Anirudh Belle - S Contract I Notes

Contracts-I (Notes) / Jindal Global Law School / 2016
Contracts-1
Class Notes
Offer
An offer, or proposal, is an objective manifestation of intent to be bound, which is made

with a view to obtaining the acceptance of another. The person making the offer, or
proposal, is called the offeror (or promisor). The person to whom the offer is made is the
offeree (or the promisee).
Applicable Sections from the Indian Contract Act (1872):
S.2(a) – Definition of offer.

S.2(c) – Definition of offeror and offeree.
S.3 – Communication of offer, acceptance and revocation of offer & acceptance.
S.4 – Communication when complete.
S.5 – Revocation of offer and acceptance.
S.6 – Method(s) of revoking offer.
S.9 – Express/implied offer and acceptance.
Acceptance
After an offeror communicates his/her offer to the offeree, the offeree may accept the
offer, reject the offer, or propose a counteroffer. Once an offeree accepts the offer, an
agreement (promise) is born.
S.2(b) – Definition of acceptance.

S.2(e) – Definition of agreement (promise).
S.2(f) – Reciprocal promises.
S.3 – Communication of offer, acceptance and revocation of offer & acceptance.
S.4 – Communication when complete.
S.5 – Revocation of offer and acceptance.
S.7 – Acceptance must be absolute.
S.8 – Acceptance by performing conditions, or receiving consideration.
S.9 – Express/implied offer and acceptance.
Anirudh Belle / LL.B. 2016 (Class of 2019) / Jindal Global Law School Page 1 of 30
Consideration
One of the fundamentals of contract law is that a contract must represent a bargained-
for exchange of promises. This bargained-for exchange is broadly referred to as
consideration. The promisee (person receiving the promise) is the one who gives
consideration in return for the promise, however, both parties to a contract are
promisors and promisees. In other words, consideration is a two-way street.
S.2(d) – Definition of consideration.

S.23 – What considerations and objects are lawful and what not.
S.24 – Agreement void, if considerations and objects unlawful in part.
S.25 – Agreement without consideration is void, unless it is in writing and registered, or
is a promise to compensate for something done, or is a promise to pay a debt barred by
limitation.
Promissory Estoppel: The doctrine of promissory estoppel prevents one party from
withdrawing a promise made to a second party if the latter has reasonably relied on the
promise. The principle of estoppel in India is a rule of evidence incorporated in S.115 of
The Indian Evidence Act.
Privity of Contract: The doctrine of privity of contract states that a contract is a private
affair between two parties consequent upon which third parties neither have rights nor
duties. However, the destiny of the privity rule is tied closely to the doctrine of
consideration.
Case Law
(i) Col. D.I. MacPherson v M.N. Appanna – Sale of bungalow in Coorg.
Theme/Holding: An agreement requires a meeting of minds.
Section(s): S.2(b), S.2(e), S.13 (‘agree upon the same thing in the same sense’).
(ii) Carlill v. Carbolic Smoke Ball Co. – Smokeball, advertisement as offer.
Theme/Holding: Specific, distinct and certain offers hold good in an

advertisement & performance of conditions in the offer constitutes valid
acceptance & inconvenience sustained by one party at the request of another
is enough to create a consideration.
Section(s): S.2(a), S.2(d), S.8
(iii) Leonard v. Pepsico – Harrier Jet, Pepsi, advertisement as offer.
Theme/Holding: An advertisement which a reasonable person would not take

seriously and which refers to other material does not constitute an offer.
Section(s): S.2(a)
(iv) Dickinson v. Dodds – Sale of house, promise to keep an offer open for a period.
Theme/Holding: A promise to keep an offer open for a period is made binding

when accompanied by consideration & an offer can be revoked any time before
communication is complete as against offeror.
Section(s): S.2(a), S.2(b), S.5, S.6(2)
(v) Lalman Shukla v. Gauri Dutt – Lost child case.
Theme/Holding: Acceptance of an offer can happen through the performance

of conditions in the offer & the duty owed from a contract cannot be
consideration for another contract between the same parties.
Section(s): S.8
(vi) B.G. Kedia v. Girdharilal Parshottamdas – Ahmedabad/Khamgaon, place of

formation of contract, postal rule.
Theme/Holding: Postal Rule
Section(s): S.4, S.5
(vii) Moolji Jaitha v. Seth Kirodimal – Sale of bliticuts of coconut oil
Theme/Holding: Mirror Image Rule, An acceptance and counteroffer are

distinct; an acceptance with an added feature to it (i.e. with a variation)
destroys the original offer and in effect is a counter-offer.
Section(s): S.7(1), S.13 (‘agree upon the same thing in the same sense’).
(viii) Pro CD v. Zeidenberg – shrink-wrap contracts.
Theme/Holding: If the buyer is presented with additional terms and offered

