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2. Top 30 Contract Law Cases on "Contracts, Voidable Contracts and Void Agreements" [S.2(h), 2(i), 2(g), 2(j); S.10-30 of ICA]?
In Contract Awareness Forum
Rahul Parekh
Dec 31, 2020
Balfour v. Balfour [1] 1. Facts of the case: Mr. Balfour was a British man who lived in Ceylon (Sri Lanka), along with his wife, Mrs. Balfour. In the year 1915, the couple travelled to England for a vacation. During their stay in England, the wife of Mr. Balfour felt seriously ill, and was advised by her doctor to stay in England till her there was significant improvement of her health. However, Mr. Balfour was to return to Ceylon due to business. The couple made an agreement that Mrs. Balfour was to remain behind in England when the husband returned to Ceylon (Sri Lanka) and that Mr. Balfour would pay her £30 a month until he returned to England. The said agreement was followed till their relationship was cordial, however, the relationship eventually turned sour. After his return to Ceylon, Mr. Balfour expressed his intention to separate permanently. The parties subsequently obtained a decree for divorce and an issue arose as to whether the said agreement was enforceable by law. In March 1918, Mrs. Balfour sued him to keep up with the monthly £30 payments as decided by the agreement between the parties. 2. Issues: The main issue that arose out of the dispute in question was; whether said agreement of payment of £30 by Mr. Balfour to Mrs. Balfour was enforceable by law? 3. Ratio: The three judge bench in the present case held that the sad agreement was not a valid contract in the eyes of law. The court held that an essential of a valid contract under law was the intention of the parties to formulate an agreement that was legally binding so as to hold it enforceable. The court further held that it would be unwise to interfere between spouses in their day to day affairs. According to the Lords, the current agreement was purely social and domestic nature and therefore it was presumed that the parties did not intend to be legally bound. Lord Atkin, one of the three judges in the case, held that the law of contract was not made for personal family relationships. Due to the fact that there was no intention to be legally bound by the said agreement between the parties, the said agreement was not a valid contract under contractual law. Lalman Shukla v. Gauri Dutt[2] 1. Facts of the case: The nephew of the Gauri Dutt; the defendant in the present case, had gone missing in the month of January 2013. The defendant sent all his servants in different areas to search for his nephew. The plaintiff; Lalman Shukla, was one of the servants who was sent to find the missing nephew of the defendant. The plaintiff was given money for his fare and other expenses. However, during his absence, the defendant issued a handbill offering a reward of Rs 501 to the person who would successfully trace down the child. The plaintiff, however, remained unaware of the reward, as he had already left to search for the missing child. The plaintiff successfully found the child, and brought him to the defendant. However, after passage of 6 months since the same, the plaintiff filed a suit against the defendant for Rs.499 in lieu of the award announced by him. The case was filed in the lower courts, where it was rejected. The plaintiff then filed an appeal in the Allahabad High Court against the order of the lower court. 2. Issues: The main issues that cropped up in the present case were: (a) whether the current situation amounts to contract under the Indian Contract Act? (b) whether the decision by the lower court was appropriate or not? 3. Ratio: The Hon’ble High Court, in the present case, opined that order of the lower court was in fact sound, and that the present case did not constitute a valid contract under law. The Court held that in order to constitute a contract there must be an acceptance of the offer and there can be no acceptance unless there is knowledge of the offer. The court stated that in the present case, the plaintiff was already under an obligation to search for the missing boy, before the announcement of the reward. Since the plaintiff was already under that obligation, which he had incurred before the reward in question was offered, he was not liable to claim the award. Furthermore, the court also held that the plaintiff was not aware about the offer and had no assent about the act. This clearly indicated that there was no valid contract as recognized under the Indian Contract Act. Therefore, the court dismissed the appeal in the present case and upheld the order of the lower court. 4. Relevant sections: The case made use of section 2(h) and section 10 of the Indian Contract Act, along with other sections. Rafles v. Wichelaus[3] 1. Facts of the case: The plaintiff had offered to sell bales of a certain amount of Surat cotton to the defendant. This Surat cotton was to be brought to Liverpool by a ship from Bombay, India. The ship that was to bring the cotton to England was called the Peerless. However, there were two ships of the same name. The plaintiff and the defendant were both thinking about a different Peerless ship when they agreed to make the sale. One of the ships was due to leave Bombay in October, which was the ship that the defendant had in mind, but the plaintiff thought that the ship that was referred to was referring to was the one that was supposed to leave in December. When the consignment of cotton arrived in Liverpool, the defendant refused to pay, as according to him, the consignment was too late. The plaintiff thus sued the defendant for breach of contract. 2. Issues: The main in the present case was whether the ambiguity regarding the ship decided between the parties for delivering the cotton prevent "meeting of the minds," and could the same be enough to render the contract unenforceable? 3. Ratio: The court held that the contract could not be enforced due to the fact there was “no meeting of minds”. Consequently, as there was no consensus ad idem (as defendant alleged), the two parties did not agree to the same thing and there was no binding contract. After analyzing the agreements from both dies, the Court held that it was impossible to objectively ascertain which ship was meant. Since the identity of the ship was a key contract term, there had been no agreement. Therefore, the Court held that the contract was void, and ruled in favour of the defendants. 4. Relevant sections: The principle laid down in the present case have been enumerated trough section 20 of the Indian Contract Act, whereby where both parties are mistaken about the subject-matter of the contract, then such a mistake is one of fact and may render the contract void. Mohori Bibee v. Dharmodas Ghose[4] 1. Facts of the case: The respondent was a minor and owned an immovable property whose mother had been appointed as his legal guardian by the Calcutta High Court. The respondent wanted to mortgage the immovable property. His property was mortgaged in favour of Brahmo Dutta, the appellant, who was a money-lender. Kedar Nath, the manager of Brahmo Dutta, acted as his attorney. A mortgage deed of close to Rs. 20,000 @ 12% interest p.a. was drawn up between the two parties. The respondent’s legal guardian had informed Brahmo Dutta about the respondent’s minority. At the time of giving loan to the respondent, Kedar Nath had full knowledge about the respondent’s minority. The respondent through his legal guardian then brought a suit against Brahmo Dutta and claimed the revocation of the contract due to the fact that the respondent was a minor and incapable of entering into the contract. At that time, Brahmo Dutta had already died, so, the petition was litigated by his wife, Mohori Bibee. The Trial Court held the contract to be void as it was entered into with a minor. The appellant was not satisfied with the verdict of Trial Court, therefore an appeal was filed in the High Court, which was also rejected. The decision of the High Court was appealed in the Court of the Privy Council by the appellant, Mohori Bibee. 2. Issues: the cases presented three main issues that were discussed by the Privy Council. They were: (a) whether under Sections 10 and 11 of the Indian Contract Act, 1872, the mortgage deed was void?; (b) Whether under Sections 10 and 11 of the Indian Contract Act, 1872, the mortgage deed was voidable?; and (c) Whether the respondent was liable to return the loan amount received by him under the mortgage deed? 3. Ratio: The Privy Council dismissed the appeal, and held that the mortgage contract between the parties was void ab-initio as the respondent was a minor at the time of making the contract. The Court stated that due to the fact that the consent given by a minor cannot be considered as a free consent because a minor is not deemed to understand the provisions of a contract like a prudent or reasonable man, the minor was incompetent to mortgage his property. The court observed that any contract entered into with a minor person is void or void ab-initio, i.e. void from the very beginning. The court also held that the respondent cannot be compelled to return the money advanced to him under the contract, as the contract does not exist and he is not bound by the contract. In the present case, the fact that the minor’s legal guardian had informed the agent of the respondent about the said infirmity, the agent still went ahead and executed the contract on behalf of the principle meant that the party had full knowledge about the said infirmity. The court also observed that any act done by an agent, any legal action taken by the agent, or any knowledge of the agent, is deemed to be that of or done by the principal. Therefore, the court dismissed the appeal. 4. Relevant sections: The sections used in the present case are section 10 and section 11 of the Indian Contract Act. Section 10 of the Indian Contract Act, 1872 encompasses that a contract is valid only if it is entered into by the parties competent to contract. As per Section 11 of the Indian Contract Act, 1872, a minor is not competent to contract. Chikkam Ammiraju v. Chikkam Seshamma[5] 1. Facts of the case: The appellant was the brother-in-law of the defendant who had executed a mortgage deed for a certain amount in favor the respondent, her husband and their son. However, the appellant failed to repay the said amount loaned to him. Due to the love and affection towards his brother, the respondent’s husband wanted to cancel the mortgage deed and release his brother’s property. However, the same was not accepted by the respondent and her son. Due to this, the husband of the respondent threatened to commit suicide if refused to listen to him and release his brother’s property. Due to the threat of suicide, the respondent executed the release mortgage in favour of the brother. However, at a later date, the respondent and her son claimed the said properties of their own. Therefore, the respondent filed a case in the lower courts demanding that the said contract be canceled as it was executed through coercive means. The lower courts agreed with the respondents, forcing the appellant to file an appeal with the Privy Council. 2. Issues: The main issue in the present case was whether the release-dead was executed by the respondents with their free consent or whether it was obtained from them through the exercise of coercion or undue influence or both. 3. Ratio: The 4 judge Bench in the present case had different ratios regarding the main issue. Chief Justice Wallis and Justice Seshagiri Ayyar opined that the threat to commit suicide would amount to coercion under section 15 of the Indian Contract Act, while the dissenting opinion was that this particular case was an instance of undue influence. The opinion of the C.J. was followed in the present case. According to the concurring opinions, the threat to commit suicide was in fact a part of attempt to commit suicide, and was forbidden under the Indian Penal Code, 1881. The judges opined that suicide and an attempt to commit suicide were acts forbidden by the Penal Code though the former cannot be punished under the code as a dead man cannot be punished. Since the definition of coercion under section 15 clearly provided for acts prohibited by the Indian Penal Code, and also stated that the threat may be to “any other person”, the release deed executed was clearly signed under coercive means. The Privy Council agreed with the lower Courts that the prejudice husband’s own life was sufficient to bring his threat within the definition of "coercion," as it was intended by the person using the threat to bring about the agreement. 4. Relevant sections: The case analyzed the definition of coercion and undue influence under section 15 and section 16 of the Indian Contract Act respectively. Mannu Singh v. Umadat Pande[6] 1. Facts of the case: A suit was filed in the subordinate court of Azamgarh in the Uttar Pradesh for cancelling a gift deed executed by the appellant in favour of the respondent whereby the appellant gave away all his property to the respondent. The main contention of the appellant in the lower court was that the gift deed was not signed with the free consent of the appellant. The appellant was a Chatri by caste, who was quite old, and the respondent was his spiritual advisor and guru. According to the appellant, the only reason why he transferred the property to the respondent was because the respondent guaranteed to secure benefits for the appellant in his next life. Immediately after executing the gift deed, the appellant moved to the lower court to cancel the deed. However, the lower ruled in favor of the respondents. Therefore, the appellant filed an appeal in the High Court of Allahabad against the order of the lower court. Under section 39 of the Specific Relief Act. The appellant contended that deed “was spurious and fictitious and it was not executed with his free will”. 2. Issues: The only in the present case was whether the gift deed was executed with the free consent of the appellant? 3. Ratio: The court in the present case, analyzed the said evidence in hand and overturned the decision of the lower court. According to the Hon’ble High Court, the circumstances of the case clearly indicated a fiduciary relationship between the parties. The court stated that the circumstances of the case indicated that there was some kind of undue influence exerted by the respondent on the appellant due to the fact the respondent was his spiritual guru. The court also opined that at having regard to the fiduciary relations subsisting between the parties, the improvidence of the gifts, the absurdity of the reason alleged for it and the principle recognized by Section 111 of the Evidence Act, the burden rested upon the defendant to show that the transaction was made without undue influence and in good faith and in the absence of such proof the plaintiff was entitled to obtain a cancellation of the deed. 4. Relevant sections: Though the case did not make use of undue influence under section 16 the Indian Contract Act, the case laid down the standard of proof required to prove a case of undue influence on similar lines to subsection 3 of section 16. Life Insurance Corporation of India v. Smt. Asha Goal and Ors.[7] 1. Facts of the case: Naval Kishore Goel, the husband of the respondent was an employee of M/s Digvijay Woollen Mills Limited at Jamnagar as a Labour Officer. He took a life insurance policy with LIC for a sum of Rs.1,00,000. The husband of the respondent passed away on 12th December, 1980 at the age of 46. The cause of death was certified as acute Myocardial Infarction and Cardiac arrest. The respondent, being nominee of her husband, submitted the claim along with other papers requesting for consideration of her claim and for making payment. The Divisional Manager of LIC repudiated any liability under the policy and refused to make any payment on the ground that the deceased had withheld correct information regarding his health at the time of effecting the insurance with LIC. According to LIC, the deceased husband of the respondent that at the time of submitting the proposal for insurance, had stated his usual state of health as good; that he had not consulted a medical practitioner within the last five years for any ailment requiring treatment for more than a week; and had answered the question if remained absent from place of your work on ground of health during the last five years in the negative. According to LIC, the answers give were false. Since the respondent failed to get any relief from the authorities of LIC, she filed the writ petition seeking a writ of mandamus against LIC to pay the ensured sum with interest. The Single bench of the High Court as well as the division bench passed the judgment in favour of the respondent. Therefore, the appellant filed an SLP to the Supreme Court against the decision of the High Court. 2. Issues: The single issue that was adjudged in the present case was whether the claim could be rejected on the grounds of fraud? 3. Ratio: The Supreme Court upheld the decision of the Division bench of the High Court. The Supreme Court analyzed the case of Mithoolal Nayak v. Life Insurance Corporation of India[8], where it was held that a repudiation of a policy under section 45 of the Life Insurance Corporation Act, 1956 must only take place where: (a) the false statement made must be on a material matter or must suppress facts which it was material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. The Court felt that the present case did not fall within this meaning, and neither under section 17 of the Indian Contract Act. In the present case, the deceased husband had not willingly falsified any information. The Court examined the evidence at hand and came to a conclusion that policy holder was not clearly guilty of a fraudulent suppression of material facts when he made his statements, as mentioned that he was generally in good health, and not visited a physician in past few months before taking up the policy. Therefore, the Court felt that the Corporation could not use the defense of fraud under section 15 of the Indian Contract Act, and passed an order that the sum, as directed by the learned Single Judge of the High Court in favour of the claimant, will be paid by the Corporation expeditiously. 