 Acceptance should be communicated:

Felthouse v. Bindley

Can a person’s silence be considered acceptance? The

petitioner, Mr. Paul Felthouse wanted to purchase a horse
from his nephew, but the price he offered to pay for the
horse was less than that his nephew was willing to sell it
for. The horse, therefore, was still in his possession. The
Uncle communicated his offer through a letter, saying, “If I
hear no more about him, I consider the horse mine at
£30.15s” The nephew could not respond to the letter
because he was busy with an auction on his farm. Though
he asked the auctioneer, Mr. Bindley, not to auction the
horses, he accidentally did. Mr. Felthouse then sued the
defendant for conversion of his property. The defendant
argued that the horse was not actually Mr. Felthouse’s
property, as there existed no contract between him and his
nephew at the time of the auction because Mr. Felthouse’s
offer was not accepted by his nephew and the nephew’s
silence cannot be considered to be an acceptance of the
offer. It was held that Mr. Felthouse did not have the
ownership of the horse at the time of the auction, which is
why he could not sue for conversion, as the offer he made
was not actually accepted.

 ·Carlill v. Carbolic Smoke Balls Company:

General Offer

Can offers be open to the public in general? Can a general

offer lead to a contract? A company carried out
advertisements about their product, carbolic smoke balls,
that claimed that any person who took the smoke balls in
the prescribed manner (i.e., three times daily for two
weeks) will not catch influenza. In case someone does, the
company promised to pay 100£ to them immediately. To
show their sincerity regarding this offer, the company
deposited a sum of 1000£ in a public bank. Now, the
plaintiff, Carlill bought the smoke balls and used them as
prescribed in the advertisement, but still ended up
catching the flu. She filed a suit for the recovery of 100£ as
promised in the advertisement. The company denied the
payment saying there existed no contract between them
and the plaintiff. It was held that a contract came into
existence between the plaintiff and the company as soon
as the plaintiff bought the smoke balls and used them as
prescribed.

 ·Offer and Invitation to Treat: Harvey v.

Facey

Can a mere quotation of price be considered an offer? The

petitioner, Harvey communicated with the defendant,
Facey, about a Hall Pen through telegram, saying “”Will
you sell us Bumper Hall Pen? Telegraph lowest cash price-
answer paid”. The same day, Facey responded with the
price of the Pen to be £900. To which, the appellant
replied, “We agree to buy Bumper Hall Pen for the sum of
nine hundred pounds asked by you. Please send us your
title deed in order that we may get early possession.” The
defendant refused to sell at that price that they had initially
quoted. It was finally held in this case that no contract
came into existence between both the parties because
their exchange of telegrams was merely an informational
exchange where the appellant asked for the price of the
Hall Pen and the defendant quoted the price. Therefore the
appellant had no right to sue.

 ·Offer and Counter Offers: Hyde v. Wrench

This is a leading case eliciting the concept of offers and

counter-offers. Wrench, the defendant offered to sell his
farm to the petitioner, Hyde for £1000. The petitioner
declined the offer. The defendant again reinstated his offer
for selling the farm at £1000 to the petitioner’s agent
stating that it is the final offer from their side. The
petitioner, through a letter, offered to buy the farm for
£950. The defendant refused to sell the farm at that price.
The petitioner, several days later, offered to buy the farm
at the initial price of £1000. The defendant did not send
any agreement to that and refused to sell the farm,
because of which the petitioner sued for breach of
contract. It was held that no contract came to arise
between the parties as the price was not agreed upon.
Rather, offers and counter-offers were exchanged.

 ·Agreement, Not Contract: Balfour v. Balfour

Can a promise between married parties result in a legally

binding agreement? Mr. and Mrs. Balfour, who used to live
together as a married couple in Sri Lanka, went for a
vacation to England. During this time, Mrs. Balfour
developed rheumatic arthritis. The doctor advised Mrs.
Balfour to stay back in England as, according to him, Sri
Lankan climate would worsen her health. Before Mr. Balfour
returned to Sri Lanka, he promised to send £30 to her per
month. During their stay away, the parties drifted apart
and separated. It was held in this case that Mr. Balfour’s
promise to pay a monthly sum of £30 did not amount to a
contract, as there was no intention to create a legal
relationship on part of either of the parties.

