Contracts
Module 4
Contents
Durga Prasad v. Baldeo (1881) ................................................................................................................ 4
Facts .............................................................................................................................................. 4
Judgement ...................................................................................................................................... 4
Errington v. Errington (1952) .................................................................................................................. 4
Facts .............................................................................................................................................. 4
Mr Errington (father and husband of plaintiff) bought house in Newcastle upon Tyne for his son and
daughter-in-law (defendant). The house was subject to a mortgage and Mr Errington promised his son
and the defendant that they could live in the house and have the house when he died if they made the
mortgage repayments. The issue before the court was ‘Was there a contract for the sale of the house?”
...................................................................................................................................................... 4
Held .............................................................................................................................................. 4
Venkata Chinnaya Rau v. Venkataramaya Garu (1881) .............................................................................. 5
FACTS .......................................................................................................................................... 5
An old woman transferred certain property consisting of a few acres of land in the name of her daughter,
the defendant, by a deed of gift. The deed of gift was registered by the respective authorities. The terms of
the contract specified that the defendant would have to pay an amount of Rs. 653/- annually to the
woman’s sister, the plaintiff. The defendant signed an Iqrarnama (agreement), in favour of the plaintiff,
agreeing to do the same. However, after the old woman passed away, the defendant failed to pay the money
she had promised to the plaintiff. Hence, the plaintiff sued the defendant to recover the promised amount. 5
Judgement ...................................................................................................................................... 5
The Court observed that according to the definition of “consideration” provided in Section 2 (d) of the
Indian Contract Act, 1872, it is clear that in a valid contract, consideration does not have to move solely
from the promisee. The Court held that the defendant was entitled to payment for the annual sum of
money and issued a decree ordering the plaintiff to pay an annuity to the defendant. ................................ 5
White v. Bluett (1853) ............................................................................................................................ 5
Facts .............................................................................................................................................. 5
Judgement ...................................................................................................................................... 6
Collins v.Godfray (1831) ......................................................................................................................... 6
Facts .............................................................................................................................................. 6
Judgement ...................................................................................................................................... 6
Rajlukhy Dabee v. Bootnath Mukherjee (1900) ............................................................................................ 6
Bhiva v.Shivaram(1899) ......................................................................................................................... 7
Kedarnath Bhattacharji v. Gorie Mahomed (1886) ........................................................................................ 7
FACTS .......................................................................................................................................... 7
In this case, the plaintiff was a municipal commissioner of Howrah and was also one of the trustees of the
Howrah city council fund. A town hall was planned to build in Howrah. After gaining enough membership
to support the funds required to build a town hall, the commissioners, including the plaintiff, made an
agreement with the defendant to build a town hall. The plans and proposed structures for the same were
submitted and also passed. Later, because of the expansion in the membership list, the plans also expanded.
Therefore, the expected cost of construction increased from 26,000/- to 40,000/-. The defendants made a
subscription to pay 100/- for the construction of the town hall, which he later refused. The commissioner
sued the defendant for the same......................................................................................................... 7
RATIO DECIDENDI ................................................................................................................... 7
DECISION ................................................................................................................................... 8
Doraiswamy Iyer v. Arunachala Ayyar (1935) ............................................................................................. 8
FACTS .......................................................................................................................................... 8
The defendant, who was a trustee in the temple, entered into a contract for the necessary repairs of the
temple which was initially initiated by village common funds were now required more than work proceeded.
A subscription list for the same was issued to raise money. The petitioner put himself down in that list for
125/-, and it is to recover the sum this particular suit was filed. The lower court decreed the suit and said it
was a perfectly good contract and 125/- can be enforced as consideration. The petition was filed by the
plaintiff in the High Court. The issue before the court was whether there is a valid consideration? ............. 8
RATIO DECIDENDI ................................................................................................................... 8
DECISION ................................................................................................................................... 8
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915) ..................................................................... 8
Facts .............................................................................................................................................. 8
Ratio .............................................................................................................................................. 9
Decision ............................................................................................................................................... 9
Smith &Snipes Hall Farms Ltd v.River Douglas Catchment Board (1949) ........................................................ 9
Facts .............................................................................................................................................. 9
Held ............................................................................................................................................ 10
Tweedle v. Atkinson (1861) ................................................................................................................... 10
Facts ............................................................................................................................................ 10
Ratio ............................................................................................................................................ 10
Outcome / Decision..................................................................................................................... 10
Durga Prasad v. Baldeo (1881)
Facts
Durga Prasad, who was the plaintiff of the case, was a contractor. Baldeo was a
shopkeeper, who was the defendant of the case. The plaintiff was requested by the
District Collector Etawah to build up a market for the local vendors. As per the
request, the plaintiff developed two markets to facilitate the local sellers, and
Baldeo was one of them. The shops within the markets are allotted to the vendors
and the rent for the same was fixed conjointly. The defendant (i.e. Baldeo) had
assured to pay the plaintiff a commission at the rate of 5% on the value of sale that
he would make from the shop. However, after some time, the defendant refused to
pay such a commission. As a result, Durga Prasad filed a suit against the defendant.
