Contracts – every answer write either a case law or an example. Sections of the contract act.

Proposal and offer are one and the same thing, in Indian law proposal is used and in English law offer
is used.

Assent – unilateral

Consent – bilateral

Proposal must be within the knowledge of the acceptor

Lalmon Shukla V Gauri Dutt – for contract to take place there has to be acceptance and for that
knowledge of the offer. Here, Lalmon Shukla did not know about the reward, so no contract.

Objective test of intention – what a reasonable person makes of the circumstance.

Harvey V Facey – Harvey wanted to buy a property in Jamaica, asked Facey to quote the lowest
price, he said 900 pounds, went to court. No intention to sell, contract did not conclude here. Only
mere information is provided.

Proposal can be express or implied and has to be certain. Proposal once rejected comes to an end.

Hyde V Wrench

Counter offer – two proposals exhaust each other, previous offer stands canceled.

Cross offer – identical parties, identical subject matters at the same time, both offers are valid, both
proposals do not exhaust each other.

Mirror rule – acceptance must be a mirror of the proposal

Invitation to offer or offer depends upon the intention of the party who is making it.

Pharmaceutical society of Great Britain V Boots Cash Chemist – customer picked up a drug from the
store and person declined to bill it. There will be no breach of contract because he did not accept the
offer of billing it.

Standing offer – for a certain period of time, a party cannot reject another party’s offer, it is called a
standing offer.

Jones v Padavatton – daughter clear Bar Exam, she will get allowance, later shifted to place to live.
Daughter said breach of contract. No contract because no intention to create legal relations.

Brogden v Metropolitan Railway Co – Brogden supplying coal since long time, no formal contract, he
suggested get into a contract, company drafted agreement along with arbitration clause and blank
spaces, Brogden signed sent to MRC, MRC didn’t sign or send it back but trade carried on, implied
that there was a contract in place. Implied acceptance.

Upton Rural District Council V Powell – fire on Powell’s farm, called for fire brigade, extinguished fire,
had to pay money, he assumed had to not pay money and free services, did contract arise? Services
were delivered under implied promise, liable to pay.

Consideration

Combe v Combe – husband and wife got divorced, husband decided to pay maintenance, she did not
go to the court, he stopped paying maintenance. No contract, no consideration, did no go from the
desire of the promisor (husband).
Durga Prasad V Baldeo – Baldeo built a market place at the order of the collector, shopkeepers
promised to pay commission to plaintiff for article sold, after sometime they stopped paying.
Contract between plaintiff and collector and not the shopkeepers and the plaintiff.

Promissory Estoppel

when one party has acted on a promise, the other party cannot go back on it. Essentials – promise,
reliance, injury.

Kedarnath V Gauri Mohammad – A wanted to construct a town hall, 100 Rs subscription per person,
based on this B engaged a contractor, A denied paying the contract. Promissory estoppel comes into
picture.

Abdul Aziz v Maussam Ali – defendant promised to pay Rs 500 to build a mosque, nothing started,
no construction, he did not pay 500.

Doraiswamy Iyer V Arunachala Ayyar – repairing of a temple was already in progress, A promised to
pay 125 as subscription amount, later denied it.

Privity of Contract

connection between 2 parties upon which rights and duties fall.

Dutton V Poole – father, son, daughter, father wanted to get daughter married, sold timber from his
farm, son promised to pay the amount of timber to the father on condition of not selling the timber,
son did not pay the amount, daughter wanted to sue, case it was held that as she was beneficiary
she could sue, but after this held that privity of contract in both India and UK, but privity of
consideration only in UK and not India.

Tweedle V Atkinson – overruled the previous case. Husband and wife, fathers of both entered into a
contract to pay a certain amount to husband, he can use it however he wants, both the fathers died,
wife’s father did not pay amount, husband sued executor of wife’s father. Husband is a stranger to
the contract, contract was between both the fathers, so husband could not sue, upheld the law that
there is privity of contract and privity of consideration in the UK.

Dunlop Pneumatic Tyre Co V Selfridge Co – Dunlop manufactured and sold tyres, he entered into a
contract with Duke to not sell tyres below a fixed price, Duke entered into a contract with Selfridge,
5 pounds penalty. In India, Dunlop could have got because no privity of consideration in India, only
contract.

Khwaja Mohammad V Hussaini Begum – Khwaja wanted his son Rustom Ali to get married to
Hussaini Begum, Khwaja and Hussaini’s father entered into a contract to pay maintenance every
month, they started living separately then, he stopped giving 500 as allowance. She can claim
because there is no privity of consideration in India.

Beswick V Beswick – A wanted to retire from business, transfer goodwill and tools if you promise to
make consultant for business, after he dies pay 5 pounds per week. He did not pay after sometime,
wife filled case in capacity of executor after husband’s estate, and also from her capacity. She could
claim not from her capacity but from her husband’s.

