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Carlill vs. Carbolic Smoke Ball Co. (1893) 1 Q.B. 256

Principle: An offer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person. Although as a rule notice of the

acceptance of an offer must be given to the person making the offer that does not apply

where he should by his offer indicate or express that he does not except to receive notice

of acceptance apart from notice of performance.

Facts: In 1891, there was an epidemic of influenza and the defendant company offered by an advertisement to pay 100 to any one who contracted influenza after using the

smoke ball three times a day for two weeks, in accordance with the printed

directions supplied with each ball. Further the defendant company announced that they

had deposited 1000 with the Alliance Bank showing their sincerity in the matter.

The plaintiff on the faith of this advertisement bought a smoke ball and used it as

directed from 20th

November, 1891 down to 17th

January 1892, but she was attacked by

influenza. She then sued the defendants to recover the sum of 100 in accordance with

the advertisement.

The defendant company contended firstly that the offer contained in the advertisement

was not binding because it was not made to any one person in particular and secondly the

defendant contended that they were not liable to the plaintiff because she had not

intimated to them that she intended to accept the offer.

Held: It was held that Carlill could recover 100, because the advertisement was not a mere invitation to offer but it is an offer at large that is addressed to the whole world and capable of being accepted by one or more who perform the conditions. In the

Court of appeal, dealing with the first point, Bowen L.J. said:

It was also said that the contract was made with the entire world, that is with everybody, and that you cannot contract with every body. It is not a contract made with the entire

world. There is the fallacy of the argument. It is an offer made to the entire world which

is to ripen into a contract with anybody who comes forward and performs the condition.

It is an offer to become liable to anyone who before it is retracted, performs the

conditions and although the offer is made to the world, the contract is made with that

limited portion of the public who come forward and perform the condition on the

faith of the advertisement

In dealing with the second point Lindley L.J. said:

But than it is said, supposing that the performance of the condition is an acceptance of the offer, that acceptance ought to have been notified. Unquestionably, as a general

proposition where an offer is made, it is necessary, in order to make a binding contract,

not only that it should be accepted but that acceptance should be notified. But is that so

in cases of this kind? I apprehend that they are exceptions to that rule, or, if not an

exception, they are open to the observation that the notification of the acceptance need

not precede the performance. This offer is a continuing offer. It was never revoked;

and if notice of acceptance is required, the person who makes the offer gets the notice of

acceptance contemporaneously with notice of performance of the condition. I think,

however, the true view in a case of this kind is that the person who makes the offer

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shows by his language and from the Nature of the transaction that he does not

expect and does not require notice of the acceptance apart from notice of the

performance. [Indian Contract Act, 1872, Section8: Acceptance by performing conditions or receiving consideration]

Bhagwandas Goverdhandas Kedia vs. Girdharilal

Parshothamdas & Co. (A.I.R. 1966) S.C. 543

Principle: An agreement does not result from a mere State of mind or intent to accept an offer. Even a mental resolve to accept an offer does not give rise to a

contract. There must be intent to accept and some external manifestation of that intent

by speech, writing or other act. And, acceptance must be communicated to the

offeror unless he had waived such intimation or the course of negotiations implies on

agreement to the contrary. The contract is only complete when the acceptance is

received by the offeror, and the contract is made at the place where the acceptance is

received.

Facts: M/s. Girdharilal Parshothamdas and Company commenced an action in the city Civil Court, at Ahmedabad against Bhagwandas Kedia Ginning factory and oil mill of

Khangaon, for the recovery of Rs.31,150/- on the ground that Defendants had failed to

supply Cotton Seeds Cake which they had agreed to supply under an oral contract on

22nd July, 1959 after negotiations between the parties by conversation on long

distance telephone.

Held: The Trial Court found that the plaintiffs had made an offer from Ahmedabad by long distance telephone to the defendants to purchase the said goods and that the

defendants had accepted the offer at Khangaon. The court held that when a contract is

made by conversation on telephone, the place where acceptance of offer is intimated to

the offeror is the place where the contract is made and therefore, the Civil Court at

Ahmedabad had jurisdiction to try suit.