4. Relevant sections: The case analyzed section 17 and section 19 of the Indian Contract Act, along with various other sections of the Life Insurance Corporation Act, 1956. Mithoolal Nayak v. Life Insurance Corporation of India[9] 1. Facts of the case: In 1942, one Mahajan Deolal sent a proposal for the insurance of his life. He was examined by Dr. D.D. Desai who submitted two reports, one with the proposal form and one confidential. The confidential report showed that Mr. Deolal was anaemic, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy and that he was a total physical wreck. Nothing came out of this proposal and it lapsed. In 1943, Mr. Deolal consulted and was treated by one Dr. Kapadia for anemia, diarrhea and panting on exertion. In 1944, Mr. Deolal made a second proposal for insurance of his life. Against the question in the proposal form whether he had consulted any medical man for any ailment within the last five years, he gave the answer ‘no’. He also did not disclose any of his ailments. After medical examination, the proposal was accepted and a policy for Rs. 25,000/- was issued on March 13, 1945. The policy lapsed for non-payment of premium but was revived in July, 1946. In the November of 1946, Mr. Deolal died. His assignee, the appellant, made a demand for Rs. 26,000/-but the Company repudiated it on the ground that the policy had been obtained by deliberate misstatement and fraudulent suppression of material facts. The appellant then filed a suit to recover the amount. 2. Issues: The Supreme Court analyzed the following main issues that were already discussed in the High Court: (1) whether the policy was vitiated by fraudulent suppression of material facts?; (2) whether the company had issued the policy with knowledge of the fact that Mr. Deolal had lied about the facts relating to the health of the insured?; (3) whether in any event the appellant is entitled to refund of the money he had paid to the respondent company? 3. Ratio: The Supreme Court, with respect to the first question, unequivocally stated that the policy was in fact taken through fraudulent means. The Court stated that the appellant was suffering from a serious type of anemia for which he was treated. The Court stated that Mr. Mahajan Deolal must have known that it was material to disclose this fact to the respondent company. In his answer to the questions put to him he not only failed to disclose what it was material for him to disclose, but he made a false statement to the effect that he had not been treated by any doctor for any such serious ailment as anemia or shortness of breath or asthma. In other words, there was a deliberate suppression fraudulently made by Mahajan Deolal. The court stated that section 17 the Indian Contract Act defined fraud as any act committed by a party to a contract with intent to deceive another party or to induce him to enter into a contract. After further analyzing the section, the court judged by the standard laid down in the same section, and stated that Mr. Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts when he made statements which he knew were deliberately false. With respect to the section question, the court stated that LIC was in fact permitted to cancel the policy due to section 45 of the Life Insurance Corporation Act which stated that repudiation of a policy can take place if :(a) the false statement is made on a material matter or to suppress facts which were material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. The Court felt that in the present case, the said requirements were fulfilled, and therefore, LIC was correct in terminating the said policy. On the final issue, the court agreed with the view of the High Court which had held that where the contract is bad on the ground of fraud, the party who has been guilty of fraud or a person who claims under him cannot ask for a refund of the money paid. 4. Relevant sections: The case analyzed section 17 of the Indian Contract Act. Cunday v. Lindsay[10] 1. Facts of the case: The plaintiff, Cunday was a trader and manufacture who received an order for sale of handkerchiefs from a person named Blenkarn. This individual signed in his name in a manner resembling Blenkiron & Co., which was a reputed firm located at 123, Wood Street. The purchaser further mentioned his address to be at 37, Wood Street, Cheapside, which was very close to the address of Blenkiron & Co. The plaintiff sent the goods to the address that was given by the purchaser. Although Blenkarn did not make any payment for the goods, he sold the goods to a third person, the defendants. The plaintiff then filed a suit, alleging that they sold the goods to Blenkarn under the mistaken assumption that they were selling it to Blenkiron & Co. The plaintiffs contended that there was no real consent to the contract of sale as they never intended to sell it to Blenkarn. Therefore, as there was no valid transfer of title, the defendants did not possess any title to the goods, and were liable for conversion. 2. Issues: The case mainly dealt with whether whether there was any contract between the claimant and Blenkarn at the first place, and if not, could the defendants procure a valid title to the good, being a third party to whom the goods were sold? 3. Ratio: In the present case, the court held that as the plaintiff lacked intention to sell the handkerchiefs to Blenkarn, there was no consent of the plaintiff to contract. The court opined that as the plaintiff wished to contract with Blenkiron & Co., the contract between the plainittf and the individual known as Blenkarn was void due to it being marred by mistake of identity of the party. The Court went on to stipulate that as there was no the plaintiff and Blenkarn, the transfer of the title of the good too the defendant was also false. To constitute a valid transfer of title, which the latter could rightfully convey to the defendants, was lacking in the present case. Hence, the defendants, being in possession without a good title of the goods, were held liable for conversion. 5. Relevant sections: Though the case did not make use of the Indian Contract Act, the case laid down the concept of mistake of identity of parties, which has been since included under the ambit of ‘mistake’ section 20 of the Indian Contract Act. Hartog v. Colin & Shields[11] 1. Facts of the case: The defendants, Colin & Shields were hide merchants who had an established business in London. Mr Louis-Levie Hartog was a Belgian furrier, living in Brussels. The defendant engaged in a verbal agreement to sell 30,000 Argentinian hare skins at 10 d per skin (which would have come to £1,250) to Mr Hartog. When the firm the final offer in writing it mistakenly wrote “10,000 skins at 10d per lb.” and the other 20,000 lesser skins similarly per lb. (imperial pound), and not in the standard unit in the industry of per piece. The said mistake made the price of the total goods 5/16th of the price discussed and orally agreed upon. On realizing their mistake, the defendants Colin & Shields pleaded that their offer was by mistake wrongly expressed. They plead that they had still intended to offer the goods per piece, and not per (imperial) pound. They argued that the plaintiff was well aware of this mistake and fraudulently accepted an offer which he well knew that the defendants had never intended to make. Due to these circumstances, they denied that any binding contract was entered into, and refused to execute the same. Therefore, the plaintiff brought a suit against the said actions of the defendant. 2. Issues: The main issue in the present case was whether the contract could be rescinded for the mistake to the price of hare skin by the defendants in the written contract. 3. Ratio: The judge found in the defendants’ favour on the grounds that the plaintiff must have realized the defendants’ error, which, as it concerned a term of the contract, rendered the contract void. The Court stated that the complainant would have known that it was normally sold per piece and not by pound. The court said that there is a duty to correct a mistake that is known to not be the real intention of the person making it. The court stated that “the offer was wrongly expressed, and the defendants by their evidence, and by the correspondence, have satisfied me that the plaintiff could not reasonably have supposed that that offer contained the offerers' real intention. Indeed, I am satisfied to the contrary. That means that there must be judgment for the defendants”. 4. Relevant sections: Though the case did not make use of the Indian Contract Act, the case laid down the concept of the duty to correct a mistake made by one party unintentionally during a contract. The concept of mistake of the quantity of goods as it was in the present case has been included in ‘mistake’ section 20 of the Indian Contract Act. Derry v. Peak[12] 1. Facts of the case: The Plymouth, the Devonport and District Tramways Company issued a prospectus where it was stated that the company was permitted to use steam trams, which would replace their horse-powered trams, and increase the business of the company. In reality, the company did not possess such a right a Board of Trade was left to grant permission to the company to make use of steam trams. Gaining the approval for such a claim from the Board was considered a formality in such circumstances and the claim was put forward in the prospectus with this information in mind. However, the claim of the company for this right was later refused by the Board. The individuals, led by Sir Henry Peek, who had purchased a stake in the business, upon reliance on the statement, brought a claim for deceit against the directors for falsifying and misrepresenting information in the prospectus. 2. Issues: The main issue in the present case was whether the statement made in the prospectus to see whether the statement amounted to misrepresentation under contract law. 3. Ratio: The claim of the shareholders was rejected by the House of Lords. The court held that it was not proven by the shareholders that the director of the company was dishonest in his belief. The court defined fraudulent misrepresentation as a statement known to be false or a statement made recklessly or carelessly as to the truth of the statement. On this basis, the claim of the shareholders against the directors of the company would fall. 4. Relevant sections: This landmark judgment of the United Kingdom has been used in India time and again. In fact, the definition laid down for misrepresentation in this case has been used a guideline to define misrepresentation under the section 18 of the Indian Contract Act. Kamal Kant Paliwal v. Smt. Prakash Devi Paliwal and Ors.[13] 1. Facts of the case: The case revolved around a plot of land situated at Moti Doongri Road Jaipur, which was purchased by defendant from Urban Improvement Board, Jaipur under a sale deed in the name of another individual for and on behalf of the plaintiff. It was stated that the purchase of the plot was Benami and the consideration of the plot was paid by the defendant out of the funds received by the plaintiff from his grand-parents, uncles and other relations from time to time. According to the plaintiff, the defendant suggested to him sometime in the month of that he should execute general power of attorney in favour of his mother and the maternal uncle as to facilitate raising of money from the plot. The plaintiff agreed to do so. The plaintiff signed the document without reading it, thinking it was a general power of attorney. In September, 1972 he was informed that the document he had executed was not a general power of attorney but a trust deed for the protection of property that was bought for him. The plaintiff filed a suit claiming that his consent was obtained by fraud. The plaintiff prayed for declaration of trust as null and void. 2. Issues: The only issue discussed by the Court in the present case was whether there was any fraud practiced on the plaintiff so as to declare the trust deed void. 3. Ratio: The court analyzed the section 10, 11, 12, 13, and 14 of the Indian Contract Act to understand the components of a valid contact. After analyzing the same, the court concluded that section 14 clearly stipulated that a contract marred by fraud, as defined under section 17, could be held as valid, and was voidable at the option of the party who was a victim of such fraud. The Court further stated that the underlying intent to constitute fraud is to deceive another party and to induce him to enter the contract and it must be by the suggestion as a fact which is not true or by the active concealment of a fact by one having knowledge or belief of that fact. Though there was some kind of concealment in the present case, the court stated that the plaintiff was an educated man, who admittedly signed the document and also after it was presented before the Sub-Registrar, Jaipur, attesting its execution. The plaintiff had all the means to know the contents of the document. The fact that the plaintiff failed to take reasonable care and caution meant that the claim of fraud against his own family could not succeed. 4. Relevant sections: The case analyzed section 10, 11, 12, 13, and 14 of the Indian Contract Act, along with section 17. The case laid down an important principle of reasonable care and caution to determine whether a contract could be marred by fraud. Great American Insurance Co. Ltd. v. Modanlal Sonulal[14] 1. Facts of the case: The respondent, who was a minor, was the sole surviving coparcener of a joint Hindu family carrying on joint family business at Devalgaum in the name of Surajmal Sonulal, and that the business of the firm was carried on under the superintendence of Goverdhandas Mohanlaland, who was also the guardian of the minor. The defendants were an insurance company incorporated in New York, United States of America, carrying on business in Bombay. The coparcenary took an insurance against fire with the appellant on certain cotton bales. Subsequently, the bales were burnt in a fire, and the respondent patented to recover loss under the insurance. However, the appellant refused to grant the same on the ground that there was collusion between the agent and the persons who effected the insurance. Therefore, the respondent filed a case in the lower court. The appellants did not plead that the plaintiff was a minor, and that on that ground the insurance policy was void while the case was heard in the lower court. However, the same did up in the oral arguments, but was left unanswered by the Judge of the lower court. The lower court eventually passed an order against the insurance company, and therefore, the company filed an appeal in the High Court. 2. Issues: The main issues discussed in the present case was whether the insurance policy taken for fire by the coparcenary was void on the grounds that the sole-surviving coparcener was a minor? 3. Ratio: The court rejected the claim of the appellants, and stated that the provisions of the law which make a contract by a minor binding were no doubt intended to be for the benefit of the minor, and courts have time and again have struggled hard to avoid holding the contract wholly void to the detriment of the minor. The court analyzed various judgments where it was held that a contract for the benefit of a minor have been held valid and not void. The court further stated that the contract was in fact made by the guardian of the minor, who was acting through his agent. The court felt that the evidence clearly the insurance company was that the business was owned by a minor, and that it was carried on by Goverdhandas, his guardian. The court felt that the present case was one where the contract was not made by a minor, but his guardian, although it was made on behalf of a minor. Therefore, keeping in mind the fact that there was already existing jurisprudence on contracts for the benefit on minors, the court stated that present case did fall within that ambit and was valid in the eyes of law. 4. Relevant sections: The case examined requirements of a valid contract under section 10 of the Indian Contract Act. The case also strengthened the exisitgn jurisprudence on validity of contracts made for the benefit of minors. Choga Lal v. Piyari and Anr.[15] 1. Facts of the case: The case was a reference made by the learned Cantonment Magistrate of Jhansi exercising the powers of a Judge of a Court of Small Causes, under Section 617 of the Code of Civil Procedure. In the present case, a suit was filed to recover rent due for a residence or quarters rented to a prostitute, with knowledge that such residence or quarters would be used by her to carry on her immoral trade and profession. 2. Issues: The question which was submitted for the opinion of the High Court was whether such an agreement was lawful under keeping in mind English law. 3. Ratio: The court stated that it was unnecessary to determine whether the English law was applicable in this country, as an express provision of the Indian Contract Act under which a contract for such a purpose would be illegal already existed. The court stated that Section 23 of that Act provided that the consideration or object of an agreement is lawful, unless, amongst other things, the Court regarded it as immoral or opposed to public policy. If the object of an agreement was immoral or opposed to public policy, the agreement could not be enforced. The court opined that knowingly letting a house to a prostitute with the object of her carrying on therein prostitution was immoral and contrary to public policy, and a landlord who knowingly let quarters to a prostitute to carry on prostitution could recover the rent in a Court of law, and any agreement signed for the same was void in the eyes of law. 4. Relevant sections: The present case analyzed the standard for lawful agreements under section 23 of the Indian Contract Act. [1] [1919] 2 K.B. 571. [2] 1913 40 ALJ 489. [3] (1864) 2 Hurl. & C. 906. [4](1903) ILR 30 Cal 539 [5] (1918) ILR 41Mad 33. [6] 1890 SCC OnLine All 2. [7] (2001) 2 SCC 160. [8] AIR 1962 SC 814. [9] AIR 1962 SC 814. [10] (1879) 3 app case 459 (465). [11] [1939] 3 All ER 566. [12] (1889) 14 App Cas 337. [13] AIR 1976 Raj 79. [14] (1934) ILR 59 Bom 656. [15] (1909) ILR 31 All 58.
