law of contracts by avtar singh.pdf

law of contract book

1. r
Avtar
CONTRACT
°O&SPECIFICRELIEF
1
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AvtarSingh
24616409,0110525171'
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www.iawrels.com
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IfOlKPt?55l1C?m,TI!«WofflT?IJS.DoW«Ami,,
TwelfthEditionhttps://t.me/LawCollegeNotes_Stuffs

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4. By the sameauthor.
LawofArbitrationandConciliation
LawsofBankingandNegotiableInstruments
LawofCarriage(Air,LandandSea)
BusinessLaw(PrinciplesofMercantileLaw)
IntroductiontoCompanyLaw
CompanyLaw
CompetitionLaw
ConsumerProtection:LawandPractice
ContractLaw(EasyLawSeries)
TextbookonLawofContractandSpecificRelief
LawofInsolvency
LawofInsurance
IntellectualPropertyLaw-
NegotiableInstruments
IntroductiontoLawofNegotiableInstruments
LawofPartnership(Principles,Practice&Taxation)
IntroductiontoPartnership(includingLimitedLiabilityPartnership)
LawofSaleofGoods
P.S.A.PiLLAi'sLawofTort[Ed]
WorksinHindi:
BankKariVidhievamParkramyaLikhatAdhiniyam
BhagidariVidhievamSeemitDayetavBhagidariAdhiniyam
CompanyVidhi
CompanyVidhi(EkParichay)
Madhyastham,SulahevamAnukalpiVivadNiptanVidhi
MalVikrayaevamAvkrayaVidhi
ParkramyaLikhat
SamvidaVidhiKeSidhantTathaVinirdishtAnutoshAdihiniyam,1963
SamvidaVidhiEvamVinirdishtAnutoshAdhiniyam—EkParichay
VanijyikVidhikeSidhant
ViDHiKUpchar—LegalRemedieshttps://t.me/LawCollegeNotes_Stuffs

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7. LAWOFCONTRACT
(A Study of theContractAct, 1872)
and
SpecificRelief
DrAvtarSingh
Advocate
BCom,LLM,LLD,(Lucknow),
SaraswatiSamman(UPGovt.)
VidyaBhushan(HindiSansthan,UP)
Ex-VisitingProfessorof Business Laws,
IIM,Lucknow
Ex-Readerin Law,LucknowUniversity
LucknowIDelhi|Allahabad
Bangalore|Ahmedabad|Nagpurhttps://t.me/LawCollegeNotes_Stuffs

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9. Preface
TheContractAct, 1872 provides the legalframeworkforformulationof
trade,businessandcommercialrelationsandtransactionsinwhichcontract
is involved. It hascompleteditshistoryof 144 years. The provisions of the
Act and principlesenshrinedthereinand theapplicationof suchprinciples
by the courts to enormous and ever changingfact-situationsconstitutethe
body of the Law ofContractof thecountry.
Thecourtdecisions provide the basic sourcematerialofdevelopmentof
this subject and also for findingouttherecenttrends,some of theimportant
rulingsof theperiodbetweenthepresentandprecedingeditionsare to be
seen in thefollowingareas of the subject: Acontractmeansbilateralrela
tions,not just onlyunilateral.Butexceptionally,one of thepartiesmay be
given therightto dothingsunilaterally,e.g., abankerwas given the right
toappointanarbitratorall by himself under the loanarrangement.This
special position may be allowed toprotectthe interest of lending bankers.
An agreement entered into by the e-mail process has binding effect,
thoughnot signed byparties.Some new decisions have been delivered on
withdrawalof bids.Nobiddercaninsistthathis bidshouldbeaccepted
because it is the lowest. Allthathe can say isthatthereshouldbe no bias,
and thereshouldbe fairness, in thedecision-makingprocess.The mere
deposit of 20 per cent of the bidamountdoes not make the bidder owner of
the property. He has to wait for approval of his bid. Letters ofintentthatthe
tenderwouldbe accepted doesnothavebindingeffect either way. Acontrac
tor can be blacklisted only because of gravemisperformanceof thecontract,
notbecauseof hisimproprietyatthestage of bids ortenders.
No binding obligation emerges on thepartof theGovernmentwhere the
contractis inconflictwithconstitutionalprovisions.Wheretheownerof
landhadenjoyedconsiderablebenefitsafterhislandwas freed from acqui
sitionandbeforeit wastransferredto theGovernmentforschoolmaking
purposewithoutprice, he was not allowed to assail thetransactionby say
ingthatit waswithoutconsideration.Mortgagein favour of aminoris void
ab initio. Alienation by de factoguardianof minor's land was reversible
at theinstanceof theminoronattainingmajorityand the pricepaidwas
[VII]https://t.me/LawCollegeNotes_Stuffs

10. VIIILawofContract
recoverable from theguardianand not the minor.Beneficialrights under
the Employees' StateInsuranceActcannotbecontractedout.Controllers
of Cricket cannot have an interest in the eventsorganised by the Board. It is
somethingawfullyagainstpublic policy.
Restraintupon a formeremployeeas a ladies hairdresser frompractising
the same professionfor 12 months and within half a mile of the employer's
place has been held to bereasonable.An arbitration agreement restraining
partiesfromapproachingcourtover the same issue has been held to benot
opposedto public policy or being inrestraintoftrade.A LokAdalatisnota
court.Restrictionsuponjurisdictionare not applicable to it. Acontractfor
CCTV servicesat Railway stations which happen to display vulgar material
was terminated. The forfeit of the whole of his deposit moneymight be ruin
ous to him whereas the Railway's loss was not ofmonetarynature.
A bank guarantee was not allowedto beencashedbecausethe Authority
had made good its losses otherwise. The controversial point whether the
surety alone be allowed to be sued without touching the principal debtor
though the latter is in possessionof means which comfortably enable him to
pay, continues to engageattentionof thecourts.The right to encash abank
guarantee was held to have been lost when the contract had expired without
encashment of the bank guarantee.Pledgee'sright for his dues prevails over
all other rights andclaims.IfanLICagent does not deposit the amount
receivedby him from the insured, LIC has to bear theconsequences.
Privity of contract is necessary for seekingspecificperformance. A con
tract requiring a retrospective date for execution was held to be not specif
icallyenforceable.Specificenforcementcannot beclaimedagainsta person
who isdevoidof title or any right to transfer: Nemo dat quod non habet. A
person whobecomesentitled tospecificperformance alsobecomesentitled
to an injunction to prevent the otherpartyfrom dealing with theproperty
inanymannerwhatsoever.
All these and many more rulings have been absorbed into the text at their
aippropriateplaces.
Ghaziabad —DrAvtarSingh
October3,2016https://t.me/LawCollegeNotes_Stuffs

11. BriefContents
Section-wiseContents xxxvii
TableofCases XLiii
PartI
GENERALPRINCIPLES
1. Agreement,ContractandProposal 1
2.Acceptance 24
3.Consideration 103
4.CapacitytoContract 153
5.FreeConsent 176
6.Mistake ' 226
7.LegalityofObject • • • •255
8.DischargeofContract 351
9.Dischargeby Breach 450
10.CertainRelationsResemblingThose
CreatedbyContract 558
[IX]https://t.me/LawCollegeNotes_Stuffs

12. XLawofContract
PartII
SPECIFICCONTRACTS
11.ContractofIndemnity 591
12.Guarantee 599
13.Bailment 671
i
14.Pledge 714 ]
15.Agency 736
PartIII
LAWOFSPECIFICRELIEF
16. SpecificRelief Act, 1963 841
SubjectIndex 965https://t.me/LawCollegeNotes_Stuffs

13. Contents
Section-wiseContents xxxvii
TableofCases XLiii
PartI
GENERALPRINCIPLES
(Ss.1-75)
1.Agreement,Contractand
Proposal
Definitionofcontract 2
Agreement 3
Whenagreementbecomes
contract 3
Bilateralrelation,not
unilateral 4
Contractas civilobligation. . 5
Proposalor offer 5
Communicationofproposal. 6
Impliedproposals 6
Communicationwhen
complete 10
Intentiontocontract 11
Familyandsocialmatters. . 12
Objectivity,notsubjectivity,
testofcontractualintention13
Businessmatters 14
SupremeCourt'sview of
requirementof"intention". 16
Lettersofintent 16
Generaloffers 17
Proposalsacceptableby
conduct 18
Generaloffer ofcontinuing
nature 19
Agreement,Contractand
Proposal{contd.)
Offerandinvitationtotreat...19
Cataloguesand display of
goods 21
Announcementtohold
auction 22
Definiteness ofproposal....23
Freedistributionofarticles.23
2.Acceptance 24
Definition 24
Communicationofacceptance
Acceptancebyexternal
manifestationorovertact
Acceptancebyconduct.
Communicationtoofferor
himself
Offercannotimpose
burdenofrefusal....
Communicationbyacceptor
himself. .i
Whencommunicationnot
necessary
Modeofcommunication
24
24
25
27
28
28
28
30
[XI]https://t.me/LawCollegeNotes_Stuffs

14. XIILawofContract
Acceptance(contd.)
Acceptanceshouldbe
made inprescribed
manner 30
Effect ofdeparturefrom
prescribedmanner 31
Wherenomanner
prescribed:reasonable
andusualmanner 31
Whencontractconcluded
(postalcommunication)...32
Differencebetween
EnglishandIndianlaws . 34
Whenpartiesindirect
communication 34
SupremeCourtapproval
of"Entorescase" 36
Absoluteandunqualified.....36
Counterproposals 37
Partialacceptance 38
Inquiryintotermsof
proposal 38
Someinstances 39
Acceptancewithcondition
subsequent 40
Acceptanceofcounter
proposal 41
Provisionalacceptance 42
Provisionalortentative
arrangements 43
Acceptanceandwithdrawal
oftendersandbids 44
Noobligationto accept
tenderorlowesttender. .49
Letterofintentto
accept 52
Liabilityforfailureto
considertender 52
Refundofearnestmoney . 54
Non-compliancewith
Requirements 54
Tenderwithconcessional
rate 55
Certaintyofterms 56
Governmentcontracting...56
Acceptance[contd.)
Preventingfromtendering
andblacklisting 57
Lapse of offer 57
1.Noticeofrevocation 58
Withdrawalbeforeexpiry
offixedperiod 59
Acceptanceofproposal
underVoluntary
RetirementScheme
[VRS] 60
Agreementto keep offer
openforspecifiedperiod61
Communicationof
revocationshouldbe
fromoffererhimself....62
Revocationofgeneral
offers 62
Supersedingproposalby
freshproposal 63
Cancellationofallotment
ofland 63
Revocationofbid 63
2. Lapse of time 66
3. By failure to accept
conditionprecedent 67
4. Bydeathorinsanityof
offerer 67
Revocationofacceptance 68
Jurisdiction 69
Standardformcontracts 69
Exploitationofweakerparty69
Protectivedevices 70
1.Reasonablenotice 70
Differencebetween
contractualdocuments
and receipts, etc 72
Contractsigned by
acceptor 74
Noticeofunusualterms. .76
2.Noticeshouldbe
contemporaneouswith
contract 77
Imputednotice 78https://t.me/LawCollegeNotes_Stuffs

15. Acceptance(contd.)
3.Theoryoffundamental
breach 79
"Core"ofcontract 79
Departurefrommain
purpose 80
Ruleofconstruction 81
Definitionofbreachin
UnfairContractTerms
Act 85
Resortto"fundamental
breach"no longer
necessary 85
4.Strictconstruction 86
Contraproferentem 87
Interpretationof price
reviewandescalation
clauses 90
Purposiveinterpretation91
5.Liabilityintort 92
Liabilityfor negligence...92
6.Unreasonableterms 92
Statutorydefinitionof
reasonableness 94
Removalsimpliciter
clausesincontractsof
employment 95
Compromiseofexisting
contract 96
7.Exemptionclausesand
thirdparties 96
UnfairContractTermsAct,
1977(UK) 98
Exclusion ofrightofset-off101
Exclusionclausesand
disclaimer 101
Discretiontolendertoset
interestrates 102
3.Consideration 103
Definitionandits
requirements 103
"Atthedesireofthe
promisor"(promissory
estoppel) 105
ContentsXIII
Consideration{contd.)
Acts done atrequest. . .
Promisesofcharitable
nature
Unilateralpromises. . .
Revocationofunilateral
promises
Promissoryestoppeland
Governmentagencies.
Estoppelof licensee . . .
105
106
108
109
109
110
Privityofcontractandof
consideration Ill
"Promiseeor anyother
person" Ill
Position of beneficiary
wrhoisnotparty 112
Fundamentalpropositions
ofEnglishLaw 113
Privityofconsideration...113
Privityofcontract 114
PositioninIndia:
Decisionsfollowing
EnghshLaw 117
Decisionsnotfollowing
EnghshLaw 118
SupremeCourtupholds
privity 119
Exceptionstoprivityrule. . 120
1.Beneficiariesunder
trustorchargeorother
arrangements 120
2.Marriagesettlement,
partitionorother
familyarrangements. 122
3.Acknowledgmentor
estoppel 123
4.Covenantsrunning
withland 124
"...Hasdoneorabstained
fromdoing..." 124
Pastconsideration 124
Pastactatrequestgood
consideration 125
PositioninIndia 126
1.Pastvoluntaryservice.126https://t.me/LawCollegeNotes_Stuffs

16. XIVLawofContract
Consideration(contd.)
2.Pastserviceatrequest126
Pastandexecuted
consideration 127
Executoryconsideration...128
"Suchact,abstinence
orpromiseis called
consideration" 128
Considerationmustbeof
somevalue 128
Valueneednotbe
adequate(adequacy of
consideration) 130
Inadequacyas evidence of
imposition 131
Forbearancetosue 131
Compromisegood
irrespectiveof merits....133
Performanceofexistingduties 133
Performanceof legal
obligations 133
Performanceofcontractual
obligations 135
A.Pre-existingcontract
withpromisor 135
Promise to pay lessthan
amountdue 138
Exceptionsto the rule in
"Pinnelcase" 138
1.Part-paymentby
thirdparty 139
2.Composition 139
3.Paymentbeforetime139
4.Promissoryestoppel139
PositionunderIndian
ContractActdifferent.143
B.Pre-existingcontract
withthirdparty. . . 143
Considerationandmotive.145
Absenceofconsideration. .146
Exceptionstoconsideration. . 146
Contractsundersealin
EnghshLaw 146
Exceptionsunder
Section25,ContractAct.146
Consideration{contd.)
1.Naturalloveand
affection 147
2.Pastvoluntaryservice . 149
3.Time-barreddebt....150
Giftactuallymade[S. 25
(Expln.I)] 152
Inadequacyofconsideration
[S. 25(Expln.II)] 152
4.CapacitytoContract....153
Minor 153
Age ofmajority 153
Natureofminor's
agreement 154
Effectsofminor's
agreement 156
1.Noestoppelagainst
minor 156
2.Noliabilityincontract
or intortarisingout of
contract 157
3.Doctrineofrestitution158
Minorseeking relief,
compellabletorestore. 159
Amendedprovisionsin
theSpecificRelief Act,
1963 162
Beneficialcontracts 163
Contractsofmarriage. . 166
MarriageofMuslim
minorgirl 167
Contractsof
apprenticeship 167
Tradecontractsnot
includedinbeneficial
contracts 168
Optiontoretirefrom
beneficialcontractson
majority 168
Ratification 168
Liabilityfornecessaries
[S. 68] 170
Meaningof"necessaries"170
Natureofliability 172https://t.me/LawCollegeNotes_Stuffs

17. CapacitytoContract{contd.)
Personsofunsoundmind....172
English Law 172
PositioninIndia 174
Disabilityat thetimeof
agreement 174
5.FreeConsent 176
Definitionoffreeconsent
[S. 14] 176
Vitiatingfactorsandtheir
effect 176
Coercion 177
Definition[S. 15] 177
Techniques of causing
coercion 177
ActsforbiddenbyIPC. . 177
Detentionofproperty. . 179
ComparisonwithEnglish
Law 179
Undueinfluence 180
Definition[S. 16] 180
Abilitytodominatewill of
other 181
Consentunderpressure. 181
Subtle species of fraud . . 181
Relationswhichinvolve
domination 182
Real orapparent
authority 183
Fiduciaryrelation 183
Mentaldistress 184
Urgentneed of money, no
distress 185
Statutorycompulsion,no
distress 185
Burden ofproof 185
Presumptionofundue
influence 186
1.Unconscionablebargains,
inequalityofbargaining
poweroreconomic
duress 187
Unconscionableness....187
FreeConsent{contd.)
Someinstancesof
unconscionableness
Unconscionableness
inmoneylending
transactions
Positionofdominance
necessaryfor
presumptiontoarise
Unconscionablegifts
Relationshipofblood,
marriageoradoption
notsinequanon 191
Inequalityofbargaining
power
Influencedistinguished
frompersuation 193
Economicduress by
forcingrenegotiationof
terms 194
Exploitationof needy...195
Techniqueofjudicial
interventioninunfair
bargains 196
Rescuingemployees
andothersfrom
unreasonableterms
Naturaljustice
2.Contractswith
pardanashinwomen.
Rescission[S.19-A]. . .
Misrepresentation[S. 18] .
Definition
1.Unwarrantedstatements
2. Breach ofduty
3.Inducingmistakeabout
subject-matter
Suppressionofvitalfacts
Ofmaterialfacts
Expressionofopinion. .
Representationofstate
ofmind
Changeofcircumstances
Inducement
Meansofdiscoveringtruth
ContentsXV
187
188
188
189
192
197
198
198
200
200
200
200
202
203
204
205
206
207
207
208
209https://t.me/LawCollegeNotes_Stuffs

18. XVILawofContract
FreeConsent(contd.)
Fraud 210
Definition 210
Assertionoffactswithout
beliefintruth 211
Activeconcealment 212
Meresilenceisnofraud. . .212
Misdeclarationin
applicationform 213
Whensilenceisfraud 213
1.Dutytospeak
(contractsuberrima
fides) 213
2.Wheresilenceis
deceptive 215
3.Changeof
circumstances 215
4.Half-truths 215
Promisemadewithout
intentionofperforming. . 216
Any other act fitted to
deceive 217
Anyactoromission
specially declared to be
fraudulent 217
Distinctionbetweenfraud
andmisrepresentation. . . 217
Limitsofrescission[Ss. 19
andl9-A] 218
Loss ofrightofrescission220
1. Byaffirmation 220
2. By lapse oftime 221
3.Interventionofrights
ofthirdparties 221
Modeofrescission 221
Restitution 222
Damagesforinnocent
misrepresentation 224
Rescissionforfailureto
performwithintime
[S. 75] 225
6.Mistake 226
Definitionof"consent"[S. 13]226
Definitionof"mistake" 226
Supplementaryprovisions.227
Mistake{contd.)
Whatfactsareessential 227
Mistakeas toidentity 228
Assumptionof false
identity 228
Mistakecausedbytakeover
ofbusiness 228
Mistakeofidentitycaused
byfraud 229
Distinctionbetweenidentity
andattributes 230
Wherefrauddoesnotlead
tomistakeofidentity....232
Whereidentityspecially
important 233
Mistakeas tosubject-matter.234
1.Non-existent
subject-matter 234
2.Mistakeastotitle
orrights 235
3.Differentsubject-matters
inmind 237
4.Mistakeastosubstance
ofsubject-matter 237
Mistakeas toquality
ofsubject-matteras
distinguishedfrom
substance 239
Misapprehensionas to
parties'respectiverights. . 241
Mistakeastonatureof
promise 243
Wherethecontractfailsto
expressparties'intention.245
Documentsmistakenly
signed ornonestfactum. 247
Limitations 250
1.Mistakeofbothparties. 251
2.Erroneousopinionabout
value ofsubjectmatter. . 253
3.Mistakeoffactandnotof
law 254https://t.me/LawCollegeNotes_Stuffs

19. 7. Legality ofObject 255
Unlawfulagreements 255
Object andconsideration. . 256
1.Forbiddenby law 257
Violationoflicencesand
permits 257
Violationofenactments.260
Assignment ofcopyright262
Stay order 262
2.Defeatany law 262
Law offriendlycountry. 263
Innocentviolations 264
Scope of the term "law" . 265
Moneyandproperty
involvedintransactions
defeatinglaw 265
Agreement to evade
taxes 266
Undercuttingofstatutory
privileges 266
3.Fraudulent 267
4.Injurioustopersonor
property 268
Fruitsofcrime 269
5.Immoral 269
Interferenceinmarital
relations 269
Dealings withprostitutes270
Illegal cohabitation....270
Dancing girls 272
"Immorality"to be
limitedtosexoutside
marriage 272
6. Public policy 272
Observationsin English
Lawaboutpublic policy 272
Indiancasesadopting
English view 273
Surrenderofrights 274
Marriageof minor girl . . 275
Paymentout of black
money 275
Grabbing of privileges by
extraneousinfluences. .276
Priceescalationand
interestclauses 276
ContentsXVII
Legality of Object(contd.)
Agreementscontraryto
public policy of friendly
foreignstate 277
Alienationoflandby
memberofdepressed
class 278
Chitty 278
Arbitrationaward
inducedbyfraudor
corruption 279
Things done under
statutoryprovisions ...279
Divorce bymutual
consent 279
Heads of public policy . . 279
1.Tradingwithenemy 279 .
2.Traffickingin public
offices 280
3.Interferencewith
administrationof
justice 280
(a)Interference
withtheCourse
ofJustice 280
(b) Stifling
prosecution....280
(c)Maintenanceand
champerty.....282
4.Marriagebrokage
contracts 284
5.Unfair,unreasonable
orunconscionable
dealings [Dealings
withemployees]...285
Surreptitious transfer of
shares 286
Partieswithmatching
bargainingpowers....287
Void agreements 288
Agreements in which apart
ofconsiderationorobject
isunlawful 288
Agreementswithout
consideration[S. 25]....290https://t.me/LawCollegeNotes_Stuffs

20. XVIIILawofContract
LegalityofObject{contd.)
Restraintofmarriage
[S.26] 290
Restraintoftrade[S. 27]....291
Protectionoffreedomof
tradeandcommerce 291
Allrestraintscovered
whetherpartialor
general 291
Developments in English
Law 292
GeneralprincipleinIndia.
andEnglandsame 293
"Profession,tradeor
business" 294
Knock-outagreements....296
Restrictionsfor longperiod297
Restrictionuponuse of
trademark 297
Restrictionsinlease 297
Exceptions 298
Statutoryexceptions 298
1. Sale ofgoodwill 298
Meaningof
good-will 298
Limitsofrestraint. .299
2.PartnershipAct 300
Under judicial interpre
tation 300
1.Tradecombinations. .300
2.Solusorexclusive
dealingagreements. . . 302
3.Restraintsupon
employees 306
Restraintsduring
employment 306
Restraintsafter
terminationof
employment 308
Recovery oftraining
expenses 309
Protectionoftrade
secrets 309
Agreementbetween
employers 312
LegalityofObject{contd.)
Effect ofpremature
removal 313
Restraintof legal
proceedings[S. 28] 314
Restrictionon legal
proceedings 315
Compromiseoutside
court 316
Limitationoftime 316
Effectofamendment 317
Forfeitureandsurrender
ofrights 318
"Absolutely":partial
restrictionasto
jurisdiction 319
Righttoapproach
courtsonmattersof
compensation 324
Provisionfor foreign
jurisdiction 324
Exceptions. 325
1.Referenceoffuture
disputes toarbitration325
2. Reference of existing
questionsto
arbitration 326
Uncertainagreements
[S.29] 327
Agreementto agree or
negotiate 328
Undefinedproperty....330
Preliminarynegotiations
taking definite shape . . 331
Partialuncertainty:
"Capableof being made
certain" 332
Agreementtoincrease
wages 334
Agreementnotcapable of
beingenforced 334
Lock-outagreement....335
Optionforrenewalof
tenancy 335
Contractlinkedwith
repealof an Act 335https://t.me/LawCollegeNotes_Stuffs

21. Legality of Object{contd.)
Wageringagreements
[S. 30] 335
Requirements of definition . 336
1.Uncertainevent 336
2.Mutualchancesofgain
orloss 337
3.Neitherpartyto have
controlovertheevent.338
4.Nootherinterestin
theevent 338
Right to seek perfor
mance 338
Speculativetransactions. 339
Effects ofwagering
transactions 340
Collateraltransactions. .341
Exceptions 341
1.Horserace[S.30
(exception)] 341
2.Crosswordcompetitions
andlottery 342
Illegal and void agreements . . 342
Maintransactionvoidin
eithercase 343
Noactionunderthemain
transaction 343
Exceptions 344
1.Wherethecontractis
stillexecutory 344
2.Partiesnot"in
pari delicto" 345
Causeofactionunder
voidcontract 346
3.Whererecovery possible
withoutrelying on illegal
contract 347
4.Collateraltransactions. .348
5.Severance 349
8. Discharge ofContract....351
Modesofdischarge 351
Performanceofcontingent
contracts 351
Definition 351
ContentsXIX
Discharge ofContract{contd.)
Conditionalcontract 351
Contingency to be collateral
tocontract 352
Contingency depending
upon will of aperson....353
Contingencyto becondition
precedent 354
Whereenforcementdepends
uponhappeningof an
event [S. 32] 355
When performance depends
upon non-happening of an
event [S. 33] 356
Eventslinkedwithhuman
conduct[S. 34] 356
Performanceofcontracts....358
Obligationofpartiesto
perform 358
Submissionoftenderis
proposal 359
Promisesbind
representatives 359
Clauseforrenewal 359
Offer ofperformance
[S. 38] 360
1. Tender ofperformance
mustbeunconditional
[S. 38(1)] 361
2.Thetenderof
performance must be
madeatpropertime
and place, and 361
Obligationtoreturn
securitydocuments
on payment 362
Obligationtoreturn
securitymoneyon
rejection of bid 362
Bywhomcontractsmust
be performed[S.40]....362
Performanceofjoint
promises 363
Devolutionofliabilities...364
Joint and several 364https://t.me/LawCollegeNotes_Stuffs

22. XXLawofContract
Discharge ofContract(contd.)
Any onecompellableto
perform 365
Rightofcontribution
[S. 43(Para2)] 365
Sharing of deficiency
[S. 43(Para3)] 365
Release of one joint
promisor 366
Jointpromisees[S. 45]....366
Either or survivor saving
account 367
Time and place for
performance[Ss.46-50]. 367
Debtortoseekhiscreditor.368
Where no time specified
andperformanceis to be
withoutapphcation...369
Usualbusinesshours. . .369
Applicationfor
performanceto be at
properplaceandtime . 370
Applicationforreasonable
place ofperformance. . 370
Timeandmannerof
performance, promisee's
choice 370
Performanceof reciprocal
promises[Ss.51-54]....371
Order ofperformance. . 372
Liability ofparty
preventingperformance373
Effect of oneparty's
default 374
Promises comprising of
legal and illegalparts . . 376
Time for performance[S.55] . 377
Factorswhichmaketimeof
essence 377
Inbusinessmatterstime
generallyof essence 379
Businessmenattach
importancetotime....379
Constructioncontracts. .380
Saletransactions 381
DischargeofContract{contd.)
Landandproperty
dealings 382
Allotmentof plots 385
Rightofrenewaland
otherpersonal
privileges 386
Agreementof
reconveyance 386
Carriageby air 387
Completionofterm....387
Saleofshares 387
Time ofreporting 387
Non-commercialmatters388
Extensionoftime 388
Consequencesoffailure...389
Impossibility ofperformance
andfrustration 390
Initial impossibility [S. 56] . 390
Subsequentimpossibility
[S.56] 390
General principle of judicial
non-interference 391
Frustration 392
Commercial hardship 394
Specificgroundsof
frustration 397
1.Destructionof
subject-matter 397
2.Changeof
Circumstances 399
3.Non-occurrenceof
contemplatedevent. . .402
4. Death orincapacity
ofparty 403
Applicationto
industrialrelations.403
5.Government,
administrativeor
legislativeintervention.404
6.Interventionofwar..408
7.Applicationto leases .409
Englishcases 409
Indiancases 412
Theoriesoffrustration....413
1. Theory of implied term 413https://t.me/LawCollegeNotes_Stuffs

23. Discharge ofContract{contd.)
2.Justandreasonable
solution 414
Theoriesnotapplicable
inIndia 415
Effectsoffrustration 415
1.Frustrationshouldnot
beself-induced 415
2.Frustrationoperates
automatically 417
3. Adjustment of rights . . 418
Discoveredtobevoid. . .419
Paridelicto 422
Quantummeruitclaims . 423
Becomesvoid 424
EnglishLaw 424
LawReform
(FrustratedContracts)
Act (English) 425
Appropriationof payments
[Ss.59-61] 426
1.Appropriationby debtor 426
2.Appropriationbycreditor428
3.Appropriationby law...428
Assignmentofcontracts 428
Assignmentof liabilities . . . 429
Assignment of rights 430
Unilateralcancellationof
saledeed 431
Effectandformalitiesof
assignment 432
Consideration 432
Subjecttoequities 432
Noticeofassignment. . . 432
Dischargebyagreement 433
Contractswhichneednotbe
performed 433
Novation 433
1.Changeofparties....434
Novationandrescission.434
2.Substitutionofnew
agreement 435
Noeffectuponarbitration
clause 438
Interdependentpromises. .438
ContentsXXI
Discharge ofContract{contd.)
Rescissionandrestoration.439
Remissionofperformance. . . 439
Acceptance of less sum....440
Acceptance ofpayment
underprotestand
additionalwork 441
Waiver 441
Extensionoftime 443
Accordandsatisfaction 445
Estoppel: Acceptance of
finalbill 446
Materialalteration 447
9.Dischargeby Breach 450
Discharge by breach 450
Anticipatorybreach 450
Meaning 450
Effectuponrights 450
Innocentparty
excusedfromfurther
performance 450
Optionsof injured
party 451
Immediaterightof
action 451
Anticipatorybreach
of acontingent
contract 452
Consequencesof
aggrievedpartywaiting
forperformance 452
Partyrepudiatingmay
choose toperform. 453
Premature
termination
ofcontractof
employment 453
Negativeinjunction. 454
Wherenegative
injunctionnot
issued 454https://t.me/LawCollegeNotes_Stuffs

24. XXIILawofContract
DischargebyBreach[contd.)
Dischargeby any
otherevent.may
benefitboth 455
Dateofassessmentof
damages 456
Prematuretermination
oflease 458
Whatconstitutes
acceptanceof
repudiation 458
Whatamountsto
repudiation 458
Breach inentirety 461
Partialfailure going to
theroot 462
Aggrievedparty'sliabilityto
offerrestitution 463
Damagesforbreach
[Ss.73-74] 465
Remotenessofdamage....465
The rule in"Hadleyv
Baxendale" 466
(i)Generaldamages....467
(ii)Specialdamages.i. .467
Norecoveryofspecial
damages when special
circumstancesnot
known 467
Specialcircumstances
alreadywithin
knowledgeofcontract
breaker ;. . .468
Relationshipbetweentwo
rulesre-examined....469
HouseofLordsrestore
originalvitalityoftwo
rules 471
Physicalinjuryresulting
frombreach 472
Damagesfornegligent
surveyreport 473
Section73oftheContract
Act 474
DischargebyBreach{contd.)
Section73incorporates
two rules of"Hadleyv
Baxendale" All
Liability inordinarycases . 478
Proofof loss isnecessary479
Buildingcontracts 479
Delay suffered bybuilder481
Schemeforallotmentof
plots 481
Auctionsale ofproperty.482
Differencebetweenmarket
priceandcontract
price (sale and supply
transactions) 482
Whetheractualpurchaseor
sale of goods necessary . . 484
Gettingworkdone
throughothersources.485
Prematureterminationof
contract 485
Incompleteexecution...485
Awardofintereston
difference 486
Interestby way of
damages 486
Loss of profits is special loss 486
Loss ofexpectedprofit . .487
Consequencesof delay in
transit 487
Meaningofmarketprice..488
Escalationofcosts 489
Agreementtoprovide
finance 490
Compensationforliability
tothirdpartybefore
payment 490
Unfair orwrongfuldismissal
of employee 491
Agreementby employee to
releaseallclaims 491
Measureofdamages 492
Claimfordamagesisnot
debt 492
Damagesarecompensatory,
notpenal 492https://t.me/LawCollegeNotes_Stuffs

25. DischargebyBreach[contd.)
Inconveniencecausedby
breach 493
Losscausedby
misrepresentation 494
Incidenceoftaxation 495
Nominaldamages(noloss
situation) 496
Compensationin no loss
situations 499
Refundonpartial
cancellationofcontract. .500
Pre-contractexpenditure. . 500
Agreementtoprovide
scientificprocess 502
Mental pain and suffering
andpunitivedamages
(non-pecuniaryloss) 502
Threecases listed by the
HouseofLords 503
Breach of promise of
marriage 504
Mentaldistresscausedby
negligentsurveyreport
oradvice 504
Compensationfor non-
pecuniaryloss 507
Housingservice 508
Negligentsurgical
operation 509
Negligencein
maintenanceof
electricitylines 509
Contractsforproviding
peace of mind or
preventing mental
distress 509
Photographer'sfailure to
appearatwedding....509
Failure bybandtoattend
weddingreception....509
Cancellationofwedding
reception 510
Holidaycases 510
Packagetour 511
Solicitor'sfailure 512
ContentsXXIII
Dischargeby Breach [contd.)
Loss ofpetsdue to
carrier'snegligence....513
Demotionof employee
withoutreasonable
cause 513
Delay inpayment 513
Dishonourof cheques...513
Tradesecrets 514
Damages for breach of
confidence 515
Injunctiontorestrainbreach
ofconfidence 516
Injunctionforrestraining
breachofcontract 517
Injunctionforrestraining
alienationofproperty. . . 518
"Writremedyagainst
terminationofdealership. 518
Terminationofcontract
byGovernmentandwrit
remedy 518
Directionforpaymentin
writjurisdiction 518
Withdrawalofletterof
intentandwritremedy...519
Waiverandwritremedy...519
Non-performanceof
Governmentcontractby
contractorandwrit 519
Impact ofinflationon
damages 519
Dutytomitigate[S. 73
(Explanation)] 520
Auctionsales and duty of
mitigation 521
Contractofemployment
and duty ofmitigation. 521
Stigmacompensation. . . 523
Advantageout of one's
ownwrongnotallowed524
Aggrievedparty
increasingloss by
unreasonableconduct.524
Transactionsconcerning
property 526https://t.me/LawCollegeNotes_Stuffs

26. XXIVLawofContract
DischargebyBreach{contd.)
Negligentvaluation....527
Aggrievedpartynotto be
inflictedwithunusual
burdens 528
Reluctanceofcourtsto
expandscope of duty of
mitigation 528
Contributorynegligence . 529
Arbitrator'saward 529
Recovery ofdamagesas
arrearsoflandrevenue. .529
ExclusionofSection73:
Arbitrationclause 530
Liquidateddamagesand
penalty[S. 74] 530
English Law 530
Court'spowertoreduce
specifiedamount 531
Application tohire-purchase
contracts 532
Heavyamountasevidence
ofpenalty 533
Fixed figureconstitutes
ceiling 533
Stipulation forpayment
oneventsextraneousto
breachofcontract 534
Applicablewhether
stipulationis forpayment
incashorkind 534
Conditionsof membership . 534
Section74,ContractAct. .535
RulestatedinSection74. .536
Onepartynotto be
adjudicatingauthority. . . 538
. Breachandrightto
compensationmustbe
established 538
Unilateraldeductionfrom
final bill not permissible 539
Commonfeaturesbetween
EnglishandIndianlaws . .540
Forfeiture of earnest money
ordeposit 541
DischargebyBreach{contd.)
Forfeitureofearnest
moneyonnon-fulfilment
ofconditionsof
e-auction 544
Withholdingofpayment
underbills 544
Whetheractualloss
necessary 544
Wherenolosscaused. . .547
Exclusion of right to
compensation 547
Losscausedbymutual
delay 548
Whereprofit follows . . . 548
Forfeitureofearnest
moneyonlywhen
reasonabletodoso548
Refundofearnest
money wherewrong
specification provided . 549
Distinctionbetween
earnestanddeposit,
howfarreal 549
Noforfeiturewhere
extracostsotherwise
recovered 551
-Noforfeiturewhere
contractstillnot
formulated 551
Stipulationforrefund
ofdoubleamountof
earnestandinterest. . .552
Securitymoneyunderother
contracts 552
Show-causenoticebefore
forfeiture 553
Consentdecrees 553
Clearnoticeofclause
requisite 554
Minimumcharges 554
Interestby way of damages 555
Bank's service charges....555
Compensationfor giving
wrongdestinationto
ship 555https://t.me/LawCollegeNotes_Stuffs

27. Discharge by Breach (contd.)
Statutorycompensation...555
Terminationofcontractfor
breach 556
Jurisdiction 556
10.CertainRelations
ResemblingThoseCreated
byContract 558
Rationale 558
Theoryofunjust.
enrichment 558
Theoryof"implied-in-fact"
contract 559
Restorationoftheoryof
unjustenrichment 560
ProvisionsoftheIndian
ContractAct 560
1. Supply ofnecessaries
[S. 68] 561
2.Paymentby
interestedperson
[S.69] 561
Conditionsofliability......561
Payermustbeinterestedin
makingpayment 561
Butshouldnotbeboundto
pay 562
Defendantshouldbeunder
legal compulsion to pay . .563
Paymentshouldbe by one to
another 564
3.Liabilityto pay for
non-gratuitousacts
[S. 70] 564
Conditionsofliabilityunder
thesection 564
"Notintendingto do so
gratuitously" 565
Sectionwouldnotencourage
officiousinterferencein
affairsofothers 566
Requestfor services creates
impliedpromiseto pay...566
ContentsXXV
CertainRelations ResemblingThose
CreatedbyContract[contd.)
Non-complianceof
constitutionalrequirements
ofcontractingwithState . 568
RecoveryunderOralor
non-provablecontracts... 569
Workdoneaftertermination
ofcontract 570
Contractsvoidunder
Article299 570
"Lawfullydoes" 571
Non-gratuitousacts 571
Lender ofmoney 572
Provisionforrefundof price 573
Appropriatepleadings....573
4. Finder of goods [S. 71] 573
Mistakeoffactoroflaw. .574
Refundoftaxmoneypaid
withoutbeing due 575
Scope of theword"mistake"
incontextofoverpaid
taxes 576
Excessstampduty . 578
Limitationandlatches....578
Someotherexamplesof
mistake 579
Discovery ofmistakeafter
longperiod 580
Changeofpositionby payee
inrelianceonpayment...581
Acceptanceof lesssumunder
courtorders 582
Coercion 583
Quasi-contractsinEnglishLaw583
Paymentsto thedefendant's
use 583
Voluntarypayments 585
Paymentsmadeunder
mistakeoffact 585
Paymentsmadeunderan
inieffectivecontract....586
Paymentsmadeunder
compulsion 587
Quantummeruit........588https://t.me/LawCollegeNotes_Stuffs

28. XXVILawofContract
PartII
SPECIFICCONTRACTS
(Ss.124-238)
11.ContractofIndemnity. . . 591
Definitionandnature 591
Definitionin English Law . 591
DefinitioninSection124
narrower 592
Insuranceindemnity 594
Extentofliability 594
Commencementofliability. . 595
Specifiedtimefornotice. . .597
12.Guarantee 599
Definition 599
Economicfunctionsof
guarantee 599
Parties 599
Independentliability
differentfromguarantee. 600
Essentialfeaturesof
guarantee 601
1.Principaldebt 601
Recoverabledebt
necessary 601
Guaranteefor voiddebt,
whenenforceable 602
Guaranteeofminor's
debt 602
2.Consideration 603
604Guaranteeforpastdebt
Pastaswellasfuture
debt
Benefit ofprincipal
debtor,enough
consideration
Counter-guarantee. .
3.Misrepresentationand
concealment
4.Writingnotnecessary
Extentofsurety'sliability
605
605
606
606
608
608
Guarantee(contd.)
1.Co-extensive 609
Conditionprecedent....610
Proceedingagainst
suretywithout
exhaustingremedies
againstdebtor 611
Actionagainstprincipal
debtoralone 614
Suitagainstsuretyalone615
Proceedingagainst
guarantor'smortgaged
property 616
Agreementto beboundby
anyacknowledgement,
etc byprincipaldebtor
aboutindebtedness....616
Prosecutionofguarantor-
suretyforbouncingof
hischeque 617
Deathofprincipaldebtor617
Windingup ofprincipal
debtorcompany 617
2.Surety'srighttohmit
hisliabilityormakeit
conditional 617
Guarantor'sinsistence
uponcollateralsecurity618
Bank'sfailuretoobtain
othersecurities 620
Impossibilityofmain
contract 621
Novationofmaincontract.621
Changesinsurety
company 622
Limitation 622
Liabilityundercontinuing
guarantee 622
Liabilityunderbank
guarantee 624https://t.me/LawCollegeNotes_Stuffs

29. Guarantee[contd.)
Variationintermsof
contract 633
Bankguaranteeseparate
transaction 633
Lettersofcreditandbank
guarantees 633
Bankguaranteeand
arbitrationclause 635
Period oflimitation(expiry
ofguaranteeperiod) 636
Joint-debtorsandsuretyship
[S. 132] 637
Dischargeofsuretyfrom
Hability 638
1. Byrevocation[S. 130]..638
2. Bydeathofsurety
[S. 131] 640
Liabilityof legal heirs . . . 640
3. Byvariance[S. 133]....640
Advanceauthorisation
ofalteration 644
Effect of decreeagainst
surety 645
4. Release ordischargeof
principaldebtor[S. 134] 646
(/)Release ofprincipal
debtor 647
EffectofDebt
ReliefActs 647
Applicationof insolvency
laws 648
[ii]Actoromission. . .648
5.Composition,extension
oftimeandpromisenot
tosue[S.135] 649
Composition 649
Promiseto givetime....650
Promisenottosue 651
Forbearancetosue 651
Reservingrightsagainst
surety 652
Promiseto givetimeto
debtormadewiththird
person 653
ContentsXXVII
Guarantee{contd.)
6. Byimpairingsurety's
remedy[S. 139] 653
Waiver ofrights 657
Rightsofsurety 657
Rightsagainstprincipal
debtor 657
1.Rightofsubrogation
[S. 140] 657
Rights beforepayment. . 658
2.Righttoindemnity
[S.145] 659
Rightsagainstcreditor....660
1.Righttosecurities
[S. 141] 660
Whenrightto
securitiesaccrues. .663
Hypothecationis only
equitablecharge 665
2.Righttoshare
reduction 665
3.Rightofset-off....665
Rightsagainstco-sureties. 665
1. Effect ofreleasing
asurety[S. 138] 666
2.Righttocontribution
[Ss.146-147] 666
Indemnityandguarantee
distinguished 668
13.Bailment 671
Definition 671
Essentialfeatures 671
1. Delivery ofpossession..671
Banklocker 672
Actualorconstructive
delivery 673
2.Deliveryshouldbe
uponcontract 674
Non-contractual
bailments 675
Contract,expressor
implied 676
3.Deliveryshouldbeupon
somepurpose 676https://t.me/LawCollegeNotes_Stuffs

30. XXVIIILawofContract
Bailment(contd.)
Bailmentcomparedwith
Othersimilarrelations.677
Postoffice,bailee 678
Dutyofbailor 678
Dutyofgratuitousbailor. . 678
Dutyofbailorforreward. . 679
Dutiesofbailee 680
1.Dutyofreasonablecare
[Ss.151-152] 680
Uniformstandardofcare680
Loss bytheft 682
Burden ofproof 683
Lossduetoactofbailee's
servant 685
Bailee'sowngoodslost
withthoseofbailor...686
MisdeliverybyRailway...686
Goodscarriedat
owner's risk 686
Involuntarybailee 687
Contractto thecontrary. .687
2.Dutynottomake
unauthoriseduse
[S.154] 690
3.Dutynottomix
[Ss.155-157] 691
4.Dutytoreturn
[Ss.160-161] 691
Terminationofgratuitous
bailment 692
Bailmentbyjointowners
[S.165] 693
5.Dutynotto set up
"justertii" 693
Transferofshipping
documents 694
6.Dutytoreturn
increase[S. 163].....694
Finder[Ss.168-169] 695
Findersarebailees 695
Finder'srights 696
Rightsofbailee 696
1.Righttocompensation
[S.164] 696
Bailment{contd.)
2.Righttoexpensesor
remuneration[S.158].696
3.Rightof lien
[Ss.170-171] 697
Particularlien [S. 170]....698
Exerciseoflabouror
skill 698
Inaccordancewith
contract 699
Goodsonwhichlabour
orskillbestowed 699
PossessoryRight. . . 699
Generallien [S. 171] 700
Partiesentitledtogeneral
lien 701
1.Bankers 701
Pre-depositfor
entertainingappeal
undertheSARFAESI
Act 706
2.Factors 706
3.Wharfingers 707
4.AttorneyofHigh
Court 707
Advocates 708
5. Policybrokers 709
Lienagainsttime-barred
debt 709
Maritimelien 709
Carrier'slien 709
LienofPortTrust 710
"Generalbalanceof
account" 710
Lienofchitfund
company 710
Setoff 710
Types of lien covered by
theAct 711
4.Rightto sue 711
14. Pledge 714
Definition 714
1.Deliveryofpossession. . 714
Pledge byhypothecation716https://t.me/LawCollegeNotes_Stuffs

31. Pledge (contd.)
2. Inpursuanceofcontract717
Rightsofpawnee 718
1.Rightofretainer
[Ss.173-174] 718
Special andparamount
interestof pledgee....718
Hypothecateehas no
directrightof seizure . . 720
Dutyof care 721
2.Righttoextraordinary
expenses[S. 175] 722
3.Rightto sell [S. 176] 722
Thetworightsare
disjunctive 724
Priorityof employees'
PFdues 725
Requirementof notice....725
Loss ofsecuritydue to
pledgee's negligence . . . 727
Pawner'srightto redeem
[S.177] 727
Legalheir'srightto
redeem 728
Whocanpledge 728
1. Pledge bymercantile
agent[S. 178] 729
1.Mercantileagent....730
2.Possessionwith
owner'sconsent 730
3.Inthecourseof
business 730
4.Goodfaith 731
Pledge bydocuments
oftitle[S. 178] 731
2.Personinpossession
undervoidablecontract
[S.178-A] 732
3. Pledge by pledgee
[S. 179] 734
Additionalexceptions
undertheSaleof
GoodsAct 734
ContentsXXIX
15.Agency 736
Definitionof"agent" 736
Representativecapacity,
hallmarkof agency 736
Test ofdetermining
existence of agency
relationship 737
Agency inhire-purchase
transactions 739
Co-agentsandco-
principals 740
Essentialsof
agencyprincipalshouldbe
competenttocontract. . . 740
Agent neednotbe
competent 742
Considerationfor
appointmentnot
necessary 742
Agentandservant 742
Agentandbailee 744
Agentandbuyer .• • • • 744
Kinds of agent 744
Factor 745
Broker 745
Delcredereagent 745
Creationof agency 746
Expressappointment 747
Impliedagencies 749
Estoppel 749
Husbandandwife 750
Husbandnotimplied
agentof wife 752
Agencies ofnecessity 752
Originatedwithmarine
adventures 752
Andthenbecame
principleof general
application 753
Pre-existingagencynot
necessary 753
Relief ofinjuredpersons754
Conditionsforapplication
of theprinciple 754https://t.me/LawCollegeNotes_Stuffs

32. XXXLawofContract
Agency[contd.)
Inabilityto
Communicatewith
Principal 755
Actshouldbe
reasonably
necessary 755
Bonafideinthe
interestofparty
concerned 756
Relations ofprincipal
andagent 756
Dutiesofagent 756
1.Dutytoexecutemandate756
2.Dutytofollow
instructionsorcustoms
[S.211] 757
3.Dutyofreasonablecare
andskill [S. 212] 759
4.Dutyto avoidconflict
ofinterest 762
5.Dutynottomakesecret
profit 764
6.Dutytoremitsums
[S. 218] 765
7.Dutytomaintain
accounts[S. 213] 765
Inspectionofagent's
accounts 767
8.Dutynotto delegate
[S.190] 768
1.Natureofwork 768
2.Tradecustom 769
3.Ministerialaction....769
4.Principal'sconsent. . . 769
1.Improperdelegation
[S. 193] 769
2.Properdelegation
[S. 192] 770
1.Principalrepresented
bysub-agent 770
2. Agent'sresponsibility
forsub-agent 771
3.Sub-agent'sliabilityto
principal 771
Agency {contd.)
Substitutedagent
[Ss.194-195] Ill
Remediesofprincipalfor
breachof duty 773
Rightsofagent 774
1.Righttoremuneration
[S.219] 774
Jurisdiction 776
Effectofmisconduct
[S.220] 777
2.Rightofretainer
[S.217] 778
3.Rightof lien [S. 221]...778
Effectoflien 779
Lossoflien 780
4.Righttoindemnity
[Ss.222-223] 781
Liabilityof agentunder
dishonouredcheque 782
5.Righttocompensation
[S.225] 783
Relationsofprincipalwith
thirdparties 783
Agent'sauthority 783
Actualauthority 785
Expressauthority 785
Impliedauthority........786
Scope ofauthority 788
Authorityof special
agents 789
Factor 789
Broker 789
EstateorHouseAgent . . 790
Auctioneer 791
Power ofattorney
holder 791
Agentof LifeInsurance
Corporation 791
Ostensible orapparent
authority 791
Apparentauthorityis real
authority 793https://t.me/LawCollegeNotes_Stuffs

33. Agency (contd.)
Appearanceofauthority
arisingfrom course of
deaUng 793
Representation"of
authoritybyconduct. . 794
Continuanceofapparent
authoritytill
termination 795
Agent'spossession 795
Employer'sundertakingto
payinsurancepremia....795
Statutoryprovisionabout
apparentauthority 797
Actualorconstructive
noticeoflackof
authority 798
Justandreasonable
solution 798
Agent'sauthorityin
emergency[S. 189]....799
Whereagent exceeds
authority 800
Effect ofnoticetoagent...801
Knowledgeofbroker...801
Liability for agent's
wrongfulacts [S.238]...801
Misrepresentationsand
frauds 803
Agent'storts 805
Rights and liabilities of
undisclosedprincipal 806
Wheretheprincipalis
disclosed 806
Unnamedprincipal 806
Undisclosedprincipal 806
Subjecttoequities 808
Thirdparty'sright to
repudiateexecutory
contract 809
Undisclosedprincipal
cannotinterveneagainst
express terms 810
Thirdparty'sright against
undisclosedprincipal. . 810
ContentsXXXI
Agency {contd.)
Personalliabilityof agent
[S.230] 811
Agentcannotsue or be sued
unlesscontrarycontract. . 811
Presumptionofcontrary
contract 812
1. Foreignprincipal! 812
2.Principalunnamed 814
Liabilityof dealerunder
theConsumerProtection
Act 815
3.Non-existentor
incompetentprincipal. . 815
Directorsofcompany...815
Electionbythirdparty.
[S. 233] 816
Estoppelofthirdparty
[S.234] 817
4.Pretendedagent [S. 235] 817
5. Breach ofwarrantyof
authority 818
Ratification 819
Requirementsofratification820
1.Onbehalfofanother.820
2.Competenceof
principal. 822
3.Whatactscanbe
ratified(Actshould
belawful)[S.200]...822
Only lawful acts can be
ratified 822
Actswhichwould
becomeinjuriousby
ratification 823
Actsdoneonbehalfof
Government 823
4.Knowledgeof facts
[S. 198] 824
5.Wholetransaction
[S.199] 824
6.Withinreasonable
time 824
Effectsofratification 825
Doctrineofrelationback825https://t.me/LawCollegeNotes_Stuffs

34. XXXIILawofContract
Agency (contd.)
Determinationof agency....827
Byrevocation[S.203]....827
Withdrawalof
vakalatnama 829
Revocationoperates
prospectively[S. 204]....830
Noticeprecedentto
revocation[S.206] 831
Liabilitytocompensate
[Ss.205-206] 831
Power ofattorney
executedon
consideration 832
Agency coupledwith
interest[S.202] 832
Interestexistingat the
timeofcreationof
agency 834
Agency[contd.)
Protectionofexisting
interest,primary
purposeof agency . . .
Renunciationbyagent
[S.206]
Completionofbusiness
[S.201]
Deathorinsanity[S. 201]
Principal'sinsolvency
[S.201]
Onexpiryoftime[S. 201]
Effectsoftermination
[S.208]
Terminationof
sub-agency
Agent'sdutyontermination
[S.209]
835
835
836
836
837
837
837
838
839
PartIII
LAWOFSPECIFICRELIEF
(Ss.1-142)
16. Specific Relief Act,1963..841
Actnotexhaustive 841
Specific relief 842
Introductiontotheoutline
oftheAct 842
1. Recovery ofpossession
ofproperty 843
2. Specificperformance
ofcontracts 843
3.Rectificationand
cancellationof
instrumentsand
rescissionof
contracts 843
4.Preventiverelief 844
5.Declaratoryrelief....844
Recoveryofpossessionof
immovableproperty 844
SpecificReliefAct,1963{contd.)
Recovery ofpossession
wherepossession
gratuitous[S. 6] 849
Prayerfordeclarationof
title 850
Noappealorreview
[Sub-s.(3)] 850
ApplicationofLimitation
Act 850
Sixmonthslimitation
notapplicableto
proceedingsunder
CrPC -851
Counterclaimandcourt
fee 851
Recoveryofpossessionof
movableproperty[Ss.7-48]. .,s851https://t.me/LawCollegeNotes_Stuffs

35. SpecificRelief Act, 1963 {contd.)
Mainingredients 851
Suitfortitle 852
Limitation 853
Liabilityto deliver
possessiontoperson
entitled 853
Ingredients 854
Differencebetween
Sections7and8 855
Specificperformance of
contracts 855
Defencesunderlawof
contracts 855
Governmentcontracts. .856
Validity of original
contract 856
Delay asgroundof
defenceunderlawof
contract 857
Contractswhichare
specificallyenforceable
[S. 10] 859
Wherenoothersuitable
remedy 859
Validcontractin
existence 859
Contractnot
extinguishedby
decree 860
Agreement for
reconveyanceor
repurchase 860
Delay 860
Sale byjointowners....862
Performanceoftrusts 863
Enforcementof
trustee'sduty 863
Limitation 864
Specificperformance of
partofcontract[S. 12]...865
Rights ofpurchaseror
lesseewhereseller'sor
lessor's titleimperfect
[S. 13] 868
ContentsXXXIII
SpecificRelief Act, 1963{contd.)
Amendmentofplaint
forrelinquishment
ofperformanceof
remainingpart 870
Purchaserofshare
inunpartitioned
property 870
Specificperformanceof
partofcontract 870
Contractswhichcannotbe
specificallyenforced 873
1.Wherecompensationis
adequate[S.14(l)(fl)]. 873
2.Contractsinvolving
personalskill
[S.14(l)(fc)] 873
3.Contractsof
determinablenature
[S.14(l)(c)] 874
4.Contractrequiring
constantsupervision
[S.14(1)(J)] 875
Constructioncontracts
[S.14(3)(c)] 876
Arbitration 877
Lackoffreeconsentand
situationofnocontract. .877
Familysettlement 877
Personsfor oragainst
whomcontractsmay be
specificallyenforced
[S. 15] 878
Assignee from legal heir . 878
Leaseorsaleinfavour
ofcompanybefore
incorporation 879
All buyers orcontractees
mustjoin 879
Personsnotentitledtorelief
of specificperformance. . 880
Readyandwilling
[Cl.(c)] 881
Unregisteredsale
agreement 886
Amendmentofplaint...887https://t.me/LawCollegeNotes_Stuffs

36. XXXIVLawofContract
SpecificRelief Act, 1963 {contd.)
Defaultof first buyer
availableasdefenceto
subsequentbuyer 887
Necessaryorproper
party 887
Jurisdiction 887
Decree,ex p 887
Sellingor lettingproperty
withouttitle [S. 17] 888
Whereperformance
notpossiblewithout
variation[S. 18] 888
Relief againstparties,
legal representatives or
subsequenttransferee....889
Relief against legal
representative[S. 19] . .890
Partiesclaimingtitle
underoriginalowner....890
Subsequentbonafide
buyer [S.19{b)] 890
Transfer executed by
only some ofowners. . 893
Acquiring title during
pendencyofsuit 893
Discretionand powers of
court[S. 20] 893
Discretion 894
Buyerwithnoticeof
previoussale 896
1.Unfaircontracts 897
Contingent
contracts 898
Contracts
Incomplete 899
Transferby
unauthorised
partners 900
Transferby
unauthorised
person 900
Oralagreement....900
Memorandumof
understandings 901
2.Hardship 901
Specific Relief Act, 1963 {contd.)
PriceEscalation....902
3.Inequitable,
unconscionable 904
Plaintifftocome
withcleanhands. .907
Agreementopposed
to publicpolicy. . . 908
Objectforbidden...908
4.Substantial
performanceby
oneside 908
5.Mutualityof remedy
(ready and willing)...909
Protecting interestof
vendor 911
Limitation 911
Limitationforexecution
ofdecree 912
Pre-emptiveordersunder
taxmeasures 912
Amendmentofplaint. . . 912
Natureofjurisdiction
undertheAct 912
Impleadment(addition
ofparty) 913
Powerofcourttoaward
compensation[S. 21]....913
Compensationinaddition
toorsubstitutionof
specificperformance....914
Orderfor delivery of
goods 916
Loss ofrightto
compensation 917
Relief of possession,
partition,etc. [S. 22]....917
Relief forpossession
has to be pleaded
(alternativerelief) 917
Refusalofrelief 918
Alternativerelief 918
Amendmentofplaint...919
Liquidationof damages no
bar[S. 23] 919
Earnestmoney ;. 919https://t.me/LawCollegeNotes_Stuffs

37. I
I
SpecificReliefAct, 1963{contd.)
Alternativereliefprovided
incontract 920
Enforcementofarbitral
awardsanddirectionto
executesettlements 920
Rescissionofcontracts 920
Whenrescission
available 921
Loss ofrightof
rescission 921
1.Affirmation 921
2.Whererestitution
notpossible 922
3.Interventionof
thirdparties 922
4.Severance 922
Inbuiltremedy of rescission
in decree of specific
performance 923
Contractnot
automatically
extinguishedon
decree of specific
performance." 924
Extensionoftimefor
paymentunder decree . 925
Limitation 925
Appealable order 925
Alternativeprayerfor
rescissioninsuitfor
specificperformance
[S. 29] 925
Extensionoftime 926
Rescissionandequity 926
Rectificationofinstruments
[S.26] 927
Essentials to be proved . . 928
Mistake 928
Cancellationofinstruments
[Ss.31-33] 929
Whocanseekcancellation.930
Nounilateral
cancellation,only by
courtorder 931
ContentsXXXV
SpecificReliefAct, 1963{contd.)
Limitation 932
Whenagreement void....933
Whencontractvoidable. . .934
Reasonableapprehension. . 934
Requirementsofgroundof
relief 934
Partialcancellation 934
Compensation 934
Limitation 935
Declaratorydecrees 936
{i)Essentialsto be set up
forreliefunder
Section34 937
[ii]Frameofplaint 937
Whensuitfor
declarationdoes
notlie 938
[iii)Furtherrelief where
plaintiffentitled to
it (proviso) 939
Power to dojustice 942
Transfer bypartnerof
firm : 942
Suitfordeclarationand
injunctionwithout
seeking relief of
possession 943
Suitfordeclaration
of possession and
injunction 943
Simultaneousconsumer
complaintand civil suit 943
Declarationastostatusof
wife 943
Declarationastotitleas
against wife 944
DeclarationastoWill. .945
Whocanseekrelief
(locusstandi) 945
Questioningsale deed on
groundof fraud 945
Right of way 945
Courtfee 946
Jurisdiction 946
Effectoflimitation 946https://t.me/LawCollegeNotes_Stuffs

38. XXXVILawofContract
Specific Relief Act, 1963 [contd.)
Declarationthat
statementisdefamatory946
Parties who areboundby
declaration. . 947
Amendmentofplaintand
limitation 947
Injunctions. 947
Kindsofinjunction 948
Temporaryinjunctions....949
Cases in whichtemporary
injunctionmay begranted949
1. Forprotectionof
interestinproperty. . .949
2.Injunctionto
restrainrepetitionor
continuanceofbreach949
Discretionaryrelief 950
Interiminjunctionwhen
perpetualinjunctionis
prayedfor 950
Disobedienceorbreachof
injunction 951
Perpetualinjunctions 951
Specific Relief Act,1963[contd.)
Restraintonperson
orpropertyoutside
jurisdiction 952
Permanentinjunction 952
Requirementsfor
applicability 952
Illustrationsinpreceding
1877Act 953
Injunctiontorestrain
possession 958
Suppressionofmaterial
facts 959
Orderfor rescuing
arbitrationprocess 959
Refusal ofinjunctiverelief . 959
Illustrationsinpreceding
1877Act 960
Mandatoryinjunctions. . . 961
IllustrationsinoldAct
of1877 961
Whennotgranted 962
Damagesin lieu of or in
additiontoinjunction
[S.40] 963
SubjectIndex 965
Ihttps://t.me/LawCollegeNotes_Stuffs

39. I
r
Section-wiseContents
INDIANCONTRACT ACT,1872
Preamble 1
PRELIMINARY
1.Shorttitle,extentand
commencement 1
2. Interpretation clause 2
ChapterI
OFTHECOMMUNICATION,
ACCEPTANCE ANDREVOCATION
OFPROPOSALS
3.Communication,acceptance and
revocation of proposals 6
4.Communicationwhen complete . 10,
33,59
5. Revocation of proposals and
acceptances 59
6.Revocationhowmade 57
7.Acceptancemust be absolute...30
8. Acceptance by performing
conditions,orreceiving
consideration 18
9. Promises,express and implied...7
ChapterII
OFCONTRACTS, VOIDABLE
CONTRACTS ANDVOIDAGREEMENTS
10. What agreements are contracts . . 3
11."Whoarecompetenttocontract. 153
12.Whatis asoundmindforthe
purposes of contracting.....174
13."Consent"defined 226
14."Freeconsent"defined 176
15."Coercion"defined 177
16.Undueinfluence 180
17.
18.
19-A.
19.
20.
21.
22.
23.
24.
25.
"Fraud"defined 210
"Misrepresentation"defined. ..200
Powertosetasidecontract
induced by undue influence . . . 200
Voidabilityofagreements
withoutfreeconsent 218
Agreementvoid where both
parties are under mistake as to
matteroffact
Effectofmistakesastolaw. .
Contractcaused by mistake of
one party as to matter of fact .
Whatconsiderationsandobjects
arelawful,andwhatnot 255
Agreementsvoid, if
considerationsandobjects
unlawfulinpart
An agreementmade without
considerationisvoid,unless
it is inwritingand registered,
or is apromisetocompensate
forsomethingdone,or is a
promiseto pay a debt barred by
limitationlaw
Agreementin restraint of
marriage void 290
Agreementin restraint of
tradevoid
Agreementsin restraint of legal
proceedingsvoid
Agreements void foruncertainty
Agreements by way of wager,
void
226
227
227
288
146
26.
27
28.
29.
30.
291
314
327
335
ChapterIII
OFCONTINGENT CONTRACTS
31. "Contingent contract" defined . . 351
[XXXVII]https://t.me/LawCollegeNotes_Stuffs

40. XXXVIIILawofContract
32.Enforcementofcontracts
contingentonanevent
happening
33.Enforcementofcontracts
contingentonaneventnot
happening
34.Wheneventonwhichcontract
iscontingentto bedeemed
impossible,if it is thefuture
conductof a living person . .
35. Whencontractsbecome void,
which are contingent on
happening of specifiedevent
withinfixedtime
36.Agreementscontingenton
impossibleevents,void....
355
.356
.356
357
358
ChapterIV
OFTHEPERFORMANCE
OFCONTRACTS
37.Obligationofparties
tocontracts 358
38. Effectof refusal to accept offer
ofperformance 360
39. Effect of refusal ofpartyto
perform promise wholly 460
40. Person by whompromiseis
to beperformed 362
41. Effect of accepting performance
from third person 363
42.Devolutionofjointliabilities. . .364
43. Any one of joint promisors may
be compelled to perform 364
44. Effect of release of one joint
promisor 366
45.Devolutionofjointrights....366
46. Time forperformanceof
promise, where no application
istobemadeandnotimeis
specified 367
47. Time and place forperformance
ofpromise,wheretime is
specifiedand no application
tobemade 367
48.Applicationforperformance
oncertainday to be at proper
timeandplace 368
49. Place forperformanceof
promise,where noapplicationto
be made and no place fixed for
performance 368
50.Performanceinmannerorat
timeprescribedorsanctioned
bypromisee 368
51. Promisor notboundtoperform,
unless reciprocal promisee ready
and willing toperform 371
52.Orderofperformanceof
reciprocalpromises 372
53. Liability ofpartypreventing
eventonwhichcontractisto
takeeffect
54.Effectofdefaultastothat
promisewhichshouldbefirst
performed in contract consisting
of reciprocal promises
55. Effect of failure to perform at
fixed time, incontractinwhich
timeisessential
56. Agreement to do impossible act
57. Reciprocal promise to do things
legal and also other things
illegal
58. Alternative promise, one branch
being illegal
59. Application of payment where
debt to be discharged is
indicated
60. Application of payment where
debt to be discharged is not
indicated
61.Applicationofpaymentwhere
neitherpartyappropriates. .
62. Effect ofnovation,rescission
andalterationofcontract. .
63. Promisee may dispensewithor
remitperformanceof promise
64.Consequencesofrescissionof
voidablecontract
65. Obligation of person who has
receivedadvantageundervoid
agreement,orcontractthat
becomesvoid
66. Mode ofcommunicatingor
revokingrescissionofvoidable
contract
67. Effect of neglect of promisee
toaffordpromisorreasonable
facilities forperformance. . ..438
373
374
377
390
376
376
426
426
426
433
.439
223
418
222
1https://t.me/LawCollegeNotes_Stuffs

41. ChapterIX
OFBAILMENT
148."Bailment","bailor"and
"bailee"defined 671
149. Delivery to bailee how made . . . 673
150. Bailor's duty to disclosefaults in
goods bailed 678
151. Care to betakenbybdlee....680
152.Baileewhennotliableforloss,
etc, of thing bailed 682
153.Terminationofbailmentby
bailee'sactinconsistentwith
conditions 690
154. Liability of bailee making
unauthoriseduse of goods
bailed 690
155. Effect ofmixture,withbailor's
consent,of his goodswith
bailee's 691
156. Effect ofmixture,without
bailor'sconsentwhen the goods
can be separated 691
157.Effectofmixture,without
bailor'sconsent,when the goods
cannot be separated 691
158. Repaymentby bailor of
necessary expenses 696
159.Restorationof goods lent
gratuitously 693
160.Returnof goods bailed,
onexpirationof time or
accomplishmentof purpose...691
161. Bailee'sresponsibility when
goods are not duly returned . . . 692
162.Terminationofgratuitous
bailment by death 693
163.Bailorentitledtoincreaseor
profitfromgoodsbailed 695
164. Bailor's responsibility to bailee . . 696
165.Bailmentby several joint
owners 693
166. Baileenotresponsibleon
re-delivery to bailorwithout
title 693
167. Right of third person claiming
goods bailed 694
168. Right of finder of goods: May
sue forspecificreward offered . . 695
169. When finder of thing commonly
on sale may sell it 695
Section-wiseContentsXXXIX
170.Bailee'sparticular lien 698
171.Generallien ofbankers,factors,
wharfingers, attorneys and
policy brokers 700
172. "Pledge","pawnor"and
"pawnee" defined 714
173. Pawnee's right ofretainer....718
174.Pawneenottoretainfordebt
or promise other than that
for which goods pledged:
Presumptionin case of
subsequent advances 718
175.Pawnee'srightas to
extraordinaryexpenses
incurred 722
176. Pawnee'srightwherepawnor
makesdefault 722
177. Defaultingpawnor'sright to
redeem 727
178-A.Pledge by person in possession
undervoidablecontract 732
178.Pledgeby mercantile agent....729
179.Pledgewhere pawnor has only a
limitedinterest 734
180. Suit by bailor or baileeagainst
wrongdoer 711
181. Apportionment of reliefor
compensationobtained by such
suits 711
ChapterV
OFCERTAINRELATIONSRESEMBLING
THOSECREATEDBYCONTRACT
68. Claim for necessariessuppliedto
person incapable of contracting,
oronhisaccount 170
69.Reimbursementofperson
payingmoneydue by another, in
payment of which he is
interested 561
70. Obligation of person enjoying
benefit ofnon-gratuitousact . . . 564
71.Responsibilityof finder of
goods 573
72. Liability of person to whom
money is paid, or thing
delivered, by mistake or under
coercion 574https://t.me/LawCollegeNotes_Stuffs

42. XLLawofContract
ChapterVI
OFTHECONSEQUENCES OF
BREACHOFCONTRACT
73.Compensationforlossor
damage caused by breach of
contract 474
74.Compensationforbreach
of contract where penalty
stipulatedfor 535
75. Party rightfully rescinding
contractentitledto
compensation 557
ChapterVII
SALEOFGOODS
76-123[Repealed] 557
ChapterX
AGENCY
182. "Agent" and"principal"defined . 736
183. Who may employ agent 740
.742
.742
184. Who may be an agent
185. Consideration not necessary
186. Agent'sauthoritymay be
expressed or implied....
187. Definitions of express and
impliedauthority
188. Extent of agent's authority .
189. Agent'sauthorityin an
emergency
190. When agent cannotdelegate
191."Sub-agent"defined....
192. Representation of principal by
sub-agent properly appointed
193.Agent's responsibility for
sub-agentappointedwithout
authority
194. Relation betweenprincipal and
person duly appointed by agent
to act in business of agency .
195. Agent's duty in naming such
person
196.Rightofpersonas to acts done
for him without his authority:
Effectofratification
197. Ratification may be expressed
orimplied
785
785
788
799
768
769
770
772
772
819
820
198. Knowledge requisite for valid
ratification
199. Effect ofratifyingunauthorised
actformingpartof atransaction
200.Ratificationofunauthorisedact
cannotinjure third person....822
Terminationof agency 827
Terminationof agency, where
agenthasaninterestin
subject-matter 832
Whenprincipalmay revoke
agent'sauthority .
Revocation whereauthorityhas
beenpartlyexercised
Compensation of revocation by
principal, or renunciation by
agent
Noticeofrevocationor
renunciation 831
Revocationandrenunciation
may be expressed or implied . .
When termination of agent's
authoritytakes effect as to
agent, and as to third persons .
Agent'sdutyonterminationof
agency by principal's death or
insanity
Terminationof sub-agent's
authority
Agent's duty in conducting
principal'sbusiness
Skill anddiligencerequired from
agent
Agent'saccounts 765
Agent's duty tocommunicate
withprincipal
Right of principal when agent
deals, on his own account, in
business of agency without
principal'sconsent 762
769 216.Principal'srightto benefit
gained by agent dealing on his
ownaccountinbusinessof
agency
217.Agent'srightofretaineroutof
sums receivedon principal's
account
218. Agent's duty to pay sums
received for principal 765
219. When agent'sremuneration
becomesdue 774
.201.
202.
824
824
827
830
831
829
837
839
203.
204.
205.
206.
207.
208.
209.
210.
211.
212.
213.
214.
215.
838
757
759
761
762
778https://t.me/LawCollegeNotes_Stuffs

43. 220. Agent not entitled to
remunerationforbusiness
misconducted. .
221. Agent's lien on principal's
property
222. Agent to be indemnified against
consequencesof lawful acts . .
223. Agent to be indemnified against
consequencesof acts done in
good faith
224. Non-liability of employerof
agent to do a criminal act...
225. Compensation to agent for
injury causedbyprincipal's
neglect
226.Enforcementandconsequences
ofagent'scontracts
227. Principalhow far bound, when
agent exceeds authority....
228. Principal not bound when excess
of agent'sauthorityis
not separable
229. Consequences of notice given to
agent
230. Agentcannot personally
enforce, nor beboundby,
contractson behalf ofprincipal
232.Performanceofcontractwith
agentsupposedto be principal .
233. Right of person deahng with
agent personally liable
234. Consequence of inducing agent
or principalto act on beliefthat
principaloragentwillbeheld
exclusively liable
235. Liability of pretended agent . .
236.Personfalselycontractingas
agent, not entitled to
performance
237. Liability ofprincipalinducing
beliefthatagent'sunauthorised
actswereauthorised 797
238. Effect, on agreement, of
misrepresentationor fraud
by agent 802
777
778
781
782
783
783
784
800
800
801
811
808
816
817
817
818
ChapterVIII
OFINDEMNITYANDGUARANTEE
124."ContractofIndemnity"defined 592
Section-wiseContentsXLI
125. Rights ofindemnity-holder
whensued 594
126."Contractofguarantee",
"surety","principaldebtor"
and"creditor" 599
127.Considerationforguarantee...603
128. Surety's liability 608
129. Continuing guarantee 622
130.Revocationofcontinuing
guarantee 638
131.Revocationofcontinuing
guarantee by surety's death . . . 640
132.Liabilityof twopersons,
.primarily liable,not affectedby
arrangement between them that
oneshallbesuretyinother's
default 637
133. Discharge of surety by variance
intermsofcontract 641
134.-Discharge ofsuretyby release or
discharge of principal debtor . . . 646
135. Discharge of surety when
creditorcompoundswith, gives
timeto,oragreesnottosue
principal debtor 649
136. Surety not discharged when
agreementmade with third
person togivetime to principal
debtor 651
137.Creditor'sforbearancetosue
does not discharge surety....651
138.Releaseof oneco-suretydoes
not discharge others 666
139. Dischargeof surety by creditor's
actoromissionimpairing
surety's eventual remedy 653
140. Rights ofsuretyonpaymentor
performance 657
141. Surety's right to benefit of
creditor'ssecurities 660
142.Guaranteeobtainedby
misrepresentation,invalid....606
145.Impliedpromiseto indemnify
surety 659
146.Co-suretiesliabletocontribute
equally 666
147. Liability of co-sureties bound in
differentsums 666https://t.me/LawCollegeNotes_Stuffs

44. XLIILawofContract
SPECIFICRELIEFACT,1963
PRELIMINARY 22.Powertograntrelieffor
1. Short title, extent and possession,partition, refund of
commencement 841 earnestmoney,etc 917
2.Definitions 842 Liquidation of damagesno bar
3.Savings 842 to specificperformance 919
4.Specificrelieftobegrantedonly ^4.Barofsuitforcompensationfor
forenforcingindividualcivil breachafterdismissalof suitfor
rightsandnotforenforcing specificperformance 917
penal laws 842 Applicationof preceding
5.Recoveryofspecificimmovable sections to certain awards and
property 845 testamentarydirectionsto
6. Suit by persondispossessedof executesettlements 920
immovableproperty 845 Wheninstrumentmaybe
7.Recoveryofspecificmovable rectified 927
property 851 27.When rescission may be
8.Liabilityof personinpossession, adjudgedorrefused 920
notas owner, to deliver to 28. Rescission incertain
personentitledtoimmediate circumstancesofcontractsfor
possession 853 thesale or lease ofimmovable
9. Defencesrespecting suits for property, the specific
relief based oncontract 855 performanceofwhichhas been
10. Cases in which specific decreed 922
performance of contract 29. Alternativeprayer forrescission
enforceable 858 insuit forspecificperformance . 925
11. Casesin whichspecific 30. Court may require parties
performanceofcontracts rescindingto do equity 926
connectedwith trusts 31. Whencancellationmay be
enforceable 863 ordered 929
12.Specificperformanceofpart of 32. What instrumentsmaybe
coritract 864 partiallycancelled 932
13.Rightsofpurchaserorlessee 33.Powertorequirebenefitto
againstpersonwithnotitleor berestoredorcompensation
imperfect title 868 to be made when instrument
14.Contractsnotspecifically iscancelledor issuccessfully
enforceable 871 resistedasbeingvoidor
15. Who mayobtainspecific voidable. ..~ 932
performance 878 34. Discretion of court as to
16.Personalbarstorelief 879 declarationofstatusorright...936
17.Contracttosellor let property 35.Effectofdeclaration 947
byonewhohasnotitle,not 36.Preventivereliefhowgranted. .948
specificallyenforceable 888 37Temporaryandperpetual
18.Non-enforcementexceptwith injunctions 948
variation 888 38.Perpetualinjunctionwhen
19.Reliefagainstpartiesand granted 952
personsclaimingunderthemby 39.Mandatoryinjunctions 961
subsequenttitle 889 40.Damagesinlieuof,orin
20.Discretionastodecreeing additionto,injunction 963
specificperformance 893 41.Injunctionwhenrefused 959
21.Powertoawardcompensationin 42.Injunctiontoperformnegative
certaincases 913 agreement 956https://t.me/LawCollegeNotes_Stuffs

45. TableofCases
Thecases inboldcanbeaccessedon SCC Online®from,the
CasePilotfeatureon EBCExplorer™.
CASEPILOT
A
A.A.Singh v Union of India, AIR 1970
Mani16 251
A.AbdulRashidKhanvP.A.K.A.Shahul
Hamid,(2000) 10 SCC 636 863, 883
A.AbuMohammedvK.M.Mohammed
Kunju Labba,(1994)2 KLJ664 565
A.ArulLathaGoldvGovtofT.N.,(1994) 2
LW686 (Mad) 784
A.B.C.Laminart(P)LtdvA.P.Agencies,
(1989)2SCC163:AIR1989SC 1239 .9,321
A.B.Marintransv Comet Shipping Co Ltd,
(1985)1WLR170 529
A.B.Ramuluv B. Yadigir, (1993) 2 An
•LT425 836
A.C. Arulappan v Ahalya Naik, (2001) 6
SCC600:AIR2001SC2783......896,906
A.C. Rangaswami v D.J. Renuka, 1997
AIHC975Kant 773
A.C. Roy&cCoVUnion of India, AIR 1995
Cal246 626
A.E.Aboobackerv P.P.Vasu,2004AIHC
551(Ker) 261
A.E.MitchellVC.L. Phillips,(1930-31)58
lA306:AIR1931PC224 664
A.E.ThirumalNaiduvRajammal,AIR
1968Mad201 271
A.F.FergusonScCo vLalitMohan Ghose,
AIR1954Pat596 409
A.K.A.S.Jamalv Moolla Dawood Sons6c
Co, (1915-16) 43lA6:ILR(1916)43Cal
493: (1916) 1 AC 175 474,520,521
A.K.BijiliSahib v Dadhamia Bhalambai,
AIR1936Mad48 708
A.K.Constructionv State ofJharkhand,
(2004) 1 BLJR516 (Jhar) 53
A.K. Lakshmipathyv Rai SahebPannalal
H.LahotiCharitableTrust,(2010) 1 SCC
287:AIR2010SC577 384
A.L.MustaneerEstablishmentvVaruna
Overseas (P) Ltd, (1998) 72 DLT 186....212
A.L.N.NarayananChettiyar v Official
Assignee, (1941) 54 LW 606: AIR 1941
PC93 630
A.LakshmanaRaov P.RamaK.Raju,
(1993) 1 AndhWR(NOC) 5 260
A.LakshmanaswamiMudaliarvLIC,1963
Supp(2)SCR 887:AIR 1963 SC 1185...130
A.M.AppavooChettiar v South IndianRly
Co, AIR 1929 Mad 177 574
A.MariaAngelina v A.G. Balkis Bee, (2002)
9SCC597:AIR2002SC2385 .902
A.Milton8c CofOjha Automobile Engg
Co, AIR 1931 Cal 279 320
A.MohamedAlivT.N.Industrial
Investment Corpn Ltd, AIR 2009 Mad
44(DB) 616
A.MohdBasheervStateofKerala,(2003)6
SCC159 393,484
A.N.GhosevRelianceInsuranceCo,ILR
11 Rang 475 318
A.P.Electronics Development Corpn Ltd v
M.K.Mohan,(2010) 1 LW 518 (Mad)...628
A.P.Kochudevassy v State of Kerala, AIR
1982Ker90 228
A.P.Paper Mills Ltd v PrincipalSecy,(1997)
3 An LT 649 (DB) 488
A.P.PaperMills Ltd v State of Maharashtra,
(2003) 4 Mah LJ 760 54
A.P. SEBVPatelandPatel,AIR1977
AP172 389
A.P. SEBVV.B.C.Foods(P)Ltd,AIR1998
AP177 536
A.P.State Coop Rural Irrigation Corpn Ltd
VCoop Tribunal, (2006) 6 ALD 814....737
A.Pramodav D.Komaraiah,AIR2010
AP81 893
[XLIII]https://t.me/LawCollegeNotes_Stuffs

46. XLIVLawofContract
A.R. Krishnamurthy v Ami Municipality,
1983seeOnLineMad126: (1985) 98
LW187 521
A.S. Motors(P)Ltd v Union of India,(2013)
10see114;(2013)4see(Civ) 660....547
A. SchroederMusic Publishing Co v
Macaulay,(1974) 1WLR1308 195
A. Srinivasulu Naidu v Gajraj Mehta, (1990)
1MLJ188 725
A. Subramanian vThirunarakutty
Desivinayagam,AIR 2003(NOC)
384(Mad) 937
A.SuryanarayanMurthiv P.Krishna
Murthy,AIR1957Ori 125 285
A.T. Brij Paul Singh v State of Gujarat,
(1984)4see59:AIR1984SC1703....479
A.T.RaghavaChariarv O.A.Srinivasa
Raghava Chariar,(2011)3MWN(Civ)
1(FB) 164
A.T.RaghavaChariarvO.M.Srinivasa
RaghavaChariar,ILR(1916) 40
Mad308 163
A.ThangalKunjuMusaiarv M.
VenkatachalamPotti,AIR 1956 SC 246:
(1955) 2 SCR 1196 748, 782, 802
A.V.M. SalesCorpnvAnuradhaChemicals
(P) Ltd, (2012) 2see315: (2012) 1 SCC
(Civ)809 322
A.V.Murthy v B.S.Nagabasawanna,(2002)
3 BomCR13 (SC) 150
A.V.N.TubesLtdvBhartiaCutlerHammer
Ltd,(1992)46 DLT453:(1992)2 Arb LJ
8 (DB) 325
A.V.VaradarajuluNaiduv K.V.Thavasi
Nadar,AIR1963Mad413 601
A.Z.MohammedFarooq v State Govt, 1984
KLT346(FB) 738
Aaron's Reefs v Twiss, 1896 AC 273 (HL) . 212
Aas£/Benham,(1891)2Ch244 (CA) 764
AbajiSitaramModakvTrimbak
Municipality,ILR(1904)28 Bom 66....443
AbbakkeHeggadthivKinhiammaShetty,
ILR(1906)29Mad491 534
AbdulAziz vMasumAll,AIR 1914 All 22:
ILR(1914)36All268 108
Abdul Dadamiya Shaikh v Jagannath
MurlidharRathi,AIR2002Bom 413 . . .907
Abdul Haq v Mohd Yehia Khan, AIR 1924
Pat84 741
AbdulHussainJambawalavBombayMetal
Syndicate,AIR1972Bom252 597
Abdul Jabbar v Abdul Muthaliff, AIR 1982
Mad12 266
Abdul Karim v Sk. Dubar, AIR 1937
Oudh445 303
Abdul Majeed v Abdul Rashid, AIR 1936
All 598 597
AbdulPirojKhan Nobab vHussenbi,(1904)
6BomLR728 265
Abdul Rahim Khan v Union of India, AIR
1968Pat433 64
Abdul RazakyMohd Hussain, ILR(1916)
42Bom499 166
AbdulSalamSheikhRahimv SkMehboob=
Sheikh Amir, (2006) 3 Bom CR 700...6
Abdiilkhaderv Plantation Corpn of Kerala
Ltd,1982KLT 928 378
Abdulla Ahmed v Animendra Kissen Mitter,
AIR 1950Se15: 1950 SCR 30 775, 790
Abdulla Darakhan v Purshottam Darakhan,
ILR1947Bom807:AIR1948Bom265.149
Abdullah Bey Chedid v Tenenbaum, AIR
1934PC91 374
AbhilashSinghv Stateof U.R, 2004 All LJ
557:2004AIHC1456 355
Abhra Sinha v IndiaExplosivesLtd, (2003)
2ice157(Cal) 367
Aboobacker v Ayishu, (1999) 3 KLT 530:
AIR2000NOC29 (Ker) 658
AboobackerKeyiv Govindan Sons, (1990)2
KLT551 335
Abu Mahommad v Mohd Kunju Lebba,
(1994)2 KLT713 567
AcharatlalKesavlalMehta8cCovVijaram
&Co,AIR1925Mad1145 320
Acharya SwamiGanesh Dassjiv Sita Ram
Thappar,(1996) 4 SCC 526: AIR 1996
SC2095 882
ActionstrengthLtd vInternationalGlass
Engg IN. GL. EN SpA, (2002) 1WLR
566(2)(CA) 608
Adaitya Das v Pram ChandMondal,AIR
1929Cal369 105
Adams v Lindsell, (1818) 1B&A681:
106ER250 32
AdamsonfJarvis,(1827)4 Bing 66:
29RR503 591,593, 782
Adani Agri FreshLtd v Mahaboob Sharif,
2015 SCCOnLineSC1302:(2016) 2
LW56 631
Adani Exports Ltd v Mktg Service
Incorporated,AIR 2005 Guj 257 627
AdaramaniDevi vLIC,1998AIHC
3006(Ori) ^513
AdconElectronics(P)Ltd v Daulat,(2001)7
see698: AIR 2001 SC 3712 917,918
AddisVGramophone Co Ltd, 1909 AC 488:
78 LJ KB1122:1010LT466 503
Addison Gandasequi,(1812)4
Taunt574 S17
AdelMuhammeduAttorney General of
Palestine, (1947) 60WN118: AIR1946
PC 42 928
Adhikanda Sahu v Jogy Sahu, AIR 1922
Pat502 282
Adhiraja Shatty v Vittil Bhatta, AIR 1914
Mad366 280https://t.me/LawCollegeNotes_Stuffs

47. AdhunikSteelsLtdvOrissaMangenese
Minerals(P)Ltd, (2007) 7 SCC 125: AIR
2007SC2563 844,959
AdikandaBiswalvBhubaneshwar.
DevelopmentAuthority, AIR 2006 Ori 36 ..21'
AdikasavanNaiduvGurunathChetti,ILR
(1918) 40 Mad 338 527
Aditya Mass Communications(P)LtdfA.P.
SRTC, AIR 1998 AP 125 54
Aditya Narayan Chouresiay'Bankof India,
AIR2000Pat222. .i. ./.. . ........:'618.
Adlerv Dickson, (1955) 1 QB 158:(1954)3 ."
WLR450(CA) .....96
AdministratorGeneralof Bengal v "''"
JuggeswarRoy,ILR(1877)3:Call92 .
(PC):1CLR107 •.' .131
Aeries Advertising Bureau v C.T.DevarajV"'"'
(1995)3 SCC 250: AIR 1995SC2251 .• 572
AfovosShipping CoyR. Pagnan, (1982) 1
WLR842;(1982) 1 Lloyd's Rep 562(CA)362
AfsarSheikhvSolemanBibi, (1976) 2 SCC ; •
142:AIR1976SC 163 .-186
Agarwal Roadlines(P)Ltd v Indian Oil
Corpn Ltd, (2003) 1 Bom CR 495 . 50
AgendaNational Ltd v A.Socie-dade
Chowgule&Cia Ltd, AIR 1967 Goa 88 . 601
Aggarwal Chamber ofCommerceLtd v
Ganpat Rai HiraLai,AIR 1958 SC 269:
1958SCR938 773
AgnewVIndian Carrying Co,(1865)2 Mad
HCCases449 760
Agra Bank v Hamlyn, ILR (1890) 14
Mad235 63
Agra Bank's Claim, re,(1872)LR 8 HL 41 . 702
AgraBeveragesCorpn Ltd v Unionof India,
(1988) 18 ECR 261: (1988) 34 ELT
465 (All) 577
Ah Cheung v Ah Wain, AIR1938
Rang 243 731
Ah San v Maung Ba Thi, (1937) 169IC221 730
AhammedvMammadKunhi,AIR1987
Ker228 800
AhmadAlimohomeKhoja,re, AIR1932
Bom613 721
AikenVShort,(1856) 1 H & N 210: 25 LJ
Ex321 585
Ailion VSpickermann,(1976)2 WLR 556 . 350
AilsaCraig Fishing Co Ltd v Malvern
Fishing Co Ltd, (1983) 1 WLR
964 (HL) 85,89
Airport Authorityof India v RRSinghal,
AIR2012Del51 9
Ajaib Singh v Gurbax Singh, (1988) 1
SCC143 910
AjaibSinghvTulsiDevi,(2000)6 SCC566:
AIR2000SC2493 883
AjayKumar v Chanchala Devi, AIR 2011
HP37 •849
TableofCasesXLV
AjayKumar Agarwal v OSFC, AIR 2007
Ori37(DB) 583
AjeetInternational v HP Horticulture
Produce Mktg 8c Processing Corpn Ltd,
AIR2002HP159 372
AjitPrasad Jain v N.K. Widhani, AIR 1990
Del42 260
Ajit Singh v Kakbhir Singh, AIR 1992
P&H193 257
Ajudhia Prasad v ChandanLai,AIR 1937
All 610(FB) 161,162,935
AkaiImpexLtd v General Steel Export,
(1998) 2 Bom CR 199 633
AkbarAlivVinodKhanna,(2005)9 SCC
367:AIR2004SC3940 906
Aker Oil&Gas Technology UKPicv
SovereignCorporate Ltd, 2002 CLC
557(QBD) 143
Akerib v Booth, (1961) 1 WLR 367 . 86
Akshay Doogad v State of M.P., AIR 2016
MP83 887
AkshayalingamPillai vAyyambalaAmmal,
AIR1933Mad386 926
Akshoy KumarPatilv New India Assurance
Co, AIR 2007 Del 136 181
Alamianiv PositiveGovtSecurityLife
AssuranceCo, ILR (1898) 23 Bom 191..338
AlbertvMotorInsurers'Bureau,(1971)3
WLR291 (HL) 15
Albrightand WilsonU K LtdBiochemLtd,
2002UKHL 37 (HL) 786
AlcoChem Ltd v Hyderabad Chemical
PharmaceuticalWorksLtd,(2003)3 BC
508(AP) 578
AlconConstructionsvBoardofTrustees,
AIR1982Goa9 362
Alderslade vHendonLaundryLtd, (1945) 1
KB189(CA)....' 79,80
Alec Lobb (Garages) Ltd v Total Oil
GreatBritainLtd,(1983) 1WLR87
(ChD) 186,297
Alekha Sahoo v Puri Urban Coop Bank Ltd,
AIR2004Ori 142:(2004)97 CLT 769
(Ori) 704
AlessioVJovica, (1973) 42 DLR (3d) 242 . . 202
Alexanderv Railway Executive, (1951) 2
KB882 80
Alexander v Rayson, (1936) 1 KB 169 (CA) 267
Alexander Brogden vMetropolitanRlyCo,
(1877) LR 2 AC 666 (HL) 27
AlfredSchonlankvMuthunynaChetti,
(1892)2MLJ57 59
AlghusseinEstablishmentv EtonCollege,
(1988)1 WLR 587 (HL) 417
AliasE.M.Patil, AIR2004Ker 214 690
Alice Mary Hill v William Clarke, ILR
(1905)27 All 266 271,289-
Alkinson v Denby,(1861)6 H&N 778 . . . 346https://t.me/LawCollegeNotes_Stuffs

48. XLVILawofContract
AllBengalTransportAgencyv Hare
KrishnaBanik,AIR 1985 Gau 7 320, 321
AllahabadBankv MECON, Doranda,
AIR2005Jhar54 702
Allahabad Bank v S.M. EnggIndustries,
(1992) 1CalLJ 448 605
AllahabadJalSansthanv StateofU.P.,
AIR2004All366 603
AllanWJ.& Co Ltd v ElNasr Export &
ImportCo, (1972) 2 QB 189: (1972) 2
WLR800 442
AlleyyHotsan,(1815)4 Camp 325 833
AllianceBank ofSimlav Amritsar Bank,
AIR1915Lah214 836
AllianceBankofSimlavGhamandiLai
JainLai,AIR 1927 Lah 408: (1927) 8
Lah 373 718
Allied Maples Group v Simmons &
Simmons,(1995)1WLR2117(CA) 506
AlliedResinsofIndiaLtdvMineralsand
Metals Trading Corpn of India Ltd,
AIR1986Cal346 632
AlokPrasadVermav Unionof India,(2000)
3 BLJR1913(Pat) 519
AlokaBosev Parmatma Devi, (2009) 2 SCC
582:AIR2009SC1527 108
AlopiParshad& Sons Ltd vUnionof
India, AIR 1960 SC 588: (1960) 2
SCR 793 400, 423
AlvaAluminiumLtd v GabrielIndia Ltd,
(2011) 1 SCC 167: (2011) 98AIC228...185
AmalKrishna Ray v Bank of Baroda,
AIR 2014 (NOC) 179 (Ori) 610
AmalgamatedInvestment& Property Co
LtdfJohn Walker & Sons Ltd, (1977) 1
WLR164(CA) 242
AmaliEnglish Medium High School v Govt
of A.R, AIR 1993 AP 338 789
AmarAhmadKhanvShamimAhmad
Khan, AIR 2012Jhar39 890
Amar Singh v UT of Chandigarh, AIR1993
P&H100 477
AmarjeetS.Vidhyarthiv Sushiladevi K.
Pillani,(2002) 2 Bom CR-694 372
Amarjeet Singh v Zonal Manager,FCI,
(2002)4fee47(P&H) 543
AmbianceIndia(P)Ltd v NaveenJain,
(2005) 81 DRJ 538:(2005)122
DLJ421 308,311
Ambika Textiles Ltd, re, AIR 1950 Cal 491 572
Ameen Trading Co v Bank of Baroda,
(1993) 2 KLT 442 579
AmeerMohdvBarkatAli,AIR2002
Raj406 855,896
AmericanExpress Bank Ltd vCalcuttaSteel
Co, (1993) 2 SCC199 939
American Express Bank Ltd v Priya Puri,
2006SCCOnLineDel 638: (2006) 110
FLR1061 311
AmericanPresidentLinesLtdvPortof
Bombay,AIR 2004 Bom 162: (2004) 4
BomCR809 710
AminavHasanKoya, 1985 KLT 596: 1985
Cri LJ1996 205
Amina Begum v Mohd Ramzan, AIR 2005
Raj41 748,829
Amina Bibi v Saiyid Yusuf,ILR(1922) 44
All 748 174
Amirchandv RamRattanchand,1903Punj
RecNo.50 285
Amiri Flight Authority vBAESystemsPic,
2002EWHC2481 (CA) 100
AmmisettiChandramvChodasani
Suryanarayana,AIR2003AP 269 877
AmolVDeorao,AIR 2011NOC
215(Bom) 860, 879
Amri Deviv Ridmal, AIR 1998 Raj 25....419
Amrik Singh v Sohan Singh, (1988-91) 93
PLR541 829
Amrit Banaspati Co Ltd v State of Punjab,
(1992)2SCC411:AIR1992
SC 1075 109, 110
AmritlalGoverdhanLalanvStateBankof
Travancore, AIR 1968 SC 1432:(1968)3
SCR 724..650, 654, 655, 658, 661, 662, 663
AmritsarRayon&SilkMillsLtd vAmin
Chand Sajdeh, (1987) 2 PLR 253 258
AmrokLogisticsTrading(P)Ltd vDigvijay
Cement Co Ltd, AIR 2001 Guj 299 630
AmteshwarAnandvVirenderMohanSingh,
(2006)1 SCC 148:AIR2006SC 151....383
AmulyaLaiChowdhury v Tripura
IndustrialDevelopmentCorpn Ltd, AIR
2007Gau113 616
Amuruvi Perumal v Sabapathi, AIR 1952
Mad253 396
AmusuPropertiesvMuruchadayah,(1989)
1 MLJ 451(Ipoh) 445
An Advocate, re, Tuticorin, AIR 1943
Mad493 7O8
AnamalaiTimberTrustLtdv
TrippunitchuraDevaswom,AIR 1954
TC305 674
AnandPrakashOmPrakashvOswal
Trading Agency, AIR 1976 Del 24 275
AnantRai vBhagwanRai, AIR1940
All 12 169
AnchorLines(P)Ltd vCementCorpn of
India Ltd, (2000) 4 Kant LJ 485 538
AndardMount(London) Ltd v Curewel
(India)Ltd, AIR 1985 Del45 462,515
AndheriBridgeViewCoopHousingSociety
VKrishnakantAnandrao Deo, AIR1991
Bom129 436
AndhraBank vAnantnath,AIR 1991
AP 245 104
Andhra Bankv VattikutiSreemannarayana,
(2004) 5 ALD 111 (DB) 265https://t.me/LawCollegeNotes_Stuffs

49. Andhra Pradesh Paper Mills Ltd v State of
Maharashtra,(2005)4 BomCR274 (DB) . 52
Andhra Sugars Ltd v State ofA.P.,AIR 1968
SC 599:(1968)1SCR 705 185
AndrewsvRamsay6cCo,(1903) 2
KB635 764,777
Angelic Star, The,(1988)1FTLR 94(CA). 541
Angile Insulations v Davy Ashmore India
Ltd,(1995) 4see153:AIR1995
SC1766 323
Anglia Television Ltd v Reed, (1972) 1 QB
60: (1971) 3WLR528;(1971) 3 All ER
690 (CA) 500
Anglo-Auto Finance Co LtdJames,(1963)
1WLR1942(CA) 533
Anglo-DanubianCo v Rogerson, (1867) LR
4Eq3 930
Aniglase Yohannan vRamlatha,(2005)7
see534:AIR2005SC3503 859,884
AnilHarishvGovtofMaharashtra,(2004)
6BomCR322 570
AnilKumarvCentralBankofIndia,AIR
1997HP5 639
Anil Kumar vHaryanaFinancialCorpn,
AIR2011P&H140 617
AnilKumarSrivastavavStateof U.P.,
(2004)8see671: AIR2004SC4299.22,23
AnimaMallickv Ajoy Kumar Roy, (2000) 4
see119 849
Anindya Mukherjee v Clean Coats (P)Ltd,
(2011) 1MahLJ 573 308
Anjadennessa Bibi v Rahim Buksh,ILR
(1915) 42Cal286 . 186
Anjaneyalu v Venuegopala Rice Mills Ltd,
ILR (1922) 45Mad620 280
Ann Trego v George StratfordHunt,1896
AC7 298
Annakiliv A.Vedanayagam,(2007) 14SCC
308:AIR2008SC346 847
AnnamaJose v KeralaFinancialCorpn,AIR
2002Ker396 636
AnnapooraniAmmalv G. Thagapalam,
(1989)3SCe287 845
AnnarpurnaBarik Dei vIndaBevi^a,AIR
1995Ori273 194
AnnatimuthuThevarvAlagammal,(2005)
6sec202 958
AnsalProperties and Industries(P)Ltd v
Engg Projects (India) Ltd, AIR 1998
Del176 632
Anti-Corruptionand Social Welfare
Organisationv State of Punjab, (1997) 1
BC 262(P&HDB) 296
AntonPiller K.G. v Mfg Processes Ltd, 1976
Ch 55: (1976) 2WLR162 (CA) 765
Anurag Anand v Sunita Anand, AIR 1997
Del94 205
Appa Pillai v Ranga Pillai, ILR (1882) 6
Mad71 147
TableofCasesXLVII
Appa Rao vSalemMotors and Saleem
Radios,AIR 1955Mad505 716
Appa Rao vSuryaprakaohRao, ILR (1899)
23Mad94 151
Appanna v Jami Venkatappadu, AIR 1953
Mad611 243
Appanna Pullam Raju v Central Bank of
India,AIR2006NOC1413 (AP):(2006)1
CCC262 656
Applesonv H. Littlewood Ltd,(1939)1 All
ER464(CA) 15
AratraPotatoCo Ltd vTaylorJoynson
Garrett,(1995) 4 All ER 695 284
Archdale&CoLtdvComservicesLtd,
(1954) 1WLR459 (CA) 87
ArchervStone,(1898)78 LT 34 810
ArjunParadeepakv G. Vani, AIR 2003
NOC468(AP) ...896
Arjun Prasad v Central Bank of India, AIR
1956Pat32 714
Arjunsa Raghusa vMohanlalHarakchand,
AIR 1937 Nag 345 340
Armagas Ltd v Mundogas S.A., 1986 AC
717: (1985) 3WLR640 (CA) 799
ArmstrongfJackson,(1917) 2 KB 822:
(1916-17)All ER Rep 1117 763
Armstrong1/Strain,(1952) 1 KB 232(CA). 804
Army WelfareHousingOrganisationv
Sumangal Services (P) Ltd, (2004) 9 SCC
619:AIR2004SC1344 330,404,481
ArnoldArnold,(1880) LR 14ChD270..867
Aroma Enterprise vMurshidabadZilla
Parishad,(2003) 2ICC745 (Cal) 46
Arosan Enterprises Ltd v Union of India,
(1999) 9 SCC 449 389
ArulMaruganTraders vRashtriya
ChemicalsandFertilisersLtd,AIR1986
Mad161 635
ArunKumarvBSNL,(2002)3KLT
(SN)92 742
Arun Kumar Agarwal v Bihar State Food
Civil SupplyCorpn,(2005) 1 BLJR 29
(Pat) 51,53
ArvindCoal&ConstructionCovDamodar
ValleyCorpn,AIR 1991 Pat 14 46
ArvindConstructionCo (P) Ltd vKalinga
MiningCorpn,(2007) 6 SCC 798: AIR
2007Se2144 949
AsaarAliKhan v BaijnathPrasad,AIR
1983All197 570
Asfaq Qureshi v Aysha Qureshi (Nivedita
Yadav), AIR 2010 Chh 58 (DB) 175
AshaVU.P. State SugarCorpnLtd,(2006)1
All LJ 808 60
AshaQureshivAfaqQureshi,AIR2002
MP263 205
AshanDevi vPhulwasiDevi,(2003)12 SCC
219:AIR2004SC511 891https://t.me/LawCollegeNotes_Stuffs

50. XLVIIILawofContract
Ashburner&CofAnant Das,ILR(1876)1
All267 316
Ashis Kumar Ghosh vGopalChandra
Ghosh,(2004)3CHN146 267
Ashish Gupta vI.B.P.Co Ltd, (2005) 125
DLT298 827
Ashmore,Benson,Pease & Co Ltd v A.V.
DawsonLtd, (1973) 1WLR828 344
Ashok Agarwal v State of Orissa, (1996) 82
CutLT239 ;..,.828
Ashok Kumar v Gaon Sabha, AIR 1981
All222 250
Ashok Kumar Chowan vh.GAnwarAli,
AIR2010Kant70 849
AshokKumar J. Pandya vSuyogCoop
HousingSocietyLtd,AIR2003NOG118
(Guj): 2002AIHC3401 153,878
AshokKumarSinhavBiharStateFinancial
Corpn,AIR2009Jhar42 482
AshokKumarSrivastavvNational
InsuranceCoLtd,(1998) 4 SCC 361:AIR
1998SC2046 842
Ashok Vandhan Bhagat v W.B. Essential
Commodity Supply Corpn Ltd, AIR 1992
Cal135 223
AshwaniKumarv State, AIR 2015
J&K99 571
AsifEnterprisesvONGCLtd, AIR2002
Guj264 632
Askari Mirza v BibiJai Kishori,(1912)16
IC344 178
Aslhing VL.S. John, (1984) 1 SCC 205: AIR
1984 SC 988 457,474
Assiamma v State Bank of Mysore, (1990) 1
KLT18 838
Assn of Corpn and Apex Societies of
Handloomsv State of Bihar, AIR2000
Del106 627
Associated Bombay Cinemas (P) Ltd v Urmi
Developers P Ltd, 1996 SCC OnLine Bom
319:(1997)2BomCR257 103
Associated Cement Co Ltd v Union of India,
AIR1998MP241 579
Associated Cement Companies Ltd v State
of Rajasthan, AIR 1981 Raj 133 276
Associated Cinemas of America, Inc v World
AmusementCo, (1937) 201Minn94
(MinnesotaSC) 450
AssociatedJapaneseBankvCreditDul
NuroS.A., (1989) 1 WLR 255 (QB) 242
AstleyVReynolds, (1731) 2 STR 915:
93ER939 179
AsudamalLaxmandasSindhivKisanrao
WamanraoDharmale,(2004) 2 Bom
CR361 3
Atamal Ramoomal v Deepchand Kessurmal,
AIR1939Sind33 267
Atkinsonv Denby, (1862) 7H&N934:
158ER749 346
Atlantic Die Casting Co v Whiting Tubular , .
ProductsInc,337Mich414 805
AtlasExportIndustries v Kotak 8c Co,
(1999)7SCC61 327
Atlas Express Ltd v Kafco (Importers and
Distributors) Ltd, 1989 QB 833: (1989) 3
WLR389 195
Atma Singh vNTPCLtd,(1988)2 An
LT421 46
AtoolChandraMukerjee v Shoshee Bhusan
Mookerjee,(1901-02)6CWN215 708
AttarSingh Balram Singh vVishanDas-
PrabhDas, ILR (1937) 18 Lah 345 953
AttorneyGeneral v Barker, (1990) 3 All ER
257(CA) .:...516
Attorney-Generalfor Ceylone vSilva,1953
AC 461: (1953) 2 WLR 1185 (PC) 794
AttwoodVLamont, (1920) 3 KB 571....309,
310,515
AttwoodVMunnings,(1827) 7B&C278:
108ER727 785
AtulMehra v Bank ofMaharashtra,AIR
2003P&H11: (2003) 2 EC 570: (2002) 3
ICC138 673
AveryvBowden,(1855)5 E & B 714: ''
25 LJ QB 49: 103RR695: 119 ER 647:
27LJ119 456
Avlapa Nayak v Narsi Keshawji, (1871) 8
BomHCApp Cas 19 800
Avon Finance Co v Bridger, (1985) 2 All ER
281(CA) 191
Awadesh Yadav v Suresh Thakur, (2002) 10
SCC156 863
Axis Bank v SBSOrganics(P) Ltd, 2016
SCC OnLine SC 353: (2016) 196 Comp
Cas236 ; 706
Ayithi Appalanaidu vPetlaPapamma, AIR
2011AP172 886
Aypunni Mani v Devassy Kochouseph, AIR.
1966Ker 203 ,647
Ayyanah Chetty vSubramaniaIyer, (1923)
45MLJ409 774-
Azhar Sultana v BRajamani,(2009) 17 SCC=
27:AIR2009SC2157 911
AzizAhmedv Sher Ali,AIR1956All
8 (FB) 652
B
B&SContractsand Designs Ltd v Victor
GreenPublicationsLtd,1989ICR419 . . . 194
B-TrakSdn Bhd v BingkulTimberAgencies,
(1989) 1MalaysiaLJ 124 258
B.D.A. Ltd VState of U.R, AIR 1995
All277 330
B.N. Venkataswamy v P.S.Rukminiamma,
1999AIHC1979(Kant) 565https://t.me/LawCollegeNotes_Stuffs

