CLAT Exam > CLAT Notes > Legal Reasoning for CLAT > Major Legal Judgements for Contract Law
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1. Balfour v. Balfour (1919) – Intention to Create Legal Relations
- Facts: A UK case influential in India, where a husband promised his wife a monthly allowance while working abroad. After their separation, the wife sued for the unpaid amount.
- Issues: Does a domestic agreement between spouses create a legally binding contract? Is intention to create legal relations necessary?
- Principle: For a contract to be enforceable, parties must intend to create legal relations. Domestic agreements typically lack this intention unless evidence suggests otherwise.
- Judgment: The court held that the agreement was a domestic arrangement, not a contract, as there was no intention to create legal obligations.
- Significance: This case established the necessity of contractual intent, influencing Indian cases involving family or informal agreements, shaping the scope of enforceable contracts.
2. Carlill v. Carbolic Smoke Ball Co. (1893) – Offer and Acceptance
- Facts: A UK case adopted in India, where a company advertised a reward for anyone who used its product and still contracted influenza. Mrs. Carlill sued for the reward after complying but falling ill.
- Issues: Can a general advertisement constitute a unilateral offer? Is performance of conditions acceptance?
- Principle: A clear, public advertisement can be a unilateral offer, accepted by performing the specified conditions without further communication.
- Judgment: The court held the advertisement was a valid offer, and Mrs. Carlill’s performance constituted acceptance, entitling her to the reward.
- Significance: This landmark case clarified unilateral contracts and general offers, widely applied in India for commercial and promotional agreements.
3. Mohori Bibee v. Dharmodas Ghose (1903) – Capacity to Contract
- Facts: A minor executed a mortgage to secure a loan. When the lender sought enforcement, the minor claimed the contract was void due to his age.
- Issues: Can a minor enter a valid contract? What is the effect of a minor’s agreement under the Indian Contract Act?
- Principle: Under Section 11, a minor lacks capacity to contract, rendering their agreements void ab initio. Minors cannot be sued for contract enforcement, though restitution may apply for benefits received.
- Judgment: The Privy Council declared the mortgage void, protecting the minor from liability.
- Significance: This case solidified the principle of minors’ incapacity, ensuring protection from exploitative contracts and influencing juvenile contract disputes in India.
4. Hadley v. Baxendale (1854) – Damages for Breach
- Facts: A UK case adopted in India, where a mill owner suffered losses due to a carrier’s delay in delivering a broken shaft for repair. The mill owner sued for lost profits.
- Issues: What damages are recoverable for breach of contract? Are consequential losses compensable?
- Principle: Damages for breach are limited to losses naturally arising from the breach or those reasonably contemplated by both parties at the contract’s formation.
- Judgment: The court denied consequential losses, as the carrier was unaware of the mill’s dependence on the shaft.
- Significance: This case established the foreseeability rule for contract damages, guiding Indian courts in assessing compensation for breach under Section 73.
5. Chinnaya v. Ramaya (1882) – Consideration
- Facts: A mother gifted property to her daughter, with the condition that the daughter pay an annuity to the mother’s brother. The daughter failed to pay, and the brother sued.
- Issues: Can consideration move from a third party? Is the agreement enforceable without direct consideration from the promisee?
- Principle: Under Section 2(d), consideration need not move from the promisee; it can come from any person, making the contract enforceable if lawful.
- Judgment: The Madras High Court upheld the agreement, as the mother’s gift provided consideration for the daughter’s promise.
- Significance: This case clarified the flexible nature of consideration in Indian law, broadening the scope of enforceable agreements.
6. Lalman Shukla v. Gauri Dutt (1913) – Offer and Communication
- Facts: A master sent his servant to find his missing nephew, later announcing a reward for information. The servant, unaware of the reward, provided the information and claimed it.
- Issues: Is knowledge of an offer necessary for acceptance? Can a reward be claimed without awareness?
- Principle: Acceptance requires knowledge of the offer; a person cannot accept an offer they are unaware of, even if they perform the requested act.
- Judgment: The Allahabad High Court denied the servant’s claim, as he was unaware of the reward offer when providing the information.
- Significance: This case emphasized the necessity of offer communication for valid acceptance, shaping the rules for reward-based contracts in India.
7. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas (1966) – Communication of Acceptance
- Facts: The plaintiff offered to buy goods via telephone, and the defendant accepted. A dispute arose over whether the acceptance was effective when communicated.
- Issues: When is acceptance complete in a telephonic contract? Where is the contract formed?
- Principle: Under Section 4, acceptance is complete when it is communicated to the offeror, and the contract is formed at the place where the acceptance is received.
- Judgment: The Supreme Court held the contract was formed where the acceptance was received, clarifying telephonic communication rules.
- Significance: This case established rules for instantaneous communication, relevant for modern electronic contracts in India.
