Contract Law

Imp. Case: Central Inland Water Transport Corporation Limited v. Brojonath Ganguly, 1986 3 SCC
156
Book: Avtar Singh
What is the function of contract law?
Contract law serves several important functions within the legal system. Its primary purpose is to provide a
framework for individuals and entities to enter into legally binding agreements, known as contracts. Here are
some critical functions of contract law:
Enforcement of Agreements: Contract law allows parties to create legally enforceable agreements. When one
party fails to fulfil its contractual obligations, the injured party can seek legal remedies, such as damages or
specific performance.
Facilitation of Transactions: Contracts facilitate a wide range of transactions, both in business and personal
relationships. Whether buying goods, providing services, or entering into employment relationships, contracts
provide a structure that helps parties understand their rights and obligations.
Certainty and Predictability: By establishing clear terms and conditions, contract law brings certainty and
predictability to commercial and personal relationships. This helps parties understand each other's expectations
and responsibilities, reducing the risk of disputes.
Protection of Parties: Contract law aims to protect the interests of both parties involved in a transaction. It
provides remedies for breaches of contract, ensuring that the injured party can seek compensation for any harm
suffered due to the other party's failure to perform.
Encouragement of Good Faith Dealings: Contract law encourages parties to negotiate and perform their
contractual duties in good faith. Good faith dealings involve honesty, fairness, and a sincere effort to fulfil the
agreed-upon terms, fostering trust and cooperation between parties.
Risk Allocation: Contracts allow parties to allocate and manage risks by specifying the responsibilities and
liabilities of each party. This helps parties make informed decisions about entering agreements and understand
non-compliance's potential consequences.
Promotion of Commerce: Contract law is crucial in promoting economic activities and commerce by providing
a legal foundation for business transactions. It helps create a stable and reliable environment for businesses to
operate.
Legal Framework for Relationships: Contracts serve as a legal framework for various relationships, including
business partnerships, employment agreements, leases, etc. This helps maintain order and resolve disputes
within a structured legal framework.
In summary, contract law establishes the rules and principles governing agreements' formation, performance,
and enforcement, contributing to the stability and functioning of commercial and personal relationships within
a legal system.
 • When discussing consent, we discuss terms that the parties have agreed to. Only if they have consented
to the terms can they be held liable.
• Terms are the positive aspect of the contract because you are only bound by the terms you have agreed
to.
• Liability arises from consent; when there is no consent, there is no liability.
• A negative aspect of freedom of contract is that no duty is owed to anyone.
Freedom of contract and sanctity of contract
• The freedom of the contract assumes the validity of the contract.
• Sanctity refers to ‘no interference’ with the freedom of contract.
• Once the contract is agreed to, you cannot change the terms or its aspects because doing so will dilute
both its freedom and sanctity.
• ‘Agreements must be kept’: Pacta sunt sarvanda.
Principles of Sanctity (read more about it)
• Law should not be too interfering; it should let the parties decide the terms. The purpose of the law is
only to ensure that the contract is enforced and not provide remedies to the aggrieved parties.
• The consent should be expressed and should not be assumed. The contract is based on consent theory;
it believes in formal equality.
• Sanctity of contract means respecting the clauses of the contract act.
Freedom of Contract Grounds:
• Parties are in an equal bargaining position.
• The economic interests of the community are considered.
• The contract law wants to make a lazier, fairer economy and ensure predictability and security.
• The state’s public policy lays down certain conditions that dilute the freedom of contract. Examples:
➢ If the terms of the contract are too harsh, the court will not enforce it.
➢ Essential facilities doctrine is an example of statutory limitation. It specifies when the owner(s) of an
“essential” or “bottleneck” facility must provide access to that facility at a reasonable price.
➢ Article 14 states that the State shall not deny to any person equality before the law or the equal protection
of the laws within the territory of India. This principle of equality implies that individuals should be treated
equally under similar circumstances and that there should be no arbitrary discrimination. This means that
contracts cannot be arbitrarily discriminatory or violate the principle of equal protection. For example, if a
contract unfairly discriminates against a particular group of people based on caste, religion, gender, or any
other arbitrary criteria, it may be considered unconstitutional.
➢ The standard form of contract is standard is of 2 types, 1. in the sense that once the parties have arrived at
a contract through negotiation, they agree to use certain important conditions on future conditions as well.
Another example of the standard form of contract is that specific contracts have pre-decided criteria for
their part of the contract, and we as consumers don’t have the negotiating power, we can either sign the
contract or reject it, for example, insurance agreements where the insurance doesn’t negotiate on the terms,
pay and liability of the contract as per the consumer.
A standard form of contract cannot be enforced until the terms have been weighed and the
parties have agreed.

Substantive and Procedural law

Substantive Law:
• Substantive law refers to the body of laws that outline individuals' and entities' rights, duties, and
obligations.
• It defines the legal relationship between people, government, and individuals.
 • Substantive law addresses the substance of legal rights and obligations, establishing the rules governing
conduct and defining legal or illegal.
• Examples of substantive law include criminal, contract, property, and tort law.
Procedural Law:
• Procedural law, on the other hand, outlines the processes and methods by which legal actions are
conducted.
• It sets forth the rules for enforcing substantive law and governs the steps in legal proceedings, from
filing a lawsuit to resolving a case.
• Procedural law ensures that legal proceedings are fair, consistent, and orderly.
• Examples of procedural law include rules of evidence, civil procedure, criminal procedure, and rules
of appellate procedure.
In summary, substantive law establishes the rights and obligations of individuals, while procedural law outlines
the processes and methods by which legal actions are conducted and resolved. Both are essential components
of a legal system, working together to ensure justice and fairness.
Is it true that as society progresses, it moves from status to contract?
Progressive society has hitherto been a movement from status to contract. - Henry Maine
The idea that societies evolve from a reliance on status to a greater emphasis on contractual relationships is
often associated with legal and sociological theories. This notion is most prominently linked to the work of
legal scholar Sir Henry Maine and his influential book "Ancient Law," published in 1861.
Maine proposed that societies progress through two primary stages: the "status" and “contract” stages. Here's
a brief overview:
Status:
• In the "status" stage, social and legal relationships are primarily determined by a person's status or
membership in a particular group or class.
• Legal rights and duties are often based on a person's position within the community, such as caste,
family, or other social structures.
• Traditional societies and early civilisations were often characterised by a system where individuals had
fixed roles and obligations based on their social status or identity.
Contract:
• As societies progress, Maine argued, they move toward a more advanced stage where legal relationships
are increasingly based on voluntary agreements and contracts.
• In the "contract" stage, individuals have greater freedom to enter into agreements with others, and legal
relationships are shaped by the terms of these contracts rather than predefined social statuses.
• This stage is associated with developing a more individualistic and market-oriented society.
While Maine's theory has been influential and provides a valuable framework for understanding legal
evolution, it's essential to note that societies are complex. Not all aspects of a society neatly fit into this binary
framework. Additionally, interpretations and critiques of Maine's theory abound, and some scholars argue that
the progression from status to contract is not universal or linear.
In contemporary legal and sociological analysis, there is recognition that elements of both status and contract
persist in modern societies, and legal systems often involve a nuanced combination of these principles. Societal
progress is viewed as a multifaceted and dynamic process, and different legal systems may exhibit variations
in the balance between status-based and contract-based relationships.
Ways In which freedom of contract is diluted
Can fundamental right be invoked against the companies – yes, the scope of art.12 has been increased. –
the fundamental rights apply vertically – the scope or ambit of the “state” is increased – vertical application of
the fundamental right means available only against the state – courts have paved the way for horizontal
application of the fundamental rights as well.
Freedom of contract
1. Can’t have a contract that is against part 3 of the consti.
If the contract is against the consti. Principles, then the court will not enforce the contract
2. Statutory restrictions
Not against public policy
3. Compulsory transactions or essential facilities
Provider of essential facilities cannot discriminate and deny to supply a commodity
HISTORICAL BACKGROUND OF THE INDIAN CONTRACT ACT, 1872 (refread.com)
HISTORICAL BACKGROUND OF THE INDIAN CONTRACT ACT, 1872 Author(s): Atul Chandra Patra
Source: Journal of the Indian Law Institute, July-Sept., 1962, Vol. 4, No. 3 (July-Sept., 1962), pp. 373-400
Published by: Indian Law Institute Stable URL: https://www.jstor.org/stable/43949727
Fitz James Stephen – responsible for the formation of the Indian Contract Act.
Kaushal Kishore v. State of U.P. https://www.scobserver.in/cases/kaushal-kishor-uttar-pradesh-azam-
khan-freedom-of-speech-and-expression-case-background/ especially second and third issue only –
both the majority and minority opinions should be read.
27156_2016_3_1501_40744_Judgement_03-Jan-2023.pdf (scobserver.in) page 15.
Answers me legal analysis karni hai exam me.
There should be a duty – to enforce a right – and there should be a forum where you can approach to enforce
that right – if that entity denies what is to be done – these questions are important
The distinction between the kinds of rights right classification
What constitutes constitutional rights? forum state actor/ duty
When The State owes the duty to enforce the right then it is a constitutional right – if non-state actors enforce
the right then it is not a constitutional right
Horizontal and vertical effect of the rights
Vertical effect refers to the enforcement of rights by the individual against the state. In contrast, horizontal
effect refers to the enforcement of rights by an individual against another individual.
Indian constitutional law and philosophy – Gautam Bhatia blog
Kaushal Kishor, Horizontal Rights, and Free Speech: Glaring Conceptual Errors
JANUARY 27, 2023 GAUTAM BHATIA1 COMMENT
There is an old adage that if you want to arrive at the right answers, you have to first ask the right questions.
The Supreme Court’s judgment earlier this month in Kaushal Kishor vs Union of India reflects another
truth: that if you want to arrive at answers that mean anything at all, your questions have to first make sense.
Ostensibly, this judgment of a Constitution Bench of the Court deals with crucial constitutional issues around
the limits to freedom of speech and expression, and the horizontal application of fundamental rights. If this
was the only information you had about Kaushal Kishor, you would imagine that the case arose out of a
factual matrix where perhaps an institutionally powerful non-State actor violated an individual’s
constitutional rights – a case such as Tomlinson vs Television Jamaica (Jamaican Court of Appeal), for
instance, or Khumalo vs Holomisa (South African Constitutional Court). In these cases, the judiciaries of
their respective countries developed the law on horizontality and free speech because the disputes before
them raised questions about horizontality and free speech.
What was the dispute in Kaushal Kishor vs Union of India? To understand this, you will first have to go back
to August 2016 – the halcyon days of Chief Justice Dipak Misra’s Court – when the SC admitted a petition
seeking action against a UP government minister, who had claimed that a gangrape in Bulandsahr was a
“political controversy.” The Court framed four “questions” for resolution, which – as I pointed out at the
time – were vague to the point of being incoherent. The government minister in question then apologised to
the Supreme Court. The matter ought to have rested here, except that in October 2017, the case – now
without a lis – was referred to a Constitution Bench of the Supreme Court, i.e., a five-judge bench that is
constituted only when a “substantial question of law” with respect to the interpretation of the Constitution has
arisen. During this time, the Court had also anointed Messrs. Fali Nariman and Harish Salve, and the genesis
of what finally became the judgment in Kaushal Kishor can be traced back to one of the “questions”
submitted to the Court by Mr. Nariman, namely, whether obligations under Article 21 would apply to non-
State parties.
The matter was then buried for a couple of years, as often happens at the Supreme Court, until its sudden
resurrection in mid-2019. At this point, the following five questions were framed by the Constitution Bench:
1. Are the grounds specified in Article 19(2) in relation to which reasonable restrictions on the right to
free speech can be imposed by law, exhaustive, or can restrictions on the right to free speech be
imposed on grounds not found in Article 19(2) by invoking other fundamental rights?
2. Can a fundamental right under Article 19 or 21 of the Constitution of India be claimed other than
against the ‘State’ or its instrumentalities?
3. Whether the State is under a duty to affirmatively protect the rights of a citizen under Article 21 of the
Constitution of India even against a threat to the liberty of a citizen by the acts or omissions of
another citizen or private agency?
4. Can a statement made by a Minister, traceable to any affairs of State or for protecting the
Government, be attributed vicariously to the Government itself, especially in view of the principle of
Collective Responsibility?
5. Whether a statement by a Minister, inconsistent with the rights of a citizen under Part Three of the
Constitution, constitutes a violation of such constitutional rights and is actionable as ‘Constitutional
Tort”?
As I had written at the time, while questions (4) and (5) had some tenuous connection to the original dispute,
the first three questions were simply general excursions into constitutional philosophy (see “A Very Strange
Constitution Bench“, October 27, 2019). I had also warned that this kind of judicial buccaneering never
ends well, because these questions are simply too complex, too multi-layered, and too poly-centric to admit
of resolution in the abstract: judiciaries all over the world have spent decades developing the law on these
issues, incrementally, and in response to the concrete disputes that are brought before them. Shortly after, in
a guest post, Anubhav Khamroi pointed out that the first question had already been decided by a coordinate
bench in Sahara vs SEBI, thus making Kaushal Kishor not only an academic exercise on this point, but
an unnecessary academic exercise too boot.
The matter once again lay buried for three years, until it was pulled out a second time during CJI Lalit’s
tenure, assigned to a bench, and then heard and decided. The Court split 4-1, with Nagarathna J in partial
dissent. Some of the conclusions in Kaushal Kishor have already been critiqued on this blog (see “Who
Killed Article 12?“). This piece sets out a few additional arguments.
Horizontality
Before looking at the Court’s analysis, it is important to get a few concepts straight. When we look at the
application of constitutional principles to private, non-State parties, there are four different approaches,
which must be kept conceptually distinct (for an explanation, see “Horizontality: A Schema” on this blog,
and the present author’s PhD thesis. These are as follows:
1. The State Action doctrine refers to an approach where you ask whether a private party
sufficiently resembles the State, for its actions to be attributable to the State. Different tests are used
in different countries: the doctrine itself originated in the US, is applied in various jurisdictions such
as South Africa, and in India, it takes the form of the extensive case law on the interpretation of
Article 12 of the Constitution (see the blog series “What is the State?“, from 2014)
2. Positive obligations refers to an approach where rights are deemed not only to have negative content
– i.e., requiring the State to refrain from doing something – but also, positive content – i.e., requiring
the State to act affirmatively to protect your rights. On some occasions, positive obligations arise in
 the context of State omission in cases where certain private parties are violating the rights of others.
The classic example here is Vishaka.
3. Indirect horizontality refers to an approach where private law is subjected to constitutional scrutiny,
and is interpreted or modified accordingly. For example, in the famous New York Times vs Sullivan,
the US Supreme Court modified the common law of defamation to bring it in line with the
constitutional guarantee of free speech.
4. Direct horizontality refers to an approach where private conduct is subjected to constitutional
scrutiny. For example, Article 15(2) proscribes discrimination by any person against any other person,
in certain specified contexts. INDIAN MEDICAL ASSOCIATION CASE.
Type of Remedy Respondent Cause of Action Case(s)
Private body Private Private act Pradeep Kumar Biswas vs
assimilated to State actor (classified as Indian Institute of Chemical
under Article 12 State act) Engineering, (2002) 5 SCC
111.
Positive Rights State State (in)action Vishaka vs State of
enforceable against Rajasthan, (1997) 6 SCC
the State 241; Medha Kotwal Lele,
(2013) 1 SCC 311
Indirect Private State R. Rajagopal vs State of
horizontality actor law/common law Tamil Nadu, (1994) 6 SCC
632.
Direct horizontality Private Private act IMA vs Union of India,
actor (2011) 7 SCC 179; PUDR
vs Union of India, (1982) 3
SCC 235.

