FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2018

TEAM CODE: 04

BEFORE THE HON’BLE

SUPREME COURT OF ASNARD

UNDER ARTICLE 133(1) OF CONSTITUTION OF ASNARD, 1950

IN THE MATTER OF:

HPC Ltd., & Amy Santiago……………………………………….APPELLANT

Versus

Steve Rovers…………………………………………………..…RESPONDENT

MEMORANDUM ON BEHALF OF APPELLANT

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TABLE OF CONTENTS

PAGE NO

LIST OF ABBREVIATIONS 4
INDEX OF AUTHORITIES
 INDIAN CASES 5
 FOREIGN CASES 5,6
 STATUES 6
 BOOKS 6

STATEMENT OF JURISDICTION 7
STATEMENT OF FACTS 8
ISSUES RAISED 9
SUMMARY OF ARGUMENT 10,11
ARGUMENTS ADVANCED 12
1. Whether Fraud was committed by Mr. Steve Rovers
under Section 17 of the Indian Contract Act?
1.1 Steve Rovers had duty to speak
1.2 Fraud is not justified by the defence of due
diligence
1.3 An act fitted to deceive
2. Whether the contract dated 14th August 2017 voidable at
the option of Mr Tony snark?
2.1 Contract dated on 14th Aug 2017 is voidable by virtue
of Fraud on the part of Mr. Tony Snark.
3. Whether Steve Rovers is liable to compensate Amy
Santiago for the death of her husband and her consequent
loss of livelihood?
3.1 The Damage suffered by the claimant would not
have occurred but for the conduct of Respondent.
3.2 Respondent owed a duty of care to the appellant
3.3 Breach of duty to take care by the Respondent
3.4 Mr. Steve Rovers is liable to compensate Ms.
Amy Santiago for her consequent loss of

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Livelihood
4. Whether Mr. Steve Rovers being the supplier and service
provider of LPT machines is liable to compensate Mr.
Tony Snark for breach of contract?
4.1 Breach of Contract by Fraud
4.2 Breach of Duty by Mr. Steve Rovers under
negligence
4.2.1 Under professional and Industrial standards
4.3 Implied condition as to the quality and fitness and
merchantability
4.4 Special damages under section 73 of ICA

PRAYER 29

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LIST OF ABBREVIATIONS

& And
AIR All India Reporter
Anr. Another
UOI Union of India
v. Versus
ICA Indian Contract Act
SOGA Sale Of Goods Act
u/s Under Section
MP Moot Proposition
Art. Article
Mr. Mister
Mrs. Mis’ess
HPC Healing Hand Pharmaceutical
LPT Labzo-pharma Tech
Co. Ltd. Corporate limited
HC High court
SC Supreme Court
Ors. others
Jun. June
Aug. August
Oct. October
ILR Indian Law Reports

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INDEX OF AUTHORITIES

INDIAN CASE LAWS

S. No. CASE TITLES CITATION

Commissioner of Custom, Kandla v. 2004, SC.
1. M/S Essar Oil Ltd. & Ors.
2. Gauri Shankar and Others v. AIR 1924 All 17.
Musammat Manki Kunwar
3. Nursey Spg & Wvg Co. Ltd. (1880) 5 Bom 92.
4. JoyChandra (1905) 32 Cal 357 : 1 CLJ 23 (PC).
Bandopadhaya v. Srinath
Chattopadhaya
5. Ningawwa v. Byrappa AIR 1968 SC 956
6. Venkataratnam v. Sivaramudy AIR 1940 Mad 560
7. The New India Assurance Co. Ltd.v. (1996) AC 366.
Mrs. Pandyal Kuniyil Pushpavally
8. Olga Tellis v. Bombay Municipal 1985 SCC (3) 545
Corporation
9. Tata Consultancy Services v. State AIR 2005 SC 371
of Andhra Pradesh
10. Union of India v. Rallia Ram 1963 AIR 1685
11. Hasanbhoy Jetha v. New India AIR 1955 Mad 435
Corporation Limited

FOREIGN CASE LAWS

S. No. CASE TITLES CITATION

1. Redgrave v. Hurd (1881)20h D1
2. Dobell v Stevens (1825) 3B & C623
3. Donoghue v Stevenson (1932) UKHL 100
4. Junior Books Ltd. v. Veitchi Co Ltd. (1983)1 AC 520
5. Stennett v. Hancock & Peters (1939) 2 All E.R. 578
6. St. Albans city and district council (1996)4 All ER 481 (CA)
v. International Computers Ltd.
7. Simpson v. London & North (1876) 1 QBD 274

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Western Railway Co.