Two main issues arose in this case-
If the above-said agreement constitutes a valid contract
If the above-said agreement can be enforceable by the law
Judgement
The plaintiff’s claims were rejected, and the case was dismissed by the court. This
was done based on the fact that there was no prominent and recognized
consideration involved in this case and hence section 2(d) of the Indian Contract
Act, 1872 dismisses the agreement from being recognized as a contract. The
absence of a consideration resulted in the contract being termed as a void contract,
according to section 25 of the Act. It was also decided by the judges that since the
Act specifies the importance of consideration as an essential element for a
contract, there lies no chance for an appeal, and the same was dismissed by the
court.
Errington v. Errington (1952)
Facts
Mr Errington (father and husband of plaintiff) bought house in Newcastle upon
Tyne for his son and daughter-in-law (defendant). The house was subject to a
mortgage and Mr Errington promised his son and the defendant that they could
live in the house and have the house when he died if they made the mortgage
repayments. The issue before the court was ‘Was there a contract for the sale of
the house?”
Held
There was a unilateral contract between the father and the couple. The father
promised to convey the house if they paid the mortgage; the children made no
reciprocal promise to make payments, but the contract was held to be binding
unless they stopped making payments. An offeror can only revoke a unilateral contract if
the offeree did not live up to their side of the contract.
Venkata Chinnaya Rau v. Venkataramaya Garu (1881)
FACTS
An old woman transferred certain property consisting of a few acres of land in the name
of her daughter, the defendant, by a deed of gift. The deed of gift was registered by the
respective authorities. The terms of the contract specified that the defendant would have
to pay an amount of Rs. 653/- annually to the woman’s sister, the plaintiff. The
defendant signed an Iqrarnama (agreement), in favour of the plaintiff, agreeing to do the
same. However, after the old woman passed away, the defendant failed to pay the money
she had promised to the plaintiff. Hence, the plaintiff sued the defendant to recover the
promised amount.
The issue was “Whether the plaintiff can sue the defendant for the amount promised in a
contract where the consideration for such promise has been furnished by a person who is
a party to the contract?”
The defendant argued the plaintiff was not a party to the contract and hence had no legal
right to sue the defendant or to compel her to pay the promised amount. According to
the doctrine of privity of consideration, the consideration may move only from a party to
a contract and not from a third party.
Judgement
The Court observed that according to the definition of “consideration” provided in
Section 2 (d) of the Indian Contract Act, 1872, it is clear that in a valid contract,
consideration does not have to move solely from the promisee. The Court held that the
defendant was entitled to payment for the annual sum of money and issued a decree
ordering the plaintiff to pay an annuity to the defendant.
White v. Bluett (1853)
Facts
Bluett Sr. lent his son, the respondent in this case, a sum of money and died before
his son had repaid this to him. Bluett Sr. and Jr. had agreed on this and completed
a promissory note to this effect. Bluett’s will was executed by White. In the course
of executing the will, White sued Bluett’s son for the outstanding payment. The
son argued, as a defence, that Bluett Sr. had stated that repayment was not
necessary to render the promissory note ineffective if the son stopped complaining
about the manner in which Bluett Sr. spread his estate among the other members
of the family.
The court was required to define whether the son’s promise to stop complaining
about his father’s plans would satisfy the requirement of consideration in
constructing a contract. If this could be proven, then it would be likely that Bluett’s
son would be released from the requirement to repay the debt owed to his father’s
estate.
Judgement
The court held that there was no consideration given by the son which would absolve him of
having to repay the debt to his father’s estate. The court also believed that the son had no right
to complain as the father was free to distribute his property as he wished. As a result, ceasing
from complaining was not consideration and was ultimately an intangible promise. Pollock, CB
was clear in his summing up of the decision: ‘…the argument…is pressed to an absurdity, as a
bubble is blown until it bursts’.