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2. Top 30 Contract Law Cases on "Contracts, Voidable Contracts and Void Agreements" [S.2(h), 2(i), 2(g), 2(j); S.10-30 of ICA]?
In Contract Awareness Forum
Rahul Parekh
Dec 31, 2020
Suraj Narain Dube v. Sukhu Aheer and Anr.[1] 1. Facts of the case: Suraj Narain, the plaintiff, lent a sum of money in June 1919 to the defendant, Sukhu Ahir, who was a minor at that time. Nearly four years later, in June 1923, the first defendant, who had by that time attained majority, executed a money bond in favour of the plaintiff for the sum of Rs. 76 in consideration of the principal sum lent to the defendant when he was a minor and for the interest that had accrued. On failure of payment of the sum due to the plaintiff, the plaintiff brought a suit in the Court of Small Causes at Jaunpur. It was contended in the court that since the previous bond was executed by a minor, it could not be valid consideration for the subsequent bond, and therefore the contract was void. The Judge dismissed the suit on the same grounds. The plaintiff then filed a revision suit in the High Court, which was then referred it to a larger Bench. 2. Issues: The only issue discussed in the present case was whether the money lend previously to the minor defendant was valid consideration for the subsequent bond, or was the bond void. 3. Ratio: The three judge bench in the present case upheld the decision of the Small Causes Court. Chief Justice A.J. Sulaiman opined that Under Section 11 a minor is not competent to contract. He is disqualified from contracting. Therefore, such a minor was incapable of making a valid proposal, or make a valid acceptance as defined in Section 2, Clauses (a) and (b). The court analyzed previous judgments of various High Courts, and held that since a minor was incompetent to contract, any previously signed contract during the person’s minority, would not be sufficient consideration under section 25 of the Indian Contract Act. Justice Mukherjee dissented with the majority opinion. He felt that Section 25, Contract Act provided an exception where a contract without consideration was valid if the consideration takes the shape of a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor. According to him, the contract had to be looked separately from the consideration. He felt that once there is a perfected contract that contract alone can be enforced, and there must be no look on whether the consideration has failed. In the present case, the money bond signed by the defendant was valid, and therefore must be executed in a court law. Justice Boys agreed with the majority opinion in the present case. He stated that in the first agreement there was no ‘competency to contract’ but there was ‘consideration’. The minor made a promise and gave a bond and a promise amounts to consideration, though the promise may for some reason be unenforceable. However, he opined that an advance made during minority upon a promise to pay, cannot by virtue of Section 2(d) be held to be consideration for a subsequent promise made after majority. The original advance was then no consideration for the second agreement, as the original one was void due to it being singed by a minor. Therefore, he felt that the second bond was void due to lack of consideration. 4. Relevant sections: The present case analysed section 11 and section 25 of the Indian Contract Act. Chacko and Anr. v. Mahadevan[2] 1. Facts of the case: The appellant owned land extending to a size of 0.2 acres. The appellant sold a part of his property through a sale deed to the respondent for Rs.18000. Thereafter, the appellant sold another part of his land to the respondent for a mere sum of Rs.1000 through sale deed dated. However, soon after the property was sold, a suit was filed in the trial court by the appellant to set aside the second sale deed on the ground that it was made when the appellant was of unsound mind. The defendant Mahadevan denied the plaint's allegations. The trial court held that the appellants had not proved any vitiating circumstances to invalidate the said sale deed and consequently ordered the title to be passed to the respondent. An appeal before the First Appellate Court. The First Appellate Court held that the fact that one part of the land was sold for Rs.18000, and another larger part was sold for a sum of Rs.1000, showed that this was an unconscionable transaction and hence the second sale deed was liable to be set aside. A second appeal against the decision of the first appellate court. However, the Second Appellate Court went into merits of the case, which was not permitted under section 100 of the CPC. Therefore, the Supreme Court, in this case, heard the matter on the basis of what was held in the first appeal. 2. Issues: The only point of law that was discussed in this case was whether the sale deed was liable to be set aside due to the fact that the appellant was under the influence on alcohol while making the same deed? 3. Ratio: The court restored the judgment of the First Appellate and quashed the second sale deed. The Supreme Court stated that it had been recorded that the first appellant was not of sound mind when he executed the sale deed, which is established from the medical certificate produced during the hearing of the First Appellate Court. The court stated that the appellant was treated for Alcoholic Psychosis in the Mental Hospital at Trichur, which showed that he was suffering from alcoholism. Furthermore, the court stated that while one part of the land was sold for Rs. 18,000, the larger part of the land, which was three times the size, was sold for a mere sum of Rs.1000. The Court used the Latin maxim of 'res ipsa loquitur' i.e. the matter speaks for itself, stating that the contract was clearly unconscionable from the facts of the case. The court stated that the First Appellate Court was right in holding that the second sale deed was void as the appellant was under the influence of alcohol while singing it, and was within the definition of ‘unsound mind’ as provided in section 12 of the Indian Contract Act. 4. Relevant sections: The case made use of section 12 of the Indian Contract Act. Mani Ram Misra vs Purshotam Lal and Anr.[3] 1. Facts of the case: The appellant used to take contracts from the railway company in Uttar Pradesh However, for certain reasons the railway company refused to grant him any further contract. In order to secure further contracts from the railway company he agreed with the defendants that the first respondent would put himself forward as the applicant for the contracts and when the same were secured by the respondent, the respondent would serve the same to the appellant for a small price, and the appellant would actually carry out the contract. However, the defendants then refused to hand over the contract to the plaintiff, and therefore the plaintiff filed a suit in the Subordinate Court. The Subordinate Judge held that the plaintiff had failed to make out his case, and that the agreement set up by the plaintiff was void under the provisions of the Contract Act. Therefore the plaintiff filed an appeal in the High Court. 2. Issues: The only issue in the present case was whether the agreement set up by the plaintiff was fraudulent in its nature and therefore the contract could not be enforced at the instance of the plaintiff. 3. Ratio: The High Court upheld the order of the Subordinate Court and stated that the plaintiff's case as brought was not maintainable in court. The Court opined that he object of the agreement between the parties entrapping the railway company into believing that the first respondent was going to be the contractor. Furthermore, it was known to the respondent that the plaintiff was the contractor and not he himself. Therefore, when the respondent represented it to the railway company that he was the contractor, he represented a matter which was not believed by him to be true. In the result the object of the agreement was to commit a fraud on the railway company, and this fraud was carried out successfully. Therefore, the court felt that the object of the contract being fraudulent, was void in the eyes of law. 4. Relevant sections: The present case analyzed the definition of fraud under section 17 of the Indian Contract Act, along with section 23, which explains lawful object/consideration. Lewis v. Averay[4] 1. Facts of the case: The plaintiff, Mr Lewis, was looking to sell his car to raise money to pay for his tuition expenses. The plaintiff met somebody interested in buying the car, who was actually a rogue that was impersonating a famous actor, Richard Greene. They agreed on the price of £450 for the car and the mode of payment for the same was decided to be by way of cheque. The plaintiff asked for identification before he agreed to accept the cheque. The impersonator provided a fake pass of Pinewood Studios and his name and photograph. Believing it to be genuine, the plaintiff accepted the check and handed over the car to the impersonator. Once that man obtained possession of the car, he sold it onto the defendant, Mr. Averay, for £200. The cheque he had given to Mr Lewis bounced, but the impersonator had disappeared and could not be found. The plaintiff contended that there was a mistake to the identity of the buyer, which meant that the contract with the rogue did not exist. Mr Lewis argued that the title had not passed, which means the car was still his property. 2. Issues: The issue in this case was whether the mistake by the plaintiff could excuse the contract between the defendant and the impersonator. 3. Ratio: It was held in the present case that the mistake to the real identity of the impersonator did not prevent a valid contract being created between him and Mr Lewis. There was a face to face interaction between the plaintiff and the impersonator, and the impersonator had in fact fraudulently obtained his consent. This meant that the contract between them was voidable in nature. However, the contract between the impersonator and the defendant was valid. In this case, the contract was could not be set aside as Mr Averay, in good faith, purchased the car. The plaintiff was free to file a suit against the impersonator, however, the defendant had the right to keep the car in lieu of the contract between him and the impersonator. 4. Relevant sections: This case analyzed the concept of mistake of identity due to fraud, which has since been recognized through judicial pronouncements under section 17 of the Indian Contract Act. Allcard v. Skinner[5] 1. Facts of the case: The plaintiff was a Protestant who was introduced to the defendant by her confessor, Revd. Nihil. The defendant was a lady superior of a sisterhood, that followed the strict rules. The plaintiff then decided to become a member of the sisterhood. As part of the process to join the sisterhood, the plaintiff had to swear a number of vows of obedience and poverty. The vow of obedience required her to treat the defendant as the word of God. The vow of poverty required the plaintiff to give away all her possessions, either to relatives, the poor or to the sisterhood itself. Therefore, the plaintiff gave away all her property to the sisterhood itself, which was held in trust by the organization and was looked over by the defendant. However, after the passage of 10 years, the plaintiff decoded to leave the sisterhood. She discussed the possibility of reclaiming her property with a lawyer shortly after, but did not act on this. Six years after that, she claimed back the property, and filed a suit. She argued that she had made the gift under undue influence, and that she had been brainwashed by the defendant to obey strict vows. 2. Issues: The case dealt with 2 main issues: (1) whether the contract was voidable due to the undue influence exerted on the plaintiff by the defendant; and (2) whether the plaintiff was entitled to the relief considering the delay in filing the case. 3. Ratio: The court in the present case held that he gift was tainted by undue influence. They presumed this from the claimant’s relationship with the sisterhood, the defendant and her confessor, the reverend. The Court stated that where there is evidence that the gift was made as a result of overt pressure or influence, then influence can be presumed from the relationship between the donor and donee. In the present case, the relationship of a head of a sisterhood and one of its disciples clearly showed an extent of influence by the former over the latter. The court stated that the principle of undue influence was developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud. However, the court stated that the plaintiff was only entitled recover as much of the gift as remained in the defendant’s hands after some of it had been spent in accordance with her wishes. The court stated that the plaintiff had unreasonably delayed the filing of a suit, and therefore could not get the full amount of the property back. 4. Relevant sections: This case analyzed the principle of undue influence, which ash been enumerated in section 16 of the Indian Contract Act. Indar Singh and Ors. v. Parmeshwardhari Singh and Anr.[6] 1. Facts of the case: Babu Mangaldhari Singh, the father of the first respondent, passed away, leaving the respondent, his son, as his heir. The first respondent contracted to sell the disputed properties for Rs. 7,000 to the appellants by executing a contract of sale dated in their favour. The plaintiffs paid Rs. 700 as an advance at that time. Subsequently, the first respondent executed a sale deed in the plaintiffs' favour on the 28th April 1944. However, on the date the sale-deed was registered, with the Sub-registry, the first respondent snatched away the sale-deed, which was lying on the table of the Sub-Registrar, and tore it into pieces. The appellants then filed a suit for the said properties in the lower court. However, the second respondent, who was also the mother of the first respondent, contended that she was the real heir of the properties, and that her son was a congenital idiot, incapable of understanding transactions relating to transfer of properties. She stated that the appellant knew of the same and therefore entered into a contract with him. The trail court agreed with the respondents and dismissed the suit. Therefore, the appellants filed an appeal in the High Court. 2. Issues: The case dealt with issue of whether the contract could be set aside on the ground that the first respondent was not competent to contract. 3. Ratio: The High Court dismissed the appeal filed. According to the Court, there was overwhelming evidence on the record to show that respondent was incapable of understanding business and forming a rational judgment as to its effect upon his interest. The court analysed section 12 of the Indian Contract Act, and stated that the person entering into the contract must be a person who understands what he is doing and is able to form a rational judgment as to whether what he is about to do is to his interest or not. The crucial point was to find out whether he is entering into the contract after he has understood it and has decided to enter into that contract after forming a rational judgment in regard to his interest. The court further opined that in the present case, though the respondent was behaving in a normal fashion, but, at the same time, he was be incapable of forming a judgment of his own, as to whether the act he is about to do is to his interest or not, and to the contracts of such a person the law gives protection. Therefore, the court passed a judgment stating that the sale deed was void under section 12. 4. Relevant sections: The Court analyzed the meaning of capacity to contract under section 12 of the Indian Contract Act. Sundara Gownder v. Balachandran[7] 1. Facts of the case: The respondent was an Abkari Contractor. From 1973 onwards was not in a position to participate in any auction for 1977-78 on account of the statutory bar whereby a defaulter to the Toddy Welfare Fund was not eligible to participate in the auction. To circumvent this ban, he entered into an agreement with appellant that Shop Nos. 17, 19 and 20 out of the 28 shops bid for by the appellant would be transferred to him with the permission of the authorities. The respondent paid Rs. 22,080 to the appellant immediately after the auction for the said shops. However, the appellant failed to perform his part of the agreement, and refused to hand over the shops. The defense taken up by the appellant was that the agreement was void. The Subordinate Judge, however decreed the suit finding that the respondent was entitled to the suit claim. Therefore the appellant filed an appeal in the High Court. 2. Issues: The issue that was discussed in the present case as whether the agreement between the parties was unlawful keeping in mind the Abkari Shops (Disposal in Auction) Rules? 