Contract Case Laws

Module 2
Balfour v. Balfour

Background/Facts

In 1919, Balfour vs Balfour case law gave birth to the purpose to create legal relations theory in
contract law. In a dispute between a husband and wife, Lord Justice Atkin said that domestic
commitments were not within the jurisdiction of contract law. The main point made was that
contracts are promises. But if contracts are a promise, are they legally enforceable?

Mr Balfour and his wife Mrs Balfour went to England for a vacation, and his wife became ill and
needed medical attention. They made an agreement that Mrs Balfour was to remain behind in
England when the husband returned to Ceylon (Sri Lanka) and that Mr Balfour would pay her £30
a month until he returned.

This understanding was made while their relationship was fine. However, the relationship later
soured and the husband stopped making the payments.

The wife sought to enforce the agreement. Later the parties separated and were divorced. The
wife brought this action for the money her husband had promised to pay to her but had failed to
do so.

Issue

Was the contract between them valid in nature?

The contention of the appellant

The promise made by Mr Balfour of providing monthly expenses to his wife Mrs Balfour was a
domestic agreement and not a legal agreement nor so the husband didn't have any intention of
creating a legal agreement. Which after turns to be in Mr Balfour vs Mrs Balfour i.e, His wife went
to the court later on.

The contention of the respondent

The wife is deemed to get the given amount of money as the husband entered into a domestic
contract by offering his wife £30 and the wife agreed and stayed back in England.’

What was held?

The Agreements made between a husband and wife to provide capitals are generally not
contracts because generally, the parties do not intend that they should be attended by legal
ends. Commonly parties to a marriage will make arrangements for personal or household
expenses. Even though there may be present what would amount to consideration if it had
occurred between different parties. The Court of Appeal unanimously held that there was no
enforceable agreement.

Rose and Frank v. JR Crompton

Facts

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 “honourable 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.

Issues

The questions arose as to (1) whether the sole agency agreement of 1913 constituted a legally
binding contract, and (2) whether the orders constituted enforceable contracts of sale.

Decision/Outcome

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 “honourable 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. In this case, the
document and circumstances did not intend to create any legal interest, and the clause expressly
precluding the agreement’s legal enforceability applies. Secondly, the Court held that the fact
that the arrangement does not constitute a legal contract does not preclude the orders and
acceptances from constituting legally-binding contracts. The lack of enforceability of an express
legal arrangement under an agency agreement does not preclude the legal transactions. The
orders constituted mutual offers and acceptances with each transaction having ordinary legal
significance.

Taylor v. Portington

Taylor v Portington, where the plaintiff agreed to rent a house owned by the defendant for three
years. It was said that the plaintiff would join as tenant if the mode of modernization is
satisfactory to him. The court held that the wording used was vague and uncertain, therefore the
contract was considered void.

Global v. Aabar: The court of Appeal State that contractual negotiations should be clear and
unequivocal

In the recent case of Global Asset Capital Inc and another v Aabar Block S.A.R.L and others [2017]
EWCA Civ 37, the Court of Appeal held that the High Court was wrong to find that following a
‘subject to contract’ offer letter, a contract was concluded during a telephone call which was
inconsistent with subsequent communications.

BACKGROUND:

For the purposes of the appeal the following version of events was accepted. On 23 April 2015,
the claimants sent a letter marked ‘without prejudice – subject to contract’ wherein they
proposed to pay €250 million for certain rights. On 5 May 2015, the second claimant was informed
by the second defendant’s CEO that a board meeting was due on 6 May 2015 where the letter
would be considered. On 6 May 2015, the CEO of the second defendant telephoned the second
claimant. The claimants case was, that during the call a contract had been agreed subject to two
conditions.

In the recent case of Global Asset Capital Inc and another v Aabar Block S.A.R.L and others [2017]
EWCA Civ 37, the Court of Appeal held that the High Court was wrong to find that following a
‘subject to contract’ offer letter, a contract was concluded during a telephone call which was
inconsistent with subsequent communications.

SUMMARY:

1. An offer must be accepted clearly and unequivocally.

2. The court is entitled to consider all communications between the parties when deciding
whether a contract has been concluded.
3. An offer marked subject to contract cannot be accepted so as to form a contract.

Module 3
Khan Gul v. Lakha Singh

FACTS:

In the case of Khan Gul vs Lakha Singh, the plaintiff purchased half a square of property from
defendant 1, a minor who fraudulently concealed his age. The property was sold for Rs. 17,500,
with Rs. 8,000 paid in cash and the remaining Rs. 9,500 secured on a promissory note. The
plaintiff claimed that the amount was duly paid, discharged through another promissory note to
defendant 1's brother-in-law. Defendant 1 refused to transfer possession, leading to a lawsuit
where the plaintiff sought property delivery or repayment of the amount with interest.

ISSUES BEFORE THE COURT:

1. Whether a minor, who misrepresents their age and induces another into a contract, can
be estopped from claiming the defense of minority.
2. Whether a minor, misrepresenting their age, can refuse to perform contractual
obligations while retaining benefits derived from the contract.

JUDGEMENT AND RATIONALE:

Issue 1: Estoppel of Minors The court held that minors cannot be estopped from claiming the
defense of minority, rejecting the application of the rule of estoppel under Section 115 of the
Indian Evidence Act. The court emphasized that the Indian Contract Act's provisions concerning
minors override general laws, ensuring protection for minors against their own actions and third-
party claims.
Issue 2: Performance and Retention of Benefits by Minors The court ruled that minors, even if
misrepresenting their age, can refuse to perform contractual obligations. However, in equity,
they cannot retain benefits obtained from void agreements. The doctrine of restitution under
Section 65 of the Indian Contract Act was not directly applied due to the minor's incapacity.
Instead, the Specific Relief Act was invoked to grant compensation to parties. The court also
discussed exceptions, such as section 68 of the ICA, allowing reimbursement for necessaries
supplied to minors, ensuring the minors receive proper care.

Overall Rationale: The court maintained that principles of equity must be balanced with statutory
provisions specific to minors. While minors cannot be estopped or held liable in tort for void
agreements, restitution and compensation may be granted to parties to prevent unjust
enrichment. The court clarified that the circumstances of the case, whether the minor is a plaintiff
or defendant, should not affect the application of equitable principles, ensuring fair treatment in
cases of fraudulent misrepresentation of age by minors.

Ajudhia Prasad v. Chandan Lal

FACTS

 A mortgage deed was executed by two infants who deliberately suppressed the fact of
their infancy and the appointment of a certified guardian for them. The mortgagee
unknown to the fact agreed to pay a certain sum of money for their marriage expenses.
Thereafter the suit was filed for the recovery of money under Section 68 of the Indian
Contract Act, 1872, the lower courts found minors were in reality above 18 years but
below 21 which still was considered minor/infant additionally, courts affirmed that
marriage expenses are not necessities, therefore, no relief can be provided under section
68 of The Indian Contract Act,1872 but subsequently the lower appellate court relied on
the case of Khan Gul vs Lakha Singh and stated that fraudulent representation of minors
makes them liable to pay the principal amount with future interest and in default sale of
property subsequent to which this instant case came into existence.

ISSUE

 Whether a mortgagee be granted a decree to recover the principal amount with future
interest under section 65 of The Indian Contract Act,1872 or by application of any
equitable principle. Even if the minor has intentionally misrepresented himself as an
adult?

CONTENTIONS

 The whole contention relied on the case of Mohori Bibi v. Dharmodardas Ghose. It was
first argued that the in presence of a relevant provision i.e. Section 65 of the Indian
Contract Act, 1872 the decision should not be based on equitable principle as courts of
equity cannot compel a person to pay regarding a transaction that is characterized as
void by legislation.
  Additionally, it was contended that Section 65 of the Indian Contract Act, 1872 will not be
applicable as the initial requirement for this section is “the existence of
agreement/contract by competent parties” and has already affirmed minors agreement
are void, they were never considered as a contract.

RATIO DECIDENDI

 The courts opined, if Section 65 of the Indian Contract Act, 1872 is employed against a
minor when he is a defendant the result of such would be chaotic, all agreements by
minors would by default be upheld and enforced against them regardless of the fact that
any mistake, misrepresentation, or fraud was committed or not.
 A decree of restoration would impose liability to pay on minors and such would quash the
protection provided by the legislation to them. This would open a wide door for mischief
and misuse. People would continue to contract with minors with confidence furthermore
it will be easy for people to obtain documentary evidence to support the charge of fraud
against the minors.
 The court also affirmed the view that restitution is only possible in reference to minors
when property needs to be restored as it is traceable and courts after considering a
contract void on the ground of infancy cannot compel to refund any money as it is non-
traceable and granting a money decree against a minor would be amount to imparting
pecuniary liability which is void.

DECISION

 The courts after in examining all the authorities and provision provided that the courts
could not award a decree of restitution in respect of repayment of money and the court
reversed the decision of the lower appellate court and pronounced the decision in favor
of minor.

Jagar Nath Singh v. Lalta Prasad

Facts:

1. The suit involves a dispute over a 2 anna 6 pie share of zamindari, and a challenge to the
validity of a sale deed dated June 28, 1899.

2. Plaintiffs are the sons of Lala Madho Prasad, and their paternal uncle is Dwarka Prasad.

3. After Madho Prasad's death in 1882, Dwarka Prasad obtained guardianship of the
plaintiffs, who jointly owned an 8 anna share in the village Kharaun.

