CONTRACT CASE LAWS

Balfour vs Balfour (LEGAL OBLIGATION)

Balfour v. Balfour is a landmark contract law case heard in the English Court of Appeal in 1919.
In the case of Balfour versus Balfour There was an agreement between the husband and wife.
The Balfour v. Balfour case deals with the intention to create a legal relationship. According to
the Essentials of a Valid Contract, there should be an intention to form a legal relationship.
Facts
● Mr. Balfour and Mrs. Balfour were husband and wife from Ceylon (Sri Lanka) and once
they went on a vacation to England in the year 1915. But unfortunately, during the
course of vacation, Mrs. Balfour fell ill; she was in urgent need of medical
attention.Then they decided and made an agreement that Mr. Balfour would return to
Ceylon and his wife, that is, Mrs. Balfour would stay back until she recovered from her
illness.They had also decided that during that period of time, Mr. Balfour would pay
Mrs. Balfour 30 pounds as maintenance every month until everything fell into place,
unless she recovered and returned to Ceylon.Now, this understanding and
interpretation were created while their relationship was good and there was no
sourness between them.However, their relationship increasingly deteriorated,
resulting in Mr. Balfour's failure to pay the amount of support due to Mrs. Balfour.Mrs.
Balfour had brought the action against Mr. Balfour for non-payment of the amount he
was supposed to pay in court of law in the year 1918.And at later point in time, they
separated legally, which means they were divorced.

The Legal Issue

The main legal issue in the case of Balfour v. Balfour was whether Mr. Balfour
ever intended to enter into any sort of agreement with his wife, Mrs. Balfour. Is
the agreement between Mr. And Mrs. Balfour valid in nature at all and is the
contract between husband and wife enforceable in court?

Mr. Balfour Perspective; I argue before the court that there is no binding contract
between spouses because agreements made within a domestic setting are generally
assumed to be based on love and affection, lacking the intention to establish legal
obligations.
Mrs. Balfour Perspective;

I put forth the argument that there existed an agreement, between

me and my husband, which was supported by the consideration that I
had agreed to stay back in England. Therefore, He had violated this
agreement by not fulfilling his obligation to pay the maintenance
because HE got into the domestic agreement by entering into the contract that
he would pay the amount of 30 pounds

JUDGMENT-It was determined that the arrangement was exclusively domestic in

nature..Lord Justice Atkin held that when a husband and wife enter into an
agreement, they never intend to create a legal relationship. Once both parties sign
an agreement, the parties must intend to create a legal relationship before it can be
enforced in court. Moreover, a court will never consider a domestic agreement
between spouses signed in everyday life.

So in this case, the agreement was outside the realm of contract all together.

Carlill v Carbolic Smoke Ball Co [1893] 1 QB

256(general offer)
Emphasised the significance of offer and acceptance in contract law; distinguishes
between offers and invitations to treat.

Facts
The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a
newspaper for their products, stating that any person who purchased and used their
product but still contracted influenza despite properly following the instructions would
be entitled to a £100 reward. The advert further stated that the company had
demonstrated its sincerity by placing £1000 in a bank account to act as the reward.
The claimant, Mrs Carlill, thus purchased some smoke balls and, despite proper use,
contracted influenza and attempted to claim the £100 reward from the defendants.
The defendants contended that they could not be bound by the advert as it was an
invitation to treat rather than an offer on the grounds that the advert was: mere ‘puff’
and lacking true intent; that an offer could not be made ‘to the world’; the claimant had
not technically provided acceptance; the wording of the advert was insufficiently
precise; and, that there was no consideration, as necessary for the creation of a
binding contract in law.

Issue
Whether the advert in question constituted an offer or an invitation to treat.

Held
The Court of Appeal found for the claimant, determining that the advert amounted to
the offer for a unilateral contract by the defendants. In completing the conditions
stipulated by the advert, Mrs Carlill provided acceptance. The Court further found that:
the advert’s own claim to sincerity negated the company’s assertion of lacking intent;
an offer could indeed be made to the world; wording need only be reasonably clear to
imply terms rather than entirely clear; and consideration was identifiable in the use of
the balls.