3. Ratio: the High Court overturned the decision of the Subordinate Court. According to the High Court, the maxim of pan delicto potior est conditio posidentis, which has its basis on the principles of public policy that the person who has paid money or handed over property pursuant to an illegal or immoral contract cannot recover it as the Courts will not assist an illegal transaction in any manner. In the present case as well, Rule 5(4A) of Abkari Shops (Disposal in Auction) Rules stated that any defaulter to the Toddy Worker's Welfare Fund would not be allowed to participate in any auction for toddy shops unless he produced a certificate from the Welfare Fund Inspector to the effect that he has remitted the arrears of contributions. The appellant was fully aware of the statutory bar that he was not to participate in the auction, yet he entered into the agreement with the respondent with the object of defeating the provisions of law. As the object of the agreement patently came within the mischief of Section 23, the agreement was void. Any action to realize the amount pursuant to void agreement could be entertained by a court of law. 4. Relevant sections: The case analyzed section 23 of the Indian Contract Act, and held that any agreement for an unlawful objet is void. Madhub Chunder v. Rajcoomar Das[8] 1. Facts of the case: In this case, the defendant faced competition from plaintiff due to which he incurred a heavy loss. Both the parties of the present case were involved in businesses established in Calcutta. Consequently, both parties entered into an agreement whereby, the terms of the contract stated that if the Plaintiff closed his business then the Defendant would pay him the money that he had advanced to his workers. Later on, the defendant refused to pay the money as promised in the contract. The plaintiff therefore sued the defendant for breach of contract. 2. Issues: The case dealt with two main issues: (a) whether plaintiff’s lawsuit against the defendant is maintainable; and (b) whether the plaintiff was entitled to receive the amount as promised. 3. Ratio: The court passed a judgment in favour of the defendant and refused to grant nay relief to the plaintiff. According to the court, the agreement entered by both parties in the present case was a complete restraint of trade making it void and not enforceable, as provided under section 27 of the Indian Contract Act. The court also laid a distinction between partial and absolute restraints of the trade. According to the Court, the present case one of complete restraint on trade, as the wordings of the agreement clearly indicated that the defendant would not be able to carry out business in the limits of the entire state. Therefore, keeping in mind section 27, the court held that the said agreement was void, and that the plaintiff was not entitled to any amount from the defendant. 4. Relevant sections: This old judgment of the Privy Council analyzed section 27 of the Indian Contract. Shrawan Kumar Pappu v. Nirmala[9] 1. Facts of the case: Shrawan Kumar Pappu filed a suit in the High Court of Allahabad. Furthermore, the same plaintiff, who was the petitioner in the present case filed for a permanent injunction against the actions of the respondent. According to the plaintiff, his marriage was agreed through a contract to be solemnized with the respondent but soon he found out that she was likely to marry someone else. Therefore, he filed for a decree of permanent injunction restraining the defendant from marrying any other person except the petitioner. 2. Issues: The main issue in the present case was whether such an injunction could succeed. 3. Ratio: The court out rightly rejected the plea of the plaintiff. The Court stated that Section 26 of the Indian Contract Act, 1872 provided that an agreement to restrain a marriage of any person was void. The court further held that anything in respect of which no valid agreement is possible cannot be ordered to be done by the order of the court. The court then went on to stated that the Right to marry was an integral part of right to life and liberty and was akin to a fundamental right. According to the court, the suit appeared to have been instituted for harassing the respondent or to put some kind of pressure on her family members, and was in good faith. Therefore, the court dismissed the plea of the plaintiff. 4. Relevant sections: The court made use of section 26 of the Indian contract Act, which holds any contract in restraint of marriage as void. Sm. Rajlukhy Dabee v. Bhootnath Mookerjee[10] 1. Facts of the case: The Defendant executed a registered deed in favour of his wife, the Plaintiff, promising to pay her for a separate residence and maintenance. The deed stated that due to mutual disagreement of mind between the husband and wife; and the probability of mutual quarrels, the husband and the wife had decided to live on their own. The deed also stated that husband would make the following provision for maintenance habitation as it had become inconvenient for the plaintiff to live with his family. However, the deed contained no provision on the part of the wife to do or abstain from doing anything and she gave up no right. Subsequently, the defendant refused to pay the maintenance. Therefore the plaintiff filed a suit for the recovery of the said maintenance basis of that deed. 2. Issues: The issue that was discussed in the present case was whether such an agreement could be valid. 3. Ratio: The High Court, in the present case, stated that the suit could not be maintained. The court also stated that in the present case, there was no consideration for this agreement moving from the wife. The Court analyzed the proviso to section 25 of the Indian Contract Act that held that, “an agreement made without consideration is void, unless it is expressed in writing and registered under the law for the time being in force for the registration of assurances, and is made on account of natural love and affection between parties standing in a near relation to each other.” Furthermore, the court agreed with contention of the defendant that in the present case, there was no love and affection between the parties as seen through the wordings of the deed. Therefore, the court held that the said deed was void for want of consideration under section 25 of the Indian Contract Act. 4. Relevant sections: The case dealt with contracts which are void for want of consideration under section 25 of the Act. Furthermore, the court also examined the proviso to the same section. Chandra Kanta Das v. Parasullah Mullick[11] 1. Facts of the case: Both the parties carried on a ferry business on a river and would transport passengers from side to the other. The respondent had entered on this business first, however he could not be prosperous. The appellant gained an advantage over the appellant by securing better landing-places and negotiating facilities for collecting dues. In 1910 the parties entered into an agreements for putting an end to the competition. Under one of these agreements, the appellant agreed to sell to the respondent the goodwill of his trade in plying the ferry-boats, and every description of interest and ownership which the appellant had acquired in several river landing-places for plying the boats, as well as the settlements obtained for the collection of tolls. The price decided for the same was Rs. 5400, payable in installments, with interest if default was made in payment of any installment. The respondent failed to pay the said amount as agreed. Therefore, the appellant filed a case in the lower court of Bombay. However, the decision of the Trail court in favor of the appellant was overturned by the Single judge bench of the High Court. Therefore, the appellant filed the second appeal before the Division Bench. 2. Issues: The question that was discussed in the appeal was whether the appellant was entitled to recover a sum of Rs. 5400, with interest amounting to Rs. 67-8, as due to him under certain agreements, or was the main agreement was invalid due to it being a restraint of trade. 3. Ratio: The Division Bench of the Court held that opinion the transaction amounted to a sale of a real goodwill, and they were unable to agree with the views expressed in the judgment of the High Court. According to the court, section 27 of the Indian Contract Act expressly contained that a contract was valid if there was here a genuine sale of the goodwill of the business. The Court held that the present case was a genuine sale of goodwill, whereby the appellant had agreed to sell his business to the respondent, and also agreed to not carry on any similar business on the river. The Court analyzed various judgments on the definition and sale of goodwill and held that the presentcase was well within the same precedents. Therefore, the court overturned the decision of the Single Judge, and upheld the order of the trail court. 4. Relevant sections: The present case analyses the exception under section 27 of the Indian Contract Act. Continental Drug Co. Ltd., Bombay v. Chemoids and Industries Ltd[12] 1. Facts of the case: The respondent instituted the suit for a declaration and for recovery of certain sums of money as commission and damage in the Subordinate Court. The agreement which was relied upon by the respondents contained a clause as follows: "Any dispute arising between the parties, settlement of same legally or otherwise, will be decided in Bombay.” The defendants raised a preliminary point to the effect that under the aforesaid clause of the agreement, it was only the Bombay Court which would be competent to try the suit. The Subordinate Judge, however, held that the agreement in question amounted to an arbitration clause and as there was no proper application under Section 34 of the Arbitration Act by the appellants, the court overruled the plea raised by the appellants. Therefore, the appellants filed an appeal against this decision of the subordinate court. 2. Issues: The court decided on the issue of: (a) whether the said clause in the agreement amounted to a restraint on legal proceeding under section 28 of the Indian Contract Act.; and (b) if the agreement was not void and if it was binding between the parties, what was the procedure by which it could be effected. 3. Ratio: The High Court set aside the order made by the learned Subordinate Judge and directed that the plaint filed by the original plaintiffs for presentation to the proper Court. The Court analyzed various precedents already established on the same and held that such an agreement would not contravene the provisions of Section 28 of the Indian Contract Act, because the plaintiff was not absolutely restricted from enforcing his rights under the contract by the usual legal proceedings, and the restriction was only partial. With respect to the second issue, relating to the procedure for filing the case, the court again analyzed the precedents on the same and stated that the plaint filed by the respondents be returned to them for presentation to the proper Court. 4. Relevant sections: The High court analyzed section 28 of the Indian Contract Act, along with its exceptions. Hirabhai Narotamdas v. The Manufacturers Life Insurance[13] 1. Facts of the case: The relative of the appellant signed an insurance contract which contained a declaration as follows: “No suit shall be brought against the Company in connection with the said policy later than one year after the time when the cause of action accrues.” The said relative passed away, and due to some complications, the insurance company refused to pay the insurance amount. Therefore, the appellant filed a suit after 1 year in the subordinate court for the said insurance amount. However, the Subordinate Court rejected the appeal on the grounds that the said clause in the insurance policy contract. Therefore, the appellant filed an appeal in the High Court. The appellant argued that that the deceased who had insured his life had the right to resort to a Court of justice. It was also argued that the said clause lessened the period prescribed for a suit by the Legislature in the Limitation Act and was against Section 28 of the Indian Contract Act. 2. Issues: The only issue that was discussed in the present case was whether the said clause was violative of section 28 of the Indian Contract Act. 3. Ratio: The High Court confirmed the decree of the Subordinate Court. According to the court, the words in the clause if interpreted literally, might have considerable force in the argument. However, the court further said that the terms used in an insurance contract must be interpreted with reference to the object and exigencies of insurance. According to the court, in the present case, the parties agreed that if no suit were brought within a year then neither party should be regarded as having any rights as against the other. In other words, the condition contained in the clause meant that there was to be a waiver of the rights of the respective parties if no suit was brought within a year. According to the Court, this resection was not a complete bar on legal proceedings. Therefore, the court upheld the order of the Subordinate Court. 4. Relevant sections: The High court analyzed section 28 of the Indian Contract Act. Abbas Khan and Anr v. Nur Khan[14] 1. Facts of the case: In this case, before the Lahore High Court, a Muslim woman had married a man without the consent of her nearest male relative. It was contended by the kin that being part of the Pathan community of ilaqa Makhad, there was a contract whereby the bridegroom who married the woman without the consent of her nearest male relative must pay to the man an amount called ‘rogha’ or bride-price under customary Muhammadan law. The lower courts had ascertained that such a practice existed and had allowed the plaintiff to seek payment from the groom. However, the High Court overturned the judgement of the lower court. Therefore, the appellant filed a second appeal before the division bench of the Lahore High Court. 2. Issues: The court, in this case, discussed whether such a contract could be held valid under law. 3. Ratio: The division bench of the High Court on the second appeal held that such payment of money for marriage to an adult woman was not enforceable by law as it was immoral and opposed to public policy. Furthermore, the court added that to enforce such a customary contract would be silimar to saying that a woman of full age cannot marry a man unless the latter pays a large sum, to her nearest male relative. According to the court, such a contract was a restraint of marriage and opposed to the principle of section 26 of the Contract Act. Thus, the court held that even though the custom only imposed a partial restraint on marriage subject to payment of a certain amount, it was found in conflict to Section 26 of the Contract Act. 4. Relevant sections: The case analyzed sections 26 of the Indian Contract Act. Carlil v. Carbolic Smoke Co.[15] 1. Facts of the case: The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a newspaper for their products, stating that any person who purchased and used their product but still contracted influenza despite properly following the instructions would be entitled to a £100 reward. The advertisement further stated that the company had demonstrated its sincerity by placing £1000 in a bank account to act as the reward. The plaintiff purchased some smoke balls and, despite proper use, contracted influenza. She attempted to claim the £100 reward from the defendants. The defendants contended that they could not be bound by the advert as it was an invitation to treat rather than an offer. Furthermore, the company also contended that that there was no consideration, among other things, as necessary for the creation of a binding contract. 2. Issues: The issue in the present case was whether the said advertisement was a valid contract. 3. Ratio: The Court, in the present case, passed the judgment in favour of the plaintiff. The court held that the advertisement amounted to the offer for a unilateral contract by the defendants. By following the instructions stipulated by the advertisement, the plaintiff provided her acceptance. The Court further found that consideration was identifiable in the use of the balls by the plaintiff. Therefore, the court held that the contract was valid, and there was sufficient and valid consideration in the present case. 4. Relevant sections: Though the case law did not analyze any sections, the case analyzed principles found in section 10 and section 26 of the Indian Contract Act. Cooper v. Phibbs[16] 1. Facts of the case: The plaintiff was the nephew of an owner of the salmon fishery near Ballysadare, Ireland. He had leased this salmon fishery from his uncle, who was the owner. When his uncle died and the lease came up for the time of renewal, the complainant renewed the lease for the salmon fishery with the defendant. However, it was later found out that in his uncle’s will, the plaintiff had been given life tenancy of the salmon fishery due to love and affection for him. Therefore, there was no technically no need for the lease that existed between him and the defendant. A dispute arose when the next rental payment was due, as the plaintiff refused to pay the said amount. The plaintiff contended that the said lease was void due to the fact that he did not known that he already had a perpetual lease. 2. Issues: The case discussed the issue of whether the said lease was void due to mistake of fact. 3. Ratio: It was held that the contract and lease that existed between the plaintiff and the defendant void. The court further stated that the plaintiff was already the beneficial owner of the salmon fishery and there could not be a lease. It was held that such an agreement had to be set aside due to the common mistake by both parties as to the contents of the uncle’s will. Both parties were mistaken as to the interest in the fishery. Therefore, the lease was void. 4. Relevant sections: The court in the UK, in the present case, laid down the principles of mistake of fact under section 20 of the Indian Contract Act. [1] AIR 1928 All 440. [2] AIR 2007 SC 2967. [3] AIR 1930 All 732. [4] [1972] 1 QB 198. [5] (1887) 36 Ch D 145. [6] AIR 1957 Pat 491. [7] AIR 1990 Ker 324. [8] (1874) Beng LR 76. [9] (2013) 3 All LJ 651. [10] (1900) SCC OnLine Cal 23. [11] (1922) 24 BOMLR 602. [12] AIR 1955 Cal 161. [13] (1912) 14 BOMLR 741. [14] (1920) ILR 1 LAH 574 [15] [1893] 1 QB 256 [16] (1867) LR 2HL 149.
