MODULE I

Donougue v Stevenson is a first impression case i.e., you shall take for
the actions that one has committed upon their neighbors
A contract existed between the retailer and the friend in this case
In this case, a duty of care has been established under a contract
Inherent powers (section 151 of cpc deals with the inherent power of
the civil courts of original jurisdiction) - Inherent power in civil
matters is applicable to all civil courts
Inherent powers in criminal matters (section 482 of cpc) - Inherent
powers in criminal matters is only applicable to high courts.
This is where the principal of “ubi jus ibi remedium” which means
“where there is a right, there is a remedy”comes in. This principle
means that for every legally recognized right, there should be a
corresponding remedy available to the individual whose right is
violated.
Relationships by persons are largely defined by rights and obligations
held towards each other. In social living, there are chances for
interaction. A dispute arises when there are conflicts. Conflicts arise
when there are different claims that are competing with one another
(in an ideal situation, the parties would resolve it amongst themselves
otherwise an external agency would be required to step in) and a
claim is stated when an individual believes that they are entitled to
something.
Appropriate allocation of resources is necessary when demand is high
and supply is low.
Obligations can be created by statutes(created by legislations),
written codes(interpretation of the law by courts) and so on. Here,
obligations are created by contracts. Obligation of one party is the
right of the other party. It invariably means that an individual enjoys
the right. Rights can be created either in rem( it focuses on the
property or the thing itself) and in personam (it focuses on the rights
and obligations of specific individuals).
Contracts are generally rights in personam which exists as the two
parties involved have created certain rights and obligations for each
other, i.e., created by these two parties through countless interactions
amongst each other.
A primary assumption is that an individual is free to make their own
choices. There is a classification between consent and informed
consent. Consent refers to permission for something to happen, while
informed consent is permission after the individual has been made
aware about the potential risks and consequences involved. Third
party members are also referred to as strangers to the contract.
Section 10 of the Indian Contract Act states the conditions that make
an agreement a contract.
The general principle is that any individual can set a criminal law in
motion. But, in civil law, the primary question requires the locus
standi (place of standing) to be known. In Donougue v Stevenson, the
woman was injured as there was a violation of duty of care by the
manufacturer (the bottle was opaque and sealed). Duty of Care is a
legal obligation imposed on an organisation, requiring adherence to a
standard of reasonable care while preventing any acts that could
foreseeably harm others.
Human societies have become more complex as the result of the
structures that have been established. Animals are often driven by
instinct and they often find a commonality of interest. This can be
applied in a human society. A hierarchy of organisms exist but since
humans are inherently more refined, there is a belief that even the
weakest individual deserves a good life which is where the concept of
state comes in but it may not be fair to every individual. Law is the
tool which is used for regulation of conduct.
There is a division of labour among individuals which is shared among
individuals and a transaction would offer where goods were
exchanged for other goods which is where the barter system
developed. Later, when the barter system grew inefficient, the
concept of money was developed.
Gentoo code - It is a compilation of Hindu laws, written in Sanskrit.
The english developed un-codified laws which later developed into
common law. But when the english came into india, they preferred
codification of laws. In tort, there is a lot of references to english
cases
Indian Contract Act - 1872
In contract law, all the codes make reference to case laws (it
establishes the context in which the code was established). The law
allows for the free creation of any given contract. The entire aspect of
transaction is left to the parties which is referred to as freedom of
contract.
In contract law, a promise is a commitment by one party to another to
do something or refrain from doing something. If promises are not
kept, it will result in uncertainty. By ensuring that there is no
inclination of breach, they ensure that no disputes arise in the case of
contracts. Many at times, the threat of law is enough to ensure
compliance by parties. Hence, the purpose of law is that it will not
interfere in the intricacies of the agreement. Agreements occur on a
day to day basis.
Contract
Latin word contractus meaning to collect, combine or make an
agreement.
Agreement - understanding, accord, concurrence, agreement,
bargain, compact, contract.
All suggest a binding arrangement between two or more parties.
Agreement ranges in meaning from mutual understanding to binding
obligation.
Bargain applies particularly to agreements about buying and selling
but also to haggling over terms in an agreement.
Compact applies to treaties or alliances between nations or to solemn
personal pledges.
Contract is used especially in law and business for such agreements
as are legally enforceable settlement, treaty and pact.
Defintion
Section 10 - What agreements are contracts
All agreements are contracts if they are made by the free consent of
parties competent to contract for a lawful consideration and when a
lawful object and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in India, and
not hereby expressly repealed by which any contract is required to be
made in writing or in the presence of witnesses, of any law relating to
the registration of documents.
Consideration that law can recognize as lawful and the object must be
lawful as well.
There may be a couple of elements that the law considers to be
unlawful which results in the failure of the formation of a contract.
Examples of agreements that are declared illegal are often termed as
conspiracy.
Public notice is given because certain privileges, rights or obligations
are involved. The public can access this information by paying a fee
and obtaining a copy.
An agreement or sale involves considerations and promises that must
be written down.
Registered documents gain evidentiary value. Courts can consider
them as evidence. If a sale deed isn’t registered, the court may not
acknowledge it’s evidentiary value. The court focuses on whether the
document is admissible as evidence, not necessarily agreeing with its
content.
In simpler terms, the evidentiary value is the value that a document
has as evidence in court.
There are two parties involved in a contract
Section 2 clause a states the meaning of a proposal - When one person
signifies to another his willingness to do or to obtain from doing
anything, with a view to obtaining the assent of that other to such act
or abstinence, he is said to make a proposal. (also known as offer)
Section 2 clause b states the meaning of a promise -
When a person to whom the proposal is made, signifies his assent
thereto, the proposal is said to be accepted. A proposal when
accepted, becomes a promise.
Section 2 clause c states that the person making the promise is called
the “promisor”, and the person accepting the promise is called the
“promisee”.
An agreement involves an exchange of promises.
Section 3 communication, acceptance and revocation of proposals -
The communication of proposals, the acceptance of proposals and the
revocation of proposals and acceptance, respectively, are deemed to
be made by any act or omission of the party proposing accepting or
revoking, by which he intends to communicate such proposal,
acceptance or revocation, or which has the effect of communicating it.
The original english law did not allow for revocation of proposals and
acceptance but in indian law it is permitted. The mistakes of the
common law have further evolved in the indian contract law as it was
made later into the future.
Four types of communication are found in this section.
Section 9 - Promise, express and implied
In so far as the proposal or acceptance of any promise is made in
words, the promise is said to be express.
In so far as such proposal or acceptance is made otherwise than in
words, the promise is said to be implied.
In Upton-on-Severn RDC v. Powell (1942), the court held that the
defendant, Mr Powell, was liable to pay the Upton fire brigade for
their services, even though his farm was mistakenly thought to be
within their service area. This was because, by requesting the fire
brigade’s assistance, he had implicitly agreed to pay for the service,
establishing an implied contract.
Section 4 communication when complete -
The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made.
Illustration : A proposes a letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B receives the
letter.
The communication of an acceptance is complete -
As against the proposer, when it is put in a course of transmission to
him as to be out of the power of the acceptor.
As against the acceptor, when it comes out of the knowledge of the
proposer.