Contract – right of third-party act 1999 – when wives are the beneficiary of the contract, they can
claim even though they are third party. Law applicable in the UK.
MC Chacko V State Bank of Travancore – highland bank was indebted to State bank, M was manager
in highland bank, K – M’s father guaranteed on behalf of M that he will repay the loan, K made a gift
deed to distribute property among family members, clause was that if there is any loan it has to be
paid by K only, not other members to ensure doesn’t fall on other members, can bank claim under
this gift deed? No because family arrangement, bank is third party, cannot claim.

Exception to doctrine of privity

1. beneficiaries under trust

2. marriage

3. Estoppel/acknowledge

4. agency – principal agent

5. assignment – life insurance policy

6. covenants running with land – Turk V Moxhay – D had a property which he sold to E on condition
that one part has to be kept for public use, e kept his bargain but transferred some property to F and
also mentioned same to F, F used for personal use so here D can claim

Executed and executory consideration – ma’am asked Nandini to get cold coffee for her, will give
100 Rs for it, Nandini goes and gets coffee, this is executed consideration, money is still left to be
paid so this is called executory.

Past consideration – Teertha told Deepna to write notes for her in contracts, after writing notes
Teertha says I will give you Rs 500 for this, Deepna has already performed her contract so this is past
consideration. Promise is subsequent to the act. Under Indian law, past consideration is valid and
good but under English law it is no consideration but it is considered consideration in 2 cases – 1.
past consideration is at the request or desire of the promisor (both Indian law and English law) –
deepna wrote notes only because Teertha asked her to so condition valid in both the countries laws.
2. At the time of making such request, there was an intention to compensate for such past
consideration – no such requirement in Indian law.

Section 2 clause d has to be read with section 25 – agreement without consideration is void

Section 10 – 2 parties needed for contract, 2 people in different capacities can enter into a contract,
eg personal capacity and business capacity, intention to create a contract, contract capable of being
performed, should be in writing and registered wherever required by the law. Cannot enter into a
contract with an alien enemy, person not from India, alien enemy is a person from a country where
India is at war with.

Parties competent to contract – Chacko and Ors V Mahadevan – Chacko sold 1 cent of his land in
1982 for 18000, next year 3 cents of land for 1000 only, both went to court, wife said not right state
of mind when contract was entered. One month before sale Chacko was in hospital for alcohol
psychosis, M to whom land was sold administered a lot of alcohol to Chacko. Contract null and void,
unsound mind.

Indian majority act, 1875 – 18 or 18 or above is regarded as a major. Before 1903, contract with
minor was voidable.

Mohri Bifi V Dharmodas – Dharmodas was a minor and he mortgaged his property to B, and
Brahmodatt was a moneylender. D wrote on a piece of paper that I am a major even though he was
not, minor’s mother already said you are entering into a contract with a minor to moneylender, D
went to court, said contract is void based on minority. Major, declared he is a major, contract with
minor voidable, even want to cancel tell him to refund the money back, court rejected all this and
said contract with minor is void ab initio, will get nothing out of it. Landmark case which declared
that contract with minor is void ab initio and that section 64 and section 65 do not apply to minors.

Khan Gul V Lakha Singh – power to give equitable relief is wider in India than UK, therefore minors
are not allowed to unjustly gain an advantage in the agreement or contract. Law commission in the
13th report agreed to this, minors have to restitute or return the property in case of contract.

Raja Rani V Prem Adib – a film producer promised to give minor a role in movie, did not get role, he
said in court that minor so cannot be enforced, court agreed.

Indian law says that benefit consists of both money and property, but UK law says only relating to
property.

Leslie V Sheill – a minor misrepresented his age and got a loan amount, he spent all the loan
amount, matter went to court. Party said ask minor to restore the loan amount he took in court, if
we ask him to repay the money it means the contract is being enforced which defeats the purpose of
minor not entering into the contract.

BEFORE 1903 – VOIDABLE – THEN MOHRI BIBI’S CASE WHERE CONTRACT WITH MINOR IS VOID AB
INITIO + 64 AND 65 DO NOT APPLY, KHAN GUL’S CASE – RESTORATION RECORDING MONEY AND
PROPERTY, 1958 – 13TH LAW COMMISSION, KHAN GUL RESTORATION – 1963, SRA S 33(2)(6),
RESTORATION

ENGLISH LAW – MONEY DOES NOT INCLUDE – LESLIE V SHEILL CASE – PROPERTY APPLIES –
TRACEABLE + POSSESSION

Section 16 – undue influence – ingredients – position to dominate the will of others + uses that
position to obtain unfair advantage

Ladli Prasad V Karmal Distillery – both these essentials have to be fulfilled to amount to undue
influence.