A revision application filed by defendants was rejected in limini by the High Court of

Gujarat. Against the order of the High Court of Gujarat, this appeal had been preferred

with special leave in Supreme Court. The defendants contended that in the case of a

contract by conversation on telephone, the place where the offer is accepted is the

place where the contract is made, and that court alone has jurisdiction within the

territorial jurisdiction of which the offer is accepted and in the present case, the

acceptance was spoken into the telephone instrument. Contention raised by the

defendants raises a prevailment of some complexity which must be approached in the

light of the relevant principles of the common law and statutory provisions contained in

the Contract Act. A contract unlike a tort is not a unilateral transaction; if there be no

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meeting of minds, no contract can result. There should therefore, be an offer by one

party, express or implied and acceptance of that offer by the other in the same sense in

which it was made by the offeror. The Contract Act does not expressly deal with place

where a contract is made. Sections 3 and 4 of the Contract Act deal with the

communication of a proposal and acceptance of proposal. The defendants contend that

the same rule applies in the cases of contracts made by conversation on telephone. On the

other hand plaintiff contended that the rule which applies to those contracts is the

ordinary rule which regards a contract as complex only when acceptance is intimated to

the proposer. In case of a telephone conversation, in a sense the parties are in the

presence of each other; each party is able to hear the voice of the other. There is

instantaneous communication of speech intimating offer and acceptance, rejection or

counter-offer.

The court after taking into consideration many English authorities on the point,

concluded that the contract is complete when the acceptance is received by the

offeror and the contract is made at place where the acceptance is received and the

Supreme Court held that the trial court was therefore, right in the view which it has

taken that the cause of action arose within the jurisdiction of the City Civil Court,

Ahmedabad where acceptance was communicated by telephone to the plaintiff and

therefore, the appeal dismissed.

Cundy vs. Lindsay (1878) 3 AC 459

Principle: Mistake as to the identity of the other party to a contract nullifies the consent and its effect is to make the contract void.

Facts: One Alfred Blenkran hired a room on the corner of little Love Lane on Wood street, Cheapside. Though the entrance was in little Love lane, he described it as 37

Wood street. He wrote letters from this address to Lindsay and Co. (Defendant), Linen

manufacturers, in Belfurst, ordering from them a quantity of goods, chiefly

handkerchiefs. In signing these letters, he used no initial as representing any name and

name signed was written as to appear to be Blenkran & Co.. There was a highly respectable firm by name W. Blenkiron & Sons carrying on business at 123, Wood

Street. Lindsay & Co. knew the name of Blenkiron & Sons but not their address and they

sent the goods so ordered to M/S Blenkran & Co. 37, Wood Street, Cheapside, and the

invoices were made out in the same way. Blenkran received the goods and sold some of

them to the plaintiffs who were bona-fide purchasers. Blenkran did not pay and Lindsay

& Co. brought an action against him for the money due to them. Later, Blenkrans fraud was discovered and he was prosecuted and convicted. Lindsay & Co. then sued Cundy

for unlawful conversion of the handkerchiefs received by them; and then, the question

before the court for decision was whether the property in goods had ever passed

from Lindsay & Co. to Blenkran.

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Held: The Court, taking into consideration that the purchaser was a bona-fide purchaser, gave judgment in favour of Cundy. But the court of Appeal reversed this decision and

Cundy now appealed. Upon this appeal the House of Lord held that no contract had been

made with Blenkran and the property in goods did not pass to him so that he never had a

valid title which he could transfer to Cundy who were therefore, liable to Lindsay & Co.

for the value of the goods. Further the court pointed out that Lindsay & Co. intended to

enter into contract with Blenkiron & Sons and not Blenkran; consequently no contract

could have arisen between them and Blenkiron as there is mistake as to the identity of

other party to a contract. On this point Lord Cairons L.C. observations are worth noting.

Of him (Blankran) they knew nothing and of him they never thought. With him they never intended to deal. Their minds never even for an instant of time rested upon him,

and as between him and them there was no consensus of mind which could lead to any

agreement or any contract whatever.

Therefore, mistake as to the identity of the other party to a contract nullify consent and

consequently no contract could come into existence between the parties.

