Law of Contracts | Legal Reasoning for CLAT PDF Download

Essentials 

Agreement 

Jones vs Padavatan

Issue: Whether the defendant, a mother, entered into an agreement with the plaintiff, her daughter, to give her allowance and a share in her house.

Held: It was held that there was no intention of forming legal relationships by entering into a binding contract in the present case. The situation was all about the essence of a family settlement that relied on the pledge of good faith.

Offer and Acceptance 

Carlill vs Carbolic Smoke Ball Co.

Issue: Whether the defendant company was liable to pay the promised reward money to the plaintiff. The defendant company made a general offer of giving reward money to anyone who contracts influenza or cold after using their smoke balls. The plaintiff used the balls after following their directions and still suffered from influenza.

Held: It was held that, since there was a valid arrangement, the defendant corporation was responsible for paying the reward money. The court dismissed the defendant's claim that the claimant did not express the acceptance and ruled that the offeror would be liable to someone who comes forward and fulfills stipulated advertising-based requirements when a general offer is made by advertising.

Harvey vs Facey 

Issue: The plaintiff telegraphed the defendant asking him whether he would sell Bumper Hall Pen to the plaintiff. Further, in the same telegraph, the plaintiff asked the defendant to quote the lowest price for the same. In his reply, the defendant only quoted the lowest price. The issue was whether the defendant was liable to sell the Hall Pen to the plaintiff at the price quoted by him.

Held: It was held that there was no implicit offer to sell by the defendant by merely citing the lowest price to the inquiry made by the plaintiff. On the first question asked by the plaintiff, the defendant reserved his answer. It was therefore concluded that the defendant was not responsible for selling the Hall Pen to the complainant at the price quoted.

Communication 

Felthouse vs Bindley 

Issue: Whether the defendant, an auctioneer, was liable to the plaintiff for unauthorised sale of a horse, after the owner of the horse allegedly sold it to the plaintiff. The plaintiff made an offer to the owner, to which the owner gave no reply to the plaintiff but told the defendant that he had already sold the horse to the plaintiff. However, the defendant failed to remove the name of the horse by mistake and sold it.

Held:It was held that the plaintiff and the owner of the horse had no legitimate agreement. In order to form a legal agreement, the bidder himself and not a stranger should be informed of acceptance. In the present case, the owner told the auctioneer, a stranger, and not the bidder himself, of the acceptance.

Powell vs Lee 

Issue: Whether the plaintiff, an applicant for headmastership of a school, can sue the defendants, managers of school administration, for breach of contract for his appointment as the school headmaster. The defendants passed a resolution for the appointment of the plaintiff but later cancelled the same before communicating the decision. In the meanwhile, one of the managers informed him of the decision in his individual capacity.

Held:It was held that the defendants were not responsible since they and the complainant had no valid agreement. It was held that the information provided by one of the managers, not in an official capacity, did not constitute a legitimate communication.

Consideration 

Kedar Nath vs Gorie Mohamed 

Issue: The defendant subscribed to a fund created for the purpose of erecting a town hall at Howrah. On the faith of this subscription, the plaintiff contracted for constructing the hall. The issue was whether the defendant can back out from his promise on the ground that there was no consideration binding him to his promise to the plaintiff.

Held: The defendant was held responsible for paying the sum he promised and he did not lift the plea for lack of consideration. The defendant acknowledged that the plaintiff relied on his pledge and signed the contract to create the hall. It was further held that the applicant's act of entering into the contract for the construction of the building represented, in the present case, legitimate consideration.

Privity of Contract 

Tweddle vs Atkinson 

Issue: Whether the plaintiff could sue the defendant for breaching the contract between the defendant and the plaintiff’s father for the benefit of the plaintiff.

Held: It was held that even though the contract was entered into for the benefit of the plaintiff, he could not sue the defendant as he was a stranger to the contract.

Capacity to Contract 

Mohiribibi vs Dharmodas Ghose

Issue: Whether an agreement entered into by a minor, borrowing a certain sum of money by mortgaging his property as security is enforceable.