Kaushal Kishor commits an elementary mistake by repeatedly bunching these concepts together. This is
evident in its opening discussion of US law from paragraphs 50 to 54), where it conflates The Civil Rights
Case (state action), New York Times vs Sullivan (indirect horizontality), and Shelley vs Kraemer (state action,
with the judiciary deemed to be state). It is evident in its consideration of Irish constitutional law (paragraph
55), where it mixes up positive obligations with horizontality. The majority states that Irish constitutional law
is on “the opposite end of the spectrum” from US constitutional law on the question or horizontality. This is
fundamentally incorrect: Irish constitutional law has developed a restrictive account of horizontality under
the constitutional tort doctrine (more on that anon). A few paragraphs later, the majority cites the Irish
Supreme Court case of Meskell to hold that under Irish constitutional law, “full horizontal effect” has been
given to rights such as freedom of association, freedom from discrimination and the right to livelihood
(paragraph 57). This is also incorrect: it is, in fact, a criticism of Irish constitutional law that its horizontal
rights doctrine is narrow and limited (see, e.g., Banda). The majority’s discussion of South African
constitutional law then conflates horizontality under the Constitution with horizontality
under statute (paragraph 61), and its awareness of South African jurisprudence on horizontality appears to
end at 2011 (for reference, the most recent South African judgments on horizontality, which significantly
developed the law, were handed down in 2021) (paragraph 64). Even its analysis of the law it does seem to
be aware of is ill-considered: the majority states that the South African Constitutional Court in Juma
Masjid took horizontal effect to “an extreme”: if anything, the decision in Juma Masjid is a fundamentally
conservative one, that firmly places horizontal rights subordinate to vertical rights against the State. And then
we finally have the UK and the ECHR (paragraphs 66 – 70), where every example the Court takes is
grounded in positive obligations, and not horizontality.
Now, nobody was forcing the majority in Kaushal Kishor to undertake a global, comparative analysis of
horizontality. However, if the majority elected to do that, then it bore a minimum obligation to (a) get the
concepts right, (b) get the law right, and (c) provide an up-to-date picture of the law. The Kaushal
Kishor majority manages to fail all three requirements.
The majority then comes to Indian law, where once again the same set of confusions is rife. In paragraph 76,
the majority claims that it is going to examine a set of cases that extended the application of fundamental
rights to non-state parties. It then indiscriminately summarises sixteen cases, some of which were about
positive obligations (e.g. Vishaka vs State of Rajasthan), some of which were about the meaning of “State”
(Zee Telefilms), some of which were about direct horizontality (IMA vs Union of India), and some of which
are utterly irrelevant to the question altogether (the RTE judgment). Having slashed and burned its way
through thus jurisprudential forest, the majority then notes “that all the above decisions show that on a case-
to-case basis, this Court applied horizontal effect, considering the nature of the right violated and the extent
of obligation on the part of the violator.” (paragraph 77) Of course, the decisions cited do nothing of the
sort. The majority then bizarrely cites a passage in Puttaswamy that goes against its own position (something
picked up on by Nagarathna J in her dissent), as it notes that common law rights are horizontally applicable,
while fundamental (constitutional) rights are vertically applicable. The majority says that Puttaswamy has
answered a “part of the question” (it does not explain how), and then triumphantly concludes, in paragraph
78:
A fundamental right under Article 19/21 can be enforced even against persons other than the State or its
instrumentalities.
Like the title of the famous Borges’ short story, this is both everything and nothing. The Court’s
“declaration” that Articles 19 and 21 apply horizontally is meaningless and incoherent without further clarity.
It should be immediately clear that not every violation of Articles 19 and 21 (or, for that matter, other
constitutional provisions) can yield a constitutional remedy through writ proceedings (a point that is
hammered home by Nagarathna J). To take a basic example, if referee Mike Riley takes a bribe to award a
wrongful penalty to Manchester United against Arsenal, the remedy is to proceed against him under criminal
law, and not under the constitutional guarantee against manifestly arbitrary treatment. Similarly, if X enters
into a contract with Y and then refuses to pay Y for services rendered, you proceed against X
under contract law, not for breaching your right to livelihood under Article 21. “Unbounded” direct
horizontality is an obvious non-starter, because it will turn all of existing private law into constitutional
adjudication, creating havoc both in substance and in procedure. It is precisely for this reason that Courts
elsewhere – whether it is Ireland, or South Africa, or Kenya, or even the United States – have developed
doctrine incrementally, and arising out of concrete cases, and not as abstract philosophical exercises. And it is
precisely for this reason that the majority ought to have refrained from answering this question in the
abstract.
There is, however, a second – and more conceptual – problem with the majority’s approach (again, noted by
Nagrathna J in her dissent). If you take up Part III of the Constitution, you will immediately see that where
the Constitution intends for a fundamental right to apply horizontally, it explicitly provides so (Articles 15(2),
17, 23, and 24). This is structurally different from, for example, the South African Constitution, where
Section 8(2) states: “a provision of the Bill of Rights binds a natural or a juristic person if, and to the
extent that, it is applicable, taking into account the nature of the right and the nature of any duty
imposed by the right” (see also, Article 20, Constitution of Kenya). Unlike the South African
Constitution, therefore, where any provision of the Bill of Rights can potentially apply horizontally (subject
to doctrinally-placed constraints, which is how the South African law on horizontality has developed), the
Indian Constitution has specific carve-outs for domains where rights apply horizontally. Presumptively,
therefore, for other rights, there is no horizontal application available. Now, the majority does not
even engage with this argument, let alone deal with it. It provides no reasoning whatsoever to explain why it
is departing from the obvious result of an eyeball test of Part III’s text and structure; and the judgments that it
relies upon – as pointed out above – do not support the proposition that it advances.
All this is unpardonably shoddy.
Miscellany
There is little profit in dwelling upon other parts of the judgment, although a few brief points may be made.
The third question involves a literal restatement of existing law, which the Court does (the answer is “yes”,
going back at least to Vishaka). The fourth question is a basic, first-principles articulation of the simple point
that a minister does not always speak for the government. Conceptual confusion returns in the fifth question,
where the majority confuses torts by government actors with constitutional tort, and embarks on a thoroughly
irrelevant excursion into tort law. As Nagarathna J correctly points out in her opinion, the reason why it is
called constitutional tort is because it incorporates the concept of damages/compensation from tort law; a
constitutional tort involves the breach of constitutional rights by State actors where compensation is an
appropriate remedy (even here, there is some degree of conflation, as constitutional tort in Ireland means
something else), not a common law “tort” committed by a State actor.
And finally, there is confusion even in the majority’s consideration of Article 19(2). The majority once again
seems to conflate two conceptually distinct points. The first point is that the Court – obviously – cannot
engraft fresh exceptions to the right to free speech, beyond the eight sub-clauses already present in Article
19(2). This the Court (correctly) affirms in paragraph 29. The second point is that there will inevitably be
occasions where rights under Part III will clash, and the Court will have to balance clashing rights through a
principled and doctrinally sound approach. Ostensibly while analysing this second point, the majority cites a
series of cases where the courts have done precisely this – sought to balance the claims of two competing
rights (e.g., free speech and privacy). Noting that “tools” exist to do so, the majority then comes right back,
in its conclusion, to the statement that “under the guise of invoking other fundamental rights or under the
guise of two fundamental rights staking a competing claim against each other, additional restrictions not
found in Article 19(2), cannot be imposed on the exercise of the right conferred by Article 19(1)(a).” But
what does this mean? When I argue for restricting your right to free speech because it is impinging on my
privacy, I am invoking privacy (not found in Article 19(2)) to restrict the scope of your right to free speech.
Also, where does this leave judgements such as the 2016 criminal defamation verdict, which explicitly
invoked reputation as a ground to justify criminal defamation as a limitation upon free speech? Once again,
there is no engagement with these thorny issues in the majority’s judgment; in the dissent, at the very least,
there is, although Nagarathna J.’s conclusion that certain kinds of speech are outside the ambit of Article
19(1)(a) altogether is, itself, a somewhat perilous idea, as it involves assessing the comparative worth of
forms of expression, without adequate thought for the structure of Article 19(1)(a) or the consequences that
follow.
Conclusion
Kaushal Kishor is a salutary lesson in judicial restraint when it comes to dealing with abstract philosophy
instead of a concrete lis. Horizontality is one of the most complex and complicated issues in contemporary
constitutionalism, involving a multitude of overlapping questions about the nature of the State, institutional
power asymmetries, public and private law, forms of remedies, and so on. These questions can only be
considered in the concrete, in a situation where a rights-bearer and a rights-violator are before the Court, and
the issue of horizontal rights applicability assumes tangible form. Without that, as we have seen, there is
confusion, and what is worse, a muddying of previously (relatively) clear waters. One can only hope,
with Kaushal Kishor, that when future courts look at the majority, they find it simply incapable of application,
and that with the passage of time, the judgment slips into judicial desuetude.

