All Case Studies For CA Foundation

THE CA CLASSROOM CA FOUNDATION
S.no Case law Facts of the case & Brief Author's Note (CA CS Karthik Concept Reference Act Unit ABC ICAI SM
name conclusion of the case (Based Manikonda) - For ease of Reference No (Page no
on ICAI Material and other understanding as per Jan
sources) 21 edition)
1 State of when on dissolution of a Here, the partnership firm is not Essentials of a The Indian Unit 1 C Page 1.5
Gujarat vs. partnership, the assets of the firm selling any property to the Valid Contract - Contract Act,
Ramanlal S & were divided among the partners, partners nor the partners are not Two parties 1872
Co. the sales tax officer wanted to tax selling anything to each other.
this transaction. It was held that it They are only receiving their
was not a sale. The partners being share of property from the firm
joint owner of those assets cannot which belongs to them as they
be both buyer and seller. are partners of the firm.
2 Balfour v. A husband agreed to pay to his Social agreements are those Essentials of a The Indian Unit 1 A Page 1.5
Balfour wife certain amount as agreements where there is no Valid Contract - Contract Act,
maintenance every month while he commercial element involved and Parties must 1872
was abroad. Husband failed to pay there is no intention to create a intent to create a
the promised amount. Wife sued legal relationship between the legal relationship
him for the recovery of the parties
amount. Here, in this case, wife
could not recover as it was a social
agreement and the parties did not
intend to create any legal relations.
3 Carlill Vs. In this famous case, Carbolic smoke A general offer is made to public General Offer & The Indian Unit 1 A Page 1.14
Carbolic Ball Co. advertised in several at large and any person can give Acceptance can Contract Act,
Smoke Ball newspapers that a reward of £100 their acceptance to such offer. In be given by any 1872
Co. (1893) would be given to any person who the instant case, Mrs Carlill had person in case of
contracted influenza after using the accepted the general offer for a a general offer &
smoke balls produced by the cure to influenza and even after Communication
Carbolic Smoke Ball Co. according using the smoke balls she could of performance.
to printed directions. One lady, not recover from influenza and
Mrs. Carlill, used the smoke balls as hence she sued the company and
per the directions of company and recovered the compensation.
even then, suffered from influenza. here there is a valid contract as
Held, she could recover the the offer is valid and Acceptance
amount as by using the smoke balls is also valid.
she had accepted the offer.
CA CS KARTHIK MANIKONDA 75501 37279 P A G E |1

4 [Boulton v. Boulton bought a business from 1. Specific offer is made only to a Special / Specific The Indian Unit 1 A Page 1.14
Jones] Brocklehurst. Jones, who was specific person and only that offer & Contract Act,
Broklehurst’s creditor, placed an person can give the acceptance. Acceptance must 1872
order with Brocklehurst for the 2. Rules of acceptance states that be given by
supply of certain goods. Boulton acceptance can be given by the person to whom
supplied the goods even though person only to whom the offer is the offer is made
the order was not in his name. made.
Jones refused to pay Boulton for
the goods because by entering into In this case, Jones made an offer
the contract with Brocklehurst, he to Brocklehurst and Boulton gave
intended to set off his debt against the acceptance, Boulton never
Brocklehurst. Held, as the offer was received an offer to make an
not made to Boulton, therefore, acceptance against jones and
there was no contract between hence the contract is not valid.
Boulton and Jones.
5 Lalman G (Gauridutt) sent his servant L An Acceptance can be made Essentials of a The Indian Unit 1 B Page 1.15
Shukla v. (Lalman) to trace his missing against an offer only if the party Valid offer - Offer Contract Act,
GauriDutt nephew. He then announced that making such acceptance is aware must be 1872
anybody who traced his nephew of such offer. Making an communicated
would be entitled to a certain acceptance without having prior
reward. L traced the boy in knowledge of the offer does not
ignorance of this announcement. constitute a valid contract. (i.e.
Subsequently when he came to you cannot accept something
know of the reward, he claimed it. without even having the
Held, he was not knowledge of the offer)
entitled to the reward, as he did
not know the offer.
6 Harvey vs. Privy Council succinctly explained Informing or stating a fact to Essentials of a The Indian Unit 1 B Page 1.16
Facie [1893] the distinction between an offer someone does not amount to Valid offer - Mere Contract Act,
AC 552 and an invitation to offer. In the making an offer. Eg : Dhoni told statement is not a 1872
given case, the plaintiffs through a Virat Kohli that he purchased a price
telegram asked the defendants two new bike for 2 crores, this does

questions not give Virat Kohli the right to
namely, purchase the bike for 2 crores,
(I) Will you sell us Bumper Hall here Dhoni is only informing i.e.
Pen? and stating the price of his new bike
(ii) Telegraph lowest cash price. to Virat Kohli.
The defendants replied through
telegram that the “lowest price for
Bumper Hall Pen is £ 900”. The
plaintiffs sent another telegram
stating “we agree to buy Bumper
Hall Pen at £ 900”.
However, the defendants refused
to sell the property at the price.
The plaintiffs sued the defendants
contending that they had made an
offer to sell the property at £ 900
and therefore they are bound by
the offer. However, the Privy
Council did not agree with the
plaintiffs on the ground that while
plaintiffs
had asked two questions, the
defendant replied only to the
second question by quoting the
price but reserved their answer
with regard to their willingness to
sell. Thus, they made no offer at
all. Their Lordships held that the
mere statement of the lowest price
at which the vendor would sell
contained no implied contract to