4. Plaintiffs allege they were minors at the time of sale, executed the sale deed under
Dwarka Prasad's influence, and seek to set aside the sale.

5. Defendants deny minority status of the plaintiffs, claim estoppel, and argue for
restitution if the sale is set aside.

Issues:
 1. Age of the plaintiffs at the time of the sale deed.

2. Validity of the sale deed based on the minority status of the plaintiffs.

3. Applicability of estoppel to minors.

4. Alleged fraudulent misrepresentation by the plaintiffs.

5. Whether the plaintiffs should make restitution if the sale is set aside.

Judgment:

1. The court finds, based on various evidence, that the plaintiffs were minors at the date of
the sale deed.

2. Citing the ruling of the Privy Council in Mohori Bibee v. Dharmodas Ghose, the court holds
the sale void due to the minors' incompetence to make a contract.

3. Rejecting the application of estoppel to minors, the court emphasizes that the law of
estoppel cannot validate a void contract.

4. The court determines that the plaintiffs made fraudulent misrepresentations regarding
their age to induce the sale, making them liable in equity for restitution.

5. Plaintiffs are ordered to refund a portion of the consideration for the sale, representing
the value of the share decreed to them.

6. The court dismisses both the defendants' and plaintiffs' appeals, with the modification
that the plaintiffs are directed to pay specific sums related to mortgage debts as a
condition for obtaining possession.

Jennings v. Rundall

(Content naahi milra hai bhai)

The defendant hired the horse to ride it for a short journey but ended up taking it on a much
larger journey. As a result, the horse was injured. But the court held that he was not liable upon
the ground that the action was founded in the contract.

Raj Rani v. Prem Adib

In Raj Rani vs Prem Adib, Prem Adib, who was a film director, entered into a contract with
Indrani's father. According to this contract, Prem Adib was to give role to Indrani, who was a
minor. But later, the defendant gave the role to another actress. The father as well as the
daughter were not in a position to sue the defendant. If the contract was with the father, it was
without consideration and thus, void. From daughter's point of view this contract was void and
invalid because she was a minor.

Section 183 of Indian Contract Act states that “Any person who is of the age of majority
according to the law to which he is subject, and who is of sound mind, may employ an
agent”.Thus Indrani was not in any position to enter into the contract. Section 11 also supports
the above mention statement. However, here it can be observed that the defendant took unfair
advantage of the minor.
Robert v. Gray

The defendant was a minor who agreed to join a well-known professional billiards player in a
world tour together and compete against each other. The plaintiff used his resources like money
and time to make arrangements for the matches but the defendant repudiated the contract. It
was held that the contract was one of necessaries for it was for the minor’s “good teaching or
instruction whereby he may profit afterwards”. It was apparent that the minor was not employed
by the plaintiff but was receiving the benefit of advice and experience. The experience and
instruction gained by playing against the plaintiff on a worldwide tour was treated as a part and
parcel of a potential billiards player’s training and career. The plaintiff succeeded in recovering
damages for the breach of contract. The Court of Appeal regarded it as a quasi-educational
contract and accordingly, within the scope of a contract for necessaries.

Mohori Bibee v. Dharmodas Ghose

Facts:-
The facts of this case were as follows:-
Dharmodas Ghose, was the respondent in this case. He was a minor (i.e. has not completed the
18 years of age) and he was the sole owner of his immovable property. The mother of Dharmodas
Ghose was authorized as his legal custodian by Calcutta High Court.

When he went for the mortgage of his own immovable property which was done in the favor of
appellant i.e. Brahmo Dutta, he was a minor and he secured this mortgage deed for Rs. 20,000 at
12% interest rate per year.

Bhramo Dutta who was a money lender at that time and he secured a loan or amount of Rs.
20,000, and the management of his business was in the control of Kedar Nath, and Kedar Nath
acted as the attorney of Brahmo Dutta.

Dharmodas Ghose's mother sent a notification to Brahmo Dutta informing him about the
minority of Dharmodas Ghose on the date on which such mortgage deed was commenced, but
the proportion or sum of loan that was actually provided was less than Rs. 20,000.

The negotiator or representative of the defendant, who actually acted instead of on behalf of
money lender has given money or sum to the plaintiff, who was a minor and he fully had
knowledge about the incompetency of the plaintiff to perform or enter into contract and also
that he was incompetent legally to mortgage his property which belonged to him.

After that, on 10thSept. 1895 Dharmodas Ghose along with his mother brought an legal suit or
action against Brahmo Dutta by saying that the mortgage that was executed by Dharmodas was
commenced when he was a minor or infant and so such mortgage was void and disproportionate
or improper and as a result of which such contract should be revoked or rescinded.

When this petition or claim was in process, Brahmo Dutta had died and then further the appeal or
petition was litigated or indicted by his executor's.
The plaintiff argued or confronted that in such case no relaxation or any sought of aid should be
provided to them because according to him, defendant had deceitfully or dishonestly
misinterpreted the fact about his age and because if mortgage is cancelled at the request by
defendant i.e. Dharmodas Ghose.

Issues Raised:-
Issues Raised in this case were:-
v Whether the deed was void under section 2, 10[5], 11[6], of Indian Contract Act, 1872 or not?
v Whether the defendant was liable to return the amount of loan which he had received by him
under such deed or mortgage or not?
v Whether the mortgage commenced by the defendant was voidable or not?

Judgement:-
v According to he verdict of Trial Court, such mortgage deed or contract that was commenced
between the plaintiff and the defendant was void as it was accomplished by the person who was
an infant at the time of execution of mortgage.
v When Brahmo Dutta was not satisfied with the verdict of Trial Court he filled an appeal in the
Calcutta High Court.
v According to the decision of Calcutta High Court, they agreed with the verdict that was given by
Trial Court and it dismissed the appeal of Brahmo Dutta.
v Then he later went to Privy Council for the appeal and later the Privy Council also dismissed the
appeal of Brahmo Dutta and held that there cannot be any sought of contract between a minor
and a major person.
v The final decision that was passed by the Council were :-
1.Any sought of contract with a minor or infant is void/ void ab-initio (void from beginning).
2.Since minor was incompetent to make such mortgage hence the contact such made or
commenced shall also be void and id not valid in the eyes of law.
3.The minor i.e. Dahrmodas Gosh cannot be forced to give back the amount of money that was
advanced to him, because he was not bound by the promise that was executed in a contract.

Principles of Law:-
The principles of law that were laid down in this case are:-
v Any contract with a minor or an infant is neither valid nor voidable but is void ab-initio(void
from beginning)
v Section 64[7]of Indian Contract Act,1872 is only applicable in the case, where the parties
entering in contact are competent to make such contract and is not applied to cases where there
is no contract made at all.
v The legal acts done by an representative or any knowledge of an agent means that such acts
done or having knowledge of anything is of his principal.

Nash v. Inaam

FACTS:
A tailor supplied 13 waistcoats and other things of that kind to a undergraduate student when
latter was a minor. Student refused to pay for the goods supplied and tailor brought this suit
against him for recovery of price of those goods.

ISSUES:

1. Whether the goods so supplied fall into the category of necessary?

2. If the answer is No, whether the contract was enforceable at law?

3. On whom does the onus to prove or disprove the necessity of goods so supplied fall?

HELD:

“Necessaries means goods or services suitable to the condition in life of minor, or any other person
incapable of forming contract for himself, and as to his actual requirements at the time of sale and
delivery”. This means that not only the goods need to be suitable and necessary to the condition in
life of a minor (here) but also be needed by minor in actuality, i.e. he must not be already having
sufficient supply of such goods. The onus to prove that the thing contracted for was a necessity lies
on plaintiff, however difficult it may be to prove that it was needed by minor in actuality.

In English Law, incompetent person is to compensate the supplier of necessities to him by paying a
reasonable price for such necessities. However, if the necessities so supplied are services instead of
goods, then action for recovery lies against estate of such person and not against him.

Conclusion: Having settled the current legal position in English law, Court held for the defendant
due to absence of any major evidence for plaintiff. Since plaintiff could not prove that the clothes
so delivered were actually needed as necessity by minor, hence, Court observed that the contract
was not the one for necessity and hence was void ab initio.

Chapple v. Cooper

In the case of Chapple v Cooper (1844) 153 ER 105 a widow was held to be liable for the funeral
expenses of her husband. It was classed as a contract for necessaries. In that case Baron
Alderson indicated that necessaries was not only restricted to things needed to survive, rather, it
would include goods and services require to maintain a reasonable living. ‘a court may need to
decide which representations are binding on the parties.

The Law Debenture Trust Corporation v. Ukraine

In 2013, Ukraine was preparing to sign an Association Agreement with the European Union. Due
to political reasons, Russia successfully applied pressure to Ukraine in order to prevent this from
happening. Russia also agreed to lend USD 15 billion and USD 3 billion would be the first tranche.

Law Debenture Corporation and Ukraine entered into a Trust Deed governed by English law,
which constituted the Notes worth USD 3 billion. Although they are fully tradeable instruments
listed on the Irish stock exchange, Russia became the sole subscriber.