51. B.P.ExplorationCo (Libya) Ltd vHunt
(No.2), (1979) 1WLR783(QB) 407
B.P.ExplorationCo (Libya) Ltd vHunt
(No.2),(1981)1WLR232(CA) 469
B.R.ChowdhuryvIndianOilCorpnLtd,
(2004)2see177 212
B.R.Enterprisesv State of U.R, (1999) 9
see700:AIR1999SC867 342
B.R.Koteswarav C.Rameswari,AIR2002
NOe42(AP):2002AIHC2973(AP)...907
B.R.ThadanivOrientalBankof
eommerce,(2002)2BomCR263 615
B.RajamanivAzharSultana,AIR2005
AP260:(2005)2 An LD862 4
B.RatnasabhapathyChettiuM.Veerappa,
(1989)1AnLT588 259
B.S.VederavUnionofIndia,AIR1969
SC 118 ; 407
B.V.BasavarajvN.R.Chandran,(2000)3
KantLJ 195 553
B.V.GururajfM RRathindran,AIR2010
Mad129 925
B.V.NagarajuvOrientalInsuranceCo Ltd,
(1996)4see674:AIR1996SC2054....79
B.V.RamaRaoJayamma,AIR1953
Mys33 271
BabasahebvRajaram,AIR 1931 Bom264. 337
BabiahvMohdAbdusSubhanKhan,
AIR1954Hyd 156 257
BabshettivVenkatramana,ILR(1879) 3
Bom154 238
BabuHarnarianKapurv BabuRamSwarup
Nigam,AIR 1941Oudh593 282
BabuRamvRamCharanLai,AIR1934
All1023 283
Babu Ram v RamDayal,ILR (1890) 12
All541 836
BabuRamBudhuMaivDhanSinghBishan
Singh, AIR1957Punj 169 117
BabuRamGuptavMahanagarTelephone
NigamLtd, AIR 1995 Del 223 49
BabuRameshwarPrasadSahivAnandi
Devi,AIR1956Pat53 741
BabuRaoRamchandraRaovBabu
ManaklalNehmal,AIR1938
Nag413 647,657
Babu Sheriff vMaqboolSheriff, AIR 2003
Mad355 938
Babu Singh vGorakhSingh, AIR 2011
MP79 945
Babulalt^StateofU.P.,AIR1966All204..738
BabulalSwarupchandShahv SouthSatara
(F.D.)Merchants'AssnLtd,AIR1960
Bom548 737
BadischeCo,re, (1921) 2Ch331 279
BadriPrasadvStateofM.P.,(1971) 3 SCC
23:AIR1970SC706 20,44
BadridasKotharivMeghrajKothari,AIR
1967Cal25 339,340
TableofCasesXLIX
Badrilal v Municipal Council of Indore,
(1973) 2 SCC388:AIR1973SC 510 37
BadruNishavYogendraPrasadSinha,
AIR2006Pat71:(2006)1BLJR
637(Pat) 378,384
BaduVBadarnessa,(1919) 29 CLJ230....290
BahamasOilRefiningCo vKristiansands
TankrederieA/S, (1978) 1 Lloyds
Reports211 13
BaileyyBullock,(1950) 2 All ER 1167....512
Bailey&WhitesLtd vHouse,(1915) 31
TLR583 794
BainFothergill,(1874) LR 7 HL 158...526,
527
Baivijli vNansaNagar,ILR (1885) 10
Bom152 269
Bajaj Auto Ltd v Sandeep Polymers (P) Ltd,
(2004)4MahLJ396 324
BajranglalShivchandraiRuia vShashikant
N.Ruia,(2004)5SCC272 845
Bakerv AsiaMotorCoLtd,1962
MLJ 425 206 '
BakervJones,(1954) 1WLR1005 314
BalachandranvSundaraGounder,(2003)2
KLT(SN) 31 259
BalakrishnanvBabu,(1994) 1 KLT947...260
Balakrishnanv H.ChunnilalBagmar,
AIR1998Mad175 : 613
Balbir Singh vArjunSingh, AIR2000All
37:2000AIHC1350 261
BalbirSoundvIndianBank,1996MPLJ
853 647
Baldeo DasAgarwallavMohamayaPersad,
(1911)15CWN447 284
Baldev Singh v KeshwaNand,(2011) 2ICC
414(P&H) 425
Baldev Steel Ltd vEmpireDyeing&MfgCo
Ltd,AIR2001Del 391 582
BalfourvBalfour,(1919) 2 KB 571/ 11
BalfourvGrace,(1902) 1 Ch 733 639
BalkarSingh vMohabatSingh, AIR2004
P&;H340 865
BalkesserbaivNaranjiWalji,ILR(1880) 4
Bom352 707
BalkishanDasvMadanLai,(1907)29
All303 , 188
BalkrishnavAtmaram,AIR1944Nag277. 647
BalletVMingay,1943 KB 281 (CA) 157
BalrajChibbervNOIDA,1995All LJ 1513:
(1996)27ALR10 209
BalramGuptav Union ofIndia,1987Supp
SCC228:AIR1987SC2354 60,61
BalvirantlalChhabildasMehtavStateBank
ofSaurashtra,(1998) 4GCD3112 690
BanarseeDasvGholamHossein,(1869-70)
13MIA358 787
BancoExteriorInternationalvMann,
(1995) 1 All ER936(CA) 192https://t.me/LawCollegeNotes_Stuffs

52. LLawofContract
BandaAlivBanspatSingh,ILR(1882) 4 All
352;1882AWN66 131
Banerjee&BanerjeevHindustanSteel
WorksConstructionLtd,AIR1986
Cal374 634
BangaloreDevelopmentAuthorityv
SyndicateBank,(2007)6see711 502
Banghy AbdulRazakvKhandiRao,
40IC851 279
Bank Line Ltd vArthurCapelScCo, 1919
AC435(HL) 398,407,415
BankofBarodavAvdootBhagwantNaik,
AIR2005Bom224 651
BankofBarodavCollector,1993 Cri LJ
3503(MP) 719
Bank ofBarodafJ KChemicals,(2010) 5
MahLJ448 613
Bank ofBarodav Kayenkay Agencies,
(2003)1 BC 59 (Del) 105
BankofBarodavRabariBachubhai
Hirabhai,AIR1987Guj 1 717, 723
Bank of Bengal v Fagan, (1849) 5 MIA 27;
18ER804 787
Bankof Bengal vRamanathan,(1915-16)
43lA48:43Cal527 787
BankofBiharvStateofBihar,(1972)3
see196:AIR1971SC1210 719
BankofBiharvTataScobDealers
(ControlledStock)CalcuttaLtd,AIR1960
Cal475 760
BankofBiharLtdvDamodarPrasad,AIR
1969Se297:(1969) 1SCR620...609,611,
612,658
BankofBombayvNandlalThackerseydass,
ILR(1912-13)40lA1;ILR(1913)37
Bom122 693
BankofChittoorvNarasimbulu,AIR1966
AP 163 673,716
BankofCreditandCommerceInternational
S.A.uAli, (2002) 1 AC 251:(2001)2
WLR735(HL) 491
BankofEnglandvCutler,(1908) 2 KB
208(CA) 819
BankofIndiavBinodSteelLtd,AIR1977
MP188 717
Bank ofIndiavLekhimoniDas,(2000)3
see640:AIR2000SC1172 718
BankofIndiav O.P.Swarnakar,(2003)2
see721:AIR2003SC858 60
Bank ofIndiavSurendraKumarMishra,
(2003)1 BC 45(Jhar):(2003)1
Bankmann551 609
BankofIndiav V.SwaroopReddy, AIR
2001AP260:(2001)2AnLT388 565
Bank ofIndiav Yogeshwar KantWadhera,
AIR1987P&H176 665,717
BankofIndiaLtd vJamsetjiA.H.Chinoy&;
ChinoyandCo,(1949-50)77lA76:
AIR1950PC90 859
Bank ofIndiaLtd vRustomFakirji
Cowasjee,AIR1955Bom419 647
BankofMaduraLtdvBankofBaroda,
1986secOnLineMad95:(1986)99
LW721 648
BankofMelliIrenv BarclaysBank,(1951) 2
TLR1057 820
BankofNewSouthWalesvO'Connor,
(1889)LR14 AC273 718
BankofNewSouthWales v ValleyButter,
1902AC543 704
BankofRajasthanLtd vHajarimalMilap
C.Surana,(2005)10SCC238 717
BankofScotlandvMorrison,
1911SC593 '....606,607
BannermanvWhite,(1861) 10 CBNS844.207
BanqueBruxellesLambertSA v EagleStar
InsuranceCoLtd,1995QB 375: (1995) 2 .
WLR607(eA) 528
BanqueParibasvCitibankNA, (1989) 1
MalaysianLJ 329 (CA) (Singapore) 63
BansiSahvKrishnaChandra,AIR1951
Pat508 873
BansilalvPunjabNationalBank,(2010) 1
MahLJlOl 613
BanwariLaivSukhdarshanDayal,(1973) 1
SCC294 16
BanwariLaiRadheMohanvPunjabState
CoopSupplyandMktgFederationLtd,
AIR1982Del357 625
BanwariLaiRadheMohanvPunjabState
CoopSupply,andMktgFederationLtd,
AIR1983Del86 626
BanwarilalvDeenanath,ILR1954
MP337 283
BarclaysBankLtdvThienel8cThienel,
(1978)122Sol Jo 472 655
Barclays BankPicvFaircloughBuilding
Ltd, 1995 QB 214: (1994) 3WLR
1057(CA) 524,529
BarclaysBankPicvO'Brien,(1994) 1 AC
180:(1993)3WLR786(HL) 192,615
Bardwellv Lydall, (1831) 7 Bing 489: 131
ER189 665
BareillyDevelopmentAuthorityvVrinda
Gujarati,(2004)4SCC606:AIR2004
SC1749 490
BaringfCorrie,(1818) 2B&;Aid137 789
BaringvStanton,(1876) LR 3 Ch D
502(CA) 777
Barings vInternationaleNederladenGroup
N V,1995CurrentLawYearBook183...67
BarodaOilCakesTradersvParshottam
NarayandasBagulia,AIR1954Bom 491 . . 35
BarodaSpg&Wvg Co Ltd vSatyanarayan
Marine&:FireInsuranceCoLtd,AIR
1914Bom25(2):ILR(1914)38
Bom344 317
BarrettvIrvine,(1907)2ILR462(CA)...793https://t.me/LawCollegeNotes_Stuffs

53. BarrowvChappell& Co, (1951) 62The
Auttor38 873
Barses J.A.D'SouzavMunicipalCorpnof
GreaterBombay, (2003) 6 Bom CR 846 . . 835
BarwickvEnglishJointStockBank,(1867)
LR2Ex259 802,805
BasantKumarMishravRoshanlal
Shrivastava,AIR 1954 Nag 300 767
BasantaKumarMittervKusumKumar
Mitter,(1899-1900)4CWN767 708
BasantiBai vPrafullaKumarRoutrai,
(2006)101CutLT686(Ori) 359
BasantiBastralayav River SteamIndia
NaviptionCoLtd,AIR1987Cal271...409
BasantiPaikarayvPrananathPaikaray, AIR
2016NOC555(Ori) 952
BasavvaKomDyamangoudaPatilvState
ofMysore,(1977) 4 SCC 358:1977SCC
(Cri)598:AIR1977SC1749 676
BashirAhmadvGovtof A.P.,AIR1970
SC1089 340,356
Basic Tele Services Ltd vUnionofIndia,
AIR2000Dell 627
BasildonDisttCouncilfJ.E.Lesser
(Properties)Ltd,1985QB 839: (1984) 3
WLR812 480
Baxendalev Seal, (1855) 19 Beav 601: 105
RR261 903
BaxtervF.W.Gapp& CoLtd,(1939) 2 KB
271(CA) 760
BazpurCoopSugarFactoryLtdvSurendra
MohanAgarwal,AIR1984All 174 389
BCCIVAli,(2000)3 All ER 51 (CA) 523
BCCIVCricketAssn ofBihar,(2015) 3
SCC251 284,286
BCPPMazdoorSanghvNTPC,(2007)14
SCC234:AIR2008SC336 286
BeaumontvBoultbee,(1802) 7 Ves599. . . 773
BeaumontvReeves,(1846) 8 QB 483 270
Beavent/Webb,(1901) 2 Ch 59 741
BechervaiseyLewis,(1872) LR 7 CP372..665
BechuVBabhutiPrasad,AIR1931 All 201 .223
Bechu Singh v BaldeoPrasad,AIR 1933
Oudhl32 171
BeckScCovSzymanowski&cCo,1923AC
43(HL) 89
Begbie vPhosphateSewage Co Ltd, (1876)
LR1QBD679(CA) 267
BehariLallShahavJagodishChunder
Shaha,ILR(1904)31 Cal 798 257
BehzadivShaftesburyHotelsLtd,1992Ch
1:(1991)2WLR1251(CA) 442
BellVLeverBrosLtd,1932AC
161(HL) 235,236,238,240,252
BellHousesLtd v City WallPropertiesLtd,
(1966)2 QB656:(1966)2WLR1323
(CA) 742
BellachivPakeeran,(2009)12 SCC 95:
(2009)4SCC(Civ)640 181,198
TableofCasesLI
BelsizeMotorSupply Co v Cox, (1914) 1
KB244 734
BengalCoalCo Ltd vHomeeWadia&Co,
ILR(1899)24Bom97 45
BeniMadhoDast/KaunsalKishoreDhusar,
ILR(1900)22 All452 341
BenjaminDomingCardozav Gladys
BenjaminCardoza,(1997)3 Bom
CR553 205
BennetvBennet,(1952)1 KB249(CA)...350
BentleyvCraven,(1853)18 Beav 75:104
RR373 764
Beresfordv RoyalInsuranceCo Ltd, 1938
AC586(HL) 269
BergVSadler &Moore,(1937) 2 KB
158 (CA) 810
Best Sellers Retail (India)(P)Ltd v Aditya
BirlaNuvoLtd, (2012) 6 SCC 792: (2012)
4MPLJ16 950
BeswickVBeswick,1968 AC 58: (1967) 3
WLR932 115
BettiniyGye, (1876) LR 1 QBD 183 387
BevanyWaters,(1828)3C&P520 698
BeyfusyLodge,1925Ch 350 897
BGRMining&Infra(P) Ltd vSingareni
CollieriesCoLtd,AIR2012AP 71 435
BhabaniShankarPatravS.B.I.,AIR1986
Ori247 654
BhagatRamBatravUnionofIndia,(1976)
2SCC416:AIR1976SC2128 462
BhagawatiOxygen Ltd vHindustanCopper
Ltd,(2005)6SCC462;AIR2005
SC2071 443
BhagvandasRangildasVani v Secy ofState,
AIR1926Bom465 624
BhagwanDasShastriv RajaRam,AIR
1927All406 280
BhagwanbhaiKaramanbhaiBharvadv
ArogyanagarCoopHousingSocietyLtd,
AIR2003Guj294:(2004)1 Guj LR506.834
Bhagwandasv ShriDial,1913 Punj Rec.
No.92 41
BhagwandasGoverdhandasKediav
GirdhariialParshottamdas&Co,AIR
1966SC543:(1966)1SCR656...24,35,36
BhagwatDayalSingh v DeviDayalSahu,
(1907-08)35lA48 283
BhagwatiEnterprisesvRajasthanSRTC,
AIR2006Raj233 4
BhagwatiPrasadPawanKumarvUnionof
India,(2006)5 SCC 311:AIR2006
SC2331 19
BhaiJawaharSingh v Secy ofState,AIR
1926Lah292 451
BhailalChaturbhaiPatelvKalyanrai,
63IC952 239
BhanwarlalyBabulal,AIR1992MP6....554
BharatBankLtd v SheojiPrasad,AIR 1955
Pat288 725https://t.me/LawCollegeNotes_Stuffs

54. LIILawofContract
BharatCokingCoalLtd vAnnapurna
Construction,(2003)8SCC154:
AIR2003SC3660 447
BharatForge Ltd vOnilGulati,AIR2005
Del369 4
BharatPetroleumCorpnLtd vChembur
ServiceStation,(2011) 3SCC710:
(2011) 2SCC.{Civ)49 778-
BharatPetroleumCorpnLtd vGreatEastern
ShippingCo Ltd, (2008) 1 SCC 503:
AIR2008SC357 8
BharatPetroleumCorpnLtd vKhaybar
Transport(P) Ltd, AIR 2011 All 131....875
BharatPetroleumCorpnLtd vRajesh
Sharma,AIR 2015NOC881 (All) 875
BharatSurvodayaMills Co Ltd v Shree
RamMills,AIR1959Bom309 791
BhartiAirtelLtdvUnionofIndia,
(2015) 12 SCC 1 2, 57,286
Bhartiya State Bank vBhanjanSingh, 2014
SCCOnLineChh52:AIR2015Chh15..49
BhaskarAdityavMinatiMajumdar,AIR
2003Cal178:(2003)1ICC573(Cal)...834
BhaskarTanhajiDhokratvParwatbai
BhaskarDhokrat,(1996)1BomCR311 .274
BhaskarraoJageshwarraoButy vSaru
JadharaoTumble,AIR1978Bom322...421
BhaskaruniVenkatanarayanavBhaskaruni
Lakshmibayamma,AIR1929Mad309 . . 434
BhatindaChemicalsLtdfM V"XPress
Nuptse",AIR2006Bom 311 692
BhavaniAmmaKanakadevivCSIDekshina
KeralaMahaIdavaka,AIR2008Ker 38 . 278
BhawaniSingh vMaulviMisbah-ud-din,
(1929)30LW 21:AIR1929PC 119 765
BheekChandvParbhuji,AIR 1963 Raj 84;
ILR(1963) 13 Raj 84 818
BHELVAmarNath,(1982)1SCC625...445
Bhikabhaiv BaiBhuri,ILR27Bom418 . . .640
BhikanbhaivHiralal,ILR(1900)24
Bom622 258
BhimMandalvMangaramCorain,
AIR1961Pat21 163
Bhim Singh v State ofHaryana,(1981) 2
SCC673;AIR1980SC768 140
BhimavNigappa,(1868)5 BHC 75
(Appeal Civil) 133
BhimbhavYeshwantrao,ILR(1900)25
Bom126 131,188
BhiwaVShivaram,(1899)1BomLR495. .148
BhojabhaivHayenSamuel,ILR(1898) 22
Bom754..' 814
BholaNathvMulChand,ILR(1901-03)25
All639 765
BholaNathShankarDasvLachmiNarain,
(1931)29 All LJ 84 300,302
BholaRamHarbansLaivBhagatRam,AIR
1927Lah24 168
BholanathvBalbhadraPrasad,AIR1964
All527 741
BholiBakshvGulia,(1876)PunjRec
No64 270
BhowanipurBankingCorpnLtd vDurgesh
NandiniDassi,(1941)54LW529:
AIR1941PC95 281
BhudraChandvBetts,(1915)22CalLJ
566:33IC347 378
BhumiputraCommerceBank v PVP
ProductsLtd,(2006)4BomCR431....627
BhumiputraMerchantBanker Berhadv
MelewarCorpn,(1990)2CurrentLJ 30
(HCKualaLumpur) 655
BhupendraEngg&Construction(P)Ltd v
StateofJharkhand,(2004)1 BLJR237
(Jhar) 53
BhushanIndustrialCo (P)LtdvCimmco
International,(1983) 54CompCases157484
BibeeSolomanvAbdoolAzeez,ILR(1881)
6Cal687 .238
BibiAnwarunisayDaulatRai,AIR1988
Pat229 386
BiddomoyDabeevSittaram,ILR4
Cal497 719
BiggVBoydGibbinsLtd,(1971)1WLR
913(CA) 23
BiggVHowardSon&cGooch,(1990) 1
EGLR173 505
Bigos VBowsted,(1951) 1 All ER 92 344
BiharNursesRegistrationCouncilv
HarendraPrasadSinha,(1991)1PLJR
114: (1991) 2 BLJR1222 565
BiharStateElectricityBoardv Green
RubberIndustries,(1990) 1 SCC 731:
AIR1990SC699 249,287
BihariLaivAllahabadBankLtd,AIR1929
All664 637
BiharilalJaiswalvCIT,(1996) 1 SCC443.257
BilaspurCentralCoopBankLtd v State of
M.R,AIR1959MP77 685
BilbeeyHasse&Co,{1889)5TLR677...774
BinaRoyvBasantiBhattacharya,AIR2009•
NOC119 (Cal) 850
BindeshariPrasadvLekhrajSahu,
(1915-16)20CWN760 934
BinduSharmavRamPrakashSharma,AIR
1997A11429 205
BinfoElectronics(P)LtdvBSNL,AIR2004
NOC214(Kant) 631,632
BinodeDasvSarumaiParangia,AIR2014
NOC73{Gau) 849
BinsteadvBuck,(1776)2WmB1117:
96ER660 695,753
Bipin Bihari Singh v State of Bihar, (2003) 3
BC593 39
BipinKumarSamalvMinarvaSwain,
AIR2016Ori41 279https://t.me/LawCollegeNotes_Stuffs

55. BiratChandraDugaravTaurianExim(P)
Ltd,AIR2005Ori147 835
Birbal v State ofHaryana,(2014) 16 SCC
757:(2015)3SCC(Civ) 781 942
BirbhadraSinghPariharvState,2003AIHC
980(MP) 65
BirchVParamountEstatesLtd, (1956) 167
EG396(CA)...; 201
BirdyBrown,(1850) 4 Exch 786 826
BirenPoddarvSBI,(1995) 2 BLJR
912(Pat) ...439
BirkmyrvDarnell,91 ER 27:
lSalk27 599,-600
BirlaCement Works v State of Punjab,
AIR1993P&H274 578
Birmingham8cDistrictLandCo vLondon
andNorthWesternRlyCo, (1888) 40 Ch
D268(CA) 139
BishalChandJainvChatturSen, AIR1967
All506 .595
BishambarNathAgarwalv KishanChandj
AIR1998All195 375
BishambharDayalvVishwanath,AIR1985
A1H2 151
BishanChandvRadhaKishan Das,
ILR(1897-1900)19 All489 •.546
Bishandayal& Sons v State ofOrissa,
(2001)1SCC555:AIR2001SC544...856,
883
Bishop &BaxterLtd vAnglo-Eastern
Trading8cIndustrialCo,1944KB 728 . . 328
BishundeoNarainv Seogeni Rai, AIR 1951
SC280:1951SCR548 218
BismiAbdullah&Sons vFCI,AIR1987
Ker56 521,41
BismillahvJaneshwarPandit,(1990) 1 SCC
207:AIR1990SC540 322
BismillahBegum vRahmatullahKhan,
(1998) 2 SCC226:AIR1998SC970...386,
860
BissessardasvKabulchand,AIR 1945Nag
121:ILR1945Nag204 798
BissetVWilkinson,1927AC 177 (PC)....206
BiswanathChowdhuryv U.P. ForestCorpn,
AIR1986Cal334 320
BiswanathGhoshvGobindaGhosh,(2014)
11SCC605:(2014)104ALR184 884
BlackburnvMason,(1893) 68 LT 510:
(1893)9TLR286(CA) 789
BlackburnBobbinCo v T.W.Allen&Sons,
(1918)2 KB467(CA) 397,404
BlackpoolandFyldeAero Club Ltd v
Blackpool BoroughCouncil,(1990) 1
WLR1195(CA) 53
Blakemorev BristolandExeterRly Co,
(1858) 8El&Bl1035:120ER385 679
Blest£/Brown,(1862) 4 De GF & J 367:
45ER1225 640,642
TableofCasesLIII
BlissVSouth EastThamesRegional
HealthAuthority,1987CLY1304:
1987ICR700 502,505,506
BlountVWarOffice, (1953) 1WLR736:
(1953) 1 All ER1071 681
Blundell Leigh vAttenborough,(1921) 3 KB
235(CA) 717
BoardofControlforCricketinIndia.t/Zee
Telefilms Ltd,2005SCCOnLineMad^.
373:(2005)2 LW567 : -52
Boardof Revenue vAnnamalai&Co (P)
Ltd,AIR1968Mad50 :....834
BoardmanvPhipps,(1967) 2 AC 46: (1966)
3WLR1009(HL) : .....763
BOIFinanceLtdt;Custodian,(1997) 10 ,
SCC488:AIR1997SC1952 275,290,
347,350,376
BoistubChurnNaunvWoomaChurnSen,
ILR(1889-90)16Cal436 257
BolivinterOilS.A.vChaseManhattan
BankN.A.,(1984) 1WLR392 (CA) .628,629
BoltonyMadden,1873 LR 9 QB 55 130
BoltonVMahadeva,(1972)1WLR
1009(CA) 463'
BoltonfSalmon, (1891) 2 Ch 48 643, 649
BoltonPartnersvLambert,(1889) LR 41
ChD295 825,826
BomIceCov S.B.Eraser8cCo,(1904)6
BomLR23 300
Bombay Dyeing 8c Mfg Co Ltd v State
ofBombay,AIR 1958 SC 328:
1958SCR1122 418,649,652
BombayMercantileCoop Bank Ltd v Paisa
FundGlassWork,(2002) 5 Bom CR 461 . 717
BombaylylotorStores vUnionofIndia,
(2000)1BLJR23 (Pat) 518
BombaySawMillsCo, re, ILR (1888) 13
Bom314 779
Bombay ScrapTradersv Port of Bombay,
(1994)1BomCR266 542
Bombay SteamNavigationCo Ltd v
VasudevBaburaoKamat,AIR1928
Bom 5:ILR(1928) 52 Bom 37 681,688
BonarvMacdonald,(1850) 3HLCas226:
10ER87 641
BoormanvBrown,(1842) 3 QB 511:
61RR287....; 790
BoothalingaAgencies v V.T.C.Poriaswami
Nadar,AIR1969SC 110: (1969) 1
SCR65 407
BorammavKrishnaGowda,(2000)9
SCC214 883
Bosech 8c CofMaudlestan,1906Punj
RecNo70 683
BostockJardine,(1865) 3H8cC700:
(1865)159ER707 758
Bostock8c CoLtdvNicholson8c SonsLtd,
(1904)1 KB725 466https://t.me/LawCollegeNotes_Stuffs

56. LIVLawofContract
Boston Deep Sea Fishing 8c Ice Co v Ansell,
(1888)LR39ChD339 (CA) 454
BostonFruitCo vBritish&ForeignMarine
InsuranceCo,1906AC336(HL) 821
BouchervRowsell,(1947) 1 All ER
870 (DC) 342
BoultonVJones,(1857) 27 LJ Ex 117;
2H&N564:(1857)157ER232 .228,229
Bow'sEmporiumLtd v A.R.Brett&:Co,
(1927) 44TLR194(HC) 777
BowdellVParsons,(1808)10East359:
103ER811 451
Bowes VShand,(1877) LR 2 AC
455 (HL) 379,381
BowmakersLtdvBarnetInstrumentsLtd,
1945KB 65 (CA) 347
Brace vCalder,(1895) 2 QB253:(1895-99)
All ER Rep 1196 521
BradburnvGreatWesternRailCo,(1874)
LRlOExl 496
BradburyvMorgan,(1862) 1H&C249:
31 LJ Ex 462: 7 LT 104 67
BradfordOldBankLtdvSutecliffe,(1918) 2
KB833 623
Brady vTodd,(1861) 9 CB (NS) 592:
127RR797 789
BrahmaputraTea Co Ltd v E.Scarth,
ILR(1885) 11Cal545 308
Brahmayya&CovK.Srinivasan
Thangirayar,AIR 1959 Mad 122 641
Brains1/Ewing,(1866) LR 1 Ex 320 800
BrancavCobarro,(1947)KB854(CA)....44
BrandaovBarnett,(1846) 12C1&Fin787:
136ER207 703
BranwhitevWorcesterWorksFinanceLtd,
(1969) 1 AC 552: (1968) 3WLR760....740
Bray vChandler,(1856) 18 CB 718 775
BrettonWoodsFinleaseLtdvMTNL,
(2005) 125 DLT 69 47
Bridge v CambellDiscountCo Ltd, 1962 AC
600:(1962) 2WLR439 533
BridgerVSavage, (1885) LR 15 QB 363...341
Bridges vGarrett,(1870) LR 5 CP 451....677
Briess vWooley,1954AC 333: (1954) 2
WLR832(HL) 803
BrightBros (P) Ltd v J.K.Sayani,AIR 1976
Mad55 832
Brij Basi v Moti Ram, AIR 1982 All 323 . . 420
BrijMohanPariharv M.P. SRTC, (1987) 1
see13:AIR1987SC29 260
BrindabanMishraAdhikaryvDhurba
CharanRoy, AIR1929Cal 606 250
BrinkbonLtd vStahagStahlUnd
StahlwarenhandelsgesellschaftM.B.H.,
(1983) 2 AC 34: (1982) 2WLR264(HL)..35
BristowVWhitmore,(1861) 9HLCas391.824
British&AmericanTelegraphCo vColson,
(1871) LR 6 Exch 108 33
British and Beningtons Ltd v N.W. Cacher
Tea Co,1923AC 48 451
BritishandCommonwealthHoldingspicv
QuadrexHoldings,1989QB 842:
(1989) 3WLR723 (CA) 387
BritishColumbiaSawMillCo vNettleship,
(1868) LR 3 CP 499: 18 LT604 468
BritishElectrical&AssociatedIndustries
(Cardiff) Ltd v Patley Pressing Ltd, (1953)
1WLR280 328
BritishIndiaSteamNavigationCo Ltd v
ShanmughavilasCashewIndustries,(1990)
3see481 322
BritishMotorTrustCoLtdvHyams,(1934)
50TLR230 645
BritishMovietonewsLtdvLondon6c
DistrictCinemasLtd,1952AC
166 (HL) 414,415
BritishRoadServicesLtdvArthurV.
Crutchley& Co Ltd, (1968) 1 All
ER 811 (CA) 74
BritishTransportCommission v Gourley,
1956AC 185: (1956) 2WLR41 (HL)....496
BritishWaggonCo v Lea 8c Co, (1880) LR
5 QBD 149 (DC) 429
BritishWestinghouseElectricfieMfg Co
VUndergroundElectric Railway Co of
London,1912AC 673 525
Broadway Centre vGopaldasBagri,
AIR2002Cal78 220
Brogdenv Metropolitan Railway Co,(1877)
LR2 AC666(HL) 24
Brook!yHook,(1871) LR 6Exch89 823
Brook'sWharf8cBullWharfLtdv
GoodmanBros,(1937)1 KB534:
(1936) 3 All ER 696 (CA) 584
BrooksVHassal,(1883)49 LT569 789
BrownvK.M.R.ServicesLtd,(1995) 4 All
ER598 506
BrownvMuller,(1872)LR7Exch319....457
BrownJenkinson8c CofPercyDalton
(London)Ltd,(1957) 2 QB621:
(1957)3WLR403(CA) 267,268
BrowningvMorris,(1778) 2Coup790. . .345
BrunervMoore,(1904)1 Ch305 66
BSESLtdVFennerIndiaLtd,(2006)2SCC
728:AIR2006SC1148 627,629
BSNLVMotorolaIndia(P)Ltd,(2009)2
SCC337:(2009)1SCC(Civ)524:
AIR2009SC357 324
BSNLVRelianceCommunicationLtd,
(2011)1SCC394 537
BuddulalGoerlalMahajanvShrikisan
Chandmal,AIR1961MP57 339,761
BudhPrakashJaiPrakashv STO,1952All
LJ322 575
BudhwantivGulabChandPrasad,(1987)2
SCC153:AIR1987SC1484 346,349https://t.me/LawCollegeNotes_Stuffs

57. Build India Construction Systemv Union of
India,(2002) 5 SCC 433: AIR2002
SC2437 448
Bull VPitney-BowesLtd, (1967) 1
WLR273 312
Bullen VSwan Electric Graving Co, (1907)
23TLR258 (CA) 685
BungeCorpnvTradaxExportS.A., (1981)
1WLR711 (HL) 381
Bungo SteelFurniture(P) Ltd vUnionof
India,AIR1967SC 378 493
BurchellvGowie,1910AC 614 775
Burn 8c CofMcdonald,ILR (1909) 36 Cal
354: 9 Cal LJ190 307
BurnStandardCo Ltd vONGCLtd, AIR
2000Cal283 321
BurnardvHaggis,(1863) 4 CBNS 45:
8LT328 157,158
BurnervMoore,(1904) 1 Ch305 442
Burnes v Trade Credits Ltd, (1981) 1 WLR
805(PC) 644
BurnettvWestminsterBank Ltd, (1966) 1
QB 742:(1965)3WLR683 74
BuronyDenman,(1848) 2 Exch 167 .823,824
BurtonvHughes,(1885) 1TLR205 775
BushwallProperties Ltd v Vortex Properties
Ltd,(1976)1 WLR 591 (CA) 332
Business Bankers v K.Anandan,(2005) 1
KLJ97 721
Business Forms Ltd vAshokaAgencies,
AIR1996Cal153 151
ButlerMachineToolCoLtdvEx-Cell-O
Corpn(England) Ltd, (1979) 1WLR
401(CA) 41
ByblosBank S.A.L. v Al-Khudhairy, 1987
BCLC232 620
Byomkesh Banerjee v NaniGopalBanik,
AIR1987Cal 92 21,33,39
c
C.BalaSubba Reddy vLakshmi
Narasamma,(2002)10SCC247:AIR
2002SC390 856
C.CzarnikowLtdvCentralaHandlu
ZagraniczneoRolimpex,1979AC 351:
(1978)3WLR274(HL) 405
C.CzarnikowLtd vKoufos,(1966) 2 QB
695:(1966)2WLR1397 470
C.H.T.LtdVWard,(1965) 2 QB 63: (1963)
3WLR1071(CA) 343,348
C.I.8cB.SyndicateLtd vRamchandra
GanapathyProbhu,AIR 1968 Mys 133 . 716,
732
C.I.B.C.MortgagespicvPitt,1994AC200:
(1993)3WLR802(HL) 192
C.I.T.VPatney& Co,AIR1959SC1070:
1959Supp(2)SCR868 736,748
TableofCases^LV
CJ.InternationalHotelLtd vNDMC,
AIR2001Del435 397
C.JayasreevCommissionerM.C.H.,AIR
1994AP312 45
C.K.AsatiVUnion ofIndia,AIR2005
MP96 4
C.K. Kesavam vKudaythoorPanchayath,
(1990)2 KLJ424 537
C.N.SundaramvChennaiFinance Co Ltd,
(2005)5 An LT 60:AIR2006NOG
505(AP) 642
C.P.SreelalvDistrictCollector,
Thiruvanantapuram,AIR2007Ker 131 . 638
C.PandurangaRao vShyamalaRao,1999
AIHC3715(AP) 465
C.R.NarasimhaSetty vCanaraBank,
(1990) 1KantLJ 81 702
C.S. CoVPunjabScSindBank,(2003) 3
KLT808 608
C.SatyanarayanavKanumarlapudi
LakshmiNarsimham,AIR 1968 AP 330 . 321
C.T. Xavier vP.V.Joseph,AIR 1995
Ker 140 397,480
C.V.EnterprisesvBraithwaite6cCo Ltd,
AIR1984Cal306 140
C.V.Sudhindrav Divine Light School for
Blind,AIR2009Kant5 829
CalcuttaCredit Corpn v Prince Peter, AIR
1964Cal374 686
CalgaryvNorthernConstructionCo,
1987ConstructionLawReporter179
(AlbertaCA) 47
CalgaryHardwood8c Veneer Ltd vC.N.R.
Co,(1977)4WLR18(AltaSC) 25
CalicoPrinters'Assn v Barclays Bank,
(1931) 145 LT 51 (CA) 770,771
Caltex (India) Ltd vBhagwanDevi
Marodia,AIR 1969 SC405:(1969) 2
SCR238 335,386
CamaHotelsLtd vAirportsAuthorityof
India,AIR2004Guj 349 49
CamaraMunicipaldeBardezv V.M.
SalgaonkareIrmaoLtd, (1996) 5 Bom
CR434 445
CambattaAviationLtdvCochin
InternationalAirportLtd,AIR1999
Ker368 44,51
CampanarivWoodburn,(1854) 15
CB400 836
CampbellvHassell,(1816) 1Stark233. . . 790
CampbellHooper,(1855) 3 Sm 8c G 153 . 173
CanadianAero Service Ltd vO'Malley,
(1971) 23DLR(3rd) 632 311,515
CanaraBankvBhavaniOil Co,AIR2004
Ker273:(2004)2 BC192(KerDB) in
CanaraBankvGokuldasShenoy, (1989) 1
KLT281 260
CanaraBankv VijayKumarArora,
AIR2004Del304' 371https://t.me/LawCollegeNotes_Stuffs

58. LVILawofContract
CanaraBank v Vijay Shamrao Ghatole,
(1996) 5 Bom CR 338 151
CanbankFinancialServicesLtdv
Custodian,(2004)8 SCC 355:,AIR2001
SC2601 290
CansoChemicalsLtdvCanadian
Westinghouse Co,(1974)54 DLR (3d) 517
(NSSCAppDiv) 85
Car&UniversalFinanceCo Ltd vCaldwell,
(1965) 1 QB 525: (1964) 2WLR600
(CA) 221,231,733
Carew&Co Ltd vNorthBengalSugar
Mills,ILR(1951) 2Cal386 300,301
CargillInternationalSAv Bangladesh Sugar
6c Food Industries Corpn, (1996) 4 All ER
563 (CA) 595
CarlEstate(P) LtdvJagdishJ.N.Counte,
(2005) 4 Bom CR 630 536
CarlesberyBreweryMalaysiav Soon
HengA.W.& Sons, (1989) 1 MLJ 104
(Malaysia) 605
Carliles NephewsScCovRicknauth
Bucktermull,ILR (1882) 8 Cal 809 303
CarlillVCarbolicSmokeBallCo,(1893) 1
QB256(CA).17,18,20, 25, 28, 29, 336, 337
Carlos Federspial8cCofCharles, 1957
Lloyd's Rep 230 362
Carney vHerbert,1985 AC 301: (1984) 3
WLR1303 (PC) 350
CarrLazarusPhillips v AlfredErnest
Mitchell,AIR1930Cal 17:ILR(1930)
57Cal764 664
Carterv Wake, (1877) LR 4 Ch D 605....725
CartervWhite,(1883) LR 25 Ch D 666
(CA) 652,833
Casey'sPatents,re,Stewartv Casey, (1892)
lChl04(CA) 127
CassimAhmedvEusufHajiAzam,(1916)
23 Cal LJ 453 823
CastrolLtd vAdmiralShippingLtd, (2005)
3BomCR507 814
Cauvery CoffeeTradersvHornorResources
(International)Co Ltd, (2011) 10 SCC
420 447
CCEandCustomsvLarsen8cToubroLtd,
(2016) 1 SCC 170 266
CeeanInternational(P)LtdvAshokSurana,
AIR2003Cal263 383,881,887,893
CelluloseAcetateSilkCoLtdvWidness
Foundry(1925) Ltd, 1933 AC 20 (HL)..530,
533
Centax(India)LtdvVinmarImpexInc,
(1986) 4 SCC136:AIR1986SC1924..629,
633,635
CentralBankofIndiavAbdulMujeeb
Khan,1997AIHC299(MP) 684,724
CentralBankofIndiavAhMohd,(1993)2
MahLJ1092 644
CentralBankofIndiavAntonyHardware
Mart,(2006) 3 CTC 285 (Mad) 610
CentralBank of India vAuthorityunderthe
Payment of Wages Act, 1986 SCC OnLine
Mad213: (1987) 100 LW 343..........719
CentralBankofIndiavC.L.Vimla,(2015)
7 SCC 337:(2015)3 SCC (Civ) 601 . 610, 613
CentralBankofIndiavGrainsandGunny
Agencies,AIR 1989 MP 28 719
CentralBankofIndiafKeshorao
NarayanraoPatil,(2005) 1 CCC
504 (Bom) -.710
CentralBankofIndiavManipurVasant•
Kini,(2000)1MahLJ744:.. . ;.555
CentralBankofIndiavMultiBlock(P)Ltd,
AIR1997Bom109 287,657
CentralBankofIndiavSionBakersand
Confectioners(P) Ltd, (2008) 5Mah
LJ772 616
CentralBankofIndiavSiriguppaSugars8c
ChemicalsLtd,(2007)8SCC353:
AIR2007SC2804 720
CentralBankofIndiav V.GuruviahNaidu,
AIR1992Mad139 437
CentralBankofIndiavVirudhunagarSteel
Rolling Mills Ltd, (2016) 3 SCC (Civ) 664:
(2016)2CHN98 610
CentralBankofIndiaLtdvFirmRur
ChandKurraMai,AIR 1958 Punj 59....773,
CentralBank of India Staff Coop Building
Society Ltd v DulipallaRamachandra
KotesewaraRao,AIR2004AP 18:(2003)
5ALD116(DB) 393
Central Coop Bank Ltd v State of
Maharashtra,(2011) 3MahLJ 634 706
CentralInlandWaterTransportCorpnv
BrojoNathGanguly,(1986) 3 SCC 156:
AIR1986SC1571 95,192,197,285
CentralLondonPropertyTrustLtd vHigh
TreesHouseLtd, (1947) 1 KB 130 140
CentralNationalBankLtdvUnited
IndustrialBankLtd,AIR1954SC181:
1954SCR391 226,228,730,733
CentralWarehousingCorpnvPrabhu
NarainSingh, AIR 2003 All 223: 2003
AIHC3392(All) 700
CentrovincialEstatesPic.vMerchant
Investors'AssuranceCoLtd,1983Com
LR158 247
CenturySpg and Mfg Co Ltd vUlhasnagar
M.C.,(1970) 1 SCC 582:AIR1971 SC
1021:(1970) 3 SCR 854 26
CertactPtc Ltd vTangStew Choy, (1991) 3
CLJ2269 310
ChackoVMahadevan,(2007)7
SCC363 175,930
ChaganlalvDharamdas,7 Bom 607 934
ChalamaniNarasaReddyvCollector,
(1987) 2 An LT 969 . 611https://t.me/LawCollegeNotes_Stuffs

59. Challapathi v Suruyya, 12 MLJ 375 773
GhamanLaiJain v Arun Kumar Jain,
AIR1996Del108 390
GhampaRam vTulsiRam,(1927)26 All
LJ81 746
Ghampseyv GordhandasKessowji,AIR .
,1917Bom250 258
Ghampsey vGordhandas,1917 SGG OnLine,•
Bom 64: AIR 1917 Bom25.0i>'. ., 257
GhamundiRoller'Flour-,Mills-r^GI,(4992) ;
1KantIJ579 v.,;,110
GhananaSteelTubes{P).Ltdt/JaituSteel ;, - :
Tubes (P)LtdjAIR.200.0.HP48 :600
GhandMairGanda Singh, 1885Rec,
No 60, p.126-i.. V•• ,,699
GhandRaniVKamalRani,(1993)il,SGGi.
519: AIR 1993SC1742.......383, 861, 885
Ghand Singh v Ram Kaur,(1987)2 PLR70.187
Ghandi Prasad Singh v State of U.P., AIR
1956SG 149: (1955) 2 SGR1049 743
Ghandler v Webster, (1904) 1 KB 493:
,(1904) 73 LJ KB 401 (GA) 425
Ghandnee Widya Vati Madden v G.L.
Katial, AIR 1964 SG 978: (1964) 2
SGR 495 375,899
Ghandra Kanta Das v Parasullah Mullick,
ILR(1921) 48 Gal 1030 (PG) 299
Ghandra Sheikhar v Gopi Nath, AIR 1963
All248 334
GhandraSreenivasaRao v Korapatti
RajaRamaMohanaRao,AIR 1952
Mad 579 256, 348
Ghandradhar Goswami v Gauhati Bank Ltd,
AIR1967SG 1058 ; 722
GhandragiriGonstructionGo v State of
Kerala, (2003) 1 KLT (SN) 14 51
Ghandrakant Manilal Shah v GIT,(1992)1
SGG 76:AIR1992SG66 12
Ghandrika v D.R.M., SouthernRly,(1985)
,1:MLJ369 576
GhandulalHarjivandasv GIT, AIR 1967 SG
816:(1967)1SGR921 352
Ghapeltonv Barry UDG, (1940) 1 KB
532(GA) 73,74
Ghaplin v Hicks, (1911) 2 KB 786(GA)...487
Ghapple v Gooper, (1844) 13M&W252:
153ER105 170
Gharan Singh v Security Finance (P) Ltd,
AIR1988Del130 645
Gharles Rickards Ltd v Oppenheim,(1950)
1KB616 (GA) 442,443
GharlesworthvMacDonald,ILR (1898) 23
Bom103 306
Gharter v Sullivan, (1957) 2 QB 117: (1957)
2WLR528(GA) 499
GharuBhatnagarvH.P.M.G.,AIR2006
HP119 566
Ghase vWestmore,(1816)15M&S180:
105ER1016 699
TableofCasesLVII
Ghathu Kutti Nair v Kundan Appa, AIR
1932Mad70 833
Ghatock1/Bellamy,(1895)64 LJ QB 250..707
GhatturbhujVithaldas Jasani vMoreshwar
Parashram,AIR1954SG236:
1954SGR817 45
Ghaui/,VanPelt, (1977) 74 DLR (3d)
244{BGSG) 75
Ghaudhri AmirUllahv Gentral Govt,(1959)
57All LJ 271 122
Ghava Rammanayudu v Suryadevara
Seetharamayya,ILR (1935) 58Mad111. 258
Ghe Som Binte Yip v Maha P Ltd, (1989)2
GLJ 802 173,187
GheemaEnterprisesv Mayu Enterprises,
AIR1998Gau86 323
GhekhaAdinarayanavOrientalFire &
GeneralInsuranceGo Ltd, AIR2006
NOG479(AP) 164
GhekkeraPonnamma v A.S. Thammayya,
AIR1983Kant124 660
GhenguniOthayothThankomv Kooloth
BalakrishnanNair,AIR2002Ker297... 867
Ghennai Metropolitan Water Supply&
Sewerage Board v AbanGonstructions(P)
Ltd, (2006) 3 GTG 794 (Mad) 539
Gheshire vBailey,(1905) 1 KB237(GA). . 685
Gheshire & GofVaughan Bros & Go,
(1920)3 KB240 758
Ghesrieanv Interhome Ltd, (1983) 114
NLJ341 495
GhesterGrosvenorHotelGoLtdvAlfred
McAlpineManagementLtd, (1991) 56
Build LR 115 (QB) 100
GhhangamalHarpaldasvDominionof
India,AIR1957Bom276 118
GhhoteyLaiGupta v Union of India,
AIR1987Ail329 39
Ghicago Gity Rly Go v McMohan,
1882ILJ485 805
GhidambaraIyeryP.S.Renga Iyer, AIR
1966 SG 193: (1966) 1 SGR 168....129,133
Ghidambaran Ghettiar vTinnevelly
SarangapaniSugar Mills Go Ltd, ILR
(1906-08)31Mad123 781
GhiefGontrollingRevenueAuthority v
SudarsanamPicture,AIR 1968Mad319 . 674
Ghief Secy,State ofGujaratv Kothari &
Associates, (2003) 1 GGD 372(Guj). . . 479,
481,492,567
Ghief Secy, State ofGujaratv Kothari
Associates, (2003) 3 Guj LR 2177 465
Ghikham Ammiraju v Ghikkam Seshamma,
ILR(1918)41Mad33 178
Ghin Gwan&GofAdamjeeHaji Dawood
& Go, AIR 1939 Rang 79 238
ChinaandSouthSeaBankLtdvTanSoon
Gin,(1990)1 AG 536: (1990) 2WLR
56(PG) 656https://t.me/LawCollegeNotes_Stuffs

60. LVIIILawofContract
ChinaCottonExportersvBeharilal
RamcharanCottonMillsLtd,AIR1961
SC1295 379,381
ChinnayavRamayya,ILR(1876-82)4
Madl37:6IndJur402 113
ChinniVenkatachalaraChettivAthivarapu
VenkatramiReddi,AIR1940Mad929 . . 721
ChiranjiLaivNaraini,ILR(1919)41
All395 594
ChiranjitSingh vHarSwarup,(1925-26)53
lA11:AIR1926PC 1 545,546,549
ChistovanVaz vIndianOverseasBank,
(1998) 2 Bom CR 522 655
Chittagong Port Authority v Mohd. Ishaque,
(1983) 35DLR(AD)364
(BangladeshSC) 683, 692
ChitturService Coop Bank Ltd vPankunny,
(1988)1 KLT 358 . . 646
ChodiMahalakshmivKoppaddaSathiraju,
AIR2011AP125 908
Chogalal v Piyari, ILR (1908-10) 31 All 58 270
Chokkammalv K.Balraj,(2008)5
CTC690 203
Chongtuokhawiv Union of India, AIR 2008
Gau6 262
Chowgule 8c Co Ltd v Rizvi Estates and
Houses(P)Ltd,(1997)4BomCR648...450
ChrisineHoden(P) India Ltd v N.D.Gadag,
(1993) 2 Bom CR 169 578
ChristinevilleRubberEstatesLtd,re, (1911)
81LJCh63 221
ChuanBee Realty Pte Ltd v Tec Chee Yeow,
(1996) 2 SLR 758 202,209
ChunibhaiPatelvNathaBhaiPatel,AIR
1944Pat185 597
ChunilalV.MehtaandSonsLtdvCentury
Spg&Mfg Co Ltd, AIR 1962 SC 1314:
1962 Supp (3) SCR 549 534, 541, 544
ChunniKuarv Rup Singh, ILR(1888-90)
11All57 188
ChurchofChristCharitableTrust&
EducationalCharitableSocietyv.
PonniammanEducationalTrust,(2012)8
see706:(2012) 4see(Civ) 612 857
Churchill& Sim vGoddard,(1937)1 KB
92 (CA) 746
ChyeEookv Teh Teng Seng Realty, (1989) 1
MaiLJ 308(IpohHC) 380
CITVA.K.Menon,(1996) 6BomCR564.407
CITVHukumchandMannalal&Co,(1970)
2see352:AIR1971SC383:(1971)1
SCR646 155
CITVKamlaTovi^nTrust,(1996)7SCC
349:AIR1996SC620 927
CIT VOgaleGlass Works Ltd, AIR 1954
SC 429: (1955) 1 SCR 185 370, 736
CITVP.M.Rathod&Co,AIR1959SC
1394: (1960) 1 SCR 401 678,737
CITVShahMohandasSadhuram,AIR1966
SC15 155
CITVShantilal(P)Ltd,(1983) 3 SCC 561:
AIR1983SC952 440,496
CITVKameshwarSingh,AIR 1953
Pat231 108
CitadelFinePharmaceuticalsvRamaniyam
RealEstates(P)Ltd,(2011) 9SCC147:
AIR2011SC3351 383,384,886,908
CITIBankN.A.vStandardChartered
Bank,(2004) 1 SCC 12: AIR2003SC
4630:(2003) 117CompCas 554 363,
433,443
CitibankN.A. v Brown Shipley & Co Ltd,
(1991) 2 All ER 690 233,581
CitibankN.A.v J.K. JuteMillsCoLtd,
AIR1982Del487 641
Citizens'LifeAssuranceCo vBrown,1904
AC423 802
City Bank N.A. v JuggilalKamlapatJute
MillsCo Ltd, AIR1982Del487...650,654
City Fur Mfg Co Ltd v Fureenbond
(Brokers) London Ltd, (1937) 1 All
ER799 734
City Municipal Council v C. Ramu,
ILR1989KAR2138 287
City Municipal Council v S.A. Lateef and
Co, AIR2004KantHCR3032 465
CityMunicipalCouncil Bhalki vGurappa,
(2016) 2 SCC 200 849,938
City Union Bank Ltd v C.Thangarajan,
(2003)3 BC 528 (Mad) 704
Civil Engineers (India) v DDA,(1995)60
DLT26: 567
Claridges Infotech (P) Ltd v Surendra Kapur,
AIR2009Bom1 899
ClarkVUrquhart,1930 AC 28 (HL) 495
ClarkevEarlofDunraven(TheSatanita),
1897AC 59 (HL) 8
ClarksonBookerLtdvAndjel,(1964) 2
QB 775: (1964) 3WLR466 (CA) . . . 816, 817
Claude-LilaParulekarvSakalPapers(P)
Ltd,(2005)11 SCC 73:(2005)124
Comp Cas 685 328,387,460
Clay VYates, (1856) 1H8cN73: 156 ER
1123 268,348,588
Clayton,re, (1816) 1 Mer 572: 15 RR 161 . 427
CleaShipping Corpn v Bulk Oil
InternationalLtd,(1984) 1 All ER129...456
Clerk VLaurie,PublicOfficer, (1857) 2
H&N199:157ER83 ,. .832,833
CliffordDavManagementLtd vW.E.A.
RecordsLtd,(1975) 1WLR61 (CA)....196
CliffordGeorge Pinto vM.R.Shenava,
(2005)3CCC498(Kant):AIR2005Kant
HCR316:(2005)1KantLJ 458 798
CliftonVPalumbo,(1944) 2 All ER
497(CA) 23https://t.me/LawCollegeNotes_Stuffs

61. Clough VLondon&N.W.RlyCo,(1871)
LR7Exch26 216,221
Clydebank Engg&Shipbuilding Co Ltd v
DonJoseRamosYzquierdoyCastaneda,
1905AC6 530
Coal India Ltd v Indian ExplosivesLtd,
(2006)3CHN433 51
Cochin Frozen FoodExports(P) Ltd v
VanchinadAgencies, (2004) 13 SCC 434 . 814
CochinPortTrustvAssociatedCotton
Traders,AIR1983Ker154 684
Coffee Board v CCT, (1988) 3 SCC 263:
AIR1988SC1487 7
Coggs VBernard,(1704) 2 Ld Raym 909 . . 680
Col.D.I.McPherson v M.N. Appanna, AIR
1951SC184;1951SCR161 20
Colchester Borough Council v Smith, (1991)
2WLR540 Ill
Coldman v Hill, (1919) 1 KB 443 (CA)....686
ColesVOdhamsPress Ltd, (1936) 1 KB
416(DC) 342
ColesyPack, (1869) LR 5 CP 65 639
Colgate PalmoliveIndia Ltd v T.J. George,
(2011) 1LW732(Mad) 434
Collector of Customs v Rakesh Press, (1997)
10SCC457 354
Colles Cranes of India Ltd v Speedeo Spares
Corpn,AIR1970Cal321 378
CollinsVAssociated Greyhound
Racecourses Ltd, (1930) 1 Ch 1 (CA)....809
CollinsVBlantern,(1767) 2Wils341 281
Collins VGodefroy, (1831) 109 ER 1040: 9
LJ KB 158 134-
CollinsVWright, (1857) 8E&B647: 27 LJ
QB215:30LT209 817,818,819
Combe1/Combe,(1951) 2 KB 215 (CA)...141
CommercialBank ofTasmaniav Jones,
1893AC 313 (PC) 437
Commercial Banking Co of Sydney Ltd v
Mann,1961 AC 1: (1960) 3WLR726. . 820,
824
CommercialEnterprisersvMadanMohan
Singh, AIR 1951 Hyd 47 745
CommercialPlasticsLtd vVincent,(1965) 1
QB623(CA) 311
Commrof Excess Profits Tax v Ruby
GeneralInsuranceCo Ltd, AIR1957
SC669 352
CommrofHR& CEDepttv S.
Muthekrishnan,AIR2012Mad43 551
Commr,AndamanvConsumerCoop
StoresLtd,(1999)1SCC507:AIR1999
SC696 577
Commr,KadayanallurPanchayatUnion v A.
PuthuranPadayachi, (2006) 2 CTC
392(Mad) 425
Commr. of Customs (Import) v Finacord
Chemicals(P)Ltd,(2015)15 SCC 697:
(2015)319ELT616 583
TableofCasesLIX
CompagnieCommercialeSucresEtDenrees
VC.CzarnikowLtd, (1990) 1WLR1337
(HL) 460
CompagniedeCommerceetCommission,
SARLVParkinsonStove Co. Ltd, (1953) 2
Lloyd's Rep 487 38
CompaniaPortoraftiCommercialeSA v
Ultramar PanamaInc,(1990) 2 Lloyd's
Rep 395 712
CompensationuPunishmentin Damages
Awards,(1965)27 AllMahLR 629 534
ComptonI.L.G.Travel,1990CLY 625..511
Confederation of Real Estate Developers
Assn of India v State of M.P., 2015 SCC
OnLine MP 2839: AIR 2015 MP 25 .424,579
ConradDiast/JosephDias, (1996) 2Mah
LJ208:(1995)3BomCR218 3
Constructionand Design Services v DDA,
(2015)-14SCC263:(2016) 2 SCC
(Civ)800 539
ContinentalandEasternAgencies v Coal
IndiaLtd,AIR2003Del387 776
ContinentalConstructionCoLtdvStateof
M.R,(1988)3SCC82:AIR1988
SC1166 399
ContinentalConstructionLtdvFood
CorporationofIndia,AIR2003Del 32 . . 317
ContinentalDrug& Co Ltd vChemoids&
IndustriesLtd,AIR1955Cal 161 319
CookVWright,(1861) 1B&S559 132
CoopCommissionShop Ltd vUdham
Singh,AIR1944Lah 424 607
CooperyJoel,(1859) 45 ER350 604
.CooperVNationalProvincialBankLtd,
1946KB1 606
CooperVPhibbs,(1867) LR 2HL149:
16 LT678(HL) 235
CornfootVFowke, (1840) 6M&W358:
55RR655 803
CoromandelIndagProducts(P) Ltd v
GarudaChit&TradingCo (P) Ltd, (2011)
8SCC601 378
CoronationConstruction(P)LtdvIndian
OilCorpnLtd, AIR 1999 Del 268 630
CorpnofCalicutv K.Sreenivasan,(2002) 5
SCC 361:(2002)1RCR(Rent) 614 795
CorporationBank v B.MohandasBaliga,
(1993) 1KantLJ308(DB) 657
CottonCorpn of India Ltd v Alagappa
CottonMills,AIR 2001 Bom 429: (2001)
3MahLJ 415 486,25
CottonCorpnofIndiaLtd v Bombay
Dyeing& Mfg Co Ltd,(2006)5 Bom
CR105 28
CottonCorpnofIndiaLtd vRamkumar
Mills (P) Ltd, AIR2009NOC384 (Bom) . 555
CoulderyvBartrum,(1881)LR 19 Ch D
394(CA) 138,139https://t.me/LawCollegeNotes_Stuffs

62. LXLawofContract
CoultharivClementson,(1879)LR5
QBD42 640
CouncilofScientificandIndustrialResearch
VGoodmanDrugHouse(P) Ltd, AIR
2007Utt58 502
CountessofDunmorevAlexander,(1830)9
Shaw190:(1830) 9Courtof Sessions 190 . 68
County Nat West Ltd v Barton, (2002) 4 All
ER494(CA) 208
Courtney8cFairbairnLtd v Tolaini Bros
(Hotels) Ltd, (1975) 1 WLR 297 (CA)...329
Coutts8c CofBrowneLecky,1947KB 10:
(1946)2 All ER207. .;. 602
CouturiervHastie,(1852) 8 Exch 40: 155
ER1250 252
CowanVMilbourn,(1867) 36 LJ Ex 24...343
CowardvMotorInsurers'Bureau,(1962)2
WLR663 (CA) 15
Cowasji Muncherji Banaji v Official
Assignee of Bombay, AIR 1928 Bom 507 . 718
CowernNield,(1912) 2 KB 419 168
Crane vHegemanHarrisCoInc,(1971)1
WLR1390 246
Craven-EllisvCanonsLtd,(1936)2 KB
403 (CA) 588
CraythorneSwinburne,(1807)14 Ves
Junl60:33ER482 661
CreetvSeth&Seth,1887AllWN136....642
CremavCenkosSecuritiespic,2011 Bus LR
943 (CA) Ill
CrestCommunicationsLtdvSBI,(2000)3
MahLJ163 627
CrickelwoodProperty&InvestmentTrust
LtdVLeighton's Investment Trust Ltd,
1945 AC 221 (HL) 393, 409
CrossVMartin8cMortimer,(1989) 1 EG
LR154 505
CrownMaritimeCo(India)LtdvEcon
Engg (P) Ltd, AIR 2003 Bom 163 633
Croydon Commercial Gas Co v Dickinson,
(1876) 2 CPD 46 (CA) 650
CruttwellVLye, (1810) 17 VesJun335:
34ER129 298
CSTVAuriayaChamberof Commerce,
(1986) 3see50: AIR1986SC1556....576
CTIGroup Inc vTransclearSA, (2008) Bus
LR1729:(2008) EWCA 856 401
CTNCash andCarryLtd vGallaherLtd,
(1994) 4 All ER 714 (CA) 490
CullinanevBritishRema Mfg Co Ltd,-
(1954) 1 QB 292 (CA) 501
CurrieyMisa,(1875) LR 10 Ex 153 104
CurtisVChemicalCleaning8cDyeingCo,
(1951) 1 KB 805 75
CustodianvEastWestTravelandTrade
LinksLtd, (1995) 4 Bom CR 194 536
CuthbertvRobarts,Lubboek8c Co, (1909)
2 Ch226(CA) 702,704
CutlerVMcPhail,(1962) 2 QB292:(1962) 2
WLR1135 647
CutterVPowell,(1775-1802)All ER Rep
159 (KB) 463
CWTVAbdulHussainMullaMuhammad
Ali,(1988) 3see562 13,14,16
CWTVHer Highness Vijayaba,(1979)2
see213:AIR1979SC982 106,133
D
D.8cC.BuildersvRees,(1966)2 QB
617 (CA) 139,195,196
D.E.C.FinancialServices vCoffey,(1991)"
BCC218PC .'612
D.N. Jeevaraj v State ofKarnataka,(2016) 2
see653 192
D.Narasimhamurthyv D.Krishnamurthy
Rao,(2005)1 An LD 75: (20 05) 1
CCe566(AP) 335
D.PandivDhanalakshmiBankLtd,
AIR2001Mad243 609
D.S.ConstructionsLtdvRitesLtd,2006
AIHC1835 (Del):(2006)127 DLT 1.....41
D.S.ThimmappavSiddaramakka,(1996) 8
see365;AIR1996SC1960 377
D.SelvamvBarCouncilofT.N.and
Pondicherry,(2008) 4CTC97 .263
D.T.H.Construction(P)LtdvSAIL,
AIR1986Cal31 632
D.W.AuchterlonievCharlesBell, (1868) 4^
MadHCR.77 ..298
D.WrenInternationalLtd vEngineersIndia
Ltd, AIR1996Cal 424 41
DadabhoyDajibhoyvPestonji,ILR(1893)
17Bom457 132
DadaraovRamrao,(1999) 8 SCC 416....920
DadriCementCo v BirdandCo (P)Ltd,
AIR1974Del223 436
DaehmIndustrialCovM.Sahai8c
Associates(P)Ltd,AIR2010NOC
843 (Guj) 322
DaewooMotorsIndiaLtdvBrijendra
Prasad,AIR2003Del 2 955
DaewooMotorsIndiaLtdvUnionofIndia,
(2003) 4 SCC 670: AIR 2003 SC 1786...626
DahlVNelson,(1881) LR 6 AC 38 -417
Dai-IchiKarkaria(P)Ltdv Oiland
NaturalGasCommission,AIR1992
Bom309 194,202,631
DaimanDevelopmentv LCTMathew,
(1981) 1MalasiyaLJ 56 332
DalbirSingh v Vir Singh, AIR2001
P6CH216 186
DalchandvHazarimal,AIR1932Nag34. 835
Dalichandv State ofRajasthan,AIR1976
Raj 112 654https://t.me/LawCollegeNotes_Stuffs

63. DalipSingh v RamNath,AIR 2002
HP106 384
Dalip Singh v SikhGurdwaraPrabhandak
Committee,(2003)10 SCC 352:AIR2004
SC137 937
DallahAlbarakaInvestmentCoLtdvMT
"Symphony" ex MT: Arabian Lady, (2005)
5BomCR589 556
Dalmia Cement (Bharat) Ltd vT.V.Oomen,
(1987)1KLT534 839
Dalmia Jain8cCo Ltd v KalyanporeLime
Works Ltd, AIR 1952 Pat 393 242
DalrympleyDarlymple,(1811)161 ER 665 . 11
DalsukhM.PanchohvGuaranteeLifeand
Employment Insurance Co Ltd, AIR 1947
PC 182 353
DamacherlaAnjaneyuluvDamcherla
Venkata Seshaiah, 1987 Supp SCC 75:
AIR 1987 SC 1641 901, 903
DambarudharBehera v State ofOrissa,
AIR1980Ori188 204
DamodarLaxmanLelevKashinathWaman
Leie,(1906)9 Bom LR 312 '...300
DamodarTukaramGaunkarvGopinath
RamaGaunkar,(2006)6 Bom CR454... 219
DamodarValley Corpn v K.K. Kar, (1974) 1
SCC141:AIR1974SC158....'.V.'...435
DamodarValley Corpn v State of Bihar,
AIR1961SC440:(1961) 2SCR522....678
DamodaraMudaliarv Secy of Statefor
India,ILR(1895) 18 Mad 88....;.570, 571
DamodharTukaramMangalmurtifState of
Bombay, AIR 1959 SC 639 332
DamordardassAgarwalv R.Badrilal,
AIR1987AP254 ;..708
DamudharPrasadVermauStateof•
ArunachalPradesh,(2003) 2 BC
351(Gau) 519
DaneyViscountessKirkwall,(1838) 8':
C&P679 .173
DarlingtonBoroughCouncil vWiltshier
NorthernLtd,(1995)1 WLR 68 (CA) . . 431,
116
DaroptivJaspatRai, (1905) (PunjRec).171.123
DarshanSingh v Dalip Kaur, 2014 SCC
OnLineP&H19044:AIR2015P&H10.902
Darwen&Pearce,re,(1927)1 Ch 176 •. . . . 654
Dass Bank Ltd vKahKumariDevi,
AIR1958Cal530DB 652
DataAccessIndiaLtdvMTNL,(2006)126
DLT617 465
DattaramvVinayak,ILR(1903)28 •
Bom181 161
DatuAbdullahbinAhmadvSyarikat
PermodalanKebangsaan,(1990) 2 Cur
LJ48 454
DaulatRamv SomNath,AIR1981
Del354 151
DaunVSimmins,(1879) 41 LT783 792
TableofCasesLXI
DavidLyell1/JohnLawson Kennedy,(1989)
LR 14 AC 437 ! ,.795
Daviel vParry,(1980) 20EstateGazette92:
1988CLY435 99
Davies v Collins, (1945) 1AllER 247 . . 79, 429
DaviesvLondon&ProvincialMarine
InsuranceCo, (1878) LR 8 Ch
D469 2081606
DavisContractorsLtdvFarehamUrban
DisttCouncil,1956AC 696: (1956) 3
.WLR37(HL) 396,401,417
DavisonvDonaldson,(1882) LR 9
,QBD 623 810
Daya RamSbniv Gyarsi BaiKhandelvi^al,
AIR2016Chh73 . '.. . .,885
Dayabhai&CoyCIT,AIR1967MP 13..258
Dayabhai Tribhovandas vLakshmichand,
ILR(1885)9Bom358 338
DayawativMadanLaiVerma,AIR2003
All276 930
DDAVBhardvifajBros, 2014 SCCOnLine
Del1581:AIR2014Del147 318
DDAVGrihsthapana Coop Group Housing
Society Ltd, 1995 Supp (1) SCC 751:
AIR1995SC1312 548
DDAVKenneth Builders & Developers Ltd,
2016 SCCOnLineSC 627: (2016)230
DLT706 408
DDAVRavindraMohanAggarwal,(1999) 3
SCC172:AIR1999SC1256 42
DDAVSkipperConstructionCo (P) Ltd,
(2000)10SCC130 216
DDAVUEEElectricalsEngg (P) Ltd,(2004)
11SCC213:AIR2004SC2100 52
DeBuschevAlt,(1878) LR 8 Ch D286...763
DeGorterfAttenborough& Sons, (1904)
21TLR19 731
De La Bere vPearsonLtd,(1908)1 KB
280(CA) 130
DeMattosv Gibson, (1858) 4D&J276: 124
RR250 876
De-Smet(India)(P)Ltdv B.P.Industrial
Corpn(P)Ltd,AIR1980All 253 464
Deb Kumar RayChoudhuryv Anath
BandhuSen, AIR 1931 Cal 421 282
DebRatanBiswas vAnandMoyi Devi,
AIR2011SC1653 829
Debenhamt/Mellon,(1880)LR6AC24..751
Debi Prasad v BhagwatiPrasad,AIR 1943
All63 151
DebiRadhaRanivRamDass,AIR 1941
Pat282 132
DebnarayanDattvChunilalGhose,ILR
(1914) 41Cal137 119
DebtorA (No 14 of 1913), re, (1913) 3
KB11 646
Decro-WallInternationalSAvPractitioners
inMktgLtd, (1971) 1 WLR 361 (CA) . . 459,
830https://t.me/LawCollegeNotes_Stuffs

64. LXIILawofContract
DeendayalvHarjotKanwar,AIR2003
Raj 202 884
Deepak Bhandari v H.P. State Industrial
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518: (2015) 3 SCC (Civ) 123 622
Deepak Kumar Sarkar v State ofW.B.,AIR
2004Cal182 49
Deepak Prakash v Jayanta Kumar Bose, AIR
2003Cal153 912
Delhasse, ex p,(1878)LR 7 Ch D 511 747
DelhiCloth&GeneralMillsCoLtdv
HarnamSingh, AIR 1955 SC 590: (1955)
2SCR402 430
DelhiClothandGeneralMillsCoLtdv
RajasthanSEB,(1986) 2 SCC 431.......90
DelhiClothandGeneralMillsLtdvUnion
ofIndia,(1988)1 SCC 86: AIR1987SC
2414: (1988) 1 SCR 383 110
Delhi Electric SupplyUndertakingv
BasantiDevi,(1999) 8 SCC229:
AIR2000SC 43 748,749
Delhi State Coop Bank Ltd v DSCO Coop
IndustrialSociety Ltd, (2001) 91
DLT555 427
Dena Bank vFertiliserCorpnofIndia,AIR
1990Pat221 625
Dena Bank vGlorphisJames, (1993) 2 KLT
105: (1994) 1 BC 240 723
DenmarkProductionsLtdvBoscobel
ProductionsLtd,(1969)1 QB 699: (1968)
3WLR841 830
Denne v Light, (1857) 8DM&G774:
44ER588 901,904
Denny,Mott8c Dickson LtdyJames B.
Eraser&Co Ltd,1944AC 265 (HL)...414,
415
DentonvGreatNorthernRly,(1865) 5
E8CB860 22
Denzyl Winston Ferries v Abdul Jaleel, AIR
1992AP246:(1992) 2 An LT 144 257
Deokabai1/Uttam,(1993) 4 SCC 181 861
Depttof AnimalHusbandryv K. Rinzing,
AIR1998Sik7 747
DerbishirevWarran,(1963)1WLR1067
(CA) 524
DerryPeek, (1889) LR 14 AC 337 211
DesaiScCovHindustanPetroleumCo,
1984GujLH864 23
DesiccantRotorsInternational(P)Ltd v
BappadityaSarkar,(2009) 112 DRJ 14
(Del) 312
Desigowda vKarnatakaIndustrialArea
DevelopmentBoard,AIR1996Kant197 . 130
DevaSharmavLaxmiNarain,AIR1956
Punj49 300
DevalsabvIbrahimsabF.Karajagi,(2005)3
SCC342:AIR2005SC1940 906
Devender Singh v State of U.P., AIR 1987
All306 382,528
DevendrakumarvGulabsingh,AIR1946
Nag 114:ILR1946 Nag 210...677, 702, 703
Devi Enterprises v State of UP, AIR 2009
NOC1213 (All) 437
DeviIspatLtd v Cental Bank of India,
(2010) 3ICC123 (Cal) 706
DeviKewalramMadranivPremierHigh
School, (1995) 3 Bom CR 229 522
DeviPrasadSteels (P) Ltd v A.P.State
Financial Corpn, (1999) 1 BC 497(AP). . 519
DeviSahaiPalliwalvUnionofIndia,(1976)
4SCC763 570
Devidayal Sales (P) Ltd v State of
Maharashtra,(2006) 4MahLJ 662 484
Devinder Singh vManshaSingh, AIR 2003
P&H166 893
DevinderSingh v ShivKaur,AIR1970
Punj549 420
Devji Shivji v Karsandas Ramji, AIR 1954
Pat280 131
DevkabaifJefferson,Bhaishankarand
Dinsha,ILR(1886)10Bom248 707
DevkiNandanvGokliBai, (1886) 90 PLR
325(P&H) 182
DevukuttyAmma vMadhusudananNair,
(1995)2KLT118 126
DhaniRam&SonsvFrontierBankLtd,
AIR 1962 Punj 321 726
Dhanipal Das v Raja Maheshwar Bakhsh
Singh,(1905-06):33lA118: ILR(1906)
28All570 189
Dhaniya BaifJiwan, AIR 2003 MP 71...963
Dhanraj Agarwalla v Union of India, AIR
1958Ass5 676
Dhanraj Mills Ltd Liability Co v Narsingh
PrasadBoobna,AIR1949Pat270:(1949)
27Pat723 450
DhanrajmalGobindramv Shamji Kalidas&
Co,AIR1961 SC1285:(1961) 3
SCR1320 327,333
DhanyalakshmiRice Mills v Commr of
CivilSupplies,(1976) 4 SCC 723:
AIR1976SC2243 582
DharambirPrasadvDevendarGope,
AIR 2011Jha20 885
DharamveervSureshChandraBhardwaj,
AIR2016All48 884
DharangadhraMunicipalityv
DharangadhraChemical Works Ltd,
(1988) 1GLH324 576,577
DharindharvKanhjiSahay, AIR1949
Pat250 423
DharmeshwarKalitavUnionofIndia,AIR
1955Ass86 153
DharniyDhami,1988CLY409 510
Dheeraj Developers (P) Ltd v OmPrakash
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(2016) 116 ALR 484 881https://t.me/LawCollegeNotes_Stuffs

65. DhianSinghSobha Singhv Union of India,
AIR1958SC274:1958SCR781 692
Dhiraj KuarvBikramjitSingh,ILR(1831)3
All787 271
Dholidas vFulchandChhagan, ILR 22
Bom658 285
Dhondu Undru Choudhary v GanpatLai
ShankarLaiAgarwal, 1991 Supp(1)SCC
513;AIR1991SC1037 66
DhruvDevChand v HarmohinderSingh,
AIR1968SC1024 393
DialaRamySarga, AIR 1927 Lah 536....184
DibakarSwainvCashewDevelopment
Corpn,2014SCCOnLineOri376:
AIR20150ri6 52
Dibbins vDibbins,(1896)2 Ch 348 824
Dick BentleyProductionsLtd vHarold
Smith (Motors) Ltd, (1965) 1WLR623 . . 202
Dickinsont/Dodds,(1876)LR 2 Ch D 463 . 62,
67
DiesenvSamson,1971SLT 49 509
DigamberYeshwantraoWatanev
Agricultural Produce Market Committee,
(2004) 3MahLJ 603: (2004) 6 Bom
CR678 61
Diggle VHiggs, (1877) LR 2 Ex D 422....337
Dilawari Exporters v Alitalia Cargo, (2010)
5SCC754:AIR2010SC2233 738
DilipKumar Patro v M. Gopikrishna Rao,
AIR2015Ori15 913
DilipKumarRay v Tata Finance Ltd, AIR
2002Ori29 319
DimmockvHallett,(1866)LR 2 Ch
App21 205
DinabandhuSaha v Abdul LatifMolla,ILR
(1922)50Cal258 797
Dinesh V. Pai v NavalAcademy,Kochi, AIR
2003Ker280 692
DingleVHare,(1859)7 CB (NS) 145: 29 LJ
(CP) 143:1LT38 788,789
Dinshaw and Dinshaw v Indoswe Engineers
(P) Ltd, AIR 1995 Bom 180: (1995) 3 Bom
CR548 7
DipakHandlingAgency vMinerals&c
MetalsTradingCorpnLtd, (1997) 84 Cal
LT560 54
DipakKumarSarkarv State ofW.B.,AIR
2004Cal182 45
DirectorateofEducationvEducomp
DatamaticsLtd, (2004) 4 SCC 19: (2004)
3ICC398 55
DirghayuMahavirDiagnosticv State of
Bihar,2015SCCOnLinePat299:AIR
2015Pat110 827
DistrictBoardofRamnadvD.K.Mahomed
IbrahimSahib,AIR1933Mad524 107
DistrictBoard,SouthKanarav G.
SanthappaNaik,AIR 1925Mad907:
(1925)86IC362 396
TableofCasesLXIII
Divyesh vAatamGems, (2006) 4 Bom
CR471 580
Diwakar Mullick v Ganga Khandelwal, AIR
2016Chh53 ; 886
DixonVClark, 136 ER 919: (1847) 16 LJ
CP237 362
DixonVStansfield,(1850) 10 CB 398:
16LT150 706
Dixon,Ex p, (1876) LR 4 Ch D 133 789
DLF Cement Ltd vInspectorof Police, AIR
1999AP 359: (1999) 2 An LD 45 630
DLF Universal Ltd v Town&Country
Planning Deptt, (2010) 14 SCC 1:(2011)4
SCC (Civ) 391 91
DodlaJBhaskarRao vSBI,AIR 1992
Ori161 724
Dodsley v Varley, (1840) 12A&E632 795
DominionCoalCovDominionIron8cSteel
Co,1919AC293 876
Dominion of India v All India Reporter Ltd,
AIR1952Nag32 468
DonAyengia v State ofAssam,(2016) 3
SCCl 615
Donald v Suckling,(1866)LR 1 QB 585...851
Donoghue v Stevenson, 1932 AC 562 (HL) . 655
DoraswamiIyer vArunachalaAyyar,
AIR 1936 Mad 135 107, 108
Doshi Talacshi v Shah UjarsiVelsi,ILR
(1899)24Bom227 340
DowardDickson 8c CofWilliams 8c Co,
(1890)6TLR316 835
Dowty Boulton Paul Ltd v Wolverhampton
Corpn,(1971) 1WLR204 876
DoyleVNichols, 1979 JBL 62 519
DoyleVOlby(Ironmongers) Ltd,(1969)2
QB 158 494
DoyleVWhiteCityStadiumLtd, (1935) 1
KB10 168
DraupadiDevi v Union ofIndia,(2004) 11
SCC425 478
DresserRandS.A. v Bindal AgroChemical
Ltd,(2006)1 SCC 751:AIR2006SC 871 . 17
Dresser U.K. Ltd v Falcongate Freight
ManagementLtd,1992QB 502: (1992) 2
WLR319(CA) 712
DrewNunn,(1879)LR 4 QBD 661 838
DrinkwatervGoodwin,1775 Cowp 251 . . 789
DriveYourselfHireCo(London)Ltd v
Strutt,(1954) 1 QB250:(1953) 3
WLR1111 112,115
DTC VMazdoorCongress, 1991 Supp(1)
SCC600:AIR1991SClOl 286,197
Dugdalev Lovering, (1875) LR 10 CP 196:
44LJ CP 157:32LT155 591
DulariaDevi vJanardanSingh, 1990 Supp
SCC216:AIR1990SC1173:1990All
LJ245 243,244
DularoDevi vAsturnaDevi, AIR 2012
Pat16 881https://t.me/LawCollegeNotes_Stuffs

66. LXIVLawofContract
DuncanFox8cCoyNorth8cSouthWales
Bank,(1880)LR6ACl(HL) 605, 637
DuniChandRatariavBhuwalkaBrosLtd,
AIR 1955 SC 182: (1955) SCR 1071 340
DunlopVHiggins,(1848)1 HLC 381 32
Dunlop PneumaticTyreCo vSelfridgeScCo
Ltd,1915AC 847 112,116
Dunlop PneumaticTyreCo Ltd v New
Garage and Motor Co Ltd, 1915 AC
79 (HL) 530
DunnVBucknallBros,(1902)2 KB
614(CA) 488
DuntonvDunton,(1892) 18VLR114 (SC
of Victoria) 129
Durga Dass v Sansar Singh, 2003AIHC
2800 727
Durga Prasad v Baldeo,ILR(1881) 3
All221 105
Durga Priya Chowdhury v Durga Pada Roy,
AIR1928Cal204:ILR(1928)55
Call54 624,640
DurgaThakuraniBijeNijigarh v
ChintamoniSwain, AIR1982Ori 158 . . . 155
DuttaSeethamalakshmammavYanamadala
Balaramaiah,AIR 2003 AP 430....881,911
DuttonVPoole,(1677) 2Levinz210:
83ER523 Ill
DwarakaDasvStateofM.P.,(1999) 3 SCC
500:AIR1999SC1031 481
DwarampudiNagaratnambav Kunuku
Ramayya,AIR 1968 SC 253: (1968) 1
SCR43 271
Dwarikesh Sugar Industries Ltd v Prem
Heavy Engg Works (P) Ltd, (1997) 6 SCC
450:AIR1997SC2477 624
DwarkadasMarfatia8cSonsvPortof
Bombay, (1989) 3 SCC 293 95
DwarkanathRaimohanChoudhuriv
River SteamNavigationCo Ltd, AIR 1917
PC173 .680
DwinellvCustomMotors,(1975)12NSR
(2d) 524 (SCApp Div) 331,332
DyaneshwarRamachandraRao Patange v
Bhagirathibai, (2006) 6 SCC 663 862
Dynamics Corpn of America v Citizens
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Supp991 202
Dyster v Randall and Sons, 1926 Ch 932 . . 810
E.A.Thirugnanamv V.P. Rajagopal, (2006)
1CTC809 (Mad) 443
E.E.CaledoniafOrbitValveCo,(1994)2
Lloyd's Rep 230 (CA) 595
E.E.MastervGarret&Taylor Ltd, (1931)
131IC220:AIR 1931Rang126 450
E.H.Parakhv KingEmperor,AIR1926
0udh202 706,745
E.I.D.Parry (India) Ltd v FarEastern
MarineTransportCo Ltd, (1988)2
TAC387 778
E.I.D. Parry (India) Ltd v Far Eastern
MarineTransportCo Ltd, 1983 SCC
OnLineMad61:(1988)lLW320 778
E.I.D. Parry (India) Ltd v SavaniTransport
(P)Ltd, AIR 1980 AP 30 321
E.P. George v Bank of India, AIR 2001
Ker107 609
E.R. Kalavian v Inspector General of
Registration, AIR 2010 Mad 18 431
E.S. Rajan v R. Mohan, 1995 AIHC 3218
(Kant) 383
East VMaurer, (1991) 1 WLR 461 (CA) . . . 495
East Ham Borough Council v Bernard
Sunley 8c Sons Ltd, 1966 AC 406 (HL) . . 480
EastIndiaCommercialCoLtdvCollector
ofCustoms,AIR 1962 SC 1893: (1963) 3
SCR338 219
EastIndiaHatCovPrakashRoadlines(P)
Ltd, (1986) 10 DRJ 133: (1986) 2 PLR
39 (Del) 319
East IndiaTransportAgency vNational
InsuranceCo Ltd, AIR 1991 AP 53 323
East IndiaTransportAgencyv Oriental
InsuranceCoLtd,AIR2014NOC
456 (Chh) 564
East West Corpn v DKBSAF 1912 A/S,
2003 QB 1509 (CA) 694
EasternCountiesLeatherpicvEastern
CountiesLeatherGroupLtd,2002EWHC
494:2002EnvLR34 592
Easun Engg Co Ltd v Fertilisers and
ChemicalsTravancoreLtd,AIR1991
Mad158 401
EcclesfBryant, 1948 Ch 93 (CA) 44
EcoCeramicsvKarnatakaStateFinancial
Corpn,AIR 2001 Kant 167: (2001) 4Kant
LJ463 362
EconomicTransportOrganisationvCharan
Spg Mills (P) Ltd, (2010) 4 SCC 114:
(2010) 3 All LJ 281 92
EconomicTransportOrganisationv United
IndiaInsuranceCoLtd,1986KLT220:
(1986)2TAC25 320
Edgington v Fitzmaurice,(1885)29 Ch D
459 (Ch) 207
EdmundsvBushellandJones,(1865) LR 1
QB97 792
EdmundsvMerchantDespatchCo, (1883)
135Mass283 231
Eduljee v CafeJohnBros, ILR1944
Nag 37 699
EdwardOwen Engg Ltd v Barclays Bank
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628https://t.me/LawCollegeNotes_Stuffs

67. EdwardsvBrown,(1863) 2H&C175:
9 LJ (OS) Ex 84 : 248
Edwardsv Skyways Ltd,(1964)1 WLR
349(QB) 13
EgbertvNationalCrownBank,1918 AC
903(PC) 643
EgertonvBrownlow,10 ER 359:(1853)4
HLCl 273
Elammav FrJosephArnachaniOlikkan,
(2003) 2 KLT 536:(2003)4ICC279 !282
ElanVMatpas, 1966LiLR595 ' 633
ElderVKoppe,(1974)53DLR(3d) 705
(NSSC) 511
Elder,Dempster&CofPatersonZochonis
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ElectronicEnterprisesv Union ofIndia,AIR
2000 Del 55 !497
ElectrosteelCastingsLtd v Saw Pipes Ltd,
(2005)1CHN612 291,306,312
ElianandRabbathvMatsasandMatsas,
(1966) 2LILR 495 628
EliasonvHenshaw,(1819) 4Wheaton225. . 30
ElizabethvAlgesendranChettiar,1986KLT
521 595
EllasVGovindChandar,ILR(1903) 30
Cal202 776
EllesmerevWallace,(1929) 2 Ch 1 (CA) . .337
EllonVTopp, (1851) 6 Ex 424 438
ElphinstonevMonklandIron&CoalCo,
(1886)LR11 AC332(HL) 531
Elvin8cPowellLtdvPlummerRaddisLtd,
(1933)50TLR158 687
EmaniKrishnaRao v VijayaChitra
Films,AIR2003NOC142 (AP):
2003AIHC334 884,895
EMCOPressmaster(P) Ltd vUnionof
India,AIR2000Del 37 627
EmersonvHeclis,(1809) 11RR520 791
EmmanuelAyodeji Ajaji v R.T. Briscoe
(Nigeria)Ltd,(1964) 1WLR1326(PC)..142
EmmsonsInternationalLtdvMetal
Distributors(UK),2005AIHC1190(Del):
(2005)116DLT559 319,325
EngellVFitch, (1869) LR 4 QB 659 (Exch) . 489
EnggProjects(India) Ltd v B.K.
Constructions(BKC),AIR2012Kant35 .485
EnglandvCurling,(1844) 8 Beav 129: 68
RR39 874
EnglandrDavidson,(1840)'9LJ(QB)287 . 134
English VDedhamValePropertiesLtd,
(1978)1WLR93 829
English Electric Co ofIndiaLtd vCement
CorpnofIndiaLtd, 1996AIHC1875
(Del) 477,546
EnnorePortLtdvHindustanConstruction
CoLtd,(2005)4 LW319 547
EntoresLtd vMilesFarEastCorporation,
(1955)2 QB 327:(1955)3 WLR 48 34
TableofCasesLXV
Envision Engg v SachinInfaEnviro Ltd,
AIR2003Guj164 877
Erlangarv NewSombreroPhosphateCo,
1878AC1218 223
ErnestCharlesElliottfWilliamTurquand,
(1881)LR7 AC 79 837
ErringtonvErringtonandWoods,(1952) 1
KB290(CA) 109
EscortsLtdvModernInsulatorsLtd,AIR
1988Del345 630
EspostioVBowden,110 RR 822 279
EssarSteelLtdvUnionofIndia,(2006)1
GLH609:(2006)1 GujLR436 179
EssoPetroleumCoLtdvCommrsof
Customs&Excise,(1976)1WLR1(HL).23
EssoPetroleumCo Ltd vHarper'sGarage
(Stourport)Ltd, 1968 AC 269: (1967) 2
WLR871 (HL) 293,297,303
EssoPetroleumCo Ltd vMardon,1976QB
801 (CA) 208
EssoStandardMalayavSouthernCross
Airways,(1972)1MaiLJ 168 60S
Euro-DiamLtdvBathurst,(1988) 2WLR
517(CA) 265,346
Evenden vGuildfordCity AssnFootball
ClubLtd,1975QB 917 (CA) 141
EvvaMemorialTeacherTrainingInstitutev
NationalCouncilforTeacherEducation,
(2008)1CTC625 288
Ex-ServicemenSecurityBureauvT.N.
ElectricityBoard,AIR2003NOC
13(Mad) 477
ExallVPartridge,(1799) 8 Term Rep 308:
(1775-1802)All ER Rep 341 (KB) 584
ExcelIndustriesLtd,(1988)1 Comp LJ 53 . 296
ExperienceHendrixLLC v PPXEnterprises
Inc,2003EWCACiv323:TheTimes,
April19,2003(CA) 499
ExploreComputers(P) Ltd vCalsLtd,
(2006)131DLT477 484,636
ExportCreditGuaranteeCorpn of India Ltd
VAnnammaPhilips,AIR2011 Bom 18..959
ExportCreditGuaranteeCorpnofIndiaLtd
VGarg SonsInternational,(2014) 1 SCC
686:(2013) 178CompGas 341 88
ExportCreditGuaranteeDepttv Universal
OilProductsCo,(1983) 1WLR399(HL)534
ExpressNewspapers(P) Ltd v Union of
India,(1986)1SCC133:AIR1986
SC872 847
Eyre vMeasday,(1986) 1 All ER 488 (CA) . 203
F.A.TamplinSteamshipCo Ltd v
Anglo-MexicanPetroleumProducts
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68. LXVILawofContract
FACT EnggWorksvKeralaIndustries,
AIR2001Ker326 539
FaduJhalavGourMohunJhala,
19Cal544 848
Fair Air Engineers (P) Ltd v N.K.Modi,
(1996)6see385 38
FakhruddinvStateofM.R,AIR1967
SC1326 723
FakirChandSethvDambarudharBania,
AIR1987Ori50 345,346,421,
422,571,572
FalckeVGray, (1859) 4Drew651:
113RR493 854,858
Falcke vScottishImperialInsuranceCo,
(1886)LR34ChD234(CA) 583,753
FanindraNarainRoy vKachhemenBibi,
AIR1918Cal816:ILR(1917)45
Cal774 104,133
FarleyvSkinner,(2001) 4UKHL49 (HL) .507
FarnwoothFinanceFacilitiesLtdvAttryde,
(1970)1WLR1053(CA) 84
FarrandvLazarus,(2002)3 All ER 175
(QBD) 204
FatehChandvBalkishanDass,AIR1963
SC1405;(1964)1SCR515...537,541,545
FatehSingh vSanwalSingh, ILR (1875) 1
All751 263
FatehchandMurlidharvMaharashtraSEB,
AIR1985Bom71 120
FawcettvSmethurst,(1914) 84 LJKB473:
112LT309 157
FazalSalamatRai,(1928)120IC421...674
FazalIlahivEastIndianRlyCo,ILR(1921)
43All623 478
FazalaldinMandalvPanchananDas,AIR
1957Cal92 104
Federal Banki/Joseph,(1990)1KLT 889..565
FederalBankLtd v V.M. Jog Engg Ltd,
(2001)1see663:AIR2000SC3166...627
FederalInsuranceCo vNakanoSingapore
(P)Ltd,(1992) 1CurrLJ 539 (CA
Singapore) 783
Felthousev Bindley, (1863) 7 LT 835 27
FendervJohnMildmay,1938 AC 1 (HL) .270,
272,273
FennvHarrison,(1791) 3TR757 789
Fenner(India)LtdvPunjabandSindBank,
(1997)7sec89:AIR1997SC3450....631
FercometalSARL vMediterraneanShipping
CoSA,1989AC788(HL) 453
Fergusonv UmChandBoid,ILR(1906)33
Cal343 786
FergusonvWilson,(1866) LR 2ChApp 77 916
Ferreri;Robbins,(1835) 2CM8c R152 758
FibrosaSpolkaAkeyjnavFairbairnLawson
CombeBarbourLtd,1943AC 32 (HL) .425,
560
FinancialCollectionAgencies Ltd v Batey,
TheTimes,May1973:1973NewLJ469. 310
FinancingsLtd vStimson,(1962) 1WLR
1184 740
FindlayvCouldwell,(1976) 69DLR(39)
320(Canada) 79
FinlayMuir&CovRadhakissen
Gopikissen,ILR (1909) 36 Cal 736 465
FinolexCables Ltd vUnionofIndia,(1988)
35ELT343(Bom) 577
FirmChhunnaMaiRamNathvFirmMool
ChandRamBhagat,(1927-28)55lA154:
AIR1928PC99 443
FirmDaulatRamvFirmDharamChand,
AIR1934Lah110 300
FirmGopalCo Ltd vFirmHazarilalCo,
AIR1963MP37 144,146
Firm JaiKishanDasJindaRamvCentral
BankofIndiaLtd, AIR 1955 Punj250...704
FirmMurlidharBanarilalvKishorilal
JagannathPrasad,AIR1960Raj 296....739
FirmofFakirchandv ShriJagadguru
Shankaracharya,AIR1970Guj 145 936
FirmofRameshardasBenarashidasv
TansookhraiBashesharilalFirm,AIR
1927Sind195 763
FirmThakurDas vMathuraPrasad,AIR
1958All66 734
FirstConsohdatedvPaduEhsan,(1994)1
CurrLJ 375(Malaysia) 476
FischervKamalaNicker,(1860) 8
MIA170 283
Fisher vBell,(1961) 1 QB 394 (DC) 22
FitchVDewes,(1921) 2 AC 158 (HL) 310
FitchySnedkar,(1868) 38NY248 10
Fitzmauricez/Bayley, (1856) 6E&B868 . . . 824
FlorenceMabelR.J. vStateofKerala,AIR
2001Ker19 621
FlureanvThornhill,(1776) 2 WB1078...503
Foley1/Hill,(1840) 9 ER1002 702
FoodCorporationofIndiavAlleppey
Municipality,AIR1996Ker 241 565
FoodCorporationofIndiavAnupama
WarehousingEstablishment,AIR2004
Ker137 380
FoodCorporationofIndiavArosan
EnterprisesLtd, AIR1996Del 126 624
FoodCorporationofIndiavBabulal
Agarwal,AIR 1998 MP 23 458
FoodCorporationofIndiavBabulal
Agrawal,(2004)2 SCC 712: AIR2004
SC2926 477,527
FoodCorporationofIndiavGauriPrasad
Gopal,1987All LJ567 545
FoodCorporationofIndiavGopalChandra
Mukherjee,(2003)2ICC797(Cal) 570
FoodCorporationofIndiav K.
Venkateswara,(1988) 1 An LT 930 .579,582
FoodCorporationofIndiavKamdhenu
CattleFeedIndustries,(1993)1SCC71:
AIR1993SC1601 361https://t.me/LawCollegeNotes_Stuffs

69. FoodCorporationofIndiavLaxmiCattle
FeedIndustries,(2006) 2 SCC 699: AIR
2006SC1452 500
FoodCorporationofIndiavNewIndia
AssuranceCoLtd,(1994) 3 SCC324....317
FoodCorporationofIndiavRamKesh
Yadav,(2007)9 SCC 531:AIR2007
SC1421 37
FoodCorporationofIndiavRatanlalN.
Gwalani,AIR2004MP215:(2004)2
CCC393 (MP) 446,447,490
FoodCorporationof India v Sujit Roy, AIR
2000Gau61 543,54
FoodCorporationof India vSurana
CommercialCo, (2003) 8 SCC 636 360
ForbesfJackson,(1882) LR 19Ch
D 615 661,662
Forbes ForbesCampbell& Co Ltd vPortof
Bombay,AIR2006Bom 162 697
ForcometalSARL vMediterraneanShipping
CoSA,1989AC788(HL) 452
FordVTiley,6 B & C 325 451
FordMotorCo vArmstrong,(1915) 31TLR
267(CA) 531
ForemanvGreatWesternRlyCo, (1878) 38
LT851 742
Forman&CoLtdvLiddesdale,1900AC
190(PC) 589
FormbyBros v Formby, (1910) 102 LT 116 . 810
ForsikringsaktieselskapetVesta vButcher,
1989AC852(CA) 529
ForwardvPittard,(1785) 1TR27:
1RR142 680
ForystheTradingServices Ltd v M.V.
Niizuru,(2004)5BomCR806 785
FostervDriscoll,(1929) 1 KB 470 (CA)...264
FostervMackinnon,(1869) LR 4 CP704.244,
247,250
FostervPearsoii,(1835)1CM8c R489:
4 LJ Ex120 788
FoujdarKameshwarDuttSingh v
Ghanshyamdas,1987Supp SCC 689....787
FraservB.N.Furman(Productions)Ltd,
(1967)1WLR898 (2) (CA) 743
FraservThamesTelevisionLtd,1984QB
44(HL) 515,964
FredDrughornLtd vRederiaktiebOlaget
Transatlantic,1919AC203 810
FrederickE.Rose(London)LtdvWilliam
H.Pim.Junior&cCoLtd,(1953) 2 QB
450(CA) 252,253
FreethBurr,(1874) 43 LJ CP 91 459
FriedmanIron 8c Supply CofJ.B. Beaird
& Co, (1952) 63 SO 2d144(SC of
Louisiona) 492
FrithVForbes,(1862)135RR217 707
FrostVKnight,(1872) LR 7 Exch 111 357,
452,525
TableofCasesLXVII
Fruits and VegetableMerchantsUnion v
DelhiImprovementTrust,AIR 1957
SC344:1957SCR1 739
Fuller1/Glyn,(1914) 2 KB 168 729
Fuller1/Wilson,(1842) 3 CB 58 803
FulleryWilson,(1936) 2AllER1039....803
G
G.AnabalganvT.N.Civil SuppliesCorpn
Ltd,(2004)2CTC135(TN) 260
G.D.SubramaniamvSub-Registrar,Sidco
Nagar,(2009)1CTC709 431
G.DayanandvChiefConservatorof
ForestsStateTradingCircle, (1997) 2 BC
195(AP) 627
G.E.CapitalTransportationFinancial
Services LtdvAmritajitMitra,AIR2009
NOC1969(Cal) 848
G.GurunadhaReddyuA.P.RTC,AIR
1999AP179 387
G.L.KilikarvStateofKerala,(1971) 3 SCC
751:AIR1971SC1196 829
G.ShankarReddyuProhibitionandExcise
Supt,(1997)5 An LT177 541
G.SubhashinifP.LakshmiBai,(1987)1
MLJ107 218
GaddarMaifTataIndustrialBankLtd,
AIR1927All407:ILR(1927)29 All674.25
GadigeppaBhimappaMetivBalangowda
Bhimangowda,AIR 1931 Bom 561 156
GafoorKhanvAmiruddin,AIR2012
Raj 35 850
GaindalalvRameshwarDas,171IC584. .325
GajananJaikishanJoshivPrabhakar
MohanlalKalwar,(1990) 1 SCC166....881
GajananMoreshwarParelkarvMoreshwar
MadanMantri,AIR1942Bom302:
(1942)203IC261 595,596
GajendraSingh vNagarpalikaNigam,AIR
1996MP10 23
GallieVLee,(1970)3WLR1078(HL)....248
GallowayvGalloway,(1914) 30TLR531 . 252
GambhirmullMahabirprasadvIndianBank
Ltd,AIR1963Cal163 408
GaneshExportandImportCo vMahadeo,
AIR1950Cal188 739
GaneshFlourMillsCo vPuranMai,1905
PunjRecNo2 822
GaneshIndustriesvBharathRubberCo,
(2006)2CTC182 330
GaneshShetvC.S.G.K.Setty,(1998) 5
SCC381 862
GangaBishanv JaiNarain,(1986) 1
SCC75:AIR1986SC441 853
GangaLaharivHarNarain,1986Raj
LR538 618https://t.me/LawCollegeNotes_Stuffs

70. LXVIIILawofContract
GangaRetreat&Towers Ltd v State of
Rajasthan,(2003) 12 SCC 91 254,221
GangaSaranv Firm RamCharanRam
Gopal,AIR 1952 SC 9: 1952 SCR 36....395
GangadeepPratisthan(P)Ltd vMechano,
(2005)11SCC273:AIR2005SC1958..178
GangadharBeheravSurendraBarik, AIR
2003NOC322(Ori):(2003)1OriLR51942
GangammavCuddapahKupammal,AIR
1939Madl39 270
GangaramvCrown,AIR1943Nag436. . . 676
GangaramRambhauZite vChindhu
DagaduTikone,AIR2003Bom 1 940
GannmaniAnasuyavParvatiniAmarchand
Chowdhary,(2007) 10 SCC 296: AIR
2007SC2380 364
GanpatvLahana,AIR 1928Nag89 285
GanpatPrasadvSarju,(1912) 9 All LJ 8...818
GanpatiSalt Works v State ofGujarat,
AIR1995Guj 61 477
GanpatraiAgarwallvFertiliserCorpn,
AIR1984Cal35 .320
GarnacGrainCoIncvHMFFaureand
FaircloughLtd, 1968 AC 1130: (1967) 3
WLR143{HL) 740
Garrardt/James,(1925)1Ch616 602
GarwarePlastics &PolyesterLtd v
MunicipalCorpnofAurangabad,
AIR1999Bom431 578
GasAuthorityofIndiaLtd vOfficial
Liquidator,Mumbai,AIR2004
Bom220 633
GattaRattaiahvFoodCorporationof
India,AIR2011AP 65 543
GaumontBritishPictureCorpnLtd v
Alexander,(1936) 2 All ER1686 304
GauriDattBasdeovNanikRam
Chauthmal,(1916) 14 All LJ 597 489
GauriShankarvNathuLai,AIR1951
All589 265
GauriShankarRaovJwalaPrasad,AIR
1930Oudh312 824
GauriShankervMumtazAliKhan,ILR
(1980)2 All 411 257,258
GautamConstructions6cFisheriesLtdv
NationalBankforAgricultureandRural
Development,(2000) 6 SCC 519: AIR
2000SC3018 481,589,75
GautamGazmervUttamGazmer,2014
SCCOnLineCal18020:AIR2015
Cal15 849
GayaSugarMillsLtd vNandKishore
Bijoria,AIR1955SC 441 750
GayabaivShriram,(2005) 3 Civ LT
420(MP) 283
GDAVUnionofIndia,(2000)6 SCC 113:
AIR2000SC2003 481,509
GeepBatteries(P)IndiaLtd vGilletteIndia
Ltd,(2005)120DLT387 518
GeepIndustrialSyndicate Ltd v Union of
India,AIR2002NOC180 (Del):2002
AIHC2201 529
GeetaSatishGokarnavSatishShankerrao
Gokarna,AIR2004Bom345 275
GeneralAssuranceSocietyLtd vChandmull
Jain,AIR1966SC1644 27
GeneralAssuranceSocietyLtd vLIC,AIR
1964SC892:(1964)2SCR125:(1964)34.
CompCas 10 38
General Billposting Co Ltd vAtkinson,
1909AC 118 (HL) 313
GeneralElectricTechnicalServicesCoIncv
Punj Sons (P) Ltd, (1991) 4 SCC 230....630
GeneralSales LtdyJagdishRana,AIR2003
HP90 910
GeneralShareTrustCo vChapman,(1876)
1CPD771 707
Genys vMatthews,(1966) 1WLR758 97
GeoTechConstructionCo (P)Ltdv
HindustanSteelWorksConstructionLtd,
AIR1999Ker72 632
Geo-GroupCommunicationsIncvlOL
BroadbandLtd,(2010) 1 SCC562 359
GeorgeHenryChambersvPatrick
Davidson,(1866) LR 1 PC296 702
GeorgeMitchell(Chesterhall)Ltd vFinney
LockSeedsLtd,(1983)2 AC803:(1983)3
WLR163 (HL) 85,100
GeorgeMitchell(Chesterhall)Ltd vFinney
LockSeedsLtd,1983QB284(CA) 74
GeorgeP.Varghesev G.Daniel,AIR1998
Ker120 214
GeorgeThomasvSrividya,AIR2003
Mad290 847
GhanshyambhaiDattaramvBabubhai
Shankarlal,1984GLH247 347
GhasiramAgarwallavState,AIR1967
Cal568 739
Ghee SengMotorv Ling, (1994) 1CurrLJ
382(Malaysia) 399
GherulalParakhvMahadeodas,AIR1959
SC781:(1959)2SCR406....257,272,273,
336,341,342,348
GhulamAhmedvMohdIqbal,AIR1970
J&;K165 349
GianChandrGopala,(1995) 2 SCC 528..356
GianChandv Shiv Dei,2014SCCOnLine
HP897:AIR2014HP54 945
GianChandv YorkExportsLtd, (2015) 5
SCC609:(2015)3SCC(Civ)189 353
GibaudvGreatEasternRlyCo, (1921) 2 KB
426(CA) 80
GibsonvCrick,(1862) 31 LJ Ex304 775
GibsonvManchesterCityCouncil,(1979) 1
WLR294(HL) 40
GilbertSteel Ltd vUniversityConstruction
Ltd,(1976) 12OR(2d) 19 (CA)....137,142https://t.me/LawCollegeNotes_Stuffs

71. GilchristWatt&SandersonPty Ltd v York
ProductsPty Ltd, (1970) 1WLR1262
(PC) 675
Giles1/Giles,1972Ch544 269
GillmanvRobinson,(1825) 1C&P642...794
GirdhariLaiv W.Crawford,ILR(1887) 9
All147 751
GirdhariSingh vNeeladharSingh, (1972)
10 All LJ 159 284
GirdharilalHanumanbuxv EagleStar&
BritishDominionsInsuranceCoLtd,
(1923)27CWN955 318
GirishChandervAmericanConsolidation
ServicesLtd,2004All LJ3098 814
GirshanIndustrialCoLtdvInterchem
Corpn,1970CurrLJ387 836
GlasbrookBros Ltd vGlamorganCounty
^Council,1925AC 270 (HL) 135
GleggVBromley, (1912) 3 KB 474 432
GlobalTradeFinanceLtdvSudarshan
OverseasLtd,(2010) 4MahLJ367.....610
GlobeTransportCorpnvTriveniEngg
Works,(1983)4see707 320,321
GlucksteinvBarnes,1900AC240 216
GobardhanChakrabortyvAbaniMohan,
AIR1991Cal195 258
GobindRamvGianChand,(2000)7 SCC
548:AIR2000Se3106 903
GodanNamboothiripadv KeralaFinancial
Corpn,AIR1998Ker 31 434
GodavariPolymers (P) Ltd vAgricultural
ProductsCommr,(2004)1AnLD783...46
GodfreyvParbati,AIR1938 Pat 308 271
Goetz(India) Ltd vH.R.ThimappaGovi^da,
AIR2016NOG179(Kar) 522
GokedaLatcharaovViswariadham
Bhimayya,AIR1956AP 182 162
GokulyKaram,8 PC 782 934
Golden Bay Realty Ptc Ltd vOrchard
TwelveInvestmentsPtcLtd,(1989) 2MLJ
70(Malaysia) 531
GoldstoneExportsLtd v Govt of A.P.,
(2003)1 ALD336 46
GomathinayagamPillai vPalaniswami
Nadar,AIR1967SC868:(1967)1
SCR227 378,383,388
GoodinsonvGoodinson,(1954)2 QB
118 (CA) 349,350
GoodwinVGray, (1874) 22WR312..663,939
GopalyTrimbak,AIR 1953 Nag 195 108
GopalChandraBhui vBankuraZilla
Parishad,2015SCCOnLineCal 261:
AIR2015Cal124 567
GopalDass v Sonu, AIR2010P8cH126. . 910
GopalLaiv BabuLai,(2004) 4 CLT 161
(Raj DB) 257
Gopal Paper Mills Ltd vSurendraK.
GaneshdasMalhotra,AIR1962Cal 61 . .308
TableofCasesLXIX
GopalRamvilasGattanivSheshraoPundlik
Hivarkar,AIR2009NOG1366(Bom)..870
GopalSingh vBhawaniPrasad,ILR
(1888-90)10 All 531 594
GopalSinghHiraSingh vPunjabNational
Bank,AIR1976Del115 682,721
GopalSridharv SashiBhushan,ILR (1933)
60Cal111:AIR1933Cal109 818
GopaldasvThakurdas,AIR1957
MB20 778,779,780
GopalkrishnaGovind vTukaramNarayan,
AIR1956Bom566 155
GopalraovKallappa,(1901) 3 Bom
LR164 289
GopiKrishnaPrasadfJanakPrasad,AIR
1951Pat519 285
GopilalJ.NachanivTracIndustriesand
ComponentsLtd, AIR 1978Mad134 . . 647,
648
GopinathvRaghuvanshKumarSingh,
AIR1949Pat522
GopinathDaulatDalviv State of
Maharashtra,(2005)1MahLJ 438 ,
GordonWoodroffe&Co(Madras)Ltdv Sk
M.A.Majid,AIR1967SC181:1966Supp
SCRl 738,744
GoreVVan deLann,(1967)2 QB 31:(1967)
2WLR358(CA)
GouldVGould,(1970)1 QB 275: (1969) 3
WLR490(CA) '....
GouriVKamalakshi,AIR2004Mad463
GoutamHazravPinakiHazra,(2005)3
CHN364: (2005) 3ICC344(Cal)....
GouthamSurana8cSonsvK.
Kesavakrishnan,1995SCCOnLineMad
5:(1998)3 LW809
GoverdhandasGoculdasTejpalvBankof
Bengal,ILR(1891-92)15 Bom 48....
GovernorGeneralinCouncilvFirmBadri
DasGauriDutt,AIR1951 All 702....
GovernorGeneralinCouncilvMadura
Municipality,(1947-48)75lA213:
AIR1949PC39
GovernorGeneralofIndiainCouncilv
JubileeMillsLtd,AIR1953Bom 46 . .
GovindGoverdhandasDagav FieldMining
&IspatLtd,(2009)6MahLJ 398..347,421
GovindPrasadChaturvedivHariDutt
Shastri,(1977)2SCC539:AIR1977
SC1005 383,386
GovindPrasadDalmiavW.B.SEB,2014
SCCOnLineCal22090:AIR2015NOG
1084(Cal) 359
GovindPrasadSharmavBoardofRevenue,
AIR1965MP66 737
GovindbhaiGordhanbhaiPatelvGulam
AbbasMullaAllibhai,(1977)3SCC179:
AIR1977SC1019 392,396
563
325
.97
.14
953
259
834
663
318
572
676https://t.me/LawCollegeNotes_Stuffs