Proposer Acceptor
A B
01 July ————— Proposal ————— 05 July
13 July ————— Acceptance ———— 06 July
The proposal has come into acceptance on the 5th of July.
The acceptance gets completed as far as B is concerned is when A
obtains it.
The moment the proposal gets accepted, it becomes a promise.
Lalman Shukla v. Gauri Dutt (1939) is a foundation case in Indian
contract law, especially regarding the requirements and
communication in forming a legally binding contract. The case
highlights the importance of awareness of an offer to constitute a
valid acceptance. The dispute centered on whether Lalman Shukla,
who was employed by Gauri Dutt, was entitled to a reward for finding
Dutt’s missing nephew.
R v. Clarke (1927) is an Australian case where it was held that Evan
Clarke was not entitled to a reward offered by the Crown for
information leading to the conviction of murderers because he did not
act in reliance on the offer when providing the information. While
Clarke had seen the offer, his primary motive for providing the
information was to clear himself of a murder charge, not to claim the
reward.
Intention to Contract
Not all agreements create obligations. When we speak of agreements,
we speak of agreements that have the purpose to create obligations.
Was it the intention of the party to create a legally binding obligation?
Is there a legally binding obligation? The easiest way to find out an
obligation is to look at the intention of the parties. The intention
should be present at the time of creation of the agreement.
Intention to contract - Intention to create legally binding obligations
Balfour v. Balfour (1919)
The Plaintiff and the Defendant were a married couple. The
Defendant husband and the Plaintiff wife lived in Ceylon where the
Defendant worked. In 1915, while the Defendant was on leave, the
couple returned to England. When it was time to return to Ceylon,
the Plaintiff was advised not to return because of her health. Prior to
the Defendant returning, he promised to send the Plaintiff £30 per
month as support. The parties’ relationship deteriorated and the
parties began living apart. The Plaintiff brings suit to enforce the
Defendant’s promise to pay her £30 per month. The lower court
found the parties’ agreement constituted a contract.
The court makes an interesting argument in not enforcing these types
of promises. The court argues that if these promises are treated as
contracts the flood gates will open.
Jones v. Padavattan (1969)
A mother and daughter came to an arrangement whereby the mother
agreed to maintain her daughter if she agreed to study for the bar.
The daughter commenced her studies and the mother paid her an
allowance. The arrangement was later altered and the mother agreed
to provide a house in which her daughter could reside whilst she
studied. Mother and daughter fell into dispute as to the occupancy of
the house, and the mother sought possession. It was held the
daughter was entitled to remain in possession and the mother
appealed.
The mother’s appeal was successful and she was awarded possession.
There is a presumption that family arrangements are based on mutual
trust, family ties and affection, and that there is no intention to create
legally binding contracts capable of enforcement in the courts. This
presumption can be rebutted, but the lack of formality regarding the
agreement between mother and daughter strongly indicated there
was no such intention and the daughter had no defence to her
mother’s claim for the house.
This case signifies the importance of domestic agreements. When it
comes to domestic agreements, the courts are reluctant to enter into
the agreement between the parties. However, there is an element of
unfairness present which is where the objectivity test comes in
Objectivity Test
The point of view of a reasonable man is also needed at certain times
(to look at the matter objectively)
Simpkins v. Pays (1955)
Ms. Simpkins was a paying boarder at Ms. Pays house, who lived with
her granddaughter. Ms. Simpkins habitually entered into newspaper
competitions. Concerning one weekly Sunday newspaper competition,
the three agreed that Ms. Simpkins would fill in a weekly coupon, with
each person making three forecasts, yet submitting them in Ms. Pays
name, and divide the prize in the event of winning. A forecast made by
Ms. Pays’ granddaughter in one of the coupons submitted won a prize
of £750 under Ms. Pays name. Ms. Pays refused to distribute the prize
and Ms. Simpkins claimed for one-third of the prize under their
agreement.
The Court held that, irrespective of the familial relations and the
informal context, there was mutuality in the arrangement between the
parties, by which they agreed to the manner of the submission of the
forecast in Ms. Pays name on a weekly basis and that, if there was a
success, all three persons would share the prize money equally.
Despite the domestic context, the filling out of the coupon by Ms.
Simpkins was not a voluntary service to Ms. Pays but rather pursuant
to an agreement by which each Party had shares in the result, thus
showing an intention to create legal relations. The Court held that the
mutual arrangement, no matter how informal, constituted a legally-
binding agreement to divide the shares in thirds.
Family Matter - intention to create legal binding obligation - depends
on parties
Merritt v. Merritt (1970)
The Court of Appeal ruled that an agreement between a separating
husband and wife regarding the matrimonial home was legally binding
and enforceable. This case is notable for distinguishing itself from the
precedent set in Balfour v. Balfour (1919), which generally held that
domestic agreements between spouses were not intended to create
legal relations.
The agreement was binding. The Court of Appeal distinguished the
case of Balfour v. Balfour on the grounds that the parties were
separated.
Commercial relation - intention is to create binding obligation -
presumption
In both cases the presumption is rebuttable
Edwards v. Skyways (1964)
The claimant was an airline pilot working for the defendant. He was to
be made redundant. The defendants sold that if he withdrew his
contributions to the company’s pension fund, they would him the
equivalent of company contributors in an ex gratia payment. The
claimant agreed to this and withdrew his contributions. The company
then ran into further financial difficulty and went back on the promise
relating to the ex gratia payment.
Generally, ex-gratia payments are not binding. The agreement had
been made in a business context which raised a strong presumption
that the agreement is legally binding.
Parties intention important - in commercial transactions too
Rose and Frank Co v. Crompton Bros (1925)
An American company and English company entered into a sole
agency agreement in 1913 for the sale of paper goods in the USA. The
written agreement contained a clause stipulating that it was not a
formal nor legal agreement, and an “honorable pledge” between
business partners. Subsequently, the American company placed
orders for paper which were accepted by the British company. Before
the orders were fulfilled, the British company terminated the agency
agreement and refused to send the goods, claiming that the 1913
agreement was not legally binding and that, consequently, the orders
did not create legal obligations.
Firstly, as to the 1913 agreement, the Court gave overriding weight to
the provision in the agreement that expressly provides that it is to be
solely an “honorable pledge”, as demonstrating that the parties did
not intend the arrangement as a legally-binding contract. The Court
explained that the argument that clauses restricting the legal
enforceability of a contract apply solely when the document is
otherwise unquestionably of legal force.
Position in India? - Not very clear
Banwarilal v. Sukhdarshan Dayal (1973)
Auction of plots of land - through loudspeakers - one of the plots to be
reserved for Dharmasala - later said to private party - other purchases
seeking to restraint.
Offers must be made to specific persons - generally
Weeks v. Tybald (1605)
Defendant told the public that - whoever marries his daughter with his
consent - would give 100 pounds. The defendant “affirmed and
published that he would give 100 pounds to him that should marry his
daughter with his consent.” Plaintiff did so and sued.
Held - not bound - The court held that “it is not reasonable that the
defendant should be bound by such general words since the words
were general to excite suitors.”
Carl v. Carbolic Smoke Ball Company
Promises in ad to pay 100 pounds to any person who contracts flu
after using smoke ball. Carl (plaintiff) used ball but contracts flu +
relies on ad
Issue : Was there a binding contract between the parties?
A contract requires notification of acceptance - Did Mrs Carl notify
Carbolic of the acceptance of the offer? - Did Mrs Carl provide
consideration in exchange for the 100 pounds reward?
The defendant - following arguments to demonstrate the
advertisement was not on offer :
The advert was a sales puff and lacked intent to be an offer
If it is not possible to make an offer to the world
The wording was too vague to constitute an offer since there was no
stated time limit as to catching the flu
There was no consideration provided since the ‘offer’ do not specify
that the user of the balls must have purchased them
Held - The Court of Appeal - entitled to the reward as the advert