8. Victoria Laundry (Windsor) Ltd. V. (1949) 2KB 528
Newman Industries Ltd

LIST OF STATUES REFERRED

1. Indian Contract Act, 1872.

2. Sale Of Goods Act, 1930.
3. Constitution Of India, 1950.
4. Law Of Torts

BOOKS REFERRED

1. Avatar Singh, Contract and Special Relief (11th ed. 2013)

2. Anirudh Wadhwa, MULLA The Indian Contract Act (13th ed. 2011)
3. Dr. R. K. Bangia, Contract-I (7th ed. 2017)
4. M. P. Jain, Indian Constitutional Law (6th ed. 2010)
5. Pollock & Mulla, The Sale of Goods Act (5th ed. 1990)
6. W. V. H. Rogers, Winfield & Jolowicz On Tort (18th ed. 2010)

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STATEMENT OF JURISDICTION

THE HON’BLE SUPREME COURT OF ASNARD IS VESTED WITH JURISDICTION TO

HEAR THE PRESENT APPEAL UNDER ARTICLE 133 OF THE CONSTITUTION OF
INDIA. 1

1
Under Art.133(1), an appeal lies to the supreme court from any judgment , decree or final order in a civil
proceedings of a High Court if it certifies –

(a) That the case involves a substantial question of law of general importance; and
(b) That in the opinion of the High Court, the said question needs to be decided by the Supreme Court

For the purpose of Art.133 (1), the proper test to determine whether a question of law is substantial or not is
whether it is of general public importance, or whether it directly and substantially affects the rights of the
parties, and if so, whether it is either an open question in the sense that it is not finally settled by the highest
court, or is not free from difficulty , or calls for discussion of alternative views.

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STATEMENT OF FACTS
1.Healing Hand Pharmaceutical Co.Ltd (HPC) is a company in Democratic State of Asnard that
enjoys absolute monopoly in the production of Lobanza capsule, which reduces addiction for
narcotic substances but is strongly advised not to be taken while a person is still consuming
drugs or tobacco. HPC Ltd. is owned by a business tycoon Mr. Tony Snark.

2. . Mr. Steve Rovers and Mr. Tony Snark were childhood friends. Mr. Steve Rovers designed
and manufactured his own machine named Labzo-pharma Tech, which can produce Lobanza
capsules at a comparatively cheaper rate and can increase its productivity. Owing to its
uniqueness, Mr. Tony agreed to purchase the machine on 4 th Jun. 2017. Owing to its efficiency,
Mr. Tony planned to buy 3 more machines and entered into an agreement with Mr. Steve on 14th
Aug. 2017 for delivery of machines in 5 days which were actually delivered after 9 days.

3. A week prior to the sale on 14th Aug., Mr. Rovers received a detailed report about the patent
defects in the machines, however, he ignored and failed to disclose because of the extreme
pressure to meet its rising demand.

4. Mr. Pablo Escocar, saw the advertisement of Lobanza capsule and subscribed to it so as to get
rid of his drug addiction and smoking habit. Even after consuming it for days he couldn't refrain
from smoking. Unfortunately, his health started deteriorating and he died after 8 days of
consuming the capsule. His pregnant wife, Ms. Amy was traumatized by the death of her
husband and dwindling financial condition of the household as he was the sole bread winner.
Due to sheer lack of awareness, she wasn't aware of the causes that lead to her husband's death.

5. Meanwhile, Mr. Tony enraged by the loss in his production, accused Mr. Rover of fraud and
initiated civil proceeding against him for breach of contract. Through local reports, he came to
know about Mr. Escocar's death and approached his widow to request her to join the suit against
Mr. Rover to which she willingly agreed. HPC Ltd. has now appealed before the Supreme Court
of Asnard after the case got dismissed by HC on the ground that it lacked sufficient merit.

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ISSUES RAISED

 Whether fraud was committed by Mr. Steve Rovers under section 17 of the Indian
Contract Act?

 Whether the contract dated 14th Aug. 2017 voidable at the option of Mr. Tony Snark?

 Whether Steve Rovers is liable to compensate Amy Santiago for the death of her husband
and her consequent loss of livelihood?

 Whether Mr. Steve Rovers being the supplier and service provider of LPT Machines, is
liable to compensate Mr. Tony Snark for breach of Contract?