Section 16 – clause 2 – talks about presumption – parties are under a presumption regarding the
domination of the will as they are in that position.

Manu Singh V Umadat Pandey – religious guru asked his devotee to transfer all his property in his
name, if you transfer property soul will be happy in next life. This is undue influence.

Section 16 – clause 3 – 10000 worth watch sold for 1 lakh, if you don’t give 1 lakh for the watch then
class participation zero, this is undue influence.

Section 19A – power to set aside contract induced by undue influence – when consent to an
agreement is cause by undue influence, the agreement is a contract voidable at the option of the
party whose consent was so caused.

Section 10 – when agreements are contracts

Section 23 – when consideration/object is lawful

Section 24 – blue pencil rule

Section 17 – fraud – essentials – intend to deceive – induce someone to enter into a contract –
EX DOLO MALO NON ORITUR ACTIO – a right of action cannot arise out of a fraud

Concealment can be active or passive. Active concealment is something you do not know, you buy a
car and after driving 50kms you realize its spoilt, this is known as latent defect. Passive concealment
is when you can actually see the defect, eg – a dent on the car, also known as patent defect.

Derry V Peek – A company wrote a prospectus that their trams were powered by steams but in
reality, they were powered by horses. It was a formality that is why mentioned in prospectus, to get
permission from board of trade. Their claim got rejected, board did not approve of doing business by
trams run by steam. This is not fraud since there is no intention to deceive, it is only
misrepresentation.

Mere silence is not fraud but silence will amount to fraud in 2 situations – duty of the person to
speak and silence is equivalent to speech.

Duty of the person to speak - A and A’s father – father tells A buy a car from me for 1 lakh, he trusts
his father and enters into an agreement, in this situation it is the duty of the father to speak about
the car, if he does not speak it amounts to fraud.

Silent is equivalent to speech - A buys a house and goes to C and asks is there mold in this house, C
does not say anything, here silence is equivalent to speech, and therefore there is fraud.

Change of circumstances – A went to C asking if the house has mold and C says no, after some
months A again goes again and asks the same question, here C has to answer the question, if he
does not then it will amount to fraud.

Half-truths – when half things are told and person stops in between while saying a thing.

Section 19

Patent defect – it is the duty of the buyer to examine

Latent defect – concealment will amount to fraud only when asked

Rights in the case of fraud –

a. right to rescind

b. right to insist performance (s 19 para 2)

c. right to claim damage for non – performance

d. right to claim damage under law of tort

in the case of misrepresentation, only 1 and 2 are allowed.

No consent – agreement is void

No free consent – agreement is voidable – undue influence, coercion, fraud, misrepresentation

Misrepresentation – can only be of facts not of opinion, but only material facts,

18 1 – know about material facts but don’t inform then fraud but if don’t know and tell anyone then
it is not misrepresentation
18 2 – there was a breach of duty without intention to deceive and therefore it is misrepresentation

18 3 – you said something by which another party commits a mistake – that is also
misrepresentation

18 has to be read with section 22

Difference between fraud and misrepresentation

1. fraud – misrepresentation + intention to deceive

Section 20 – mistake has to go to the root of the agreement, for superficial mistake agreement
cannot be void. Talks about bilateral mistake – such agreements are void

Essential to the agreement –

Identity of the parties – police offer helped to arrest Chirag but arrested Srishti

Identity of the subject matter – A wanted to buy an iPhone but entered into a contract to buy a
Samsung

Character of the document – wanted to enter into a lease agreement but entered into a sale
agreement

Mistake regarding value of property doesn’t fall under mistake and will not make contract void.

Cundy v Lindsay – Lindsay wanted to enter into a contract with Blaenkarn but entered into a
contract with Blankiron, Blankiron did not pay and sold goods to third party, Linday went to court
said Blankiron had no right to do so, court said agreement is void, this is mistake as to identity of the
parties.

Bell V Lever Bros Ltd – Bell was an employee of Lever Bros, he was managing director, he traded for
personal profits which was forbidden by contract, Lever Bros provided compensation and told him to
leave the job, then they came to know about the personal profits and said money will be taken back,
company went to court and said void contract as mistake of fact, court said that this fact was not
important to the contract, as mistake was not essential to the contract so he can keep his money
with him.

Section 21 – ignorance of law is not excuse

Section 22 – unilateral mistake is a valid contract, does not make a contract void

Section 21 – foreign law – bilateral is void and unilateral is not voidable.

Mistake can negate the consent or nullify the consent. Negate consent is under section 13 – did not
agree on the same thing in the same sense that is mutual mistake. Nullifying consent is agreeing
upon the same thing in the same sense but due to an assumption it is nullified dealt under section 20
21 22

Section 25 – 3 conditions where agreement without consideration is not void.