constituted an offer of a unilateral contract, accepted by performing
the conditions stated in the offer. The court rejected all the arguments
put forward by the defendants for the following reasons :
The statement referring to the deposit of 1,000 pounds demonstrated
intent and therefore it was not a mere sales puff
It is quite possible to make an offer to the world
In unilateral contracts there is no requirement that the offerree
communication on intention to accept, since acceptance is through
full performance - conduct.
What there may not be some ambiguity in the wording this was
capable of being received by applying a reasonable time limit or
confining it to only those who caught flu while still using the balls
The defendants would have value in people using the balls even if they
had not been purchased by them directly
Section 8 - Acceptance by performing conditions, or receiving
consideration
Performance of the conditions of proposal for the acceptance of any
consideration for a reciprocal promise which may be offered with a
proposal, is an acceptance of the proposal.
Harbajan Lal v. Harcharan Lal (1925)
A young boy ran away from his father’s home. The father issued a
pamphlet offering a reward of Rs. 500 to anybody who would bring
the boy home. The plaintiff saw the boy at a railway station and sent
at a telegram to the boy’s father.
The handball was an offer open to the world at larger and was capable
to acceptance by any person who fulfilled the conditions combined in
the offer. The plaintiff substantially performed the conditions and was
entitled to the reward offered.
Offer - invitation to treat - Dt
Harvey v. Facey (1893)
The case of Harvey v. Facey (1893) is a landmark decision in contract
law, primarily concerning the distinction between an offer and an
invitation to treat. The Privy Council, in this case, clarified that a mere
statement of the lowest price at which a party would sell property
does not constitute a binding offer. It's considered an invitation to
treat, meaning it invites the other party to make an offer.
Total and unconditional acceptance must be there. If there is no
prescription, similar circumstances are looked into to determine a
usual and reasonable manner.
Surendra Nath v. Kedarnath (1935)
The prescribed mode of acceptance was that it must be sent to a
particular person. The offerre instead met that person and
communicated acceptance. It was held that the acceptance was valid
as it is an equally effective mode.
Adams v. Lindsell (1818) - postal rule
The defendant offered to sell wool to the claimant and asked for reply
in the course of post. The letter was delayed in post and reached the
plaintiff after 3 days. On receiving the letter, a letter of acceptance
was posted on the same day. However, it was delayed again and
reached the defendant after 4 days. The defendant assumed that the
claimant was not interested and instead sold the wool after waiting
for a reasonable period of time. The claimant sued for breach of
contract. It was held that the moment the letter of acceptance was
placed in the post box, there was acceptance.
The postal rule applies where post is the agreed form of
communication. The acceptance is valid when the letter of acceptance
is posted. This is unfair on the offeror but the offeror gets to choose
the mode of communication.
The acceptance can be revoked before it reaches the offeror. To
amount to an effective acceptance the acceptance needed to be
communicated.
Household Fire v. Grant (1879)
The defendant, Mr Grant, applied for shares in the complainant’s
company, the Household Fire Insurance. The complainants allotted
shares to Mr Grant and they completed this contract by posting him a
letter with notice of the allotment. However, this letter never reached
Mr Grant and it was lost in the post. Mr Grant never paid for the
shares as a consequence. When the Household Fire Insurance
company went bankrupt, the liquidator asked the defendant for
payment of the shares. Mr grant refused to pay, as he did not believe
he was a shareholder nor was there a binding contract in his mind.
Indian Law Section 4 - different from English law
Ramdas Chakrabarti v. Cotton Ginning Co Ltd - the Court held that
the offeror becomes bound when a properly addressed and adequately
stamped letter of acceptance is posted.
Letter of doctrine of shares - claimed to be pooled - not accepted
Entornes v. Miles Far East Corp. (1955)
This is a landmark decision in contract law that clarified the formation
of contracts using instantaneous communication made like Telex. The
court held that the postal rule, which states acceptance is effective
upon posting, does not apply to instantaneous communications.
Instead, acceptance occurs when and where the acceptance is
received by the offeror.
To amount to an effective acceptance the acceptance needed to be
communicated to the offeror. Therefore, the contract was made in
England.
Acceptance - absolute and unqualified
Hyde v. Wrench (1840)
The defendant offered to sell a farm to the claimant for a 1000
pounds. The claimant, in return offered 950 pounds which the
defendant refused. The claimant then sought to accept the original
offer of 1000 pounds. The defendant refused to sell to the claimant
and the claimant brought an action for specific performance.
There was no contract. Where a counter offer is made this destroys
the original offer so that it is no longer open to the offerre to accept.
Perala Krishnayyan Chetti v. Padmanathan Chettiar (1917)
The defendant wrote to the plaintiff on the 17th of October 1909 to
Palghat where the latter was permanently residing, to send 15 or 20
bags of areca nuts "at once". The letter also stated that the plaintiff
should attend to other business, only after sending this consignment.
The plaintiff, who had left Palghat owing to plague, wrote on the 28th
October that he would send the goods within 15 or 20 days. No reply
was admittedly received from the defendant in answer to this
suggestion, 25 bags of nuts were finally sent by the plaintiff on the 1st
of December. The defendant refused to take delivery of them. Hence
this suit for damages for breach of contract.
No absolute or unqualified acceptance - offerre - by asking for time -
made a counter proposal
Ramanbhal v. Ghai Ram (1918)
The applicant applied for shares in a company on the condition that
he should be appointed a branch manager of the company. Shares
were allotted to him but he was not appointed the branch manager.
Did not appoint him - claimed shares money
Inquiry of terms of proposal - not rejection
Stevenson Jaques and Co v. McLean
Offer to sell steel for a particular price and the offer was open till the
following Monday - offerre enquired on Monday - whether delivery can
be made over a period of two months - offeror treated this as rejection
and sold it on.
It was only an enquiry - not a counter proposal - offer still open for
contract.
Counter proposal may be accepted
If acceptance of an offer is qualified - proposer may be bound - if he
indicates by his conduct that he has accepted the qualification.
Hargopal v. People’s Bank of Northern India Ltd. (1934)
Application for shares on condition that applicant would be made
permanent Director of a local branch shows allotted without fulfilling
condition.
Applicant accepted dividend and even pledged his shares.
Offer - invitation to treat - Dt
Harvey v. Facey (1893)
Harvey sent a Telegram to Facey which stated -
“Will you sell us Bumper Hall Pen Telegram lowest - cash price -
answer paid”
Faced replied by Telegram -
“Lowest price for Bumper Hall Pen 900 pounds”
Harvey then replied -
“We agree to buy Bumper Hall Pen for the sum of nine hundred
pounds asked by you. Please send us your like deed in order that we
may get early possession”
The Privy Council held that there was no contract concluded between
the parties. Facey had not directly delivered the first question as to
whether they would sell and the lowest price stated was merely
recording to a request to information not an offer. There was thus no
evidence of an intention that the telegram sent by facey was to be an
offer.
Pharmaceutical Society of Great Britain v. Boots (1953)
Boots introduced the then new sell service system into their shops
whereby customers would pick goods from the shells out of them in
their basket and then take them to the cash to pay. The
Pharmaceutical Society of Great Britain brought an action to
determine the legality of the system with regard to the side of
pharmaceutical products which were required by law to be sold in the
presence of a pharmacist. The court thus needed to determine where
the contract comes into existence.
Goods on the shelf constitute an invitation to treat not an offer. A
customer takes the goods to the counter and makes an offer to
purchase. The shop assistant then chooses whether to accept the
offer. The contract is therefore concluded at the counter in the
presence of a pharmacist.
McPherson v. Appana (1951)
The plaintiff desired to buy “Morvern Lodge” owned by the first
defendant in Mercara. Mr Youngman was the manager of the Morvern
Lodge. Mr White was the manager of another one of the first
defendant’s estates. The plaintiff conveyed his offer to buy the
Morvern Lodge to the first defendant. MacPherson responded to the
offer saying that he would not accept anything fewer than 10,000/-.
The plaintiff took this to be a counter offer and accepted it
immediately. In the meantime, the first defendant accepted another