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SUMMARY OF ARGUMENTS

ISSUE I

Whether Fraud was committed by Mr. Steve Rovers under section 17 of the Indian
Contract Act, 1872?

It is humbly submitted before the Hon’ble Supreme Court that Mr Steve Rovers has committed
fraud under section 17 of ICA , 1872. Firstly, he had a duty to speak as the contract between him
and Mr. Tony Snark was based on trust. Secondly, fraud is not justified by the defence of due
diligence. Thirdly, there was an act fitted to deceive on the part of Mr. Steve Rovers.

ISSUE II

Whether the contract dated 14th August 2017 voidable at the option of Mr. Tony Snark?

It is humbly submitted that Mr. Steve Rovers has committed Fraud under section 17 of ICA as he
failed to provide Mr. Tony Snark with the goods fit for the production of Lobanza capsule and
also he had a duty to speak. In the instant case, prima facie the appellant’s consent for the
contract was obtained by fraud and that the respondent having prior knowledge of the defects,
could have informed it. Therefore, the contract concluded between the parties on 14 th Aug. 2017
is voidable at the option of the appellant.

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ISSUE III

Whether Steve Rovers is liable to compensate Amy Santiago for the death of her husband
and her consequent loss of livelihood?

It is humbly submitted before the court that the damages would not have occurred but for the
conduct of respondent. There was a contractual relation between manufacturer and consumer as
he was aware that the machine he had manufactured was meant to produce Lobanza capsule
which would ultimately be consumed by the people. He owed a duty of care towards consumers
under Law of Torts which was breached resulting in the death of appellant’s husband. Therefore,
Steve Rovers is liable to compensate Amy Santiago for the death of her Husband and her
consequent loss of livelihood as he was the sole bread winner of the family.

ISSUE IV

Whether Mr. Steve Rovers being the supplier and service provider of LPT Machines, is
liable to compensate Mr. Tony Snark for breach of Contract?

Mr. Steve Rovers having committed Fraud is liable to compensate Mr. Tony Snark for the breach
of contract. The goods provided were not reasonably fit for the purpose even after the special
purpose was made known to the seller and also the goods provided were not of merchantable
quality resulting in a breach of contract. Negligence has been committed on the part of Mr. Steve
in the capacity of the professional and industrial standards. Hence, Mr. Steve is liable to
compensate the appellant for the losses incurred.

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ARGUMENTS ADVANCED

I. FRAUD WAS COMMITTED BY MR. STEVE ROVERS UNDER SECTION 17 OF

INDIAN CONTRACT ACT.

It is humbly submitted that on 4th of Jun. 2017, HPC Ltd purchased a LPT Machine from Mr.
Steve Rovers, his childhood friend, which proved to be a boon for his company. Owing to the
productivity of the machine, Mr. Tony Snark on 14th Aug. ,2017 entered into an agreement for
three more LPT Machines with Mr. Steve. He was ensured the delivery of goods in five days but
eventually received it after nine days.2 A week prior to the sale of 3 LPTs on 14th Aug., Mr. Steve
received a detailed report mentioning some defects in the machine which he ignored and didn’t
disclose to the HPC Ltd. On 22nd Oct. 2017 all the machines malfunctioned. Mr Steve is
therefore liable for Fraud.3

Section 17 of Indian Contract Act defines Fraud as any act committed by a party to the contract
to induce the other to enter into the contract. It can be a suggestion which is not true by one
who does not believe it to be true; or, the active concealment of a fact by one having a
knowledge of the fact; or, a promise made without any intention of performing it; or, any other
act fitted to deceive; or, any act or omission as the law specially declares to be fraudulent.4

Further, fraud is explained by the Hon’ble Supreme Court in the case of Commissioner of
Custom ,Kandla v. M/S Essar Oil limited & Ors.5

“A "fraud" is an act of deliberate deception with the design of securing something by taking
unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating
2
Moot Proposition, ¶6.
3
Moot Proposition,¶12.
4
Indian Contract Act, 1872.
5
2004, SC.