Collins v.Godfray (1831)
Facts
Godefroy, the defendant, brought an action against an attorney for negligence and
caused Collins, the plaintiff, to be subpoenaed to attend and give evidence.
Godefroy was keen to ensure that Collins attended as this would help his case, so
he promised to pay him one guinea per day he was at court as compensation for
the loss of his time. Collins attended court for six days but was not called to give
evidence. At the end of this Collins demanded payment of six guineas as per the
agreement. When this was not paid, he brought an action against the defendant for
the sun owing. The question for the court was whether the agreement between the
plaintiff and the defendant was supported by valuable consideration.
Judgement
The court held that the agreement that the plaintiff’s should attend court was not
supported by consideration. This was because the plaintiff was under a public duty
to attend court anyway having been subpoenaed. The law would not allow
someone to recover expenses incurred in the performance of a duty that they were
merely obliged to do anyway by law.
Rajlukhy Dabee v. Bootnath Mukherjee (1900)
In this case , the defendant promised to pay his wife a certain amount every month
as maintenance. The promise was made in writing and the quarrels the husband
and wife had were also mentioned. A case was filed to recover the amount
promised to be paid as maintenance. However, the judge decided in favour of the
defendant as although the two were in a near relation, the court held that there was
no natural love and affection between them.
Bhiva v.Shivaram(1899)
A sued B, his brother, for a share in a certain piece of land. The suit was held not
to be maintainable as B confirmed that the property in question was ancestral,
although B then agreed and registered to give A one-half of the proerty in dispute.
The present suit was brought to obtain the share. It was concluded by the Bombay
High Court that this is just the case to which Section 25(1) should be held to apply.
The defendant had such natural love and affection for his brother that in order to
be reconciled to him, he was willing to give him his property. Although, in certain
situations and owing to certain external circumstances, the degree of instinctive
love and affection between partier near related may sometimes be overruled.
Kedarnath Bhattacharji v. Gorie Mahomed (1886)
FACTS
In this case, the plaintiff was a municipal commissioner of Howrah and was also one of
the trustees of the Howrah city council fund. A town hall was planned to build in
Howrah. After gaining enough membership to support the funds required to build a
town hall, the commissioners, including the plaintiff, made an agreement with the
defendant to build a town hall. The plans and proposed structures for the same were
submitted and also passed. Later, because of the expansion in the membership list, the
plans also expanded. Therefore, the expected cost of construction increased from
26,000/- to 40,000/-. The defendants made a subscription to pay 100/- for the
construction of the town hall, which he later refused. The commissioner sued the
defendant for the same.
ISSUE
Whether the lawsuit started by the plaintiff maintainable?
Whether the defendant is liable to pay the amount?
RATIO DECIDENDI
The Honourable Judges present to hear this case were Justice W C Petheram and
Justice Beverley. The bench was of the opinion that-
1. In an ordinary situation, when someone puts his name for a subscription for a
charitable work then it cannot be recovered as there is no consideration.
2. But in this case, the people subscribing knew the purpose for which their
money will be used and also were aware that on what account of their
subscription the plaintiff entered into a contract with them.
On these grounds, the court considered it to be a valid contract with good
consideration.
DECISION
The court held that even if the defendant does not benefit from the promise he
made; he is liable to pay. The defendant was responsible for the promise he made
and cannot step back or take it back after its commencement. Therefore, the suit
was successful.
Doraiswamy Iyer v. Arunachala Ayyar (1935)
FACTS
The defendant, who was a trustee in the temple, entered into a contract for the
necessary repairs of the temple which was initially initiated by village common funds
were now required more than work proceeded. A subscription list for the same was
issued to raise money. The petitioner put himself down in that list for 125/-, and it is
to recover the sum this particular suit was filed. The lower court decreed the suit and
said it was a perfectly good contract and 125/- can be enforced as consideration. The
petition was filed by the plaintiff in the High Court. The issue before the court was
whether there is a valid consideration?
RATIO DECIDENDI
The Honourable Judges present to hear this case was Justice Cornish. He was of the
opinion that-
1. It cannot be said that mere promise to subscribe a sum of money or the entry
of such promised sum in a subscription list secures consideration.