offer made by the second defendant. The second defendant paid the
11,000 rupees and occupied the Bungalow. The Judicial Commissioner
of Coorg held in favor of the plaintiff. It was against this order that
this appeal was made under section 109(c) of the Civil Procedure
Code.
Section 2(b) - Acceptance - When a person to whom the proposal is
made, signifies his assent thereto the proposal is said to be accepted
Some overt act showing acceptance is a must - may be express or
implied
Bogden v. Metropolitan Railway (1877)
The case of Brogden v Metropolitan Railway Co. (1877) is a landmark
case in English contract law. It established that a contract can be
formed through the conduct of the parties, even in the absence of a
formal written agreement. The case involved a coal supplier, Brogden,
and the Metropolitan Railway Company, who had been doing business
informally. They decided to formalize their agreement with a written
contract, but after Brogden amended and returned the draft, the
railway company didn't explicitly communicate their acceptance.
However, they continued to order and receive coal under the
amended terms. The House of Lords ultimately ruled that the railway
company's conduct in continuing to do business according to the
amended terms constituted acceptance, thus forming a valid contract.
Hindustan Co-operative Insurance Company v. Shyam Sundar (1952)
Oral understanding to insurance company informed - if he submitted
proposal form and deposited half yearly premium - would be accepted
held - accepted by conduct
Communication of acceptance - must be to the offeror
Felhouse v. Binley (1862)
Paul the uncle and John the nephew were negotiating about the sale
of farming stock, following a understanding about the place of a
horse, the uncle wrote to the nephew saying “If I hear no more about
him, I consider the horse mine at 30 pounds 45 shillings”. The nephew
did not reply but told the auctioneer that the horse had been sold.
However, the auctioneer then went ahead and sold the horse by
mistake. The uncle then sued the auctioneer in conversion - an action
in which P claims that D had improperly dealt with his property.
Although the nephew intended the uncle to have the horse, he had
done nothing to communicate the intention to the uncle, or to bind
himself. Therefore there was no contract to pass the property in the
horse to the uncle.
Provisional acceptance - Standing offer
It refers to an acceptance that is conditional and not final. It signifies
that while something has been initially approved, there are still
outstanding requirements or conditions that need to be met before
the acceptance becomes fully valid and official.
An offer is open to be revoked at any time before acceptance. A
standing offer is something that stands until it is revoked. An
acceptance should be absolute and unqualified. Provisional
acceptance is something you can walk away from. Standing offers are
not absolute.
Lenders - same as quotation of price - when lender approved, it
becomes a standing offer. Contract arises only when an order is
placed
Bengal Coal Co. v. Homee Wadia and Co. (1899)
A agreed in writing to supply coal to B at certain prices and up-to a
stated quantity, or in any quantity which may be required for a period
of twelve months. Orders placed - complied by defendant - before 12
months - withdrew offer - refused to comply with further orders - sued
for breach. Held - mere continuing offer - accepted by B from time to
time by ordering goods upon the terms of the offer - each order is an
acceptance of the offer - A can withdraw the offer/revoke the
proposal, of any time before its acceptance by an order from B - only
has to fulfill orders already placed.
Not even necessary to place orders
Madho Ram v. The Secretary of State for India (1934)
Plaintiff agreed to supply so much oil of sorts as the officers specified
‘may require, subject to the conditions set forth in this tender and in
the schedule annexed thereto military - never placed any order
Sued for breach as military placed orders to others - difference in
price - sought damages
Held - no remedy
Not even necessary to place orders
Madho Ram v. The Secretary of State for India
Madho Ram v. The Secretary of State for India is a case concerning a
breach of contract related to the supply of goods to the British Indian
Army. The case involved a contractor, Madho Ram, who sued the
Secretary of State for damages after the military authorities allegedly
breached a contract for the supply of "oils of sorts other than
kerosene". The core issue revolved around whether the contract
included petrol and if the military authorities were justified in
obtaining petrol from other sources during the contract period
Cambata Aviation Ltd. And Anr. v. Cochin International Airport
Evolution Committee found culprit to be more competent tenderer
BoD selected another tenderer without any reason - and then asked
him to match the culprit
Followed Tata Cellular v. Union of India (1994) SCC 651 - The right to
refuse the lowest or any other tender is always available to the
Government. But, the principles laid down in Article 14 of the
Constitution have to be kept in view while accepting or refusing a
tender. There can be no question of infringement of Article 14 if the
Government tries to get the best person or the best quotation. The
right to choose cannot be considered to be an arbitrary power. Of
course, if the said power is exercised for any collateral purpose the
exercise of that power will be stuck down
Held - procedure violative of natural justice
Under Article 12 of the Constitution, “instrumentalities of the state”
refer to entities that, while not directly part of the government, are
considered to be performing state functions and therefore subject to
the same constitutional limitations as the state itself.
R.D. Shetty v. International Airport Authority of India -
This case established the "five tests" framework for determining if a
corporation is an instrumentality of the state, focusing on factors like
financial and administrative control, functional character, and
whether the entity performs a governmental function
Article 299 of the INC outlines the requirements for valid government
contracts, emphasizing that they must be expressed to be made by the
President or Governor, executed by authorized persons, and comply
within specific formalities.
Lapse of offer - acceptance must be made before the offer lapses
Revocation how made
A proposal is revoked -
(1) by the communication of notice of revocation by the proposal to
the other party
(2) by the lapse of the time prescribed in such proposal for its
acceptance, or, if no time is so prescribed, by the lapse of a
reasonable time, without communication of the acceptance
(3) by the failure of the acceptor to fulfill a condition precedent to
acceptance; or
(4) by the death or insanity of the proposer; if the fact of the death or
insanity comes to the knowledge of the acceptor before acceptance
Revocation of Proposals and Acceptance
A proposal may be revoked at any time before the communication of
it’s acceptance is complete as against the proposer, but not
afterwards
An acceptance may be revoked at any time before the communication
of the acceptance is complete or against the acceptor, but no
afterwards
Illustrations
A proposes, by a letter sent by post, to sell his house to B
B accepts the proposal by a letter sent by post
A may revoke his proposal at any time before or at the moment when
B posts his letter of acceptance, but not afterwards
B may revoke his acceptance of any time before or at the moment of
the acceptance
Communication of revocation - must be from the offeror himself
Revocation how made - A proposal is revoked -
(1) by the communication of notice of revocation by the proposer to
the other party
But in England, enough that offeree is aware that the offer is revoked
Dickinson v. Dadds (1876)
Df made an offer to sell a property - offer open till a particular date
and time - before its expiry the pf was informed by a third party that
the property was sold to anr
Pf - before expiry of time - accepted the offer
Held - offer withdrawn - when sale to anr came to the knowledge of pf
Henthron v. Fraser (1892)
Offer to sell property to pf for 750 pounds - option to accept within 14
days -
Next day - pf at 3.50 p.m. - sent his acceptance by past - reached the
df at 8.30 p.m.
But - at 1:30 pm, all had posted letter revoking offer - pf received it at
5:30 p.m.
Revocation is denied
Nutakki Sesharatanam v. Sub Collector (1992)
Landowner offering land for acquisition for a lump sum price -
withdrew the offer before the govt. offer prepared award of
acceptance
Held - withdrawal was good
Even where offeree has option to accept within a fixed no. of days -
the offer can be revoked before that
But, if it is for some consideration, offeror cannot cancel it before the
expiry of that period, irrevocable
Mountford v. Scott (1975)
Pf given an option to buy property of 10,000 pounds within six months
- one pound given as consideration, df wanted to revoke
Held - sufficient consideration - offer cannot be revoked for that
period
Revocation of a bid - can be revoked before it is accepted or is subject
to confirmation
Union of India v. Bhimsen Walaifi Ram (1970)
Df won auction for a liquor shop, paid 1/6 of the case upfront, bid to
be finalized by the financial commissioner- not done. Df failed to pay
the remaining amount, commissioner ordered a re-auction, less money