Phillips vs. Brooks (1919) 2.K.B. 243

Facts: A person by name North entered a firm of Jewellers (plaintiff) and representing himself to be Sir George Bullough of ST. James Square, purchased some pearls of the

value of 2550 and a diamond ring worth 450. The plaintiff, who had heard of Sir

George Bullough but had never seen him, believed in good faith that the person who

purchased the ring was Sir George Bullough and accepted a cheque in payment and

permitted North to take away one ring which he said he wanted at once for his wifes birth-day gift.

Subsequently when cheque was dishonoured, plaintiff discovered on enquiry that the ring

had been pledged with the defendants a pawn broker for 350. North was subsequently

convicted for obtaining the ring by false pretences.

The plaintiff instituted a suit against the defendant for the return of the ring on the

ground of mistake. The defendant contended that there was no mistake or error in

consensus, but there was only an error in the inducing cause, or error in cause, namely a

fraud practiced by North. Therefore, plaintiff could not recover. The question before

the court was, did the plaintiff enter into a contract with the person who entered the

shop identified by sight and by hearing? If so, however, much they were in mistake in

thinking him to be Sir George Bullough, even though the inducing cause of the contract

was their belief that he was Sir George Bullough, the contract would only be voidable.

But if the plaintiff intended to and did enter into a contract only with Sir George

Bullough and not with the person who entered the shop, then the contract would be

void and cannot transfer property.

Held: The court held that the plaintiffs intention was to deal with the man, who was physically in flesh and blood before them. Therefore, it was held that the property in

the ring had passed to North; that the plaintiff intended to sell the ring to the person when

he saw in his shop with whom he made the contract and though he was induced so to sell

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by the fraud of North, that made the contract voidable but not void, and as in the mean

time the defendants had taken the ring from North in good faith for value and

without notice. They were protected. In this connection the expressions used by Morton

C.J. in Edmunds vs. Merchants Dispatch Transportation Co. seem to fit in this case.

The minds of the parties met and agreed upon all the terms of the sale, the thing sold, the price and time of payment, the person selling and the person buying. The fact that the

seller was induced to sell by fraud of the buyer made the sale voidable but not void. He

could not have supposed that he was selling to any other person; his intention was to sell

to the person present, and identified by sight and hearing.

Dunlop Pneumatic Tyre Co. vs. Selfridge & Co. Ltd. 1915 AC 847

Principle: A contract cannot be enforced by a person who is not a party to it even though it is made for his benefit. In this case it was established and settled that one of the

fundamental principles of Law of Contract is that a stranger to a contract cannot sue.

Facts: The plaintiff company supplied motor tyres and covers to D.J. Dew & Co. who were motor accessory dealers. By an agreement in writing between the Plaintiff Co. and

Dew & Co. in consideration of certain trade discounts. Dew & Co. agreed to purchase a

quantity of Dunlop motor tyres, covers, tubes and sundries and the understanding was

that the Dew & Co would not to sell the same below the listed prices, except to persons

engaged in the motor trade. They agreed further that when they sold any of the goods to a

motor trader below the list prices, they would, as agents for the Dunlop Company in that

behalf, obtain a contract in that behalf, i.e. obtain a written undertaking from the trader

that he would similarly observe the Dunlop listed prices, and would forward such

undertaking from the trader that he would similarly observe the Dunlop list prices, and

would forward such undertaking from the trader to the plaintiff company.

The defendant Co. obtained Dunlop covers from Dew & Co. at a discount and signed an

agreement not to sell or offer them below the listed price. The same agreement also

contained a clause according to which the Defendant undertook to pay 5 to the Dunlop

Company by way liquidated damages for each such sale or offer below the list prices.

Subsequently Defendant Company accepted two orders from their customers for Dunlop

covers below the current list. prices and also actually supplied materials to their

customers. The Dunlop Co. claimed an injunction against the Defendant to prevent them

from supplying their products below the listed prices and claimed damages for sale, in

breach of agreement, alleging that Dew & Co. had acted as their agent making the

agreement with Selfridge & Co.

