal rule.

Kedarnath Bhaattacharya vs Gauri Mohammed. (1887, Cal HC )

Facts :

The town planners of howrah,thought advisable to erect a townhall at


howrah,provided sufficeient subscription were collected.with the object
in view the commisioner of howrah municipality started to raise
necessary fund by public subscription.the defendants one of the
subscribor’s of this fund for Rs 100 signed his name in the
subscription book at that amount.

On the faith of the promised subscription the plaintiff (commisioner of


the howrah municpality) entered into a contract with a contractor for
the purpose of the building the town hall.

Later the defendant subscriber referred to pay the amount upon the
promise to pay / subscribe. In other words ,he contended that there
would be no personal benefit / significance by the construction of the
hall.

Held :

He was held liable. It was observed that in he case person were asked
to knowingly subscribe the purpose to which the money was to be
applied / use. They also knew, that on the faith of their subscription
and an obligation was to be incurred to pay the contactor for the work.
The Act of plaintiff is entering into contract with the contractor was
done at the desire of the prommisor so as to constitute a good
consideration within the meaning of the section 2(d) of ICA.

Chinnaya vs ramayya (1882 Madr HC)

Facts :

A, an old lady, granted / gfted an estate to her daughter the defendant,


with the direction / condition that the daughter should pay an annuity (
annual payment ) of Rs 653 to A’s brother, the plaintiff.
On the same day the defendant, daughter (promisor) , made a
promise vis a vis an agreement with her uncle that sshe would pay the
annuity as directed by her mother, the old lady.

Later the defendant refused to pay on the ground that her uncle
(promisee, plaintiff) has not given any consideration. She contended
that her uncle was stranger to this consideration and hence he cannot
claim the money as a matter of right.

Held:

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 (defendant’s mother). Although the
plaintiff was stranger to the consideration but since he was a party to
the contract he 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.

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.

Thomas vs Thomas (1842)


&

Tweddle vs Atkinson (1861) {See Bottom }

Held:

It was held in these cases that the under the English law, that if the
consideration is furnished by any person other than the promisee
himself, then the promisee is relegated to the position and status of a
stranger to the consideration and therefore, he cannot sue for
promise.

Harvey vs Gibbons :

Facts :

In this case a servant was promised £ 50 in consideration of promise


that he would release a debt to his master.

Held:

This is legally impossible.


Collins vs Godefroy (1831) –

Facts :

The promisee, plaintiff, received subpoena (summon from the Court)


to appear at a trial as a witness on behalf of the defendant (promisor).
The defendant promised him a sum of money for the troubles which
was to be taken by him in appearing that case. A person who
receives a subpoena is bound to attend and give evidence before the
Court. Later the defendant refused to pay the promised amount. The
plaintiff sued him to recover the promised amount.

Held :

It was held that there was no consideration for promise. The plaintiff
being already a legal duty to attend.

But where the undertaking is to do something more than what the


promisee is legally bound. This may constitute a good consideration
for the promise of the promisor.

Glasbrook Bros. Ltd. Vs Glamerglan County Council (1925)


Facts :

Glamerglan County Council, a police authority, sued for a summ of £


2200 promised to it by Glasbrook Brothers Ltd. a colliery company.
The police authority had provided a stronger guard during a strike,
as required by the company than was in its opinion, necessary.

Held :

It was held that providing stronger guard then what was actually
necessary was a good consideration and the defendants were liable to
pay for the same.

Tweddle Vs Atkinson

Note – The rule that only parties to the contract can sue each other
was recognised for the first time in 1861 in this case.

Facts:
In this case, the plaintiff, A , married a girl B. After this marriage a
contract in writing was made between the fathers of the married
couple that each should make a payment of a certain sum to A who
should have the power to sue the executors of her father in law’s
estate for the promised money by the father in law.

Held:

It was held that the husband could not sue her since

1. He was not a party to the contract (stranger to a contract), as also


2. No consideration has moved from him to his father in law (stranger
to the consideration)

Guarantee – Bailment
GUARANTEE

Madho Shah vs Sita Ram

Note –

The liability of the surety is said to be ” vicarious ” with that of the


Principal Debtor. Vicarious liability means that the liability between two
parties is joined and several. The Principle of Vicarious
Liability involved in a contract of guarantee was recognised for the first
time in this case.

R . Lilavati vs Bank of Baroda

Note –

The loss of securities by the creditor results in the discharge of the


surety – vide Section 141. If however the pledged securities are lost
without any fault of the creditor, for instance, theft, fire, etc. the surety
is not discharged thereby. This was seen in the above mentioned
case.
**

BAILMENT

Reed vs Dean

Facts :

‘A’ hired a motor from B for a holiday on river Thames. The motor
caught fire and A was unable to extinguish it as the fire fighting
equipment was out of order. As such he was injured and suffered loss.

Held :

B was liable as it was a case of non gratuitous bailment.

Misa vs Currie
Facts :

A customer had two separate accounts with a bank and he owes to


the bank on of the accounts. The bank can liquidate / realize the debt
due to it by transferring money there from. The same provision is
equally applicable to India.