Held: It was concluded that the deal with a minor is invalid as the parties to the contract should be qualified at the time of the contract being entered into. It was therefore held that at the time of entering into the deal, the defendant, being a minor, was not liable to refund the amount he borrowed.

Leslie vs Sheill 

Issue: Whether the defendant, a minor, is liable to return money borrowed from the plaintiff, a money-lender, by misrepresenting himself to be an adult.

Held: It was held that, even under the doctrine of restitution, the defendant is not obligated to refund the money he borrowed from the claimant. That would mean nothing but enforcing a void contract if such a thing was allowed.

Free Consent 

Chikham Amiraju vs Chikham Seshamma 

Issue: Whether threat of committing suicide by a person, to induce his wife and son to transfer certain properties in the favour of his brother, amount to coercion.

Held: It was held that, in the present case, the sale of property was a voidable contract, as the threat of suicide amounted to coercion.

Ranganayakamma vs Alwer Chetty

Issue: Whether the act of forcing a widow to adopt a child, in order to remove the body of her dead husband for cremation by the relatives of the husband, amounted to coercion.

Held: It was concluded that the act of stopping the widow's husband from being cremated was also an act of coercion. Hence the adoption was held to be voidable.

Void Agreements 

Agreement in Restraint of Trade 

Madhub Chander vs Raj Coomer

Issue: Whether an agreement between the plaintiff and the defendant, rival shopkeepers in a locality, restraining the plaintiff from professing his business in that locality, in consideration for a certain amount by the defendant, a contract in restraint of trade.

Held: The claim of the appellant that such a contract was not a contract in restraint of trade as the restraint was only partial, was dismissed. It was held that whether the restraint was partial or absolute was immaterial. As long as it was a restriction on the exercise of a legal occupation, trade or business, it was a trade restriction contract and hence void.

Agreement to do impossible Act 

Taylor vs Caldwell

Issue: Whether the plaintiffs can sue the defendants for loss suffered by them, on destruction of the defendant's hall, which was to be used by the plaintiffs for holding a concert.

Held: It was held that the hall was destroyed for no fault of the defendants, making the performance of the contract an impossible act. Hence the defendants were not held liable.

Damages for Breach of a Contract 

Consequential Damages 

Hadley vs Baxendale

Issue: Whether the defendant, common carrier, is liable to the plaintiff for delay in delivery of a broken mill shaft of the plaintiff’s mill. The defendant was required to deliver the shaft to an engineer in order to get it duplicated. As a result of the delay, the mill remained closed for a longer time and the plaintiff suffered loss in business. He sued the defendant for loss of profit as a result of the breach of contract.

Held: It was held that, when a case requires special circumstances, the party to the violation should be held responsible for the resulting harm of the infringement only if, at the time of entering into the contract, the defendant had made certain special circumstances known to him. The defendants did not realize in the instant case that the mill would be held closed for the delay in delivery. Consequently, they could not be held responsible for loss of benefit, since that effect was not considered by the parties at the time the contract was concluded.

Remoteness of Damage 

Monarch Steamship Co. Ltd. vs Karlshamns

Issue: Whether the defendant ship is liable to the plaintiff for the cost of transhipment. The defendant’s ship was unseaworthy which caused prolonged voyage. As a result of the prolonged voyage, the ship was exposed to the war situation between Great Britain and Germany on entering Europe. Consequently, the goods could not be shipped to the nominated destination, due to which the plaintiff suffered loss.

Held: It was concluded that the damage was not a remote consequence of the ship's unseaworthiness. The parties may have fairly expected the prospect of war and its repercussions. The defendant was then held responsible because, due to extended travel, he exposed the goods to war situations.

Measure of Damages 

Robinson vs Harman

Issue: In the present case, the defendants agreed to lease out certain property to the plaintiff, but later on failed to do. The issue was whether the plaintiff was entitled to the damages for loss of profits that he would have earned had the least been granted to him.

Held: It was held that if a person suffers failure, he should be put in the same position as he was in before the violation occurred due to breach of a contract. The court directed the defendant to pay damages to the plaintiff for loss of benefit.