Pradeep Kumar Vishwas's case for the definition of state

Unbounded horizontality
Equating private action with state action.
 UNIT -2
ELEMENTS OF THE CONTRACT FORMATION.

Offer – section 2(a) of the contract act; When one person signifies to another his willingness to do or to
abstain from doing anything, to obtain the assent of that other to such act or abstinence, he is said to make a
proposal;
The offer should be made to a specific person.
Read sections 3, 4, and 5.
Carlil v. Carbolic Smoke Balls, Case analysis of Carlill v. Carbolic Smoke Ball Co - iPleaders.

Facts of the case

The Carbolic Smoke Ball Company came up with a new advertising strategy that would require the company
to advertise that their Carbolic Smoke Ball was a definite panacea for influenza, hay-fever, coughs and colds,
headaches, bronchitis, laryngitis, whooping cough and any other sore throat related troubles.
The company was, in fact, very confident of the usefulness of their product. They also claimed that the carbolic
smoke ball not only possesses the ability to cure influenza but also prevent users from getting any type of
common flu. However, the main crux of their advertisement was that the company stated that any person who
catches a cold or gets affected by influenza even after using their product (carbolic smoke ball); such a person
will be entitled to claim £100 from the company provided that the product has been used for a certain specified
period of time.
The company also stated that it had also gone as far as to deposit £1000 in a certain Alliance Bank. This deposit
was made by the company in the event of any claims that could be made in lieu of their advertisement. The
plaintiff Carllil followed all the procedures of using the carbolic smoke ball. Even after following the
procedure, she still caught the flu. Consequently, she filed a suit against the Carbolic Smoke Ball
Company. Her claim was £100 from the company as the company advertised their product as such. The Court
ruled in her favour. The defendants, however, appealed.
Issues raised
There were 4 main issues raised:
1. Whether there was any binding effect of the contract between the parties?
2. Whether the contract in question required a formal notification of acceptance?
3. Whether Mrs Carlill was required to communicate her acceptance of the offer to the Carbolic Smoke
Ball Company?
 4. Whether Mrs Carlill provided any consideration in exchange for the reward of 100 pounds offered by
the company?
Concept of Unilateral Contracts
A simple way of describing Unilateral Contracts or Single-sided Contracts is that they consist of an offer to the
world at large and formal communication of its acceptance is not required.
There are a few implications of the way these types of contracts function. After a thorough analysis of this
concept of Single-sided Contracts, a common conclusion is that its implementation is problematic due to the
doctrine of consideration.
Most contracts have consideration as an essential part without which an agreement is not considered as a valid
contract under law. Anything of value is a consideration. For example, a benefit or a detriment. When such a
benefit or detriment is promised in return for the promisor’s promise then only an agreement becomes a valid
contract. The consideration also needs to be valid and lawful. Unlawful consideration renders a contract void.
Only promises (from both sides) which are backed by a valid consideration are enforceable. The problem with
Unilateral contracts is that both sides don’t hold a definite obligation towards each other. If the offer made is
beneficial then also under such contracts there is no seeming obligation for the other party (at the receiving end
of the benefit) to provide any consideration in return. According to the essentials of a valid contract, a unilateral
contract should be invalid due to the lack of consideration, however, in daily scenarios, it very well exists and
thrives in market places.
Analysis
Defendant’s arguments
The Carbolic Smoke Ball Company argued that their offer didn’t have a binding impact in order to form a valid
contract. Their reasoning was that words used in the advertisement did not really amount to a proper promise
because the advertisement was too vague in its terms to form a contract.
Secondly, they argued that there was no specified limit as to time and there was no means of checking as to
how the smoke ball (product) was being utilised by the consumers. For example, an unscrupulous consumer
may have not used the product properly at all and then alleges the company into depositing the money according
to the offer.
Thirdly, there was no contract because in order to form a valid contract requires communication of intention to
accept. In this case, Carlill didn’t really send any acceptance with regard to the offer either expressly or
impliedly or through any performance of an overt act.
Thus, it is clear that the advertisement was just a marketing strategy and the company didn’t have any intention
to form any form of a contract while making an offer to the world at large.
Plaintiff’s arguments
The plaintiff, on the other hand, argued that the promise was not vague and also the construction of the offer
was such that it was clear that in case the product wasn’t effective the company would reward a certain amount.
Also in order to facilitate the same, the company had deposited a large amount in the Alliance bank account.
Thus, their act of depositing the amount is proof of their intention to actually form an agreement from one side.
The plaintiffs also proved that there was a consideration in the form of the money paid to buy the carbolic
smoke ball.
The advertisement was not an empty boast. In fact, it characterised most of the essentials that attribute a contract
and more precisely a Unilateral Contract. Thus, the company has to fulfil its part of the bargain.
Court’s stance
The English Court of Appeals held that the contract was a binding one. Carlill was successful. The reasoning
provided by the judges are as follows:
In a nutshell, Justice Lindley stated that the advertisement shall be treated as an express promise. According to
this promise, anyone who contracts the flu despite the preventive capacity of the smoke ball as claimed by the
company will be paid 100 pounds provided that the ball is utilised as per the directions (three times daily for 2
weeks). Elaborating his reasoning as follows:
1. Justice Lindley said that the advertisement was not an empty boast or a mere puff because of the use of
a particular statement that is “1000 is deposited with the Alliance Bank, showing our sincerity in the
matter”. This statement makes it evident that the company was sincere enough while offering the
reward in the first place.
2. The promise made by the company is binding enough even though there was no specific at the receiving
end of this conditional benefit. This is a unilateral offer which doesn’t require acceptance as it is made
to the world at large. It shall be treated as an offer to anyone who performs the conditions and anyone
who performs the specific condition (in this case using the smoke ball 3 times for 2 weeks) accepts the
offer.
3. Justice Lindley also concluded that the advertisement is not vague. The words used to construct the
language of the advertisement can be construed as a promise. The words are reasonably constructed to
lead any potential consumer to believe that if they contracted the flu even after using the smoke ball,
they are entitled to 100 pounds.
4. With regard to the notification of acceptance Lindley observed that the notification of the acceptance
need not precede the performance. It was a continuing offer. For example, if an express acceptance was
required, then the person making the offer gets the notice of acceptance along with a promise of
performance of the condition laid down in the advertisement”. In other words, if the specific conditions
are performed then it implies the communication of acceptance of the offer.
5. Lastly, Justice Lindley concluded that consideration did exist in this case mainly for 2 reasons. Firstly,
the company received a benefit in the form of sales. Secondly, there is a detriment involved that is the
direct inconvenience caused to the consumer who uses the smoke ball as per the conditions laid down
in the advertisement. Thus, the performance of the specified conditions constitutes consideration for
the promise.
Justice Bowen also offered his reasoning. Bowen also agreed with Justice Lindley. His reasoning can be
summed up into 3 points.
1. An offer made to the public at large can also ripen into a contract if anyone fulfils the conditions of the
contract. Their performance implies their acceptance and also establishes the consideration.
2. A specific Notification of acceptance is not required in such situations.
3. There exists a valid consideration. Firstly, the company will profit from the sale of the product.
Secondly, the fact that the company deposited 1000 pounds in the bank for the purpose of the offer
made by them implies their sincerity to fulfil their part of the bargain in case their product fails to
prevent the flu.
Finally, Justice Smith went with the reasoning of Justice Bowen and Lindley and dismissed the appeal
unanimously. The plaintiff received compensation of £100.
Impact of Carlill v. Carbolic Smoke Ball case on English Contract Law in the present day
This judgment impacted English contract law. Especially the concept of Unilateral contract as now companies
and advertising agencies are more careful with what they release to the world at large. A thoughtless marketing
strategy can incur grave losses for the company as they may be pulled into an unnecessary litigatory matter.
Now, there are other scenarios of unilateral contracts. For example, If a person/ pet goes missing and the
missing person’s family/ owner puts up a poster with their picture and name on it, offering a reward for any
relevant information of the missing person/ pet or even the safe return of the same; this can be treated as a
unilateral contract. It is an offer to the world at large. Once the person or pet is found then it shall be implied
that the offer was accepted. Thus, the offeror is now under the obligation to perform his part of the agreement
that is to reward the person who found them.
Similarly, if the police offer rewards to the public at large if anyone provides information that will assist the
police in a criminal investigation; then also such a scenario shall be treated as a unilateral contract. Thus,
making the reward money payable.
Commercial Uncertainty due to the concept of Unilateral contracts
Due to the flawed implementation of the doctrine of consideration in unilateral contracts create commercial
uncertainties which could have been otherwise ruled out. For example, the implied terms that specify the
variations in remuneration in commercial contracts causes commercial uncertainty. In other words, the face of
the document may put up one price however, it would vary. Thus, the deal on the contract papers isn’t as
straightforward as it seems but it’s still considered as a valid contract. Same is the case with the unilateral
contracts where there are no specific parties to the contract. This also means that such contracts also cannot be
certain about its privity until the conditions are performed by someone (which again can be anyone).
At this point, the only question that arises is that how would commercial parties be certain about what all
conditions would be adhered to?
The confines of the implied terms and conditions are narrow in its scope. Therefore, there are limited to
situations in which commercial certainty would be violated due to failure of performance.
Conclusion
This is one of the most frequently cited cases in the English common contract law. It is a perfect example of
unilateral contracts. It also points out the problems associated with unilateral contracts. This case also helps in
understanding the basic essentials of normal contracts as this is a case of exception to these principles owing
to lack of need for acceptance of offer and consideration. The commercial uncertainties created due to such a
vacuum in unilateral contracts it also affects the concept of privity of contracts. Thus, this case has become a
foundation case for Contract law. Altogether, the judgement was well put together, however, the underlying
implications of the judgment have become an evergreen subject of debate in commercial circles.

➢ An offer becomes irrevocable upon acceptance

➢ It can be revoked before acceptance
Section 8 of ICA. Acceptance by performing conditions, or receiving consideration - Performance of the
conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered
with a proposal, is an acceptance of the proposal.
Consent is the foundational remise of the contract.
Consensus ad idem – meeting of the minds.
Acceptance has to be absolute and unqualified.

Harvey v. Facey – “Harvey v. Facey” is a legal case that was decided in 1893 by the Privy Council, the highest
court of appeal in Jamaica at the time. While this case is not as well-known as some other legal cases, it has
become a classic example in contract law and is often studied in legal education for its significance in
understanding contract formation.
Case Background:
• The case involved a telegraphed exchange of messages between two parties, Harvey and Facey, in the
context of a potential sale of property.
 • Harvey sent a telegraph to Facey inquiring about whether he would sell a particular piece of land and
asking for the lowest price. Facey replied with a telegram stating, “Lowest price for Bumper Hall Pen
is £900.”
• Harvey, in response, sent another telegram stating, “We agree to buy Bumper Hall Pen for the £900
asked by you.”
Key Legal Issue:
• The central issue in the case was whether a binding contract had been formed based on the exchange of
telegrams between Harvey and Facey.
Court Decision:
• The Privy Council held that there was no enforceable contract between the parties.
• The court determined that Facey’s telegram merely provided information about the lowest price at
which he was willing to sell the property, but it did not constitute an offer.
• Harvey’s telegram, in which he expressed agreement to buy the property for £900, was held to be an
offer, not an acceptance of an offer. However, this offer had not been accepted by Facey, as he did not
explicitly confirm the sale in his previous telegram.
• Therefore, there was no mutual assent, which is a fundamental element of contract formation.
Legal Significance:
• The case of Harvey v. Facey is often cited in contract law to illustrate the importance of clear and
unequivocal offer and acceptance in contract formation.
• It underscores the principle that mere inquiries, price quotations, or negotiations do not necessarily
constitute offers capable of forming a contract. An offer must be distinguished from preliminary
communications and must be met with a clear and unconditional acceptance to create a binding contract.
• The case serves as a cautionary example for parties engaged in negotiations and highlights the
importance of precise communication in contractual relationships.
In summary, Harvey v. Facey is a classic case in contract law that emphasizes the need for a clear offer and
unequivocal acceptance for a contract to be valid. It highlights the importance of careful communication in
contractual negotiations.
BATTLE OF FORMS
Battle of forms - A battle of the forms is a situation that occurs when two parties seek to enter into a contract
using their own standard forms with different terms and conditions. The parties exchange pre-printed order
forms or other documents without reaching a final agreement on the terms of the deal. This can lead to
confusion and disputes over which terms and conditions apply to the transaction or contractual relationship

Material terms of the transaction – certain conditions will remain same –

Boiler Plate/Dickered provisions - Boilerplate provisions are standard language in contracts that can be reused
in a new context or application without being wholly changed from the original text.