Held: It was held that the contract was unenforceable by the Plaintiff and on appeal the House of Lords held that there was no contract between the Plaintiff & Defendant and the

appeal was dismissed. In this connection Viscount Haldane L.C. had observed:

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In the Law of England certain principles are fundamental; One is that only a person who

is a party to a contract can sue upon it. The second principle is that if a person with

whom a contract, not under seal, has been made is able to enforce it; consideration must

have been given by him to the promisor or to some person at the promisors request. A third proposition is that a principal not named in the contract may sue upon it, if the

promisee really contracted as his agent. But again, in order to entitle him so to sue, he

must have given consideration either personally or through the promisee acting as his

agent in giving it.

Mohri Beebe vs. Dhurmodas Ghose P.C. (1903) 30 I.A. 113

Principle: Section 10 of Indian Contract Act of 1872 declares the all agreements are contracts if they are made by free consent of the parties competent to contract and

Section 11 of the Act further declares every person is competent to contract who is of age

majority according to the law to which he is subjectand the effect is that a contract with infant is void.

Facts: On the 20th July, 1895, the defendant executed a mortgage in favour of Brahmo Dutt, a money-lender carrying on business at Calcutta, to secure the repayment of Rs.20,

000 at 12% interest on some house belonging to the Defendant. At that time, the

defendant was infant and he did not attain 21 years until the month September of that

year. Throughout the transaction, Brahmo Dutt was absent from Calcutta and the whole

business was carried by his attorney Kedar Nath. While considering the proposed

advance, Kedar Nath received information that Defendant was still a minor. On the day

on which the mortgage was executed, Kedar Nath got the infant to sign a long declaration

which he had prepared for him - containing a statement that he came of age on 17th

of

June 1895, and Brahmo Dutt, relying on this declaration, had agreed to advance to him

Rs.20, 000 and out which the money lender paid him only about Rs.8, 000. Kedar was

fully aware of the fact that at the time the mortgage was executed, the Defendant was at

the age of minority.

On the 10th

September 1895, the defendant with his mother and guardian commenced an

action against the Brahmo Dutt, stating that he was under age - when he executed the

mortgage and paid for a declaration; that the same was void and in-operative as contract

with the minor is void. Brahmo Dutt put in a defence that the plaintiff was of full age

when he executed mortgage; that neither he nor Kedar Nath had any notice that the

Plaintiff was then infant; and even if he was a minor, the declaration as to his age was

fraudulently made to deceive appellant and thereby he contended that the defendant was

not entitled to any relief.

Held: The court of first instance found the facts as above and granted the relief asked. And the appellant court dismissed the appeal. Subsequently to the institution of the

present appeal Brahmo Dutt died and his appeal has been prosecuted by the executors.

The Plaintiffs reason in the present appeal is that the courts below were wrong in holding that the knowledge of Kedar Nath must be imputed to the Defendant.

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The Appellants Counsel contended that the Plaintiff is estopped from setting up that he was an infant when he executed the mortgage. The Court pointed out that the Estoppel

does not apply to a case (like the present) where the statement relied upon is made to a

person who knows the real facts and is not misled by the untrue statement. There can be

no Estoppel where the truth of the matter known to both parties. It was further contended

that as an infants contract was only voidable, the sum actually borrowed must be refunded under Sec.64 of Indian Contract Act of 1872. Looking at Sec.10, 11 and other

contentions raised by Plaintiff and Defendant, their Lordships are satisfied that the Act

makes it essential, that all contracting parties should be competent to contract and

expressly provides that a person, who by reason of infancy is incompetent to contract,

cannot make a contract within the meaning of the Act. The question whether a

contract is void or voidable presupposes the existence of a contract within the

meaning of the Act and cannot arise in case of an infant. Their Lordships were of the

opinion that the infant contract is not voidable but only void and void only.

Consequently no question of refunding any monies could arise in such circumstances.

With this declaration of the Juridical Committee of Privy Council as regards the

interpretation of Section -11 of Indian Act, it is settled that infants contract under Indian Law is absolutely void and therefore no possibility of ratification by the infant

on coming of age and present appeal was dismissed.

Chikkam Ammiraju vs. Chikkan Seshamma

A.I.R. (1918) Mad.414

Principle: An agreement to which the consent is caused by coercion is voidable at the option of the party whose consent was so caused. The consent is said to be caused by

coercion, when it is obtained by pressure exerted by either (1) committing or threatening

to commit any act forbidden by the Indian Penal Code (2) or unlawfully detaining or

threatening to detain any property.