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intended to get an advantage. "Fraud" as is well known vitiates every solemn act. Fraud and
justice never dwell together. Fraud is a conduct either by letter or words, which includes the
other person or authority to take a definite determinative stand as a response to the conduct of
the former either by words or letter. A fraudulent misrepresentation is called deceit and consists
in leading a man into damage by willfully or recklessly causing him to believe and act on
falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and
injury enures therefrom although the motive from which the representations proceeded may not
have been bad. An act of fraud on court is always viewed seriously. Fraud and deception are
synonymous”.6

In the case of Gauri Shankar and Others v. Musammat Manki Kunwar 7 fraud was defined in the

sense that :

 “To prove a case of fraud it must be proved that the information provided is false to the

knowledge of the party making it or is such that the party making it could have no reasonable

belief that it is true, that it is made for the purpose of being acted upon and believed, that it was

believed and acted upon and caused the actual damage for which relief is claimed.”

Here in the case at hand, Mr. Steve Rovers received the detailed report from his auditor
categorically highlighting the patent defects of the machine. He, however, in order to maximize
his profit ignored the report and failed to disclose it to the appellant, leading to damage by
recklessly causing him to believe and act on falsehood.

6
Ibid.
7
AIR 1924 All 17.

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A. STEVE ROVERS HAD A DUTY TO SPEAK

It is humbly submitted that Mr. Steve Rovers owed a duty to speak while entering into the
contract as the relation between Mr. Tony Snark and Mr. Steve Rovers was based on trust.
They were childhood friends and even completed their school together. After completing
their Senior Secondary School in the year 2007, they took admission at the same university.
This further strengthened their bond. All this points out to the fact that they had known each
other for a long time and that they had built a relation which was based on trust, where they
can rely on each others ability to provide goods which would be fit for the purpose and
would disclose all the material facts which could possibly change the willingness of a person
to enter into a contract. Duty to speak arises where in contracting party reposes trust and
confidence in the other.8

It cannot be doubted that there may be a case in which there is deception by omission, but
silence may be treated as deception only when there is a duty to speak; in other words, as
Bigelow points out, ‘a duty to speak, which is the ground of liability, arises wherever and
only where silence can be misleading.’9

Mr. Tony on 4th Jun. 2017, purchased the machine fulfilling necessary compliances and due
diligence which further proved to be a boon for his company. 10 The efficiency and
productivity of the machine increased his confidence in his friend. Consequently he bought
another three machines solely relying on his friend’s ability. Moreover he appointed Mr.
Steve and his tech team to repair the machines 11 which shows that he had full faith and
confidence in Mr. Steve. That being the case, it becomes the duty of Mr. Steve to speak and
disclose to the Appellant the defects of the machines.

8
Nursey Spg & Wvg Co. Ltd, Re, ILR(1880)5 Bom 92.
9
Joy Chandra Bandopadhaya v. Srinath Chattopadhaya, (1905) 32 Cal 357 : 1 CLJ 23 (PC).
10
Moot Proposition,¶5.
11
Moot Proposition,¶12.

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B. FRAUD IS NOT JUSTIFIED BY THE DEFENCE OF DUE DILIGENCE

If the Representor is untrue it is no defence that the person to whom the representation is
made had the means of discovering, and might with reasonable diligence have discovered
that it was true, or that he made a cursory inquiry into the facts. To escape liability the
respondent must show that either the appellant had knowledge of the facts which showed it to
be untrue, or that he stated in terms or, showed clearly by his conduct that he did not rely on
the representations.12 In the present case, it is explicit that the appellant had no knowledge of
the defects and he never showed by his conduct that he distrusted respondent’s capacity to
make the machine. Moreover his refusal to check the machines showed that he solely relied
and placed his trust in the respondent. Mr. Steve Rovers cannot justify his act of fraud by the
defence of due diligence.

C. AN ACT FITTED TO DECEIVE.

As per the interpretation of the statute, two kinds of fraud are mentioned. First is actual or
positive fraud and second is constructive or legal fraud which includes such contracts or acts
as though not originating in any actual or evil design or contrivance to perpetrate a fraud yet,
by their tendency to deceive or mislead others, or to violate private or public confidence, are
prohibited by law.13Here in the present case Mr. Steve was bound by law to disclose the
defects of his machine to Mr. Tony yet he failed to do so just to meet the rising demand of
his machines. He became aware of the defects a week prior to the sale i.e. on 7 th Aug. yet
ignored to inform it to Tony and went ahead with the contract. This act of Mr. Steve clearly
misleads and violate the private confidence which was placed upon him and made Mr. Tony
believe that the machine was perfectly fit for the purpose and would deliver the best.