Material terms aka dickered terms

Traditional analysis means = offer and acceptance should be the mirror image of each other.
MR engineering v. Somdatta Building

BUTLER MACHINE TOOL V. EXCEL O CORPORATION

BUTLER MACHINE TOOL V EX-CELL-O CORPORATION.PDF
HON'BLE JUDGES/CORAM: Denning, Lawton and Bridge, JJ.
Facts
The plaintiffs offered to provide delivery of a machine tool for the price of £75,535. The delivery of the tool
was set for 10 months, with the condition that orders only qualified as accepted once the terms in the quotation
were met and prevailed over any of the buyer’s terms. The buyer responded to the offer with their own terms
and conditions, which did not include the ‘price variation clause’ listed in the seller’s terms. This included a
response section which required a signature and to be returned in order to accept the order. The sellers returned
this response slip with a cover letter signalling that delivery would be in accordance with their original
quotation. The tool was ready for delivery but the buyers could not accept delivery, for which the sellers
increased the price which was in line with their initial terms. This was denied by the buyer and an action was
brought by the seller to claim the cost of delay and interest.
Issue
The court at the first instance found in favour of the sellers and ordered for the buyers to pay the increased cost.
The buyers appealed this decision. In the appeal, it was important for the court to establish at which point, and
on which party’s terms the contract had been constructed.
Decision / Outcome
The court allowed the buyer’s appeal. The court found that the buyer’s order was not an acceptance of the
initial offer from the seller but a counter-offer which the sellers had accepted by returning the signature section
of the buyer’s letter. On this basis, the court found that the contract was completed without the price variation
clause and therefore the seller could not increase the cost of the tool.
Dennings - The terms and conditions of both parties are to be construed together. If they can be reconciled so
as to give a harmonious result, all well and good. If differences are irreconcilable - so that they are mutually
contradictory - then the conflicting terms may have to be scrapped and replaced by a reasonable implication.

Performance for a promise - Unilateral Contract

Promise for a promise - Bilateral Contract
WHAT IF THE PERFORMANCE IS HALF COMPLETE?
If there is initiation of the performance for a specific contract then you cannot revoke the offer.

Unilateral Contract
Standing offer -A standing offer is an offer from a potential supplier to provide goods and/or services at
pre-arranged prices, under set terms and conditions, when and if required

Union of India vs Maddala Thathiah case provides the concept of standing offer, also called
continuing offer. Standing offer refers to when an offer is allowed to remain open for acceptance over a
period of time, such as tenders. Advertisement inviting tender is an invitation to offer, and it is not an
offer.
The person by an advertisement inviting such an offer is not the offeror but the person who reads the
advertisement can become an offeror if he places the bid to the party who invited the tender by
advertisement. If the advertiser accepts the offer, then it becomes an agreement. Therefore, the person
who reads the advertisement and places the bid for tender is the offeror in these types of cases. In cases
of standing or continuing offer, it remains open for a specific period and the offer will be accepted by the
offeree (original advertiser) from time to time for the supply of goods, therefore for each order placed there
will be a different acceptance and hence a different contract. If the offeree (advertiser) accepts the tender,
that doesn’t mean the contract is legally binding until and unless the required quantity is ordered by the offeree
(advertiser or acceptor) (It can be revoked before the acceptance). The contract only exists when the terms and
conditions are fulfilled.
Union of India i.e. Madras and Southern Railways are actually:
• Original defendant.
• Appellant in this petition.
• Advertiser of the tender to get the jaggery.
• The acceptor of the offer.
Maddala Thathiah is actually:
• Original plaintiff.
• Respondent to this petition.
• Bidder to the advertisement of the tender to sell the jaggery.
• The offeror, i.e. Jaggery supplier.
BENCH: In the Supreme Court of India.
Hon’ble Justice Raghuvar Dayal [Delivery of the Judgement], Hon’ble Justice K. Subba Rao, and Hon’ble
Justice J. R. Mudholkar.
PROVISIONS APPLIED:
1. Mental acceptance is no acceptance.
2. Section 4 of Indian Contract Act 1872 states that acceptance should be communicated to the
offeror
3. Acceptance must be absolute and unqualified.
FACTS OF THE CASE:
1. Appellant i.e. Madras and Southern Railway invited to tender by an advertisement for
the supply of 14,000 imperial pounds Cane Jaggery to the railway grain shops.
2. Respondent i.e. Maddala Thathiah read the advertisement (which was an invitation to offer) and
placed the bid for that invitation to tender by depositing Rs. 7,900 as a security fee. In other words, the
respondent after reading the invitation to the tender in an advertisement offered the tender to the
Railways, i.e. Appellant.
3. As per the terms and conditions, jaggery was to be transported in four installments, i.e. 3,500 maunds
each. During the contract, the appellant said that they have the power to cancel the contract anytime.
4. Deputy General Manager of Railways informed the respondent that they have canceled an order for the
supply of Jaggery and the contract was closed according to them.
5. Respondent protested against the Appellant took the defence that the right to cancel the contract was
reserved with them only.
6. Finally, Respondent-Plaintiff (Maddala Thathiah) instituted the suit for claiming the damages on breach
of contract.
7. The Trial Court dismissed the suit on the grounds that the railway administration had the authority
to cancel the contract at any point in time without making itself liable to pay damages. This decision
was in favour of the appellant herein.
8. The High Court held that the clause granting the appellant’s authority to cancel the
contract was void and the Trial Court was wrong in not deciding on the damages and dismissing the
suit for settlement. The appellant was according directed to pay the damages for the breach of contract.
9. The appellant now filed this appeal herein against the order of the High Court.
CONTENTION BY THE APPELLANT:
Appellant took the defence that the right to cancel the contract was reserved with them only.
ISSUES FRAMED:
1. Whether there was no enforceable obligation to purchase the entire quantity or not?
2. Whether the appellant was at liberty to end the contract at any stage of the duration of the
contract regarding the outstanding obligations under it or not?
JUDGEMENT:
The impugned clause refers to a right in the appellant to cancel the agreement for such supply of jaggery about
which no formal order had been placed by the General Manager with the respondent.
However, it doesn’t apply to such supplies of jaggery about which a formal order had been placed specifying
a definite amount of jaggery to be supplied and the definite date or definite short period for its actual delivery.
Once the order is placed for such supply in such dates, the order amounts to a binding contract making it
incumbent on the respondent to supply the jaggery in accordance with the terms of the order and also making
it incumbent on the General Manager to accept the jaggery delivered in pursuance of that order.
CONCLUSION:
The Court construed the contract between the parties in the instant case where the respondent had not made
a definite offer but standing or open or continuing offer because of the tender requiring a deposit of security
and placing of the formal order.
A standing offer may be revoked at any time provided that it has not been accepted in the legal sense
and acceptance in the legal sense is complete as soon as a requisition for a definite quantity of goods is
made. Each requisition by the offeree is an individual act of acceptance that creates a separate contract.
Therefore, the appeal was dismissed and the order of the High Court regarding the remand of the suit to the
trial court for deciding the issue about damages was restored.
UNIDROIT- The International Institute for the Unification of Private Law (UNIDROIT) is an
independent intergovernmental Organisation with its seat in the Villa Aldobrandini in Rome. Its purpose is to
study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial
law as between States and groups of States and to formulate uniform law instruments, principles and rules to
achieve those objectives.

Section 5 – Revocation.
NHAI v. Ganga enterprises - National Highway Authority Of India vs Ganga Enterprises And Anr on 28
August, 2003 (indiankanoon.org)
► Forfeiture of earnest money—Forfeiture of earnest money when it is made for breach of auction/tender
conditions at pre-contractual stage when no contract has yet come into existence, does not infringe any statutory
right under the Contract Act, 1872 since earnest/security is given and taken in such cases to ensure that a
contract comes into existence. Tenderer has a right to withdraw his offer, but he will have no right to claim
refund of earnest money if said offer is subject to condition that earnest money will be forfeited if offer is
withdrawn, NTPC v. Ashok Kumar Singh, (2015) 4 SCC 252: (2015) 2 SCC (Civ) 563.
FCI V. PREMCHAND - FOOD CORPORATION OF INDIA V. PREM CHAND JAIN . | DELHI HIGH COURT |
JUDGMENT | LAW | CASEMINE

INTENT -
Balfour v. Balfour – points in the legal analysis – 1. Bargain 2. Domestic arrangement 3.

COMMUNICATION OF OFFER AND ACCEPTANCE –

Bhagwan das Gobardhan das kedia v. girdhari lal Purshottam das and company
Bhagwandas Goverdhandas Kedia vs M/S. Girdharilal Parshottamdas And Co. ... on 30 August, 1965
(indiankanoon.org)
Minority opinion questions the assumption that the general rule is a better rule.
Lalman Shukla v. Gauri Dutt : case analysis - iPleaders
Adams v Lindsell (lawteacher.net) –
Facts
The case involved two parties in the sale of wool. On 2 September, the defendants wrote to the plaintiffs
offering to sell them certain fleeces of wool and requiring an answer in the course of post. The defendants
misdirected the letter so that the plaintiffs did not receive it until 5 September.[1] The plaintiffs posted their
acceptance on the same day but it was not received until 9 September. Meanwhile, on 8 September, the
defendants, not having received an answer by 7 September as they had expected, sold the wool to someone
else.
The defendants argued that there could not be a binding contract until the answer was actually received, and
until then they were free to sell the wool to another buyer.[1]
Judgment
Law J said that if that was true it would be impossible to complete any contract through the post; if the
defendants were not bound by their offer until the answer was received, then the plaintiffs would not be bound
until they had received word that the defendants had received their acceptance, and this could go on
indefinitely.[1] Instead it must be considered that the offerors were making the offer to the plaintiffs during
every moment that the letter was in the post. Then when the Offeree has placed his acceptance in the post there
is a meeting of minds, which concludes the offer and gives effect to the acceptance.[2]
The acceptance did not arrive in course of post strictly speaking (all parties understood in course of post to
refer to 7 September). But because the delay was the fault of the defendant it was taken that the acceptance did
arrive in course of post.
Significance
This case is the first step towards establishing the postal acceptance rule (mailbox rule). It was not until 1892
in Henthorn v Fraser [1892] 2 Ch 27 that the court determined the precise timing of the acceptance, that is the
moment the letter of acceptance is posted. (See also Entores Ltd v Miles Far East Corporation [1955] 2 QB
327).
For the reason of commercial expediencies, the judges created a dispatch rule in Adam v. Lindsell – in cases
of postal communication the offer will be binding at the point they have posted the letter of acceptance.
Postal rule was made for commercial expediency.
General rule – receipt rule -when the acceptance is received.
Exception rule – postal rule -
ENTORES LTD. V. MILES FAR EAST CORPORATION –
FACTS
The complainants, Entores, were a company that was based in London. They had sent an offer to purchase 100
tons of copper cathodes to the defendants, Miles Far East Corp. Their company was based in Amsterdam and
this offer was communicated by Telex, a form of instantaneous communication. The Dutch company sent an
acceptance of this offer by Telex to the complainants. When the contract was not fulfilled, the complainants
tried to sue the defendants for damages.
ISSUES
In order to decide whether the action for damages should arise in English or Dutch law, the court had to decide
the moment of acceptance of the contract. If it was when the contract acceptance was sent, damages would be
dealt with under Dutch law. If acceptance was when it was received, then it would be under English law.
DECISION/OUTCOME
The court held that the contract and damages were to be decided by English law. It was stated that the postal
rule did not apply for instantaneous communications. Since Telex was a form of instant messaging, the normal
postal rule of acceptance would not apply and instead, acceptance would be when the message by Telex was
received. Thus, the contract was created in London. This general principle on acceptance was held to apply to
all forms of instantaneous communication methods. Acceptance via these forms of communication had to be
clear before any contract is created.
always read section 3,4,5 together.

