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Bank of India v O.P. Swarnakar (2003) 2 SCC 721 [S.

2(a)]
Facts - A large number of employees (1,01,000 employees approx.) submitted their
applications out of whom a small number of employees (200 employees approx.) withdrew
their offer. Despite withdrawal of their offer the same was accepted. In some cases offers
despite withdrawal thereof were accepted within the period during which the scheme was
operative and in some beyond the same. The scheme was introduced by the banks with the
approval of the Board of Directors.
Held - We, therefore, have no hesitation in coming to the conclusion that the voluntary scheme was
not a proposal or an offer but merely an invitation to treat and the applications filed by the employees
constituted 'offer'. Once the application filed by the employees is held to be an 'offer'; Section 5, in
absence of any other independent binding contract or statute or statutory rules to the contrary would
come into play.
We are of the view that the High Court should not have rejected the writ application. It has not been
disputed anywhere that option stood withdrawn before it was accepted. The provision in the rule "an
option once used will be deemed to be final" would not mean that when an offer made it is not open to
be withdrawn before it is accepted. The respondent No.1 obviously acted under the wrong notion and
the High Court did not appreciate this aspect. We would accordingly hold that the appellant was
entitled to withdraw the option"

Lily White v Munuswami, AIR 1966 Mad 13 (doctrine of fundamental breach of contract)
Facts - On 13-5-1963, the plaintiff in the case gave a new saree (6 yards in length) and a blouse, to
the firm of the revision petitioners for dry cleaning. The revision petitioners undertook to dry-clean
the articles and to redeliver on 18-5-1963. Admittedly, the saree was never redelivered, and it must be
held that the garment has disappeared, though only negligence is alleged against revision petitioners
in this respect and, not mala fides. The plaintiff, in essence, claimed the market value of the entrusted
article. The defence to this action was a very curious one. On the reverse of the bill, which is
generally handed over by the firm to customers when receiving articles for dry-cleaning, certain
conditions are printed. Under condition No. 2, the customer was entitled to claim only 50 per cent of
the market price or value of the articles, in case of loss. The present action relates to the saree alone,
the blouse having been subsequently traced and recovered.

Held - The learned Judge observed that the condition relating to restriction of the claim to 50 per cent
to the market price, "is not enforceable on public grounds. a term which is prima facie opposed both
to public policy and to the fundamental principles of the law of contract, cannot be enforced by a
court, merely, because it is printed on the reverse of a bill and there is a tacit acceptance of the term
when the bill was received by the customer. if a condition is imposed, which is in flagrant
infringement of the law relating to negligence, and a bill containing this printed condition is served on

the customer, the court will not enforce such a term, which is not in the interests of the public, and
which is not in accordance with public policy.

Felthouse v Bindley (1862) 142 E.R. 1037. (silence amount to acceptance or not?)
Facts - Felthouse negotiated to purchase a horse from his nephew. There was a mix-up with the price, as
the uncle offered less than the nephew desired. The uncle gave a definite offer to the nephew in January,
however no response was given, and no actions were performed as the horse remained in the possession of
the nephew. In February the nephew sold all of his farm stock in an auction, and the horse, despite the
nephew's instructions that it be reserved, was sold. Felthouse sued the auctioneer, Bindley, in conversion to
recover the horse. Felthouse was successful at trial, receiving 33, which Bindley appealed.

Held - Willes,( agreed to the same by Byles and Keating) writing for a unanimous court, says that it is
clear here that nothing had been done at the time of the auction to imply that the property had changed
hands to the uncle, and the nephew had given no acceptance. Therefore, with no acceptance or implied
acceptance through actions the property remained that of the nephew at the time of the auction, and the
uncle has no case against the auctioneer for selling goods that were not owned by the nephew. If the
nephew wanted to enter into the contract he must have given clear indication of his acceptance, which he
had failed to do.

Acceptance cannot be assumed if there is no notification of acceptance, or implied acceptance


through action present.

You cannot impose obligations on an unwilling party.

Silence doesnt amount to acceptance.