sell to the person who had
enquired about the price.
7 Harris vs. The defendant (Nickerson) Inviting a party to make an offer Essentials of a The Indian Unit 1 B Page 1.16
Nickerson advertised that an auction of is different from an offer, for Valid offer - Contract Act,
(1873) certain goods would take place at a example, when you visit a Invitation to offer 1872
stated time and place. The plaintiff showroom in a shopping mall is different from
(Harris) travelled to the auction which has a hoarding stating 50% an offer
only to find that items that he was off on selected clothes, this
interested in had been withdrawn. statement is inviting you to make
He claimed compensation for an offer to the store keeper to
breach of contract, arguing that the purchase their clothes at 50% off,
advertisement constituted an offer, later the store keeper has to
and his travelling to the auction, an accept your offer and sell the
acceptance by conduct. selected clothes to you. in a
HELD, The advertisement was not similar manner, Nickerson had
an offer, merely a declaration of advertised regarding an auction
intention. which is an invitation to offer and
not an offer in itself.
8 [Neale vs. M offered to sell his land to N for Acceptance must be Absolute Essentials of a The Indian Unit 1 C Page 1.19
Merret £280. N replied purporting to and unqualified, this states that Valid Acceptance Contract Act,
[1930] accept the offer but enclosed a once an offer is made, the - Acceptance 1872
W. N. 189] cheque for £ 80 only. He promised offeree has to either accept the must be Absolute
to pay the balance of £ 200 by offer in whole or reject the offer, and unqualified.
monthly instalments of £ 50 each. making a conditional acceptance
It was held that N could not or changing the terms of the offer
enforce his acceptance because it amounts to a counter offer.
was not an unqualified one.
9 Brogden vs. B a supplier, sent a draft Let's say you receive an offer to Essentials of a The Indian Unit 1 B Page 1.19
Metropolitan agreement relating to the supply of purchase an iPhone 12 for Rs Valid Acceptance Contract Act,
Railway Co. coal to the manager of railway Co. 50,000 from official apple - Acceptance 1872
(1877) viz, Metropolitan railway for his website, you have decided to must be
acceptance. The manager wrote purchase the same but you failed Communicated

the word “Approved” on the same to communicate your acceptance
and put the draft agreement in the with Apple, does this lead to a
drawer of the table intending to valid contract? No, the same way
send it to the company’s solicitors the manager of the railway
for a company accepted the offer but
formal contract to be drawn up. By failed to communicate the same
an over sight the draft agreement with Brogden and hence there is
remained in drawer. Held, that no valid contract.
there was no contract as the
manager had not communicated
his acceptance to the supplier, B.
10 (Bhagwandas Where an offer made by the Giving an acceptance without Essentials of a The Indian Unit 1 C Page 1.20
v. Girdharilal) intended offeree without the having prior knowledge of the Valid Acceptance Contract Act,
knowledge that an offer has been offer does not amount to a valid - Acceptance 1872
made to him cannot be deemed as contract even if the acceptance is must be
an acceptance thereto (Note: communicated. Communicated
Details of case not relevant for
exam)
11 [Heyworth vs. A mere variation in the language certain small changes in the Essentials of a The Indian Unit 1 C Page 1.20
Knight [1864] not involving any difference in language of the acceptance not Valid Acceptance Contract Act,
substance would not make the changing the substance of the - Acceptance 1872
acceptance ineffective (Note: acceptance would not make it must be
Details of case not relevant for ineffective. Communicated
exam)
12 Felthouse vs. F (Uncle) offered to buy his where an offer is made and the Essentials of a The Indian Unit 1 B Page 1.20
Bindley nephew’s horse for £30 saying “If I offeree did not respond to the Valid Acceptance Contract Act,
(1862) hear no more about it I shall offer, it means that acceptance is - Mere Silence is 1872
consider the horse mine at £30.” not made, the offeror here not acceptance
The nephew did not reply to F at cannot assume that since the
all. He told his auctioneer, B to offeree was silent, it amounts to
keep the particular horse out of acceptance. In other words,
sale of his farm stock as he acceptance has to be

intended to reserve it for his uncle. communicated either through
By mistake the auctioneer sold the implied or express manner, but
horse. F sued him for conversion of remaining silent about an offer is
his property. Held, F could not not equal to acceptance.
succeed as his nephew had not
communicated the acceptance to
him.
13 [Central Bank Where a resolution passed by a Usually communication of offer Communication The Indian Unit 1 C Page 1.22
Yeotmal vs bank to sell land to ‘A’ remained or acceptance can be implied, eg: of acceptance by Contract Act,
Vyankatesh uncommunicated to ‘A’, it was held a coolie picking up your luggage conduct 1872
(1949) that there was no communication and you accepting the same
and hence no contract. without stopping him. However
where offer was never
communicated, acceptance
cannot be assumed.
14 (Entores Ltd. The complainants, Entores, were a When an offer is made of Acceptance over The Indian Unit 1 B Page 1.23
v. Miles Far company that was based in instantaneous communication telephone, Telex Contract Act,
East London. They had sent an offer to like telex, telephone, fax or or Fax 1872
Corporation). purchase 100 tons of copper through e-mail, the contract is
cathodes to the defendants, Miles only complete when the
Far East Corp. Their company was acceptance is received by the
based in Amsterdam and this offer offeree, and the contract is made
was communicated by Telex, a at the place where the
form of instantaneous acceptance is received. However,
communication. The Dutch in case of a call drops and
company sent an acceptance of disturbances in the line, there
this offer by Telex to the may not be a valid contract
complainants. When the contract
was not fulfilled, the complainants
tried to sue the defendants for
damages.