was realized, pf sued to recover the shortfall
Held - commissioner not given his final approval for the bid,
communication of acceptance, not complete against the df.
Lapse of time
Ramsgade Victoria Hotel v. Montefiore
Df offered to purchase shares at a certain price in June, no time
prescribed. In November, claimant accepted this offer, the value of
the shares had fallen, action for specific performance of the contract.
Held - offer was no longer open, nature of the subject matter, offer
lapsed offer a reasonable period of time
Standard forms of contract - contrats d’ adhesion
L’Estrange v. Groucab (1924)
Lady purchased a cigarette vending machine - signed an order form -
in small print “Any express or implied, condition, statement of
warranty, statutory or otherwise is expressly excluded’ - machine
totally defective - claimant sought to reject if - for not being of
merchantable quality
Held - in signing the order form she was bound by all the terms
contained in the form irrespective of whether she had read the form
or not
Unfair - no courts have evolved some rules to cover such cases
Reasonable notice
Henderson and Ors v. Stevenson (1875)
A condition on the back of a steamer ticket excluded liability for loss
of luggage - nothing on the front of the ticket and - attention was not
drawn to the conditions on the back of the ticket - steamer sank -
auction for lost luggage
Held that the exclusion clause was not incorporated into the contact.
The notice of the clause was not adequate therefore it was not
included in the contract.
Parker v. South Eastern Railway Company (1877)
Parker paid to leave his bag in the cloakroom of South Eastern
Railway (SER). There was a notice within the cloakroom stating that
SER would not be responsible for any deposits exceeding £10. in
value. The tickets given to customers on making their deposit had the
same notice printed on them in legible writing. Parker’s bag exceeded
10l. in value and it was lost or stolen. Parker successfully claimed
against SER for his lost bag and SER appealed.
A re-trial was ordered. The judge’s direction at first instance that
Parker was not bound by terms he had failed to read was incorrect.
Parker would not be bound by terms he did not know were printed on
the ticket, but where he knew there were terms on the ticket, or that
there was writing on the ticket, he would be bound providing the jury
were satisfied he had been given sufficient notice.
Document must be of a “contractual kind” - not binding otherwise
Chappelton v. Bary (1940)
Council provided deck chairs on beach - beside stack of chairs,
notice : “Barry Urban District Council, Cold Knapp. Hire
Held - ticket issued too late - no more than a receipt for payment -
applicant entitled to assume all conditions of hire were on notice near
the stack of chairs - not bound by the condition printed on the back of
the ticket - entitled to recover
Thomton v. Shoe Lane Parking Limited (1971)
Pf injured in a car park partly due to the df’s negligence - given a
ticket on entering the car park after putting money into a machine -
ticket stated - contract of parking was subject to terms and conditions
- deployed on the inside of the car park - One of the terms - excluded
liability for penchant injuries arising through negligence.
The question for the court was whether the term was incapacitated
into the contract i.e., had the df brought it to the attention of the pf,
before or at the time of the contract was made. This question
depended upon whether the offer and acceptance took place in
relation to the machine.
But if signed - may be bound as in
L’ Estrange v. Graucab
Unfair to bind - gives a person freedom - to exclude himself from
liability
Most of these exclusion clauses - very wide and of pervasive - leaving
no remedy to the other party
Courts have caved out exceptions :
Doctrine of fundamental breach
Misrepresentation
Curtis v. Chemical Cleaning and Dyeing Co. (1951)
Pf took her wedding to the cleaners - asked to sign a form - asked the
assistant what she was signing. - assistant told her that it excluded
liability for “any damage to the beads” - form in fact contained a
clause “excluding of liability for any damage howsoever caused” -
dress refunded badly stained.
Held - assistant had misrepresented the effect of the clause -
therefore could not rely on the clause in the form even though the
claimant had signed it.
Oral assurances prevailing over
Mendelssohn v. Normand Ltd (1969)
The Claimant parked in a garage owned and operated by the
Defendant. There was a notice board in the car park which stipulated
that the Defendant would ‘accept no liability for any loss of damage
sustained by the vehicle, its accessories or contents howsoever
caused’. This board was not obvious for drivers who drove into the car
park but was obvious when the driver would exit the vehicle and go to
pay for the parking. In addition, the Claimant had previously parked
in the same garage. In this instance, an employee of the Defendant
insisted that the Claimant should leave his car unlocked and assured
the Claimant that he would lock it. However, valuables were
subsequently stolen from the claimant’s car.
Unusual terms - should be brought to notice clearly
Inferfolo Picture Library v. Stiletto (1989)
The Interfoto Picture Library v. Stiletto case is a landmark English
contract law case concerning the incorporation of onerous terms into
a contract. It established that particularly unusual or onerous terms in
a contract must be explicitly brought to the other party's attention for
them to be enforceable. In this case, Interfoto, a picture library, sued
Stiletto for a substantial holding fee for transparencies they had
supplied. Stiletto argued the fee, printed on a delivery note, was not
adequately communicated, and the court agreed, finding the fee
unreasonable and not properly incorporated into the contract.
Notice should be contemporaneous
Olley v. Marborough Court Hotel (1949)
Olley was a guest in the defendant hotel. On arrival, Olley paid for a
week’s board in advance and then went to the room. In the room, a
notice was displayed stating the proprietors would not be responsible
for any items lost or stolen, unless handed to them for safe keeping.
Olley left the room and deposited her key on the board in reception
before leaving the hotel. The key was taken and several items were
stolen from her room. Olley sought damages in negligence.
Olley was successful in her claim and recovered the cost of the stolen
items in their entirety. The exclusion clause had not been successfully
incorporated into the contract because the contract was concluded at
reception, and the notice purporting to exclude liability was not
visible until after the contract was formed, when the guest entered
the bedroom.
Fundamental Breach
Rule of construction - by ascertaining the parties intention
Every contract is a giveaway to the parties intentions
Davies v. Collins (1945)
In this case, a customer (Davies) left clothes at a laundry (Collins) to
be cleaned, receiving a ticket with an exclusion clause printed on the
back. The clause limited the laundry's liability for loss or damage to a
certain amount. The clothes were lost, and Davies sued for their full
value. The court had to determine whether the exclusion clause was
valid and applied to the specific circumstances. The court ultimately
found that the exclusion clause was valid, but it did not apply to the
specific circumstances of the case because the laundry had acted
outside the scope of the contract by losing the clothes. The laundry's
primary obligation was to launder the clothes, and the ancillary
obligation to take care of them while in their possession was
breached.
Alexander v. Railway Executive
In the case of Alexander v. Railway Executive, the court held that the
Railway Executive was in fundamental breach of contract by allowing
an unauthorized person to collect luggage deposited at their parcel
office. This breach was considered so severe that it prevented the
Railway Executive from relying on the exclusion clauses in their
contract with the depositor.
Gibaud v. Great Eastern Railway
"Gibaud v. Great Eastern Railway" is a legal case involving a dispute
over a contract between a passenger and a railway company. The case
highlights the principle that a party cannot rely on exempting clauses
within a contract to excuse themselves from liability when they have
committed a breach that goes to the root of the contract
Hollins v. J. Davy
The plaintiff left his car at the defendant's garage under a monthly
garage contract. The contract included an exemption clause printed in
the terms and conditions stating the garage would not accept liability
for any loss or damage to the vehicle or its contents. It applied
standard contract principles including the law of bailment, the parol
evidence rule, and the doctrine of “repugnant clause vs oral
promise.”As a result, the exemption clause could not absolve the
garage of liability when it breached such an oral promise. The plaintiff
prevailed.
Court of appeal - No fundamental breach
Hallion v. Day (J) (1963)
Court of Appeal held : No fundamental breach
Facts : Plaintiff was in error due to a misunderstanding; only one
condition was different from that agreed upon for delivery
Holding : Defendant not liable due to an instant mistake
Linea Atlantique Societies d’Armenent Maritime v. Kolen Central
(1966)
Plaintiff chartered a ship to carry coal from the US to Europe for one
year