72. LXXLawofContract
GovindjiVathalLaiBhojamvGujarat
HousingBoard,(1982) 1 SCC 412 444
GovindraraGordhandasSeksariavStateof
Gondal,(1949-50)77lA156;AIR1950
PC99. 562,563
GovindramSeksariapEdwardRadbone,
(1946-47)74lA295:AIR1948PC56..424
GovtofA.P.VPratapKaran,(2016) 2
SCC82;AIR2016SC1717 938
GovtofA.P.VStateBankofHyderabad,
(1993)2 AnWR65 (DB) 611
GovtofA.P.VV.SatyamRao,AIR1996
AP288 480
Govtof GoaVGoaUrbanCo-operative
BankLtd,(2011)2MahLJ 37 (Bom)....809
GovtofGujaratv R.L.Kalathia&Co,
AIR2003Guj 185 ; 446
GovtofIndiavJamunadharRungta,
AIR1960Pat19 738
GovtofIndia,Ministryof Defence vIndira
Devi,AIR2003AP329 938
GovtofMaharashtravDeokar'sDistillery,
(2003)5SCC669;AIR2003SC1216...334
GovtofRajasthanvVenkataramana
Seshiyer, AIR1984AP 5 72,320,323
GowriVShanthi,(2014)11SCC664:(2014)
4SCCCiv250 962
GowrishankarvJoshiAmbaShankar
FamilyTrust,(1996) 3 SCC 310:AIR1996
SC2202 212
GrahamvCampbell,(1878) LR 7 Ch D
490(CA) 493
Grainger&Son vGough,1896 AC 325
(HL) 21
GrandhiPitchaiahVenkatraju8c Coy
PalukuriJagannadham8c Co,AIR1975
AP32 321,322
Grantv GoldExplorationandDevelopment
SyndicateLtd,(1900)1 QB 233 (CA)....764
GrasimIndustriesLtd vAgarwalSteel,
(2010)1SCC83 250
GrayvBarrPrudentialAssuranceCoLtd,
(1971) 2 QB554:(1971)2WLR1334...269
GreatAmericanInsuranceCoLtdv
MandanlalSonulal,ILR(1935) 59
Bom656 164
GreatEasternEnergyCorpnLtdvJain
IrrigationSystemsLtd,(2010) 4Mah
LJ759 359
GreatNorthernRlyCo v L.E.P.Transport
8cDepositoryLtd,(1922) 2 KB 742 (CA) . 680
GreatNorthernRly CovSwaffield,(1874)
LR9Exchl32 753
GreatNorthernRly Co vWitham,(1873)
LR9 CP 16; 43LJCP1: 29 LT 471 46
GreatPeaceShippingLtd vTsavlirisSalvage
(International)Ltd,2003QB679:
(2002)3WLR1617:2002EWCACiv
1407(CA) 236,241
GreenvBartlett,(1863) 14 CBNS 681: 8 LT
503:11WR834:32LJCP261 775
Greenev ChelseaBoroughCouncil,(1954) 2
QB127;(1954)3WLR12 122
GreenhillsExports(P) Ltd v CoffeeBoard,
(2001)4KantLJ158(DB) 492
GreenwoodvMartinsBankLtd,1933AC
51(HL) 823
GreervDownsSupply Co, (1927) 2 KB
28 (CA) 808
GreeryKettle,1938AC156(HL) 619
Gregory8cParkervWilliams,(1817) 3Mer
582:36ER224 121
GrindlaysBankP.L.C. vCentrefor Dev of
InstructionalTechnology,AIR1997
Del164 579
Grover8cGroverLtd vMathews,(1910) 2
KB401 825
GudurusyamaiaDevi vAttolaAmmarvara
Rao,AIR2002AP'462 908
GujaratBottlingCo Ltd v Coca Cola Co,
(1995)5SCC545:AIR1995SC2372:
(1995) 84CompCas 618 293,305,956
GujaratElectricityBoardv K.R.Patel,
(1988)2GLH169 478
GujaratElectricityBoardvMaheshkumar
8cCo,(1982)2 GujLR479:AIR1982
Guj289 950
GujaratElectricityBoardv ShriRajratna
NaranbhaiMillsCo Ltd, (1975) 16 Guj
LR90 554
GujaratHousingBoardvHarilalJethalal,
AIR2001Guj259 490
GujaratHousingBoard vVipulCorpn,AIR
2004Guj319 397,413
GujaratSRTCvKayOrrBros,AIR2000
Guj 313 521
GujaratSteel Tubes Ltd vPortofKandla,
AIR2002Guj 173 580
GujaratWaterSupply8cSewerageBoardv
PagiMalabhaiAndarbhai,(2004)2GCD
923(Guj) 285
GujobaTulsiramvNilkanth,AIR1958
Bom202 741
GulabChandvKamalSingh, AIR1922
All260 132
GulabchandvKudilal,AIR1966SC1734:
(1966)3SCR623 266,280
GulabraiDayaramv IndiaEquitable
InsuranceCoLtd,AIR1937Sind51....766
GulamhussainLaljiSajan vClaraD'Souza,
AIR1929Bom471 724
GulkandivDhikkal,AIR2016PScH73 . . . 945
GunputNarainSingh,re,ILR(1875-78)1
Cal74 873
GuntonvRichmond-Upon-ThomesLondon
BoroughCouncil,1981 Ch448:(1980) 3
WLR714(CA) 453https://t.me/LawCollegeNotes_Stuffs

73. GunupatiAlluraiahv State ofA.P.,AIR
1963AP394 738
GunvantlalRatanchandvRameshbhaiP.
Patel,(2001) 2 GCD 1518 (Guj) 465
GunwantbhaiMulchandShahvAntonElis
Farel,(2006)3 SCC634:AIR2006
SC1556 862
GuptaEnterprisesvGovtofA.P.Revenue &
EndowmentsDeptt,(2003) 2 BC 4 (AP)...51
GurBhag,96 PR 1911;11IC213 953
GurbaxRai vPunjabNationalBank,(1984)
3SCC96;AIR1984SC1012 703,727
GurdashanSingh v Bishen Singh, (1962) 2
Punj5(FB) 412
GurdialSingh vPeareyLaiMalhan,AIR
1982Del120 464
GurditSingh v Secy ofState,AIR 1931
Lah347 396
GurdwaraSahib vGramPanchayatVillage
Sirthala,(2014) 1 SCC 669; (2014) 1 SCC
Civ630:(2014) 4MahLJ 74; (2014) 3
MPLJ36 942
Gurmel Singh v Ujagar Singh, (1991) 99
PunjLR571 741
GurpreetSingh v Union ofIndia,{2006) 8
SCC457 427
GurrattvCullum,1710 BullNP42:
Willes400 807
GuruNarayanv SheoLaiSingh,(1918-19)
46lA1 (PC) : 266
GurubaxSinghGorowarav Begum Rafiya
Khurshid,AIR1979MP66 540,552
GustavusCouturiervRobertHastie,(1856)
5HLCas673:10ER1065 234
GuthingVLynn, (1831) 2 BScAd 232....327
GuwahatiMunicipalCorpnvInternational
ConstructionLtd,AIR2014Gau 101 . . . 221
GVPREL-MEE(JV)vGovtofA.R,(2006)3
ALD703(DB) 46
GwaliorRayon Silk Mfg(Wvg)Co v Shri
Andavar&Co,AIR1991Ker134 396
GwilliamvTwist,(1895) 2 QB 84 (CA)...755
H
H. Anraj vGovtofT.N.,(1986) 1 SCC 414:
AIR1986SC63 430
H.B.GowrammavLIC,2006SCCOnLine
Kar365:2007ACJ1087 796
H.L.Nagaraj'uv Vijaya Bank,ILR1999
Kant197:1999LabIC2354 61
H.M.KamaluddinAnsari&CofUnionof
India,(1983) 4 SCC 417;AIR1984SC 29 552
H.O.Brandt&CoH.N.Morris&Co
Ltd,(1917) 2 KB784 813
H.P.FruitGrowers'CoopMarkProcessing
Society Ltd v H.P.HousingBoard, AIR
1996HP94 536
TableofCasesLXXI
H.RGuptaVHiralal,(1970) 1 SCC 437;
1970SCC(Cri)190;AIR1971SC206;
1970SCR788 370
H.P.JalajakshivKarnatakaBank,AIR
2003Kant280 615,656
H.P.SEBLtdVAhluwaliaConstracts(India)
Ltd,AIR2015HP108 629
H.P.StateCooperativeBankLtd v U.P.State
FinancialCorpn,AIR2016HP29 397
H.Parsons(Livestock) Ltd vUttleyIngham
8cCo,1978QB791:(1977)3WLR990.472
H.R.BasvarajvCanaraBank,(2010) 12
SCC458 438
H.SowbhagyavNGEFLtd, AIR2004
Kant155 543,547,548,551
HabibMianvMukhtarAhmad,AIR1969
All296(FB) '. 554
HaddockvHumphrey,(1900) 1 QB
609(CA) 707
HadleyvBaxendale,(1854) 9 Exch 341 . .466,
477
HaesenBanu v SyedHabeebSayeeduddin,
1997AIHC135(AP) 260
HagamiLaiRamPrasadvBhuralalRam
Narain,AIR1961Raj 52 339
HagedornvOliverson,(1814) 2M&S485 . 821
HairoonBibivUnitedIndiaLifeInsurance
Co, AIR 1947 Mad 122 35
Hajee Ismail & Sons vWilliams8c Co, ILR
(1918) 41Mad709 488
Haji AbdulRahmanv HajiNoorMahomed,
ILR(1892)16Bom141 361
Haji AbdulRahmanAllarakhiav Bombay
andPersiaSteamNavigationCo,ILR
(1892) 16Bom561 251
HajiAdamSaitDharmasthapanamv
Hameed,1985KLT169 566
HajiAhmadYarkhanv Abdul GaniKhan,
AIR1937Nag270 205,214,218
HajiMohdHajiJiva v E.Spinner,ILR
(1900)24 Bom 510 37
Haji MohdIshaqv MohdIqbaland Mohd
Ah 8cCo,(1978)2SCC493;AIR1978
SC798 8
HajiRahimBux vCentralBank ofIndia,
AIR1929Cal447 734
Haji Shakoor Gany v H.E. Hinde 8c Co Ltd,
AIR1932Bom330 318
HajraBaii/Jadavabai,AIR 1986 MP 106..218
HakamSingh vGammon(India) Ltd,
(1971)1SCC286:AIR1971SC740:
(1971) 3 SCR 313 320
HamaraRadioandGeneralIndustriesv
State ofRajasthan,AIR1964Raj 205 . . . 405
HambrovBurnard,(1904)2 KB 10 (CA) . .786
HameedvJayabharatCreditandInvestment
CoLtd,AIR1986Ker206 536
HameedvKanhaiya,AIR2004All 405...931https://t.me/LawCollegeNotes_Stuffs

74. LXXIILawofContract
HamelavJangSher Singh, AIR2002
P&H147 190,198
HamiltonJonesv David 8cSnape,(2004) 1
WLR924:2003EWCH3147{ Ch) 513
HamlinvGreatNorthernRlyCo,(1856)1
H&N408:156ER1261 493
HamzehMalas&SonsvBritishImex
IndustriesLtd,(1958) 2 QB 127: (1958) 2
WLR100(CA) 628,634
HanamantBasappaChoudhariv
Laxmawwa,(2002)5KantLJ405 275
HandleyPage Ltd vCustomsand Excise
CommrsandRockwellMachineToolCo
Ltd, (1970) 2 Lloyd's Rep 459 (CA) 897
HanilEraTextiles(?)LtdvPuromatic
Filters(P)Ltd,(2004)4 SCC 671:AIR
2004SC2432 320
HansRaj vRanSingh, AIR 2011NOC
451(HP) 945
HansaV.Gandhiv DeepShankarRoy,
(2013)12SCC776:(2013)116Cut
LT457 52
HappyHomeBuilders(P) Ltd vDelite
Enterprises,(1995) 2AIHC1320 526,
541,738
HarBhajanLaivHarCharanLai,AIR
1925All539 18,28
HarBilasvMahadeoPrasad,AIR1931
All539 303
HarPrasadChoubeyvUnionofIndia,
(1973)2SCC746:AIR1973SC2380...373
HarbakhshSingh Gill v RamRattan,AIR
1988P&;H60 355
HarbottleR.D.(Mercantile)Ltd vNational
WestminsterBankLtd,1978QB 146:
(1977)3WLR752 634
HarburgIndiaRubberCombCo vMartin,
(1902)1 KB778(CA) 601
Harbutt'sPlasticine Ltd v WayneTank&
Pump Co Ltd, (1970) 1 QB 447: (1970) 2
WLR198(CA) 82,83
HarcharanDasGuptav DDA, AIR2007
Del75(DB) 630
HardeshOres (P) Ltd v Hede 8c Co, (2007)
5SCC614 360
HardmanvBooth,(1862) 1H8CC803: 32
LJExl05 229,231
HarevNicoll,(1966) 2 QB 130: (1966) 2
WLR441(CA) 386
HareandO'More,re, (1901) 1 Ch 93 830
Hargopalv People's Bank ofNorthernIndia
Ltd,AIR1935Lah691 41
HargopalAgarwalvSBI,AIR1956
Mad211 610,639
Hargreavev Smee,(1829)6 Bing244:8
LJCP46:31RR407 623
HariBalkrishnaJoglekarvNaro
MoreshwarJoglekar,ILR(1893) 18
Bom342 295
HariChandMadanGopalvStateofPunjab,
(1973)1SCC204:AIR1973SC381...440,
738
HariLahuPatilvRamjiValadPanda,ILR
(1904)28Bom371 540
HariRamfJyotiPrasad,(2011) 2 SCC 682:
(2011)1SCC(Civ)540:AIR2011
SC952 ;.... 955
HariShankerJainvSoniaGandhi,(2001) 8
SCC233:AIR2001SC3689 322
HariSingh vDewaniVidyawati,AIR1960
J8CK91 413
HaribhaivSharafAli,ILR(1897)22
Bom861 301
HaribhauS.Watanev Raju D.Borkar,
(2004)4AIHC2728(Bom) 427
HaridasMundravNationalandGrindlays
BankLtd,AIR1963Cal132 724
HaridasRanchordasvMercantileBankof
IndiaLtd,(1919-20)47lA17 8
HaridwarSingh vBagunSumbrui,(1973) 3
SCC889:(1972)3SCR629:AIR1972
SC1242 64
HariharPrasadSingh v KeshoPrasadSingh,
AIR1925Pat68 830
HarilalNathalalTalativBhailalPranlal
Shah,AIR1940Bom143 283
HarimohanvDuluMiya,ILR (1934) 61
Cal 1075 157,163
HaripadaSadhukhanvAnathaNathDey,
AIR1918 Cal 165: (1918) 22
CWN758
HarjeetSingh vAmrikSingh, (2005) 12
SCC270
HarjibanDas vBhagwanDas, (1871) 7
BLR535
HarkervEdwards,(1887)57 LJ QB
147(CA)
HarmeshKumarvMayaBai, AIR2006
P8cHl
HarnathKaurvIndarBahadurSingh,
(1922-23)50lA69 PC:AIR1922
PC403
HaroldFielding Ltd vMansi,(1974) 1 Ali
ER1035
HaronBinMundirv SingaporeAmateur
AtheleticAssn,(1992) 1 SLR 18
HarriesvWyreForestDistrictCouncil,
(1990)1 AC 831:(1989)2WLR
790(HL)
HarringtonvVictoriaGravingDockCo,
(1878) LR 3 QBD549
HarrisvNickerson,(1873) LR 8 QB 286 .
Harris(L.S.)TrusteesLtd v PowerPacking
Services Ltd, (1970) 2 Lloyd's Rep 65....765
Harrisonv W.Gardner,369F2d172 298
Harsev Pearl LifeAssuranceCo, (1904) 1
KB558 346
716,721
914
637
788
219
420
836
503
99,101
...764
...12https://t.me/LawCollegeNotes_Stuffs

75. HarshadJ.ShahvLIC,(1997) 5 SCC 64:
AIR1997SC2459 749,799
HarsudCoopMktgSocietyLtd vUnited
IndiaFireandGeneralInsuranceCoLtd,
AIR1992Bom341 316,488
HartO'Connor,1985AC1000 173
HartleyvHitchcock,(1816) 171 ER 512...700
HartleyvPonsonby,(1857) 7E&B872: 119
ER1471:26 LJ QB322:29LT195 136
HartogVColin and Sheilds, (1939) 3 All
ER566 245
HarveyvFacey,1893AC552 20
HarveyvVentilatorenfabrikOeledge,
FinancialTimes,Nov11,1988(CA) 76
HaryanaFinancialCorpnvRajeshGupta,
(2010)1SCC655:AIR2010SC338....542
HaryanaPesticides vBankofRajasthanLtd,
AIR2004P&H83 727
HaryanaTelecom Ltd vUnionofIndia,AIR
2006Del 339 378,546
HaryanaUrbanDevelopmentAuthority
VDevinderKaur,AIR2002NOC268
(P&H) 427
HasanAlivWaliullah,AIR1930All730. . 624
HaseldinevC.A.Davif& SonLtd,(1941) 2
KB343(CA) 96
HashmanvLucknowImprovementTrust,
(1927)101IC847 372
HasiMazumdarvW.B.SEE,AIR2006
Cal59 583
HasinaBanovAlamNoor,AIR2007
Raj 49 177
HaslamandHier-Evans,re, (1902) 1 Ch 765
(CA) 764
Hasmukhlaland Co vMunicipalCorpnfor
GreaterMumbai,(2005)3MahLJ 149...47
HastievCouturier,(1856)5HLCas673. . 745
HastingsCorpnvLetton,(1908) 1 KB 378 .649
HayesfJames & CharlesDodd(a firm),
(1990) 2 All ER 815 (CA) 502,505
HazardvTredwell,(1722)1Stra506 793
HazarimalKochnaji vKhemchandMaggaji,
AIR1962Raj 86 783
HDHanumanthappavMohdSab, (2011) 1
KantLJ 49 219
Heard1/Pilley,(1869) LR 4 Ch 548 748
HeathParkinson,(1926)42TLR693...778
Helsby, re, (1894) 1 QB 742 346
Hely-Hutchinsonv Brayhead Ltd, (1968) 1
QB549:(1967)3WLR1408(CA)..743, 791
HemantaMondalvGaneshChandra
Naskar,(2016) 1 SCC 567:AIR2015
SC3757 900
HemendroCoomarMullickvRajendrolall
Moonshee,ILR(1878) 3Cal353 366
HeinmoPharmavDaviroodShoes(P)Ltd,
(2003)3 BomCR781 365
HendersonvStevenson,(1875)2 Sc&Div
470:(1875)32LT709(HL) 70
TableofCasesLXXIII
HenryKendall & Sons vWilliamLillico&
SonsLtd,(1969) 2 AC 31: (1968) 3WLR
110(HL) 88
Henthornt/Eraser,(1892) 2 Ch 27 58
HerHighnessMaharaniShantideviP.
GaikwadvSavjibhaiHaribhaiPatel,
(2001)5SCC101:AIR2001SC
1462 876,907
HerbertMorrisLtd v Saxelby, (1916) 1 AC
688(HL) 306
HermannSuerkenGmb8cCofSelco
(ShipyardPte) Ltd, (1991) 3 CLJ2289....40
HerneBaySteamBoatCo vHutton,(1903)
2 KB683(CA) 402
HeronII,TheKoufosv C.CzarnikowLtd,
(1969)1 AC350:(1967)3WLR1491
(HL) 470, 471,477
HetRamvDeviPrasad,(1881) 1 AllWN2604
HewisonRicketts,(1894) 63 LJQB 711..649
HewittVBonvin,(1940)1 KB 188 (CA)...749
HeymanvDarvi^insLtd, (1942) AC 356 . . 457,
768
HeysVTindal,(1861) 1B&S296 760
Heywoodv Wellers (a firm),1976QB446:
(1976)2WLR101 512
Hi-Tech Systems and Services Ltd v
SuprabhatRay, 2015 SCC On Line Cal
1192:AIR2015Cal261 311
HichensHarrison,WoolstonScCov
Jackson& Sons, 1943 AC266(HL) 781
HickmanvHaynes,(1875) LR 10 CP598. . 495
HidrogasvGreatPlains Devp Co of
Canada,(1972) 5WWR22 (All Sup Ct) . 330
HigginsVNorthamptonCorpn,(1927) 136
LT235 251
HillVWilliamHills(ParkLane)Ltd,1949
AC530(HL) 341,343
Hillas& CoLtdvArcos.Ltd,(1932)147LT
503(HL) 328,331
Hillst/Croll,(1845) 2 Ph 60: 78RR23..904,
905
HiltonVEckersley, (1855) 6E&B47 302
HimadriChemicalsIndustriesLtdvCoal
TarRefiningCo,(2007)8 SCC 110:AIR
2007SC2798 626,634
HimanchalFruitGrowersCoopMktg&
ProcessingSocietyLtd vUpperIndiaFood
Preservers&Processors(P)Ltd,AIR1984
HP18 726
HimmatnagarNagrikSahakariBankLtd
VSureshkumarJayantilalThakkar,AIR
2016Guj68 715
HimsEnterprisesvIshakBinSubari,(1992)
1 CLJ132(HC) 208
HindConstructionContractorsvStateof
Maharashtra,(1979)2SCC70:AIR1979
SC720 389,544
HindustanAntibioticsLtdvKohliMedical
Stores,1997AIHC2630(MP) 774https://t.me/LawCollegeNotes_Stuffs

76. LXXIVLawofContract
HindustanConstructionCo Ltd v SathijJal
VidyutNigamLtd, AIR2006Del 169...631
HindustanConstructionCoLtdvStateof
Bihar,(1999) 8 SCC436:AIR1999SC
3710 388,627
HindustanCoopInsuranceSociety v Shyam
Sunder,AIR1952Cal691 26
HindustanDevpCorpnvModiluftLtd,
(2005)4CHN14 (Cal) 724
HindustanMachineTools Ltd vNedungadi
BankLtd,AIR1995Kant185 721
HindustanPetroleumCorpnvUniversityof
Hyderabad,AIR2003NOC448(AP)...437
HindustanSteelWorkersConstructionLtd
VG.S.Atwal& Co (Engineers) (P) Ltd,
(1995)6SCC76:AIR1996SC 131 629
HindustanSteelworksConstructionLtdv
Tarapore& Co, (1996) 5 SCC 34:AIR
1996SC2268 626
HindustanTimesvStateof U.P.,(2003)1
SCC591;AIR2003SC250 286
HipkinsJackCottonPartnership,(1989) 2
EGLR157 505
HiraLai1/Gulab,10CPCR1 936
HirabhaiNarotamdasvManufacturers
LifeInsuranceCo, 16IC1001:
(1912)14BomLR791' 316,317
HirachandPunamchandv Temple, (1911) 2
KB330(CA) 139
HiralaxmivLIC,(1999) 2 BC 118
(BomDB) 27
HiranyapravaSamantrayvOrissaState
FinancialCorpn,AIR 1995 Ori 1 612
HirjiMuljivCheongYue S.S. Co Ltd,1926
AC497(PC) 414
HiteshD. Desai v Supt of Stamps and
InspectorGeneral ofRegistration,AIR
2016Guj62 578
HitkariMotorsvAttarSingh, AIR1962
J&KIO 379
HMKKamaluddinAnsari&CoyUnion
ofIndia,(1983) 4 SCC 417:AIR1984
SC29 88
HobbsVLondon8cSouth-WesternRlyCo,
(1875)LR10 QB 111 493
HobsonVBass, (1871) LR 6 Ch App
792 663,665
Hochesterv De LaTour,(1853) 2E8cB678:
22LJQB455 ! 452
HodgesVDelhi&LondonBankLtd,
(1899-1900)27IA168 198
HoenigvIsaacs,(1952) 2 All ER 176 (CA) .463
HoganVStophelt,(1899) 170111150 134
HolliervRamblerMotorsAMCLtd, (1972)
2 QB 71:(19722WLR401 87
HollinsV]. Davey Ltd, (1963) 1 QB 844:
(1963)2WLR201 81
HolmeVBrunskill,(1877) LR 3 QBD
495(CA) 643
HoltVMarkham,(1923)1 KB504 586
Holt8cMosleyLtd vCunningham&
Partners,(1949)83LILReports141....813
HolwellSecuritiesLtdvHughes,(1974) 1
WLR155 35
HolyfaithInternational(P) Ltd v Shiv
Kumar,AIR2006AP198:(2006)3An
LT 216:(2006)3 ALJ319 262
HomeVMidlandRailwayCo, (1873) LR 8
CP131 467
Hotelde L'EuropeLtdvCurrie-Freyer,
(1956)3MC89(SingaporeCA) 207
HotelVrindaPrakashvKarnatakaState
FinancialCorpn,AIR2007Kant187....728
Hotson8cHotsonvPayne,1988CLY1047.510
HoughlandvR.R.Low(LuxuryCoaches)
Ltd, (1962) 1 QB 694 (CA) 681
HoughtonVMathew,(1803) 3 Bos
8cP485 778
HoughtonVTrafalgarInsuranceCo Ltd,
(1954)1 QB247(CA) 89
Houldsworthv City ofGlasgowBank,
(1880)5 AC317 802
HouseholdFire8cAccidentInsuranceCov
Grant,(1879)LR4 Ex D216(CA) 32
HowardvHarris,(1884) 1 C8cE 253 687
HowardvPickfordTool Co Ltd, (1951) 1
KB417 457
HowardvSheward,(1866) LR 2 CP 148 . . 789
HowardvShirlstarContainerTransport
Ltd,(1990) 1WLR1292(CA) 264
HowardMarine8cDredgingCo Ltd v
Ogden8c Sons(Excavations)Ltd,
1978QB574:(1978)2WLR515(CA) . .201
HowellVCoupland,(1876) 1 QBD
258(CA) 397
HowrahMotorCoLtdvBharatPetroleum
Corpn,(2000)3 BLJR1854(Pat) 518
HPSEB2/HariChand,AIR2009HP30...957
HPSIDCVMansonIndia(P)Ltd,AIR2009
NOC490(HP) 622
HR8c SSainsburyLtd vStreet,(1972) 1
WLR834 418
HubbilalSadashiv vMohd.Maqbool
AhmedKhan,AIR1977MP65 261
HubliDharwadMunicipalCorpnv
Chandrashekar,AIR2012Kant41 65
HUDAVKedarNath,(2015) 1 SCC 186:
(2015)1SCC(Civ)482 5
Hudson,re, (1885)54LJCh811 107
HughesVAssetManagersPic,(1995) 3 All
ER669(CA) 259
HughesVLiverpoolVictoriaLegal Friendly
Society,(1916) 2 KB482 346,422
Hugueninv Basely, (1807) 14 Ves 273:
9RR283 182
HukmiChandi/JaipurIce and OilMills,
AIR1980Raj 155 300https://t.me/LawCollegeNotes_Stuffs

77. HukumchandInsuranceCoLtdvBankof
Baroda,AIR1977Kant204 820
Hulas Kunwar vAllahabadBank Ltd, AIR
1958Cal644 725
HultonVHulton,(1917) 1 KB 813 223
HumblevHunter,(1848) 12 QB 310 810
HumbrovBurnard,(1904)2 KB 10 793
HungerfordInvestmentTrustLtd vTurner
Morrison& CoLtd,(2009)2CHN330. 217
HungersfordInvestmentTrustLtd vHaridas
Mundhra,(1972)3 SCC684:AIR1972
SC1826 369
HuntSilk;(1804) 5East449 587
Hunt8cWinterbothani(West of England)
LtdVB.R.S. (Parcels) Ltd, (1962) 1 QB
617:(1962)2WLR172 684
HurnandraiFulchanduPragdasBudhsen,
(1922-23)50lA9:AIR1923PC 54 (2)..394
HussainaliCasanvDinbai,AIR1924
Bom135 271
Husseyt/Horne-Payne,(1879) 4 AC 311...332
HutchinsonvHarris,(1978) 10 Build LR
19 (CA) 505
HutleyyHutley,(1873) LR 8 QB 112 283
HuttonVCarMaintenanceCo,(1915)1
Ch21 698,699
HVSTechnologiesInc,USA vAeronautical
DevelopmentAgency, (2001) 4Kant
LJ211 635
HydefWrench,(1840) 3 Beav 334 37
HydraulicEngg Co vMcHaffieGoslett&
Co, (1878) LR 4 QBD 670 468
Hyman& Wife v Nye & Sons, (1881) LR 6
QBD685 679
I
I.S.Sikandarv K.Subramani,(2013)15
SCC27:(2014)118CutLT 89 892
I.T.C.LtdVGeorgeJosephFernandes,
(1989)2SCC1:AIR1989SC839 883
IbrahimAbdulLatifShaikhvCorpnBank,
AIR2003Kant98:(2003)IICC726..636,
661
IchhaDhanjivNatha,ILR(1888) 13
Bom338 677
ICICIBankLtdvTataInternationalLtd,
(2008)6MahLJ446 637
ImperialIceMfgCo vMunchershaw
BarjorjiWadia,ILR(1889) 13 Bom 415 . .822
ImperialLoanCo v Stone, (1892) 1 QB
599(CA) 172
IncheNoriahBinteMohdTahirv SkAllie,
AIR1929PC3 190
InderSingh vParmeshwardhariSingh, AIR
1957Pat491 174
InderSingh vThakarSingh, (1921) 2 Lah
207:AIR1921Lah20 602
TableofCasesLXXV
IndermalvRamPrasad,AIR1970MP 40 . 144
IndiaCharleswrorthvMacDonald,ILR
(1899)23Bom103 307
IndianAirlines v RenuGupta,AIR2007
(DOC) 116: (2006) 3 CPR 201 770
IndianAirlinesCorpnvMadhuri
Chowdhuri,AIR1965Cal252 93
IndianBank v C.K. SyedMohammed,
(1997)2 KLJ290 150
IndianBankv M.Ambika,(2001) 1Kant
LJ478 656
IndianBankvMocroElectronics,AIR2005
AP328:(2005)6 ALD234(NOC) 579
IndianBankv S.Krishnaswamy,AIR1990
Mad115 645
IndianBankv State ofT.N.,AIR2002
Mad423 636
IndianDrugsandPharmaceuticalsLtd v
IndustrialOxygenCo (P) Ltd,1984Mah
LJ690 536,552
IndianFinancialAssn of Seventh Day
Adventists v M.A.Unneerikutty,(2006) 6
SCC351:(2006)4 KLT520 908
IndianHotelsCoLtdvBhaskarMoreshwar
Karve,1993CriLJ3370 267
IndianMutualGeneralInsuranceSociety
Ltd VHimalayaFinanceandConstruction
Co,AIR1974Del 114 119
IndianOilCorpnv Lloyds SteelIndustries
Ltd,AIR2008NOC866(Del) 380
IndianOilCorpnv RajUnocalLubricants
CorpnLtd,(1997)2MahLJ 281 273
IndianOilCorpnLtd vAmritsarGas
Service,(1991)1SCC533 875
IndianOilCorpnLtd v MegiControl
Systems (P)Ltd,(2011) 5MahLJ892...539
IndianOverSeasBankv G.Ramulu,(1999)
2ALD104 609
IndianOverseasBankvGohTengHoon,
(1989) 1 CLJ554(HCSingapore) 638 -
IndianOverseasBankvNaranprasad
GovindlalPatel,AIR1980Guj 158 452
IndianOverseasBankvSNGCastorete(P)
Ltd,AIR2002Del 309 600
IndianRareEarthLtdvSouthernElectric
Supply Co ofOrissa,AIR2010Ori 115 . . 393
IndianRareEarthsLtd vUniqueBuilders
Ltd,AIR1987Ori30 320
IndianThermalPowerLtdvStateofM.P.,
(2000)3SCC379:AIR2000SC1005.556,4
IndiraKaurv SheoLaiKapoor,(1988) 2
SCC488:AIR1988SC1074 910
IndoreMalwaUnitedMillsLtdvCIT,AIR
1966SC1466:(1966)2SCR651 748
IndrapalvShamShankarLai,AIR2002
All243 894
InduMehtavStateofU.P.,AIR1987
All309 421,571https://t.me/LawCollegeNotes_Stuffs

78. LXXVILawofContract
IndustrialCredit&DevelopmentSyndicate
VSmithabenH.Patel,(1999) 3 SCC 80:
AIR1999SC1036 427,428
IndustrialFinanceCorpnof India vP.V.K.
Papers Ltd, AIR1992All 239 609
IndustrialFinanceCorpnof India v Sehgal
PapersLtd, AIR1986P&H21 490
IndustrialFinanceCorpnofIndiaLtd v
CannanoreSpg&cWvgMillsLtd,
(2002)5SCC54:AIR2002SC1841:
(2002) 110CompCas 685 621, 641,
644,661,664
IndustrialInvestmentBankofIndiav
BiswanathJhunjhunwala,(2009) 9
SCC478 613
Infotech2000India Ltd v State ofPunjab,
AIR2007P&H58 580
InfrastructureLeasing 8cFinancial
Services Ltd v Vijaya V.Prabhu,AIR 2010
Bom72 615
IngramvLittle,(1961) 1 QB 31 (1960) 3
WLR504(CA) 231,232,733
InstalmentSupply (P) Ltd vUnionofIndia,
AIR1962SC 53: (1962) 2SCR644 678
InterGlobeAviationLtd v N.Satchidanand,
(2011) 7SCC463:(2011) 3 KLT295:
(2011)3 CPJ 1 (SC) 325
InterfotoPictureLibraryLtd vStiletto
VisualProgrammesLtd, 1989 QB 433:
(1988)2WLR615(CA) 76
International(India) v Indian Sugar&c
General IndustriesExportImportCorpn,
AIR2001Guj227 627
InternationalGeneralElectric(India) Ltd v
HaradhanSasmal,AIR2005Cal308...483
Ireland v Livingston,(1866)LR 2 QB 99:
(1872)27LT 79 758
IrrawaddyFlotilla&Co Ltd v Bugwandass,
(1890-91)18lA121:ILR(1891-92)18
Cal 620 (PC) 680
IrrigationDepttvProgressiveEngg Co,
(1997) 4 ALD 489 (AP) 179,195
IrvinevUnionBankofAustralia,ILR
(1875-78)3Cal280 822
Irvine,re,(1928)3DLR268 68
Isaac Cooke v Henry Douglas Eshelby,
(1887)LR12AC271(HL) 809
IsaackvClark,(1615) 2Bulstr306 695
IshaqAbdul Karim vMadanLai,AIR 1965
All 34 444,792
IshwarDayalHingwasiavRath
Municipality,AIR1980All 143 420
Ishwara Bhat v AnnappaNaika,AIR 1997
Kerl65 954
IshwarappavArunkumar,2004AIR Kant
HCR2273: AIR2004Kant 417....456, 835
IshwarbhaivBhanushaliHiralalMohanlal
Nanda,AIR2002Guj 328 950
IsmailAllarkhiavDattatraya,ILR(1916)
40Bom638 237
IsmailLebbeMarikarEbrahimLebbev
Bartlett& Co, (1942) 55LW332:AIR
1942PC19:199IC574 338
IsmailSait&cSons vWilson& Co,AIR
1919Madl053 485,497
IsuffalliVIbrahim,1920SCCOnLineBom
93:AIR1921Bom191 (1) 692
ITCClassic Finance Ltd vGrapcoMining&
CoLtd,AIR1997Cal397 "^328
ITC Hotels Ltd v Adarsh CoopHousing
SocietyLtd, (2013) 10 SCC 169: (2012) 94
AIR682 845
J
J.DaulatSingh vDelhiGolfClub Ltd,
AIR2002Del501 941
J.Evans&Son(Portsmouth)LtdvAndrea
MerzarioLtd,(1976)1WLR1078...76, 84,
201
J.G.Engineers(P)LtdvUnionofIndia,
(2011)5SCC758:AIR2011SC2477...538
J.JayalalithaavNakheerangopal,AIR 2009
NOC853(Mad) 946
J.K.Anand1/DDA,(2001)92 DLT 598...326
J.K.EnterprisesvStateofM.P.,AIR1997
MP 68 60,543,33
J.N.SrivastavavUnionofIndia,(1998) 9
SCC559:AIR1999SC1571 61
J.P. Builders v ARamadasRao, (2011) 1
SCC429 353
J.R.EnterprisesvS.T.C.,AIR1987
Del188 629
J.R.Sayani vBrightBros (P) Ltd, AIR1980
Mad162 831
J.RamarajvIliyazKhan,AIR2007NOC
2031(Kant) 782
J. Spurling Ltd v Bradshaw, (1956) 1
WLR461 79
J.T. Mobiles Ltd v Deutsche BankLtd,AIR
1999Del358 630
J. Thomas (P)Ltd 8c CofBengalJute Baling
CoLtd,AIR1979Cal20 807
J.W. Seager vHukmaKessa, ILR(1899-00)
24Bom458 729
J8cK Bank Ltd v Abdul SamadChaloo,AIR
2008J8CK1 701
J8cK Bank Ltd vAttar-ul-Nisa,AIR1967
SC540:(1967)1SCR792 574
J8cK Bank Ltd vChoudharyPrakash
Chand, AIR 2006J6cK11 656
JabalpurCableNetvsrork(P) Ltd v ESPN
SoftwrareIndia(P) Ltd, AIR 1999
MP271 375
JacksonvChryslerAcceptancesLtd,1978
RTR474 511https://t.me/LawCollegeNotes_Stuffs

79. JacksonvHorizonHolidays,(1975) 1WLR
1468(CA) 511
Jacksonv Royal Bank ofScotlandpic,
(2005)1WLR377(HL) 516
Jacksonv UnionMarineInsuranceCo Ltd,
(1874-80)All ER Rep 317 398
Jacob& YoungsIncvGeorgeE. Kent,
(1921)230NY239. 480,48,1
JacobsVLatour,(1828) 5 Bing 130:
130ER1010 700
786,
798
469
JacobsVMorris,(1902) 1Ch816 (CA)
Jacques v Miller, (1877) LR 6 Ch D 153
JaffarMeherAliv Budge Budge Jute Mills
Co,ILR(1906)33Cal702
JagadBandhuChatterjeevNilimaRani,
(1969)3'see445:(1970)2SCR925.
JagadishProsadPannalalv Produce
ExchangeCorpnLtd, ILR(1945)2Cal41:
AIR1946Cal245 419,574
JaganNathJagdishRai,(1998)5 SCC
537:AIR1998SC2028 890
JagannathyNanakkal,1972MP LJ 981..321
JagannathBakshSingh vChandraBhushan
Singh, AIR1937Oudh19: (1936) 12
Luck484 601
JagannathGaneshramvShivnarayan
Bhagirath,AIR 1940 Bom 247: ILR 1940
Bom387 602
JagannathPrasad,re, AIR 1938 All 193...221
JagannathTewari vGopalPrasad,(1983) 31
.BLJR17(Pat) 344
JagarNathSingh vLaltaPrasad,ILR
(1908-10)21 All21 156,159,163
JagatBahadurvDistrictSupply Officer,
Allahabad,AIR1990A1I113 286
JagathSwapna&CofChurchof South
IndiaTrustAssn,AIR2011 AP 81 887
Jagdev Singh vGursewakSingh, AIR 2016
NOC231(P&H) 911
JagdishChandraSahanivPrakashKaur,
(1997)2MPLJ320 659
JagdishChandraTrikhav PunjabNational
Bank,AIR1998Del 266 684
Jagdish SardaSBI,AIR 2016 Cal 2 610
JagdishSingh vNatthuSingh, (1992) 1 SCC
647:AIR1992SC1604 915
JagdishTiwaryvLalitaKuer, AIR 2011
Pat40 930
JageshwarSingh vJawahirSingh, ILR
(1875-80)1 All 311 849
JagganNathv Secy of State for India,(1886)
21 Punj RecNo21, p. 37 228
Jagon RamMarwarivMahadeoProsad
Sahu, ILR(1909-10)36 Cal 768...170,171
JagsonInternationalLtd v Oil&Natural
Gas Corpn Ltd, (2003) 4MahLJ 733:
(2004) 2 Bom CR 272 537,547,631
JagtuMaifLaxmanDas,157IC523....938
256
441
TableofGasesLXXVII
JaharRoy v Premji BhimjiMansata,(1977)
4SCC562:AIR1977SC2439 367,426
JaiDayalvKrishanLaiGarg,(1996) 11
SCC588:AIR1997SC3765 964
JaiDurgaFinvest (P) Ltd v State of
Haryana,(2004)3 SCC 381:AIR2004
SC1484 360
Jai Kishen Das vAryaPritiNidhiSabha,
ILR(1920)1Lah380 527
JaiNarainParasrampuriavPushpaDevi
Saraf,(2006)7SCC756. .862,879,897, 914
JainMillsandElectricalStores vStateof
Orissa,AIR1991Ori117 4
JaipurDevelopmentAuthorityvDaulatMai
Jain,(1997)1 SCC 35 278
JalalNasarv OfficialLiquidator,(2008)5
CTC385(Mad) 543
James Cundy vThomasLindsay, (1878) LR
3AC459:38LT573:47LJQB481 .229,733
JamesGraham&;Co(Timber)Ltd v
SouthgateSands, 1986 QB 80 611
James-Machintosh8c CofSreeYamuna
MillsCoLtd,(1990) 2 KLJ 141 813
JammulaRamaRaovMeriaKrishnaveni,
AIR2003NOC134(AP):2003AIHC
106(AP) 896
JamnaAutoIndustriesvUnionofIndia^
AIR1984Del235 333
JamnaDas vPanditRamAutarPande,
(1911-12)39lA7:ILR(1911-12)34
All63 117,120
JamunaDasvRamKumar,AIR1937Pat
358:169IC396 108
Janand Son v A.Cameron,ILR(1922)44
All735 680,682
JanakPrasadyGopiKrishnaLai,AIR 1947
Pat132 166
JanakiPaul vDhokarMallKidarbux,
(1935)156IC200 603
JanakidasvDhumanmal,AIR1917Sind 5 . 763
JanathaDalPartyvIndianNational
Congress,(2014) 16 SCC 731:AIR2014
SC1062 847
JaniNautamlalVenishanker v Vivekanand
CoopHousingSociety Ltd, AIR1986
Guj 162 . 801
JansonvDriefonteinConsolidatedMines
Ltd,1902AC484 273,279
JaraoKumarivBasantaKumarRoy,ILR
(1905) 32 Cal 374 572
Jarvisv SwanToursLtd,1973QB 233:
(1972) 3WLR954 (CA) 510
JaswantraiManilalAkhaney v State of
Bombay,AIR1956SC 575:
1956SCR483 727,734
JaswinderSingh vSanjogtaNanda,1996
AIHC4477(P&H) ,...260
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80. LXXVIIILawofContract
JawaharLaiWadhwavHaripada
Chakroborty,(1989) 1 SCC 76: AIR1989
SC606 909
JawaharlalDaima& CofChinta
Chittemma,(1989) 1 An LT 335 752
JayContainerServicesShipping(P) Ltdv
S.D.S.Shipping(P) Ltd, (2003) 3 Bom
CR163 476
JayKarnatakaNewsPrintersLtd v
SyndicateBank,(2001) 2 BC 27
(KarDB) 433
JayabharathiCorpnv Sv. P.N. Sn.
RajesekaraNadar,1993 Supp (1) SCC 401:
AIR1992SC596 762
JayakrishnaTradingCo vKandasamyWvg
Factory&Co,1994SCCOnLineMad
502;(1995)1 LW230 669
JayalakshmivAnilkumar,1996AIHC
4353(Ker) 383
JayammauMariaBai,(2004)7SCC459:
AIR2004SC3957 278
JayantShanitlalSanghvivVadodara
MunicipalCorpn,AIR 2011Guj
122(DB) 551
JayantiKar v DillipKumarPatnaik,AIR
20160ri44 958
JayantilalGoelvZubedaKhanum,AIR
1986AP120 423
JaykantHarkishandasShah vDurgashankar
ViljiPandya, AIR 1970 Guj 106 165
JaykrishnaIndustriesLtdvEconomic
DevelopmentCorpn,(2005) 4 Bom
CR218 51
JayteeExportsvNatvarParekhIndustries
Ltd,AIR2001Cal150 811, 835
JebaravOttoman,(1927) 2 KB 254 (CA) . . 753
JeetKumarivGirdhariLai,(2003)4
ICC501 834
Jeet Singh vDaulatRam,AIR2012P&H3 870
JefferMeherAliv Budge Jute Mills Co,ILR
(1906)33Cal702 430
JenkinsvRoberton,(1854) 2Drewry351:
61ER755 645
JenningsvRundall,(1799) 8TR335:
(1799) 101 ER 1419 157, 158
JeromeFrancisvMunicipalCouncillorsof
KualaLumpur,(1962) 1WLR1411 (PC) . 454
JethalalC.Thakkarv R.N. Kapoor, AIR
1956Bom74 356
JethamalMadanlalJokotiavNevatia&Co,
AIR1962AP350 336
JhandoovRameshChandra,AIR 1971
All189 915
JhandooMaiJaganNathvPhulChand
FateshChand,AIR1925Lah217 453
JhariaCoalField Electric Supply Co Ltd v
KaluramAgarwala,AIR 1951 Pat 463 . . . 261
JharnaMajumdarvSuprobhatBhowmick,
(2002)4ICC959(Cal) 328
JibanKrishnaMulhckvNirupamaGupta,
ILR(1926) 53 Cal922. 108
JibrailMianvLaluTuri,AIR2004
Jharl39 219
JindalStainlessLtd vICICIBankingCorpn
Ltd,AIR2005Del 53 627
JitSinghVPiara,(2003)4ICC275(P8cH),. 278
JitendraChandraRoyChowdhuryv S.N.
Banerjee,AIR1943CaI181 444
JiwanLaiv BrijMohanMehra,(1972) 2
SCC757:AIR1973SC559 44
JoachinsonvMeghjeeVailabhdas,ILR
(1910)34Bom292 764
JobsonJohnson,(1989) 1WLR
1026(CA) 534
JodhaMaiKuthaliavAssociatedHotelsof
IndiaLtd,AIR1950Lah106 238
JogabhaivRustomjiNasarvanji,(1885) 9
Bom311 833
JoginderSingh vRegistrarofCoop
Societies,AIR1965J&K39 419
JohnVOrientalKuriesLtd,(1994) 2
KLT353 537
JohnyPhilip, (1987) 2 KLT 50 (SN)..757,790
JohnEdwardsandHenryIsaacs vRobert
BrudenellCarter,1893 AC360(HL)....168
JohnJacobyJosephJoseph,(1990) 1
KLT75 281
JohnMcCainand Co v Pow, (1974) 1WLR
1643(CA) 768
JohnMinasApcarv LouisCairdMatchus,
AIR1939Cal473 218
JohnWestonFoakesJuliaBeer, (1884) LR
9AC605. 444
Johnsonv Agnew,1980AC 367: (1979) 2
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64NWRep1100 749
Johnsonv Pye, (1665) 1 Sid 258:
82ER1091 157
Johnsonv Unisys Ltd, (2001) 2WLR
1076(HL) 491,504
JohnsonMatheyand Co Ltd vConstantine
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Jolly SteelIndustries(P) Ltd vGuptaSteel
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Jones VPadavatton,(1969) 1WLR328 (CA) 12
JonesVVernon'sPools Ltd, (1938) 2 All
ER626 15
JonesandJonesvVillaRamos,
1988CLY1061 525
JoravarmullChampalalfJeygopaldas
Ghanshamdas,AIR1922Mad486 63
Jordonv RamChandraGupta,(1903-1904)
8CalWN831 775
Josez^Joseph,(1993)2KLJ712 367
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81. Joseph VGeorge Moonjely, AIR 1994
Ker289 509
JosephVNationalMagazineCo, 1959
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JosephAbrahamvTahsildarMeenachil,
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JosephConstantineSteamship Line Ltd v
ImperialSmeltingCorpnLtd,1942AC
154(HL) 399,414,415
JosephGeorge vCochinSanitaryWares,
{1991)2KLT447 833
JosephJohnPeter Sandy v VeronicaThomas
Rajkumar,(2013) 3 SCC 801: (2013) 2
see(Civ)332 929
JosephVilangandanv Executive Engineer,
(1978)3SCC36:AIR1978SC930 552
JowandSingh vTirathRam,AIR 1939
Lahl93 642
Jowitt& Sons VUnion Cold Storage Co,
(1913)3 KB 1 700
JoyNarayanSen vSrikanthaRoy,(1921-22)
26CWN206 939
JugalkishorePannalalDarakvUnionof
India,AIR1988Bom377 689
JugalkishoreRampratapjiRathiv
Brijmohan,(1994) 2 BomCR537 658
JuggilalKamlapatvPratapmalRameshwar,
(1978)1SCC69:AIR1978SC389 462
JuggilalKamlapatOilMillsv Union of
India,(1976) 1 SCC 893:AIR1976
SC227 693,694
JugguttIndarNarainRayChowderyv
NistiarineeDassee,(1931) 151IC
981 (PC) 600
JugmohandasVurjiwandasvNusserwanji
JahangirKhambatta,ILR(1901-02)26
Bom744 488
JugrajSingh v Labh Singh, (1995) 2 SCC 31:
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Junius Construction Corpn v Cohen,(1931)
257NY393 216
JupudiVenkataVijayaBhaskarvJupudi
KesavaRao,AIR1994AP134 103
JuteCorpnofIndiaLtd vKonarkJute Ltd,
AIR1986Ori238 632
JwalaPrasadyJwalaBankLtd,AIR1957
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JyotiKrishnaEngineersv StateBankof
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JyotiPrakashNandivMuktiPrakash
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JyotindraBhattacharjeevSonaBalaBora,
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K
K.A.MathaivKoraBibbikutty,(1996) 7
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K.AbdulkhaderState,(1993)2 KLJ977. 372
K. Appa Rao vTungabhadraSteelProducts
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K.B.MachaishvAjjittiraS.Mandanna,AIR
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K.Balakrishnanv K.Kamalam,(2004)1
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K.BasavarajappavTaxRecoveryCommr,
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K.C.SkariavGovtofStateofKerala,
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K.E.Aboobackerv Vasu RP.,2004AIHC
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K.G.Arumughamv K.A.Chinnappan,
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K.G.HiranandanivBharatBarrel&Drum
Mfg Co P Ltd, AIR 1969 Bom 373 522
K.GopalakrishnanvKarunakaran,(2004)
6CTC333(Mad) 741
K.GopalasamyChettyvSelliammanKoil
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K.JagdishwarvSharada,AIR2011
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K.JagdishvifarReddy vAndhraBank,(1988)
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K.K.VermavUnionofIndia,AIR1954
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K.KallaiahvNinegegowda,AIR1982
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K.KasuluVCommission,Endowments
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K.KrishnavA.N.ParamkushaBai,AIR
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K.L.JoharScCovCTO,AIR1965SC
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K.L. Steels Ltd vMaharashtraSEB, (1998) 2
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K.M.Hidayathulla-vBankofIndia,AIR
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K.M.JainaBeevi vM.K.Govindaswami,
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K.M.JoseVD.AnanthaBhat,AIR1987
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K.M.PareethLabhavKeralaLivestock
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K.M.SankaranyDC,(2004)2CTC101..812
K.MadhuvDugarFinanceIndiaLtd,
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K.N.Krishnamurthyv G.K.Sridhar,
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K.P.SubbaramaSastri v K.S.Raghavan,
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540
K.Prakashv B.R.SampathKumar, (2015) 1
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K. ProInfraWorks(P) Ltd v State of
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K.R.KothandarmanvCIT,AIR1967
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K.R.RajaramvState,1999AIHC2585....48
K. RajuVBangaloreDevelopmentAuthority,
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K.RamachandraRaovStateof A.P.,(2005)
2CTC417 (AP FB) 741'
K.S.BakshivState,AIR2008NOC
998 (Del) 105
K.S.NagalambikavCorporationBank, AIR
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K.S.RamachandranvCoopSocieties,AIR
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K.S.SatyanaraynafV.R.NarayanaRao,
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K. SitaVCorporationBank, (1999) 3 An
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K.SoosalrathnamvDivlEngineer,National
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K.T.Venkatagiriv State ofKarnataka,
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K.V.PeriyamiannaMarakkayarand Sons v
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KadambaSugarIndustries(P) Ltd v Devru
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KaikkaraConstructionCovGovtofKerala,
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Kalash Properties (P) Ltd v LillyPushpam,
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KalvaguntaLakshmiNarayana,ILR
(1909) 32Mad185 284,285
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KaliannaGoundervPalaniGounder,(1970)
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KaliaperumalPillai v Visalakshmi, AIR
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KalibakhshSingh v RamGopalSingh,
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KalicharanvAbdulRahman,(1919) 10 LW
34:AIR1918PC226 604
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KallathilSreedharanvKamathPandyala
Prasanna,(1996)6SCC218 894
KalloomalTapeshwariPrasad&Cof
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Kalyan Singh v Ranjot Singh, AIR 2002
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Kalyani Breweries Ltd v State ofW.B.,
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Kalyanji Kuwarji vTirkaramSheolal, AIR
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KalyanjiVithaldas&Sons v State of M.P.,
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KalyanpurLime Works Ltd v State of Bihar,
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KamalRanivChandRam,AIR1980
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KamalSinghDugarvCorporatedEngineers
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KamaleshwariPrasadvGangadharMai,
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KamihSarjinivIndianBank,AIR2008
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83. KammanaSambamurthyvKalipatnapu
Atchutamma,(2011) 11 SCC 153:AIR
2011SC103 860,871,900,902
KampaPrasadvAddlDistrictJudge,
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Kampa Prasad v SheoGopalLai,ILR(1904)
26All342 163
KamrunnisavPramodKumarGupta,AIR
1997MP106 283
KanchusthabamSatyanarayanavNamuduri
Atchutaramayya,(2005) 11 SCC 109: AIR
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KandamathCineEnterprises(P) Ltd vJohn
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Mad99 468
KanhaiyaLaiAgrawalvUnionofIndia,
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Kanhayalal vGirdharilal,(1912) 9 All
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KanhayalalBisandayalBhiwapurkarv
IndarchandjiHamirmaljiSisodia, AIR
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KanigollaLakshamanaRao v Gudimetla
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KannellesvLocke,(1919) 12Ohio
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Kanpur DevelopmentAuthority v Sheela
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KapurchandGodhav MirNavifab
HimayatalikhanAzamjah,AIR 1963 SC
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KarnailSinghRandhawavJagirKaur,
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ShankararaoKulkarni,AIR1977
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KarnatakaElectricityBoard vHalappa,
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KarnatakaStateIndustrialInvestment&
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India,(2005)1 CLT 437:(2004)3CCC
568 (Kant) 606,608
KarnatakaStateIndustrialInvestmentand
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KarnatakaStateKhadiandVillage
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KarsandasH.ThackervSaranEnggCo
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KartickPrasadGoraivNeamiPrasad
Gorai,AIR1998Cal278 186
KaruppayeeAmmalvKaruppiahPillai,
(1987) 2 MLJ 138 179
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KasimAlivNewIndiaInsuranceCo,
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Kasturivlyymaperumal,(2005) 6 SCC 733:
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KateshwarMittalKamathv K.Rangappa
Baliga & Co,AIR1959 SC 781: (1959) 2
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KathuJairamGujar v Vishvanath Ganesh
Javadekar,AIR 1925 Bom 470 284
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KaulashwariDevivNawalKishore,1955
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1WLR578 226,244
KavitaTrehanv Balsara HygieneProducts
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Kay VGroves, (1829) 6 Bing 276:
130ER1287 622
Kay VeeEnterprises v JawaharlalNehru
TechnologicalUniversity, AIR2006NOC
488 (AP):(2006)1 ALD126 55
Kearley vThomson,(1890) LR 24 QBD
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84. LXXXIILawofContract
KedarLaiSeal vHariLaiSeal,AIR1952
SC47:1952SCR179 365
KedarNathv AjudhiaPrasad,1883 Punj
Recl65 171
KedarNathMatanivPrahladRai, AIR
1960SC 213: (1960) 1 SCR 861 266,
267,343
KedarnathBhattacharjiv GorieMahomed,
ILR(1886) 14Cal64 105, 109
KeighleyMaxseted& CofDurant,1901
AC240(HL) :.807,821
KeirVLeeman,(1846)9Qb'371:(1844)6
QB308 281
KelamvPolavampur,191 Cal 746 934
Kelkar&Kelkar vIndianAirlines, (1996) 2
BomCR303 445
KellyVSolari,(1841) 9MScW54:
11 LJEx10 585
Kelner1/Baxter,(1866) LR 2 CP 174 .815,822
Kemble vFarren,(1829) 6 Bing 141 . . 531, 533
Kemp VBaerselman,(1906)2 KB604:
(1906)75 LJ KB 873 (CA) 431
KendallvHamilton,(1879) LR 4 AC
504(HL) 365,816
Kennedyv DeTrafford,1897AC
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KennedyvPanamaNewZealandand
AustralianRoyalMailCo, LR 2 QB 580 . 241
Kennedy Alemas v Executive Engineer,
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KenyonSon&CravenLtdvBarterHoare
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KeppelVWheeler,(1927) 1 KB577 761
Kerala Electric and Allied Engg Co Ltd v
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KeralaFinancialCorpnvVincentPaul,
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KeralaSEB vHindustanConstructionCo
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SC425 581
KeralaSEB vKurienE.Kalathil,(2000)6
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Kerala State Financial Corpn Ltd v C.J.
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KersarimalvGundabathula
Suryanarayanmurthy,AIR1928
Mad1022 725
KeshavlalLallubhaiPatelvLalbhai
TrikumlalMills,AIR1958SC 512:
1959 SCR 213 329,443
KesoramIndustries8cCottonMillsLtdv
CWT,AIR1966SC1370 490-
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KesulalMehtavRajasthanTribal Areas
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Key Pee Buildtech (P) Ltd vShahjahan
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KhairMohdKhanv S.Eramani,(1998) 4
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KhanduCharanPolley vChanchala
Bhuinp,AIR2003Cal213 203
KharbujaKuer vJangbahadurRai, AIR
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KhardahCo Ltd vRaymon8c Co (India) (P)
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KhatoohBiviAmmalvArulappaNadar,
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KhatunBibi vAbdullah,ILR(1880)3All9 642
KhawazaBux vMirzaMohammadIsmail,
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KhazanSingh vRallaRam,AIR1937
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KhedutSahakariGinning 8c Pressing
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KhemchandManekchandv Dayaldas
Bassarmal,AIR1942Sind 114 292
KhetrapalAmarnathvMadhukarPictures,
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KhilaDhish vMoolChand,(1969) 3
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Khimji Kuveriji Shah vLaljiKaramsi
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Khiria Devi v Rameshwar Sao, 1992 Supp
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KhivrajChordiav EssoStandardEastern
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KhoobiramvUrmillaChauhan,AIR 2010
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Khub Singh vJahanLai,12 CPCR 13 934
KhubchandvBeram,ILR(1888) 13
Bom150 272
KhursheedAlamv AsaRam,AIR 1933
Lah784 774
KidderMinisterCorpn vHardwick,(1873)
LR9Exchl3 823
KilburnEngg Ltd vONGCLtd, AIR2000
Bom405 46
KimtuVLachhiDevi,1999AIHC
2533(HP) 174
King'sNortonMetal Co Ltd v Edridge,
Merrett8c CoLTD,(1897) 14TLR98 . . .230
KingswforthTrustLtd v Bell, (1986) 1
WLR119 191
KinkarSantanandaSanyasi vSBI,AIR2002
Ori114 600
KirloskarPneumaticCo Ltd vNTPCLtd,
AIR1987Bom 308 629, 635
ICirorilal v State ofM.R,AIR 1977 Raj 101 572https://t.me/LawCollegeNotes_Stuffs

85. KirpaRamvSami-ud-dinAhmadKhan,
ILR(1901-03)25 All284 188
KisendasvDhondu,ILR(1920)44
Bom542 271
KishanLaivRadheyShyam, AIR2002
All271 958
KishanLaiKalravNDMC,AIR2001Del
402:(2001)92DLT67 179
KishangarhMunicipalityvMaharaja
KishangarhMillsLtd, AIR 1961 Raj 6...420
KishanlalvBhanwarLai,AIR1954SC
500(1955) 340,781
KishanlalPanchvStateofOrissa,AIR2010
NOC535 (Ori) 573
Kishni Devi vStateofRajasthan,AIR1992
Raj 24 830
KishoriPrasadvAddlDisttJudge, AIR
2003All58 931
KishunDas vGaneshRam,AIR1950
Pat481 780
KlausMittelbachertvEastIndiaHotelsLtd,
AIR1997Del201 122
KleinertvAbossoGoldMiningCo, (1913)
59SolJo 45 373
KleinwartBensonLtd vMalaysiaMining
Corpn,(1988) 1WLR799 (CA) 14
KnottBotton,(1995)45ConLR127....508
Ko Pa Tu VAzimulla,AIR 1940 Rang 73 . . 280
KochappuVSomasundaramChettiar,
(1991) 1 KLJ525 383
KochavareedvMariappa,AIR 1950 TC 10 253
KochuDevasseyvStateofKerala,AIR1982
KerLR180 572
Koegler vCoringaOil Co Ltd, ILR (1876) 1
Cal466 315,325
KofiSunkersetteObuvA.Strauss&Co
Ltd,1951 AC 243 (PC) 774
KoUmiPeddaSamasHussainSahebv
GowdaraRajasekharaGowd,AIR2006
NOC511 (AP) 527
KolliparaSriramuluv T.Aswathanarayana,
AIR1968SC1028:(1968)3SCR387..333,
44
KommineniSeetharamaiahv K.Punnaiah,
1996AIHC4384(AP) 263
KonarkUthasnagarMunicipalCorpnv
Commr,UthasnagarMC,(2003)2 Bom
CR838 39
KondayyaChettivNarasimhaluChetti,ILR
(1897) 20Mad97 (1893) 834
KondepuElukkoruRaghavayyav
Vasudevayya,AIR1944Mad47 320
KongYeeLone8c CofLowjeeNanjee,
(1900-01)28lA239;ILR(1902)29
Cal461 339,340
Kores Mfg Co Ltd vKolokMfg Co Ltd,
1959Ch108:(1958)2WLR858 (CA)..301,
312
TableofCasesLXXXIII
KotaCentral Coop BankLtd vDistrict
Legal ServiceAuthority,AIR2016Raj 1 . 791
KotaSatyanarayanavQamarunnisaBegum,
AIR2003AP63 907
KotakMahindraBankLtd vChopra
Fabricator8cMfr.PLtd,AIR2011
A1119 279
KotakMahindraFinanceLtdvT.Thomas
EducationTrust,(2003)5BomCR579. .320
KoteswarVittalKamathvK.R.Baliga8c
Co,(1969)1see255:AIR1969SC504.343
KotharajuNarayanaRaovTekumalla
RamachandraRao,AIR1959AP370...344
KovuruKalappaDevaravKumarKrishna
Mitter,ILR1945Mad521:AIR1945
Mad10 334
KowtaSubrahmanyaSastryvKowta
Chandramouli,AIR2014NOC
309(AP) :..930
KoylashChunderDoss vTarineyChurn
Singhee,ILR(1884)10Cal588 43
KpohrarorvWoolwithBuilding Society,
(1996) 4 All ER199(CA) 514
KrellVHenry,(1903) 2 KB 740 (CA)....392,
402,424
KrishnavAkilanda,.ILR(1889) 13Mad54 848
KrishnaScCovGovtofA.P.,AIR1993
API 477
KrishnaChandraDuttaRoy vHemaja
SankarNandi,(1917-18)22CWN463. .132
KrishnaChandraGanpativ K.Hanumantha
Rao,AIR1950Ori241 760
KrishnaD. Singh vPavanT.Punjabi,(2004)
1BomCR551 482
KrishnaElectricalIndustries(P)LtdvSBI,
AIR1996MP188 624
KrishnaKishoreKarvUnitedCommercial
Bank,AIR1982Cal62 703
KrishnaKumarvElectricalEngineer,(1979)
4see289:AIR1979SC1912 823
KrishnaLaiSadhuvPromilaBalaDasi,
AIR1928Cal518:ILR(1928)55
Cal1315 118,119
KrishnaMohanKulvPratimaMaity,
(2004) 9see468: AIR2003SC 4351...186
KrishnaPillaiRajasekharanNairv
PadmanabhaPillai,(2004)12SCC754:
(2004)2ICC89 563
KrishnaPrasadv ShyamNarayanPrasad,
AIR2006Sikk25 176
KrishnaRamMahalevShobhaVenkatRao,
(1989)4SCC131:AIR1989SC2097...958
KrishnaWantiLie,AIR2000Del 63...219
KrishnamoorthyvSivakumar,(2009) 3
CTC446 182
KrishnamurthyGounderv
Venkatakrishnan,AIR2012Mad105 . . . 918
KrishnaraovShankar,1954SCCOnLine
Bom61:ILR1954Bom1409 300https://t.me/LawCollegeNotes_Stuffs

86. LXXXIVLawofContract
KrishnaveniConstructionsvExecutive
Engineer,PanchayatRaj,Darsi,AIR1995
AP362 46
KshirodebihariDuttavMangobindaPanda,
ILR(1934) 61Cal841:AIR1934
Cal682 119,121,123
KubernathvMohateRam,ILR(1912) 26
ILRAll587 302
KuchwarLime8cStoneCovDehriRohtas
LightRlyand Co Ltd, AIR1969SC 193:
(1969)1SCR350 738
KuddusVChiefConstableofLeicestershire
Constabulary,(2002) 2 AC122;(2001) 2
WLR1789(HL) 506
KudremukhIronOreCoLtdvKorula
RubberCo(P)Ltd,AIR1987Kant139. .635
KujuCollieriesLtd vJharkhandMinesLtd,
(1974)2see533:AIR1974
SC1892 276,420,421
KukkalaBalakrishnav Vijaya OilMills,
AIR2009NOC648(AP) 959
KulasekaraperumalvPathakutty
Thalavanar,AIR1961Mad405:
(1916) 74LW16(Mad) 129,130
KuldipGandotravShailendraNathEndlay,
AIR2007Dell 384
KuldipGandotrav Union ofIndia,(2005)
125DLT5(DB) 61
Kuldip Singh v SubhashChanderJain,
(2000)4see50:AIR2000SC1410....955
KuljaIndustries. Ltd v Western Telecom
ProjectBSNL,(2014)14SCC731:
(2013)6ALD142 57
Kuluwat/Punia,1995AIHC8 All 218
KumarDhirendraMullickvTivoliPark
Apartments(P) Ltd, (2005) 9 SCC 262...924
KumarNathBhattacharjeevNoboKumar,
ILR26Cal241 596
KumarivStateofT.N.,(1992) 2 SCC223:
AIR1992SC2069 509
KumariAnandanv T.BalamukundaRao,
AIR2002Mad472 855
KumariDevi vNoorMohammadMian,
AIR2002Pat132 938
KumariShahnoorMdTahssenvStateof
U.P.,AIR2007NOC437(All):(2007)1
All LJ 185 167
Kumud Agarwalla v FertilizerCorpnof
IndiaLtd,AIR1985Cal89 320
KunbiSahakariBank Ltd vShaktiPaper Co,
(2009)1MahLJ 696 645
KundanBibi v ShreeNarayan,(1906) 11
CWN135 169
Kunjannammav Kerala FisheriesCorpn,
1986KLT37 625
Kunjukrishnanv State ofKerala,AIR 1983
Ker73 65
KunjuvarecthvUnionofIndia,(1991) 1
KLT49(SN) 661
KunwarSinghRawatvStateofUttaranchal,
AIR2007NOC1789(Utt) 359
KunwarlalDaryavSingh vSurajmal
Makhanlal,AIR1963MP58 171
KurnoolChiefFunds(P)Ltdv P.
Narasimha,AIR2008AP 38 615
KusaParidavBaishnabMalik,AIR1966
0ri60 741
KuttappaVStateofKerala,(1988) 2
KLT54 683
KuttikrishnanNairv AppaNair,ILR (1926)
49Mad900:AIR1926Mad1213 816
Kwong YikFinancevMutualEndeavour,
(1989) 1MaiLJ 135 (HC KualaLumpur). 613
L
L.C.DeSouza,re,AIR1932All 374 742
L. French6cCo Ltd v Leeston Shipping Co
Ltd,(1922)1 AC,451 828
L.N.GuptaVTaraMani,AIR1984Del 49 370
L.T. Societa vLakshminarayanan,AIR 1959
Cal669 321
L'Estrangev F.GraucobLtd, (1934) 2
KB394 69,75
L8cTFinanceLtd v AnupKumarBera, AIR
2014Cal78 943
LaBanqueJacques-Cartierv LaBanque
d'Epargne,(1887) LR 13 AC 111 (PC)...822
LachmiNarainv Bombay,Baroda&c
CentralIndiaRly Co, ILR (1923) 45
All235 676
LadliPrasadJaiswalvKarnalDistilleryCo
Ltd,AIR1963SC1279:(1964)1
SCR270 191
LagunasNitrateCo vLagunasSyndicate,
(1899) 2 Ch392(CA) 223
LakeSimmon,1927AC487(HL) 231
LakhajivMahadeo,AIR 1938 Bom 101 . . . 683
LakhanSao vParwatiDevi,AIR2010
NOC1112(Pat) 946
LakhiRam RamDass vHarPrasadSyal,
(1972)3SCC337:AIR1971SC1956...611
LakhmiChandvChotooram,ILR(1900) 24
Bom403 835
LakhwinderSingh vParamjitKaur,AIR
2004PScH6:(2004)1ICC151 154
Lakshmammav P.K.Jayachandra,AIR
2015NOC1037(Kar) 913
LakshmanaswamiMudaliarvLIC,AIR
1963 SC 1185,1190:1963 Supp (2)
SCR887 109
LakshmivKaruppathal,AIR2011
Bom192 849
LakshmiAmma vAyyappan,(2003)3
KLT577 379https://t.me/LawCollegeNotes_Stuffs

87. LakshmiAmma vTalengalanarayana,
(1970)3see159:AIR1970
Se1367 190,192
Lakshmi Doss v RoopLaul,ILR(1906-08)
30Mad169 183
LakshmiNarainBaijinathv Secy of State for
India,(1922-23)27CWN1017 683
LakshmiNarainBanerjee v TaraProsonna
Banerjee,ILR(1904) 31Cal944 962
LakshmiVilasBankLtdvShreechakra
Enterprises,AIR2003Mad1 621
Lakshmidasv Megh Raj, (1900) Punj Rec
No90,p. 371 686
LakshmikantMaharanav State ofOrissa,
AIR20120ri4 953
LakshminarayanRamGopal8c Sons Ltd
VGovtofHyderabad,AIR1954SC 364:
(1955) 1SCR393 742
LaiChandvChandigarhAdmn, AIR 1992
P&H194 548
LalaBansidharv Govt of Bengal, (1872) 9
BengLR364:14MIA86 639
LalbhaiDalpatbhaiScCovChittaranjan
ChandulalPandya, AIR1966Guj 189 . . .307
LalitKumar Jain v Jaipur Traders Corpn (P)
Ltd, (2002) 5sec383 907,931
LahtMohanvHaridas,(1916) 24 Cal
LJ335 716
LallanPrasadvRahmatAli,AIR1967SC
1322:(1967)2SCR233 714,717,
719,723,727
LalljeeMahommadvDadabhaiJivanji
Guzadar,AIR1916Cal964 837
LalluYeshwant Singh v RaoJagdishSingh,
AIR1968se620:(1968)2SCR203....847
LalmanShuklavGauriDatt,(1913) 11
All LJ 489 10,17
LaltaPrasadyJagarNathSingh,ILR1909
All21 163
LamdonTrustLtdvHurrel,(1955) 1
WLR391 532
LampleighvBrathwait,Hob106:
80ER255 125,127
LamplughIron Ore Co, Ltd, re, (1927) 1
Ch308 657
LancashireLoansvBlack,(1934)1 KB
380(CA) 186
LancoConstructionsLtdvGovtofA.P.,
AIR1999AP371 51
LandAcquisitionOfficervMekalaPandu,
(2004)3CTC19 278
LamervLCC,(1949)2 KB683(CA) 586
Larsen&cTubroLtdvMaharashtraSEB,
(1995)6see68:AIR1996SC334.627,629
LasalgaonMerchantsCoopBankLtd v
PrabhudasHathibhai,AIR1966
Bom134 675
-TableofCasesLXXXV
LataConstructionvRarrieshchandra
Ramniklal,(2000)1SCC586:AIR2000
SC380 433,436
LatafatunnissavShaharbanuBegam, AIR
1932Oudh108 290
LatchfordvBeirne,(1981) 3 All ER 705...655
LateefaBegum v B.G.Kirloskar,(2005) 11
SCC515 794
LatifEstate LineIndiaLtd vHadeeja
Ammal,AIR2011Mad66 932
LatifJahanBegam vMohdNabiKhan,AIR
1932All174 133
LaurielyScholefield,(1869) LR 4 CP622..638
LavinderKumarSharmavPramodKumar,
AIR2011P&H30 917
LaxmanvGanpat,2NagLR 4 928
LaxmanHaraklalv UkhajiZingaMahajan,
AIR2011Bom159 919
LaxmanLahanujiLende vHarichand
DomajiKuiharkar,(2006)3 Bom CR 864
(NagBench) 267
LaxmanTatyabaKankatevTaramati
HarishchandraDhatrak,(2010) 7 SCC
717:AIR2010SC3025 885
LaxmiGinning&OilMillsvAmrit
BanaspatiCo Ltd, AIR1962Punj 56....737
Le Blanche L&NWRlyCo, (1876) LR 1
CPD286 525
LeafVInternationalGallories,(1950) 2 KB
85 (CA) 253
LeaseManagementServicesLtdvPurnell
SecretarialServicesLtd,(1994) 13 Tr LR
337(CA) 94
LeatherClothCo vLorsont,(1869) LR 9 Eq
345, 354: 39 LJ Ch 86 291
LeduCoachmanvHiralalBose,(1914-15)
19CWN919:(1915)29IC625 280
LeeVMuggeridge,(1813) 128 ER 599....103
Leet/Walker,(1872) LR 7 CP 121 760
Lee (John) & Sons(Grantham)Ltd v
RailwayExecutive,(1949) 2 All ER
581 (CA) 86,93
LeeCooperLtd vC.H.Jeakins&Sons Ltd,
(1967)2QB1:(1965)3WLR753 685
LeedsIndustrialCoopSocietyLtd v Slack,
1924AC851(HL) 964
LeelaHotelsLtd vHousing&Urban
DevelopmentCorpnLtd, (2012) 1
see302 427
LeggVEvans,(1840)151ER311 700
LeicestershireCountryCouncilvMichael
Faraday&PartnersLtd, (1941) 2 KB 205 743
LeisureComplexvMalaysiaCredit
FinanceBerhad,(1994) 1CurrentLJ 185
(Malaysia) 328
LekhRaj vStateofRajasthan,(1987) 1 Raj
LR661 Ill
LemendaTradingCo Ltd vAfricanMiddle
EastPetroleumCo Ltd,1988QB 448....277https://t.me/LawCollegeNotes_Stuffs

88. LXXXVILawofContract
Leslie (R)LtdvSheill,(1914) 3 KB
607(CA) 157,158,159,161,162
LevervKoffler,(1901) 1 Ch 543 874
LevettVBarclaysBankpic,(1995) 1
WLR1260 608
Levison vPatentSteamCarpetCleaningCo
Ltd,1978QB 69:(1977)3WLR
90 (CA) 84,93
LewisVAveray, (1972) 1 QB 109: (1971) 3
WLR603(CA) 232
LewisVBond,(1853)52ER34:
18Beav85 874
Lewis VNicholson,(1852) 18 QB 503 812
LibertySales Services vJakkiMull 8c Sons,
1997AIHC2368(Del) 738
Liez/Annamma,(1999)3 KLT 142 27
LieV B.KusumaT.Rai,(1989)1Kant
LJ52 214
LieVBeni Bai, (1998) 2BC157(MP)(DB) .206
LieVBrazinhaD'Souza,AIR1995
Bom223 26
LieVConsumerEducationandResearch
Centre,(1995)5SCC482;AIR1995
Sei811 69,192
LieVEscortsLtd,(1986)1SCC264:
AIR1986SC1370 716,732
LieVK.RamaIyer,2004AIRKant594:
(2004)1KantLJ216(DB) 796,806
LieVMachilipatnamVankadaru
Koteswaramma,AIR2003AP153 40
LieVMukeshDevi,AIR2002Raj404...806
LieVNandaraniDassi,AIR1970Cal20 0199
LieVPrasannaDevaraj,AIR1995
Ker88 26
LieVRajivKumarBhaskar,(2005) 6 SCC
188:AIR2005SC3087:(2005)126
CompCas 809 796,797
LieVS.Sindhu,(2006)5SCC258:AIR
2006SC2366 593
LieVVasireddyKomalavalliKamba,(198-^
2SCC719:AIR1984SC1014 W.26
LieyVenkadaruKoteswaramma,(2003)1
Bankmann152 26
LiesboschDredgervSSEdison,
1933AC449 761
Lilleyt/Doubleday,(1881)LR7QBDh0.758
Lilly,Wilson8c Co v Smales,Eeles8c Co,
(1892)1 QB456 813
LilyWhitevMunuswami,AIR1966
Mad13 93
LimaLeitao8c CoLtdvUnionofIndia,
AIR1968Goa29 601
Linck,Mocller8c CofJameson8c Co,
(1885)2TLR206(eA) 790
ListonVOwnersCarpathian,(1915) 2
KB42 136
LiverpoolHouseholdStores Assn, re, (1890)
59Ljeh616 740
LiverpoolMortgageInsuranceCo's,re,
(1914) 2 Ch 617 (CA) 596
LlanellyRly8c Dock Co vLondonand
NorthWesternRlyCo,(1875) LR 7
HL550 828
LloydVGrace Smith 8c Co, 1912 AC
716(HL) 805
LloydVStanbury,(1971) 1WLR535 501
LloydsfHarper,(1880) LR 16 Ch D 290..639
LloydsBankvBundy, (1975) 1 QB326....192
Lloyds Bank Ltd vAdministrator-General
ofBurma,(1934) 12Rang25:AIR1934
Rang66 702
Lloyds SteelIndustriesLtd vIndianOil
CorpnLtd, AIR 1999 Del 248 633, 645.
Lloyds SteelIndustriesLtd v Oil 8c
NaturalGasCorpnLtd,AIR1997
Bom337 435,445
LohiaTradingCo vCentralBank ofIndia,
AIR1978Cal468 579
LombardFinanceLtd vBrookplainTrading
Ltd,(1991)1WLR271 (CA) 646
London8cNorthernEstatesCov
Schlesinger,(1916) 1 KB 20 411
LondonGeneralOmnibusCo vHolloway,
(1912)2 KB 72 (CA) 607
LondonJointStockBankvSimmons,1892
AC201(HL) 780
LongVLloyd, (1958) 1WLR753 (CA)....220
LoonKaranSohanLaivJohn8c Co,
AIR1967All308 737,738
LoonkaranSethiya vIvonE.John,
(1977)1see379:AIR1977
SC336 448,833
LotusConstructionsvGovtofA.P.,
AIR1997AP200 45
LourduMariDavidvLouisChinnaya
Arogiaswamy,(1996) 5 SCC 589:
AIR1996SC2814 894
LovellandChristmasvWall,(1911)104
LT88 246
LoweVPeers,(1768)4Burr2225 290
Lubrizol(India)LtdvLubrizolCorpn,USA,
(1998)2BomCR210 7
LucasVDorrein,(1817) 7Taunt278:129
ER112 702
LuckmidasKhimjivPurshotamHaridas,
ILR(1882)6Bom700 366
LucknowAutomobilesvReplacementParts
Co,AIR1940Oudh443 388
LumleyvWagner,(1852) 1 DeGM
8c G604 454,956
LuxmiNarayanArjundasvSBI,AIR1969
' Pat 385 726
Luxor(Eastbourne)Ltd vCooper,1941 AC
108(HL) 776
LyellVGangaDai,ILR(1875-1880)1
All60 680https://t.me/LawCollegeNotes_Stuffs

89. M
'M'anAdvocate,re,AIR1957SC 149:
1956SCR811 708
M 6c SDrapers(firm) vReynolds,(1957) 1
WLR9 312
M.A.JabbarvLICHouse Building
Employees Society,(2000)1 An LT 385 . . 265
M.B.T. CoMadrasv A.N. Rao, (1968) 1 An
WR424 321
M.C.Chackov State Bank ofTravancore,
(1969) 2see343;AIR1970SC504...119,
120
M.D.RajanvI.T.C.Ltd,(1985) 2
MLJ372 523
M.EswarivMSTCLtd,AIR2014
Mad182 544
M.G.BrosLorryServicevPrasadTextiles,
(1983) 3see61:AIR1984SC 15 259,
266,319
M.GulamHusainKhan v M. FaiyazAli
Khan,AIR1940Oudh346 • 604
M.HariNarayanav P.SwaroopaRani,
AIR2009NOe257(AP) 959
M.Hassanji& Sons vStateofM.P.,AIR
1965Se470: 1963 Supp (2) SCR 235...216
M.JayaRaovM.KrishnaRao,AIR2012
AP34 899
M.JohnKotaiahv A.Divakar,AIR1985
AP30 834
M.K.MakboolKhanvShamsunisa,AIR
2002 NOC 87(Kant)..! 881
M.K.UsmanKoya v C.S.Santha,AIR2003
Ker191;(2003)3CLT12 274, 275,
290,864,875
M.K.WattsVUshaSharma,AIR2004
P&:H295 383
M.Kamalakannanv M.Manikanndan,
(2011)4CTC139 359
M.KarunnakaraKurup vVaniyarambath
LakshmikuttyAmma,1984KLT
83 (SN) 190
M.LachiaSetty& Sons Ltd v CoffeeBoard,
(1980)4see636:AIR1981SC162....65,
488,525
M.M.HussainvLaminatedPackageP Ltd,
(1999)6AndhLT529 133
M.M.T.C.LtdVS.MohamedGani,AIR
2002Mad378 539
M.M.T.C.LtdVSineximco(P)Ltd,(2006)
135DLT629 537
M.MeenakshivMetadinAgarwal,(2006)7
sec470 899
M.MohammadAslamvC.N.A.
Gowthaman,AIR2003Mad248...923,927
M.P.HousingBoardvStateofM.P.,AIR
2014MP1 946
TableofCasesLXXXVII
M.P.M.MurugappaChettivOfficial
Assignee ofMadras,(1936-37)64lA343:
AIR1937PC296 823
M.P.MinesLtdvRaiBahadurShriram
DurgaPrasad(P) Ltd, (1972) 3SCC180:
AIR1971SC1983 ,..459,477
M.PalanisamyvValmoorty,AIR 2010
NOC557(Mad) 919
M. PogoseVBank of Bengal,ILR(1877) 3
Call74 637
M.R.BalakrishnanvGovtofKarnataka,
AIR2010NOC1063(Kant) 254
M.R.ChakrapanilyengarvCanaraBank,
AIR1997Kant216 654
M.R.DhawanvMadanMohan,AIR1969
Del313 728
M.RamalingamvSubramanyam,AIR2003
Mad305 859
M.RamiahPillai v P.A.Sankaranarayana
Iyer,AIR1958 Ker246:1958KLJ 253...132
M.Ramnarain(P) Ltd vStateTrading
CorpnofIndia,AIR1988Bom 45 662
M.RangasamyvRengammal,(2003) 7 SCC
683:AIR2003SC3120 191
M.RathnamvSusheelamma,AIR2009
Kant79 252
M.S.AnirudhanvThomco'sBankLtd,AIR
1963SC746:(1963)1SCR63:(1963)33
CompCas185 448,642
M.S.Desai&CofHindustanPetroleum
CorpnLtd, AIR1987Guj 19 488, 828
M.S.MadhusoodhananvKeralaKaumudi
PLtd,(2004)9 SCC204:AIR2004
SC909 154,328,
859,883,960
M.ShamSingh v State ofMysore,(1973) 2
See303:AIR1972SC2440 441,
443,592
M.Siddalingappav T.Nataraj,AIR1970
Mys154 93
M.V.A1QuamarvTsavlirisSalvage
(International)Ltd,(2000)8 SCC278:
AIR2000SC2826 709
M.V.PremaChandravSarojamma,AIR
2015Karl 910
M.V.ShantanarasimhaiahvDenaBank,
(2002)2KantLJ255:(2002)2ICC260
(Kant) 644
M.VeerabhadraRaovUnionofIndia,
(1985)1ATC207(AP) 684
M.VenkataramanaiahvMargadarsiChit
Funds,AIR2009NOC940(AP) 650
M.VenicateshvKishoreJataram,(1999)2
KantLJ535 421
MaHnitvFatimaBibi,(1926-27)54lA
145 (PC) 154
MaPwaKywevMaungHmatGyi,AIR
1939Rang86 167https://t.me/LawCollegeNotes_Stuffs

90. LXXXVIIILawofContract
MaYwestvChinMutualLifeInsuranceCo
Ltd,91IC622 316
Maa Binda Express Carrier vNorth-East
FrontierRailway,(2014) 3 SCC 760 49
MacclesfieldCorpn v Great CentralRlyCo,
(1911) 2 KB528(CA) 584
MachaimanvUsmanBeari,(1907)17
MLJ78 174
MaclvervAmericanMotors,(1976)70DLR
(3d) 473 331
MackayvCommercialBank of New
Brunswick,(1874) LR 5 PC 94 802
MackayvKameshwarSingh,(1931-32)59
lA398:AIR1932PC196 488,497
MackenzievStriramiah,ILR(1890) 8
Mad472 303
MackenzieLyall&Cot/ChamraooSingh 6c
Co, ILR(1889-90)16Cal702 42
MackertichvNoboCoomarRoy,ILR
(1903) 30Cal477 457
MackillicanvCompagnieDesMessageries
MaritimesdeFrance,ILR(1881) 6
Cal227 72
MackinnoninNingawwavByrappa
ShiddappaHirekurabar,AIR1968SC
956: (1968) 2 SCR797 250
MackinnonMackenzie&cCovLang,Moir
&Co,ILR(1881) 5Bom584 812,814
Macleodt/Kerr,1965SLT358 231
MadanGopalJajoo v Union ofIndia,AIR
1992Del253 630
MadanJenavSaraswatiJena,AIR2003
Oril4 954
MadanLaiSobe vRajasthanStateIndustrial
Development&InvestmentCorpnLtd,
(2006)135 DLT554 604
MadanlalDhariwalvBherulal,AIR1965
Mys272 741
MaddasaniVenkataNarasaiahvMuddasani
Sarojana,AIR2016SC2250 850
MadeshwaraCargoMoversvHindustan
CocoaProductsLtd,(1993)2Bom
CR154 488
MadhabanandaNayakvStateofOrissa,
AIR1998Oril 828
MadhadevGangaPrasadvGouriShankar
Sanganaria,ILR(1949) 1Cut453:AIR
1950Ori42 817
MadhoSahvSitaramSah,AIR1962
Pat405 609
MadhoSingh vAbdulQaiyumKhan,AIR
1950All505 962
MadholalSindhu v Official Assignee of
Bombay, AIR 1950 FC 21 725
MadhuVermavUrmilaDevi,AIR2011
Pat46 895
MadhubChanderv RajCoomar,(1874) 14
BengLR76 291
MadhukarbhaiTrambaklalShahthro
VSterlingBhopalCityCoopHousing
Society, AIR2009NOC262 (Guj) 850
MadhusudanSenvRakhalChandraDas
Basak,AIR 1916 Cal 698 830
MadrasOfficial Assignee vMercantileBank
oflndiaLtd,1935AC53 715
MadrasRailway Co vGovindaRau, ILR
(1898) 21Mad172 478,75,72
MadrasRly Co vRust,ILR(1890) 4
Mad18 307
MaduraMunicipalityv K.Alagirisami
Naidu,AIR 1939Mad957 825
MafatlalIndustriesLtdvUnionofIndia,
(1997)5 SCC536 577
MafizuddinKhanChowdhuryvHabibuddin
Sheikh,AIR1957Cal 336 259
MaganlalKishordasShah vRamanlal
HiralalShah,1942SCCOnLineBom 151:
AIR1943Bom362 169
Magee v PennineInsuranceCo Ltd, (1969) 2
QB 507: (1969) 2WLR1278 (CA) . . 241,244
MagnumFilms v GolchaProperties(P) Ltd,
AIR1984Del162 437,457
MahabirAutoStores vIndianOilCorpn,
(1990)3 SCC 752:AIR1990SC 1031 .56,95
MahabirKishorevStateofM.P.,(1989) 4
SCC1:AIR1990SC313 576
MahabirPrasadJainv Ganga Singh, (1999)
8SCC274:AIR1999SC3873 795,907
MahabirPrasadRungtavDurgaDatt,AIR
1961SC990:(1961) 3SCR639 379
MahabirShum Sher v LloydsBank,AIR
1968Cal371 601
MahadeoNathujiPatilvSurjabai
KhushalchandLakkad,(1994)Mah
LJ 1145 351
MahadeoProsadShawvCalcuttaDyeing&
CleaningCo, AIR 1961 Cal 70 413
MahajanChit Fund and Finance (P) Ltd v
PunjabandSindBank,(2003) 5 ALD 75 .704
MahalingaNadarvGanapathiSubbien,ILR
(1903-1905)27Mad528 722
MahantSinght/U Ba Yi,(1938-39)66lA
198:AIR1939PC410:(1939)181IC1 . .652
MahanthRamasisDasvNoorMdMian,
AIR2012Pat67 930
MaharajaofBenaresvHarNarainSingh,
ILR(1906-1907)28 All 25 609
MaharamAliv AyshaKhatun,(1914-15)
19CWN1226 290
MaharanaShriJarvatSinghji v Secy ofState
forIndia,ILR188914Bom299 597
MaharashtraSEE vOfficialLiquidator,
(1982)3SCC358:AIR1982
SC1497 625,648
MaharashtraSEBvSterliteIndustries
(India)Ltd,AIR2000Bom204:(2000)2
MahLJ 181 485https://t.me/LawCollegeNotes_Stuffs

91. MaharashtraSEB vSterliteIndustries
(India), (2001) 8 SCC 482: (2002) 1 Bom
CR 415: (2002)1ICC178 497,530
MaharashtraState Coop Bank Ltd v Astt.
ProvidentFundCommr,(2009) 10 ,
SCC123 725
MaharashtraState Financial Corpnf
MagnaElastomericRollers (P) Ltd,2005
SCCOnLineBom 227:(2005)4Bofn-
CR661 ....63.6
MaharashtraStateHandloomCorpn Ltd
fAssn ofCorpn&Apex Societies of
Handlooms,AIR2006NOC1185(Del)'631
MaharashtraState RoadDevelopment-
-CorpnVLarsen8cToubrbLtd,(2004)5
BomCR186..........,.'..........323
Mahavir Ice&Cold Storage LtdfSrnall
IndustriesDevelopmentBank ofIndia,
AIR2009NOC1218(OriDB)! iS8
MahavirKhandsariSugar Mill1/1
MaharashtraSEB,AIR1993Bom279...554
MahavirSingh v State ofHaryana,(2005)4'
ICC47(P&H) 197
MahboobKhanvHakimAbdulRahim,
AIR 1964 Raj 250 181
MahendraNathMukherjeev JogendraNath
RoyChaudhury,(1897-98) 2CWN260 . 246
MahendraPratap Singh v Padam Kumari
Devi,AIR1993All 143 741
MaheshChandravZilaPanchayat
Mainpuri,AIR 1997 All 248 4
MaheshChandraDwivediv State of UP,
AIR2009NOC205(All) 275
MahewsvBaxter,(1873) LR 8 Exch 132 . . 173
MahfobzAhmedvNeelmani,AIR2010
MP165 924
MahilaSewaSahakariBankLtdvChief
"PostMaster,AIR2007Guj 72 580
Mahkutai,The,1996AC 650: (1996) 3
WLR1 (PC) 712
Mahmud-Un-NissavBarkatUllah,AIR
1927All44.., 788
MahomedSyedol Ariffin v Yeoh OoiGark,
(1915-16)43lA256:AIR1916PC242..159
MahomedalliIbrahimji vLakshmibaiAnant
Palande,AIR1930Bom122 .649
MakImpexChemicals(P) Ltd vUnionof
India,(2003)3 BomCR440 625
MakhanLaiHarnarainvKaramchand
thaper8cBros(P)Ltd,AIR2004
Jharl43 652
MakinvWatkinson,(1870) LR 6
.Exch25 438
MakkalaNarsimluvGunnala
RaghunandanRao, AIR1977AP 374...551
MalapaliMunaswamyNaiduv P.Suraathi,
(2004)13SCC364 894
MalayanUnitedBankvStraitsCentral
Agencies(Sarwak),(1990) 2 MLJ254...617
TableofCasesLXXXIX
MaleVenkatesv\^arluv State Bank ofIndia,
AIR2006NOC508(AP):(2005)5Andh
LD62 644
MalikVBankofCreditandCommerce
International,1998AC 20: (1997) 3WLR
95(HL) 507,523
MalikarjunappaBasavalihgappaMamie
Desai vSiddalingappa,(1973) 3 SCC 180:
AIR1973SC190 407
MalireddyButhiramannaDonavDasari
VeerabhadraRao,AIR2012AP 52 885
MalladiSeetharamaSastryvNaganath
Kawlivjrar 8cSons,AIR1968AP 315....261
MallalieuvHodgson,(1851) 16 QB 689...267
MallavarapuSuryanarayanaMurthyv
BuddarajuSuryanarayanaRaju, AIR1982
AP313 540
MallozziVCarapelli,(1976) 1 Lloyd's Rep
407(CA) 331
MalrajuLakshmiVenhayyammafVenkata
NarasimhaAppaRao,(1915-16)43
IA138 19,28
MaluKhanv State ofRajasthan,(1989) 1
RajLR890 50
MalukchandvShamMohan,ILR(1890) 14
Bom590 787
MalwaUnitedMillsLtdvCIT,AIR1966
SC1466:(1966)2SCR651 736
MamataGhosevUnitedIndustrialBank
Ltd,AIR1987Cal280 658
MamchandvChajuram8c Sons, (1937) 169
IC827 763
MamtaDrinksandIndustriesvUnionof
India,(1990) 70CutLT 423 576,577
ManIndustriesIndiaLtdvKharote
Engineers8cContractors,AIR2005
Bom311 627
ManKaurvHartarSinghSangha,(2010) 10
SCC512 388,860
ManSingh vKhazanSingh, AIR 1961
Raj277 405
ManaliSinghal v RaviSinghal,AIR 1999
Del156 148
ManapragadaKrishnaMurthyv Savani
Transport(P) Ltd,AIR2006AP 78 178
MancharanvPranShanker,ILR(1882)6
Bom298 280
ManchesterDiocesanCouncilforEducation
VCommercialandGeneralInvestmentLtd,
(1970)1WLR2041 58
ManchubhaivJohnH.Tod,ILR(1896) 20
Bom633 773
MandakiniPundalikSalkervChandrasen
Raiker,AIR1986Bom172 243
ManeklalMansukhbhaivJwaladuttPilani,
AIR1947Bom135 773
MangalChandMaloovPurnaChandra
Basu,AIR1949Cal505:ILR(1945) 1
Cal430 707https://t.me/LawCollegeNotes_Stuffs

92. XCLawofContract
MangalSen vMohdHussain,ILR(1915) 37
All115 118
MangalSingh v DialChand,AIR 1940
Lahl59 527
MangaldasJivanRam,ILR (1899) 23
Bom673 848
MangaldasRaghavjiRuparelv State of
Maharashtra,AIR1966SC128:(1965)2
SCR894 176
MangaloreCatholicCoopBankLtd v M.
SundaraShetty, (1987) 3KantLJ 21....705
MangiLaivMewarTextileMillsStaff
ConsumersCoopSocietyLtd,1985Raj
LR274 569
MangladhaRamvGandaMai,AIR1929
Lah388 592
ManickaGoundervMuniammal,AIR1968
Mad392 271
ManindraChandraNandivAswiniKumar
Achariya,AIR 1921Cal185 280
ManishankarvAlliamUndStuttagarterLife
AssBankLtd,193IC155 338
ManiyanNadarvHarikijmar,AIR2015
Kerl83 160
ManjuMahadevvShivappaManjuShetti,
ILR(1918)42Bom444 601
ManjunathAnandappavTammanasa,
(2003)10see390:AIR2003SC1391..896
ManjunathaOverseasGraniteLtd v Mysore
MineralsLtd,AIR2010NOC69 (Kant) .382
MankuwarAsaramvBodhiMukundi,AIR
1957MP211 937
MannaLaivBankof Bengal, ILR(1875-80)
1 Ail309 128,132
MannalalKhetanvKedarNathKhetan,
(1977)2see424:AIR1977SC536....259
MannuSingh vUmadatPande,ILR
(1888-90)12 All 523 181,183
ManoharvSaraswatiCoopHousingSociety
Ltd, (2005) 3MahLJ297 34
ManoharLaivMaya,(2003)9 SCC 478:
AIR2003SC2362 899
ManoharLaiBeliRamvHarKishan.Lal,
AIR1968Dell08 647
ManohurKoyalvThakurDasNaskar,ILR
(1887-88)15 Cai 319 435,444
ManojVChandraKishore,AIR2015NOC
87 (Bom) 847
MansukDas vRangayyaChetti,1Mad
HC162 451
ManzoorAhmedMagrayvGhulamHassan
Aram,(1999)7SCC703:AIR2000SC
191 867,919
Maple Flock Co Ltd v UniversalFurniture
Products(Wembley)Ltd,(1934) 1KB
148 (CA) 459
MaraiPackiamvVallaimmal,1989SCC
OnLineMad301:(1990)1 LW449 281
MarciCelineD'SouzavRenieFernandez,
AIR1998Ker280 192
MarcoProductionsLtd vPagola,1945
KB 111 ,454
Marco Shipping Agency v R Piyarelal
International,(2008)4CHN520 262
Marelyv Boothby, (1825) 3 Bing 107 603
MargadarsiChit Fund Co Ltd v Sd
Fayazuddin,(2001) 1 An LT 541 710
MargaretLalita Samuel vIndoCommercial
BankLtd,(1979) 2 SCC396:AIR1979
SC102..• 623
MariaColacovAlbaFloraHerminda
D'Souza,(2008)5 SCC268 958
MariaEudariaApoloniaGonsalves v
ShripadVishnuKamatTarcar,AIR1998
Bom46 189
MariaMargaridaSequeiraFernandesv
ErasmoJackdeSequeira,(2012) 5 SC 370:
(2012)3 LW 111 (SC) 962
Marikar(Motors)LtdvLalanCarmu,
(2004)1 All LJ522(NC) 815
MarineContainerServicesSouth(P)Ltdv
Go GoGarments,(1998)3SCC247:AIR
1999SC80 811
MarionWhiteLtdvFrancis,(1972)1
WLR1423 311
MaritimeNationalFishLtdvOcean
TrawlersLtd,1935AC524(PC)....415,416
MarkandevSudamaChaubey,AIR2007
All70 220
MarketCommittee,HodalvSukhdevi,
(2016)1SCC290:AIR2016SC2226...845
MarkfedVanaspati8cAlliedIndustriesv
UnionofIndia,(2007)7SCC679 397
MarshallvBaltimore8cOhioRailroadCo,
14 L Ed953;57US (16How)314(1853).280
MarshallvHarland&WolffLtd,(1972) 1
WLR899 403
MarshallvN.M.FinancialManagement
Ltd,(1995)1WLR1461 309
MarstonConstructionCoLtdvKigassLtd,
(1989)15ConLR116 501
MartinvLondonCountyCouncil,
1947KB628 681
MaruthyEnterprisesvCorpnof City of
Bangalore,AIR1999Kant41 577, 579
MaryvStateofKerala,(2014) 14 SCC272:
(2013)4KLT466 95,573
MasandTransportvAddlTransport
Commr,(1996)4AIHC3556 575
Masjidiv Ayisha,1880Punj Rec
No135 178,185
MaskellVHomer,(1915)3 KB106(CA) . .587
MasonfJoseph,(1804) 1SmithKB406...769
MasonvProvidentClothingandSupplyCo
Ltd,1913AC724(HL) 309
Masulipatamv CavalyVencataNarrianpah,
(1861) 8MIA529PC 824https://t.me/LawCollegeNotes_Stuffs

93. MatadinYadav vMidasLids (P) Ltd, AIR
2014NOC295(Del) 886
MatanhellsBrosvShriMahabirIndustries
(P) Ltd,AIR1970Pat91 20
MathaiGeorge vMathewChacko,(1987) 1
KLT342 256
MathaiMathaiJosephMary,(2015) 5
see622:AIR2014SC2277 162
Mathesonv Smiley, (1932) 2 DLR 781....754
MathewvKuruvilla,1983KLT104 582
MathewHenryAbrahamv Lodge
"Goodwill",ILR34Mad156 444
MathraDas vShambooNath,AIR1929
Lah203 604
MathurAshish Coop Housing Society Ltd v
BhavanaMaternityHome,(2004) 2 Bom
CR864 261
MathuriBewa v Prafulla Routray, AIR2003
Ori136 945
MatruAshish CoopHousingSociety Ltd v
BhavanaMaternityHome,(2004) 2 Bom
CR864 261
MattheyvCurling,(1922) 2 AC
180(HL) 410
MaturiPullaiahvMaturiNarasimham,
AIR1966SC1836 148
MaulaBux vUnionofIndia,(1969) 2 SCC
554: AIR1970SC1955 545, 549,550
May&ButcheryR, (1934) 2 KB17n 328
MayaDevi vLataPrasad,(2015) 5
SCC 588 544,862
MayawantivKaushalyaDevi, (1990) 3
SCC1 856
MaybanFinancev Aik SoonAuto,(1994) 1
CurrLJ 273(Malaysia) 332
MCNagalakshmiv MAFarook,AIR2007
Kant105 169
McAlpine(Alfred)ConstructionLtd v
PanatownLtd,(2001) 1 AC 518:(2000)3
WLR946(HL) 124
McArdle,re, 1951 Ch 669 (CA) 125
McCallVAustralianMeatCo Ltd, (1870) 19
WR188 837
McCannJohn&cCovPow, (1974) 1WLR
1643(CA) 770
McCorkindale,re,ILR(1880)6Cal1 708
McCutcheonv DavidMacBrayneLtd,
(1964)1WLR125:(1964)1 AllER
430(HL) 88
MCDyJaganNathAshokKumar,(1987) 4
SCC497:AIR1987SC2316 379
MCDJagdishLai,(1969) 3 SCC 389:AIR
1970SC 7:(1970)1SCR579 784
McdermottInternationalIncvBurn
StandardCoLtd,(2005)10 SCC 353....436
McDermottInternationalIncvBurn
StandardCoLtd,(2006)11 SCC 181...380,
389
TableofCasesXCI
McEllistrim v Ballymacelligott Coop
Agricultural&CDairySociety, 1919 AC
548(HL) 297,299
McGrathvShah,(1989)57P&CR452...224
McGregorvMcGregor,(1888) LR 21 QBD
424(CA) 12
McMahonv Fields, (1881) LR 7 QBD
591(CA) 493
McRaevCommonwealthDisposals
Commission,(1951) 84CLR377(Aust) . .252
MdHanifKhanvNareshPrasad,AIR 2010
Jhar73 912
MeconLtd vPioneerFabricators(P) Ltd,
AIR2008NOC870 (Del) 389, 486,548
MedisettiRaviBabuvPramidaChitFund
(P) Ltd, (2003) 2 BC527(AP) 638
MeenakshisundaraMudaliarvRathnasami
Pillai, ILR (1918) 41Mad959 873
MeenakshisundaramChettiarvVelambal
Ammal,AIR1944Mad423 645
MegaEnterprisesv State ofMaharashtra,
AIR2007Bom156 48
Meganv UpdikeGrainCorpn,94 F 2d
551(1938) 394
MeghrajvBayabai,(1969) 2 SCC 274: AIR
1970SC 161 427,428
MendelsohnvNormandLtd, (1970) 1
QB177 76
MenonvCochineMercantilesLtd, (1962)
32CompCas378 778
MercantileBankofIndiaLtdvChetumal
Bulchand,AIR1930Sind247 770
MercantileBankofIndiaLtdvRochaldas
Gidumal&Co, AIR1926Sind 225 .701,703
MercantileBankofIndiavCentralBankof
India,1938AC287(PC) 716
MercantileCreditCo Ltd vHamblin,(1965)
2 QB242:(1964)1WLR423:(1964)2 All
ER592(CA) 740
MeritScadaAutomation(P)LtdvSanmar
IndustrialSystems Ltd, (2004) 5CTC
81 (Mad) 311
MerittracServices(P)LtdvPostGraduate
InstituteofMedicalEducationand
Research,AIR2015P&H174 57
MerrittvMerritt,(1970)1WLR211 (CA) . . 14
MetonicIndia(P)LtdvKrishnaBehl,AIR
1997P&H297 718
MetroElectricCo vDDA,AIR1980
Del266 480
MetropolitanAsylumsBoardofManagerv
Kingham&Sons,(1890) 6TLR217 825
MetropolitanPoliceDisttReceiverv
CroydonCorpn,(1957) 2 QB154:
(1957)2WLR33 (CA) 585
MetropolitanWaterBoardv Dick Kerr 8c
CoLtd,1918 AC 119 (HL) 405
MewsVCarr,(1856)1H&N484:
108RR683 791https://t.me/LawCollegeNotes_Stuffs