The court held that the contract
and damages were to be decided
by English law. It was stated that
the postal rule did not apply for
instantaneous communications.
Since Telex was a form of instant
messaging, the normal postal rule
of acceptance would not apply and
instead, acceptance would be
when the message by Telex was
received. Thus, the contract was
created in London. This general
principle on acceptance was held
to apply to all forms of
instantaneous communication
methods. Acceptance via these
forms of communication had to be
clear before any contract is
created.
15 Mukul Datta When someone travels from one Such Terms and conditions are Communication The Indian Unit 1 A Page 1.23
vs. Indian place to another by air, it could be deemed to have been accepted of Special Contract Act,
Airlines seen that special conditions are by the passengers where such Conditions 1872
[1962] AIR printed at the back of the air ticket T&C are reasonable in nature.
cal. 314 in small letters [in a non- Eg: A condition which says that
computerized train ticket even the passengers have to
these are not printed] Sometimes mandatorily pay additional
these conditions are found to have amount of Rs 500 for having their
been displayed at the notice board own food on plane is NOT
of the Airlines office, which reasonable.
passengers may not have cared to
read. The question here is whether
these conditions can be considered

to have been communicated to the
passengers of the Airlines and can
the passengers be treated as
having accepted the conditions.
16 [Lily White P delivered some clothes to Special conditions are deemed to Communication The Indian Unit 1 B Page 1.23
vs. R. drycleaner for which she received a be accepted if the same are of Special Contract Act,
Mannuswam laundry receipt containing a reasonable, here the laundry Conditions 1872
y [1966] A. condition that in case of loss, receipt states that in case of loss
Mad. 13]. customer would be entitled to of a clothing, the party would be
claim 15% of the market price of compensated 15% of the market
value of the article, P lost her new value is unreasonable as P should
saree. Held, the terms were eligible to recover the entire
unreasonable and P was entitled to 100% of the value and not just
recover full value of the saree from 15% because of a special
the drycleaner. In the cases condition.
referred above, the respective
documents have been accepted
without a protest and hence
amounted to tacit acceptance.
17 [Raipur A transport carrier accepted the Where a party accepts a contract, Communication The Indian Unit 1 B Page 1.24
transport Co. goods for transport without any he is deemed to have accept the of Special Contract Act,
vs. conditions. Subsequently, he issued special conditions also as long as Conditions 1872
Ghanshyam a circular to the owners of goods they are reasonable and visible
[1956] A. limiting his liability for the goods. In on the face of the contract,
Nag.145]. such a case, since the special however where the acceptor will
conditions were not communicated have to accept certain
prior to the date of contract for contractual obligations (i.e.
transport, these were not binding certain additional liabilities)
on the owners of goods because of these special
conditions, then such conditions
are not valid. (eg : A new liability

imposed in a special condition
after entering into a contract)
18 Ramsgate a person who applied for shares in This case is not relevant today, Modes of The Indian Unit 1 C Page 1.26
Victoria Hotel June was not bound by an after the companies Act 2013 has Revocation of Contract Act,
Co. Vs allotment made in November, come into force, it has imposed Offer - By lapse of 1872
Montefiore Offer stands revoked by lapse of time limit within which an time
(1866 L.R.Z. time. allotment process has to be
Ex 109) & completed, failing which money
India received on application has to be
Cooperative refunded. i.e. Allotment has to be
Navigation completed within 60 days of
and Trading receiving application money.
Co. Ltd.
Vs Padamsey
Prem Ji
19 Durga Prasad The plaintiff requested the district This case deals with an invalid Legal Rules The Indian Unit 2 C Page 1.35
v. Baldeo collector to construct some shops agreement because of lack of regarding Contract Act,
in his town. Those shops were proper consideration between Consideration - 1872
given for rent to the defendant for the parties. The parties having no Consideration
doing business. The rent was also proper consideration means no must move at the
fixed. Later, the defendant had legitimate contract between desire of the
promised to the plaintiff that he parties. According to the Indian promisor
will be giving a 5% commission to Contract Act, 1872 it is clearly
him on all articles which he is going mentioned that the contract
to sell through that shop in without consideration is void.
consideration of the construction
of the building by the plaintiff by
spending huge money. However,
the defendant failed to pay the
commission. So Durga Prasad filed
a suit against the shopkeepers who
did not give the commission.

The court held that the claims for

the plaintiff were rejected because
there is no proper contract
between the plaintiff and the
defendant mainly the contract has
no proper consideration. Contract
without consideration is void. The
promissory has no personal benefit
about the contract. The contract
was done without the intention of
the promissory. So the contract is
void.
20 Chinnayya vs. An old lady made a gift of her In Indian Law, consideration may Legal Rules The Indian Unit 2 A Page 1.36
Ramayya property to her daughter with a be given by the promise or any regarding Contract Act,
(1882)] direction to pay a certain sum of other person. In India, there is a Consideration - 1872
money to the maternal uncle by possibility that consideration for Consideration
way of annuity. On the same day, the promise may move not from may move from
the daughter executed a writing in the promise but a third person, promisee or any
favour of the brother agreeing to who is not a party to the other person.
pay annuity. The daughter did not, contract, different from the
however, pay the annuity and the English Law in which the
uncle sued to recover it. It was held consideration must move from
that there was sufficient only the promisee, for your
consideration for the uncle to exams, Indian law is only
recover the money from the applicable.
daughter.
21 (Kadarnath v. A Town Hall was planned to build Where the other party has Validity of an The Indian Unit 2 B Page 1.39
Gorie in Howrah. Based on it, all the incurred an obligation with the agreement Contract Act,
Mohammad) subscriptions, funds, and faith of the promise made, the without 1872
interested persons came up for the promisor cannot escape liability consideration -
construction. Municipal from the promise, he has to Charity
CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 10