Carlill v. Carbolic Smoke Ball Co.) 1 Q.B.D. (1893 256. [S. 2(a) and S.8]
It is an authority on the point and serves as a good illustration of acceptance by performing a
condition. The defendant company advertised that they would pay 1,000 pound to any person
who used their Carbolic Smoke ball for a certain time and yet contracted influenza. The
plaintiff purchased the medicine, used it for the stated time but contracted the disease. It was
held that the contract was accepted by being acted upon, that the defendant had not stipulated
for any communication of acceptance and therefore the plaintiff was entitled to recover the
amount.

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co., 1894 AC 535. (Agreement in
restraint of trade).

Avtar Singh Pg 282.


Henderson v Stevenson (1875) 2 Sc & Div 470.( Standard form of Contracts Reasonable
Notice)
Avtar Singh Pg 68.
L'Estrange v F Graucob Ltd [1934] 2 KB 394 (Standard Form of contracts Contract signed by
acceptor).

Facts - Miss Harriet Mary L'Estrange had a cafe in Great Ormes Road, Llandudno. Twotravelling
salesmen, Mr Page and Mr Berse, representing Mr Graucob's slot machine business in City Road, London,
came to visit her. She was persuaded to purchase a cigarette machine and signed a document entitled 'Sales
Agreement', stating:
"Please forward me as soon as possible: One Six Column Junior Ilam Automatic Machine .... which I agree
to purchase from you on the terms stated below..."
Further along, in small print, an exclusion clause was stated:
"This agreement contains all the terms and conditions under which I agree to purchase the machine
specified above, and any express or implied condition, statement, or warranty, statutory or otherwise not
stated herein is hereby excluded. .... (sgd.) H. M. L'Estrange."
She did not read the document. She was supposed to pay for the machine in installments. But after
machine was delivered it got jammed and did not work, despite mechanics coming to fix it. Miss
L'Estrange

thus

refused

to

continue

paying

her

installments

and

brought

an

action

in

the Carnarvonshire County Court at Llandudno for the sums already paid, arguing the machine was not fit
for purpose. Mr Graucob contended that any warranties for fitness were expressly excluded by the
contractual agreement she signed.

Held Avtar Singh Pg 71.

The claimant purchased a cigarette vending machine for use in her cafe. She signed an order
form which stated in small print 'Any express or implied, condition, statement of warranty,
statutory or otherwise is expressly excluded'. The vending machine did not work and the
claimant sought to reject it under the Sale of Goods Act for not being of merchantable quality.
Held:
In signing the order form she was bound by all the terms contained in the form irrespective of
whether she had read the form or not. Consequently her claim was unsuccessful.

Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., AIR 1966 SC 543.
Facts Avtar Singh Pg 34.
Held - The present is a case in which the proposer is claiming the benefit of the completion of the
contract at Ahmedabad. To him the acceptor may say that the communication of the acceptance in so
far as he was concerned was complete when he (the acceptor) put his acceptance in the course of
transmission to him (the proposer) so as to be out of his (the acceptor's) power to recall. It is obvious
that the word of acceptance was spoken at Khamgaon and the moment the acceptor spoke his
acceptance he put it in course of transmission to the proposer beyond his recall. He could not revoke
his acceptance thereafter. It may be that the gap of time was so short that one can say that the speech
was heard instantaneously, but if we are to put new inventions into the frame of our statutory law we
are bound to say that the acceptor by speaking into the telephone put his acceptance in the course of
transmission to the proposer, however quick the transmission. What may be said in the English
common law, (which is capable of being moulded by judicial dicta,) we cannot always say under our
statutory law because we have to guide ourselves by the language of the statute. It is contended that
the communication of an acceptance is complete as against the acceptor when it comes to the
knowledge of the proposer but that clause governs cases of acceptance lost through the fault of the
acceptor. For example, the acceptor cannot be allowed to say that he shouted his acceptance and
communication was complete where noise from an aircraft overhead drowned his words. As against
him the communication can only be complete when it comes to the knowledge of the proposer. He
must communicate his acceptance reasonably. Such is not the case here. Both sides admit that the
acceptance was clearly heard at Ahmedabad. The acceptance was put in the course of transmission at
Khamgaon and under the words of our statute I find it difficult to say that the contract was made at
Ahmedabad where the acceptance was heard and not at Khamgaon where it was spoken. It is plain
that the law was framed at a time when telephones, wireless, Telstar and Early Bird were not
contemplated. If time has marched and inventions have made it easy to communicate instantaneously
over long distance and the language of our law does not fit the new conditions it can be modified to
reject the old principles. But we cannot go against the language by accepting an interpretation given
without considering the language of our Act.
No doubt the authority of the Entores case is there and Lord Denning recommended an uniform rule,
perhaps as laid down by the Court of Appeal. But the Court of Appeal was not called upon to construe a
written law which brings in the inflexibility of its own language. It was not required to construe the words:
The communication of an acceptance is complete as against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of the acceptor.