Lalman Shukla v. Gauri Datt (1913)communication

of the offer

The plaintiff, Lalman Shukla, was a servant employed by the defendant, Gauri Datt.
Before leaving on a journey, Gauri Datt informed Lalman that he would reward him if he
found his missing nephew. However, Lalman found the nephew before being informed
of the reward.
The court held that Lalman was not entitled to the reward because he was not aware of
the offer when he found the missing nephew. The principle established in this case is
that for a contract to be formed, the offer must be communicated to the offeree, and
the offeree must accept the offer with knowledge of its terms. Since Lalman was not
aware of the offer at the time he found the nephew, he could not claim the reward.

Handerson vs Stevenson (1875), 32 L.T. 709

(Communication of Special Terms)
The plaintiff bought a teamer ticket which bore on its face the words: ‘Dublin to Whitehaven’ On
the back of the ticket certain special terms were printed one of which excluded the liability of the
company for loss, injury or delay to the passenger or his luggage. The plaintiff never looked at
the back of the ticket and no one told him to do so, and the front of the ticket bore no reference
to the back. The plaintiff’s luggage was lost in the shiploss. It was held that the plaintiff was
entitled to recover his loss from the company as there was not sufficient communication of the
terms and conditions contained on the back of the ticket.

Parker vs South Eastern Railway Co. (1877), 2

CP.D. 416(reasonably sufficient notice)
In the above case P deposited his bag at the cloak-room at a railway station and received a
ticket containing on its face the words, ‘see back’. On the back of the ticket there was a
condition that, “the company will not be responsible for any package exceeding the value of 10
pounds unless extra charge was paid.” A notice to the same effect was hung up on the
cloak-room.• P’s bag was lost and he claimed the actual value of the lost bag, 24 pounds 10 Sh.
P, admitted knowledge of the printed matter on the ticket, but denied having read it. It was held
that, even though he had not read the exemption clause, he was bound by it, as the defendants
had done what was reasonably sufficient to give him notice of its existence, and therefore P was
entitled to recover only 10 pounds
Ramsgate Victoria Hotel Co. vs. Montefiore (1866),
L.R. 1 Ex. 109 ( An offer lapses after stipulated or
reasonable time)
An application for allotment of shares was made on 8 June. The applicant was informed on the
23 November that shares were allotted to him. He refused to accept them. It was held that his
offer had lapsed by reason of the delay of the company in notifying their acceptance, and that
he was not bound to accept the shares.

Hyde vs Wrench (1840), 3 Beav. 334(rejection by

counter offer)
A offered to sell his house to B for Rs.90,000. B offered Rs. 80,000 for which rice A refused to
sell. Subsequently B offered to purchase the house for Rs.90,000. A declined to adhere to his
original offer. B filed a suit to obtain specific performance of the alleged contract. Dismissing the
suit, the court held that A was justified because no contract had come into existence, as B, by
offering Rs.80,000, had rejected the original offer. Subsequent willingness to pay Rs. 90,000
could be no acceptance of A’s offer as there was no offer to accept. The original offer had
already come to an end on account of ‘counter offer

Boulton vs Jones(1857), 157 E.R. 232(Acceptance

must be given only by the person to whom the offer
is made.)
A sold his business to his manager B without disclosing the fact to his customers. C, a
customer, who had a running account with A, sent an order for the supply of goods to A by
name. B received the order and executed the same. C refused to pay the price. It was held that
there was no contract between B and C because C never made any offer to B and as such C
was not liable to pay the price to B
Felthouse vs Bindley (1863), 7 L.T.
835(uncommunicated acceptance did not amount to
acceptance )
Felthouse offered by letter to buy his nephew’s horse for ₤30,15s., adding “if I hear no more
about him I shall consider the horse mine at ₤30,15s.” • The nephew sent no reply to this letter
but told Bindley, an auctioneer, to keep the horse out of a sale of his farm stock, as he intended
to reserve it for his uncle Felthouse. • Bindley sold the horse by mistake, and Felthouse sued
him for conversion of his property. The Court held that as there was no communication of
acceptance to Felthouse before the auction sale took place, there was no contract and therefore
Felthouse had no right to complain of the sale