the opportunity to reject and return the goods and subsequently does not
reject the terms and keeps the goods, then the buyer will have accepted those
terms & a buyer may accept by performing the acts the vendor proposes to
treat as acceptance.
Section(s): S.3, S.7(2), S.10, S.23
(ix) Chappel v. Nestle – Nestle Wrappers case (do chocolate wrappers constitute
valid consideration?)
Theme/Holding: Wrappers did form part of the consideration as the object was
to increase sales and therefore provided value; the fact that the wrappers were
to be simply thrown away did not remove from this fact & the mere sufficiency
insufficiency of consideration is not a valid ground for determining what
constitutes valid consideration.
Section(s): S.2(d), S.25(Explanation 2)
(x) V.C.R. Garu v. Venkataramaya Garu – a prior charge created on inherited

property.
Theme/Holding: Privity of Contract & plaintiff can sure of the consideration

moved indirectly from him/her (i.e. if there was a prior right to the property
that has been compromised by the defendant).
Sections: S.25(1)
(xi) M.C. Chako v. State Bank of Travancore – bank overdraft case
Theme/Holding: Privity of Contract & a ‘charge’ may be created on immovable

property when either through express words or implied from the deed, it is
clear that the party intended to make a specified immovable property or fund
belonging to him/her liable for debt due by him/her (see S.3 for ‘intent’ and
S.25(3) for ‘specially authorized).
Section(s): S.3, S.25(3)
(xii) Kedarnath Bhattacharya v. Gauri Mohammed – Building a Town Hall in

Calcutta, collecting public funds for charity
Theme/Holding: If a person promises to contribute to charity and, on this faith,

the promisee undertakes a liability to the extent not exceeding the promised
subscription, the contract shall be valid & agreements not supported by
consideration are void.
Section(s): S.2(d), S.2(e), S.25
(xiii) Doraswamy Iyer . Arunachala Iyer – Building a temple, collecting funds for
charity
Theme/Holding: When works pursuant to a charity fund have already been set
in motion, and there is evidence to show that a promisee’s contribution to the
fund is not the reason or faith based on which the works from the fund are
proceeding, the promisor cannot recover the funds if the promisee withdraws
his/her contribution.
Section(s): S.2(d), S.2(e), S.25
(xiv) Webb v. McGowin – saved an individual from injury/death. Saviour was

promised money reward for act (to be given periodically)
Theme/Holding: A promise can be enforced even when the consideration was

a performance done in the past for which the promisor did not assent to
beforehand; this is only if the performance was to save the party from serious
bodily injury or death.
Section(s): S.25(2)
(xv) Mill v. Wyman – non-minor relative experienced bad health on a ship.
Theme/Holding: A promise, after the fact, to pay for services rendered to a

non-minor relative is not enforceable.
Section(s): S.25(2)
(xvi) M.P. Sugar Mills v. State of U.P. – exemption of sales tax to new industrial
units.
Theme/Holding: Promissory Estoppel
Section(s): S.2(d)
Capacity
Generally speaking, the capacity to contract requires an analysis of whether a person is

eligible to enter into a contract. The most common example is that a minor is not
capable of entering into a contract.
Related to this inquiry, is an analysis of the consequences which follow if persons

ineligible to enter into a contract do so and the legal principles that must be considered.
S.10 – What agreements are contracts.

S.11 – Who are competent to contract.
S.12 – What is a sound mind for the purpose of contracting.
S.65 – Obligation of a person who has received advantage under void agreement or
contract that becomes void.
S.68 – Claim for necessaries supplied to person incapable of contracting.
Case Law
(xvii) Mohiri Bibee v. Dharmodardas Ghose – minor mortgages property to

moneylender; mother intervened to declare contract void.
Theme/Holding: The question whether a contract is ‘void’ or ‘voidable’

presupposes the existence of a contract within the meaning of the Indian
Contract Act and cannot arise in the case of an infant (who is incompetent to
transfer within S.11 of the Act). A contract with an infant is not a ‘voidable’
contract within the meaning of S.64 (as a contract cannot be said to exist in the
first place) and, for these stated reasons, neither can S.65 apply. Only S.68,
which contemplates a situation of such nature – which confers a quasi-
contractual right on the suppliers of “necessaries” to a “person incapable of
entering into a contract” or those who are legally bound to be supported by
him/her – can apply.
Section(s): S.10, S.11, S.64, S.65, S.68
(xviii) Gadigappa Bhimappa Meti v. Balangowda Bhimangowda – the question over

whether a minor is estopped from pleading his/her minority when a contract
he entered into is challenged.
Theme/Holding: There doesn’t seem to be any real conflict between the two
S.11 (Contract Act) and S.115 (Evidence Act). S.115 of the Indian Evidence Act
does not affect in any way the validity of evidence. It does not provide that
what would be sufficient proof in one case will not be sufficient in another; it
only provides that in certain circumstances and as between the parties no
evidence of certain things shall be allowed to be given. But where the evidence
to be excluded goes to show that the Court has no jurisdiction to make the
order which it is asked to make, it seems to me that the Court must, for its own
protection, look at the evidence. It is not really looking at the evidence for the
purpose of defeating one party, it is looking at the evidence for the purpose of
seeing that its own process is not abused.
The Court was of opinion that where an infant represents fraudulently or

otherwise that he is of age and thereby induces another to enter into a contract
with him then in an action founded on the contract the infant is not estopped
from setting up infancy.
Section(s): S.11, S.115 (The Indian Evidence Act)
Consent
For a contract to be executed, the contracting parties must consent to the contract that
governs them. But, there might be occasions in which the consent of a party to the
contract has been obtained in a questionable manner.
Consent in a contract can be influenced by: a) coercion, b)undue influence, c) fraud, d)

misrepresentation and e) mistake.
S.13 – Consent defined.

