Relevant Section:
General Offer, Acceptance, Unilateral Contracts
Facts:
The Carbolic Smoke Ball Company advertised in a newspaper that it would pay £100 to any person who used its smoke ball three times daily for two weeks and still contracted influenza. Mrs. Carlill used the product as instructed but still got sick. The company refused to pay, claiming the advertisement was mere sales puffery.
Legal Issue:
Was the company's advertisement a legally enforceable offer, and did Mrs. Carlill’s use of the product amount to acceptance of that offer?
Judgment:
The Court of Appeal held that the advertisement constituted a unilateral offer to the world, which became a binding contract when anyone fulfilled the conditions laid out in the offer. Mrs. Carlill had accepted the offer by performing the act required (using the smoke ball as directed).
Principle Laid Down:
A general offer can be accepted by anyone who fulfills the conditions, and performance of the conditions amounts to acceptance. An intention to create legal relations was inferred by the company’s deposit of £1,000 in the bank as a sign of sincerity.
Importance for Civil Judge Exam:
This case is a foundational authority on general/unilateral offers, acceptance by conduct, and intention to create legal relations. Frequently cited in contract law examinations.
Relevant Section:
Offer and Acceptance – Knowledge of Offer
Facts:
Gauri Dutt's nephew went missing. He sent his servant, Lalman Shukla, to find the boy. After sending him, Gauri Dutt announced a reward for anyone who found the boy. Lalman, unaware of the reward, found the boy and later claimed the reward after knowing about it.
Legal Issue:
Can a person claim a reward without being aware of the offer when performing the act?
Judgment:
The Allahabad High Court held that since Lalman Shukla was not aware of the offer when he found the boy, he could not be said to have accepted the offer. Thus, he was not entitled to the reward.
Principle Laid Down:
For acceptance to be valid in a unilateral contract, knowledge of the offer is essential. One cannot accept an offer without knowing it exists.
Importance for Civil Judge Exam:
This case highlights a fundamental rule of contract law—there can be no acceptance without knowledge of the offer. It is a landmark Indian judgment frequently cited in exams and practical discussions.
Relevant Section:
Intention to Create Legal Relations
Facts:
Mr. and Mrs. Balfour were living in Ceylon. Mr. Balfour went back to work while Mrs. Balfour stayed in England for health reasons. Mr. Balfour orally promised to send her £30 per month. Later, he stopped sending the money, and she sued him.
Legal Issue:
Can domestic arrangements between spouses be enforceable as contracts under law?
Judgment:
The Court held that such agreements made in a domestic setting are not intended to create legal obligations. Therefore, the arrangement was not a contract and could not be enforced.
Principle Laid Down:
In domestic and social agreements, there is a presumption that the parties do not intend to create legal relations. Hence, no contract exists.
Importance for Civil Judge Exam:
This case is essential for understanding the requirement of "intention to create legal relations" in forming a valid contract. Frequently tested in competitive law exams.
Relevant Section:
Intention to Create Legal Relations
Facts:
Rose & Frank Co. entered into an agreement with Crompton Bros. for the exclusive supply of paper tissues. The agreement contained an "honourable pledge clause" stating that it was not a legal agreement and not subject to legal jurisdiction. When Crompton Bros. terminated the contract, Rose & Frank sued for breach.
Legal Issue:
Is a written agreement that includes a clause stating it is not legally binding enforceable under contract law?
Judgment:
The House of Lords held that the clause showed a clear intention of the parties not to enter into legal relations. Therefore, the agreement was not enforceable as a contract.
Principle Laid Down:
If the parties clearly indicate that they do not intend to be legally bound, the agreement is not enforceable as a contract, even if it appears formal.
Importance for Civil Judge Exam:
This case emphasizes that the intention to create legal relations is essential for contract formation and that express disclaimers can negate enforceability.
Relevant Section:
Offer and Invitation to Offer
Facts:
Harvey sent a telegram to Facey asking two questions: (1) Will you sell us Bumper Hall Pen? (2) Telegraph lowest price. Facey replied, "Lowest price is £900." Harvey assumed it was an offer and replied accepting the price. Facey refused to sell.
Legal Issue:
Was Facey’s reply of the lowest price an offer that could be accepted to form a contract?
Judgment:
The Privy Council held that quoting the lowest price was merely a response to a question and did not constitute an offer. Hence, there was no contract formed between the parties.