Powell vs Lee (1908), 99 L.T. 284 (acceptance must

be communicated by the acceptor )
P was a candidate for the post of headmaster in a school. The managing committee of the
School passed a resolution selecting him for the post. A member of the managing committee,
acting in his individual capacity, informed P that he had been selected, but P received no other
intimation. Subsequently, the resolution was cancelled, and P was not appointed to the post. P
filed a suit against the committee for breach of contract. The Court held that in the absence of
an authorized communication from the Committee, there was no binding contract
Thornton v. Shoe Lane Parking Ltd.
• In this case, Thornton went to a park in his car. The prices were displayed outside the car park.
And a notice verbally expressed cars were parked at their owner’s jeopardy. Thornton parked
his vehicle by vending a ticket. It was written in small writing that it was stated to be issued
subject to conditions displayed on the premises. There was a pillar opposite to the machine
where a notice said that the owners wouldn’t be held liable for any injury occurring on their
premises. • Unfortunately, Thornton had an accident, and he claimed damages from Shoe Lane
Parking. The Court held that the exclusion clause had not been included in the contract and
SLP had not done enough to bring terms and conditions to his attention before the contract
formation. Thornton accepted the initial offer when we drove in, but it was too late by then to
incorporate further terms when he drove into the park

Mohori Bibi vs Dharmo Das Ghosh(capacity of minor

Brief Facts And Disputes Of The Case:
The respondent was Dharmodas Ghose, who was a minor, received a loan from Brahmodutt, a
lender in Calcutta, by saying that he was an adult and had written a mortgage deed (Mortgage
Deed) in his favour to get a loan. At the time when the mortgage was being considered for advance
money, At the time of standing, Kedarnath, the agent of Brahmodutt, had received information that
the respondent was a minor; So, he cannot execute the deed. But still he executed a mortgage deed
from Dharamdos Ghose.

The minor then filed a suit against Brahmodutt by his mother and guardian in which he appeal to the
court to cancel the mortgage deed, as he was a minor at the time of the mortgage deed being
executed. Justice Jenkins (Jenkins J.) who was a judge of the trial court, Accepting the appeal of the
respondent, he cancelled the mortgage deed.

The appeal against the order was also quashed by the High Court; Therefore, the appellant
appealed to the Privy Council. Brahmodutt had died at the time of making this appeal. So, he was
replaced by his successor, Mohori Bibee.
Rule propounded:
1. The contract made by the minor is not null and void from the beginning
2. Section 64 of the Contract Act against the minor does not apply as these sections require
that the parties to the contract should be able to make contracts.
3. The principle of restriction cannot apply in this case because both the parties were aware
that the contract was being done with a minor.
4. Under the Specific Relief Act, 1963, the minor may be compelled to return the benefits
availed under zero contract. But in this case, the court does not think it appropriate, because
when Dharmodas Ghose was given a mortgage loan, the appellant knew that he was a
minor.
A minor executed a mortgage for Rs. 20,000 and received Rs.8000 from the
mortgagee. The mortgagee filed a suit for the recovery of his mortgage money
and for sale of the property in case of default. The Privy Council held that an
agreement by a minor was absolutely void as against him and therefore the
mortgagee could not recover the mortgage money nor could he have the
minor’s property sold under his mortgage

Suraj Narain vs Sukhu Ahir(No ratification on attaining the

age of Majority)
Where a minor borrowed a sum of money by executing a promissory
note, and after attaining majority executed a second bond in respect
of the original loan, the court held that a suit upon the second bond
was not maintainable as that bond was without consideration

• Since ratification related back to the date when the contract was
originally made, it is necessary for a valid ratification that the person
who purports to ratify must be competent to contract at the time of
the contract. But if services are rendered or an advance is made after
he attains majority, a promise to pay for such services or amount as a
whole would be valid and enforceable

Jennings vs. Rundall(Minors liability in tort)

where a minor hired a horse for riding and injured it by overriding, he
was not held liable.• The court observed in that case, “If an infant in
the course of doing what he is entitled to do under the contract is
guilty of negligence, he cannot be made liable in tort if he is not liable
on the contract.” • But if the wrongful action is of a kind not
contemplated by the contract, the minor may be held liable for tort.