Ukraine paid interest three times in 2014 and 2015, but on 18 December 2015, the Ukrainian
government suspended payments on the Notes.
On 17 February 2016, the proceedings were brought by the Claimant upon instructions of the
Russian Ministry of Finance and soon after the Claimant filed an application for a summary
judgment.

Throughout the proceeding, Ukraine advanced several defences; all but one failed. Ukraine
contended in its defence that the Notes were procured by duress thus were voidable and had
been avoided. The SC agreed and on this ground alone held that the Claimant was not entitled to
summary judgment and Ukraine would be permitted to defend the claim at trial before the High
Court.

Ukraine’s allegations fell into two categories that were considered separately since they raise
distinct issues under the English law of duress - economic pressure and threats of the use of
force.

This was the first time ever when the SC considered application of the doctrine of duress in a
situation where such duress had been exercised by one state towards another one. A future
decision may become an important precedent for the development of case law of the act of state
and duress doctrines.

Module 4
Durga Prasad v. Baldeo

Facts of the case

 The District Authority of Etawah approached the complainant with a plan to establish a
market close by.

 The plaintiff established a two-grain market in Etawah, one known as Hume Ganj and the
other as Ram Ganj, and he had extended a significant amount of rupees for constructing
shops and purchasing land for the same.

 This was done to satisfy the aforementioned request and win the defendant’s trust.
Defendants hired the lookout shops, worked as commission specialists, and even
received some commission from the dealers in exchange.

 By agreement of both parties, the commission due to the plaintiff in 1875 was set at 6
annas, and the defendants signed a contract to that effect. The plaintiff had requested
that only commission payments be sent on a regular basis, thus this was done in
accordance with his desires.

 After being advised by the Municipal Corporation that he should have the commission
agreement registered, the plaintiff took the advice seriously and made arrangements to
have the agreement registered in order to make it legally binding and have it verified for
the purposes of their security with regard to receiving the commission that was promised
to them.

 According to Indian law and the Indian Contract Act, 1872, both parties to an agreement
must certify that they have entered into the agreement and have given their complete
approval for the agreement’s applicability in order for it to be registered.
  The problem started when the defendant refused to assent to the agreement’s
registration upon the plaintiff’s request and denied that they were required to sign the
agreement in response, which is when the dispute first arose.

 Due to this, the plaintiff was required to file a lawsuit to establish the basis of his rights.
As a result, he sued the Respondents in the lower court to determine whether the
understanding could be enforced. He then filed an appeal in the high court due to the
lower court’s unsatisfactory response.

Issues

In this case, there were two major issues such as

 If the aforementioned agreement is a contract that is enforceable by law,

 If the aforementioned contract can be enforced by the law

Judgement

The claims of the plaintiff were denied, and the case was dismissed by the judge. According to
section 2(d) of the Indian Contract Act, 1872, the arrangement was rejected as a contract because
there was no significant and well-known consideration involved in this case. According to section
25 of the Act, the transaction was deemed defective because there was no consideration. The
judges also determined that there was no option for an appeal because the Act stipulates the
significance of consideration as a necessary component for a contract, and the appeal was
rejected by the court.

Conclusion

The aforementioned case is based on section 2(d) of the Indian Contract Act, 1872, which
discusses in part: “When at the desire of the promisor, promisee, or any other person has done or
abstained from doing or does or abstains from doing, or promises to do or to abstain from doing
something, such act or abstinence, or promise is called a consideration for the promise.”

In this instance, the plaintiff accepted the market’s construction plan as payment for the
commission that the defendant was going to give them. The defendant countered that the
plaintiff’s reference to the commission had nothing to do with the market’s structure because he
has never been motivated to do so. Furthermore, the deal cannot be deemed to be a legitimate
contract because no consideration was provided.

The plaintiff’s complaint was founded on the defendant’s unwillingness to offer a commission
based on the market’s structure, which can be seen. The defendant is not responsible for paying
the commission to the plaintiff because the building was built without his involvement.

Errington v. Errington

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. They did. Lord Justice Denning set out the facts
as follows:

The facts are reasonably clear. In 1936 the father bought the house for his son and daughter-in-
law to live in. The father put down £250 in cash and borrowed £500 from a building society on the
security of the house, repayable with interest by instalments of 15s. 0d. a week. He took the
house in his own name and made himself responsible for the instalments. The father told the
daughter-in-law that the £250 was a present for them, but he left them to pay the Building
Society instalments of 15s. 0d. a week themselves. He handed the Building Society book to the
daughter-in-law and said to her: "Don't part with this book". "The house will be your property
when this mortgage is paid." He said that when he retired he would transfer it into their names.
She has in fact paid the Building Society instalments regularly from that day to this with the result
that much of the mortgage has been repaid, but there is a good deal yet to be paid. ...

The father died and left the house to his widow. The son later left the house to live with his
mother and the mother/widow (plaintiff) sought possession of the house from the daughter-in-
law (defendant).

Issue

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.

Venkata Chinnaya Rau v. Venkataramaya Garu

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 will 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.

ISSUE

 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?

CONTENTIONS
  The plaintiff claimed that the consideration for the property transferred to the defendant
by her mother was the defendant’s promise to pay the promised sum annually to the
plaintiff. Hence, the plaintiff has the right to sue the defendant and is entitled to the
amount promised by the defendant.

 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.

RATIO DECIDENDI

Innes J: It could flow from someone who is not a party to the contract. Innes J. quoted the case
of Dutton v. Poole [(1677) 2 Levinz 210, wherein it was observed that despite the fact that the
defendant made the promise to his father and the father provided the consideration for it, it was
obvious that the contract was made for the plaintiff’s benefit. The court ruled that depriving the
plaintiff of the money would be extremely inequitable, and ordered the defendant to pay the
same to her. In the present case, prior to the formation of the contract in question, the plaintiff
had been receiving a sum of money from her sister’s estate. When the lady passed it to the
defendant, the contract required her to continue the same arrangement. When the plaintiff’s
sister transferred the property to the defendant, she lost the annuity that she had been getting.
It was held that such loss served as consideration for the promise. Therefore, the plaintiff was
presumed to have given the consideration.

Kindersley J: The deed of gift and the defendant’s agreement to pay the annuity to the plaintiff
were executed simultaneously. Thus, they may be considered components of the same
transaction. The defendant’s promise to compensate the plaintiff served as consideration for the
defendant’s mother transferring the property to the defendant. Therefore, the defendant’s
failure to pay the same would constitute a breach of contract, entitling the plaintiff to sue her for
the sum.

DECISION

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.

CONCLUSION

This case explained the applicability and relevance of the doctrine of privity of consideration to
Indian contract law. In Venkata Chinnaya Rau v. Venkataramaya Garu, the court ruled that the
doctrine of privity of consideration does not apply in India. Under the Indian Contract,
consideration may be provided by the pledge or by someone else. According to the Indian
Contract Act, 1872, consideration may move not from the promisee, but even from a third person
who is not a party to the contract, as opposed to English law, which requires consideration to
move only from the promisee.
White v. Bluett

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.

Issue

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.

Decision/Outcome

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. Godefry

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.

Issue

The question for the court was whether the agreement between the plaintiff and the defendant
was supported by valuable consideration.

Decision / Outcome

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. Lord Tenterden said
(at 956):

‘If it be a duty imposed by law upon a party regularly subpoenaed, to attend from time to time to
give his evidence, then a promise to give him any remuneration for loss of time incurred in
such attendance is a promise without consideration. We think that such a duty is imposed by
law’.

Consequently, the agreement was unenforceable.

Rajlukhi Devi v. Bootnath Mukkherjee

In the case of Rajlukhy Dabee v. Bhootnath Mookerjee[i], 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. Shivram

Bhiwa vs Shivaram[ii] two brothers quarrelled regarding some property. One of them lost, upon
which the other brother promised through a written and duly registered agreement that he 5
would give half his property away to him. He later backed out. When taken to court, however,
the court held that, in spite of the earlier property dispute, Section 25(1) applies since the brother
had made the promise out of natural love and affection for someone who was a near relative,
and therefore the brother was held liable to comply with his promise.

However these two judgements are extremely contradictory – if natural love and affection does
not apply in the first case, there is no logical reason as to why it should have applied in the second
case. The term “natural love and affection” is a very subjective term and cannot be defined. It can
easily be taken advantage of.

Kedarnath Bhattacharji v. Gorie Mahomed

Facts:

The plaintiff, a Municipal Commissioner of Howrah and a trustee of the Howrah Town Hall Fund,
was involved in a project to build a Town Hall in Howrah. Subscriptions were sought to fund the
project, and a contract was entered into with a contractor for construction. The original cost was
Rs. 26,000 but increased to Rs. 40,000 due to additions authorized by the Commissioners. The
plaintiff seeks to recover a subscription of Rs. 100 from the defendant, who had subscribed to the
fund.

Issue:

The primary legal questions are whether the plaintiff's suit is legally maintainable and whether,
based on the facts, the trustees are entitled to judgment. Specifically, the issue revolves around
whether the plaintiff, who is liable under the contract with the contractor, can sue to recover the
subscription amount from the defendant.
Judgment:

The court holds that the plaintiff can bring the action on behalf of himself and others jointly
interested. The contract between subscribers and the project is deemed valid, with subscribers
agreeing to fund the construction in consideration of the obligation incurred. As such, the court
answers both questions in the affirmative. It declares that the Small Cause Court should decree
the suit in favor of the plaintiff for the claimed amount and awards costs, including those of the
hearing, to the plaintiff.