12
Redgrave v. Hurd,(1881) 20 h D1;Dobell v.Stevens, (1825) 3B &C623.
13
Hungerford Investment Trust Ltd v. Turner Morrison & Co. Ltd, (2009) 2CHN 330

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II. THE CONTRACT DATED 14th AUG. 2017 IS VOIDABLE AT THE OPTION OF

MR. TONY SNARK

A. CONTRACT DATED ON 14TH AUG. 2017 IS VOIDABLE BY VIRTUE OF

FRAUD ON THE PART OF MR. TONY SNARK

Mr. Tony Snark on 14th Aug., 2017 entered into a contract with Mr. Steve Rovers for the
purchase of 3 LPT machines for the production of Lobanza Capsules. However it was
found that the machines had some defects because of which the machines malfunctioned,
incurring a heavy loss upon the appellant.

When consent to an agreement is caused by coercion, fraud or misrepresentation, the

agreement is a contract voidable at the option of the party whose content was so caused. 14
In the present case, Mr. Steve Rovers had the prior knowledge of the defects of the
machine yet he failed to disclose the same to Mr. Tony Snark. The relationship which he
shared with Mr Tony was based on trust therefore Mr Tony relied on him for the quality
products. The onus was on Mr. Steve to disclose the defects to the appellant.

B, having discovered a vein of ore on the estate of A, adopts means to conceal and does
conceal the existence of the ore from A. through A’s ignorance B is enabled to buy the
estate at an under-value. The contract is voidable at the option of A. 15 In the present case,
Mr. Tony received the detailed report from his auditor about the defects of the machines.
He in order to meet the rising demand and maximise his profit however ignored the
report and failed to disclose it to Mr. Tony causing him to act on falsehood and buy
machines which were not reasonably fit for his purpose. The contract is thus voidable at
the option of Mr. Tony.

14
Section 19, Indian Contract Act, 1872.
15
Illustration (d) to section 19, Indian Contract Act, 1872.

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In Ningawwa v. Byrappa,16 it was held :

“……It is well established that a contract or other transaction induced or tainted by
fraud is not void, but only voidable at the option of the party defrauded. Until it is
avoided, the transaction is valid, so that third parties without notice of the fraud may in
the meantime acquire rights and interests in the matter which they may enforce against
the party defrauded…….”17

Mr. Tony’s consent for the contract dated on 14th Aug.,2017 was caused by Fraud leading to
damage by recklessly causing him to believe and act on falsehood, rendering the contract
voidable at the option of Mr. Tony.

In Venkataratnam v. Sivaramudy,18 a vendor not only failed to disclose that he has leased away
the land which was being sold, but stated that immediate possession would be given. The madras
HC did not allow the vendor to take the defence of that vendee has failed to exercise the defence
of due diligence and vendee was allowed to treat the contract as voidable. In the case at hand, the
respondent also failed to disclose the defects to the appellant with whom he shared a relationship
based on trust and therefore cannot take the defence that the appellant failed to exercise the
defence of due diligence. The contract, thus becomes voidable at the option of the appellant.

16
AIR 1968 SC 956.
17
Ibid.
18
AIR 1940 Mad 560.

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III. STEVE ROVERS IS LIABLE TO COMPENSATE AMY SANTIAGO FOR THE

DEATH OF HER HUSBAND AND HER CONSEQUENT LOSS OF

LIVELIHOOD

It is humbly submitted before the court that the object underlying a provision for grant of
compensation is to enable the family of the deceased to tide over the sudden crisis resulting due
to death of the sole bread earner which has left the family in penury and without any means of
livelihood.

It is to be contended that the respondent was negligent in disclosing the defects in the machine
which ultimately resulted in the death of the deceased concerned.

A.THE DAMAGES SUFFERED BY THE CLAIMANT WOULD NOT HAVE

OCCURRED BUT FOR THE CONDUCT OF THE RESPONDENT

It is contended before the court that Mr. Steve had a detailed report of the defects in those
machines which were used to manufacture capsules and he knowingly concealed this from the
appellant. Also there were few instances of illness that were reported due to defect in the
machine19. After consuming the capsule there was no change in the habit of the deceased and he
couldn’t refrain from smoking and consequently his health deteriorated and he died after 8 days
of consumption of the capsule20.

Negligence is a breach of duty caused by the omission to do something which a reasonable man,
guided by those consideration which ordinarily regulate the conduct of the human affairs would
do , or doing something which a reasonable man would not do21. The definition thus involves
three ingredients of Negligence (1) Legal duty to exercise due care on the part of the party

19
M. P., ¶12.
20
M.P., ¶5.
21
Indian Contract Act,1872.

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complaining the former conduct within the scope of the duty; (2) breach of such Duty (3)
consequential Damage.