P.R TRANSPORT AGENCY V. UNION OF INDIA –

P.R. Transport Agency Through Its ... vs Union Of India (Uoi) Through Secretary, ... on 24 September, 2005
(indiankanoon.org)
Based on promissory estoppel.
Section 4 is applicable for all forms of communication.

Revocation of acceptance is a problem that might arise in postal communication.

Is it possible to revoke acceptance considering the fact that contract cannot be revoked?
Offeree can revoke acceptance only till the time acceptance is not posted.
In case of email communication where do we consider the acceptance to be completed.
CONSIDERATION, section 2(d) - definition

PAST CONSIDERATION - Past consideration implies that the consideration for any promise was given
before and the promise is made from thereon. For instance, A lost his dog and B found the dog and returned it
to A, then A promised to pay Rs.100 and in that case, it will be a past consideration as the act of finding the
dog happened before any agreement.
Types of consideration
Executed executory consideration
(unilateral contracts) (bilateral)

The act has been completed

i.e the performance has happened

Difference between executed and past consideration.

in past consideration offer is made after an act is done.
➢ Consideration is greatly diluted by the principle of promissory estoppel.
➢ Adequacy of consideration is not required, i.e. a consideration will be counted even when it is drastically
less.
Consideration functions as the evidence that they are willing to enter into legally binding contract.
In answers try to write the case name and issue along with the facts and the ratio decidendi.

Most imp. aspect of consideration is privity

Privity of consideration is a doctrine that states that only a person who has provided consideration can enforce
the contract and take action against it1. The doctrine of privity of contract is a common law principle that states
that only parties to a contract can sue each other to enforce their rights and liabilities2. The consideration must
only move from the promisee and the stranger to the contract, although a beneficiary can enforce the terms of
the agreement3.

Abdul Aziz v. Mausin Ali

Abdul Aziz vs Masum Ali Case made it clear that mere promise to contribute to charitable purpose is
not enforceable as it is without consideration.
According to Section 2 (d) of Indian Contract Act, consideration is when-
• Happens at the desire of the promisor
• There should be a promisee or any other person.
• It has to be done or abstained from doing something (or)
• Does or abstains from doing something (or)
• Promises to do or abstain from doing something.
FACTS
• The appellate here belongs to Islam Local Agency Committee, Agra. In 1907 a movement was set up
on foot to collect money for repairing and reconstruction of a mosque known as Masjid Hamman
Alawardi Khan.
• The committee themselves sanctioned a subscription of 3000/-. Besides this, 100/- was paid by Hakim,
500/- was promised by Munshi Abdul, and another sum of 500/- was promised by Munshi.
• Among them, Munshi Abdul was appointed as treasurer. The committee handed over their contribution
to Munshi Abdul, and he also received 100/- from Hakim.
• Munshi Jan gave cheque of 500/- on 12th September 1907. On 29th Sep 1907, the cheque was presented
to the bank. The bank returned the cheque with notice of irregularity in an endorsement.
• It was again presented on 12th Jan 1909. The bank again returned the cheque with a notice saying that
it was out of date. Munshi Abdul died on 20th April 1909 and a suit was initiated against his heirs on
14th April 1910. Munshi Jan died in May 1910.
• This suit was brought against heirs of Munshi Abdul for the recovery of 1000/- that is, 500/- paid by
him and 500/-, the amount paid by Munshi Jan that was not cashed. The Lower Appellate Court made
the heirs liable to pay 1000/-.
• A second appeal was made in the High Court.
ISSUE
 • Whether the promise is enforceable without any consideration?
• Whether the heirs of Munshi Abdul are liable to pay 1000/- for negligence?
CONTENTIONS
Plaintiff’s contentions
1. It was contended on behalf of the appellants that the money promised by treasurer did not go beyond
the stage of promise.
2. Secondly, he had enough money but had not transferred from his private account.
3. Thirdly, on strength of promise, no liability was incurred.
Defendant’s contentions
1. The defendants contended that the promise was made by treasurer himself.
2. The committee suffered a loss through the negligence of Munshi Abdul paid via cheque was
questionable if he were alive.
3. He was appointed as an agent to undertake these works. But this resulted in gross negligence for which
committee has to suffer.
RATIO DECIDENDI
The Hon’ble Judges present to hear this case were Sir Henry Richards, Chief Justice, and Justice Pramada
Charan Banerji. The bench was of the opinion that-
1. It was a mere gratuitous promise on Munshi Abdul’s part with regard to his subscription.
2. Under the circumstances of this case it is admitted if the promise had been made by outsider it could
not have been enforced.
3. There is no evidence which tells that he set aside 500/- to meet his promised subscription.
4. He had presented the cheque for payment; the mistake in the endorsement was a natural one and the
delay in representing the cheque or getting a replacement from the drawer may well be explained by
the delay in carrying out the proposed work.
5. Under these circumstances, Munshi Abdul could not have been sued in his lifetime and no suit can lay
against his heirs after his death for the same.
6. The appeal is allowed and the appellants will get the costs, including the court fees.
DECISION
The court held that Munshi Abdul could not be sued or any suit can be laid against his heirs after his death as
there is a lack of evidence to prove the consideration for his promised subscription and there is a great difficulty
in holding that a suit could have been brought against Munshi Abdul with respect to the cheque in his lifetime.
Therefore, the appeal is allowed and the costs shall be received.
CONCLUSION
This judgment made it clear that mere promise to contribute to charitable purpose is not enforceable as it is
without consideration.

Kedarnath v. Gauri Mohammed.

“Any act done at the will of the promisor’s wish is taken as the fulfilment of consideration of a contract”- this
was emphasised by the Calcutta high court under the contract law in the Kedarnath Bhattacharji v. Gorie
Mohammad case.
Facts of the case
In Kedarnath Bhattacharji v. Gorie Mohammad, the offended party was a Municipal Commissioner of Howrah
and one of the trustees of the Howrah City Council Fund. Sometime before, it was thought to make a City Hall
in Howrah, they gave the essential resources that could be raised and, provided that things existed, people were
intrigued to work to perceive what memberships they could obtain.
After gaining enough membership to support the funds required to build the town hall, the commissioners
including the offended party made an agreement with the defendant to build the town hall. The plans for the
proposed structure were submitted and passed. But as the membership list increased the plans also expanded.
Hence the expected cost of construction is increased from Rs. 26,000 to Rs. 40,000; the now increased amount
of Rs. 40,000 stayed approved and obligated by the commissioners including the offended party.
The offended party though as a member and one of the commissioners obligated under the agreement to the
respondent can sue the respondent for the benefit of himself and each one of those members.
Reasoning
Without making reference to the fact that he is a trustee or a Municipal Commissioner, we (The learned judge
of Calcutta High Court) believe that according to the agreements of the Code of Civil Procedure, he is qualified
to accelerate an activity-benefit of himself and of other people who are intrigued with him. In the event that
the activity could be maintained for the benefit of all, and there was no other segment that prevented this from
being done, it would fix any specialized imperfection of the situation.
At that time, the investigation is, regardless of whether it is a demand that could be maintained by all the people
who were put at risk to the temporary worker in case they were totally united. Obviously, there are a
considerable number of memberships that cannot be recovered. A man for unknown or different reasons
inscribes his name to be a member of some charitable article, for example, but the extent of his membership
cannot be recovered from him in light of the fact that there is no thought.
He approached people to buy, knowing the reason why the money should be connected, and they realized that,
with the confidence of their membership, they had to acquire a commitment to pay the contractual worker for
the job. Under these conditions, this type of agreement arises.
The endorser buying on your behalf says, as a result, with respect to your consent to enter into an agreement
to lift or lift this structure, I agree to supply the money to pay up to the amount for which I purchased my name.
That is an impeccably substantial contract and for a good thought; It contains all the basic components of an
agreement that can be authorized by law by the persons to whom the obligation is acquired.

As we (The learned judge of Calcutta High Court) would see, that is the situation here, and in this sense we
believe that the two consultations should be answered in the agreement, in light of the fact that, as I just said,
we believe there is an agreement for good thoughts, which may be authorized by the best possible meeting,
and we imagine that the offended party can implement it, since it can sue for the interest of itself and of all the
people in a similar intrigue, and, therefore, we answer the two questions in the certificate, and we believe that
the Judge of the Court of Minor Cause must declare the claim for the guaranteed sum, and we also believe that
the offended party must receive his expenses, including the expenses of this conference.
Judgment
In the case, it was held that although the promise was for a charitable purpose and that D had no benefit,
however, he is responsible for the promise made by him. So he was held liable. It was noted that in this case
people were asked to knowingly subscribe to the purpose for which the money was to be applied or used.
They also knew that in the faith of their subscription they had to incur the obligation to pay the contractor for
the work. The Law of the applicant, that is, the conclusion of a contract with the contractor was made at the
will of the promoter, which is a good consideration in the sense of section 2(d).
Legal principle
Section 25 of the Indian Contract Act, 1872 states openly that “an agreement made without consideration is
void”. In other words, the presence of consideration is essential for a contract to be valid.
According to Section 2(d) of the Indian Contract Act, 1872, Consideration for a promise is “When the promisor
wishes, the fiancé or any other person has done or abstained from doing, or does or refrains from doing, or
promises to do or refrain from doing something, such act or abstinence or Promise.” It is the price paid by one
party for the promise of the other. The consideration is the benefit that corresponds to the parties to a contract.
The consideration may be “right, interest, profit or benefit” for one of the parties. It may also be ‘some
indulgence, prejudice, loss or responsibility given, suffered or assumed by the other.
In addition, we can also generally observe that the legal principle of “Revocation of unilateral promises” is
also included, which is a branch of an important legal principle “Unilateral promises”. Therefore, a question
that is expected from an ideal law student would be “What, are the unilateral promises?” To which the answer
is such that it is a one-sided promise and is intended to induce some action.
We can also observe that the Supreme Court has correctly ruled that “A unilateral contract refers to a free
promise where only one party makes a promise without any promise of return” in the case of Aloka Bose v.
Paramatma Devi (2009). Therefore, we can clearly say that the promised is not obliged to act since he does not
give any promise on his side, but if he carries out the desired actions by the promisor, he can fulfil the promisor.
However, in the discussion of the legal principle of “Revocation of unilateral promises,” it can be said that
there is another problem related to such unilateral contracts. It is certainly true that a promise given in exchange
for an act is revocable before the betrothed begins to alter his position by acting on the promise. The next
expected question that appears in the mind of a genius regarding this statement is such that “Can the Contract
be revoked after the fiancé has begun his performance?”
To this, I can usually explain it in the following manner. for example, the promise is to pay a sum of money if
the promised walks from Lucknow to Vijayawada, can it be revoked after the fiance has embarked on the trip?
The decision in Kedarnath Bhattacharji v. Gorie Mohammad suggests, although in a few words, that such
revocation is impossible. The accused, in that case, was held responsible as soon as the contract for the
construction of the room was concluded.
The same follows from the decision of DENNING LJ in Errington v. Errington and Woods, in which we can
analyze the facts of the case that the owner of a house had mortgaged. The house was in the occupation of his
son and his daughter-in-law. He told them that the house would become their property if they paid the mortgage
debt in instalments and the payments began. In these circumstances, the court considered that it would be unfair
if the promoter could revoke this promise to his liking.
His lordship said: “The promise of the father was a unilateral contract. A promise of the house in exchange for
his act of paying the dues.” It could be revoked by him once the couple started doing it, but on the other hand,
He would also stop obliging him if they left the payments incomplete and unfulfilled.
Relevant case laws
In Doraswami Iyer v. Arunachala Ayyar [2], the Madras High Court explained the principle used in the
previous case on the basis that there was no simple promise to subscribe, but also a request for the promise to
do an act (construction of the municipality in that case), and that where There is such a request for an act, the
promise will be a simple promise and without any consideration.
The facts of the case were the repair of a temple in progress. As the work progressed, more money was required
and to raise these funds, subscriptions were invited and a list of subscriptions was created. The defendant was
placed on the list for Rs. 125 and it was to recover this sum that the claim failed. But no recovery was allowed.
In addition, The Hon’ble CORNISH J regarding the case has proceeded as follows: “The complaint found
consideration of the promise in the following manner: plaintiffs who rely on the subscriber’s promise incurred
responsibilities in repairing the temple. The question is, is this amount to consider? The definition of
consideration in the Contract Law is that when the promisor has done or has abstained from doing something,
such act or abstinence is called consideration.
Therefore, the definition postulates that the betrothed must have acted on something that amounts to more than
just a promise. There must be some negotiation between them with respect to which consideration has been
given… The promisor must have made some request to promise to do something in consideration of the
promised subscription “.
In addition, the wise judge found support in the English case of Hudson, where the promise was to contribute
a large sum of money for the payment of the debts of the Chapel, the promisor had died after paying a large
fee, the balance was not he could recover from his executors The claim was considered untenable insofar as
the fiancé had not assumed any responsibility as part of the deal with the promisor. Applying these principles
to the present case, the wise judge said that there was no evidence of any request from the subscriber to the
plaintiff to make repairs to the temple.
In Radhakrishna Joshi v. Syndicate Bank [3], upon the death of his father, his two children picked up a crash.
His mother intervened writing to the youngest son that, in case his older brother did not pay the sum of Rs. 50
lakhs that was owed to him outside of the family assets, she would pay the same. The brother paid a part of the
amount. The mother supplemented the payment to a certain extent but still had to pay the amount of the balance
and therefore claimed a reduction.
The contract was part of the family agreement. It was not affected by section 25 since a purchase of family
peace in such circumstances is a good consideration. A loan was granted to the child in the event that his father,
who executed all the essential documents, would be considered enforceable against the father.
Conclusion
It is clearly evident from the above that the promisor cannot revoke the promise once the promisee commenced
the performance or process mentioned in the contract. The Calcutta High Court, in its judgement, without a
doubt stated that promise cannot be revoked after the commencement of the act as per the contract.

