Mithoolal Nayak vs LIC

In 1942, one M sent a proposal for the

insurance of his life. He was examined by Dr. D
who submitted two reports, one with the proposal
form and one confidential. The confidential report
showed that M was anaemic, had a dilated heart and
his right lung showed indications of an old attack
of pneumonia or pleurisy and that he was a total
physical wreck. Nothing came out of this proposal
and it lapsed. In 1943, M consulted and was
treated by one Dr. L for anaemia oedema of the
feet, diarrhoea and panting on exertion. In 1944,
M made a second proposal for insurance of his
life. Against the question in the proposal form
whether he had consulted any medical man for any
ailment within the last five years, he gave the
answer, "Nor'. He also did not disclose any of his
ailments. After medical examination by one Dr. K
the proposal was accepted and a policy for Rs.
25,000/- was issued on March 13, 1945. The policy
lapsed for non-payment of premium but was revived
in July, 1946. In November, 1946, M died. His
assignee, the appellant, made a demand for Rs.
26,000/-but the Company on October 10, 1947,
repudiated it on the ground that the policy had
been obtained by deliberate mis-statement and
fraudulent suppression of material facts.
Thereupon, the appellant filed a suit to recover
the amount of the policy contending that s. 45
Insurance Act, barred the company from calling in
question the policy after two years on the ground
that any statement made in the proposal was
inaccurate or false.
Held, that the policy-holder was guilty of
fraudulent suppression of material facts relating
to his health and the Company was entitled to
avoid the contract.
Smith v. Hughes
Mr Hughes was a racehorse trainer. Mr Smith, who was a farmer, brought him (Mr. Hughes) a
sample of oats, and Hughes ordered forty to fifty quarters of oats at 34 shillings a quarter.
Sixteen quarters were sent to start with. But when they arrived, Hughes said they were not the
oats he thought they were. He had apparently wanted old oats (which are the only ones
racehorses can eat), and he was getting new, green oats. In fact, Smith's sample was of green
oats. Hughes refused to pay and Smith sued for breach of contract, for the amount delivered and
for damages for the amount for oats that were still to be delivered. Later questions were asked to
jury.
The jury at the County Court of Surrey holden at Epsom, initially held for Mr Hughes that there
was a mistake on his part, but were directed by the judge that if Mr Hughes was under a mistake
about the oats (thinking they were old when they were green oats) and Mr Smith had known it,
they should find in Mr Hughes' favour. Mr Smith appealed.

The Court of the Queen's Bench found that the jury had been misdirected and ordered a retrial.
Leaning in Mr Smith's favour, they held that the question was not merely whether the parties
were at consensus ad idem, but what they had communicated by their conduct and words to one
another. Mr Smith was held to be under no duty to inform Mr Hughes of his possible mistake
about the kind of oats, reaffirming the old idea of caveat emptor (buyer beware).[2] A unilateral
mistake is therefore in principle no ground for rescission of a contract.

Saunders v. Anglia Building Society

Mrs Gallie, who had broken her spectacles, signed a document without first informing herself of
its contents. She was lied to by her nephew's business partner, Mr Lee, that the documents were
merely to confirm a gift of her house to her nephew. In fact, she signed papers allowing the
nephew's business partner to grant a mortgage over the property in favour of Anglia Building
Society. When the business partner defaulted on the mortgage, Anglia Building Society claimed
to foreclose and repossess the House. Mrs Gallie died before the litigation reached the House of
Lords, and was represented by Saunders.

Lord Denning MR, reversing the judge’s decision, found that Mrs Gallie was out of luck. Grown
literate people cannot simply get away with signing things, and not being bound.

House of Lords[edit]
The House of Lords upheld the Court of Appeal, though disapproving of the strength of Lord
Denning’s criticisms.
Lord Reid said the defence is unavailable for the following reasons. [3]

Cundy v. Lindsay
Lindsay & Co were manufacturers of linen handkerchiefs, amongst other things. They received
correspondence from a man named Blenkarn. He had rented a room at 37 Wood
Street, Cheapside, but purported to be 'Blenkiron & Co'.[4] Lindsay & Co knew of a reputable
business of this name which resided at 123 Wood Street. Believing the correspondence to be
from this company, Lindsay & Co delivered to Blenkarn a large order of handkerchiefs. [4] Blenkarn
then sold the goods – 250 dozen linen handkerchiefs – to an innocent third party, Cundy. When
Blenkarn failed to pay, Lindsay & Co sued Cundy for the goods.
The House of Lords held that Lindsay & Co had meant to deal only with Blenkiron & Co. There
could therefore have been no agreement or contract between them and the rogue.
Accordingly, title did not pass to the rogue, and could not have passed to Cundy. They were
forced to therefore return the goods.