38. Regard being had to the words of our statute I am compelled to hold that the contract was complete at
Khamgaon. It may be pointed out that the same result obtains in the conflict of laws as understood in
America and quite a number of other countries such as Canada, France, etc. also apply the rule which I
have enunciated above even though there is no compulsion of any statute. I have, therefore, less hesitation
in propounding the view which I have attempted to set down here.

Entores Ltd. v. Miles Far East Corporation [ (1955) 2 QBD 327]


that:
* * * where a contract is made by instantaneous communication, e.g. by telephone, the contract is
complete only when the acceptance is received by the offeror, since generally an acceptance must be
notified to the offeror to make a binding contract;
In Entores Ltd. case [ (1955) 2 QBD 327] the plaintiff made an offer from London by Telex to the
agents in Holland of the defendant Corporation, whose headquarters were in New York, for the
purchase of certain goods, and the offer was accepted by a communication received on the plaintiff's
Telex machine in London. On the allegation that breach of contract was committed by the defendant
Corporation, the plaintiff sought leave to serve notice of a writ on the defendant Corporation in New
York claiming damages for breach of contract. The defendant Corporation contended that the contract
was made in Holland. Denning, L.J., who delivered the principal judgment of the Court observed at p.
332: When a contract is made by post it is clear law throughout the common law countries that the
acceptance is complete as soon as the letter is put into the post box, and that is the place where the
contract is made. But there is no clear rule about contracts made by telephone or by Telex.
Communications by these means are virtually instantaneous and stand on a different footing.,and
after examining the negotiations made in a contract arrived at by telephonic conversation in different
stages, Denning, L.J., observed that in the case of a telephonic conversation the contract is only
complete when the answer accepting the offer was made and that the same rule applies in the case of a
contract by communication by Telex. He recorded his conclusion as follows:
* * * that the rule about instantaneous communications between the parties is different from the rule
about the post. 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.
Sachindra Nath v Gopal Chandra, AIR 1949 Cal 240. (S. 56 Commercial Hardship)
Facts Avtar Singh Pg 381
Held Avtar Singh Pg 381.
Metropolitan and water board v Dick Kerr Co. Ltd, 1918 AC 119. (Frustration of Contract due to
Government, administrative or legislative intervention)
Facts and Held Avtar Singh Pg 391.

Frost v Knight, (1872) 7 Exch 111. ( Contingent Contract S.34, Anticipatory Breach S. 39)
Facts and Held Avtar Singh Pg 345 and 437.
State of West Bengal v B.K. Mondal & Sons., AIR 1962 SC 779. (S. 70 Obligation for enjoying
benefit of non gratuitous act)
Facts and Held Avtar Singh Pg 549.

Mohori bibee v dharmodas ghose, ILR (1903) 30 Cal 539 (PC). (Contractual Capacity)
Facts - Agent of defendant advanced money to plaintiff, an infant, fully knowing his incompetency to contract,
against mortgage of property belonging to latter. Plaintiff commenced this action to get the mortgage declared as
void u/s 2, 10 and 11 of ICA and repossession of property thereunder conveyed to defendant.