Commissioner of Howrah, the perform his obligations, even
Plaintiff entered into an agreement though the said promise is only a
with the contractor and supplied charity.
necessary information of the plans.
Later on, with an upswing of

subscriptions and plans, there was
a rise in the cost of construction
making it from Rs.20,000 to
Rs.40,000. The defendant made a
subscription to pay Rs. 100 for the
construction of Town Hall.
However, he refused to pay the
amount. The Plaintiff commenced
an action to claim the amount.
22 Mohori Bibi “A, a minor borrowed ` 20,000 A minor is not competent to A contract made The Indian Unit 3 B Page 1.34
vs. Dharmo from B and as a security for the enter into any contract, any with or by a Contract Act,
Das Ghose same executed a mortgage in his contract made by a minor or with minor is void ab- 1872
(1903) favour. He became a major a few a minor is Void ab initio and such initio
months later and filed a suit for the a contract cannot also be ratified
declaration that the mortgage at a later date.
executed by him
during his minority was void and
should be cancelled. It was held
that a mortgage by a minor was
void and B was not entitled to
repayment of money. Further
money lender’s request for not
accepted. It is especially provided
in Section 10 that a person who is
incompetent to contract cannot

make a contract within the
meaning of the Act.
23 Sain Das vs. where there was a joint purchase We have learnt that where a Joint contract by The Indian Unit 3 B Page 1.47
Ram Chand by two purchasers, one of them minor makes a contract with any Minor and an Contract Act,
was a minor, it was held that the person, the said contract is void- Adult 1872
vendor could enforce the contract ab-initio, however one exception
against the major purchaser and to the above rule is that the
not the minor. minor can enter into a joint
contract with a major and the
major would be held liable in
case of breach of a contract, in
either case the minor will not be
held liable.
24 [Kirpa Ram A youth of 18 years of age, spend Where ta party to a contract is in Undue Influence - The Indian Unit 3 C Page 1.47
vs. thrift and a drunkard, borrowed Rs a position to dominate the will of Unconscionable Contract Act,
Sami-Ud-din 90,000 on a bond bearing another and the contract is bargains: 1872
Ad. Khan compound interest at 2% per unfair, i.e. beyond ordinary
(1903)] mensem (p.m.). It was held by the terms, then it is presumed by law
court that the transaction is that is it entered by undue
unconscionable, the rate of influence
interest charged being so
exorbitant
25 Word vs. H sold to W some pigs which were A party to the contract is under Mere Silence is The Indian Unit 3 B Page 1.53
Hobbs. to his knowledge suffering from no obligation to disclose the not fraud Contract Act,
(1878)]. fever. The pigs were sold ‘with all whole truth to the other party. 1872
faults’ and H did not disclose the ‘Caveat Emptor’ i.e. let the
fact of fever to W. Held there was purchaser beware is the rule
no fraud applicable to contracts. There is
no duty to speak in such cases
and silence does not amount to
fraud. Similarly, there is no duty
to disclose facts which are within

the knowledge of both the
parties.
26 (Regier V. A broker was asked to buy shares Generally mere silence does not When does The Indian Unit 3 C Page 1.54
Campbell for client. He sold his own shares amount to fraud, meaning the silence amounts Contract Act,
Staurt) without buyer has to be cautious while to fraud - 1872
disclosing this fact. The client was entering into a contract. however Fiduciary
entitled to avoid the contract or in case of a fiduciary relationship relationship
affirm it with a right to claim secret i.e. a relationship with trust and
profit made by broker on the good faith between the parties,
transaction since the relationship the buyer need not be cautious
between the broker and the client as it is understood that parties
was relationship of utmost good would not take advantage of
faith. each other, in a case where a
party takes advantage and makes
a personal profit in a case of
fiduciary relationship, then the
defence of mere silence is not
fraud would not apply here. eg :
Father and son relationship.
27 (Hazi Ahmed Every material fact must be In case of contract of marriage, When does The Indian Unit 3 C Page 1.54
v. Abdul disclosed by the parties to a parties to a contract have to silence amounts Contract Act,
Gassi). contract of disclose every known material to fraud - 1872
marriage fact ( Eg: whether they were Contracts of
previously married, exact details marriage
of property of the family etc)
28 State of A crossword puzzle was given in Crossword puzzles in which prizes Transactions The Indian Unit 3 B Page 1.65
Bombay vs magazine. Abovementioned clause depend upon the similar to wager - Contract Act,
R.M.D. was stated in the magazine. A correspondence of the Crossword 1872
Chamarbaug solved his crossword puzzle and his competitor’s solution with a puzzles and
wala (AIR solution corresponded with previously prepared solution kept competitions
1957 SC 699) previously prepared solution kept with the editor of a
with the editor. Held, this was a newspaper is a lottery and

game of chance and therefore a therefore, a wagering
lottery (wagering transaction). transaction.
Note: In-depth explanation of this

case is not provided as the same
is not relevant at CA Foundation
level, the case infact relates to
Constitutional rights regarding
levying of taxes and calling the
said transaction as part of trade
or not.
29 Hadley vs. The crankshaft of P’s flour mill had where a contract has been Ordinary The Indian Unit 5 A Page 1.100
Baxendale broken. He gives it to D, a common breached by a party, he is Damages Contract Act,
carrier who promised to deliver it entitled to compensate to the 1872
to the foundry in 2 days where the other party any loss or damage
new shaft was to be made. The mill that arose naturally in the course
stopped working, D delayed the of such breach, such a
delivery of the crankshaft so the compensation is not to be given
mill remained idle for another 5 for any remote and indirect loss
days. P received the repaired or damage sustained by reasons
crankshaft 7 days later than he of the breach. I.e. unless earlier
would have otherwise received. informed about other
Consequently, P sued D for consequences, the party need
damages not only for the delay in not compensate for indirect loss
the delivering the broken part but that has occurred.
also for loss of profits suffered by
the mill for not having been
worked. The count held that P was
entitled only to ordinary damages
and D was not liable for the loss of
profits because the only
information given by P to D was

that the article to be carried was
the broken shaft of a mill and it
was not made known to them that
the delay would result in loss of
profits.
30 Gibbons vs In GIBBONS V. WESTMINSTER Where a cheque was Vindictive or The Indian Unit 5 A Page 1.101
West BANK LTD., (1939) 2 K.B. 882, a dishonoured by mistake of the exemplary Contract Act,
Minister non-trader was awarded only 40 bank even though there was damages 1872
Bank) shillings as nominal damages. The sufficient funds available, this
customer's credit is or may be would cause the party damages
seriously injured by return of one by loss of his reputation and
of his cheques dishonoured. The would affect his creditworthiness,
smaller the cheque, the greater is hence he is entitled to claim
the possibility of damage to his vindictive or exemplary damages
credit. to compensate such a qualitative
for wrongful dishonour by a banker loss.
of his customer’s cheque because
in this case the injury due to
wrongful dishonour to the drawer
of cheque is so heavy that it causes
loss of credit and reputation to
him. A business man whose credit
has suffered will get exemplary
damages even if he has sustained
no pecuniary loss. But a non-trader
cannot get heavy damages in the
like
circumstances, unless the damages
are alleged and proved as special
damages.