Lake v. Simmons

 A jeweller claimed on a policy of insurance. One Ellison had induced him, in face-to-face
dealings, to part with possession of two necklaces by pretending she was the wife of a local
gentleman called Van der Borgh, with whom she was living, and that he wanted a necklace on
approval as he was contemplating giving it to her. She further pretended that a Commander
Digby, who was engaged to her sister, wanted the other necklace on approval. There was no
such man. Miss Ellison disposed of the necklaces. Were the underwriters were exempted from
liability under an exclusion in respect of ‘loss by theft or dishonesty committed by . . any
customer in respect of goods entrusted to’ the customer. 
Held: They were not. When considering whether the goods were ‘entrusted’ to Miss Ellison, the
test was whether the face-to-face dealings between her and the jeweller were capable of giving
rise to a contract. They were not because of the mistake as to her identity.

Ingram v. Little

Two ladies had a car for sale. A buyer came along. He fooled them into believing him to be
someone else, and they sold him the car, after checking the name in the telephone directory.
Before the cheque bounced, the rogue sold the car to the defendant from whom the ladies now
sought the return of the car. 
Held: Applying the rule nemo debt quod non habet, the car remained the property of original
owners. Phillips v Brooke differed in that property had passed before the misrepresentation
(majority). Devlin LJ dissenting: ‘The true spirit of the common law is to override theoretical
distinctions when they stand in the way of doing practical justice. For the doing of justice, the
relevant question in this sort of case is not whether the contract was void or voidable, but which
of two innocent parties shall suffer for the fraud of a third. The plain answer is that the loss
should be divided between them in such proportion as is just in all the circumstances. If it be pure
misfortune, the loss should be borne equally; of the fault or imprudence of either party has
caused or contributed to the loss, it should be borne by that party in the whole or in the greater
part.’ 

Lewis v. Avery

The claimant sold his mini cooper to a rogue claiming to be the

actor Richard Greene (who played Robin Hood in a series at the
time). The rogue showed the claimant a Pinewood studio pass
which had Richard Greene's name and an address on it. The
claimant then let him take the car with the log book in exchange
for a cheque for £430 which was later dishonoured. The rogue
sold the car on to Mr Avery for £200 claiming to be the claimant.
The claimant sought return of the car on the grounds that the
contract was void for mistake.
Held: The contract was not void for mistake. The case of Ingram
v Little was criticised by all of the judges although not formally
overruled. The presumption that the parties intend to deal with
the person in front of them was not displaced.

Kalyanpur Lime Works v. State of Bihar

The Government of Bihar (defendant No. 1) gave a lease of
hills on April 1, 1928, to K (a company) for a period of 20
years for the purpose of quarrying lime-stones with
a
condition attached thereto that it would not assign its
lease-hold rights to anyone without its consent. In 1933 K
assigned its lease-hold rights to one Bose by
an
unregistered deed handing over the possession of the leased
property to him. The Government stopped the assignee from
working the quarry and forfeited the lease in favour of K in
March- 1934; and recentered into possession. L
(plaintiff)
took the lease of the hills from the Government on the 1st
April, 1934, taking possession thereof on the 15th April,
1934. K sued the Secretary of State for India in September,
1934, for a declaration that losses in its favour had not
been validly forfeited and for an injunction restraining him
from granting leases to anyone else and for damages. The
suit, though dismissed by the trial court, was decreed
by
the High Court in appeal in 1936. Pending the appeal before
the High Court K obtained an interim injunction
restraining
the Secretary of State from granting lease to L. The
decision of the High Court was affirmed by the Privy
Council. K, which had been reinstated into possession
surrendered it when the lease in its favour expired on 31st
March, 1948, and the Government entered into possession
informing the plaintiff that it had decided to lease the
hills to defendant No. 2. L obtained a decree against the
Government for specific performance and compensation from
the trial court for the period commencing from let
April,
1948, till L would got possession of lease-hold property.
Held, (reversing the judgment of the High Court that neither
party was under a mistake of fact as both know that K had
assigned its interest to Bose and, the assignment having
been made without the consent of the lessor, K's interest
was liable to forfeiture and the mistake, if any, was
a
mistake of law as it was regarding the validity of
the
assignment deed under the registration law