S.14 – Free Consent defined.
S.15 – Coercion defined.
S.16 – Undue Influence defined.
S.17 – Fraud defined.
S.18 – Misrepresentation defined.
S.19 – Voidability of agreements without free consent.
S.19A – Power to set aside contract induced by Undue Influence.
S.20 – Agreement void where both parties are under mistake as to matter of fact.
S.21 – Effect of mistakes as to law.
S.22 – Contract caused by mistake of one party as to matter of fact.
S.23 – What considerations and objects are lawful and what not.
S.64 – Consequences of rescission of voidable contract.
S.65 – Obligation of person who has received advantage under void agreement or
contract that becomes void.
S.66 – Mode of communicating or revoking rescission of voidable contract.
Case Law
(xix) Atlas v. Kafco – basket delivery and economic duress
Theme/Holding: Economic duress – when there is economic duress, consent is

involuntary and the consent is ‘vitiated’ consent (and is therefore revocable). It
was held that the following factors (which must be distinguished from the
rough and tumble of the pressure of normal commercial bargaining) must be
taken into account by a court in determining whether there has been economic
duress: a) whether there has been an actual or threatened breach of contract,
b) whether the victim protested at the time, c) whether the victim has any
realistic practical alternative but to submit to the pressure, d) whether or not
the person allegedly exerting the pressure has acted in good faith and e)
whether the victim affirmed or sought to rely on the existing contract.
Section(s): S.16
(xx) Central Inland Water Transportation Ltd. v. Brojo Nath Ganguly – public sector
employer, unconscionable employment contract.
Theme/Holding: An unfair or an unreasonable contract entered into between

parties of unequal bargaining power was void as unconscionable, under Section
23 of the Act.
Section(s): S.23
(xxi) Chikkam Ammiraju v. Chikkam Seshamma – suicide threat case.
Theme/Holding: Threat of suicide, though not punishable, is an act prohibited

by the IPC and therefore consent obtained by threat of suicide comes under
coercion.
Section(s): S.15
(xxii) Lloyds Bank v. Bundy – poor bundy and a bullying bank.
Theme/Holding: In the vast majority of cases a customer who signs a bank

charge cannot get out of it. However, there is an exception to this rule – i.e.
when the parties have not met on equal terms; when one is very strong in
bargaining power and the other is weak, it is a matter of fairness that the
stronger party should not be able to push the weaker one to the wall. A contract
is voidable for unconscionability if: a) the terms were very unfair or
consideration inadequate; b) bargaining power was impaired by necessity,
ignorance or infirmity; c) undue pressure or influence was used, not necessarily
consciously; d) and there was an absence of independent advice.
Section(s): S.23
(xxiii) Vokes v. Arthur Murray – dance teacher over-praising an incompetent student

to exploit the student financially.
Theme/Holding: When one party has superior knowledge, statements of

opinion can be treated as misrepresented statements of fact and give the party
cause of action.
Section(s): S.18
(xxiv) Raffles v. Wichelhaus – two ‘peerless’ ships.
Theme/Holding: That the contract did not specify which ‘peerless’ the cotton
would be shipped on was a mutual mistake by both parties & as there was
clearly no agreement on which ship to use, as reflected in the contract, there
would be no meeting of minds (no mutual assent), no agreement on terms and,
as such, no contract at all.
Section(s): S.13, S.20, S.29
(xxv) Tarsem Singh v. Sukhminder Singh – land sale with differing local metric
system measurements.
Theme/Holding: The mistake has to be mutual and in order that the agreement
be treated as void, both the parties must show to be suffering from mistake of
fact.
Section(s): S.20
(xxvi) Redgrave v. Hurd – rescinding a sale made on misrepresentation.
Theme/Holding: If it is shown that a representation was made in an attempt to

induce a party to enter into a contract, and the contract in fact was formed,
then there is a presumption that the representation was in fact relied upon.
This can only be refuted by proving that the party hearing the representation
had definite knowledge to the contrary, or by explicit evidence that he/she did
not rely on the evidence.
Legality
A contract must be based not only upon the mutual assent of competent parties, but
must also have a lawful object and lawful consideration. If the object of an agreement,
or the consideration of an agreement, is not lawful, the agreement is unenforceable.
S.23 – What considerations and objects are lawful and those that are not.
S.24 – Agreements void, if considerations and objects unlawful in part.
S.25 – Agreement void, if made without consideration.
S.26 – Agreement in restraint of marriage is void.
S.27 – Agreement in restraint of trade Is void.
S.28 – Agreements in restraint of legal proceedings are void.
S.29 – Agreements void for uncertainty.
S.3o – Agreements by way of wager are void.
Case Law
(xxvii) Niranjan Shankar Golikari v. The Century Spinning Co. – a company

collaborates with a foreign producer, accepting a secrecy clause.
Theme/Holding: Any term of a contract of employment which operates in