22
In the case of The New India Assurance co. Ltd. v. Mrs Pandyat Kuniyil pushpavally it was
alleged that the deceased was the sole bread winner of the family and they were dependent on
him for their livelihood. The death was caused due to the negligence of the respondent. The
respondent was made liable and the Court awarded Compensation for the same.

B. RESPONDENT OWED A DUTY OF CARE TO THE APPELLANT

The general priniciple of ‘forseeability’ and ‘proximity’ is applicable in solving the case
presenting the existence or otherwise of a new situation laid down by LORD ATKIN in the
celebrated case of Donoghue v Stevenson23. According to Lord Atkin’s ratio decendi,“a
manufacturer of products, which he sells…to reach the ultimate consumer …owes a duty of care
to the consumer to take reasonable care and you must take reasonable care to avoid acts and
omissions which you can reasonably foresee would be likely to injure neighbor. Who then in law
is my neighbor? The answer seems to be ,person who are so closely and directly affected by my
act that I ought reasonably to have them in contemplations as being so affected when I am
directing my mind to the acts or omission which are called in question. ” The court established
that manufacturers have a duty to the end consumers or users of the product.

1. He had the knowledge of the defects in the machine by the audit report and also he was
the manufacturer as well as seller of the same. The machines were meant to produce the
capsules so he had reasonable forseeability of the harm to the claimant.
2. According to Lord Atkin’s definition of proximity or neighbourhood, defendant comes
under the ambit of neighborhood.

22
(1996) ACC 366.
23
(1932) UKHL 100.

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In Junior books Ltd. v. Veitchi co. Ltd.24, it was held that “The defendants were specialist in
flooring and were sub-contractors to lay a floor in a factory which was to be used by plaintiffs.
The plaintiffs claimed that due to the negligence of the defendants, the floor was faulty and as
they were specialist on the matter, they were liable for the damage caused by cracking of floor to
that they were awarded 2,07,000 pounds being the cost of replacing the floors and other
consequential loss.”

C. BREACH OF DUTY TO TAKE CARE BY RESPONDENT

The Defendant’s ignorance to the report and failure of disclosure the reports to the plaintiff
breached the duty of care which was owed to the plaintiff.

D. MR STEVE ROVERS IS LIABLE TO COMPENSATE AMY SANTIAGO FOR HER

CONSEQUENT LOSS OF LIVLIHOOD

In the present case, claimant believes that conduct of the defendant caused the damage and loss
of livelihood to Ms. Amy. For making defendant liable it must be shown that the particular act of
the defendant constituted the cause of damage suffered by the claimant. To establish the
requirement for satisfying the existence of causation that we have already discussed in the above
contentions of this issue. The Supreme Court in Olga Tellis v. Bombay Municipal
corporation25 implied that “‘Right to livelihood’ is borne out of ‘Right to Life’ as no person can
live without the means of living, that is, the means of livelihood. The easiest way of depriving a
person of his right to life would be deprive him of his means of livelihood to the point of
abrogation”. In the present scenario claimant being deprived of her means of living, i.e. there is
no source of income by which she can enjoy bare neccessaties of life such as adequate nutrition,
clothing and shelter for her head.

    

Therefore, keeping in mind the above purview the claimant has claimed a compensation of
$20m under the following criteria:

24
(1983) 1 AC . 520.
25
1985 SCC (3) 545.

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1. Loss of Dependency
2. Cremation Expenses
3. Loss of love and affection
4. Loss of consortium to widow
5. Childbirth expenses
6. Upbringing of daughter

Basic intention is that, on the death of the deceased concerned, his family should not be
deprived of the means of livelihood. The object is to enable the family to get over sudden
financial crisis.

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IV. MR. STEVE ROVERS BEING THE SUPPLIER AND SERVICE PROVIDER OF

LPT MACHINES IS LIABLE TO COMPENSATE MR. TONY SNARK FOR

BREACH OF CONTRACT.

It is humbly submitted before the Hon’ble Supreme Court that in the present case Mr. Steve
Rovers was made known by Mr. Tony Snark on 14 th Aug. 2017 specifically the purpose for
which he needed three more LPT machines for the production of Lobanza capsules. The LPT
Machine which comes under the purview of goods 26 under sale of goods act which includes
every kind of movable property other than actionable claim and money. A contract for the sale of
goods contain certain stipulation and contravention of these expressed or implied stipulations
give rise to the breach of contract and allow the innocent party to claim damages for such breach.