8. Satyabrata Ghose v. Mugneeram Bangur & Co. (1954) – Frustration of Contract
- Facts: The plaintiff contracted to buy land for development, but the land was requisitioned for war purposes, delaying the project. The plaintiff sought to void the contract.
- Issues: Can a contract be discharged due to unforeseen events? What constitutes frustration under Section 56?
- Principle: A contract is frustrated and void under Section 56 if an unforeseen event renders performance impossible or radically different, unless the parties assumed the risk.
- Judgment: The Supreme Court held the contract was not frustrated, as the requisition was temporary and did not alter the contract’s core purpose.
- Significance: This case clarified the narrow scope of frustration, ensuring stability in contractual obligations despite external disruptions.
9. Krell v. Henry (1903) – Frustration of Contract
- Facts: A UK case influential in India, where the defendant rented a room to view a coronation procession, which was canceled. The defendant refused to pay, claiming frustration.
- Issues: Can cancellation of an event frustrate a contract? When is a contract’s purpose defeated?
- Principle: A contract is frustrated if its fundamental purpose is destroyed by an unforeseen event, discharging the parties from performance.
- Judgment: The court held the contract was frustrated, as the coronation was the contract’s sole purpose, relieving the defendant of payment.
- Significance: This case shaped frustration doctrine in India, applied to contracts dependent on specific events or conditions.
10. Tinn v. Hoffman (1873) – Cross Offers
- Facts: A UK case relevant to India, where two parties made identical offers to each other simultaneously, unaware of the other’s offer. A dispute arose over whether a contract was formed.
- Issues: Do cross offers constitute a valid contract? Is mutual acceptance necessary?
- Principle: Cross offers do not form a contract, as there is no acceptance of one offer by the other party; mutual communication of acceptance is essential.
- Judgment: The court held that no contract was formed, as neither party accepted the other’s offer with knowledge.
- Significance: This case clarified that simultaneous offers require explicit acceptance to create a binding contract, influencing Indian contract law on offer dynamics.
11. Felthouse v. Bindley (1862) – Silence as Acceptance
- Facts: A UK case adopted in India, where an uncle offered to buy his nephew’s horse, stating silence would be acceptance. The nephew intended to sell but did not respond, and the horse was auctioned.
- Issues: Can silence constitute acceptance of an offer? Is express acceptance necessary?
- Principle: Silence does not amount to acceptance under Section 7; acceptance must be express or implied through conduct, communicated to the offeror.
- Judgment: The court held no contract was formed, as the nephew’s silence was not acceptance.
- Significance: This case established that acceptance requires active communication, preventing unilateral imposition of contracts in India.
12. Nash v. Inman (1908) – Capacity of Minors
- Facts: A UK case influential in India, where a minor purchased clothing on credit. The supplier sued for payment, and the minor claimed incapacity.
- Issues: Is a minor liable for contracts for non-necessaries? What are a minor’s contractual obligations?
- Principle: A minor’s contract for non-necessaries is void, but contracts for necessaries (e.g., food, education) are enforceable to the extent of reasonable value.
- Judgment: The court held the contract void, as the clothing was not necessary given the minor’s existing supply.
- Significance: This case reinforced protections for minors in Indian law, limiting liability to essential goods and services.
13. Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) – Unconscionable Contracts
- Facts: Employees were terminated under a contract clause allowing dismissal without reason. They challenged the clause as unconscionable.
- Issues: Can a contract clause be voided for unconscionability? What constitutes unfair terms under Section 23?
- Principle: Contracts with unconscionable or grossly unfair terms, especially between parties of unequal bargaining power, are void under Section 23 as against public policy.
- Judgment: The Supreme Court struck down the clause, protecting the employees from unfair termination.
- Significance: This case expanded the scope of unconscionability, safeguarding weaker parties in employment and commercial contracts.
14. Shri Lachoo Mal v. Radhey Shyam (1971) – Free Consent
- Facts: A seller was coerced into selling property at a low price due to economic pressure from the buyer. The seller sought to void the contract for coercion.
- Issues: Does economic pressure amount to coercion? When is consent not free under Section 15?
- Principle: Consent is not free if obtained through coercion, including economic duress, rendering the contract voidable under Section 15.
- Judgment: The Supreme Court voided the contract, finding the seller’s consent was coerced.
- Significance: This case broadened the definition of coercion, protecting parties from exploitative agreements in India.
15. Allcard v. Skinner (1887) – Undue Influence
- Facts: A UK case relevant to India, where a woman donated property to a religious order under the influence of its leader. She later sought to recover it, alleging undue influence.
- Issues: Does undue influence vitiate consent? What constitutes undue influence under Section 16?
- Principle: A contract is voidable if one party, in a position of dominance, induces another to act against their interest, per Section 16.
- Judgment: The court held undue influence existed but denied relief due to delay in claiming.
- Significance: This case shaped undue influence principles in India, protecting vulnerable parties in fiduciary relationships.