Principle Laid Down:
A mere statement of price in response to an inquiry does not amount to an offer. An offer must express willingness to be bound by acceptance.
Importance for Civil Judge Exam:
This case distinguishes between an offer and an invitation to offer. It is a landmark decision in understanding communication in contract formation.
Relevant Section:
Communication of Acceptance – Section 4, Indian Contract Act
Facts:
Bhagwandas offered to sell goods to Girdharilal over the telephone. Girdharilal gave his acceptance via telephone, but Bhagwandas claimed that he did not hear the acceptance and thus denied the existence of a contract.
Legal Issue:
When is the acceptance of an offer complete in case of instantaneous communication like telephone?
Judgment:
The Supreme Court held that in cases of instantaneous communication, such as telephone, acceptance is complete only when it is heard by the offeror. As Bhagwandas had not heard the acceptance, no contract was concluded.
Principle Laid Down:
In telephone or similar communications, acceptance must be heard by the offeror to conclude a contract. Mere utterance is not enough.
Importance for Civil Judge Exam:
This case is significant in understanding modern modes of communication in contract law. It highlights the distinction between postal and instantaneous communication.
Relevant Section:
Revocation of Offer – Section 5, Indian Contract Act
Facts:
Haji Mohd. Haji Jiva made an offer to sell goods to E. Spinner. Before the acceptance reached him, he withdrew the offer. E. Spinner had already sent acceptance, which had not yet reached Haji Mohd. Jiva.
Legal Issue:
Can an offer be revoked before the acceptance is communicated to the offeror?
Judgment:
The Bombay High Court held that the offeror has the right to revoke the offer at any time before the communication of acceptance is completed as against him. Hence, the revocation was valid.
Principle Laid Down:
An offer can be revoked at any time before the acceptance is communicated to the offeror. Revocation must reach the offeree before he posts acceptance.
Importance for Civil Judge Exam:
This case illustrates the application of Section 5 of the Indian Contract Act and helps in understanding the concept of revocation before acceptance is complete.
Relevant Section:
Communication of Acceptance – Silence as Acceptance
Facts:
Mr. Felthouse offered to buy a horse from his nephew and said, "If I hear no more from you, I shall consider the horse mine." The nephew intended to sell it but did not reply. The horse was mistakenly sold by an auctioneer, Mr. Bindley, to someone else. Felthouse sued.
Legal Issue:
Can silence or failure to respond be treated as acceptance of an offer?
Judgment:
The Court held that there was no contract as the nephew had not communicated acceptance. Silence cannot be considered acceptance of an offer.
Principle Laid Down:
Acceptance must be communicated clearly to the offeror. Silence, even if intended as acceptance, is not valid in law.
Importance for Civil Judge Exam:
This case is fundamental in understanding the requirement of communication of acceptance. It is a leading case cited in exams on contract formation principles.
Relevant Section:
Revocation of Offer before Acceptance
Facts:
Dodds made a written offer to sell his property to Dickinson and promised to keep the offer open until Friday. On Thursday, Dickinson heard from a third party that Dodds had sold the property to someone else. Dickinson still tried to accept the offer.
Legal Issue:
Whether an offer can be considered revoked when the offeree learns from a reliable third party that the offeror has acted inconsistently with the offer?
Judgment:
The Court held that an offer can be revoked at any time before acceptance, and the revocation can be communicated by a reliable third party. Since Dickinson had knowledge of revocation before acceptance, no contract was formed.
Principle Laid Down:
Revocation of an offer is valid even if communicated through a reliable third party. An offer does not become irrevocable merely by stating it will remain open for a certain time.
Importance for Civil Judge Exam:
This case clarifies the rule on revocation of offers and the role of communication in withdrawal of offers. It is essential for understanding Section 5 of the Indian Contract Act.
Relevant Section:
Acceptance – Communication by Authorized Person
Facts:
Powell applied for the position of a school headmaster. The committee decided to appoint him, but this decision was communicated to him by an unauthorized person. Later, the committee changed its decision and Powell sued for breach of contract.
Legal Issue:
Can an acceptance communicated by an unauthorized person bind the offeror?
Judgment:
The Court held that since acceptance was not communicated by an authorized person, there was no valid contract. Communication of acceptance must come from a person authorized by the offeror.
Principle Laid Down:
To conclude a contract, acceptance must be communicated by or on behalf of the offeror by someone with authority. Otherwise, no binding contract is formed.