In the present case Mr. Tony purchased 4 LPT machines from Mr. Steve for an amount of $10
million each. The machines supplied by Mr. Steve were defected and not fit for the purpose, and
all the machines malfunctioned and stopped working on 22 nd Oct. 2017 incurring a huge loss
upon the appellant. Therefore breached the established contract between the parties becoming
liable to compensate the appellant for the losses suffered.

Breach of contract by fraud

In the present case fraud has been committed by Mr. Steve Rovers which gives rise to breach of
contract and the same has already been dealt under the contention of issue 1.

BREACH OF DUTY BY MR STEVE ROVERS UNDER NEGLIGENCE

26
Section 2, Sale of Goods act, 1930.

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In the case at hand, Mr. Steve Rovers owed a legal duty to Mr. Tony Snark under the terms
of the contract to provide machines fit for the production of Lobanza Capsule. However he
failed to provide the same. According to Law of Torts, the respondent is liable for tort of
negligence if he breaches the legal duty owed to him by the appellant resulting into
consequential damages suffered by the appellant. 27

In Donoghue v. Stevenson28, Lord Atkin propounded ,

“You must take reasonable care to avoid acts or omissions which you can reasonably
foresee would be likely to injure your neighbour.”29

He then defined “neighbours” as “persons so closely and directly affected by my act that I
ought reasonably to have them in contemplation as being so affected when I am directing my
mind to the acts or omission which are called in question.”

Similarly in the present case Mr. Steve was liable to Mr. Tony as his omission of ignoring the
report led to the failure of the machinery on 22 Oct. consequently causing him a heavy loss
which was reasonably foreseeable that a negligent act would result in same.

 UNDER PROFESSIONAL AND INDUSTRIAL STANDARDS

If anyone practices a profession or is engaged in a transaction in which he holds himself out as

having professional skill, the law expects him to show the amount of competence associated with

27
W. V. H. Rogers,Winfield and Jolowicz on Tort 150, (18th ed., Thomson Reuters (Legal) Ltd, 2010) (1937)
28
Donoghue v. Stevenson, (1932) UKHL, A. C. at 580.
29
Ibid.

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the proper discharge of the duties of that profession, or trade, and if he falls short of that and
injures someone in consequence he is not behaving reasonably. 30

In the case of Stennett v. Hancock & Peters, It was held that service providers generally owe a
duty to take reasonable care not to cause foreseeable injury in providing a service.31

Similarly in the present case, Mr. Steve being reckless about his conduct in providing proper
machines and services to Mr. Tony made a breach of duty to take reasonable care and to avoid
any foreseeable injury. A week prior to the sale of LPTs on 14 th Aug. he became aware of the
defects which his machine had and yet ignored to disclose the same to the appellant knowing the
fact that it would result in heavy losses.

IMPLIED CONDITION AS TO THE QUALITY AND FITNESS AND

MERCHANTABILITY:

According to the sale of goods act where goods are bought by description from the seller who
deals in the goods of that description there is an implied condition that goods should be of
merchantable quality.32

In Tata consultancy service vs. state of Andhra Pradesh 33 taking reference from St. Albans
city and district council v. International Computers Ltd. case 34 it was cited that if the disk is sold
or hired by the manufacturer, but the program is defective, there would be prime facie breach of
the terms as to quality and fitness. Similarly in Union Of India vs. Rallia Ram 35 it was held that a

30
W. V. H. Rogers,Winfield and Jolowicz on Tort 284, (18th ed., Thomson Reuters (Legal) Ltd, 2010) (1937)
31
(1939) 2 ALL E.R. 578.
32
Section 16(2) of S.O.G ,1930.
33
AIR 2005 SC 371, (2004) 39 APSTJ 205.
34
(1996) 4 All ER 481 (CA).
35
1963 AIR 1685, 1964 SCR (3) 164.

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part of cigarette supplied to respondent was mildewed and unfit for consumption and therefore
the respondent was entitled to claim compensation on the ground that government of India has
committed breach of warranty.