94. XCnLawofContract
Mhow Hosiery (P) LtdfJitendraNirlan
Singh, (2005) 3 MP LJ 179 223
Micklefieldv S.A.C.TechnologyLtd, (1990)
1WLR1002 524
MidlandBankLtdvReckitt,1933AC
1 (HL) 786
MidlandBankPicv Massey, (1995) 1 All ER
929 (CA) 192
MidlandMotorShowroomsLtdvNewman,
(1929) 2 KB 256 (CA) 650,651
MidlandOverseasvC.M.B.T.Tana,AIR
1999Bom401 812
MilapCarriersvNationalInsuranceCo
Ltd,AIR1994AP 24 684
MilesVNewZealandAlfordEstateCo,
(1886)32ChD266(CA) 132
MilesyThomas,(1839) 9 Sim606:
47RR320 954
MilleniaRealotes(P)Ltdv SJR
Infrastructure(P)Ltd,(2005)6Kant
LJ36 353
MillervLakefieldEstates,TheDaily
Telegraph,May8, 1988 (CA) 333
MillervNasmyrhsPatentPressCo,ILR
(1882) 8Cal312 699,707
Miller,Gibb&cCovSmith&Tyre Ltd,
(1917) 2 KB 141 813
MilletVVanHeek&Co,(1921) 2 KB
369 (CA) 456
MiloryvLord,(1862) 4 De GF&J264:
(1862)31 LJ Ch 798: 7 LT 178 432
MirAbdulJalilv State ofW.B.,AIR1984
Cal200 567
MirNiyamathAliKhan vCommercial&
IndustrialBank,AIR1969AP294 604
MirSarwarjanvFakhruddinMahomed
Chowdhury,(1911-12)39lA1: (1912) 39
Cal232PC 154,909
MirahulEnterprisesv Vijaya Srivastava,
AIR2003Del 15 56,899
Mirams,re, (1891) 1 QB594 273
MirzaJavedMurtazav U.P.Financial
Corpn,AIR 1983 All 235 487
MisaCurrie,(1876)LR1 AC554(HL)..703
MissouriSS Co, re,(1889)LR 42 Ch D
321 (CA) ; 277
MistryAmarSingh vKulubya,1964AC
142(PC) 345,347
MitchellVHomfray,(1881) LR 8 QBD
587(CA) 183
MitiBewa vDaitariNayal,AIR1982
Oril74 194
MJRSteels (P) Ltd vChrisomarCorpn,AIR
2007NOC234(Cal) (DB) 435
ModiEntertainmentNetworkvWSG
CricketPteLtd,(2002)3 BomCR634...500
ModiKoreaTelecommunicationsLtdv
IndusindBank,AIR2001Del254;(2003)
1Banker'sJournal383 632
Modi Sugar Mills v Union of India, 1984
Suppsee338: AIR 1984 SC 1248 487
Modi Vanijya v Metal Scrap Trading Corpn
Ltd, (1991) 1 Cal LT 156 632
MogulSS Co LtdVMcGregorGow 8c Co,
(1889) LR 23 QBD 598 (CA) 302
MohamedvAlaga& Co,(2000)1WLR
1815 (CA) 262
MohammadvOnaMohdEbrahim,AIR
1922Upper Burma 9 292
MohammedfPushpalatha,(2008) 8
see335 372
MohanJatiavIndianBank, AIR2004
Cal326 646
MohanLaiAhuja vTarunChandra,(2009)
107DRJ342(Del) 520
MohanlalvDayaldas&Co, AIR1976
Raj 68 497, 548
Mohanlalv Sri GungajiCottonMills Co,
(1899-90)4CWN369 201
MohanlalJainv SawaiManSinghji, AIR
1962SC 73:(1962)1SCR702 736,748
MohdAbdulAzeemvSouthIndiaPrime
Tannery (P) Ltd, AIR 2016 Hyd 170 .385,884
MohdAbdulHakeemvNaiyazAhmad,
(2004)3 CLT137(AP) 877
MohdAbdulRahmanvMohdEgmal
Sheikh,AIR2015Gau112 953
MohdAbdullahButukvZainabBegum,
AIR2004AP474 957
MohdAliSahibvAbdulKhadirSaheb,
(1927) 59 MLJ 351 926
MohdAskarivRadheRamSingh, ILR
(1900)22All307 366
MohdAslamvRais,AIR2015NOC31
(Utt) ; 892
MohdGulamMustafaKhanvPadamsi,
AIR1923Nag48 341
MohdHabibullahvMohdShafi,ILR(1919)
41All324 546
MohdIsackvDaddapaneni,AIR 1946Mad
289 294
MohdJamalSahabvMunwarBegam,AIR
1964AP188 420
MohdMiraRowthervSavvasiVijya
Roghunanda,ILR (1900) 23Mad227...295
MohdMuradIbrahimKhanvGovtof U.P.,
AIR1956All75 674
MohdNayabuddinv Union ofIndia,AIR
2016Cal172 705
MohdNazeerAhmedvEconomicTransport
Organisation,(2005) 3 ALD 527 (AP)...625
MohdNazranvAl-EkhwanConstruction,
.(1991)3CurrentLJ2324 383
MohdSaidvBishamberNath,AIR1924
All156 163
MohdSalimuddinvMisriLai,(1986) 2SCC
378:AIR1986SC1019 348,422https://t.me/LawCollegeNotes_Stuffs

95. MohdSultanRowthervNainaMohammad,
AIR1973Mad233 549
MohdTajuddinvJointCollector,AIR2006
NOC490(AP):(2006)1 An LD 351 56
MohdUmar vNagarPalika,Khatima,AIR
1998A11227 529
MohdUsmanvUnionofIndia,AIR1982
Raj100 443
MohdUsmanvUnionofIndia,AIR1984
Raj156 487
MoheshChandraBosuvRadhaKishore
Bhattacherrjee,(1907-08)12CWN28 .736,
738
MoheshChandraGuhavRajaniKanta
Dutt,(1915)31IC29 133
MohindervMohan,AIR1939All188....768
MohinderSingh v State of Punjab, AIR
2009NOC434(P&H) 263
MohiniJainv State ofKarnataka,(1992) 3
see666:AIR1992SC 1858 276,280
MohitBhargava vBharatBhushan
Bhargava,(2007)4 SCC 795: AIR2007
SC1717 952
MohitKumarSahavNewIndiaAssurance
CoLtd,AIR1997Cal179 595
MohitMohanChoudhuryvAbdulRouf
Mia,(1991) 1CalLT 361 259
MohomedallyEbrahimPirkhanvSchiller,
ILR(1889)13Bom470 742
MohoriBibee vDhurmodasGhose,
(1902-03)30lA114:ILR(1903)30
Cal539 (PC) 154,159,160,163,
165,933,935
MohtaAlloy & SteelWorksvMohta
Finance&LeasingCoLtd,1987AIHC
1327(Del) 3
MokffinWithVU.M.B.C.,(1987)2MaiLJ
. 610(Malaysia) 618
Mollett1/Robinson,(1870)LR5 CP646..763
MoltonVCamrous,154ER 1107: (1848) 2
Exch487 223'
MonarchInfrastructure(P)Ltdv
UlhasnagarMunicipalCorpn,(2000)5
SCC287:AIR2000SC2272 53
MonarchSSCoLtdvKarlshamns
Oljefabriker(A/B),1949AC 196 (HL)...470
MonklandfJackBarclayLtd,(1951) 2
KB252 273
MonmouthshineCountyCouncilvSmith,
(1957)2 QB154:(1957)2WLR33 (CA) .584
MonmouthshireCountyCouncilvSmith,
(1956)1WLR1132 584
MontaguvForwood,(1893) 2 QB
350(CA) 808
MontaignacvShitta,(1890) LR 15
AC357 798
MontefiorevMendayMotorComponents
CoLtd,(1918) 2 KB241 276,277
TableofCasesXCIII
MontgomerievUnitedKingdomMutualSS
Assn,(1891) 1 QB370 806
MoodyyCox,(1917) 2 Ch 71 183,184
MoodyVPallMallDeposit&Forwarding
Co, (1917) 33TLR306 730,731
MooljiJaitha&;CofSethKirodimal,AIR
1961Ker21 39
MooljiMurarjiSunderji vM.C.Pinto, AIR
1926Sind156 637
Moon1/WitneyUnion,(1837)43RR802. 769
MoonsheBuzloorRaheemvShumsoonisa
Begum,1867MIA551 (PC) 199
MoorevElphick,(1945) 2 All ER
155(DC) 342
Moorev Vestry ofFulham,(1895) 1 QB
399(CA) 587
MoosaBhoy v V.Kristiah,AIR1952
Hyd79 797
MorelBros & Co Earl ofWestmorland,
1904AC 11:(1900-03)All ER Rep
397(HL) 751
MorganvAshcroft,(1938) 1 KB 49 (CA) . . 585
MorganvManser,(1948)1 KB184 403
MorganGrenfell&CCo Ltd vWelwyn
HatfieldDistrictCouncil,(1995) 1 All
ERl 339
MorgansvLaunchbury,1973 AC 127:
(1972)2WLR1217(HL) 749
Morrell1/Cowan,(1877) 7 Ch D 151 605
Morrisv C.W.MartinandSonsLtd,(1966)
1 QB 716: (1965) 3WLR276(CA) 711
MorrisvRedlandBricksLtd,1970AC652:
(1969)2WLR1437(HL) 901
Morrisv Saxelby, (1916) 1 AC 688 310
MorrisonKnudsen8c CofB.C.Hydroand
PowerAuthority,(1978) 85DLR(3rd) 186
(BrColCA) 589
MorrisonSteamshipCo Ltd vCrown,
(1924)20LILR283 109
MortlockVBuller,(1804) 10 Ves292:
7RR417 863,864
MorviMercantileBankvUnionofIndia,
AIR1965SC1954:(1965)3
SCR254 673,711,715,732
MoschiVLep Air Services Ltd,1973AC
331:(1972)2WLR1175(HL) 451
MosesyMacferlan,(1760) 2Burr1005...558
MostParwatiDevivMahabirMahto,AIR
2015Jhar87 '. 925
MotiLaiChunniLaivCIT,(1987)1 Raj
LR737 258
MotilalBabulalvLakhmichand,AIR1943
Nag234 725
MotilalHirabhaiv BaiMani,(1924-25)52
IA137 695
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96. XCIVLawofContract
MotilalPadampatSugar Mills v State of
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AIR1979SC621 110
MountfordvScott,1975eh258;(1975) 2
WLR114(eA) 62
Mountgarret,re, (1913) 29TLR325 107
MountstephenvLakeman,(1871) LR 7
QB196 600,601
MSK Projects (I) (JV) Ltd v State of
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MTUAsia Pre Ltd vBrightside-WohHup,
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MuddannavPanthanagereGroup
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MugneeramBangur&CCo vGurbachan
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MujibunnissavAbdulRahim,(1900-01)28
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MukandLtd vHindustanPetroleumCorpn,
(2005)3CLT45 (Bom) 25
MukeshGuptavSIMCOMLtd, AIR2004
Bom104:(2004)2 BC470:(2004)2Bom
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MukeshKumarv ColHarbansWaraich,
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MukteshwarSingh vStateofBihar,AIR
1979Pat40 326
MukulKumarvNorthernRly,AIR 1995
All72 22
MukundDasRajaBhagwanDas vState
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MulamchandvStateofM.P.,AIR1968SC
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MullaBadruddinvTufailAhmed,AIR1963
MP31 388
MullensyMiller,(1882)LR22ChD194.789
MumbaiAgriculturalProduceMarket
CommitteevMinisterforMktg,AIR2015
Bom234 739
MumbaiInternationalAirport(P) Ltd v
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SC3109 . 887
MuneshvAnasuyamma,AIR2001
Kant355 267
MuniLaivOrientalFire&General
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MuniammalvRaja,AIR1978Mad103 . . . 274
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MunicipalCommittee,Pundriv Bajrang
RaoNagrath,AIR2006P&H142 567
MunicipalCorpnvBaluram,(2006) 4 CLT
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MunicipalCorpnof Bombay v CuverjiHirji,
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MunicipalCorpnofChandigarhv
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MunicipalCorpnofGreaterBombayv
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MunicipalCorpn,KotafJ.K. Synthetics
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1991MPLJ910 565
MunilakshmammavVijendraRao, AIR
2003NOC376(Kant):ILR(2003)1
Kant637 940
MunisamiNaickervVedachalaNaicken,
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MunjalGasesv SBI,(2004)2ICC518
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MunnaKumarivUmraoDevi,AIR2006
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MunniBibi vTrilokiNath,ILR(1932)54
All140 561
MunnoBibiCIT,AIR1952All514 427
MunrovWillmott,(1949) 1 KB295 755
MunshiAmirAlivInderjitKoer, (1871) 9
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MuralidharChatterjeevInternationalFilm
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PC34 464,223
MurariGangulivKanailalGarai,AIR2003
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MurlidharAggarwalv State of U.P., (1974)
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MurugesavProvinceofMadras,AIR1947
Mad74 787
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QB904(eA) 249
MusliarakathAbdullavAbdulAzeeaNaha,
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MuthuRamanvChhinnaVellayan,ILR
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97. N
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N.B.Gurudevav State Bank of Mysore, AIR
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N.G.VigneshawaraBhatvRSrikrishna
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N.KunhiramanvMunicipalCouncil,
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N.N.ChowdharyvHindustanSteel Works,
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N.NarasimahaiahvKarnatakaState
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N.NarayaniAmmalv P. Sanjeev, AIR 2001
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N.O.ShettyvKarnatakaSRTC, AIR1992
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N.ParthasarathivControllerof Capital
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N.PeddannaOgetiBalayyav Kotta V.
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N.S.VarghesevDhanalakshmiBankLtd,
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N.V.P.PandianvM.M.Roy,AIR1979
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NabinchandraSahaParamanickvKrishna
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NadarBank Ltd vCanaraBank Ltd, AIR
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NagalingaChettiarvKayarohanaChettiar,
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NagarPalikaJagatSingh,(1995)3 SCC
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NagendraKumar Brijraj Singh vHindustan
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NagiaConstructions(India)(P)Ltdv
NationalBuildingConstructionCorpn
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NagoraoGovindraoAyachitv
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NairServiceSocietyLtd v K.C.Alexander,
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NaitRamfShibDat,ILR(1882)5
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NajafAliKhanvMohdFazalAliKhan,
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NakubaiValuDhokanevBhagwanSingh
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NallabothuPurnaiahvGarreMallikarjuna
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NallappaReddivVirdhachalaReddi,ILR
(1914)37Mad270 594https://t.me/LawCollegeNotes_Stuffs

98. XCVILawofContract
NamasivayaGurukkalv Kadir Ahmad,ILR
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NandLaiThanviv LegalRepresentativesof
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NandaDulalSen vRao&CSons,(1972)38
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NandanIronandMetalIndustriesvFenesty
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Nandganj Sihori Sugar Co Ltd v BadriNath
Dixit,(1991) 3see54:AIR1991
SC1525 875
NandkishoreLalbhaiMehtavNewEra
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2015SC3796 353,356
NandlalvThomasJ.William,171IC948 . 257
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AIR1932Nag62 609
NanhujivChimna,(1911) 10 IC 869 721
Nanjacharyv P.Chennaveerachari,AIR
2015Mad73 385
NannapaneniVenkataRaoCoopSugars
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ALD307 565,572
NanniervN.M.Rayalu Iyer, AIR 1926Mad
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NanyangInsuranceCo v AChinKimHin,
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NarainSingh vChiranjilal,AIR 1924 All
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NaraindasvBhagwandas,1993 MPLJ
1005 267
NarandasMorardasGajiwalavS.P.A.M.
Papammal,AIR1967SC 333:
1966SCR38 765,767,776
NarasimhaMudalivNarayanaswami
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NarasimharajuvGurumurthyRaju,AIR
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NarasimmaThathaAcharyavAnantha
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NarayanDuttTiwarivRohitShekhar,
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NarayanSharmavDevenderKumar
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NarayanSingh vChhatarsingh,AIR1973
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Narayan Venkatesh Pandit v SyedNuroddin
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NarayanaAyyangar v K.Vallachami
Ambalam,ILR(1927)50Mad696 337
NarayandasShreeram Somani v Sangli Bank
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(1965) 35CompCas 596 371
NarayanraoJagobaji Gowande PublicTrust
VStateofMaharashtra,AIR2016SC823143
NarbadaDeviGuptavBirendraKumar
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NarenderSingh v JaiBhagwan,(2005) 9
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NarendraSingh vStateofBihar,(2002) 1
ICC 468 (Pat) 704
NarendraV.Kanekarv BardezTalukaCoop
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NarendrakumarNakhatvNandi
HasbiTextileMillsLtd,AIR1997
Karl85 54,543
NareshChandraSanyal vCalcuttaStock
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NarpatRajBabulal,AIR1964Raj 92...741
NarsapaNikadevNarshivShripat,ILR
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Nash1/Inman,(1908)2 KB 1 171
NasibKaurvChananSingh, (1999) 1
PLR216 836
NasiranBibi vMohdHasan,(1996)All
LJ1648 209
Nathan!/NokhuRam,AIR2004HP20. . 891
NathaniSteelsLtdvAssociated
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NathuLaivGomtiKuar,(1939-40)67
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NathubhaiyJauherRaiji,ILR (1876) 1
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NathulalvPhoolchand,(1969)3SCC120:
AIR1970SC546:(1970)2SCR854...374,
375,899
NationalBankofLahoreLtd vSohanLai,
AIR1962Punj534:ILR(1962) 1
Punj566 805
NationalBankofNigeriaLtd vM.S.
Awolesi,(1964)1WLR1311 644
NationalCarriersLtd vPanalpina
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NationalCoffeePalaceCo,re,Panmure,ex
p,(1883)LR24ChD367(CA) 758
NationalCouncilofYMCAsofIndiavC.
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99. National Fertilizers Ltd v Somvir Singh,
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National Highways Authority of India v
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NationalHighways Authority of India v
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402(Guj) 633
NationalInsurance Co Ltd vArumugham,
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National Insurance Co Ltd v Boghara
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AIR2009SC170 441
NationalInsuranceCoLtdvCalcuttaDock
LabourBoard,AIR1977Cal492 326
NationalInsurance Co Ltd v Geetha, (2004)
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NationalInsuranceCoLtdvNew
DarjeelingUnion Tea Co Ltd, (2001) 1 Cal
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NationalInsuranceCoLtdvSeema
Malhotra,(2001) 3 SCC 151: AIR2001
SC 1197 376, 26
NationalInsurance Co Ltd vSujirGanesh
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NationalOverseas vExportCredit
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NationalPari-MutualAssn Ltd v R.,(1930)
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National ProjectConstructionCorpn Ltd v
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NationalProjectConstructionCorpn Ltd v
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NationalProvincial Bank of England v
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NationalProvincial Bank of England v
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NationalShipping Co of SaudiArabiav
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CRl 765
NationalTelecomofIndiaLtdvUnionof
India,AIR2001Del236 626
NationalTextileCorpnLtd vHaribox
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NationalTextileCorpnLtd vNareshkumar
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NationalTobaccoCoofIndiaLtdvIndian
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NationalWestminster BankP&CvMorgan,
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Navayuga Exports Ltd vA.P.Mineral Devp
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All678 928
NawabKhwajaMuhammadKhan v
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IA152 118,119,120
NazirAhmadt/JiwanDas,AIR1938
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NazirMaricarvMarshallsSons8cCo
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Neckram Dobey v Bank of Bengal, ILR
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Nedungadi Bank Ltd v EzhimalaAgrl
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NeelratanMukhopadhyavCooch-Behar
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Nellore Coop Urban Bank Ltd vAkili
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Neminath Appayya v Jamboorao Sateppa
Kochtevi, AIR 1966 Mys 154 265
NensukhdasvBirdichand,1917 SCC
OnLineBom47:AIR1917Bom19 771
Nepal Food Corpn vU.P.T.Importand
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NestorPharmaceuticals(P) Ltd vUnionof
India,AIR1995Del260 49
NetyamVenkataramannavMahankali
Narasimhan,AIR1994AP244 261
NevilalRohitaConstruction(P) Ltd v State
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Neville vLondonExpress, 1919 AC 368 . . . 283
NewAsiaticInsuranceCovBiharState
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New Bank of India v Sajitha Textiles, AIR
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New Golden Bus Service v State of Punjab,
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NewHampshireInsuranceCo vMGN,The
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NewHorizonsLtd vUnionofIndia,(1995)
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NewIndiaAssuranceCovFood
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NewIndiaAssuranceCo Ltd v DDA, (1991)
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New India Assurance Co Ltd vIttyKurian,
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NewIndiaAssuranceCoLtdvKesavan
Ramamurthy,(1997) 2 ALD446 261
NewIndiaAssuranceCoLtdvKusumanchi
KameshwaraRao,(1997) 9 SCC 179 388
New IndiaAssuranceCo Ltd vRaghvir
SinghNarang,(2010) 5 SCC 335 61https://t.me/LawCollegeNotes_Stuffs

100. XGVm La\^^bfGonfiact
NewIndiaAssurance-Co'Ltdi/State^"' '
Trading Corpn of India, AIR2007NOC
517(Guj) 594
NewIndiaRubberWorks(P)Ltd vOriental
Fire&GeneralInsuranceGoLtd,(1969)1-
'Gomp LJ 153(Gal) 245, 929
NewMarineCoaldofUnion'ofIndia,AIR'
i964SG152:{1964)2 SGR859". . .. ..569
New Media Broadcasting(P)Ltdi/Unionof
'India,AIR2008NQG967(Del)'J:l.;:542
New MogaTransportGot'-Umted'-India'-i '
'insurance-GoLtd;{'2004)4SGG677;320
NewNetherlands®ank-6f'NiY;i>'Demburgj'
'200NYS{2d)577(1967);;..vUfyn:-.^'655
NewZealand'aii'd'Austr'aliah-Land'-Go't'
Watson,(1881)LR7QBD-S/HSjGiAl)9A-'771
NewZealaii'd^ShippihgGo'Ltdt^'A.M. '
Satterthwaite&cGoLtd,(1974) 2
WLR865 97
Newabganj Sugar Mills Go Ltd v Union of
India,(1976) 1 SGG 120: AIR 1976 SG
1152 577
NewarMarbleIndustries(P)Ltdv
RajasthanSEB, 1993 Gri LJ 1191 (Raj) . . 281
Newdigate v Davy, (1694) 1 Lord
Ragra 742 587
NewellVCanadianPacificAirlines,(1976)
74DLR(3d) 574(OntGty Gt) 513
NewmanvBourne8cHollingsworth,(1951)
31TLR209 687
NicholsonvChapman,(1793) 2 Hy
B1254 696,753
Nicholson8c 'Venn vSmith-Marriott,(1947)
177LT 189 (KB) 241
NicoleneLtdvSimmonds,(1953) 1 QB543:
(1953) 2WLR717 332
NihalChandvAmarNath,AIR1926
Lah645 37
NihalSingh v Ram Bai, AIR1987
MP126 260
NikunjaKishorePradhanvSBI,(1990) 70
GutLT416 614
Niligiri Estates (P) Ltd vKhanivaHousing
(India) (P) Ltd, AIR2012Gal 60 913
NilimaGhoshvHarjeetKaur,AIR2011
Del104 174
Niloufer Siddiqui v Indian Oil Corpn Ltd,
AIR2008Pat5 829
NingawwavByrappaShiddappa
Hireknrabar,AIR1968SG956:(1968)2
SGR797 212,221,244,250
NiranjanDas vOrissaSEB, (2003) 96Cut
LT528 565
NiranjanShankarGolikarivCenturySpg
6c Mfg Go Ltd, AIR1967SC1098:
(1967) 2 SCR 378 307,308,515
NiranjanSingh v Bant Singh, AIR2004
P8CH334 937
NiravDeep'akModi'yNajobBehrairi-'-O '
Bhiwandiwala,AIR 2012 Bom 50 . . .;.';'900
NirconDevelopers(P)Ltd v Zohrabai'"--''
•Eakhruddin,(1998)IBomCR153 . ...^330
NirmalChahdr'a'HaldarvSumifraNaskarii-lii-i
AIR2007NOC1978(Cal)-'.;^::..r.i'-'--';192
NirmalaAnandvAdventCorpn(P) Ltd,:---
(2002)5SCG481:'AIR2002^/' •--i'mM
-5C2290.... Ii'40§f9'03
Nirmala:BalagopallfVehkatesuluBalagopalV'-^-'f
f:<AlR2004Mad2555.C3322
NivartiGdvindlhgale't'Reva:na-'''-'''vAamiM
'BhimanagoudaPatil,(1997)1-SCC475;'i.859
Noctonz^LordAsHb'uho'ri,^'(l9l4)AC
932(MLj':i7^t'JC:n^^iAX)!>: ^2214
NokhiaStateof-H.P.,AIR4985.'HI?88;:-\rai76
NoorMohaminadRawtherit'Charii,1959'•'
KIJ168
NoorudeenvUmairathuBeevi,AIR1998
Kerl71 247
NordenfeltvMaximNordenfeltGuns8c
AmmunitionGo,1894AG 535 292,349
NordiskInsulinlaboratoriumGorgate -'''
ProductsLtd, 1953 Gh 430: (1953) 2WLR:-'
879(GA) ;v764
Normanv Cole, (1800) 3 ESP253:'^i
170ER606 -^'^7
NorthOcean Shipping Go Ltd v Hyundai
GonstructionCoLtd,1979QB705: '
(1979)3WLR419 ;L;;194
NorwichCityCouncilvHarvey,(1989) 1''
WLR828 (GA)
NorwichUnion FireInsuranceSociety Ltd ir'-'''
PriceLtd,1934AC455 '.' 585
Noti China Subba Reddy vPulavarthiRarria-- ''
Rao, AIR 2003 AP 49 -909
NottinghamBuildingSocietyv ''
EurodynamicsSystemspic,1995 FSR
605(GA) ./458
NottinghamshireCountyCouncil R v Secy '
ofStateforEnvironment,Exp1986AG -
240:(1986) 2WLR1 (HL) 50
NTPGVSingerGo, (1992) 3 SGG 551: -'
AIR1993SG998 :'.-322
NTPGLtdVFlowmore(P)Ltd,(1995)4
see515 ;624
NTPGLtdVReshmiConstructions,Builders
8cContractors,(2004)2see663:AIR
2004SG1330;(2004) 1 KLT 1065 . . ..'447,
186,447
NumericPower Systems Ltd vMohd.
Muzaffar,2006SGGOnLineMad697:
(2006)4LLN385 307,311
NurAliDubashvAbdulAli,ILR(1892)19-
Gal765 293
NurDinAllahDitta,AIR1932Lah 419 . 652
Nurdin8cPeacockPicvD.B.Ramsden8c
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101. NurseySpg&Wvg::CoLtd,re;ILR(18,80)5,
:.Bom92 . . ..,,...... 204, 209, 214
NursingDassKotharit/ChuttooLall
:?Misser,ILR(1923) 50Cal615 238
NutakkiSesharatanarnvSub-Collector
.(LA),(1992)1see114:AIR1992'.,,,
SC131 58
NutanKumar vAddlDistrictJudge,(2002).'
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Nutan.KumarfAddlDistrictJudge;Banda,.
;AIR1994.A11298 .;....;263
Nuthaki Venkataswamit/Katta Nagi Reddy,•
^AIR1962AP457; .A.-,. . ;283
NuttingVBaldwin,.(1995):imR201.,....535
NVSM Anandvalef.K.T.Santhanakrishnan,.;
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NWPClubVSadullah,-ILR(1898)20',
:All497 814
o
O. Konava'lov vCommander,CoastGuard
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O'Grady v Westminster Scaffolding Ltd,
(1962)2 Lloyd's Rep 238 524
QakeleyvPasheller,(1836) 4Cl&Fin 207:
7ER80 637
Obbayashi-GumiLtd vIndustrial
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2330(Singapore) 771
OceanTrampTankersCorpnfV O
Sorfracht, The Eugenia,(1964)2 QB 226:
(1964)2WLR114 408
OceanicSteamNavigationCofSoonderdas
:Dharamsey,ILR (1890) 14 Bom 241 200
Official Assignee vMadholalSindhu, AIR
1947Bom 217 714,724,725
Official Assignee vMercantileBank ofIndia
Ltd,(1933-34)61lA416 732
Official Assignee vSmith,ILR (1908)
Mad68 702
Official AssigneevSRMMRMRamaswamy
Chetty, ILR (1920) 43Mad747 702
Official Receiver vJugalKishore Lachhi
RamJaina,AIR1963All 459 222
OffordVDavies, (1862) 6 LT 579:
142ER1336 638
OgleVEarl Vane, 1868 LR 3 QB 272 495
OilandNaturalGasCommissionvDai-ichi
Karkaria(P) Ltd,1994MahLJ1084 202
OJSCCorpnTransstroyvGovtof
Karnataka,AIR2005Kant351:
2005AIRKant1492 518,519
OldWorldHospitality(P) Ltd vIndia
HabitatCentre,(1997) 73 DLT 374 330
Oliver v Bank ofEngland,(1901) 1 Ch
652(CA) 818
TableofGases;XCIX
OliverVOliver,(1861).11CBNS139.....851
OlleyVMarlboroughCourtLtd;(1949) 1
KB532{CA) 77
OlympusSuperstructures(P) Ltd vMeena
VijayKhetan,(1999) 5 SCC 651:AIR
1999Se2102 889
OmPrasadi/;SecyofState,AIR1937.Lah,.
:572:(1937)172IC567.., .,..,. ....6,74
Om Prokash Pariwal Union of India,AIR
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OmShankarBiyani.t;,PortofCalcutta,
(2002)3see168:AIR2002,SC1217,...710
OmanaPurushottamanNairy.LIC,AIR
,2005Bom152 ,V. 27
OmniumD.VEnterprises;fSutherland,(1919) .
rlKB 618:120,LT265-....;......,,,452
Omprakash& Co City andIndustrial•
DevelopmentCorpnofMaharashtra
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LJ1419 47,543
ONGCVAssn ofNaturalGas Consuming
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Se2796 582
ONGCVBalaramCementsLtd, AIR2001
Guj287 46
ONGCVModernConstruction& Co,
(1997)3 Guj LR1855 34
ONGCVS.S.Agarvsralla&cCo,AIR1984
Gaull 378,541
ONGCLtdVAssnofNaturalGas
ConsumingIndustries,(2004)5 SCC253:
AIR2004SC2327 362
ONGCLtdVEssarSteelLtd,(2002) 2 Bom
CR379 9
ONGCLtdVSaw Pipes Ltd, (2003) 5 SCC
705:AIR2003SC2629 465,546,547
ONGCLtdVStreamline Shipping Co (P)
Ltd, AIR2002Bom 420 287,874
OnkarmalvBanwarilal,AIR1962
Raj127 422
OppenheimervAttenborough8c Sons,
(1908)1 KB221 731
OrangKayaMenteriPadukaWanAhmad
IsaShakurv Kwong Yik Bank Berhad Bhd,
(1989) 3 MLJ 155 (SCKualaLumpur)...618
OrdOrd,(1923) 2 KB 432 586
OrgInformaticLtd v Tulip Telecom Ltd,
AIR2011NOC258 (Del) 626
OrientPaperMillsLtdvUnionofIndia,
AIR1984Ori156 684
OrientalBankCorporationvJohnFleming,
ILR(1879)3Bom242 202
OrientalFire&GeneralInsuranceCoLtd
VNewSurajTransportCo (P)Ltd,AIR
1985All136 322
OrientalFireandGeneralInsuranceCov
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102. CLawofContract
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Mad162 118
OrientalInsuranceCoLtdvAshaPaul,
1996AIHC2043(J8cK) 597
OrientalInsuranceCoLtdvGowramma,
AIR1994Kant29 210
OrientalInsuranceCoLtdvMantoraOil
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OrientalInsuranceCoLtdvPeacock
Plywood (P) Ltd, AIR 2005Cal97 4
OrientalInsuranceCoLtdvV.D.
Jhunjhunwala,(2001)91 DLT 496 421
Orissa Agro Industries Corpn Ltd v KCS (P)
Ltd,2004AIHC1788(Ori) 324
Orissa Agro Industries Corpn Ltd v
SarbeswarGuru,AIR1985Ori270 . 617, 653
OrissaConstructionCorpnLtd v B.
Engineers&Builders (P) Ltd, (1996) 81
CalLT126 624
OrissaSEB vIndianMetals&CFerroAlloys
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OrissaTextileMillsLtdvGaneshDas,AIR
1961Pat107 377
OrmrodvCrosvilleMotorServicesLtd,
(1953) 1WLR1120 (CA) 749
OsmanJamal&Sons Ltd vGopal
Purshottam,ILR(1929)56 Cal 262 596
OttomanBankvJebara,1928AC 269....753
OusephPouloVCatholic Union Bank Ltd,
AIR1965SC 166: (1964) 7SCR745....282
OverbrookeEstatesLtdvGlencombe
PropertiesLtd, (1974) 1WLR1335 205
Overend 8cGurneyCo v Gibb, (1872) LR 5
HL480 758
Overend, Gurney&CoyOrientalFinancial
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P
P.AnasuyammavCommrof Land Revenue,
1995AIHC2082(AP) 218
P.B. Pathy v SPandurangam,AIR2012
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RC.RajputVState of M.P., AIR 1993 MP
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P.C.RaviVUnionBankofIndia,1995
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P.C. Varghese v Devaki AmmaBalambika
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P.C.WadhwavStateofPunjab,AIR1987
P&:H117 570
P.J.ChackoLie,AIR2008SC 424 214
P.J.Rajappanv AssociateIndustries(P) Ltd,
(1990) 1 KLJ 77 608
P.Jagdeshwar Reddy v Bank of
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P.K.Ramaiah8cCofNTPC,1994Supp(3)
SCC126 445
P.KrishnaBhattavMundilaGanapathi
Bhatta,AIR 1955Mad648 736,737
P.L. RajuVDrNandanSingh, (2005) 5
ALD402 212
P.L.S.A.R.S.ArunchelamChettyvKrishna
Iyer, AIR 1925 Mad 1168: 90IC481....361
P.M.NainaMohammedRowtherv
KapporchandJain, 1987 SCC OnLine:.
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P.M.S.TradersfJaitexLungiCo,AIR2007
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P.N. RaviVKottayam Coop Urban Bank,
(1993) 1 KLJ 538 612
P.N.V.S.V.PrasadvUnionofIndia,(1995)1
AnWR126 593
P.Nagrajanv SouthernStructuralsLtd, ILR
(1995)1Mad337. . . .' 543
P.Panneerselvanv A. Baylis, (2005) 5
CTC17 330
P. PoppanVKaria Gounder, (2002) 2
CHN40 7
P.PurushothamReddy vPratapSteels Ltd,
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P.PurushottamReddy vPratapSteels Ltd,
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P.R. 8c CofBhagwandas,ILR (1909) 34
Bom192 465
P.R. Deb andAssociatesvSunandaRoy,
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P.R.SashannahChettiv P.Ramasamy
Chetti,(1868) 4MHC7 134
P.R.SubramaniaIyer vLakshmiAmmal
LakshmiAmmal,(1973)2SCC54 120
P.R.TransportAgency v Union ofIndia,
(2005) All LJ 3568:AIR2006All
23 (DB) 323
P.R.YelumalaivM.M.Ravi,(2015)9SCC
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P.S.DuraikannoovM.SaravanaChettiar,
AIR1963Mad468 379
P.S.N.S.AmbalavanaChettiarvExpress
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P.S.RanakrishnaReddyvM.K.
Bhagyalakshmi,(2007)10 SCC 231:
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RSarojamfLie,AIR1986Ker 201 214
P.SreeramaReddy vRajahmundry
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P.SukhadevvCommrofEndowments,
(1998) 1 BC403(AP) 837
P. Syamala v R.Gopinathan,(2004) 1
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P.T.MathewvKeralaSEB,AIR2014NOC
588(Ker) 768
PacificMineralsLtd vSinghbhumMining
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103. PacificRefractoriesLtd v SteinHeurtey
India Projects(P)Ltd,(2006)3 Mah LJ
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PadamakarK.Bhagwatharv State Bank
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(Bom) 662
PadinhareVeetilMadhavivPachikaran
VeetilBalakrishnan,AIR 2010 Ker 111 . . 159
PadmaSrinivasanvPremierInsurance
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SC836 556
Padma Vithoba Chakkayya v Mohd
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PadmakumarivDasayyan,(2015) 8 SCC
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PadminiChandrasekharanv R. Rajagopal
Reddy, (1996) 8 SCC 632 :937
PagnanSpa v FeedProducts,(1987) 2
Lloyd's Rep 601 (CA) 333
PaidiLakshmayyavIndianBank Ltd, AIR
1982Kant338 572
PalaniVannanvKrishnaswamiKonar, AIR
1946Mad9:(1946)ILRMadl91 835
PalaniyappaChettiarvChockalingam
Chattiar,ILR(1921) 44Mad334 765
PalayDuttavMohdAhAfsar,AIR 2016
Call99 886
PallavaGraniteIndustriesIndia(P) Ltd v
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Pameshvi^ariDasMehravRamChandOm
Prakash,AIR 1952 Punj 34 399
PamparaPhilip vKoorithottiyl
Kinhimohammed,AIR2007Ker 69 570
PanchananDharavMonmathaNath
Maity,(2006)5SCC340:AIR2006
SC2281 327,371,383
PanchuPradhanvRamachandraSethi,AIR
2003NOC88 (Ori) 956
PancommerceS.A. vVeecheemaB.V., (1983)
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PaniBai v SireKanwar,AIR1981
Raj184 761
PanickervPrabhakaran,(1993) 2 KLJ 380:
(1993)2 KLT417 151
PankajBhargavavMohinderNath,(1991) 1
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PankajakshyvDevakiRamakrishnan,AIR
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Pannalalj/Commr,(1973) 1 SCC 639....569
PannalalJankidasvMohanlal,AIR1951
SC144:1950SCR979:(1951) 21
CompCas 1 474, 757,758,761
PanoramaDevelopment(Guildford)Ltd v
FidelisFurnishingFabrics,(1971) 2 QB
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TableofCasesCI
PanporivCentral BankofIndia,(2002) 1
ICC838 1(P8cH) 614
Pao On VLao Yiu Long, 1980 AC614:
(1979)3WLR435 194
Papaiah v State ofKarnataka,(1996) 10
SCC533:AIR1997SC2676 278
Paquin Ltd v Beauclerk, 1906 AC 148 (HL) 751
ParadineJane,King's Bench, (1647)Aleyn
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ParagonFinancePicvStaunton,(2002) 1
WLR685: (2002) 2 All ER 248 (CA)....102
ParakkateShankaranKeshavanvT.A.
Sukumaran,AIR1997Bom 381 259
ParakunnanVeetillJoseph'sSonMathew
VNedumbaraKuruvila'sSon, 1987 Supp
SCC 340: AIR 1987 SC 2328 898, 903
ParamanandaBose vSantoshKumarDutta,
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ParamjitSingh Ahuja vPSIDC,2006RD
P&H8393 616
ParasramvAir-IndiaLtd,1952SCC
OnLineBom144 681
ParasullahMullikvChandraKantaDas,
(1916-17)21CWN979 299
ParesarvMunicipalBoard,Mt.Abu,1997
AIHC1897Raj 278
ParkVHammond,(1816) 6Taunt495:
128ER1127 760
ParkashoDevi vTarsemLai,AIR2003
P&H245 952
ParkervClark,(1960) 1WLR286 12
ParkervLewis,(1873) LR 8 Ch
Appl035 594
Parker v SouthEasternRailway Co, (1877)
LR 2 CPD 416 (CA) 71,73,75
Parkinsonv College ofAmbulanceLtd,
(1925)2 KB 1 280,343
Parkinsonv St James andSeacroftUniversity
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3WLR376(CA) 203
ParleBiscuit (P) Ltd v Kabisco Agro
Foods(India)(P)Ltd,AIR2009NOC
256(All) 901
Parmanandv Bajrang, (2001) 7 SCC 705 . . 856
ParmanandSetiavSomlal,AIR2003
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ParshotamDas vMunicipalCommittee,
Batala,AIR1949EastPunjab301 393
ParsonsvBNMLaboratoriesLtd,(1964) 1
QB 95:(1963)2WLR1273(CA) 496
Parsons(H) (Livestock) Ltd vUttleyIngham
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PartapvPuniyaBai,AIR1977MP108. . .244
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104. CIILawofContract
ParvateneniBhushayya vPotluri
Suryanarayana, AIR 1944 Mad 195:
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ParvathammafUma,AIR 2011Kant58 . 335,
352
ParvatiBai vAyodhiaPrasadJain,1985
MPLJ703 537,553
PatelBrosvVadilalKashidasLtd,AIR1959
Mad227
PatelDadubhaiNarsibhaivGujaratEB,
(1990)1 GujLR673
Patel Engg Ltd vNationalHighways
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Patel Roadways Ltd vPrasadTradingCo,
(1991) 4see270; AIR1992SC 1514 .
PattipatiRamalingaiahvNagulagunta
Subbarami,AIR 1951Mad390
PattnaikIndustries(P)LtdvKalingaIron
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Paul Beier vChotalalJaverdas,ILR (1904)
30Bom1
PaulFelthousevBindley,(1862) 142
ER1037
PaulaLeeLtdvRobertZahil&CoLtd,
(1983) 2 All ER390(QB)
Pavey andMatthewsPty v Paul, (1987) 162
CLR221:(1990) 6ConstLJ 59
PawanKumarDuttvShakuntalaDevi,
(2010) 15see601: (2013) 2 SCC
(Civ)235
Pawan KumarJainv PradeshiyaIndustrial
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AIHC1360(All)
Payana Reena LayanaSaminathanChetty v
PanaLanaPanaLanaPalaniappa
Chetty,(1913-14)41lA142:
18CWN617(PC)
Payne vLeconfield,(1882) 51 LJ QB 642 .
Payzu Ltd vSaundars,(1919) 2 KB 581 . .
321
478
321
295
320
758
29
528
589
334
611
445
791
525,
526
PeacockvFreeman,(1888)4TLR
541 (CA) 774
PeacockvPenson,(1848)11 Beav355:
50ER854 904
Pearce vBrookes,(1866) LR 1 Exch 213 . . . 270
PearcevMerriman,(1904)1 KB 80 12
Pearl CycleIndustriesLtd v A.N.Kaul,AIR
1964Punj482 396
PearlInsuranceCovAtmaRam,AIR1960
Punj 236 ,.318
PearliteLiners(P)LtdvManormaSirsi,
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PearsonvRose8cYoungLtd,(1951) 1 KB
275 {CA) 731,733
PeecoHydraulic(P) Ltd vEastAnglia
Plastics (India) Ltd, (1987) 1Cal
LT551 379
PeekVGurney,(1873) LR 6HL377 209
PemmadaPrabhakarvYoungmen'sVysya
Assn, (2015) 5 SCC 355: (2015) 3 SCC
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PennaiahvThippamma,AIR2004
Kant444 938
Pennington v Reliance Motor Works Ltd,
(1923) 1 KB 127 700
PepinVChunder SeekurMookerjee, ILR
,(1880) 5 Cal 811 594, 595
Perala KrishnayyanChettiarvPaimanathan
Chettiar,AIR 1917Mad63 39
PerceptD'Mark(India)(P)Ltd v Zaheer
Khan,(2004)2 Bom CR 47 303
PerceptD'Mark(India) (P) Ltd v Zaheer
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Performing Right Society Ltd v Mitchell 8c
Booker(Palais de Donse) Ltd, (1924) 1
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PermataMerchantBankv GloveSeal,
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Perry v Phillips, 1982 CLY2164 502
Perry v Sidney Phillips 8c Sons (a firm),
(1982) 1WLR1297(CA) 505
Perry vTruefitt,(1842) 6 Beav 66:
49ER749 960
Perrylease Ltd vImecarA.G., (1988) 1 WLR
463 (QB) ,604
Persons(H) (Livestock) Ltd vUttleyIngham
8cCo Ltd, 1978 QB791:(1978)94'
LQR171 472
PerumalMudaliarvSendanathaMudaliar,
AIR1918Mad311 107
PerwatraHabibBankvSehatian
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(Malaysia) 640, 664
Pestonji vMatchett,(1870) 7 BHC App
Casio 833
Pestonji Bhimji v RavjiJaverchand,(1934)
150IC483(Sind) 779
Pestonji Manekji Mody v Bai Meherbai, AIR
1928Bom539 150,604
PestonjiNesserwanjeeBottlewallahvGool
MohdSahib,(1874) 7MadHCR369....787
Peters vFleming,(1840) 6M8cW42:
151ER314 171
Peters vParkwayMercurySales Ltd, (1975)
10NBR(2d) 703 (SC App Div) 79
PetroleumIndiaInternationalvBankof
Baroda,(2008)6MahLJ487 628
PfizerLtdvUnionofIndia,(1996)4Bom
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PhanidharKalitavSaraswatiDevi,(2015)5
SCC661:(2015)3SCC(Civ)230 940
PharmaceuticalSocietyofGreatBritainv
BootsCashChemistsSouthernLtd,(1952)
2QB795 21
PharmaceuticalSocietyofGreatBritian
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(1953) 1 QB401:(1953) 2WLR427(CA) . 21https://t.me/LawCollegeNotes_Stuffs

105. •PhelpsJames (1891)I'QB '
605(CA)..V..V. 755,756
PhilipLukkavFranciscanAssn, AIR1987
Ker204 i ; . ; .188
PhillipsVBrooksLtd,(1919)2 KB 243 230,
232,732
PhillipsProductsLtd vHyland,(1987) 1
WLR659(CA) ' 100
Phillipsont/Hayter,(1870)LR6CP38...751
PhippsyJackson,(1887) 56 LJ Ch 550....875
PhonogramLtd v Lane, 1982 QB 938:
(1981) 3WLR736(CA) 815
PhonographicPerformanceLtd vHotelGold
Regency,AIR2009Del 11 787,797
Photo Production Ltd v SecuricorTransport,
(1978)1WLR856(CA) -..84
PhulChandFatehChandvJugalKishore
GulabSingh,AIR1927Lah693 453
PhulchandExports(P) Ltd vO.O.O.Patriot,
;:(2011)10SCC300 287,573
•fekeringfBusk,(1812)15East38..749,793
PickeringvIllfracombeRlyCo, (1868) LR
"^^3-CP235 289
PillaAppalaNarsammavMadras
iegiment,AIR2011AP183 944
PilooDhunjishawSidhwa vMunicipal
'Corpnof City of Poona, (1970) 1 SCC
213:AIR1970SC1201 .569
Pinnel's case, (1602) 5 Co Rep 117a 138
iPioneerContainer,re,(1994)2AC324:
, ,,(1994) 3WLR1 712
PirthiyJatiRam,(1996) 5 SCC457 894
PishoriLaiMaggov DDA,1997AIHC
1579(Del) 480
PitambarvCassibai,ILR(1886) 11
Bom272 527
PlinchevColburn,(1831) 5C&P58: 172
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PlumptonBurkinshaw,(1908) 2 KB572. 747
PNBDharamshalav Prem SagarChaudhary,
iilR1996 HP 86 428
PoddarSteelCorpnvGaneshEnggWorks,
•'(1991)3SCC273:AIR1991SC1579....50
PplakVEverett,(1876) LR 1 QBD 669....650
PolemisandFurnessWithy& Co, re,
(1921)3 KB560(CA) 761
PolestarElectronics(P)Ltdv CST, (1978) 1
see636 783
PollenDealcom(P)LtdvChambal
Fertilizers8cChemicals,(2010)92
'AIC695(Cal) 600
PolymatIndia(P) Ltd vNationalInsurance
CoLtd,(2005)9 SCC 174:AIR2005
SC286 419,433
Ponnurangamv SlumClearanceBoardof
T.N.,1986SCCOnLineMad20:AIR
1996Mad274 217
PoolfPool,(1889) 58 LJP 67 836
TFabled#Ga^es-cm
PoonamchandShankarlal&Cov'
DeepchandSireymal,AIR1972MP 40..731
PoonooBibi v FyazBuksh,1874 SCC
OnLine Gal 59: (1874) 15 L Beng LR
App5 289
PopcornProperties(P)LtdvStateof
Maharashtra,(2005) 6 Bom CR 518 52
PopularShoeMartv K. Srinivasa Rao,
(1989)2 An LT541:AIR1990NOC
87 (AP) ;744,831
PortofBombayvPremierAutomobiles,
(1974)4SCC710 703
Portof Bombay v SriyaneshKnitters,(1999)
7SCC359:AIR1999SC2947 676,710
Port of Bombay v SriyaneshKnitters,AIR
1983Bom88 703
PortofMadrasvK.P.V.SheikMohammed
Rowther& Co Ltd, 1963 Supp (2)
SCR915 710
Port ofMadrasvSouthernShippingCorpn
(P)Ltd,AIR2001Mad413 811
Portof theTrust,Madrasv Bombay Co (?)
Ltd,AIR1967Mad318 563
PortSwettenhamAuthorityv T.W. Wu 8c
Co (M) Sdn Bhd,1979AC580:(1978) 3
WLR530 673
PortugueseConsolidatedCopperMinesLtd,
re, (1890) LR 45 Ch D 16 (CA) 824
PostmasterGeneralvRamKripalSahu,AIR
1955Pat442 122
PothiRamvIslamFatima,AIR1915All
94(2) 294
PournamiOilMillsvStateofKerala,1986
Supp SCC728:AIR1987SC590 110
PowellfLee,(1908)24TLR606 28
PowellDuffrynSteamCoalCo vTaffVale
Rly Co, (1874) LR 9 Ch App 331 876
PowerFinanceCorpnLtd vPramodKumar
Bhatia,(1997)4SCC280 61
PrabhakarAdsulevStateofM.P.,(2004)11
SCC249:AIR2004SC3557 937
PrabhatBankvBabuRam,AIR1966
All134 725
PradeepKumarvMahaveerPershad,AIR
2003A?107 , 940
PradeepOilCorpnvUnionofIndia,AIR
2012Del56 961
PradeepTimberCo v H.P.StateForest
Corpn,1984Sim LC 245 50
PrafulKumarMohantyvOrientalInsurance
CoLtd,1997AIHC2822(Ori) 597
PrafullaKumarv GopiBallabh,AIR1964
Gal159 596
PragervBlastpielStamp&HeacockLtd,
(1924)1KB566 752,753,
754,755,756
PragjiVPranjiwan,(1903) 5 Bom LR 878 . .307
PrakashvUnionofIndia,(1994) 2 Bom
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106. CIVLawofContract
PrakashRoadLines(P)LtdvHMTBearing
Ltd,AIR1999AP106 321
PrakashRoadLines (P)LtdvOrientalFire
andGeneralInsuranceCo,(1988)1TAC
263:(1988)1KantLJ 118 692
PrakashRoadlines(P)Ltdv P.Mulhuswamy
Gounder& Co,AIR1985Mad84 321
PrakashwatiJainfPunjab StateIndustrial
DevelopmentCorpn,AIR2012P&cH13 . 616
PramodBuildings and Developers(P)Ltd v
ShantaChopra,(2011) 4 SCC 741:
AIR2011SC1424 486,909
PranNathGuptav Union ofIndia,AIR
2004J&K135 552
PranNathSurivStateofM.P.,AIR1991
MP121 550
PrasanjitMahthav United Commercial
BankLtd,AIR1979Pat151 603,605
PratapBalkrishnaKedari v Premadevi
LaxminarayanAgarwal,(2002) 3 Bom
CR46 741
PratapConstructionsv State ofJharkhand,
(2005)1 BLJR492(Jhar) 450
PratapraiN. Kothari v John Braganza,
(1999)4SCC403:AIR1999SC1666...845
PratapsingGanpatraoKadamvMaruti
RaghunathTodkar,AIR 2003 Bom 11 . . . 850
PratapsingMoholalbhaiv KeshavlalHarilal
Setalwad,(1934-34)62lA23:AIR1935
PC21 641
PravaraSahakariSakharKarkhanaLtdv
ExpressIndustrialCorpn,AIR2002
Bom185 483
PremChandvStateofU.P.,1987All
LJ1320 260
PremLatafMCD,AIR2003Del 211....497
PremNathKapur vNationalFertilizers
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PremNathMotorsLtd vAnuragMittal,
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PremSharmavNishiSharma,AIR2003
HP45 846
Prem Singh vBirbal,(2006)5 SCC 353:
(2006)2 KLT 863:(2006)5Mah
LJ441 243,931
PremaKorgaokarvMustakAhmed,AIR
1987Guj106 515
PremabhaivBrown,(1873) 10BHCR319 .800
PrembaivGhanshyam,AIR 2011 MP 1...957
PremierExplosivesLtd vSingareniCollieries
CoLtd,AIR2010AP107 394,481
PremjiRatanseyShahvUnionofIndia,
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PrenticeHallIndia(P)LtdvPrenticeHall
Inc,AIR2003Del236:(2003)1CLT
576(Del) 262,287
PridmorevCalvert,(1975)54DLR(3d) 133
(BCSC) 131
PrincevClarke,(1823)1B8cC186:
107ER70 825
PringlefJafarKhan,ILR(1883) 5
All443 341,342
PritchardvMerchantsandTradesmen
MutualLifeAssuranceSociety,(1858) 3
CBNS622 252
PrithviNathMallavUnionofIndia,AIR
1962JScK15 318
Prithvi Singh v BanshiLai,AIR2004
Raj 100 122
PrithvichandRamchandSablokvS.Y.
Shinde,(1993)3 SCC 271:AIR1993
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PriyankaVivek Batra vNeeruMalik,AIR
2009NOC260(Del) 887
PrmodKumarRathvStateofOrissa,(2005)
99CutLT299 57
ProductionTechnologyConsultantsv .
Bartlett,(1988) 25 Eg 121 CA(Estate's
Gazette):1988CLY460 218
ProgressiveConstructionsLtd vBharat
HydroPowerCorpnLtd, AIR1996
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ProtapmullRameswarv State ofW.B.,
(1956)61CWN78 118
ProvidentFinancialGrouppicvHayward,
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PublicWorksCommrvHills,
1906AC368 530
PukhrajDJainv G.Gopalakrishna,(2004)
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Puliyath Govinda Nair v Parekalathil
AchutanNair,AIR1940Mad678..150,151
PunchanunGhose v Dally, (1875) 15
BLR331 637
PunitBeriwalav SuvaSanyal,AIR1998
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Punj Lioyd Ltd vIndiaCementsLtd,AIR
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PunjLloydInsulationsLtdvSBI,AIR2006
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Punj Sons (P) Ltd vUnionofIndia,AIR
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Punjaband SindBankvNagrathIndustries
(P)Ltd,AIR1996MP32 724
PunjabNationalBankvKhazanSingh, AIR
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PunjabNationalBankvLakshmi
Industrial&TradingCo (P) Ltd,
AIR2001All 28 621,656
PunjabNationalBankvMayaEnterprises,
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PunjabNationalBankvMehraBros (P)Ltd,
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107. PunjabNationalBank v State of U.P., (2002)
5see80 621
PunjabNationalBank v Surendra Prasad
Sinha,1993 Supp (1) SCC 499: AIR1992
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PunjabNationalBank v Surinder Singh
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PunjabNationalBank vVirenderKumar
Goel,(2004)2 SCC 193 60
PunjabNationalBank v Yarlapadda
VenkataKrishnaiah,1998AIHC
3052(AP) 644
PunjabNationalBank Ltd v Satyapal
Virmani,AIR 1956 Punj 118 704
Punjab SEBv Abnash Textile Trading
Agencies, AIR 1986P&H323 483
PunjabSEBLtd vZoraSingh, (2005) 6
SCC776 583
Punjab Urban Planning8cDevelopment
Authority v ShivSaraswatiIron&cSteel
Re-Rolling Mills, (1998) 4 SCC 539 851
PunjabWoollen Textiles Firm v Bank of
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PunjabraoDeoraovSheshrao,AIR 1962
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PuranLaiSahvStateof U.P., (1971) 1
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PurbanchalCables&Conductors(P)Ltdv
AssamSEB, (2012) 7 SCC 462: (2012) 4
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PurePharmaLtdvUnionofIndia,ILR
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PurnaChandraBoravCommr,AssamState
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PurshotamdasTribhovandasv
PurshotamdasMangaldas,ILR (1896) 21
Bom23 396
PurshottamDasBanarsiDasvUnionof
India,AIR 1967 All 549 711,729
PurshottamVasudeovRamkrishnaGovind,
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PurshottamdasvGulabKhan,AIR1963
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PurushottamHaridasvAmruthGheeCo
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PusapatiKrishnaMurthyRaju v A.P. SEB,
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Pushong VManiaHalwani,1868 BLR
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Pushpendra Motilal Singh v Commercial
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Puspabala Rayt/Lie,AIR 1978Cal221..333
PuthukkattilParangodanvPuthukkattil
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PyareMohanvNarayani,AIR 1982 Raj 43 271
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2 QB402:(1954) 2WLR1005 98
Qabool Singh v Board of Revenue, AIR
1973
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QamarShaffi Tyabji vCommr,Excess
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R&cBCustomsBrokersCoLtdvUnited
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R.Clarke,(1927) 40 CLR227 10
R.VHoare,(1844) 13 M&W494:
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R.VKylsant, (1932) 1 KB 442 204
R.yMacdonald,(1885)LR15QBD323..675
R.VViscountHertford,(1681)Shower172:
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R.VWalker,1858LJMC207:
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R.&H.HallLtdvW.H.PimJuniorCo's
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R. BabuVTTKLig Ltd, (2004) 2 CTC 684:
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R.BaskarBhatvHindustanPetroleum
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R.C.ChandiokvChuniLaiSabharwal,
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R.C.Thakkarv BombayHousingBoard,
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R.D.SaxenavBalramPrasadSharma,
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R.K. Apartments(P)Ltd v Aruna Bahree,
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108. CVI:LawpfContract
R.K.MohammedUbaidullaht/HajeeC. RadhakrishnaSivaduttaRaifTayeballi
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R.K.MotishawvMercantileBankofIndia, RadheshyamvLalchand,(2005)4 Mah
37IC258 279 LJ441 4.65
R.K.ParvatharajGuptavK.C.Jayadeva RadheyShiamvBiharilal,ILR(1918)40
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LJ1 882RafflesfWichelhaus,(1864)2H&e906:
R.K.Saxenat/DDA,(2001)4see137: 159ER375 226,237,253
AIR2002Se2340 386RagazzonifK.e.Sethia,(1956)2QB490:, .r,
R.KumarandeovehemicalsUnlimited, (1956)2WLR204 !.263
AIR2001Bom116 9RaghavanyAlameluAmmal,ILR(1907)31j:,
R.L.Kalathia&cCovStateofGujarat, Mad35 563,564
(2011)2see400:AIR2011se754....441RaghbarDayalfPiareLaiBhoraMai,AIR.,
R.L.PintofF.RMenzes,AIR2001 1933Lah93 740
Kant141 791RaghunathfVarjivandas,(1906)30
R. LilavatilyBank of Baroda, AIR 1987 Bom578 ,183
Kant2:ILR1987Kant964 623,641,RaghunathPrasadySevaRamTikamDas,,
662, 664 AIR 1980 All 15 ;,\770
R.M.RRamanathanChettiarvRS.L. RaghunathPrasadSahuvSarjuPrasad.V
RamanathanChettiar,AIR1960 Sahu,(1924)19LW470:AIR1924
Mad207 741 PC60 185,189,191
R.N.GhoshVStateofTripura,AIR2000 RaghunathRaivJogeshwarPrashad
Gaull4 48 Sharma,AIR1999Del383 .,360
R.N.KumarvR.K.Soral,(1988)2SCC RaghuvirSinghBhattyvRamChandra
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R.ParthasarthyvDipsiChemicals,1987 RaharmanProdhanvStateofW.B.,(2009)
MahLJ900 577 4 CHN 701 557
R.RaghavacharivM.A.PakkiriMahomed, RaiBahadurH.RBanerjivCIT,ILR(1940)
1916seeOnLineMad 403:AIR1917 20 Pat202,214:AIR1941Pat 59 131
Mad250 821RaigadConcreteIndustriesvICICIBank
R.RamaRaovR.AppalaSwamy,AIR2011 Ltd,(2009)4 MahLJ923 595
1 847RaigarhJute andTextileMillsLtd vNew
R.RamanivShanthiDamodaran,AIR2011 HaryanaTransportCo,1994MPLJ626.319
960 Raj ChowdhuryfUnion of India, AIR 2000
R.RangarajvLegalRepresentatives,2000 Cal232 40
AIHC2206 3RajKishoreyPremSingh,AIR2011
R.S.DeboovM.V.Hindlekar,AIR1995 SC382 387,882,895
93 Raj Kumar Guptat/DesRaj, AIR 1995
R.SivaramvT.A.John, AIR1975 HP 107 390
282 Raj Narayan Pandeyv KameshwarThakur,
R.SureshchandraScCovVadnereChemical AIR2011Jha 13 846
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R.VinothKumarvSecretary,Kilpauk Bom215 165,167,168
MedicalCollege,Madras,1995SCC RajSheelvStateofA.P.,(1989)3SCC262-'
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R.W.GreenLtdvCodeBrosFarmers, RajaDhruvDevChandvRajaHarmohinder
(1978)1Lloyd'sRep602 86 Singh,AIR1968SC1024:(1968)3
RachakondaNarayanaPonthala SCR339 412
Parvathamma,(2001)8SCC173. . .865,867RajaGopalacharyuluvSecyofState,ILR
RadfordvDeFroberville,(1977)1 38Mad997 820
WLR1262 495,528RajaMaheshwarBakshSinghvShadilal,
RadhaFlourMillsPLtdvBiharState ILR(1908-09)36lA76:(1909)31
FinancialCorpn,AIR2009Pat12 581 All386 189
RadhaThiagarajanvSouthIndianBank RajaMaheshwarDayalSeth1/YuvrajDutt
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RadhakrishnaJoshivSyndicateBank, 1946Oudh42 953
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109. Raja of Venkatagiri v Rao Bahadur
Krishnayya,(1948) 61LW545:
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Raja Rai BhagwatDayalSingh v DebiDayal
Sahu,(1907-08)35lA48 821
Raja Ram v AbdulRashim,(1973) 9
SLR 77:(1915)31IC450 760
Raja Singh v Chaichoo Singh, AIR 1940
Pat201 244
RajahMokhamSingh v Rajah Rup Singh,
(1892-93)20lA127 . 283, 284
Rajah V. Muthu Krishna Yachendra vW.H.
iNurse, AIR 1921 Mad 320 . 708
Rajammav C. Puttachari,(2005)AIR
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Rajant/Yunuskutty,AIR2002Ker339. ..891
RajanagaramVillage Coop Society v P.
Veerasami Mudaly, AIR 1951Mad322...42
Rajaram Maize Products v M.P. Electricity
Board,AIR1999MP 44 322
RajasthanBhavan Trust v Pradlya Devi,
•Air2003 NOC 352 (Jhar): 2003AIHC
2272 (Jhar) 939
Rajasthan Coop Dairy Federation Ltd v
MahaLaxmiMingrateMarketingService
'(P) Ltd, (1996) 10see405: AIR1997
SC66 17
iRajasthanHandicrafts Emporiumv Pan
AmericanWorldAirwfays,AIR1984
Del396 ..318
RajasthanHousing Board v Engineering
Projects (India) Ltd, AIR2000
Raj 200 326
Rajasthan Rajya Sahkari KrayaVikraya
Sangh Ltd v RamMohan,(1988) 2 Raj
LR962 489
RajasthanSEBv Dayal Wood Works, AIR
1998AP 381: (1998) 2 ALD 599 40, 45
Rajat Kumar Rath v Govt of India,
AIR2000Ori32 265
Rajender Kumar Gupta vMadanLai,
AIR2010NOC644(P&H) 890
Rajendra Bahadursinghv Roshan Singh,
:AIR1950All592 167
Rajendra Kantilal Dalai v Bombay Builders
Co (P) Ltd, AIR2002Bom 408....892, 915
Rajendra Kumar Verma v State ofM^P.,
AIR1972MP131 46
Rajesh Kumar Choudhari v Darshansingh
Sardar, AIR 2011 Chh 179 919
Rajesh Kumar ChoudharyfUnited India
InsuranceCoLtd,(2005)3CCC
64(Gau) ^ 214
Rajesh Kumar Midda v State of Punjab,
(2004) 2CalLT 362 317
RajeshwarifPuranIndoria,(2005)7-
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Rajinder Kumar v Kuldeep Singh,(2014)15
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TableofGasesCVII
RajinderSinghvJoginderSingh,'(2003)1
ice705 (P&H) 2i9
Rajkishor Mohanty v Banabehari Patnaik,
AIR1951Ori291 332
Rajlukhy Dabee vBhootnathMookerjee,
(1899-00)4CWN488 147
Rajshree Sugars & Chemical Ltd v
AxisBankLtd,(2009)1CTC
111(Mad) 206,339
Rajshree Sugars and Chemicals Ltd v Axis
BankLtd, AIR 2011Mad144 279, 339
Raju Jyrwa v Union of India, AIR 2014
Gaul63 65
RakeshKumarDineshKumarvUGHotels
&ResortsLtd,AIR2006HP 135 150
RakhaSingh v Babu Singh, AIR2002
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Ram & Shyam Co v State ofHaryana,
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Ram AshishChaudharyv State of U.P.,
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RamAutarvRamPrasad,(2004)3 All
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RamAwadhvAchhaibarDubey,(2000)2
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RamBahadurSingh vTehsildar,AIR2002
All344 612
RamChandDiwanChandvSantSingh,
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RamChanderAggarwalvHansRajBanga,
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RamCharanDas vGirjaNandiniDevi,AIR
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RamDasvSalimAhmed,(1998)9
see719 936
RamDasChakarbartivCottonGinningCo
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RamDass vKishanDev, AIR1986HP 9 . . 148
RamGulamvGovtofU.P.,AIR1950
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RamKhilonavSardar,(2002)6SCC375:
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RamKishanDassvBhaviChandSharma,
AIR1988Del20 383
RamKishunvStateofU.P.,(2012)11SCC
511: (2012) 173CompCas 105: (2012) 4
All LJ 653 613
RamKrishanSinghal v ExecutiveEngineer,
ILR (1991) 1 Del 275 6
RamKrishnavNarayan,27 MLJ 639 936
RamKumarAgarwalavLakshmiNarayan
Agarwala, AIR 1947 Cal 157 466, 783
RamLaiKapur & Sons v Asian Commercial
AssuranceCo Ltd,AIR1933Lah483 . . . 766
RamNarainvHariSingh,AIR1964
Raj 76: ILR (1963) 13 Raj 973 603
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110. CVIIILawofContract
RamNiwasvBano,(2000)6SCC685:
AIR2000SC2921 856,892
RamPertabvMarshall,ILR(1898)26
Cal701 798
RamPrasadv State ofM.R,(1969) 3 SCC
24:AIR1970SC1818 723
RamPraveshPrasadvStateofBihar,
AIR2007Pat26 570
RamRattanvStateofU.R,(1977)1 SCC
188:AIR1977SC619 958
RamSaranvGangaDevi,(1973) 2 SCC 60:
AIR1972SC2685 940
Ram Sarup Bhagat v BansiMandar,ILR
(1915)42Cal742 268
RamSewakvRamCharan,AIR1962
All177 266
Ram SinghyJethanandWadhumal& Co,
AIR1964Raj232. . . . ; 422
RamSundarvEmperor,AIR 1929All904 938
Ram Swaroop Singh vKaranSingh, AIR
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RamSwarupvCourtofWards,ILR1940
Lah 1 (PC) 283
RamaIyerz^Jacob,(2003) 3KLT(SN)....419
RamaShankarSingh vShyamlataDevi,
AIR1970SC 716: (1969) 2 SCR360....365
RamachandraB. Loyalka v Shapurji N.
Bhownagree,AIR1940Bom 315 601
RamachandraMadhavadossCovMoovakat
MoidunkuttiBirankutti& Bros, Firm,
AIR1938Mad707 767
RamachandraNarayanNayakvKarnataka
NerravariNigamLtd, (2013) 15 SCC 140:
(2014) 5 SCC (Civ) 159 373
RamachandranvAngamuthuAmmal,
AIR2004NOC469(Mad) 937
Ramacharyav ShivNivascharya,(1918) 20
BomLR441:46IC19 130
RamakantSingh v Union of India, (2004) 1
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MahadeoChefalkar,(2004) 1 Bom
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GourishankarHanumanPrasad,
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111. RampurEngg Co Ltd v UnitedConstruction
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(1919-20)47lA434 939
RamzanvHussaini,(1990)1SCC104:
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RanchhodvManmohandas,ILR(1907)32
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RandhirSinghChandolkv Vipin Bansal, ,
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RanganathaGounder v Sahadeva Gounder,
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RaniConstructions(P)LtdvPatibelJV,
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132IC39 , 236
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Call50 189,540
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HP166 321,908
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All504 652
Ranjitsingh Murlisingh v Ramlal Shivlal,
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RannvHughes,(1778) 7 TermReports
350n(HL) 103
RanneeAnnapurniISIachiarv Swaminatha
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RaoRanivGulabRani,ILR1942
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Rasamoy Chowdhury v Anil Krishna Dawn,
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Rasappa Pillai vMittaZemindarDoraisami
Reddiar,AIR1925Mad1041 563
RasboraLtdyJCLMarineLtd, (1977) 1
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Raymond Woollen Mills Ltd v Coal India
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ReckittVBarnet,Prembroke&SlaterLtd,
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Red Rose CoopLabourandConstruction
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132ER1057 672,716
Regalian Propertiespicv London Dockland
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Ch766 764
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Frith,1906AC254 832
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RelianceIndustriesLtdvP8cOContainers
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Remington Rand of India v Sohanlal
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RenukaDatlav SolvayPharmaceuticalB.V.,
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Kukama,AIR 1951Kutch56 294
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RigossExportsInternational(P) Ltd v
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Robophone FacilitiesLtd v Blank, (1966) 1
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Robson&cSharpe v Drummond,(1831)2 B
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Rochees Hotels(P)Ltd v Jaipur
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Rocklines Constructions v Trupti K.Patel,
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Rodocanachiv Milburn,(1886)LR 18QBD
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Rogers Sons&cCovLambert& Co, (1891)
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Rose Fernandez v Joseph Gonsalves,
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Rose Valley RealEstate&Construction
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RoshanLaiv Delhi Cloth 8c GeneralMills'
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114. CXIILawofContract
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SamuelFitz&;CoStandardCottonand
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115. SatishChandraJain vNationalSmall
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Satnam Channan v Darshan Singh, AIR
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Satwant Singh Kochhar&cCovPunjab
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Satyabrata Ghosev Mugneeram Bangur&
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405,415, 416,417
SatyanarayanaConstructionCo vUnionof
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Saundatti Yellama Municipality v
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SavoySolventOilExtractionLtd vIndian
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SBIVEconomicTradingCo, AIR 1975
Cal145 625
SBIt/G.J.Herman,AIR1998Ker 161....613
SBIVGeminiIndustries,(2001) 3
GCD1885 623
SBIVGoutmiDeviGupta,AIR2002MP
61: (2003) 1 BC 165 613,704
SBIVIndexportRegistered, (1992) 3 SCC
159: AIR1992SC 1740 613, 645
SBIVJavedAkhtarHussain,AIR 1993
Bom87 702
TableofCasesCXIII
SBIt'Jayanthi,(2011) 2CTC465:
AIR 2011 Mad 179(DB) 640, 705
SBIVKusum VallabhdasThakkar,(1994)1
GLH 62: (1994) 1 Guj LR 655 603
SBIVLalsangbera,AIR2015Gau 67 359
SBIVM.P. Iron and Steel Works (P) Ltd,
AIR1998MP93 613
SBIVMadhumitaConstruction(P) Ltd,
AIR2003Cal7 959
SBIVManglabaiG.Deshmukh,(2005) 3
CCC487(Bom) 729
SBIVMulaSahakariSakkarKarkhanaLtd,
(2006) 6 SCC 293: AIR2007SC 2361..593,
624,633
SBIyN.Sathiah,AIR1989Mad279 719
SBIVNationalOpen School Society,
AIR2004Del306 582
SBIVNeelaAshokNaik,AIR2000Bom
151:(2000)1MahLJ 801 724
SBIVPraveenTanneries,(1992) 2 An LT 5 . 653
SBI VPremDass,AIR1998Del 49 667
SBIVPremco Saw Mills, AIR 1984 Guj 93 . 604
SBIVQualityBread Factory, AIR 1983
P&H244 656, 684
SBI1/S.B.ShahAli,AIR1995AP134....721
SBIVSajita Engg Works, AIR 1992
Ori237 609
SBIVSaksaria Sugar Mills Ltd, (1986) 2
SCC145:AIR1986SC868 614
SBIVState ofRajasthan,1995AIHC
4314(Raj) 719
SBI VSureshKumar,1995AIHC3889....724
SBIVT.Bardhan,AIR2011Gau68 9
SBIVT.R.Seethaverma,(1994) 2 KLT 18:
AIR1995Ker31 434
SBI VVivek Garg, AIR 2011 Sikk 7 645
SBQ Steels Ltd vIndianBank, AIR 2014
NOG452(Mad) 703
Scammell v Ousto, 1941 AC 251 327, 328
ScarfVJardine,(1882)LR 7 AC 345 . . 433, 817
Scarfe vMorgan,(1838)4M&W270:
150ER1430:51RR568 699
Scaria Paul v Paracka Industries, AIR 2011
Ker97 943
Schelde Delta ShippingB.V.vAstarte
Shipping Ltd, (The Panela) (1995) 2
Lloyd's Rep 249 60
Schiller vSooltanChand,ILR (1878) 4
Cal 252 461,462
Schultz VLa Groses CityRlyCo,(1907)133
Wis420 805
SCIL(India) Ltd vIndianBank,
AIR1992Bom 131 625, 648
ScotsonVPegg, (1861) 6H&N295:
158ER121:123RR516 144
ScottVRayment,(1868) LR 7
Eqll2 872,874
ScottScHartonvGodfrey,(1901) 2
KB726 788https://t.me/LawCollegeNotes_Stuffs

116. CXiyfLaw.ofContract
ScottishUnion8cNationalInsuranceCo
VN.RoushanJahanBegam, AIR 1945
Oudh152:ILR(1945) 20 Luck 194 269
ScrimshirevAlderton,(1743) 2Stra1182:
93ER1114 807
Scriven BrosScCovHindley&Co,
(1913) 3 KB564 237
ScruttonsLtdvMidlandSiliconesLtd,1962
AC446:(1962) 2WLR186 (HL)....97, 116
SearlevLaverick,(1874) LR 9 QB122....685
SebastianvMathai,(2006)1 CLT
147 (Ker) • 260
Secy of State v G.T.Sarin&Co, ILR (1930)
llLah375 569
Secy of State vMadhoRam, ILR(1929)10
Lah493 47
Secy of State v Sheo Singh Rai,(1875-80)2
All756 677
Secy of State forEducationand Science v
TamesideMetropolitanBorough Council,
1977AC 1014: (1976) 3WLR641 50
Secy of State for India v A.J.Arathoon,ILR
(1869-70)5Mad173 353
Secyof State for India v Bhaskar Krishnaji
Samani,AIR1925Bom485:ILR(1925)
49Bom759 47
Secy of State for India vFernandes,ILR
(1906-08)30Mad375 564
Secy of State for India in Council v Bank of
IndiaLtd,(1937-38)65lA286:AIR1938
PC 191: (1938) 175IC327 593
Secy of State in Council for India v
KamacheeBoye, 7MIA476 820, 823
SeeVFarey,(1889)13 LRNSW72 623
SeikhBrosLtdvOchsner,1957AC136:
(1957) 2WLR254 (PC) 238
SekarMudaliarvShajathiBi, AIR1987
Mad239 838
SekhsariaExportsv Union of India, AIR
2004Bom 35:(2004)1MahLJ 415...46,67
SelectmovLtd,re,(1995)1WLR474 (CA) .137
Sellers vLondonCountrisNewspapers,
(1951) 1 KB784(CA) 774
SelvarajuKounderv Sahadeva Kounder,
1997seeOnLineMad126:(1997)2
LW197 250
SenVBankof Bengal,(1919-20)47
IA164 624
Sepulchre Bros v Sait Khushal Das Jagjivan
DasMehta,AIR1942Mad13 35
Sesappier vSubramaniaChettiar,ILR
(1917) 40Mad678 729
SethKanhayaLaivNationalBank of India
Ltd,(1912-13)40lA56 583
SethMohanLaivGrainChambersLtd,
AIR1968SC772 396
SethSrenikbhaiKasturbhaivSeth
ChandulalKasturchand,AIR1997
Pat179 239
SethanivBhana,1993 Supp (4) SCC639;,
AIR1993SC956 285
Seymorev Kingscote, (1922) 38 TLR 586 . . 751
ShadiRamvMahtabChand,(1895)Punj,,,
Rec1 .734
ShadwellvShadwell,(1860) 9 CB (NS)159::.
142ER62:127RR604 -..143
Shah Jugaldas Amritlal v ShahHiralal
Talakchand,AIR1986Guj 88 ."689
ShaikIsmailvAmirBibi, (1902) 4 Bom .•-.r-A'
LR146 198
ShaikhKaluvRamSaranBhagat, '
(1908-09)13CWN388: 1 IC 94...292,,303
ShakuntalaDevifChamruMahto, .n'
AIR2009SC2075 . .851
ShambhuMurariSinhavProject&C. r'r„:-
DevelopmentIndia, (2002)3 SCC437:'j-
AIR2002SC1341 •60
ShambooNathTikoov S. Gian Singh, 1995r:
Supp (3) SCC 266 954
ShamliDasvSwadeshGhose,(2010)2 ;:
ICC40(Cal) :-830
ShamsherSingh vRajinderKumar,(2015)5
SCC531:AIR2014SC2253 ..-898
ShamsuddinivShawWallace8cCo,ILR ''
1939Mad282:AIR1939Mad520. . .816
ShanbhushamPillaivAnnalakshmiAmmal,'
AIR1950FC38:1949FCR441 ;386
ShankarMurlidhar1/MohanlalJaduram,'
ILR(1887) 11 Bom704 .'729
ShankarVishvanathvUmabai,ILR(1913)
37Bom471 118
ShankarlalAgarwallavSBI,AIR1987''
Cal29 759
ShankarlalBijreja v Ashok B Ahuja, AIR
2011Chh66 .'.909
ShankarlalLaxminarayanRathiv
UdaisinghDinkarraoRajukar,AIR 1976 .
Bom237 ..261
ShankerLaivBhuraLai,AIR1951
Ajm24 :.677
ShankerLaivStateofRajasthan,AIHC
2548(Raj) . ...: .362
ShankerLaiDamodharvAmbalalAjaipal,
AIR1946Nag260 .,436
ShankerNimbajivLaxmanSapdu,
AIR1940Bom161 596,597
ShanmughasundaramvDiraviaNadar,
(2005)10SCC728:AIR2005SC1836..,870
ShantaAgarwalvBaldotaBros, 1971 SCC
OnLineBom134 344
ShantabaiSonbaMadavivNanibai
UdebhanUike,AIR2015NOC
47(Bom) -846
ShantadevivSavjibhaiH.Patel,(1999) 4
GCD3190 833
ShanthiKawarbaifSushila,AIR2010
NOC454MadDB ,886https://t.me/LawCollegeNotes_Stuffs

117. ShantiDevivBhojpiirRohtas Gramin Bank,
(2006) 4 CPJ 83 (NC): AIR2007DOC
102(NCC) 367
ShantiLaiv Tara Chand MadanGopal,
AIR1933All158 682
Shanti Prasad Devii)ShankarMahto,
(2005)5see543:AIR2005SC2905...874
Shanti Swarup v Munshi Singh, AIR 1967
SG 1315: (1967) 2 SCR 315 .597
Shanti Vijay and Co v PrincessFatima
iFouzia,(1979) 4 SCC602:AIR1980
SC17 407
Shantidevi Pratap Singh Rao Gaekwad v
•Savjibhai S.Patel,(1998) 2 Guj
LR1521 ; 834
Shantiniketan Coop H.S. Ltd v Distt
Registrarof Coop Societies, AIR2002
Guj 428 742
ShappuAmmalv Subramaniyam,ILR
(1910) 33Mad238 123
SharadR.KhannavIndustrialCreditand
InvestmentCorpnofIndia,(1993) 1 Bom
CR546 645
SharadinvGokulchand,AIR 1931
Lah526 730
SharfathAlivNoorMahomed,AIR1924
Rang136 165
SharmaTransportv State ofKarnataka,
(2005)AIRKant94:2005AIHC583...578
Sharp Bros 8c Knight vChant,(1917) 1
KB771(CA) 586
ShashikalahParasharv State of Goa,
(1998)2BomCR427 60
Shaw VShaw, (1954) 2 QB 429: (1954) 3
WLR265(CA) 270
ShawVWoodcock,(1872) 7B&C73:
31RR158 746
Shaw&CofSymmons&Sons, (1917) 1
KB799 692
Shaw'Wallace8cCo Ltd v Unionof India,
,,,(2004)5CTC308 479,814
Shayler vWoolf,1946Ch 320 (CA) 430
ShearsonLehmanHuttonIncvMaclaine
Watson8c CoLtd,(1990)3 All ER
723(QBD) 488
SheffieldVEden, (1878) LR 10 Ch D
.291(CA) 707
SheffieldCorpnv Barclay, 1905 AC 392 . . 591,
819
Sheikh Farid Baksh vHargulalSingh,
AIR1937All46 775
Sheila B. Das v P.R. Sugasree, (2006) 3
MahLJ567 615
SheillsVBlackburne,(1789) 1 HBL 158...686
Shell U.K. Ltd v Lostock Garages Ltd,
(1976) 1WLR1187(CA) 304
SheoNathrAli,80A1170 963
SheoRatanPrasadGuptav Prema Devi,
(1997)IBLJR695 177
TablebfGasesCXV
Sheoratanv KaliCharah,79IC955 174
Shephard vCartwright,1953 Ch 728:
(1953) 1WLR460 (CA) 740,741
ShetManibhaiv Bai Rupaliba, ILR(1899)
24 Bom 160 815,818
ShiamLaiv AbdulSalam,AIR 1931
All754:ILR53All246 597
Shiam Sunder v Durga, AIR 1966.
All185 405
Shiamlalv Ram Piari, ILR (1910) 32
All25 163
ShibhoMaivLachmanDas, ILR (1901) 23
All165 341
Shibi Francis v State of Kerala, AIR2007
Ker296 721
ShiddappaAdiveppaJadivRamanria,AIR
2002Kant 416 ' 907
ShippingCorpnofIndiaLtd vBharatEarth
MoversLtd, (2010) 2MWN(Civ) 1 479
Shipping Corpn of India Ltd v C.L. Jain
WoollenMills,(2001) 5 SCC 345:AIR
2001SC1806 709
Shipping Corpn of India Ltd vMachado
Bros,1996AIHC3869 831
ShippingCorpnof India Ltd vMare
Shipping Inc, (2011) 8 SCC 39: AIR 2011
SC2608 555
Shipway vBroadwood,(1899)1 QB
369(CA) 764
ShirishFinanceandInvestmentPLtdvM.
Sreenivasulu,(2002)1 BomCR419 262
Shirley vBurdett,(1911) 2 Ch 418 667
ShivCharanvSukhRam,AIR2003NOC
251 (P8cH): (2003) 2 Rec Cri R 149 940
ShivConstructionvPWD,AIR2015
MP42 225
ShivKant Yadav v Indian Oil Corpn, (2007)
4SCC410:AIR2007SC1534 213
ShivKumarTiwarivJagatNarainRai,
(2001)10SCC11:AIR2002SC 211.....873
ShivNathRaiRamDharivUnionofIndia,
AIR1965SC1666 682
Shiv PalKaranKholivStateof U.P.,AIR
1988All 268 90, 91
ShivSaranLaivStateofM.P.,AIR1980
MP93:1980MPLJ218 45
ShivShankarDal Mills v State ofHaryana,
(1980)2SCC437:AIR1980
SC1037 576,577
Shiv Singh vUnionofIndia,AIR2007
NOC1879(MP) 55
Shiva Jute Baling Ltd vHindley8c Co Ltd,
AIR1959SC1357:(1960)1SCR569...541
ShivarajVasantBhagwatvShevantaD.
Indulkar,(1997) 2 BomCR384 84
ShivgangawaMadiwalappaVulaviv v
BasangoudaGovindgouraPatil,AIR1938
Bom304 193https://t.me/LawCollegeNotes_Stuffs

118. CXVILawofContract
ShivlalMotilalvBirdichandJivraj,1917
seeOnLineBom68:AIR1917
Bom268 816
ShivsaranLaivKeshavPrasad,AIR1917
Pat92 280
ShobatdeivDevipal,(1972) 3 SCC 495:
AIR1971SC2192 330
Shoolbred1/Roberts,(1899) 2 QB560....337
ShortVStone,(1846)8 QB358:
15 LJ QB 143 451
ShoshiMohunPalChowdhryvNobo
KrishtoPoddar,ILR(1874) 5Cal801...209
ShreeChandDaga vSohanlalDaga, AIR
1943Cal257 238
ShreeDigvijayCement Co Ltd v Union of
India,(2003)2SCC614;AIR2003
SC767 578
ShreeGopalBhagwan Das v State of Bihar,
(2004) 2 BLJR 1311 (Pat) 49
ShreeHanumanCottonMillsvTata
AircraftLtd,(1969)3SCC522:
AIR1970SC1986 548,223
Shree Jaya Mahal Coop Housing Society Ltd
VZenithChemicalWorks(P) Ltd,
AIR1991Bom211 67
ShreeramCloth Stores vTradingCorpnof
Bangladesh,(1980) 1CHN132 625
ShriBishwakarmaFurnitureWorkshop
VSantanuSarkar,(2006)5AIRKant
(NOC) 762 (Jha): AIR2006Jhar89:
2006AIHC2511 608,660
ShriJagdishMillsLtd vCIT,AIR 1959
SC1160:(1960) 1SCR236 736
ShriKrishnanvKurukshetraUniversity,
(1976) 1 SCC 311: AIR1976SC 376....213
ShriMahadevRamaBhonslevCentralBank
ofIndia,(1998)2 Bom CR244 655
ShriRamMetalWorksvNationalSmall
IndustriesCorpn,AIR1977Kant24 39
ShriTirumalaVenkateshwaraTimber&c
BambooFirmvCTO,AIR1968SC784:
(1968)2SCR476 739
Shri Vallabh Glass Works Ltd v Union of,
India,(1984)3SCC362:AIR1984
SC971 576
ShrikantfVasantrao,(2006)2SCC682:
AIR2006SC918 434
ShrilekhaVidyarthiv State of U.R, (1991) 1
SCC212:AIR1991SC537 95,192
ShrimantShamraoSuryavanshivPralhad
BhairobaSuryavanshi,(2002)3 SCC 676:
AIR2002SC960 922
ShrimativSiidhakarR.Bhatkar,AIR1998
Bom122:(1997)4BomCR237. . . .186,193
ShriniwasShankarPotnisvRaghukul
SahakariGriharachanaSansthaMaryadit,
(2010) 1MahLJ 368 606
Shriram City Union Finance Corpn Ltd v
RamaMishra,(2002)9 SCC 613:
AIR2002SC2402 320
Shriram Engg Co v State ofChattisgarh,
AIR2015Chh183 :437
ShriramPistons and Rings Ltd v Buckeye
Machines(P) Ltd, AIR2007NOC
1844 (Del) 467
ShriramTransportFinance Co Ltd v R.
KhaimllaKhan,(1993)1KantLJ
62 (DB) 720
Shuey v United States, 23 L Ed 697:
(1875)92 US 73 63
Shyam Behari Prasad Singh v State of Bihar,
(1991) 2 BLJR1024 565
ShyamCharanMaivChoudharyDebya
Singh Pahraj, ILR (1894) 21 Cal 872....171
ShyamKumariv EjazAhmadAnsari,
AIR1977All376 412
Shyamnagar Tin Factory (P) Ltd v Snow
WhiteFoodProductCoLtd,AIR1965
Cal541 444
SibKishoreGhosevManikChandra,
(1915) 29IC453 567
SicalLogistics Ltd vKarnatakaPower
CorpnLtd,(2006)6 AIRKant394 55
SICOMLtdVHarjindersingh,AIR2004
Bom337 615,623
SICOM Ltd VPadmashriMahipatraiShah,
(2005) 3MahLJ 125 605, 636
Siddhivinayak Realities (P) Ltd v Tulip
HospitalityServices Ltd, (2007) 4
SCC612:AIR2007SC1457 603
Simla BankingIndustrialCo Ltd v
Bhagwan Kaur, AIR 1928 Lah 316 704
SimlaBankingCo vPritams,AIR1960
Punj42 721
Simpkins v Pays, (1955) 1WLR975 13
SimplexConcretePiles (India) Ltd v Union
ofIndia,ILR(2010)2 Del699 548
Simpson vLondon&NorthWestern
RailwayCo, (1876) LR 1 QBD 274 468
Sims8cCofMidlandRlyCo, (1913) 4
KB103 752
SinclairvBrougham,1914 AC 392 (HL) 559,
560
Sinclair Freight andCharteringConsultants
(P) LtdVFielTraders,AIR1987Cal 201 .
Sind Biscuits Mfg Co vDelightEnggWorks,
1984All LJ964
Sindha ShriGanpatsinghjivAbraham,
ILR(1896)20Bom755 127,149
SinghyAli,1960AC 167 (PC) 347
SirDorabjiJamsetjiTataLtd vEdwardP.
Lance,AIR1917Bom138 342
SirdharVasantaRaoAnandaRao vGopal
RaoSethuRaoPeshwai,AIR1940
Mad299 Ill
759
389https://t.me/LawCollegeNotes_Stuffs

119. Sirkakulam Subramanyam v Kurra Subba
Rao,(1947-48)75lA115: AIR 1948
PC25 155
SirmauliInfrastructure(P) Ltd v State of
Maharashtra,(2011)5MahLJ 274 463
SirmourTruckOperatorsUnion vNational
InsuranceCoLtd,AIR2011NOC
389(HP) 687
Sita Deviv Bihar State Financial Corpn,
AIR2003Pat92 220
Sita Ram v KunjLai,AIR 1963 All 206 . . . 260
Sita Ram vRadhaBai, AIR 1968 SC 534:
(1968)1SCR805 276
Sitaram Bindraban vChiranjilalBrijlal,
AIR1958Bom291 496
Siya Ram vNagarPalikaParishad,
AIR 2010NOCnil(All) 846
Sk Dawood vS.I.RlyCo Ltd,ILR1945
Mad194 72
SkKaluVRam Saran Bhagat, (1909) 8
CWN388 293
Sk Peru Bux v Kalandi Pati Rao, AIR 1970
SC 1885: (1969) 2 SCR 563 748
Sk Rahmatulla v Sk SariutullaKagchi,10
WR51(FB) 939
SkinnerfJager, ILR (1883) 6 All 139 699
Smart v Sanders,(1848)5 CB 895....832, 834
SmithVEric S. Bush, (1990) 1 AC 831:
(1989) 2WLR790 (HL) 100,101
SmithVGreen, (1875) LR 1 CPD 92 472
SmithVHughes,(1871)LR 6 QB
597 (DC) 226, 239, 240
SmithVLand&cHouse Property Corpn,
(1884) LR 28 Ch D 7 (CA) 205, 206
SmithVLascelles,(1788)2 TR 187:
1RR457 757
SmithVMosse,(1940)1 KB 424 749
SmithVRiver DouglasCatchmentBoard,
(1949) 2 KB500:(1949) 2 All ER 179...116
Smith & SnipesHallFarm Ltd v River
DouglasCatchmentBoard, (1949) 2
KB500(CA) 115,124
SmithabenH.PatelvIndustrialCreditand
DevelopmentSyndicate, AIR1997
Kant188 427
Snow ViewPropertiesLtd v Punjab & Sind
Bank,AIR2010Cal94 446
Soames,re, (1837) 13TLR439 107
SociedadeDeFomentoIndustrialLtdv
RavindranathSubrayaKamat,(2000) 1
MahLJ 148 306
SocieteItalo—BeigePour Le Commerce et
I'Industriev Palm 8c Veg Oils (Malaysia)
SdnDhd,(1982) 1A11ER19 108
SocietePepperGrenoldevUnionofIndia,
AIR2004Del376 287
SohanLaiv Puran Singh,(1916)54 Punj
Rec165 602
TableofCasesCXVII
SohanLaiv Union of India,(1991)1
see438:AIR1991SC955 856
Sohan Singh v Avtar Singh, AIR 2015
Raj 1 900
Sohrabji v Oriental Govt SecurityAssurance
Co,(1944-45)72lA315:AIR1946
PC9 831
SolleVButcher,(1950)KB671(CA). . 235, 252
Solomanv Barker, (1862) 2F&F726:
121RR828 758
SomaDevi vGuinDevi,AIR2003HP158937
SomaiyaOrganics(India) Ltd v State of
U.R,(2001)5see519:AIR2001
SC1723 575
SomasundaramPillaivProvincialGovtof
Madras, AIR 1947 Mad 366 42, 64
Somnath Mahaswara v OrissaSRTC,
AIR1995Ori186 579
Sonia Bhatia v State of U.P., (1981) 2
see585 ; 129
SoorajmullBaijnath(P) Ltd vIndianOil
Corpn Ltd, (2004) 3ice539 (Cal) 55
SoornthNathBanerjeeBabasanker
Goswami,AIR1929Cal547 239
Soraban BewaJinnathBibi, (2004) 1ICC
273 (Cal) 219
SornalingaMudaliv PachaiNaickan,ILR
(1915)38Mad680 604
Sotiros ShippingIncv Sameiret Solholt,
1981ComLR201 521
South Australian Insurance Co v Randell,
(1869)LR3PC101 678
SouthEasternCarriers(P) Ltd vMohd
Sarvar,1996AIHC2988(AP) 685
South Eastern Roadways v United India
InsuranceCoLtd,AIR1991Ker 41 322
SouthcotVBennet, 1601 CroEliz815:
78ER1041 680
SouthwellVBowditch, (1875) LR 1
CPD 374 806,814
Sova Ray vGosthaGopalDey, (1988) 2
see134:AIR1988SC981 541
Sovintorg(India) Ltd v State Bank ofIndia,
(1999)6sec406:AIR1999SC2963...481
SowlerVPotter,(1940) 1 KB 271 234
SowrashtraVipra Sabha vNamakal
Municipality,(1996) 11SCC584 937
Spalding v Ruding, (1843) 6 Beav 376:
49ER871:63RR120 707
Spellman v Spellman, (1961) 1 WLR
921(CA) 13
Spence vCrawford,(1939) 3 All ER
271(HL); 223
SpencervHarding,(1870) 5 CP 561:
39 LJCP332:23 LJ237 22
Spruling(J.) Ltd v Bradshaw, (1956) 1WLR
461 (CA) 77
Sree YellammaCottonMills Co Ltd, re,
AIR1969Mys280 705https://t.me/LawCollegeNotes_Stuffs

120. CXVIIILawofContract
SriAlamvNewaires,(1994) 1CurrentLJ
32(Malaysia) 214
SriBrahadambalAgency vRamasamy,AIR
2002Mad352 881
Sri Chand v Jagdish Parshad Kishan Chand,
AIR 1966 SC 1427: (1966) 3 SCR 451...666
SriLakhaGranitesv Eklavya Singh,
AIR 2011 Raj 49 i.932
SriPalmarDevp andConstructionf
Transmetric,(1994) 1CurrLJ224'
(Malaysia) 625
Sri Raja Kakral Puni Venkatasudarasana
Sundaraetc. vAndhraBankLtd,(1960)1
AnWR234 ,, 725
Sri Rama Finance Corpn v Chajla Yellaiah
Reddi, (1976) 1 AnWR107 726
SriSanlcaranarayanaConstructionCo v
KonkanRlyCorpnLtd, (2004) 2 Bom
CR676 49
Sri Sri Shiba Prasad Singh v Maharaja Srish
ChandraNandi,(1948-49)76lA244:
AIR1949PC297 574
SriSunamaniNathvSukumariDeb,
AIR2009NOC261 (Gau) 901
SriVishnuCementsLtdv A.P. SEB,
AIR1999AP 103 556
Srihari Jena vKhetramohanJena, AIR 2002
Ori 195: (2002) 94 CLT 201 (Ori) . . 263, 281
Srikakulam Subrahmanyam v Kurra Subba
Rao,(1947-48)75lA115:ILR1949
Mad141PC 155,909
SrikanthaS.M.vBharathEarthMoversLtd,
(2005) 8see314: 2005 AIR Kant 2993..61
Srinivas& CofIndenBiselers,(1971) 3
see725:AIR1971SC2224 423,572
St Albans City and District Council v
InternationalComputers,1995 FSR 686 . . 95
StadiumFinanceLtdvRobbins,(1962)2
QB 664: (1962) 3WLR453(CA) 731
StaffsMotorGuaranteeLtd vBritishWagon
Co Ltd, (1934) 2 KB 305 730
Stag Line Ltd v TyneShiprepair Group Ltd,
(1984) 2 Lloyd's Rep 211 QB 100
StainforthvLyall,(1830) 7 Bing 169 521
StandardCharteredBankvAndhraBank
FinancialServices Ltd, (2006) 6 SCC 94 . 853
StandardCharteredBankvCustodian,
(2000) 6 SCC 427: AIR2000SC 1488..695,
714
StandardCharteredBankLtdvWalker,
(1982) 1 WLR 1410 (CA) 655
StandardChemicalsCo (P) Ltd vPalakol
Cooperative Sugars Co Ltd, (1988) 25
Reports 60.- 395
Star India (P) Ltd vLaxmirajSetharam
Nayak, (2003) 3 Bom CR 563: (2003) 3
MahLJ726 314,515
Starkey v Bank of England, 1903 AC
114 (HL) 591,817,819
StartupVMacdoriald,(1843)64 RR 810:
12 LJEx 477:(1843)6 Man&G 693....361
StateVBansilalChatarlal,1985Raj
LR325 578
StateAidedBankofTravancoreLtdv
DhirtRam,(1941-42)69lA1:
AIR1942PC 6 22
StateBankofBikanervFirmBallabhDas,
AIR 1984 Raj 107 723
State Bank ofHydembadfGadiraju Rama
BhaskaraVisvi^anadhaRaju,"AIR 1993
AP337' 718
StateBankofIhdorevNationalTextile
, Corpn,(2004)4 MPLJ 214 760
State Bank of Mysore v K.Amariiath,
(2003) 2 Kant LJ 31(DB) !721
State Bank of Mysore vMachadoComputer
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State Bank of Mysore vPukhrajmal
Sugarmal Lunkad, AIR 2007 NOC
589 (Mad)(DB) 630
StateBankofPatialavRomeshChander
Kanoji, (2004) 2 SCC 651: AIR2004
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StateBankofSaurashtravChitranjan
RangnathRaja, (1980) 4 SCC 516:
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StateBankofSaurashtravP.N.B.,(2001)5
see751:AIR2001SC2412 465,916
StateIndustrialandInvestmentCorpnof
MaharashtraLtd vNarangHotels (P) Ltd,
AIR1995Bom275 239
Stateof A.P. vAndhraBankLtd,AIR1988
AP18 719
Stateof A.P. vAssociatedEnggEnterprises,
AIR1990AP294 3.89
Stateof A.P. vCentralBankofIndia,(1982)
1AnWR(SN)10 648
Stateof A.P. vPioneerConstructionCo,
AIR1978AP281 9
State of A.P. v Singam Setty Yellamanda,
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AP182 :500,47
State of A.P.y'TanguduVaraprasadaRao,
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StateofA.P.vUnitedIndiaInsuranceCo
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State of A.P. v V.NarenderReddy, (2003) 4
ALD345 400
State of Bihar v Bengal Chemical 8c
PharmaceuticalWorksLtd,AIR1954
Pat14 19,28
State ofBiharvCharanjitlalChadha,
AIR1960Pat139 118
State of BiharVS.Gheyasuddin,AIR2009
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State ofGujaratv Bank of Baroda,
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121. State of GujaratVDahyabhai'Zaverbhai,
(1997)9see34:AIR1997SC2701....543
State of Gujarat v M.K.Patel&Co,
;AIR 1985 Guj 179 ,.536
State of GujaratyMemonMahomedHaji
Hasan, AIR 1967SC1885:(1967j'3.
SCR938 ,.675, 676
State of Gujarat v StateBank.of.Saurashtra,
AIR 2003NOe437(Guj).v ...^.;615
State ofHaryanaMalik!TradMS,-'(20ll)13 "
see200:(2oi2)Jsec(Civ):^9;;;;.",.49
Stateof Karnataka vCoimBatorePremier'f
Constructions,(1988)1Kant,LJ245^...,'.V..379
StateofKarnatakavk.K.Mohandas,'.',"'
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State ofKarnatakav M. Muriiraju,(2003),1"'"
kWlJ291 ..........786
State ofKarnatakav ShreeRameshwara
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StateofKarnatakavStellarConstruction
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StateofKeralavA.R.A.S.
ArmughamswamyNadar&Co, 1964
KLT203 64
StateofKeralavCochinChemical
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(1968) 3 SCR 556 457,477
State ofKeralav K.Bhaskaran,AIR 1985
Ker49 480
State of Kerala v K.D.Thomas,1996AIHC
1339(Ker) 9
State of Kerala v M.A.Mathai,(2007) 10
see195:AIR2007Se1537 179
State of Kerala vPailyChandy, 1984 KLT
260:AIR1984NOC70 (Ker) 396
StateofM.P.vFirmGobardhanDass
KailashNath,(1973) 1 SCC 668:
AIR 1973 SC 1164 64,65
State of M.P. vKaluram,AIR1967
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656,661,662
State of M.P. vRecondoLtd,
1989MPLJ822 497
State of M.P. vVyankatlal,(1985) 2 SCC
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State ofMadrasvGannonDunkerley & Co,
AIR1958SC560:1959SCR379 423
State ofMadrasvJayalakshmiRice
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ILR1958 AP 671 738,739
State ofMaharashtrav A.P. Paper Mills Ltd,
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StateofMaharashtravBritanniaBiscuits
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STC642 677
State ofMaharashtravDeepak,(1996) 2
.BomCR468 737
Tableof,CasestGXIX
State ofMaharashtrav M.N.Kaul,AIR
1967SC1634 318,640
StateofMaharashtravNational
ConstructionCo, (1996) 1 SCC 735:
AIR1996SC2367 ...I,...624
State of Mysore v Mysore Spg&MfgCo
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State ofOrissav Khan SahebMohdKhan,
AIR196iOri75 .^.,..,., 237
State ofOrissa.t/PratibhaPrakashBhawan,
AIR2005Ori58........................484
StateofOrissa.i;Rajbailav,Misra,AIRi976 ,
Ori19:y..1.1. ; ^420
StateofOrissavUnitedIndiaInsuranceCo.
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?.SC2671 ..v., ;592
State ofPunjabv DialChandGian
ChandScCo, (1983) 2 SCC 503:
AIR1983SC743 65
State of Punjab v KishanLai,(1991-2)
PLR283 64
State of Punjab v Rafiq Masih, (2014) 8
SCC883 570
State of Punjab v Shiv Ram, (2005) 7 SCC 1:
AIR2005SC3280 203
State ofRajasthanvAssociatedStone
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SC466 423
State ofRajasthanv BasantNahata,(2005)
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State ofRajasthanvNathuLai,AIR2006
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State of T.N. v S.Alagirsubramanian
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StateofT.N.v T.R.Surrendranath,AIR
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State of U.P.VBridge and Roof Co (India)
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State of U.P. VChandraGupta & Co,
AIR1977All 28 551,571
State of U.P.VKapilDeoShukla,(1972) 3
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State of U.P.VKishoriLai,(1980) 3 SCC 8:
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State of U.P.VMurariLai&Bros Ltd,
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State of U.P. VRajNarain,(1975) 4
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State of U.P.VVijayBahadurSingh, (1982) 2
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StateTaxCommrv SadaSukhVyapar
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State Trading Corpn of India Ltd v Golodetz
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StedmanvCollett,(1854)17 Beav608:
51ER1171 928
Steel Bros & Co Ltd vDayalKhatao8cCo,
ILR(1923) 47 Bom924 451
Steinberg vScala(Leeds)Ltd, (1923) 2 Ch
452 (CA) 166
Stephens v Badcock,(1832)3B&Ad354:
110ER133 771
Steven vBromley8cSon, (1919) 2 KB
722(CA) 7
StevensonvHardie,(1773) 2 BlackW872:
96ER513 742
Stevenson (Hugh) 6c Sons Ltd v Ag Fur
CartonnagenIndustrie,(1917) 1 KB 842
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Stewardv Rapley, (1989) 1 EGLR 159....505
StewartGill Ltd vHoratioMyer8cCo Ltd,
1992 QB 600: (1992) 2WLR72 (CA)...101
StilkVMeyrick,(1809) 2Camp317:
170ER1168 136
Stimpson v Smith, 1999 Ch 340: (1999) 2
WLR1292(CA) 667
STOVKanhaiyaLaiMukundLaiSaraf,
AIR1959SC135:1959SCR1350 575
StocksWilson,(1913) 2 KB 235 158
StocktonVMason,(1978) 2 Lloyd's
Rep 430 801
StoddartvUnionTrustLtd,(1912) 1 KB
181 (CA) 432
StorervGreatWesternRlyCo, (1842) 2 Y
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Storey v Fulham SteelWorks Co Ltd, (1907)
24TLR89 (CA) 404
StriklandvTurner,(1852) 7 Exch 208....252
StruttvWhitnell,(1975) 1WLR870 (CA) .526
SubbaRaovVaradaiah,AIR1943
Mad482 833
SubbammavMohdAbdulHafiz,AIR1950
Hyd 55 183
SubbashChandravNagarMahapalika,
AIR1984All228 109
SubbuChettivArunachalamChettiar,
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Mad382 117
SubhaNaiduvHajiBadshaSahib,ILR
(1902) 26Mad168 303,307
Subhadrav M.NarasimhaMurthy,AIR
2012Kant19 832
Subhadrat/Thankam,(2010)11SCC514:
AIR2010SC3031 929
SubhadraRaniPalChoudharyv Sheirly
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AIR2005SC3011 895
SubhasChandraDasMushibvGanga
PrasadDasMushib,AIR1967SC878:
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SubhashvNationalInsuranceCo,(2010)4
MahLJ582 594
SubhashKumarManwanivStateofM.P.,
AIR2000MP109 342
SubhashMainivNathiRam,AIR2012
All67 884
SubhashchandravNarbadabai,AIR1982
MP236 271
SubramaniavBatchaRowther,AIR1942
Mad145 647
SubramaniaChettiarvM.P.
NarayanaswamiGounder,AIR 1951
Mad48 647
SubramanianvKeralaSEB,(2003)2
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SubrataKumarDas vStateofWB,AIR
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SuchandGhosalvBalramMardana,ILR
(1911) 38 Cal 1 566
SucharitaPradhanv U.P. TwigaFibreglass
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SudarshanKumarKhoslavRajinderPal
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SudeshPrabhakarVolvoikarvGopalBabu
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SudhindraKumarvGaneshChandra,ILR
(1939) 1 Cal 241 281
Sugar VLondon Midland&;Scottish Rly
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Sughra Bee v Kaneez FatimaQureshi,
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Suguna VVinod G.Nehemiah,(2008) 2
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Suhrid Singh vRanbirSingh, (2010) 12 SCC
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SuisseAtlantiqueSocieteD'ArmementS.A.
VN.V.RotterdamscheKolenCentrale,
(1967) 1 AC 361: (1966) 2WLR
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Sujan SinghSadhanavMohkamChand
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Sujir Ganesh Nayak & CofNational
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Sujit DasGuptavSBI,AIR 2015 Cal 246...66
SukdevdossRamprasadv Govindoss
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SukhbirSingh VBrij Pal, (1997) 2 SCC200:
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SukhdeoRaivChampaDevi, (1986) 34
BLJR90 186
SukhdevKaurvHoshiarSingh,(2004)2
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SukulBros vH.K.Kavarana,AIR 1958
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Sukumaranv Anthony, (2005) 2 KLT 919 . 554
SukumariGuptavDhirendraNath,AIR
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SultanVNaner,1877 Punj Rec No 64 270
SultanSadik v Sanjay Raj Subba, (2004) 2
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SultanaSafianaTahsinvManojJajodia,
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SumatPrakashJainvLaxmi,AIR 2010 Raj
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SumathyvKamalamma,AIR2014NOC
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SumitomoHeavyIndustriesLtd vONGC,
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SumitraKawlrav DDA,1996AIHC
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SummanSingh vNationalCity Bank of
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SummersvSoloman,(1857)7E8cB879. . . 795
SumptervHedges,(1898) 1 QB 673 (CA) . . 462
SunPropertiesvHappyShoppingPlaza,
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SundaramFinanceLtdvStateofKerala,
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SunderSingh v KishenChand,1889 Punj
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Suraj KetPrasadvChandraMul,AIR1934
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SurajNarainvSukhuAhir,ILR (1928) 51
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SurajSanghiFinanceLtd vCredential
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SurajbaiGaliyanaSolankiBhilvRoopa
NevjiDabharBhil,AIR 2011 MP 160...938
SurajmallShiwbhagawanv Kalinga Iron
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SurasaibaliniDebivPhanindraMohan
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SurendraBehariLaiyJodonath,1984All LJ
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SurendraKumarGuptavNarayanRam,
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SurendraKumarRaivZilaParishadJhansi,
AIR1997All387 239,421
SurendraNathKoleyv KaliKumarSen,
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SurendraNathRoy vKedarNathBose,
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Suresh BabuNathvHargovindBatham,
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SureshDhanukavSunitaMohapatra,
(2012)1SCC578 297
SureshJindalv RizsoliCorriereDelia Sera,
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SureshMahajanvMyveneers,ILR1990
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SureshNarainSinhavAkhauriBalbhadra
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SurinderSingh vKapoorSingh,(2002)10
SCC109 863
SurinderSingh vKapoorSingh,(2005)5
SCC142 870,895
Suriya Das v AssamStateFisheriesDevp
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SurjitKaurvNaurataSingh,(2000)7
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SurjitSingh vBimlaDevi,AIR2008
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SuryaInvestmentCo v S.T.C. ofIndia,
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SuryaInvestmentCo v StateTradingCorpn
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SuryaNarainUpadhyayav Ram Roop
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SuryaNathSinghv.KKeduSingh,1994Supp
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SuryanarayanmurtivTammanna,ILR
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SusheelaDevivMaharshiCommerceLtd,
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SushilaDevi vHariSingh, (1971) 2 SCC
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SushilaUttamchandJainvRajeshKumar
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SuttonVTatham,(1839) 10 Ad&E 27:
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SvifanVBankofScotland,(1836) 10Bligh
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SwarnamRamachandranvAravacode
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Swastic Gases (P) Ltd vIndianOilCorpn
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SwirevFrancis,(1877)LR3 AC
106(PC) 802
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SyedKhursedAliv State ofOrissa,
AIR2007Ori56 405
SyedQuadriv SyedMujeebuddin,AIR 2010
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SyndicateBankvA.P.Manjunath,(1999) 2
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SyndicateBankvChannaveerappa
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SyndicateBankvDevendraKarkera,
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SyndicateBank v K.Manohara,AIR2003
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SyndicateBankv K.Prakash,AIR2007
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Syndicate Bank vMahalaxmiGinning
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Syndicate Bank vNarayanaIyer, (2003) 3
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SyndicateBankv R.Veeranna,(2003) 2
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Syndicate Bank v SeenuTraders,1999
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SyndicateBankv VijayKumar,(1992) 2
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Syndicate Bank vWilfredD'Souza,AIR
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T.A.Choudharyv State ofA.R,(2004)3
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T.C.MathaivDistrict8c SessionsJudge,
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T.G.LakshmiNarayanaChettyv K.V.
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T.JayaramNaiduvYasodha,AIR2008
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T.L.Rajagopalv S.N.Shivakumar,
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T.Lakshmipathiv P.NithyanandaReddy,
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T.M.BalakrishnaMudaliarfM.
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T.MohanKannammal,(2002)10 . .
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T.N. Civil SuppliesCorpnLtd vOswal
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T.N.TeaPlantationCorpnLtd vSrinivasa
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T.P.PetherpermalChettyv R.Muniandi
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T.R.BhavaniShankarJoshivGordhandas
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125. T. Sesha Reddyt^;ManagingGommittee,
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T.T. Augustine vChanganacherry
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T.Vijayendradasv M.Subramanian,
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Taj KeralaHotels&ResortsLtd vEasytec
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TakriDevi vRamaDogra,AIR1984
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TalbotVFord,(1842) 13 Sim 173:
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TamilNaduIndustrialInvestmentCorpnv
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Madl5(DB) 638
Tampling S.S. Co Ltd vAnglo-Mexican
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TanKinShanv V. Che Si,AIR1925
Rang135 618
Tan-WayBoom vOmarMaricanHoldings,
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TapashMajumdarvPranabDasgupta,
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Taplin VFlorence, (1851) 10 CB 744 835
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TataCellularvUnionofIndia,(1994)6
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TatungElectronic(S) Pte Ltd vBinatono
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TaylorvBhail,TheIndependent,Nov20,
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Taylorv Bowers, (1876) LR 1 QBD 291...344
TaylorvCaldwell,(1863) 3B&S826:
122ER309 391,392,397
TaylorvGlasgowCorpn,1952 SC440
(Scotland) 74
Taylorv Lee, (1924) 121 SE 659:
187NC393 600
TaylorO'Connor,1971AC 115 519
TCB Ltd Gray,1987Ch 458 (CA)..618,828
TciDistributionCentresLtdvOfficial
Liquidator,(2009) 6 CTC 814 897
Teb PekCheongv WongSoonKwong,
SingaporeHC(unreported) 207
TeheranEuropeCo Ltd v S.T. Belton
(Tractors)Ltd,(1968) 2 QB545 813
TekaDulav Bai Jivi, 39 BLR1072 933
TenaxSteamshipCo Ltd vBrimnes,1975
QB929(CA) 59
TenetHomes&Resorts(P)Ltdv
Ernakulam,AIR2001Ker279 262
TennentvTennents,LR 2ScotAp 6 131
TeraiTeaCoLtdvNathmalKedia,AIR
2012Cal43 877
TextileMachineryCorpnLtd v Kichcha
Sugar Co Ltd, (1989) 2CalLT 101 490
ThakammaMathewvM.Azamathulla
Khan,1993 Supp (4) SCC 492:
AIR1993SC1120 864,941
ThakarDast/Pulli,AIR1924Lah 611....164
ThakarKanaiya'lalRasiklalv State of
Gujarat,AIR2003Guj 14 288
Thaket/Maurice,(1985)2WLR215 203
ThakevMaurice,1986QB644(CA) 203
ThakorlalV.Patelv Lt. Col.Syed
Badruddin,(1993) 1 Guj LR 28 378,
492,543
ThamSaw Fong v Teh Teng Seng Realty,
(1990) 2CurrLJ860(Malaysia) 117
ThirumalaivGomathiAmmal,2000AIHC
1000(Mad) 265
ThiruvenkidamvQuilonPencilFactory,
(1990) 2 KLT327 766
ThithiPakurdasuvBheemudu,ILR(1903)
26Mad430 257
Thomast/Thomas,(1842)2 QB 851..103,145
ThomasBates 8c Son Ltd vWyndham
(Lingerie) Ltd, (1981) 1WLR505 (CA) . . 251
ThomasGabriel&SonsvChurchillSim,
(1914) 3 KB1272(CA) 746
ThomasGiblin vJohnFranklinMcMullen,
{1869)LR2PC317 681,685https://t.me/LawCollegeNotes_Stuffs