Importance for Civil Judge Exam:
This case is essential for understanding the rule of proper communication of acceptance and the role of authority in contract formation.
Relevant Section:
Capacity to Contract – Section 11, Indian Contract Act
Facts:
Dharmodas Ghose, a minor, mortgaged his property to a moneylender. Later, he sought to set aside the mortgage on the ground that he was a minor when he executed it. The moneylender claimed repayment under contract law.
Legal Issue:
Is a contract entered into by a minor valid or enforceable under the Indian Contract Act?
Judgment:
The Privy Council held that a contract with a minor is void ab initio (void from the beginning) and cannot be enforced. The minor cannot be asked to repay any money under such a void agreement.
Principle Laid Down:
A minor is not competent to contract under Section 11. Any agreement entered into by a minor is absolutely void and has no legal effect.
Importance for Civil Judge Exam:
This is a landmark case on the competency of parties. It is extensively cited to explain legal incapacity of minors in contract law.
Relevant Section:
Minor’s Contract – Necessaries of Life
Facts:
Nash, a tailor, sued Inman, a minor, for non-payment of clothes supplied to him. Inman was already sufficiently supplied with clothes at the time of this transaction.
Legal Issue:
Can a minor be held liable for non-payment of goods that are claimed to be “necessaries” under contract law?
Judgment:
The court held that the goods supplied were not necessaries as the minor already had adequate clothing. Hence, the minor could not be held liable for payment.
Principle Laid Down:
Under the law, a minor is liable only for necessaries. The burden of proving that the goods were necessaries lies on the supplier.
Importance for Civil Judge Exam:
This case is crucial in explaining what constitutes necessaries and reinforces the protection of minors under contract law.
Relevant Section:
Lawful Consideration – Section 25, Indian Contract Act
Facts:
The plaintiff filed a suit based on a written promise to pay money without any consideration. The defendant had acknowledged a debt but did not provide any new consideration.
Legal Issue:
Is a promise to pay a time-barred debt enforceable even in the absence of new consideration?
Judgment:
The Madras High Court held that such a promise is enforceable under Section 25(3) of the Indian Contract Act, if made in writing and signed by the person to be charged.
Principle Laid Down:
A written and signed promise to pay a time-barred debt is valid even without new consideration. It is an exception to the general rule requiring consideration.
Importance for Civil Judge Exam:
This case is key to understanding exceptions to the rule of consideration and how old debts can become legally enforceable through acknowledgment.
Relevant Section:
Lawful Consideration – Section 2(d), Indian Contract Act
Facts:
The defendant promised to donate Rs. 500 to a mosque for its reconstruction. The plaintiff, who was the secretary of the mosque, sued for the promised amount. However, no action had been taken based on the promise before the suit.
Legal Issue:
Is a voluntary promise to donate money enforceable under the Indian Contract Act if there is no consideration?
Judgment:
The Allahabad High Court held that the promise to donate was not supported by consideration and hence was not enforceable. There was no legal obligation created.
Principle Laid Down:
A bare promise to make a donation is not binding unless it is supported by consideration or some legal detriment undertaken by the promisee.
Importance for Civil Judge Exam:
This case helps in understanding that voluntary promises without consideration are not enforceable, reinforcing the necessity of consideration in contract law.
Relevant Section:
Consideration – Past Consideration
Facts:
The plaintiff built some shops at the request of the Collector for the development of a town. The defendants, shopkeepers, promised to pay the plaintiff a commission from the proceeds of the business. The plaintiff sued to recover the promised amount.
Legal Issue:
Can a promise based on an act done at the instance of a third party, without the promisor’s request, be treated as valid consideration?
Judgment:
The court held that the act of building shops was not done at the request of the defendants and therefore could not be valid consideration. Hence, the promise was not enforceable.
Principle Laid Down:
Consideration must move at the desire of the promisor. If the act is not done at the request of the promisor, it cannot be treated as valid consideration under contract law.
Importance for Civil Judge Exam:
This case clarifies the concept that consideration must move at the desire of the promisor and not any third party, reinforcing a foundational principle of contract law.
Relevant Concept:
Misrepresentation – Duty to Disclose Material Change in Circumstances
Facts:
O’Flanagan, a doctor, was negotiating to sell his medical practice to the plaintiff. He misrepresented that the practice was earning £2,000 a year. However, due to his illness, the income dropped significantly before the contract was signed, and he failed to disclose this change.