In Hasanbhoy Jetha vs. New India Corporation Limited 36 an appeal is brought by the
defendants a firm carrying on the business of hardware goods and second hand machinery in
Bombay. The suit was instituted in Mar. 1946 by the respondents herein for the recovery of the
damages on the ground that applicant firm was guilty of breach of contract, breach of condition
and warranty. Even though the machine was repaired and inspected before-hand, learned judge
held that respondents were clearly entitled for the refund of the entire purchase price.

SPECIAL DAMAGES UNDER SECTION 73 OF INDIAN CONTRACT ACT

Special damages are those which arise on account of the unusual circumstances affecting the
plaintiff. They are only recoverable when the special circumstances were brought to the
knowledge of the defendant so that the possibility of the special loss was in the contemplation of
the parties.

In the case of Simpson v London & North Western Railway Co 37 the above suggestion was
qualified to this extent that if the special circumstances are already within the knowledge of the
party breaking the contract, the formality of communicating them to him may not be necessary.

The plaintiff was in the habit of exhibiting samples of his implements at cattle shows. He
delivered his samples to the defendant company for consignment to the show grounds. The
consignment note stated: “must be at New Castle on Monday certainly”. But no mention was
made of the intention to place the goods in the exhibition. On account of negligence the goods
reached only after the show was over. But as the company already had the knowledge of the

36
AIR 1955 Mad 435.
37
(1876) 1 QBD 274.

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purpose, the plaintiff was allowed to recover not only the loss of freight but also the profits he
would have made by placing the goods at the show.

Cockburn CJ said:

“The principle is now well-stated that, whenever either the object of the sender is specially
brought to the notice of the carrier, or the circumstances are known to the carrier, from which
the object ought in reason to be inferred, so that the object may be taken to have been in the
contemplation of both parties, damages may be recovered for the natural consequences of the
failure of that object”.

It was restated in the case of Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd38

By Lord Asquith that: “Only such loss is recoverable as was at the time of the contract
reasonably foreseeable as liable to result from the breach. Foreseeability depends upon the
knowledge”.

In the present case Mr. Tony conducted a market research to test the viability of his new project
regarding the Lobanza capsule and discovered that the LPT machine would slash the cost of
production by one third and the productivity would increase roughly by ten times. Seeing such a
positive result, on 14th Aug. 2017, HPC Ltd entered into an agreement with Mr. Steve,
regarding the purchase of three more LPT Machines for Lobanza Capsule’s production. Hence
the specific purpose of purchasing the machine was made known to the seller.

However, a week prior to the sale of three LPTs on 14 th Aug., Mr. Steve received a detailed
report from the auditor categorically highlighting certain patent defects in those machines yet he
ignored the reports and failed to disclose it, showing a reckless conduct from his side. On certain
occasions HPC Ltd. encountered frequent problems with machines and finally on 22 nd Oct. all
the machines malfunctioned and stopped working resulting in a heavy loss incurred by Mr. Tony
Snark. Hence he is obligated to get special damages for his loss as he made his purpose known
38
(1949) 2KB 528: (1949) 1 All ER 997 (CA).

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to Mr. Steve, yet he failed to deliver the goods fit for the purpose and it did not serve his
purpose. He also incurred heavy losses due to the failure of the machinery and the resulting
damages were also reasonably foreseeable.

Hence, keeping in mind all the above circumstances and losses incurred Mr. Steve Rovers is

liable to compensate Mr. Tony Snark for breach of contract and all the foreseeable and

consequential losses. The cost of machines was 10 million each and four machines were

purchased making it a total of 40 million solely for the cost of same. Further when the machines

malfunctioned the production was hampered and HPC lost the control over the market and had to

bear consequential losses. Aggrieved by such huge losses Mr. Tony should be allowed to recover

a compensation of 40 million for loss of production of lobanza and the profits he would have

earned from the same. Therefore Mr. Tony should receive a total sum of 80 million as

compensation.

V.

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PRAYER

For the reasons aforesaid, in the light of issues raised, arguments advanced and authorities cited,
the counsel of Appellant prays before this Hon’ble Court to:

Declare that the fraud has committed by Mr. Steve and order for the restitution to Appellant,

Declare that the contract is voidable by the virtue of fraud and order for the damages to
Appellant,

Declare that there is loss of livelihood of the wife of deceased and order for the compensation to
Appellant,

Declare that there is a breach of contract and order for the restitution and damages.

The Hon’ble Court may make any other order as it may deem fit in terms of Justice, Equity and
good conscience.

Respectfully submitted,

Counsel of Appellant.

29 MEMORANDUM ON BEHALF OF APPELLANT