A threat to commit suicide, in consequence of which a document is executed by a

person, is the threatening to commit an act forbidden by the Indian Penal Code and it

amounts to coercion within the meaning of Section 15 of the Indian Contract Act.

Facts: By threat of suicide, Chikkam Ammiraju induced his wife and his son to execute a release in favour of his brother in respect of certain properties which they were

claiming as their own. Consequently, Chikkam Seshamma along with her son executed

a release document as desired by her husband. Later on, wife wanted to set aside the

document on the ground that she had executed the release document under coercion and

as such she prayed in the Lower Counts - let the document be declared as void. But the

Defendant Ammiraju contended that the suicide was not an act forbidden by the Indian

Penal Code within the meaning of Sec. 15 of the Contract Act; he further pleaded that the

Plaintiffs consent was obtained freely and therefore the release document could not be declared void.

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Held: The lower courts were of the opinion that the deed in question was obtained by coercion; the coercion consisting in a threat by husband to his wife and son that he

would commit suicide if they did not execute the document. But there was different

opinion as to whether the facts as found amount to coercion within the meaning of

sec.15 of Indian Contract Act of 1872, then the present appeal come before High Court.

The main point argued before High Court was that suicide was not an act forbidden

by the Indian Penal Code and whether threatening to commit suicide was considered to

be coercion within the meaning of the Sec.15 or not since - threatening to commit

suicide is not an offence under I.P.C; only attempt to commit suicide is punishable

offence under I.P.C.

By the majority of judges led by Chief Justice, it was held that threatening to commit

suicide amounts to coercion within the meaning of Sec.15 of Contract Act. It was

further held that the document should be set aside and the appeal be dismissed with

costs.

In this connection, Willis Chief Justice and Seshagiri Iyer, J - observed:

It was impossible to hold that an act which is made punishable to abet or attempt is not

forbidden by the Indian Penal Code, especially in the absence of any Section punishing

the act itself is due to the fact that the suicide is in the nature of things beyond the

Jurisdiction of the Court.

Oldfield, J. dissenting held that the section should be strictly construed and that an act

not punishable under I.P.C. shall not to be said to be forbidden by the Code.

Nordenfelt vs. Maxim Nordenfelt Guns and

Ammunitions Co. (1894) A.C. 535

This is a leading case on the issue of restraint of trade relevant under Section 27 of the

Indian Contract Act. The House of Lords had declared the judgment and laid down the

policy of law consisting of four (4) major principles in respect of restraint of trade.

Facts: In this case, the appellant, Nordenfelt was an inventor and a maker of guns and ammunition. He sold his business to the respondent Co. for 287,500 and entered

into a covenant which reads as follows:

- that he would not for 25 years hence-forth engageeither directly or indirectly in the trade or business of a manufacturer of guns, gun mountings or carriages, gun-powder

explosives or ammunition, or in any business competing or liable to compete in any way

with that for the time being carried on by the company.

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Held: It is clear that the restraint entered into by Nordenfelt was of a general and not merely of partial nature, since there was no limit placed on the area to which it was

be extend. Nevertheless, the House of Lords held that the agreement was not totally

void. The latter part of covenant underlined above was unreasonable, and as it was

distinct and severable from the rest of the agreement, was void.

The House of Lords, went on to express the view that the division of agreements into

two classes general and partial could no longer be sustained as a rule of common law. All contracts, said Lord Macnaughtan, which had for their object the restraint of trade, were prima facie void; but all might be justified if they were reasonable in the

interests of the parties and the public.

Rules laid down in Nordenfelt case:

i. All restraint trade, in the absence of special justifying circumstances, are contrary to public policy and therefore, void;

ii. It is a question of law for the decision of the court whether the special circumstances adduced do or do not justify the restraint.

iii. A restraint can only be justified if it is reasonable

a) in the interest of the contracting parties and

b) in the interest of the public

iv. The onus of showing that the restraint is reasonable between the parties rests upon the person alleging that is so i.e. covenantee.

Gherulal Pareekh vs. Mahadevdas, A.I.R. 1959 S.C. 78

This is a leading case dealing with the wagering contract and various issues arising

under Section 23 of the Indian Contract Act. It raised the question of the legality of a

partnership to carry on business in wagering contract. Justice K. Subba Rao delivered

the majority judgment in this case.