Doraiswami Iyer v. Arunachala Ayyar

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.

ISSUE

 Is there a valid consideration in this particular case?

RATIO DECIDENDI

The Honorable 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 honorable 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.

CONCLUSION

This judgment puts forth the point that for a consideration to be valid, it has to move at the
desire of the promisor and must have value in the eyes of law. It clarifies that the acts have to be
done at the request of the promisor, even if there is no personal benefit to the promisor are
considered as good consideration.
Dunlop Pneumatic Tyre v. Selfridge

Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at
a discounted price on condition that they would not resell the tyres at less than the listed price
and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower
price either. Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to
sell at a lower price either and that they would pay £5 in damages if they violated this agreement.
Selfridge proceeded to sell the tires below the price he promised to sell them for. Dunlop
brought action and was successful at trial. The appellant Court held that Dunlop is the third party
to the contract between Dew and Selfridge & Co. and also held that the appellant is seeking to
enforce the maintenance of prices to public disadvantage and overturned the ruling by the lower
court.

Smith & Snipes v. River Doughles Catchmat Board

The defendant was a catchment board and covenanted with the owner of the land on the banks
of river Douglas, which was subject to flooding. 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, 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. Subsequently, 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 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

Facts

William Tweddle and John Guy’s daughter were due to marry each other. The two men agreed
between them that they would each pay a sum to Tweddle’s son for the couple’s maintenance.
After Guy’s death, Tweddle’s son sued his estate to enforce the agreement made with his father.

Issue(s)

1. Could the claimant sue on a contract he was not a party to?

Decision

The High Court held in favour of the defendant. The claimant was not a party to the agreement as
he had not provided consideration for it. He therefore had no power to sue to enforce the
contract.

This Case is Authority For…

This case establishes the common law principle of privity of contract. The general rule under the
common law is that a person who has not provided consideration for an agreement cannot sue in
contract law to enforce it. Consideration must move from the person seeking to enforce the
contract.

Other

Crompton J noted that love and affection between a father and son does not qualify as
consideration.

Module 5
Chikham Amiraju v. Chikham Seshamma

Fact:

In the instant case, the Husband Held held out a threat of committing suicide to his wife and son
if they did not execute a release deed in favor of his brother. The wife and son executed the
release deed under the threat.

Issue / Questions:
The question was whether a threat of committing suicide amounts to coercion?
Held :

Court Held that the threat of suicide amounted to coercion within Section 15 of the Indian
Contract Act, 1872 and the release deed was, therefore, voidable"

Rangnayakamma v. Alwar Seti

A widow was coerced into adopting a boy by the boy’s parents by not allowing the corpse of the
widow’s husband to be removed from the home until the adoption is made.

This amounted to coercion within Section 15 of the Indian Contract Act, 1872 and the release deed
was, therefore, voidable

Muttiah Chettiar v. Karuppan Chetti

In the case of Muthiah Chettiar v Karupan Chetti, it was held that if an outgoing agent refuses to
hand over the account books to the new agent until the principal executes releases in favour, it is
coercion.

Askari Mirza v. Bibi Jai Kishori

1. ISSUE:

Whether a threat of filing criminal charges lead to coercion under Section 15 of the Indian
Contract Act.

2. RULE:

To threaten a criminal prosecution is not per se an act forbidden by the Indian Penal Code. It
could only be forbidden if it amounted to a threat to file a false charge. Thus, the plaintiff who
sets a plea of coercion based on a threat of this nature has to establish 3 things:
1. The threat was uttered.

2. That it was a threat to commit an act forbidden by the IPC.

3. The threat was uttered with the intention of causing the plaintiff to enter into the agreement
complained of.

A criminal prosecution was instituted against a person and fearing the result of prosecution, he
entered into an agreement in consideration of the other party abandoning the prosecution. It
was held that the threat of criminal prosecution is not per se an act forbidden by the Indian Penal
Code. Hence, consent is valid.

Sheikh Ismail v. Amir Bibi (samjh nahi aaya kaiha se likhu)

Ranee Annapurna v. Swaminatha Chettiar

Facts:

1. The appeal involves two main points: (1) the transferability of a right to future
maintenance and the effectiveness of the mortgage of such right, and (2) whether the
contract was induced by undue influence.

2. The plaintiff, a money-lender, advanced Rs. 1,500 to a widow under a deed with a high-
interest rate and stringent terms, with the purpose of enabling the widow to establish
her right to maintenance.

3. The widow, at the time of the contract, was in a poor state with no means for
maintenance, and the transaction was facilitated through legal advice.

Issues:

1. Whether a right to future maintenance is transferable, especially considering the

provisions of Section 6 of the Transfer of Property Act.

2. Whether the contract between the money-lender and the widow was induced by undue
influence, as per the amended Section 16 of the Contract Act.

Judgment:

1. Transferability of Right to Future Maintenance:

 The court opines that a right to future maintenance is not an interest in property
restricted to the owner personally under Section 6 of the Transfer of Property
Act.

 The court distinguishes this case from the Transfer of Property Act, stating that
the Act's non-recognition of the transfer is not conclusive on the question of
validity.

 The court suggests that, especially where the amount is fixed subsequently, a
widow's right to maintenance may not be inalienable.
 2. Undue Influence:

 The court evaluates the contract under the amended Section 16 of the Contract
Act, focusing on the circumstances and relations between the parties.

 The court notes the high interest rate and stringent terms in the contract,
emphasizing that the widow was in a poor state at the time of execution.

 The court concludes that the plaintiff was in a position to dominate the will of the
defendant (widow) and that the bargain was unconscionable.

 The burden of proving that the contract was not induced by undue influence lies
with the plaintiff, and the court holds that the plaintiff failed to discharge this
burden.

Final Decree:

 The court modifies the Subordinate Judge's decree, granting the plaintiff a decree for the
advance amount with interest. The mortgage remains, and payment is ordered within
three months. Each party bears its own costs throughout. A receiver is appointed by
consent.

Wajd Khan v. Raja Ewaz Ali Khan

In this case, where the old and illiterate woman conferred a great monetary benefit into her
manager without any valuable consideration, it was held by the Privy Council that, the undue
influence was exercised. The onus was on the manager to prove bonafide of the transaction and
that no undue influence was used to him.

Derry v. Peek

Facts of Derry v Peek

In the prospectus released by the defendant company, it was stated that the company was
permitted to use trams that were powered by steam, rather than by horses. In reality, the
company did not possess such a right as this had to be approved by a Board of Trade. Gaining the
approval for such a claim from the Board was considered a formality in such circumstances and
the claim was put forward in the prospectus with this information in mind. However, the claim of
the company for this right was later refused by the Board. The individuals who had purchased a
stake in the business, upon reliance on the statement, brought a claim for deceit against the
defendant’s business after it became liquidated.

Issue in Derry v Peek

It is important to note that the law regarding false misrepresentation was still developing and
this was an important case in doing so. In this case, the court was required to assess the
statement made by the defendant company in its prospectus to see whether the statement was
fraudulent or simply incorrect.

Decision/Outcome of Derry v Peek

The claim of the shareholders was rejected by the House of Lords. The court held that it was not
proven by the shareholders that the director of the company was dishonest in his belief. The
court defined fraudulent misrepresentation as a statement known to be false or a statement
made recklessly or carelessly as to the truth of the statement. On this basis, the plaintiff could not
claim against the defendant company for deceit.

Peek v. Gurney

Iska nahi mila kuchdhanka content its just fcking sgares and stocks and no misrepresentation

Phillips v. Brooks

Facts of Phillips v Brooks

Phillips was a jeweller. The fraudster purchased a ring from the jeweller with a cheque and signed
his name “Sir George Bullough” and provided this person’s address. Phillips knew of Bullough
and knew he lived at the address, so allowed him to take the ring before the cheque cleared. The
purchaser subsequently turned out not to be ‘Sir George Bullough’. The fraudster then pledged
the ring to a bona fide third party.

Issue in Phillips v Brooks

Whether Phillips could rely on mistake to identity to void the contract and seek
possession/ownership of the ring.

Decision/Outcome of Phillips v Brooks

It was found that whilst the fraudster had indeed fraudulently purchased the ring there was no
mistake as to identity due to the fact this contract was made face-to-face. Whilst fraudulent
statements were made, the identity of the fraudster could not be considered ‘mistaken’.
Importantly, a fraudulent contract is voidable (not void) and permits property to pass to bona
fide third-party meaning Brooks Ltd was the legal owner of the ring.

Cundy v. Lindsay

Facts

The claimant received an order for sale of handkerchiefs from a person named Blenkarn, who
signed in his name in a manner resembling “Blenkiron & Co.”- a reputed firm located at “123,
Wood Street”. The purchaser further mentioned his address to be at “37, Wood Street,
Cheapside”, to which the claimant sent the goods. Although no payment was made by Blenkarn,
he sold the goods to a third person- the defendants.

Later, the claimants alleged that, as they sold the goods to Blenkarn under the mistaken
assumption that they were selling it to Blenkiron & Co., there was no real consent to the contract
of sale. Consequently, there was no valid transfer of title, which remained with the claimants, and
accordingly, they sued the defendants for conversion of goods.