31 Frost V. the defendant promised to marry Here Knight did something to Rules relating to The Indian Unit 6 B Page 1.112
Knight the plaintiff on the death of his make the event mentioned in the enforcement Contract Act,
father. While the father was still contract impossible of 1872
alive, he married another woman. happening, as Knight married
It was held that it had become someone else while Frost's father
impossible that he should marry was still alive, knight cannot now
the plaintiff and she was entitled to marry frost which leads to a
sue him for the breach of the breach of contract and frost is
contract. entitled to sue knight. here the
performance of the contract was
contingent upon the death of the
father, however before his death
knight performed an act which
makes the contract impossible to
perform.
32 Shyam Lal vs. ‘K’ a government servant was Here K enjoyed the benefits of Quasi contract - The Indian Unit 6 B Page 1.114
State of U.P compulsorily retired by the receiving salary even though no Obligation of Contract Act,
government. He filed a writ work was given to him, the person enjoying 1872
petition and obtained an injunction intention of the government was benefits of non-
against the order. He was not to give him salary for free, i.e. gratuitous act
reinstated and was paid salary but not to perform a gratuitous act
was given no work and in the and hence money has to be
meantime government went on returned.
appeal. The appeal was decided in
favour of the government and ‘K’
was directed to return the salary
paid to him during the period of
reinstatement.
33 Hollins vs. ‘H’ picked up a diamond on the The finder of lost goods has the Quasi contract - The Indian Unit 6 A Page 1.115
Howler L. R. floor of ‘F’s shop and handed over right to safeguard the goods until Finder of lost Contract Act,
& H. L the same to ‘F’ to keep till the the true owner is found, he has goods 1872
owner was found. In spite of the this right to retain the goods

best efforts, the true owner could found against everybody except
not betrayed. After the lapse of the true owner. I.e. he has to
some weeks, ‘H’ tendered to ‘F’ the return it only to the true owner
lawful expenses incurred by him and nobody else even though it
and requested to return the was found on their premises.
diamond to him. ‘F’ refused to do
so. Held, ‘F’ must return the
diamond to ‘H’ ashe was entitled to
retain the goods found against
everybody except the true owner.
34 Sales tax A payment of municipal tax made In this case kanhaiyalal had Quasi contract - The Indian Unit 6 B Page 1.115
officer vs. under mistaken belief or because mistakenly made wrong payment Money paid by Contract Act,
Kanhaiyalal of mis-understanding of the terms of municipal tax to the mistake 1872
of lease can be recovered from authorities, now he has the right
municipal authorities to recover the same as it was
paid under a mistake and the
authorities cannot deny him a
refund.
35 [Trikamdas ‘T’ was traveling without ticket in a Here, the contention raised by Quasi contract - The Indian Unit 6 B Page 1.115
vs. Bombay tram car and on checking he was Trikamdas was that travelling Money paid Contract Act,
Municipal asked to pay `5/- as penalty to without a ticket was a non- under coercion 1872
Corporation compound transaction. T filed a compoundable offence, the ticket
A. I. R.1954] suit against the corporation for collector had no authority to levy
recovery on the ground that it was a penalty and make it a
extorted from him. The suit was compoundable offence, he had
decreed in his favour. paid this sum of Rs 5 only to
avoid the prosecution he would
have faced if he had not paid the
said sum to the ticket collector,
which he felt was coercion upon
him and hence claimed the
money back.

36 Bombay timber was purchased for the Where the article can be used for Caveat Emptor - The sale of Unit 2 B Page 2.27
Burma express purpose of using it as only one particular purpose, the Fitness as to goods Act,1930
Trading railways sleepers and when it was buyer need not tell the seller the quality or use
Corporation found to be unfit for the purpose, purpose for which he required
Ltd. vs. Aga the Court held that the contract the goods. But where the article
Muhammad could be avoided. can be used for a number of
purposes, the buyer should tell
the seller the purpose for which
he requires the goods, if he wants
to make the seller responsible.
37 Priest vs. Last P, a draper, purchased a hot water Where the article can be used for Caveat Emptor - The sale of Unit 2 A Page 2.27
bottle from a retail chemist, P only one particular purpose, the Fitness as to goods Act,1930
asked the chemist if it would buyer need not tell the seller the quality or use
stand boiling water. The Chemist purpose for which he required
told him that the bottle was meant the goods. But where the article
to hold hot water. The bottle burst can be used for a number of
when hot water was poured into it purposes, the buyer should tell
and injured his wife. It was held the seller the purpose for which
that the chemist shall be liable to he requires the goods, if he wants
pay damages to P, as he knew that to make the seller responsible.
the bottle was purchased for the
purpose of being used as a hot
water bottle.
38 Mount D. F. A entered into a contract to sell Where the seller gives consent to Exceptions where The sale of Unit 4 B Page 2.60
Ltd. vs Jay & cartons in possession of a the buyer for the buyer to unpaid seller’s goods Act,1930
Jay wharfinger to B and agreed with B dispose, Sell or mortgage the right of lien and
(Provisions) that the price will be paid to A from goods, right of lien comes to an stoppage in
Co. Ltd the sale proceeds recovered from end. Logic being that seller transit are
his customers. Now B sold goods to himself gave the right to the defeated
C and C duly paid to B. But anyhow buyer to sell the goods to
B failed to make the payment to A. someone else, post this he
A wanted to exercise his right of