 ·Communication of Offer is Necessary: Lalman

Shukla v. Gauri Dutt

The defendant’s nephew went missing and the petitioner,

who was a servant under the defendants was sent out in
his search to Hardwar. After sending the petitioner, the
defendant carried out an offer to the general public offering
Rs. 501 to whomsoever finds the missing boy. The Plaintiff
found the boy and helped return him back to his home. He
had been paid the money he spent in going to search for
the boy, i.e., his travel expenses. When he returned, he
continued working for the defendants for about six months.
After six months, he sued the defendants for paying him
the prize money that was offered earlier. It was held that
the petitioner was not entitled to the prize money, as he
was only obliged by the duty he had as the defendant’s
servant to find the missing boy, and the reward was
announced after he had already been sent.
  ·Minor’s Capacity to Contract: Mohori Bibee v.
Damodar Ghose

Is a minor’s agreement void ab initio? The defendant,

Darmodar Ghose, as a minor was the sole owner of his
property. His mother was his legally appointed guardian.
One Mr. Brahmo Dutt who was a moneylender, through his
agent Kedar Nath, lent Damodar Ghose a sum of Rs 20,000
at 12% interest per year. The loan was taken by way of
mortgaging the property. The same day this deal was
made, Damodar Ghose’s mother notified the appellant that
Damodar was a minor, and anybody who would get into an
agreement with him would do so at his own risk. Kedar
Nath claimed that Damodar Ghose had lied about his age
on the date of the execution of this deed, which turned out
to be untrue. Therefore, Brahmo Dutt’s appeal was
dismissed and his request for the return of Rs 10,500
advanced towards him was also rejected. It was held that a
minor’s agreement is void ab initio.

 Doctrine of Frustration: Krell v. Henry

The defendant agreed to rent a flat of the plaintiff to watch

the coronation of King Edward VII from its balcony. The
plaintiff had promised that the view from the flat’s balcony
will be satisfying since the procession will be perfectly
visible from the room. The parties corresponded through
letters and agreed on a price of £75 for two days. Nowhere
in their written correspondence did the parties mention the
coronation ceremony. The coronation did not take place on
the days the flat was booked for, as the kind fell ill. The
defendant refused to pay the whole sum of money that the
parties had agreed upon, for this reason. It was held that it
could be incurred from the circumstances surrounding the
contract what the implied purpose behind the contract was.
Due to the cancellation of the procession, the purpose of
booking the flat was frustrated.

 · The remoteness of Damage: Hadley v.

Baxendale
The plaintiffs were operators of a mill, that they had to shut
down temporarily when the crankshafts of the mill broke.
Plaintiffs then contacted the manufacturers of the engine
to make a new engine on a similar pattern. A servant of the
defendants was then sent to the carriers to transport the
crankshaft to the engine manufacturers. The servant told
the Defendants that the mill is shut down, so the
crankshafts must be sent immediately. The defendants
informed that whenever the old crankshaft is given to
them, the new one will be delivered by 12 o’clock its next
day. Due to the delay of the defendants, the delivery got
delayed and the mill had to stay shut for several days. In
this case, due to the involvement of a third party (the
carriers), the delay and loss could not entirely be blamed
upon the defendants. Whatever damages or loss rose, did
not come to existence because of a direct breach of
contract by the defendants.
INDEMNITY & GUARANTEE

 Adamson vs. Jarvis: The plaintiff, who was an

auctioneer sold certain cattle on the instruction of
the defendant. It was subsequently found out that
the livestock sold was not owned by the defendant
but belonged to another person who made the
auctioneer (plaintiff) liable for the conversion. The
auctioneer in turn sued the defendant for
indemnity for the loss and damage suffered by him
while acting on the defendant's instructions. The
court laid down that the plaintiff had acted upon
the request of the defendant and was entitled to
presume that he would be indemnified in case
things went wrong. Hence, the defendant was
ordered to indemnify the loss and damage to the
plaintiff.