MC Chacko v. State Bank of Travanco

https://indiankanoon.org/doc/942900/

Most imp. aspect of consideration is privity

Privity of consideration states that only a person who has provided consideration can enforce the contract
and take action against it.
Elaboration of the Consideration and Privity of Contract (ipleaders.in).

Chinnaya v. Ramayya
In the Madras High Court
Equivalent Citation:
ILR (1876-82) 4 Mad 137
Appellants
Venkata Chinnaya
Respondent
Venkata RamayyaGaru
Decided on
21st October, 1987
Bench
Innes J, Kindersley J.
Background
Consideration is an important element of a contract. In English law, the doctrine of privity of consideration is
accepted. According to this doctrine, consideration must move from the promisee only. If it is furnished by
any other person, the promisee becomes a stranger to the consideration and, therefore, cannot enforce the
promise. This doctrine is, however, not applicable in India. According to section 2(d) of the Indian Contract
Act (1872), it is clear that for the formation of a valid contract consideration is essential. However, it is
immaterial whether the consideration flows from the promisee or any other person. This case laid down this
rule in India in 1882.
Facts
A lady transferred her property which consisted of certain lands to her daughter (defendant), by a deed of gift.
Such deed was registered. One of the terms of the gift deed was that the daughter would pay a sum of Rs.
653/- every year to the lady’s sister (plaintiff). The defendant executed an Iqrarnama or agreement in favour
of the plaintiff promising to do the same. The defendant failed to pay the annual amount to the plaintiff.
Hence, the plaintiff sued the defendant for the recovery of the same.
Issue
Whether the plaintiff can bring an action against the defendant for the amount promised in a contract where
the consideration for such promise has been furnished by the mother of the defendant (plaintiff’s sister)?
Arguments Advanced
Contentions by the plaintiff
• The consideration for the defendant’s mother to gift the property to the defendant was defendant’s
promise to pay an annuity to the plaintiff. Hence, the plaintiff is entitled to sue the defendant to
recover the same.
Contentions by the defendant
• The plaintiff had not furnished any consideration under the contract. Hence, she is not entitled to sue
the defendant for the recovery of the amount promised to her.
Judgment
According to section 2(d) of the Indian Contract Act (1872), “When, at the desire of the promisor, the
promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to
do or abstain from doing, something, such act or abstinence or promise is called a consideration for the
promise. From this definition, it is clear that in a valid contract the consideration need not flow from the
promisee only. It could flow from any other person who is not a party to such contract. The Hon’ble Court in
this case, upheld this point of law in the plaintiff’s right to recover the annuity due to her from the defendant
under the contract in question but their reasons for the same were different.
Innes J drew similarities between the instant case and the English case Dutton v. Poole [(1677) 2 Levinz
210]. In Dutton v. Poole, a man had a daughter of marriageable age and wanted to sell a portion of wood that
he possessed at the time to meet his daughter’s wedding portion. The man’s son (defendant) promised to pay
the daughter (plaintiff) £.1000 if the man forbore from selling the wood. The man forbore but the defendant
failed to pay the promised sum. The daughter and her husband sued the defendant for the sum. Though the
defendant made the promise to his father and the father furnished the consideration for it, it was clear that the
contract was made for the benefit of the plaintiff. The court held that it would be highly inequitable to
deprive the plaintiff of the money and held the defendant liable to pay the same to her.
Innes J observed that prior to the creation of the contract in question, the plaintiff had been receiving a sum
of money out of her sister’s estate. When the lady transferred the same to her daughter, the defendant, the
contract stipulated that the same arrangement be continued by her. When the plaintiff’s sister transferred the
property to the defendant, the plaintiff suffered a loss of annuity that she had been receiving so far. It was
held that such loss formed the consideration for the promise. Hence, the plaintiff was deemed to have given
the consideration.
Kindersley J also arrived at the same conclusion but his reasoning was different. The deed of gift and the
defendant’s agreement to pay the annuity to the plaintiff were executed at the same time. Thus, they could be
considered parts of the same transaction. The defendant’s promise to pay the plaintiff was the consideration
for the defendant’s mother to transfer the property to the defendant. Hence, the defendant’s failure to pay the
same would amount to breach of contract and would entitle the plaintiff to sue her for the recovery of the
same. The defendant was held liable to pay the annuity to the plaintiff.
Case Commentary
This case clarified the applicability of the doctrine of privity of consideration to Indian contract law. In this
case, the court laid down that the doctrine of privity of consideration is not applicable in the Indian context.

Dalton v. poole
Dutton v Poole (1678) 2 Lev 210
Contract law – Third party – Privity of contract
Facts
A son made a contract with his father for his father to not cut down an oak woodland. As consideration for
this, the son would make a payment to his sister of £1000 once she had married. The money gained from the
woodland would have been paid to the sister. The father died before the sister was married and the son
subsequently refused to pay his sister the money as was previously agreed, at the time of her marriage. The
sister sued her brother for the amount that was originally promised between the father and son.
Issue
The concept of privity of contract had not been fully established at this stage and therefore this decision had
significant importance to the broader subject. The court had to understand whether the daughter could be
considered to be privy to the contract between the father and son regarding the payment. Within this, it was
vital for the court to establish whether the daughter had given consideration for the promise that was made by
the son, to his father, to pay the daughter the sum of money upon her marriage.
Decision/Outcome
The court found in favour for the sister on the basis that the relationship between the father and the daughter
had made the sister a party to the agreement, even if she was not included at the time the contract was agreed.
The relationship between father and daughter was found to extend the consideration that the father gave in
the promise to the children. (Scroggs CJ)

Tweedle v. Attkinson –
Facts
The son and daughter of the parties involved in this dispute were getting married. As such, the father of the
groom and father of the bride entered into an agreement that they would both pay sums of money to the
couple. Unfortunately, the father of the bride died before he paid the money to the couple and the father of
the son died before he could sue on the agreement between the parties. As a result of this, the groom brought
a claim against the executor of the will for the payment that was previously agreed between the fathers.
Issue
The primary issue for the court was whether or not the son could, as a third party to the agreement, enforce
the contract between the fathers, which was ultimately for the benefit of him and his wife. It was argued that
the intention of the agreement between the fathers was for the couple to derive a benefit from the payment of
the money. Moreover, it was argued that preventing the son from being able to enforce the contract would
effectively ignore the intention of the fathers.
Outcome / Decision
The groom’s claim was rejected by the court. It was held that the groom was not a part of the agreement
between the fathers and he did not provide any consideration for the promise made by the father of the bride.
Also, as a stranger to the contract, the son could not enforce it. On this basis, the court found in favour for the
executor of the will.
WHY DO COURTS IN INDIA FOLLOW PRIVITY?
Facts
Khwaja Muhammad Khan(defendant) entered into a contract on 25th October 1877 with the father of Husaini
Begum(plaintiff) for the marriage of his son Rustam Ali and the plaintiff. The contract expressed that after
the marriage, the defendant would pay rupees 500 per month on perpetuity bases as kharch-i-padan, out of
specific properties mentioned in the contract. The marriage took place on 2nd November 1877 however both
Rustam Ali and Husaini Begum(plaintiff) were minors due to which plaintiff was welcomed in her
matrimonial home in 1883 and the couple lived together till 1893 after which due to various differences
plaintiff left her matrimonial home and started residing at her pre-nuptial home. And during this time the
defendant discontinued the payment of rupees 500 as agreed earlier. The suit was bought in this respect, the
subordinate judge provided the decision in favor of Khwaja Muhammad Khan(defendant) but the subsequent
appeal was made to the High Court where the decision of the subordinate court was reversed and the court
pronounced the decision in favor of Husaini begum (plaintiff). This led Khwaja Muhammad Khan to appeal
before Privy Council.
Issues
1. Whether the plaintiff is legally entitled to bring legal action against the defendant as she is not the
party to the contract?
2. Whether the right of the plaintiff to receive kharch-i-pandan is forfeited, as she has ceased to reside
with her husband in her matrimonial home?
Contention taken by defendant
The defendant relied on the precedent of Tweddle v. Atkinson, which instituted the doctrine of privity which
conveys that, a third person who is stranger to the contract i.e. not a party to the contract does not maintain or
derive any rights to set in motion any legal action. Additionally, it was contented by the defendant that,
as kharch-i-padan is equivalent to English pin-money, therefore the plaintiff is not entitled to kharch-i-
padan as she has ceased to reside with her husband at her matrimonial home.
Ratio Decidendi
The contemporary situation in Mohammedan law is, among them the marriages are usually contracted for
minors by their parents or guardians, and application of a common-law doctrine on a contract of such nature
would result in grave injustice. Moreover, as per the contention of the defendant, the kharch-i-padan is
similar to English pin-money to a certain degree has a different legal footing. The pin-money is spent by
women at instance of husband in contrast husband has no control over the application and consumption
of kharch-i-padan by wife additionally the agreement executed also did not mention the condition for
forfeiture.
The decision, according to the court the principle laid down in Tweddle v. Atkinson was not applicable in this
case. The court held that the contract which was executed created a charge on the immovable property and
designated the plaintiff as the sole beneficiary under it, therefore even if she is not a party to the contract she
is qualified to proceed with the legal actions for enforcement of her claim. Additionally, the charge created by
the defendant which tied him to make regular payments, and the contract which was executed did not provide
any reference to the condition that such payment would be rendered only if she resides with her husband at
her matrimonial home. The only time provided in the agreement was regarding the commencement of
payments. Therefore, the court gave a decision in favor of the plaintiff.

Privity of contract – no rights to 3rd parties

Calcutta high court decision,
Krishna Bal kasi v. Promila bal
Khwaja Muhammad khan v. husaini begum
 UNIT 3 – CONSENT

Consent has to be free

1. The person having unsound mind cannot be said to have freely consented.
2. Minor person cannot be said to have freely consented.
Consent of the Minor.