126. cxxivLawofContract
ThomasHughesvMetropoHtanRailway
Co,(1877)LR2 AC439 140
ThomasMarshall(Export) Ltd vGuinle,
1979Ch227 453
ThompsonfASDA-MFI,Grouppic,(1988)
2WLR1093 417
ThompsonvGibson,10 LJ Ex 243 597
ThompsonvLondon,Midland6cScottish
RlyCo, (1930) 1 KB 41 (CA) 72
Thomson-CSFvNationalAirportAuthority
ofIndia,AIR1993Del252 272
Thorntonv Shoe LaneParkingLtd, (1971) 2
QB 163 (CA) 69,73,74,77
ThotaGangaLaxmiv Govt of A.R, (2010)
15see207:(2011) 3 KLT345 930
ThovensenCarFerries vWeymouth
BoroughCouncil,(1972) Lloyd's Rep 614 . . 8
ThukkaramvShanthiVaradharajan,
AIR2011Mad57 946
ThyssenStahlunionGmbHv SAIL,
AIR2002Del255 483
TichelVShort,(1750) 2 Ves Sen239:
28ER154 757
Tiedemann8cLedermannFreres,re,(1899)
2QB66 821
TikkiLaiJaithuTelivKomalchand,AIR
1940Nag327:ILR1940Nag632..171,602
TilakramChaudharivKodumalJethanand,
AIR1925Bom175 320
TildenRent-A-CarvClendenning,(1978) 83
DLR(3d)400(OntCA) 76
TilendraNathMahantavUnitedBankof
India,AIR2002Gau1 704
TilokchandMotichandvH.B.Munshi,
(1969)1see110:AIR1970SC898....576
TilokchandNathmalvDhundiraj
Madhavurao,AIR 1957 Nag 2 964
TinsleyvMilligan(1994) 1 AC 340 (HL) . .347
TirthanandSingh v SkZerMohammad,
(2001)2BLJR1499(Pat) 353
TirumalaTirupatiDevasthanamsvK.M.
Krishnaiah,(1998) 3SCC331:AIR1998
SC1132 847
Tong Kheng Bros vAnuarulAini,(1990) 2
CLJ715 289
ToolMetalMfg Co Ltd vTungstenElectric
CoLtd,(1955) 1WLR761 142
TotaRamvKunwarZalimSingh, AIR1940
All69 764
TotalLibanSa vVitolEnergySa,2001QB
643(QBD) 491
ToubiVInatsunHohdays,1988 CLY 423 . . 525
ToucheVMetropolitanRly Warehousing
Co, (1871) 6 Ch App 671 121
TownAreaCommitteevRajendraKumar,
AIR1978All103:1978ALR78 420
TrainVGibbons,(1861) 2F&F358:
175ER1095 619
TransoceanShipping Agency(P)Ltd v
Black SeaShipping,(1998) 2 SCC 281:
AIR1998SC707 273
TransworldShipping Services (I) (P) Ltd
VOwners,1984SCCOnLineMad285:
(1986)99LW517 561
TravancoreDevaswomBoardvThanath
International,(2004)13SCC44:
(2004)1 KLT56 394
TravancoreRubber8c Tea CoLtdvCIT,
(2000)3SCC715:AIR2000SC1980...360
Treacher&Co Ltd vMohomedallyAdamji
Peerbhoy,ILR(1911) 35 Bom 110 43
TredgarIron8cCoalCo Ltd vSteamship
Colliope,1891 AC 11 (HL) 707
Tribe Taylor, (1876) LR 1 CPD 505 775
TribeTribe,1996Ch107(CA) 345
TridentGeneralInsurancevMcNieceBros
PLtd,(1988) 165CLR107:1989Comm
LRl 119
TrimexInternationalFZELtdvVedanta
AluminiumLtd,(2010) 3 SCC 1: (2010) 1
SCC(Civ)570 34
TirputiPlywoodProduct(P)Ltd vPradeshik
IndustrialInvestmentCorpnof U.P.Ltd,
AIR1997All364 611
TristarConsultantsvCustomerService
India(P)Ltd,AIR2007Del157 816
Trojan&cCovNagappaChettiar,AIR1953
SC235:1953SCR789 487
Trollope8c Colls Ltd vAtomicPower
ConstructionsLtd,(1963) 1WLR333:
(1962) 3 All ER1035 44
TronsonvDent,(1853) 8MooPC419....756
Tropic Shipping Co Ltd vKothariGlobal
Ltd,(2002)2 BomCR93 ;...811
TropicalInsuranceCo vZenithLife
Assurance,(1941)196IC198(Lah) 593
TruemanvLoder,(1840) 11 Ad 8c
El589 838
TrusteesofHarbour,Madrasv Best 8c Co,
ILR(1899)22Mad524 684
Trusteesof thePropertyof Ellis 8c Coy
DixonJohnson,1925AC489 723
Tsakiorglou8c CoLtdvNoblee8cThorl
GMBH,1962AC 93:(1961)2WLR633.408
TSBBankpicvCamfield,(1995) 1WLR
430(CA) 192
TTITeamTelecomLtdvHutchinson3G
UK Ltd,2003EWHC762 (TCC) 629
TudorGrangeHoldingsLtd vCitibankNA,
1992Ch53:(1991)3WLR750 96
TudorMarineLtd vTradaxExportS.A.,
(1976) 2 Lloyd's Rep 135 813
TukaramRamjiShendrevMadhorao
ManajiBhange, AIR 1948 Nag 293 168
TulkVMoxhay,(1919)88LJKB
861(HL) 124
Tulsabai vRajani,(2010) 6MahLJ 371 . . . 424https://t.me/LawCollegeNotes_Stuffs

127. TulshiramvRoopchand,(2006) 2Mah
LJ 647:AIR2006Bom 183 167
TulsiRam v Same Singh, AIR 1981
Del165 150
TungabaiBhratarPurushottamShamji
Kumbhojkavv YeshvantDinkarJog,
AIR1945PC8 190
TurnervGoldsmith,(1891)1 QB
544(CA) 398
TutikaBasavrajuvParry& Co,ILR(1904)
27Mad315 '.814
TweddlevAtkinson,123 ER761-.
1B&S23: 30 LJ QB 218: 4 LT468 112
TweddlevAtkinson,124RR610 117,
118,119
TwentscheOverseasTradingCo Ltd v
UgandaSugarFactoryLtd, (1945) 58
LW315:AIR1945PC144 393,408
TwyfordvManchesterCorpn,(1946) 1
Ch236 587
TyabjiDayabhai&CofJethaDevji&Co,
AIR1927Bom542 707
u
U.G.S.FinanceLtd vNationalMortgage
Bank of Greece, S.A., (1964) 1 Lloyds
Rep 446 81
U.K.Ramakrishnanv R.Raveendran,
(2004)1 KLT (SN 7) 6 (Ker) ...379
U.N.Automobiles(P)LtdvBankofBaroda,
AIR 2016 Raj 41 5
U.P.AvasEvamVikasParishadvOm
PrakashSharma,(2013) 5 SCC 182:
(2013)2see(Civ)737 51
U.P. Coop Cane UnionsFederationsv
West U.P. Sugar Mills Assn, (2004) 5
SCC430:AIR2004SC3697 179,185
U.P. Coop Federation Ltd v Singh
Consultantsand Engineers(P)Ltd,
(1988) 1 SCC 174 627,628,629, 631
U.P.FinancialCorpnvGarlonPolyfeb
Industries,AIR2001All 286 612
U.P.GovernmentvLalaNanhooMai
Gupta,AIR 1960 All 420 243
U.P.PurvaSainikKalyanNigamLtd v
StateofUttaranchal,AIR2005Utt33:
2006All LJ 1622 (Utt) 827,829
U.P. SEB VCityBoard,Mussoorie,(1985) 2
SCC16:AIR1985SC883 577
U.P. SEB VGoelElectricStores,AIR1977
All494 38
U.P. State BridgeConstructionCorpnLtd v
BangaloreDevelopmentAuthority,
AIR2005NOC421(Kant):(2005)5
KantLJ 112 388,518
TableofCasesCXXV
U.P. State Sugar Corpn vMahalchandM.
Kothari,(2005)1 SCC348:AIR2005
SC61 450,477
U.P.StateSugarCorpnvSumac
InternationalLtd,(1997)1 SCC 568:
AIR1997SC1644 624
U.P. State SugarCorpnKaramchariAssn v
StateofU.R,1995All LJ937 209
U.PanVMaungPo Tu,AIR1927Rang90:
100IC327 236
U.SulaimanvMaYwet,AIR1934Rang
198:(1934)151 IC 413 730
UberoiMohinderSingh v State ofHaryana,
(1991)2SCC362 373
UCOBankvHemChandraSarkar,(1990)3
SCC389:AIR1990SC1329..677,683,744
UdhoBai vAmbikaTiwary,AIR2007
Pat136 103
UjjalTransportAgency v CoalIndiaLtd,
AIR 2011Jha34 604
UlfatRaivGauriShankar,ILR(1911) 33
All657 164
UltzenNicols,(1894) 1 QB 92 672
UmaKanoriavPradipKumarDaga,(2002)
2ICC588(Cal) 714
UmaMineralsvMalabarCementsLtd,
AIR2003Ker146 539
UmabaivNilkanthDhondibaChavan,
(2005) 6 SCC 243:(2005)MahLJ306...882
UmacharanShaw&BrosvCIT,(1959)37
ITR271 (SC) 258
UmaraniSen vSudhirKumarDutta,AIR
1984Cal230' 711
UmashankerSao vSonsaiSahu,AIR2006
Chhatl02 330
UmeshChandraChakravartyvUnionBank
ofIndia,(1991)1GauLR223 150
UnikolBottlersLtdvDhillonKoolDrinks,
AIR1995Del25 437
UnionBankofIndiavA.T.AliHussain8c
Co, AIR 1978 Cal 169 581
UnionBankofIndiavAvinashP.Bhonsle,
1991MahLJ1004 604
UnionBankofIndiavDebendraNathRoy
Choudhury,AIR1992Gau 88 723
UnionBankofIndiav K.V.Venugopalan,
AIR1990Ker223 677
UnionBankofIndiavM.P.Sreedharan
Kartha,AIR1993Ker285 607, 656
UnionBankofIndiavMankuNarayana,
(1987) 2 SCC 335: AIR1987SC 1078..645,
656
UnionBankofIndiavMoninEnterprises,
AIR2002Kant270 603
UnionBankofIndiavNoorDairyFarms,
(1997) 3 Bom CR 126 614
UnionBankofIndiavSureshBhailal
Mehta,AIR1997Guj 48 609,654https://t.me/LawCollegeNotes_Stuffs

128. CXXyrLaw;ofContract
Union Bank of India v T.J. Stephen,
AIR1990Ker180 623
UnionBankofIndiavVenugopalan,
(1990)1KLT262 703
UnionCarbideCorpnv Union ofIndia,
(1991) 4see584:AIR1992SC 317...282,
446
UnionofIndiav A.L.RalliaRam,AIR1963
SC1685:(1964)3SCR164 490,820
Union of India vAmarSingh, AIR 1960 SC
233;(1960)2SCR75 574,681,768
UnionofIndiavAmarendraNathSarkara,
AIR1967Cal119 595
UnionofIndiav B.Prahlad8c Co,AIR
1976Del236 488
UnionofIndiavBabulalUttamchand
Bhandari,1967SCCOnLineBom 62:
AIR1968Bom294 446
UnionofIndiav Bhim SenWalaitiRam,
(1969)3SCC146:(1970)2SCR594 64
UnionofIndiav C.Damani& Co,1980
Supp SCC 707:AIR1980SC1149 407
UnionofIndiav C.T.Shentilanathan,(1978)
48CompCas640 . 721
UnionofIndiavChamanLaiLoonaScCo,
AIR1957SC652:1957SCR1039 128
UnionofIndiavChananShahMahesh
Dass, AIR 1955 Pepsu 51 402
UnionofIndiavChinoyChablani8c Co,
AIR1976Cal467 815
Union ofIndiav Col.L.S.N.Murthy,
(2006)4ALD368 567
Union ofIndiavCommercialMetalCorpn,
AIR1982Del267 484
Union ofIndiav DeepChand,AIR2007
NOC1756(Utt) 728
Union of India vGangadharanMohandas,
(1997) 2 Cal LJ 221 22
Union ofIndiavGangaramBhagwandas,
AIR1977MP215 441
Union of India vGodfreyPhilips India Ltd,
(1985)4SCC369:AIR1986SC806 110
UnionofIndiavGopalChandraMisra,
(1978)2SCC301:AIR1978SC694 61
Union ofIndiavGosaliaShipping (P) Ltd,
(1978)3SCC23:AIR1978SC1196 88
UnionofIndiavHafizBashirAhmed,
1987SuppSCC 174 689
UnionofIndiavHalasidharnthSahakari
SakharKarkhanaLtd,AIR2011
Gau78 686
UnionofIndiavHariMohanGhosh,
AIR1990Gau14:(1990)1GauLR
(N0C)31 479
UnionofIndiavHariShankerGauri
Shanker,2005All LJ2200 479,689
Union ofIndiavIbrahimUddin, (2012) 8
SCC148:(2012)4SCC(Civ)362 940
UnionofIndiavIndoAfghanAgenciesLtd,;,
AIR1968SC718:(1968)2SCR366 110
Union of India vITCLtd,1993.Supp (4)
SCC326:AIR1993SC2135 578
UnionofIndiafJ.K. GasPlant,(1980) 3
SCC469:AIR1980SC1-330. :.-570
UnionofIndiafjalRustomjiModi,(1970) :}.
3SCC368:AIR1970SC1490........;582
UnionofIndiav Jolly SteelIndustries(P)-JG
Ltd,1980Supp SCC 436: AIR1980
SC1346 ...:;...;;488
UnionofIndiavK.H.Rao,(1977)1' !.'
SCC 583: AIR1976SC 626 '488|'552
Union of India v KishoriLaiGupta 8c Bros,
AIR1953Cal642 436
Union ofIndiavKishorilalGupta8cBros;:-
AIR1959SC1362:(1960) 1SCR493 . .3216,
435,44
UnionofIndiavLaiChand8cSons,
AIR1967Cal310 574
UnionofIndiav M.V.Damodar,AIR2005'
Bom137 .188
UnionofIndiavMaddalaThai,(1964) 3
SCR774:AIR1966SC1724 48
Union ofIndiavMankuNarayana,(1987)2
SCC335:AIR1987SC1078 613
UnionofIndiavMeenaSteelsLtd,
AIR1985All282 629
UnionofIndiavModernStoresIndiaLtd,
AIR1988Cal18 651
UnionofIndiavMohdNazim,(1980) 1
SCC284:AIR1980SC431 .769
UnionofIndiavNavilakha8c Sons,
AIR1997Bom209 446
Union ofIndiafPanipatWoollen Mills Co
Ltd, AIR1967Punj 497 479
Union of India v Pearl Hosiery Mills,
AIR1961Punj281 287,641,657
Union ofIndiav PeecoHydraulics(P) Ltd,
AIR2002Del367 39
UnionofIndiavPhilipsConstruction,
(1980)1KLT42 328
Union of India vRadhaKissanAgarwala,
(1969)1SCC225:(1969)2SCR28:
AIR1969SC762 370
Union ofIndiavRamanIronFoundry,
(1974)2SCC231:AIR1974
SC1265 490,635
Union of India vRampurDistillery 8c
ChemicalCoLtd,(1973) 1 SCC649:
AIR1973SC1098 550
Union of India v S.NarainSingh, AIR 1953
Punj274 42
UnionofIndia!/SAIL,AIR1997Ori77..579
UnionofIndiavShaimSunderLai,
1963A11LJ251 542
Union of India vShenthilnathan,(1977) 2
MLJ499 720https://t.me/LawCollegeNotes_Stuffs

129. UnionofIndia'rSiWMmJaiswal,(J976)4
;SCG505:AIR)1977SG329':v-../. 567
UnionofIndiavSolarPesticides'(P) Ltd,
"(2000)2see705: AIR2000SC 862....559
UnionofIndiavSteelStock-Holders'
^Syndicate,(1976)see108:'''
AIR1976'SC879 v. ; 487
UiiionofIndiavStrawProdiicts,(1989) 2
OriLR356,...;.;...;.. 576
Union ofIndiavSugauliSugarWorks (?)
•Ltd,(1976)3see32 684
UnionofIndiaz/TantiaConstiruction(?)
iLtd;.(2011)5see697 437
Union,of-IndiavTribhuwanDasLaljiPatel,
oAIR1971Del120, .... . :497
UnionofIndiai/UdhaRam&Sons,
,,AIR1963Se422:(1963)2SCR702 682
UnionofIndiaV.P.Parukutty,(1997) 2
see252:AIR1997Se1903 828
UnionofIndiav WestPunjabFactoriesLtd,
AIR1966se395:(1966)1SeR580....488
Union of India v Wood Papers Ltd,
(1989) 2 Guj LR1323 577
UnionofIndiav Col.L.S.N.Murthy,(2012)
1SCC-718:(2012) 1see(eiv)368 567
UnionofIndiav VasaviCoopHousing
Society,(2014)2See269:AIR2014
;SC937 942
UniquePharmaceuticalLaboratoriesv
iStalco FreightInternationalCo, (2005) 6
BWeR829 320
UnitTrustofIndiavRavinderKumar
Shukla,(2005)7See428:AIR2005
,SC3528 739
UnitedAustraliaLtd v BarclaysBankLtd,
-,1941Aei 560
UnitedBankofIndiavNewGlencoeTeaCo
Ltd,AIR1987Cal143 716
UnitedBankofIndiavRafiullaTeaand
Industries(P)Ltd,AIR2002Gau101...600
UhitedBankofIndiavRamdasMahadeo
Prashad,(2004)1See252:(2004)1
CLJ 147 433
UnitedBankofIndiav.BankofBaroda,
AIR1997Mad23 582
United Breweries(Holding)Ltd vKarnataka
StateIndustrialInvestment
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Kar 65 (DB) 601
UnitedBreweriesLtdvStateofA.P.,(1997)
3see530:AIR1997Se1316 677
UnitedeityMerchants(Investments) Ltd v
Royal Bank ofCanada,(1983) 1 AC 168:
(1982) 2WLR1039 (HL) 628, 631, 634
UnitedCoconutOilMillsvIndian
OverseasBank,(1991)3CurrLJ2345
(Singapore) 634
UnitedCommercialBankvJawaharlalMill,
(1989) 2 Cal LJ 246 380
53^blieofGasesjCXXVII
UnitedCommercialBankLtd'V'OkaraGrain''-''
Buyers Syndicate Ltd, AIR 1968SC1115:
(1968)3SCR396 624
UnitedIndiaInsuranceCoLtdvAbbisetti
Venkatarao,AIR2008AP 8 376
UnitedIndiaInsuranceCoLtdvKiran
Combers&Spinners,(2007)1SCC368:
AIR2007se393 87
UnitedIndiaInsuranceCoLtdvM.K.J.
Corpn,(1996) 6 SCC428:AIR1997
SC408 447
UnitedIndiaInsuranceCoLtdv
PushpalayaPrinters,(2004) 3 SCC 694:
AIR2004SC1700 360,89
UnitedIndiaInsuranceCoLtdv T.Venkata
Narsaiah,AIR2002NOC119 (AP) 592
UnitedProvinceGovtvChurchMissionary
TrustAssn Ltd,ILR(1948) 22 Luck 93:
AIR1948Oudh54 133,786
Unity Finance Ltd vWoodcock,(1963) 1
WLR455(CA) 649,653,669
UniversalPetrochemicalsLtdvRajasthan
SEB, AIR2001eaH02 326
UniversalSteamNavigationCofJames
McElvie&;Co,1923AC492(HL) 813
UniverseTankshipsIncvInternational
TransportWorkers'Federation,(1983) 1
AC366:(1982)2WLR803 (HL) 194
UnnaoCommercialBankvKailashNath,
AIR1955All393 284
UpendraMohantvChampa,1996AIHC
3449(Ori) 219
Upfillt^Wright,(1911)1KB506 270
UPSEBVLakshmiDeviSehgal,AIR1977
All499 261
Upton-on-Severn RDC v Powell, (1942) 1
AllER220(eA) 7,127
UrbanImprovementCo (P) Ltd vUjagar
Singh, AIR1996P&H167 563
Usha VSukhdevSingh, AIR2015NOC
338(P&H) 883
UshaDeltronLtdvNandKishore
Parasramka,AIR2001Cal 137 485
UshadeviMalhotravBhagwandasTiwari,
AIR1967MP250 650,652
UtpalMitrav Chief Executive Officer,
AIR2006Cal74 57
UttamSinghDugaland Co (P) Ltd v
HindustanSteelLtd,AIR1982MP206. . 333
UttamchandvMohandas,AIR1964
Raj 50 419
V
V.e.K.BusService.LtdvRTA,AIR1957
SC489:1957SCR663 422
V.L.Narasuv P.S.V.Iyer,AIR1953
Mad300 398,416https://t.me/LawCollegeNotes_Stuffs

130. CXXVIIILawofContract
V.Lakshmananv B.R.Mandalagiri,1995
Supp(2)SCC33 543
V.MuthusamivAngammal,(2002) 3 SCC
316:AIR2002SC1279 902
V.N.DeshpandevArvindMillsCo Ltd,
AIR1946Bom423 307
V.P.DesavUnionofIndia,AIR1958
MP297 356
V.PechimuthuvGowrammal,(2001) 7
SCC617:AIR2001SC2446......860,903
V.R.Subramanyamv B.Thayappa,AIR
1966SC1034;(1961) 3SCR663 570
V.R.SudhakaraRaov T.V.Kameswari,
(2007)6SCC650 860
V.RaghunadhaRao v State of A.P., (1988) 1
AnLT461 266
V.RajaRaov A.P.T.Co,(1969)2
APLJ151 ; 323
V.RajeshwarivT.C.Saravanabava,(2004)
1SCC551 845
V.RamanujamvKarnatakaStateFinancial
Corpn,2002SCCOnLineKar616;
2003AIRKantR473 615
V.RameshvConvenor,EAMCET,
AIR1997AP79 784
VS.PalanichamyChettiarFirm v C.
Alagappan,(1999) 4 SCC 702: AIR1999
SC918 923
VS.Prabhuv R.D.Mujumdar,(1993) 2
KantLJl 697
VS.RahiVRamChambeli,(1984) 1 SCC
612:AIR1984SC595:(1984)2
SCR290 422
V.SardarAliv Sajan Singh,1900AC
167(PC) 266
VV.GuptaVMCD,AIR2006NOC
1035(Del) 627
VVSivaramvFOSECOIndiaLtd,2005
SCCOnlineKar595:(2006)1AIR
KantR120. . . ." 313
V/0TvazhpromexportvMukandLtd,
(2005)5BomCR130 483
VadakattuSuryaprakasam-fAkeGangaraju,
AIR1956AP33 155
VaidehiAkashHousing(P) Ltd vNewD.N.
NagarCoopHousingSocietyUnionLtd,
AIR2015NOC772(Bom) 579
VairappaThevarvTehsildar,(1989) 1
MLJ387 477
Vairavanv K.S.Vidyanandam,AIR1996
Mad353 378
VairavanChettiarvAvichaChettiar,ILR
(1915)38Mad275 818
VairavanChettiarvKannappaMudaliar,
AIR1925MadPC91 ; 374
VaithelingavSaminada,ILR (1872) 2
Mad44 301
Valapad Coop Stores Ltd v Srinivasa Iyer,
AIR1964Ker 176 792,793
ValentinivCanali,(1889)24 QBD 166:
(1886-90)AllERRep883:59LJQB74. 166
Valley vDallubhoy,ILR 25 Bom 10 934
ValliamalvAngammal,AIR2002
Mad292 881
ValluriRamanammavMarinaViranna,
(1931)33MLW757:AIR1931PC100..284
VamanTrimbakJoshivChangiDamodar
Shimpi,ILR(1925) 49 Bom 862 363
VanHatzfeldtWildenburgvAlexander,
(1912)ICh284 329
VanVibhagKaramchariGrihaNirman
SahkariSansthaMaryaditvRamesh
Chander,(2010) 4 SCC596:AIR2011
SC41 912
VancouverMalt8c SakeBrewingCo Ltd v
VancouverBreweriesLtd,(1934) 39LW
618:AIR1934PC 101 291,299
VarghesevAbraham,AIR1952TC202...600
VarghesevDhanalakshmiBankLtd,
(1997)1KLT843 612
VarghesevDivlForestOfficer,AIR2003
Ker197:(2003)1KLT892 48,65
VarghesePaul vNarayananNair,(1999) 2
KLT571 371
VarietyBodyBuildersvUnionofIndia,
AIR1973Guj256 550
Varsha Engg (P) Ltd v VijayTraders,
Baroda,AIR 1983 Guj 166 739
VarshaFabrics(P)LtdvStateofOrissa,
(2006)102CutLT137 4
Vasanji Moolji vKarsondasTejpal,
AIR1928Bom270 77A,775
VasantDeoraoDeshpandevSBI,(1996)1
MahLJ914 727
VasantRajaramNarvekarvAnkusha
RajaramNarvekar,(1995) 3 Bom
CR196 152
VasanthaViswanathanv V.K.Elayalwar,
(2001)8SCC133 890
VasireddiSeetharamaiahvSriramaMotor
FinanceCorpn,AIR1977AP164 654
VasundharaOilIndustries(P)Ltdv
Collector,(1998) 33ALR29 611
VaswanivItalianMotors(Salesand
Services)Ltd,(1996)1WLR270 459
VatsalaShankarBansole v Sambhaji
NanasahebKhandare,AIR2003
Bom57 926
VatsavayaVenkataSubhadeayyamma
JagapatiBahadurGuruvPoosapati
VenkatapatiRajuGaru,(1924-25)
52lA1:(1924)20LW298;AIR1924
PC 162 283,284
VatsavayiVenkataSuryanarayanamaRaju v
MettaVeerabhadraRao,(1999) 1
ALD308 384
Ved and Sopher v R.P.Wagle& Co,
AIR1925Bom351 707https://t.me/LawCollegeNotes_Stuffs

131. VeerProbhuMktg Ltd v NationalSupply
Corpn,AIR2006Cal301 629
Veera Exports v T. Kalavathy, (2002) 1
see97:AIR2002SC 38 332
VeeraPropertyDevelopment (P) Ltd v
T.N. SlumClearanceBoard, AIR 1999
Mad304 48
VeerammavAppayya,AIR1957AP 965 . . 123
VeerayeeAmmalvSeeniAmmal,(2002) 1
see134;AIR2001SC2920 862
VegiVenkateswara Rao v VegiVenkatarama
Rao,AIR1998AP 6 374
VelappaKumar v KosammattomCliitFund,
1978KLT10 646
VeluPadayachi v Sivasooriam Pillai,ILR
1950Mad987 258
VenkataHanumanthaBhushanaRaov
GadeSubbayya,(1936) 44LW414:
AIR1936PC283 540
Venkata SimhadriJagpatirajuv SriLakshmi
NrusimhaRoopaSadrusannamaArad
DugarazuDakshinaKavataDugarazu,
AIR1916Mad980 563
VenkatachalamvNarayanan,ILR (1914) 39
Mad376 836
Venkatappa2/M.Abdul Jabbar, (2006) 9
see235 942
Venkatarajai/.VidyaneDoureradjaperumal,
(2014)14see502 940
Venkataramanav Annayya Hedge,
AIR2004Kant433 937
Venkatarangayya Appa Rao v Varaprasada
RaoNaidu,ILR (1920) 43Mad898:
(1921) 60IC164 595
Venkataswamy v A.Narayana,AIR 2002
Kant326• 958
VenkateshConstructionCovKarnataka
VidyuthKarkhaneLtd, (2016) 4SCC119:
AIR2016SC553 380
Venkateswara MineralsyJugalkishore
ehiranjitlal,AIR1986Kant14 382
Venture Global v SatyamComputer
ServicesLtd,(2010)8SCC660:
AIR2010SC3371 279
VPS Global Services (P) Ltd v Suprit Roy,
2007seeOnLineBom1083:(2008)3
MahLJ266 306,313
VictoriaLaundry(Windsor)Ltd vNewman
Industries Ltd, (1949) 2 KB 528(CA). . . 469,
470,483,492
VideoconIndustriesLtd vCoalIndiaLtd,
AIR2014ealll3 637
Vidya Securities Ltd vComfortLiving
Hotels(P)Ltd,AIR2003Del214 875
Vidya Vati v DeviDas,(1977) 1 SCC 293:
AIR1977SC 397 362,375
Vidya Wati vHansRaj, AIR 1993
Del187 297
TableofCasesCXXIX
Vijay Bhadur andChampalalv Surendra
Kumar, AIR 2003 MP 117 883, 892
Vijay Engineers8cDevelopers v
Suryadarshan Coop Housing Society Ltd,
(2011) 5MahLJ 610 (Bom) 537
Vijay FireProtectionSystems Ltd v
VisakhapatnamPort Trust, (1997) 3 An
WR261 54
VijayKumarv NeeruRajput,AIR 2014
NOC217(Del) 895
Vijay Kumar AjayKumar v Steel Authority
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Vijay SinghAmarSingh vHindustanZinc
Ltd, AIR 1992 Raj 82 274
Vijay Singh Padode v Sicom Ltd, (2000) 4
MahLJ772 615
Vijay Traders v Bajaj Auto Ltd, (1995) 6
SCC566 738
VijayaBankvNaveenMechanised
Construction(P)Ltd,AIR2004
Kant 199 704,706
Vijaya Bank v UnitedCorpn,AIR 1991
Ker209 744
VijayaMinerals(P)LtdvBikashChandra
Deb,AIR1996Cal67 130
VijayakumarMotilalvNewZealand
InsuranceCoLtd,AIR1954Bom347. . . 165
VijaykumarKhandre(Dr) vPrakash
Khandre,AIR2002Kant145 433
Villa Moda General Trading CoW.L.L.v
ChordiaFashions(P) Ltd, (2005) 3 CLT
331 (Bom) 517
VillayatiRamMittal(P) Ltd vUnionof
India,(2010) 10 SCC 532 49
VimalKishoreTiwarivDistrict
DevelopmentAuthority,Lucknow,
AIR2010NOC401(All DB) 616
VimaleshwarNagappaShet vNoorAhmed
Shriff,(2011) 12 SCC 658:AIR2011
SC2057 904
VimleshKumariKulshresthavSambhajirao,
(2008)5SCC58:AIR2009SC806 899
VinayakRao vRansordas,(1870) 7 BHC
(OC)90 764
VinayakappaSuryabhanappaDahenkarv
DulichandHariramMurarka,AIR1986
Bom193 196
VinayanvRadhakrishnan,AIR2016
NOC216(Ker) 923
VinitaDevanganvRakeshKumar
Devangan,AIR2010NOC117Chh....275
VinodJ.AgarwalvChiefOfficer,Mira
BhayanderMunicipalCouncil,(2006) 4
BomCR356:AIR2006Bom254:
2006AIHC2461:(2006)4MahLJ126..54
VipinBhimanivSunandaDas,(2006)2
CHN396: AIR2006Cal 209 (DB) 835
VipinbhaiR.ParekhvWesternRly,
AIR1984Guj 41 437https://t.me/LawCollegeNotes_Stuffs

132. CXXXLawofContract
VipulRai Sharma v Ludhiana Improvement
Trust, AIR 1992P&H42 277
Virdichandji Garg v Fiat India(P)Ltd,
AIR2004Bom462 626
Virender Singh v LaxmiNarain,(2006) 135
DLT273 343
VisakhapatnamPortTractv Uma
Constructions,(1988)25Reports
126(AP) 437
VishakhapatnamPort Trust v T.S.N. Raju,
(2006) 7see664 61
VishalEngineers8cBuildersv IndianOil
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VishalkumarNemichandKakadv
ShankarMahadeoKubde,AIR2009
NOG 258 (Bom) 385, 886, 920
VishanNarainvOrientalInsuranceGoLtd,
AIR2002Del336 592
Vishnucharya vRamchandra,ILR(1881)5
Bom253 835
VishwaIndustrialCo (P)Ltd-fMahanadi
CoalfieldsLtd, AIR2007Ori 71 (DB)....55
VishwaNathSharmav ShyamShanker
Goenka,(2007) 10see595 859, 862
VishwanathvAmarlal,AIR1957
MB190 485,488,497
VisveswaranvState,(2003) 6 SCC 73:
AIR2004SG1227 212
VithobaLaxmanKalarvMarotiUkandsa
Kalar,AIR 1940 Nag 273 699
VitolS.A.VNoreifLtd,1996AC800:
(1996)3WLR105 (HL) 453,458
VOChidambaranarPortTrustv PSASical
TerminalsLtd, 2015 SCCOnLineMad
2905:AIR2015Mad175 435
VolitionInvestment(P)LtdvMadhuri
JitendraMashroo,AIR 2003 Bom 360 . . . 949
Vose VFloridaRailroadCo,50NY369. . . 655
VulcanInsuranceCo Ltd vMaharajSingh,
(1976) 1see943: AIR 1976 SG 287 317
VurdhmanBros vRadhakishanJaiKishan,
AIR1924Nag79 797
Vyasya Bank Ltd v DGFT, (2003) 6
ALD241 609
Vysya Bank Ltd v A.P. State Agro Industries
DevpCorpiiLtd, AIR2004AP 10 462
w
W.B.EssentialCommoditiesSupplyCorpn
Ltd VKorenForeignTransportation
Corpn, AIR 2002 Gal 211 813
W.B. SEBVPatelEngg Go Ltd, (2001) 2
SCC451:AIR2001SG682 48,53
W.B. SEBVSidhartaFerro Alloys Ltd,
AIR1997Gal221 583
W.L.ThompsonLtd vRobinson
(Gunmakers) Ltd, 1955 Gh 177 499
W.R.FinkvBuldeoDass,ILR(1899) 26
Gal715 836
Wadham Stringer Tin Ltd v Meaney,(1981)
1WLR39 540
WahidAlivAshrafHussain,ILR(1882) 8
Gal732 280
WajidKhan v Raja Ewaz Ali Khan,
(1890-91) 18lA144 183,187
WalfordVMiles,(1992) 2 AC128:
(1992) 2 WLR 174 (HL) 335
WaliSingh v Sohan Singh, AIR 1954
SG263 156,157
WalidadKhanJanakSingh, AIR 1935
All370 165
Walker v Boyle, (1982) 1 WLR 495 224
WalkervWilsher,(1889) LR 23 QBD
335(GA) 447
Wallis VSmith,(1882)LR 21 Gh D
243(GA) 531
WalterfJames,(1871)LR 6 Exch 124....827
WalterLouisFranklinv George' Singh,
(1997) 3see503 954
WamanShrinivasKinivRatilal
Bhagwandas& Go, AIR 1959 SG 689:
1959 Supp (2) SCR 217 258,441
WandoorJupiter Chits (P) Ltd v K.P.
Mathew,AIR 1980 Ker 190 650
Ward VByham, (1956) 1 WLR 496(GA)...135
WardVNationalBankofNewZealandLtd,
(1883) LR 8 AC 755 (PC) 619, 643
Warehousing andForwardingGo of East
Africa Ltd vJafferali& Sons Ltd,1964
AC 1: (1963) 3WLR489 (PC) 827
WarmanvSouthernCountiesCarFinance
Corpn Ltd, (1949) 2 KB 516 582, 587
WarmanSriniwasKimvRatilal,AIR1959
SG 689: 1959 Supp (2) SCR 217 344
WarnerBrosPicturesIncvNelson,(1937)1
KB209 454
WarrenvMendy,(1989)1WLR
853 (GA) 455
WasooEnterpriserv J.J. OilMills,AIR
1968 Guj 57 382
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967 (AP) 428
WathiervWilson,(1911) 27TLR582 602
WatkinsvRymill,(1883) LR 10 QBD
178 (DC) 74
Watkins Mayor 8c Cov'JullundurElectricity
Supply Go Ltd, AIR 1955 Punj 133 554
WatsonVDavies,(1931) 1 Gh 455 826
WatsonVR., (1815) 4Camp272 833
WatsonVSwann,(1862) 11 GB (NS) 756:
142ER993 821
WatteauvFenwick,(1893) 1 QB346 792
WattsVChristie,(1849)11 Beav546:
50ER928 705
WattsVMorrow,(1991)1WLR
1421 (GA) 473,505,508https://t.me/LawCollegeNotes_Stuffs

133. WattsVSpence, 1976 Ch 165: (1975) 2
WLR1039 218
Wazarimal v Rallia, 1889 Punj Rec
No.128 284
Webster v Bosanquest, 1912 AC 394 (PC) . . 530
Wedgwoodv Adams, (1843) 6 Beav 600:
63RR195:49ER958 903
Weeks1/Tybald,1605 Noy 11: 74 ER 982..17
Weigall S. 8c CofRunciman&Co, (1916)
85 LJKB 187 (CA) 785, 819
WeilerInternationalElectronics (P) Ltd v
PunitaVeluSomasundaram,(2003) 3
BomCR59 313
Wertheim v Chicoutimi Pulp Co, 1911 AC
301:(1908-10)All ER Rep 707 (PC)....489
West Bengal Khadi and Village Industries
Board v Sagore Banerjee, (2003) 1ICC
991(Cal) 398
Weston FoakesJuliaBeer, (1884) LR 9
AC 605 137,138
Westosen vOlatheState Bank, (1925) 78
Colo217 502
WestpacSecuritiesvDickie,(1991) 1NZ
LR657{CA) 606
Whateleyv Palanji, (1866) 3 BHC
(OC)137 680
WhincupVHughes,(1871) LR 6 CP 78....587
White1/Bluett,(1853) 23 LJ Ex 36 129
White1/JohnWarwick&Co Ltd, (1953) 1
WLR1285(CA) 92,116
White (Marion) Ltd v Francis, (1972) 1
WLR1423 310
White&;Carter(Council)Ltd v McGregor,
1962AC 413: (1962) 2WLR17 (HL)....457
Whiteheadv Taylor, (1839) 10
Ad&E1210 826
Whitenv PilotInsuranceCo, (2002) 1
SCR 595: (2002) 209 DLR (4th)257
(Canada) 507
WilkieVLondon PassengerTransport
Board, (1947) 1 All ER 258 (CA) 7
Wilkinsonv Lloyd, (1845) 7 QB 27:
4 LT (OS)432 587
Wilkinsonv. Shields,ILR(1887) 9
All398 684
William Lacey (Hounslow) Ltd v Davis,
(1957)1WLR932 501
WilliamRobinson8c Co Ltd v Heuer, (1898)
2 Ch 451 (CA) 454
WilliamSindallpicvCambridgeshire
CountyCouncil,(1994) 1WLR
1016(CA) 218
WilliamSonMagor8c CofKeshoram
Agarwalla,ILR1956Ass268 745
Williams v Bayley,(1866)LR 1
HL200 281,182
WilliamsvCarwardine,(1833) 2
LJKB 101 11
TableofCasesCXXXI
WilliamsVMillington,(1788)1 HyB181: 2
RR724 • 779
Williams vNorthChina Insurance Co,
(1876) LR 1 CPD 757 (CA) 825
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(1990) 2 WLR 1153 (CA) 136,137
WilliamsVWilliams,(1957) 1 WLR
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Williams BrosAguis,1914 AC 510 (HL) . 521
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WilsonVCarnley, (1908) 1 KB 729 (CA) . . 270
Wilsoni/Jones,(1867)LR 2 Exch 139....338
WilsonVPegasus Holidays (London), 1988
CLY1059 510
Windfield v De St Croin, (1919) 35
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Windhill Local Board ofHealthv Vint,
(1890)LR45ChD351 280
WinmaxxManagementService (P) Ltd v
UCOBank,AIR2011Gau217 542
WinnVBull, (1877) 47 LJ Ch 139:
(1877)LR7ChD 29 43
WiproLtdvBeckmanCoulterInternational
SA, (2006) 131 DLT 681 312,313
WithfO'Flanagan,1936 Ch
575 (CA) 208,215
Withers v General Theatre Corpn Ltd,
(1933) 2 KB536(CA) 502
Withingtonv Herring, (1829) 5 Bing 442 . . 786
Wolf8cSonsVDadybha Khimji 8c Co,
ILR (1919) 44 Bom 631 279, 574
Wolmershausenv Gullick, (1893) 2
Ch514 665,667
Wolstenholm vSheffieldUnion Banking Co
Ltd, (1886) 54 LT 746 (CA) 705
WongMeeWanvKwanKinTravelServices
Ltd, (1996) 1WLR38 (PC) 511
WoodVRowcliffe,(1844) 3Hare304:
64RR303 854
WoodarInvestment Devp Ltd v Wimpey
ConstructionUK Ltd,(1980)1WLR
277(HL) 458
WoolcottVExcessInsuranceCo Ltd, (1978)
ILloyd's Rep 633 (CA) 801
WorldSportGroup(Mauritius)Ltd v
MSM Satelite (Singapore) Pte Ltd, (2014)
IIsee639:AIR2014SC968 326
WrightVJockey Club, The Times,June16,
1995 8
WrothVTyler,1974Ch 30: (1973) 2
WLR405 901
Wuff8c BillingVJay, (1872) LR 7
QB 756 661
WyldeRadford,(1863)33 LJ Ch 51 705
WythesvLabouchere,(1859) 3 De
G8CJ593 607https://t.me/LawCollegeNotes_Stuffs

134. CXXXIILawofContract
X
XaviervStateofT.N.,AIR1994
Mad306 509
Y.P.GanesanvT.N.Civil SuppliesCorpn
Ltd, (2006) 1 CTC 277 (Mad) 555
Yab Kee Seong vTeguhBina, (1992) 1
CLJ525 429
Yab Kok Heng vInternationalAuto
Enterprise, (1994) 1 CLJ 414 (Malaysia) . . 550.
Yalden, ex p, (1876) LR 4ChD 129 707
YamunaNagarImprovementTrustv
KhariatiLai,(2005)10 SCC 30:
AIR2005SC2245 957
Yarlagadda Bapanna v Devata China
Yerkayya,AIR1966AP 151
YasudaFireandMarineInsuranceCov
OrionMarineInsuranceUnderwriting
Agency Ltd, 1995 QB 174: (1995) 2
WLR49
Yates Building Co. Ltd v R.J. Pedleyn&c
Sons (York) Ltd, (1975) 237 EG 183 30
YelamatiVeeraVenkataJaganadhaGuptav
VejjuVenkateswara Rao, AIR 2002
AP369 896
618
767
YellammaCottonWollenandSilkMillsCo
Ltd, re, AIR 1969 Mys 280 705
YeomanCreditLtdvLatter,(1961) 1
WLR828: (1961) 2 All ER 294 (CA) 603
YiannivEdwinEwans&Co,1982QB438:
(1981) 3 WLR 843 655
Yogesh Mehta vCustodian,(2007) 2
SCC624 383
YongeVToynbee, (1910) 1 KB
215 (CA) 819,836
Yorkshire Railway Wagon Co v Maclure,
1881 19ChD478(CA) 602
ZaheerKhan v PerceptD'markIndia(P)
Ltd, AIR2004Bom 362 294, 950
ZeeTelefilmsLtdvSundial
Communications(P)Ltd,(2003)5
BomCR404 517
ZeeTelefilmsLtdvUOI,(2005)4SCC649:
AIR2005SC2677 52
Zemhunt(Holdings) v Control Securities,
1991ScottishLT653:1991CLY5101...587
ZorawarSingh vSarwanSingh,(2002)4
SCC460:AIR2002SC1711 857
ZoroastrianCoop Housing Society Ltd v
Coop Societies (Urban), (2005) 5
SCC632:AIR2005SC2306 428https://t.me/LawCollegeNotes_Stuffs

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136. I
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PARTI
GeneralPrinciples
(Ss.1-75)https://t.me/LawCollegeNotes_Stuffs

137. 1
Agreement,Contract
andProposa
TheIndianContractAct,1872
[Act 9 of1872]^
[2SApril1872]
Preamble—Whereasitisexpedienttodefineandamendcertainpartsof
thelawrelatingto contracts;it isherebyenacted asfollows:—
Preliminary
S.1. Short title—This Actmaybe calledtheIndianContractAct,1872.
Extentand commencement—Itextendsto^(thewholeofIndiaP(except
theStateofJammuandKashmir);anditshallcomeintoforceonthefirstdayof
September1872.
1.FortheStatementofObjectsandReasonsfortheBillwhichwasbasedon areportofHer
Majesty'sCommissionersappointedtoprepareabodyofsubstantivelawforIndia,dated 6th
July,1856,see,Gaz.ofIndia,1867,Extra.,p.34;fortheReportoftheSelectCommittee,see,
ibid.Extra.,dated28thMarch,1872;fordiscussionsinCouncil,see,ibid,1867,Supplement,
p. 1064; ibid, 1871, p. 313 and ibid, 1872, p. 527.
ThechaptersandsectionsoftheTransferofPropertyAct,1882(IVof1882),whichrelate
tocontractsare, inplacesinwhichthat Act is inforce,to be taken as part of Act IX of
1872—ieeAct IV of1812,S. 4.
ThisActhasbeenextendedtoBerarbytheBerarLawsAct,1941(IVof1941),toDadra
andNagarHavelibyRegn.6 of1963,S.2andSch.I, toGoa,DamanandDiubyRegn.11of
1963,S. 3 andSch.,toLaccadive,MinicoyandAmindiviIslandsbyRegn.8, 1965,S. 3 and
Sch., to Pondicherry by Act 26 of 1968, S. 3 and Sch. and has been declared to be in forcein—
theSanthalParganas—seetheSanthalParganasSettlementRegulation(IIIof1872),S.3,
asamendedbythe Santhal ParganasJusticeandLawsRegulation,1899 (IIIof1899),S. 3.
PanthPiploda—thePanthPiplodaLawsRegulation,1929 (I of 1929),S. 2.
It hasbeendeclaredbynotificationunderS.3{a)oftheScheduledDistrictsAct,1874(XIV
of 1874), to be in forcein-—
the Taraiof theProvinceofAgra—seeGaz.ofIndia,1876,Part 1, p. 505;
theDistrictsofHazaribagh,LohardagaandManbhumandParganaDhalbhumand the
Kolhanin the DistrictofSingbhum—seeGaz.ofIndia,1881,Part 1, p. 504.
The Districtof Lohardagaincludedat this time the presentDistrict of Palamauwhichwas
separatedin,1894.The District of Lohardaga is now called the RanchiDistrict—seeCalcutta
Gaz., 1899,Part1, p. 44.
It hasbeenamendedinC.P.byC.P.Act1 of1915and inC.P.andBerarbyC.P.BerarAct
15of1938.
2.Subs,by A.O. 1950 for"alltheProvincesofIndia".
3.Subs,by S. 3 andScheduleof Act 3 of 1951 for "exceptPart 'B' States".
[1]https://t.me/LawCollegeNotes_Stuffs

138. 2Chapter1Agreement,ContractandProposal [S.2]
NothinghereincontainedshallaffecttheprovisionsofanyStatute,Act
orRegulationnotherebyexpresslyrepealed,noranyusageorcustomoftrade,
noranyincidentofanycontract,notinconsistentwiththeprovisionsofthisAct.
S. 2.Interpretationclause—InthisActthefollowingwordsandexpres
sionsare usedinthefollowingsenses,unlessacontraryintentionappearsfrom
thecontext:—
(a)Whenone personsignifiesto anotherhiswillingnessto do or to abstain
fromdoinganything,withaviewtoobtainingthe assentofthat otherto
such act orabstinence,he is said to make aproposal;
(b)Whenthe person to whom theproposalis madesignifieshis assent
thereto,theproposalissaidto beaccepted.Aproposal,when accepted,
becomesapromise;
(c)Thepersonmakingtheproposaliscalledthe"promisor",and the person
acceptingtheproposal iscalledthe"promisee";
(c/)When, at the desire of the promisor,the promisee or anyotherperson
hasdoneorabstainedfrom doing or does orabstainsfrom doing, or
promisesto do or to abstainfromdoing,something,such act or absti
nence orpromiseiscalledaconsiderationforthepromise;[Notesunder
Chap. 3 onconsideration]
(e)Everypromiseandeveryset ofpromises,formingtheconsiderationfor
each other, isanagreement;[Notesunderconsideration]
if) Promiseswhich form the consideration or part of the consideration for
each other, are called reciprocal promises; [Notes under consideration]
(g)Anagreement notenforceablebylawissaidto bevoid;[Notesunder
Section23 voidagreements]
(h)Anagreementenforceableby law isacontract;
(/)Anagreement whichisenforceable by lawat the option of one or more
of the parties thereto, but not at the option of the other or others, is a
voidablecontract;[seeNotesunderSections19to19-A]
(y)Acontractwhichceasesto be enforceablebylawbecomes voidwhen it
ceasestobeenforceable.[FornotesseeunderSection56]
DEFINITIONOFCONTRACT
Theterm"contract"is defined inSection2{h)oftheIndianContract
Act, 1872, asfollows:"An agreement enforceableby law is a contract."^
Thusfortheformationof acontracttheremustbe—(1)anagreement,
and(2)the agreement should be enforceable by law.
4.Thewords"theenactmentsmentionedin theScheduleheretoarerepealedto theextentspec
ified in the third column thereof; but" were repealed by S. 3 and Sch. II of the Repealing and
AmendingAct, 1914 (X of 1914).
5.BhartiAirtel Ltd v Union ofIndia,(2015)12 SCC 1, a licence to provide telecom service is a
contractbetweenthelicenseeandGovernmentofIndia,thelicensor.https://t.me/LawCollegeNotes_Stuffs

139. Definitionofcontract3
Agreement
"Agreement"isdefinedinSection2(e)as"everypromiseandeveryset
ofpromisesformingtheconsiderationforeachother".Andapromise
isdefinedasanacceptedproposal.Section2{b)says:"Aproposal,when
accepted,becomesapromise."Thisisanotherwayofsayingthatanagree
ment is an accepted proposal. The process of definitions comes down to
this:Acontractisanagreement;anagreementisapromiseandapromiseis
anacceptedproposal.Thuseveryagreement,in itsultimateanalysis,is the
resultofaproposalfromonesideand itsacceptancebytheother.^
Whenagreementbecomescontract
Anagreementisregardedas acontractwhenit isenforceablebylaw.''In
other words, an agreementthatthe law will enforce is acontract.The con
ditionsofenforceabilityarestatedinSection10.Accordingto thissection,
an agreement is acontractwhen it is made for some consideration, between
partieswhoarecompetent,withtheirfreeconsentandforalawfulobject.
S. 10. Whatagreementsarecontracts.—Allagreementsare contracts if
they are made bythe free consent of partiescompetent to contract,foralawful
considerationand with alawfulobject, and are not herebyexpresslydeclared
tobevoid.
Nothing herein contained shall affect any law in force in®[lndia]and not
herebyexpresslyrepealed, bywhichany contract is required to be made in
writingor in the presence ofwitnesses,or any lawrelatingto the registration
ofdocuments.
6. Anarrangementfor sale of goodswhichimposednoobligationson the part of the purchaser
and was not even signed by him was held to be no agreement. It must have been a mere
understanding.Therebeingnomutuality,thepurchasercouldnot askfor theremedyofspe
cificenforcementunder S. 15,SpecificReliefAct, 1963;S.M.GopalChettyv Raman, AIR
1998Mad169.Everyagreementhas not to be inwriting.It must bebilateral,TarsemSingh
VSukhminderSingh,(1998)3SCC471:AIR1998SC1400.Writingisnecessaryonlywhen
prescribed by law, T.N. Tea Plantation Corpn Ltd v Srinivasa Timbers, AIR 1999 Mad 111.
ConradDias vJosephDias,(1996)2 Mah LJ 208:(1995)3BomCR 218, oralagreement
between father and son for tenancy. AsudamalLaxmandasSindhi vKisanraoWamanrao
Dharmale,(2004)2BomCR361,anagreementfor sale oflanddoesnotrequireto be an
attested document. It was an agricultural land and the purchaser was not a farmer. His suit
forspecificenforcementwasallowedbecauseitwashisproblemto getnecessaryapprovals.
7. S.2{h).Mohta Alloy & Steel Worksv Mohta Finance & Leasing Co Ltd, 1987AIHC1327
(Del),aleaseagreementbetweentwobodiescorporatewassignedbyoneonly,representing
bothsidesbecausehewasa directorin boththelegalentities.Heldvalid.K.Basavarajappav
TaxRecoveryCommr,(1996)11 SCC 632, anagreementto sell does not create any right or
interests in the property under sale. R.Rangarajv Legal Representatives, 2000 AIHC 2206,
agreement signed by the very party who had to sell the land, valid forspecificenforcerhent.
RandhirSinghChandolkvVipinBansal,(2006)135 DLT56, under an oral arrangementof
sale of property, the receipt for moneywas signed by the seller,the court said that the law did
not prohibit a written offerof salesignedby the sellerbeingacceptedorally bythebuyer.
8.Subs,by S. 3 and Schedule of Act 3 of 1951 for the words "Part A States, and Part C States"
which have beensubstitutedby the A.O. 1950 for"theProvinces".https://t.me/LawCollegeNotes_Stuffs

140. 4Chapter1Agreement,ContractandProposal [S-10]
Everycontractisanagreement,buteveryagreementisnotacontract.An
agreementbecomesacontractw^henthefollowingconditionsaresatisfied:
(1)Thereissomeconsiderationforit.[Ss.2{d)and25]
(2)Thepartiesarecompetenttocontract.'[Ss.11and12]
(3)Their consent is free.[Ss.13-22]
(4)Their object islav^rful.^"[Ss.23-30]
Bilateralrelation,notunilateral
Therewas aconcludedagreementundertheRuralFranchiseeScheme
betweenconsumersandElectricityBoardfixingspecificrates with regard
toincentivepayabletoconsumers.Itwasheldthat aunilateralrevisionor
modificationin theschemeby the Board was notpermissibleduring cur
rencyoftheagreement.Suchamendmentswerenotenforceable."
9.C.K.AsativUnionof India,AIR2005MP 96,experienceofpartnerscan beconsideredas
experienceoftheirfirm.Withoutconsideringthis,refusaloftenderto thefirmwasnotproper.
PatelEnggLtdvNationalHighwaysAuthorityofIndia,AIR2005Del298,requirementof
experienceinawardofcontract,correctperspectiveistosee,actualexperienceofthepartici
pantandentityandnotlabelofthefirm.Astatutorybodycouldnotgiveeffecttoexperience
certificateissuedby it.
10.Onceanenforceableagreementcomesintobeingitremainsenforceableevenif thegoods
which wereto bedeliveredunder it were brought late and they werealso acceptedby the other
party.See,JainMillsandElectricalStoresvStateofOrissa,AIR1991Ori117.ACollector
can beauthorisedonlybystatutetorecoveranyduesasarrearsoflandrevenue.Suchauthority
cannot begivenunderanagreement.PowersogivenbyZilaParishadwasheldto be against
law,MaheshChandra v ZilaFanchayatMainpuri, AIR 1997All248. A statutory contract
means a contract of the contents of which some portion isfilledunder a statute. For example,
S.43-A(2)of theElectricitySupplyAct, 1948fillsinto a powerpurchaseagreementthe terms
relatingtodeterminationoftariff.IndianThermalPowerLtd vStateofM.P.,(2000)3SCC
379: AIR 2000 SC 1005. The fact that acontractis forconstructionof a public utility and is
awardedby astatutorybodydoesnotnecessarilymakeit astatutorycontract.KeralaSEB
VKurienE. Kalathil,(2000)6 SCC293: AIR 2000 SC2573. B. Rajamani v Azhar Sultana,
AIR 2005 AP 260:(2005)2 An LD 862,agreementsto sellimmovableproperty was reduced
towritingbutnotsignedbythepurchaser,didnotmeantherewasnoconcludedcontract.The
contract came into existencewhen both parties agreed. It becameenforceable.VarshaFabrics
(F)Ltd VState ofOrissa,(2006)102 CutLT137,thesharePurchaseAgreementhad not
beensignedbytheparties,thecourtsaidthatsigningofthesamewasamereformality,since
the terms and conditions had already been negotiated and agreed upon between the parties.
BhagwatiEnterprisesvRajasthanSRTC,AIR2006Raj233,tendersissuedforappointment
ofsolelicenceefortransportationbusiness,applicant'stenderacceptedandworkorderissued.
Theapplicantaccordinglyfurnishedrequisitebankguarantee,concludedcontractaroseeven
thoughnoformalcontractsigned.SyndicateBankvR.Veeranna,(2003)2SCC15:(2003)5
KantLJ1,provisionin contractthat interestcould berevisedupwardson loansup to a certain
percentage,theSupremeCourtheldthat no priornoticeforexercisingthispowerwasneces
sary.BharatForgeLtd vOnilGulati,AIR2005Del369,thesuitwasbasedoninvoicesand
billscontaining the terms ofsupplyand otherrequisiteterms theinvoiceswereacted upon,
acceptedandpaidpartly.Theclaimfortherestoftheamountwasmaintainableevenin the
absenceofanywriting.OrientalInsuranceCoLtd vPeacockPlywood(F)Ltd, AIR2005Cal
97,acceptancebybanktoprovideloanon thebasisofdocumentsofhypothecationetc.exe
cutedbythecustomerwasheldto bebindingonthebank.Butasnolendercanbecompelled
to disburse loan, an action lies only for breach ofcontract.
11.SunilChandraMishravStateofBihar, AIR 2016 Pat 47.https://t.me/LawCollegeNotes_Stuffs

141. 10] Proposaloroffer5
Underahypothecationagreement,aunilateralrightwasgivento the
bank to refer any dispute to arbitration. No consent of the borrower was
stipulated.The courtsaidthat in theabsenceofconsensus-ad-idem,such
clause could not be regarded as an arbitrationclause.^^In the same deci
sionthe courtadoptedtheviewthatsuchaunilateraloptionis notunfair,
unreasonableoragainstpublicpolicy.Financialinstitutionscarryingon the
businessofcollecting,investing,lendingfundsarewellwithintheirrights
tocarveoutwaysandmeansofsettlementofcommercialtransactionswith
theirborrowers.^^
Wherethehighestbidderdid notavailtheopportunitygivento him to
retain property by making payment along with 10 per cent interest, it was
heldthat there was no bonafideintentionon the part of thebidder.The
Authority could resume possession."
Contractas civilobligation
The law of contractconfinesitselfto theenforcementofvoluntarilycre
atedcivilobligations.Itdoesnotcoverthewholerangeofcivilobligations.
Therearemanyobligationsofcivilnature, likethoseimposedbylawor cre
ated by theacceptanceof a trust, whoseviolationmay be actionable under
the law of torts or of trusts, or under a statute, but they are outside thefield
ofcontract.Thelawofcontractisalsonotabletotakecareofthewhole
range ofagreements.Manyagreementsremain outsideits purviewbecause
they do not fulfil the requirements of a contract. In addition, there are some
agreements which literally satisfy the requirements of a contract, such as
proposal,acceptance,consideration,etc., but which do not catch its spirit
and they arenotenforcedbecauseit doesnotsoundto bereasonableto do
so. They are excluded under the legaldevicethat the parties must not have
intendedlegalconsequences.
PROPOSALOROFFER
A proposal and its acceptance is the universally acknowledged process for
the making of an agreement.The proposal is the starting point. Sectionl{a)
defines"proposal"as follows:
Whenonepersonsignifies toanotherhis willingness to do or toabstainfrom
doinganything,with a view toobtainingtheassentofthatotherto suchactor
abstinence,he is said to make aproposal.
The person who makes the proposal is called the promisor or "offeror",
the person to whom it is made is called the proposee or "offeree" and when
he accepts it, he is called a "promisee". In the terminology of Section2(c)
"the person making the proposal is called the "promisor", and the person
12.JJ.N.Automobiles(P)Ltdv BankofBaroda,AIR 2016 Raj 41.
13.Ibid.
14.HVDAVKedarNath,(2015) 1 SCC 186; (2015) 1 SCC (Civ)482.https://t.me/LawCollegeNotes_Stuffs

142. 6Chapter1Agreement,ContractandProposal [S.3]
acceptingtheproposaliscalledthe"promisee".Inviewoftheabovedefi
nition,aproposalisinthefirstplaceanexpressionoftheofferor'swilling
nessto do or to abstainfromdoingsomething.Secondly,it shouldbe made
with aviewtoobtainingtheassentof theoffereeto theproposedact or
abstinence.
Communicationofproposal
Thefirstpart of thedefinitionof"proposal"laysemphasisupon the
requirementthatthewillingnesstomakeaproposalshouldbe"signified".
Tosignifymeanstoindicateordeclare.In thetraditionallanguageofthe
law of contract, itmeansthat the proposalshouldbecommunicatedto the
otherparty.Theprocessofmakingaproposaliscompletedbytheact of
communicatingit to the otherparty.Section3recognisesthemodesof
communication:
S. 3.Communication,acceptanceandrevocationofproposals.—The
communication of proposals,tlieacceptance of proposals, and the revocation
ofproposalsandacceptances,respectively,are deemed to be made byanyact
oromissionofthe party proposing,accepting orrevoking,bywhich he intends
to communicate such proposal, acceptance orrevocation,or which has the
effectofcommunicatingit.
Thus, aproposalmaybecommunicatedin anywaywhichhas theeffect
oflayingbeforetheoffereethewillingnessto do orabstain."Itmay,for
example,bedonebywordsofmouty^,or bywriting,orevenbyconduct.
Impliedproposals
A man frequentlyexpresseshis desire to do something or to get some
thing done by hisactions."Wordsare not the onlymediumofexpression.
Conduct may often convey as clearly as words a promise, or an assent to a
proposedpromise."^^Anofferandacceptanceneednotalwaysbeformal,
15. It is now settled lawthatacontractcan come into existence between thepartiesbyexchange
of letters. Ram Krishan Singhal v Executive Engineer,ILR(1991) 1 Del 275. Followed inSBI
VAditya Finance & Leasing Co (P) Ltd, AIR 1999 Del 18 at p. 21, here a leasecontract was
inferred from correspondence and the minutes of the meeting between the parties.Sumitra
Kawirav DBA, 1996AIHC4373 (Del), anallotmentof flats, on whatever basis, like by lot
or otherwise, becomes effective from the date ofcommunicationto the allottee. If there is
anything wrong in the processof allotment that can be questionedunder writ jurisdiction.
16. P.Syamalav R. Gopinathan, (2004) 1 CTC117,oral agreement for sale of property under
which the sellerreceivedcheques for the price and encashed them. The agreement was held to
be valid and not defeated by the subsequent registered sale agreement with a subsequent buyer.
AbdulSalamSheikhRahimv SkMehboobSheikh Amir, (2006) 3 Bom CR 700, allegedoral
agreementfor sale of tenantedpremisesto the tenant,premisessold to another at a higher
price,subsequentsaleheldvalid becausethere was no concludedoral contract, there wereonly
negotiations, even the earnest was not paid and was only undertaken to be paid. T. Jayaram
Naidu VYasodha,AIR 2008 NOC 972 (Mad), an oral agreement for sale is valid and enforce
able, proving such agreementmay be difficult, but when proved,valid.
17.Restatement,Contracts,AmericanLawInstitute,S. 21.https://t.me/LawCollegeNotes_Stuffs

143. [S-9] Proposaloroffer7
nordoesthe law of contract or ofsaleofgoodsrequirethatconsentto a
contract must be inwriting.^^Offer andacceptancecan be spelt out from
theconductof the parties whichcoversnot only their acts but alsoomis
sions.^'Anofferwhichisexpressedbyconductiscalledan"impliedoffer"
and the onewhichisexpressedbywords,written orspoken,iscalledan
"expressoffer".Anacceptancemaylikewisebemadeexpresslyorimpliedly.
Section9declares:
S. 9.Promises,expressandimplied.—In so far as the proposal or accept
ance ofanypromiseismade inwords,the promiseissaidto be express.Insofar
as such proposalor acceptance ismade otherwisethan inwords,the promiseis
said to beimplied.
Acontractimplied in fact requires meeting of minds. Thecourtshave to
refuseto readanimpliedterminto a contractwhichissilenton thepoint or
did not clearly indicate thenatureof terms.
A bidat an auctionis animpliedoffertobuy.Similarly,steppinginto an
omnibus^^and consuming eatables at aself-servicerestaurant, both create
implied promises to pay for the benefits enjoyed. An illustration of a con
tractarising impliedly fromconductisUpton-on-SevernRDCvFowell-}^
Afirebrokeoutinthedefendant'sfarm.Hebelievedthathewasenti
tled to the free services of Upton Fire Brigade and, therefore, summoned
it. The Brigade put out the fire. It thenturnedoutthatthedefendant's
farm was not within free service zone of the Upton, which therefore,
claimedcompensationfor the services. Thecourtsaid:"Thetruthof the
matter isthatthe defendant wanted the services of Upton; he asked for
theservicesof Upton and Upton, in responseto that request, provided the
services. Hence the services were rendered on an implied promise to pay
forthem."
Similarly,where thechartererof a ship chartered for loading steel billets,
instead loaded generalmerchandise,for which the rate of freight was higher,
he was held to have done so under an implied promise to pay the higher
rate;^^where the time for which a ship was chartered expired, but the ship
owner did not call back the ship and it remained in use with the other party,
the SupremeCourtsaidthata silent agreement arose under whichcurrent
18. P.PoppanVKariaGounder,(2002)2CHN40,enforceabilityof oralcontractsandexamin
ingwhethertime was of essence.
19.CoffeeBoardvCCT,(1988)3 SCC263:AIR1988SC1487.
20.MaharashtraRajyaSahakariKappos Utpadak PananMahasanghaLtd v Manga Bhaga
Choudhary,(2009)3MadLJ 721.
21.WilkieVLondonPassengerTransportBoard,(1947) 1 All ER 258 (CA).
22.(1942) 1A11ER220(CA).
23.StevenvBromley&Son,(1919) 2 KB111(CA). SeealsoDinshawandDinshawvIndoswe
Engineers (P) Ltd, AIR 1995 Bom 180: (1995) 3 Bom CR 548, thecontractorhaving used B
class pipes instead of C class, was allowed to recover the price for the material actually used.
Lubrizol(India)LtdvLubrizolCorpn, US, (1998) 2 Bom CR 210, the expression"landed
costs"was heldimpliedlytoincludecustomsandotherduties.https://t.me/LawCollegeNotes_Stuffs

144. 8 Chapter 1Agreement,Contract and Proposal [S.9]
charter rates becameapplicable;^"*where the customer of a bank did not
object to the charge of a compound rate of interest in accordance with the
usual course of business, he was held to have impliedlycontractedto pay the
compoundinterest;^^and where the rules of a yacht club regatta provided
that competitors would be liablefor damage done by fouling, they were held
bound to each other by the rules and where one of them fouled andsanka
yacht, he was heldliable.Thislast mentioned case showsthatin order to
ascertainwhetheran agreement has arisen, regard must be had to thetotal
ity of the circumstances in which the parties contracted and not merely to
the formalities of offer and acceptance. Sometimes a sequence of events may
exhibit an agreement, though offer and acceptance are indiscernable.
Thisshouldbecontrastedwitha case inwhichamemberof aJockeyClub
sought to recover damages from his club for causing him loss of earningsby
refusing him a racing licence on medical grounds. He based hiscontention
on thecontractualdutyof the club ofcarryingout its licensingfunctions
withcare.Theclaimwasstruckout.TheJockeyClub was adomestictribu
nal and nocontractualduty could be implied inrespectof itsfunctioning.
The only obligation in such cases is to actfairly.^''
Section 9 was applied by the SupremeCourtin acase^^where on the
orders of a go between mancertaingoods were supplied by theplaintiffon
hisownaccountto thedefendants.Thedefendantsclearlyandunerringly
accepted the goods and paid apartof the price. Accordingly a liability to pay
thebalancearose."Thedefendantsbytheirclearconductofacceptingthe
goods and neverrepudiatingany of thenumerouslettersandtelegramsof
theplaintiffdemandingthe money from them, clearly showedthatadirect
contractwhichin law iscalledanimpliedcontractbyconductwasbrought
aboutbetweenthem."Inanothermatterbefore the SupremeCourtthe facts
were:^'AcontractwassignedbetweenanIndianandaYugoslavianparty.
One of the terms provided forarbitrationby theInternationalChamber
ofCommercein Paris.ImmediatelythereaftertheIndianpartycabledand
alsowroteitsobjectionaboutthearbitrationclause.Theotherpartymade
no reply to it, butpermittedtheworkto go on. Adisputehavingarisen,it
washeldthatthearbitrationclausehadbecorhedeletedfromthecontract
by an impliedagreement.A suit could lie in acourtof law. Inanothercase
of the samekind,^"aharbourauthorityofferedto anoperatorberthing
facilities for hisoperations.Correspondencebetweenthetwofollowedwith
24.BharatPetroleumCorpnLtd vGreatEasternShippingCo Ltd, (2008) 1 SCC 503; AIR2008
SC357.
25.HaridasRanchordasvMercantileBankofIndiaLtd,(1919-20)47lA17.
26.ClarkevEarlofDunraven(TheSatanita),1897AC 59 (HL).
27. Wright vJockeyClub, TheTimes,16-6-1995.
28.HajiMohdIshaqvMohdIqbalandMohdAli& Co, (1978) 2 SCC 493,500:AIR1978
SC798.
29.RamjiDayawala& Sons (P)LtdvInvestImport,(1981) 1 SCC 80: AIR 1981 SC2085.
30.ThovensenCarFerriesvWeymouthBoroughCouncil,(1972) Lloyd's Rep 614.https://t.me/LawCollegeNotes_Stuffs

145. Proposaloroffer9
aviewtooperateaservicefromtheretoanotherport.Subsequently,the
portauthoritiesattemptedtowithdraw^theirfacihties.Theoperatorwas
allowedtorecoverdamagesforbreachofcontract.Thecorrespondencehad
alreadygivenriseto animphedagreementthat thepro-offeredfacilitieshad
beenaccepted.Wherethe partiesconducted,theirbusinesstransactionson .
thebasisof aclausein theiragreement,it was held that thatclausebecame
embeddedintotheircontractandtheywouldnotbeheardtosaythatthe
clausewas intendedto be only ageneralterm.^^
Failureonthepartofahirerunderahire-purchaseagreementtokeepup
thepaymentofinstalmentswouldenablethefinanciertoresumepossession
of the materialdeliveredunder the contract,evenif the contract contains no
termto thateffect.Suchrightis theresultofalegalimplication.^^Avaluer
wasengagedbya bankforevaluatingpropertiesofferedbytheborrowerfor
thepurposeof anequitablemortgage.Therewasnothingtoindicatethat
thebankmadeanypromisetopayhimhisprofessionalfee.Thepractice,
on the other hand, was that suchfeewaspaid byborrowers.The bank was
heldnotliableunderanyimpliedpromise,nor forcompensationunderthe
quantummeruitprinciple.^^
No impliedcontract to pay higher price was deemedto have arisen where
theGovernment,beingbound under a contracttosupplymaterialatfixed
prices,suppliedit atenhancedrateandsomeoneonbehalfof thecontractor
happenedtoacceptthematerial.^'*Inacontractforsupplyofspecifiedquan
tityeverymonth bytheGovernmentto adealer,the court said that,because
thedateofsupplywasnotprescribed,notermcouldbeimpliedthatsupply
shouldbemadein thefirstweekof the month.Supplymadein the last week
ofthemonthwasheldtobenotabreachofcontract.^^
An auction purchaser failed to deposit the balance amount. The auction
seller could prove his loss by showing that he had to sell the machine at a
lowerprice.Buthe neitherpleadednorprovedanyloss.He was not allowed
to forfeit the earnestmoney.^®
31.A.B.C.Laminart(P)Ltd vA.P.Agencies,(1989)2SCC163:AIR1989SC1239.InTatung
Electronic(S)Pte Ltd vBinatoneInternationalLtd,(1991)3CLJ2339(Singapore),thelegal
requirement of 45 per cent local content in televisionsto be imported into UK was held to have
become animpliedtermof thecontract.
32. K.A. Mathai v KoraBibbikutty,(1996)7 SCC 212. Anunconditionalacknowledgementof
liabilitywith nothing said to the contrary amounts to animpliedpromiseto pay,R.Kumar
and Co vChemicalsUnlimited.,AIR 2001 Bom116.Accordingly,a summarysuit for recov
ery of the admitted amounts was allowed under Or. 37, R. 2, CPC.
33.SBlVT.Bardhan,AIR2011 Gau 68.
34.StateofA.P. vPioneerConstructionCo, AIR 1978 AP 281.
35. State of Kerala v K.D. Thomas, 1996AIHC1339(Ker);ONGC Ltd v Essar SteelLtd,(2002)
2 Bom CR 379, acontractformulatedthrougha tender, the formalcontractcould not be
signed becausecertainclarificationswere needed, but work order was issued and the work
wascompleted.Arbitrationproceedingcommencedin terms of thecontract.Awardsubmitted
thereunder was not allowed to be challenged on the ground that there was no formal contract.
36.AirportAuthorityofIndiavKKSinghal, AIR 2012 Del 51.https://t.me/LawCollegeNotes_Stuffs

146. 10Chapter1Agreement,ContractandProposal [S.4]
Communicationwhencomplete
S. 4.Communicationwiiencomplete.—Thecommunication of a pro
posaliscompletewhenitcomestotheknowledgeofthepersontowhomitis
made.
Obviously,therefore,anoffercannotbeacceptedunlessanduntilithas
beenbroughttotheknowledgeofthepersontowhomitismade.Thisprin
cipleenabledtheAllahabadHighCourtinLalmanShuklavGauriDatf^
to deal with a matterinvolvinga verycrucial question on this point.
Defendant'snephewabscondedfromhome.He sent hisservantin
searchoftheboy.Whentheservanthadleft,thedefendantbyhandbills
offeredto payRs501toanybodydiscoveringtheboy.Theservantcame
to knowof thisofferonlywhenhe hadalreadytracedthemissingchild.
He,however,broughtanactiontorecoverthereward.Buthis action
failed.
Explainingtheprinciple,BanerjiJsaid:"Inmyopinionasuitlikethe
presentcanonlybefoundedonacontract.Inordertoconstituteacontract,
there must be anacceptanceof anofferand there can be noacceptance
unless there is knowledge of the offer."
When this case was decided, the English Law on thepointwasuncertain.
Buttheprinciple,thattherecan be noacceptancewithoutknowledgeof
offerhadalreadybeenadoptedin theUnitedStates.Forexample,asearly
as1868,ajudgeremarked:How cantherebeconsentorassentto that of
whichtheotherparty hasneverheard?^®Theprinciplehasbeencarrieda
littlefurtherin anAustraliancase^'whereit was heldthateven if the accep
tor had once known of the offer but hadcompletelyforgotten about it at the
timeofacceptance,hewouldbeinnobetterpositionthan apersonwhohad
not heard of the offer at all. One of the judgesgavethe following interesting
illustration:
An offer of £100 to any person who would swim a hundred yards in
theharbouron the first day of the year would not in my opinion be sat
isfiedbyapersonwhowasaccidentallyormaliciouslythrownoverboard
onthatdate and swam the distance simply to save his life,withoutany
thoughtof the offer.
Thefactsofthecasewere:
TheAustrahanGovernmenthadofferedarewardof£1000toany
onegivinginformationaboutcertainmurderers.Theofferfurtheradded
that if the informationwasgivenby anaccomplice,not beinghimselfthe
murderer, he would also be entitled to a free pardon. The plaintiff, being
anaccomplice,saw theofferandhavingbeensoexcitedby the hope of
CASEPILOT
37. (1913) 11 All LJ 489 at p.492.
38. See, Fitch vSnedkar,(1868) 38 NY 248 at p. 249.
39.R.VClarke,(1927)40CLR227.https://t.me/LawCollegeNotes_Stuffs

147. Intentiontocontract11
pardon,hegavetheinformationtosavehimself,completelyforgettingthe
reward.Hecouldnotrecoverthereward.
Whereawomangaveinformationaboutthemurderersofherhusband,
not somuchforreward,but toassuageherfeelings,shewasallowedto
recover.'"'Whereanofferhasbeenacceptedwithknowledgeofthereward,
the fact that theinformerwasinfluencedbymotivesother than thereward
willbeimmaterial.
INTENTIONTOCONTRACT
ThereisnoprovisionintheIndianContractActrequiringthat anoffer
oritsacceptanceshouldbemadewiththeintentionofcreatingalegalrela
tionship.ButinEnglishLawit isasettledprinciplethat "tocreatea contract
theremustbeacommonintentionofthepartiestoenterintolegalobli
gations".''^It was pointed out in an early case that "contracts must not be
thesportsof anidlehour,meremattersofpleasantryandbadinage,never
intended by the parties to have anyseriouseffectwhatsoever".''^"It is not
everylooseconversationthatistobeturnedintoacontract,althoughthe
parties may seem toagree."''^The case of Balfour vBalfout^'^hasbecome
wellknown as anillustrationof thisprinciple:
Thedefendantand hiswifewereenjoyingleaveinEngland.Whenthe
defendantwasdueto return toCeylon,wherehewasemployed,hiswife
wasadvised,byreasonofher health,to remaininEngland.The defendant
agreedtosendheranamountof£30 amonthfortheprobableexpenses
ofmaintenance.He did send the amount for some time, but afterwards
differencesarosewhichresultedin theirseparationand theallowancefell
intoarrears.Thewife'sactiontorecoverthearrearswasdismissed.
LordAtkinexplainedtheprinciplethus:"Thereareagreementsbetween
parties which do not result in contract within themeaningof that term in
ourlaw.The ordinaryexampleiswheretwo partiesagreeto take a walk
together,orwherethereis anofferandacceptanceofhospitality.Nobody
wouldsuggestin ordinarycircumstancesthat thesearrangementsresult in
what weknow ascontracts,and oneof the mostusualformsofagreement
which does not constitute a contract appears to be the arrangementswhich
are made between husband and wife. These arrangements do not result in
contractsat all, eventhoughthere may bewhatwouldconstituteconsidera
tion for the agreement.They are not contracts becauseparties did not intend
that they shall be attended by legalconsequences."
40. See, King's Bench decision in Williams vCarwardine,(1833) 2 LJKB101.
41.AtkinJ at p. 293 in Rose & Frank Co vJ.R. Crompton & Bros Ltd, (1923) 2 KB 261(CA).
42. Dalrymple v Darlymple,(1811)161 ER 665, per LordStowell.
43.Costigan,CasesonContracts(3rd Edn.) 32.
44. (1919) 2 KB 571 at pp.578-79.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

148. 12Chapter1Agreement,ContractandProposal [S-4]
Family and socialmatters
Theintentionofthepartiesisnaturallytobeascertainedfromtheterms
oftheagreementandthesurroundingcircumstances.Itisforthecourtin
each case to find out whether the parties must have intended to enter into
legalobligations."Inthecaseofarrangementsregulatingsocialrelationsit
followsalmost as a matter of coursethat the parties do not intend legalcon
sequencestofollow.Inthecaseofagreementsregulatingbusinessrelations
itequallyfollowsalmostasamatterofcoursethatthepartiesintendlegal
consequences tofollow.'"'^
Thisdoesnot,however,meanthat infamilyorsocialmatterstherecan
notbealegallybindingcontract.'"^Allthat thelawrequiresisthat thepar
tiesmustintendlegalconsequences.McGregorvMcGregor^'^is anearly
illustrationof abindingengagementbetweenahusbandandwife.Here a
husbandand wifewithdrewtheircomplaintsunder anagreementbywhich
thehusbandpromisedtopayheranallowanceandshewastorefrainfrom
pledginghiscredit,theagreementwasheldtobeabindingcontract.An
agreementbetweenrelativestoshareahousehasbeenheldtobebinding.''^
The"principleappliestodealingsbetweenotherrelations,suchasfather
andsonanddaughterandmother".Thesewordsoccurin thejudgmentof
DanckwertsLJ in]onesvFadavatton-f'^
Adivorcedwoman waslivingin Washington with her son where
shewasemployedas anassistantaccountantin the IndianEmbassyon
attractiveterms.Hermotherwas inTrinidadandwishedherdaughterto
be nearher.Shewasparticularlyattachedto thegrandson.The mother
persuadedherdaughter,muchagainstherwill,toleaveservice,totake
legaleducationinEnglandandfinallytocomebacktoTrinidadasa prac
tisinglawyer.Themotherundertooktofoottheexpenses.Subsequently,
the mother boughtahouseinEngland,part of whichwasallowedto the
daughterandresttenantedout.Forfivelongyearsthedaughtercouldnot
completehereducation.Shealsoremarriedin themeantime.Differences
arose between them and the mother stopped payments and also com
menced proceedings to evict the daughter.
DanckwertsLJallowedthemother'sappeal.HisLordshipsaid:"There
is nodoubtthatthis case is a most difficult one,but...is one ofthosefamily
arrangementswhichdependon the good faith of thepromiseswhichare
made and arenotintendedto be rigid,bindingagreements."SalmonLJ
also allowed the mother's appeal, but on a different ground. He felt that
45. PerBankesLJat p. 282 in Rose & Frank Co vJ.R.Crompton& Bros Ltd,(1923)2KB
261(CA).
46. Forexample,theSupremeCourtobservedin ChandrakantManilalShahv CIT,(1992)1SCC
76: AIR 1992 SC 66 that a contract of any kind including that of partnership between the
undividedmembersof aHindufamily isquitepossible.
47. (1888) LR 21 QBD 424 (CA).See also Pearce vMerriman,(1904) 1 KB 80.
48.ParkervClark,(1960)1WLR286.
49. (1969) 1WLR328 (CA) at p.620.https://t.me/LawCollegeNotes_Stuffs

149. [S. 4] Intentiontocontract13
acting on hermother'spromise, thedaughterhad left anattractiveservice
and gone toanothercountryfor education and themothercould not in these
circumstances get out of the promise at her sweet will and leave the daugh
ter inthatcondition.Theengagement,therefore,did result in acontract,
but the agreement could last only for a period reasonably sufficient for the
daughterto complete her education and the period offiveyears was more
thansufficient for thepurpose.She could not have expected hermotherto
supporther, her son andhusbandinperpetuity.
The mere opening of a joint banking account between a man and his wife
or the man promising to buy her a car in an effort to improve their strained
matrimonialrelationship has been held to be a purely domesticarrangement
notresultingin any legalrelationship.^"
Objectivity, not subjectivity, test ofcontractualintention
The test ofcontractualintentionis objective, not subjective.Whatmat
ters is notwhatthepartieshad in mind, butwhata reasonableperson
wouldthink,in thecircumstances,theirintentionto be. Thus, where three
ladies, two of them beingmotheranddaughterand thethirda paying guest,
together made entries into a crosswordpuzzlein the name of the mother, the
expenses being met by one or other, without any rules. The entry was suc
cessful and themotherrefused to share the prize. But thecourtheldthatshe
was bound to do so, for any reasonable man looking at their conduct would
at once concludethatthey must have intended to share theprize.^^Following
these principles, the SupremeCourtobserved on the facts of a case:
Here, onepartnerhas lent a large sum of money to the other to be uti
lised as capital in the partnership venture. The transaction is in the con
textof a commercial venture. Thepresumptionisthatlegalobhgations
are intended. The onus is on the parties asserting the absence of legal
obligationsand the test is notsubjective,but is anobjectiveone. Where,
as here, the tax implicationsof large financial obligationsare sought to be
-put an end to, the burdenisheavyon theassesseetoestabhshthat what
wouldotherwisebetheincidentsofthetransactionwereexcludedfrom
contemplationby theparties.
Thecourtcited the following passage from an Englishcase:^^
In decidingwhether or not there was any contract in relation to a cer
taintransaction,orwhetheror not sufficient notice of acertainterm
wasgiven,the lawappliesanobjectiveand not asubjectivetest....In the
absence of such evidence, how can thecourtassume,thatthe master did
notintendtoenterintoacontract.
50. Spellman v Spellinan,{1961)1WLR921 (CA).
51.Simpkinsv Pays, (1955) 1WLR975.
52.CWTVAbdulHussainMullaMuhammadAli, (1988) 3 SCC 562,perVenkatachaliahJ.
53. Bahamas OilRefiningCo v KristiansandsTankrederieA/S,(1978)1Lloyd'sRep 211. The
courtalso citedEdwardsv Skyways Ltd, (1964) 1 WLR 349 at p. 359 (QB).https://t.me/LawCollegeNotes_Stuffs

150. 14Chapter1 Agreement,ContractandProposal [S. 4]
The results of cases on this subject areboundto bevariable,for the
matter wholly depends upon the fact whether the conduct of the parties in
thesurroundingcircumstancesaffords evidence of objectiveintention.For
example, inMerrittvMerritt,^'^an agreement totransferto the wife the
beneficial ownership of thematrimonialhome made at the time of separa
tion was held to be binding. But in Gould vGould,anagreement similarly
made was held to be not binding as the husbandundertookto pay only as
long as he had the means to pay.Uncertaintyof these words showedthatno
legal relations werecontemplated.^^
Businessmatters
In an agreement to provide loan facilities to a company's subsidiary, the
company gaveto the lender assurances of providing security by giving them
two "letters of comfort", they being commercial papers, were held sufficient
to create the responsibility of providing security. Taking intoaccountthe
nature of thepromise,the courtheld:"A letter of comfort from a parent
company to a lender stating that it was the policy of the parent company to
ensurethatits subsidiary was 'at all times in a position to meet its liabili
ties' in respect of a loan made by the lender to the subsidiary did not have
contractual effect if it was merely a statement of present fact regarding the
parentcompany'sintentionsand was not acontractualpromise as to the
parent company's future conduct. On the facts, the relevantparaof the let
ters of comfort was in terms a statement of present fact and not a promise
astofutureconductandinthecontextinwhichtheletterswerewrittenwas
not intendedto be anything other than a representationof factgivingrise to
no morethana moral responsibility on thepartof the defendants to meet
M'sdebt."^^Aninvestmentin a partnershipfirmwas taken bytheSupreme
Court to be ofcommercialnature putting the onus on the partyasserting
that he did not intend to be a legalpartnertoprove thatfact.^^
Eveninbusinessmatters, parties intend to rely on each other's "good
faith and honour," and not on the courts. Forexample,in Rose & Frank Co
VJ.R.Crompton&BrosLtdJ^
AnexhaustiveagreementwasdrawnbetweenoneAmericanandtwo
Englishfirmsfor theirdealingsin papertissues.The agreementcontained
thefollowingclause:"This arrangement is not entered into as a formal
legalagreementand shall not be subjectto a legal jurisdictionin the law
courtseitherin theUSor inEngland."Theagreementwasterminatedby
54.(.1970)1WLR211(CA);noted, (1970) 86 LQR 436 at p. 437.
55. (1970) 1 QB 275: (1969) 3 WLR 490 (CA). Criticised (1970) JBL 113.
56. This result hasbeencriticised.See,Ingram,Intention to CrateLegalRelations,(1970)JBL
181; P.L. Bradbury,ContractualIntent,120 New LJ 828.
57.KleinwartBensonLtd vMalaysiaMiningCorpn,(1988)1WLR799(CA),goingbythepre
sumptionof legal consequences in allcommercialmatters.
58.CWTVAbdulHussainMullaMuhammadAli,(1988)3 SCC562 at p. 568.
59. (1923) 2 KB 261 (CA).https://t.me/LawCollegeNotes_Stuffs

151. [S. 4] Intentiontocontract15
one of the partiescontraryto its terms. The American firmbroughtan
actionforthebreach.Itwasheldthatthedocumentdidnotconstitutea
bindingcontractas there was nointentionto affect legal relations.
"Intentiontocontract"saidLordAtkinLJ,"maybenegativedimpliedly
by thenatureof thepromise....If theintentionmay be negatived impliedly,
it may be negativedexpressly....I have never seen such a clause before, but
I see nothing necessarily absurd in businessmen seeking to regulate their
businessrelationsbymutualpromiseswhich fallshortof legalobligations,
and rest on obligations of either honour or self-interest or perhapsboth."^°
Inanother case, coupons were invited from persons generally showing
certainentriesandthecorrectentriesweretoberewarded,therewasa
clause on the back of everycouponthatthetransactionwould not give rise
to any legal relationship, or be legally enforceable, but binding in honour
only. No action was allowed either about the receipt of a coupon or the cor
rectnessof itsparticulars."
A winner at a football pool sued for his winning, but was not allowed to
recover because the pool was subject to a condition that it was not legally
enforceable.^^The practice, whereby workmen go to their place of business
in a motor car or on the motor cycleof a fellowworkmanupon the terms of
making contribution to the cost of transport, has been held not to result in
acontract.Statingthe reasonsUpjohnLJ said: "The hazards ofeveryday
life, such as temporaryindisposition,theincidenceofhoHdays,the possi
bilityof a change of shift or differenthours ofovertime,orincompatibility
arising, make it most unlikely that eithercontemplatedthat the one was
legallybound to carry and the other to be carried to work." In a subsequent
case, it was pointed out that such anagreementshould be held binding at
least to theextentso as to enable the vehicle owner to recover thepromised
contribution from the otherparty."LordCrossofChelseadid not think
it necessary that there should be positiveevidenceof intention to contract.
He gave anillustration:
If I get into a taxi and ask the driver to drive me to the Victoria Station
it is extremely unlikely that either of us directs his mind to the question
whetherwe areenteringintoacontract.Weenterintoacontractnot
becausewe form any intention to enter into one but becauseif our minds
weredirectedto the point we shouldasreasonablepeopleboth agreethat
we were infactenteringintoone.
60. At p. 293.SeealsoApplesonvH. LittlewoodLtd,(1939)1 AllER464{CA);Jones vVernon's
Pools Ltd,(1938)2 All ER 626, in both of which a clause providing that no legal relations
should arise, was held toexcludealllitigation.For acriticismof thisEnglishrulesee.Tuck,
(1943) 21CanadianBar Rev123.
61..Jones v Vernon's Pools Ltd, (1938)2 All ER 626.
62. Appleson v H. Littlewood Ltd,(1939)1AllER 464(CA).
63.CowardvMotorInsurers'Bureau,(1962) 2WLR663 (CA).
64.AlbertvMotorInsurers'Bureau,(1971)3WLR291(HL).https://t.me/LawCollegeNotes_Stuffs

152. 16Chapter1Agreement,ContractandProposal [S. 4]
SupremeCourt'sview ofrequirementof"intention"
The SupremeCourthase~xpresseditsreservationaboutthe need of this
separaterequirementof"intentiontocontract"undertheContractAct.
Going by the criticismwhichisalreadythere in the West, thecourtfound
thatit was a necessity of those systems whereconsiderationwas not a req
uisite of enforceability. Thus it is still an open question whether the require
ment of"intentiontocontract"is applicableundertheIndianContractAct
in the way inwhichit has been developed inEngland/^
But earlier to this, a limitedrecognitionof theapplicabilityof thisprin
ciple in India could be inferred from the decision of the SupremeCourtin
BanwariLaivSukhdarshanDayal.^^In an auction sale of plots of land, a
loudspeakerwasspellingouttheterms,etc., of the sale, one of thestatements
beingthata plot ofcertaindimensionswouldbe reserved for aDharamshala
(public inn).Subsequently,thatplot was also sold for private purposes. The
purchaserssoughttorestrainthis.ChandrachudJ(afterwardsCJ) said:
Microphones...havenot yet acquired notoriety as carriers of binding rep
resentations. Promises held out over loudspeakers are often claptraps of pol
itics. In theinstantcase, the announcement was, if at all, a puffing up of
propertyputup for sale.
In a subsequentcase^^on thesubject,theSupremeCourt noted the general
propositionthatin addition to the existence of an agreement and the pres
enceofconsiderationthereisalsothethirdcontractualelementintheform
ofintentionof thepartiesto create legal relations, and also notedthatthis
proposition, though accepted in English Law, has not passed unchallenged.
Thecourtthen cited the following passage from Cheshire and Fifoot's Law
OFContract:''^"...thecriticism of it made by Prof.Willistondemands
attention, not only as emanating from a distinguished American jurist, but
as illuminating the whole subject. In his opinion, the separate element of
intention is foreign to the common law, imported from the Continent by
academicinfluencesin theI9thcentury and useful only insystemswhich
lackthetestofconsiderationtoenablethemtodeterminetheboundariesof
contract."
Lettersofintent
A letter of intent merely indicates aparty'sintention to enter into a con
tract on the linessuggestedin the letter. It may become a prelude to a con
tract. However, where a letter statedthatit would be followed by a detailed
purchase order whichcarriedanarbitrationclause, it was heldthatthe letter
65. CWTVAbdul HussainMullaMuhammadAli,(1988)3 SCC 562 at p. 569.
66.(1973)1SCC294.
67. CWT VAbdul Hussain Mulla Muhammad Ali, (1988) 3 SCC 562 at p. 569.
68.(lOthEdn) 97.https://t.me/LawCollegeNotes_Stuffs

153. [S. 4] Generaloffers17
was not a supply order and thearbitrationclause contained in it did not by
itself fructify into anarbitrationagreement.®
GENERALOFFERS
It was suggested in the old case of WeeksvTybald7°thatan offer must be
made to a definiteperson.Thatcase arose out of thedefendant'saffirmation
to the publicthathe would give£ 100 to him that should marry his daughter
with his consent. Theplaintiffallegedthathe did so and sued the defendant.
Rejectingtheaction,thecourtsaid:"Itisnotaverrednordeclaredtowhom
the words were spoken." The difficulty suggested wasthatif an offer of
this kind addressed to several persons could be accepted, theoffererwould
find himselfboundininnumerablecontracts.This was, however, soon over
ruled. Themodernposition isthatan offer may be made to the world at
large. But thecontractis not made with all the world.Contractis made only
withthatpersonwho comesforwardandperformstheconditionsof the
proposal.Theprincipleis thusstatedin Anson: "An offer neednotbe made
to anascertainedperson, but nocontractcan arise until it has been accepted
by anascertainedperson."^^An offer of thiskindhasalreadybeen seen in
LalmanShuklavGauriDatf^whichwasaddressedto the public generally.
AnotherauthorityisCarlillvCarbolicSmokeBallCo (Smoke Ballcase).^^
Acompanyoffered byadvertisementto pay £ 100 to anyone"whocon
tractstheincreasingepidemicinfluenza,colds or anydiseasecausedby
takingcold,afterhaving used the ballaccordingtoprinteddirections".It
was addedthat"£1000isdepositedwiththe Alliance Bankshowingour
sincerityin thematter".Theplaintiffused the smoke ballsaccordingto
thedirectionsbut she neverthelesssubsequentlysuffered frominfluenza.
She was heldentitledtorecoverthepromisedreward.
It wascontendedby thedefendantsthattherewas nointentiontoenter
into legalrelationsas it was simply a puffingadvertisement;thatthe offer
was not made to any onepersoninparticularandthattheplaintiffhad
notcommunicatedherintentionto accept. The firstargumentwas easily
disposed of byBowenLJ by saying: "Was itintendedthatthe £ 100should,
if theconditionswere fulfilled, be paid?Theadvertisementsaysthat£1000
is lodged at thebankfor thepurpose.Therefore,itcannotbe saidthatthe
statementthat£100would bepaidwasintendedto be a mere puff." His
Lordshipalsoexposedthe fallacy of theargumentthatan offer couldnot
be made to theworldat large,whenhe said;"Whyshouldnotan offer be
69.DresserRandS.A. vBindalAgroChemicalLtd, (2006) 1 SCC 751; AIR2006SC 871, rely
ing upon its own earlier decision inRajasthanCoopDairyFederationLtdvMahaLaxmi
MingrateMarketingService(P)Ltd,(1996) 10 SCC 405; AIR1997SC 66.
70.1605Noy11; 74 ER982.
71.Anson'sLawofContract(23rdEdnbyA.G.Guest,1971)40.
72. (1913) 11 All LJ 489.
73. (1893) 1 QB256(CA).
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154. 18Chapter1Agreement,ContractandProposal [S. 8]
made to all the worldwhichis toripeninto acontractwithanybodywho
comesforwardandperformsthecondition?It is an offer to become liable
to anyone who, before it isretracted,performstheconditions,andalthough
the offer is made to theworld,thecontractis madewiththatlimitedportion
of the public who comeforwardandperformtheconditionon thefaithof
theadvertisement."
Proposalsacceptablebyconduct
HisLordshipalsopointedoutthatin cases like thiscommunicationof
acceptanceisnotnecessary. "Asnotificationofacceptanceisrequiredfor
the benefit of thepersonwho makes the offer, he may dispensewithnotice
to himself if hethinksit desirable to doso...and if he expressly or impliedly
intimates in his offerthatit will be sufficient to act on theproposalwithout
communicatingacceptanceof it to himself,performanceof thecondition
is a sufficientacceptancewithoutnotification.In theadvertisementcases it
seemstofollowasaninferencetobedrawnfromthetransactionitselfthat
a person is not to notify his acceptance of the offer before heperformsthe
condition.... Iadvertiseto theworldthat my dog is lost and thatanybody
who brings the dog to aparticularplace will be paid some money, are all the
police andotherpeople whose business is to find lost dogs to sit down and
write me a note sayingthatthey haveacceptedmyproposal?"^''
Section 8 of theContractActincorporatesthis principle:
S. 8.Acceptancebyperformingconditions,orreceivingconsidera
tion.—Performanceoftheconditionsof a proposal, ortheacceptanceof any
considerationfor a reciprocalpromisewhich may beofferedwith aproposal,is
anacceptanceoftheproposal.
The principle of the section was followed byYearsCJ of theAllahabad
HighCourtinHarBhajanLaivHarCharanLaF^and applied to asituation
where the terms of a general offer were substantially, though not literally
compliedwith.
A young boy ran away from his father's home. The father eventually
issued a pamphlet, offering a reward in these terms: "Anybody who finds
trace of the boy and brings him home, will getRs500."Theplaintiffwas
at theDharamshalaof a railway station, there he saw a boy, overheard
partof the conversation, realizedthatthe boy was the missing boy and
promptly took him to the RailwayPoliceStation and sent a telegram to
the boy'sfatherthathehadfoundhis son. It was heldthatthehandbill
was an offer open to the whole world and capable of acceptance by any
person whofulfilledthe condition, and that the plaintiff substantially
performedtheconditionandwasentitledto theamountoffered.
74. At pp.269-70ofCarlillvCarbolicSmoke Ball Co, (1893) 1 QB 256 (CA).
75.AIR1925All539.https://t.me/LawCollegeNotes_Stuffs

155. [S. 8] Offerandinvitationtotreat19
A Privy Councildecision''^is still another illustration of an offer which is
acceptedby acting upon its terms. Upon the marriage of the appellant, her
aunt, Papamma, a wealthy Hindu widow with whom she had resided since
childhood, promised that if the appellant and her husband would reside
with her, she would purchase immovablepropertyfor the appellant. The
appellantand herhusbandaccordinglyresidedwith the aunt.Shedid pur
chase some property but in her own name. Thisdissatisfiedthe appellant
whowithherhusbandceasedtoresidewiththeaunt.Theauntwrotetothe
appellantthat thepropertyhadbeenpurchasedfor theappellantandwould
betransferredto her uponthe writer's death. The appellantand her husband
thereafterresidedwiththeauntuntilherdeath.Thiswasheldtobe asuffi
cientacceptanceof the promisecontained in the aunt's letter:
The Board is of the opinionaccordinglythat there was here a com
pletedcontract.Papammaaccomplishedherdesire,and she obtainedthe
considerationwhichshehadso much atheart.Acceptanceof her terms
and compliancewith her stipulation were made.
It has beenobservedin a decision of thePatnaHighCourt^^that"where
theacceptanceistoconsistof an act, as forexample,despatchinggoods
orderedby post, the rule is that no furthercommunicationofacceptance
isnecessary".Where theallotmentof a quarter was tobecomeacomplete
transaction on the making of the finalpayment,not tohavedoneso brought
aboutlapseof theallotment.Suchallotteewasnotallowedtoquestionthe
allotmentofthe quarter to anotherperson.^^In a claimagainstRailwaysfor
shortdeliveryofgoods,twochequesweredispatchedto theclaimantwith
this clarificationthatencashment of the cheques would be full and final sat
isfaction of the claim. Theclaimantencashed the cheques and subsequently
protestedandclaimedthe fullclaimamount.Hisclaimapplicationwas
dismissed.^^
Generalofferofcontinuingnature
"Whereageneralofferis ofcontinuingnature,as itwas,forexample,in
theSmokeBallcase,it willbeopenforacceptanceto anynumberofpersons
until it isretracted.But where an offer requires someinformationas to a
missingthing, it isclosedas soon as the first informationcomesin.
OFFERANDINVITATIONTOTREAT
An offer should bedistinguishedfrom aninvitationtoreceiveoffers.
When a man advertisesthat he has got a stock of books to sell, or houses to
let, there is no offerto be bound by any contract."Suchadvertisementsare
76.MalrajuLakshmiVenhayyammavVenkataNarasimhaAppaRao,(1915-16)43lA138at
p.146.
77. Stateof BiharvBengalChemical&PharmaceuticalWorksLtd, AIR1954Pat 14.
78.RameshRamchandraNewarevShankerMahadeoChefalkar,(2004) 1 Bom CR 470.
79.BhagwatiPrasadPawanKumarvUnionofIndia,(2006)5SCC311:AIR2006SC2331.https://t.me/LawCollegeNotes_Stuffs