restraint of trade is, prima facie, contrary to public policy and therefore
unenforceable. Such a term may, however, be justified if: a)it is designed to
protect legitimate business interests, and b) the restriction is no greater than is
reasonably required to protect the relevant interest (i.e. it is not
unconscionable, excessively harsh, unreasonable or harsh). Therefore, a
restraint by which a person binds himself during the term of his agreement
directly or indirectly not to take service with any other employer or be engaged
by a third party has been held not to be void and not against S.27.
Section(s): S.27
(xxviii) Khardah Company Ltd. v. Raymon and Co. (India) Pvt. Ltd. – East Pakistan
trade case
Theme/Holding: When a contract has been reduced to writing, one must look
only to that writing for ascertaining the terms of the agreement between the
parties, but it does not follow from this that it is only what is set out expressly
and in so many words in the document that can constitute a term of the
contract between the parties. If on a reading of the document as a whole, it can
fairly be deduced from the words actually used therein that the parties had
agreed on a particular term, there is nothing in law which prevents them from
setting up that term. The terms of a contract can be expressed or implied from
what has been expressed. It is in the ultimate analysis a question of
construction of the contract. And again it is well established that in construing
a contract it would be legitimate to take into account surrounding
circumstances. Therefore, on the question whether there was an agreement
between the parties that the contract was to be non-transferable, the absence
of a specific clause forbidding transfer is not conclusive. What has to be seen is
whether it could be held on a reasonable interpretation of the contract, aided
by such considerations as can legitimately be taken into account that the
agreement of the parties was that it was not to be transferred. When once a
conclusion is reached that such was the understanding of the parties, there is
nothing in law which prevents effect from being given to it.
It was held that the contract was transferable and, therefore, it couldn’t be
enforced as it was forbidden by law [S.17 of the Forward Contracts (Regulation)
Act, 1952].
Section(s): S.23
(xxix) VFS Global Services Pvt. Ltd. v. Mr. Suprit Roy – garden leave clause
Theme/Holding: The “garden leave clause” whereby the company reserved the
right to require the senior manager to remain away from work/employment
for a period of 3 months after termination or resignation of his services. It was
held to be in restraint of trade and hit by S.27.
Section(s): S.27
Contingent Contracts
Contingent means that which is dependent upon something else. A contingent contract
is a contract to do or not to do something, if some event does or does not happen.
S.31 – Contingent contract defined.

S.32 – Enforcement of contract contingent on an event happening.
S.33 – Enforcement of contract contingent on an event not happening.
S.34 – When event on which a contract is contingent to be deemed impossible, if it is the
future conduct of a living person.
S.35 – When contracts become void which are contingent on happening of specified
event within fixed time.
S.36 – Agreement contingent on impossible events are void.
Case Law
(xxx) Ganga Saran v. Firm Ram Charan Ram Gopal – obligation to supply upon
supply from mill.
Theme/Holding: The agreement did not seem to to convey the meaning that
the delivery of the goods was made contingent on their being supplied to the
respondent firm by the Victoria Mills. It was difficult to hold that the parties
had ever contemplated the possibility of the goods not being supplied at all.
The words "prepared by the Mill" were only a description of the goods to be
supplied, and the expressions "as soon as they are prepared" and "as soon as
they are supplied to us by the said Mill" simply indicated the process of delivery.
What was to be construed was a commercial agreement entered into in a

somewhat common form, and, to use the words of Lord Sumner, "there is
nothing surprising in a merchant's binding himself to procure certain goods at
all events, it being a matter of price and of market expectations."
Since the true construction of an agreement must depend upon the import of
the words used and not upon what the parties choose to say afterwards, it is
unnecessary to refer to what the parties have said about it.
The contract was held not to be contingent.
Section(s): S.31
Discharge of Contract
Discharge of a contract refers to termination of a contract where it ceases to operate

and the rights and obligations of the parties created by the parties come to an end.
A contract may be discharged in mainly one of the following manners: a) by

performance, b) by agreement or consent, c) by impossibility of performance and d) by
breach of contract.
Applicable Sections from the Indian Contract Act (1872): S.37 to S.67 and S.73
Force Majeure (S.56): A force majeure clause relieves one or both parties from liability to
perform contract obligations when performance is prevented by an event or
circumstance beyond the parties’ control. Typical force majeure events may include fire,
flood, civil unrest or terrorist attack. Force majeure is a term used to describe a "superior
force" event. The purpose of a force majeure clause is two-fold: it allocates risk and puts
the parties on notice of events that may suspend or excuse service.
Doctrine of frustration (S.56): The essential idea upon which the doctrine of frustration
of contract is based is that of impossibility of performance of the contract; in fact,
‘impossibility’ and ‘frustration’ are often used as interchangeable expressions. The
changed circumstances, it is said, make the performance of the contract impossible and
the parties are absolved from the further performance of it as they did not promise to
perform an impossibility.
The parties shall be excused if substantially the whole contract becomes impossible of
performance or, in other words, impracticable by some cause for which neither was
responsible.
Joint and Several Liability (S.42 & S.43): “Liability that may be apportioned either among
two or more parties or to only a few select members of the group at the adversaries
discretion. Thus each liable party is individually responsible for the entire obligation, but
a paying party may have a right of contribution and indemnity from non paying parties.”
(Black’s Law Dictionary)
Case Law
(xxxi) V.L. Narasu v. P.S.V Iyer – on account of heavy rains, rear wall of cinema hall
collapsed and killed three people; the theatre’s licence was cancelled until the
building was reconstructed to the satisfaction of the Chief Engineer.
Theme/Holding: Destruction of subject matter – the Court held that the owner
was under no obligation to reconstruct the hall; even if he chose to reconstruct
it, the film’s appeal would likely be lost by then. The contract, hence, was
considered frustrated.
(xxxii) Wasoo Enterprises v. J. J. Oil Mills – failure to ship goods.
Theme/Holding: It was held that time was the essence of the contract. Thus,
the supplier was liable for breach of contract. In all commercial transactions,
time of performance, as determined by the parties is considered as an essence
of the contract.
When the stipulated time is not the essence of a contract and the promisor fails
to preform his promise on the due date, the promisee can only claim for
compensation (if he has suffered any loss).
If the stipulated time is an essential factor in a contract, the promisee is free to

