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Contract I – Case Laws
Contract I
Balfour vs. Balfour – Intention to Create Legal Relationship
Facts:
A husband promised to pay his wife a house hold allowance of £ 30 every month. Later the
parties separated and the husband failed to pay the promised amount. The wife sued for the
promised allowance
Held:
The wife will not succeed as agreements such as this did not create any legal obligations vis a
vis legal relations.
Rose & Frank Co. VS Crompton Bros. Ltd. – Intention to Create Legal Relationship

Facts:
There was an agreement between these two companies by means of which rose and frank co. was
appointed as the agent of Crompton Bros. Ltd. One clause in the agreement stated that the
agreement is not entered into as legal and formal and shall not be subject to legal jurisdiction in
the law courts.
Held:
There was no binding and legally enforceable contract between the 2 companies as there was no
intention to create legal relationship.
Upton Rural District Council VS Powell – Implied Contract
Facts:
A fire broke out in Powell’s farm. He called upon the fire brigade to put out the fire which the
latter did. Now Powell’s farm did not come under fire service zone although he believed it to be
so.
Held:
He was liable to pay for the service rendered as the services were rendered by Upton Fire
Brigade on an implied promise to pay.
Willkie vs. London passenger transport board – Implied Agreement

When a transport company runs a bus there is an implied offer by the transport company to carry
passengers for certain fare. The acceptance of the offer is complete as soon as a passenger boards
a bus – that is, implied acceptance.
Boulton Vs Jones (1857) – Offer made to a particular person
Facts :
Jones used to have business dealings with Brockle Hurst. He sent an order (offer) to Brockle
Hurst for the purchase of certain goods. By the time the order reached Brockle Hurst, he had sold
his business to Boulton. Boulton receiving the order sent all the goods to Jones as per the order
without informing Jones of the changing of the hands of the business. When Jones learnt that the
goods were not supplied by Brockle Hurst, he refused to pay for the goods. His contention was
that he had never placed an order to Boulton, the offer being made to Brockle Hurst, and
therefore had no intention to make a contract with Boulton.
Held:
Jones was not liable to pay ( – Section 64 will also apply )
Carlill VS Carbolic Smoke Ball Co. (1893) – General offer
Facts:

The defendant company advertised in several newspapers that a reward of £ 100 would be paid
to any person who contracted influenza, cold, or any other disease associated with cold even
after using the smoke balls of the company – a preventive remedy, 3 times a day, for 2 weeks in
accordance with the printed directions. They also announced that a sum of £ 1000 had been
deposited with the Alliance Bank as a proof of their sincerity.
The plaintiff, Mrs. Carlill had seen the advertisement, used the smoke balls according to the
printed directions and for a period as specified, but still contracted influenza. She sued the
defending company to claim the reward of £ 100 as advertised by the company.
The defendants argued inter alia that it was impossible to contract with the whole world and that
she should have notified / communicated to them of her acceptance of the offer.
Held:
Rejecting the argument the Court held that the advertisement constituted the offer to the whole
world at large ( – general offer) which was accepted by the plaintiff by conduct. ( – by using
smoke balls) . Therefore she was justified to the reward of £ 100.
The Court observed that by performing the required act and complying with the necessary
conditions attached to the offer of this kind ( – general offer) — the offeree has sufficiently
accepted the offer and there is no need for any formal notification / communication of her
acceptance to the offer.
Note – This is the principle of English Law of contract and endorsed by Section 8 of ICA. The
effect of the decision in Carlill’s case is that performance of stipulated condition of the proposal
is not only acceptance of the proposal but it is also sufficient communication of the acceptance.
Lalman Shukla vs. Gauri Dutt (1913)

Facts :
In this case, G (defendant) sent his servant l (plaintiff) in search of his missing nephew. G
afterwards announced a reward for information concerning the missing boy. It traced the boy in
ignorance of any such announcement. subsequently when he came to know of this reward, he
claimed it.
Held :
It was held that since the plaintiff was ignorant of the offer of reward, his Act of bringing the lost
boy didn’t amount to the acceptance of offer and therefore he was not entitled to claim the
reward.
Fitch vs. Smedabar
Held :
In this case the American Court has held that a reward cannot be claimed by one who didn’t
know that it had been offered.
Harbhajan Lal vs. Harcharan Lal
Facts :