156. 20Chapter1Agreement,ContractandProposal [S. 8]
offers tonegotiate—offersto receiveoffers—offersto chaffer."^" An offer is
the final expression of willingness by theoffererto be bound by his offer,
should the otherpartychoose to accept it. This may be inferred from the
definition of"proposal"in Sectionl{a),which emphasisesthatthere should
be the expression of willingness to do or abstain with a view to obtaining
the assent of the other. The offeror must have expressed his willingness to
contractin terms of his offer with such finalitythatthe only thing to be
waited for is the assent of the other party. Where a party, without expressing
his finalwillingness,proposescertain terms on which he is willing to nego
tiate, he does not make an offer, but only invites the otherpartyto make
an offer on those terms. This is perhaps the basic distinction between an
"offer" and an "invitation" toreceiveoffers.The PrivyCouncilin Harvey v
Facey^^hasexplainedthedistinction.
The plaintiffstelegraphedto thedefendants,writing; "Will you sell us
BumperHallPen?Telegraphlowestcash price". Thedefendantsreplied,
also by atelegram:"Lowest price for Bumper Hall Pen,£900".
The plaintiffsimmediatelysent their last telegram stating: "We agree
to buy Bumper Hall Pen for£900asked by you."
Thedefendants,however,refused to sell the plot of land at that price.
Theplaintiffscontendedthat by quoting theirminimumprice inresponse
to theenquirythedefendantshad madean offertosellat thatprice.But'the
Judicial Committee turned down thesuggestion.TheirLordshipspointed
out that in theirfirsttelegram,theplaintiffshadaskedtwoquestions,
first,as to thewillingnesstoselland,second,as to thelowestprice.The
defendantsansweredonlythesecond,andgaveonlythelowestprice.They
reservedtheir answer as to thewillingnesstosell.Thus, they had made no
offer.The lasttelegramof theplaintiffswas an offer tobuy,but that was
neveracceptedby thedefendants."TheirLordshipsare of opinionthat the
merestatementof the lowest price at which the vendor would sellcontains
noimpliedcontracttosellat thatpriceto thepersonmakingtheinquiry."
Theprincipleof this casewasfollowedbytheSupremeCourt in Col. D.I.
McPherson vM.N.Appanna.^^
The plaintiffofferedtopurchasealodgeownedby thedefendantsfor
Rs6000.He wrote the defendant's agent asking whether his offer had
beenacceptedandsayingthat hewaspreparedtoacceptanyhigherprice
iffoundreasonable.Theagentreplied:"Won'tacceptlessthanrupees
tenthousand".Theplaintiffacceptedthis andbroughta suitforspecific
performance.It washeldthat thedefendantdid notmakeanyofferor
counter-offerin his cable but wasmerelyinvitingoffers.There was no
CASEPILOT
80. Carlill v Carbolic Smoke Ball Co,(1893)1 QB 256(CA).
81.1893AC552.
82. AIR1951SC184:1951SCR161.Followedin Badri Prasad v StateofM.P.,(1971)3 SCC23:
AIR 1970 SC706. Seealso Matanhells Bros v Shri Mahabir Industries (P) Ltd, AIR 1970 Pat
91.https://t.me/LawCollegeNotes_Stuffs

157. [S. 8] Offerandinvitationtotreat21
assent to theplaintiff'soffer to buy at Rs10,000and,therefore,no con
cludedcontract.
Asdistinguishedfrom it where theproposee,inresponseto aproposal
topurchasehisland,asked for a higher priceandalso some advancewith
acceptance;theCourtheldthattheproposer'sacceptance,alongwithan
advancepaymentamountedto acontract,althoughtheproposeelater
revokedhisoffer.
ADevelopmentAuthoritymade anannouncementformakinganallot
ment of plots on first come first served basis onpaymentof full consider
ation. Anapplicationinresponseto this madewithfullconsiderationwas
heldto be anofferand,therefore,therecouldbe noconcludedcontracttill
the offer was accepted.^''
Cataloguesanddisplay of goods
Ashopkeeper'scatalogueof prices isnotan offer; it is only an invita
tionto theintendingcustomersto offer to buy at theindicatedprices."The
transmissionof a price list,"observedLordHerschell,"doesnotamount
to an offer to supply anunlimitedquantityof the wine described at the price
named,sothatas soon as anorderis given there is abindingcontractto
supplythatquantity. If it were so, themerchantmight find himself involved
in anynumberofcontractualobligationsto supply wine of aparticular
description which he would be quite unable to carry out, his stock of wine of
thatdescription being necessarilylimited."^^For the same reason the display
of goods in a shopwithprice chitsattachedis not an offer even if there is a
"self-service" system in the shop. This was so held inPharmaceuticalSociety
ofGreatBritainVBoots Cash ChemistsSouthernLtd.^^LordGoddardCJ
said:"Itwouldbewrongto saythattheshopkeeperismakinganoffer to
sell everyarticlein the shop to anypersonwhomightcome in andthat
person can insist on buying any article by saying T accept youroffer'....In
most bookshops customers are invited to go in and pick up books and look
at them even if they do not actually buy them. There is nocontractby the
shopkeeper to sell until the customer has taken the book to the shopkeeper
or hisassistantand said: Twantto buy thisbook'and theshopkeepersays
'yes'.Thatwould not prevent the shopkeeper, seeing the book picked up,
saying,'IamsorryIcannotlet you havethatbook; it is the only copy I have
got and I have alreadypromisedit toanothercustomer.' Therefore, I am of
opinion, the mere factthata customer picks up a bottle of medicine from the
shelves in this case doesnotamountto anacceptanceof an offer to sell. It is
an offer by thecustomerto buy, and there is no sale effected until the buyer's
offer to buy isacceptedby theacceptanceof the price."
83.ByomkeshBanerjeevNaniGopalBanik,AIR 1987Cal92.
84.AdikandaBiswal vBhubaneshwarDevelopmentAuthority,AIR2006Ori 36.
85.Grainger& Son vGough,1896AC325,334(HL).
86.(1952)2 QB 795 at p. 802, affirmed,PharmaceuticalSociety of Great Britian v Boot Cash
Chemists(Sourthern)Ltd,(1953) 1 QB 401: (1953) 2WLR427(CA).
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158. 22 .Chapter1Agreement,ContractandProposal [S. 8]
Abanker'scatalogueof charges is also not anoffer.®^Arailwaytimetable
is in the samecategory.^®Where a shopkeeper was convicted of offering for
sale a flick-knifecontraryto theRestrictionof OffensiveWeaponsAct, 1959
[S.1(1)](UK) which he had displayed in his shopwindow,it was heldthat
it was in no sense an offer for sale theacceptanceofwhichcouldconstitute
acontract.®^
Announcementtoholdauction
Anauctioneer'sannouncementthatspecifiedgoodswill be sold by auc
tionon acertainday isnotan offer to hold theauctionandhe willnotbe
liable topersonstravellingup to the place if he changes hismindanddoes
not hold theauction.'"Indicationof reserve price isneitheraproposalto sell
atthatpricenorit is avaluationoftheproperty.'^Evenwhenanauctionis
held, the bid is not anacceptanceso as to entitle thehighestbidder to get the
goods. Thehighestbid isnothingmorethanan offer to buy and itrequires
to beacceptedby theauctioneer.'^It doesnotmatterfor thispurposethat
theauctionwas held by theGovernment.Even aGovernmentauctionmay
becancelledbefore any bid is finally accepted.Aftercancellingtheauction
(in this case the right to fell trees in a forest), therightwashandedover to
aGovernmentcorporationand it wasconsideredto be noargumentthata
corporationcannotaffordto pay anamountequal toprivatebidders. The
SupremeCourtalso gave thislatitudeto theGovernment,as is enjoyed by a
privateauctioneer,thatit may evenignorethehighestbidandacceptalower
bid. The highest bidder may be found to be an undesirablepersonfor many
reasons,forexample,fromthe mereenormityof thebid.'^However,one
contractorshouldnot bepreferredoveranotherwithoutany rhyme or rea
son,thiswouldbemoreso inthematterofGovernmentcontracts.Where
out of theparticipatingbidders ortenderers,any one is called to revise his
87.StateAidedBankofTravancoreLtdvDhirtRam,(1941-42)69lA1:AIR1942PC 6.
88. In one English case, namely,DentonvGreatNorthernRly,(1865) 5E&B860, theRailway
companywas held liable indamagesforfraudincancellingatrain.
89.FisherVBell,(1961) 1 QB394(DC).
90.HarrisvNickerson,(1873) LR 8 QB286.See also UnionofIndiavGangadharanMohandas,
(1997)2 Cal LJ221,cancellationofauctionafterdueconsideration,nobiddercanclaim
anythingunderthedoctrineoflegitimateexpectations.
91.AnilKumarSrivastavavStateofU.P., (2004) 8 SCC 671:AIR2004SC 4299.
92.SpencervHarding,(1870) 5 CP 561: 39 LJCP 332: 23 LJ 237.
93. StateofU.P. vVijayBahadurSingh, (1982) 2 SCC 365: AIR 1982 SC1234.Agovernment
contractis like anyothercontractbetweenprivatepartiesandonlythoseremediesare avail
able for its breach as in other cases. Remedy by way of writ is not available for enforcing
governmentcontract,StateofU.P. vBridgeandRoofCo(India)Ltd,(1996) 6 SCC 22: AIR
1996SC 3515. Aninvitationfortendersrequiredcertaindocumentsto besubmitted.It was
heldthat such documents could be submitted evenafterwards.Tender should not be disquali
fied forthatreason alone.MukulKumarvNorthernRly, AIR 1995 All 72.Strictcompliance
withancillaryorsubsidiaryconditionsoftendernot necessary. Suchrequirementscan be
complied withafterwards,/yofiKrishnaEngineersvStateBankofHyderabad,AIR 1993 AP
327.https://t.me/LawCollegeNotes_Stuffs

159. [S. 8] Offerandinvitationtotreat23
figure, an equalopportunityshould begivento the highest bidder or the
lovi^esttenderer,providedthere isotherw^isenothingagainsthim.
Fixationof reserve price in aninvitationforsubmissionoftendershas
beenheldtobenotanoffer.'^
Definiteness ofproposal
Aclassifiedadvertisementtotheeffect:"cocksandhens25s.each"has
been held to be not an offer tosell.^®Similarly, aletterwhichstatedthatthe
writerwaspreparedto offer for sale his estate for acertainprice and allow
reasonablysufficient time forverificationofdataanddetailfor the comple
tionofthesale,washeldto benotadefiniteoffer.^^
Freedistributionofarticles
Whereinpursuanceof a schemeadoptedby ESSO, thepetrolstation
proprietorsannouncedthattheywouldgive"theWorldCupCoins",one for
every buyer offourgallonsofpetrol,it was heldthatthedistributionofthe
coins wasnotacontractof sale so as toattracttheprovisionsofPurchase
Tax Act, but was only agift.'®
94.Desai& Co vHindustanPetroleumCo,1984GujLH 864. Thehighestbiddercannotcom
pelauthoritiesto enter intocontractwith him. Theauthoritiesmay decide not to gofurther
with thematter,GajendraSingh vNagarpalikaNigam, AIR 1996 MP 10;SaritaKarnwal
VMeerutMandalVikasNigamLtd,AIR2012Utr 30, rice millrunningin lossputto sale,
highest biddernegotiatedwiththegovernmentand made a higher bid. In themeantime,
anothercompanymade a still higher bid, notaccepted,20 years lost since thengovernment
not compelled to accept.Valuationmust have altered materially.
95. AnilKumarSrivastavavStateofU.P., (2004) 8 SCC 671: AIR2004SC 4299.
96.PartridgevCrittenden,(1968)1WLR1204.
97. CliftonVPalumbo,(1944) 2 All ER 497 (CA). See also Bigg v BoydGibbinsLtd,(1971) 1
WLR913(CA).
98. EssoPetroleumCoLtdvCommrsofCustoms&Excise,(1976) 1WLR1 (HL).
EBC
Explorer"
Visitebcexplorer.comtoaccesscasesreferred
to inthebookthroughEBCExplorer™on
seeOnline®;alongwithupdates,articles,videos,
blogsandahostofdifferentresources.
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•BalfourvBalfour,(1919) 2 KB 571
•CarlillVCarbolicSmokeBallCo,. (1893) 1 QB256(CA)
•Harveyv Facey, 1893 AC 552
•LalmanShuklavGauriDatt,(1913) 11 All LJ489
•PharmaceuticalSocietyofGreatBritainv Boots Cash
ChemistsSouthernLtd,(1952) 2 QB 795
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

160. CASEPILOT
Acceptance
DEFINITION
Section2{b)definesacceptanceas follows:
Whenthepersontowhomtheproposalismadesignifies hisassentthereto,
theproposalis said to beaccepted.Aproposal,whenaccepted,becomesa
promise.
Thus"acceptance"is the assent given to aproposal,and it has the effect
ofconvertingtheproposalintopromise.^
COMMUNICATION OFACCEPTANCE
Acceptancebyexternalmanifestationor overt act
Thedefinitionclearlyrequiresthatthe assentshouldbe signified. It may
be signified orexpressedby an act oromissionbywrhichthepartyaccepting
intendstocommunicatehisassentorwhichhas the effect ofcommunicating
it. [S. 3] A verycommoninstanceof anactamountingtoacceptanceis the
fall of thehammerin the case of anauctionsale. Theprincipleisthatthere
should be someexternalmanifestation[overtact) ofacceptance.A mere
mentaldeterminationto acceptunaccompaniedby anyexternalindication
willnotbesufficient.In thewordsofShahJ(afterwardsCJ):^"Anagree
mentdoesnotresultfrom a merestateofmind:intenttoacceptanoffer
or even amentalresolve toacceptan offer doesnotgive rise to acontract.
Theremustbe...someexternalmanifestationofthatintentbyspeech,writ
ing orotheract."
Suchmanifestationmay be in theformofexpresswords,writtenor spo
ken or may be signifiedthroughconduct.Anillustrationofacceptanceby
conductis the decision of theHouseof Lords inBrogdenvMetropolitan
RailwayCo.^
1.MaharashtraHousing& AreaDevelopmentAuthorityvMaharashtraStateHumanRights
Commission,AIR 2010 Bom 104, anapplicationforallotmentof a flat doesnotbyitselfgive
a legalrightfor a flat to theapplicant.Legalrightarises only on issue of theletterofallotment.
There can be hohumanright also earlier tothat.
2. InBhagwandasGoverdhandasKedia vGirdharilalParshottamdas& Co, AIR1966SC 543:
(1966)1SCR656.
3.(1877)LR2 AC666(HL).
[24]https://t.me/LawCollegeNotes_Stuffs

161. [S. 2] Communicationofacceptance25
B had been supplying coal to a railway company without any formal
agreement.Bsuggestedthat a formal agreementshould be drawn up. The
agentsof both the parties met and drew up a draft agreement.It had some
blanks when it was sent to B for his approval. He filled up the blanks
including the name of anarbitratorand thenreturnedit to the company.
The agent of thecompanyput the draft in his drawer and it remained
there without final approvalhaving beensignified.B kept up his supplyof
coals but on the new terms and also receivedpaymenton the new terms.
A dispute having arisen B refused to be bound by the agreement.
The conduct of the company's agent in keeping the agreement in his
drawerwas an evidence of the factthathe hadmentallyacceptedit. But he
had not expressedhis mental determination and retention of.the agreement
was not asufficientacceptance. But the subsequent conduct of the parties
insupplyingand accepting coal on the basis of proposed agreement was a
conductthatevidencedormanifestedtheirintention.Thefinalacceptance
"wasclearlygiven",said LordCairnsLC "when the companycommenced
a course of dealing which is referable only to the contract and when that
course of dealingwasacceptedand acted upon byBin thesupplyofcoals"."*
Acceptancebyconduct
Anothercommonexa;mpleof acceptance byconductis an action in terms
of the offer. All cases of general offers, which are a kind of unilateral con
tract, demand some act inreturnfor the promise topay.^In express recogni
tion ofthisprincipleSection8providesthat"performanceoftheconditions
ofaproposal,of theacceptanceofanyconsiderationfor areciprocalprom
isewhichmaybeofferedwith aproposal,is anacceptanceoftheproposal".
Suchproposalsdemandacceptancebyperformance.Acceptanceofmoney
after priorinformationthathigherratesofinterestwouldbechargedand
retentionofgoodssent onapprovalamounttoacceptanceof theconsidera
tionofferedalongwith aproposal.^A Canadiancourt hasgoneas far as to
holdthat,wherean offerwasmadefor the saleof a part of a land andlease
ofthe otherpartsubjectto theconditionthat theoffereeobtainedplanning
permissionandtheoffereeobtainedpermissionwithinninemonths,avalid
contractarose,thoughnocommunicationofacceptancehadbeenmade
duringtheperiodofninemonths.^"Theofferorhadindicatedaparticular
4.Whereaproposalforsupplyofimportedgoodswasalreadyacceptedby atelexmessage
beforethereceiptof astandardformcontract,itwasheldthat thecontractwasalreadycon
cluded and it was immaterial that the duly signed standard form was notreturned.Cotton
CorpnofIndiaLtd vAlagappaCottonMills,AIR2001Bom429:(2001)3 MahLJ415.
5.CarlillvCarbolicSmokeBallCo, (1893) 1 QB256(CA).
6.GaddarMaiv TataIndustrialBank Ltd, AIR 1927 All 407:ILR(1927) 29 All 674.
1.CalgaryHardwood&VeneerLtdvC.N.R.Co,(1977)4WLR18(AltaSC);MukandLtdv
Hindustan Petroleum Corpn,(2005)3CLT45(Bom),bank guaranteeforwardedfor obtain
ingmobilisationadvance,amountedtoacceptancebyconductincludingarbitration,delayin
issuingworkorders,claimofescalationcosts,referencetoarbitrationandawardbindingon
parties.https://t.me/LawCollegeNotes_Stuffs

162. 26Chapter2Acceptance [S. 2]
mode of acceptance and, therefore, by doing the act, the offereehad accepted
the:offer and did not have to notify the offeror in advance of itsintentionto
accept."^
The position in India is the same. This appears from the decision of the
CalcuttaHighCourtinHindustanCoopInsuranceSociety vShyamSunder.^
After an oralunderstandingto insure and the completion of the medical
examination,the company informed theproposerthatif hesubmittedthe
proposal form and deposited the half-yearly premium, hisproposalw^ould
beaccepted.He accordinglysubmitted a chequeand the proposal. The com
pany encashedthe cheque but had not yet replied to him their acceptance of
the proposal that the proposer died. The questionw^aswhether by encashing
the cheque the company had accepted the proposal without there being the
formal acceptance.HarrisCJ referred to the English authorities and said:
Merementalassenttoanofferdoesnotconcludeacontracteither
under the IndianContractAct or in English Law. The offeror may, how
ever,indicate the mode of communicating acceptance either expressly or
byimplicationbothin India and English Law. In the case before us it is
clearfrom the factsthat thedeceasedindicatedclearlythe modeof accept
ance of his proposal. Thedeceasedindicatedclearlythat if the appellant
acceptedhis proposal the chequeshould be appropriated towards thefirst
premium and that such appropriation would conclude the bargain. The
chequewasreceivedonthatimplied understanding.'"
Where, on the other hand, the insurer hadreceivedthe proposal form
along with thefirstpremium and it was still awaitingacceptancewhen the
proposerdied, noliabilityto payarose.It wasimmaterialthat the ground
work foracceptancewas under preparation and the agent had assured
that the proposal would beaccepted.''Acceptanceiscompleteonly when
8.NicholasRafferty,RecentDevelopmentsin the Law ofContract,(1978)24McGillLJ239.
9.AIR1952Cal691.Seefurther CenturySpgandMfgCo Ltd vUlhasnagarM.C.,(1970)1
SCC582:AIR1971 SC1021:(1970)3 SCR854, a person acted on arepresentationheldout
byState.
10. ThisshouldbecontrastedwithL/C vBrazinhaD'Souza,AIR1995Bom223, aproposalwas
receivedwithpremiumamountwhichwas kept insuspenseforcomplianceofformalities.
Thisdidnotamounttoacceptance.Nocontractaroseimmediately.L/C vPrasannaDevaraj,
AIR 1995Ker88, acceptance of cheque of premium, proposer died beforeconsiderationof the
proposal by authorities, no contract. L/C v Venkadaru Koteswaramma, (2003) 1 Bankmann
152,signingofpolicydocuments"can beat asubsequentstage.In thiscasetheproposalwas
acceptedandmedicalwasdone.Acceptancearose,theproposerdiedwithin5days.ElsaTony
PhillipVLie,AIR2009 NOC785NCC:(2009)1ALJ279,neitheracceptancecommuni
cated,norpolicyissued,mereencashmentofthechequedidnot amounttoacceptance,insurer
notliabletohonourclaim.
11.L/CVVasireddyKomalavalliKamba,(1984)2SCC719:AIR1984SC1014.Thecompany
accepted the proposal and made the policy effective from 10.00 a.m. from 15-6-1998. An
accidenttook placeat 5.30 a.m. that veryday.Noliabilityunderpolicy,National Insurance
CoLtd VGeetha,(2004)1CTC401.Wherethechequeissuedforpaymentoffirstpremium
wasdishonoured,the insurer was not liableto pay any claimlaid by the insured himselfand
not by a thirdparty.National Insurance Co Ltd v Seema Malhotra,(2001)3 SCC 151: AIR
2001SC1197.https://t.me/LawCollegeNotes_Stuffs

163. [S.2] Communicationofacceptance27
communicatedto theofferer.Mere silenceafterreceiptandretentionof pre
miumcannotbeconstruedasacceptance.^^Thecourtfollowed the decision
inGeneralAssuranceSocietyLtdvChandmullJain^^where it wasobserved
thatacontractis formed when theinsureraccepts thepremiumandretains
it. The decisionfurthersaysthatin the case of theassured,a positive act on
hispartby which he recognises or seeks to enforce the policyamountsto an
affirmationofit.
It isclearthatmereencashingthechequesentalongwiththeproposal
cannotamountto be aconcludedcontractbetweenthepartiesanditcan
notbesaidthatinsurerhasassumedriskbecauseoftheencashmentofthe
cheque.^''
Wheretheacceptanceletterwas issuedalongwiththefirstpremium
receipt but ithappenedto be sentwithoutknowing the fact of theproposer's
death,theLICwasnotallowedtodisownitsliabilityunderthepolicy."
Whetherexpressly or impliedly, the fact remainsthatacceptance has to
be signified. In the words ofBowenLJ:^^
Onecannotdoubtthat,as anordinaryruleof law, anacceptanceof
an offer madeoughtto be notified to thepersonwho makes the offer in
orderthatthe twomindsmay come together. Unless this is done the two
minds may beapart,andthereis notthatconsensuswhich isnecessary
accordingto the EnglishLaw...to make acontract.
Communicationtooffererhimself
Further, acceptance must be communicated to the offeror himself. A
communicationto anyotherpersonis asineffectualas if nocommunication
has been made. To take, for example,FelthousevBindley}^
Theplaintiffoffered by means of a letter to purchase his nephew's
horse.Thelettersaid:"IfIhearnomoreaboutthehorse,Iconsiderthe
horse mine at£33.15s."To thisletterno reply was sent. But thenephew
told thedefendant,hisauctioneer,notto sellthehorse as it wasalready
sold to his uncle. Theauctioneerbymistakeputup the horse forauction
and sold it. The plaintiff sued the auctioneer on the groundthatunder the
contractthe horse had become hispropertyand, therefore,defendant's
unauthorisedsaleamountedtoconversion.Buttheactionfailed.
Thecourtsaid: "It is clearthatthe nephew in his own mind intended the
uncle to have thehorse,but he hadnotcommunicatedhisintentiontothe
12.L/CVAnnamma,(1999)3 KLT142.
13.AIR1966SC1644.
14.HiralaxmivLIC,(1999)2 BC 118(BomDB).
15.OmanaFurushottamanNairVLie,KYKlQQS'&omlSl.
16. AlexanderBrogdenv MetropolitanRlyCo,(1877)LR 2 AC 666(HL);Sultan Sadik v Sanjay
Raj Subba, (2004) 2 SCC 377:AIR 2004 SC 1377,the contract ofemploymentis also created
by proposal and acceptance.Acceptanceof the application for appointment must be commu
nicated to the applicant who may then complete the contract by joining.
17(1863) 7 LT835.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

164. 28Chapter2Acceptance [S. 2]
uncle." The case is also anauthorityfor twofurtherpropositions.One of
them isthatthe acceptance of an offer made should becommunicatedto
theoffererhimselfor to thepersonhe hasauthorisedto receive theaccept
ance. Acommunicationto astranger,like theauctioneerinthiscase, will
notdo.
Offercannotimposeburdenofrefusal
Secondly, an offerorcannotimpose upon the offeree theburdenof
refusal.Theofferorcannotsaythatif noansweris receivedwithinacertain
time,the sameshallbedeemedto have beenaccepted."Itisnotopento
an offeror tostipulateagainstanunwillingoffereethatthelatter'ssilence
will beregardedasequivalenttoacceptance.Hecannotforcehimtotake
a positivecourseofactionunderpenaltyof beingcontractuallyboundif he
doesnot."^®
Communicationbyacceptorhimself
Thenaturalcorollaryof thisprincipleisthatthecommunicationofaccept
anceshouldbefromapersonwhohas theauthoritytoaccept.Information
receivedfromanunauthorisedpersonis ineffective. InPowellvLee-P
Theplaintiffwas anapplicantfor theheadmastershipof aschool.The
managerspassedaresolutionappointinghim,butthedecisionwasnot
communicatedtohim.one of themembers,however,in hisindividual
capacityinformedhim.Themanagerscancelledtheirresolutionandthe
plaintiffsued forbreachofcontract.
Rejecting theactionthecourtobserved:"Theremust be notice of accept
ance from thecontractingpartyin some way.Informationby anunauthor
isedpersonis as insufficient asoverhearingfrombehindthedoor."
Whencommunicationnotnecessary
Incertaincases, however,communicationof acceptance is not necessary.
The offeror may prescribe aparticularmode of acceptance, then allthat
the acceptor has to do is to followthatmode.^"Then, there may be an
offerwhichimpliedlyindicatesthatactingon itstermswill be asufficient
acceptance.Announcementto payrewardfor discovering a lostthingis
an offer of thiskind.^^Again, the offeror may have acquiesced in acertain
conducton thepartof theacceptorasequivalenttoacceptance.^^In such a
18.CottonCorpnofIndiaLtdvBombayDyeing& Mfg CoLtd,(2006)5 Bom CR 105, the term
in theproposalthatif it is not rejected up to acertaindate, it would be deemed to have been
acceptedwas held to be of noeffect.
19.(1908)24TLR606.
20. See,StateofBiharv BengalChemical&PharmaceuticalWorksLtd,AIR1954Pat 14.
21. See, for example, Carlill vCarbolicSmoke Ball Co, (1893) 1 QB 256 (CA);HarBhajanLaiv
HarCharanLai,AIR1925All 539.
22.MalrajuLakshmiVenhayyammav VenkataNarasimhaAppa Rao,(1915-16)43lA138.https://t.me/LawCollegeNotes_Stuffs

165. [S. 2] Communicationofacceptance29
case also no formalcommunicationof acceptance isnecessary.Referring
to the requirement ofcommunicationinCarlillv Carbolic Smoke BallCo,^'*
BowenLJobservedas follows:
But there is this clear gloss to be madeuponthatdoctrine,thatas
notification of acceptance is required for the benefit of thepersonwho
makes the offer, he may dispensewithnotice tohimself...andtherecan
be nodoubtthatwhere the [offeror] expressly or impliedlyintimatesa
particularmode of acceptance as sufficient to make thebargainbinding
it is only necessary for theotherperson to follow theindicatedmethodof
acceptance; and if the personmakingthe offer expressly or impliedly inti
mates in his offerthatit will besufficienttoacton theproposalwithout
communicatingacceptance of it to himself,performanceof thecondition
is a sufficientacceptancewithoutnotification.
But there is thisfurthergloss to be placeduponthisprinciplethatan
offer can dispense with notification of acceptancethatit applies only in
cases ofunilateralcontractsas opposed to bilateralcontracts.In aunilateral
contractthe offerdemandsanaction,e.g., arewardforswimmingacross a
river. The otherpartyhas only to perform the act and not to give a promise
inreturn.Where the otherpartyhas to promise orundertaketo do some
thing, the requirement of the notification of his acceptance should not be
allowed to be dispensed with. If, for example, in Paul Felthouse vBindley^^
thenephew,without having replied to the uncle's letter, had asked his uncle
to take away the horse and pay the price, the position of the uncle would
have beencurious,for, while the uncle couldhardlyhave denied theprom
ise, the nephew could always say at his conveniencewhether, by not commu
nicating his acceptance, he had acceptedthe offer or not. It is for this reason
thatthe law has in such cases always insisted upon an overt act (external
manifestation)of acceptancethana mere mentaldetermination.In a case
of this kind beforeDenningLJ,^^a clause in thecontractprovidedthatthe
contractwould be binding only when theotherpartyput hissignatureupon
it. HisLordshipsaid:
Signingwithoutnotificationis notenough.It would bedeplorableif it
were.The plaintiffswouldbeableto keeptheformin theirofficeunsigned,
and then play fast and loose as they pleased. The defendant would not
knowwhetherornottherewas acontract....Justasmentalacceptanceis
not enough, nor is internal acceptance within the plaintiff'soffice.
Inanothercase of the samekind,^^amotor-cyclistwasconvictedfor
being with his motorcycleon a public road withoutthird-partyinsurance.
23. For a further study of such contracts, see George P. Costigan, Jr., ImpliedinFact Contracts
andMutualAssent,(1920)33HarL Rev376.
24.(1893)1 QB256(CA).
25. (1862) 142 ER 1037.
26. Robophone Facilities Ltd v Blank, (1966) 1WLR1428 (CA).
27. Taylor v Alton, (1966) 1 QB 304; (1965) 2 WLR 598.https://t.me/LawCollegeNotes_Stuffs

166. 30Chapter2Acceptance [S. 7]
Hisinsurancehadexpired,but hiscompanyhadsent him atemporarycover
note. Hehadnotaccepted thisand,therefore,at therelevantdatetherew^as
nocontract,thoughthetemporaryrisknotewas still in force.LordParker,
however, suggestedthatif he hadtakenout hismotorcycle in reliance upon
thetemporaryrisk notethatwouldhave been sufficientacceptanceby con
ductwithoutcommunication.Even this resultwouldcreate thedifficulty
thatwhile he could have saved his skin byshowing theunacceptedtemporary
cover, he could always deny his liability to the company to pay thepremium.
Modeofcommunication
Acceptanceshouldbemadeinprescribedmanner
Acceptance has to be made in themannerprescribed orindicatedby the
offeror. An acceptance given in anyothermannermay not be effective,par
ticularly where the offeror clearly insiststhatthe acceptance shall be made
in theprescribedmanner.AnAmericancaseillustratesthis:^^ .,:
A offered to buy flour from B requestingthatacceptance should besent
bythe wagon which brought the offer.B sent his acceptance bypost,think
ingthatthiswouldreach the offeror more speedily. But theletterarrived
after the time of the wagon. A was held to be not bound bythe acceptance.
Whatwouldhavebeentheresultifthemailhadreachedearlierthanthe
wagon?AccordingtoWinfield^'andCheshireandFifoot,^"inthatcase the
offeror would have been boundunless"he had anexclusivepreferencefor
reply by wagon". A minordeparturefrom the prescribed mode of communi
cation should not upset the fact of acceptance providedthatthecommunica
tion is made in an equallyexpeditiousway, "for, in a case where the offeree
was told to reply 'byreturnof post' it was said by the Court of Exchequer
Chamber that a reply sent by some other method equally expeditious would
constitutea validacceptance".
Where the notice toexercisean option to purchase a building landwas
required to be sent by registered or recorded deliverypost but it was sentbyi
ordinarypost and receivedwithin time, thecourtwas of the opinionthatthe
letteramountedto bindingcontract eventhough itwassentbyordinarypost.^^
This Anglo-American rule has, however, not been strictly followed in the
IndianContractAct.Section7dealswiththismatter.
S. 7.Acceptancemustbeabsolute.—Inordertoconvertaproposalintoa
promise,theacceptancemust—
(1)beabsoluteandunqualified,
(2)be expressed in some usual and reasonable manner, unless the pro
posal prescribes themannerin which it isto beaccepted,iftheproposal
28.EliasonvHenshaw,(1819) 4Wheaton225.
29.Winfield,Some Aspects of Offer and Acceptance,(1939)55 LQR 499, 515-16.
30. Cheshire and Fifoot, LawofContract(8th Edn, 1972) 40.
31. YatesBuildingCoLtdvR.J.Pedleyn & Sons (York) Ltd, (1975) 237 EG 183.https://t.me/LawCollegeNotes_Stuffs

167. [S.7] Communicationofacceptance31
prescribesamannerin whichitis to beaccepted,andtheacceptanceis
. notmadein suchmanner,theproposermay, within areasonabletime
aftertheacceptanceiscommunicatedto him, insistthathisproposal
shallbeacceptedintheprescribedmanner,andnototherwise;but,if he
fails todoso, heacceptstheacceptance.
Effectofdeparturefromprescribedmanner
Thesectibn.nodoubtrequiresthatacceptanceshouldbe made in the
mannerprescribedin theproposal.But adeparturefromthatmannerdoes
not of itselfinvalidatetheacceptance.A duty is cast on theofferorto reject
suchacceptancewithinreasonabletimeandif he fails to do so, thecontract
is clinched on him and he becomesboundby theacceptance.Thesection
thusmarksa visibledeparturefrom the English law andshould,therefore,
be readwithoutreference to the English law on the subject.
English law is also now comingpartlyin linewithSection 7.Article7 of
theUniformLawontheFormationofContractsfortheInternationalSale
ofGoods,appendedto theUniformLaws onInternationalSales Act, 1967,
containsthefollowingprovisions:
1. Anacceptancecontainingadditions,limitations,orothermodifica
tionsshallberejectionof the offerandshallconstituteacounter-offer.
2. However, a reply to an offerwhichpurportsto be anacceptancebut
whichcontainsadditionalordifferenttermswhichdonotmaterially
alter the terms of the offer shallconstituteanacceptanceunless the
offerorpromptlyobjects to thediscrepancy;if he doesnotobject, the
termsofthecontractshallbethetermsoftheofferwiththemodifica
tionscontainedin theacceptance.
It has been held bytheCalcuttaHighCourt^^thatwhereanofferor
requiresthattheacceptanceshouldbesentto aparticularperson,it"has
tobereadinareasonableandinasensiblemanner"andtherewasnovio
lationof Section 7 when the offeree,insteadofwritingto theparticular
person,methimpersonallytocommunicatehisacceptance.Thedefendant
wasboundby theacceptance.
There is however, one advantage to the acceptor in following the pre
scribedmode.By giving hisacceptanceinthatmode,he has done allthat
the offerorrequiredhim to doandhe isentitledto thecontract,even if the
acceptancedoesnotreachtheofferor.
Where nomannerprescribed:reasonableandusualmanner
Whereno mode ofacceptanceisprescribed,acceptancemust"be
expressedin someusualandreasonablemanner".Mailis, ofcourse,a very
reasonablemannerin such cases. InEnglandthe rule isthatwhereanoffer
32.SurendraNathRoy vKedarHathBase,AIR1936Cal87.https://t.me/LawCollegeNotes_Stuffs

168. 32Chapter2Acceptance [S. 7]
is receivedthroughpost, acceptance may also becommunicatedbypost.But
in India, in view of the language of Section 7,postmay be used as a mode
ofcommunicationin all casesw^hereit isreasonable,exceptw^henthe offer
requiresaparticularform ofcommunication.
Whencontractconcluded(postalcommunication)
Whenthepartiesare at adistanceand arecontractingthroughpostor
by messengers, thequestionarisesw^henis thecontractconcluded?Does
thecontractarise when theacceptanceispostedor when it is received. The
question first arose in England in Adams vLindselP^
On September2,1817,the defendants sent a letter offering to sellquan
tity of wool to theplaintiffs.Theletteradded "receivingyouranswerin
course of post". The letter reached the plaintiffs on September 5. Onthat
evening theplaintiffswroteanansweragreeing to accept the wool. This
was received by thedefendantsonSeptember9. Thedefendantswaited
for the acceptance up to September 8 and not having received it, sold the
wooltootherpartiesonthatdate.Theywere sued forbreachofcontract.
It wascontendedontheirbehalfthattill theplaintiffs'answerwasactu
ally received there could be nobindingcontractand,therefore,they were
freetosellthewoolon8th.Butthecourtsaid:
Ifthatwere so, nocontractcouldever becompletedbypost.For ifthe
defendantswere notboundbytheirofferwhenacceptedby theplaintiffs
till theanswerwas received, then theplaintiffsoughtnotto beboundtill
afterthey had received thenotificationthatthedefendantshadreceived
theiranswerandassentedto it. And so itmightgo onadinfinitum
(endlessly).
Theresultof the decision isthatacompletecontractariseson thedate
whentheletterofacceptanceispostedin due course. This rule wasaffirmed
by theCourtofAppealinHouseholdFire &AccidentInsuranceCo v
GrantP'
Thedefendantinthiscasehadappliedforallotmentof100sharesin
theplaintiffcompany. Aletterofallotmentaddressedto thedefendantat
hisresidencewaspostedin duetime,butit neverreachedthedefendant.
Neverthelesshe was heldboundby theacceptance.
ThesigerLJstatedtherulethus: "Anacceptancewhichonlyremainsin
thebreastof theacceptorwithoutbeingactuallyandby legalimplication
communicatedto theofferor,is nobindingacceptance.... But if thepostbe
treatedas the agent ofbothparties,thenas soon as theletterofacceptance
33. (1818) 1B&A681; 106 ER 250Courtof King's Bench.
34.(1879)LR 4 Ex D 216 (CA). See alsoDunlopvHiggins,(1848) 1HLC381,whereanaccept
anceletterpostedin due time was delayed by one day as theslipperystateofroadsfromfrost
preventedthe mail bagfromreachingthestationbeforedepartureof thetrain,nevertheless
thedefendantswereheldbound.https://t.me/LawCollegeNotes_Stuffs

169. [S. 4] Communicationofacceptance33
is delivered to thepostoffice, thecontractis made ascompleteand finaland
absolutely binding as if the acceptor had put his letter into the hands of a
messengersent bytheoffererhimselfas hisagentto deliver the offerandto
receive theacceptance.... Theacceptor,inpostingtheletterhasputitoutof
hiscontrolanddoneanextraneousactw^hichclinchesthematter,andshows
beyondalldoubtthateach side isbound.How,then,canacasualtyin the
postoffice,whetherresultingin delay,whichincommercialtransactionsis
often as bad as no delivery, or in non-delivery,unbindthepartiesorunmake
thecontract."^^
TheIndianContractAct, in Section 4adoptsaratherpeculiarmodifi
cationof the rule.Accordingto thesection,when aletterofacceptanceis
posted and is out of the power of the acceptor, theproposerbecomes bound.
Buttheacceptorwillbecomeboundonlywhentheletterisreceivedbythe
proposer.Thesectionrunsas follows:
S. 4.Communicationwhencomplete.—Thecommunicationof anaccept
anceiscomplete,asagainsttlieproposer,wiienit isputin acourseoftransmis
sion to him, so as to beoutofthepoweroftheacceptor;asagainsttheacceptor,
whenitcomestothei<nowledgeoftheproposer.
Thus the provision makes no differencein the position of the offeror. The
offeror becomesboundwhen a properly addressed and adequatelystamped
letter of acceptance is posted. This aspect was emphasised by the Allahabad
High Court in Ram DasChakarbartiv Cotton Ginning CoLtd.^^
Aletterofallotmentof shares was claimed to have beenpostedby a
company, but the applicant denied to have receivedit.
The HighCourtsaid: "It follows from this(Sections4 and 5)thata notice
of allotment, which is the acceptance of the offer to purchase shares, is com
municatedto theallotteewhen it is despatched, and fromthatmomentthere
is a completecontract for him. Whether or not hereceivesthe letter is abso
lutelyimmaterial."^''However, the company failed to furnish anyevidence
of the posting of the notice of allotment.
35. There was a strong dissenting judgment byBramwellLJ.According to him if the commu
nication of acceptanceis completeat the time of posting, the same should be true of all com
munications sentthroughpost. "Suppose," he said, "a man has paid a tailor by cheque, and
posts a letter containing a cheque to his tailor, which never reaches, is the tailor paid?...The
question then is, is posting a letter which is neverreceiveda communication to the person
addressed?" His Lordship answered by saying"thatit is not a communication". Many other
problems illustrating the absurdity of the rule appear in the judgment of his Lordship. See,
for example, the opinion of LordBramwellin British & AmericanTelegraphCo v Colson,
(1871)LR6Exch108,wherethedefendantwasheldto benotjjoundbyaletterofacceptance
which was lost in the course of post. His Lordship said: "If a man proposed marriage and
thewomanwas toconsulther friends and let him know,wouldit be enough if shewroteand
posteda letter whichneverreachedhim?" For otherargumentsagainst the rule, seeWinfield,
Some AspectsofOfferandAcceptance,(1939) 55 LQR 499, 510.
36.ILR(1887) 9 All 366. Seealso/.K.EnterprisesvStateofM.P.,AIR1997MP 68,communi
cation of acceptancecompletewhen letter posted to the address givenby the offerer.
37.ByomkeshBanerjeev NaniGopalBanik,AIR 1987Cal92, letter ofacceptancedulypostedhttps://t.me/LawCollegeNotes_Stuffs

170. 34Chapter2Acceptance [S. 4]
CASEPILOT
Thecontractisconcludedat the placefromwheretheproposalisaccepted
andcommunicationofacceptanceisdespatched,i.e. theaddressatwhich
theproposalwas sent.Thecourtatthatplacewouldhavejurisdictionto
entertainacauseofactionunderthecontract.^^
DifferencebetweenEnglishandIndianlaws
The only differencethatthesectionmakes is in thepositionof the accep
tor. InEnglandwhen aletterofacceptanceisposted,boththeofferorand
theacceptorbecomeirrevocablybound.But inIndia,theacceptordoesnot
becomeboundby merelypostinghisacceptance.Hebecomesboundonly
when his acceptance "comes to the knowledge of theproposer".The gap of
timebetween,thepostingandthe,deliveryof theacceptancecanbeutilised
by theacceptorfor revoking his:acceptanceby aspeediercofnmunicatioh
whichwillovertaketheacceptance.^'
Thepeculiarityof this rule isthatafteranacceptanceispostedandbefore
it comes to theknowledgeof the offeror, only oneparty,thatis, theofferor,
is bound. The acceptor still has the right to recede from thecontractby
revoking his acceptance. Acontract,on the otherhand,means an agreement
whichbindsboththepartiestoit.'*"
Whenpartiesindirectcommunication
This rule,thatthecommunicationof an acceptance is complete asagainst
theproposerwhen the letter is posted, is probablyintendedto apply only
when the parties are at a distance and they communicate by post. In England
also its operation has been confined only to cases where the post is used, and
the illustration{b),appended to Section 4 also supposescommunicationby
post. "Where,however,the parties are in each other's presence or, though
separated in space", they are in direct communication, as, for example, by
telephone,nocontractwillariseuntiltheofferorreceivesthenotificationof
acceptance. This appears from the speeches delivered inEntoresLtdv Miles
FarEastCorporation.'^^DenningLJobservedasfollows:
Let me first consider a case where two people make acontractby word
of mouth in the presence of one another. Suppose, for instance,thatI
by acceptor was held effective though the otherpartyrefused to receive it and it came back
undelivered.
38.ONGCVModernConstruction& Co,(1997)3 GujLR1855; ProgressiveConstructionsLtd
VBharat Hydro Power Corpn Ltd, AIR 1996 Del 92; Manohar v Saraswati Coop Housing
SocietyLtd, (2005) 3 Mah LJ297, allotment of a plot which had been completedby full pay
ment, not allowed to be cancelled arbitrarily,withoutany show-cause notice.
39. S. 5, which provides that "an acceptance may be revoked at any time before the communica
tion of its acceptance is complete as against the acceptor, but notafterwards".
40. This anomaly was pointed out by theMadrasHighCourtin Kamisetti Subbaih vKatha
Venkatasawmi,ILR(1903) 27Mad355, 359.
41. (1955) 2 QB 327: (1955) 3WLR48.TrimexInternationalFZELtdvVedantaAluminium
Ltd, (2010) 3see1: (2010) 1 SCC(Civ)570, all communications made through e-mail,
agreement thus arising washeldto be valid, though there was no formal contract signed by
theparties.https://t.me/LawCollegeNotes_Stuffs

171. [S. 4] Communicationofacceptance35
shoutan offer to amanacross a river or acourtyardbut I do.nothear
,hisreply because it isdrownedby anaircraftflying overhead.Thereis
nocontractatthatmoment.If hewishestomakeacontract,hemust
waittill theaircraftis gone andthenshoutback hisacceptancesothat
Icanhearwhathe says....Nowtakea casewheretwopeoplemakea
contractby telephone.SupposCjforinstance,thatI make an-offerto a
.man by telephone and, in,the middle of his reply, theline-goes,'dead'so
;,,*,thatIdpnothearhis.wordsofacceptance.Thereis.nocontractatthat
mpment.,.,, ;:,, , ^ ,
(!Thefacts of the casewere-.thatan offer was madefromLondonby telex to
a'partyiriHollandand it was duly acceptedthroughthestelex,the only ques-
tioriibeingas:to.;whethertheic6ntract,was:?rhade:inrHolkndLoriin/England.
The'Gourt of Appeal-heldthattelexis-amethod;ofinstantaneous,comrriuni-
cationand"theruleaboutinstantaneouscommunicationsbetweenthepar
ties,is different from the ruleaboutthe post. Thecontractis only complete
when the acceptance is received by the offerer; and thecontractis made at
thie.placewhere the acceptance isreceived.'"*^
..Where,however, theproposaland acceptance are made by letters, the
contractis made at the place where the letter of acceptance is posted. It has
been observed by the SupremeCourtthat"authoritiesinIndia"*^exhibit
a fairly uniform trendthatin case of negotiations by post thecontractis
complete when acceptance of the offer is put into a course of transmission
to theofferer".'''*Thus where apremiumdue on a lifeinsurancepolicy was
sent by money order, it was heldthatthe policy had revived from the date
ofthemoney order and not from the date of its receipt by thecompany.The
assured having died inth,emeantime, his widowrecoveredtheproceeds.''^
'.Whatever merit this rule may have from the point of view of the assured
or:the offeree, it certainly makes the position of the offeror miserable. The
current feeling,therefore, isthatevenin referenceto postal communications
theprincipleofconsensusor "meetingof minds" should be adhered to and
there should be nocontracttill the acceptance isreceived.Thus in Holwell
SecuritiesLtdvHughes'^^an option.topurchase land was exercisable by
notice, it was heldthatthe mere posting of the notice which was never deliv
ered wasnota valid exercise of theoption.
42. This was affirmed by the House of Lords in Brinkbon Ltd v StahagStahlUnd
.^tahlwarenhandelsgesellschaft(1983)2AC34:(1982)2WLR264(HL),the con
tractwas held to be made in Vienna where acceptance was received.
43. In Sepulchre Bros v Sait Khushal Das Jagjivan Das Mehta, AIR 1942 Mad 13, the Madras
High Court held that although anacceptanceby post iscompletewhen the letter is posted,
it is a continuing act until it reachesthe person to whom it is communicated and thus can be
taken to be made also at the place where it is received.But this opinion has not been followed.
See alsoBarodaOil Cakes Traders vParshottamNarayandasBagulia,AIR 1954 Bom 491.
44.ShahJ in Bhagwandas Goverdhandas Kedia v GirdharilalParshottamdas& Co, AIR 1966
SC543:(1966)1SCR656.
45.HairoonBibi v UnitedIndiaLifeInsuranceCo, AIR 1947Mad122.
46.(1974) 1WLR155.https://t.me/LawCollegeNotes_Stuffs

172. 36Chapter2Acceptance [S. 7]
SupremeCourtapprovalof"Entorescase"
Theprincipleof theEntorescase has beenendorsedby the SupremeCourt
inBhagtuandasGoverdhandasKediavGirdharilalParshottamdas&
Inthiscase, theplaintiffsmadean offerfromAhmedabadtothedefendants
atKhamgaontopurchasecertaingoods and thedefendantsacceptedthe
offer.Thequestionwaswhethertheconversationresultedin acontractat
Khamgaonor"atAhmedabad.Amajorityof the judges(HidayatullahJ
[afterwardsCJ]) (dissenting)preferred to follow the English rule as laid down
in theEntorescase and saw noreasonforextendingthepostoffice rule
totelephoniccommunications.ShahJ(afterwardsCJ) feltthat"Section4
does not implythatthecontractis made qua theproposerat one place and
quatheacceptoratanotherplace. Thecontractbecomescomplete...when
the acceptance of offer is intimated to the offerer." But, he continued to say,
thatthedraftsmanof the IndianContractAct could not have envisaged use
oftelephonebecause ithadnotyet beeninventedand,therefore,thewords
of the section should be confined to communications by post.
HidayatullahJ(afterwardsCJ)was,on theotherhand,convincedthat
though"the law was framed at a time when telephones, wireless, Telstar
and Early Bird were not contemplated", the language of Section 4 isflexible
enoughto covertelephoniccommunications.Thecourtsshouldnotcom
pletely ignore the language of the Act. When the words of acceptance are
spoken into the telephone, they are put into the course of transmission to the
offerer so as to be beyond the power of the acceptor. The acceptor cannot
recall them. Thecommunicationbeinginstantaneousthecontractimmedi
ately arises.
Communication by fax is similartocommunicationby telex.
Communication by fax is also instantaneous communication. If operates
throughtelephoneconnection. The normal rule applies.Faxcommunication,
like telephonic communication, becomes complete when the acceptance is
receivedby theofferor."*^The mere absence of a signed formalcontractdoes
not affect theunconditionalacceptance of a proposal or implementation of
the contract resulting from it. The unconditional acceptance of acontract
through e-mail of an offer made through e-mail specifying the terms and
conditionssatisfied the requirements of Sections 4 and7^^
ABSOLUTEANDUNQUALIFIED
Section7provides:
Inordertoconvertaproposalinto apromise,theacceptancemustbeabso
luteandunqualified.
CASEPILOT
47. AIR 1966 SC543:(1966)1 SCR 656;PacificRefractories Ltd v SteinHeurteyIndia Projects
(P) Ltd, (2006)3 MahLJ438:(2006)4 BomCR 311, letter posted from Calcutta accepting
theoffer,held,thecontractmustbedeemedto havearisenthere.Aclauseinthecontractfor
exclusiveCalcuttajurisdiction was held to be binding.
48.QuadriconP Ltd vBajrangAlloys Ltd, (2008) 3MahLJ 407.
49.TrimexInternationalFZELtdvVedantaAluminiumLtd,(2010)1 SCC (Civ)570.https://t.me/LawCollegeNotes_Stuffs

173. [S.7] Absolute and unqualified 37
Counterproposals
"Any departure from the terms of the offer or any qualification vitiates
theacceptanceunlessit isagreedto by the person from whom the offer
comes. In other words, an acceptancewithavariationis no acceptance; it is
simplyacounter-proposal,whichmust beacceptedbythe original promisor
beforeacontractismade."^°Thefactsofthecaseinwhichthisstatement
occurswereasfollows:
Beforeacceptingan offer the plaintiffintroducedcertains terms like
'FreeBombayHarbour andinterest',whichwerenot therein the original
offer. This, the defendant refused to accept.Subsequentlythe plaintiff
communicatedhisacceptanceoftheoriginal offer,but the defendantdid
notassenttothis.Plaintiff'sactionforbreachofcontractwasdismissed.
SirJenkins CJsaid:"Unlessthere is anabsoluteandunqualifiedaccept
ance, the stage ofnegotiationshas not yet passed, and no legal obligation
isimposed."Theplaintiff'sfirstacceptancewith new terms was in fact a
counter offer whichimpliedthe rejection of the originaloffer.A counter
offerputsan endto theoriginalofferandit cannotberevivedbysubsequent
acceptance. Inanothercase:^^
Aofferedby a letter to sellcertain claimstoBat aspecifiedrate.Bin
turnofferedto buy at a littlelessrate whichA did not accept, but he did
not withdraw his originaloffer.Then Bacceptedthe rate as originally
offered.This also A did not accept and B sued him for breach of contract.
It was heldthat B by hiscounter-offerto buyat areducedrateimpliedly
rejectedA'soriginal offer and there was no contract.
The courtrelieduponHydevWrenchJ^In thiscaseanoffertosell
a farm for £1000 wasrejectedby theplaintiff,whooffered£950 for it.
This was turned down by the offeror and then the plaintiff agreed to pay
£1000. Holding that thedefendantwas not bound by any such accept
ance,the courtsaid;"Thedefendantofferedtosellitfor£1000, and if
that had been at once unconditionally accepted, there would undoubtedly
havebeenaperfectbindingcontract,insteadofthat, theplaintiffmadean
offerofhisown,topurchasethepropertyfor£950 andtherebyrejectedthe
offerpreviouslymadeby thedefendant.Itwasnotafterwardscompetent
for him torevivethe proposal of the defendant, by rendering an accept
ance of it.Therefore,there exists no obligation of any sort between the
parties."^^
50. PerSirJenkinsCJin HajiMohdHajiJivavE.Spinner,ILR(1900)24Bom510,523;Food
CorporationofIndiavRamKeshYadav,(2007)9SCC531:AIR2007SC1421,acondi
tional offer has to beacceptedorrejectedwith acounter-offer,theoffereecannot accept a
partof it.
51.NihalChandvAmarNath,AIR1926Lah 645.
52. (1840) 3 Beav334.
53.SeeBadrilalv MunicipalCounciloflndore,(1973)2 SCC388: AIR 1973 SC510.https://t.me/LawCollegeNotes_Stuffs

174. 38Chapter2 Acceptance [S.7]
Where the proposal carried an acceptance slip with certain conditions
and said that theacceptanceshould besignedon theslipand not in any
other manner and theoffereeacceptedbymeansof a separate letter without
signingthe slip,it was held that the acceptancewas good becausetheofferer
had to protest against such acceptance and he having not done so the condi
tions on the slip becamewaived/''
Partialacceptance
Acceptanceshouldbeofthewholeoftheoffer.Theoffereecannot accept
apartof its terms which are favourable to him and reject the rest. Such
an acceptance is another kind ofcounter-proposaland does not bind the
offererunlessheagreesto thequalifiedacceptance.Thus, in acase:"
An application for certain shares in a company was made on the con
dition that the applicant would be appointed cashier in a new branch of
thecompany.Thecompanyallottedhimsomeshareswithoutfulfilling
the condition and claimed the share money.
It was held"thatthe petitoner's application for 100 shares was condi
tional and that he had nointentiontobecomeamemberof thecompany
whenheappliedfor the sharesuntil hewas appointeda cashierin the branch
office".^«
Inquiryintotermsofproposal
Amereinquiry into the terms of a proposal is not the same thing as a
counter-proposal.In a negotiation for the sale of a quantity of iron, the
proposalwas"Iwouldnowsellfor 40s. netcash,open tillMonday".The
offereeinquiredbywirewhethertheofferorwouldaccept40s.fordelivery
overtwo months orless.Theofferor,treating this as a rejection,sold off the
goods.Hewasheldliableforthebreach.Toseekanexplanationofthe terms
issomethingdifferentfromintroducingnewterms." Aninquiryaboutthe
technicaldetailsof aproposalis not acounter-proposal.Onacceptanceof
theproposal,thecontractwill be created on the basis of the terms and con
ditions of the original proposalincludingarbitrationclause.^®
54.CompagniedeCommerceetCommission,SARLvParkinsonStoveCoLtd,(1953)2Lloyd's
Rep 487.
55. Ramanbhai M. Nilkanth v GhashiramLadliprasad,ILR(1918)42Bom595.
56. For another such case see Mutual Bank of India Ltd v SohanSingh,AIR 1936 Lah 790. A
person by accepting a part of the offer cannot say that a contract has been made and that the
disputeshouldrelateonlyto theunacceptedpart oftheoffer.GeneralAssuranceSocietyLtd
VLie,AIR1964SC892:(1964)2SCR125:(1964)34CompCas10;TechnocomvRailway
Board,AIR2009Pat15,acceptanceof a part oftenderbyrailways,notvalidacceptance,
a reservation or trinket acceptance, no acceptance in the eye of law, tenderer not liable for
breach, earnest money has to be refunded.
57. U.P. SEBVGoelElectricStores,AIR1977All494.
58. Fair Air Engineers (P) Ltd v N.K. Modi, (1996) 6 SCC 385.https://t.me/LawCollegeNotes_Stuffs

175. [S.7] Absolute and unqualified 39
Someinstances
In aKarnatakacase^'a Government company drew out a scheme for
procuringmachineryonhire-purchasebasisforsmall-scalefirms.A firm
requestedthecompanyto arrange for the supplyof a machineof a particular
maker.Thecompanyrequestedthe maker to supplythe machineto the firm
along withagreementforms for signature. The firmreceivedthe machine
but did not sign the forms.Even.soit was held that a complete agreement
had already arisen between theparties.
In anothercase/''anoffererasked the offeree to attend to everything
elseafterwardsand send him 15 to 20 bags of areca nuts at once. The
offeree wrote backthathe would send the goodswithin15 to 20 days.
The offeror did not reply andultimatelyabout a month and a half later
theoffereesent the goods. The court held that there was noabsoluteor
unqualifiedacceptancewithinthemeaningofSection7(1).It was an order
forimmediatesupplyand theoffereebyaskingfor 15 or 20 days' time had
madeacounter-proposal.Thisdestroyedthe originaloffer.Wherea tender
wasacceptedsubjectto a newstipulationthat the contractor wouldhave
toprovidesupervisorystaffasrequiredbytheMinesAct(35of1952),the
acceptance was of noeffect.®^
:Similarly,whereapersonaskedtosupplygoods,acceptedtheoffer,but
subjectto thepaymentof anadvance,itwasheldthat thedemandfor an
advancewasanewtermandalsoanuncertaintermbecausetheamount
wasnotspecifiedand,therefore,preventedthe contractfromarising.®^The
courtdistinguishedthis casefrom another casewhereafterreceivinga coun-
ter-proposal,theofferorrejectedit andrepeatedhisoriginalofferwhich
was thenacceptedby theofferee,a contractwasdeemedtohavearisen.^^
Where a landowner, onreceivinga proposal, wrote back to the proposer to
know whether he would offer a higher price and, if so, whether he would
send some advance, and the latter accepted it by sending some advance, a
contractarose leaving no chance forrevocation.^''
ApersonexpressedadesiretopurchasetheCouncilhouseinwhichhe
wasliving.TheCouncilsenthim a letter whichsaid "I referto your request
for details of the cost of buying your Council house. TheCorporationmay
59. Shri Ram Metal Works vNationalSmall Industries Corpn, AIR 1977 Kant 24; Union of
India vFeecoHydraulics(P)Ltd, AIR 2002 Del367,anoffercontainingan arbitration
clausewasacceptedwithoutprotestand anattemptwasalsomadetoperformthecontract.
Theacceptorwasnotallowedsubsequentlytoobjectto thearbitrationclause.BipinBihari
SinghVStateofBihar,(2003)3BC593,writremedynotallowedfordeterminingwhether
thequotationwas10or15percentbelowtheScheduledRate.KonarkUthasnagarMunicipal
CorpnVCommr,UthasnagarMC,(2003)2BomCR838,tendercouldnot beacceptedby
apersonwhodidnotfulfiltheeligibilitycriteria,criteriasubsequentlyrelaxed,thebidder
becamequalified,thecourtwouldnotdirectthat anyparticulartenderbeaccepted.
60. PeralaKrishnayyanChettiarvPaimanathanChettiar,AIR1917Mad 63.
61. ChhoteyLaiGupta v Union of India, AIR 1987 All 329.
62.MooljiJaitha &CovSeth Kirodimal, AIR 1961 Ker 21.
63.PacificMineralsLtd vSinghbhumMiningSyndicate^AIR1938Cal343.
64.ByomkeshBanerjeevNaniGopalBanik,AIR1987Cal92.https://t.me/LawCollegeNotes_Stuffs

176. 40Chapter2 Acceptance [S.7]
be prepared to sell the house to you at the purchase price of £2180". He
sent in an application and statedthathe wished to buy.thehouse. The issue
beforetheHouseofLordswaswhethertheCouncil'sletteramountedtoan
offer.It was heldthat this letter was not a contractual offercapableof being
converted into a legally enforceable open contract by applicant'swritten
acceptanceofit."
Awrittencontractwas executed between the parties for telecast
ing 65episodesof a TV serial. Prior to this there was an oral approval
by DoordarshanAuthoritiesof the proposal totelecast500episodes.That
approval was held to be only apartof the continuing negotiations. It could
nothaveanyeffectbecausethe partiessubsequentlyboundthemselvesbya
definitewrittencontract.®®
Acceptancewithconditionsubsequent
If anacceptancecarries a conditionsubsequent,it maynot havethe effect
of acounter-proposal.Thus,whereanacceptancesaid:"termsaccepted,
remit cash downRs25,000by February 5,otherwiseacceptancesubject
towithdrawal",this was not acounter-proposal,but anacceptancewith
awarningthatif the money was not sent thecontractwould be deemed
to have beenbroken.®^Inanothercase, afterinvitationfor and submission
oftender,thereweresomenegotiationsbetweentheparties.Acceptance
wascommunicatedto thetendererbyFAXstatingthat "a regular purchase
orderfollows".Thecourtsaidthat thisconcludedthecontract.Therequire
mentsofsignaturesof parties andcollaboratorsandfurnishingof bank
guaranteesfor dueperformanceweresubsequentconditions.They were
65.GibsonvManchesterCityCouncil,(1979)1WLR294(HL).SeealsoRickmersVerwaltung
GmbHVIndian OilCorpnLtd,(1999)1SCC1:AIR1999SC504, draftcharter-party
agreementexecutedbetweenparties, but terms of letters of credit andperformanceguaran
tees could not be agreed upon. There was no concludedcontract, arbitration clausecould not
acquirebindingforce.RajasthanSEBvDayalWoodWorks,AIR1998AP381;(1998)2ALD
599,securitydepositmadewithtender.Thetenderer'sletterindicatedtermsandconditionsof
supply.Purchaseorders issued by the Boardcontainedadditionalterms andconditionswhich
the tendererdid notaccept.Held, no contract, securitydepositrefundable.
66. RajChowdhuryvUnionof India, AIR 2000Cal232. Forinterpretationofcontractsand
theimportancein this context of priornegotiations,declarationsofsubjectiveintent, sub
sequentconduct of the parties in the surroundingcircumstances,seeMcMeelGerard, Prior
NegotiationsandSubsequentConduct,the Next Step towards ContractualInterpretation,
F.A.Trindade, "Reformation of the nervousshock rule", 2003LQR119,272-97. The author
discussesauthoritieson theorthodoxlimits on thematerialswhich could betakenintoaccount
incontractualinterpretationandthemodernapproach.Healsoexaminescasesonpriornego
tiationsruleandsubsequentconduct.L/CvMachilipatnamVankadaruKoteswaramma,AIR
2003AP153,insurance,proposalsubmittedthroughanauthorisedagentof thecorpora
tion,administrativeofficersignedit intokenofacceptance,examinationbyapaneldoctor.
Allthisamountedtoacceptancebeforedeath.Thecourtsaidthat aninquiryby theLIC
mto thecauseof death andsubsequentrepudiationof thepolicyshowedexistenceof the
policy.
67. S.D.KatherineStiffles v M.P. Carr Mackertich, 164IC732. A letter of intent does not
amountto aproposalor itsacceptance.HermannSuerkenGmb &CovSelco(ShipyardFte)
Ltd, (1991) 3 CLJ 2289 Singapore HC.https://t.me/LawCollegeNotes_Stuffs

177. [S.7] Absolute andunqualified41
not like a conditional acceptance or a counter-proposal. Communication of
collaborators' approval was not necessary because the main tenderer was
acting ontheirbehalf.®^
Acceptance ofcounterproposal
Even "where the acceptance of a proposal is not absolute and unqualified
the proposer may become bound, if, by his subsequent conduct, he indicates
that he has accepted the qualifications setup".®Thus inHargopalv People's
BankofNorthernIndiaLtd-7°
An application for shares was made conditional on an undertaking by
the bank that the applicant would be appointed apermanentdirector of
thelocalbranch.Theshareswereallottedtohimwithoutfulfillingthe
condition. The applicant accepted the position as shareholder by accept
ingdividends,filing a suit to recoverit and by pledging his shares.
It was, therefore, held,"thathe could notcontendthattheallotmentwas
void on the ground of non-fulfilment of the condition as he had by his con
ductwaivedthecondition".
When a counter-proposal is accepted, a contract arises in terms of the
counter-proposal, and not in terms of the original proposal.
An offer to sell a machine contained a price variation clause whereby
it was a condition of acceptancethatgoods would be charged at prices
ruling at the date ofdelivery.Theoffereeplacedan order for themachirie
in their form which did not contain any variation clause and which had
a tear-offacknowledgementslip. The proposers signed and returned the
slip.The machine was ready fordeliverybySeptemberbut thebuyers
could not accept it untilNovember.Thesellersinvokedthe price vari
ation clause. Thecourtdid not permit it. The buyer's order was not an
acceptance,but acounter-proposal,which thesellersacceptedand that
carriedno pricevariationclause.^^
Where tenders are invited subject to a deposit, it is open to theparty
invitingthem towaivetherequirementand anacceptancegivento a tender
without deposit would be binding on thetenderer.^^
Wherethetenderermodifiedthetermsof histenderwithinthepermissi
bleperiod, but themodificationwas onlypartlyacceptedby the otherside
without the tenderer's consent, nocontractarose. Earnest money could not
beforfeited.^^
68. D. WrenInternationalLtd v Engineers India Ltd, AIR 1996Cal424.
69.Bhagwandasv Shri Dial, 1913PunjRec. No. 92, p. 325.
70. AIR 1935 Lah 691. See alsoJawaharLaiBarman v Union of India, AIR 1962 SC 378.
71. Butler Machine Tool Co Ltd vEx-Cell-OCorpn (England) Ltd, (1979) 1 WLR401(CA).
72.BismiAbdullah&SonsvFCI,AIR1987Ker 56.
73. D.S.ConstructionsLtdv Rites Ltd,2006AIHC1835(Del):(2006) 127 DLT 1.https://t.me/LawCollegeNotes_Stuffs

178. 42Chapter2Acceptance [S. 7]
Provisionalacceptance
An acceptance is sometimes made subject to final approval. Aprovisional
acceptance of this kind does notordinarilybind eitherpartyuntil the final
approvalis given.Meanwhilethe offeror is atlibertyto cancel his offer. The
decision of the Punjab HighCourtin UnionofIndiav S.NarainSingh'''^is
anillustrationinpoint.Thecourtobservedas follows:
Where the conditions of auction sale of liquor shop expressly provide
thatthe acceptance of the bid shall be subject to theconfirmationof the
ChiefCommissioner,there will be no complete contract till the accept
ance of thehighestbid isconfirmedby the ChiefCommissionerand the
person whose bid has been provisionally accepted is entitled towithdraw
hisbid.
The bidder will have the right towithdrawhis bid even where it is a con
dition of the auction salethata bid which has been provisionally accepted
cannotbewithdrawn.^-'"Such aprohibitionagainstwithdrawaldoes not
havetheforceoflawunlessthereissomeconsiderationtobindhimdownto
thecondition."Inanothercase:^^
A bid at an auction was acceptedkutchapucca and was referred to the
owner of the goods for approval andsanction.The bidder was allowed to
revoke his bid before the approval came in.
Whenaprovisionalacceptance is subsequently confirmed, the fact should
benotifiedto theofferor,for it is only then that hebecomesfinallybound.
An acceptance is not complete till communicated. A mere noting of accept
ance in the auctionfileinside theofficeis not enough. Even if the bidder
comesto know of that fact of his own, that will notdo.^^The Madras High
Court,however, held in twocases,^^thatconfirmationneednotbenoti
fied.The court said: "The communicationofacceptancetwice, that is, once
when the conditional acceptance is made and again when the condition is
fulfilled is unnecessary." In Pollock andMulla,^^"it is submittedthatthese
twocaseswerewronglydecided".
Whereanofferfor the saleofimmovablepropertywasaccepted"subject
totheconditionthatthetitleadducedshouldbetothesatisfactionofthe
purchaser'ssolicitors",it was held that the offeror "must prove either that
the solicitors did approve of the title orthatthere was such a title tendered as
74. AIR 1953Punj274. The auctioneer is not bound to accept the highest bid. See in connection
withgovernmentcontracts, StateofU.P.vVijayBahadurSingh,(1982)2 SCC365: AIR 1982
SC1234.
75.ThiswassoheldbytheMadrasHigh Court inSomasundaramFillaivProvincialGovt of
Madras,AIR1947Mad366.
76. MackenzieLyall&CovChamraoooSingh & Co,ILR(1889-90) 16Cal702.
77. DDAVRavindraMohanAggarwal,(1999) 3 SCC 172: AIR 1999 SC 1256.
78.RajanagaramVillageCoop Society v P.VeerasamiMudaly, AIR 1951 Mad 322.
79.IndianContractandSpecificReliefActs(9th Edn byJ.L. Kapur, 1972) 76.https://t.me/LawCollegeNotes_Stuffs

179. [S. 7] Absoluteandunqualified43
made itunreasonablenot to approve ofit".^°Siinilarly, in KoylashChunder
DossVTarineyChurnSinghee:^^
The defendant accepted to buy theplaintiff'shouse for a specified price
and called him to come to theattorney'shousewithtitle deedsandreceive
theearnestmoney. They met at theattorney'soffice in the absence of
theattorneyand noinspectionof title deeds or payment of theearnest
money,therefore,couldtakeplace.
CunninghamJ observed:"Ifthere be adistinctoffer on one side,anda
distinct acceptance on the other, acontractarisesnotwithstandingthatthe
parties may have recorded their intentionthatit shall be put into a more for
mal shape by a solicitor. But, on theotherhand,if on the trueconstruction
of thecorrespondenceand evidence it appears to have been theintentionof
the partiesthatthey are not to be bound till the agreement has been put into
more formal shape and approved by them, then thepartiesoughtnotto be
boundtill theformaldocumenthas beenexecuted."Applying this test to the
facts of the present case the learned judge concludedthat"boththe parties
having treated the payment of earnest money as an element in thecontract,
thecontractcould not be completed till theamountofearnestmoney had
beenascertained".'^
Provisionalortentativearrangements
Thus, it is a question of fact in each case whether the parties intend to
be bound by the provisional agreement or whetherthatis only a tentative
arrangement.InWinnvBulP^the parties entered into anagreementfor a
lease"subjectto the preparation and approvalof a formal contract". When
the finaldraft waspreparedthe parties couldnot agreeon itsterms.Holding
that there was no contract,JesselMR said that this was an agreement sub
jectto the termsbeingapprovedand the termswerenotapproved.Similarly,
an agreementfor the sale of a house stated that it is "subject to ! contract".
Thesellerwrote to the buyer that he hassignedthe finalagreementand
would be glad toexchangeit with the part of the contractwhichwas to be
signedby thebuyer,thebuyerthereuponsent the partsignedby him but
thesellerchangedhis mind andrefusedto sendhis part inexchange.Lord
GreeneMR held, for theCourtof Appeal,thatthe agreement was subject
to thepartsbeingexchangedand,therefore,neitherparty wasboundtillthe
80.Treacher& Co Ltd vMohomedallyAdamjiPeerbhoy,ILR(1911)35Bom110. RoseValley
RealEstate&ConstructionLtdv UnitedCommercialBank,AIR 2008 Gau 38,deposit
moneynotallowedto beforfeitedon failureof the bidderto pay the balancemoney.
81.ILR(1884)10Cal588.
82. R.ElanchizhianvSecyto Govt of T.N., AIR 2008 NOC 973(Mad),saleofficeraccepted
plaintiff'sbid,directedhim toremitbalanceof theprivilegeamountandsecuritydeposit
immediately,and to applyfor liquorlicencewithinsevendays, failingwhich earnestmoney
was to be forfeited, plaintiff not allowed to wriggle out.
83. (1877) 47 LJ Ch 139: (1877) LR 7 Ch D 29.https://t.me/LawCollegeNotes_Stuffs

180. 44Chapter2Acceptance [S. 7]
exchangeactuallytookplace.HisLordshipdistinguishedthe case from
his own decision inBrancavCobarro}^An agreement for thesaleof the
lease and goodwill of a mushroom farm contained the terms of payment,
a forfeiture clause and finally concluded: "This is a provisional agreement
until a fully legalisedagreement drawn up by a solicitor and embodying all
the conditions herewith stated is signed." LordGreeneMRheldthatthe
partiesintended to beboundby this"provisionalagreement'Luntilit was
replaced by a formalcontractcontainingthe same terms.
A tender was invitedfor settlement of sand mahals. The matter was provi
sionally settled with one of the tenderers. The relevant rule providedthatthe
settlement order was to be treated as final only after 15 days. The tenderer
receivedthe order and revokedhis tender the next day after receivingit. The
court saidthatwithdrawaltook place before finality. Nocontractcould
arise and therefore there was no question of forfeiture of earnestmoney.
The parties can make a contract withretrospectiveeffect.The parties
cansay,"This contract is to be treated as applying, not only to our future
relations, but also to what has been done by us in the past since the date of
the tender in the anticipation of the making of this contract."
Acceptanceandwithdrawaloftendersandbids
A tender is in the same category as a quotation of prices. It is not an
offer.^^When a tender isapproved,it isconvertedinto a standingoffer.A
contract arises only when an order is placed on the basis of the tender. These
84.EcclesvBryant,1948Ch93(CA);seealsoKoIIiparaSriramuluvT.Aswathanarayana,AIR
1968 SC 1028:(1968)3 SCR 387; Union of India v Kishorilal Gupta & Bros, AIR 1959 SC
1362: (1960) 1 SCR 493; JiwanLaivBrijMohan Mehra, (1972) 2 SCC 757: AIR 1973 SC
559,wherethepurchaserpaidearnestmoney,thebalancebeingpayableonregistrationof the
deed, bindingcontract.
85.(1947)KB854(CA).Seealsothedecisionof theSupremeCourtin BadriPrasadv State of
M.P.,(1971)3 SCC23: AIR 1970 SC 706 and alsoRickmersVerwaltungGmbH v Indian
OilCorpnLtd,(1999)1SCC1:AIR1999SC504,arrangementscouldnotgoevenup to the
stage of letters of credit, nocontract,arbitrationclause could not be availed of.
86.HomeswarBora vStateofAssam, AIR 2010 Gau 167.
87.Trollope&CollsLtd vAtomicPowerConstructionsLtd,(1963)1WLR333:(1962)3 All
ER1035.
88. Atenderwhichdoesnotcomplywith thespecifiedrequirementsis open torejection.N.O.
ShettyVKarnatakaSRTC,AIR1992Kant94,securitydepositin theformofguarantee
requiredforsubmittingatendernotcompliedwith.Rejectionof thetenderupheld.Sat
PrakashMehravStateofM.P.,(1984)29MPLJ318,atenderernotpemittedtocomplain
that handpumpsto beinstalledwererequiredto beapprovedbyUNICEF;P.Sreerama
ReddyvRajahmundryMunicipality,1996AIHC2305(AP),publicationoftendersin
violationofMunicipalRules,namely,non-publicationin atleastonelocalnewspaperand
the failure to give 15 days' time forsubmission,tender set aside. Cambatta Aviation Ltd
VCochinInternationalAirportLtd,AIR1999Ker368,onthemeaningandconceptof
a public tender. The requirements that tenderers must submit their tenderswithina cer
taintimeon the lastdate,withbankguaranteeswithforfeitureclause,list ofequipments,
andstatementsofauditedaccounts,wereheldnot todetractitfromitsbeingpublic
tender.https://t.me/LawCollegeNotes_Stuffs

181. [S.7] Absolute and unqualified 45
principleswere laid down by the Bombay High Court in the well-known
case of Bengal Coal CoLtdvHomeeWadia &Co.^^
The defendants signed an agreement which, among other terms, pro
vided: "The undersigned have this day made acontractwith Messrs .
Homee Wadia for a period of 12 months for the supply of a kind of coal
from time to time as required by the purchasers." Certain orders were
placed and werecompliedwith by thedefendants.Butbeforethe expiry
of 12 months they withdrew their offer and refused tocomplywith fur
ther orders. They were accordingly sued for breach ofcontract.
Thecourtobservedasfollows:
"There is no contract, but simply a continuing offer, andthateach
successiveorder given by the plaintiffs under it was an acceptance of the
offer as to thequantityordered, andthatthus the offer of the defendants
and eachsuccessiveorder of the plaintiff together constituted a series of
contracts.Thedefendantscouldnotrevoketheirofferastoordersactu
ally given, but except as to them, they had full power ofrevocation."^"
Where purchase orders were issued in terms of an arrangement of supply
but there was anoptionin the purchase order itself for the tenderer to refuse
to supply, it was heldthatnoconcludedcontractwas madeandthereforethe
contractorwas entitled to refund of his securitydeposit.^^
In reference to a tender the SupremeCourtof India has observed: "As
soon as anorderwas placed acontractarose anduntilthenthere was no
contract."^^
Also, "eachseparateorder and acceptanceconstituteda different and
distinctcontract".'^Atenderercanwithdrawhistenderbeforeitsfinal
89.ILR(1899) 24 Bom 97; C.JayasreevCommissionerM.C.H,AIR1994AP312,nocontract
tillatenderisaccepted.Thetenderinvitingauthoritycancancel thetenderbeforethat.The
tender provided that thecorporationwould accept a tender if the tenderer was willing to pay
the entire bidamountwithin60 days. Thetendereraccepted thisrequirementin his tender,
but even so thecorporationcouldcancel thetender.
90.KatyanjiVithaldas& Sons vStateofM.P.,(1996) 10 SCC762,revocationshouldreach
before the order ofacceptanceis out of thehandsof theotherparty.Arevocationafterreceiv
ing an order is of no effect.OverrulingShiv SaranLaivStateofM.P.,AIR 1980 MP93:1980
MPLJ 218; K.SoosalrathnamvDivlEngineer,NationalHighwayCircle, AIR 1995Mad90,
thelastdate forsubmissionoftenderswasdeclaredto be a holiday, datebecameextendedto
thenextworkingdayautomatically.
91.RajasthanSEB vDayalWood Works, AIR 1998 AP 381: (1998) 2 ALD 599.Whereone of
theconditionsof a tender wasthataftercommunicationofacceptance,thetenderermust
signagreementpapers,it was heldthatwithoutsuchsignaturethere was noconcludedcon
tract,LotusConstructionsvGovtofA.P.,AIR1997AP200.Wheretheauctioncarriedthe
stipulationthattheacceptanceof bidwouldbecommunicatedthroughletterofintentand
thatwouldconcludethecontract,held,contractaroseon suchcommunicationin spite of the
failureof thepartiesto signformalpapersbecauseofdifferencesinmakingsomechanges.
ProgressiveConstructionsLtdvBharatHydroPowerCorpnLtd,AIR1996Del 92.
92.ChatturbhujVithaldasJasanivMoreshwarParashram,AIR1954SC 236:1954SCR 817.
93.Ibid.SeefurtherDipakKumarSarkarvStateofW.B., AIR2004Cal182,righttoaccept CASEPILOT
orrejectanytenderwithoutassigninganyreasonwasreserved,noreasonsweretherefore
-requiredto bestated,no work order had been issued, norightaccrued.Internalnote sheets
andnotingshad no face value. Atendererhavingparticipatedin the newtendercouldnothttps://t.me/LawCollegeNotes_Stuffs

182. 46 Chapter 2 Acceptance [S.7]
acceptanceby a work orsupplyorderevenif there is aclausein the tender
restricting his right towithdraw.'"'But once an order is placed that will
have to be complied with. The order converts the tender into a contract: A
tender which wasfiledalong with a bank guarantee had to be accepted by
the Authoritywithin a certain time. The Authority askedthe contractor for
extension of time. The tenderer did not agree. TheAuthoritytheninformed
him that thecontractwas likely to be awarded to him. It was heldthatthis
did notamountto an acceptance of the tender. Thebankguaranteewas
not absolute. An injunction against its encashment wasgranted.'^Where a
tenderer had revised his tendered rates before acceptance of his tender, but
even so the Authority accepted his tender at the original tendered rates, it
was heldthatnocontracthadarisenand,therefore,encashmentof thebank
guaranteewasstayed.'®
If you say to another, "If you will go to York, I willgiveyoii£100,"that
is in acertainsense aunilateralcontract.He has notpromisedto go to York.
But, if he goes, it cannot be doubted that he will be entitled toreceive£ 100.
His going to York at my request is a sufficientconsideration for my promise.
So, if one says to another, "If you will give me an order for iron, or other
goods, I will supply it at a given price;" if the order is given, there is a com
pletecontractwhich the seller is bound toperform.'^
complain of the cancellation of the earlier tender. Some guidelines have been provided in the
Calcuttadecision inAromaEnterprisevMurshidabadZillaParishad,(2003) 2ICC745
(Cal),acceptance of highest or lowest bid cannot be the criteria of best deal by any State
machinery, but rejection should besupportedby reasons. Tenders should be opened under
informationto tenderers. Anopportunityof revision should not be given to any selected ten
derer. It can affect the rights of others.Quotationof a much less rate for aparticularitem as
comparedvifiththe estimate of that item should not be a ground for rejection.
94.RajendraKumarVerma v StateofM.P.,AIR 1972 MP 131. Where a tenderercommunicated
well in advancethathe would not accept theworkorder unlesscertainchanges in his tender
CASEPILOT document werepermitted,it was held that no bindingcontractarose by accepting the tender
withoutpermittingthetenderertointroducehismodifications.ArvindCoal&Construction
Co VDamodarValleyCorpn,AIR 1991 Pat 14;AtmaSingh vNTPCLtd,(1988)2 An LT
421,rightofwithdrawalof tender even where the tendercarriedtheconditionthatthe ten
dererwouldnotwithdrawthetenderfor 60 days.KrishnaveniConstructionsvExecutive
Engineer,PanchayatRaj,Darsi,AIR 1995 AP 362, astipulationthatthetenderwouldnot
bewithdrawnfor acertainperioddoes not bind unless there isconsiderationfor thepromise
not towithdraw.Asia TechEngineeringAssociatesvDirectorGeneral(RoadDevelopment),
AIR 2010Mad54 (DB), tenders whichremainedunopened,openinghaving beenpostponed,
theirwithdrawalwas held to bejustified.
95.KilburnEnggLtdvONGCLtd,AIR2000Bom 405.Anothersimilarcase isSekhsariaExports
VUnionofIndid,AIR2004Bom 35, atendernotacceptedwithinreasonabletime,tenderer
withdrewmuch beforeacceptance,nocontract,invocationofbankguaranteenotproper.
96.ONGCVBalaramCementsLtd,AIR2001Guj 287.
97.BrettJ inGreatNorthernRlyCo vWitham,(1873) LR 9 CP 16: 43 LJCP 1: 29 LT 471;
GVPREL-MEE (JV) vGovtofA.P.,(2006) 3 ALD 703 (DB), atenderwassubmittedbytwo
jointventurersbut one ofthemwithdrewfrom theventure,theGovtdidnotconsiderthe
tenderbecauseone ofthemwasnotqualifiedfortenderingandbyitselfitsannualbusiness
was not up to the requisiteamount.ThecourtcitedGoldstoneExportsLtdvGovtofA.P.,
(2003) 1 ALD 336;GodavariPolymers(P)LtdvAgriculturalProductsCommr,(2004) 1 An
LD783,tenderconditionshave to bestrictlycompliedwith,be it at thepre-qualificationstage
or at thestageofconsiderationof bids.https://t.me/LawCollegeNotes_Stuffs

183. [S.7] Absoluteandunqualified47
Atenderwill,however,beirrevocablewherethetendererhas,onsome
considerationpromisednot towithdrawit orwherethereisastatutorypro
hibitionagainstwithdrawal.'®TheAlbertaCourtofAppealhasgoneastep
further byholdingthat a term in thetenderagainstwithdrawalwouldbe .
equallyeffective.
A construction contractor submitted a tender which stipulated that
once the tender was opened, it would become irrevocable until such time
as the contract had been signed by the successfultenderer. His tender was
found to be thelowest,but prior to the award of the contract, he notified
a clerical error resulting in asubstantialunderestimate.He offered to do
the work for the tender as corrected(stillthe lowesttender).This was
refused.Thecontractwasawardedtothenextlowesttendererandhewas
suedforthedifferencebetweenthetwoonthebasisoftheuncorrected
tender.
Hewasheldliable.Thetermsonwhichtenderswereinvitedbecamea
partof the offer and there was no obligation to accept the revisedtender.'®
Explaining why such a clauseisjustified,the BombayHigh Courtsaid:^°°
"Municipal Corporation invites bidsinvolvinglarge financialirnpli-
cations and involving the interests of the community.Withdrawalof
offers by bidders results in the escalation of costs of projects and also
.delaysto the detriment of public interest. Hence, by demanding appro
priateundertakingsfrom bidders, it protects itself and also public inter
est. It is observedthatthe petitioner before it who withdrewpartof his
offer on thegroundthatquarryowner with whom he hadcontactedhad
declined to effect supply could not make grievance about forfeiture of
tenderdeposit."
Justas thetendererhas the right to revoke histenderas tofutureorders,
so also the acceptor of the tender has a right to refuse to place any orders
whatsoever. This appears from SecyofState vMadho
98. See, Secy of State forIndiavBhaskarKrishnaji Samani, AIR 1925 Bom 485: ILR (1925) 49
Bom759, where certain rules prohibiting withdrawal of tenders framed under the provisions
of the Indian Forest Act were held not to be ultra vires.NationalHighways Authority of
Indiav GangaEnterprises,(2003) 7 SCC 410: (2003) 4ICC786 where earnest money could
be forfeited for refusing to enter intocontractor for notperformingit, the tenderer was
allowed towithdrawthe tender but could not ask for refund of earnest.Omprakash& Co v
CityandIndustrialDevelopmentCorpnofMaharashtraLtd, (1994) 1 Bom CR 30: (1993)
MahLJ 1419;StateofA.P.v Singam SettyYellamanda,(2003) 2 An WR 154: AIR 2003 AP
182, suit for recovery of bid moneyallowed.Government could not claim damages because
no loss was caused to it.BrettonWoods FinleaseLtdvMTNL,(2005) 125 DLT 69, black
listing.
99. Calgary vNorthernConstructionCo, 1987ConstructionLaw Reporter 179 (Alberta CA).
100.HasmukhlalandCo vMunicipalCorpn forGreaterMumbai,(2005) 3MahLJ 149.
101. ILR (1929) 10 Lah 493; Villayati RamMittalPLtdv UnionofIndia,AIR 2011 SC 301,
the tenderstipulatedforforfeitureofearnestmoney if the tender was revoked. Thetenderer
companyrevised its offer aftermakingit. Thecourtsaidthatrevision of an offeramountsto
revocationof theoriginaloffer.Forfeitureofearnestmoney wasproper.https://t.me/LawCollegeNotes_Stuffs

184. 48Chapter2Acceptance [S. 7]
CASEPILOT
Atenderforthesupplyofcertaingoodsatspecifiedpriceswasaccepted
bythemilitaryauthorities,butnorequisitionwasissuedduringtheperiod
ofthetender.
Thecourtsaid: "The military authorities were not bound, by their accept
ance of the tender, to purchase any or all of the said goods needed by them,
fromtheplaintiffin theabsenceofacovenantto thateffect.Theywerefree
toaccepttheofferor not astheywouldthink fit and they could buy the
goodsfromanyothersourcewithoutanyreferencetohim."In otherwords,
the partyacceptinga tendercanalwayssay:"We do not intendtogiveany
furtherorders under this document and against such refusal there can be no
remedy atall."^"^
It was pointed out by theSupremeCourt in Union ofIndiavMaddala
Thaf°^thata clause in a tenderauthorisingthepartyinviting tenders to ter
minate thecontractat any time for future supplies does not destroy the very
basisofthecontractandtheclauseisvalid.
A tender should be completed and submitted as required by its terms:
Where signing of the tender document in full was one of the requirements,
yet thetendererdid not signit in full and onlyinitialedit.Rejectionof the
tender was held to be notimproper.^"''A tendercontainedinstructionsto
bidders to state against each work item unit rates in Indian currency and
in US Dollars or JapaneseYen.The tenderer stated 50 per cent of the unit
rates in Indian currency and50per cent in foreign currency. This was held
tobenotaclericalormechanicalerror.Thetenderwasnotallowedtobe
corrected.Errorsinitemrateswerealsonotallowedtoberectified.Tender's
request that errors should be ignored and his tender should be taken on the
wholewasignored.^"^
Where the highest bidder who had already deposited theearnestmoney,
participated in the auction, anddepositedsecurity money after approval of
his tender, thecourtsaidthatthese were the relevant criteria for holdingthat
therewasaconcludedcontract.Theexecutionoftheformalcontractisnot
the onlycriterionfor themakingof acontract.'"^
102. Acceptance of bid money even though it was apartof thesaleconsideration was not an
acceptance of the tender on final basis,VeeraProperty Development (P) Ltd v T.N. Slum
ClearanceBoard,AIR1999Mad304.
103.(1964)3SCR774:AIR1966SC1724.
104.R.N.GhoshvStateofTripura,AIR2000Gau 114.
105. W.B. SEBVPatelEngg Co Ltd,(2001)2 SCC 451: AIR 2001 SC 682; K.R.RajaramvState,
1999AIHC2585, thetendererfailed to depositearnestmoney asrequiredin the tender,
he alleged oral promise giving him extended time for the deposit but failed tosubstantiate
it,cancellationof thecontractandforfeitureof thedepositwere held to be justified. Mega
Enterprisesv State ofMaharashtra,AIR 2007 Bom 156, conditions set by tenderingauthor
itycannotbequestionedparticularlyby a bidder whoparticipatedin the process but was
unsuccessful.The possiblegroundscould bethatthey werearbitrary,discriminatoryand
malafide.
106. VarghesevDivlForest Officer, AIR 2003 Ker 197:(2003)1 KLT 892. State ofMaharashtra
VA.P.Paper Mills Ltd, (2006) 4 SCC 209: AIR2006SC 1788,withdrawalof bid before
declarationofresult.Thetenderwas notwithdrawableup to 45 daysandnochangeoftermshttps://t.me/LawCollegeNotes_Stuffs

185. Absolute andunqualified49
No obligation to accept tender or lowest tender
A partyinvitingtendersis not bound toacceptanytender,norit is
boundtoacceptthelowesttender.ButwherethepartyisaGovernment
or any of itsagencies,itshouldnotarbitrarilypick andchoose.Itshould
havesomerulesandthoserulesmustrequirereasonsfordeparturefromthe
normalprincipleto berecordedinwriting.Accordingly,wherean author
ityignoredtheclaimofthelowesttendererbecauseofhisbadhistoryand
awardedthe contractto the nextlowesttenderer,the court didnotinterfere
inthedecisionoftheauthority.!"^Explainingtheprincipleswhichpublic
authoritieshavetoobservethecourtfoundittobesettledlawthatapublic
wasallowableup to thattime.Withdrawalbeforethatperiod,validforfeitureof earnest
money.Failuretodeclarethe resultwithin the stipulatedperiodwas heldto be not material.
StateofHaryanavMalikTraders,(2011)13SCC200;(2012)3SCC(Civ)429,a bidat an
auctionwas notallowedto be withdrawnbeforethe expiryof 90 dayswhichwas one of the
conditionsoftheauctionprocess.VillayatiRamMittal(P)LtdvUnionofIndia,(2010)10
SCC532,afteracceptanceoftender,thetendererwantedtochangehisratesbringingabout
revisionofhisquotation,held,thisamountedtorevocationofhistenderjustifyingforfeiture
ofearnestmoney.
107. Deepak Kumar Sarkar v State ofW.B.,AIR 2004Cal182, there was a clause in the ten
derdocumentsforrejectionoracceptanceof anytenderwithoutassigninganyreason.No
liabilityfornotacceptinganytender.CamaHotelsLtdvAirportsAuthorityofIndia,AIR
2004Guj349, no malafideshownin thewithdrawalof atenderbyAuthorities,amere
apprehension on the part of the petitioner that this was done to favour his businessrival was
not sufficientto warrantinterferenceby writ petition.
108. N.KunhiramanvMunicipalCouncil,(1992)1KLJ191.SeealsoSuriyaDas vAssamState
FisheriesDevp CorpnLtd, 1995AIHC3617(Gau),lowesttendererignoredbecausehe had
not complied with the terms andconditionsof thecontracton an earlier occasion.State
ofU.P.VRajNarain,(1975)4SCC428:AIR1975SC865,theauthorityoughttohave
recordedreasonsforrejectingthetenderwhichquotedthelowestprice.Inatenderforsupply
of drugs the decision to accept was to be that of the Minister of Commerce who reviewed
thedecisiontoacceptthelowesttender,therewas no malafideandreviewwas due to rec
ommendationof the tenderadvisorycommittee,upheld,NestorPharmaceuticals(P) Ltd v
Unionof India, AIR1995Del260. Afternegotiationswith thelowesttendererand others,
GovernmentpreferredaGovernmentundertakingundera statutoryright ofpreference,no
interference,BabuRam GuptavMahanagarTelephoneNigamLtd, AIR1995Del223;Red
RoseCoopLabour andConstruction(LOC)Ltd v State ofPunjab,AIR 1999 P&H 244,
a tender was issued twice for the same items. Nobody was awarded after the initial tender.
Thequotationsinresponseto thesecondtendershowedthat thepetitionerhadquotedlow
est rates in the first tender in respect of 12 items. Onthatbasis he was not allowed to claim
award of contract in respect of those items.Sri Sankaranarayana Construction Co v Konkan
RlyCorpnLtd,(2004)2BoraCR 676, theobligationordinarilyis toacceptthelowestten
der.ShreeGopalBhagivanDasvStateofBihar,(2004)2BLJR1311(Pat)failuretocomply
with the mandatoryrequirementofdepositingthe earnestmoney,tender ought not to have
beenaccepted.RamanaDayaramShettyvInternationalAirportAuthorityofIndia,(1979)
3SCC489:AIR1979SC1628,tenderofapersonwhodoesnotfulfiltherequisitequalifi
cationprescribedby the noticeof tender cannot beaccepted.Maa Binda Express Carrier v
North-EasiFrontier Railway, (2014)3 SCC 760, bidder cannot insist that his bid should be
accepted.All that the participatingbiddersare entitled to is fair, equal and non-discrimina
tory treatment.Thecourt can examinewhethertheaggrievedparty has beentreated unfairly
ordiscriminatedagainstto thedetrimentofpublicinterest.BhartiyaState BankvBhanjan
Singh,2014SCCOnLineChh 52: AIR 2015 Chh 15, thedocumentofacknowledgement
alsocarriedanexpressionto pay thetime-barreddebt.Thus,itbecameapromisetopay.
Dismissal of the suit was not proper.https://t.me/LawCollegeNotes_Stuffs

186. 50 Chapter2Acceptance [S.7]
authority cannot act arbitrarilyevenin the matter ofawardingcontracts
ordistributinglargesse.There ought to be apublicelementin all itsdeci
sionsanditmustconformtothemandateofArticle14andobservetenets
ofequalityand fairaction.The court said that theacceptanceof ahigher
tender does notipsofacto make theacceptanceillegal.A sixteenmember
electedcouncilhadtakenthedecisioninaccordancewiththerules.The
courtcontinued:
"Evenif twoviewsare possible,there will be no justificationfor inter
ference unless the view adopted by the authority is so grosslyunreasona
ble ortaintedbyothervitiatingcircumstances.
The view does not become unreasonable, merely becauseanother
view would arise on the facts. The process of judicial review is not in the
nature of an appeal against thedecision.Only the decision-making pro
cess, is underreview.Neither the view of the Municipality on facts, nor
its assessmentof future events based on past performance, can be labelled
unreasonable.As observed by LordHailsham,two reasonable persons
canperfectlyreasonablycometooppositeconclusionson the samefacts,
withoutforfeitingtheir title to be regarded asreasonablemen.Unlessthe
decision is sounreasonablethatnoreasonablepersonwouldcome to it,
it does not merit interference. As observed by theCourtof Appeal in the
Tamsidecase:^°^'No one can be properly labelled as being unreasonable,
unless he is not only wrong, but so unreasonably wrongthatno reasona
ble person could sensibly takethatview'.
It is alsousefultorefertotheobservationsofScarmanLJ in
Nottinghamshire County Council R vSecyof State for Environment,
'Unreasonablenessmustprimafacie showthatthe officialbehaved
absurdly or must havetakenleave of his senses'.
The decisionof the Municipal Council must betested on the touchstone
of theseprinciples.The decision is not under appeal and the tenability
109. Secy of State for Education and Science v Tameside Metropolitan Borough Council, 1977
AC 1014:(1976)3WLR641;PradeepTimberCo vH.P.StateForestCorpn,1984SimLC
245,cancellationof anauctionso as to defeat the highest bidder and which had noother
justification,cancellationquashed.
110. 1986 AC 240: (1986) 2 WLR 1 (HL). See alsoMaluKhan v StateofRajasthan,(1989) 1 Raj
LR 890 where the highest bidder was ignored and the allotment of the liquor licence was
being negotiated with a person who had not submitted the bid but who was offering more
than the next highest bid, it was held that the next highest bidder should have been given
opportunity to appear in negotiations.Agarwal Roadlines (P) Ltd v Indian Oil Corpn Ltd,
(2003) 1 Bom CR 495, tender rejected because thetendererby somemistakehappenedto
submit the earnest moneyamountin the name of some other company. Thecourtsaidthat
administrativedecisions based onhypertechnicalapproach treating a non-essential condi
tionas anessentialconditionwasliableto beinterferedwith.ThecourtfollowedSupreme
Courtauthoritiesone ofwhichwasPoddarSteelCorpnvGaneshEnggWorks, (1991) 3
see273: AIR 1991 SC 1579, where the SupremeCourtdid not uphold the sidelining of
a tender on the ground that the earnest moneydraftwas required to be that of the State
Bank whereas thetenderersubmitteda certified cheque ofanotherbank.Thecourtfound
the cheque to be equally safe. It could have been accepted by the authority by waiving the
requirement because it was in their interest to get the highest bidder.https://t.me/LawCollegeNotes_Stuffs

187. Absolute and unqualified 51
ofanotherviewwillbe nogroundtostampthedecisionwithvice.As
alreadynoticed,thepastperformanceofthepetitioner-contractor,and
the reports made by competentAuthoritieswereconsideredanddecision
taken byanelectedbodyofsixteenpersons,afterdeliberation.Thedeci
sionisnotunreasonable."
AnothercaseofthiskindwasbeforetheKeralaHighCourtinCambatta
Aviation Ltd v CochinInternationalAirportLtd}^^The evaluation author
ityconsideredall theaspectsandfoundtheappellantto be the mostcom
petenttendererto beawardedthecontract.TheBoardofDirectorsselected
anothertenderer(therespondent).ThisdecisionwastakenbytheBoard
even beforetakinga decision on the soundness of theothertenderers. The
minutesoftheBoardmeetingdidnotgiveanyreasonas towhytheBoard
decidedtoinvitetherespondent.Therespondentwasthenpersuadedto
make amatchingofferwith that of theappellant.The courtdeclaredthat
theBoardofdirectorsadoptedaprocedurewhichwasclearlyviolativeof
theprinciplesofnaturaljustice.Theawardwasaccordinglyheldto bearbi
traryandillegal."^
Abidderat anauctionacquiresnovestedrightinthepropertyunderauc
tion untilhisbidhasbeenaccepted.Themeredepositof20 per centof the
bidamountbythehighestbidderdoesnotamounttoacceptanceofhisbid.
Communicationofacceptanceofhisbidto thehighestbidderisnecessary
for concluding thecontract.^"
Where there was nothing on record to showfavouritism,"''the court
refusedtointerfereand citedthefollowingSupremeCourtstatement:"^
111.AIR1999Ker368.'
112. StillanothersimilarrulingisinLancoConstructionsLtd v GovtofA.P.,AIR1999AP371,
it wasa tenderfor a WorldBankProject.Thelowesttenderwasrejectedby theGovernment
withoutgivinganyreasons.TheWorldBankalso notedthat therejectionof thelowestbid
was without any convincing reasons and, therefore, not fair and reasonable. The decision
wasliableto be setasidebecauseit wasbaseduponincorrectinformation.Chandragiri
Construction Co v State of Kerala, (2003) 1 KLT(SN)14, negotiating with one of the ten
derers behind the back of others, held arbitrary. Sandhu Tractors v Orissa Small Industries
Corpn Ltd,(2004)4BC60(Ori),publicinterestbeingparamount in thetenderingpro
cess, there should be no arbitrariness in award of contracts, all tenderers should be treated
alike. Gupta Enterprises v Govt ofA.P.Revenue& Endowments Deptt,(2003)2 BC 4
(AP),scopeofjudicialreviewofadministrativeactioninawardofcontractsismuchlimited.
KaikkaraConstructionCo v Govt of Kerala, (1999) 2 BC 338 (Ker DB), decision of the
singlejudgeupsettingtheawardofa contractworkwithoutinvitingtendersfrompublicwas
held to be illegaland was set aside.There were no vitiating circumstances. Coal India Ltd v
Indian ExplosivesLtd, (2006) 3 CHN 433, a contract of sale or supplyof goods to the State,
noelementof publicinterestin it so as toenablethe Statetoexerciseany superiorpower.
113.U.P.Avas Evam Vikas Parishad v OmPrakashSharma, (2013) 5 SCC 182:(2013)2 SCC
(Civ)737.
114. Arun Kumar Agarwal v Bihar State Pood Civil Supply Corpn, (2005) 1 BLJR29(Pat).
115. Tata Cellular v Union of India, (1994) 6 SCC 651;JaykrishnaIndustriesLtd vEconomic
Development Corpn, (2005) 4 Bom CR 218 scope of judicial reviewis confined to the pro
cessing of tenders so as to ensurethatpowers are not abused, there can be nointerferencein
matters of business.Hasmukhlaland Co v Municipal Corpn for Greater Mumbai, (2005) 3
MahLJ149,forfeitureofearnestmoney inaccordancewith a clause in thecontractbut blackhttps://t.me/LawCollegeNotes_Stuffs

188. 52Chapter2Acceptance [S-
"It cannotbedeniedthat theprinciplesofjudicialreviewwouldapply
to theexerciseofcontractualpowersbyGovernmentbodiesin order to
preventarbitrarinessorfavouritism.However,itmustbeclearlystated
thatthere are inherent limitations in exercise ofthatpower of judicial
review.Governmentis the guardian of thefinancesof theState.It is
expectedtoprotectthefinancialinterestoftheState.Therighttorefuse
thelowestor anyother tenderisalwaysavailableto theGovernment.But,
theprincipleslaiddowninArticle14oftheConstitutionhavetobekept
inviewwhileacceptingorrefusingatender.Therecanbenoquestionof
infringementofArticle14iftheGovernmenttriestogetthebestperson
or the bestquotation.Therighttochoosecannotbeconsideredto be an
arbitrarypower.Ofcourse,ifthepowerisexercisedforanycollateral
purposetheexercisewill be struckdown."
BCCI(BoardofControlforCricketinIndia)thoughnot a part of the
superstructureoftheStateisneverthelessperforminganimportantpub
licfunctioninvolvinghugeamountsandpublicinterest.A writunder
Article226,"^but not underArticle32 can,therefore,lieagainstit."^
Thedebarringof acompanyfromtenderingbecauseone of itsdirectors
hadassaultedanemployeeof theAuthoritywasheldto benot malafideor
withobliquemotives."^
Letterofintenttoaccept.—Sometimealetterofintenttoacceptisissued
beforefinalacceptance.It has nobindingefficacyoneitherparty."®The
letterofacceptanceonlystatedthecorporation'sintentionaboutacceptance
of the tender. The same was not reduced into writing. Thecourtsaidthat
therewas noconcludedcontractandnoworkorderhadbeen issued.The
amountdepositedbythetenderercouldnot beforfeited.He wasentitledto
refund.^^o
Liability for failure toconsidertender
Avalidtendermust be openedand dulyconsideredbythe invitingauthor
ity,otherwiseitwouldbeunfairness.In acaseof this kindwhereavalid
listingfor a certain period in theabsenceof any contractclauserequireddecisionon merits
after hearingparties.AndhraPradeshPaperMillsLtd vState of Maharashtra,(2005)4 Bom
CR 274(DB),the bidder was fully aware of the terras and conditions of the bidding process
and also of the fact that it was wholly a commercial matter with no public interest, writ
did not lie to question the validity of the terms on the ground of being arbitrary. Popcorn
Properties (P) Ltd v State of Maharashtra,(2005)6BomCR 518, fresh bidding ordered
because of lack of transparency in previousbidding.Government agreed to it.
116. Board of Control for Cricket in India v ZeeTelefilmsLtd, 2005 SCC OnLine Mad 373;
(2005)2LW567, Zee had withdrawn its tenders and had the right to do so. It had no right
to file a writ. Approved in ZeeTelefilmsLtd vUOI,(2005) 4 SCC 649: AIR 2005 SC 2677.
117. Zee TelefilmsLtdv UOI, (2005) 4 SCC 649: AIR2005SC 2677.
118. DDAVUEEElectricalsEngg (P)Ltd, (2004)11 SCC213: AIR 2004 SC2100, the debarring
was for a period of five years.
119.HansaV.Gandhi v Deep Shankar Roy, (2013) 12 SCC 776: (2013) 116 Cut LT 457.
120.DibakarSwain v Cashew Development Corpn, 2014 SCC OnLine Ori 376: AIR 2015 Ori 6.https://t.me/LawCollegeNotes_Stuffs

189. [S-7] Absoluteandunqualified53
tenderwasnotconsidered,the Court ofAppealobservedi^^i"In certain
circumstancesaninvitationtotendercangiverisetobindingcontractual
obligations on thepartof the invitor to consider tenders which conformed
with theconditionsoftender.Since,in this case, tenders had beensolicited
by the Council fromselectedparties, and since theCouncil'sinvitation to
tenderprescribedaclear,orderlyandfamiliarprocedure,whichincluded
draftcontractconditionsavailableforinspectionbut notopentonegotia
tion,aprescribedcommonformoftender,thesupplyofenvelopesdesigned
topreservetheabsoluteanonymity oftenderersand anabsolutedeadline,
itwasto beimpliedthat if aninviteesubmittedaconformingtenderbefore
thedeadlinehewouldbeentitledas a matter ofcontractualright tohave
his tender opened andconsideredalong with any other tenders that were
considered.Damageswere to beassessedin respect of theCouncil'sfailure
in accordance with its Standing Orders."
Where the contract was awarded to anunqualifiedtenderer at the cost of
thepetitioner-tendererwho wasqualifiedfor the job,the courtallowedthe
awardeetocompletetheworkandalsoallowedtheaggrievedparty acom
pensationofRs1,00,000 to berecoveredfromthe salary ofguiltyofficers.^^^
The courtfollowedthefollowingobservationof theSupremeCourt:^^^
"In a work of thisnatureandmagnitudewhere bidders who fulfil
pre-qualificationalone are invited to bid,adherenceto theinstructions
cannot be givenagO-byby branding it as a pedantic approach, otherwise
it will encourage and provide scope for discrimination, arbitrariness and
favouritism which are totally opposed to the rule of law and our constitu
tional values. The very purpose of issuingrules/instructionsis to ensure
theirenforcementlest the rule of law should be acasualty.Relaxation or
waiverof a rule orcondition,unlesssoprovidedunder theITB,by the
State or itsagenciesin favour of one bidder would create justifiabledoubts
in the minds of otherbidders.It would impair the rule of transparency
and fairness and provide room for manipulation to suit the whims of the
121. Blackpool andFyldeAero Club Ltd v Blackpool Borough Council, (1990) 1WLR1195
(CA);VijayKumar Ajay Kumar v SteelAuthorityofIndiaLtd, AIR 1994 All 182, tenders
for management of materials and port, restricting the tender to handling stockyard for the
purpose of testing theirexperience,held, notwrong.New Horizons Ltd v Union of India,
(1995) 1see478: (1997) 89 Comp Cas 849, disqualification of a company tenderer on the
ground that it had norequisiteexperiencewas heldto bewrongful,theshareholdersenjoyed
the requisite experience.
122. A.K.ConstructionvStateofJharkhand,(2004)1 BLJR 516 (Jhar).
123.W.B.SEBVPatelEngg Co Ltd, (2001) 2 SCC 451: AIR 2001 SC 682. Also citing Monarch
Infrastructure(P) Ltd v UlhasnagarMunicipalCorpn,(2000) 5 SCC 287: AIR2000SC
2272; Bhupendra Engg &Construction(P) Ltd v State ofJharkhand,(2004) 1 BLJR237
(Jhar), there was no explanation for18days delayin scrutinising tenders after opening them
and why another tender was scrutinized just the next day after opening. The court said that
transparency should be maintained in awarding contracts, set aside. Arun Kumar Agarwal v
Bihar State Food CivilSupply Corpn, (2005) 1BLJR29(Pat)no record showing any favour
to any body, noinfirmityin thedecision.https://t.me/LawCollegeNotes_Stuffs

