CASE LAWS OF CONTRACT

CHAPTER 1-OF THE

COMMUNICATION,ACCEPTANCE AND
REVOCATION OF PROPOSALS

At the desire of the promisor

In the case of Kedarnath Bhattacharji v. Gorie Mohammad, the Calcutta High Court
held that the defendant, Gorie Mohamed, is liable to pay even if the promise he made
in this contract is not entirely to his benefit. This is because the defendant has a
responsibility toward the promise he originally made and he cannot take it back after
the commencement of the contract.

Consideration and motive

In the case of Abdul Aziz v. Masum Ali, the Allahabad High Court held that a mere
promise to contribute to a charitable purpose is not enforceable as it is without
consideration 1234. The court observed that the quid pro quo aspect of the agreement
was absent; there was no valid consideration, and the agreement could not be
enforced .

Contract
In the case of J.K. Industries Limited v. Mohan Investments & Properties Private
Ltd., the Delhi High Court held that if there is a prior condition that there must be a
written contract between the parties, in the absence of such written contract it
cannot be said that the contract has been executed 12. The court also observed that
the absence of a written contract does not necessarily mean that there was no
contract between the parties 2.

Proposal: offer and statement of intention

In the case of Tarsem Singh v. Sukhminder Singh, the Supreme Court held that an
agreement or contract can be legally binding even if it is not in writing. The court
observed that a mistake of fact has to be bilateral and in order for an agreement to
be treated as void, both parties must be shown to be suffering from a mistake of
fact. The forfeiture of earnest money is permissible only when a concluded contract
has come into being and not prior thereto 1234.

Valid consideration
I assume you are referring to the case of Chidambaraiyer v. P. S. Renga Iyer 123. In
this case, the Calcutta High Court held that a mortgage debt cannot be scaled down
under the provisions of the Madras Agriculturists Relief Act if the mortgagee’s rights
have been transferred to a charity for valuable consideration 1. The court observed
that the transfer of mortgagee’s rights to a family charity in lieu of a sum earlier
dedicated to the charity was for valuable consideration within the meaning of the
Act 1.

When strangers may not sue-the general rule

In the case of Venkata Chinnaya Rau v. Venkataramaya Garu, the Madras High Court
held that the doctrine of privity of consideration is not applicable in Indian contract
law in cases where consideration may move from the parties or anyone who is not a
party to a contract 12. The court observed that the plaintiff has the right to sue the
defendant and is entitled to the amount promised by the defendant 1.

Creating legal relations

If there being no agreement ,there was no breach of contract committed by the
respondent and also that since there was no breach of contact ,the petitioner cannot
retain or forfeit the earnest money deposited by the respondent by way of penalty ;
state of Tripura v. Bhowmik & Co.,2004.

Section 3 : Communication ,acceptance and

revocation of proposals

Communication of acceptance
In the case of Felthouse v. Bindley, the court held that silence or inaction in response
to an offer does not create a contract and highlights the necessity of clear and
unequivocal acceptance to form a binding agreement 1234. The case established that
one cannot impose an obligation on another to reject one’s offer 4.
Exposure of goods : offer or not
In the case of Pharmaceutical Society of Great Britain v. Boots Cash Chemists, the
Court of Appeal held that the display of goods on shelves in a self-service shop is
not an offer, but rather an invitation to treat. The customer makes an offer to the
cashier upon arriving at the till, which is accepted when payment is taken. The
contract of sale is completed on payment under the supervision of a registered
pharmacist 1.
The defendant ran a self-service shop in which non-prescription drugs and
medicines, many of which were listed in the Poisons List provided in the Pharmacy
and Poisons Act 1933, were sold. These items were displayed in open shelves from
which they could be selected by the customer, placed in a shopping basket, and
taken to the till where they would be paid for. The till was operated by a registered
pharmacist 1.
Offer to the whole world
In the case of Lalman Shukla v. Gauri Dutt, the Allahabad High Court held that an
agreement without consideration is void 1. The case arose when the plaintiff, who
was sent to search for the defendant’s missing nephew, found him and brought him
back to Cawnpore. The defendant rewarded the plaintiff with two sovereigns and
twenty rupees. The plaintiff claimed Rs. 499 as the reward for tracing down the
defendant’s nephew. The plaintiff alleged that while leaving for Haridwar, along with
the expenses and other gifts, he was also promised to be paid Rs. 501. The main
claim of the plaintiff against the defendant was that he did not provide him with a
reward even after performing the given task 12.