accept delayed performance. If he wants to claim compensation for delayed
performance, he must give notice of his intention to the promisor.
Section(s): S.39
(xxxiii) Satyabrata Ghose v. Mugneeram Bangur – developing and selling during

wartime.
Theme/Holding: ‘Impossibility’ under S.56 doesn’t mean literal impossibility to

perform (owing to strikes, commercial hardships, etc.) but refers to those cases
where a supervening event beyond the contemplation and control of the
parties (like the change of circumstances) destroys the very foundation upon
which the contract rests, thereby rendering the contract ‘impracticable’ to
perform, and substantially ‘useless’ in view of the object and purpose which
the parties intended to achieve through the contract.
In the present case, war condition were known to the parties while entering
into the contract such they were aware of the possible difficulty in performance
of the contract, in such circumstances, the requisition of property did not affect
the root of the contract. Secondly, no stipulation as to time was provided in the
agreement such that the work was to be completed within a reasonable time,
but having regard to the nature of the development contract and the
knowledge of the war conditions prevailing during the contract, such a
reasonable time was to be relaxed. Therefore, the contract had not become
impossible of performance under S.56.
(xxxiv) Devilal v. Himatram – joint liability from a contract
Theme/Holding: All defendant parties had taken had jointly taken a contract
for construction of a Town Hall at Udaipur as partners, even though the
contract was sanctioned by the City Corporation of Udaipur in the names of
defendants Himmatram and Narottam Swaroop only. Further allegations were
that while entering into a subcontract with the plaintiff-appellant Devilal, the
defendant Kanaiyalal acted as an agent for the rest of the partners. In the relief
cause the plaintiff claimed relief that a decree be passed. The trial court passed
the decree but for a less amount than asked and the amount was reduced
further by the district judge. The plaintiff Devilal, therefore, filed this second
appeal. Himmat Ram died during the pendency of the suit, but the surviving
defendants were his partners. The plaintiff has claimed a money decree against
all the defendants jointly and severally for the amount which may be found due
to the plaintiff from the partnership. In view of S.44, the discharge of one of
the promisors from, in this case Himmatram due to his death does not imply
that the rest of the defendants are also discharged from performing their
promise. The appeal was allowed and the suit did not abate.
The principal in this case was that abatement of an appeal against one joint
debtor or death of one joint promisor does not release the other joint
promisors.
Section(s): S.42, S.43, S.44
Remedies
A contract when breached gives rise to damages that could be claimed by the injured
party, and in certain instances a right to demand specific performance of the contract.
“Damages” means compensation in terms of money for the loss suffered by the injured
party. Every action for damages raises two problems: a) the problem of “remoteness of
damage” and b) the problem of “measure of damages”.
S.73 – Compensation for loss or damage caused by breach of contract.

S.74 – Compensation for breach of contract where penalty stipulated for.
Case Law
(xxxv) Hadley v. Baxendale – crankshaft and mill case.
Theme/Holding: The damages available for breach of contract include:
1. Those which may fairly and reasonably be considered arising naturally from
the breach of contract or
2. Such damages as may reasonably be supposed to have been in the
contemplation of both the parties at the time the contract was made.
3.
If any special circumstances exists which were actually communicated to the
Defendant, the Claimant may recover any damages which would ordinarily
follow from a breach of contract under the special circumstances
communicated.
Section(s): S.73
(xxxvi) Murlidhar Chiranjilal v. Harish Chandra Dwarkadas – resale contract, Kanpur-