190. 54Chapter2Acceptance [S-7]
Stateagenciesinpickingandchoosingabidderforawardingcontracts as
in the case ofdistributingbountyor charity."
Refundofearnestmoney
Wheretheopeningandacceptanceoftenderswaspostponedbecause
of aHighCourtorder,itwasheldthat thetendererwasentitledto with
draw his tender and he, havingeffectivelywithdrawn it, was entitled to
refund of his earnestmoney.The retention of the money by the department
afterrevocationwasunreasonable.An order forrefundcould begranted
withinterest.^^'*Where the earnest money of a tenderer was forfeited before
acceptanceof thetenderandconclusionof the contract and thedispute
between the parties was also not related with the contract, a writ petition
challengingtheforfeiturewasheldto bemaintainable.^^^Forfeitureof bid
securityon the ground that thebidderhadindulgedin afraudulentpractice
washeldto be not properbecauseno suchgroundwasmentionedin the bid
documents.^^®Wherethe lowesttendererwas found to belackingin eligi
bilitycriteriaat thepre-qualifyingstageitself,the court saidthat histender
could berejected.Butforfeitureof his earnestmoneyand that too without
givinghimshow-causenoticewasillegalper se andviolativeof theprinci
ples ofnaturaljustice.^^^
Non-compliancewithRequirements
Atender-invitingauthority made it clear to thetenderersthat only one
brand of pump sets would beaccepted.Theygaveeventhe last-minute
opportunitybeforeopeningthetenderstoenablethetendererstochange
their quotationsaccordingly.The tenderer to whom the contract was
awarded refused tocomplywith the supply order. The authoritycancelled
the contract and the order. Theauthoritywas held to be within its right to
do so. Itsactioncould not beregardedasarbitrary.^^®
124. AdityaMassCommunications(P) Ltd v A.P. SRTC,AIR 1998 AP 125; Vinod}.Agarwal
V Chief Officer, MiraBhayanderMunicipal Council, (2006) 4 Bom CR 356: AIR 2006
Bom 254:2006AIHC2461: (2006) 4MahLJ 126, tenderwithdrawnbeforeacceptance,
and after expiry of validity period tenderer entitled to refund of earnest money. A.P. Paper
Mills Ltd VState ofMaharashtra,(2003) 4 Mah LJ 760, time for accepting tenders had
, expired, the tenderers who were awarded were allowed to withdraw their earnest money.
HarendrakumarNakhatvNandiHasbiTextile MillsLtd,AIR1997Kar185, fully depos
ited money including earnest allowed to be refunded because of sale by thecourtowing to
objectionableconductofbothparties.
125.FoodCorporationofIndiavSujitRoy, AIR2000Gau 61.
126.SaniconsvGovtofA.P.,AIR2006AP282.
127.SRSInfra Project P Ltd v Gwalior Development Authority, AIR 2010 NOC 955 MP.
128.VijayFire ProtectionSystemsLtd v Yisakhapatnam Port Trust,(1997)3 AnWR261. The
court added that the wholearrangementbeingcontractualandpartof private law and not
a part of statutory or public law, the matter could not be raked up in a writ petition under
Article 226 of theConstitution.DipakHandlingAgency v Minerals & Metals Trading
Corpn Ltd,(1997)84CalLT 560, where a tender required that a labourlicenceunder
the Contract Labour (Regulation & Abolition) Act, 1970 should be filed along with thehttps://t.me/LawCollegeNotes_Stuffs

191. [S. 7] Absblii'teandunqualified55
Whereone oftheconditionsinthetenderwasthatthetenderershould
have one yearexperiencein the workinvolved,the court said that such a
conditioncouldberelaxedinfavourof anotherwisecompetentcontractor
and he could be required to produce the certificate of work later. His tender
wasalsothelowestone.^^'
Ithasbeenheldthat atenderinvitingquotationsfordisposaloftrees
shouldmentiontheapproximatevalueof thetrees.Itcouldbeassessedby
thetenderersand on thatbasistheycouldquotetheirfigures.""
A tender was submitted withoutcomplyingwith therequiremeiltof sub
mittingtheperformancebankguarantee.Butevenso the otherpartyplaced
asupplyorder in terms of thetender.The'tendererimmediatelywrote back
tosaythat the term ofperformancebank guaranteewas notacceptableto
it. Thecourt saidthat thisamountedtocancellingone'stender.Nobinding
order could be placed on the bases of a tender which was still in its fluid
state.^^^
Tenderwithconcessionalrate
Atenderofferedfirmratesbutalsoofferedconcessionalratesifthetender
was finalised within shorter period than otherwise allowed. It was heldthat
this did not amount to a conditionaloffer.It was only aninducementfor
bringing about more expeditiousacceptance."^
tender, it was held that more time should have been givento the tenderer to complywith the
requirement andnon-considerationof his tender only because the licence was not filed was
not proper.SoorajmullBaijnath(P) Ltd vIndianOilCorpnLtd, (2004) 3ICC539(Cal),
requirements of tender notice were not at all fulfilled. Hem RajGoyalv State of Punjab,
(2009) 1 RCR (Civil) 151PScH,DB, lowest bid not considered because of not being absolute
andunqualified.
129. Kesulal Mehta vKajasthanTribal Areas Development Coop Federation Ltd, AIR 2005 Raj
55;StealLogisticsLtdvKarnatakaPower Corpn Ltd, (2006) 6 AIR Kant 394, none of the
tendererswas found to be not qualified,yet one of them was ruled out in violationof applica
ble rules, the whole process was held to be vitiated. KayVeeEnterprises vJawaharlalNehru
Technological University, AIR 2006 NOC 488(AP):(2006) 1 ALD 126, issueoffenderand
award of contract against rules to a contractor who was not registered, not proper.
130. K.M. PareethLabhav Kerala LivestockDevelopmentBoard Ltd, AIR 1994 Ker 286; Shiv
SinghVUnion ofIndia,AIR 2007 NOC 1879 (MP), tender submitted his tender, but did not
sign each and every page asrequired.Hewasnot allowed to saythathis tender should not
have been accepted for want of signature at certain places. The tenderer should have specif
ically indicated term and conditions not acceptable to him. He participated in negotiation
proceedings.It wasnotopento him to saythattherewas noconcludedcontract.Hisearnest
money wasforfeitedbecausehe didnotperform.
131. VishwaIndustrialCo(P)LtdvMahanadiCoalfields Ltd, AIR2007Ori 71 (DB).
132. KanhaiyaLalAgrawalv UnionofIndia, (2002)6 SCC315:AIR 2002 SC2766; Directorate
ofEducationvEducompDatamaticsLtd, (2004) 4 SCC 19: (2004) 3 ICC 398, the terms of
atendercannotbe made thesubject-matterofjudicialreview.Freedomofcontractis as much
essentialto theGovernmentas to anyindividual.S.UmamaheswaraRaovNabardRoads
andBuildings, (2003) 2 ICC 737 (AP), terms andconditionsnecessaryforgettingworkdone
depends upon various factors, thematterbelongs to thedomainofexpertbodies. Thecourt
cannotinterferein suchmattersand saythataparticularconditionortechnicalspecification
isonerousorimpracticableto becompliedwithandliableto be set aside.
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192. 56Chapter2Acceptance [S-7]
Certaintyofterms
Anagreementtosellimmovablepropertymustidentifythepropertywith
certainty.Itshouldfixthepriceandshouldbebasedonmutuality."^The
noticeinvitingtendersforhiringofservicesofvehiclesdidnotstipulateany
period.Thecontractwasawardedto thelowesttendererforthreeyears.It
was heldthatthere was nothing wrong in it. An open ended tendercannot
beregardedasvoidforvagueness.Thetenderrequiredthatvehiclesshould
notbe morethansixmonthsold. Themanufacturerhadgiven up the speci
fiedmodel.Theacceptanceofsubstitutevehiclesofequalefficiencyand cost
wasnotarbitrary.""*
Governmentcontracting
Thejudgmentof theSupremeCourt in Mahabir AutoStoresv Indian
OilCorpn^^^is ofextremerelevancy.SabyasachiMukherjiCJobserved
asfollows:
"The State acts in itsexecutivepower under Article 298 of the
Constitution in enteringor not enteringin contracts with individualpar
ties. Article 14 of theConstitutionwould be applicable to such exercise
ofpower.The actionof Stateorgancan betestedunderArticle14.Every
action of the State executive authority must besubjectto the rule of law
and must beinformedofreason.So,whateverbe theactivityof the public
authority, it should meet the test of Article 14 of the Constitution.Ifa
Governmentactioneven in themattersofenteringornotenteringinto
contract, fails to satisfy the test ofreasonableness,the same would be
unreasonable.Rule ofreason,ruleagainstarbitrarinessanddiscrimina
tion, and rules of fair play andnaturaljustice are all apartof the rule
of law applicable to dealings with citizens.Evenwhere the rights of citi
zens are in the nature ofcontractualrights, the manner, the method and
motive of a decisionof entering or not entering into acontract,are subject
to judicialreview on the touchstone ofrelevanceand reasonableness,fair
play,naturaljustice, equality and non-discrimination. It is well settled
thatthere can be'malicein law'.Indeed'maliceinlaw'is apartof the
dimensionsoftheruleofrelevanceandreasonaswellastheruleoffair
play inaction."
133.MirahulEnterprisesvVijayaSrivastava,AIR 2003 Del 15.
134. NewGoldenBus Service vStateofPunjab,AIR2006P&H141;MohdTajuddinvJoint
Collector, AIR 2006 NOC 490 (AP):(2006)1 An LD 351, no minimum rate wasstipulated
in notice invitingtenders,noconditionwasstipulatedthatrates below acertainamount
would not be accepted. Thewritpetitioner'stender was rejected on the groundthatthe
rate was so lowthatit was notworkable,notproper.SainikMining& Allied ServicesLtd
VMahanandiCoalFieldsLtd,AIR 2010NOC683Ori;detailsweretherein theoriginal
tender carrying"instructionsto bidders", and there was also detailed work order and letter
of intent, execution of awrittenagreement would have been a bare formality.
135.(1990)3see752:AIR1990SC1031.https://t.me/LawCollegeNotes_Stuffs

193. [S* Lapseofoffer57
The court could not sit in appeal against thedecisionof theTender
Committeewhichconsistedofexpertstosubstituteit'sowndecision.Scope
ofinterferencebythe court isverylimitedandonlywhenthe court issatis
fiedthat thedecisionmakingprocessofthe TenderCommitteewas actuated
by mala fides, the court might interfere in thesame."^
Therecanbenocontractualobligationon thepart ofgovernmentin con
flictwith theconstitutionalobligations.Obligationsflowingfromcontract
must necessarily yield to obligations flowing from theConstitutionand
laws.^^^
Preventing fromtenderingandblacklisting
A bidder was prevented by some elements inside the office from submit
tinghistender.Aninquiryconductedbytheauthoritiesverifiedtheallega
tion. The person so ruled out was permitted to submit his tender after two
interveningholidays.His tender wasaccepted.Noprejudicewas caused to
othertenderers.Theworkorderissuedtohimwasnotinterferedwith."®
The condition of blacklisting a contractor arises only if the contract is
awarded and the tenderer fails to perform anypartof the contract.Some
material fact may be required from the bidder about hisexperiencefor the
purpose of seeking permission for making his proposal. If any such fact is
concealed,it maydisentitlethe bidderfrom getting the contract. It maylead
to forfeiture of earnest money but not toblacklisting."^
The power ofblacklistinga contractor is inherent in a party allotting
contracts. But when the party is a State, the decisionto blacklist is open to
judicialreviewon the touchstone ofproportionalityand principle ofnatural
justice.""
LAPSEOFOFFER
Acceptance should be made before the offer lapses. An offer lapses in the
circumstancesprovidedfor inSection6.
S. 6.Revocationhowmade.—Aproposalisrevoked—
(1)bythecommunicationof notice of revocation bytheproposertothe
otherparty;
(2)bythelapse ofthetimeprescribedin suchproposalfor itsacceptance
or, if notimeis soprescribed,bythelapse of areasonabletime,without
communicationoftheacceptance;
136.PrmodKumarRathvStateofOrissa,(2005) 99 CutLT299.
137. Bharti AirtelLtdvXJnionofIndia,(2015) 12 SCC 1. The question was whether auctioning
cell phone licences was likely to create unhealthy competition.
138.UtpalMitravChiefExecutiveOfficer, AIR2006Cal74.
139.MerittracServices(P)LtdvPostGraduateInstituteofMedicalEducationandResearch,
AIR2015P&H174.
140. KuljaIndustriesLtdv Western TelecomProjectBSNL, (2014) 14 SCC 731: (2013) 6 ALD
142.https://t.me/LawCollegeNotes_Stuffs

194. 58Chapter2Acceptance [S.6]'
(3)bythefailureof the acceptortofulfilaconditionprecedent to accept
ance;or
(4)bythe deathorinsanityoftheproposer,ifthe factofhisdeath orinsanity
comes totheknowledgeoftheacceptorbeforeacceptance.
1.Noticeofrevocation
Section5providesthat "aproposalmayberevokedat any timebefore
the communication of its acceptance is complete as against the proposer,
but not afterwards". It has already been seen that as against thepiroposer,
thecommunicationofacceptanceiscomplete"when it is put in a courseof
transmissionto him, so as to be out of the power of the acceptor". Itmeans,
therefore,that thecommunicationofrevocationto beeffectivemust reach
theoffereebefore he mails his acceptance and makes it out of his power.A
revocation iseffectiveonly when it is brought to the mind of thepersonto
whomtheofferismade.ThiswaslaiddowninHenthornvFraser}'^'^
The secretary of a buildingsocietyhanded to the plaintiff in theoffice
of the society an offer to sell a property at £750givinghim the right to
acceptwithinfourteendays.The plaintiffresidedin adifferenttown and
took away with him the offer to that town. The next day at about 3.50
p.m. he sent by post his letter ofacceptance.This letter wasreceived
at the society'sofficeat 8.30 p.m. But before that at about 1.00 p.m.
the societyhad posted a letterrevokingitsoffer.The revocation and the
acceptancecrossedin the course of post. The plaintiffreceivedthe letter
of revocation at 5.30 p.m. The revocation was held to be ineffective.
Explaining the principle. LordHerschellobserved:"If the acceptance
by the plaintiff of the defendant's offer is to be treated as complete at the
time the lettercontainingit was posted, I canentertainno doubtthatthe
society's attempted revocation of theofferwas wholly ineffectual. I think
that a person who has made an offer must beconsideredascontinuously
making it until he has brought to the knowledge of the person to whom it
wasmadethatitiswithdrawn."
Thusthecommunicationofrevocationshouldreachtheoffereebefore
the acceptance is out of his power. An illustration to Section 5 explains the
matter. A proposes by letter sent bypost,to sell his house to B. B accepts
the proposal by a letter sent by post. A may revoke his proposal at any
time before or at themomentwhen Bpostshisletterofacceptance,butnot
afterwards.^"*^
The provisions relating to communication of proposal, acceptance, and
revocationaretobefoundinSections4and5.Thesesectionsareasfollows:
141. (1892) 2 Ch 27. To thesameeffect,ManchesterDiocesanCouncilforEducationv
CommercialandGeneralInvestmentLtd,(1970)1WLR2041.
142.SeealsoNutakkiSesharatanamvSub-Collector(LA),(1992)1SCC114:AIR1992SC131,
landowner offering land for acquisition iflumpsum price was paid. Hewithdrewhis offer
before the Acquisition officerpreparedhis award of acceptance. Held,withdrawalgood.https://t.me/LawCollegeNotes_Stuffs

195. [Ss.45] Lapseofoffer59
S.4.Communicationwhencomplete.—^Thecommunicationofaproposal
iscompletewhenitcomesto theknowledgeofthe persontowhomitismade.
Thecommunicationofanacceptanceiscomplete-
as againsttheproposer,when it isputina courseoftransmissiontohim,so
as to be out ofthe power of the acceptor;
asagainsttheacceptor,whenitcomesto theknowledgeoftheproposer.
Thecommunicationof arevocationiscomplete,—
as against the person who makesit,when it is put into a course oftransmis-
sipntothepersontowhomitismade,soastobeoutofthepoweroftheperson
whomakesit;
asagainstthepersontowhomitismade,whenitcomestohisknowledge.
S. 5.Revocationof proposals andacceptances.—Aproposalmaybe
revokedatanytimebeforethecommunicationofitsacceptanceiscompleteas
againsttheproposer,butnotafterwards.
Anacceptancemay be revoked at any time beforethecommunicationofthe
acceptanceiscompleteasagainsttheacceptor,butnotafterwards.
Withdrawalbeforeexpiryaffixedperiod
iWhereanofferergivestheoffereeanoptiontoacceptwithinafixed
period,hemaywithdrawitevenbeforetheexpiryofthatperiod.Thedeci
sionoftheMadrasHighCourtinAlfredSchonlankvMuthunynaChetti^'*^
is anillustrationinpoint.Thedefendantleftanoffertosellaquantity
ofindigoattheplaintiff'sofficeallowinghimeightdays'timetogivehis
answer.On the 4thdayhoweverthedefendantrevokedhisproposal.The
plaintiffacceptedit on the 5thday.
Holdingtheacceptancetobeuseless,thecourtsaid:"Bothonprinciple
andonauthorityitisclearthatintheabsenceofconsiderationfortheprom-
ise'tokeeptheofferopenforatime,thepromiseismerenudumpactum."
Noticeofrevocationshallbedeemedto have beenservedwhenitreaches
theofferee'saddress.Anoticeforthewithdrawalof ashipfromthe char
terers'serviceswas sent by telex and wasreceivedby the plaintiff's telex
machineduringnormalbusinesshours,buttheplaintiffreadthemessage
the nextday.He was,however,held bound by the noticewhen his machine
receivedit.""*The courtsaid:"If anoticearrivesat theaddressof aperson
to be notified, at such a time and by such a means of communication that it
wouldinthe.naturalcourseofbusinesscometo theattentionofthatperson
on its arrival,thatpersoncannotrely on some failure of himself or his serv
ants to act in a normalbusinesslikemanner in respect of takingcognizance
of thecommunication,so as to postpone theeffectivetime ofthe noticeuntil
somelatertimewhenitinfactcametohisattention."
Wherethequestionwaswhetherthenoticeforwithdrawalof aship
under acharterer-partyfor default in payment of hire waseffectivewhen
143. (1892) 2MLJ57.
144. TenaxSteamshipCoLtdvBrimnes,1975 QB 929(CA).https://t.me/LawCollegeNotes_Stuffs

196. 60Chapter2Acceptance [S*
it was recorded on the telex machine of the charterer or on the opening of
theofficeonthenextworkingdaywhenthemessagewasactuallyread,
thecourtupheldthedecisionofthearbitraltribunalthat themessagewas
deemed to have been delivered when it was read on the machine on thenext
workingday.^"*^
AcceptanceofproposalunderVoluntaryRetirementScheme[VRS]
Theemployeesweregiventherighttoapplyunderavoluntaryretirement
scheme.The authorities had, under thescheme,anabsolutediscretion to
acceptorrejecttherequestofanemployee.Theretirementwastotakeeffect
onlyaftertherequesthadbeenacceptedinwriting.Theschemewasheld
tobeonlyaninvitationtooffer.Anemployee'sapplicationhadtheeffect
ofmakinganoffer.Hecouldwithdrawitbeforeitwasaccepted.Atermin
theschemewhichpreventedtheemployeefromwithdrawinghisrequestwas
heldto be notbinding.It had theeffectof apromisenot towithdrawthe
requestandtherewasnoconsiderationforthepromisetomakeitbinding."^
Anemployeefirstproposedtotakevoluntaryretirementandthen
requestedthathisresignationbekeptinabeyance.TheGovernment
acceptedtheresignation.Thecourtsaidthatthemereassertionwithoutany
prooforaffidavitthattheretractionwasservedontheGovernmentbefore
acceptancecouldnotbeaccepted.Thecourtfurthersaidthatarequestfor
keepingtheproposalinabeyancewasnotthesamethingaswithdrawing
it."''Anemployeecanwithdrawhisproposalofresignation.It ispossible
uptothetimewhentheacceptanceoftheproposalhasbeencommunicated
to him. Thecourtdid notconsiderit tenablethatthe employee in ques
tionshouldhavebeenpermittedtowithdrawherproposaltillshereceived
thecash."^Aresignationwassubmittedand itwasacceptedon March31,
2003,butthat itwouldtakeeffectfromJune23,2003afterexpiryofthe
noticeperiodofthreemonths.Thecourtsaidthattheeffectivedateofresig
nation was the date on which theemployeewas goingto bereleasedand not
thedateofacceptanceand,therefore,in themeantimeresignationcouldbe
withdrawn."'
145.ScheldeDeltaShippingB.V.v AstarteShippingLtd,{ThePanela)(\995)1Lloyd'sRep
249,telexmessagewasrecordedbythemachineatabout11.00p.m.on aFriday,Saturday
andSundaybeingholidaysthemessagewasreceivedat theopeninghoursonMonday.].K.
Enterprisesv StateofM.P.,AIR 1997MP 68,communicationofrevocationsent to a wrong
faxnumber,ineffective.
146.BankofIndiav O.P.Swarnakar,(2003)2SCC721:AIR2003SC858;StateBankofPatiala
VRomeshChander Kanoji,(2004)2 SCC651:AIR 2004 SC2016, no withdrawal allowed
where the scheme became closed after receiving all applications. PunjabNationalBank v
VirenderKumar Gael,(2004)2 SCC193,applicationforretirementaccepted,a part of the
retirementbenefitspaid and used byemployee,withdrawalnotallowable.
147.ShashikalahParasharvStateofGoa,(1998) 2 Bom CR 427.
148. Asha v U.P. State Sugar Corpn Ltd, (2006) 1 All LJ 808.
149.K.AppaRaovTungabhadraSteelProductsLtd,(2006)5 AIRKantR 296;BalramGuptav
UnionofIndia, 1987SuppSCC228:AIR1987SC2354,employercannotrefusetoaccept
resignation,employeesareentitledtotheirfreedom.ShambhuMurariSinhavProject&https://t.me/LawCollegeNotes_Stuffs

197. [S-5] Lapseofoffer61
Anemployeemade aconditionalproposal ofretirementand one of the
conditionswasahigheramountofgratuity.Theofferwasacceptedby
theemployer.Inviewof theprovisionsofSection4(5)of thePaymentof
Gratuity Act, 1972 whichhaveanoverridingeffect,theemployeebecame
entitled toreceivebetter terms ofgratuity.""
Theemployerisnotnecessarilyboundtoaccepttheproposalofpremature
retirement.Noactionliesagainstrefusaltoaccept.In thiscasetheapplica
tionsforretirementhappenedto bemorethanexpectedand the numberof
retirementsthat theemployerscould afford to accept was exhausted when
someapplicationswerestillleftout. It washeldthat theemployercouldnot
be forced to accept the wholenumber."^
Where the schemestipulated that an application once made could not be
withdrawn,nowithdrawalwasallowedaftertheclosureof thescheme."^
Thegeneralprinciplesofcontractingwereheldto be notapplicablewhere
thevoluntaryretirementwasundera statutoryschemewhichcategorically
barredtheemployeefromwithdrawingthe option onceexercised.The terms
of a statutoryschemewouldprevailoverthegeneralprinciples."^
Agreement to keep offer open for specifiedperiod
Where theagreementto keep the offer open for a certain period of time
is forsomeconsideration,theofferorcannotcancelitbeforethe expiry of
thatperiod. The owner of a house agreed, in consideration of the sum of
one pound, to give the plaintiff an option to purchase the house for ten
thousandpounds within a stated period. He was not allowed to revoke
DevelopmentIndia,(2002)3 SCC437:AIR 2002 SC 1341, thoughresignationaccepted,
employee was asked to continue up to acertaindate.Thatdate became the effective date.
Resignation could be withdrawn up to that date. H.L. Nagaraju v VijayaBank,ILR1999
Kant197:1999LabIC2354, employercannotrefuse voluntary retirement.SrikanthaS.M. v
BharathEarthMoversLtd, 2005 8SCC314:(2005)AIRKant2993,employeeresigningand
acceptancewith immediate effect.Subsequently,another letter told him that his application
for casual leave had been accepted up to a certain date and his resignation would become
effectiveon the expiryof that date. A weekbeforethat date theemployeewithdrewhisresig
nation.Withdrawalbecame effective. N.DinakaraShetty v UnionofIndia,(2005)6 Bom
CR 470(Panaji),once theapplicationhas beenaccepted,the employee becomesboundto
take his retirement.KuldipGandotra v Union of India, (2005) 125 DLT 5(DB),employee
withdrew before acceptance,filedpetition, money sent to him duringpendency,acceptance
under protest, termination of job not proper. The Supreme Court relied upon earlier deci
sions in UnionofIndiavGopalChandraMisra, (1978) 2 SCC 301: AIR 1978 SC 694;
Balram Gupta v Union of India, 1987 Supp SCC 228: AIR 1987 SC2354;/.N.Srivastava v
Union of India, (1998) 9 SCC 559: AIR 1999 SC 1571; Power Finance Corpn Ltd v Pramod
Kumar Bhatia, (1997) 4 SCC 280 in which it was held that a resignation which has already
beenacceptedcan bewithdrawnbefore the "effective date."
150.DigamberYeshwantrao'WatanevAgriculturalProduceMarketCommittee,(2004)3Mah
LJ603:(2004)6BomCR678.
151.VishakhapatnamPortTrust v T.S.N.Raju,(2006) 7 SCC 664;DigamberYeshwantrao
'Watane vAgriculturalProduceMarketCommittee,(2004) 3MahLJ 603: (2004) 6 Bom CR
678,acceptanceofvoluntaryretirement,difference overamountofgratuity,amountdue has
to bepaid,reactionofotheremployeesimmaterial.
152.StateBankofPatialav RomeshChanderKanoji,(2004) 2 SCC 651: AIR2004SC 2016.
153. NewIndiaAssurance CoLtdv Raghvir Singh Narang, (2010) 5 SCC 335.https://t.me/LawCollegeNotes_Stuffs

198. 62Chapter2Acceptance [S.5]
theproposalwithinthattime.Onepoundwasasufficientconsideration
because it was valuable. The effect wasthatthe offer wasirrevocablefor the
specifiedperiodoftimeandtheoffereecouldacceptitnotwithstandingthe
purportedrevocation."'*
The bid carried a conditionthatthe bid security would be forfeited in
casethe bidwaswithdrawnduringitsvalidityperiod.It washeldthat with
drawalofthe bidduringvalidityperiodevenbeforeacceptancedid not nul
lifythe right of theoffereetoforfeitthe bidsecurity."^
Communication of revocation should befrom offererhimself
It is, ofcourse,necessarythat thecommunicationofrevocationshould
be from the offeror or from his duly authorised agent. But it has been held
inEnglandinDickinsonvDodds^^^that it isenoughif theoffereeknows
reliablythat the offer has beenwithdrawn. The factswere;
The defendantsignedanddeliveredto the plaintiff an offer to sell a
propertyat apricefixedandaddedapostscriptsaying:'Thisofferto be
leftopenuntilFriday9o'clock,a.m., 12th June.' A daybeforethe expiry
of this periodthe plaintiffwasinformedbya third personthat the prop
erty hadalreadybeensoldtoanother.However,theplaintiff,before9
a.m. of 12thJune,found the defendant entering a railway carriage and
handedhim the notice ofacceptance.
Thecourtheld"thatthedocumentamountedonly to an offer,which
might be withdrawn at any timebeforeacceptance,and that a sale to a
third personwhichcameto theknowledgeof the personto whomthe offer
was made was an effectualwithdrawalof the offer".JamesLJ added:"In
this case,beyondall question, the plaintiff knew that Dodds was no longer
mindedto sellthe property to him asplainlyandclearlyas if Dodds hadtold
him in so many words, 'Iwithdrawthe offer'."
It issuggestedinPollockandMulla,that this rule willnot beapplicablein
India for thesimplereason thatSection6(1)requiresin so many words that
the notice ofrevocationshouldbe "by theproposerto theotherparty.""''
Revocationofgeneraloffers
Where an offer of a generalnatureis publishedthroughnewspapers, it
can bewithdrawnby the same media and the revocation will be effective
even if aparticularperson, subsequent to thewithdrawal,happened to per
form its terms in ignorance of the withdrawal. In an American case,,the
announcementthroughnewspapersof arewardforreportingcertaincrim
inals waswithdrawnby a subsequentnotification.But a person who was
154.MountfordvScott,1975Ch258:(1975) 2WLR114 (CA).
155.StateofHaryanav Malik Traders, AIR 2011 SC 3574:(2011)13 SCC200.
156.(1876)LR2 Ch D 463 at p.472.
157.IndianContractandSpecificReliefActs(8th Edn by Setalvad andGooderson,1957)
49.https://t.me/LawCollegeNotes_Stuffs

199. [^•^3 63
workingonthetrackofthecriminalsdetectedandreportedthem.Hewas
absolutelyunaware of therevocation.He could notrecover."It was with
drawnthroughthesamechannelinwhichitwasmade.Thesamenotoriety
wasgivento therevocationthat wasgivento theoffer."
Supersedingproposal byfreshproposal
Where,beforeacceptance,aproposalisrenewedinsomepartsofitand
not in itsentiretyasproposedearlier(proposaltosellsalvageclaimsin
respectof9vessels,supersededbyasubsequentproposaltosellonly4)and
theletterpurportstosupersedetheearliercommunication,suchproposal
is nolongeravailableforacceptance.Theacceptancecanbeonlyofthe
renewedpart.Theallotmentoftherestoftheworktoanotherbuyerwould
givehim a goodright."'
Cancellationofallotment of land
Anallotmentoflandwasmadeundertheorderof aDevelopment
Authority.Theallotteedepositedthemoneyandanagreementwassigned
bytheparties.Thisbroughtaboutaconcludedcontract.Asubsequentcan
cellationoftheallotmentbytheAuthoritywasheldtobenotproper.The
courtsaidthat theAuthoritywasunderabindingobligationtoapprove
buildingplansfortheland.Thependencyofacriminalinvestigationregard
ing theallotmentwas held to be of norelevance.'^"
Revocationofbid
In thecaseofanauction,"theassentissignifiedon thepart oftheseller
byknockingdownthehammer"."Abidmayberetractedbeforethe ham
merisdown".^"InaMadrascasei^"
Theappellantmadeabidat anauction(thehighestbidthatwasmade)
butbeforethepropertywasknockeddown,hediscoveredthattheprop
erty was subject to a mortgage and retracted his bid. But even so the
auctioneerknockeddownthepropertytohim.Theowneroftheproperty
suedhim.
The court held that "the plaintiff's bid was no more than an offer and he
wasentitledtowithdrawthesamebeforeitwasacceptedbytheproperty
beingknocked down to him by theauctioneer".i^^
158.ShueyvUnitedStates,23LEd697:(1875)92US73.Theburdenisontheproposertoprove
hisrevocationfailing which he becomesboundand liable for breach.RamanathanChettiar
VNationalTextileCorpnLtd, AIR 1985 Ker262.
159.BanqueParibasvCitibankNA,(1989)1MalaysianLJ329(CA)(Singapore).
160.RocheesHotels(P)Ltd vJaipurDevelopmentAuthority,AIR2002 Raj316.
161. PerBestJ in Agra Bank v Hamlyn,ILR(1890) 14 Mad 235, 236.
162.JoravarmullChampalalvJeygopaldasGhanshamdas,AIR 1922 Mad 486.
163. The court cited RajaofBobbiliv Suryanarayana Rao Gara, ILR(1917)42 Mad 776. See
alsoAgraBankvHamlyn,ILR(1890)14 Mad 235whereBest Jappliedtheruleto court
auctionsaswell.He said: "Abiddingat an auction is a mere offer which may be retractedhttps://t.me/LawCollegeNotes_Stuffs

200. 64Chapter2Acceptance [S-5]
In asubsequentcase,i"thesameHighCourtextendedthisprincipleto
caseswhereabidhasbeenprovisionallyacceptedandissubjecttoconfir
mationbyhigherofficers.Thebiddercanwithdrawbeforeanysuchconfir
mationtakesplace.ThisprinciplehasbeenendorsedbytheSupremeCourt
in Union of India vBhimSenWalaiti
Aliquorshopwasknockeddowntoabidderatapublicauction.This
wassubjecttotheconfirmationbytheChiefCommissionerwhohadthe
powerbeforegrantingthelicencetoinquireintothefinancialcondition
of the bidder. The bidder had to pay one-sixth part of the price imme
diatelyandincaseofanydefaultonhisparttheGovernmenthadthe
powertore-auctiontheshopandtheshortfall,ifany,wasrecoverable
fromthebidder.Hefailedto payone-sixthpart and,therefore,theChief
Commissioner did not confirm the bid and ordered resale. Resale realised
muchlessthan theoriginalbid and thequestionofbidder'sliabilityto
pay theshortfallarose.
Thecourtsaid:"It isnotdisputedthat the ChiefCommissionerhasdisap
provedofthebidofferedbytherespondent.IftheChiefCommissionerhad
grantedsanctioninfavouroftherespondent,thentherewouldhavebeen
acompletedtransactionandhewouldhavebeenliableforanyshortfallon
theresale."
Thequestionarisesthatwhenthebidderbynotmakingthedeposit
had committed adefault,where was thenecessityof any final confirma
tion,which,evenifgiven,wouldhavemeantnothing.If theSupremeCourt
equatedthedefaultinmakingthedepositwithaformalrevocation,then
it would not have beennecessaryto say that if the confirmation had been
giventherespondentwouldhavebeenliable,forifthebidhadbeenwith
drawn bythedefault,itsconfirmationwouldhavemadenodifference.
Thereasonwhythebidderhasthe libertyto withdrawisthat the contract
isconcludedonlywhenthebidisconfirmedandformalcommunicationof
^ itisgiventothebidder.ThishasbeenfurtherpointedoutbytheSupreme
Court inHaridtvarSinghv BagunSumbrui}^^A forestwas knocked down
CASEPILOT
before the hammer is down. Such is therulewith regard to auctions in general, and the same
mustbeheldapplicablealso to courtauctions,in theabsenceof any law or rule to the con
trary.";StateofPunjabvKishanLai,(1991-92)PLR283wheretheprovisionalacceptance
wasnotapprovedforalongperiodandthebidderwithdrewhisbidandhewasallowed6 per
centinterestonhisearnestmoney.
164. Sotnasundaram Pillai v Provincial Govt of Madras, AIR 1947 Mad 366. Followed in State
ofKeralavA.R.A.S.ArtnughamswamyNadar&Co,1964KLT203;AbdulRahiinKhan
vUnionofhidia,AIR1968Pat433;StateofM.P.vFirmGobardhanDassKailashHath,
(1973)1see668;AIR1973Se1164,whendepositis aconditionprecedentfor theaccept
ance of a tender, the acceptancecannot be treated as valid without the condition being sat
isfied;State ofU.P.VKishoriLai,(1980)3See8; AIR 1980Se680, thehighestbidder,
though heaffixedhissignaturein the bid sheetintokenof hisacceptance,did notdeposit
one-sixth of the bid amount as was required. It was held that no contract resulted.
165. (1969) 3see146: (1970) 2 SCR 594.
166. (1973) 3sec889: (1972) 3 SCR 629: AIR1972SC1242.https://t.me/LawCollegeNotes_Stuffs

201. [S.5] Lapse of offer 65
to abidderbelowtheminimumprice.Itsconfirmationwasstillin the pro
cessthat thebidderagreedto pay theminimum.The departmentaccepted
this and telegraphed its acceptance to the forest officer foronwardtransmis
sionto thebidder.The forestofficerneverreceivedthetelegram.Meanwhile
another person offereda still higher price.The department acceptedthis and
informed the forestofficer,whoreceivedthiscommunicationand passed it
ontothenewbidder.Itwasheldthatnocontracthadbeenmadeonthe
earlier bid. Whatever acceptance hadtakenplacethatwas stillwithinthe
departmentandnotcommunicatedto thebidder.^®^
Theauctioneercan provide themannerinwhichbids can be revoked. In
a case before the SupremeCourt,oneof the auction rules providedthat
"telegraphic bids or telegraphic instructions regarding bidding" will not be
considered.The defendant had made his bid byfillinga bid form at the spot.
Subsequently,before the results were announced, he sent a telegram revok
ing his bid. But the Board accepted his bid. On his refusal to perform, he was
held liable for breach. The SupremeCourtfeltthatthe words "telegraphic
instructionsregardingbidding"were wideenoughto include allkindsof
instructionsaboutbids,includingtheirrevocation.
Atenderwaswithdrawnat the stage whenfinancialbids were still in
sealed cover and the offeree was still to take decision onawardingthe con
tract.On opening of financial bids it was foundthatthepetitionerfirm
wasnotthelowestbidderandnolosswouldhavebeencausedduetowith
drawal.Withdrawalas made before acceptance was complete. Revocation
waspermissibleandthereforeforfeitureofearnestmoney was notproper.^®®
Whereanauctionbid was accepted being thehighestand nofurthercom
municationwasnecessaryandthebidderhadonly todepositmoneyand
subsequentlythe fullpaymentwithinthe specified time, thecourtsaidthat
167. Abidderisboundby thebargainmadeif he hasparticipatedin theauctionwithfullknowl
edge,StateofPunjabvDialChandGianChand& Co, (1983) 2 SCC 503: AIR 1983 SC 743
wherethebidderdidnotdeposit25 per cent of the money, asrequiredby therules,no con
tractaroseevenwhenhis bid wasaccepted.StateofM.P. vFirmGobardhanDassKailash
Nath,(1973) 1 SCC 668; Varghese vDivlForestOfficer,AIR2003Ker 197: (2003) 1 KLT
892,auctiontocollectforestusufructfromtrees incashewplantations.Theauctionwas con
firmed to the bidder. He was notpermittedsubsequentlyto resile from it bysayingthatthe
coststructurehadaltered.ThecourtreferredtoKunjukrishnanvStateofKerala,AIR1983
Ker 73,whereinit was heldthatthefailureto execute aformalagreementis not thecriterion
of aconcludedcontractandto SyedIsrarMasoodvStateofM.P.,(1981) 4 SCC 289:AIR
1981 SC2010,on the basis ofwhichthecourtsaidthatthe very fact ofdepositingearnest
money,participationin theauctionandremittingthedepositon thesameday wererelevant
criteriatoholdthatthecontracthadbeenconcluded.HubliDharwadMunicipalCorpnv
Chandrashekar,AIR2012Kant41,auctionbid,provisionalacceptance,withdrawalbefore
finalacceptance,forfeitureof 50 per cent of theearnestmoneywouldbepenalty.
168. M.LachiaSetty& SonsLtdv CoffeeBoard,(1980)4 SCC 636: AIR 1981 SC 162;Birbadra
SinghPariharvState,2003AIHC980 (MP),conditionsofauctionapplicabletogroup
bidding and auctions appliedsubsequentlyto cases ofindividualbidding also. The same
was held to be binding. The words"successfulbidder ofgroup"would include successful
individualbidderfor a shop.
169.RajuJyrwavUnionofIndia,AIR 2014 Gau 163.https://t.me/LawCollegeNotes_Stuffs

202. 66Chapter.2Acceptance [S.5]
he was not entitled toextensionof time formakingpayment and also not
entitledto refund of his earnestmoney.Wherethe tenderer sought upward
revision of his bid after it had already been accepted, theearnestmoney was
heldtobenotrefundable.^^^
2. Lapse of time
An offer lapses on the expiry of the time, if any, fixed foracceptance.^^^
Where an offer says that it shall remain open for acceptance up to acertain
date, it has to be accepted withinthatdate. It has been suggested by the
Calcutta High Court that in such a case it is enough if the acceptor has
"posted theacceptancebefore the stipulated time",evenif,itreachesthe
offeror after the stipulated date. Thecourtsaid,"thataneffectivedate on
which the option of acceptance isexercisedby a party is to be ascertained
from the date when the acceptance is put in transmission and the letter is
posted".
WhereanofferwastolastuntiltheendofMarchandtheoffereesenta
telegram accepting the offer on 28Marchwhich was receivedby the offeror
on 30March,it was heldthattheoptionwas dulyexercised.^^^
Where an application for admission to aninstitutionhad to be filedwithin
the prescribed time by sending it either by registered post or in person and
thecandidatesent it by registeredpostsome four days before the last date
but itreachedaftertheexpiryof time, it was heldthattheapplicationwas
toolate.'^"*Amajorityoftwojudges were of the viewthatwhere deliverycan
be made in a mode at theoptionof the sender, the agencythroughwhom
delivery is made acts as the agent of the sender,whereasif the delivery is
made in a mode prescribed by the addressee, the agency acts as the agent of
the addressee. In the first case, delivery to the agency is not delivery to the
addressee,but in the later case it is. Thedissentingjudge was of the viewthat
if thecandidateselected one of thetwomodesprescribedby theaddressee,
the prescribed agency, i.e., post office, would be the agent of the addressee.
Whereno time foracceptanceisprescribed,the offer has to beaccepted
withinareasonabletime.Whatis"reasonabletime"willdependuponthe
170. SteelUnionPLtdvCommissionerofCustoms,AIR2009NOC1215Cal;Su/itDasGupta
VSBI,AIR2015Cal246;SARFAESIAct,S.13(6),atanauctionofsecuredasset,successful
bidderdepositedearnestmoney, but didnotdepositfullauctionpricebecausethebankdid
not give himdocumentsas to title of the properly. Thecourtsaidthattherelevantdocuments
could have beenobtainedby exercise ofordinarydiligence. Evenotherwisethebanksells
the secured assets as owner. Bidder's plea wasuntenable.Forfeitureofearnestmoney was
proper.
171.YillayatiRamMittalPLtdvUnionofIndia,(2010) 10 SCC 532.
172. A leaseterminateson theexpiryof itsterm.Itwouldrequirea freshterm.Thelessee's
remaininginpossessiondoesnotrevive the lease by itself.DhonduUndruChoudharyv
GanpatLaiShankarLaiAgarwal,1991 Supp (1) SCC 513: AIR 1991 SC 1037.
173.BrunerVMoore,(1904) 1 Ch305.
174. R. VinothKumarvSecretary,KilpaukMedicalCollege,Madras,1995SCCOnLineMad
78:(1995)ILW351.https://t.me/LawCollegeNotes_Stuffs

203. [S.5] Lapseof offer 67
factsandcircumstancesofeachcase.^^^Thedefinitionof"areasonable
period" is aquestionof factdependingon the surroundingcircumstances
in which the agreementwas made. Where the subject-matter of the contract
is an article, like gold, the prices of which rapidly fluctuate in the market,
veryshortperiod will be regarded as reasonable, but not so in reference to
land. Anofferforsaleofsharesalloweda month in which toaccept,but
both partiesagreedthat areasonableperiodforacceptancewas animplied
term.Theoffereefeltthathecouldnotmakeaninformeddecisionwithin
one-month time and arguedthata reasonable period in this context would
beonethat wouldallowaninformeddecisionas to whethertheacceptance
was in their best financial interest. Thecourtdid not agree with this conten
tion.Theofferwasmadeatanuncertaintime.Yettheoffereewantedthat
he should be allowed to accept after theuncertaintieswere over. This would
be unusual in this type of commercialagreement.^^^
3. By failure to acceptconditionprecedent
Where the offer is subject to a condition precedent, it lapses if it is
accepted without fulfilling the condition. Where a salt lake was offered by
way of lease on deposit of a sum of money within aspecifiedperiod, and the
intended lessee didnotdeposit theamountfor three long years, it was held
thatthisentailedcancellationoftheallotment.^^^
4. Bydeathorinsanityofofferer
An offer lapses on the death or insanity of the offeror, providedthatthe
factcomesto theknowledgeof theoffereebeforehe makes hisacceptance.
InEnglandit was felt at one timethatan offerterminatesat once on the
deathoftheofferor,whetherornotthefacthascometothenoticeofthe
offeree.MelishLJ suggested {obiter) inDickinsonvDodds^^^thatan offer
cannotbe accepted after the death of the offeror. But in an earliercase,^^^
where a creditor continued to act on a guarantee without knowledge of the
surety's death, thecourtpointedoutthatan offer is not necessarily termi
nated with the death of the offeror. It mayremainopen until the offeree
comestoknowofdeath.
Thereis noprovisionin the Actaboutthe effect of thedeathof an offeree.
But as an offer can beacceptedonly by an offereeandnotby anyother
175. Seefurther,Shree JayaMahalCoopHousingSocietyLtdvZenithChemicalWorks (P)
Ltd, AIR 1991 Bora 211, membership of a Society with tenancy rights for shops offered,
response after six months, held too late. SekhsariaExportsv UnionofIndia,AIR2004
Bom 35: (2004) 1MahLJ 415, atenderwhich was notacceptedwithinreasonabletime and
it was revoked by thetenderermuch before itsacceptancecould hot give rise to acontract.
Invocationofbankguaranteewasimproper.
176. Barings vInternationaleNederladenGroupN V, 1995CurrentLaw Year Book 183.
177.StateofW.B.vMahendraChandraDas,(1990)2CalLJ 1.
178.(1876)LR2ChD463,475.
179.BradburyvMorgan,(1862) 1H&C249: 31 LJ Ex 462: 7 LT 104.https://t.me/LawCollegeNotes_Stuffs

204. 68 Chapter 2 Acceptance [S.5]
person, it should not be capableof beingacceptedby theofferee'sexecutor
also}'"
REVOCATION OFACCEPTANCE
Accordingto English law an acceptance once made is irrevocable. In the
words of Anson: "Acceptance is to offerwhata lighted match is to atrain
of gunpowder. Both do something which cannot beundone."^^^Thisruleis
obviouslyconfinedin its operation only to postal acceptance. It is suggested
in Ansonthatinothercases"anacceptance can be revoked at any time
beforeacceptance is complete, provided, of course, that the revocation itself
iscommunicatedbefore theacceptancearrives".^®^
In India, on theotherhand,acceptance is generally revocable. Anacceptor
may cancel his acceptance by a speedier mode ofcommunicationwhich will
reach earlierthanthe acceptance itself. Section 5 is the relevant provision:
Anacceptancemay be revoked at any timebeforethecommunicationofthe
acceptanceiscompleteasagainsttheacceptor,butnotafterwards.
Thusthecommunicationofrevocationshouldreachearlierthanthe
acceptance itself.Whatwill be the result if they reach together. The section
does not make thispointclear. But the onlyillustrationappended to the
section seems to showthatin such a case also theacceptancewill be deemed
tohavebeenrevoked.Theillustrationisasfollows:
"Aproposes, by letter sent by post, to sell his house to B. B accepts the
proposalby a letter sent by post. B may revoke his acceptance at any time
before or at themomentwhenthelettercommunicatingit reaches A, but
notafterwards."
Thatthisshouldbe theprincipleisfurtherborneoutbyCountessof
DunmorevAlexander}^^
Aproposalof service made by a letter was sentthroughan agent. The
agent received the acceptance andforwardedit to theprincipal,but the
principalwas awaythatday. Thenextday the agent received the revo
cationandforwardedit to theprincipal,who received thetwoletters
together.
Therevocationwas held to be effective, thecourtsayingthat"theadmis
sionthatthetwoletterswere receivedtogetherputsan end to thecase."
180. See, forexample,ReynoldsvAtherton,(1921) 125 LT 690,695-96(CA) and theCanadian
caseofIrvine,re,(1928)3DLR268.
181.TheLawofContract{23rdEdn1972by A.G. Guest) 50.
182.Ibid.
183. (1830) 9Shaw190:(1830) 9CourtofSessions190.VadadaGaneswaraRaovMummidisetti
VijayaChamundeswari,AIR2010AP 74,revocationis anindependentcauseofaction
which comes into being at the place from where the notice ofrevocationisdespatched.The
courtsatthatplace would haveterritorialjurisdictiontoentertainsuit forrefundof the
amountcoveredby theagreementof sale.https://t.me/LawCollegeNotes_Stuffs

205. [S. 5] Standardformcontracts69
Jurisdiction
In a suit for recovery of damages on account of breach of contract, the
notice terminating thecontractwas received by theplaintiffat a place in
Hyderabad. It was heldthatapartof the cause of action could be said to
have arisen at that place. The suit filed atthatplace wasmaintainable.^®''
STANDARD FORMCONTRACTS
Exploitationofweakerparty
The law ofcontracthas inrecenttimes to face aproblemwhichis assum
ing new and widedimensions.The problem has arisen out of the modern
"large-scale and widespread" practice of concluding contracts instandard
isedforms.^®^The Life InsuranceCorporationof India, for example, has
to issuethousandsofinsurancecovers everyday.^^®Similarly, the railway
administrationofIndiahas tomakeinnumerablecontractsofcarriage.It
would be difficult for such large-scaleorganisationstodrawup aseparate
contract with every individual. They, therefore, keep printed forms of con
tract. Suchstandardisedcontractscontaina largenumberof terms and con
ditions in "fine print" which restrict and oftenexcludeliability under the
contract.The individual canhardlybargainwith the massiveorganisations
and, therefore, his only function is to accept the offer whether he likes its
termsornot."Hecannotalterthosetermsor evendiscussthem;theyare
thereforhimtotakeorleave.Hethereforedoesnotundertakethelaborious
andprofitlesstask ofdiscoveringwhat the termsare."^®^LordDenningMR
pointed out inThorntonv Shoe Lane Parking
Nocustomerin athousandever read theconditions.If hehadstopped
to do so, he would have missed thetrainor the boat.
Thisgivesa uniqueopportunity to the giant companyto exploitthe weak
ness of the individual by imposing upon him terms which often look like a
kind ofprivatelegislationand whichmaygo to the extent ofexemptingthe
companyfromallliabilityunderthecontract."Thebattleagainstabusehas
fallen to thecourts."Thecourtshave found it very difficult to come to the
rescueof the weaker party particularly where he hassignedthe document.
Insuchcasesthecourtshavebeenconstrainedtoholdthathewillbebound
bythedocumentevenifheneveracquaintedhimselfwithitsterms.Thishas
come to be known as the rule in L' Estrange v F. GraucobLtd.}^^
184. State ofA?v T V Krishna Reddy, AIR 2009 NOC 647 AP, DB.
185. SeeA.J. Kerr, Imposed Terms inStandardForm Contracts,(1981)98SALJ15.
186. SeeL/CvConsumerEducationandResearchCentre,(1995)5 SCC482:AIR1995SC 1811.
187.Towhat extenttheyhaveerodedfreedomof contract, seeF.Kessler,Contract ofAdhesion—
Some Thoughts About Freedom of Contract(1943)43 ColumbiaLR 629.
188. (1971) 2 QB 163 (CA).
189.(1934)2 KB394.https://t.me/LawCollegeNotes_Stuffs

206. 70 Chapter 2Acceptance [S.5]
Mrs Lsignedanagreementwithoutreadingit underwhichshe pur
chasedacigarettevendingmachine.TheagreementexcludedHabiHtyfor
all kindsofdefectin themachine.Themachinewas totallydefective.
Thecourtfoundit asafactthat thesupplierhadmadenoefforttobring
the sweepingexemption term to the notice of Mrs L. Evenso thecourtheld:
"Whereadocumentcontainingcontractualtermsissigned,then, in the
absenceoffraud,ormisrepresentation,the partysigningit is bound, and
it is whollyimmaterialwhetherhe has read thedocumentornot.''^^"The
resultwouldhavebeendifferentiftheplaintiffhad notsigned.
Suchcontractshavebeenvariouslydescribed."ContractsofAdhesion",
whichmeansthat theindividualhas nochoice"but toaccept;hedoesnot
negotiate,butmerelyadheres'^"compulsorycontracts",theybeinga
kind ofimposition;^^^and"privatelegislation",theybeinga kind ofcode
ofbye-lawson thebasisofwhichtheindividualcanenjoytheservices
offered."^
Protectivedevices
Theindividual,therefore,deservestobeprotectedagainstthepossibility
ofexploitationinherentinsuchcontracts.Followingaresomeof themodes
of protectionwhichhavebeenevolvedbythecourts."''
1.Reasonablenotice
Inthefirstplace,itisthedutyofthepersondeliveringadocumenttogive
adequatenoticeto theoffereeof the printed terms andconditions.Where
thisisnotdone,theacceptorwillnot beboundbytheterms.Thiswaslaid
downby theHouseof Lords inHendersonvStevenson}^^
The plaintiff bought a steamer ticket on the face of which were these
wordsonly;"DublintoWhitehaven";on thebackwereprintedcertain
conditionsoneofwhichexcludedtheliabilityofthecompanyforloss.
190.SeethejudgmentofScruttonLJ.SeealsoS.S.Singhvi,SomeReflectionson theProblem
ofAdhesionContracts,AIR(1979)22JournalSection.Consumerlegislationwouldhave
helped despite signature if it had been a consumer sale and not a trade sale.
191. Anson's LawofContract,142 (23rd Edn by A.G. Guest, 1971).
192.Linhoff,ScopeofCompulsoryContractsProper,(1943)43 Col LR 586.
193.LordDenning,Roadto Justice,93.EconomicTransportOrganisationvCharanspg
MillsPLtd,(2010)4SCC114:(2010)88AIC177,theSupremeCourthassuggestedthatall
institutions using this method of contracting should throw out clauses which have become
time-worn and thereforeredundant and inappropriate.
194.Followinglearnedarticlesonthesubjectaresuggestedforstudy:FreedomofContractand
AdhesionContracts,(1965)14InternationalandComparativeLawQuarterly173;Gower,
ExemptionClauses—ContractualandTortiousLiability,(1954)17MLR155;Sales,
StandardFormContracts,(1953)16MLR318;ContractClausesinPinePrint,(1950)63
HarvLRev494;Kesler,AdhesionContracts,(1943)43ColLR329;Reynolds,Warranty,
ConditionandFundamentalTerms,(1963)79LQR534;Linhoff,TheScopeofCompulsory
Contracts Proper,(1943)43 Col LR 586; Chin Nyuk Yin,ExcludingLiabilityin
Contracts,1985.
195.(1875)2 Sc & Div 470:(1875)32 LT 709(HL).https://t.me/LawCollegeNotes_Stuffs

207. [S. 5] Standardformcontracts71
injuryor delay to thepassengeror his luggage. Theplaintiffhadnotseen
the back of the ticket, nor was there anyindicationon the faceaboutthe
conditionson the back. Theplaintiff'sluggage was lost in theshipwreck
caused by the fault of thecompany'sservants.He was heldentitledto
recover his loss from thecompanyin spite of theexemptionclauses.
TheHouseof Lordsobservedthattheplaintiffcouldnotbe said to have
acceptedaterm"whichhe hasnotseen, ofwhichheknewnothing,and
whichisnotin any wayostensiblyconnectedwiththatwhichisprinted
andwrittenuponthe face of thecontractpresentedtohim".Theresult
wouldhavebeenotherwiseifwordslike"Forconditionsseeback"had
beenprintedontheface of thetickettodrawthepassengers'attentionto
the place where theconditionswereprinted.Theprinciplewould,therefore,
seem to bethatwhere awrittendocumentispresentedto apartyfor accept
ance, areasonablysufficient noticemustbe given to him of thepresenceof
termsandconditions.Noticewill beregardedassufficientif it will"convey
tothemindsofpeopleingeneralthattheticketcontainsconditions".This
was clearlyrecognisedin thesubsequentcase ofParkervSouthEastern
Railway
Theplaintiffdeposited his bag at thecloakroomat a railwaystation
and received a ticket. On the face of theticketwereprinted,amongother
things,thewords,"seeback"and on the backtherewas a noticethat
"thecompanywill not beresponsiblefor any packageexceedingthe value
of £ 10". A notice to the same effect was also hung up in thecloakroom.
Theplaintiff'sbag was lost and he claimed the full value of his bag which
was morethan£ 10. Thecompanyreliedupontheexemptionclause. The
plaintiffcontendedthatalthoughhe knew there was somewritingon the
ticket,he didnotseewhatit was as hethoughtthattheticketwas a mere
receipt for the money paid by him.
MellishLJpointedoutthatif theplaintiff"knewthere waswritingori
the ticket, but he did notknowor believethatthewritingcontainedcondi
tions, nevertheless hewouldbebound",for there wasreasonablenoticethat
thewritingcontainedconditions.
Where,on theotherhand,a folded upticketwashandedover to a pas
senger and theconditionsprintedon it were alsoobliteratedinpartby a
stamp in redink"'^and where in another case, the words on a ticket, "For
conditionsseeback",wereobliteratedby the date stamp,"® it was held in
either casethatnopropernotice of the terms had been given.
196.(1877)LR2CPD416(CA).
197.Richardson,Spence & CoandLordGoughSS Co vRwntree,1894 AC 217(HL).
198. Sugar vLondonMidland& Scottish Rly Co,(1941)1AllER 172. For comments see Turpin:
ContractandImposedTerms, (1956) 73 SouthAfricanLawJournal144 at p. 154. A con
signment note signed neither by the consignor nor consignee and containing a clause on the
back excluding the jurisdiction of all the courts except one was held not binding. There was
no proper notification, Road Transport Corpn v Kirloskar Bros Ltd, AIR 1981 Bom 299. Ahttps://t.me/LawCollegeNotes_Stuffs

208. 72Chapter2Acceptance [S.5]
The principle has been cited with approval by theCalcuttaHighCourt
in twocases"'and was applied by it inMackillicanvCompagnieDes
MessageriesMaritimesdeFrance.^""
The plaintiff accepteda steamer ticket containing conditions printed in
the French language. He claimed that he was not bound by them, being
unabletoreadFrench.
Rejecting this contention,GarthCJ said: "Although he may not under
stand French, he was a man ofbusinesscontracting with a French company,
whose tickets he knew very well were written in the French language. He
had ample time and means to get the tickets explained andtranslatedto him
before he went on board; and it very plainly disclosed upon thefaceof it
that the conditions endorsed were those upon which the defendants agreed
to carry him." "Similarly, it has been heldthatwhere reasonably sufficient
notice ofexistenceof the terms isgiven,it would be nodefenceto say that
theplaintiffwasilliterateorotherwiseunabletoread."^°i
Differencebetweencontractual documents andreceipts,etc.
In the application of thisprinciplethe courts have had to distinguish
between two kinds of documents, namely,contractualdocuments and
mere receipts and vouchers.EmphasisingthisdistinctioninParkervSouth
Eastern RailwayCo^°^MellishLJ said: "I think there may be cases in
which a paper containing writing isdeliveredby one party to another in
the course of abusinesstransaction, where it would be quite reasonable
that the partyreceivingit shouldassumethat the writing contained in it no
condition,andshouldput it in hispocketunread.Forinstance,if a person
drivingthrough aturnpike-gatereceiveda ticket uponpayingthe toll, he
mightreasonablyassumethat the object of the ticket was that by produc
ing it he might be free from paying toll at some other turnpike-gate, and
mightput it in hispocketunread.On the otherhand, if apersonwhoships
goodsto becarriedon avoyagebyseareceivesa billof ladingsignedbythe
master, he would plainly be bound by it, although afterwards in an action
against the shipowner for the loss of the goods, he might swear that he had
never read the bill of lading andthathe did not knowthatitcontainedthe
terms of thecontractofcarriage."Adocumentis said to becontractualif it
embodiesthe contract, that is tosay,if the persons to whom it isdelivered
shouldknowthat it issupposedto containconditions.Butwherethe paper
isnotsupposedtoexpresstheconditionsofthecontract,it willberegarded
lotteryticketcontainingat thebacksmallprintas tojurisdiction,held,notbinding,Goi^tof
^RajasthanvVenkataramanaSeshiyer, AIR 1984 AP 5.
199.MadrasRailwayCovGovindaRau,ILR(1898)21Mad172,174;SkDawoodvS.I.RlyCo
Ltd,ILR1945Mad194,178.
200.ILR (1881) 6Cal227 at p. 234.
201.Thompsonv London, Midland & ScottishRly Co,(1930)1KB41(CA).For a criticismof
thisdecisionseeWinfield,SomeAspectsof OfferandAcceptance,(1939)55 LQR499,518.
202.(1877) LR 2 CPD 416 (CA).https://t.me/LawCollegeNotes_Stuffs

209. [S. 5] Standardformcontracts73
as a merevoucheretc.,andextracarewill have to betakentocommunicate
its termsthanmerewarningon the face. A goodillustrationisChapeltonv
BarryUDC-?°'
Theplaintiffwent on to a beach and hired two chairs from a pile of
deck chairs belonging to the defendant Council. He received two tickets
from theattendant,glanced at them, and slipped them into his pocket.
While he was sitting on one of the chairs, he had themisfortuneto go
through the canvas with the result that he sufferedinjury. Ticketscarried
the words:"TheCouncilwill not beUablefor anyaccidentordamage
arising from hire of chairs." He said that he had no ideathatthere were
any conditions on these tickets andthathe did not know anything about
whatwas onthebackofthem.TheCouncilwasheldliablefor hisinjury.
SlesserLJ said:"Inmy opinion, this ticket is no morethana receipt,
and is quite different from a railway ticket which contains upon it the terms
upon which a railway company agreesto carry thepassenger."The object of
the ticket wasthatthe person taking it might have evidencethathe had paid
the hire and the termprintedon it was nopartof thecontract.
In suchcases.LordDenningMR pictorially remarked inThorntonv
Shoe Lane Parking "In order togivesufficientnotice, it would need
to be printed in red ink with a red hand pointing to it, or somethingequally
startling." If this is not done, the condition would not formpartof the con
tract.Thefactsofthecasewere:
The plaintiff parked his car in an automatic car park. A notice at the
entrance stated: "Cars parked at the owner's risk". The plaintiff slipped
the moneyinto a machinewhich brought forth a ticket. The barrier at the
gate was then automatically raised and the plaintiff parked in his car. He
looked at the ticket to see the time ofparking,and noticed someother
words, but did not pay further attention to them. These words drew the
attention of.the customer to a poster inside the garage which displayed
the conditions one of which excluded liability for any injury to the car or
customer. While taking back his car, the plaintiff was injured, for which
he brought an action and thedefendantssought the protection of the
exemptionclause.
But they were heldliable."Theexemptingcondition is so wide and so
destructiveof rights that the court should not hold any man bound by it
unlessit isdrawnto hisattentionin themostexplicitway."
A lorryloadofwhiskywasdeliveredtowarehouse-keepersunder adeliv
ery notewhichstated that theywouldbeliablefor anylossof thegoods.
Thewarehouse-keepersstamped thedeliverynote onreceivingthe goods
and this carried a condition limiting their liability to£800per ton. The
203.(1940)1 KB532(CA).
204.(1971) 2 QB 163 (CA).https://t.me/LawCollegeNotes_Stuffs

210. 74 Ghapter 2Acceptance [S.5]
goodswerelost bytheft and thequestionaroseas towhosetermsgoverned
the contract. The court said that thewarehouse-keepers'conditionswere
incorporatedintothecontractandnotthoseof theownerandthereforethe
habiHtywas limited to£800per ton subject to further reduction for the
bottleswhichwererecoveredafterthetheft.^®^
Themereexistenceof aclausein aconsignmentnoterestrictingjurisdic
tion to onecourt onlywasheldto benotcapableofbindingthe other party.
The term, beingtoo serious, required specialnotification.^"®The court cited
the following passage fromChittyonContracts:^°^
"Thedocumentmust be of aclasswhicheitherthe partyreceivingit
knows, or which areasonableman would expect, to contain contractual
conditions. Thus acheque-book,^"^a ticket for adeck-chair,^"'a ticket
handedto apersonat apublicbathhouse,andaparking-ticketissued
by anautomaticmachine^"have been held to be caseswhereitwouldbe
quitereasonablethat thepartyreceivingitshouldassumethat thewriting
contained no conditionsand should be put in his pocket unread."
LordDenning MR inGeorgeMitchell(Chesterhall)Ltd vFinneyLock
SeedsLtd^^^observed:
"Theclausewasnotnegotiatedbetweenpersonsofequalbargaining
power.It wasinsertedbytheseedmerchantsin theirinvoiceswithoutany
negotiationswiththefarmers."
Exhibitednoticescanbecomea part ofthecontractiftheyaredisplayed
soprominentlyas to bring themhometo the other partybeforeor at the
timeofcontracting.Thus,whereareceiptissuedfor adepositshowedthat
it wassubjectto theconditionsexhibitedon thepremisesand thenotices
weredisplayedin prominentplacesin thepremises,that was held to be a
reasonablysufficientnotice.^"
Contractsigned byacceptor
Wherea written contract issignedby the partyaccepting,hebecomes
boundbyallitsterms,whetherhehasreadit ornot."Inanordinarycase,
whereanactionisbroughton awrittenagreementwhichissignedbythe
defendant,theagreementisprovedbyprovinghissignature,and, in the
205.BritishRoadServicesLtdvArthurV.Crutchley& CoLtd,(1968)1AllER811(CA).
206.RoadTransportOrganisationofIndiavBarunaiPowerloomWeavers'CoopSocietyLtd
(1997)84CutLT 174.
207. 313, para 677,VolII (24th Edn, 1977).
208. Burnett v WestminsterBank Ltd,(1966)1 QB 742:(1965)3WLR683.
209. Chapelton v Barry UDC,(1940)1 KB532(CA).
210. Taylor v GlasgowC.orpn,1952 SC440(Scotland).
211. Thornton v ShoeLane ParkingLtd,(1971)2 QB163(CA).
212.1983QB284(CA).
213. Watkins v Rymill,(1883)LR 10 QBD 178 (DC).https://t.me/LawCollegeNotes_Stuffs

211. [S. 5] Standardformcontracts75
absence of fraud, it is whollyimmaterialthathe has not read the agreement
anddoesnotknowitscontents."^"
This principle was laiddowninL'Estrangev F.Graucob and has
alreadybeen noted. But even in cases likethis,theaffectedpartycan be
protectedby thedoctrineoffundamentalbreachor by findingthatthe terms
areunreasonableorthattherewasmisrepresentationaboutthem. The for
mer two modes ofprotectionwill benotedsubsequently,the effect of mis
representationmay beillustratedhere.TheleadingauthorityisCurtisv
ChemicalCleaning&DyeingCo.^^^
Theplaintiffdelivered a whitesatinweddingdress to thedefendants
for cleaning.Onbeing asked to sign a receipt, sheinquiredwhy she was
to sign it and was toldthatshe was totakeresponsibilityfor anydamage
to beads and sequins. Theplaintiffthensigned the receiptwithoutread
ing it. The receipt, in fact,containedaconditionexcludingliabilityfor
anydamagehowsoevercaused.Whenthe dress wasreturnedtherewas a
stainon it. To theplaintiff'saction for damages, the cleaners pleaded the
exemptionclause.
But they were held liable. LordDenningMRsaid:"Inthose circum
stances by failing to draw theattentionto thewidthof the exemption clause,
theassistantcreated the false impressionthatthe exemptiononlyrelated to
beads and sequins, andthatit did not extend to thematerialof which the
dress wasmade,"andthiswassufficienttodisentitlethemfromrelyingon
theexemptionclause.
In aCanadiancase,^^^avendorfraudulentlymisrepresentedthecapacity
of a boiler. He was held liable in damages for the fraud, despite the presence
of an exemption clause. "Apartyto acontractcannotrely on an exclusion
clause to avoidliabilityforfraud."
Where astatementaccompanies the delivery of adocument,an oral
assurance may prevail overwhatthedocumentprovides.
Apersonparked his car in a garage. Theattendanttold him not to lock
thecar.Hetoldtheattendantthattherewerevaluablearticlesinthecar.
Theattendanttold himthathewouldlock itaftermoving it to theproper
place. The briefcasecontainingvaluables was stolen.Thoughthe garage
owner had excluded liability for the loss of the contents of a car, he was
held liable. Theattendantsin such cases get anapparentauthorityto give
214. PerMellishLJ inParkerv SouthEasternRailway.Co,(1877)LR 2 CPD 416 (CA). This
statement was relied upon bySubramaniaAyyarJ inMadrasRailway Co vGovindaRau,
ILR(1898)21Mad172, 174;GautamConstructions& FisheriesLtdvNationalBank for
Agriculture and Rural Development, (2000) 6 SCC 519: AIR 2000 SC 3018, arbitrators and
courtsmustadheretocontractterms. Thecourtdid not approveinterferencein rates for
constructionandtheinterestrate.
215.(1934)2 KB394.
216.(1951)1 KB805.
217.ChauVVan Pelt,(1977)74DLR{3d)244(BCSC).https://t.me/LawCollegeNotes_Stuffs

212. 76Chapter2Acceptance [S. 5]
assurances about the safety of thevehiclesand garage users could rely on
theassurance.^^^
The modern development in this connection is reflected byAmerican
RestatementsofContracts.[S. 11,Part13]Therulestatedisthatwhen
the otherpartyhas reason tobelievethat the party manifesting written
assent would not do so if he knewthatthe writing contained aparticular
term; the term is not apartof the agreement. "Reason tobelieve"may be
inferred from the factthatthe term is bizarre or oppressive, or from the fact
that it eliminates the dominant purpose of the transaction. An application
of thisprincipleisexemplifiedby TildenRent-A-Car vClendenning.^^^The
plaintiffsigneda motor car insurance document which carried a warning
on the face that no liability would arise if the provisionswere not observed.
On the back there were terms in fine and faint print one of which was that
there would be no liability if the driver had taken any drink. The driver who
caused the accident testified that though he had consumed some alcohol,
he was not intoxicated and was capable of controlling thevehicle.Holding
the company to be liable, thecourtsaid that a signature can be relied on as
manifestingassentto adocumentwhenit isreasonablefor the partyrelying
on the signed document tobelievethatthe signer really did assent to its
contents.Hencethe plaintiffwas not bound byunusual and onerousprinted
termswhichwerenotdrawntohisattention.
Noticeofunusualterms
Another example isInterfotoPicture Library Ltd v Stiletto Visual
ProgrammesLtd.^^°Thedefendants,anadvertisingagency,required pho
tographsfor a1950'spresentation.Theplaintiffsdispatched47 transparen
cieswitha delivery notewhichstatedthatthe same were to bereturnedin
14 days and that a holdingfeeof £5 per day for each transparency would
be charged if they were not soreturned.The defendants did not use the
transparencies, put them to one side and forgot about them for afurther
twoweeks.Totheirutterandconsiderableconsternationaninvoicearrived
for £3783holdingfee.The court said thatwhereaconditionis particularly
onerous or unusual, the party seekingto enforce it has to show that a clear,
fair and reasonable effort was made to bring it to the attention of the other
party.Thecondition,in this case, wasunreasonableandextortionateand
had not beensufficientlybrought to the defendant's attention, it did not
formpartof thecontract.
In anothercase,^^^the party was sent two apparently similardocuments
forcounter-signature,and one forreturnto the sender hadadditionalclauses
218. Mendelsohn v Normand Ltd,(1970)1 QB 177;]. Evans & Son{Portsmouth)Ltd v Andrea
Merzario Ltd,(1976)1WLR1078,repugnancybetweenoral statementand printed terms,
the former prevailed.
219. (1978) 83DLR(3d)400'(0ntCA).
220.1989 QB 433: (1988) 2WLR615 (CA).
221.HarveyvVentilatorenfabrikOeledge, Financial Times, Nov 11, 1988 (CA).https://t.me/LawCollegeNotes_Stuffs

213. [S. 5] Standardformcontracts77
on thereverseside which were written in aforeignlanguage and to which
the other party's attentionhad notbeendrawn in anyway.That party was
held to be not bound by those termseventhough hesignedand returned
thosedocuments.
ThesecasesshowtheimportanceoftheremarkofDenningLJinSpruling
(J.)LtdVBradshaw^^^to the effectthat:
"The morestartlinga clause is, the greater the notice which must be
given of it. Some clauses would need to be printed in red ink with a red
handpointingto it before the notice could be held to be sufficient."
The court attached equalimportance to the viewofthe matter asexpressed
byMegawLJinThorntonv Shoe Lane ParkingLtd-?^^
Whenaparticularconditionrelied on involves asortofrestriction
which is not usual inthatclass ofcontracts,adefendantmust showthat
his intention to attach an unusual condition ofthatparticularnaturewas
fairly brought to the notice of the other party. How much is required
dependsuponthenatureof therestrictivecondition.
In addition to this the courts are also under thestatutoryduty to consider
reasonableness of the clause in the light of thecircumstanceswhich were
known or which should have been known at the time ofcontracting.^^''
2. Notice should becontemporaneouswithcontract
Secondly, notice of the terms should be given before or at the time of the
contract.Asubsequentnotificationwillindeedamountto amodificationof
the originalcontractand will not bind theotherpartyunless he has assented
thereto. A man and his wife hired a room in a hotel and paid a week's rent
in advance.Whenthey went up to occupy theroomthere was anoticeon
one of the walls to the effectthat:"Theproprietorswill not hold themselves
responsiblefor articles lost or stolen, unlesshandedto themanagersfor safe
custody."Theirpropertyhaving been stolenowingto the negligence of the
hotelstaff,thedefendantswereheldliableasthecourtheldthatthenotice
was not apartof theagreement.^^^
Wherethemakingof acontractissymbolisedby the issue of aticketby
anautomaticmachine,thequestionariseswhetherthenoticeprintedonthe
tickethas been givencontemporaneouslywiththecontractorsubsequent
to it. Thisaspectof thematterwasconsideredby LordDenningMRin
Thorntonv ShoeLaneParkingLtd.^^^In the case ofticketsissued by clerks
thetheoryisthatthecompanymakesthe offer of theticketandthe cus
tomerby paying for theticketwithoutobjectionaccepts itwithall its terms.
222.(1956)1WLR461(CA).
223.(1971)2 QB 163 (CA).
224. The duty isundertheUnfairContractTerms Act,1977(UK). SeeElizabethMacDonald,The
Duty to GiveNotice of Unusual Contractual Terms, 1988JBL375.
225.OlleyvMarlboroughCourtLtd,(1949)1 KB 532 (CA).
226.(1971) 2 QB 163 (CA).https://t.me/LawCollegeNotes_Stuffs

214. 78Chapter2Acceptance [S. 5]
He has a chance ofrejectingthe ticket. But where theticketis issued by an
automaticmachine,thecustomercannotrefuse it. Hecannotget back his
money. He iscommittedbeyond recall at the verymomentwhenhe puts his
money into themachine.Theinstallationof themachineasreadyto receive
themoneyis an offerandtheconductofthecustomerinputtinghismoney
into the slot is an acceptance. Thecontractis then made. The terms of the
offer arecontainedin the notice placed on ornearthemachine.The cus
tomerisboundby thosetermsif they are sufficientlybroughtto his notice
beforehand,but nototherwise.He is notboundby thetermsprintedon the
ticketif they differ from the notice, because theticketcomes too late. The
contracthasalreadybeen made. Theticketis no morethana merevoucher
or receipt for the money. Applying theseprinciplesto the facts, hisLordship
said:
In thepresentcase the offer wascontainedin the notice at theentrance
giving thechargesforgaragingand saying'atowner'srisk'. The offer
wasacceptedwhentheplaintiffdrove up to theentrance...andtheticket
wasthrustathim.Thecontractwasthenconcluded,anditcouldnotbe
alteredby anywordsprintedon theticketitself.
Thus it is thedutyof thepartyrelying on an exclusion clause tomakeit
clear to the other at the time of thecontractthatthe same isincorporated
intothecontract.
A vehicle was offered for sale at anauction;theauctionconditions,
advertised by posters in the auction room, excluded all rights of buyer
toreturnthe vehicle or claim damages. The vehicle failed to reach the
reserve price. The auction ended. It was thenboughtby apersonby pri
vatenegotiation.The vehicle broke downalmostimmediately. The buyer
returnedit and stopped the payment of the cheque for the price. The seller
sued him for the price.
Thecourtdelivered a judgment for the buyer. Thevehiclewas not of
merchantablequality. It waspurchasedat a private sale where the seller did
not point out to the buyerthatthe auction conditions would be applicable.
Imputednotice
The court said in the case of an e-ticket for contract of carriage of pas
sengers,there is the possibility of the passenger not having read thecontract
or not demanding a copy of thecontractand even if aparticularterm is
not within the knowledge of thepassenger,it could not be ignored. The
passengerwouldbeboundby the terms of thecontract.Thetermrelatedto
exclusivejurisdictionofcourtsat Delhi. Suchtermcould not beallowedto
beignored.^^^
227.Inter-GlobeAviation Ltd v NSachidanand,(2011)7 SCC 463: (2011) 104AIC101. The
court conceded that the Lok Adalat at Hyderabad too had jurisdiction because the passenger
having beendetainedthere, apartof the cause ofactionarose there.https://t.me/LawCollegeNotes_Stuffs

215. [S. 5] Standardformcontracts79
3.Theoryoffundamentalbreach
Thethirdmethodisthedoctrineoffundamentalbreach.It is amethod
ofcontrollingunreasonableconsequencesofwideandsweepingexemp
tion clauses. Even where adequate notice of the terms andconditionsin a
documenthasbeengiven,the partyimposingtheconditionsmay not be
able torelyon them if he hascommitteda breach of thecontractwhich
can be described as "fundamental". The rule has been thus stated by Lord
Denning
These exempting clauses are now a days all held to be subject to the
overridingprovisothatthey only avail to exempt apartywhen he is car
rying out his contract, not when he is deviating from it or is guilty of a
breach which goesto the root of it. Just as apartywho is guilty of a rad
ical breach is disentitled from insisting on the further performance by the
other, so too he is disentitled from relyingon an exemptingclause.
An easyillustrationis to be found in cases where goods different from
those contracted aredelivered.For example, a car was sold on "as is" basis
andwithoutanywarrantyorguaranteewhatever. Even so the seller was
heldliable whenfivedays later the engine of the car blew up. It was not
a "car" which wasdelivered.Hence thecontractwas fundamentally bro-
ken.^^^If the car had shown any other defectwhich a used car is toevery
body'sknowledgelikely todevelop,such as, for example, a transmission
problem, it would not have been regarded as afundamentalbreach.^^°
"Core"ofcontract
Whatconstitutesfundamentalbreach? "Everycontractcontainsa
'core'^^^or fundamental obligation which must be performed. If oneparty
fails to perform this fundamental obligation, he will be guilty of a breach of
thecontractwhether or not any exempting clause has been inserted which
purportstoprotecthim."^^^This may beillustratedwiththe facts ofDavies
VCollins-P^
Theplaintiffentrustedto a dyer and cleaner auniformfor cleaning.
Onthedocketgiven tohimwhenhehandedover theuniformwerethe
following clauses:"Whilstevery care is exercised in cleaning and dye
inggarments,allordersareacceptedatowner'srisk entirely and we are
228./.SpurlingLtdvBradshaw,(1956) 1 WLR 461, 465. See also the decision of the Supreme
Courtin B.V.NagarajuvOrientalInsuranceCoLtd,(1996) 4 SCC 674: AIR1996SC2054,
explainingfundamentalbreach.
229.FindlayvCouldwell,(1976) 69DLR(39) 320(Canada).
230. Peters vParkwayMercurySalesLtd,(1975) 10 NBR (2d) 703 (SC App Div).
231. Per LordGreeneMR inAldersladevHendonLaundryLtd,(1945) 1 KB 189, 193 (CA).
232.See A.G.Guest,FundamentalBreachofContract,(1961) 77LQR98, 99. See also L.W.
Melville,The CoreofaContract,(1956) 19MLR26; L.J.Montrose,SomeProblemsAbout
FundamentalTerms,(1964)CambLJ 60, 64.
233.(1945) 1 All ER 247, seeLordGreeneMRat p. 249.https://t.me/LawCollegeNotes_Stuffs

216. 80 Chapter 2Acceptance [S.5]
unable to holdourselvesresponsiblefor damage, shrinkage, colour or
defectsdevelopedinnecessaryhandling.The proprietor's liabilityfor loss
is limited to an amount not exceedingten times the cost of cleaning." The
defendantsent theuniformto be cleaned by asub-contractoranditw^as
never returned. The plaintiff claimed the full value of the uniform.
It was heldthatthe mere fact of theparticularlimitation clause in the
contractwas sufficient to exclude any right tosub-contracttheperformance
of thesubstanceof thecontract.Limitationclauses ofthiskinddonotapply
where the goods are lost not within the four corners of the contract but
while something was beingdone which was outside the terms of the contract
ahogether, or when loss takes place in the course of some operation which
wasnevercontemplatedby the contract at all. In Alderslade v Hendon
Laundry on the other hand, the plaintiff's handkerchiefs were lost in
the laundry itselfand, therefore, the exemption clauseeffectivelylimited the
defendant's liability to twenty times the charge made for laundering.
AnotherillustrationoffundamentalbreachisAlexandervRailway
Executive?^^
On depositing his luggage at the parcelofficeof a railway station, pay
ing ordinary rates, the plaintiffreceiveda ticket containing conditions
one of which exempted the defendants from liability for misdelivery or
loss of any article exceeding £5 in value unless a special charge for the
same was paid. The defendants allowed the plaintiff's friend to take away
the luggage and in an action by the plaintiff relied on the above exemp
tionclause.
But it was heldthat"an essentialpartof the executive's duty was to take
care of the deposited goods;thatthey had committed afundamentalbreach
of thecontractin allowing anunauthorisedperson to have access to the
goods and to take them away and, therefore, they could not rely on the
exemption clause to shield them from liability."
Departurefrommainpurpose
In the following two cases, however, the bailees were heldnotliable as
thecourtdidnotfind anyfundamentaldeparturefrom themainpurport
of thecontract.OneofthemisGibaudvGreatEasternRly Herea
cycle deposited at astationof thedefendant-railwaycompany was not in
facttakento thecloakroom,but was left in thebookinghall itselfandfrom
there it was stolen, thecompanywas held to beprotectedby the clause in
theticketwhichexemptedthecompanyfrom liability. TheCourtofAppeal
could find nofundamentalbreach as it was nopartof thecontractthatthe
cycleshouldbe necessarilystoredin thecloakroom.
234.(1945)1 KB189(CA).
235.(1951)2 KB882.
236.(1921)2 KB426(CA).https://t.me/LawCollegeNotes_Stuffs

217. [S. 5] Standardformcontracts81
The other caseis Hollins vJ. DaveyLtd.^^'^The plaintiff's car was garaged
at the defendants' garage. One of the conditions of the contract exempted
the defendant from loss ormisdelivery.One of the plaintiff's former serv
ants called at the garage and successfullypersuadedtheattendantto deliver
the car to him telling himthathe had been authorised by the plaintiff. The
defendantswereheldnotliable.Theattendantmadetheinnocentmistakein
believing in theholdingout by theservant.But if theattendanthad delivered
the car to a completestranger,therewouldhave beenfundamentalbreach.
Ruleofconstruction
Theresultsofthesecaseshavebeenvariablebecauseitseemsthatthe
theory offundamentalbreach is not anindependentrule of law, but is only a
rule of construction. A rule of law operates irrespective of theparties'inten
tions. But a rule ofconstructionis one of themethodsofascertainingthe
parties'intention.Thisapproachwas"mostclearly andaccurately"enun
ciated byPearsonLJ in U.G.S.FinanceLtdvNationalMortgage Bankof
Greece, HisLordshipsaid;
As to thequestionof'fundamental breach',...thereis a rule of con
structionthatnormally an exception or exclusion clause or a similar pro
vision in acontractshould beconstruedasnotapplying to asituation
created by a fundamental breach of contract. This is not an independent
rule of law imposed by the courts on the parties willy-nilly in disregard
to theircontractualintention. On thecontrary,it is a rule ofconstruction
based on thepresumedintentionof thecontractingparties.It involves
theimplicationof a term to give to thecontractthatbusiness efficacy
whichthepartiesreasonablymusthaveintendedit to have.Thisruleof
constructionis not new in principle but it has becomeprominentin recent
years inconsequenceof thetendencyto havestandardforms ofcontract
containingexception clausesdrawninextravagantlywide terms, which
would haveproducedabsurd results if applied literally.
This passage was citedwithapprovalby theHouseof Lords in Suisse
AtlantiqueSocieteD'ArmementS.A. vN.V.RotterdamscheKolen
CentraleP' casepilot
Thedefendantscharteredtheplaintiff'sship forcarriageof coal from
theUnitedStates toEuropefortwoyears.Thecontractsetouttherates
of loading and also providedthatin case of any delay in loading the
defendantswouldhave to paydemurrageat the rate of onethousanddol
lars a day. The defendants caused delays for which the plaintiffs claimed
thatthecontractwasrepudiatedbut nevertheless,withoutprejudice to
237.(1963)1 QB844:(1963)2WLR201.
238.(1964) 1 Lloyd's Rep446,453.
239.(1967)1 AC361:(1966)2WLR944(HL).
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218. 82Chapter2Acceptance [S. 5]
their rights, allowedthe defendants to use the ship. At the end of the term
they claimed damages for the delays in excess of the demurrage clause.
TheHouseofLordsheldthattherewasnofundamentalbreach.The
defendants were guilty of conduct which entitled the plaintiffs to repudiate
the contract, but they, in fact, affirmed it. Thecontractremained in force
including the demurrage clause. Moreover, the demurrage clause was not
an exception or limiting clause;it only stipulated liability for breach of con
tractand, therefore, the principle offundamentalbreach was not applicable.
But even so their Lordships explained (obiter) the meaning offundamental
breach or a breach going to therootof thecontract."These expressions",
observed LordWilberforce,"areused in the cases to denote two quite dif
ferent things, namely:(/)aperformancetotallydifferent fromthatwhich the
contractcontemplates,(n)a breach ofcontractmore seriousthanone which
would entitle the otherpartymerely to damages and which (at least) would
entitle him to refuseperformanceorfurtherperformanceof thecontract."
His Lordship then explained that iffundamentalor total breach means a
departurefrom the contract, the question will arise how great adeparture
and if it means supply of a different thing, the question will be how differ
ent? And added:"Noformulawill solve this type ofquestion,andonemust
look individually at thenatureof thecontract,thecharacterof the breach
and its effect on future performance andexpectationand make a judicial
estimationofthefinalresult."
Theseobservationsof theHouseof Lords on thequestionoffundamental
breach being in the nature ofobiterdicta, it left theCourtof Appeal free to
reconsider the question. Thisopportunitycame inHarbutt's"Plasticine"
LtdVWayne Tank & Pump CoLtd.^'*°
Thedefendantsagreedwiththeplaintiffto design andinstallequip
ment for storing and dispensing stearine in a molten state at their factory.
The defendants specified durapipe, a form of plastic pipe. In fact this was
whollyunsuitablefor thepurpose.Itburstat the very firsttestingleading
to a firewhichdestroyed the factory. Thedefendantshadlimitedtheirlia
bility under thecontractfor any accident, etc., to£2330.Theplaintiff's
losswasmuchgreater.
TheCourtof Appeal heldthatthe defendants wereguihyoffundamental
breachand,therefore,they couldnotavail of thelimitationclause and were
liable for the cost ofreinstatingthe factory. Thecourtpointedoutthatone
must look not merely at the quality of the breach but also at its results. If the
resultofbreachis thetotaldestructionof thesubject-matterof thecontract
(factory in this case) then thecontractisautomaticallyat an end alongwith
all its exception clauses. LordDenningMRconsidered the effect of the
decision of theHouseofLordsin the SuisseAtlantiqueSocieteD'Armement
240.(1970) 1 QB 447: (1970) 2WLR198 (CA).https://t.me/LawCollegeNotes_Stuffs

219. [S.5] Standardformcontracts83
S.A.VN.V.RotterdamscheKolenCentrale^'*^and theirLordships'emphasis
upontheruleofconstruction,andremarked:^''^
So,in the nameofconstruction,weget backto theprinciplethat, when
a company inserts in printed conditions an exception clausepurportingto
exemptthem from all and everybreach, that isnot readily to be construed
or considered as exempting them from liability for afundamentalbreach;
for the good reason that it is onlyintendedtoavailthem when they are
carryingout the contract insubstance;and not when they arebreaching
it in amannerwhich goes to the veryrootof thecontract.^"*^
The contrast between the Suisse Atlantique case and this case is that
though in each the defendant had limited his liability under the contract,
that is, in theSuisseAtlantique caseliabilityfordelaywas £ 1000 a day and
in this case £2330 for anyaccidentaldamage, in the former thedelaydid
not operate as a fundamental breach, but in the latter the supply of unsuita
blematerialdestroyed the verysubstratumof thecontract.
Thatthese two cases were not contradictory, but reconcilable,further
appears from the judgment ofDonaldsonJ in Kenyan Son & CravenLtd
VBarterHoare&CoLtd.^'''*
The plaintiff stored in the defendant's warehouse 250 tons of ground
nuts packed in bags. The warehouse was suitable for the purpose and
wasotherwisealsostructurallysound.Thedefendantshad excludedtheir
liability for any loss or damage unless it was due to the wilful neglect or
default of the company or its own servants. Thewarehousewas not, how
ever,rat-proofand thegroundnutswere badly damaged by rats.
DonaldsonJreferredtothreecategories of cases inwhichthe rule of
fundamentalbreach has been applied as stated by LordWilberforcein the
SuisseAtlantiquecase. They are:[i)Supply of a different article;{ii)Hire-
purchase cases;and(iii)Mairinecasesrelating to deviation. The learned judge
then statedthattheCourtof Appeal considered theHarbutt's"Plasticine"
case as one ofdeviationfrom themainpurposeof thecontract."Thebreach
found consisted of the design, supply and thecreationof a system or instal
lationthatwas wholly unsuitable for itspurpose."
Comingto the facts of thepresentcase, thelearnedjudge foundthatthe
case didnotfall in any of LordWilberforce'scategories.He said:"Had
thedefendantsstoredthese nuts in theopenor in an areawhichwasprohib
ited by thecontractorhadtheyevenstoredthemin awarehousewhichwas
structurallyor byreasonof itsothercontentssounsuitedto suchstorageas
241.(1967)1 AC361:{1966)2WLR944(HL).
242.(1970) 1 All ER at pp.235-36;seeMalcolmClark,FundamentalBreachisDead!Long
Live...TheKuleAgainstAbsurdity,(1984)CambLJ 32.
243. For anappreciationof thisdecisionseeProfessorBrianCoote,TheEffectofDischargeby
BreachonExceptionClauses,(1970)CambLJ221.
244.(1971)1WLR519.https://t.me/LawCollegeNotes_Stuffs

220. 84 Chapter 2Acceptance [S.5]
todestroythewholecontractual substratum of the contract, then none of
the defendant's conditions would have applied. That was not, however, the
position.Thewarehouseitself,although not perfect andthereforerequir
ingspecialvigilanceagainstinfiltrationbyrats, wasnotunsuitableand the
other goods stored there caused no damage to thenuts.^''^
It has been laid down by the Court ofAppeaP"*^that where the goods are
lost from the custodyof a bailee (acarpet-cleanerin thiscase)fundamental
breachwould bepresumedunless he accountsfor theloss.The baileemust
show that the loss had not occurred in consequence of afundamentalbreach
on his part sincehe is in a better positionthan the bailor to know what had
happened to the goods while they were in hispossession.Sincethe cleaner
could notaccountfor the loss he was notpermittedto rely upon a clause
by which he had hmited his liability to anegligiblefigure.LordDenning
went to the extent of sayingthat limitation clausesshould not be giveneffect
to incontractsinstandardforms where there isinequalityofbargaining
power.
In a contract of carriage entered into onstandardconditions of the for
warding trade, the parties orally agreed that the goods would be carried
under the deck of the ship and not on the deck. The goods were by mistake
put on the deck and lost. The cargo-owner was allowed to recover his loss
notwithstandingthe exemption clause in thestandardform limiting the car
rier's liability, because the oral promise was to be treated as overriding the
printedconditions.
Acontractfor hire-purchase of a motor cyclestated that the motor cycle
was subject to no conditions or warranties whatsoever, express or implied.
Themachinewas defective. It wasreturnedforremedyingthe faults. It was
deliveredagain to the buyer but all the faults were not rectified. Ultimately
there wasbreakdownof the chaindamagingalso someotherparts.The
buyer finally rejected the machine and sought refund of the hire instalments
he had already paid. He succeeded. The supply of a defective machine was a
fundamentalbreach,thiscancelledoutall theexemptionclauses.Therewas
noaffirmationof thecontracton the buyer'spartsimply byaskingforand
acceptingrepairs.^''®
Fundamental breach was also inferred where the plaintiff's factory was
burntdownby asecurityguardwho had beenprovidedby thedefendants
toprotectthe factory against fire. The defendants were held liable despite a
numberofexemptionclauses. Thehmitof£25,000asstatedin thecontract
was held to benotapplicable.
245.ShivarajVasaiitBhagwatvShevantaD.Indulkar,(1997)2 Bom CR384,overloadingan
insuredvehicle was a mereirregularityandnotafundamentalbreachso as toenablethe
insurerto get rid of hisliability.
246.LevisonvPatentSteamCarpetCleaningCoLtd,1978QB 69: (1977) 3WLR90 (CA).
247. J.Evans& Son(Portsmouth)LtdvAndreaMerzarioLtd,(1976) 1WLR1078.
248.FarnwoothFinanceFacilitiesLtdvAttryde,(1970) 1WLR1053 (CA).
249.PhotoProductionLtdvSecuricorTransport,(1978) 1WLR856 (CA).https://t.me/LawCollegeNotes_Stuffs

221. [S. 5] Standardformcontracts85
Definitionofbreach in UnfairContractTerms Act
The theory of fundamental breach has now foundstatutoryrecognition
to someextentin the (Enghsh)UnfairContractTerms Act, 1977.TheAct
saysthatapartywhocommitsbreach of hiscontractcannottaketheadvan
tage of any clause in thecontractwhich either excludes or limits his liability.
Further,if there is any provision in thecontractto the effectthat"noperfor
mance" or"substantiallydifferentperformance"will betakenas equivalent
toperformance,thatwill be of no avail.Thusthe term"breach"will include
aperformancewhich issubstantiallydifferent fromthatcontemplatedby
thecontract.
Resortto"fundamentalbreach"nolongernecessary
The effect of the provision isthatit is no longer necessary for thecourtsto
resortto"fundamentalbreach". The same result can beattainedbyresort
ing to thetestofreasonablenessunderSection11 of theUnfairContract
Terms Act,1977(English).Thisapproachwas in evidence in the decision
of the House of Lords in George Mitchell (Chesterhall)Ltdv Finney Lock
SeedsLtd?'°
Theplaintiffs,who werefarmers,orderedaquantityof seeds from seed
merchants.Itwasknowntothesellersthattheseedshouldbeforwinter
whitecabbagefit forhumanconsumption.The supply was onstandard
terms whichlimitedliabilityin case of defective goods toreplacement
orrefundof price.Theseedsgrewintounusableweedsandnotfit for
humanconsumption.
Thedefendantswere notallowedto claim theprotectionof theexemption
clause and were held liable for theplaintiffs'loss. Theplaintiffshadbased
theirclaim onfundamentalbreachandrequirementofreasonableness.But
theirLordshipspreferredto go by thestatutoryground.
"Where as aresultof thebreach,theinjuredpartyrescindsthecontract,
all theexemptionclauses will fallwithit. But if hetreatsthecontractasstill
subsistingandwantsonly to becompensated,it will be amatterofconstruc
tionwhetherthe type ofbreachwhich hasoccurredwill be covered by the
exemptionclause or not.
Anelectricalequipmentwassuppliedunderacontracttotheplaintiff
to be used byhimforproducingchemicals. Themachineturnedoutto
be defective sothatit couldnotoperateat full capacity. It was setright
two-and-a-halfmonthslaterandthen itfunctionedto its full capacity.
Theplaintiffsued for the loss ofearningsfor thetwo-and-a-halfmonths'
period.^^^
250.(1983)2 AC803:(1983)3WLR163(HL).
251.CansoChemicalsLtdvCanadian'Westinghouse Co, (1974) 54 DLR (3d) 517 (NSSC App
Div). For anexampleoflimitationclauseswhichwouldapply evenwhentherehas been a
total failure toperformseeAilsaCraig Fishing CoLtdvMalvernFishingCoLtd,(1983) 1
WLR964(HL).https://t.me/LawCollegeNotes_Stuffs

222. 86Chapter2Acceptance [S. 5]
He had to face a formidable exemption clause by which the supplier had
undertakentheresponsibilityforrepairbut noresponsibilityfor consequen
tial damage. But even so the defendant was held liable. Thecourtsaidthat
by supplying equipment which suffered from an error in design, the supplier
had donesomethingwhich was essentially different fromwhatwas contem
plated by the parties. The plaintiff was entitled to repudiate thecontractand
was,therefore, entitledtocompensationin lieu ofrepudiation.Thecourt
construedtheexemptionclause asconfinedonly to casesrequiringrepair
andnotto be extensiveenoughto covererrorsin design also.
Atermin a sale ofpotatoseeds excluded allliabilityunless the buyer gave
notice of any defectswithinthree days of delivery has been held to beunrea
sonable. In such cases the defect is likely to be discovered onlywhenthe
seed has beenplantedandit comes out. Theothertermwhichrestrictedthe
seller's liability tocontractprice was found to bereasonablebecause it was
there with the approval, and as a common practice, of the wholetrade.^^^
4.Strictconstruction
Exemption clauses areconstruedstrictlyparticularlywhere a clause is so
widely expressed as to be highlyunreasonable.Any ambiguity in the mode
ofexpressinganexemptionclause is resolved in favour of theweakerparty.
Anillustrationof thisprincipleofconstructionisaffordedby Lee (John) &
Sons(Grantham)LtdvRailwayExecutive-}^^
Goodsstoredin arailwaywarehouselet to atenantweredamagedby fire
and thetenantbroughtanactionagainsttherailwayexecutive allegingthat
the accident was due totheirnegligence because asparkejected fromtheir
railway engine had caused the fire. The defendants set up a clause in the
tenancyagreementwhichexemptedthemfor loss of ordamagetoproperty
however caused(whetherby act or neglect of thecompanyortheirservants
oragentsor not)which"butfor thetenancyherebycreatedwouldnothave
arisen". Thecompanywas nevertheless held liable. Thecourtwas ofopin
ionthatthewords"butforthetenancyherebycreated"wereconfinedto
liabilitieswhicharosebyreasonof therelationshipoflandlordandtenant.
AnotherillustrationofstrictinterpretationisAkeribvBooth-}^''
By awrittenagreementthedefendantslet to theplaintiffsa fewrooms
on the second andthirdfloors oftheirpremises for officeandstorepur
poses.Theyretainedintheirpossessionawater-closeton thefourthfloor.
The agreement providedthattheplaintiffswould exclusivelyemploy the
252.R.W.GreenLtdv Code BrosFarmers,(1978)1 Lloyd's Rep 602.
253.(1949)2 All ER 581 (CA).SumitomoHeavyIndustriesLtdvONGCLtd,(2010) 11 SCC
296: AIR 2010 SC3400,it isnotappropriatetoconstrueinternationalcommercialcon-
tiractsstrictly.Meaningfulandpurposiveinterpretationshouldbe put on the clauses in ques-
' tion. For a study of Rulesrelatingtointerpretationofcontracts,see Dr A.M. Abdul Rub,
OrientalJournalofLawandSocialSciences(2016)15.
254.(1961)1WLR367.https://t.me/LawCollegeNotes_Stuffs

223. [S. 5] Standardformcontracts87
defendantsin making up and packing all the goods brought by them for
businesson thepremisesand that thedefendantswould not in any cir
cumstances be responsible for damage caused by water, insects, vermin
or fungi to any goods.Owingto the negligence of the defendants or their
servants water escaped from the closet and caused damage to the plain
tiffs' goods.
It was held that the exceptionclausemust be limited to the purpose of the
contract. The purpose was to exempt the defendants from liability to goods
that came to their possessionfor packing or making up, etc. The exemption
clause must be confined to this and was not to apply to any other goods and
accordinglythedefendantswere liable.
Aninsurancecovered loss by flood andinundationbut excluded liability
for events likeearthquake,typhoon, etc. Loss took place due to floods and
subsidence of the building. Thecourtsaidthatin view of the non-inclusion
of subsidence, the insurer's contentionthatthe policy did not cover subsid
ence was not sustainable. Theinsurerhad also certifiedthatthe building
was a first classconstructionand, therefore, was estopped from sayingthat
therewerestructuraldefects.^^^
Contraproferentem
Where the words used in an exclusion clause are capable of two con
structions,awiderconstructionandalimitedconstruction,thenthelimited
constructionwould bepreferred,for the rule of law isthat"every exception
clause is to beinterpreted,in case of ambiguity,contraproferentem"}^^This
meansthat"if there is anydoubtas to the meaning and scope of the exclud
ing or limiting term, the ambiguity will be resolvedagainstthepartywho
has insertedit...These principles were applied by theCourtof Appeal
inHolliervRamblerMotorsAMCLtd.^^^
Hinquiredof R overtelephonewhetherRcouldrepairhis car. Rtold
H tobringthe car andthatitwouldberepairedin due course.Onthree
or fouroccasionsduringthe last fiveyears Rhadcarriedoutservicing for
255.UnitedIndiaInsuranceCoLtdvKiranCombers&Spinners,(2007)1 SCC 368;AIR2007
SC393.
256.SeeProfessorBrianCoote,BreachandexceptionClauses,(1970)CambLJ at p.238.
257.CheshireandFifoot,TheLawofContract,129 (8thEdn,1972).BankofIndiavK
Mohandas,(2009) 5 SCC 313, in case ofunclearterm orexpression,interpretationagainst
thepartyis to be preferred who used such expressions,{verBachartarumfortiusaccipiuntur
contraproferentem)DDA vJitenderPalBhardwaj,(2010) 1 SCC 146:AIR2010SC 497,
where the terms ofexemptionare specific,unambiguousandplain,theyshouldbetakenin
theirplainmeaning.
258.(1972) 2 QB 71: (1972) 2WLR401. It washeldinArchdale& CoLtdvComservicesLtd,
(1954) 1WLR459 (CA)thatthisdoctrinewouldapply onlywhenthepartiesleavetheir
intentionindoubt.But when thepartieshave clearlyexpressedwhattheirintentionis, there
is no necessity to refer to the principle. In this caseinsuranceagainstfireduringtheexecution
of the works was made by thecontractaresponsibilityof the owner, he was notallowedto
hold thecontractorliable evenwhenthe fire was due to thecontractor'snegligence.https://t.me/LawCollegeNotes_Stuffs

224. 88 Chapter 2 Acceptance [S.5]
H.On each occasion R was required to sign an invoice which described
the work and mentioned the charge and gavewarningbelow the custom
er's signature that "the companyis notresponsiblefor damage caused by
fire to the customer's car on the premises". On this occasion the customer
did not sign any suchinvoiceand this time his car was destroyed by a fire
whichoccurreddue toR'snegligence. R was held liable.
This doctrine appliesin the case of a commercialcontractsince the clauses
of thecontractarebilateralandmutuallyagreedupon.^^^
TheCourtof Appeal had to face two formidable questions, namely,
whether the signature on the previous occasions amounted to a notice of the
term for this occasion also and, secondly, if it did,whethernegligent fire was
within the scope of the exclusion clause. In reference to the first question
SalmonLJ had to consider two earlier House of Lords' decisions. One of
them isHenryKendall& Sons v William Lillico & SonsLtd.^^°In this case
during the past three years three or four times in every month goods were
supplied on oral orders followed by signature on sold notes which excluded
liability for latent defects. It was heldthatthis practice was a sufficient
notice of the terms.Distinguishingthis case from thepresentthecourtsaid
that thatwas a typical case where a consistent course of dealingbetweenthe
partiesmade it imperative for thecourtto read into thecontractthe terms
printedon the sold notes, whereas in the present case there had been only
three or four dealings during thepastfiveyears. This was not sufficient to
establisha course of dealing.Moreover,thedealingwasnotconsistentas on
thisoccasionthecustomerwasnotrequiredto sign any invoice.
Theothercase isMacCutcheonvDavidMcBrayneLtd.^^^Inthiscase
Mhadaskedhisbrother-in-lawto have acarshippedfromthe Isle ofIslay
to themainland.Mhadpersonallyconsignedgoods on four previous occa
sions and each time he signedwhatwas called a"risk"note. The risk note
made itplainthatthecompanywasacceptingthe goods on its ship on the
conditionthattheywouldnotberesponsiblefor anydamageby negligence
thatthe goodsmightsufferduringthecourseof the voyage. The shipsank
throughnegligenceandthecarwas lost.M'sbrother-in-lawhadalsocon
signed goods on severalpreviousoccasions.Sometimes he signed a risk note
andsometimesnot.Onthisoccasionnosuchnotewaspresentedtohimfor
signature.TheHouseofLordsheldthattherewas nopreviouscourseof
dealingfromwhichthetermofinclusioncouldbeimpliedintothecontract
whichhadbeenmadeonbehalfof M by hisbrother-in-law.
259.ExportCreditGuaranteeCorpnofIndiaLtdvGargSonsInternational,(2014) 1 SCC 686:
(2013) 178CompCas 341;RashtriyaIspatNigamLtdvDewanChandRamSaran,(2012)
5SCC306:(2012)93ALR257.
260.(1969)2 AC 31:(1968)3WLR110(HL).
261. (1964) 1WLR125:(1964) 1 All ER 430 (HL). See alsoHMKKamaluddinAnsari& Co
V UnionofIndia,(1983) 4 SCC 417: AIR1984SC 29, oninterpretationof thetermsof a
contract.UnionofIndiavGosaliaShipping(P)Ltd,(1978) 3 SCC 23:AIR1978SC1196,
oninterpretationof acharter-partycontract.https://t.me/LawCollegeNotes_Stuffs

225. [S. 5] Standardformcontracts89
After considering the case,SalmonLJ concluded:"Ifit was impossible
to rely on a course of dealing in theMcCutcheoncase, still less would it be
* possible to do so in this case, when the so-called course of dealing consisted
only ofthreeor fourtransactionsin thecourseof five years."
This should have been sufficient to dispose of the case. ButSalmonLJ
I wentfurtherto examinethatsupposingthat theclausehadbecomea part of
thecontract,would it have covered fire by negligence. "It is well-settledthat
a clause excluding liability fornegligenceshould make its meaning plain on
the face of it to anordinaryliterate and sensible person Thedefendant
shouldnotbeallowedto shelterbehindlanguagewhich mightlull the cus
tomerinto a false sense ofsecuritybylettinghimthinkthathewouldhave
redress...forany damage which he might suffer by the negligence ofthat
person."
A car insurance policy excluded liability for "Loss, damage, and/or lia
bility caused or arising while any such car isconveyingany load inexcessof
thatforwhichitwasconstructed."Atthetimeoftheaccidentunderwhich
the car became a total loss there were six persons in thefive-seatercar. The
court said that any doubt about the use of the word "load" would be con
struedin favour of theassured.The clauseshouldhave been spelledoutin
terms ofspecifiedweight. The court alsogavethisadvicethat if any insur
ance company wishes to put forward a policy which would be inapplicable
when an extra passenger is carried, they should print that provision in red
\ ink sothattheassuredwould have itdrawnto hisparticularattention.^^^
' Cottonthreadsdeliveredunderacontractwerefoundto be 6percent
shorter than they should have been and thesellersought to get rid of the
liabilityfor shortdeliverybyshelteringhimself.undertheexemptionclause
which said that the goods actuallydeliveredwould be taken to be in accord
ance with thecontractin all respects unless the sellerswere informed within
14 daysofdeliveryofsomethingwrong. Thebuyersdiscoveredthe shortage
when they put the threads to actual use and that was much later than 14
days.The court did not permit thesellerto use hisclauseforcreatingthis
phenomenonthatgoodsnotdeliveredshouldbe taken tohavebeendeliv
ered. There was nowarrantfor an implication to the effectthatnon-delivery
inlengthorsmallmeasurewasincludedin theobjectionswhichshould,
withinthetime-limit,be made to goodsdelivered.^^^
262.HoughtonvTrafalgarInsuranceCo Ltd,(1954)1QB247(CA);UnitedIndiaInsurance
Co Ltd VPushpalayaPrinters,(2004)3 SCC 694; AIR 2004 SC 1700, damagetobuilding
by"impact"coveredininsurancepolicy,damagecausedbybulldozermovingon the road
closelyto thebuilding,held,fellwithin theexpressiondamageby"impact".Evenif its mean
ing was not clear, it was to be taken in favour of the insured.
263.Beck& Co vSzymanowski& Co, 1923AC43(HL).Thoughthetermshaveto be strictly
construed,that constructionmust not be a strained one.Limitationof liabilityfor any lapse
insecurityserviceswasstatedin the contractto be£1000.Theprovisionbeingclear,recov
eryfortheactuallosswhichwasmuchgreaterwasnotallowed,AilsaCraigFishingCoLtd
VMalvernFishing Co Ltd, (1983) 1WLR964 (HL).https://t.me/LawCollegeNotes_Stuffs