Issues
The case concerned whether a mistake as to the identity of a contracting party was so
fundamental so as to negate the consent of the other party, and thereby, causing the contract to
be void. In other words, the question was whether there was any contract between the claimant
and Blenkarn at the first place, and if not, could the third party defendants procure a valid title to
the goods.

Ruling

It was held that, as the claimant did not intend to sell the handkerchiefs to Blenkarn but to
Blenkiron & Co., there was no consent of the claimant to the contract with the former.
Accordingly, as no contract was concluded between the claimant and Blenkarn so as to
constitute a valid transfer of title which the latter could rightfully convey to the defendants, the
title remained with the claimant. Hence, the defendants, being in possession without a good title
over such goods, were held liable for conversion.

Smith v. Chandwick

Facts
The prospectus of a company, which was created for the purposes of a takeover of an
ironworks enclosed the following statement: ‘the present value of the turnover or output
of the entire works is over £1,000,000 sterling per annum.’ This meant that if the works
were capable of turning out this volume of produce, the statement was true. The plaintiff
was not asked his understanding of the phrase throughout proceedings. The plaintiff
brought an action for deceit on the basis that the company had made a fraudulent
misrepresentation that had induced him to purchase shares. The Court of Appeal had
reversed the decision of the trial judge which found in favour of the plaintiff. This case
was an appeal by the plaintiff of that decision.

Issue
The court was required to establish whether the company had made a fraudulent
statement, in its prospectus, with regards to the value of the company. If this was the
case, it was also for the court to consider whether this false statement had been relied
upon by the plaintiff when he purchased his shares. If so, it could be possible for the
plaintiff’s claim to succeed.

Held
The court found that the statement in the prospectus was unclear and that it was
capable of more than one meaning. However, they found that the burden rested with
the plaintiff to show that he had taken the words in a sense that meant that they were
false, which had influenced his decision to purchase the shares in the company. The
plaintiff could not show this and therefore the plaintiff’s action was not successful.

Raffles v. Witchelhaus
Facts

The complainant, Mr Raffles, offered to sell an amount of Surat cotton to the defendant, Mr
Wichelhaus. This Surat cotton would be brought to Liverpool by a ship from Bombay, India. This
ship was called the Peerless, but there were two ships that had this name. The complainant and
the defendant were both thinking about a different Peerless ship when they agreed to make the
sale. One of the ships was due to leave Bombay in October, which was what the defendant had
thought for his Surat cotton delivery, but the complainant was referring to the ship that was to
leave in December. When the Surat cotton arrived in Liverpool, Mr Wichelhaus refused to pay, as
in his mind, it was months late.

Issues

The complainant sued the defendant for breach of contract. The issue in this case was whether
there was an enforceable contract between the parties.

Decision/Outcome

It was held that the contract between the complainant and defendant was not enforceable.
When the contract was being discussed, there was ambiguity in the Peerless and what ship was
being referred to, as well as no agreement on the terms on the sale. There had been no
consensus ad idem or meeting of the minds between the parties to form a binding contract. The
objective test made it clear that a reasonable person would not have been able to identify with
certainty what ship had been agreed on.

Module 6
Lowee v. Peers

Back in 1768, a precedent was set by the Court of King’s Bench in Lowe v. Peers where the
defendant had entered a promise under seal to marry no one but the promisee, on penalty of
paying her 1000 pounds within three months of marrying anyone else.

The Court remarked-

“that it was not a promise to marry her, but not to marry anyone else, and yet she was under no
obligation to marry him.” The Court found the contract void as it was purely restrictive and
carried no promise to carry on either side.

Rao Rani v. Gulab Rani

A division bench of the Allahabad High Court looked into this case wherein the two parties were
the widows of the same man, Ram Adhar. After the death of their common husband, a dispute
had arisen at the Revenue Court regarding the matter as to who would inherit a certain zamindari
land holdings.

However, the dispute was amicably settled by the two parties by signing a compromise deed
wherein it was stated that both of them would inherit equally but if anyone would re-marry, the
entire right over the property would shift to the other. Subsequently, Gulab Rani married again
and the property came under the complete control of Rao Rani.
However, years later, Gulab Rani filed a suit to regain ownership of part of that property and,
amongst other contentions, claimed that the compromise deed which was contractual in nature
was void under Section 26 of the Indian Contract Act as it was in restraint of marriage.

The High Court expressed its serious doubt on whether section 26 of the Contract Act
encompassed partial or indirect restraint on marriage and it was not persuaded by this argument.
Chief Justice Ahmad delivered the judgment stating-

“All that was provided was that if a widow elected to re-marry, she would be deprived of her
rights given to her by the compromise. In other words, no direct prohibition to re-marry was
imposed by the compromise and the compromise was arrived at in order to preserve the family
properties and to ensure their proper management.”

Madhub Chunder v. Raj Coomer Doss

Facts

In this case, the Defendant faced competition from Plaintiff due to which he incurred a heavy
loss. Consequently, both parties entered into an agreement. The terms of the contract state that
if the Plaintiff closes his business then the Defendant would pay him the money that Madub
Chunder advanced to his workers. Later on, Rajcoomar refused to pay the money as promised in
the contract. Both the parties of the present case were involved in businesses established in
Calcutta.

As a result, the Plaintiff filed a lawsuit to claim the amount from the Defendant.

Issues

1. Whether Plaintiff’s lawsuit against the defendant is maintainable?

2. Whether the Plaintiff was entitled to receive the amount as promised?

Judgement

Advertisement

Sir Richard Couch C.J while referring to the case of Mitchel v. Reynolds laid a distinction between
partial and absolute restraints of the trade. He stated that any contract which falls within the
ambit of Section 27 of ICA is void unless certain exceptions.

He also asserted that “The words “restrained from exercising a lawful profession, trade or business”
do not mean an absolute restriction and are intended to apply to a partial restriction, a restriction
limited to someplace.”

Further, he cited Section 28 of the Indian Contract Act that has the word ‘absolutely’, proving
that the intention of Section 27 is only partial restraint but not an absolute restraint. The
agreement entered by both parties in the present case is a complete restraint of trade making it
void and not enforceable.

Nordenfelt v. Maxim Nordernfelt Guns and Ammunittions Co. Ltd.

Facts
The appellant, Thorsten Nordenfelt, was a Swedish gun manufacturer with a valuable, world-
wide business. He sold the business to a company, the respondents, and agreed to enter into a
restrictive covenant not to work for any rival business for a 25 year period in an unlimited
geographical area. Later, he worked for a rival business. The respondents brought an action to
enforce the covenant by inunction. The case came to the House of Lords.

Issues

The appellant argued that clause was a restraint of trade clause and had to be reasonable to be
upheld. He argued that a worldwide geographical limitation was unreasonable. The respondents
argued that the restraint was only such as was necessary to protect themselves.

Decision / Outcome

Lord McNaughton said a clause by which someone restrains themselves from the exercise of his
trade was prima facie unlawful. It was a principal of English law all trade should be free. However,
it would discourage trade if someone who has built up a valuable business could not dispose of it
to his best advantage. Therefore, restraint of trade clauses would be upheld if they were
reasonable (at 564):

“in reference to the interests of the parties concerned and reasonable in reference to the
interests of the public, so framed and so guarded as to afford adequate protection to the party in
whose favour it is imposed, while at the same time it is in no way injurious to the public.”

It was not disputed that this particular clause was reasonable, as a huge sum had been paid for
the business. Nor was it injurious to the public. Therefore, the clause was upheld.

S.B Fraser v. Bombay Ice Mfg. Co.

The Allahabad High Court, in the case of SB Fraser & Co. v. Bombay Ice Manufacturing Co. Ltd.,
observed the following, “The rules of an association of traders and weigh men provided that
members shall not deal with outsiders, the penalty for breach being fine and expulsion. The
legality of the association was attacked on the ground that its object and methods were unlawful
as it aimed at the creation of a monopoly by shutting out all competition and was a defiance of
the spirit of Section 23 and 27”.

Guthyng v. Lynn

Facts

The buyer of a horse, who was the plaintiff in this case, promised the seller that they would pay
£5 more for the horse, or buy another horse from the seller if the horse was lucky. The horse was
not in the condition that the plaintiff believed and a dispute arose between the parties as to
whether the seller was owed the conditional payment mentioned by the buyer.

Issue

The court had a number of issues to decide. The most prominent issue was whether the offer
from the buyer, to pay more for the horse if it was lucky, could be considered to be a valid offer
for the purposes of the sale. This would give an indication as to whether the seller could rely on
the payment that had been mentioned. Specifically, the court was required to understand
whether the terms ‘lucky’ and ‘buy another horse’ could be defined and considered legally
binding on the parties.

Decision/Outcome

The court held that the condition to pay £5 extra for the horse if it was lucky, was deemed to be
too vague to create a binding contract between the parties. The words contained in an
agreement must be clear so that the parties can be sure of the terms upon they are contracting.
As a result of this, the only part of the transaction that was sufficient for the court was the
purchase of the horse for the price of £63 and that was the vast majority of the legal agreement
between the parties.

Gherulal Pareh v. Mahadeo Das

FACTS

1. Appellant and respondent entered the partnership agreement for the sale and purchase
of wheat with other firms on the condition that the Respondent will enter a contract on
behalf partnership and profit and loss will be distributed equally.