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Top 100 Contract Law Cases | Contest
In Contract Awareness Forum
Rahul Parekh
Dec 31, 2020
Suraj Narain Dube v. Sukhu Aheer and Anr.[1] 1. Facts of the case: Suraj Narain, the plaintiff, lent a sum of money in June 1919 to the defendant, Sukhu Ahir, who was a minor at that time. Nearly four years later, in June 1923, the first defendant, who had by that time attained majority, executed a money bond in favour of the plaintiff for the sum of Rs. 76 in consideration of the principal sum lent to the defendant when he was a minor and for the interest that had accrued. On failure of payment of the sum due to the plaintiff, the plaintiff brought a suit in the Court of Small Causes at Jaunpur. It was contended in the court that since the previous bond was executed by a minor, it could not be valid consideration for the subsequent bond, and therefore the contract was void. The Judge dismissed the suit on the same grounds. The plaintiff then filed a revision suit in the High Court, which was then referred it to a larger Bench. 2. Issues: The only issue discussed in the present case was whether the money lend previously to the minor defendant was valid consideration for the subsequent bond, or was the bond void. 3. Ratio: The three judge bench in the present case upheld the decision of the Small Causes Court. Chief Justice A.J. Sulaiman opined that Under Section 11 a minor is not competent to contract. He is disqualified from contracting. Therefore, such a minor was incapable of making a valid proposal, or make a valid acceptance as defined in Section 2, Clauses (a) and (b). The court analyzed previous judgments of various High Courts, and held that since a minor was incompetent to contract, any previously signed contract during the person’s minority, would not be sufficient consideration under section 25 of the Indian Contract Act. Justice Mukherjee dissented with the majority opinion. He felt that Section 25, Contract Act provided an exception where a contract without consideration was valid if the consideration takes the shape of a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor. According to him, the contract had to be looked separately from the consideration. He felt that once there is a perfected contract that contract alone can be enforced, and there must be no look on whether the consideration has failed. In the present case, the money bond signed by the defendant was valid, and therefore must be executed in a court law. Justice Boys agreed with the majority opinion in the present case. He stated that in the first agreement there was no ‘competency to contract’ but there was ‘consideration’. The minor made a promise and gave a bond and a promise amounts to consideration, though the promise may for some reason be unenforceable. However, he opined that an advance made during minority upon a promise to pay, cannot by virtue of Section 2(d) be held to be consideration for a subsequent promise made after majority. The original advance was then no consideration for the second agreement, as the original one was void due to it being singed by a minor. Therefore, he felt that the second bond was void due to lack of consideration. 4. Relevant sections: The present case analysed section 11 and section 25 of the Indian Contract Act. Chacko and Anr. v. Mahadevan[2] 1. Facts of the case: The appellant owned land extending to a size of 0.2 acres. The appellant sold a part of his property through a sale deed to the respondent for Rs.18000. Thereafter, the appellant sold another part of his land to the respondent for a mere sum of Rs.1000 through sale deed dated. However, soon after the property was sold, a suit was filed in the trial court by the appellant to set aside the second sale deed on the ground that it was made when the appellant was of unsound mind. The defendant Mahadevan denied the plaint's allegations. The trial court held that the appellants had not proved any vitiating circumstances to invalidate the said sale deed and consequently ordered the title to be passed to the respondent. An appeal before the First Appellate Court. The First Appellate Court held that the fact that one part of the land was sold for Rs.18000, and another larger part was sold for a sum of Rs.1000, showed that this was an unconscionable transaction and hence the second sale deed was liable to be set aside. A second appeal against the decision of the first appellate court. However, the Second Appellate Court went into merits of the case, which was not permitted under section 100 of the CPC. Therefore, the Supreme Court, in this case, heard the matter on the basis of what was held in the first appeal. 2. Issues: The only point of law that was discussed in this case was whether the sale deed was liable to be set aside due to the fact that the appellant was under the influence on alcohol while making the same deed? 3. Ratio: The court restored the judgment of the First Appellate and quashed the second sale deed. The Supreme Court stated that it had been recorded that the first appellant was not of sound mind when he executed the sale deed, which is established from the medical certificate produced during the hearing of the First Appellate Court. The court stated that the appellant was treated for Alcoholic Psychosis in the Mental Hospital at Trichur, which showed that he was suffering from alcoholism. Furthermore, the court stated that while one part of the land was sold for Rs. 18,000, the larger part of the land, which was three times the size, was sold for a mere sum of Rs.1000. The Court used the Latin maxim of 'res ipsa loquitur' i.e. the matter speaks for itself, stating that the contract was clearly unconscionable from the facts of the case. The court stated that the First Appellate Court was right in holding that the second sale deed was void as the appellant was under the influence of alcohol while singing it, and was within the definition of ‘unsound mind’ as provided in section 12 of the Indian Contract Act. 4. Relevant sections: The case made use of section 12 of the Indian Contract Act. Mani Ram Misra vs Purshotam Lal and Anr.[3] 1. Facts of the case: The appellant used to take contracts from the railway company in Uttar Pradesh However, for certain reasons the railway company refused to grant him any further contract. In order to secure further contracts from the railway company he agreed with the defendants that the first respondent would put himself forward as the applicant for the contracts and when the same were secured by the respondent, the respondent would serve the same to the appellant for a small price, and the appellant would actually carry out the contract. However, the defendants then refused to hand over the contract to the plaintiff, and therefore the plaintiff filed a suit in the Subordinate Court. The Subordinate Judge held that the plaintiff had failed to make out his case, and that the agreement set up by the plaintiff was void under the provisions of the Contract Act. Therefore the plaintiff filed an appeal in the High Court. 2. Issues: The only issue in the present case was whether the agreement set up by the plaintiff was fraudulent in its nature and therefore the contract could not be enforced at the instance of the plaintiff. 3. Ratio: The High Court upheld the order of the Subordinate Court and stated that the plaintiff's case as brought was not maintainable in court. The Court opined that he object of the agreement between the parties entrapping the railway company into believing that the first respondent was going to be the contractor. Furthermore, it was known to the respondent that the plaintiff was the contractor and not he himself. Therefore, when the respondent represented it to the railway company that he was the contractor, he represented a matter which was not believed by him to be true. In the result the object of the agreement was to commit a fraud on the railway company, and this fraud was carried out successfully. Therefore, the court felt that the object of the contract being fraudulent, was void in the eyes of law. 4. Relevant sections: The present case analyzed the definition of fraud under section 17 of the Indian Contract Act, along with section 23, which explains lawful object/consideration. Lewis v. Averay[4] 1. Facts of the case: The plaintiff, Mr Lewis, was looking to sell his car to raise money to pay for his tuition expenses. The plaintiff met somebody interested in buying the car, who was actually a rogue that was impersonating a famous actor, Richard Greene. They agreed on the price of £450 for the car and the mode of payment for the same was decided to be by way of cheque. The plaintiff asked for identification before he agreed to accept the cheque. The impersonator provided a fake pass of Pinewood Studios and his name and photograph. Believing it to be genuine, the plaintiff accepted the check and handed over the car to the impersonator. Once that man obtained possession of the car, he sold it onto the defendant, Mr. Averay, for £200. The cheque he had given to Mr Lewis bounced, but the impersonator had disappeared and could not be found. The plaintiff contended that there was a mistake to the identity of the buyer, which meant that the contract with the rogue did not exist. Mr Lewis argued that the title had not passed, which means the car was still his property. 2. Issues: The issue in this case was whether the mistake by the plaintiff could excuse the contract between the defendant and the impersonator. 3. Ratio: It was held in the present case that the mistake to the real identity of the impersonator did not prevent a valid contract being created between him and Mr Lewis. There was a face to face interaction between the plaintiff and the impersonator, and the impersonator had in fact fraudulently obtained his consent. This meant that the contract between them was voidable in nature. However, the contract between the impersonator and the defendant was valid. In this case, the contract was could not be set aside as Mr Averay, in good faith, purchased the car. The plaintiff was free to file a suit against the impersonator, however, the defendant had the right to keep the car in lieu of the contract between him and the impersonator. 4. Relevant sections: This case analyzed the concept of mistake of identity due to fraud, which has since been recognized through judicial pronouncements under section 17 of the Indian Contract Act. Allcard v. Skinner[5] 1. Facts of the case: The plaintiff was a Protestant who was introduced to the defendant by her confessor, Revd. Nihil. The defendant was a lady superior of a sisterhood, that followed the strict rules. The plaintiff then decided to become a member of the sisterhood. As part of the process to join the sisterhood, the plaintiff had to swear a number of vows of obedience and poverty. The vow of obedience required her to treat the defendant as the word of God. The vow of poverty required the plaintiff to give away all her possessions, either to relatives, the poor or to the sisterhood itself. Therefore, the plaintiff gave away all her property to the sisterhood itself, which was held in trust by the organization and was looked over by the defendant. However, after the passage of 10 years, the plaintiff decoded to leave the sisterhood. She discussed the possibility of reclaiming her property with a lawyer shortly after, but did not act on this. Six years after that, she claimed back the property, and filed a suit. She argued that she had made the gift under undue influence, and that she had been brainwashed by the defendant to obey strict vows. 2. Issues: The case dealt with 2 main issues: (1) whether the contract was voidable due to the undue influence exerted on the plaintiff by the defendant; and (2) whether the plaintiff was entitled to the relief considering the delay in filing the case. 3. Ratio: The court in the present case held that he gift was tainted by undue influence. They presumed this from the claimant’s relationship with the sisterhood, the defendant and her confessor, the reverend. The Court stated that where there is evidence that the gift was made as a result of overt pressure or influence, then influence can be presumed from the relationship between the donor and donee. In the present case, the relationship of a head of a sisterhood and one of its disciples clearly showed an extent of influence by the former over the latter. The court stated that the principle of undue influence was developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud. However, the court stated that the plaintiff was only entitled recover as much of the gift as remained in the defendant’s hands after some of it had been spent in accordance with her wishes. The court stated that the plaintiff had unreasonably delayed the filing of a suit, and therefore could not get the full amount of the property back. 4. Relevant sections: This case analyzed the principle of undue influence, which ash been enumerated in section 16 of the Indian Contract Act. Indar Singh and Ors. v. Parmeshwardhari Singh and Anr.[6] 1. Facts of the case: Babu Mangaldhari Singh, the father of the first respondent, passed away, leaving the respondent, his son, as his heir. The first respondent contracted to sell the disputed properties for Rs. 7,000 to the appellants by executing a contract of sale dated in their favour. The plaintiffs paid Rs. 700 as an advance at that time. Subsequently, the first respondent executed a sale deed in the plaintiffs' favour on the 28th April 1944. However, on the date the sale-deed was registered, with the Sub-registry, the first respondent snatched away the sale-deed, which was lying on the table of the Sub-Registrar, and tore it into pieces. The appellants then filed a suit for the said properties in the lower court. However, the second respondent, who was also the mother of the first respondent, contended that she was the real heir of the properties, and that her son was a congenital idiot, incapable of understanding transactions relating to transfer of properties. She stated that the appellant knew of the same and therefore entered into a contract with him. The trail court agreed with the respondents and dismissed the suit. Therefore, the appellants filed an appeal in the High Court. 2. Issues: The case dealt with issue of whether the contract could be set aside on the ground that the first respondent was not competent to contract. 3. Ratio: The High Court dismissed the appeal filed. According to the Court, there was overwhelming evidence on the record to show that respondent was incapable of understanding business and forming a rational judgment as to its effect upon his interest. The court analysed section 12 of the Indian Contract Act, and stated that the person entering into the contract must be a person who understands what he is doing and is able to form a rational judgment as to whether what he is about to do is to his interest or not. The crucial point was to find out whether he is entering into the contract after he has understood it and has decided to enter into that contract after forming a rational judgment in regard to his interest. The court further opined that in the present case, though the respondent was behaving in a normal fashion, but, at the same time, he was be incapable of forming a judgment of his own, as to whether the act he is about to do is to his interest or not, and to the contracts of such a person the law gives protection. Therefore, the court passed a judgment stating that the sale deed was void under section 12. 4. Relevant sections: The Court analyzed the meaning of capacity to contract under section 12 of the Indian Contract Act. Sundara Gownder v. Balachandran[7] 1. Facts of the case: The respondent was an Abkari Contractor. From 1973 onwards was not in a position to participate in any auction for 1977-78 on account of the statutory bar whereby a defaulter to the Toddy Welfare Fund was not eligible to participate in the auction. To circumvent this ban, he entered into an agreement with appellant that Shop Nos. 17, 19 and 20 out of the 28 shops bid for by the appellant would be transferred to him with the permission of the authorities. The respondent paid Rs. 22,080 to the appellant immediately after the auction for the said shops. However, the appellant failed to perform his part of the agreement, and refused to hand over the shops. The defense taken up by the appellant was that the agreement was void. The Subordinate Judge, however decreed the suit finding that the respondent was entitled to the suit claim. Therefore the appellant filed an appeal in the High Court. 2. Issues: The issue that was discussed in the present case as whether the agreement between the parties was unlawful keeping in mind the Abkari Shops (Disposal in Auction) Rules? 