Thus, where a minor hired a horse for riding under express

instructions not to jump, he was held liable when he lent the horse to
one of his friends who jumped it, whereby it was injured and
ultimately died
Durga prasad vs Baldeo (1881)(Consideration must
move at the desire of the promisor)
D had built, at his own expense a market at the request of the Collector of the District. The
shopkeepers in the market promised to pay D a commission on the articles sold by them in the
market. When D sued the shopkeepers for the commission, it was held that the promise to pay
commission did not amount to a contract for want of consideration, because D (the promisee)
had constructed the market not at the desire of the shopkeepers (the promisors) but at the
desire of the Collector to please him
This essential does not require that the consideration must confer ‘some benefit’ on the
promisor. It would be enough if the act or forbearance or promise constituting the consideration
was done or given at the promisor’s request, the benefit may accrue to a third party

Chinnayya vs. Ramayya (1881), 4

Mad(.Consideration may move from the promisee or
any other person)
A an old lady, by a deed of gift made over a certain property to her daughter R, with a direction
that the daughter should pay an annuity to A’s brother C, as has been done by A. Accordingly,
on the same day, R, the daughter, executed a writing in favour of her maternal uncle C, agreeing
to pay the annuity. Afterwards, she declined to fulfill her promise saying that no consideration
had moved from her maternal uncle i.e. the promisee. It was held that the words “the promisee
or any other person” in section 2(d) clearly show that a stranger to consideration may maintain a
suit. Hence the maternal uncle, though a stranger to consideration (as the consideration
indirectly moved from his sister) was entitled to maintain the suit. In the above case, it will be
observed that although C, the maternal uncle, wa sa stranger to the consideration, he was not a
stranger to the contract as there was a separate contract between him and R, the daughter. The
maternal uncle could not have sued on the basis of the ‘gift deed’ executed by A in favour of R
because he was not a party to it

Veeramma vs Ayyappa, (1957), AIR AP

965](exception to stranger to contract)
•A daughter along with her husband entered into a contract with her father, whereby it was
agreed that she will maintain her mothe and ptoperty of the father will be conveyed to them. The
daughter subsequently refused to maintain the mother. Ona suit it was held that the mother was
entitled to require her daughter to maintain her, though she was a stranger to the contract
Collins vs. Godefroy (1831), I.B. & Ad. 950(A
promise to do something which is illegal does not
amount to good consideration)
• C (the plaintiff) received a summon to appear at a trial as a witness on behalf of G (the
defendant). G promised him a sum of money for his trouble. On default by G, C filed the suit for
recovery of the promised sum. It was held that C being under public duty to attend and give
evidence, there was no consideration for the promise and hence the promise is unenforceable

Venkataswamy vs. Rangasami 6 Mad.

71(agreements out of love and affection)
A registered agreement, whereby an elder brother, on account of natural love and affection,
promised to pay the debts of his younger brother, was held to be valid and binding and the
younger brother could sue the elder brother in the event of his not carrying out the agreement.

Kedar Nath v. Gorie Mohammad(Contribution to

Charity)
The defendant had agreed to subscribe Rs. 100 towards the construction of the Town Hall at
Howrah. The plaintiff ( secretary of the Town hall) on the faith of the promise entrusted the work
to a contractor and undertook liability to pay him. The defendant was held liable.

Abdul Aziz vs. Masum Ali, (1914) AIR All. 22 The

defendant promised to subscribe Rs.500 to a fund
started for rebuilding a Mosque. But no steps had
been taken to carry out the repairs. The defendant
was held not liable and the suit was dismissed.
• Rann v. Hughes, 1778
Mary Hughes died, and Rann was the executor of her bequest. Isabella Hughes was the
administratrix of John Hughes’s estate after he died intestate (not making a will before death).
Mary and John had various disagreements while they were living, which were resolved through
arbitration, with John agreeing to pay Mary £983 as a settlement. At the time of John’s death,
this debt remained unpaid. Following Mary’s death, her executors demanded payment of the
obligation on John’s inheritance, which they estimated to be worth at least £3000. Isabella
pledged to pay the money, but she couldn’t since there was insufficient money in the estate

The executors then sued Isabella, alleging that her pledge was made in her own right, not as
administratrix, and thus not contingent on the estate having sufficient cash. The plaintiff was
victorious at trial, and the verdict was maintained by the King’s Bench on appeal. This verdict
was reversed in favour of the defendant on appeal to the Court of Exchequer. A writ of error was
filed in response to this reversal. The defendant claimed that the commitment was made in her
capacity as administratrix, but that even if it was a promise to be personally accountable, it was
unenforceable due to the lack of a written contract or the lack of consideration

This case was delivered by a single judge bench of Justice Skymer EB. The court stated that
the submissions of the defendants held that agreements without consideration have no legal
validity, and a promise or agreement not under seal is not actionable unless there be a
consideration for the same, even if it is in writing

Ranganayakamma vs Alwar Setti (1889), 13 Mad.

