CASE REVIEW

LALMAN SHUKLA VS GAURI DAT

INDIAN CONTRACT ACT, 1872

The Indian Contract Act, 1872 is based on English Common Law principles. It
determines the situation and circumstances under which promises made by parties would be
legally binding on each other. Section 2(h) of the Indian Contract Act, 1872 provides the
definition of contract as an agreement enforced by law. All contracts are contracts, but all
agreements are not contracts. This Act plays an important role in deciding how a contract is
formed. This case review would be focusing on a very important aspects in formation of a
valid contract that is Section 3 of the Indian Contract Act which deals which acceptance of
the offer and acceptance in ignorance of the offer in the landmark judgement of Lalman
Shukla v. Gauri Dat.

FACTS OF THE CASE: -

The defendant, Gauri Dat was a resident of the town of Cawnpore (now Kanpur). She
had a nephew who went missing and no traces of him was found for several days. The
defendant sent his servants to different places in search of his nephew. The plaintiff, Lalman
Shukla, the munim of his firm, was one among then. He was given money for travelling
expenses. Gauri Dat issued handbills and displayed it all over the town which rewards Rs.
501 to anyone who find his nephew. Meanwhile, Lalman Shukla traced the boy in Hrishikesh
and gets him back to Gauri Dat. In the immense happiness he rewarded the plaintiff with Rs.
20. After six months when the plaintiff was dismissed from the job, he came to know about
the offer made by the defendant. The plaintiff filed a suit against the defendant and claimed
Rs. 499.

ISSUES:

1. Whether the plaintiff is entitled to get the reward?

2. Whether the acceptance of offer mandatory to make a contract legally binding?
3. Whether there was a valid contract formed between the plaintiff and the defendant?
JUDGEMENT:

The High Court of Allahabad held that the plaintiff cannot claim the reward of Rs.
501 and dismissed the claimed made by the plaintiff as there was no contract formed between
the parties. The communication of acceptance is an essential element in formation of a valid
contract.

CASE ANALYSIS:

The judgement held in the favour of defendant was in accordance with the Indian
Contract Act, 1872 and the researcher has tried to analyse it in two major arguments-

(1) There should be a valid acceptance for the formation of Contract

For the formation of a contract the communication of acceptance plays an
important role. Under the Section 2 (b) the proposal is said to be accepted, when a
person to whom the proposal is made signifies his assent. A proposal when accepted
becomes a promise. Section 3 of the Indian Contract Act states the acceptance of
proposal is deemed to be made by any act or omission of the party accepting by which
he/she intends to accept it, or which has the effect of communicating it. In this case it
is very clear that the plaintiff has not accepted the offer. He was ignorant of the fact
that an offer has been made. A person cannot make an acceptance before an offer has
been made to him/her. The communication of acceptance as given under the section 4
is complete as against the acceptor, when it comes to the knowledge of proposer. The
plaintiff was unaware of the handbills issued by the defendant when he found the
defendant’s nephew. An offer must be clearly communicated. It should always be
communicated from the offeror to the acceptor. This is the case of general offer. In
this case, the communication of the offer must not be direct in nature. A general offer
can be accepted by any party. Here, acceptance need not to be expressed directly to
the offeror. In the case of Carlil vs. Carbolic Smoke Ball Co 1., the plaintiff made a
general offer which was accepted by the plaintiff by acting in accordance with the
conditions given in the advertisement has accepted the offer and therefore, the

1
Carlil v. Carbolic Smoke Ball Co.[(1893) 1 QB 256]
 plaintiff is entitled to the reward. But the plaintiff should have the knowledge of offer
to accept it either directly or through his/her actions in case of a general offer. But a
person cannot give his/her acceptance in case when he/she does not have any
knowledge about the offer. Though the plaintiff has fulfilled the condition of
searching the defendant’s nephew and getting him back to home, because he was
assigned to do that work and not because of the general offer made. The plaintiff has
done the action even before knowing the reward of Rs. 501 (general offer made by the
defendant) not amounting to acceptance. An action done without the knowledge of the
proposal is not an acceptance. The defendant cannot claim any reward as no contract
exists.

(2) Consideration is an essential element in a contract. (no consideration, no

contract)
For a valid contract, consideration also plays an important role as given under
section 2(d) of the Indian Contract Act which states: when at the desire of the
promisor, the promise or any other person has done or abstained from doing, or does
or abstain from doing, or to do or abstain from doing, that such act or abstinence is
called the consideration. In the absence of consideration, no contract exists. In this
case, apart from the fact that the plaintiff was unaware of the offer, if he claims that
he has done the part required to do to give his acceptance it can be argued that the
plaintiff has already a pre-existing duty to search for the nephew. The plaintiff by the
virtue of his post has an obligation to do so. Being the servant of Gauri Dat, Lalman
undertook the duty to search for the nephew. The plaintiff was given Rs. 20 for the
expense and was asked to go for the search of the nephew as he was the servant of the
defendant. For the performance of subsiding duty, a person cannot claim any reward.
In the case of Ramachandra Chintaman vs Kalu Raju2, the Bombay High Court held
that a promise to do something which the promise is already under an obligation or
more precisely, under a pre-existing duty to do so, does not amount to consideration

Therefore, the plaintiff is not entitled to reward of Rs. 501 on the basis of arguments
cited above. There was no contract between the plaintiff and the defendant.

SUBMITTED BY: BA0180002

2
Ramachandra Chintaman vs Kalu Raju [1878 ILS2 Bom 362]