lien and ordered the wharfinger cannot exercise his lien to retain
not to make delivery to C. Held that the goods again.
the seller had assented to the
resale of the goods by the buyer to
the sub-buyers. As a result A’s right
to lien is defeated
39 In KD Kamath The appellant was a firm consisting The Supreme Court has held that Elements of The Indian Unit 1 A 3.4
& Co of six partners and the the two essential conditions to be partnership Partnership Act,
partnership was constituted under satisfied are that: 1932
a document dated March 20, (1) there should be an agreement
1959, the business of the to share the profits as well as the
partnership having already losses of business; and
commenced from October 1,
1958. The partnership was (2) the business must be carried
registered under the Indian on by all or any of them acting for
Partnership Act 1932 on or about all, within the meaning of the
August 11, 1959. For the definition of ‘partnership’ under
assessment year 1959-60 section 4.
corresponding to the previous year
ending March 31, 1959 the The fact that the exclusive power
appellant filed an application for and control, by agreement of the
registration under s. 26A of the parties, is vested in one partner
Indian Income-tax Act, 1922. The or the further circumstance that
Income-tax Officer by his order only one partner can operate the
dated September 28, 1960 declined bank accounts or borrow on
to grant registration on the behalf of the firm are not
ground that there was no destructive of the theory of
relationship of partners inter se partnership provided the two
created under the partnership essential conditions, mentioned
deed. earlier, are satisfied.
Note : For exam purpose facts are

not relevant ( shared only for
knowledge purpose)
40 Santiranjan According to the plaintiff-appellant In Santiranjan Das Gupta Vs. True test of The Indian Unit 1 A 3.5
Das Gupta Vs. he had a mill at Nojai where he was Dasyran Murzamull, following Partnership Partnership Act,
Dasyran carrying on his milling business. factors weighed upon the 1932
Murzamull The defendants represented to him Supreme Court to reach the
(Supreme that if the milling business was conclusion that there is no
Court) carried on in partnership with them partnership between the
then the plaintiff would make large parties:
profits and on that representation (a) Parties have not retained any
and assurance he entered into a record of terms and conditions of
partnership with the defendants on partnership.
or about January 10, 1948. The (b) Partnership business has
partnership business, to quote the maintained no accounts of its
plaint "commenced from about the own, which would be open to
middle of January, 1948 and the inspection by both parties.
work continued up to 10th (c) No account of the partnership
September, 1948". Some disputes was opened with any bank.
arose and on or about November 6, (d) No written intimation was
1948 Murzamull Agarwal told the conveyed to the Deputy Director
plaintiff that the business in of Procurement with respect to
partnership was no longer possible. the newly created partnership.
In September 1951 the plaintiff
instituted the present suit for
dissolution of partnership and
accounts out of which the present
appeal arises.
Note : The facts of the case are not

relevant for Exam ( shared only for
knowledge purpose)

41 Vishnu Plaintiff appellant filed the suit for The Supreme Court in Vishnu Retirement of a The Indian Unit 2 A 3.35
Chandra Vs. dissolution of firm and rendition of Chandra Vs. Chandrika Prasad, Partner Partnership Act,
Chandrika accounts alleging that the held that the expression ‘if any 1932
Prasad partnership was a partnership at partner wants to dissociate from
will and by the notice and by the partnership business’, in a
institution of the suit the firm clause of the partnership deed
stood dissolved effective from which was being construed,
November 23, 1976. The comprehends a situation where a
respondents resisted the suit partner wants to retire from the
alleging that the partnership is not partnership. The expression
a partnership at will. Two questions clearly indicated that in the event
that were agitated before the High of retirement, the partnership
Court were: "(I) whether the business will not come to an end.
partnership was a partnership at
will or for a fixed duration; (ii) i.e. if the remaining partners
whether the respondent (appellant would want to continue the
before us) was entitled for business, they can if the
retirement from the partnership or remaining partners wish to do so.
for dissolution of the firm itself." retirement leads to dissolution of
After an elaborate discussion and partnership and not dissolution
after specifically referring to of firm.
Clauses 7, 18 and 20, both
amended and unamended, of the
instrument of partnership the High
Court held that the partnership
was not a partnership at will. We
do not propose to examine this
contention. What was pressed
before u$ was the second
contention canvassed before the
High Court.

That if any partner wants to
dissociate from the partnership
business then he can dissociate
after serving one month notice to
remaining partners, but in that
event the partnership business will
not come to an end. If the majority
of the partners do not agree to
work with other partner then in
that event the majority partners
will have the right to seek
explanation from that partner and,
if think fit and justifiable, may
expelled him from the partnership
business.
Note : Facts of case are not

relevant for exam here ( shared
only for knowledge purpose)
42 Macaura v. Macaura (M) was the holder of Concept of separate legal entity is Separate Legal The Companies Unit 1 A 5.3
Northern nearly all (except one) shares of a tested here, timber belonged to entity Act, 2013
Assurance timber company. He was also a the company and hence should
Co. Limited major creditor of the company. M have been insured in the name of
(1925) insured the company’s timber in the company and not in the name
his own name. The timber was lost of macaura as shareholder is
in a fire. M claimed insurance different from a company.
compensation. Held, the insurance
company was not liable to him as
no shareholder has any right to any
item of property owned by the
company, for he has no legal or

equitable interest in them.
43 Salomon Vs. In Salomon vs. Salomon & Co. Ltd. Where a company was Lifting of The Companies Unit 1 A 5.5
Salomon and the House of Lords laid down that a incorporated with the intention corporate veil Act, 2013
Co Ltd company is a person distinct and to defraud it's creditors then the
separate from its members. In this court has the power to lift the
case one Salomon incorporated a corporate veil, in this case the
company named “Salomon & Co. concept of separate legal entity
Ltd.”, with seven subscribers does not hold good, the company
consisting of himself, his wife, four and members would be treated
sons and one daughter. This as one and the same when the
company took over the personal corporate veild is lifted.
business assets of Salomon for £
38,782 and in turn, Salomon took
20,000 shares of £ 1 each,
debentures worth £ 10,000 of the
company with charge on the
company’s assets and the balance
in cash. His wife, daughter and four
sons took up one £ 1 share each.
Subsequently, the company went
into liquidation due to general
trade depression. The unsecured
creditors to the tune of £ 7,000
contended that Salomon could not
be treated as a secured creditor of
the company, in respect of the
debentures held by him, as he was
the managing director of one-man
company, which was not different
from Salomon and the cloak of the
company was a mere sham and