Rajlukhy Dabee V Bhoothnath – husband and wife used to quarrel and disagree a lot, husband
executed a document where he agreed to pay separate maintenance to the wife, here consideration
moves from the husband but not from the wife, wife went to court and said there has to be
consideration. There is no love and affection so therefore it is a void contract.
Essentials – writing and registered – out of natural love and affection – near relation of parties to
each other.

Section 25 and section 2 clause D have to be read together

Section 25 clause 2 - A building has caught fire, a girl is trapped inside the building, Niloy sees the girl
and goes to rescue her, he has done it voluntarily, the girl said since you saved me, I will go on a date
with you, contract is formed after the action has been done. It was not according to the desire of the
promisor, therefore its subsection 2 of section 25, if it would be according to the desire to the
promisor then it is past consideration (the girl asks to bring a rose then only she will go on a date).

Section 25 clause 3 – essentials – it must refer to a debt which the creditor might have enforced but
could not because of expiry of period of limitation. Limitation period is passed, you cannot claim the
money back and cannot go to court – there must be clear or distinct promise to pay wholly or partly
such debt – promise must be in writing and signed by the person or by his duly appointed agent.

Agreement without consideration is void – exceptions to this rule – section 25 – gift (explanation 1 to
section 25) – section 185 – gratuitous bailment (a type of bailment in which the bailee receives no
consideration).

Section 26 – agreement in restraint of marriage is void – father tells a daughter you cannot marry
anyone else except A, this is void. The essence is that there is restraint. Father tells daughter you
cannot marry for 2 years, mother and father of boy and girl agree but not the girls – this is partial
restraint so void. Boy says girl that I will marry only you and no one else, this is a valid contract
because there is no restraint.

U Ga Zan V Har Pru – father-in-law told his son in law I would pay for you education if you do not
bring a second wife – is this a contract? – so there is not a contract and it is void because there is
restraint of marriage.

Lowe V Peers – the defendant told plaintiff if I marry someone else other than you, I will give you
10000 pounds. The court held here that it is void – don’t write the case in the exam.

Section 27 – agreement in restraint of trade is void. Partial and full restraint both make the
agreement void. Only that part of the agreement which is void will be separated, the other part will
be carried on as a valid contract.

Madhu Chander V Raj Coomar – there was a shopkeeper who asked another shopkeeper to shut his
shop and he will pay him some amount, the shopkeeper did not pay him the amount, the other
shopkeeper went to court that he did not pay me, this is not a valid contract as it is in restraint of
trade.

Violative of article 19 (1)(g) of the constitution.

Restraint is divided into 2 parts – curb the competition – here the agreement is void – to protect
own personal interest – then restraint is not void.

Srishti comes for a job and owner says that if you come for a job, I will tell you secret recipes, you
cannot open own shop for 2 years – this is valid as it is to protect your interest.

Exception 1 – can’t open a similar business – within certain limits

Restraint has to be reasonable

Chandra V Prasullah – plaintiff had a business where he used to run bus from Pune to
Mahabaleshwar and defendant also had the same business, plaintiff bought goodwill of defendant
and contract said cannot open a similar business for 3 years, defendant breached the contract. The
restraint is valid and the contract is also valid.

Three exceptions under the Indian partnership act

1. agreement with a partner of a firm to not open another business.

2. agreement with a partner to not open similar business.

3. in anticipation of closure of firm, the partners can come to an agreement together in restraint of
carrying out a similar business in similar area or similar type of business.

Exceptions evolved through judicial interpretations where restraint of trade is valid

1. trade combination – few companies come together and fix prices of a certain product, this is valid
restraint

2. sole dealing agreement – franchise of dominos says that you are restraining us from selling pizza
hut pizza.

Gujarat Bottling Co V Coca Cola Ltd – supreme court case – Gujarat bottling company entered into a
contract wit coca cola to manufacture bottles and trade mark painted goods, there was a condition
by coca cola that if you manufacture our goods cannot manufacture any other companies’ goods.
Contract can be canceled by one year notice or mutual consent. Another contract reduced the time
period to 90 days from 1 year. The shares of Gujarat bottling were bought by Pepsi so the ownership
also changed. Now Gujarat bottling company started manufacturing goods for Pepsi, coca cola
moved to the court and said to stop manufacturing Pepsi. Was this agreement in restraint of trade?
It is a valid contract.

M/S Stellar Information Technology Pvt Ltd V Rakesh Kumar – there are 2 companies A and B, now X
employees of company A founded company B, A went to court and said B is approaching our
customers and should not be allowed to do so. Court said that this information is available in public
domain and therefore it is not confidential, here no remedy will be allowed and there is no restraint
of trade.

3. contract exclusive service or restraint on employees – if a teacher is teaching in NMIMS there can
be a contract that cannot teach anywhere else. This is valid contract.