The contract stated that at the end of loading, any delay would incur
1000 pounds a day as demurrage (a sum payable to the shipowner if
loading/unloading exceeds agreed time).
Plaintiff claimed the contract was repudiated but without prejudice to
their rights, and allowed defendant to work on
At the end, the claim was for demurrage- held: No fundamental
breach. They could have repudiated but did not, so the contract stood,
including demurrage clause.
Fundamental Breach Defined:
Lord Wilberforce: These expressions are used in case law to denote
two quite different things:
Performance that is totally different from what the contract
contemplates
A breach of contract more severe than one entitling the other party to
mere damages
Example: In carriage of goods contracts, deviation is a fundamental
breach. No formula solves all cases; must look individually at the
contract’s future
More Case Law and Examples
Wayne Tank and Pump Co Ltd (Barbat, Rubere):
Facts: Defendant agreed to designed and install equipment (plastic
pipes) in a factory. Limited liability clause capped damages at 2280
pounds.
Held: Defendant guilty of fundamental breach. Court emphasized not
only the quality but also the effect/impact of the breach
Unreasonable Terms
Lilywhite v. Mannu (AIR Carbs, 13 Madras):
Laundry receipt limited liability to 15% of the market price for loss
Plaintiff’s expensive saree was lost. Held: The clause placed an
unreasonable burden on customers.
Central Inland Water Transport Corp. v. R.N Ganguly (AIR 1986 SC
152)
Employment contract allowed for the removal of permanent
employees without inquiry
Held: Such a clause is unreasonable and violates Article 14 (right to
equality) of the Indian Constitution
General Principle from Indian Contract Act 1872:
A party who commits a breach cannot benefit from clauses that
exclude or limit liability (if such limitation would cover the breach).
Case: Neary v. Mitchell Hestrall Ltd (1980):
Plaintiff ordered goods, but they were of standard lower quality. The
issue was with replacement clauses
Consumer Contracts and Unfair Terms
UK Consumer Contracts (Regulation 1997):
Implements EC Directive 93/13/EEC on unfair terms in consumer
contracts
Regulation prohibits unfair contract terms - such terms are not
binding on the consumer
Schedule 2 includes a “blacklist” of terms presumed unfair
Related UK Acts:
Consumer Credit Act 1974, Road Traffic Act 1988
Interpretation of Exemption Clauses
Strict Construction
Especially when the words are ambiguous and designed to exempt
from liability
Example: John Lee and Sons (Grantham) Ltd v. Railway Execute
(1942):
Railway worker died in accident due to negligence (spark from rail
equipment)
Court held exemption clause only covered liability when caused by
specific events, not negligence
Contra Proferentem Rule:
Ambiguous terms are interpreted against the party relying on the
exclusion or limitation
Example: Hayton Trafalgar Insurance Co. Ltd (1955) - Policy excluded
liabilty for damage “arising while car is being used for hire.”
Ambiguity construed against insurer
Uniform Commercial Code (UCC):
Article 2 (Sales): Barton clause - where goods supplied with
exemption clauses may not bind third parties
Norwich City Council v. Harvey (1989) 1 WLR 828 (CA)
Main contractor delegated work; various issues with exemption of
liability and sub-contractor’s responsibility
Law Commission of India- 103rd Report:
Discusses clauses in contracts
199th Report: Focuses on unfair procedural and substantive contract
clauses
Legally Binding Promises
The question of when a promise becomes legally binding hinges on
the element of consideration
Promises vs. Obligations
Not all promises create legal obligations. For instance, if "A" invites
"B" for lunch and "A" incurs expenses, but "B" doesn't show up, "A"
generally cannot drag "B" to court because the initial promise didn't
create a legally binding obligation. This differs from situations where
an intention to create legally binding obligations is evident, such as in
business agreements.
Injurious Reliance
One theory that supports the enforcement of certain promises is
injurious reliance. If "A" incurs expenses based on "B's" promise
(reliance), and "B" doesn't fulfill their promise, "A" may have a case
for legal recourse.
Ex Nudo Pacto Non Oritur Actio
Out of a bare promise, no cause of action arises.
This maxim means that an agreement without consideration is
unenforceable.
Cause of action: The legal reason to go to court.
Action: A legal suit.
Nude element: An agreement without consideration.
Consideration: Something in Return
Consideration is what a promisor receives in return for making a
promise, making the promise legally binding. Think of it as quid pro
quo - something for something.
When a proposal is accepted, it becomes a promise.
For the promise to be binding, the promisor must receive something
in return.
Barter of Contracts
Contracts are seen as a kind of barter. A transaction should be mutual
rather than unilateral.
Example: Promising to give a pen for 10 rupees and receiving the
promise of 10 rupees in return involves an exchange of promises.
Exchange of Promises
Agreements involve an exchange of promises, where one promise
serves as consideration for the other.
Offer and acceptance: Viewed as an exchange of promises.
Offeror: Makes the offer.
Offeree: Receives the offer.
Promisor: Once an offer is accepted, the offeror becomes the
promisor.
Promisee: The offeree becomes the promisee.
Each promise must be supported by consideration from the other
party.
Value of Consideration
The "something for something" must have value. While values are
generally comparable, we'll delve into the specifics of value later.
Section 2(d) - Indian Contract Act
Section 2(d) of the Indian Contract Act defines consideration:
When, at the desire of the promisor, the promisee or any other person
has done or abstained from doing, or does or abstains from doing, or
promises to do or abstain from doing, something, such act or
abstinence or promise is called a consideration for the promise.
Key elements of this definition:
Desire of the promisor: The act, abstinence, or promise must be at the
promisor's desire.
Promisee or any other person: The act, abstinence, or promise can be
from the promisee or any other person.
Past, present, or future: The act, abstinence, or promise can be in the
past ("has done"), present ("does"), or future ("promises to do").
Promissee or Any Other Person
Indian law differs from English law in that consideration can come
from the promisee or any other person. English law requires
consideration to come from the promisee alone. Indian law
emphasizes that the promisor received a benefit from the promise.
Consideration: Looking Forward
Unlike looking to the past, consideration in contract law is about
looking to the present and the future.
Past Consideration vs. Executed Consideration
It's important to distinguish between past consideration and executed
consideration. Past consideration is generally not a good basis for a
contract.
Past consideration: something already done or not done.
It differs from executed consideration. Executed consideration
involves actions already taken in response to a desire but before a
formal promise.
Desire and Promise: The Sequence
The sequence of desire and promise is important.
A person might desire something without making a promise at the
same time.
The promise might come after the act, acknowledging the action
taken in response to the expressed desire.
Indian law requires that the performance of an act is in response to a
desire.
Types of Consideration: Executed, Being Executed, and to Be
Executed
Executed: Something that has been done.
Being Executed: Something that is being done.
To be Executed: Something that is promised to be done.
All three require that the execution or promise of execution be in
response to an expressed desire.
Promissory Estoppel: No Going Back
If a situation changes such that going back on a promise would injure
the other person, promissory estoppel prevents the promisor from
doing so.
Promissory Estoppel: Prevents a party from denying or refusing to
fulfill a promise.
Case Study: Durga Prasad v. Baldeo (1880)
Background: A collector (government official) ordered the plaintiff to
build shop rooms to improve a marketplace. The defendant occupied
one of these rooms and promised to pay a commission on sales to the
plaintiff, recognizing the plaintiff's expenses.
Issue: Was the defendant's promise legally binding?
Ruling: The court rejected the claim, stating that the shop rooms were
built at the collector's order, not at the defendant's desire. Thus, there
was no valid consideration.
Key takeaway: The act must be done at the desire of the promisor to
constitute valid consideration.
Case Study: Kedar Nath v. Gauri Muhammad (Tolaram)
Background: People were raising money to build a town hall, with
individuals subscribing amounts to contribute. The defendant
subscribed 100 rupees but later refused to pay.
Issue: Was the defendant bound to pay the subscribed amount?
Ruling: The court held the defendant liable. The act of the plaintiff in
starting the construction of the town hall at the desire of the
defendant was sufficient consideration. It was not necessary for the
defendant to receive a personal benefit.
Key takeaway: Consideration doesn't always require personal benefit;
acting at the desire of the promisor is sufficient.
The Evolving Concept of Consideration
Traditional View Modern View