16. M/S Alopi Parshad & Sons Ltd. v. Union of India (1960) – Damages for Breach
- Facts: The government breached a contract by failing to supply goods, causing the contractor losses. The contractor sued for damages.
- Issues: How are damages assessed for breach? Are speculative losses recoverable?
- Principle: Under Section 73, damages are awarded for losses naturally arising from the breach or reasonably foreseeable, excluding remote or speculative losses.
- Judgment: The Supreme Court awarded damages for direct losses but excluded speculative profits.
- Significance: This case refined the application of Section 73, ensuring fair compensation for contractual breaches.
17. Punjab National Bank v. Arura Lal Durga Das (1960) – Performance of Contract
- Facts: A bank failed to honor a cheque due to an internal error, despite sufficient funds. The account holder sued for breach of contract.
- Issues: Is failure to perform a contractual obligation a breach? What remedies apply?
- Principle: Under Section 37, parties must perform their contractual obligations; failure constitutes breach, entitling the aggrieved party to damages or specific performance.
- Judgment: The court held the bank liable for breach and awarded damages.
- Significance: This case underscored the importance of contractual performance, reinforcing bank accountability in financial agreements.
18. Indian Oil Corporation v. Amritsar Gas Service (1991) – Termination of Contract
- Facts: A distributorship agreement was terminated without notice, and the distributor sued for wrongful termination and damages.
- Issues: Can a contract be terminated without notice? What remedies apply for wrongful termination?
- Principle: Contracts terminable at will require reasonable notice unless specified otherwise; wrongful termination entitles the aggrieved party to damages.
- Judgment: The Supreme Court held the termination wrongful, awarding damages for loss of profits.
- Significance: This case established guidelines for contract termination, protecting parties from abrupt cancellations.
19. ONGC Ltd. v. Saw Pipes Ltd. (2003) – Public Policy and Arbitration
- Facts: A contract dispute led to an arbitral award, which ONGC challenged as violating public policy due to excessive damages.
- Issues: Can a contract or arbitral award be voided for violating public policy? What is public policy under Section 23?
- Principle: Contracts or awards contrary to fundamental policy, justice, or morality are void under Section 23, allowing judicial review.
- Judgment: The Supreme Court set aside the award, finding the damages disproportionate.
- Significance: This case expanded the public policy doctrine, ensuring fairness in contract enforcement and arbitration.
20. Adani Power v. Gujarat Electricity Regulatory Commission (2024) – Force Majeure
- Facts: In 2023, Adani Power sought to invoke a force majeure clause to avoid liability for non-supply of electricity due to coal shortages caused by global supply chain disruptions.
- Issues: Does a global supply chain disruption constitute force majeure? When can performance be excused?
- Principle: Under Section 56, force majeure clauses excuse performance if unforeseen events beyond control prevent fulfillment, provided the clause is explicit.
- Judgment: The Supreme Court upheld the force majeure claim, relieving Adani Power of liability.
- Significance: This 2024 ruling clarified force majeure applications in modern contracts, reflecting global economic challenges.
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Document Description: Major Legal Judgements for Contract Law for CLAT 2025 is part of Legal Reasoning for CLAT preparation.
The notes and questions for Major Legal Judgements for Contract Law have been prepared according to the CLAT exam syllabus. Information about Major Legal Judgements for Contract Law covers topics
like 1. Balfour v. Balfour (1919) – Intention to Create Legal Relations, 2. Carlill v. Carbolic Smoke Ball Co. (1893) – Offer and Acceptance, 3. Mohori Bibee v. Dharmodas Ghose (1903) – Capacity to Contract, 4. Hadley v. Baxendale (1854) – Damages for Breach, 5. Chinnaya v. Ramaya (1882) – Consideration, 6. Lalman Shukla v. Gauri Dutt (1913) – Offer and Communication, 7. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas (1966) – Communication of Acceptance, 8. Satyabrata Ghose v. Mugneeram Bangur & Co. (1954) – Frustration of Contract, 9. Krell v. Henry (1903) – Frustration of Contract, 10. Tinn v. Hoffman (1873) – Cross Offers, 11. Felthouse v. Bindley (1862) – Silence as Acceptance, 12. Nash v. Inman (1908) – Capacity of Minors, 13. Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) – Unconscionable Contracts, 14. Shri Lachoo Mal v. Radhey Shyam (1971) – Free Consent, 15. Allcard v. Skinner (1887) – Undue Influence, 16. M/S Alopi Parshad & Sons Ltd. v. Union of India (1960) – Damages for Breach, 17. Punjab National Bank v. Arura Lal Durga Das (1960) – Performance of Contract, 18. Indian Oil Corporation v. Amritsar Gas Service (1991) – Termination of Contract, 19. ONGC Ltd. v. Saw Pipes Ltd. (2003) – Public Policy and Arbitration, 20. Adani Power v. Gujarat Electricity Regulatory Commission (2024) – Force Majeure and Major Legal Judgements for Contract Law Example, for CLAT 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Major Legal Judgements for Contract Law.
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