Calcutta.
Theme/Holding: S. 73 imposes a duty on the party seeking damages to mitigate

its loss. The Supreme Court of India has set out two principles on which
damages are calculated in case of breach of contract of sale of goods:
I. The first is that the injured party has to be placed in as good a situation
as if the contract has been per formed.
II. This is qualified by a second principle - the injured party is debarred from
claiming any part of damages arising out of his neglect.
The onus is on the inured party to mitigate the losses consequent to the breach
of contract.
This specific case is of purchase of goods for resale anywhere and therefore the
measure of damages has to be calculated as they would naturally arise in the
usual course of things from such breach. That means that the respondent had
to prove the market rate at Kanpur on the date of breach for similar goods and
that would fix the amount of damages, in case that rate had gone above the
contract rate on the (late of breach. Therefore, this is not a case of the special
type to which the words "which the parties knew, when they made the
contract, to be likely to result from the breach of it" appearing in S.73 of the
Contract Act apply. This is, in ordinary case of contract between traders which
is covered by the words "which naturally arose in the usual course of things
from such breach" appearing in S.73. As the respondent had failed to prove the
rate for similar canvas in Kanpur on the date of breach it is not entitled to any
damages in the circumstances.
Section(s): S.73
(xxxvii) Jamal v. Moolla Dawood Sons & Co. – stock-market case; the plaintiff claimed
damages from the buyer for his failure to accept shares contracted to be taken
on a particular date. Two months after that date the sellers began to re-sell the
shares on a rising market.
Theme/Holding: Damages for breach of contract such as a contract of sale are

normally to be assessed as at the date of the breach. The profit accruing should
not be deducted from the damages for non-acceptance. Lord Wrenbury said:
“The seller’s loss at the date of the breach was and remained the difference
between contract price and market price at that date. When the buyer
committed this breach the seller remained entitled to the shares, and became
entitled to damages such as the law allows. The first of these two properties,
namely, the shares, he kept for a time and subsequently sold them in a rising
market. His pocket received benefit, but his loss at the date of the breach
remained unaffected.”
Section(s): S.73
Quasi-Contracts
There are also many situations in which law and justice require that a certain person be
required to conform to an obligation, although he/she has neither broken any contract
nor committed any tort. Such obligations are generally described as quasi-contractual
obligations.
Applicable Sections from the Indian Contract Act (1872): S.68 to S.72
(xxxviii) State of West Bengal v. B.K. Mondal
Theme/Holding:
• “In our opinion, there can be no doubt that failure to comply with the
mandatory provisions of the said section makes the contracts invalid…
There can be no doubt that in enacting the provisions of S.175(3) the
Parliament intended that the state should not be burdened with liability
based on unauthorised contracts and the plain object of the provision,
therefore, is to save the State from spurious claims made on the strength of
such unauthorised contracts. Thus the provision is made in the public
interest and so there can be no difficulty in holding that the word "shall"
used in making the provision is intended to make the provision itself
obligatory and not directory.”
• “It is plain that three conditions must be satisfied before this section can be
invoked. The first condition is that a person should lawfully do something
for another person or deliver something to him. The second condition is
that in doing the said thing or delivering the said thing he must not intend
to act gratuitously; and the third is that the other person for whom
something is done or to whom something is delivered must enjoy the
benefit thereof. When these conditions are satisfied S.70 imposes upon the
latter person, the liability to make compensation to the former in respect
of or to restore, the thing so done or delivered. In appreciating the scope
and effect of the provisions of this section it would be useful to illustrate
how this section it would operate. If a person delivers something to another
it would be open to the latter person to refuse to accept the thing or to
return it; in that case S.70 would not come in to operation. Similarly, if a
person does something for another it would be open to the latter person
not to accept what has been done by the former; in that case again, S.70
would not apply. In other words, the person said to be made liable under
S.70 always has the option not to accept the thing or to return it. It is only
where he voluntarily accepts the thing or enjoys the work done that the
liability under S.70 arises.”
• “S.70 requires that a person should lawfully do something or lawfully

deliver something to another. The word "lawfully" is not a surplusage and
must be treated as an essential part of the requirement of S.70. What then
does the word "lawfully" in S.70 denote?... the thing delivered or done must
not be delivered or done fraudulently or dishonestly nor must it be
delivered or done gratuitously. S.70 is not intended to entertain claims for
compensation made by persons who officiously interfere with the affairs of

another or who impose on others services not desired by them. S.70 deals
with cases where a person does a thing for another not intending to act
gratuitously and the other enjoys it. It is thus clear that when a thing is
delivered or done by one person it must be open to the other person to
reject it. Therefore, the acceptance and enjoyment of the thing delivered or
done which is the basis for the claim for compensation under S.70 must be
voluntary. It would thus be noticed that this requirement affords sufficient
and effective safeguard against spurious claims based on unauthorised
acts.”
• “S.70 occurs in Chapter V which deals with certain relations resembling