Something for something; direct Acting at the desire of the

personal benefit. promisor is sufficient, even
without direct personal benefit.
Reliance on the promise and
acting accordingly constitutes
valid consideration.

As long as the other party acted according to the desires expressed by

the promises, that's enough to make the promises legally binding.
Expressing Desire
When someone writes their name and an amount, they're expressing
their desire and making a promise. For instance, writing "100 rupees"
expresses a desire for someone to construct something.
Reliance on Promises
Once someone relies on a promise and acts accordingly, the promisor
can't simply walk away from their promise. This principle is
highlighted in legal cases like K. R. Nath vs. Gauri Muhammad and
District Board of Ramnaal vs. Muhammad Ibrahim.
Case Examples
District Board of Ramnaal vs. Muhammad Ibrahim
A sum of 5000 rupees was promised as a personal contribution for
constructing a bridge. Similar to an earlier case involving a town hall,
the argument arose that the promisor wasn't getting anything in
return for their promise.
K. R. Nath vs. Gauri Muhammad
The court held that a promise to pay a subscription becomes binding
as soon as definite steps have been taken in furtherance of the object,
and the promise to subscribe channels.
Social and Legal Interest
Promises must be kept to avoid chaos and uncertainty. If anyone could
walk away from a promise at any time, it would undermine social and
legal interests by making transactions uncertain.
Freedom of Contract
Everyone has the freedom to enter into a contract with anyone on
whatever terms they choose. Theoretically, one is free to walk out of a
contract. However, the law intervenes when a promise has been made
and the other party has relied on that promise.
Detrimental Reliance
If the other party has relied on a promise and changed their position
to their detriment, suffering an injury or loss as a result, the promisor
can still walk away but must compensate for that loss.
Contractual Freedom vs. Consequences
You can enter into a contract, and you can walk out of the contract.
Nobody can stop you. All that the law can do is, if you have made a
promise, the other party has relied on your promise, these are all
important links. The other party has relied on your promise. On the
basis of this advice, the other party changes his position and that
change of position is to his detriment. and because it is to his
detriment he suffers us and a loss which you call us a lien in the way
you will have to compensate that loss as you walk out of a promise. It
is not asking you or it is not telling you you cannot walk out of that
but it is insisting as you walk out of the box.
Goal of Compensation
The goal is to put the injured party in the position they would have
been in had the promise been performed.
Detriment: A loss or injury suffered by a promisee.
Key Concept Description

Expressing Making a promise by expressing a desire to do something, like contributing

Desire funds.

Reliance Acting based on a promise made by another party.

Detrimental Changing one's position based on a promise, leading to a loss or injury if the
Reliance promise is broken.

Freedom of The right to enter into contracts freely, but with the understanding that
Contract breaking promises can have legal consequences.

Compensation The act of restoring the injured party to the position they would have been in if
the promise had been kept.

District Board of Ramnad v. Mohammed Ibrahim

In District Board of Ramnad v. D.K. Mahomed Ibrahim Sahib (1933),
the Madras High Court addressed whether a claim to recover a
subscription of ₹1,031 collected for the construction of a bridge was
time barred under Article 62 of the Limitation Act. The Court held
that Article 62, which applies to money received for another’s use,
was not applicable because the amount was a voluntary subscription
and enforceable only after the project commenced not upon mere
receipt. Since work on the bridge began in 1923 and the suit was filed
in 1925, the claim was within time under the more general Article
120. The Court reversed the lower court’s decision and allowed
recovery of the ₹1,031, clarifying that limitation for such
subscriptions runs from when substantial steps are taken toward the
promised objective.
Doraswamy Iyer v. Arunachala Ayyar
In Doraswamy Iyer v. Arunachala Ayyar (Madras High Court, 15
August 1935, AIR 1936 Mad 135), the court addressed whether a
subscriber’s promise of ₹125 merely entered into a subscription list to
fund temple repairs, constituted valid consideration under
Section 2(d) of the Indian Contract Act. The High Court, in an opinion
by Justice Cornish, held that a bare promise without any
corresponding request by the promisor, or any undertaking by the
promisee (the temple trustees), did not amount to enforceable
consideration. Since there was no bargain or reciprocal obligation
only a unilateral pledge the promise was unenforceable, and the suit
was rightly dismissed.
Erington v. Erington Woods
Erington v Erington & Woods [1952] 1 KB 290 is a key case in English
contract law concerning unilateral contracts and the principle of
irrevocability once performance has begun. A father promised his son
and daughter-in-law that if they paid off the mortgage on a house he
bought, it would belong to them. They began paying the instalments,
but after the father's death, his widow (Mrs. Woods) sought
possession of the property. The Court of Appeal, led by Denning LJ,
held that the father’s promise constituted a unilateral contract, which
became irrevocable once the couple began performance by paying the
mortgage. Therefore, they had a right to remain in the house as long
as they continued making payments, illustrating that commencement
of performance can bind the promisor in a unilateral offer.
He is expressing his desire and the other person is acting/abstaining → which is the
consideration for the promise.
DoraswamyIyer v. ArunachalaAyyar AIR1936 Mad 135
Trustees of a temple sought to recover a contribution promised by a
subscriber to a subscription list for the repairs of a temple –
subscription list was raised as more money was required for the work
already started – df subscribed Rs. 125.
No request by the subscriber when he put his in the list for Rs. 125 to
the pl. To do the temple repairs or any undertaking by them to s
anything – a bare promised unsupported by consideration.
Errington v. Errington and Woods [1952] 1 KB 290 Court of Appeal
Father in law purchased a house and paid 250 pounds as a wedding
gift and the remaining 500 pounds in mortgage instalments. He
promised the couple that if they paid the mortgage instalments, he
would transfer the house to them. He died and the mother inherited
the house. The son went to live with his mother but the wife refused
and continued to pay the mortgage instalments. The mother brought
an action to remove the wife from the house.
Held → father could not have revoked the promise once the couple had begun
performing the act. The father made a unilateral contract and it could not be revoked
once they began performance, but would cease to bind him if they did not perform
their side. The payment of the mortgage formed the consideration in the agreement.
Had the couple not paid the instalments routinely, it would not have
been binding.
One makes a promise, and another acts on that promise; one can not
go back on it.
Promissory Estoppel
A representation made to another about a fact (not law), based on
which the other person alters his position to his detriment. In such a
case, the person who made the representation cannot alter his
position.
Also called ‘equitable Estoppel’, ‘quasi Estoppel’ and ‘new Estoppel’.
Basis of this doctrine – equity – stepped in to mitigate the rigours of
strict law
Relying on the representation – acted on it – changed or altered his
position – generally to his detriment (may not be required in all
circumstances)
The principle of Estoppel in India – also a rule of evidence
Section 121 of the Bharatiya Sakshya Adhiniyam, 2023 121, Estoppel
– ‘When one person has, by his declaration, act or omission,
intentionally caused or permitted another person to believe a thing to
be true and to act upon such belief, neither he nor his representative
shall be allowed, in any suit or proceeding between himself and such
person or his representative, to deny the truth of that thing.’
Justice must not just be done; it must be seen to be done. People
around should be convinced that justice has really been done.
Theoretical Position Equity courts are not bound by the rigidity of
laws. Availability of remedies in the equity courts are discretionary.
Even if it is established that you are entitled to a remedy, it is up to
the mind of the Court to declare a remedy for you. Equitable remedy
is thus discretionary. Not just that, as it goes outside the scope of
common law, newer principles are established under this branch.
Privity of Contract / Privity of Consideration
If you and I enter into an agreement with all the characteristics of a
contract, and you don’t perform, who gets to go to the court? Me. Is it
just me who can go to the court? Or can anyone?
Why is it that only i can go to court? It is because i was the one who
gave consideration, and i deserve to get a remedy for the violation of
the contract
Locus standi → locus means point, and standi means standing. It is used to decide
who has the right to seek a remedy a legal remedy. When you have a legal injury,
you are aggrieved. And when you are aggrieved you have locus standi in a court of
law. So, fundamentally, you have to establish the existence of a right, and then prove
that it has been violated or infringed.
Section 2(d) “..the promisee or any other person.…”
Dutton v. Poole (1677) 83 Eng. Rep. 523 (KB)
Father planned to sell wood to raise a dowry for his daughter – eldest
son – to inherit the wood, interceded and promised the father that he
would provide for the daughter, if he would not sell the wood – father
agreed – the son failed to pay – daughter sued him – argued that the
consideration did not proceed from the daughter and that she was not
in Privity.
Held liable – though not privy to contract or consideration
Daughter was entitled to sue
Tweddle v. Atkinson [1861] EWHC QB J57 QBD
A couple were getting married. The father of the bride entered into an
agreement with the father of the groom that they would each pay the
couple a sum of money. The father of the bride died without having
paid the father of the groom, who also died.
So, unable to sue on the agreement, the groom made a claim against
the executor of the bride’s father’s will
Held – groom was not party to the agreement, and the consideration
did not move from him – not entitled to enforce the contract
No stranger to the consideration can take advantage of the contract,
even if the sole object was to secure him a benefit.
Established the principle of privity.
Privity of Contract and Consideration
Privity of contract - the principle that only the parties to a contract
can enforce its terms
Privity of consideration - the principle that only the party who have
consideration (or a person on whose behalf consideration was given)
may enforce the contract
Historical Foundations
Consideration - the “quid-pro-quo” that makes a promise legally
binding
Under English law, the privity contract rule is derived from the privity
of consideration rule
The Indian Contract Act (Section 2(d) expands consideration; it may
arise from the promisee or any other person, removing the strict
English requirement that it comes from the promisee alone
Case Year Parties Issue Outcome