Unaccepted offer creates no rights or obligation

In the case of Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, the
Supreme Court of India held that in the case of a contract by telephone, only the
court within whose territorial jurisdiction the acceptance of offer is spoken into
telephone has jurisdiction to try any suit regarding the contract 1. The case arose
when the plaintiff, Kedia Ginning Factory and Oil Mills of Khamgaon, entered into a
contract over the telephone to supply cottonseed cakes to M/s. Girdharilal
Parshottamdas and Co. of Ahmedabad. The respondents commenced an action
against the appellant in the City Civil Court of Ahmedabad for failing to supply
cottonseed cakes as per the aforementioned agreement. The appellants contended
that the respondents’ offer to purchase was accepted at Khamgaon, and the delivery
and payment of the goods were also agreed to be made in Khamgaon, and the City
Civil Court of Ahmedabad did not have jurisdiction to try the suit. The City Civil Court
of Ahmedabad held that it had jurisdiction as the acceptance of the offer was
intimated to the offerree at Ahmedabad and that is where the contract was made.
The Supreme Court held that the contract act does not expressly deal with the place
where a contract has been made. As against cases of correspondence by post or
telegram, in the present case of correspondence by a telephone, a contract was
formed when acceptance was duly communicated to the offeror and hence at
Ahmedabad 1.

Section 4- Communication when complete

Communication of proposal and acceptance
In the case of Shyam Biri Works Pvt. Ltd. v. U.P. Forest Corporation, the Supreme
Court of India held that in the case of a contract by telephone, only the court within
whose territorial jurisdiction the acceptance of offer is spoken into telephone has
jurisdiction to try any suit regarding the contract 1. The case arose when the
petitioner, Shyam Biri Works, Private Limited Company, entered into a contract over
the telephone to supply cottonseed cakes to M/s. Girdharilal Parshottamdas and Co.
of Ahmedabad. The respondents commenced an action against the appellant in the
City Civil Court of Ahmedabad for failing to supply cottonseed cakes as per the
aforementioned agreement. The appellants contended that the respondents’ offer to
purchase was accepted at Khamgaon, and the delivery and payment of the goods
were also agreed to be made in Khamgaon, and the City Civil Court of Ahmedabad
did not have jurisdiction to try the suit. The City Civil Court of Ahmedabad held that it
had jurisdiction as the acceptance of the offer was intimated to the offerree at
Ahmedabad and that is where the contract was made. The Supreme Court held that
the contract act does not expressly deal with the place where a contract has been
made. As against cases of correspondence by post or telegram, in the present case
of correspondence by a telephone, a contract was formed when acceptance was
duly communicated to the offeror and hence at Ahmedabad 1.

In the case of Entores Ltd v Miles Far East Corporation, the Court of Appeal held that
a contract is formed when acceptance is communicated to the offeror and not when
it is sent 1. The case arose when Entores, a London-based company, sent an offer to
purchase copper cathodes to Miles Far East Corporation, an American corporation
with headquarters in New York and agents all over the world, including a Dutch
company in Amsterdam. The offer was communicated by telex, a form of
instantaneous communication, and was accepted by the Dutch company. When the
contract was not fulfilled, Entores tried to sue Miles Far East Corporation for
damages. The court held that the contract was created in London, where the
acceptance was received on Entores’ telex machine, and damages would be dealt
with under English law 1.

Contract by correspondence :Antecedents and subsequent

negotiations
In the case of Haridwar Singh vs Bagun Sambrui, the issue arose about what will
happen when the transmission of the acceptance was not made to the offeror. The
Forest department of the Government of Bihar advertised the right to exploit a coup
by public auction. The appellate bid of 92,001/- being the highest was accepted by
the office. He further deposited 23,800/- as security and executed an agreement.
Later the appellate sent a letter of his willingness to buy the coup for 95,000/- as the
matter was still pending before the government. The government said the coup may
be settled with the highest bidder namely the appellate for 95,000/- with the
consultation of the Finance Department. One day, the respondent sent a letter to the
office for the question of settlement of a coup for 1,01,125/-. The whole matter was
placed before the Minister of Forest and the minister rejected the settlement with the
appellate and accepted the settlement of a coup with the respondent. The
government then sent a letter to the office, who later sent the letter to the respondent
to deposit the security amount. The appellate filed a petition in the High Court which
was dismissed and later moved to Supreme Court by special leave. The honorable
judges present to hear this case were Justice K.K Mathew and K.S Hegde. The
Judges were of the opinion that- In this case, there is no need for the communication
of confirmation by the government to the appellate to stand in the way of their being
a concluded contract but the need of confirmation by the government of the
conditional acceptance by the Divisional Forest Officer. The acceptance of the bid by
the appellate of 92,001/- by the officer was subjected to confirmation by the
government. Rule 10 of Article 166 (3) says, no department shall, without prior
consultation with the Finance Department, authorize by any order, title lease, or
license of mineral or forests. When it relates to the performance of public duty and to
invalidate acts done in neglect of them would be a serious general inconvenience or
injustice to persons who have no control over those entrusted with the duty, such
rules are generally understood as mere instruction for the guidance of those upon
whom the duty is imposed 1.