In this case the appellant, Gherulal Pareekh and the respondent Mahadevdas entered

into a partnership agreement to carry on wagering contracts with two firms of

Hapur. It was agreed that the said contracts would be made in the name of the

respondent on behalf of the firm and the partners should share the profit and loss

resulting from the transaction. In pursuance of this agreement the respondent entered

into contract in his own name and suffered loss. As the Appellant denied his liability to

bear the loss, the respondent instituted a suit to recover Rs.5, 300/-

Held: The appellant has taken the defence that the agreement between the parties is wagering contract and hence, unlawful under Section 23 of the contract Act.

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The trial court accepted the plea of the defendant and dismissed the suit. The High Court

of Calcutta held that this partnership between the managers of Joint Hindu Family

amounts to wagering contract and is void under Section 30 of the contract Act. But its

object was not unlawful under Section23 of the Contract Act. Hence, the High Court

allowed the claim of the Plaintiff / Respondent.

The issue before the Supreme Court was whether this partnership agreement falls under

section 23 of the Contract Act. For this we have to deal with the Supreme Court

observations on the following three issues.

1. Whether the agreement is Forbidden by Law: In India where the criminal law is

codified, acts forbidden by law seem practically consists of acts punishable under Indian

Penal Code and of acts prohibited by special legislation or by regulations or orders.

This has been accepted by the courts. Hence, the wager is only void it is not forbidden

by law and the object of collateral agreement is not unlawful under section 23 of the

Act. Supreme Court held that the present partnership is not unlawful within the

meaning of section 23 of the Contract Act.

2. Whether the agreement is opposed to Public Policy: In this regard the Supreme

Court observed that it is no longer legitimate for the courts to invent new heads of public

policy. The judge must apply the principles laid in previous decision. The doctrine should

be involved only in clear cases in which the harm to the public is substantial. The

common laws of England and India have never struck down contracts of wager on the

ground of public policy.

3. Immorality: The case law both in England and India confines the operation of the

doctrine to sexual immorality. Immoral is very comprehensive word and takes in every

aspect to personal conduct deviating from the standard norms of life. There is no

universal standard and the doctrine is limited by interpretation at the courts and thereby

meaning allotted to it. Hence, the wager does not fall under the category of immorality.

For the foregoing reasons the Supreme Court held that the partnership was not unlawful

within the meaning of section23 of the contract Act. In the result the appeal fails and is

dismissed with costs.

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Satyabrata Ghose vs. Mugnee Ram Bangur and Co. 1954 S.C.R.310

This case deals with the point of discharge by impossibility of performance. The

Supreme Court has considered the relevancy of English Law regarding frustration and

explained the scope of section 56 of the Contract Act. Justice Mukherji delivered the

majority judgment.

Facts: The defendant company was the owner of a large trust of land situated at Calcutta. The company started a scheme for development of this land for residential

purposes. The plaintiff was granted a plot on payment of earnest money. The

company undertook to construct the roads and drains necessary for making the lands

suitable for building and residential purposes and as such as they were completed, the

purchaser would be called upon to complete the conveyance by payment of the balance of

the consideration money. But before anything could be done, a considerable portion

of the land was requisitioned by the State during the Second World War for

military purposes. The company attempted to cancel the contract on the ground that by

reason of the supervening events, its performance had become impossible. The

plaintiff filed a suit for specific performance and pleaded that the contract was still

subsisting.

Three issues were raised before the Supreme Court:

1. Whether the English law relating to frustration can be applied in view of specific provision in India i.e. Section - 56 of the Contract Act.

2. Whether impossibility of performance can be a defence in case of contract of sale of land.

3. Whether the doctrine is available in the light of events and circumstances of this case.

Held:

(1) As regards the first issue, the Supreme Court observed that the whole law relating

discharge by impossibility of performance is laid down in section 56 of the Contract Act.

It would be incorrect to say that Section 56 applies only to cases of physical

impossibility. The provision is exhaustive one. Hence it is not permissible to import the

principle of English law, through these statutory provisions.

