THE INDIAN CONTRACT ACT

GENERAL PRINCIPLES

• Satyabrata Ghose v. MugneeramBangur and Co., AIR 1954 SC 44

To the extent Indian Contract Act deals with a particular subject it is exhaustive upon it. In such case it is not permissible to import principles of English law. Decisions of English courts possess only persuasive value.

• Carlill v. Carbolic Smoke Ball (1893) 1 QB 256 (CA)

The test of determination of such intention is objective. It is not what parties had in mind but what a reasonable man would think in the circumstances is to be inferred.

OFFER

• Lalman Shukla v. Gauri Dutt (1913) 11 A11 LJ 489

A proposal cannot be accepted unless it comes to the knowledge of the person accepting it.

• Carlill v. Carbolic Smoke Ball Company Ltd (1893) 1 QB 256 (CA)

The court observed the following points with regard to general offers:

(a) Offer can be made to the world at large and contract is made with the person who comes forward and accepts the offer;

(b) In such cases communication of acceptance is not necessary. Performance of conditions is a sufficient acceptance without communication.

(c) General offer is continuing in nature and it is open for acceptance to any number of persons until it is retracted.

ACCEPTANCE

• Powell v. Lee (1908) 24 TLR 606

Communication must be received from the authorized person only. It should be communicated by the person who has authority to accept. Communication from unauthorized person is no communication in the eyes of law.

• Felthouse v. Bindley (1863) 7 LT 835

Acceptance must be communicated to the offeror only. Communication to any other person is no communication in the eyes of law.

An offeror cannot impose upon the offeree the burden of refusal or duty to reply. In other words, silence cannot be prescribed as mode of acceptance.

• Union of India v. S. Narain Singh AIR 1953 Punj. 274

A provisional acceptance is acceptance subject to final approval from higher authority. It does not bind either party and offeror can revoke his offer.

• Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co., (2008) 1 SCC 503

Under certain circumstances the acceptor’s silence coupled with his conduct which takes form of a positive act may constitute an acceptance.

• Bhagwandas v. Girdharilal and Co., (1966) 1 SCR 656

In case where contracts are concluded by postal communications the place of contract is where the letter of acceptance is dispatched. In case of instantaneous communications, the place of contract is where the acceptance is heard.

PRIVITY OF CONTRACT

• Tweddle v. Atkinson, 124 RR 610 Dunlop PeumaticTyre Co. Ltd. v. Seifridge Co. Ltd., 1915 AC 847

Position under English law: The doctrine of privity of contract was followed and it was held that no stranger to the consideration can take advantage of a contract although made for his benefit.

• Tulk v. Moxhay (1919) 88 LJKB 861 (HL)

A person who buys the land with a notice that the owner is bound by certain duties then the purchaser will also be bound even though he was not a party to the contract.

CAPACITY TO CONTRACT

• Mohiri Bibee v. Dharmodas Ghose,(1902-03) 30 1A 114

Indian Contract Act does not specifically lays down the fate of agreement if it has been entered into by a minor. However, it was authoritatively settled that minor’s agreement is absolutely void. A minor cannot make a promise enforceable by law.

Indian law with respect to restitution is slightly different from English law. The court held that minor is not liable under Section 64 and 65 of Contract Act to repay any money or compensate for any benefit.

FREE CONSENT

• Derry v. Peak, (1889) 14 AC 337

The court defined fraud as a false statement made knowingly or without belief in its truth or recklessly whether it be true or false.

VOID AND VOIDABLE CONTRACT

• Carlill v. Carbolic Smoke Ball Co. (1893) 1 QB 256 (CA)

Following are the essentials of the wagering contract:

(a) Event must be uncertain;

(b) Mutual chances of gain or loss for both parties;

(c) Neither party should have any interest except winning or losing;

(d) Neither party should have any control over the happening or non-happening of the event.

• Gherulal Parekh v. Mahadeo Das AIR 1959 SC 781

Supreme Court has held that wagering agreements are void but they are not illegal. Therefore, transactions collateral to wagering agreements is enforceable.

QUASI CONTRACT

• Chappel v. Cooper 153 ER 105

What are necessaries? Necessaries mean such things which are necessary to maintain a person according to his condition in life. It is to be determined with reference to fortune and circumstances of the particular minor. What are necessaries may also depend on the status of person and also his requirements at the time of actual delivery.

• State of W.B. v. B.K. Mondal and Sons, AIR 1962 SC 779

Before invocation of Section 70 the following conditions are to be satisfied:

1. A person should lawfully do something for another person or deliver something to him;

2. In doing so he must not intend to act gratuitously, 3. The person to whom the thing is delivered must acceptand enjoy the benefit.

The person made liable under this section always has an option to reject the things. It is only when he voluntarily accepts then the liability arises.

DAMAGES

• Hadley v. Baxendale (1854) EWHC 570

When two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally from the usual course of things or such as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract.

• Murlidhar v. Harsihchandra, (1962) 1 SCR 653

Two principles on which the damages are generally calculated are; firstly-as far as possible who has suffered from the breach be placed as far as money can do it in as good situation as if the contract had been performed and secondly- plaintiff is under the duty to take all reasonable care to mitigate the losses.

• Dunlop Pneumatic Tyre Ltd. v. New Motor Co. Ltd., (1915) AC 79

If a single lump sum is made payable by way of compensation on the occurrence of one or more or all of several events, some of which may occasion a serious and others trifling charge, then it is presumed that the sum is in the nature of penalty.