3. Ratio: the High Court overturned the decision of the Subordinate Court. According to the High Court, the maxim of pan delicto potior est conditio posidentis, which has its basis on the principles of public policy that the person who has paid money or handed over property pursuant to an illegal or immoral contract cannot recover it as the Courts will not assist an illegal transaction in any manner. In the present case as well, Rule 5(4A) of Abkari Shops (Disposal in Auction) Rules stated that any defaulter to the Toddy Worker's Welfare Fund would not be allowed to participate in any auction for toddy shops unless he produced a certificate from the Welfare Fund Inspector to the effect that he has remitted the arrears of contributions. The appellant was fully aware of the statutory bar that he was not to participate in the auction, yet he entered into the agreement with the respondent with the object of defeating the provisions of law. As the object of the agreement patently came within the mischief of Section 23, the agreement was void. Any action to realize the amount pursuant to void agreement could be entertained by a court of law. 4. Relevant sections: The case analyzed section 23 of the Indian Contract Act, and held that any agreement for an unlawful objet is void. Madhub Chunder v. Rajcoomar Das[8] 1. Facts of the case: In this case, the defendant faced competition from plaintiff due to which he incurred a heavy loss. Both the parties of the present case were involved in businesses established in Calcutta. Consequently, both parties entered into an agreement whereby, the terms of the contract stated that if the Plaintiff closed his business then the Defendant would pay him the money that he had advanced to his workers. Later on, the defendant refused to pay the money as promised in the contract. The plaintiff therefore sued the defendant for breach of contract. 2. Issues: The case dealt with two main issues: (a) whether plaintiff’s lawsuit against the defendant is maintainable; and (b) whether the plaintiff was entitled to receive the amount as promised. 3. Ratio: The court passed a judgment in favour of the defendant and refused to grant nay relief to the plaintiff. According to the court, the agreement entered by both parties in the present case was a complete restraint of trade making it void and not enforceable, as provided under section 27 of the Indian Contract Act. The court also laid a distinction between partial and absolute restraints of the trade. According to the Court, the present case one of complete restraint on trade, as the wordings of the agreement clearly indicated that the defendant would not be able to carry out business in the limits of the entire state. Therefore, keeping in mind section 27, the court held that the said agreement was void, and that the plaintiff was not entitled to any amount from the defendant. 4. Relevant sections: This old judgment of the Privy Council analyzed section 27 of the Indian Contract. Shrawan Kumar Pappu v. Nirmala[9] 1. Facts of the case: Shrawan Kumar Pappu filed a suit in the High Court of Allahabad. Furthermore, the same plaintiff, who was the petitioner in the present case filed for a permanent injunction against the actions of the respondent. According to the plaintiff, his marriage was agreed through a contract to be solemnized with the respondent but soon he found out that she was likely to marry someone else. Therefore, he filed for a decree of permanent injunction restraining the defendant from marrying any other person except the petitioner. 2. Issues: The main issue in the present case was whether such an injunction could succeed. 3. Ratio: The court out rightly rejected the plea of the plaintiff. The Court stated that Section 26 of the Indian Contract Act, 1872 provided that an agreement to restrain a marriage of any person was void. The court further held that anything in respect of which no valid agreement is possible cannot be ordered to be done by the order of the court. The court then went on to stated that the Right to marry was an integral part of right to life and liberty and was akin to a fundamental right. According to the court, the suit appeared to have been instituted for harassing the respondent or to put some kind of pressure on her family members, and was in good faith. Therefore, the court dismissed the plea of the plaintiff. 4. Relevant sections: The court made use of section 26 of the Indian contract Act, which holds any contract in restraint of marriage as void. Sm. Rajlukhy Dabee v. Bhootnath Mookerjee[10] 1. Facts of the case: The Defendant executed a registered deed in favour of his wife, the Plaintiff, promising to pay her for a separate residence and maintenance. The deed stated that due to mutual disagreement of mind between the husband and wife; and the probability of mutual quarrels, the husband and the wife had decided to live on their own. The deed also stated that husband would make the following provision for maintenance habitation as it had become inconvenient for the plaintiff to live with his family. However, the deed contained no provision on the part of the wife to do or abstain from doing anything and she gave up no right. Subsequently, the defendant refused to pay the maintenance. Therefore the plaintiff filed a suit for the recovery of the said maintenance basis of that deed. 2. Issues: The issue that was discussed in the present case was whether such an agreement could be valid. 3. Ratio: The High Court, in the present case, stated that the suit could not be maintained. The court also stated that in the present case, there was no consideration for this agreement moving from the wife. The Court analyzed the proviso to section 25 of the Indian Contract Act that held that, “an agreement made without consideration is void, unless it is expressed in writing and registered under the law for the time being in force for the registration of assurances, and is made on account of natural love and affection between parties standing in a near relation to each other.” Furthermore, the court agreed with contention of the defendant that in the present case, there was no love and affection between the parties as seen through the wordings of the deed. Therefore, the court held that the said deed was void for want of consideration under section 25 of the Indian Contract Act. 4. Relevant sections: The case dealt with contracts which are void for want of consideration under section 25 of the Act. Furthermore, the court also examined the proviso to the same section. Chandra Kanta Das v. Parasullah Mullick[11] 1. Facts of the case: Both the parties carried on a ferry business on a river and would transport passengers from side to the other. The respondent had entered on this business first, however he could not be prosperous. The appellant gained an advantage over the appellant by securing better landing-places and negotiating facilities for collecting dues. In 1910 the parties entered into an agreements for putting an end to the competition. Under one of these agreements, the appellant agreed to sell to the respondent the goodwill of his trade in plying the ferry-boats, and every description of interest and ownership which the appellant had acquired in several river landing-places for plying the boats, as well as the settlements obtained for the collection of tolls. The price decided for the same was Rs. 5400, payable in installments, with interest if default was made in payment of any installment. The respondent failed to pay the said amount as agreed. Therefore, the appellant filed a case in the lower court of Bombay. However, the decision of the Trail court in favor of the appellant was overturned by the Single judge bench of the High Court. Therefore, the appellant filed the second appeal before the Division Bench. 2. Issues: The question that was discussed in the appeal was whether the appellant was entitled to recover a sum of Rs. 5400, with interest amounting to Rs. 67-8, as due to him under certain agreements, or was the main agreement was invalid due to it being a restraint of trade. 3. Ratio: The Division Bench of the Court held that opinion the transaction amounted to a sale of a real goodwill, and they were unable to agree with the views expressed in the judgment of the High Court. According to the court, section 27 of the Indian Contract Act expressly contained that a contract was valid if there was here a genuine sale of the goodwill of the business. The Court held that the present case was a genuine sale of goodwill, whereby the appellant had agreed to sell his business to the respondent, and also agreed to not carry on any similar business on the river. The Court analyzed various judgments on the definition and sale of goodwill and held that the presentcase was well within the same precedents. Therefore, the court overturned the decision of the Single Judge, and upheld the order of the trail court. 4. Relevant sections: The present case analyses the exception under section 27 of the Indian Contract Act. Continental Drug Co. Ltd., Bombay v. Chemoids and Industries Ltd[12] 1. Facts of the case: The respondent instituted the suit for a declaration and for recovery of certain sums of money as commission and damage in the Subordinate Court. The agreement which was relied upon by the respondents contained a clause as follows: "Any dispute arising between the parties, settlement of same legally or otherwise, will be decided in Bombay.” The defendants raised a preliminary point to the effect that under the aforesaid clause of the agreement, it was only the Bombay Court which would be competent to try the suit. The Subordinate Judge, however, held that the agreement in question amounted to an arbitration clause and as there was no proper application under Section 34 of the Arbitration Act by the appellants, the court overruled the plea raised by the appellants. Therefore, the appellants filed an appeal against this decision of the subordinate court. 2. Issues: The court decided on the issue of: (a) whether the said clause in the agreement amounted to a restraint on legal proceeding under section 28 of the Indian Contract Act.; and (b) if the agreement was not void and if it was binding between the parties, what was the procedure by which it could be effected. 3. Ratio: The High Court set aside the order made by the learned Subordinate Judge and directed that the plaint filed by the original plaintiffs for presentation to the proper Court. The Court analyzed various precedents already established on the same and held that such an agreement would not contravene the provisions of Section 28 of the Indian Contract Act, because the plaintiff was not absolutely restricted from enforcing his rights under the contract by the usual legal proceedings, and the restriction was only partial. With respect to the second issue, relating to the procedure for filing the case, the court again analyzed the precedents on the same and stated that the plaint filed by the respondents be returned to them for presentation to the proper Court. 4. Relevant sections: The High court analyzed section 28 of the Indian Contract Act, along with its exceptions. Hirabhai Narotamdas v. The Manufacturers Life Insurance[13] 1. Facts of the case: The relative of the appellant signed an insurance contract which contained a declaration as follows: “No suit shall be brought against the Company in connection with the said policy later than one year after the time when the cause of action accrues.” The said relative passed away, and due to some complications, the insurance company refused to pay the insurance amount. Therefore, the appellant filed a suit after 1 year in the subordinate court for the said insurance amount. However, the Subordinate Court rejected the appeal on the grounds that the said clause in the insurance policy contract. Therefore, the appellant filed an appeal in the High Court. The appellant argued that that the deceased who had insured his life had the right to resort to a Court of justice. It was also argued that the said clause lessened the period prescribed for a suit by the Legislature in the Limitation Act and was against Section 28 of the Indian Contract Act. 2. Issues: The only issue that was discussed in the present case was whether the said clause was violative of section 28 of the Indian Contract Act. 3. Ratio: The High Court confirmed the decree of the Subordinate Court. According to the court, the words in the clause if interpreted literally, might have considerable force in the argument. However, the court further said that the terms used in an insurance contract must be interpreted with reference to the object and exigencies of insurance. According to the court, in the present case, the parties agreed that if no suit were brought within a year then neither party should be regarded as having any rights as against the other. In other words, the condition contained in the clause meant that there was to be a waiver of the rights of the respective parties if no suit was brought within a year. According to the Court, this resection was not a complete bar on legal proceedings. Therefore, the court upheld the order of the Subordinate Court. 4. Relevant sections: The High court analyzed section 28 of the Indian Contract Act. Abbas Khan and Anr v. Nur Khan[14] 1. Facts of the case: In this case, before the Lahore High Court, a Muslim woman had married a man without the consent of her nearest male relative. It was contended by the kin that being part of the Pathan community of ilaqa Makhad, there was a contract whereby the bridegroom who married the woman without the consent of her nearest male relative must pay to the man an amount called ‘rogha’ or bride-price under customary Muhammadan law. The lower courts had ascertained that such a practice existed and had allowed the plaintiff to seek payment from the groom. However, the High Court overturned the judgement of the lower court. Therefore, the appellant filed a second appeal before the division bench of the Lahore High Court. 2. Issues: The court, in this case, discussed whether such a contract could be held valid under law. 3. Ratio: The division bench of the High Court on the second appeal held that such payment of money for marriage to an adult woman was not enforceable by law as it was immoral and opposed to public policy. Furthermore, the court added that to enforce such a customary contract would be silimar to saying that a woman of full age cannot marry a man unless the latter pays a large sum, to her nearest male relative. According to the court, such a contract was a restraint of marriage and opposed to the principle of section 26 of the Contract Act. Thus, the court held that even though the custom only imposed a partial restraint on marriage subject to payment of a certain amount, it was found in conflict to Section 26 of the Contract Act. 4. Relevant sections: The case analyzed sections 26 of the Indian Contract Act. Carlil v. Carbolic Smoke Co.[15] 1. Facts of the case: The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a newspaper for their products, stating that any person who purchased and used their product but still contracted influenza despite properly following the instructions would be entitled to a £100 reward. The advertisement further stated that the company had demonstrated its sincerity by placing £1000 in a bank account to act as the reward. The plaintiff purchased some smoke balls and, despite proper use, contracted influenza. She attempted to claim the £100 reward from the defendants. The defendants contended that they could not be bound by the advert as it was an invitation to treat rather than an offer. Furthermore, the company also contended that that there was no consideration, among other things, as necessary for the creation of a binding contract. 2. Issues: The issue in the present case was whether the said advertisement was a valid contract. 3. Ratio: The Court, in the present case, passed the judgment in favour of the plaintiff. The court held that the advertisement amounted to the offer for a unilateral contract by the defendants. By following the instructions stipulated by the advertisement, the plaintiff provided her acceptance. The Court further found that consideration was identifiable in the use of the balls by the plaintiff. Therefore, the court held that the contract was valid, and there was sufficient and valid consideration in the present case. 4. Relevant sections: Though the case law did not analyze any sections, the case analyzed principles found in section 10 and section 26 of the Indian Contract Act. Cooper v. Phibbs[16] 1. Facts of the case: The plaintiff was the nephew of an owner of the salmon fishery near Ballysadare, Ireland. He had leased this salmon fishery from his uncle, who was the owner. When his uncle died and the lease came up for the time of renewal, the complainant renewed the lease for the salmon fishery with the defendant. However, it was later found out that in his uncle’s will, the plaintiff had been given life tenancy of the salmon fishery due to love and affection for him. Therefore, there was no technically no need for the lease that existed between him and the defendant. A dispute arose when the next rental payment was due, as the plaintiff refused to pay the said amount. The plaintiff contended that the said lease was void due to the fact that he did not known that he already had a perpetual lease. 2. Issues: The case discussed the issue of whether the said lease was void due to mistake of fact. 3. Ratio: It was held that the contract and lease that existed between the plaintiff and the defendant void. The court further stated that the plaintiff was already the beneficial owner of the salmon fishery and there could not be a lease. It was held that such an agreement had to be set aside due to the common mistake by both parties as to the contents of the uncle’s will. Both parties were mistaken as to the interest in the fishery. Therefore, the lease was void. 4. Relevant sections: The court in the UK, in the present case, laid down the principles of mistake of fact under section 20 of the Indian Contract Act. [1] AIR 1928 All 440. [2] AIR 2007 SC 2967. [3] AIR 1930 All 732. [4] [1972] 1 QB 198. [5] (1887) 36 Ch D 145. [6] AIR 1957 Pat 491. [7] AIR 1990 Ker 324. [8] (1874) Beng LR 76. [9] (2013) 3 All LJ 651. [10] (1900) SCC OnLine Cal 23. [11] (1922) 24 BOMLR 602. [12] AIR 1955 Cal 161. [13] (1912) 14 BOMLR 741. [14] (1920) ILR 1 LAH 574 [15] [1893] 1 QB 256 [16] (1867) LR 2HL 149.