In this case a young boy had run away from his father’s house. The father had offered a reward
of Rs. 55 to anyone who finds the boy and brings him home. The plaintiff who was aware of the
offer of reward found the boy on a railway station and informed the father. The plaintiff claimed
the reward. the father contended that since the plaintiff had not brought the boy; he is not entitled
to the reward.
British judge means the( C.J of the privy council ) held that although there is no strict
compliance of the condition of the reward, the plaintiff was however aware of the reward, the
plaintiff was however aware of the reward an there is substantial performance. The plaintiff was
held entitled to succeed.
{information was very much trust worthy based on which father.}
Harvy vs. Facey
Facts :
The defendants were the owners of the plot of land named ” Bumper Hall Pen “. The plaintiff
being interested in purchasing the same sent a telegram to the defendants “will you sell us
Bumper Hall Pen ? Telegraph lowest cash price “.(1st telegram)
The defendants replied also by a telegram ” lowest price for BHP, £ 900 asked by you”. (2nd
telegram)
The plaintiff immediately sent another telegram to defendants – “we agree to buy BHP for £ 900
as asked by you”. (3rd telegram)
The defendants subsequently refused to sell the plot of land at that price. The plaintiffs contained
that the telegram from the defendants quoting lowest price was an offer and the same has been
accepted by the plaintiff and thus, the contract is complete.

The defendants contended that quoting the price was not an offer which could be accepted.
Held:
The Judicial Committee of Privy Council held that the exchange of the above telegrams have not
resulted into a contract. It was observed that the 1st telegram had asked two questions regarding
willingness to sell and the other regarding the lowest price. In reply only the lowest price was
quoted and this was not an offer but a mere supply of information as desired by the other party.
The third telegram from the plaintiffs saying ” he agrees to buy” was only an offer and not the
acceptance of an offer. Since this offer of the plaintiff had not been accepted, there was no
binding contract between the parties.
Fischer vs. Bell (1961) – Display of goods
Facts:
The defendant – Bell, exhibited in a show window in his shop, a knife with a marked price. The
question arose whether the exhibition of that knife in the show window executed an offer for
sale.
Held:
Lord Parker, the chief justice, stated that the display of an article in a shop window is merely an
invitation to treat. It is in sense an offer for sale, the acceptance of which constitutes a contract. It
is quite impossible to say that an exhibition of goods in a shop window in itself an offer for sale.

Pharmaceutical Society of Great Britain vs. Boots Cast Chemist Ltd. (1952) – Display of
Goods
Held :
The display of articles on shelves in a self-service shop / store merely amounts to invitation to
treat.
Ramsgate Victoria Hotel Company vs. Montefeire (1866) – if time not stipulated
Facts :
On 8th June, M offered to take shares in R company. He received a letter of allotment on 23rd
November. M refused to take the shares.
Held:
M was entitled to refuse as the offer had lost by the delay of acceptance since the period of 5
months was not a reasonable one.
Hyde vs. Wrench (1840) – Counter offer
Facts :

W, the defendant, had offered to sell his farm to H, the plaintiff, for £ 1000. upon the defendant’s
refusal to sell the farm, the plaintiff brought an action for specific performance.
Held:
The Court held that an offer to buy for £ 950 was not an acceptance of the offer to buy because
the offer to sale was for £ 1000. it was a counter offer and a counter offer to a proposal amounts
to its rejection. As such no contract had come into existence between the parties.
Neale vs. Merret – Counter offer
Note – this case law also highlights that the offeree must not deviate from the terms and
conditions of the original offer as laid down by the offerer.
Facts :
M, the defendant offered to sell land to N the plaintiff at £ 280. N accepted and enclosed #80
with a promise to pay the balance by monthly installments of £ 50 each.
Held:
There was no contract between M and N as the acceptance was not qualified ( unconditional).
Thus, an offer once rejected is dead and cannot be revived by its subsequent acceptance.

Brogden vs. Metropolitan Railway Co. (1877) – Acceptance communication necessary
Facts :
A draft agreement relating to supply of coal was sent to the manager of a railway company viz.
Metropolitan Railway company. For his acceptance the manager wrote the words, approved and
put the draft in his drawer of his table intending to sent it to the companies solicitors for a formal
contract to be drawn up. Through oversight the contract remained in the drawer.
Held:
There was no contract because there was no communication of acceptance.
Felthouse vs. Bindley (1862) – Acceptance communication necessary
Facts :
F (uncle) offered to buy his nephew’s horse for £ 30 saying “if I hear no more about it I shall
consider the horse mine at £ 30.” (offer must not thrust the burden of acceptance.) the nephew
did not write / reply to F at all. He told his auctioneer, B to keep the particular horse out of sale
of his farm stock as he intended to reserve it for his uncle, F. B the auctioneer, inadvertently, sold
the horse. F sued him, B, for conversion of his property.
Held:

F has no right of action against the auctioneer since the horse was not sold to him. This offer of £
30 having not been properly accepted, since the nephew had not properly communicated the
acceptance to F.
The Court observed that it was clear that the nephew had in his mind the intention to sell his
horse to his uncle. But an unconditional assent to accept unaccompanied by any external
inclination will not suffice. Normally the person to whom the proposal is sent need not reply and
the general rule – acceptance of offer – will not be implied, intended from the mere silence on
the part of the offeree.
Adams vs. Mindsell (1818) – Acceptance by non-instantaneous methods
Note – this was the first case in which the rule of acceptance by non – instantaneous methods
was propagated.
Household Fire & Carriage Accident Insurance Co. Ltd vs. Grant
Note – one of the more obvious consequence of the postal acceptance rule is that the offerer must
bear the price of the letter of acceptance being delayed or lost. This based on the fact that posting
the acceptance makes it invariably out of the offeree’s control.
Held:
In household fire case, the Court of appeal held that the defendant, Grant, was the offerer who
had applied for shares in the company and to whom a letter of allotment ( acceptance letter,
hence the company is the acceptor) had been posted but which had not reached him was
nevertheless, liable as a share holder. The legal defects of the Court’s decision is that acceptance
is complete as against the offerer, that is, the offerer will be bound as soon as the letter is posted.
A binding contract takes place between the parties even if the letter of acceptance is delayed due
to postal strike or loss in transit.

Where however, the delay or loss is due to the fault of the acceptor, as in the case of an
acceptance, which is incorrectly addressed, or insufficiently stamped. The rule is that it will take
effect of and when it is received by the offerer, provided the offer is still enforced by them or is
received within a reasonable time.
Durga Prasad vs Baldeo (1880) – Consideration must be given at the desire of the promisor.
Facts :
The plaintiff, baldeo, at the desire and requset of the elecotr of the town expanded money in the
construcvtion of a marjet in the town. Subsequently the defendants, Durga Prasad & Ors.
Occupied the shops in the market. Since the plaintff had spent money for the constructoin of the
market, the defendants in consideratoin thereof, promised to pay to plaintiff, a commission on
the articles ssold throuhg their (defendants) shops in that market. Defendants however, failed to
pay the promised commission, the plaintiff brought an action to recover the promised
commission.
Held:
The plaintiff will not succeed since the agreement was void for the want of consideration.
It was observed in this case that the consideration of the promisre to pay the commission was the
construction of market by the plaintiff. But the expenses incuurred by the plaintiff in
construction of the market was not there in the desire of the defendants (promisors) but at the
instance/ request of the 3rd party ie, contractor of the town.
It was therefore, held that since the consideraion for the construction of markeet did not move at
the desire of the defendants., that is, the promisor ( D & Ors.). It did not constitute a valid / good
consideration. Hence the defendants were not liable in respect of the promise made by them,
following the first legal rule.

Kedarnath Bhaattacharya vs Gauri Mohammed. (1887, Cal HC )
Facts :
The town planners of howrah,thought advisable to erect a townhall at howrah,provided
sufficeient subscription were collected.with the object in view the commisioner of howrah
municipality started to raise necessary fund by public subscription.the defendants one of the
subscribor’s of this fund for Rs 100 signed his name in the subscription book at that amount.
On the faith of the promised subscription the plaintiff (commisioner of the howrah municpality)
entered into a contract with a contractor for the purpose of the building the town hall.
Later the defendant subscriber referred to pay the amount upon the promise to pay / subscribe. In
other words ,he contended that there would be no personal benefit / significance by the
construction of the hall.
Held :
He was held liable. It was observed that in he case person were asked to knowingly subscribe the
purpose to which the money was to be applied / use. They also knew, that on the faith of their
subscription and an obligation was to be incurred to pay the contactor for the work. The Act of
plaintiff is entering into contract with the contractor was done at the desire of the prommisor so
as to constitute a good consideration within the meaning of the section 2(d) of ICA.
Chinnaya vs ramayya (1882 Madr HC)