2. There must have been some request or demand by the promisor to the
promisee to do something in consideration of the promised subscription.
There was no consideration in this contract.
DECISION
The honourable court held that it was a bare promise unsupported by consideration.
There is no evidence that there was any request by the subscriber to the plaintiffs to
do any temple repairs or any undertaking to do anything by them when he put his
name in that list for 125/-. Therefore, the suit ought to be dismissed, and the petition
was allowed with costs as well.
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915)
Facts
Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires
below a recommended retail price (RRP). As part of the agreement, Dunlop also
required their dealers to gain the same agreement with their retailers, who in this
instance was Selfridge. The agreement held that if tires were sold below the RRP,
they would be required to pay £5 per tire in damages to Dunlop. This was agreed
between the dealer and Selfridges, which effectively made Dunlop a third-party to
that agreement. Sometime after this, Selfridge sold the tires below the agreed price
and Dunlop sued for damages and an injunction to prevent them from continuing
this activity. At the initial trial, the decision was given to Dunlop. This was
appealed by Selfridge and the decision was reversed. Dunlop appealed.
Selfridge argued that Dunlop could not enforce the contract as Dunlop was not part of the
agreement between the dealer and Selfridges. On this basis, the question for the court was
whether Dunlop had the right to access damages without a contractual relationship.
Ratio
Only parties to a contract can sue for a breach of the contract.
The only exception to this rule is if a party named in the contract was acting as an agent
of an unnamed party; in this case, the unnamed party can be sued.
Decision
The court held in a unanimous decision that Dunlop could not claim for damages
in the circumstances. The court found that firstly, only a party to a contract can
claim upon it. Secondly, Dunlop had not given any consideration to Selfridge and
therefore there could be no binding contract between the parties. Lastly, Dunlop
was not listed as an agent within the contract and could therefore not be included
as a valid third-party who had rights to claim on the contract.
Smith &Snipes Hall Farms Ltd v.River Douglas Catchment Board (1949)
Facts
The defendant was a catchment board and covenanted with the owner of land,
which was subject to flooding. It did so on the basis that they were the local
drainage authority as per the Land Drainage Act 1930. The defendant agreed to
replace the outfall and to enlarge the banks of the river as well as maintain this
once the work was complete. Two years later, in 1940, one of the covenantees
under the agreement transferred her land to the first plaintiff. The second plaintiff
was a company that rented the land from the first plaintiff. Occasionally the banks
of the river would breach but in 1946, the banks of the river burst and caused
significant flooding to the plaintiff’s land. The plaintiffs subsequently claimed
against the defendant for damages for breach of contract and in tort. The court
was required to answer whether the covenant could pass from the original
owner of the land to the plaintiffs in this case. If so, it would enable them to
rely on the covenant in establishing the breach of its terms for the damage
caused to the land as a result of the riverbank being burst.
Held
The court held that the defendant board had breached the contract and this breach
had caused the damage to the plaintiff’s land that had been complained of. The
court looked to the language of the agreement between the original landowner and
the catchment board and found intention that the obligation to maintain the land
would pass to all future owners. On this basis, the plaintiffs could enforce their
rights under the original covenant.
Tweedle v. Atkinson (1861)
Facts
The son and daughter of the parties involved in this dispute were getting married.
As such, the father of the groom and father of the bride entered into an agreement
that they would both pay sums of money to the couple. Unfortunately, the father
of the bride died before he paid the money to the couple and the father of the son
died before he could sue on the agreement between the parties. As a result of this,
the groom brought a claim against the executor of the will for the payment that
was previously agreed between the fathers.
The primary issue for the court was whether or not the son could, as a third
party to the agreement, enforce the contract between the fathers, which was
ultimately for the benefit of him and his wife. It was argued that the
intention of the agreement between the fathers was for the couple to derive
a benefit from the payment of the money. Moreover, it was argued that
preventing the son from being able to enforce the contract would effectively
ignore the intention of the fathers.
Ratio
Third parties to a contract do not derive any rights from that
agreement nor are they subject to any burdens imposed by it.
Natural love and affection is not sufficient consideration in the eyes of
the law.
Outcome / Decision
The groom’s claim was rejected by the court. It was held that the groom was not a
part of the agreement between the fathers, and he did not provide any
consideration for the promise made by the father of the bride. Also, as a stranger
to the contract, the son could not enforce it. On this basis, the court found in
favour for the executor of the will.
