Cases of Indian Contract Act 1872 Essay

The Carbolic Smoke Ball Company made a product called the â€Å"smoke ball†. It claimed to be a cure for influenza and a number of other diseases, in the context of the1889-1890 flu pandemic (estimated to have killed 1 million people). The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a user’s nose and squeezed at the bottom to release the vapours. The nose would run, ostensibly flushing out viral infections. The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay  £100 to anyone who got sick with influenza after using its product according to the instructions provided with it. â€Å"|  £100[1] reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two wee ks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address: â€Å"Carbolic Smoke Ball Company, â€Å"27, Princes Street, Hanover Square, London.†| †| Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used it three times daily for nearly two months until she contracted the flu on 17 January 1892. She claimed  £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke ball’s efficacy, but â€Å"to protect themselves against all fraudulent claims† they would need her to come to their office to use the ball each day and be checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract. Consideration 1.Abdul Aziz vs. Masum Ali, (1914). The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made to subscribe Rs. 500 to the re-building of a mosque. Held: â€Å"the promise was not enforceable because there was no consideration in the sense of benefit†, as â€Å"the person who made the promise gained nothing in return for the promise made†, and the secretary of the Committee to whom the promise was made, suffered no detriment as nothing had been done to carry out the repairs. Hence the suit was dismissed. 2.Kedar Nath vs. Gauri Mohamed, (1886) The facts of this case were almost similar to those of the above case, but the secretary in this case incurred a liability on the strength of the promise. Held: The amount could be recovered, as the promise resulted in a sufficient detriment to the secretary. The promise could, however, be enforced only to the extent of the liability (detriment) incurred by the secretary. In this case, the promise, even though it was gratuitous, became enforceable because on the faith of the promise secretary had incurred a detriment. 3.Durga Prasad vs. Baldeo, (1880) B spent some money on the improvement of a market at the desire of the Collector of the district. In consideration of this D who was using the market promised to pay some money to B. Held: The agreement was void being without consideration as it had not moved at the desire of D. 4.Chinnaya vs. Ramayya, (1882) An old lady, by a deed of gift, made over certain property to her daughter D, under the direction that she should pay her aunt, P (sister of the old lady), a certain sum of money annually. The same day D entered into an agreement with P to pay her the agreed amount. Later, D refused to pay the amount on the plea that no consideration had moved from P to D. Held: P was entitled to maintain suit as consideration had moved from the old lady, sister of P, to the daughter, D. 5. Debi Radha Rani vs. Ram Dass, (1941) D is ready to sue her husband for maintenance allowance. On husband’s agreeing to pay her a monthly allowance by way of maintenance, she forbears to sue. Held: The wife’s forbearance to sue amount to consideration for the husband’s agreement for payment of maintenance allowance. 6. Ramchandra Chintaman vs. Kalu Raju, (1877) There was a promise to pay to the Vakil an additional sum if the suit was successful. Held: The promise was void for want of consideration. The Vakil was under a pre-existing contractual obligation to render the best of his services under the original contract. 7. Dunlop Pneumatic Tyres Co. Ltd. Vs. Selfridge & Co. Ltd., (1915) S bought tyres from the Dunlop Rubber Co. & sold them to D, a sub-dealer, who agreed with S not to sell these tyres below Dunlop’s list price and to pay the Dunlop Co.  £5 as damages on every tyre D undersold, D sold two tyres at less than the list price and thereupon the Dunlop Co. Sued him for the breach. Held: The Dunlop Co. Could not maintain the suit as it was stranger to the contract. Capacity to Contract Mohiri Bibi vs. Dharmodas Ghose, (1903) In this case, a minor mortgaged his house in favour of a money-lender to secure a loan of Rs. 20,000 out of which the mortgagee (the money-lender) paid the minor a sum of Rs. 8,000. Subsequently the minor sued for setting aside the mortgage, stating that he was underage when he executed the mortgage. Held: The mortgage was void and, therefore, it was cancelled. Further the money-lender’s request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted. Mistake of Law Solle vs. Butcher, (1950) Ignorantia juris non excusat, i.e., ignorance of law is no excuse, is a well settled rule of law. A party cannot be allowed to get any relief on the ground that it had done a particular act in ignorance of law. A mistake of law is, therefore, no excuse, and the contract cannot be avoided. Mistake as to the Subject-Matter Couturier vs. Hastie, (1856) A agreed to sell a cargo of corn supposed at the time of contract to be in transit from Salonica to the United Kingdom. Unknown to the parties, the corn had become fermented and had already been sold by the master of the ship at Tunis. Held: The agreement was void and the buyer was not liable for the price. Mistake as to the Identity of the Subject-Matter Raffles vs. Wichelhaus, (1864) W agreed to buy from R a cargo of cotton â€Å"to arrive ex-peerless from Bombay†. There were two ships of that name sailing from Bombay, one sailing in October and the other in December. W meant the former ship but R meant the latter contract. Remedies for Breach of Contract Hadley vs. Baxendale X’s mill was stopped by the breakdown of a shaft. He delivered the shaft to Y, a common carrier, to be taken to a manufacturer to copy it make a new one. X did not make known to Y that delay would result in loss of profits. By some neglect on the part of Y the delivery of the shaft was delayed in transit beyond a reasonable time (so that the mill was idle for a longer period than otherwise would have been the case had there been no breach of the contract of carriage). Held: Y was not liable for loss of profits during the period of delay as the circumstances communicated to Y did not show that a delay in the delivery of the shaft would entail loss of profits to the mill. Alderson, B observed in this case as follows: â€Å"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both the parties at the time they made the contract, as the probable result of the breach of it.† Quasi Contracts Damodar Mudaliar vs. Secretary of State for India, (1894) A village was irrigated by a tank. The Government effected certain repairs to the tank for its preservation and had no intention to do so gratuitously for the zamindars. The zamindars enjoyed the benefit thereof. Held: They were liable to contribute. 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 â€Å". The plaintiff being interested in purchasing the same sent a telegram to the defendants â€Å"will you sell us Bumper Hall Pen ? Telegraph lowest cash price â€Å".(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 – â€Å"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 â€Å"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 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   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. UPTON-ON-SEVERN RURAL DISTRICT v. POWELL (1942); briefed 9/10/94, pg. 171. Prepared by Roger Martin (http://people.qualcomm.com/rmartin/) Facts: ∆’s barn was on fire and he called the local Upton police chief and asked him to send â€Å"the fire brigade†. The Upton fire brigade showed up and began to put out the fire. While the fire was still burning, a neighboring fire chief came by and informed all that the farm was really in his district, and so the Upton fire brigade was not under obligation to put it out for free. When the ∆ refused to pay for the service, they sued. Nature of the Risk: You may contract by implied promise when you ask for assistance in protecting your property. Issue: Was there a contract between the fire brigade and the farmer by implied promise of the farmer to pay if payment was required? Holding: Yes. Parties create a contract by implied promise when one renders service that requires payment, even though the other may not be aware that the service requires payment. Reasoning: The court reasoned that the fact that neither intended to enter into a contract was irrelevant. The contract was created because the service was performed and therefore there was an implied promise to pay. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6 is a famous English contract law decision on the nature of anoffer. The Court held that the display of a product in a store with a price attached is not sufficient to be considered an offer, but rather is an invitation to treat.