1. The Genesis: Intention, Offer & Acceptance
- Balfour v. Balfour (1919)
- The Concept: Intention to create legal relations.
- The Rule: Domestic or social agreements between spouses (like a husband promising to send a monthly allowance) do not automatically create legally binding contracts. The law presumes there was no intention to be legally bound unless explicitly stated otherwise.
- Lalman Shukla v. Gauri Dutt (1913)
- The Concept: Communication of Offer (Section 4).
- The Rule: You cannot accept an offer you don’t know about. When a servant found his master’s missing nephew beforte knowing about the reward money, he could not claim the reward later. Ignorance of the offer means no valid acceptance.
- Harvey v. Facey (1893)
- The Concept: Invitation to Treat vs. Offer.
- The Rule: Answering a question about the “lowest price” is just supplying information, not making an offer. (e.g., Q: “Will you sell Bumper Hall Pen? Telegraph lowest cash price.” A: “Lowest price £900.” This reply was just an invitation to treat, not a binding offer to sell).
- Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953)
- The Concept: Display of Goods.
- The Rule: Goods displayed on a supermarket shelf with a price tag are an invitation to treat. The actual offer is made when the customer takes the goods to the cashier, and the cashier accepts the offer by taking the money.
- Powell v. Lee (1908)
- The Concept: Who can communicate acceptance?
- The Rule: Acceptance is only valid if it is communicated by the offeree or their officially authorized agent. If a third party (like an unofficial committee member) leaks the news that you got the job, there is no binding contract yet.
2. The Engine: Consideration & Privity
We already discussed Chinnaya v. Ramayya (Stranger to Consideration is valid in India) and Dunlop (Privity of Contract). Here are the other vital cases:
- Kedarnath Bhattacharji v. Gorie Mahomed (1886)
- The Concept: Consideration in Charitable Subscriptions.
- The Rule: Usually, promising money to charity is a void agreement (no consideration). BUT, if the charity starts building or incurs a liability specifically based on your promise to pay, your promise becomes legally enforceable.
- Tweddle v. Atkinson (1861)
- The Concept: English Law on Privity of Consideration.
- The Rule: This is the English contrast to Indian law. It established that under English law, consideration must move from the promisee. (Remember: Indian law under Section 2(d) deliberately rejected this, allowing consideration from “any other person”).
3. Vitiating Elements: Fraud & Public Policy
When consent is tainted, or the deal is against the greater good of society, the courts step in aggressively.
- Derry v. Peek (1889)
- The Concept: Defining Fraud (Section 17).
- The Rule: For a misstatement to be considered fraudulent, it must be made knowingly, without belief in its truth, or recklessly (not caring if it’s true or false). If a company director honestly believes a false statement is true, it is misrepresentation, not fraud.
- Central Inland Water Transport Corp v. Brojo Nath Ganguly (1986)
- The Concept: Unconscionable Contracts & Public Policy (Section 23).
- The Rule: A landmark Indian judgment. The Supreme Court struck down an arbitrary employment rule that allowed a government corporation to fire permanent employees with 3 months’ notice without reason. The court ruled it was an “unconscionable bargain” between parties with highly unequal bargaining power, making it opposed to public policy under Section 23.
4. Quasi-Contracts: Unjust Enrichment
- Moses v. Macferlan (1760)
- The Concept: The foundation of Quasi-Contracts (Sections 68-72).
- The Rule: Lord Mansfield established the principle that a defendant must refund money if they are “obliged by the ties of natural justice and equity.” You cannot unjustly enrich yourself at the expense of another.
5. The Endgame: Advanced Damages
Beyond the basic foreseeability rule of Hadley v. Baxendale, you must know how courts calculate penalties.
- Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd (1949)
- The Concept: Remoteness of Damages (Section 73 expansion).
- The Rule: Clarified Hadley. The plaintiff can recover losses that were a “reasonably foreseeable” result of the breach. The laundry company could recover normal lost profits for a delayed boiler, but not the profits from a highly lucrative, secret government contract the defendant knew nothing about.
- Kailash Nath Associates v. Delhi Development Authority (DDA) (2015)
- The Concept: Liquidated Damages and Earnest Money (Section 74).
- The Rule: A crucial modern Indian case. The Supreme Court ruled that even if a contract says an earnest money deposit will be “forfeited” upon breach, the party claiming the forfeiture must prove they actually suffered a loss. If there is no real legal injury or loss, you cannot just keep the penalty money.