fraud. It was held by Lord Mac
Naughten:
44 Daimler Co. A company was incorporated in The courts have the power to lift Lifting of The Companies Unit 1 A 5.6
Ltd. vs. England to sell tires in England, the corporate veil to ascertain corporate veil - To Act, 2013
Continental made in Germany by a German the character of the company, i.e. determine the
Tyre & company. The shareholders were whether to find out if the character of the
Rubber Co all German expect one who was company is a friend or an enemy. company.
born in Germany and had become In substance, a company is
a naturalized British citizen. After controlled and all decisions are
the outbreak of the first world war taken by the shareholders, where
between England and Germany, the shareholders are enemy in
continental tire being the German nature, then the company would
company did not pay any amount also be enemy in nature.
claiming that it would amount to
trading with an enemy nation thus
violating trading with enemy act
1914. the secretary initiated an
action against the same. The same
was adjudged in favour of the
German company meaning that the
company had an enemy character.
45 [Dinshaw it was held that the company was where a company was Lifting of The Companies Unit 1 A 5.6
Maneckjee not a genuine company at all but incorporated merely to avoid tax corporate veil - To Act, 2013
Petit] merely the assessee himself obligations by transferring protect
disguised under the legal entity of income to the other companies, Revenue/Tax
a limited company. The assessee i.e. diversion of funds and the
earned huge income by way of said companies have no
dividends and interest. So, he significant transactions and is
opened some companies and created only to defraud the legal
purchased their shares in exchange system, then the corporate veil
of his income by way of dividend can be lifted to highlight that the
and interest. This income was

transferred back to assessee by company and the members are
way of loan. The Court decided one and the same.
that the private companies were a
sham and the corporate veil was
lifted to decide the real owner of
the income.
46 Workmen of The facts of the Where a company was Lifting of The Companies Unit 1 A 5.6
Associated case are that “A Limited” incorporated only to avoid a legal corporate veil - To Act, 2013
Rubber purchased shares of “B Limited” by obligation, in this case the Avoid a legal
Industry ltd., investing a sum of ` 4,50,000. The company was incorporated only obligation.
v. Associated dividend in respect of these shares to reduce the bonus payable
Rubber was shown in the profit and loss towards employees, then court
Industry Ltd. account of the company, year after has the power to lift the
year. It was taken into account for corporate veil.
the purpose of calculating the
bonus payable to workmen of the
company.
Sometime in 1968, the company
transferred the shares of B Limited,
to C Limited a subsidiary, wholly
owned by it. Thus, the dividend
income did not find place in the
Profit & Loss Account of A Ltd.,
with the result that the surplus
available for the purpose for
payment of bonus to the workmen
got reduced.
Here a company created a
subsidiary and transferred to it, its
investment holdings in a bid to
reduce its liability to pay bonus to
its workers. Thus, the Supreme

Court brushed aside the separate
existence of the subsidiary
company. The new company so
formed had no assets of its own
except those transferred to it by
the principal company, with no
business or income of its own
except receiving dividends from
shares transferred to it by the
principal company and serving no
purpose except to reduce the gross
profit of the principal company so
as to reduce the amount paid as
bonus to workmen.
47 Merchandise a transport company wanted to a company sometimes is treated Lifting of The Companies Unit 1 A 5.7
Transport obtain licences for its vehicles, but as an agent of another company corporate veil - Act, 2013
Limited vs. could not do so if applied in its own to perform such acts and obtain Formation of
British name. It, therefore, formed a such licenses which the principal subsidiary to act
Transport subsidiary company, and the company failed to obtain, here as an agent
Commission application for licence was made in the subsidiary company was
the name of the subsidiary. The incorporated for the sole reason
vehicles were to be transferred to that the holding company was
the subsidiary company. Held, the unable to obtain license, apart
parent and the subsidiary were one from that there was no other
commercial unit and the significant transaction, hence it
application for licences was was held that both the
rejected. companies were one and the
same
48 Ashbury The facts of the case are: To summarise the case, an act Doctrine of Ultra The Companies Unit 1 A 5.27
Railway The main objects of a company performed by the company which vires Act, 2013
Carriage and were: is not mentioned in the object
Iron (a) To make, sell or lend on hire, clause is VOID AB INITIO, even if

Company railway carriages and wagons; all the members ratify the same
Limited v. (b) To carry on the business of after the act is performed. These
Riche-(1875). mechanical engineers and general acts are called ultra vires the
contractors. object clause, I.e. beyond the
(c) To purchase, lease, sell and power of the company, known as
work mines. doctrine of ultra vires.
(d) To purchase and sell as
merchants or agents, coal, timber,
metals etc.
The directors of the company
entered into a contract with Riche,
for financing the construction of a
railway line in Belgium, and the
company further ratified this act of
the directors by passing a special
resolution. The company however,
repudiated the contract as being
ultra-vires. And Riche brought an
action for damages for breach of
contract. His contention was that
the contract was well within the
meaning of the word general
contractors and hence within its
powers. Moreover it had been
ratified by a majority of share-
holders. However, it was held by
the Court that the contract was null
and void. It said that the terms
general contractors was associated
with mechanical engineers, i.e. it
had to be read in connection with
the company’s main business. If,