2. Transaction resulted in loss, which was fully paid by the respondent to the third parties.

3. When respondent ask appellant for the sharing of liability, appellant refused.

4. Respondent sued appellant to recover the amount which the appellant has refused.

ISSUE

 Whether the partnership agreement of entering wagering agreement was illegal within
the section 23 of the Indian Contract Act, 1872?

RATIO DECIDENDI

 The mistake of fact has to be bilateral and in order that an agreement be treated as void,
both the parties must suffer from mistake of fact.

 Earnest money (byana) or any kind of other deposit cannot be given up if the underlying
contract is void.

 The forfeiture of earnest money (byana) is permissible only when a concluded contract
has come into being and not prior thereto.

DECISION

The court held that though the wagers are void under section 30 of the Indian Contract Act, 1872
but cannot be forbidden by law under section 23 of the Indian Contract Act for the person
entering a wagering contract. Therefore, the agreement intending to wager the contract cannot
be declared void as it is forbidden by law under section 23.

Frost v. Knight
Facts Mr Knight promised to
marry Miss Frost when
her father died.
Knight changed his mind and
said that he
would not marry her once he
died. As the
father was still alive, he had
not yet breached
the contract, yet Frost still
sued for breach of
contract.
Issue Was Miss Frost able to
sue for breach of
contract even though the
contract had not yet
been breached?
Conclusion As Knight had
demonstrated intention to
breach the contract, it is
inevitable that a
marriage would not
eventuate. If she was
allowed to cancel the
contract, she could
move on to find someone
else.
Would have been a waste of
time and
resources to require the
injured party to stick
to the contract, when the
breach is clearly
going to occur.
Parties should be able to
redirect their
resources elsewhere.
Facts Mr Knight promised to
marry Miss Frost when
her father died.
Knight changed his mind and
said that he
would not marry her once he
died. As the
father was still alive, he had
not yet breached
the contract, yet Frost still
sued for breach of
contract.
Issue Was Miss Frost able to
sue for breach of
contract even though the
contract had not yet
been breached?
Conclusion As Knight had
demonstrated intention to
breach the contract, it is
inevitable that a
marriage would not
eventuate. If she was
allowed to cancel the
contract, she could
move on to find someone
else.
Would have been a waste of
time and
resources to require the
injured party to stick
to the contract, when the
breach is clearly
going to occur.
Parties should be able to
redirect their
resources elsewhere.
Facts Mr Knight promised to
marry Miss Frost when
her father died.
Knight changed his mind and
said that he
would not marry her once he
died. As the
father was still alive, he had
not yet breached
the contract, yet Frost still
sued for breach of
contract.
Issue Was Miss Frost able to
sue for breach of
contract even though the
contract had not yet
been breached?
Conclusion As Knight had
demonstrated intention to
breach the contract, it is
inevitable that a
marriage would not
eventuate. If she was
allowed to cancel the
contract, she could
move on to find someone
else.
Would have been a waste of
time and
resources to require the
injured party to stick
to the contract, when the
breach is clearly
going to occur.
Parties should be able to
redirect their
resources elsewhere.
Facts

Mr Knight promised to marry Miss Frost when her father died. Knight changed his mind and said
that he would not marry her once he died. As the father was still alive, he had not breached the
contract, yet Frost sued for breach of contract.

Issue

Was Miss Frost able to sue for breach of contract even though the contract had yet not been
breached?

Conclusion

Defendant was held liable.

Pym v. Campbell

Facts

Pym and Campbell signed a written agreement wherein Campbell agreed to purchase three-
eighths of the profits to accrue from Pym’s new invention. The invention did not receive the
requisite approval from one of Campbell’s engineers and, accordingly, Campbell refused to pay
Pym the purchase price. Pym sued for breach of contract. However, Campbell claimed that the
agreement was conditional upon the approval of the invention, presenting oral evidence of party
negotiations to that effect.
Issues

The question arose as to whether the oral evidence, extrinsic to the terms of the written
contract, was admissible before the Court and able to alter the construction of said written
contract and/or show that it was unenforceable.

Decision/Outcome

The Court held that, as a general rule of law, the terms contained within a signed written contract
are conclusive and cannot be varied by parol evidence. Thus, parol evidence cannot introduce an
addition to or variation from the terms of a written contract between the Parties. However, in
this case, the Court held that the general parol evidence rule is not applicable as the question did
not concern the construction of the terms of a contract but rather whether there was any
agreement at all. Thus, parol evidence that sought to show that the agreement was never
entered into was admissible. On the facts, the Court held that there was overwhelming evidence
from the oral negotiations between the Parties that, prior to signing the written document, the
Parties came to a mutual understanding the prospective purchase was not intended to be an
agreement until the invention was approved by the engineers. As there was no approval, there
was no agreement and Campbell was not obliged to pay Pym.

Brown v. Knowlsey

Yeh case tort ka hai pata nahi ismai kyu diya hai

Module 8
Hadley v. Baxendale

Facts of Hadley v Baxendale

The claimant, Hadley, owned a mill featuring a broken crankshaft. The claimant engaged
Baxendale, the defendant, to transport the crankshaft to the location at which it would be
repaired and then subsequently transport it back. The defendant then made an error causing the
crankshaft to be returned to the claimant a week later than agreed, during which time the
claimant’s mill was out of operation. The claimant contended that the defendant had displayed
professional negligence and attempted to claim for the loss of profit resultant from the
unexpected week-long closure. The defendant retorted that such an action was unreasonable as
he had not known that the delayed return of the crankshaft would necessitate the mill’s closure
and thus that the loss of profit failed to satisfy the test of remoteness.

Issue in Hadley v Baxendale

Whether the loss of profits resultant from the mill’s closure was too remote for the claimant to
be able to claim.

Outcome of Hadley v Baxendale

The Court found for the defendant, viewing that a party could only successfully claim for losses
stemming from breach of contract where the loss is reasonably viewed to have resulted naturally
from the breach, or where the fact such losses would result from breach ought reasonably have
been contemplated of by the parties when the contract was formed. As Baxendale had not
reasonably foreseen the consequences of delay and Hadley had not informed him of them, he
was not liable for the mill’s lost profits.

Simpson v. London & North Western Railway and Co.

The defendant contracted to carry the plaintiff’s samples of cattle food from an
agricultural show at Bedford to another at Newcastle. He delivered certain goods to an
agent of the defendant at Bedford showground. The goods were marked ‘must be at
Newcastle by Monday certain’. No express reference was made in the contract of
carriage to the Newcastle show. The samples arrived at Newcastle after the show was
over.

The defendant was held to be liable for loss of profits which the plaintiff would have
made had the samples reached Newcastle on time. The plaintiff’s purpose and intention
could readily be inferred from the circumstances, which clearly indicated that the
contract was one to carry samples to the Newcastle show and not simply to Newcastle.

Warner Bros v. Nelson

Facts

The defendant was a film artist, otherwise known as Bette Davis, who had entered into a
contract with the plaintiffs, Warner Bros. Pictures, in the United States to provide her
services exclusively to the company for the period of twelve months with a further
twelve-month option. Under the contract, she could not, therefore, provide her services
to another company, without the plaintiff’s express written consent. By her own
admission, the defendant came to the United Kingdom to agree with a business to work
to produce films for a third party and claimed that she was no longer bound by the
original agreement with the defendants. The plaintiffs brought an action and claimed an
injunction to restrain her actions.

Issue

The issue for the court was to understand and consider all of the options available with
regards to remedying the breach of contract in this instance. Specific performance would
be a strict requirement that would require Nelson to perform for the business, whereas
damages would potentially be difficult to quantify in the circumstances. The court would
also have to consider the length of time that such a restriction might run for.

Held

The court found that the contract was not meant to force the defendant to specific
performance but that an injunction would enforce the contract to perform and therefore
specific performance was not an appropriate remedy. This was also the case for damages
as they could not be appropriate quantified under the circumstances. On this basis, an
injunction, with a time limit was applied to prevent Nelson from carrying out the other
contract.
Cutter v. Powell

Facts

Mr. Cutter, a sailor, was hired for a voyage and given a promissory note from his
employment that ten days after the ship arrives at Liverpool, he will pay Mr. Cutter a
certain sum, “provided he proceeds, continues and does his duty as second mate in said
ship from hence to the port of Liverpool.” Mr. Cutter began sailing the ship as second
mate for about six weeks, yet died before its arrival in Liverpool. Mr. Cutter’s wife
brought an action for a proportionate part of his due wages for the substantial amount
of the voyage on which he acted as second mate.

Issues

The question arose as to whether the sailor was entitled to payment for his substantial
performance of the contract as an implied term within the contract.

Decision/Outcome

The Court stipulated that, where parties conclude an express contract, no terms can be
implied into the contract. On the facts, the contract between the parties expressly
provided that the payment was conditional upon the completion of the voyage and only
payable after the ship’s arrival. Thus, under the express terms of the contract, the sailor
was entitled to receive the payment if the whole duty of the contract was performed,
and not entitled to any payment if the contract was only partially performed. The Court
noted that the contract made payment conditional on performance of the full voyage as
a form of insurance for the employer. Accordingly, the Court held that, even though the
sailor was not to blame for failure to perform the contract, the express terms of the
contract renders payment conditional on the full performance of the contract. Thus, on a
construction of the express terms of the contract, no payment was due for partial
performance.

