INDIAN CONTRACT ACT, 1872

Relevant Topic

Relevant Section

Key Issue

Summary Judgement

MANU Citation

Proposal

Section 2: This section is the definition clause, in which 'Proposal' is defined as an offer made by one person by showing his wish to do or not to do something and taking the consent for it of other person to whom such offer is made.

Whether the sale was completed at the shelf when the goods were selected, or at the cash desk.

Facts: The defendants operated a self-service retail chemist shop. The customers took the items they required from the shelves, put them into a basket, and then took them to the cash desk. The pharmacist supervised the transaction at the cash desk. The issue in this case was whether the sale was completed at the shelf when the goods were selected, or at the cash desk.

Held: It was held that the display of articles is merely an invitation to treat and not an offer. The shopkeeper has the right to accept or reject the same.

The Pharmaceutical Society of Great Britain vs. Boots Cash Chemists (Southern) Ltd. (05.02.1953 - UKWA) : MANU/UKWA/0122/1953

Proposal

Section 2: This section is the definition clause, in which 'Proposal' is defined as an offer made by one person by showing his wish to do or not to do something and taking the consent for it of other person to whom such offer is made. If the person to whom the offer was made gives his consent or approval to such offer, then the proposal or offer becomes a promise.

Whether quotation of price is an offer?

Facts: The parties in this case were negotiating for the sale and purchase of a property owned by Respondents. Harvey and Anor asked Facey if he would sell them the property and the minimum price at which Facey would sell it. In response, Facey stipulated his minimum price for the property, but he was silent as to whether he was ready to sell the property to Harvey and Anor. Harvey and Anor sent Facey a telegram in which they agreed to pay Facey the stipulated price. Harvey and Anor regarded this telegram as obligating Facey to sell them the property at that price. When Facey attempted to sell the property to other buyers, Harvey and Anor accused Facey of breaching their contract and sued Facey for specific performance.

Held: The court held that quotation of price is not an offer and therefore no binding contract happened between the parties.

Harvey and another v Facey and others (Jamaica) (29.07.1893 - UKPC) : MANU/UKPC/0001/1893

Acceptance by performing conditions, or receiving consideration

Section 8: The performance of any condition by the acceptor mentioned in the proposal and also, the acceptance of any consideration which is offered with a proposal implies the acceptance to such proposal.

Whether the offer was merely an invitation to treat and not a contract

Facts: A medical firm advertised that its new wonder drug, a smoke ball, would cure people's influenz flu, and if it did not, buyers would receive 100. The aggreived bought the defendants product and used it in the manner as presecribed by the product. After some days she again got flu. When sued, Carbolic argued the ad was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, and a gimmick.

Held: It was held that while making an offer, the offeror expressly or impliedly indicated that there is no need of intimating acceptance to the said offer and only performance of the conditions of offer would be enough to result in valid contract.

Carlill vs. Carbolic Smoke Ball Company (07.12.1892 - UKWA) : MANU/UKWA/0001/1892

Persons competent to contract

Section 11: A person can be capable of entering into a contract if he is of the age of majority i.e. 18 years and is of sound mind and is not subjected to any disqualification under any law.

Whether contracts with minor are valid or not

Facts: The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favour of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs. 20,000. The actual amount of loan given was less than Rs. 20,000. The plaintiff brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, mortgage was void and inoperative and the same should be cancelled.

Held: Court held that agreements with minor are void-ab-initio.

Mohori Bibee and another vs. Dharmodas Ghose (04.03.1903 - PRIVY COUNCIL) : MANU/PR/0049/1903

Agreement without consideration

Section 25: If any agreement is formed without consideration it will be void. But, if the consideration is based on natural love and affection or a promise has been made to compensate, promise to pay a part of payment, then such an agreement is a contract. This section will not affect the validity of any gift made b y the donor to the donee. And also, the agreement in which the consideration is not proper and the consent is freely given, it will not be void.

Whether a contract is enforceable if consideration for the promise had not moved at the desire of the promisor.

Facts: The petitioner had constructed some shops at the market with the promise of paying commissions on the sales made at his shop. The respondent spent some money for the improvement of the condition of the market on the authority of the government. Later, the petitioner denied to pay the respondent with the commission.

Held: It was held that since the consideration for the promise had not moved at the desire of the promisor, the same was not sufficient to support the promise.

Durga Prasad vs. Baldeo and Ors. (31.03.1880 - ALLHC) : MANU/UP/0115/1880

Effect of accepting performance from third person

Section 41: When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.

Whether there as any contract between the plaintiff and the defendant.