those created by contract. In other words, this chapter does not deal with
the rights or liabilities accruing from the contract. It deals with the rights
and liabilities accruing from relations which resemble those created by
contract. That being so, reverting to the facts of the present case once again
after the respondent constructed the warehouse it would not be open to
the respondent to compel the appellant to accept it because what the
respondent has done is not in pursuance of the terms of any valid contract
and the respondent in making the construction took the risk of the rejection
of the work by the appellant. Therefore, in cases falling under S.70 the
person doing something for another or delivering something to another
cannot sue for the specific performance of the contract nor ask for damages
for the breach of the contract for the simple reason that there is no contract
between him and the other person for whom he does something or to
whom he delivers something. All that S.70 provides is that if the goods
delivered are accepted or the work done is voluntarily enjoyed then the
liability to pay compensation for the enjoyment of the said goods or the
acceptance of the said work arises. Thus, where a claim for compensation
is made by one person against another under S.70, it is not on the basis of
any subsisting contract between the parties, it is on the basis of the fact that
something was done by the party for another and the said work so done has
been voluntarily accepted by the other party. That broadly stated is the
effect of the conditions prescribed by S.70.”
Section(s): S.70, S.175(3)
(xxxix) Puran Lal v. State of U.P.
Theme/Holding:
Facts:
1. The appellant had accepted a tender notice issued by the respondent- State for
the construction of a road. The tender was accepted and the contract was
signed.
2. The stone required for building the road was at a distance of 26 chains as
claimed by the PWD. However no stone was available in that distance.
3. The appellant had to get stone from Gadhera and Bhumendar, a distance of 79 and
110 chains respectively.
4. The stone was indeed available inside 26 chains but it was located inside the
Cantonment Area, but for its removal permission from the Cantonment
authorities had to be taken. The appellant was not able to obtain the
necessary permission from the Cantonment Authorities, and so he had to get the
stone from a much longer distance.
5. The appellant requested for a higher rate but his request was refused.
6. He commenced work, and only after the work was completed did the Chief
Engineer recommend his case for a higher rate. The appellant also took to
execute some additional work for the department. However, the quantity of
work performed was far in excess of what was mentioned in the contract. He thus
claimed a higher rate of payment for such extra work.
7. The High Court dismissed his suit on appeal on the grounds that there was no
assurance or guarantee to the contractors that they would get the stone from
a much longer distance and that the appellant performed his work without
even relying on Paragraph 5 of the special instructions
Issues:
1. Is the estimate of the PWD part of the contract so as to be binding on both parties?
Were any assurances given to the Appellant that he could get the stone from a
longer distance?
2. Is clause 5 of the Special Instructions applicable to extra item of work done by the
Appellant?
3. Could the remedy of quantum meruit be applicable to this case?
Appellants Contentions:
1. PWD had given assurance, on the basis of which they had carried on the work in
spite of having to get the stone from a far longer distance.
2. The availability of stone at 26 chains distance was a part of the contract, and once
the stone was not available at a distance of 26 chains, the contract was put
to an end and because the appellant had done the work, he should be paid
on the basis of quantum meruit.
Respondents Contentions:
1. No assurance had been given to the Appellant by the officers of the PWD, and that
under paragraph 5 of the special instructions; extra work till 30% was
permissible.
Judgement:
1. There is no specific mention in anywhere in the clauses of the tender that

if the stone is not available at a distance of 26 chains, the appellant would
be entitled to a higher rate. Also it is not denied that stone was not available
within 26 chains. It was. However, it was in an area belonging to the
Cantonment authorities and the appellants could not get required permission to
remove that stone. It was up to the contractor to have satisfied himself
before entering into the contract that the Cantonment authorities would
grant him permission to remove the stone. Thus, when he commenced work,
he already knew of the situation and therefore could not be said to have
been induced by the assurances. The letter by the Executive Engineer was
only recommendatory and did not establish any right for a higher rate.
2. The argument regarding quantum meruit is far-fetched. This is so because

even before he started his work, the appellants acquiesced in the stand taken
by the respondents that he was not entitled to any higher rates, and even then he
carried on and completed the contract even though there was no such
condition. The principle of quantum meruit is rooted in English law under
which there were certain procedural advantages in framing an action for
compensation for work done. In order to avail a remedy under quantum
meruit: The original contract must have been discharged by the defendant in such
a way as to entitle the plaintiff to regard himself as discharged from further
performance and he must have elected to do so. The remedy is not available to
the party who breaks the contract even though he may have partially
performed part of his obligation. This remedy is restitutionary i.e. it is
recompense for the value of the work done by the plaintiff in order to
restore him to the position in which he would have been if the contract had
never been entered into. [It is different from a compensatory remedy because
compensatory remedy, the aim is to restore the party to the position in which it
had been had the contract been carried out.] Refers Alopi Prasad and says
that compensation quantum meruit is not applicable when work is done
pursuant to the terms of the contract.
3. Under clause 12, the plaintiff is bound to perform some additional work on the
same terms and conditions under which he tendered. The contractor was
bound to perform all additional work required of him (contract + 30% extra). Thus
the appellant could not claim anything apart from that mentioned in the contract.
4. Appeal dismissed without costs.
Battle of Forms/Mirror-Image-Rule/Knockout-Rule
In many commercial transactions, the parties exchange printed purchase orders

and acknowledgment forms. Naturally, these forms are more favourable to the
respective drafting parties and the terms contained in them often do not correspond and
sometimes directly contradict each other.
Under the common law’s mirror-image rule, an acceptance that varies the terms of an
offer becomes a counter-offer. This operates as a rejection of the original offer. If the
offeror then proceeds with the contract, his performance is an acceptance of the terms
of the counter-offer. However, the common law rule has been replaced by statute in
many jurisdictions to achieve more fairness between the parties. For example, the US
Uniform Commercial Code (UCC) changes this rule and converts a counter-offer into an
acceptance even if it contains additional or different terms. The only requirement is that
the responding form must contain a definite and seasonable (=done or happening at the
appropriate or proper time; timely) expression of acceptance. The terms of the
responding form that correspond to the offer constitute the contract. Any additional
terms become proposals for additions to the contract. When the transaction is
between merchants, the additional terms become part of the contract unless the offer is
specifically limited to its terms, the offeror objects to the new terms, or the additional
terms materially alter the offer.
However, if an acceptance expressly conditions acceptance on the offeror’s assent to the