Dutton v. Poole – – Rejected the –

primitive contract
principle

Twentile v. Atkinso 1861 Father (contractor) → Groom sued Court held groom
n Groom (beneficiary) father’s not a party; privity
representatives rule upheld.
after contract
formation.
Dunlop Pneumatic 1915 Dunlop (manufacturer) Minimum resale Court held Dunlop
Tire Co. v. Selfridge ↔ Dealer (first contract) price clause; could not sue
liquidated damages Selfridge due to
↔ Selfridge (retailer)
£5 per tyre sold privity; only parties
below price. to a contract may
enforce it.

The Dunlop v. Selfridge Scenario

Manufacturer (Dunlop) – sets minimum retail price (contrasting
maximum retail price).
Dealer – contracts with Dunlop not to sell below that price.
Dealer-to-Retailer agreement (same clause).
Selfridge (retailer) sells below price → violates contract, triggers £5 per tyre liquidated
damages payable to Dunlop.
Contract Parties Key Obligation

Dunlop-Dealer Dunlop ↔ Dealer Do NOT sell below the set price;

pay £5 per violation.

Dealer-Selfridge Dealer ↔ Selfridge Same clause as above;

enforceable against Selfridge.

Result: Dunlop’s claim failed because it was not a party to the

Dealer-Selfridge contract, illustrating the strict English privity rule.
Indian Perspective – Chindaya v. Ramayana
Situation: Mother gifts property to daughter on condition that the
daughter pay annual sum to the aunt.
Contracts:
Mother ↔ Daughter (gift with condition).
Daughter ↔ Aunt (promise to pay).
Daughter’s defense: “No consideration from Aunt; cannot enforce.”
Court’s Holding: Under Indian law, consideration may be provided by
any person. The daughter received consideration from her mother,
satisfying the law.
Key Takeaway: Indian law does not require consideration to originate
from the promisee, rejecting the strict English privity of
consideration.
Core Takeaways
Privity of contract limits enforcement to parties of the contract.
English law ties privity to consideration; Indian law separates the two.
Dunlop v. Selfridge exemplifies English privity; Chindaya v. Ramayana
illustrates the Indian approach.
MRP (Maximum Retail Price) vs. minimum price: manufacturers may
impose minimum resale requirements, but enforceability depends on
contract privity.
Comparison of Privity Rules
Jurisdiction Basis of Privity Consideration Effect on Third-Party
Requirement Rights

England Privity of Must be direct from Strict – third parties

(pre-1915) consideration promisee cannot enforce.

India Separate privity of Any person’s More flexible – third

(Section 2(d)) contract consideration suffices parties may enforce.

Consideration – a benefit, detriment, or forbearance that is essential

for a contract to be enforceable.
English law: consideration must originate from the promisee (the
party who makes the promise).
Indian law: consideration may come from any source; the key
requirement is its existence, not its source.
Key Points
Consideration is a must under Section 10 (Lawful Consideration).
The Exeguto Pacto, Non-Oratorio Actio principle remains applicable in
India – the contract must have consideration regardless of its origin.
Privity of Contract
Privity – the doctrine that only parties to a contract can enforce or be
bound by its terms.
Criticisms & Cases
Case Parties Issue Outcome

Dutton v. Poole Father-son-daughter Beneficiary (daughter) Contract upheld but

relationship not a party beneficiary barred from
suing

Twiddell v. Atkinson Husband-wife-couple Beneficiaries (couple) Same privity limitation

Bestwick v. Bestwick Uncle-nephew (sale) & Third-party beneficiary Court denied direct
(1968) widow (aunt) claim beneficiary claim,
allowed claim only as
executrix of will

Lord Denning argued that privity should be relaxed to allow

third-party beneficiaries to enforce contracts made for their benefit.
This view was reversed by the House of Lords.
Agent-Principals & Liability
Agent – a person who acts on behalf of a principal in a contract.
Undisclosed principal: agent does not disclose who the principal is.
In such cases, the agent may be personally liable only if the agency is
disclosed or if certain doctrines apply.
General rule: liability and rights flow back to the principal; the agent’s
personal liability is limited.
When an Agent Can be Liable
Undisclosed principal: the agent may personally assume liability.
Explicit agency clause: the contract must state that the signer is
acting as an agent.
Definition – Agent liability arises only when the agent’s status is clear
in the contract or an undisclosed principal scenario creates personal
responsibility.