Legal Issue:
Is there a duty to inform the other party of a material change in circumstances during the course of negotiations?
Judgment:
The Court held that there is a duty to disclose any material change in the circumstances which renders the earlier statement false. The failure to update the information amounted to misrepresentation, and the contract could be rescinded.
Principle Laid Down:
A representation which is true when made, but becomes false before the contract is concluded, must be corrected. Silence in such situations constitutes misrepresentation.
Importance for Civil Judge Exam:
This case explains the continuing duty to correct false representations during pre-contract negotiations, an essential concept under misrepresentation law.
Relevant Concept:
Mistake – Mutual Mistake as to Identity of Subject Matter
Facts:
The contract was for the sale of cotton to arrive on a ship named 'Peerless' from Bombay. However, there were two ships named Peerless departing at different times. The seller referred to the later ship, while the buyer believed the cotton was on the earlier one. This misunderstanding led to a dispute.
Legal Issue:
Does a mutual mistake regarding the identity of the subject matter invalidate a contract?
Judgment:
The Court held that there was no consensus ad idem (meeting of minds), and thus, no binding contract. The mutual mistake as to the identity of the ship rendered the agreement void.
Principle Laid Down:
If both parties are mistaken about a fundamental fact essential to the agreement, the contract is void due to lack of true consent.
Importance for Civil Judge Exam:
This case is a classic authority on mutual mistake under contract law and is used to explain Section 20 of the Indian Contract Act, which deals with void agreements due to mutual mistake of fact.
Relevant Section:
Lawful Consideration – Section 2(d), Indian Contract Act
Facts:
The defendant promised to donate money for the construction of a town hall. Based on this promise, expenses were incurred. Later, the defendant refused to pay.
Judgment:
The Court held that even though it was a voluntary promise, since the plaintiff incurred liabilities relying on the promise, it constituted valid consideration.
Principle:
Expenditure incurred on the basis of a promise can be sufficient consideration, making a gratuitous promise enforceable.
Relevant Concept:
Definition of Consideration in English Law
Principle Laid Down:
Consideration is some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other.
Importance:
This case provides the foundational definition of consideration and is frequently cited to support Section 2(d) of the Indian Contract Act.
Relevant Concept:
Doctrine of Privity of Contract
Facts:
Two fathers agreed that they would pay money to the husband (plaintiff) on his marriage to one’s daughter. The husband (Tweddle) sued to enforce this promise but was not a party to the agreement.
Judgment:
The Court held that Tweddle could not enforce the contract since he was not a party to it and had not provided consideration.
Principle:
A person who is not a party to the contract cannot enforce it, even if the contract is made for his benefit. This illustrates the principle of privity of contract.
Relevant Concept:
Definition of Consideration in English Law
Facts:
Currie drew a bill of exchange on behalf of a third party and gave it to Misa. Later, Misa refused to honor the bill claiming there was no proper consideration. The dispute revolved around whether there was any consideration to enforce the promise of payment.
Legal Issue:
What constitutes valid consideration in English contract law?
Judgment:
The court, through Justice Lush, provided a classic and widely accepted definition of consideration. It held that there must be a benefit to one party and a detriment or forbearance to the other. In this case, there was no sufficient consideration from Currie to bind Misa.
Principle Laid Down:
"A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other."
Importance for Civil Judge Exam:
This is a foundational case that defines the term "consideration" in common law, widely used to understand and interpret Section 2(d) of the Indian Contract Act, 1872.
Relevant Section:
Consideration – Stranger to Consideration
Facts:
An old lady transferred property to her daughter on the condition that the daughter would pay an annuity to the plaintiff, her maternal uncle. The daughter accepted the property but later refused to pay the annuity, arguing that the plaintiff was not a party to the contract.
Legal Issue:
Can a person who is not a party to the agreement but is the beneficiary of the consideration enforce the contract?
Judgment:
The Madras High Court held that the plaintiff was entitled to enforce the contract, even though he was not a party to the agreement, because the consideration was furnished at the promisor’s desire.
Principle Laid Down:
In Indian law, unlike English law, a stranger to consideration can enforce a contract if the consideration was provided at the promisor’s desire and the beneficiary is clearly intended.
Importance for Civil Judge Exam:
This case is crucial in understanding the distinction between English and Indian contract law regarding privity and consideration. It expands the scope of enforceable agreements in India.
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