offeree’s terms, the forms do not result in a contract unless the offeror gives
an unequivocal (=certain) expression of assent. If so, they have a contract and the
differing or additional terms are included. If the offeror does not assent, but the parties
proceed as if they have a contract, their performance results in a contract. In this case,
the terms of the contract will be those on which the forms agree.
Specifically, in respect of the battle of the forms, the common law last shot rule provided
that the party who puts forward the latest terms and conditions gets all of its terms simply
because it fired the last shot in the exchange of forms. In most cases this would be the
offeree. However, as seen, modern statutes abolish this rule by giving neither party the
terms it attempted to impose unilaterally. Instead, under the knock-out rule, the terms
on which the forms do not agree cancel each other out and are dropped from the
contract. The relevant sale of goods act then supplies any missing terms.

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Contracts-I (Notes) / Jindal Global Law School / 2016

An offer, or proposal, is an objective manifestation of intent to be bound, which is made

Applicable Sections from the Indian Contract Act (1872):

S.2(a) – Definition of offer.

Applicable Sections from the Indian Contract Act (1872):

S.2(b) – Definition of acceptance.

Applicable Sections from the Indian Contract Act (1872):

S.2(d) – Definition of consideration.

(i) Col. D.I. MacPherson v M.N. Appanna – Sale of bungalow in Coorg.

Theme/Holding: An agreement requires a meeting of minds.

(ii) Carlill v. Carbolic Smoke Ball Co. – Smokeball, advertisement as offer.

Theme/Holding: Specific, distinct and certain offers hold good in an

Section(s): S.2(a), S.2(d), S.8

(iii) Leonard v. Pepsico – Harrier Jet, Pepsi, advertisement as offer.

Theme/Holding: An advertisement which a reasonable person would not take

Theme/Holding: A promise to keep an offer open for a period is made binding

Section(s): S.2(a), S.2(b), S.5, S.6(2)

(v) Lalman Shukla v. Gauri Dutt – Lost child case.

Theme/Holding: Acceptance of an offer can happen through the performance

(vi) B.G. Kedia v. Girdharilal Parshottamdas – Ahmedabad/Khamgaon, place of

Theme/Holding: Postal Rule

Section(s): S.4, S.5

(vii) Moolji Jaitha v. Seth Kirodimal – Sale of bliticuts of coconut oil

Theme/Holding: Mirror Image Rule, An acceptance and counteroffer are

(viii) Pro CD v. Zeidenberg – shrink-wrap contracts.

Theme/Holding: If the buyer is presented with additional terms and offered

Section(s): S.3, S.7(2), S.10, S.23

Section(s): S.2(d), S.25(Explanation 2)

(x) V.C.R. Garu v. Venkataramaya Garu – a prior charge created on inherited

Theme/Holding: Privity of Contract & plaintiff can sure of the consideration

(xi) M.C. Chako v. State Bank of Travancore – bank overdraft case

Theme/Holding: Privity of Contract & a ‘charge’ may be created on immovable

Section(s): S.3, S.25(3)

(xii) Kedarnath Bhattacharya v. Gauri Mohammed – Building a Town Hall in

Theme/Holding: If a person promises to contribute to charity and, on this faith,

Section(s): S.2(d), S.2(e), S.25

Section(s): S.2(d), S.2(e), S.25

(xiv) Webb v. McGowin – saved an individual from injury/death. Saviour was

Theme/Holding: A promise can be enforced even when the consideration was

(xv) Mill v. Wyman – non-minor relative experienced bad health on a ship.

Theme/Holding: A promise, after the fact, to pay for services rendered to a

Theme/Holding: Promissory Estoppel

Generally speaking, the capacity to contract requires an analysis of whether a person is

Related to this inquiry, is an analysis of the consequences which follow if persons

Applicable Sections from the Indian Contract Act (1872):

S.10 – What agreements are contracts.

(xvii) Mohiri Bibee v. Dharmodardas Ghose – minor mortgages property to

Theme/Holding: The question whether a contract is ‘void’ or ‘voidable’

Section(s): S.10, S.11, S.64, S.65, S.68

(xviii) Gadigappa Bhimappa Meti v. Balangowda Bhimangowda – the question over

The Court was of opinion that where an infant represents fraudulently or

Section(s): S.11, S.115 (The Indian Evidence Act)

Consent in a contract can be influenced by: a) coercion, b)undue influence, c) fraud, d)

Applicable Sections from the Indian Contract Act (1872):

S.13 – Consent defined.

(xix) Atlas v. Kafco – basket delivery and economic duress

Theme/Holding: Economic duress – when there is economic duress, consent is

Theme/Holding: An unfair or an unreasonable contract entered into between

(xxi) Chikkam Ammiraju v. Chikkam Seshamma – suicide threat case.

Theme/Holding: Threat of suicide, though not punishable, is an act prohibited

(xxii) Lloyds Bank v. Bundy – poor bundy and a bullying bank.

Theme/Holding: In the vast majority of cases a customer who signs a bank