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Top 100 Contract Law Cases | Contest
In Contract Awareness Forum
Rahul Parekh
Dec 31, 2020
Balfour v. Balfour [1] 1. Facts of the case: Mr. Balfour was a British man who lived in Ceylon (Sri Lanka), along with his wife, Mrs. Balfour. In the year 1915, the couple travelled to England for a vacation. During their stay in England, the wife of Mr. Balfour felt seriously ill, and was advised by her doctor to stay in England till her there was significant improvement of her health. However, Mr. Balfour was to return to Ceylon due to business. The couple made an agreement that Mrs. Balfour was to remain behind in England when the husband returned to Ceylon (Sri Lanka) and that Mr. Balfour would pay her £30 a month until he returned to England. The said agreement was followed till their relationship was cordial, however, the relationship eventually turned sour. After his return to Ceylon, Mr. Balfour expressed his intention to separate permanently. The parties subsequently obtained a decree for divorce and an issue arose as to whether the said agreement was enforceable by law. In March 1918, Mrs. Balfour sued him to keep up with the monthly £30 payments as decided by the agreement between the parties. 2. Issues: The main issue that arose out of the dispute in question was; whether said agreement of payment of £30 by Mr. Balfour to Mrs. Balfour was enforceable by law? 3. Ratio: The three judge bench in the present case held that the sad agreement was not a valid contract in the eyes of law. The court held that an essential of a valid contract under law was the intention of the parties to formulate an agreement that was legally binding so as to hold it enforceable. The court further held that it would be unwise to interfere between spouses in their day to day affairs. According to the Lords, the current agreement was purely social and domestic nature and therefore it was presumed that the parties did not intend to be legally bound. Lord Atkin, one of the three judges in the case, held that the law of contract was not made for personal family relationships. Due to the fact that there was no intention to be legally bound by the said agreement between the parties, the said agreement was not a valid contract under contractual law. Lalman Shukla v. Gauri Dutt[2] 1. Facts of the case: The nephew of the Gauri Dutt; the defendant in the present case, had gone missing in the month of January 2013. The defendant sent all his servants in different areas to search for his nephew. The plaintiff; Lalman Shukla, was one of the servants who was sent to find the missing nephew of the defendant. The plaintiff was given money for his fare and other expenses. However, during his absence, the defendant issued a handbill offering a reward of Rs 501 to the person who would successfully trace down the child. The plaintiff, however, remained unaware of the reward, as he had already left to search for the missing child. The plaintiff successfully found the child, and brought him to the defendant. However, after passage of 6 months since the same, the plaintiff filed a suit against the defendant for Rs.499 in lieu of the award announced by him. The case was filed in the lower courts, where it was rejected. The plaintiff then filed an appeal in the Allahabad High Court against the order of the lower court. 2. Issues: The main issues that cropped up in the present case were: (a) whether the current situation amounts to contract under the Indian Contract Act? (b) whether the decision by the lower court was appropriate or not? 3. Ratio: The Hon’ble High Court, in the present case, opined that order of the lower court was in fact sound, and that the present case did not constitute a valid contract under law. The Court held that in order to constitute a contract there must be an acceptance of the offer and there can be no acceptance unless there is knowledge of the offer. The court stated that in the present case, the plaintiff was already under an obligation to search for the missing boy, before the announcement of the reward. Since the plaintiff was already under that obligation, which he had incurred before the reward in question was offered, he was not liable to claim the award. Furthermore, the court also held that the plaintiff was not aware about the offer and had no assent about the act. This clearly indicated that there was no valid contract as recognized under the Indian Contract Act. Therefore, the court dismissed the appeal in the present case and upheld the order of the lower court. 4. Relevant sections: The case made use of section 2(h) and section 10 of the Indian Contract Act, along with other sections. Rafles v. Wichelaus[3] 1. Facts of the case: The plaintiff had offered to sell bales of a certain amount of Surat cotton to the defendant. This Surat cotton was to be brought to Liverpool by a ship from Bombay, India. The ship that was to bring the cotton to England was called the Peerless. However, there were two ships of the same name. The plaintiff and the defendant were both thinking about a different Peerless ship when they agreed to make the sale. One of the ships was due to leave Bombay in October, which was the ship that the defendant had in mind, but the plaintiff thought that the ship that was referred to was referring to was the one that was supposed to leave in December. When the consignment of cotton arrived in Liverpool, the defendant refused to pay, as according to him, the consignment was too late. The plaintiff thus sued the defendant for breach of contract. 2. Issues: The main in the present case was whether the ambiguity regarding the ship decided between the parties for delivering the cotton prevent "meeting of the minds," and could the same be enough to render the contract unenforceable? 3. Ratio: The court held that the contract could not be enforced due to the fact there was “no meeting of minds”. Consequently, as there was no consensus ad idem (as defendant alleged), the two parties did not agree to the same thing and there was no binding contract. After analyzing the agreements from both dies, the Court held that it was impossible to objectively ascertain which ship was meant. Since the identity of the ship was a key contract term, there had been no agreement. Therefore, the Court held that the contract was void, and ruled in favour of the defendants. 4. Relevant sections: The principle laid down in the present case have been enumerated trough section 20 of the Indian Contract Act, whereby where both parties are mistaken about the subject-matter of the contract, then such a mistake is one of fact and may render the contract void. Mohori Bibee v. Dharmodas Ghose[4] 1. Facts of the case: The respondent was a minor and owned an immovable property whose mother had been appointed as his legal guardian by the Calcutta High Court. The respondent wanted to mortgage the immovable property. His property was mortgaged in favour of Brahmo Dutta, the appellant, who was a money-lender. Kedar Nath, the manager of Brahmo Dutta, acted as his attorney. A mortgage deed of close to Rs. 20,000 @ 12% interest p.a. was drawn up between the two parties. The respondent’s legal guardian had informed Brahmo Dutta about the respondent’s minority. At the time of giving loan to the respondent, Kedar Nath had full knowledge about the respondent’s minority. The respondent through his legal guardian then brought a suit against Brahmo Dutta and claimed the revocation of the contract due to the fact that the respondent was a minor and incapable of entering into the contract. At that time, Brahmo Dutta had already died, so, the petition was litigated by his wife, Mohori Bibee. The Trial Court held the contract to be void as it was entered into with a minor. The appellant was not satisfied with the verdict of Trial Court, therefore an appeal was filed in the High Court, which was also rejected. The decision of the High Court was appealed in the Court of the Privy Council by the appellant, Mohori Bibee. 2. Issues: the cases presented three main issues that were discussed by the Privy Council. They were: (a) whether under Sections 10 and 11 of the Indian Contract Act, 1872, the mortgage deed was void?; (b) Whether under Sections 10 and 11 of the Indian Contract Act, 1872, the mortgage deed was voidable?; and (c) Whether the respondent was liable to return the loan amount received by him under the mortgage deed? 3. Ratio: The Privy Council dismissed the appeal, and held that the mortgage contract between the parties was void ab-initio as the respondent was a minor at the time of making the contract. The Court stated that due to the fact that the consent given by a minor cannot be considered as a free consent because a minor is not deemed to understand the provisions of a contract like a prudent or reasonable man, the minor was incompetent to mortgage his property. The court observed that any contract entered into with a minor person is void or void ab-initio, i.e. void from the very beginning. The court also held that the respondent cannot be compelled to return the money advanced to him under the contract, as the contract does not exist and he is not bound by the contract. In the present case, the fact that the minor’s legal guardian had informed the agent of the respondent about the said infirmity, the agent still went ahead and executed the contract on behalf of the principle meant that the party had full knowledge about the said infirmity. The court also observed that any act done by an agent, any legal action taken by the agent, or any knowledge of the agent, is deemed to be that of or done by the principal. Therefore, the court dismissed the appeal. 4. Relevant sections: The sections used in the present case are section 10 and section 11 of the Indian Contract Act. Section 10 of the Indian Contract Act, 1872 encompasses that a contract is valid only if it is entered into by the parties competent to contract. As per Section 11 of the Indian Contract Act, 1872, a minor is not competent to contract. Chikkam Ammiraju v. Chikkam Seshamma[5] 1. Facts of the case: The appellant was the brother-in-law of the defendant who had executed a mortgage deed for a certain amount in favor the respondent, her husband and their son. However, the appellant failed to repay the said amount loaned to him. Due to the love and affection towards his brother, the respondent’s husband wanted to cancel the mortgage deed and release his brother’s property. However, the same was not accepted by the respondent and her son. Due to this, the husband of the respondent threatened to commit suicide if refused to listen to him and release his brother’s property. Due to the threat of suicide, the respondent executed the release mortgage in favour of the brother. However, at a later date, the respondent and her son claimed the said properties of their own. Therefore, the respondent filed a case in the lower courts demanding that the said contract be canceled as it was executed through coercive means. The lower courts agreed with the respondents, forcing the appellant to file an appeal with the Privy Council. 2. Issues: The main issue in the present case was whether the release-dead was executed by the respondents with their free consent or whether it was obtained from them through the exercise of coercion or undue influence or both. 3. Ratio: The 4 judge Bench in the present case had different ratios regarding the main issue. Chief Justice Wallis and Justice Seshagiri Ayyar opined that the threat to commit suicide would amount to coercion under section 15 of the Indian Contract Act, while the dissenting opinion was that this particular case was an instance of undue influence. The opinion of the C.J. was followed in the present case. According to the concurring opinions, the threat to commit suicide was in fact a part of attempt to commit suicide, and was forbidden under the Indian Penal Code, 1881. The judges opined that suicide and an attempt to commit suicide were acts forbidden by the Penal Code though the former cannot be punished under the code as a dead man cannot be punished. Since the definition of coercion under section 15 clearly provided for acts prohibited by the Indian Penal Code, and also stated that the threat may be to “any other person”, the release deed executed was clearly signed under coercive means. The Privy Council agreed with the lower Courts that the prejudice husband’s own life was sufficient to bring his threat within the definition of "coercion," as it was intended by the person using the threat to bring about the agreement. 4. Relevant sections: The case analyzed the definition of coercion and undue influence under section 15 and section 16 of the Indian Contract Act respectively. Mannu Singh v. Umadat Pande[6] 1. Facts of the case: A suit was filed in the subordinate court of Azamgarh in the Uttar Pradesh for cancelling a gift deed executed by the appellant in favour of the respondent whereby the appellant gave away all his property to the respondent. The main contention of the appellant in the lower court was that the gift deed was not signed with the free consent of the appellant. The appellant was a Chatri by caste, who was quite old, and the respondent was his spiritual advisor and guru. According to the appellant, the only reason why he transferred the property to the respondent was because the respondent guaranteed to secure benefits for the appellant in his next life. Immediately after executing the gift deed, the appellant moved to the lower court to cancel the deed. However, the lower ruled in favor of the respondents. Therefore, the appellant filed an appeal in the High Court of Allahabad against the order of the lower court. Under section 39 of the Specific Relief Act. The appellant contended that deed “was spurious and fictitious and it was not executed with his free will”. 2. Issues: The only in the present case was whether the gift deed was executed with the free consent of the appellant? 3. Ratio: The court in the present case, analyzed the said evidence in hand and overturned the decision of the lower court. According to the Hon’ble High Court, the circumstances of the case clearly indicated a fiduciary relationship between the parties. The court stated that the circumstances of the case indicated that there was some kind of undue influence exerted by the respondent on the appellant due to the fact the respondent was his spiritual guru. The court also opined that at having regard to the fiduciary relations subsisting between the parties, the improvidence of the gifts, the absurdity of the reason alleged for it and the principle recognized by Section 111 of the Evidence Act, the burden rested upon the defendant to show that the transaction was made without undue influence and in good faith and in the absence of such proof the plaintiff was entitled to obtain a cancellation of the deed. 4. Relevant sections: Though the case did not make use of undue influence under section 16 the Indian Contract Act, the case laid down the standard of proof required to prove a case of undue influence on similar lines to subsection 3 of section 16. Life Insurance Corporation of India v. Smt. Asha Goal and Ors.[7] 1. Facts of the case: Naval Kishore Goel, the husband of the respondent was an employee of M/s Digvijay Woollen Mills Limited at Jamnagar as a Labour Officer. He took a life insurance policy with LIC for a sum of Rs.1,00,000. The husband of the respondent passed away on 12th December, 1980 at the age of 46. The cause of death was certified as acute Myocardial Infarction and Cardiac arrest. The respondent, being nominee of her husband, submitted the claim along with other papers requesting for consideration of her claim and for making payment. The Divisional Manager of LIC repudiated any liability under the policy and refused to make any payment on the ground that the deceased had withheld correct information regarding his health at the time of effecting the insurance with LIC. According to LIC, the deceased husband of the respondent that at the time of submitting the proposal for insurance, had stated his usual state of health as good; that he had not consulted a medical practitioner within the last five years for any ailment requiring treatment for more than a week; and had answered the question if remained absent from place of your work on ground of health during the last five years in the negative. According to LIC, the answers give were false. Since the respondent failed to get any relief from the authorities of LIC, she filed the writ petition seeking a writ of mandamus against LIC to pay the ensured sum with interest. The Single bench of the High Court as well as the division bench passed the judgment in favour of the respondent. Therefore, the appellant filed an SLP to the Supreme Court against the decision of the High Court. 2. Issues: The single issue that was adjudged in the present case was whether the claim could be rejected on the grounds of fraud? 3. Ratio: The Supreme Court upheld the decision of the Division bench of the High Court. The Supreme Court analyzed the case of Mithoolal Nayak v. Life Insurance Corporation of India[8], where it was held that a repudiation of a policy under section 45 of the Life Insurance Corporation Act, 1956 must only take place where: (a) the false statement made must be on a material matter or must suppress facts which it was material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. The Court felt that the present case did not fall within this meaning, and neither under section 17 of the Indian Contract Act. In the present case, the deceased husband had not willingly falsified any information. The Court examined the evidence at hand and came to a conclusion that policy holder was not clearly guilty of a fraudulent suppression of material facts when he made his statements, as mentioned that he was generally in good health, and not visited a physician in past few months before taking up the policy. Therefore, the Court felt that the Corporation could not use the defense of fraud under section 15 of the Indian Contract Act, and passed an order that the sum, as directed by the learned Single Judge of the High Court in favour of the claimant, will be paid by the Corporation expeditiously. 