 Osman Jamal and Sons Ltd. vs. Gopal

Purshottam: The plaintiff's company was in the
process of liquidation and was being represented
by the official liquidator. The plaintiff's company
 was acting as the commission agent for the
defendant firm for the purchase and sale of certain
goods. Further the defendant firm was to indemnify
the plaintiff company against all loss and damage
in respect of such transaction. The defendant firm
failed to receive the delivery because of which the
goods were resold by the vendor at less than the
contract price. The plaintiff consequently sued for
the recovery of the sum. The judge decided in the
favour of the plaintiff.

 Gajanan Moreshwar Parelkar v Moreshwar

Madan Mantri: The plaintiff executed two
mortgages in favour of Mohandas at the command
of the defendant. Defendant promised to indemnify
the plaintiff against any suits by the mortgagee,
along with executing a third mortgage in place of
the previous two(by the means of a letter). Plaintiff
requested to release of liability. The issues raised
were whether the indemnified could ask for
performance of the contract of indemnity without
suffering any actual loss and whether the
obligation of the plaintiff was absolute. It was held
that the sections 124 and 125 do not apply, as said
sections do not cover the transaction.

 Lala Shanti Swarup vs Munshi Singh &

Others: The plaintiff sold an encumbered land to
defendant, who promised to make required
payment against a mortgage to the mortgagee; but
failed to do so because of which the plaintiff
incurred loss in the form of ¾th of their property
being sold. The plaintiff sued under implied
contract of guarantee. The Issues that arose were:
was there a contract of guarantee? Was the suit
barred by limitation? It was held: A conveyance
which contains a covenant whereby the purchaser
promises to pay off encumbrances on the sold
property is nothing but an implied contract of
 indemnity, whose cause of action arises when
actually indemnified. (Mortgage decree being
passed does not amount to actual indemnification).

BAILMENT

 · Chaturgun v Shahzady AIR 1930 Oudh

395: The defendant borrowed the ornament for
Ram Lila, which was stolen. Defendant denied its
liability to compensate the plaintiff. The court
observed that while borrowing the ornament, the
defendant has made an implied contract to return
the borrowed goods to the plaintiff. Section 160 of
the Act delivers that once the purpose of the
bailment is fulfilled or the specific time for which
the goods are bailed are expired, the bailee
becomes liable to pay back the borrowed goods
following the directions of the bailor, without
bailor’s demand. In the present case, the purpose
of the bailment is completed as the Ram Lila ended
on 24th October 1924 while the complaint about
the theft of the ornament was registered on 27th
October 1924. The appeal was allowed by the
court. Moreover, in Kush Kanta Barkakati v.
Chandra Kanta Kakati AIR 1924 Cal 1056 case the
court clarifies the liabilities of the bailee if he fails
to deliver back the bailed goods to the bailor after
the time for which it was bailed expires or the
purpose gets completed for which it was bailed.

 · Coldman v Hill: The court observed that if

the bailee goods are lost or stolen when the good
were kept with the bailor, the burden lies on bailee
to prove that he had made all reasonable efforts to
get back those goods, or else he will be held liable
for the negligence.

PLEDGE
 · Lallan Prasad v. Rahmat Ali AIR 1967 SC
1322: The defendant borrowed Rs 20,000 from the
plaintiff on a promissory note and gave him aero
scrapes worth about Rs 35,000 as security for the
loan. The Plaintiff sued for repayment of the loan,
but was unable to produce the security, having sold
it, and, therefore his action for the loan was
rejected.

 · Central Bank of India v. Abdul Mujeeb

Khan 1997 AIHC 299 (MP), The bank took over
the possession of the hypothecated truck but
thereafter neither sold it according to the agreed
terms nor took care of it, leaving it in open place,
the bank was liable for the extraordinary
depreciation in the value of the vehicle.