(2) The second contention related to the English principle that the doctrine of frustration

does not operate in the case of contracts for sale of land. The rule of frustration can only

be put on to purely contractual obligations, but it cannot destroy an estate in land which

has already accrued in favour of a contracting party. According to the Indian Law -

Section 54 of the T.P. Act - a contract for the sale of land does not itself create any

interest in the property. Hence, the doctrine of frustration is equally applicable to

contracts for sale of land in India.

(3) As regards the third issue the Supreme Court pointed out that the nature of the

contract in this case was different. The most material thing which deserved notice was

that there was absolutely no time limit within which the roads and drains are to be made;

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another important thing which requires notice was that the war was already on, when the

parties entered into contract. Hence, the contract in this case is not frustrated.

Hechester vs. De in Tour 1853 2 E & B 679

This is a leading case on the point of anticipatory branch of contract. It may sometimes

happen that even before the time for performance arrives, the promisor may definitely

renounce the contract and refuse to perform it. The affected party can bring an action

without waiting till the end of the last date of performance.

In this case, the defendant engaged the plaintiff on the 12th April to enter into his service

as courier and to accompany him upon a tour; the employment was to commence on the

1st June. On the 11th of May the defendant wrote to the plaintiff to inform him that his

services would not longer be required. The plaintiff at once brought an action, although

the time for performance had not yet arrived. Now the question in such cases is whether

the party would at once be entitled to treat the contract as broken or whether he

should wait till the time for performance arrives, and then bring an action for

damages.

The court held that the plaintiff was entitled to do so. The court observed that in case of

what is called anticipatory breach of contract, it is not necessary for the plaintiff to

wait till the time of performance passes. In this case, keeping the contract alive would

involve an obligation on the courier to keep himself equipped for the three months

foreign travel, thus preventing him from taking up any other employment. It was

considered reasonable that in such cases of anticipatory breach of a contract, it should be

open to the other party to accept renunciation as immediate breach of the contract and sue

for damages. He can claim prospectively such damages as would be caused by a breach at

the appointed time subject to any circumstances which may operate in mitigated of the

damage.

The rule had also been applied to situations where the performance is conditional, as in

Frost vs. Knight (1872).

Hadley vs. Baxendale (1854) 156 ER 145

Principle: This is a leading case dealing with the principle of damages for breadth of contract. The foundation of modern law of damages is laid down through this case. The

statement of law is generally known as the rule in Hadley vs. Baxendale and it will be

seen that it lays down damages are recoverable in two cases:

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Facts: The Plaintiffs carried on the business as Millers. Their Mill was stopped by the breakage of a crankshaft, and it was necessary to send the crankshaft to the makers as a

pattern for a new one. The Defendants who were carriers undertook to deliver the shaft

to the makers, but the only information given to them was that the article to be carried

was the broken shaft of a mill, and that the plaintiffs were the millers of the mill. By

some neglect on their part the delivery of the shaft was delayed and in consequence

the mill could not be re-started. The Plaintiff lost profits which they would otherwise

have made.

Held: The question was whether this loss of profits ought to be taken into account in estimating damages. It lays down the Principle that damages are recoverable in two

situations.

1. When they arise naturally i.e. according to the usual course of things

from the breach; and

2. When they are such as may reasonably be supposed to have been in

contemplation of both parties at the time they made the contract, as the

probable result of the breach of it.

Applying these principles quoted above, the court pointed out that the circumstances

communicated to the defendant, did not show that a delay in the delivery of the

shaft would entail loss of profits of the mill. The plaintiffs might have had another

shaft, or there might have been some other defect in the machinery to cause the

stoppage.

Alderson B. observed as follows:

It follows, therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably

contemplated by the parties when they made this contract. For such loss would neither

have flowed naturally from the breach of this contract in the great multitude of such

cases occurring under ordinary circumstances, which perhaps, would have made it a

reasonable and natural consequence of such breach of contract, communicated to or

known by the defendants.

The court, therefore, held that the loss of profits to the miller could not be taken into

consideration at all while estimating the damages.

Compiled by:

Prof. Dr. K.S.N. Sarma B.Sc; M.A (S.W); LL.D

Advocate

High Court of Judicature [A.P]

Visiting Faculty ICFAI Business School 109-Star Shelters, Saidabad Colony

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