Contract I – Case Laws

Contract I


Balfour  vs. Balfour – Intention to Create Legal Relationship




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




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




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.




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




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.




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.




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



Carlill VS Carbolic Smoke Ball Co. (1893) – General offer




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.




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.




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




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.




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.




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.




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.




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. 




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.




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.




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.




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.




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 }




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. 




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.




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.




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




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.






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.





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