Indu Mehta v. State of UP

Facts:

1. Km. Indu Mehta, an Advocate, served as Assistant District Government Counsel

(Criminal) for Kanpur Dehat from 1st Feb, 1983, to 30th April, 1985, appointed at
the request of the District Magistrate.

2. She received fees at the rate of the Assistant District Government Counsel
(Criminal).

3. The government, after a delay, canceled her appointment, citing lack of authority
in the District Magistrate's appointment.
 4. The government sought to recover an alleged excess payment of fees (Rs. 5,056)
from Indu Mehta.

Issues:

1. Whether Indu Mehta is entitled to fees at the rate of the Assistant District
Government Counsel (Criminal) for her services.

2. Whether the government can recover the alleged excess payment of fees from
Indu Mehta.

Judgment:

1. The court affirmed Indu Mehta's entitlement to fees at the specified rate,
considering her services rendered and payment received.

2. The recovery of the alleged excess payment was deemed unjustified as the
payment was voluntary and without any mistake or coercion.

3. The court quashed the orders related to recovery, directed the payment of
withheld fees, and instructed the government to pay the costs of the petition (Rs.
500) for its arbitrary conduct.

Nair Service Society v. Rev Father KC Alexander

nahi milra bhai

A G Venatanarasiah v. Smt. Vijayalakshami

(I am not sure yeh likhte-likhte baatein kar rahe the)

Heading: Consumer Complaint on Tejaswini Chilly Seed Crop Damage

Facts:

 Complainant owns and leases land for chili cultivation.

 Purchased Tejaswini Chilly Seed with assured germination and yield from Opposite
Party No-1.

 Expected 30 quintals per acre but entire crop damaged.

 Seeks Rs. 5,40,000 for crop loss and Rs. 75,000 for damages.

Issues:

1. Validity of the complaint under Consumer Protection Act, 1986.

 2. Opposite party claims crop damage due to natural factors and denies assured
yield.

Judgment:

 Complainant fails to provide receipts for claimed expenditure.

 Opposite parties argue defective seed proof required under Section 13(1)(c) of
Consumer Protection Act.

 Complainant doesn't send seeds for laboratory testing, unable to prove seed
defect.

 Complaint dismissed, no costs awarded.

Result: Consumer complaint dismissed due to failure to prove defective seed and lack of
supporting evidence.

Union of India v. Ibrahim Uddin

(nahi mila)

Kachan Udyog v. United Spirits

In Kanchan Udyog Limited vs. United Spirits Limited[6] however Supreme Court insisted
for proof of loss of anticipated profit. It did not accept profitability projections made in
loan application, as proof of estimated profitability. In the said case the court also found
that the party claiming compensation could not establish that the other party had
committed any breach. Besides, the said case did not pertain to works contract.

Nagar Parishad v. Gangaram Narayan Ambekar

In Ratnagiri Nagar Parishad v. Gangaram Narayan Ambekar, the Court held that the civil
courts could not have decided a suit wherein it was prayed that a mandatory injunction
be granted against the construction of a solid waste and management project as the
project was allegedly injurious to the health of the villages. The Court relied on Section
41(h) of the Specific Relief Act 1963, Section 29 of the 2010 Act as also paragraph 41
in Bhopal Gas Peedith Mahila Udyog Sangathan (2012) 8 SCC 326. Furthermore,
applying Anuthala Sudhakar (2008) 4 SCC 594, Hargovind Jasraj and Another (2013) SCC
182. The Court stated as no declaration has been sought by the plaintiffs in the present
case, the suit for simpliciter permanent injunction could not be proceeded further at all.
This was so because ‘if the matter involves complicated question of fact and law relating
to title, the Court will relegate the parties to the remedy of a comprehensive suit for
declaration of title, instead of deciding the issue in a suit for mere injunction’. Relying
on Kuldip Singh (2000) 4 SCC 50 and Section 41(f), it was held that no case for quia timet
action was made out. [Keywords: Section 41(h) of the Specific Relief Act 1963, Section 29
of the National Green Tribunal Act 2010] [Coram: A.M. Khanwilkar, J., Dinesh Maheshwai,
J.]
 Module 7
Krell v. Henry

Facts

By contract in writing of 20 June 1902, the defendant agreed to hire from the plaintiff a flat in Pall
Mall on 26 June and 27 June, on which days it had been announced that the coronation
processions would take place and pass along Pall Mall. The contract did not contain any express
terms on the coronation processions or any other purposes for which the flat was to be hired.
The defendant paid the deposit upon signing the contract. The processions, however, did not
take place on the announced dates. As a result, the defendant declined to pay the balance of the
agreed rent.

Issues

Was the defendant obliged to pay the rent despite the fact that the processions did not take
place as planned?

Decision/Outcome

The decision was in favour of the defendant.

(1) Applying Taylor v Caldwell (1863) 3 B & S 826,as both parties recognised that they regarded the
taking place of the coronation processions on the days originally fixed as the foundation of the
contract, the words of the obligation on the defendant to pay for the use of the flat for the days
named were not used with reference to the possibility that the processions might not take place.

(2) The plaintiff was not entitled to recover the balance of the rent fixed by the contract.

Taylor v. Cadwell

Introduction

The case of Taylor v Caldwell[1] is a fundamental case in the area of frustration with regards to
contract law. Taylor v Caldwell is an extremely important case, as Murray states,[2] “frustration
developed to alleviate harshness of absolute obligation rule”. Frustration comes about in
circumstances where the courts will discharge the parties of obligations under the contract,
therefore meaning that the parties are not liable for any further obligations under the contract.

Case Facts of Taylor v Caldwell

The case centred on a musical hall which the claimant agreed to hire from the defendant. The hall
was to be used for ‘grand concerts’ and fetes. However before the performance that the music
hall was to be used for; there was a fire and the hall was destroyed. Neither party was at fault for
this destruction. The claimant sued for breach of contract. The legal issue is whether because the
hall that the claimants had contracted to use could no longer be used, this excuses the rights and
liabilities of the parties’obligations under the agreement? Under the doctrine of absolute
obligations the defendants would be liable to the claimants because under the agreement they
would no longer be able to perform their obligations which had been contracted for; namely the
use of a music hall for four days[3]. In the case, Justice Blackburn notes[4] the harshness of this
obligation and therefore, it was held that the defendant was released from their obligations
under the doctrine of frustration. The reasoning behind this is that this was the most just solution
and the one that made the most sense in terms of contract law. If the parties were forced to
continue their obligations under the contract even though the music hall was on longer in use
then this performance would be very different from the ones that the parties had originally
contracted to undertake. The burnt down musical hall renders the contract undoable under the
current terms[5].

Taylor v. Caldwell (1863) defendants were discharged from their liabilities mentioned in the
contract as it stood frustrated because it was impossible and incapable of being performed due
to external factors.

Robinson v. Davinson

Where a party to the contract has died after entering into contract or the party is
incapable of performing the contract, in such a situation the contract will be void
( Robinson v Davison).
Satyabrata Ghose v. Mugneeram Bangur

FACTS:

 The company of the respondent in the said matter owned an extensive amount of land in
Calcutta, and started a strategy with an intention of developing the land for residential
purposes and thus, distributed the entire property into plots.

 For the successful completion of the above mentioned strategy, the company went in for
agreements with the interest purchasers with a motive of selling different plots to
different purchasers, for which they gained a small amount as earnest money during the
sale of the land.

 In order to complete the goal of developing the land for residential purposes, the
company shouldered the responsibility of constructing various amnesties that are
requisites for residential purposes such as building roads and drainage systems.

 The plan was to provide the buyers with the plots and attain the remaining payments
from the buyers once the requisite construction was complete.

 One of these buyers was Mr. Bejoy Krishna Roy, who entered such an agreement with the
company and made the payment for the earnest money of 101 INR on August 5 th, 1941.
After making the payment for the earnest money, the appellant became the nominee of
the said land. Despite of this later the Collector, 24–Paragnas demanded the use of the
land as per the Defence of India rules for military, which led the company to conclude
regarding cancellation of the agreement in November 1943.

 However, the company provided the appellant, Mr. Bejoy Krishna Roy, with a choice of
either receiving the paid earnest money back or else to make the outstanding payment to
the company, as the company would continue its complete the task once the war ends.
  Despite the situations that were going on at the time and the choices provided to him by
the company, the appellant filed a civil suit against the company on January 18 th, 1946
claiming that everything should have worked as per the agreement as both the parties
were bound to the terms mentioned in the agreement.

 The appellant refused both options. He sued on 18th January 1946 and claimed that the
company was bound to the terms of agreement.

ISSUES:

 Whether the appellant holds a locus standi and is qualified enough to institute the suit?

 Can law of frustration in English law be applied in India?

 Does this contract becomes frustrated according to section 56 of Indian Contract Act?

BEST BOOK FOR CONTRACT LAW: Contract Law by RK Bangia (Latest Edition)

RATIO DECIDENDI:

The Supreme Court of India held that although the government requisitioned the
land, impossibility can not apply in this case as:

The work did not start when the work when the land was demanded use by the Defence of India.
The plea of the defendant is just as the situations would give rise to undecided detainment in the
contract’s completion, and thus, the impossibility shall apply.