Mohori Bibee V/S Dharmodas Ghose - Ilr (1903) 30 Cal 539 (Pc) - Minor's Agreement
Landmark Case - Bench of Judges: Lord Mcnaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir
Andrew Scoble, Sir Andrew Wilson, JJ.

Introduction:-
Mohori Bibee V/S Dharmodas Ghose[1] is a case that covers the ambit of minors agreement. This case
basically deals with a minor's contract or a contract with a minor. In India, an agreement or a contract with a
minor ( a person who is below the age of 18 yrs. or any person who has not completed 18 yrs. of age legally)
is void ab-initio (void from very beginning) such rules and regulations are made because, according to law
such people does not comes under the ambit of capacity of contract or agreement of doing so.

According to courts opinion, any person who is below 18 yrs of age or who has not completed the age of 18
yrs. of age i.e. a minor cannot intend to create contract or make major decisions. This case has basically
provided us with the knowledge that, since minors are legally incompetent to give their assent so they need to
deserve or be provide with the protection in their dealings with the other major persons. After this case , any
sought of contact or agreement with the minor was void from beginning. Such contracts are "void ab-
initio[2]".

In this case, the Privy Council declared the law that any contact by minor or any minor's agreement is
"absolutely void" and it has also been strictly followed and is still growing also.Section 10[3]of Indian
Contact Act, 1872 provides for what agreements are contracts? and Section 11[4] provides that a person who
are competent to contract.

Facts:-
The facts of this case were as follows:-
v 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.

v 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.

v 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.

v 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.

v but the proportion or sum of loan that was actually provided was less than Rs. 20,000.

v 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.

v 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.

v 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.

v 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.

Majority Act, 1875:-

Majority Act, 1875 was enforced on 2ndMarch 1857. It is a law that was enacted to introduce various laws
relating to the "law of majority". Prior to the enactment of this act, there was no surety or certainty about the
age limit of attaining majority. This act has basically fixed the age limit of attaining majority and i.e. 18 years
of age. It states that, every single person who is domiciled in India can only achieve the age of majority only
after the completion of age of 18 years, and not before that at any cost. There comes an exception in the case
were any particular personal law provides the age of attaining majority only and if not provided than, else
any person domiciled by India shall only achieve majority after the completion of 18 years of age.

In the case were the guardian or a custodian is appointed by any court of justice for a minor in case of a
person or his property or for both before the age of 18 years, then in such a case the age of majority would be
after attaining the age of 21 years instead of attaining 18 years of age.

Critical Analysis:-
In the case of Mohori Bibee V/S Dharmodas Ghose, the Privy Council strictly defined that any sought of
contract or agreement with a minor[8]or with any infant shall be null and void. All contacts with the minors
will be void ab-initio. Majority Act, 1875 outlined the definition of a minor, according to such act, any person
who is below the age of 18 years or has not completed the age of 18 years shall not be competent to create or
enter into any sought of contact or agreement.

According to me any sought of contract in which a minor is party to contract or whether he/she is involved in
it shall be void. This perception is correct because minor or infant comes in the category of such people who
cannot give there free consent along with the reason that they are not in a situation where they can think in a
manner in which a prudent or an ordinary person could do it. An agreement is a deal where free an equal
consent of all parties are given but in case of a minor there consent can be dominated by major ones as a
result of which , it leads to the violation of one of the condition to form a contract, i.e. free consent[9](a
consent is said to be free when it is not caused by Coercion[10], Undue Influence[11], Fraud[12], Miss
representation[13]and Mistake[14]).

The court also through its verdict has propounded that, a contact with an infant shall be declared null and
void it means that it is neither valid nor voidable. According to me, minors contract shall be avoided and
stopped because it sometimes lead to the harmful social, economic and legal effects on the lives and
conditions of the minors. Any such person who commits such offence shall be strictly punished by court of
law, either through imprisonment or with a fine or with both according to the ambit of the offence committed
by the major person.

Conclusion:-
In Mohori Bibee V/S Dharmodas Ghose, at the end it can be concluded that any agreement or deed in
which minor is party to it or is included in such contact by any way, such deed or agreement shall be declared
null and void because such agreement is no agreement in the eyes of law. Any agreement with an infant
cannot be administered against them. In cases minors parents or custodians shall not be liable for the dealings
done by the minor without their consent or knowledge, and hence they will not be liable to return the amount
back taken by the minor out of the moral obligations. But parents and guardians will be liable to repay back
the amount when minor or an infant acted with the consent of the his/her parents or his/ her custodians. If any
minor has got any profit out of the void contact the he/she cannot be forced to reimburse it back or make
compensation for it.
Khangul v. Lakha Singh
Introduction
▪ This case deals with minor contracts where the minor deceptively conceals his true age.
Facts
▪ In this case, the first defendant engaged in negotiations to sell a piece of land to the plaintiff while
still minor and deceptively concealing his true age.
▪ The amount of Rs. 17,500/- was received as payment, with Rs. 8,000 paid in cash to the Sub-
Registrar, and the remaining Rs. 9,500 secured through a promissory note payable on demand.
▪ The plaintiffs contended that the Rs. 17,500 had been lawfully paid to defendant no. 1, as the
promissory note of Rs. 9,500 in his favor was discharged by another promissory note issued by the
plaintiffs to defendant no. 1's brother-in-law, Muhammad Hussain, as per defendant 1's request.
▪ Additionally, the plaintiffs asserted having paid Rs. 5,500 of the Rs. 9,500 to Muhammad Hussain and
expressed willingness to settle the remaining amount.
▪ Despite receiving the payment, defendant no. 1 refused to transfer ownership of the property.
▪ The plaintiffs sought either possession of the property sold or a decree for Rs. 17,500, the
consideration money, along with interest or damages for breach of contract at a rate of 1% per month,
totaling Rs. 1,050.
▪ This amounted to a request for a total of Rs. 19,000, which the plaintiffs proposed to be imposed
against defendant no. 1's other properties.
Issues involved
▪ Whether a minor who has convinced a person to sign into a contract by fraudulently claiming himself
to be a major is barred from arguing his minority to escape the contract?
▪ Whether a party who, as a minor, entered into a contract by making a false representation about his
age, whether as a defendant or plaintiff, can decline to fulfill the contract while retaining the
advantage he may have gained from it in a future dispute?
Observation
▪ Prior to 1903, doubts surrounded the contractual capacity of minors, questioning the validity or
voidability of their contracts.
▪ The Privy Council's decision in Mohori Bibee v. Dharmodas Ghose (1903) clarified that a person
incompetent to contract due to minority cannot create a legally binding contract.
▪ The law of estoppel, generally applicable, becomes specific in contract law, where legislative
intentions determine exceptions.
▪ Indian High Courts align on rejecting estoppel for minor contract invalidity.
▪ Mohori Bibee case abstained from clarifying the application of Section 115 of the Indian Evidence
Act, 1872 (IEA) to minors.
▪ The prevailing view in India is that infants, using false age representations, can avoid contracts
without estoppel.
▪ Equitably, minors may be compelled to restore benefits gained through misrepresentation.
 ▪ Stocke v. Wilson (1913) exemplifies restitution, where a minor, though contractually immune, must
repay gains.
▪ Dissenting views suggest minors may bear equitable obligations for misrepresentation.
Conclusion
▪ In conclusion, a minor who entered into a contract by making a false representation about his age,
though not liable under the contract, may be required in equity to return the benefit he received by
making a false representation about his age, whether he is a defendant or a plaintiff.

Ajudhia Prasad v. Chandan Lal –

Background of the Case
• This case is a second appeal stemming from an action for acquisition based on a mortgage deed made
by the defendants in favor of the plaintiffs on October 15, 1925. The defendants argued that they were
juveniles at the time of the mortgage transaction and that there was no need for them to contract the
indebtedness because a fully qualified guardian had been designated for them.
• The plaintiffs contested that the defendants were children in their response, and they also claimed that
the defendants were responsible to pay the money under Section 68 of the Indian Contract Act, 1872.
The lower appeal court found that the defendants were juveniles, as they were under the age of 21,
and that the wedding expenditures for which the money was supposed to have been supplied were not
“necessary”. Hence, Section 68 did not apply.
• It was retained, however, that the respondents and their father not only protected the fact that the
minors had already been assigned a guardian, but that the father even went so far as to declare before
the Sub-Registrar that his younger son was over the age of 18, and that the respondents’ and their
father’s deceitful subjugation of the reality that the executants were under his own guardianship
outlined to the plaintiffs that they were dealing with children.
“Therefore, in the opinion of the lower court, there was a false deception made by or on part of the
respondents,”
Issues at hand
• Whether the case is related to the defendants’ minority, the debt’s object, and its proper attestation and
consideration?
• Whether the money obtained by the two juveniles under a mortgage agreement, when they were
minors (more than 18 but less than 21), was under a dishonest misrepresentation of the fact that the
executants were minors because a curator had been assigned for them under the Guardians Act?
• Whether the presence of a contract within the meaning of the Act necessitates the existence of a
contract, which cannot occur in the case of a child?
Judgment
• The court is satisfied that in this instance, where the defendant is an infant, the cause of action is in
essence ex contractu and is closely related to a loan contract, and that the lawsuit would be an
“indirect manner of executing that contract.” There is no circumstance in which a Court of Equity has
given judgement against an infant in conditions like the present, where it has intervened on the
ground of infant’s fraud, via which he stimulated the creation of the loan contract, to authorise infant
to pay the plaintiff a sum equal to the sum loaned under the void contract, and in influence, to the
value of fundamental lent: to give legitimacy to the contract.
 • It would be as basic as acquiring a promissory note for people who assault infants to collect
information that may be used to establish an allegation of deception from them. As a consequence, the
infant would have to prove his infancy while also facing an accusation of fraud. The fact that the
mortgagors, of the document founded on, were minors at the time of execution is adequate for the
matter to be decided; such a deed executed by children is unquestionably a nullity under Indian law,
and devoid of establishing an estoppel claim.
• However, the concept of estoppel cannot be applicable to a legislative act. Estoppel only relates to
inter partes contracts, and therefore does not allow contracting parties to estop themselves or anybody
else in the midst of a legislative act.
Critical analysis
• In this case, the plaintiff could not win on any other grounds. The equity rules that can be
implemented are well-established and widely accepted in England. It is unlikely that an Indian court
will develop a new rule of equity that is adverse to English law concepts for the first time. If the law
in England is unambiguous and there is no formal legislation in India to the contrary, any seeming
rule of equity in contradiction with that law should be avoided.
• Is estoppel applicable in the case of a minor?
The doctrine of estoppel does not extend to minors. It was stated that there is a clear statutory provision that
a minor who is unfit to contract is devoid of incurring any obligation for any debt, and that the doctrine of
estoppel cannot override this requirement to render him liable. In other terms, if money was taken by a kid
falsifying his age, it was fraud, and he may be forced to repay it; however, if there was no fraud, no
repayment could be imposed.
Principle of restitution
Doctrine of restitution maintains the status quo ante.
Introduction
▪ The Doctrine of Restitution, as envisaged in the Indian Contract Act, 1872 (ICA) pertains to the
restoration of benefits received by a party under a contract that is subsequently declared void or
unenforceable.
o However, it is not explicitly mentioned in ICA.
▪ The scope of restitution extends beyond mere compensation and seeks to eliminate any unjust
enrichment resulting from a flawed or unfulfilled contract.
▪ Essentially, it is designed to prevent a party from unjustly retaining the benefits derived from a contract
that fails for legal reasons.
Which Provision of ICA Covers Doctrine of Restitution?
Section 65 - Obligation of person who has received advantage under void agreement or contract that
becomes void:
▪ This section deals with situations where an agreement is discovered to be void or becomes void.
▪ In such cases, a person who has received any advantage under the agreement is bound to restore it or
to make compensation for it to the person from whom he received it.
What is the Application of Doctrine Restitution?
▪ Void Contracts:
o When a contract is declared void, restitution becomes imperative.
o Parties involved are obligated to return any benefits received, ensuring neither party gains
an undue advantage from a contract that lacks legal validity.
▪ Failure of Consideration:
o Restitution comes into play when a contract fails due to lack or failure of consideration.
 o If one party has already received benefits without fulfilling their part of the bargain, restitution
requires the return of those benefits.
▪ Mistake, Coercion, or Fraud:
o Restitution is triggered when a contract is tainted by mistake, coercion, or fraud, rendering
it voidable.
o In such cases, the innocent party is entitled to restitution, ensuring they are restored to their
pre-contractual position.
▪ Quasi-Contracts:
o The doctrine extends to quasi-contractual situations where there is no express contract but a
legal obligation to restore benefits arises.
o This is often seen in cases of quantum meruit or unjust enrichment.
What are the Exceptions of Doctrine of Restitution?
▪ In situations where:
o parties are acquainted with the fact that the agreement is void.
o incompetent parties enter into agreement.
o the party is obligated to provide a certain amount of earnest money as a form of security but
subsequently fails to meet this obligation.
What are the Landmark Judgments of Doctrine of Restitution?
▪ Mohori Bibee v. Dharmodas Ghose (1903):
o This seminal case highlighted the necessity of restitution in contracts involving a minor’s
agreement.
o The court emphasized the importance of restoring parties to their pre-contractual positions in
situations where contracts are void ab intio due to incompetent parties.
▪ Sadasiva Panda v. Prajapati Panda (2017):
o The defendant agreed to sell his property to the plaintiff for Rs. 5000, with an advance
payment of Rs. 2600.
• However, the defendant sold the property to someone else, refusing ownership rights
to the plaintiff.
o The plaintiff filed a case under Section 65 of ICA, and the court applied the Doctrine of
Restitution, ruling the defendant's actions as wrongful.
• The plaintiff was deemed eligible for the restitution of the advance payment.
Lex generalis – general rule
What means lex specialis?
This Latin term is derived from the legal maxim in the interpretation of laws, both in domestic and
international law: 'lex specialis derogat legi generali'. This essentially means that more specific rules will
prevail over more general rules.
Shield v. sword –
Raja rani v. prem adip
Joseph mary v. mathai mathai - https://main.sci.gov.in/jonew/judis/41489.pdf
Section 13 to 22 – consent is vitiated.
Section 23 to 30 – Statutory limitations to freedom of contract.
Read all the illustrations of the above sections
Silence can be represented as fraud when you have duty to speak
Ordinary due diligence – misrepresentation
duty of disclosure
Uberrimae fides – utmost good faith.