Facts :
A, an old lady, granted / gfted an estate to her daughter the defendant, with the direction /
condition that the daughter should pay an annuity ( annual payment ) of Rs 653 to A’s brother,
the plaintiff.
On the same day the defendant, daughter (promisor) , made a promise vis a vis an agreement
with her uncle that sshe would pay the annuity as directed by her mother, the old lady.
Later the defendant refused to pay on the ground that her uncle (promisee, plaintiff) has not
given any consideration. She contended that her uncle was stranger to this consideration and
hence he cannot claim the money as a matter of right.
Held:
The Madras HC held that in this agreement between the defendant and plaintiff the consideration
has been furnished on behalf of the plaintiff (uncle ) by his own sister (defendant’s mother).
Although the plaintiff was stranger to the consideration but since he was a party to the contract
he could enforce the promise of the promisor, since under Indian law, consideration may be
given by the promisee or anyone on his behalf – vide Section 2 (d) of ICA.
Thus, consideration furnished by the old lady constitutes sufficient consideration for the plaintiff
to sue the defendant on her promise. Held, the brother / uncle was entitled to a decree for
payment of the
annual sum of money.
Thomas vs Thomas (1842)
&

Tweddle vs Atkinson (1861) {See Bottom }
Held:
It was held in these cases that the under the English law, that if the consideration is furnished by
any person other than the promisee himself, then the promisee is relegated to the position and
status of a stranger to the consideration and therefore, he cannot sue for promise.
Harvey vs Gibbons :
Facts :
In this case a servant was promised £ 50 in consideration of promise that he would release a
debt to his master.
Held:
This is legally impossible.
Collins vs Godefroy (1831) –
Facts :
The promisee, plaintiff, received subpoena (summon from the Court) to appear at a trial as a
witness on behalf of the defendant (promisor). The defendant promised him a sum of money for
the troubles which was to be taken by him in appearing that case. A person who receives a

subpoena is bound to attend and give evidence before the Court. Later the defendant refused to
pay the promised amount. The plaintiff sued him to recover the promised amount.
Held :
It was held that there was no consideration for promise. The plaintiff being already a legal duty
to attend.
But where the undertaking is to do something more than what the promisee is legally bound.
This may constitute a good consideration for the promise of the promisor.
Glasbrook Bros. Ltd. Vs Glamerglan County Council (1925)
Facts :
Glamerglan County Council, a police authority, sued for a summ of £ 2200 promised to it by
Glasbrook Brothers Ltd. a colliery company. The police authority had provided a stronger guard
during a strike, as required by the company than was in its opinion, necessary.
Held :
It was held that providing stronger guard then what was actually necessary was a good
consideration and the defendants were liable to pay for the same.
Tweddle Vs Atkinson

Note – The rule that only parties to the contract can sue each other was recognised for the first
time in 1861 in this case.
Facts:
In this case, the plaintiff, A , married a girl B. After this marriage a contract in writing was made
between the fathers of the married couple that each should make a payment of a certain sum to A
who should have the power to sue the executors of her father in law’s estate for the promised
money by the father in law.
Held:
It was held that the husband could not sue her since
1. He was not a party to the contract (stranger to a contract), as also
2. No consideration has moved from him to his father in law (stranger to the consideration)
Guarantee – Bailment

GUARANTEE
Madho Shah vs Sita Ram
Note –
The liability of the surety is said to be ” vicarious ” with that of the Principal Debtor. Vicarious
liability means that the liability between two parties is joined and several. The Principle of
Vicarious Liability involved in a contract of guarantee was recognised for the first time in this
case.
R . Lilavati vs Bank of Baroda
Note –
The loss of securities by the creditor results in the discharge of the surety – vide Section 141.
If however the pledged securities are lost without any fault of the creditor, for instance, theft,
fire, etc. the surety is not discharged thereby. This was seen in the above mentioned case.
**
BAILMENT
Reed vs Dean
Facts :

‘A’ hired a motor from B for a holiday on river Thames. The motor caught fire and A was unable
to extinguish it as the fire fighting equipment was out of order. As such he was injured and
suffered loss.
Held :
B was liable as it was a case of non gratuitous bailment.
Misa vs Currie
Facts :
A customer had two separate accounts with a bank and he owes to the bank on of the accounts.
The bank can liquidate / realize the debt due to it by transferring money there from. The same
provision is equally applicable to India.
**
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July 18, 2009Tanay Saraf, Advocate
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35 thoughts on “Contract I – Case Laws”
1.
Gewinne says:
May 16, 2010 at 10:32 pm
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Tanay Saraf, Advocate says:
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5.
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April 20, 2013 at 11:43 am
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6.
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o

August 21, 2014 at 7:04 pm
it is my pleasure that my notes which had helped my friends and me in our exams
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Advocate
High Court, Calcutta.
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10.
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August 3, 2014 at 11:04 am
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o
August 21, 2014 at 7:03 pm

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May 20, 2016 at 12:47 am
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o
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17.
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18.
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November 24, 2016 at 1:06 pm
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20.
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