However, there was no mention of a specified time limit in the contract and the demand was only
short-term. Thus, it concluded that there wasn’t any unspecific slowdown.

The provision of the Indian Contract Act Section 56 stated that whenever a person, while signing
the contract, has appropriate assiduity which the other party didn’t know about, then the party
must compensate for the loss incurred by the other party.

INDIAN CONTRACT ACT, 1872 (Bare Act) (Latest Edition)

DECISION:

The Supreme Court stated that the principles of Frustration of Contract in English law, as per the
judgment passed by the High Court, were not relevant in the statutory provisions of the Indian
Contract Act. Besides this, the court also affirmed that the execution of the contract did not
become impossible.

F.A. Tamplin Steamship Co. Ltd. v. Anglo Mexican Petroleum Products Co. Ltd.

Facts

The charteres hired an oil tank steamship for a period of five years

Two and a quarter years of the contrat had expired when the ship was requistioned by the British
Government.

The British Governement made structural alterations upon the ship.

The shipowners claimed that the requistion and alterations determined the contract.

Rulings

The court held the contract was not terminated by the requistion and alterations made by the
British Government

The court found that the contract was not contingent on the continuance of of peace or freedom
from interruption in the use of the vessel.

The court determined that the contract could only be dissolved if the power of the performance
had been wholly slept away with no prospect of restoration.

British Movietonews Ltd v. London & District Cinemas Ltd

Nai milra

Bhudra Chand v. Betts

In this case, the plaintiff agreed with the defendant to use his elephant for Kheda operations (to
capture wild elephants). The contract stated that the elephant would be delivered on October
1st, 1910; however, the defendant obtained a time extension until October 6th and did not deliver
the animal until October 11th. The plaintiff refused to take the elephant and filed a lawsuit for
breach of contract.

Hochester v. De La Tour

Facts

De La Tour concluded an agreement to employ Mr. Hochster to act as a courier and travel with
him in Europe on 1 June 1852. On 11 May 1852, De La Tours wrote to Hochster informing them that
they no longer require his services. On 22 May 1852, Hochster brought an action of damages for
anticipatory breach of contract. De La Tours argued that he could not bring an action before the
date on which the contract was due to commence.

Issues

The question arose as to (1) whether a party’s refusal to perform the agreement before the date
of commencement entitled the other party to damages, and (2) whether this breach is actionable
before the date on which the contract was due to commence.

Decision / Outcome

Firstly, the Court held that when a contract provides for a promise for future conduct, a party
refusal to perform the agreement, thus renouncing the contract, becomes liable for breach of
contract. Further, a contract for future conduct constitutes an implied promise that, in the
meantime, neither party will prejudice the performance of that promise. Secondly, on that basis,
the Court rejected the defendant’s argument that the other party must remain ready to perform
the contract until after the commencement day, thus preventing him from bringing a suit
beforehand. The Court held that the renunciation of a contract of future conduct by one party
immediately dissolves the obligation of the other party to perform the contract, thus leaving “no
reason for requiring that the other wait till the day arrives before seeking his remedy by action.”
(p 928) Thus, a breach of contract by renouncing the duty to perform the future obligation
immediately renders the party liable to a suit of action for damages by the injured party. The
Court awarded damages to Hochster.

Devaynes v. Noble

In England, it has been considered a basic rule since the case of Devaynes vs Noble, also known as
Clayton’s case. In this, it was held that the debtor can request the creditor to appropriate the
amount to any of the debt in case he owes to the creditor several and distinct debts, if the
creditor agrees to it, then he is bound by it.

In the Devaynes vs Noble[1] case, a partner in a banking firm died. The surviving partners
continued to trade without making any changes. They later fell into bankruptcy. Creditors of the
bank at the date of the death still traded with the bank with varying changes in their banking
accounts. So, it was held that: The fact that they continued to trade with the continuing partners
did not discharge the estate of the deceased partner. The Judge Grant MR said: ‘I apprehend by
the general mercantile law, a partnership contract is several as well as joint. That may probably
be the reason why courts of equity have considered joint contracts of this sort, that is joint in
form, as standing on a different footing from others.

Avery v. Bowden

A charterparty provided that a ship should proceed to Odessa and there take a cargo from the
charterer’s agent. The ship arrived at Odessa and the master demaned a cargo, but the agent
could not provide one. The ship’s master continued to ask for one. A war broke out. The
charterer sued. The court held, inter alia, that if the agent’s conduct amounted to an anticipatory
repudiation of the contract, the master had elected to keep the contract alive until it
was discharged by frustration on the outbreak of war.

Energy Watchdog v. CERC

(mil nahi raha hai)

M/s Halliburton Offshore Services Inc. v. Vedanta Limited

(mil nahi raha hai)

Standard Retail Pvt. Ltd v. Gs Global Corp, Commercial Arbitration Petition

(mil nahi raha hai)

Ramanand & Ors v. Dr. Girish Soni

Facts: The COVID-19 pandemic has disrupted global commercial activities, impacting various
businesses and, in turn, commercial lease agreements. In the case of Ramanand v. Dr. Girish Soni,
the High Court of Delhi (May 21, 2020) addressed the legal implications of Force Majeure in the
context of lease agreements.

Issues:

1. Force Majeure and Rent Suspension: The tenants sought suspension of rent due to
business disruption caused by the lockdown, invoking Force Majeure.
 2. Legal Position on Force Majeure: The Court had to determine the legal standing of Force
Majeure concerning lease agreements.

Observations of the Delhi High Court:

 The Court examined various lease categories, emphasizing that the applicability of rent
suspension or waiver differs based on lease types.

 Referring to Black's Law Dictionary, Force Majeure was defined as an unforeseeable and
uncontrollable event.

 Citing Energy Watchdog v. CERC, the Court noted that the presence of an explicit Force
Majeure clause in the contract would be governed by Section 32 of the Indian Contract
Act, while Section 56 would apply in the absence of such a clause.

 The Court clarified that tenants could claim rent waiver or suspension only if the contract
included a relevant clause.

 In cases lacking a Force Majeure clause, tenants might resort to the Doctrine of
Frustration under Section 56 of the Contract Act. However, the Court cited precedents,
including Raja Dhruv Dev Chand, asserting that Section 56 doesn't apply to lease
agreements.

 The Court explored Force Majeure within the Transfer of Property Act, highlighting
Section 108(B) (e), applicable in the absence of specific contract terms. Notably,
temporary non-use of the property doesn't automatically trigger Section 108(B) (e).

 Complete destruction (permanent) of the property emerged as a prerequisite for tenants

seeking protection under Section 108(B) (e). Temporary non-use doesn't qualify unless it
results from substantial and permanent damage due to a Force Majeure event.

 The Court considered Surendra Nath Bibran v. Stephen Court, affirming that rent
suspension depends on the circumstances of each case.

Judgment:

 The Delhi High Court allowed tenants to postpone rent payments, specifying deadlines
for different months.

Conclusion: The decision clarified the application of legal sections (Section 32 and Section 56 of
ICA and Section 108(B) (e) of TPA) to lease agreements, offering guidance on Force Majeure-
related rent issues amidst the pandemic. It affirmed that Section 56 of ICA doesn't apply to
leases, and Section 108(B) (e) of TPA requires substantial, permanent property damage for rent
suspension.

Indrajit Power Private Limited v. UOI

Indrajit Power had inter-alia moved the Delhi High court thereby seeking following reliefs:

 Directing Central Government, from appropriating the bank guarantee which was given
to them for an amount of over Rs 30 crores pursuant to a mining auction;
  Extension of time to complete the pending project after renewal of the bank guarantee
above and

 Seeking to quash an email of April 4, 2020 which was sent to Indrajit, where the Central
Government conveyed its decision to appropriate the bank guarantee in its favour.

The guarantee which was being invoked by the Government was on account of Indrajit's failure
to comply with parameters laid down in the Coal Mine Development and Production Agreement
("Agreement"), before the mining operation begins.

Indrajit's broad arguments before the Court were (i) company's power plant was closed down
because of lockdown thereby having no immediate source of revenue; (ii) invocation of the bank
guarantee was unfair and inequitable and also barred in view of the prevailing situation of COVID-
19 pandemic and the stipulation of Force Majeure shall apply and (iii) as such due to non-
payments Indrajit shall be pushed into default and effectively towards being declared as NPA.

The Central Government, on the other hand, broadly argued that despite an extension of twelve
months granted to Indrajit under the Agreement to meet their parameters, Indrajit had failed to
complete their milestones and were in default, since April-June 2018. Further, it was argued that
the bank guarantee invocation decision was taken after due compliance of natural justice and
under the provisions of Agreement. The bank guarantee being unconditional and irrevocable
there could be no fetters upon encashment of the same, unless in exceptional cases of
irretrievable injustice or fraud which was absent in the present case.

The Court's Order was mainly passed on the premise that various lockdown orders which were
passed by various courts in India and relied upon by Indrajit, were not applicable to the present
case for the reason that the lockdown came into force with effect from March 24,2020 and
inspite of an extension of twelve months given by the Government, Indrajit could not fulfil its
obligations and continued to be in default. Merely because the invocation would cause financial
distress, it could not be a ground of stay, exception being of irrevocable injury which was absent
in the present case.