The parties are under a mistaken assumption about a certain fact.

Tarsen Singh v. Sukhwinder Singh
Raghunath Prasad v. Sanju Prasad
Subhash Chandra v. Ganga Prasad
UNDUE INFLUENCE
Sn 16
16(1) and 16(3) – we will have to see the relationship between the parties.
Fiduciary Relationship hona chahiye
Section 16 is only applicable when there is huge economic disparity or inequal bargaining posn.
Law commission reports where they have talked about provisions for substantive unfair terms.
Every agreement of which object or consideration is unlawful is void.
Standard form contract is based on take it or leave it basis or if the contract terms are not understandable.
WAYS IN WHICH THE COURT CAN INTERFERE IN THE CONTRACT
1. Principle of reasonability – should not be against the fundamental rights. | Gheru lal
parakh v. Mahadeodas Maiya | Section 23, ICA.
2.
Niranjan Shankar Golikari v. Century Spinning or Manufacturing Company -
NEGATIVE COVENANT – these are formal written agreements where it is written what you are not required
to do
A negative covenant is an agreement that restricts a company from engaging in certain actions. Think of a
negative covenant as a promise not to do something.
Gujarat Bottling Company v. Coca Cola

DISCHARGE

Ways to discharge the contract.

➢ Discharge by impossibility.
➢ By performing obligation.
Section 56 – Satyabrata ghoshe v. Mungneeram Bangur, AIR 1954 SC 44.
Taylor v. Caldwell
Section 73 – Hadley v. Baxendale
➢ Whenever a breach has happened, we will see damage that would naturally arise
from such action.
➢ Reasonable contemplation of the party.
➢ Damages
KARSANDAS H. THACKER V. SARA ENGINEERING
Karsandas H Thacker vs Saran Engineering Co Ltd case expounded the rule that loss of
profits arising from the resale of goods cannot be recovered unless the other party is
informed that the goods are for resale under a special contract and deemed loss of profits
as a special loss. Section 73 of the Indian Contract Act, 1872 provides that the party who
suffers because of the breach of contract is entitled to compensation from the party who
breached for the loss or damage he suffered because of the breach, which naturally arose
in the normal course of things from the breach and it states such compensation is not to
be awarded for any loss or damage suffered because of the breach in the distant or indirect
sense.
BENCH: Justice Raghubar Dayal, Justice J.R. Mudholkar
RELEVANT PROVISIONS
Indian Contract Act: Section 73 and Section 74
FACTS
• The appellant, Mr. Karsandas H Thacker, entered into a contract with the respondent
company in July 1952, for the supply of 200 tonnes of scrap. The respondent company
failed to deliver the scrap iron and notified the appellant, his inability to fulfil the terms
of the contract in a letter dated January 30, 1953.
• In the meantime, the appellant had signed a contract with M/s. Export Corporation of
Calcutta to supply them with 200 tonnes of scrap iron. The appellant could not fulfil his
contract with M/s. Export Corporation because of the respondent’s breach of contract.
M/s. Export Corporation purchased the scrap iron on the open market and got from the
appellant the difference between the amount they had to pay and what they would have
paid to the appellant under the contract.
• The appellant sued the respondent for breach of contract and sought Rs. 20,700 in
damages for the losses suffered by him because of the breach.
ISSUES
Whether a claim for forfeiture of the amount can be considered as compensation
regarding Sections 73 and/or 74 of the Indian Contract Act,1872?
CONTENTIONS
• The appellant claimed the parties had a completed contract which the respondent had
breached. Therefore, the appellant was entitled to the damages sought.
• The respondent contended the parties did not have a completed contract between them
and that the appellant had suffered no damages. The respondent argued it was not liable
to compensate for the damages the appellant had to pay the Export Corporation because
the appellant had entered the contract on a principal-to-principal basis and had not
disclosed that he was buying scrap iron for the Export Corporation or for export.
BEST BOOK FOR CONTRACT LAW: Contract Law by RK Bangia (Latest Edition)
RATIO DECIDENDI
Justice Raghubar Dayal: Because it did not require the appellant to pay a higher price than
the respondent, he could not have suffered any consequential loss because of the breach. The
actual loss suffered by the appellant because of the breach of contract resulted from his
contracting to sell 200 tonnes of scrap iron for export to the Export Corporation. Since the
respondent was unaware of this contract, he had no way of knowing the likelihood of the actual
loss.
INDIAN CONTRACT ACT, 1872 (Bare Act) (Latest Edition)
DECISION
The Honorable Supreme Court observed that when a party breaches a contract, the other party
is entitled to compensation for any loss resulting from the damage caused to him that naturally
arose in the ordinary course of business because of the breach or that the parties knew would
likely result from the breach when they made the contract. The Court held the appellant suffered
no such damage which he could recover from the respondent. The apex court ruled in favor of
the respondent by stating that a party who suffers a remote or indirect loss or damage because
of the breach is not entitled to any compensation.
CONCLUSION
According to Section 73 of the Indian Contract Act, 1872, a person who breaches a contract
must pay the other party the difference between the contract price of the goods agreed to be
sold and the amount paid by the other party for purchasing another good because of the first
party’s breach. However, the first party is not liable for the compensation that the second party
owed to third parties because he was not informed at the time of the contract that the second
party was purchasing the article for delivery to third parties. The judgment in Karsandas H.
Thacker vs. The Saran Engineering Co. Ltd. relies on the above principle and is referred to by
different courts in cases pertaining to special losses arising out of a breach of contract.
SECTION 74. -
MAULA BAKSH V. UNION OF INDIA
MAULA BUX vs UNION OF INDIA case falls under the Indian Contract Act, 1872. The
case falls under the concept i.e. ‘Breach of Contract’. There must be proof of any actual
damage or loss for claiming the damages for breach of contract under the Indian Contract
Act, 1872.
BENCH
Honorable Justice J.C. Shah
Hon’ble Justice Vaidyanathier Ramaswami
Honorable Justice A.N. Grover
RELEVANT SECTIONS
Section 74 of the Indian Contract Act, 1872
FACTS OF THE CASE
 • The petitioner, i.e. Maula Bux, entered a contract no. C/74 with the Govt. of India on
20th February 1947 for the supply of potatoes at Military Headquarters, U.P. Area.
• He deposited an amount of Rs.10,000(Ten Thousand) as security for due performance of
contract. On 4thMarch, 1947 another contract no. C/120 was made by him with the Govt
of India for supply of poultry, eggs and fish at the same place stated above for one year
and deposited another sum of Rs.8500(Eighty-Five Hundred) for due performance of
contract.
• The Plaintiff failed to supply the regular commodities as agreed by him to the Govt. of
India. Therefore Govt. of India rescinds the first contract on 23 rd November 1947 and
second 2nd December 1947 and gives up the amount deposited by plaintiff.
ISSUES PRESENTED BEFORE COURT
• Whether the Deposited money by the contractor to be treated as the Earnest money
in the contract?
• Whether the amount given up by Govt. of India comes under the actual damage or
loss?
BEST BOOK FOR CONTRACT LAW: Contract Law by RK Bangia (Latest Edition)
RATIO DECENDI OF THE CASE
By the decree in favor of the plaintiff held that there was no sufficient evidence that proves the
actual damage or loss to the other party in consequence of the default by the plaintiff.
The High Court was of the view that earnest money deposited as the security for the due
performance of a contract does not make up any penalty under section 74 of the Indian Contract
Act, 1872. Even security deposited in this case by stipulation of penalty, Govt. of India was
entitled to receive reasonable compensation from plaintiff not exceeding that amount whether
actual damage or loss has been proved or not and that even in the absence of evidence to prove
that actual damage or loss has been caused.
Further, the High Court observed that the contract was for the supply of large quantities of
potato, eggs, poultry, and fish which would not easily be available in the market during the year
1947-48 which cause great inconvenience and takes judicial notice about the fact that it was
the year when prices were rising and it would not be easy to buy the supply rates as contracted
for. Therefore, High Court stated it would not be unfair if we consider an amount of Rs.18,500
through damages not unreasonable. The High Court observed deposits made by the plaintiff
may be treated as earnest Money.
As observed by the Judicial Committee in Kunwar Chiranjit Singh vs Har Swarup
“Earnest money is part of the purchase price when the transaction goes forward: it is given up
when the transaction falls through by fault or failure of vendee”.
Therefore, the plaintiff had deposited the amounts claimed as for security for guaranteeing the
due performance of contracts. Such deposits cannot be treated as earnest money.
INDIAN CONTRACT ACT, 1872 (Bare Act) (Latest Edition)
DECISION
The Trial was of the view that there was no sufficient evidence which proves that any loss or
damage has been suffered by the Govt. of India in default by the plaintiff and on that account
decrees in favor of the plaintiff and security was not held liable to be given up. Further, the
decision of the High Court in appeal by the Union of India it was decided that they consider an
amount of Rs. 18,500 /- through damages received by Govt. of India was not unreasonable.
SPECIAL LEAVE APPEAL
There was a special leave filed by the petitioner against the decision of the High Court. The
Honorable Supreme Court also observed that Union has failed to establish any evidence that
they suffered any damage or loss which arose out of the default committed by the plaintiff. In
this view, High Court was in error disallowing the plaintiff’s case. Therefore, we set aside the
decree passed by the High Court and substitute the following decree. The Union of India pays
to the plaintiff the amount of Rs. 18,500/- with an interest rate of 3% per annum from suit till
payment. The plaintiff was also guilty of a breach of contract and they are of the view that each
party bears its own cost throughout.
GHAZIABAD DEVELOPMENT AUTHORITY V. UNION OF INDIA
PYQS
For legal advice cases, this is the procedure.
Facts ko dekho
Aur legal provisions apply karke facts analysis karke advice dedo.
Facts of the case ko legal case ke facts se mingle karo and give the advice.
Presentation 3rd April