Held - Laying emphasis on true literal construction of Indian Contract Act, notwithstanding the rules as to
enforceability of contracts entered into by minors, Supreme Court held that unless the parties are competent to
contract as u/s 11, no agreement is contract as u/s 10 and hence, is not enforceable by law u/s 2(h) and is void
u/s 2(g). Since minor is not competent to contract u/s 11, hence every such agreement entered into by a minor
is void ab initio (void from the very inception). Even u/s 68, a minor is deemed as incompetent to contract and is
not to be personally liable for any necessaries supplied to him, albeit a statutory claim is created against his
property.

D & C Builders v. Rees, (1966) 2 QB 617 CA: (1966) 2 WLR 28 Court of Appeal
(S.16 Undue influence through economic duress)
Facts - Mr Rees instructed the claimant to do some building work at his home to the value of
746. Mr Rees paid 250 on account and the claimant reduced the bill by 14 and there was a
sum owing of 482. The claimant wrote to the defendant several times pressing for payment
but was unsuccessful there had been no complaints as to the workmanship at this time. The
claimant at the time was in dire financial need and the business was verging on bankruptcy a
fact that Mrs Rees was aware of. The defendant telephoned the home and Mrs Rees answered
she made complaints about the work and said she would give them 300 in satisfaction of the
whole debt. The defendant refused and said he would take the 300 and give her a year to
clear the balance. He called at the house to collect the money but Mrs Rees remained firm
that she would only pay 300 and demanded that the defendant wrote on the receipt 'in
completion of the account' otherwise she would pay him nothing. The defendant needed the
money immediately so reluctantly agreed to write this on the receipt but stated he fully
intended to pursue the balance as the money paid did not cover the costs he had incurred. He
subsequently brought an action to recover the balance. The defendant sought to rely on
estoppel relying on the written receipt as demonstrating a promise to accept the lesser sum.

Held: The claimants were successful. Mrs Rees could not rely on estoppel as there was no
true agreement to accept less and because Mrs Rees had taken advantage of the builder's
position and mislead them as to her financial position.
Lord Denning MR, Danckwerts LJ and Winn LJ delivered judgment

Allcard v Skinner, (1887) 36 Ch D 145. (S.16 Undue Influence).


Facts - Miss Allcard was introduced by the Revd Mr Nihill to Miss Skinner, a lady superior of a religious
order named "Protestant Sisters of the Poor". She had to observe vows of poverty and obedience. Three
days after becoming a member, Miss Allcard made a will bequeathing all property to Miss Skinner, and
passed on railway stock that she came into possession of in 1872 and 1874. She then claimed the money
back after she left the sisterhood.
Held In this class of cases it has been considered necessary to show that the donor had independent

advice, and was removed from the influence of the donee when the gift to him was made. and The
[the courts of Equity] have not shrunk from setting aside gifts made to persons in a position to
exercise undue influence over the donors, although there has been no proof of the actual exercise of
such influence; and the courts have done this on the avowed ground of the necessity of going this
length in order to protect persons from the exercise of such influence under circumstances which
render proof of it impossible. The courts have required proof of its non-exercise, and failing that
proof, have set aside gifts otherwise unimpeachable. The mere existence of the influence is not
enough: But if the gift is so large as not to be reasonably accounted for on the ground of friendship,
relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the
donee to support the gift.

Dunlop Pneumatic Tyre Co. & Selfridge Co., (1915) AC 847. (S.2(d) Privity of Contract).
Facts - Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for
tyres at a discounted price on condition that they would not resell the tyres at less than the listed
price and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower
price either. Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to
sell at a lower price either and that they would pay 5 in damages if they violated this agreement.
Selfridge proceeded to sell the tires below the price he promised to sell them for. Dunlop brought
action and was successful at trial but this was overturned by the Court of Appeal

Held - Only parties to a contract can sue for a breach of the contract.

The only exception to this rule is if a party named in the contract was acting as an agent
of an unnamed party; in this case, the unnamed party can be sued.