Dispensing with notice of acceptance

In the case of Carlill v Carbolic Smoke Ball Co, the Court of Appeal held that an
advertisement can constitute a binding contract if it contains clear and specific
terms and indicates an intention to be bound. The court held that the advertisement
in this case constituted a binding contract, and Mrs. Carlill was entitled to the
promised reward 1234. The defendant company, Carbolic Smoke Ball Co., advertised a
product called “The Carbolic Smoke Ball” which they claimed could prevent
influenza. The advertisement stated that the company would pay £100 to anyone
who contracted influenza after using the product as directed. Mrs. Carlill purchased
the product and used it as directed but still contracted influenza. She sued the
company for the promised reward. The court held that the advertisement constituted
a unilateral offer that could be accepted by anyone who performed its terms. The
court also held that Mrs. Carlill had provided consideration in the form of her
purchase of the product and her reliance on the company’s promise 1234.

Section 5- Revocation of proposal and

acceptance
Revocation
In the case of Airfred Schonlank v. Muthurayna Chetty, the Madras High Court held
that an offeror can withdraw an offer with an option to accept within a fixed period
before the expiry of that period if the offeree has not accepted the offer before it is
withdrawn 12. The defendant left an offer to sell a quantity of indigo at the plaintiff’s
office allowing him eight days time to give his acceptance. The defendant then
revoked his offer on the fourth day and plaintiff accepted it on the fifth day. The
plaintiff filed the suit for the specific performance of the contract. The court
observed that the acceptance is useless as both on principle and on authority it is
clear that there is no consideration for the promise to keep the offer open for a time
once it is withdrawn 1.

Section 6- Revocation how made

Section 7-Acceptance must be absolute
Acceptance must be unqualified and without condition
The cardinal principle in section 7 of the Indian Contract Act, 1872 (ICA) is that the
offer and acceptance of an offer must be absolute and unqualified, without giving
any room for doubt or negotiation. This means that the acceptance must correspond
exactly with the terms of the offer, and not introduce any new conditions or
modifications. If the acceptance deviates from the offer in any way, it is not a valid
acceptance, but a counter-offer, which must be accepted by the original offeror
before a contract is formed. This principle is based on the idea that a contract is a
result of mutual consent and agreement between the parties, and there can be no
consent if the terms are not clear and definite.
Some examples of applying this principle are:

• In the case of Bhagwandas Goverdhandas Kedia vs. M/S. Girdharilal

Parshottamdas, the Supreme Court held that in the case of a contract by
telephone, only the court within whose territorial jurisdiction the acceptance
of offer is spoken into telephone has jurisdiction to try any suit regarding the
contract, as that is where the contract is made1.
• In the case of Haridwar Singh vs. Begum Sumbrui, the Supreme Court held
that when the acceptor puts in a new condition while accepting, the contract
already signed by the proposer is not complete until the proposer accepts the
condition2.
• In the case of Haji Mohd. Haji Jiva vs. E. Spinner, the Bombay High Court held
that an acceptance with a variation is no acceptance, but a counter proposal,
which must be accepted by the original promisor before a contract is made.

In the case of Kilburn Engineering Ltd. v Oil and Natural Gas Corporation, the
Bombay High Court held that the plaintiff was not entitled to a permanent injunction
restraining the first defendant from encashing the bank guarantee executed by the
second defendant on behalf of the plaintiff in favor of the first defendant 1. The case
arose when the first defendant invited tenders for the installation of Pig Barrels for
WI and WF pipe lines at 13 Platforms. The plaintiff submitted their tender and
furnished a bank guarantee as earnest money. The first defendant invoked the bank
guarantee, and the plaintiff filed a suit for a permanent injunction restraining the first
defendant from encashing the bank guarantee. The court held that the bank
guarantee was an independent contract between the second defendant and the first
defendant, and the plaintiff had no right to interfere with the same 1.