the term general contractor’s was
not so interpreted, it would
authorize the making of contracts
of any kind and every description,
for example, marine and fire
insurance.
49 The Royal Mr. Turquand was the official Doctrine of indoor management Doctrine of The Companies Unit 1 A 5.30'
British Bank manager (liquidator) of the states that, an outsider dealing Indoor Act, 2013
vs. Turquand insolvent Cameron’s Coalbrook with the company must only be management
Steam, Coal and Swansea and aware of what procedures a
Loughor Railway Company. It was company has to follow, but it is
incorporated under the Joint Stock not his responsibility to check
Companies Act, 1844. The whether these procedures have
company had given a bond for £ actually been followed correctly.
2,000 to the Royal British Bank,
which secured the company’s
drawings on its current account.
The bond was under the company’s
seal, signed by two directors and
the secretary. When the company
was sued, it alleged that under its
registered deed of settlement (the
articles of association), directors
only had power to borrow up to an
amount authorized by a company
resolution. A resolution had been
passed but not specifying how
much the directors could borrow.
Held, it was decided that the bond
was valid, so the Royal British Bank
could enforce the terms. He said
the bank was deemed to be aware

that the directors could borrow
only up to the amount resolutions
allowed. Articles of association
were registered with Companies
House, so there was constructive
notice. But the bank could not be
deemed to know which ordinary
resolutions passed, because these
were not registrable. The bond was
valid because there was no
requirement to look into the
company’s internal workings. This
is the indoor management rule,
that the company’s indoor affairs
are the company’s problem.
50 Howard vs. where the directors could not where the parties to a Doctrine of The Companies Unit 1 B 5.31
Patent Ivory defend the issue of debentures to transaction are aware about the Indoor Act, 2013
Manufacturin themselves because they should irregularity that the internal management -
g Co have known that the extent to management procedures are not Knowledge of
which they were lending money to properly followed, they cannot irregularity
the company required the assent take the defence of Doctrine of
of the general meeting which they indoor management. It would be
had not obtained. an exception to the doctrine of
indoor management.
51 Anand Bihari the plaintiff accepted a transfer of where a party dealing with the Doctrine of The Companies Unit 1 B 5.31
Lal vs. a company’s property from its company has a suspicion in the Indoor Act, 2013
Dinshaw & accountant, the transfer was held transaction, he cannot ignore the management -
Co void. The plaintiff could not have same stating internal affairs of suspicion of
supposed, in absence of a power of the company are not within his irregularity
attorney that the accountant had scope, the moment he has a
authority to effect transfer of the suspicion, he has to clarify
company’s property. whether the same is compliant

with the procedures of the
company. here Anand Bihari had
a suspicion that the accountant
did not have the authority to
transfer the property and still
went ahead with the transaction
and hence the transaction is not
valid, he will not get the benefit
under doctrine of indoor
management.
52 Ruben v the plaintiff was the transferee of a Indoor management does not Doctrine of The Companies Unit 1 B 5.31
Great Fingall share certificate issued under the work in case of forgery because Indoor Act, 2013
Consolidated seal of the defendant’s here the question is not about management -
company. The company’s wrong consent, it is about Forgery
secretary, who had affixed the absence of consent and hence
seal of the company and forged the the transaction would be void.
signature of the two directors,
issued the certificate.
The plaintiff contended that
whether the signature were
genuine or forged was apart of the
internal management, and
therefore, the company should
be estopped from denying
genuineness of the document.
But it was held, that the rule has
never been extended to cover such
a complete forgery.
53 [Heavy the law recognizes such a Just because the entire share Effect of The Companies Unit 1 B 5.21
Electrical company as a juristic person capital is held by the government registration Act, 2013
Union vs. separate and distinct from its or it's bodies, the companies
members. The mere fact that the

State of entire share capital has been does not become and agent of
Bihar] contributed by the Central the government
Government and all its shares are
held by the President of India and
other officers of the Central
Government does not make any
difference in the position of
registered company and it does not
make a company an agent either of
the President or the Central
Government
54 [Spencer & It may be noted that under the if a company holds 100% shares Effect of The Companies Unit 1 B 5.21
Co. Ltd. provisions of the Act, a company of another company, it does not registration Act, 2013
Madras vs. may purchase shares of another mean that both the companies
CWT company and thus become a are one now, both the companies
Madras]. controlling company. However, will still be treated as a separate
merely because a company entity.
purchases all shares of another
company it will not serve as a
means of putting an end to the
corporate character of another
company and each company is a
separate juristic entity
55 Haughton & where a person holding where a transaction on the face Doctrine of The Companies Unit 1 C 5.31
Co. v. directorship in two companies of it looks very suspicious of Indoor Act, 2013
Nothard, agreed to apply the money of one whether the companies had the management -
Lowe & Wills company in payment of the debt to power to enter into such a suspicion of
Ltd other, the court said that it was transaction, the parties cannot irregularity
something so unusual “that the take the defence of doctrine of
plaintiff were put upon inquiry to indoor management to complete
ascertain whether the persons the transaction, the fact has to be
making the contract had any checked whether the companies

authority in fact to make it.” Any in real have the power to enter
other rule would “place limited into such a transaction or the
companies without any sufficient company is merely acting as an
reasons for so doing, at the mercy agent of the directors.
of any servant or agent who should
purport to contract on their
behalf.”

All Case Studies For CA Foundation

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

All Case Studies For CA Foundation

Uploaded by

Copyright:

Available Formats

THE CA CLASSROOM CA FOUNDATION

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |1

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |2

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |3

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |4

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |5

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |6

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |7

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |8

CA CS KARTHIK MANIKONDA 75501 37279 P A G E |9

The court held that the claims for

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 10

Later on, with an upswing of

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 11

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 12

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 13

Note: In-depth explanation of this

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 14

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 15

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 16

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 17

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 18

Note : For exam purpose facts are

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 19

Note : The facts of the case are not

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 20

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 21

Note : Facts of case are not

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 22

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 23

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 24

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 25

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 26

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 27

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 28

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 29

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 30

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 31

CA CS KARTHIK MANIKONDA 75501 37279 P A G E | 32

You might also like