Chinnaya v. Ramayya, (1882) 4 Mad 137. (S.2(d) Privity of Consideration).


Avtar Singh Pg 111

Balfour v Balfour, (1919) 2 KB 571. [S.4 Intention to create legal relations].


Avtar Singh Pg 12.

Raja of Bobhili v Suryanarayan Rao, (1917) 1 LR 42 Mad 776. ~ (S.5 Revocation of Bid)
Facts - The decree under execution was for over Rs. 250,000 and eight villages of a zamindari
belonging to the judgment debtors, here respondents, were put up for sale in one lot on 27-9-1918.
The sale was continued from that date until 22-10-1918, when other bidders having dropped out,
competition was confined to the Rajah of Bibbili, the petitioner and appellant here, and one Perla
Ramamurthi Chetty. On that date the former by his Muktyar or agent bid Rs. 325,000. On 28-10-1918,
however the Cheety bid Rs. 326,000. The sale was then continued unit 5-11-1918, although no further
bids were received, apparently in compliance with the requests of the Rajah and the Chetty contained
in two of the telegrams marked as Ex. III. Meanwhile news was received of the Chetty's death and on
the date last mentioned an adjournment to the next day was granted to enable his widow to bid; and
there were further adjournments until 18-11-1918, when the Subordinate Judge held quite correctly
that the Chetty's bid was revoked by his death. He, however, decided to go on with the sale from the
bid of the Rajah as the highest before him. No other bid being made, he at once knocked down the
property in the Rajah's favour on his last bid of Rs. 325,000 granting him time until the next evening
to pay the necessary deposit. As it was not paid by 20-11-18, he held that a default was established
and directed the resale of the property forthwith at the Rajah's risk. The re-sale went on until 27-1118, when the present proceedings had been initiated and a stay order was passed by this court.
Held - The result is that the appellant's offer, which was made on the 22nd of October 1918 not
having been accepted within a reasonable time, was no longer in existence. This result would follow
even if there were no higher offers than his. The acceptance of the conclusion of the Subordinate
Judge must lead us to hold that every bid at an auction sale is a sub-sisting offer which can be
converted into a contract at the option of the auctioneer at any moment of time. The theory that every
bid is a contract has been repudiated long ago in England, see Warlow v. Harrison (1859) 1 Ellis &
Ellis 309 and is not law in this country. The reasoning in the above case applies against accepting the
position that every bid is a subsisting offer. I have therefore come to the conclusion that the decision
of the Subordinate Judge is wrong from every point of view.

Rose & Frank Co v Crompton Bros [1925] AC 445


House of Lords
Facts - The claimants and defendants entered an agreement for the supply of some
carbonised tissue paper. Under the agreement the claimants were to be the defendant's sole
agents in the US until March 1920. The contract contained an honourable pledge clause
which stated the agreement was not a formal or legal agreement and shall not be subject to
the jurisdiction of the courts in neither England nor the US. The defendants terminated the
agreement early and the claimants brought an action for breach.
Held: The honourable pledge clause rebutted the presumption which normally exists in
commercial agreements that the parties intend to be legally bound by their agreements. The
agreement therefore had no legal affect and was not enforceable by the courts.
Williams v Roffey Bros. & Nickolls (Contractors) Ltd., (1990) 1 All ER 512. [S.2(d)
Performance of pre existing legal duty]
The defendants were building contractors who entered an agreement with Shepherds Bush
Housing Association to refurbish a block of 27 flats. This contract was subject to a liquidated
damages clause if they did not complete the contract on time. The defendants engaged the
claimant to do the carpentry work for an agreed price of 20,000. 6 months after commencing
the work, the claimant realised he had priced the job too low and would be unable to
complete at the originally agreed price. He approached the defendant who had recognised that
the price was particularly low and was concerned about completing the contract on time. The
defendant agreed to pay the claimant an additional 575 per flat. The claimant continued
work on the flats for a further 6 weeks but only received an additional 500. He then ran out
of money and refused to continue unless payment was made. The defendant engaged another
carpenter to complete the contract and refused to pay the claimant the further sums promised
arguing that the claimant had not provided any consideration as he was already under an
existing
contractual
duty
to
complete
the
work.
Held:
Consideration was provided by the claimant conferring a benefit on the defendant by helping
them to avoid the penalty clause. Therefore the defendant was liable to make the extra
payments promised.