214](coercion)
A gentleman died leaving a young widow. The relatives of deceased threatened the widow to
adopt a boy otherwise they would not allow her to remove the dead body of her husband for
cremation. The widow adopted the boy and subsequently applied for cancellation of the
adoption.It was held that her consent was not free but induced by coercion, as any person ho
obstructed a dead body from being removed for cremation, would be guilty of an offence under
section 297 of the IPC. The adoption was set aside

Bhudra Chand v. Betts(1915)(time is the essence of

contract)
the defendant promised to deliver an elephant to the plaintiff for the capture of a wild elephant
as a part of Kheda Operations. The contract provided that the elephant would be delivered on
delivered on the 1st of October, 1910, but the defendant obtained an extension of the time till
6th Oct and yet did not deliver the elephant till 11ththe 1st of October, 1910, but the defendant
obtained an extension of the time till 6th Oct and yet did not deliver the elephant till 11th
The plaintiff refused to accept the elephant and sued for damages for the breach. It was held
that the plaintiff was entitled to recover damages since it was proved that time was the essence
of the contract since the defendant had tried to obtain an extension of time

• State of Kerala v. M.A Mathai(2007), it was held

that if
there are any delays in the performance of reciprocal obligations by
an employer, the contractor gets the right to avoid the contract but if
he does not avoid the contract and accepts the belated performance,
he cannot claim compensation for any loss sustained to him due to
delay in performance, unless he gives a notice of the same to the
delaying party

Mrs Saradamani Kandappan vs. Mrs S.

Rajalakshmi and Ors, ( RECIPROCAL PROMISES)

•In Mrs Saradamani Kandappan vs. Mrs S. Rajalakshmi and Ors, Sadarmani was paying for a
piece of land to Rajalakshmi in instalments. Before the payment of the last instalment,
Sadarmani wanted to see the title document. Rajalakshmi failed to show it and Saradamani thus
did not pay the last instalment.Thus, Rajalakshmi terminated the contract. Sadarmani moved to
the court and argued that failure to show the title document was the reason she could not pay
the last instalment. The court ruled that these two promises (the promise to show the title
document and the promise to pay for the last document) were exclusive as Sadarmani could
pay the last instalment without showing the title document. Thus, Sadarmani should have paid
the last instalment.

M/s Shanti Builders vs. CIBA Industrial Workers’ Co-Operative Housing Society Ltd., the
defendant, CIBA alleged that they suffered losses as Shanti builders did not do their work on
time. On the other hand, Shanti builders contested they were not given plots of land (as per
payment for construction). Since this plot of land was not given to them, they were not able to
complete construction
Shrawan Kumar v. Nirmala, ( RESTRAIN OF
MARRIAGE)
the plaintiff held that the defendant had promised to marry him and therefore her present
marriage should be injuncted by the court. This petition was dismissed by the Allahabad High
Court on the grounds of restraint of marriage.

Madhub Chander v. Raj Kumar, ( Agreements in

Restraint of Trade (Sec.27)
This is dealt with under Section 27 of the Act. The freedom to practice any form of trade and
occupation is a fundamental right guaranteed by the Constitution of India under Article 19(1).
Hence, any agreement in restraint of trade and occupation would be deemed as void. The
restraint can be both partial and complete

Chandra v. Parsullah ( EXCEPTION) SALE OF GOODWILL

Chandra v. Parsullah the plaintiff and defendant both had the business of running buses
between Pune and Mahabaleswar. To avoid competition, the plaintiff bought the defendant’s
business along with its goodwill and made a contract whereby the defendant would not be
allowed to carry on business in the same locality. However, there was a breach of contract on
the part of the defendant. When brought to the court, the court ruled in favor of the plaintiff since
the agreement was valid under Section 27.

Firm Daulat Ram vs. Firm Dharm Chand, where two ice factory owners constituting a
partnership agreed that only one factory will be worked at a time and its profits distributed
among them. The restraint was held to be justified