In the case of Haji Mohd. Haji Jiva v. E. Spinner, the Bombay High Court held that an
acceptance with a variation is not acceptance, but a counter proposal, which must
be accepted by the original offeror before a contract is formed 1. The case arose
when the plaintiff, Haji Mohd. Haji Jiva, introduced certain terms like “Free Bombay
Harbour and Interest” while accepting the defendant’s offer to sell goods. The
defendant refused to accept the new terms, and the plaintiff filed a suit for breach of
contract. The court held that the acceptance with new terms was not a valid
acceptance, but a counter-offer, which must be accepted by the original offeror
before a contract is formed 1.

Implied acceptance
In the case of Rakesh Kumar Dinesh Kumar v. U.G. Hotels and Resorts Ltd., the
plaintiffs filed a suit for recovery of Rs. 12,23,250/- on account of principal and
interest from the defendant, who had failed to pay the amounts due on account of
supply of goods made to it. The accounts between the parties were settled, and the
defendant agreed to pay a sum of Rs. 14,00,000/- to the plaintiffs in respect of the
goods supplied by the plaintiffs to the defendant. However, the defendant only paid
Rs. 1,00,000/- on 4.1.2001, Rs. 1,00,000/- on 22.5.2001, and Rs. 1,50,000/- on
30.6.2001, and as such, the defendant still owed a sum of Rs. 10,50,000/- to the
plaintiffs. The plaintiffs claimed interest at the rate of 18% on this amount. Interest
up to the date of filing of the suit was worked out to Rs. 1,73,250/-, and the total
amount of Rs. 12,23,250/- was claimed. Future interest at the same rate was also
claimed. The defendants filed a written statement taking up various pleas, including
that the suit was hopelessly time-barred. The court held that the plaintiff No. 1 was a
Hindu Undivided Family Trading firm, and the suit filed was maintainable. The court
also held that the payments made by the defendant to the plaintiff had not been
taken into consideration and that the defendant was liable to pay the amount
claimed by the plaintiffs 123.

No second acceptance
Certainly! Dickinson v Dodds is a landmark case in English contract law. The case
was heard by the Court of Appeal, Chancery Division in 187612. The issue in this case
was whether the defendant’s promise to keep the offer open until Friday morning
was a binding contract between the parties and if he was allowed to revoke this offer
and sell to a third party1. The court held that the statement made by Mr Dodds was
nothing more than a promise; there was no binding contract formed1. He had
communicated an offer for buying his house to the complainant, Mr Dickinson, and
this offer can be revoked any time before there is acceptance1. Thus, as there was no
obligation to keep the offer open, there could be no ‘meeting of the minds’ between
the parties1. In addition, the court stated that a communication by a friend or other
party that an offer had been withdrawn was valid and would be treated as if it came
from the person themselves1

Section 8 Acceptance by performing conditions

,or receiving consideration
Performance by act : Interference of acceptance
Carlill v Carbolic Smoke Ball Co

Section 9 – Promise , express and implied

Implied terms
I found a case with a similar name, State of Maharashtra and Others v Saifuddin
Mujjaffarali Saifi. The case was heard by the Bombay High Court in 19931. The State
of Maharashtra and its officers had appealed against the judgment and decree
passed by the Civil Judge, Senior Division, Dhulia, in Special Civil Suit No. 17/841. The
plaintiff had submitted a tender for the construction of a bridge across the river
Serpani at Mile No. 76 (622 Kms.) on Surat-Dhulia-Edlabad-Nagpur road1. The tender
was accepted, and the plaintiff started the work of the construction of the
bridge1. However, the construction of the bridge was completed beyond the
prescribed time limit1. The plaintiff had written to the defendant pointing out the
difficulties in respect of excavation of foundation and dewatering1. The plaintiff
claimed that the rates in the tender for this work were far less than the cost which he
was required to incur for carrying out this work1. The court directed the
appellant/State to pay Rs. 2,18,755/-, together with six per cent interest from the
date of filing of the suit till realization to the respondent/plaintiff1.