Facts: Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires below a recommended retail price . As part of the agreement, Dunlop also required their dealers to gain the same agreement with their retailers, who in this instance was Selfridge. This was agreed between the dealer and Selfridges, which effectively made Dunlop a third-party to that agreement. Sometime after this, Selfridge sold the tires below the agreed price and Dunlop sued for damages and an injunction to prevent them from continuing this activity.

Held: The court applied the doctrine of privity of contract and held that there was no contract between the plaintiff and defendant and hence the plaintiff cannot sue the defendants for breach of contract.

DUNLOP PNEUMATIC TYRE COMPANY, LIMITED vs. SELFRIDGE AND COMPANY, LIMITED (26.04.1915 - UKHL) : MANU/UKHL/0001/1915

Agreement without consideration

Section 25: If any agreement is formed without consideration it will be void. But, if the consideration is based on natural love and affection or a promise has been made to compensate, promise to pay a part of payment, then such an agreement is a contract. This section will not affect the validity of any gift made b y the donor to the donee. And also, the agreement in which the consideration is not proper and the consent is freely given, it will not be void.

Whether the plaintiff and all other persons interested can sue the defendant for payment of the amount subscribed

Facts: Plaintiff being the commissioner of Howrah and one of the trustees of the Howrah town hall fund, contemplated that if the necessary amount is raised by the way of subscription, they would build the town hall. The subscribers of the fund, while promising the money, undertook that in pursuance of the commissioner entering into a contract for erecting the building, they are paying a certain amount. After certain amount was raised, the plaintiff entered into a contract with the contractors for building the hall. One of the subscribers, who had promised to pay Rs.100 refused to pay and plaintiff sued. Question was whether the plaintiff and all other persons interested can sue the defendant for payment of the amount subscribed?

Held: The Court held that an act done at the promisor's desire is good consideration for his promise even if it is of no significance or benefit to him. Hence, the plaintiff and other persons interested could sue for the amount subscribed and defendant has to pay the money promised.

Kedarnath Bhattacharji vs. Gorie Mahomed (26.11.1886 - CALHC) : MANU/WB/0012/1886

Agreement to do impossible acts

Section 56: This section provides that the agreement becomes void when the performance of the act becomes impossible or unlawful.

Whether the defence of frustration of contract be taken where there is merely delay in performance of contractual duties.

Facts: The plaintiff sued the defendants for wrongfully repudiating the contract of developing the lands which were sold to the plaintiff, and asked for specific performance of the same. Defendant took the defence of frustration as the lands which needed to be developed were temporarily requisitioned by the Govt. under the defence rules such that for unspecified period of time, any development work if executed on the land would be illegal. The contract was made at a time when war conditions were prevailing and any such requisition was imputed to be in contemplation of the parties while forming contract. Further, no time was specified in the contract.

Held: The court held that the doctrine of frustration is applicable in contracts where performance of the act becomes unlawful or impossible thereby upsetting the object of the contract. However, in this case the doctrine does not apply as there was a mere delay in the performance of contract.

Satyabrata Ghose vs. Mugneeram Bangur and Comapny and Ors. (16.11.1953 - SC) : MANU/SC/0131/1953

Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises

Section 54: This section explains that reciprocal promises are conditional and dependent.

Whether reciprocal promised are conditional.

Facts: The plaintiff was the owner of a ginning factory constructed on an agricultural land and nominally held in the name of his brother. He sold the factory to the defendant who paid half the price at once and was put in possession, the balance being payable on a fixed date. The buyer defaulted in paying up on that date and the seller rescinded the contract and brought an action for possession.

Held: Supreme Court held that when a certain act for the performance of the contract has been decided by the parties, that has to be considered taking into account if that particular party is ready and willing to perform his part of the contract or not.

Nathulal vs. Phoolchand (16.10.1969 - SC) : MANU/SC/0492/1969

Considerations or objects of a valid agreement

Section 23: An agreement or contract is void if its purpose is the commission of an illegal act or it is expressly or impliedly prohibited by any law or its performance is not possible without disobedience of any law.

Validity of unreasonable clauses in a service agreement.

Facts: Plaintiffs worked in a company which was dissolved by Court's order and they were then inducted into defendant Corporation upon latter's terms and conditions. After years of serving Corporation, plaintiffs were arbitrarily kicked out of the Corporation by virtue of Rule 9(i) of said terms and conditions which provided for termination of employees' services on three months notice on either side upon which three months salary to be paid by Corporation. Plaintiffs requested Court to quash Rule 9(i) on grounds of unconscionability.

Held: Supreme Court held that unreasonable clauses in a service agreement between persons having gross inequality of bargaining power was wholly unreasonable and was against the public policy.

Central Inland Water Transport Corporation Limited and Ors. vs. Brojo Nath Ganguly and Ors. (06.04.1986 - SC) : MANU/SC/0439/1986