4. Relevant sections: The case analyzed section 17 and section 19 of the Indian Contract Act, along with various other sections of the Life Insurance Corporation Act, 1956. Mithoolal Nayak v. Life Insurance Corporation of India[9] 1. Facts of the case: In 1942, one Mahajan Deolal sent a proposal for the insurance of his life. He was examined by Dr. D.D. Desai who submitted two reports, one with the proposal form and one confidential. The confidential report showed that Mr. Deolal was anaemic, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy and that he was a total physical wreck. Nothing came out of this proposal and it lapsed. In 1943, Mr. Deolal consulted and was treated by one Dr. Kapadia for anemia, diarrhea and panting on exertion. In 1944, Mr. Deolal made a second proposal for insurance of his life. Against the question in the proposal form whether he had consulted any medical man for any ailment within the last five years, he gave the answer ‘no’. He also did not disclose any of his ailments. After medical examination, the proposal was accepted and a policy for Rs. 25,000/- was issued on March 13, 1945. The policy lapsed for non-payment of premium but was revived in July, 1946. In the November of 1946, Mr. Deolal died. His assignee, the appellant, made a demand for Rs. 26,000/-but the Company repudiated it on the ground that the policy had been obtained by deliberate misstatement and fraudulent suppression of material facts. The appellant then filed a suit to recover the amount. 2. Issues: The Supreme Court analyzed the following main issues that were already discussed in the High Court: (1) whether the policy was vitiated by fraudulent suppression of material facts?; (2) whether the company had issued the policy with knowledge of the fact that Mr. Deolal had lied about the facts relating to the health of the insured?; (3) whether in any event the appellant is entitled to refund of the money he had paid to the respondent company? 3. Ratio: The Supreme Court, with respect to the first question, unequivocally stated that the policy was in fact taken through fraudulent means. The Court stated that the appellant was suffering from a serious type of anemia for which he was treated. The Court stated that Mr. Mahajan Deolal must have known that it was material to disclose this fact to the respondent company. In his answer to the questions put to him he not only failed to disclose what it was material for him to disclose, but he made a false statement to the effect that he had not been treated by any doctor for any such serious ailment as anemia or shortness of breath or asthma. In other words, there was a deliberate suppression fraudulently made by Mahajan Deolal. The court stated that section 17 the Indian Contract Act defined fraud as any act committed by a party to a contract with intent to deceive another party or to induce him to enter into a contract. After further analyzing the section, the court judged by the standard laid down in the same section, and stated that Mr. Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts when he made statements which he knew were deliberately false. With respect to the section question, the court stated that LIC was in fact permitted to cancel the policy due to section 45 of the Life Insurance Corporation Act which stated that repudiation of a policy can take place if :(a) the false statement is made on a material matter or to suppress facts which were material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. The Court felt that in the present case, the said requirements were fulfilled, and therefore, LIC was correct in terminating the said policy. On the final issue, the court agreed with the view of the High Court which had held that where the contract is bad on the ground of fraud, the party who has been guilty of fraud or a person who claims under him cannot ask for a refund of the money paid. 4. Relevant sections: The case analyzed section 17 of the Indian Contract Act. Cunday v. Lindsay[10] 1. Facts of the case: The plaintiff, Cunday was a trader and manufacture who received an order for sale of handkerchiefs from a person named Blenkarn. This individual signed in his name in a manner resembling Blenkiron & Co., which was a reputed firm located at 123, Wood Street. The purchaser further mentioned his address to be at 37, Wood Street, Cheapside, which was very close to the address of Blenkiron & Co. The plaintiff sent the goods to the address that was given by the purchaser. Although Blenkarn did not make any payment for the goods, he sold the goods to a third person, the defendants. The plaintiff then filed a suit, alleging that they sold the goods to Blenkarn under the mistaken assumption that they were selling it to Blenkiron & Co. The plaintiffs contended that there was no real consent to the contract of sale as they never intended to sell it to Blenkarn. Therefore, as there was no valid transfer of title, the defendants did not possess any title to the goods, and were liable for conversion. 2. Issues: The case mainly dealt with whether whether there was any contract between the claimant and Blenkarn at the first place, and if not, could the defendants procure a valid title to the good, being a third party to whom the goods were sold? 3. Ratio: In the present case, the court held that as the plaintiff lacked intention to sell the handkerchiefs to Blenkarn, there was no consent of the plaintiff to contract. The court opined that as the plaintiff wished to contract with Blenkiron & Co., the contract between the plainittf and the individual known as Blenkarn was void due to it being marred by mistake of identity of the party. The Court went on to stipulate that as there was no the plaintiff and Blenkarn, the transfer of the title of the good too the defendant was also false. To constitute a valid transfer of title, which the latter could rightfully convey to the defendants, was lacking in the present case. Hence, the defendants, being in possession without a good title of the goods, were held liable for conversion. 5. Relevant sections: Though the case did not make use of the Indian Contract Act, the case laid down the concept of mistake of identity of parties, which has been since included under the ambit of ‘mistake’ section 20 of the Indian Contract Act. Hartog v. Colin & Shields[11] 1. Facts of the case: The defendants, Colin & Shields were hide merchants who had an established business in London. Mr Louis-Levie Hartog was a Belgian furrier, living in Brussels. The defendant engaged in a verbal agreement to sell 30,000 Argentinian hare skins at 10 d per skin (which would have come to £1,250) to Mr Hartog. When the firm the final offer in writing it mistakenly wrote “10,000 skins at 10d per lb.” and the other 20,000 lesser skins similarly per lb. (imperial pound), and not in the standard unit in the industry of per piece. The said mistake made the price of the total goods 5/16th of the price discussed and orally agreed upon. On realizing their mistake, the defendants Colin & Shields pleaded that their offer was by mistake wrongly expressed. They plead that they had still intended to offer the goods per piece, and not per (imperial) pound. They argued that the plaintiff was well aware of this mistake and fraudulently accepted an offer which he well knew that the defendants had never intended to make. Due to these circumstances, they denied that any binding contract was entered into, and refused to execute the same. Therefore, the plaintiff brought a suit against the said actions of the defendant. 2. Issues: The main issue in the present case was whether the contract could be rescinded for the mistake to the price of hare skin by the defendants in the written contract. 3. Ratio: The judge found in the defendants’ favour on the grounds that the plaintiff must have realized the defendants’ error, which, as it concerned a term of the contract, rendered the contract void. The Court stated that the complainant would have known that it was normally sold per piece and not by pound. The court said that there is a duty to correct a mistake that is known to not be the real intention of the person making it. The court stated that “the offer was wrongly expressed, and the defendants by their evidence, and by the correspondence, have satisfied me that the plaintiff could not reasonably have supposed that that offer contained the offerers' real intention. Indeed, I am satisfied to the contrary. That means that there must be judgment for the defendants”. 4. Relevant sections: Though the case did not make use of the Indian Contract Act, the case laid down the concept of the duty to correct a mistake made by one party unintentionally during a contract. The concept of mistake of the quantity of goods as it was in the present case has been included in ‘mistake’ section 20 of the Indian Contract Act. Derry v. Peak[12] 1. Facts of the case: The Plymouth, the Devonport and District Tramways Company issued a prospectus where it was stated that the company was permitted to use steam trams, which would replace their horse-powered trams, and increase the business of the company. In reality, the company did not possess such a right a Board of Trade was left to grant permission to the company to make use of steam trams. Gaining the approval for such a claim from the Board was considered a formality in such circumstances and the claim was put forward in the prospectus with this information in mind. However, the claim of the company for this right was later refused by the Board. The individuals, led by Sir Henry Peek, who had purchased a stake in the business, upon reliance on the statement, brought a claim for deceit against the directors for falsifying and misrepresenting information in the prospectus. 2. Issues: The main issue in the present case was whether the statement made in the prospectus to see whether the statement amounted to misrepresentation under contract law. 3. Ratio: The claim of the shareholders was rejected by the House of Lords. The court held that it was not proven by the shareholders that the director of the company was dishonest in his belief. The court defined fraudulent misrepresentation as a statement known to be false or a statement made recklessly or carelessly as to the truth of the statement. On this basis, the claim of the shareholders against the directors of the company would fall. 4. Relevant sections: This landmark judgment of the United Kingdom has been used in India time and again. In fact, the definition laid down for misrepresentation in this case has been used a guideline to define misrepresentation under the section 18 of the Indian Contract Act. Kamal Kant Paliwal v. Smt. Prakash Devi Paliwal and Ors.[13] 1. Facts of the case: The case revolved around a plot of land situated at Moti Doongri Road Jaipur, which was purchased by defendant from Urban Improvement Board, Jaipur under a sale deed in the name of another individual for and on behalf of the plaintiff. It was stated that the purchase of the plot was Benami and the consideration of the plot was paid by the defendant out of the funds received by the plaintiff from his grand-parents, uncles and other relations from time to time. According to the plaintiff, the defendant suggested to him sometime in the month of that he should execute general power of attorney in favour of his mother and the maternal uncle as to facilitate raising of money from the plot. The plaintiff agreed to do so. The plaintiff signed the document without reading it, thinking it was a general power of attorney. In September, 1972 he was informed that the document he had executed was not a general power of attorney but a trust deed for the protection of property that was bought for him. The plaintiff filed a suit claiming that his consent was obtained by fraud. The plaintiff prayed for declaration of trust as null and void. 2. Issues: The only issue discussed by the Court in the present case was whether there was any fraud practiced on the plaintiff so as to declare the trust deed void. 3. Ratio: The court analyzed the section 10, 11, 12, 13, and 14 of the Indian Contract Act to understand the components of a valid contact. After analyzing the same, the court concluded that section 14 clearly stipulated that a contract marred by fraud, as defined under section 17, could be held as valid, and was voidable at the option of the party who was a victim of such fraud. The Court further stated that the underlying intent to constitute fraud is to deceive another party and to induce him to enter the contract and it must be by the suggestion as a fact which is not true or by the active concealment of a fact by one having knowledge or belief of that fact. Though there was some kind of concealment in the present case, the court stated that the plaintiff was an educated man, who admittedly signed the document and also after it was presented before the Sub-Registrar, Jaipur, attesting its execution. The plaintiff had all the means to know the contents of the document. The fact that the plaintiff failed to take reasonable care and caution meant that the claim of fraud against his own family could not succeed. 4. Relevant sections: The case analyzed section 10, 11, 12, 13, and 14 of the Indian Contract Act, along with section 17. The case laid down an important principle of reasonable care and caution to determine whether a contract could be marred by fraud. Great American Insurance Co. Ltd. v. Modanlal Sonulal[14] 1. Facts of the case: The respondent, who was a minor, was the sole surviving coparcener of a joint Hindu family carrying on joint family business at Devalgaum in the name of Surajmal Sonulal, and that the business of the firm was carried on under the superintendence of Goverdhandas Mohanlaland, who was also the guardian of the minor. The defendants were an insurance company incorporated in New York, United States of America, carrying on business in Bombay. The coparcenary took an insurance against fire with the appellant on certain cotton bales. Subsequently, the bales were burnt in a fire, and the respondent patented to recover loss under the insurance. However, the appellant refused to grant the same on the ground that there was collusion between the agent and the persons who effected the insurance. Therefore, the respondent filed a case in the lower court. The appellants did not plead that the plaintiff was a minor, and that on that ground the insurance policy was void while the case was heard in the lower court. However, the same did up in the oral arguments, but was left unanswered by the Judge of the lower court. The lower court eventually passed an order against the insurance company, and therefore, the company filed an appeal in the High Court. 2. Issues: The main issues discussed in the present case was whether the insurance policy taken for fire by the coparcenary was void on the grounds that the sole-surviving coparcener was a minor? 3. Ratio: The court rejected the claim of the appellants, and stated that the provisions of the law which make a contract by a minor binding were no doubt intended to be for the benefit of the minor, and courts have time and again have struggled hard to avoid holding the contract wholly void to the detriment of the minor. The court analyzed various judgments where it was held that a contract for the benefit of a minor have been held valid and not void. The court further stated that the contract was in fact made by the guardian of the minor, who was acting through his agent. The court felt that the evidence clearly the insurance company was that the business was owned by a minor, and that it was carried on by Goverdhandas, his guardian. The court felt that the present case was one where the contract was not made by a minor, but his guardian, although it was made on behalf of a minor. Therefore, keeping in mind the fact that there was already existing jurisprudence on contracts for the benefit on minors, the court stated that present case did fall within that ambit and was valid in the eyes of law. 4. Relevant sections: The case examined requirements of a valid contract under section 10 of the Indian Contract Act. The case also strengthened the exisitgn jurisprudence on validity of contracts made for the benefit of minors. Choga Lal v. Piyari and Anr.[15] 1. Facts of the case: The case was a reference made by the learned Cantonment Magistrate of Jhansi exercising the powers of a Judge of a Court of Small Causes, under Section 617 of the Code of Civil Procedure. In the present case, a suit was filed to recover rent due for a residence or quarters rented to a prostitute, with knowledge that such residence or quarters would be used by her to carry on her immoral trade and profession. 2. Issues: The question which was submitted for the opinion of the High Court was whether such an agreement was lawful under keeping in mind English law. 3. Ratio: The court stated that it was unnecessary to determine whether the English law was applicable in this country, as an express provision of the Indian Contract Act under which a contract for such a purpose would be illegal already existed. The court stated that Section 23 of that Act provided that the consideration or object of an agreement is lawful, unless, amongst other things, the Court regarded it as immoral or opposed to public policy. If the object of an agreement was immoral or opposed to public policy, the agreement could not be enforced. The court opined that knowingly letting a house to a prostitute with the object of her carrying on therein prostitution was immoral and contrary to public policy, and a landlord who knowingly let quarters to a prostitute to carry on prostitution could recover the rent in a Court of law, and any agreement signed for the same was void in the eyes of law. 4. Relevant sections: The present case analyzed the standard for lawful agreements under section 23 of the Indian Contract Act. [1] [1919] 2 K.B. 571. [2] 1913 40 ALJ 489. [3] (1864) 2 Hurl. & C. 906. [4](1903) ILR 30 Cal 539 [5] (1918) ILR 41Mad 33. [6] 1890 SCC OnLine All 2. [7] (2001) 2 SCC 160. [8] AIR 1962 SC 814. [9] AIR 1962 SC 814. [10] (1879) 3 app case 459 (465). [11] [1939] 3 All ER 566. [12] (1889) 14 App Cas 337. [13] AIR 1976 Raj 79. [14] (1934) ILR 59 Bom 656. [15] (1909) ILR 31 All 58.
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