Zaheer Khan v Percept DMark India (P) Ltd.


Facts - Defendant entered into a contract for management of his media affairs with the plaintiff company on
the term that prior to the completion of first negotiation period and thereafter, plaintiff will have the right of
first refusal in regard to any offer for services of management of media affairs received by defendant; such that
defendant cannot accept any third party offer without offering plaintiff right to match the offer on same terms
and in plaintiffs failing to do so. However, defendant entered into an agreement with third party after the
termination of the said agreement and plaintiff claimed permanent injunction.

Held - The contract of agency as one entered here between the parties is of personal in nature such that forcing
the negative covenant will mean compelling the defendant to get his affairs managed by the plaintiff company
even after the initial agreement has not been breached and has been lawfully terminated; this will be in restrain
of his right to trade with any person in any manner he chooses. So long as it is sought to enforce the covenant
while the subsisting of the agreement it is valid, but the moment it is sought to be enforced after the contract has
been terminated, it will be violative of S.27 and hence, void and unenforceable.

Superintendence Co. of India Ltd. v K. Murgai, (1981) 2 SCC 246.


Facts - On March 27, 1971, the respondent was employed by the appellant company as the
Branch Manager of its New Delhi office on terms and conditions contained in the letter of
appointment issued to him on the same date. Clause (10) of the terms and conditions of
employment placed the respondent under a post service restraint that he shall not serve any
other competitive firm nor carry on business on his own in similar line as that of the
appellant company for two years at the place of his last posting. On November 24, 1978, the
appellant company terminated the respondent's services with effect from December 27, 1978.
Thereafter, respondent started his own business under the name and style of "Superintendence
and Surveillance Inspectorate of India" at E-22 South Extension New Delhi on lines
identical with or substantially similar to that of the appellant company. On April 19, 1979
the appellant company brought a suit in the Delhi High Court on its original side, claiming
Rs. 55,000/- as damages on account of the breach of negative covenant contained in clause
(10); and for permanent injunction restraining the respondent by himself, his servants,
agents or otherwise, from carrying on the said business or any other business on lines

similar to that of the appellant company or associating or representing any competitors of


the appellant company before the expiry of two years from December 27, 1978.

Held - 1. Assuming that the negative covenant contained in


clause (10) of the service agreement is valid and not hit by
section 27 of the Indian Contract Act, it is not enforceable
against the respondent at the instance of the appellant
company. The appellant company should have taken care to use
appropriate language, while incorporating such restrictive
covenant so as

to include every case of cessation of

employment arising from any reason whatsoever and not used


the expression

"leave", which normally is synonymous to the

expression "quit" and indicates voluntary act on the part of


the employee. [1285 F, 1287 A, B-C]
(2) The word "leave" has various shades of meaning
depending upon

the context or intent with which it is used.

According to the plain grammatical meaning that word in


relation to an employee would normally be construed as
meaning voluntary leaving of the service by him and would
not include a case where he is discharged or dismissed or
his services are terminated by his employer. Ordinarily, the
word connotes voluntary action.
[1286-D]
(3) In the instant case, having regard to the context
in which the expression leave occurs in clause (10) of the
service agreement and readingit alongwith all the other
terms of agreement, it

is clear that the word "leave" was

intended by the parties to refer to

a case where

the

employee voluntarily left the services of his own.

Taylor v Laird
In Taylor v Laird (1856) the captain of a ship resigned during a voyage. The former captain provided
navigation services for the remainder of the voyage even though this had not been requested by the
owner of the ship. The former captain later claimed in the courts for proper remuneration for his
services from the owner. The captain had not communicated his offer to provide such services. As

such the owner did not have the opportunity to refuse or accept the offer as he had no knowledge of
its existence. There was no binding contract.