226. 90Chapter2Acceptance [S. 5]
Interpretationofpricereviewandescalationclauses
In a case before the SupremeCourt^®''a clause in acontractfor supply of
electricityprovided:
"The rate of supply asdeterminedin Clause 17 shall be reviewed every
fifth year provided the component of the cost of generation out of the
totalcost varies by 25 per cent ormore."
The consumer contendedthatthisw^asa priceescalationclause and
wouldpermitincrease from the base price only according to a rise in the
cost of production. The SupremeCourtdid not accept this. Explaining the
distinction between an "escalation" clause and a "price review" clause, A.K.
SenJ said:
An escalation clause, according to its accepted legalconnotationmeans
a clause which takes care of the rise and fall of prices in the market,
whereasthe right to reviewconfersthe power torevisethe rate ofsupply.
The word 'review' necessarily implies the power of the Board to have a
secondlook and to so adjust from time to time itschargesso as to carry
on itsoperationunder the Actwithoutsustaininga loss.
ThecourtreferredtoButterworth'sEncyclopaediaofFormsand
Precedents,^"Hudson'sBuildingAndEngineeringContracts,^"
Keating'sBuildingContracts^^^and Black's LawDictionary,which
portraydifferentformsof "rise and fall" orescalatorclausesinbuilding
andcommercialcontracts.The court cited thefollowingpassagefrom
AmericanJurisprudence."'
Insomecontractsthereiswhatisknownasanescalatororfluctuation
clausewhichisdefinedas onein whichthe contractfixesa basepricebut
contains a provisionthatin the event of specifiedcost increase, the seller
orcontractormay raise the price up to a fixed percentage of the base
and suchescalatorclausesaregenerallyheldto besufficientlydefinitefor
enforcement.
264. DelhiClothandGeneralMillsCo Ltd vRajasthanSEB,(1986)2SCC431at p.455.See
alsoShivPalKaranKholiv State ofU.P.,AIR1988All268,revisionofhousingprices.
RamachandraReddyvUnionofIndia,(2009)6 SCC414,a contractrequiresinterpretation
or construction when its terms arevagueandunambiguous.Udaipur Sahkari Upbhokta
ThokBhandarLtd vCIT,(2009) 8 SCC 393: (2009) 315ITR21, a contract has to be inter
preted on its own terras. Conductof parties also playsan important role. Bank of India v K
Mohandas,(2009)5SCC313,the natureandpurposeof thecontractisalsoanimportant
guide. CommercialAuto Sales P Ltd v Auto Sales Properties, (2009) 9 SCC 620, intention
ofthepartiesto aninstrumentmustbegatheredfromitstermsin thelightofsurrounding
circumstances.
265.(Vol3,4thEdn) 148.
266.10thEdn.
267.{4thEdn)498.
268.(4thEdn)639.
269. (Vol 17,2ndEdn) 786.https://t.me/LawCollegeNotes_Stuffs

227. [S. 5] Standardformcontracts91
Thecourtalso cited the following passage fromCorpusJuris
Secundum:^^°
[A]contractgiving one of thepartiestherightto vary the price isnot
unenforceablefor lack ofmutualitywheretherightisnotanunlimited
one, as where its exercise is subject to express or impliedlimitation,such
asthatthevariationmust be inproportionto some objectively deter
minedbase, ormustbereasonable,andthisrulehas beenappliedto
contractscontainingso-called'escalator'clauses.
Where under a housing scheme, the price to be charged is made expressly
variable,theallotteescannotclaim anyestoppelagainstvariationnor seek
refund on thegroundof anyproposed,but reasonable,variation.^^^
The SupremeCourtheldthatthe power to vary terms relating toquan
tumofworkcannotbeunlimited.Any clause giving absolutepowerto one
partyto modify the contract terms would amount to interfering with the
integrity of thecontract.Under the general law ofcontract,once the con
tractis entered into, any clause giving absolute power to onepartyto modify
thetermsofthecontractathissweetwillortocancelthecontractwouldbe
in essence anegationof thecontract.^^^
Purposiveinterpretation.—Acontracthas to be interpreted according to
its purpose. Consistent with the character of purposiveinterpretation,the
courtis required to determine the ultimate purpose of thecontractprimarily
bylookingat thejointinterestof theparties.Itisnotappropriatetoput
strictconstructionupon aninternationalcommercial contract. Meaningful
and purposive interpretation should be given to itsclauses.^^''In another
decision the SupremeCourtdeprecatedanotherkind of practice in the use
ofstandardformcontracts.Itobservedthatuseofsuchcontractformsin
a'blanket mannerwithoutpaying attention leads to the factthatmany of
its general clauses are inapplicable to the transaction in hand. The court
viewed it with disapprovalthatapartyusing astandardform does not take
care to check it in the context of aparticularcontractand to delete clauses
which are not applicable to the transaction in hand. The document should
be transactionspecific.The court has to ignore the inapplicable clauses
to find out the intention of the parties andnatureof thetransaction,for
example to know whether thetransactionis simplythatof subrogation or
assignment or subrogation-cum-assignment, etc. Even where the document
was meant to apply to carriage of goods by road, it seemed topertainto
carriage by air, or rail. Claims and remedies against a road carrier were not
'270.(Vol17) 406.
271. Shiv Pal KaranKholivStateofU.P., AIR 1988 All 268.
111.NationalFertilizersvPuranChandNangia,(2000)8 SCC 343: AIR2001SC 53.
273.DLFUniversalLtdv Town &CountryPlanningDeptt,(2010) 14 SCC 1: (2011) 4 SCC (Civ)
391.
274.SumitomoHeavyIndustriesLtdvONGC,(2010) 11 SCC 296.https://t.me/LawCollegeNotes_Stuffs

228. 92Chapter2Acceptance [S. 5]
evenmentioned.Whenallsuperfluousmatterwasexcluded,thedocument
seemed to be purely one ofsubrogation.^'^^
5.Liabilityintort
Evenwhereanexemptionclause isexhaustiveenoughtoexcludeallkinds
ofliabilityunderthecontract,it maynotexcludeliabilityintort.Thusin
White VJohnWarwick& CoLtd-P^
Theplaintiffhireda cycle from thedefendants.Thedefendantsagreed
tomaintainthe cycle inworkingorderanda clause in theagreementpro
vided;'nothingin thisagreementshallrenderthe owners liable for any
personalinjuries...'.Whiletheplaintiffwasridingthe cycle thesaddle
tiltedforwardandhe wasthrownandinjured.
It was heldthatalthoughthe clauseexemptedthedefendants(even if they
were negligent) fromtheirliabilityincontract,it did notexemptthemfrom
liabilityinnegligence.^^^
It is, however, open to thepartiesto excludeliabilityeven for negli
gence by express words or necessary implication. For example, inRuttherv
Palmer^'^^acarwas given to thedefendantsfor saleunderacontractwhich
providedthatwhileontrialthecarswouldbedrivenat thecustomer'srisk.
Anaccidenttookplacewhilethecarwas on atrialrun.Thedefendants
were held not liable, for they had by expresswordsshiftedthe risk to the
customers.
Liabilityfornegligence
The results of such cases should now be different. The (English) Unfair
ContractTerms Act, 1977, expressly providesthatany clause in acontract
which excludes or restricts liability for death or personal injury resulting
fromnegligenceshall be absolutely void. The expression "negligence" is
defined in the Act to mean the breach of anycommonlaw orcontractual
duty.
6.Unreasonableterms
Anothermode ofprotectionis to excludeunreasonabletermsfrom the
contract.Atermisunreasonableif itwoulddefeat the verypurposeof the
275.EconomicTransportOrganisationvCharanSpg Mills (P)Ltd,(2010) 4 SCC 114: (2010) 3
AllLJ281.
276.(1953) 1WLR1285(CA).
111.Besidesthese, the courts have tried othervi^aysof controlling the undesirable consequences
of exemption clauses. This is indeed the only way to protect the individual and make up
for the growing loss of individual freedom of contract. For a summary of such techniques,
see Gower,ExemptionClauses:ContractualandTortiousLiability,(1959) 17MLR155.
For an assessment of the need andproprietyof suchcontractssee Bowes Egan,Standard
Contracts,1968JBL204;G.H.Treitel,ExclusionClauses, PossibleReforms,(1967) JBL 209
and334.
278.19222 KB 87(CA).https://t.me/LawCollegeNotes_Stuffs

229. [S.5] Standardformcontracts93
contract or if it is repugnant to publicpolicy.Pointing this out in the Suisse
Atlantiquecase,^^'LordWilberforcesaid:
One may safely saythatthepartiescannot,in acontract,have contem
platedthat aclauseshall haveso wide an ambit as in effecttodepriveone
party'sstipulationsof allcontractualforce: to do sowouldbe toreduce
thecontracttoameredeclarationofintent.
An example of an unreasonable term is to be found in Lily White v
Munuswami.^^°Alaundryreceiptcontainedaconditionthatacustomer
would be entitled to claim only fifteen per cent of the market price or value
of the article in case of loss. Theplaintiff'snew sari was lost. Thecourt
observed:
Certainly the conditions printed on the reverse of a bill may govern or
modify any simplecontract...subject to the obligation on thepartof the
businessman toperformthe process properly and toreturnthe article safe
and intact. But, if a condition is imposed which is in flagrant infringement
of the law relating tonegligence...thecourtwill not enforce such a term
which is not in the interest of the public, and which is not inaccordance
with public policy. And there iscertainlyjustification for theobservation
that this(enforcementof the condition) may well be putting a premium
upon theabstractionof clothes, which may be committed by an employee
of the firm, intent on private gain,thoughthefirmitself may be blameless
withregardto theactualloss.^®^
Explainingthe justification for not enforcingunreasonableterms in Lee
(John) & Sons(Grantham)LtdvRailwayExecutive,LordDenningLJ
remarked:
Thereis the vigilance of thecommonlaw which, whileallowingfree
dom ofcontract,watchesto seethatit isnotabused.
Theimportanceof this vigilance was amplydemonstratedby hisLordship
inLevisonvPatentSteamCarpetCleaningCoLtd.^^^
Acarpetwas delivered to acleaningcompanyunderthesignatureof
thecarpet-owner.Immediatelyabove the space forsignaturethe form
statedthattheundersignedagreed to thetermsandconditionsset out
above.Oneof the clauses fixed the value of thecarpetat £ 40andanother
279. SuisseAtlantiqueSocieteD'ArmementS.A. vH.V.RotterdamscheKolenCentrale,(1967)
1 AC361:(1966)2WLR944(HL).
280.AIR1966Mad13 at pp.13-14.
281. See also M.Siddalingappav T.Nataraj,AIR1970Mys 154,whereaconditionthatonly
eight per cent of the cost of agarmentwould be payable in case of loss was held to beunrea
sonable.R.S.DeboawM.V.Hindlekar,AIR 1995 Bom 68,laundryreceiptcontainedprinted
conditionrestrictingliabilityfor loss ordamageto 20 timeslaunderingchargesorhalfthe
value of thegarment,whicheverwas less.Theconditionwas held to beunreasonable.
282.(1949) 2 All ER581,584(CA).See alsoIndianAirlinesCorpnvMadhuriChowdhuri,AIR
1965Cal252.
283.1978QB 69:(1977)3WLR90.(CA). CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

230. 94Chapter2 Acceptance [S.5]
stated that the goods had been accepted at the owner's risk and the cus
tomers should insure their goods. Thecarpetwas neverreturnedand the
cleanersinformedthecustomerthatithadbeenstolen.Thecustomer
recovered the full value of thecarpetfrom his insurer and recovered £ 900
fromthecleaners.
The clause which fixed theUabilityat£40was regarded asunreasonable
and, therefore, the cleaners were required to pay the full value of thecarpet.
Notto havereturnedthecarpetalsoamountedto afundamentalbreach.
LordDenningreiteratedthatan exemption orlimitationclause should not
be given effect to if it was unreasonable or if it would be unreasonable to
apply it in the circumstances of the case. The cleaners knewthatthecarpet
waswortha lot of money and it would be mostunreasonableto limit liabil
ity to£40.It was equallyunreasonableto impose a term on the customers
thattheir goods were accepted only at their risk.
It is notreasonableto excludeliabilityfor breach of a termwhichis fun
damentaltothecontract.
Aphotocopyingmachine wastakenon lease. The machine was sup
posed tocontainaparticularfeature. The machine which wasactually
supplied did not havethatfeature. The lease excluded liability for rep
resentations,if any,madeaboutthemachine.
Itwasheldthattheexclusionclausewasunreasonable.Itbecameoverrid
den by therepresentationsmade by the copiersalesman.^^"*
Statutorydefinitionofreasonableness
The principle ofexcludingunreasonableclauses has now foundstatu
toryrecognitionin the (English)UnfairContractTerms Act, 1977. The Act
providesthatin respect of any loss caused by the breach ofcontract,any
restrictingorexcludingclause shall be void unless it satisfies therequirement
ofreasonableness.Atermwill beregardedasreasonableif it is "a fairand
reasonableone to beincludedhavingregardtothecircumstanceswhich
were, oroughtreasonablyto havebeenknownto or in thecontemplationof
thepartieswhenthecontractwasmade".^^-'
284.LeaseManagementServicesLtdvPurnellSecretarialServicesLtd,(1994)13 TrLR
337(CA).
285.InAmericanRestatement[2ndEdn,S. 211(Part3)] themoderndoctrineisthusstated:
Wheretheotherpartyhasreasonto believethatthepartymanifestingsuch(written)assent
wouldnotdo so if heknewthatthewritingcontainedaparticularterm,thetermisnota
partof theagreement.Reasonto believe may beinferredfromthe factthatthetermisbizarre
or oppressive, from the factthatit eviscerates thenon-standardterms explicitly agreed to,
or from the factthatiteliminatesthedominantpurposeof thetransaction.See Todd D.
Rakoff,ContractsofAdhesion:AnEssayinreconstruction,(1983) 96HarvLR1174;J.H.
Baker,FromSanctityofContracttoReasonableExpectation,CurrentLegalProblems,
1979whereit is saidthatjudges are toimposereasonableness.Whateverisnotreasonable
is not law. If thepartieshaveagreedtosomethingunreasonabletheyshouldbetreatedas if
they have notagreedandtheyshouldbereleased.Thisbringsin thedoctrineofreasonable
expectation.PolicingUnfairnessinContracts,(1984) 47ModLR 523 inReubenHassen'shttps://t.me/LawCollegeNotes_Stuffs

231. [S. 5] Standardformcontracts95
A local authority entered into a contract with a supplier for purchase
of computersoftware designedto administer the collection of community
charge according topopulation.Thesoftwarecontainedanerrorwhich
led to wrong count and, therefore, loss of revenue. The supplier company
hadhmiteditsliabilityunderthestandardtermsto£100,000.Thecourt
allowed the authority to recover its whole loss of revenue and not merely
theamountunderthelimitationclause,whichwas held to beunreasona
ble. The supplier was asubstantialcompany with ample resources to meet
any liability and wasinsuredunderaworldwidepolicy for fiftymillion
pounds. There were a very few companies who could meet theauthority's
requirementsand,therefore,thesupplierwas in a verystrongbargaining
position.The suppliercompanyfailed to adduce any evidence as to why
thelimitof£100,000wasjustified.It wasirrelevantto thedefendant
company'sliabilitythattheauthorityhadmade up its loss byincreasing
thecommunitychargethe followingyear.^^*"
Inreferencetostatutorycontracts,theSupremeCourtobserved:
Astatutorycontractcannotbe varied, added to, or altered byimporting
thedoctrineoffairness.Inacommercialormercantilecontractbetween
partiesof equalbargainingpower, more so in acontractforliquorvend,
the licensee takes acalculatedrisk of beingputundertheburdenof rules
andregulations.
Removalsimpliciterclauses incontractsofemployment
Atermin acontractofemploymentbeingofferedby aGovernment
corporationproviding for the removal of apermanentemployeewithout
inquiryhas been regarded by the SupremeCourtto beunreasonable.^^®The
SupremeCourthas gonefurtherstill by laying downthatin all its affairs,
including economic andcontractualmatters,the state and itsinstrumental
itieshavetoobservethemandateofArticle14oftheConstitutionandoffer
equalopportunitiesand make a fair and reasonable selection of theparty,
including the selection of aGovernmentDistrictCounsel, on whom benefits
of aGovernmentcontractare going to beconferred.^^®
The SpecialNatureoftheInsuranceContract.Steve Hedley,QualityofGoods,Information
andtheDeathofContract,2001 JBL 114,consideringthepositionof thedoctrineofcaveat
emptorin theHghtofstatutorydevelopments.
286. St Albans CityandDistrictCouncil vInternationalComputers,1995 FSR 686. See also
to the same effect, Salvage Assn v CapFinancialServices, 1995 FSR 654, where also the
computers with accounting softwarecontainednumerous errors causing huge losses and,
therefore,the limit of£25,000upon liability was held to beunreasonable.In themeantime
thedefendantcompanyhad alsoincreasedits limit uponliabilityto £100,000.
287.MaryvStateofKerala,(2014) 14 SCC 272: (2013) 4 KLT466.
288.CentralInlandWaterTransportCorpnvBrojoNathGanguly, (1986) 3 SCC 156.
289.ShrilekhaVidyarthivStateofU.P., (1991) 1 SCC 212: AIR 1991 SC 537. Relying upon
itsownearlierdecisions inDwarkadasMarfatia& Sons vFortofBombay,(1989) 3 SCC
293 the State has to show fairness in evicting itstenants;MahabirAutoStores vIndian
Oil Corpn, (1990) 3 SCC 752,terminatingthe agency of adistributorwithoutproperhttps://t.me/LawCollegeNotes_Stuffs

232. 96Chapter2 Acceptance [S.5]
Compromiseofexistingcontract
The purpose of the Unfair Contract TermsAct, 1977(English)is to inval
idate exemption clauses in the strict sense, its clauses in acontractwhich
modify prospective liability. The Act does not affectretrospectivecompro
mises of existing claims. Section 10 of the Act on its trueconstructiondoes
not apply to acontractto settle disputesv^^hichhave arisen concerning the
performance of an earlier contract. Furthermore, Section 10 does not apply
wherepartiestobothcontracts(namely, the earliercontractand agreement
of itsaccordandsatisfaction)are the same.Thusacompromisewouldnot
bebadinlawevenifsomeoftheclausesofthecontractwereunreasonable
either generally orwithinthe meaning of the EnglishAct.^^°
7.Exemptionclausesandthirdparties
One of the basic principles of the law ofcontractisthatacontractis a
contractonlybetweenthepartiesto it and nothirdpartycan either enjoy
any rights or suffer any liability underit.^^^This should apply tostandard
formcontractsalso. The effectwouldbethatwhere goods aresuppliedor
servicesrenderedunderacontractwhichexempts thesupplierfromliability
and athirdpartyisinjuredby the use ofthem,thesupplieris liable to him
notwithstandingthathe haspurchasedhisexemptionfromtheotherparty
to thecontract.If, forexample,acontractoragreestomaintainandrepair
a lift incertainpremisesundercontractwiththeownerwho exempts him
from liability,thatexemptionwouldbe of no avail to thecontractoragainst
apersonwho isinjuredowingto badrepairs.If this were not so, the lifeand
securityof millions of peoplewouldbe in thehandsof the twopartiesto a
contract.Theywouldthenmake lawnotonly for themselves, but also legis
late forcountlessothers.Obviously,therefore,inHaseldinev C.A.Daw&
SonLtd/^^theabovementionedliftcase,thedefendantswereheldliablefor
thetortof negligence.GoddardLJremindedthecontractor"thattheduty
to thethirdpartydoesnotarise out ofcontract,butindependentlyof it".
Justas athirdpartyisnotaffectedby thetermsof acontract,so also a
thirdpartycannotclaimtheadvantageofthem.If,-forexample,asea-line
companyexemptsitselffromanyliabilityto itspassengersfor thenegligence
of its employees, apassengerinjuredby the negligence of an employee will
nevertheless beentitledto sue the negligentemployee.^^^Inanothercase,
ashippingcompanylimiteditsliabilityto a fixedamountfor any loss of
or damage to goods. The stevedores inEnglandagreedwiththecompany
opportunityto enable him to comeunderthe newpoHcy.Thecourtalso relied upon Wade's
AdministrativeLawandJudicialReviewandContractualPowerofPublic
Authorities,(1990)106LQR277-92.
290.TudorGrangeHoldingsLtdvCitibankNA,1992Ch 53; (1991) 3WLR750. {SeealsoNotes
undertheheading"ConsentDecrees"undercommentson S. 74).
291. Thedoctrineof privity ofcontractis more fully discussed in thethirdchapter.
292.(1941) 2 KB343(CA)atp. 379.
293. So held inAdlervDickson,(1955) 1 QB 158: (1954) 3WLR450 (CA).https://t.me/LawCollegeNotes_Stuffs

233. [S. 5] Standardformcontracts97
to handle cargo subject to the same condition, but the plaintiff had no
knowledgeof this agreement.His consignmenthaving been lost through the
negligenceof the stevedores, they were held not entitled to theprotectionof
thelimitingclause.^^'^
Looking at this state of thelaw^transportcompanies began todrafttheir
exclusion clauses so as to providethatneither they nor their employeesvi^ould
incur any liability. In two such cases, inbothof which two free pass-holders
of a bus company were injured, onethroughthe negligence of the driver and
the other of the conductor, they were allowed to proceed against the negli
gent employees, in the one case because the free pass was a licence and not
acontractand the driver wasnotapartytoit^'^and in theotherbecause it
vyasacontractand was voidunderSection 151 of the (English)RoadTraffic
Act,1960.^5^
The only way ofconferringthe benefit ofexceptionclausesuponemploy
ees orsub-contractors,etc., seems to be the principle ofvicariousimmunity
or impliedcontractas suggested by theHouseof Lords in Elder,Dempster
& CoVPatersonZochonis& In this case the plaintiffcontracted
withachartererand thelatterhireda ship from theshipownerforcarriage
of oil casks. The bill ofladingasdrawnbetweentheplaintiffandcharterer
exemptedboththechartererandshipownerfromconsequencesof bad stow
age.Theoil waslostincircumstancescovered by theexceptionclause.The
plaintiffsuedbothof them, but they were held liable, either because the bill
of lading became an impliedcontractbetweentheplaintiffandshipowner
or because theshipownerwasactingas an agent of thecharterer.A dif
ferent result followed where the exclusion clausenotmerelyprotectedthe
carrier,but also his agents andcontractorsand the stevedorescontractedto
unloadthe ship as agents for thecarrier.Theywereaccordinglyheldnotlia
ble fordamagecausedto theplaintiff'smachinerythroughtheirnegligence
in the act ofunloading.^'®Nowunderthe (Enghsh)UnfairContractTerms
Act,1977,a clausewhichexcludesliabilityfornegligencewouldbeenforced
only if it isreasonablein thecircumstancesof the case.Anothercase of the
samekindisNorwichCityCouncilvHarvey}^^
Acontractfor theerectionof abuildingcontainedaprovisionthat
thebuildingownerwas tobearthe risk of loss ordamagecausedto the
buildingby fire. Asub-contractorhadcontractedwiththecontractoron
thatbasis. Thecourtsaidthatitwouldnotbe just andreasonableto
exclude thesub-contractorfromtheprotectionofthatprovisionin the
maincontractif thebuildingwasdamagedby fire as the result of the
294.ScruttonsLtdvMidlandSiliconesLtd,1962AC446:(1962)2WLR186(HL).
295. Genys vMatthews,(1966) 1WLR758.
296.Gorev Van deLann,(1967)2 QB 31: (1967) 2WLR358 (CA).
297.1924AC522.Seefurther,ProfessorB.Coote,ExceptionClausesandThoseto Whom They
areAddressed,(1973)CambLJ 14,104.
298.NewZealandShippitigCoLtdvA.M.Satterthwaite& CoLtd,(1974) 2WLR865.
299.(1989)1WLR828(CA).https://t.me/LawCollegeNotes_Stuffs

234. 98Chapter2 Acceptance [S.5]
negligenceof the sub-contractor, eventhough there was no privity of con
tractbetween him and the building owner. In suchcircumstancesthere
was not such a close anddirectrelationshipbetweenthebuildingowner
and thesub-contractorfor thelatterto owe a duty of care to the former.
Itfollowedthatthesub-contractorswereentitledtothebenefitofthe
exemption from liability under the main contract in respect of the claim
brought against them bythe building owners in respect of their employees'
negligence.
"Wherea person is entitled to the benefits of acontracthe would have to
accept itsburdensalso.^""
Inconclusion,thefollowingstatementof LordReidin the Suisse
Atlantiquecase may becited:^"^
Exemption clauses differ greatly in many respects. Probably the most
objectionable are found in the complexstandardconditionswhich are
now socommon.In theordinaryway thecustomerhas no time toread
themand,if he did read them, hewouldprobablynotunderstandthem. If
he didunderstandand object to any ofthem,hewouldgenerally be told
thathe couldtakeit or leave it. If he thenwenttoanothersupplier, the
resultwouldbe the same.Freedomtocontractmuststrictlyimplysome
choice orroomforbargaining.
At theotherextremeis the case where thepartiesarebargainingon
terms ofequalityandastringentexemptionclause isacceptedfor aquid
proquo orothergoodreason;but this ruleappearstotreatall cases alike.
Thereisnoindicationintherecentcasesthatthecourtsaretoconsider
whethertheexemptionis fair in all thecircumstancesor isharshand
unconscionable,orwhetherit was freely agreed to by thecustomer.It
doesnotseem to besatisfactorythatthe decision must always go one
way if, e.g., defects in a car orothergoods are just sufficient tomakethe
breachofcontractafundamentalbreach,butmustalways go theother
way if the defects fall justshortofthat.Thisis a complexproblemwhich
intimatelyaffectsmillionsofpeople,anditappearsto methatitssolution
shouldbelefttoParliament.
UnfairContractTermsAct,1977(UK)
The(UK)UnfairContractTermsAct,1977,whichcameintoforce on
February1,1978,improves or affects some of the principlesestablishedby
thecourtsinreferencetobusinesscontracts.TheActtriestoimprovethe
situationbycompletelyoverrulingcertaintypesofexemptionclausesand
subjectingall ofthemto thetestofreasonableness.
300.PyreneCo vScindiaNavigationCo, (1954) 2 QB402:(1954) 2WLR1005whereit was held
thatapersonwho accepts the benefit of acontractshall have totakeitsburdensalso.
301. SuisseAtlantiqueSocieteD'ArmementS.A.VN.V.RotterdamscheKolenCentrale,(1967) 1
AC 361,406:(1966) 2WLR944 (HL).Parliamenthaspartlydealtwiththisproblemin the
(UK)UnfairContractTermsAct,1977.https://t.me/LawCollegeNotes_Stuffs

235. [S. 5] Standardformcontracts99
The Act provides, for the first time, astatutorydefinitionof theterm
"negligence" which isappHcablebothtotortandbreach ofcontractcases.
In the terms of thedefinition,negligence means:
'{a)breach of anyobligation,arising from the express or implied terms of
acontract,totakereasonablecareor exercisereasonableskill in the
performanceof thecontract;
{b)breachof anycommonlawdutytotakereasonablecareor exercise
reasonableskill (butnotastricterduty); or
(c)breach of the duty of careimposedby theOccupiers'Liability
Act,1957.
The secondimportanteffect of the Act isthatany clause in acontract
whichexcludes orrestrictsliabilityfordeathorpersonalinjuryresulting
from negligence shall be absolutely void.
Thethirdnoteworthyprovisionof the Act isthatinregardtoothertypes
of loss, not being death or physical injury, anyrestrictingor excluding clause
shall also be void unless it satisfies therequirementofreasonableness.The
testwillbedeemedtobesatisfiedifthetermis"afairandreasonableone
to be included having regard to thecircumstanceswhich were, or ought
reasonably to have been,knownto or in thecontemplationof theparties
when thecontractwas made". It meansthatreasonablenessdependsupon
theunfairnessof the terms in the light of thecircumstanceswhichought
to have beeneitherknownor to be in thecontemplationof theparties.A
charteredsurveyor who gave a negligent mortgagevaluationof abungalow
upon which the plaintiff relied in purchasing thepropertywas held liable in
spite of aclauseexcludinghis liability in the matter. Theclausewas found
tobenotreasonableinthecircumstances.
Thefouirthimportantprovision of the Act is concerned with the protec
tion of the consumer and those who have been subjected to astandardform
contract. The Act saysthata person who deals with a consumer on his own
standardterms,will not beallowedto claim theprotectionof any clauses
restricting or excluding liability if he himself commits breach; nor can he
claim substantially different performance as equivalent to performance. He
can, however, take advantage of such terms if they are reasonable.
The fifthimportantpartof the Act extends the scope of the Supply of
Goods(ImpliedTerms)Act, 1973. This Act does not permit in referenceto
consumer sales the liability for breach of impliedconditionsandwarranties
to be excluded. This will now apply to allcontractsunder which possession
of or property in goods passes from one person to another, for example,
302. Daviel v Parry, (1980) 20 Estate Gazette 92: 1988 CLY 435. A similar advice by a local
authority underexclusionof liabilityprotectedthe authoritybecauseit was not the profes
sional business of the authority. Harries v Wyre ForestDistrictCouncil,(1990)1 AC 831:
(1989)2WLR790(HL).https://t.me/LawCollegeNotes_Stuffs

236. 100Chapter2Acceptance [S. 5]
contractsofrentingor leasing ofappliances.Innon-consumercontractsthe
exceptionclauses will besubjectedto thetestofreasonableness.^"^
Aplanthire company,hiredanexcavatorto theplaintifftogetherwith
the firstdefendant,a driver, for use inbuildingworkconsistingof an
extensiontotheplaintiff'sfactory. Aconditionwasthatthedriverswere
to beregardedfor allpurposesas theservantsoragentsofthehirerwho
alonewill be liable for theconsequencesoftheoperationbythem.An
accidentoccurredas aresultof thedriver'snegligence,causingconsider
abledamageto theplaintiff'sfactory.
Goingby thesubstanceandeffect oftheterm,ratherthanby itsform,the
courtheldthatthetermhadthe effect ofexcludingthecommonlawdutyin
tort.Ithadthe effect ofexcludingliabilitywhichfellwithinthepurviewof
the Act and was, therefore, not fair andreasonable.^"'^Thecourtrelied upon
the speech of LordBridgein GeorgeMitchell(Chesterhall)LtdvFinney
LockSeedsLtd:^°^
303. Forfurtherstudy see BrianCoote,UnfairContractTerms Act, 1977, (1978) 41MLR312;
PeterArsonstam,ConsumerProtection,FreedomofContractandTheLaw,(Juta
& Co, South Africa). Theauthorfindsthatmany firms whichdominateaparticularmarket
abuse their economic power by means of oppressivestandardcontracts.Courtshave often
expressed their unwillingness to delve into the problem ofcontractualmoralityandunfair
ness. Theauthorregrets that our judges have not beenpreparedto formulate a general theory
of contractual conscionability which could governall instances of abuse of bargaining power;
UnfairContractTerms in CivilLawSystems, (1980) 4 Can Bus LawJournal429; (1981)
98 SALJ 70, where it is observed that sentiment on the sanctity ofcontracthas undergone a
sea-change.The decline of laissez faire and theconcomitantgrowthof Stateinterventionin
the economy, the strongly felt need toprotectthepoorand theignorantfromexploitation
by the rich and shrewdoperators,the emergence and spread of thestandardformcontract,
all these have combined to erode the pactasuntservanda principle. Today all western legal
systems have a multiplicity of protective laws, ranging from anti-monopoly legislation to
consumerprotectionlaws, from rent control to legislation regulating sales oninstalments;
EdwardH.Hondius,UnfairContractTerms: NewcontrolSystem, (1978) 26American
JournalofComparativeLaw 525, 526; A.J. Kerr, Terms inStandardFormContract,(1981)
98 SALJ 15; Todd D.Rakoff,ContractsofAdhesion:An Essay inReconstruction,(1983) 96
HarvLR 1174. For theconceptof"dealingas aconsumer"see R&BCustomsBrokersCo
Ltd VUnited Dominions Trust Ltd,(1988)1WLR321(CA),here a company purchasing a
motorcar for the use of itsdirectorwas held to bedealingasconsumersothatthe exclusion
ofmerchantabilitywas not binding on the parties. Rasbora Ltd v JCLMarineLtd, (1977)
1 Lloyd's Rep 645, thesameconclusionwasreachedwithreferenceto theterm"aconsumer
sale" in its application to purchase of a boat by a company for the private use of the owner
of the whole of the issued sharecapitalof the company.ChesterGrosvenorHotelCoLtdv
Alfred McAlpine Management Ltd,(1991)56 Build LR 115(QB),the meaning of astandard
form ofcontractand dealing on theother'swrittenstandardterms of business. Smith vEric
S. Bush,(1990)1 AC 831:(1989)2 WLR 790 (HL),their Lordshipsconsideredthe question
whether professional valuer can exclude his liability for negligence and whether it would be
reasonable and fair to do so. Stag Line Ltd v TyneShiprepair Group Ltd,(1984)2 Lloyd's
Rep 211 QB, consideration of the question whether the Act nullifiesall clauseswhichpurport
to limit liability.Sealy,UnfairContractTerms Act, 1977, (1978) CLJ 15.
304. PhillipsProductsLtdvHyland,(1987) 1 WLR 659 (CA).
305. (1983) 2 AC 803: (1983) 3 WLR 163 (HL);AmiriFlightAuthorityv BAE SystemsPic,
2002 EWHC 2481 (CA), where the requirements of the Act were applied to aninternationalhttps://t.me/LawCollegeNotes_Stuffs

237. [S. 5] Standardformcontracts101
Inconsideringtherequirementofreasonableness,thecourtmust enter
taina whole range ofconsiderations,putthemin the scales on one side
orotherand decide at the end of the day onwhichsidethebalancecomes
down. There willsometimesberoomfor alegitimatedifference of judi
cial opinion as towhatthe answer should be, where it will be impossible
to saythatone view isdemonstratablywrong and theotherdemonstrat-
ablyright.
Exclusion ofrightofset-off
The right of set-off being aninstrumentof justiceand equity, its exclusion
undercontractclauses has been held to beprimafacieunreasonableandhit
by Section 13 of the Act.Accordingly,a counter-claim raised by way of set-
off against thecontractor'sbill for final payment was allowed to be raised
despite a clause in the contract excludingthe right of set-off. The court put
the burden upon the contractor to provethereasonablenessof the clauseand
addedthatthe question whether acontractterm satisfied the requirements
ofreasonablenessinSection13 of the1977Act has to bedeterminedby
consideringthe term as a whole and not merely thatpartof it relied on by
the plaintiffs to defeat the defendant'sset-off.^°®
Exclusionclausesanddisclaimer
The House of Lords have laid downthatnegligent advice given by a pro
fessionalmanwouldmakehimliabletohisimmediateadviseeevenifthe
advicewasgivenunder aclausecontainingdisclaimerof allliability.The
disclaimer would have to pass the test of reasonableness under the 1977
Act.^°^A house was purchased by the plaintiffs, price being paid on the
basis of the advicesought from a local authority whose surveyors prepared
anegligentreport andadvice.Theadvicewasofferedunderdisclaimerof
liability.Thehouseturned out to beunusableandrequiredan amount for
repair which was more than the cost of thepurchaseprice.Theauthority
was held liable to the plaintiffs. Their Lordships saidthathaving regard to
the high cost of the house it would not be fair andreasonableforvaluersto
imposeon purchasers the risk of loss arising out ofincompetenceor care
lessnesson thepartof valuers.Itfollowed,therefore, that the disclaimerwas
not effective to exclude liability for the negligence of the valuers.
contract for thesaleof an aircraft which proved to be defective and had to be sold off at a
loss.Thecourtsaidthatthe Act was notconfinedin its application only to sale of goods
transactions.ThatwouldhavedefeatedtheintentionofParliamenttoaccordfreedomof
contract to partiesinvolvedin substantial transactions of an international character.
306.StewartGillLtdvHoratioMyer & Co Ltd, 1992 QB 600: (1992) 2WLR72 (CA).
307. The case before their Lordships was Smith v Eric S. Bush, (1990) 1 AC 831: (1989) 2 WLR
790 (HL); Harries v Wyre ForestDistrictCouncil, (1990) 1 AC 831: (1989) 2 WLR79Q
(HL).https://t.me/LawCollegeNotes_Stuffs

238. 102Chapter2Acceptance [S.5]
Discretiontolendertosetinterestrates
Power given to a lender bymortgageagreements,to setinterestratesfrom
time to time, has been held to be not anunfetteredpower. Suchpowercan
notbe used dishonestly, for animproperpurpose,capriciouslyorarbitrarily.
Thelendercannotsetexorbitantorunreasonablerates.
308.ParagonFinancePicvStaunton,(2002) 1WLR685: (2002) 2 All ER 248 (CA).
Visitebcexplorer.comtoaccesscasesreferred
to inthebookthroughEBCExplorer™on
seeOnline®;alongwithupdates,articles,videos,
blogsandahostofdifferentresources.
EBC
Explorer'
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•BhagivandasGoverdhandasKediavGirdharilalParshottamdas&
Co,AIR1966SC543:(1966) 1SCR656
• Brogden vMetropolitanRailway Co, (1877) LR 2 AC 666 (HL)
•EntoresLtdv Miles FarEastCorporation,(1955) 2 QB 327:
(1955)3WLR48
•Felthousev Bindley, (1863) 7 LT 835
•HaridwarSingh vBagunSumbrui,(1973) 3 SCC889
•IndianAirlinesCorpnvMadhuriChotvdhuri,AIR 1965Cal252
•KanhaiyaLaiAgrawal v UnionofIndia,(2002) 6 SCC 315
• ProgressiveConstructionsLtdvBharatHydroPowerCorpn Ltd,
AIR1996Del92
•RajendraKumarVerma v StateofM.P.,AIR 1972 MP 131
• SuisseAtlantiqueSocieteD'ArmementS.A. v N.V.RotterdamscheKolen
Centrals,(1967) 1 AC 361: (1966) 2 WLR 944 (HL)
• UnionofIndiavMaddalaThai, (1964) 3 SCR 774: AIR1966SC 1724
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

239. 3
Consideration
Section 25 of theIndianContractAct opens with thedeclarationthat"an
agreement madewithoutconsiderationisvoid...InEnglandalso"prom
iseswithoutconsiderationarenotenforced,becausetheyaregratuitous".^
InRannvHughes^Lord Chief BaronSkynnerobserved: "It is undoubtedly
truethatevery man is by the law ofnatureboundto fulfil his engagements.
It is equally truethatthe law of the country supplies no means, nor affords
anyremedy,to compel the performance of an agreement madewithoutsuf
ficientconsideration."
DEFINITIONANDITSREQUIREMENTS
Considerationhas been variously defined. The simplest definition is by
Blackstone:'*"Considerationis the recompense given by thepartycontract
ing to theother."
In other words, it is a price of the promise. In the words of Pollock,
"Consideration is the price for which the promise of the other is bought, and
the promisethusgivenfor valueisenforceable."^Anothersimpledefinition
is byJusticePatterson:®"Consideration means somethingwhich is of some
1. The section then goes on to provide certain exceptions to the rule. Questions of considera
tion do not arise unless there is an agreement. Associated Bombay Cinemas (?) Ltd vUrmi
DevelopersP Ltd, 1996 SCCOnLineBom319;(1997)2 BomCR 257, anagreementto form
partnership fordevelopingthe land of the owner;theland tobecomepartnership property
onpaymentofRsl.25crore to the owner;considerationnot paid, held, no question of the
land becoming partnership property. Kampa Prasad vAddlDistrict Judge, Mainpuri, AIR
1997All 201, judgment-debtoragreeingto pay decretal amount by stipulated date allowing
dismissal of objections but getting no benefitunder the agreement, agreement without consid
eration, void. The agreement was also void by reason of non-compliance with U.P.Regulation
of Money Lending Act, 1976.JupudiVenkataVijayaBhaskar vJupudiKesava Rao, AIR
1994 AP 134, agreement by a would-be adoptee that he would not claim the coparcernary
rights of hiswould-beparents is not voidfor want ofconsiderationand also does notinvolve
anysurrenderof rightsso as to attract S.17of theRegistrationAct, 1908.UdhoBaivAmbika
Titvary,AIR 2007 Pat 136, a piece of land belongedtofivebrothers, one of them alone sold
off the entire chunk of land for a single consideration ofRs25,000,the sale was held to be
void, it could not be specifically enforced.
2. SeeHeathJ in Lee vMuggeridge,(1813) 128 ER 599.
3.HouseofLords,(1778) 7 TermReports350n(HL).
4.Commentaries.
5. Sir Frederick Pollock,PollockonContracts(13th Edn) 133.
6. InThomasvThomas,(1842) 2 QB 851, 859.
[103]https://t.me/LawCollegeNotes_Stuffs

240. 104Chapter3Consideration [S. 2(d)]
value in the eyes of the law It may be some benefit to theplaintifforsome
detrimenttothedefendant."
But the mostcommonlyaccepteddefinitionisthatwhichwasattempted
byLushJ inCurrievMisa-7"Avaluableconsiderationinthesenseofthe
law, mayconsisteither in someright,interest,profitor benefitaccruingto
the oneparty,or someforbearance,detriment,loss, orresponsibilitygiven,
sufferedorundertakenby theother."
Thedefinitionofconsiderationas a"priceof thepromise"has been com
mended byCheshireand Fifoot.Accordingto thelearnedwriters,"it is
easier tounderstand,itcorrespondsmorehappilyto thenormalexchange
of promises and it emphasises the commercialcharacterof the English con
tract.It reveals theessentialsimplicityof theconcept."'TheCalcuttaHigh
Courthas observed in a casethat"considerationis the price of a promise,
areturnorquidproquo,somethingof value received by thepromiseeas
inducementof thepromise."®
InSection2{d) oftheIndianContractActconsiderationisdefinedas
follows:
When, atthedesire ofthepromisor,thepromiseeor anyotherpersonhas
doneorabstainedfromdoingordoesorabstainsfrom doing, or promises to do
or toabstainfromdoing,something,suchactorabstinenceorpromiseis called
aconsiderationforthepromise.
This is rather a practical definition. The purpose is to emphasise the sim
ple fact that consideration is some act, done or promised to be done, at the
desire of the promisor. It also avoids the practical difficulties caused by the
theoryofconsiderationasconsistingof some actwhichis beneficial to one
partyordetrimentalto theother.Thisantithesishasbeendescribedto be
not altogether happy. The Actsimplifiesthe matter by sayingthatany kind
ofactorabstinencewhichisdoneorundertakentobedoneatthedesireof
thepromisoris a sufficientconsideration.
The definition of consideration in Section 2(d) requires, in the first place,
that the act or abstinence, which is to be a consideration for the promise,
should be done at the desire of thepromisor,secondly,thatit should be done
by promisee or any other person and, lastly, that the act or abstinence may
7.(1875)LR10Ex153,162.
8.LawofContract{8thEdn,1972)60.
9.FazalaldinMandalvVanchananDas,AIR1957Cal92.Thesamecourthadheld inFanindra
NarainRoy vKachhemenBibi, AIR 1918 Cal 816:ILR(1917) 45 Cal 774thatconsideration
receivedby two mortgagors was good enough to bind all the four who executedthe mortgage
deed. This was followed inAndhraBank vAnantnath,AIR 1991 AP 245 so as to hold all the
joint promisors executing apromissorynote liable though consideration was handed over to
only one of them. Prakashwati Jain v Punjab StateIndustrialDevelopment Corpn, AIR 2012
PScH13, detriment suffered by the promisor for the benefitof another person (not party to
consideration)was heldas goodconsideration.Accordingly,the collateralsecurityofferedby
the surety for the benefit of the principal debtor was regarded as sufficient consideration to
makeitenforceable.https://t.me/LawCollegeNotes_Stuffs

241. [S.2(d)] Definition and its requirements 105
have been already executed or is in the process of being done or may be still
executory, that is to say, it is promised to be done.
"At the desire of thepromisor"{promissory estoppel)
The definition ofconsiderationin Section2{d)clearly emphasisesthat
an act or abstinence which is to be aconsiderationfor the promise must be
done or promised to be done in accordancewiththe desire of the promisor.
Inotherwords, anact^"shallnotbe a goodconsiderationfor apromise
unless it is done at the desire of the promisor. InDurgaPrasadvBaldeo-}^
Theplaintiff,on theorderof theCollectorof atown,builtat hisown
expense,certainshops in abazar.The shops came to beoccupiedby the
defendantswho, inconsiderationof theplaintiffhavingexpendedmoney
in theconstruction,promisedto pay him acommissionon articles sold
throughtheiragency in the bazar. Theplaintiff'sactionto recover the
commissionwasrejected.
"Theonlygroundfor themakingof thepromiseis the expenseincurred
by theplaintiffinestablishingthe Ganj (market) but it is clearthatanything
done inthatway was not'atthe desire' of thedefendantsso as toconsti
tuteconsideration."^^The act was theresultnotof thepromisebut of the
Collector'sorder.
Acts doneatrequest
On theotherhand,an act done at thepromisor'sdesirefurnishesa
goodconsiderationfor his promise eventhoughit is of nopersonalsig
nificanceor benefit to him.Thedecisionof theCalcuttaHighCourtin
KedarnathBhattacharjivGorieMahomed^^has becomewell-knownin
thisconnection.
It wasthoughtadvisable to erect a town hall atHowrahprovided suf
ficientsubscription could be got together for the purpose. To this end the
Commissioners ofHowrahmunicipalityset out to work toobtainneces
sary funds by pubhc subscription. The defendant was a subscriber to this
fund for Rs 100 having signed his name in thesubscriptionbookforthat
10. The word "act", for the purpose of this definition, includes "abstinence" also. BankofBaroda
VKayenkayAgencies, (2003) 1 BC 59 (Del), in connection with thegrantofoverdraftfacil
ity, fee ofRs5000for execution of documents was held to be a valuable consideration.K.
S. Bakshi v State, AIR 2008 NOC 998 (Del),contractbetweenlandownerand builder for
constructionof multistoreyed building, the owner agreeing to block his assets till completion,
good consideration, cheque issued in that connection was presumed to be for consideration.
11.ILR(1881) 3 All221,OldfieldJ at p.228.
12. See also Raja of Venkatagiri v RaoBahadurKrishnayya,(1948)61 LW 545: AIR 1948 PC
150; Adaitya Das v Prem Chand Mondal, AIR 1929Cal369. In this case the defendant
promisedto bringa Thakur to the plaintiff'shousetopresideovera dinner to begivento the
plaintiff's guests. The defendant failed to bring the Thakur and consequentlythe dinner was
whollywasted as no guest partook of it in the absenceof the Thakur. The plaintiff's action for
damages was dismissed as he had done nothing on the desire of the promisor.
13.ILR(1886) 14 Cal 64.
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242. 106 Chapter 3 Consideration [S.2(d)]
amount. On the faith of the promised subscriptions theplaintiffentered
into acontractwith acontractorfor thepurposeof building the hall. But
thedefendantfailed to pay theamountand contendedthatthere was no
considerationfor hispromise.
He was, however, held liable: Persons were asked tosubscribeknowing
the purpose for which the money was to be applied, they knewthaton the
faith of theirsubscriptionan obligation was to beincurredto pay the con
tractorfor the work. The promise is:"Inconsiderationof your agreeing to
enter into acontractto erect, Iundertaketo supply money for it." The act
of the plaintiff in entering intocontractwith thecontractorwas done at
the desire of thedefendant(thepromisor)so as toconstituteconsideration
withinthemeaningof Section 2{d).
It was indeed apromiseto pay for theperformanceof an actandit
could not have been revoked once thepromiseeenteredperformance.In
Englandalso"thelaw forcenturieshas beenthatan act done at therequest
ofanother,express orimplied,is sufficientconsiderationtosupportaprom
ise".^''Writingin anarticleDenningLJ says:"Nowadaysthere are some
groundsforsuggestingthatan act may be goodconsiderationeventhough
it isnotabenefitto thepromisornoradetrimentto thepromisee.If aman
promisesacharitableinstitutionthathe will pay£100intoitsfundsif it
procuresnineotherpersonsto do thesame,justicerequiresthathispromise
shouldbe heldbindingon him assoonas it hasprocuredthenine othersto
pay £ 100 each; but the act done by theinstitutionis not a benefit to him nor
adetrimenttotheinstitution."Atrendofthiskindisobservableinadecision
of the SupremeCourt.^^On the death of their father, his two sons picked up
a clash.Theirmotherintervenedwritingto thejuniorsonthatin case his
elderbrotherdid not pay the sum of rupees fiftylakhswhichwas due to him
out of the family assets, she would pay the same. Thebrotherpaid apartof
theamount.Themothersupplementedthepaymentto acertainextent,but
shehadstillto pay thebalanceamountandforthatsheclaimedareduction
inthecomputationofhernetwealth.TheCourtallowedthededuction.The
contractwas apartof the familyarrangement.It wasnothit by Section 25
aspurchaseof family peace in suchcircumstancesisgoodconsideration.
Aloangiven to the son at theinstanceof hisfatherwhoexecutedall the
essentialdocumentswas held to beenforceableagainstthefather.^®
Promisesofcharitablenature
The decision of theCalcuttaHighCourtin theKedarnathcase was fol
lowed bytheMadrasHighCourtintwocases inbothofwhichthecourt
14. Rt.Hon.SirAlfredDenning,RecentDevelopmentsin theDoctrineofConsideration,
(1952) 15ModernLaw Review, p. 1.
15.CWTVHerHighnessVijayaba,(1979) 2 SCO 213: AIR1979SC982.
16.RadhakrishnaJoshiv Syndicate Bank, (2006) 1 AIR Kant 692: (2006) 2 All LJ (NOC) 403
(Kant).https://t.me/LawCollegeNotes_Stuffs

243. [S. 2(d)] Definitionanditsrequirements107
laid downthat"a promise to pay asubscriptionbecomes enforceable as
soon as any definite steps have beentakeninfurtheranceof the object and
on the faith of thepromisedsubscription".^^In one of these cases:
A sum of Rs5000waspromisedby thedefendantas apersonalcontri
bution for thepurposeofconstructinga bridge. He was held liable to pay
theamountonthecompletionofthebridge.^^ ^Jjx
Inasubsequentcase,DoraswamiIyervArunachalaAyyar^^,theMadras J
HighCourtexplained the principle ofKedarnathBhattacharjiv Gorie
Mahomedon the footingthatthere was not a bare promise to subscribe,
but also a requestthatthe promisee should do an act(constructionof the
townhallinthatcase),andthatwherethereis no suchrequestfor anactthe
promise will be a bare promise andwithoutanyconsideration.The facts of
thecasewere:
The repair of a temple was in progress. As the work proceeded, more
money was required and to raise this money subscriptions were invited
and a subscription list raised. The defendant put himself down on the list
forRs125anditwastorecoverthissumthatthesuitwasfiled.
But no recovery was allowed.CornishJ proceeded like this:"The-plaint
found theconsiderationfor the promise as follows:Thatplaintiffsrelying on
the promise of the subscriber incurred liabilities in repairing the temple. The
question is, does this amount to consideration? The definition of considera
tionin theContractAct isthatwhere at the desire of thepromisortheprom
isee has done orabstainedfrom doingsomething,such act orabstinenceis
calledconsideration.Therefore,thedefinitionpostulatesthatthepromisee
must have acted onsomethingamountingto morethana bare promise.
There must be somebargainbetween them in respect of whichconsideration
has beengiven....There must havebeensomerequest bythe promisor to the
promisee to do something in consideration of the promised subscription."
The learned judge found support in the English case ofHudson,
where the promise was to contribute a large sum of money for the payment
17.PerumalMudaliarvSendanathaMudaliar,AIR1918Mad311.
18. District BoardofRamnadv D.K. Mahomed Ibrahim Sahib, AIR 1933 Mad 524. There are
some English authorities to the same effect. See, for example, Soames, re, (1837) 13TLR439.
In this case S promised to leavethe plaintiffs £3000 bywillfor opening of a school and its
maintenance. The plaintiffs immediatelyestablished the school, which it was clear they would
nothavedonebutforMissSoame'sinfluence.But herwillcontainednosuchbequest.It was
held that the plaintiffs were entitled to be paid £3000 from the estate by way of damages for
breachofcontract.Anothercase to thesameeffectisMountgarret,re, (1913) 29TLR325.A
testator promised to defray the cost of certain alterations in a Chapel in which he was inter
ested, provided the total expense did notexceeda certain amount. Estimates were obtained
andsubmittedto the testator, andthereafterthe Provost of the Chapel entered into a formal
contractfor thework.Thetestatordiedaftersomeof theworkhadbeenexecuted,butbefore
acontractfor theremainderhad beenenteredinto.Held,thatthetestator'sestatewas liable
for the cost of so much only of the work in respect of which a contract had been entered into
beforethetestator'sdeath.
19.AIR1936Mad135.
20.(1885)54LJCh811.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

244. 108Chapter3Consideration [S. 2(d)]
CASEPILOT
ofChapeldebts,thepromisorhavingdiedafterpayingalargeinstal
ment,thebalancecouldnotberecoveredfromhisexecutors.Theclaim
wasconsideredto beunsustainablein as much as thepromiseehadnot
undertakenany liability aspartof the bargain with the promisor. Applying
these principles to thepresentcase, thelearnedjudge saidthattherewas no
evidence of anyrequestby thesubscriberto theplaintiffto do the temple
repairs.
Unilateralpromises
Aunilateralpromiseis apromisefromone side onlyandisintendedto
inducesomeactionby theotherparty."Aunilateralcontractrefers to a gra
tuitouspromisewhere only onepartymakes apromisewithoutanyreturn
promise."^^Thepromiseeisnotboundto act, for he gives nopromisefrom
his side. But if hecarriesoutthe act desired by thepromisor,he can hold the
promisorto hispromise.His act is at the same time anacceptanceof and a
considerationfor thepromise."An act done at therequestof theoffererin
responseto hispromiseisconsideration,andconsiderationin its essence is
nothingelse butresponseto such arequest."^^
Itshouldbenotedthatin all the above cases whereliabilityarose it arose
only when thepromiseehad by doing some act, on the faith of thepromise,
altered his position. It follows, therefore,thatwhere the promisee has done
nothing,there is noconsideration.Accordingly, inAbdulAzizvMasum
Ali,^^the defendant promisedRs500to a fundstartedto rebuild a mosque
butnothinghad been done tocarryout the repairs andreconstruction.The
subscriber was, therefore, held not liable. Similarly, it has beenpointedout
inothercasesthata merepromisetosubscribeto acharitableinstitution
cannotbe suedupon.^''Thus where thedefendanthad agreed to pay from
time to time, out of his ownpocketcertainsumsproportionateto the value
of the goods imported by him, to a charitable society, the promise was held
to benotenforceable,beingwithoutconsideration.^^
21.AlokaBose vParmatmaDevi,(2009) 2 SCC 582: AIR2009SC 1527.Thecourtaddedthat
the observation in Mohd Mohar Alt case, AIR 1998 Gau 92 that an agreement of sale is a
unilateralcontractis not correct. Every sale presupposes somebody to sell and some other to
buy.
22. C.J.Hamson,TheReformofConsideration,(1938) 54LQR233,234.
23.AIR1914All 22:ILR(1914) 36 All268.
24. See,Gopalv Trimbak, AIR 1953 Nag 195;DoraswamiIyerv Arunachala Ayyar, AIR
1936 Mad 135;JihanKrishna MuUick vNirupamaGupta,ILR (1926) 53Cal922;C/Tv
Kameshwar Singh, AIR 1953 Pat 231. In this case an assessee purchased Government securi
ties and had agreed that the amount of interest on them would be paid to the Viceroy's War
Purposes Fund for the duration ofwar—held,the agreement was not legally enforceable.
Prejudice to rights is essential for therepresentationto beactionableunderthis rule. Societe
Italo—BeigePour Le Commerce etI'Industriev Palm &VegOils (Malaysia) Sdn Dhd,
(1982)1 All ER 19.
25.JamunaDasvRamKumar,AIR1937Pat358:169IC396.https://t.me/LawCollegeNotes_Stuffs

245. [S.2(d)] Definition and its requirements 109
Revocationofunilateralpromises
There is yet another problem concerning such unilateral contracts. It is
no doubt truethata promise which is given inreturnforanact is revo
cable before the promisee begins to alterhisposition by acting upon the
promise. But may it be revoked after the promisee has commenced perfor
mance? If, for example, the promise is to pay a sum of money if the prom
isee walks from Lucknow to Kanpur, can it be revoked after the promisee
has embarked upon thejourney?The decisionin KedarnathBhattacharjiv
GorieMahomed}^suggests,thoughnot in so many words,thatsuch a revo
cationisimpossible.Thedefendant,inthatcase, was heldliableassoonas
thecontractfortheconstructionofthehallwasenteredinto.
The same appears from the decision ofDenningLJ inErringtonv
ErringtonandWoods?'^The owner of a house had mortgaged it. The house
was in theoccupationof hisson^and daughter-in-law. He told themthat
the house would become theirpropertyif they paid off the mortgage debt
ininstalmentsand they commenced payment. In thesecircumstances,the
courtfeltthatit would be unjust if the promisor could revoke this promise
at his pleasure. His Lordship said:"Thefather's promise was aunilateral
contract...a promise of the house inreturnfor their act of paying the instal
ments. It could not be revoked by him once the couple entered onperfor
mance of the act, but it would cease to bind him if they left it incomplete
andunperformed."
Either way there is some difficulty. If thepromisoris atlibertyto revoke,
he canfrustratethe promisee at his pleasure. On theotherhand,if he has
no such liberty, he will beboundeventhoughthe promisee may stop per
formance at his sweet will. The House of Lords, therefore, suggested in
MorrisonSteamshipCoLtdvCrotun^^thatthe merecommencementof
performancedoesnotconvertthe offer into acontractin the sensethatthe
promisorisboundto staywithhispromise,butthatif he revokes it, he may
be sued fordamagesor on aquantummeruit?-^
PromissoryestoppelandGovernmentagencies
Thepositionof thedoctrineofpromissoryestoppel asagainstthe
Governmentandits agencies is thussummarisedbyRMSahaiJ of the
SupremeCourtinAmritBanaspatiCoLtdvStateofPunjab:^°
26.ILR(1886) 14 Gal 64.
27.(1952)1 KB290at p.295(CA).
28.(1924)20LILR283.
29. ForfurtherreadingseeJ.C.Smith,UnilateralContractsandConsideration,(1953) 69LQR
99and106.TheSupremeCourthas also held inLakshmanaswamiMudaliarvL/C,AIR
1963 SC 1185, 1190: 1963 Supp (2) SCR 887, 888, that the mere acceptance or retention of
donatedmoney does notamounttoconsiderationso as topreventthedonorfrom recovering
back hisdonation.SubbashChandravNagarMahapalika,AIR1984All228,wherethe
doneepromisedto spend Rs 100 on themaintenanceof the giftedproperty,held, no consid
eration;it wasonlyagift.
30. (1992) 2see411:AIR1992SC1075,1077.https://t.me/LawCollegeNotes_Stuffs

246. 110chapter3 Consideration [S.2(d)]
Law of promissory estoppel which found its most eloquent exposition
in Union of India vIndoAfghanAgenciesLtd,^^crystallised in Motilal
PadampatSugar Mills v StateofU.PJ^as furnishing cause of action
to a citizen, enforceable in acourtof law,againsttheGovernmentif
it or its officials in the course oftheirauthorityextendedanypromise
which created or was capable of creating legalrelationship,and it was
acted upon by the promisee, irrespective of any prejudice. It was reit
erated in UnionofIndiav Godfrey PhilipsIndiaLtd^^and wastaken
furtherwhen it was heldthatnodutyof excise was assessable on ciga
rettesmanufacturedby the assessee by including the cost ofcorrugated
fibreboardcontainerswhen it was clearlyrepresentedby theCentral
Board of Excise and Customs in response to the submission made by
the CigaretteManufacturers'Association and therepresentationwas
approved and accepted by theCentralGovernmentthatthe cost of con
tainerswouldnotbeincludedin the value ofcigarettesfor thepurpose
ofassessmentof excise duty. InDelhiClothandGeneralMillsLtdv
UnionofIndia^'^it was held: 'Allthatis nowrequiredisthattheparty
asserting the estoppel must have acted upon the assurance given to him.
Musthave reliedupontherepresentationmade to him. Itmeansthatthe
partyhas changed or altered his position by relying on the assurance
orrepresentation.Thealterationof hispositionby thepartyis the only
indispensablerequirementof thedoctrine.It isnotnecessaryto prove
furtheranydamage,detrimentorprejudiceto thepartyassertingthe
estoppel.'
InPournamiOilMills vStateofKerala^^theGovernmentwasnotper
mittedto gobackon itsearlierpromiseofwiderexemptionfrom salestaxin
pursuanceof whichcertainindustrieswere set up. Asubsequentnotification
curtailingtheexemptionwas held to be applicable toindustriesestablished
afterthenotification.Apromisewhichisagainstpublic policy or in viola
tion of astatutoryprohibitioncannotbe thefoundationof anestoppel.^®
Estoppeloflicensee
Thepartywho wasgrantedaliquorlicence was held to beestoppedfrom
sayingafterwardsthatsome of therestrictionsimposeduponhistradefree
dom,particularlytheoneunderwhichtheGovernmentreservedwithit
31.AIR1968SC718:(1968)2SCR366.
32.(1979)2see409:AIR1979SC621:(1979)2SCR641.
33.(1985)4see369,370:AIR1986SC806.
34.(1988)1see86:AIR1987SC2414,2419:(1988)1SCR383.
35.1986Suppsee728: AIR1987SC 590writjurisdictionisavailablewhenpromissoryestoppel
is involved but nototherwiseforenforcingaGovernmentcontract.ChamundiRollerFlour
Mills vPCI,(1992) 1KantLJ 579;PrakashvUnionofIndia,(1994) 2 Bom CR 53, even in
mattersofcontract,theGovernmentmustact fairly(Governmentlessee in this case),writ
petitionliesagainstunfairness.
36.AmritBanaspatiCoLtdvStateofPunjab,(1992) 2 SCC 411: AIR1992SC 1075,promiseto
refundsales taxamountsalready paid was held to be not capable ofcreatingan estoppel.https://t.me/LawCollegeNotes_Stuffs

247. [S.2(d)] Privity ofcontractand of consideration 111
the power to vary issue prices, were unreasonable. Unreasonableness has to
beconsideredin the totality of thecircumstancesincludingpublicinterest.
Liquorconsumptionhas to bereducedand,therefore,freetradeof such
an item cannot be encouraged. The power to vary issue prices is a method
ofexercisingcontrol of this trade. The courts will onlypreventa crush
ing use of this power. Such power does not also offend Section 29 of the
Contract Act because there is no uncertainty about the nature of the price
variation clause. Its unreasonable use can always be prevented under writ
jurisdiction.^^
A person, who had acquired title to the land of a Council byadverse
possession,agreedsubsequentlyto hold the sameundera term licence from
the Council. On the expiry of the term the Counciltoldhim tohandover
possession. He tried to assert his title by adverse possession. He was not
allowed to do so. Whatever rights he had acquired became substituted under
the new arrangement which he voluntarily accepted. The new arrangement
constitutedapromissoryestoppelagainsthim.^^
PRIVITYOFCONTRACT ANDOFCONSIDERATION
"Promiseeor anyotherperson"
The second notable feature of the definition ofconsiderationin Section 2(d)
isthatthe act which is toconstituteaconsiderationmay be done by"the
promiseeor anyotherperson".Itmeans,therefore,thatas long as there is
a consideration for a promise, it is immaterial who has furnished it. It may
move from the promisee, or, if the promisor has no objection, from any
other person. This principle had itsgenesisin the English common law, hav
ing beenadoptedby theCourtof King's Bench as early as1677inDutton
VFoole-P
Apersonhadadaughtertomarryandin order to provide her amar
riageportionheintendedto sell awoodofwhichhe waspossessedat
the time. His son (the defendant)promisedthatif'thefatherwouldfor
bear to sell at hisrequesthewouldpay thedaughter£1000'.Thefather
accordinglyforborebut thedefendantdidnotpay. Thedaughterandher
husbandsuedthedefendantfortheamount.
It isclearthatthedefendantgave thispromiseto hisfatherandit was the
fatheralone who, byabstainingfrom selling thewood,hadfurnishedcon
siderationfor thepromise.Theplaintiffwasneitherprivy to thecontractnor
interestedintheconsideration.But it isequallyclearthatthewholeobjectof
theagreementwas toprovideaportionto theplaintiff.Itwouldhave been
highlyinequitabletoallowthe son to keepthewoodandyet todeprivehis
sister of herportion.He wasaccordinglyheld liable.
37.LekhRaj vStateofRajasthan,(1987) 1 RajLR661.
38.ColchesterBoroughCouncilvSmith,(1991) 2WLR540.
39.Courtof King's Bench,(1677)2Levinz210: 83 ER 523.https://t.me/LawCollegeNotes_Stuffs

248. 112Chapter3Consideration [S.2(d)]
Positionofbeneficiary who isnotparty
Nearlytwohundredyearslater in1861inTweddlevAtkinson'''^the
Court of Queen's Benchrefused to follow thisprinciple.
The plaintiff was to be married to the daughter of one G and in con
sideration of this intended marriage G and the plaintiff's father entered
into a writtenagreementby which it was agreed that each would pay
theplaintiffa sumof themoney.Gfailedtodo so and the plaintiffsued
his executors.WhitmanJ considered it to be an established principle
'that no stranger to theconsiderationcan takeadvantageof a contract,
althoughmade for his benefit'.
Thus, although the sole object of the contract was to secure a benefit to
the plaintiff, he was not allowed to sue as the contract was made with his
fatherandnotwithhim.
The case laid thefoundationofwhatsubsequentlycame to beknownas
the doctrine of "privity ofcontract",which means that acontractis a con
tract between the parties only and no third person can sue upon it evenif it
isavowedlymade for hisbenefit."*^Referring to this in Drive YourselfHire
Co (London)LtdvStrutf^^DenningLJsuggestedthatthedoctrinenever
aroseuntil1861andthenobserved:
For the last two hundred years before 1861 it was settled lawthat,if
a promise in a simple contract was made expressly for the benefit of a
third person in such circumstances that it was intended to be enforceable
by him, then the common law would enforce the promise at his instance,
akhoughhe was not apartyto the contract.''^
The principle was affirmed by the House of Lords inDunlopPneumatic
Tyre Co v Selfridge & CoLtd.'^'*
Plaintiffs (Dunlop&Co) soldcertaingoods to one Dew&Co and
secured an agreement from them not to sell the goods below the list price
andthatif they sold the goods toanothertraderthey wouldobtainfrom
him a similarundertakingtomaintainthe price list. Dew&Co sold the
motortyres to the defendants (Selfridge&cCo) who agreed not to sell the
tyres to any private customer at lessthanthe list prices. The plaintiffs
suedthedefendantsforbreachofthiscontract.
It was heldthatassumingthattheplaintiffswereundisclosedprin
cipals, noconsiderationmoved from them to the defendants andthat
thecontractwasunenforceablebythem.LordViscountHaldanemost
emphaticallydeclaredthat:
40.123ER762:1B&S23,393:30 LJ QB 218: 4 LT468.
41.KantaDeviBerlliavMohitJhunjhunwala,(2006) 2CHN161, nor can such apersonbe sued
onthecontract.
42.(1954) 1 QB250at p.272:(1953) 3WLR1111.
43. See a note byE.J.RonPrivityofContract,(1954) 70 LQR 467.
44.1915AC847.https://t.me/LawCollegeNotes_Stuffs

249. [S.2(d)] Privityof contractand ofconsideration113
In the law ofEnglandcertainprinciplesarefundamental.One is that
only a person who is apartyto a contract can sue on it. Our law knows
nothingofajusquaesitumtertioarisingbywayofcontract.Sucharight
maybeconferredbywayofproperty,as, forexampleundera trust, but
it cannotbeconferredon astrangerto a contractasa righttoenforcethe
contract in personam. A second principleis that if a person with whom a
contract not under seal has been made is to be able to enforce it, consid
eration must have been given by him.
Fundamental propositions ofEnglishLaw
Statedin otherwordsthe twofundamentalpropositionsofEnglishlaw
referred to by his Lordship are:
(1)Considerationmustmovefromthepromiseeandthepromiseeonly.If
itbefurnishedbyanyotherperson,thepromiseebecomesastrangerto the
considerationand,therefore,cannotenforcethepromise.''-'
(2)Acontractcannot beenforcedbya personwhoisnot a party to iteven
though it is made for hisbenefit.He is a stranger to the contract and can
claim no rightsunderit.'*^
Privityofconsideration
TheformerofthesetwopropositionsisnotatallapplicableinIndia.Here,
inviewoftheclearlanguageusedindefiningconsiderationinSectionl{d),
it is notnecessarythatconsiderationshould befurnishedby thepromisee.
Apromiseisenforceableif thereissomeconsiderationfor it and it isquite
immaterialwhether itmovesfrom thepromiseeor any other person. The
leadingauthorityis thedecisionof theMadrasHigh Court inChinnayav
Ramayya:'*^
An oldlady,bydeedof gift, madeovercertainlandedproperty to the
defendant,herdaughter.Bythetermsof thedeed,whichwasregistered,
it wasstipulatedthat an annuity of Rs653should be paideveryyear to
theplaintiff,who was the sister of the oldwoman.Thedefendanton the
samedayexecutedinplaintiff'sfavouran Iqrarnama(agreement)prom
isingtogiveeffectto thestipulation.The annuitywas,however,not paid
andtheplaintiffsued torecoverit.
It wasclearthat the onlyconsiderationforthedefendant'spromiseto pay
the annuity was the gift of certain lands by the old woman to the defendant.
45. SeeAnson,PrinciplesoftheEnglishLawofContract(23rd Edn by A.G. Guest, 1971)
89; Cheshire and Fifoot, LawofContract(8th Edn, 1972) 64.
46. See Anson, ibid at p. 370; Cheshire and Fifoot, ibid at pp.380-82;Arthur L. Corbin,
Contracts for the Benefit of Third Persons, (1930) 46 LQR 12. In this article the learned
writer maintains that the doctrine is not after all as dogmatic as the leading authors on the
EnglishLawofContractassert.
47.ILR(1876-82) 4 Mad 137. Another illustration: Samuel Pillai vAnanthanathaPillai, (1883)
6Mad351.https://t.me/LawCollegeNotes_Stuffs

250. 114Chapter3Consideration [S-2(d)]
Thedefendant,therefore,tried todefendherselfon thegroundthat the
promisee(theplaintiff)hadfurnishednoconsideration.Briefly,thewhole
situation was this: thedefendant'spromisewasgivento the plaintiff, but
considerationwasfurnishedby theplaintiff'ssister.The court couldhave
easilyallowedtheplaintifftorecovertheannuity,asconsiderationgivenby
"anyotherperson"isequallyeffective.Thecourtreachedthesameresult
but on a somewhat different ground.InnesJ tried to equate the situation
with the facts ofButtonvPoole.Inthatcase thedefendant'ssister would
havegothermarriageportionbutforthedefendant'spromise.Inthepresent
casealsoitappearedthat theplaintiffwasalreadyreceivingfromhersister
anannuityoflikeamountoutoftheestateandwhentheestatewashanded
overto thedefendantit wasstipulatedthat thepaymentto the plaintiff
should becontinuedand shepromisedaccordingly.Thatmeansthat the
failuretokeepthepromisewouldhavedeprivedtheplaintiffof an amount
whichshewasalreadyreceivingand it is alegalcommonplacethat if a
promisecausessomelosstothepromisee,thatissufficientconsiderationfor
thepromise.Thustheplaintiffhadgivenconsideration.
JusticeKindersleyalsocameto thesameconclusion,butonadifferent
ground.Accordingto him thedeedof gift and thedefendant'spromiseto
paytheannuitywereexecutedsimukaneouslyand,therefore,theyshouldbe
regardedasonetransactionandtherewassufficientconsiderationforthat
transaction.
Americanjudicialopinionisinfavourofthisrule.Inthewordsofthegreat
AmericanwriterWilliston:"Therulethatconsiderationmustmovefrom
thepromiseeissomewhattechnical,and in adevelopedsystemofcontract
lawthereseemsnogoodreasonthatwhyAshouldnot beablefor aconsid
erationreceivedfromBto make aneffectivepromise to C. Unquestionably
hemayin theformof apromissorynote,and thesameresultisgenerally
reachedin this country in the case of an ordinarysimplecontract.'"'^
Privityofcontract
The rule of "privity ofcontract"which meansthata stranger tocontract
cannotsue hastakenfirm roots in the EnglishCommonLaw. But theprin
ciplehas beengenerallycriticised.''®In1937,the LawRevisionCommittee,
under the chairmanship of LordWright, alsocriticisedthe doctrine and rec
ommended its abolition. In its Sixth Interim Report the Committee stated:
Where a contract by itsexpressterms purports to confer abenefit
directly on a third party, the third party shall be entitled to enforce the
provisionin his ownname,providedthat thepromisorshall beentitled
48. Samuel Williston,Contractsfor the Benefit of a Third Person, (1901-02) 15HarvL Rev 767.
49. Professor Corbin, Contract for the Benefit of Third Person, (1930) 46 LQR 12. Andrew
Tettenborn,ThirdPartyContracts—Pragmatismfrom the Law Commission, 1996 JBL 602;
PeterKincaid,Privity Reform in England,(2000)116 LQR 43; M.H.Ogilvie,Privity of
Contract in the Supreme Court of Canada; Pare Thee'WellorWelcomeBack, 2002 JBL 163.https://t.me/LawCollegeNotes_Stuffs

251. [S.2(d)] Privity of contract and of consideration 115
to raise against thethirdpartyany defencethatwould have beenvaUd
against thepromisor....
LordJusticeDenninghas alsocriticisedthe rule in a number ofcases/"
in one of which his Lordshipobserved:^^
It(theprivityprinciple)hasneverbeenableentirelyto supplantanother
principle whose roots go much deeper. I mean the principle that a man
whomakesadeliberatepromisewhichisintendedto bebinding,that is
tosay,under seal or for goodconsideration,must keep hispromise;and
the Court will hold him to it, not only at the suit of the party whogave
theconsideration,but also at the suit of one who was not a party to the
contract,providedthatit wasmadefor his benefitandthathe has a suffi
cient interest to entitle him to enforceit, subjectalways,of course, to any
defencesthatmay be open on the writs.
In thesubsequentcase ofBeswickvBeswick^^the Court of Appeal
adoptedthe sameapproach.Inthatcase:
B was a coal merchant. The defendant was assisting him in his busi
ness. B entered into an agreement with thedefendantby which the busi
ness was to be transferred to the defendant. B was to beemployedin it as
a consultant for his lifeand after his death the defendant was to pay to his
widow anannuityof £ 5 per week, which was to come out of the business.
AfterB'sdeath, the defendant paidB'swidow only one sum of £5. The
widowbroughtan action to recover thearrearsof theannuityand also to
get specificperformanceof the agreement.
It was held that shewas entitled to enforcethe,agreement.Thus the plain
tiff was allowed to enforce the agreement in her personal capacity, although
she was not apartyto it and it was considered not necessary to infer atrust
in favour of the plaintiff. LordDenningMRconcluded with the words:
Where acontractis made for the benefit of athirdperson who has a
legitimate interest to enforce it, it can be enforced by the third person in
thenameof thecontractingpartyorjointlywithhim or, if herefusesto
join, byaddinghim as adefendant.Inthatsense, and it is a very real sense,
thethirdpersonhas arightarisingby way ofcontract.Hehas aninterest
whichwill beprotectedby law.Theobservationsto thecontrary...are
50. See Smith & SnipesHallFarmLtdvRiverDouglasCatchmentBoard,(1949) 2 KB500(CA);
DriveYourselfHireCo(London)LtdvStrutt,(1954) 1 QB 250: (1953) 3WLR1111.
51. In first of theabove-statedcases, at pp.514-15.CatherineMacMillan,ABirthdayPresent
forLordDenning-, TheContracts(RightsofThirdParties)Act,1999,(2000) 63MLR721 at
pp.726,730-31.ThisNewZealandActpermitsapersonwho isnotapartyto acontractto
enforcea term of thecontractin twosituations:(1)wherethecontractexpresslysoprovides
and(2)wherethetermpurportstoconfera benefitexceptwhereonproperconstruction,it
appearsthatthepartiesto thecontractdid notintendthatthe termshouldbeenforceableby
thethirdparty.S. M.Waddams,PrivityofContractin theSupremeCourtofCanada,(1993)
109LQR349.
52.1968AC58:(1967)3WLR932.https://t.me/LawCollegeNotes_Stuffs

252. 116Chapter3Consideration [S.2(d)]
inmyopinionerroneous.It isdifferentwhena thirdpersonhas nolegit
imate interest, as when he is seekingto enforcethe maintenance of prices
to thepublicdisadvantage,as in DunlopPneumaticTyrevSelfridge&
CoLtd^^or when he is seeking to rely not on any right given to him by
the contract, but on anexemptionclause,seekingto exempthimselffrom
his just liability.
The case showsthatareform,as wasrecommendedby the Law Revision
Committee in 1937,is long overdueand if Parliament takes any step in this
respectthatwould hardly be revolutionary.
Anothersuchobservationis to be seenthroughthe words ofSteynLJ in
Darlington Borough Council vWiltshierNorthernLtd-J'*
"The case for recognising acontractfor the benefit of athirdparty
issimpleand straightforward. The autonomy of the will of the parties
should be respected. The law of contract shouldgiveeffectto the reason
ableexpectationsof contracting parties.Principlecertainly requires that
a burden should not be imposed on a thirdpartywithouthis consent. But
there is no doctrinal, logical or policy reason why the law should deny
effectivenessto acontractfor the benefit of athirdpartywherethatis the
expressed intention of the parties. Moreover, often the parties, and par
ticularly third parties, organise their affairs on the faith of the contract.
They rely on the contract. It is therefore unjust to denyeffectivenessto
such acontract.I will not strugglefurtherwith thepointsincenobody
seriouslyassertsthecontrary...."
But the House of Lords did not approve the approach adopted by Lord
DenningMR and found for the plaintiff on a differentground.LordReid
saidthatthe plaintiff "in her personal capacity has no right to sue, but she
has a right asadministratrixof herhusband'sestate to require theappellant
to perform this obligation under the agreement". LordPearceput it like
this:"Theestate (though not the widow personally) can enforceit."'®
In someearliercases also theHouseofLordsshowednopreference
for LordDenning'sapproach.Forexample,inScruttonsLtdvMidland
SiliconesLtd^'^referringto theargumentthattheorthodoxviewwhichcrys
tallised acenturyago inTweddlevAtkinson(1861)and finally established
inDunlopv Selfridge (1915)shouldberejected,ViscountSimondsaidthat
"certainstatementswhichappeartosupportit inrecentcases such as Smith
VRiverDouglasCatchmentBoard^^andWhite vJohnWarwick & CoLtd^^
mustberejected.If theprincipleoijusquaesitumtertiois to beintroduced
53.1915AC847.
54.(1995)1WLR68 at p.903-04(CA).
55.BeswickvBeswick,1968AC 58:(1967)3WLR932.
56. AsstatedinAnson,TheLawofContract(23rdEdnby A.G.Guest,1971)388.
57.1962AC446:(1962)2WLR186(HL).
58. (1949) 2 KB500:(1949) 2 All ER 179.
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253. [S.2(d)] Privity of contract and of consideration 117
into our law, it must be done by Parliament after a due consideration of its
meritanddemerits".HisLordshipemphasisedthat "the law isdeveloped
by theapplicationof oldprinciplesto newcircumstances.Therein lies its
genesis.Its reformbythe abrogationof thoseprinciplesis the task not of the
courtsoflawbutofParhament".
Position in India: Decisions following English Law
In India also there has beena greatdivergenceof opinion in the courts as
to how far a strangerto a contract canenforceit. There are manydecided
caseswhichdeclarethat a contract cannot beenforcedby a person who is
not a party to it and that the rule inTweddlevAtkinson^"is as much appli
cable in India as it is inEngland.But there is noprovisionin the Contract
Act either for or against the rule. The Privy Council extended the rule to
India in its decision inJamnaDasvPanditRamAutarPande.^^
A borrowedRs40,000byexecutingamortgageof her zamindari in
favourof B.Subsequentlyshe sold the property to C forRs44,000and
allowedC, thepurchaser,to retainRs40,000of thepricein order to
redeemthemortgageif he thoughtfit.BsuedC for therecoveryof the
mortgagemoney,but he could not succeedbecausehe was nopartyto the
agreementbetweenAandB.
LordMacNaughtan,in his very short judgment, saidthatthe under
taking to pay back the mortgagee was givenby the defendant to his vendor.
"Themortgageehas no right to availhimselfof that. He was no party to the
sale. The purchaser enteredinto no contract with him, and the purchaser is
not personally bound to pay this mortgagedebt."^^
Thus, whereall that appearsisthat a persontransfersproperty to another
andstipulatesfor the payment of moneyto a third person, a suit toenforce
thatstipulationby the third party will notlie.^^But the party making the
contract maysueforspecificperformancefor thebenefitofthe third party.
Similarly,where on a lease of certain muafi land, thelesseesundertook,
asbetweenthemselvesand theirlessor,to beresponsiblefor the payment
to the zamindar of certainsumswhichthemuafidarwas primarily bound
to pay, it was held that the zamindar could not enforce this covenant by a
60. 123 ER 762: 1B&S23,393: 30 LJ QB 218: 4 LT468.
61.(1911-12)39lA7: ILR (1911-12) 34 All 63.BabuRamBudhuMaivDhanSingh Bishan
Singh,AIR 1957 Punj 169, the first mortgageewas not allowedto recoverthe moneyretained
by thesecondmortgageeunder theagreementbetweenthe owner and secondmortgagee.
62. At p. 9.ThamSawFongvTehTengSengRealty,(1990)2CurrLJ860(Malaysia),High Court,
Ipoh,where the directors of a company were not permitted to sue a person who puported to
sell land to theircompanyand about whom theyallegedthat hedefaultedingivingvacant
possession.
63. SubbuChettivArunachalamChettiar,ILR (1930) 53Mad270: AIR 1930Mad382.
64.K.GopalasamyChetty v SelliammanKoilCoopHousingSociety Ltd, (2003) 1ICC
184(Mad).https://t.me/LawCollegeNotes_Stuffs

254. 118Chapter3Consideration [S.2(d)]
suitagainstthelessees."Instillanothercase",theplaintiffcouldnot get
adecreeagainst theappellantfor his salary on thebasisof anagreement
entered into by the plaintiff with anotherperson/^
In theopinionofRankinCJthisseemsto be theeffectof the Contract
Actitself. InKrishnaLaiSadhuvPromilaBalaDasi^^heobserved:Not
only,however,istherenothinginSection2 toencouragethe ideathat con
tracts can beenforcedby a person who is not a party to the contract, but
this notion isrigidlyexcludedby thedefinitionof "promisor" and "promi
see"....In myjudgment,it is erroneous... tosupposethat in India persons
who are not parties to a contract can be permitted to suethereupon....
Consequently,a Hinduassured'swife'sactiontorecoverthemoneydue
under herdeceasedhusband's pohcy wasrejectedbecauseshe, though a
nomineeunder thepolicy,was not a party to the contractbetweenthe
deceasedand the insurancecompanyand no interest passed to hermerely
becauseshe wasnamedin thepolicy.®^
Decisionsnotfollowing EnglishLaw
There is,however,another line of thinking also which is mainly based
upon anobservationof thePrivyCouncilin Nawab Khwaja Muhammad
Khan vNawabHussainiBegum Their Lordships observed:
In India and amongcommunitiescircumstanced asthe Mahommedans,
amongwhom marriages are contractedfor minors byparents and guard
ians it might occasion serious injustice if the common law doctrine was
appliedtoagreementsorarrangementsenteredinto inconnectionwith
suchcontracts.
This statement has been taken by some High Courts as laying down the
rulethatIndiancourtsare notboundby the rule in Tweddle vAtkinsonJ^
Accordingly,it hasbeenobserved by the Madras HighCourt:^^
CASEPILOT
65. Mangal Sen v MohdHusain,ILR(1915) 37 All 115.
66.Stateof Bihar vCharanjitlalChadha,AIR 1960 Pat 139.
67. This line of thinking has been followed in insurance cases also. See, for example, Shankar
Vishvanath vUmabai,ILR (1913) 37 Bom 471, where the beneficiary of aninsurancepolicy
could claim no right under thecontractbetween the assured and theinsurancecompany
because there was nothing to show that the plaintiff was either the promisor or the promisee
and, therefore, a party to theagreement.Seealso Oriental Govt SecurityLifeAssurance Ltd
VVentedduAmmiraju, ILR (1912) 35 Mad 162, where it was held that the contract between
the companyand the assuredgivesno right of action to thebeneficiarynamed.
68.AIR1928Cal518:ILR(1928)55Cal1315.
69. Other examples of the rule are:ProtapmullRameswarv State ofW.B.,(1956) 61CWN78;
ChhangamalHarpaldas v Dominion of India, AIR 1957 Bom276. In the last-mentionedcase
the court held that a bare consignee, who is not a party to the contract of consignment, and
who is not the owner of the goods,cannotmaintaina suit for compensation for loss of or
damageto thegoods.
70.(1909-10)37lA152.
71.123ER762:1B&S23,393:30 LJ QB218:4 LT468.
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255. [S.2(d)] Privity of contract and of consideration 119
There isampleauthority for thepropositionthat in thiscountry,and
indeed in a certain class of cases in England where a contract is made
between 'A' and'B'for the benefit of'C,'Cis entitled to sue the default
ing party. It isunnecessaryto cite authorities, but theprincipleisfirmly
establishedfor this country bythe decisionof the Privy Council inNawab
KhwajaMuhammad Khan v Nawab HussainiBegumJ^
Similarly,the Calcutta High Courtobserved:^''Nor is there anything in
the Indian Contract Act, whichpreventsthe recognitionof a right in a third
party to enforce a contract made by others, which contains a provision for
hisbenefit.
Again,JenkinsCJ said in anotherimportantcase:^^We now have ample
authority for saying that theadministrationof justice in British India is
not to be in any wayhamperedby thedoctrinelaid down in Tweddle v
AtkinsonJ^That I take to be the result of the decisionof the Privy Council
in Nawab KhwajaMuhammadKhan v Nawab HusainiBegumJ^
SupremeCourtupholdsprivity
The SupremeCourtof India has expressed itself in favour of the rule in
Tweddle v Atkinson. In M.C. Chacko v State Bank ofTravancore^^Shah
Ag. CJ(afterwardsCJ) endorsed thestatementofRankinCJ inKrishnaLai
SadhuVPromilaBalaDasf^and after referring to theobservationof Lord
HaldaneinDunlopv Selfridge, said:
The JudicialCommitteeappliedthatrule inNawabKhwaja
MuhammadKhan vNawabHussainiBegum.^°In a later case,Jamna
73.(1909-10)37lA152.
74.KshirodebihariDuttavMangobindaPanda,ILR(1934) 61Cal841: AIR 1934Cal682, Per
LordWilliamsJ at p. 857.RaymondWoollen MillsLtdvCoalIndiaLtd,(1998) 1CHN53,
where thecourtsaid that the doctrine of privity ofcontracthas undergone a change in recent
years and, therefore, a principal can initiate a legal action against a thirdpartyalthoughthe
principalwas only one of thebeneficiariesunderthecontract.Thecourtcited thedecision
of theHighCourtofAustraliainTridentGeneralInsurancevMcNieceBros PLtd,(1988)
165 CLR 107:1989CommLR 1wherethecourtobserved:"Thelong-establishedrulethat
acontractcouldbeenforcedonly by thepartiestothatcontracthadcausedconsiderable
injustice and inconvenience in thecontextofcontractsof liabilityinsurance.The existence
of the privity rule had provoked criticism by judges, academics and law reform agencies alike
andin somejurisdictionsstatutoryabrogationof the rule hadoccurred.Itwouldbeunjust
in the present case to apply the rule and preclude therespondentfrom enforcing the policy of
insurance."Thecourtalso citedIndianMutualGeneralInsuranceSocietyLtdvHimalaya
FinanceandConstructionCo,AIR1974Del 114,wheretheratioofthedecisionwasthatthe
ownersof a vehicle who really have legalinterestin thepropertycouldvery easily comewithin
thedefinitionofbeneficiary,thoughnotpartyto thepolicybecausethesamewastakenout by
thehirer.
75.DebnarayanDattvChunilalGhose,ILR (1914) 41 Cal 137.
76.123ER762:1B&S23,393:30 LJ QB 218: 4 LT468.
77.(1909-10)37lA152.
78.(1969)2SCC343:AIR1970SC504.
79.AIR1928Cal 518:ILR(1928) 55 Cal1315.
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256. 120Chapter3Consideration [S.2(d)]
Das VPanditRamAutarPande,^'^the Judicial Committee pointed out
that thepurchaser'scontractto payoffamortgagecouldnot beenforced
bythemortgageewhowasnot a party to thecontract.Itmusttherefore
be taken as well-settled that except in the case of a beneficiary under a
trust or in the case of a family arrangement, no right may be enforced by
apersonwho is not apartytocontract.
Thefactsofthecasewereasfollows:
The Highland Bank was indebted to the State Bank ofTravancore
under an overdraft. One M was the manager of theHighlandBank and
. his father K had guaranteed therepaymentof the overdraft. K gifted
hispropertiesto themembersof hisfamily.The giftdeedprovidedthat
theliability,ifany,under the guarantee should be met by M either from
the bank or from the share of property gifted to him. The State Bank
attempted to hold M liableunder thisprovisionof thedeed.
But he was held not liable."TheState Bank not being apartyto the deed
was not bound by the covenants in the deed, nor could it enforce the cove
nants. It is settled law that a person not apartyto acontractcannotenforce
thetermsofthecontract."
Therepresentativeswho held the properties of K would have been liable
to pay out of the property if the action against them had not been time
barred.
Exceptions toprivityrule
In the course of time, thecourtshaveintroducedanumberof excep
tions in which the rule of privity ofcontractdoes not prevent apersonfrom
enforcing acontractwhich has been made for his benefit butwithouthis
being a party to it. Many of the exceptions are connected with the special
branchesof the law ofcontract,such asnegotiableinstruments,agency, bill
of lading, railway receipts,transferofproperty,etc. Some of the most com
monlyknownexceptions may be considered here.
1. Beneficiariesundertrustor charge orotherarrangements
A person in whose favour a charge or other interest in some specific prop
erty has beencreatedmay enforce itthoughhe is not apartyto thecontract.
The decision of the PrivyCouncilinNawabKhwajaMuhammadKhanv
NawabHussainiBegum^^isillustrativeof this principle. The facts were:
81.(1911-12)39lA7:ILR(1911-12)34 All 63.
82. See,M.C.ChackovStateBankofTravancore,(1969) 2 SCC 343: AIR1970SC504at
pp.347-48.Reaffirmedby the SupremeCourtinP.R.SubramaniaIyervLakshmiAmmal
LakshmiAmmal,(1973) 2 SCC 54;FatehchandMurlidharvMaharashtraSEE,AIR1985
Bom 71, where it was heldthatwhere the supply ofelectricitywasgrantedto theoccupierof
a premises, itsownercould not be sued for dues, there being no privity.
83.(1909-10)37IA152.https://t.me/LawCollegeNotes_Stuffs

257. [S.2(d)] Privityof contract and ofconsideration121
Theappellantexecutedanagreementwiththerespondent'sfatherthat
inconsiderationof therespondent'smarriagewithhisson(bothbeing
minors at thetime)he would pay to the respondentRs500a month in
perpetuityforthebetel-leafexpensesandchargedcertainpropertieswith
thepayment,with power to therespondenttoenforceit. The husband
andwifeseparatedonaccountofaquarrelandthesuitwasbroughtby
theplaintiff-respondentfortherecoveryofthearrearsofthisannuity.
It washeldthat therespondent,althoughno party to theagreement,was
clearlyentitledtoproceedinequitytoenforceherclaim."Heretheagree
mentexecutedby the defendant(appellant)specificallychargesimmovable
propertyfor theallowancewhichhebindshimselfto pay to the plain
tiff(respondent);she is the only personbeneficiallyentitledunder it." An
example of a trust in favour of a third party is to be found in the facts of
anotherPrivyCouncildecision,namely,RanaUmaNathBakhshSinghv
JangBahadur:^'*Uwasappointedbyhisfatheras hissuccessorandwasput
inpossessionof his entire estate. Inconsiderationthereof U agreed with
hisfatherto paya certainsumofmoneyand togiveavillageto /, the ille
gitimate son of his father, on hisattainingmajority. It was heldthatin the
circumstances mentioned above a trust was created in favour of / for the
specified amount and the village. Hence he was entitled tomaintainthe
suit.^^
InEnglandalsothereis a line of cases inwhich"trust"has been used as
adeviceforholdingthepromisorto hispromise.One suchcaseisGregory
&ParkervWilliams-}^
Parkerwas indebtedto bothWilliamsandGregory.Parkerassignedall
hispropertytoWilliamsinsatisfactionof the debt andWilliams
ised to pay Parker's debt toGregory.Williamsfailedtopay.But
held liableto pay Gregory in terms of his promise with Parker.
Another illustration is Touchev MetropolitanRlyWarehousingCo:^^
The plaintiff renderedservicesto the promoters of the defendant-
companyand theypromisedthathe should receive£2000from the com
pany. Later, when thecompanywas formed, its articles ofassociation
providedthat£2000should be paid to Walker, one of the promoters, for
the benefit of theplaintiff.
Theplaintiffsued thecompanyin his own name. It was heldthatthe
defendant-company's promise was for the benefit of the plaintiff andthat
the plaintiff had the right to obtain the benefit of the arrangement entered
intobetweenthepromoterand the company.
prom-
hewas
84.AIR1938PC245.
85. InKshirodebihariDuttavMangobindaPanda,ILR (1934) 61 Cal 841: AIR 1934 Cal 682.
86.(1817)3Mer582:36ER224.
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258. 122Chapter3Consideration [S.2(d)]
Trustmaybeactualorconstructive.Butingeneralthecourtsareslowto
inferaconstructivetrust.ExplainingthejudicialapproachinRamchandv
ThakurJankiBallabhjiMaharaf^Shah,AGCJ(afterwardsCJ)said:
Forcreatingachargeonimmovablepropertynoparticularformof
words isneeded;...Butin order that a chargemay be created, there must
beevidenceof intention disclosed by the deed that aspecifiedproperty
or fund was intended to be made liable to satisfy the debt. The recitals in
thedeed(inthepresentcase)do notevidenceanyintentionof the donor
to create achargeinfavourof the StateBank;theymerelyset out an
arrangementbetweenthedonorand themembersofhisfamilythat the
liabilityundertheguaranteewillbesatisfiedbyM.C.Chackooutofthe
property allottedto him under thedeed.
Constructivetrustiscreatedinfavourof anaddresseeofinsuredarti
cles and he can claim compensation from the Central Government on
non-delivery of sucharticles.^'
An airlinecompanymade an arrangement with a hotel foraccommo
datingitspassengers.Oneofthepassengerssoaccommodatedwasinjured
becauseofnegligentmaintenanceofthehotelpremises.Hisactiondirectly
againstthehotel-keeperwasallowed.Thecourtsaidthedoctrineofprivity
of contract issubjectto manyexceptions,one of thembeingthat abenefi
ciarycansueon acontractwhichismeantonlytoprovidesomebenefitsto
him.'°
2. Marriage settlement, partition or otherfamilyarrangements
Where an agreement is made in connection with marriage,partitionor
otherfamilyarrangementand aprovisionis madefor thebenefitof a per
son, he may takeadvantageof thatagreementahhoughhe is no party to
it. Forexample,inRoseFernandez v JosephGonsalves,^^a girl's father
enteredinto anagreementfor her marriagewith thedefendant,it was held
that the girlafterattainingmajoritycouldsuethedefendantfordamagesfor
breachof the promiseof marriage and the defendantcould not take the plea
that she was not a party to the agreement.Similarly,where two brothers,
88. (1969) 2see313.
89.ChaudhriAmirUllahvCentralGovt,(1959)57 All LJ 271;PostmasterGeneralv Ram
KripalSahu,AIR 1955 Pat 442. Punjab National Bank v KhazanSingh,AIR 2004P&H
•282,financier ofvehicleis the beneficiaryof the insurance policy on the vehicle, entitled to be
impleaded in a proceeding under an accident claim.
90.KlausMittelbachertvEastIndiaHotelsLtd,AIR1997Del201at p.230.InGreenev
Chelsea Borough Council,(1954)2 QB 127: (1954) 3 WLR 12, the husband had taken prem
ises on licence from the defendant. A ceiling fell on his wife injuring her. She was allowed to
sue the owner in her own right as a beneficiaryunder the contract. Prithvi Singh v BanshiLai,
AIR 2004 Raj 100, landlord gave a piece oflandto his tenant in lieu of the latter permitting
passage to a person who had purchased a part of the property. Denial of such passage to the
purchaser on the ground that there was no privity betweenhim and the tenant was held to be
improper.
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259. [S.2(d)] Privity of contract and of consideration 123
on a partition of joint properties, agreed to invest in equal shares a certain
sum of money for themaintenanceof theirmothershe was held entitled to
requirethem to make theinvestment.^^Also,whereadaughteralongwith
herhusbandagreedthat shewillmaintain her motherif the property of the
fatheris conveyed tothem,themotherwas heldentitledtomaintaina suit
forspecificperformance although the agreement was between the father,
daughterand thedaughter'shusbandonly and the mother was not a party
toit.'^Another interesting case isDaroptivJaspatRai.^'^The defendant's
wife left him because of hiscruelty.He then executed an agreement with
herfather,promisingto treat herproperly,and if hefailedto do so, to pay
hermonthlymaintenanceand toprovideherwith adwelling.Subsequently
she was againill-treatedby the defendant and also driven out. She was held
entitled to enforce the promise made by thedefendantto her father.
3.Acknowledgmentorestoppel
Where by the terms of a contract a party is required to make a payment
to a third person and he acknowledgesit tothatthirdperson, a binding obli
gation is thereby incurred towards him.Acknowledgmentmay be express
or implied. This exception covers cases where the promisor by his conduct,
acknowledgment, or otherwise, constitutes himself an agent of thethird
party. The case of N.DevarajaUrs vRamakrishniah^^is a good example:
A sold his house to B under a registered sale deed and left apartof the
sale price in hishandsdesiring him to pay thisamountto C, his creditor.
Subsequently B made part-payments to C informing himthatthey were out
of the sale price leftwithhim andthatthebalancewouldberemittedimme
diately. B,however,failed toremitthebalanceandC suedhimforthesame.
The suit was held to be maintainable."Thoughoriginally there was no priv
ity ofcontractbetween B and C, B having subsequently acknowledged his
liability, C wasentitledto sue him for recovery of theamount."
AnillustrationofacknowledgmentbyconductisKshirodebihariDatta
VMangobindaPanda:^^Thetenantand thesub-tenantof a piece of land
agreed between themselvesthatthesub-tenantwould pay thetenant'srent
direct to thelandlord.The agreement was acted upon by all theparties
interested.
Underthesecircumstancesthelandlordwasallowedtoobtainadecree
for hisrentdirectagainstthesub-tenant.Inotherwords,thesub-tenantwas
estoppedfrom denying hisliabilityto pay thetenant'srent on theground
thattherewasnosuchcontractbetweenhimandthelandlord.
In atripartitebuildingcontractthebuildercontractingwithhis employer
simultaneouslyagreed to bedirectlyresponsibleto theownerof thebuilding.
92.ShappuAmmalvSubramaniyam,ILR(1910)33Mad238.
93.YeerammavAppayya,AIR1957AP965.
94.(1905)(PunjRec) 171.
95.AIR1952Mys109.
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260. 124Chapter3Consideration [S.2(d)]
Itwasheldthat theemployerhad no right tosuethebuilderfor anyloss
causedto the owner byanydeficiencyinworks.Suchliabilitywas incurred
directlyto theowner.'^
4.Covenantsrunningwithland
The rule of privity may also bemodifiedby theprinciplesrelating to
transfer ofimmovableproperty.Theprincipleof thefamouscase ofTulkv
Moxhay^^is that a personwhopurchasesa land withnoticethat the owner
of the land isboundbycertainduties created by an agreement or covenant
affectingthe land, shall be bound by them although he was not a party to
theagreement.
An illustration of the principle is Smith & Snipes Hall Farm Ltd v River
Douglas CatchmentBoard:^^Thedefendants(theBoard)agreedwith cer
tain landowners adjoininga stream toimprovethe banks of the stream and
to maintain them in good condition. The landlords on their part paid pro
portionatecosts.Subsequentlyoneof thelandlordssoldhisland to thefirst
plaintiffand he to thesecondplaintiff.Therewasnegligenceon the part of
the Boardin maintaining the banks, which burst and the land wasflooded.
Both the plaintiffs were strangers to theagreementwith the Board, but
evenso the Court of Appealallowedthem to suethe Boardfor breachof the
contract, for the whole arrangement was for the benefit of the landowners
whoever they might be and not merelythe parties to the agreement.
Where theCentralGovernmentassigned a piece of land to its own cor
porate undertaking with all the rights,interestsandprivileges,it was held
thatprivilegesor rights toexemptionfrompaymentof landrevenuewhich
had accrued to the Central Government in respect ofthatland would also
be available to theundertakingas a successor in interest to the Central
Government.io°
"...HASDONEORABSTAINEDFROMDOING..."
Thesewordsmeanthatconsiderationisanactorabstinencewhichhas
alreadybeen done at the desire of thepromisor,or is inprogressor isprom
ised to be done infuture.Anactwhichhasalreadybeen done inresponseto
the promise is referred to as an executedconsideration.
Pastconsideration
It is an age-old principle of English law that consideration should be
contemporaneous with the promise. Consideration, being the price for the
97.McAlpirie(Alfred)ConstructionLtdvFanatownLtd,(2001) 1 AC 518:(2000)3WLR946
(HL).
98.(1919)88LJKB861(HL).
99.(1949)2KB500(CA).See Andrew Tettenborn, Covenants, Privity of Contract and the
PurchaseofPersonalProperty,(1982) Camb LJ 59.
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261. [S.2(d)] "...Hasdone orabstainedfromdoing..."125
promise, should be given in response to and as aninducementfor theprom
ise. If the act has been done before any promise is made, it is called past
consideration and a past consideration is no consideration. If, for example:
A haslosthispurseandB, afinder,delivers it to him. A, inrecognitionof
this service, promises to pay B, a sum of money. This promise is given for an
act which was done before anypromiseexisted,and,therefore,cannotbe
said to have been done as a price for the promise. The promise is to pay for
a wholly past act and is, therefore, no morethanan expression ofgratitude.
The past act mayexplainwhy the promise was given and may, thus, be a
motive for thepromise,but itfurnishesno legalconsideration.^"^"Thecon
siderationand thepromiseoughtto gotogether."^°^An example is McArdle,
A effectedcertainimprovementstoproperty.Theultimatebeneficiar
ies of thepropertysigned adocumentdeclaringthat:"Inconsiderationof ,,
yourcarryingoutcertainalterationsandimprovements,we the beneficiaries
shall repay to you the sum of£488insettlementof theamountspenton
suchimprovements."Anactionto enforce thispromisewas rejected.
JenkinsLJ said:"Butthetruepositionwasthat,as theworkhadin fact
all been doneandnothingremainedto be done by thepromiseeat all, the
considerationwas whollypastconsideration,and, therefore, the beneficiar
ies' agreement for the repayment to her out of the estate wasnudumpactum,
a promisewithnoconsiderationtosupportit."^"'^
Theruleinvolvesinconvenienceandhardship.If apersonpromisesto
pay for a past act, he means to recognise the past consideration and, there
fore, should not bepermittedto break his voluntary promise. The(English)
LawReformCommitteehas,therefore,recommendedtheabolitionof the
rule.«^
Pastactatrequestgoodconsideration
However,animportantexceptionis almost as old as the rule itself.It was
establishedas early as 1616in Lampleigh vBrathwait^°^that a past act done
at request will be goodconsiderationfor asubsequentpromise.The facts
were:
The defendant, having committed a murder, requested the plaintiff to
labourand to do his endeavour toobtainpardonfrom the King. The
plaintiff did his best to obtain the King's pardon, riding andjourneyingat
his own expense. Afterwards the defendant promised the plaintiff togive
him £ 100 and then refused to pay. He was, however, held liable.
101. See Roscor v Thomas,(1842)3 QB 234: 11 LJ QB 214, where a horse having been sold, a
subsequentwarrantyfor its soundness was held to be based upon past consideration.
102.Street,FoundationsofLegalLiability,281.
103.1951Ch669(CA).
104. See also Savage vUwechia,(1961) 1WLR455 (PC).
105.6thInterimReport,para32.
106.Hob106:80ER255.https://t.me/LawCollegeNotes_Stuffs

262. 126Chapter3Consideration [S.2(d)]
Thecourtobserved: "A merevoluntarycourtesyw^illnothaveconsidera
tion to uphold asassumpsit.^°^But if thecourtseywere moved by a request
of thepartythatgives the promise, it will bind, for the promise,thoughit
follows, yet it is not naked, but it couples itself with the suit before."
Themodernversionofthisruleisthatin such cases it isordinarilyin the
contemplationof thepartiesthatthe service rendered at request would be
ultimately paid for andthatsubsequent promise isnothingbut afixationof
reasonablecompensationfor the service.
Besidesthis,twomoreexceptionshave beenadmitted.Apromisetopaya
time-barreddebtandanegotiableinstrumentissued for apastconsideration
arebothvalid.
PositioninIndia
It is notnecessaryfor thecourtsinIndiato follow the Englishruleas to
pastconsideration.^"^Apastconsiderationmayariseintwoways. It may
consistof servicesrenderedatrequestbutwithoutanypromiseat the time
or it mayconsistofvoluntaryservices.
1.Pastvoluntaryservice
Apastvoluntaryservice isadequatelycovered by theprovisionin
Section 25(2). Avoluntaryservicemeansa servicerenderedwithoutany
requestorpromiseandthereis asubsequentpromiseto pay for the same.
Forexample,toborrowanillustrationfromAnson:
"If A savesBfromdrowningand B later promises A areward."
TheninEnglishlaw "Acannotrely on hisactionasconsiderationfor B's
promise for it is past in point oftime".^"^But in India the promise would
be enforceable by virtue of Section 25(2) which providesthat"a promise to
compensate, wholly or inpart,a person who has alreadyvoluntarilydone
something for thepromisor"is enforceable.The Actgivesthe following two
illustrationstoexplainthis:
"Afinds B's purse andgivesit to him. B promises to give A Rs 50. This
isacontract."
"A supports B's infant son. B promises to pay A's expenses in so doing.
Thisisacontract."
2.Pastserviceatrequest
The only area ofuncertaintyshould be about requested services, because
this is not adequately covered either by Sectionl{d)or by Section25{b).
107.Assumpsitwas thenameof a form ofaction(nowabolished)fromwhichthelawofcontract
originated.
108.DevukuttyAmmavMadhusudananNair,(1995) 2 KLT118,where it wasobservedthat
pastconsiderationis goodconsiderationundertheIndianContractAct andthatit is a devi
ation from the Englishcommonlaw.
109.Anson'sPrinciplesofTheEnglishLawofContract(23rdEdn,1972)86.https://t.me/LawCollegeNotes_Stuffs

263. [S.2(d)] "...Hasdone orabstainedfromdoing..."127
Section 2(d) requiresthatthe act should be done at the promisor's desire.
This presupposes the existence of a promise to pay for the act and even when
construedliterally the provisioncannotapply to an act done at request but
withoutanypromiseto pay. But theprovisioncan beconstruedto include an
act which has been done atrequestandforwhichapromiseto pay is given
subsequently. Even if nosubsequentpromiseis given thecourtscan,follow
ing the principle laiddowninUpton-on-SevernRDCvPowell™infer an
impliedpromise.Everyrequestfor an actcarriesaninbuiltpromiseto pay.
In the words ofBowenLJ inCasey'sPatents,re,StewartvCasey}^'^
The fact of apastservice raises animplicationthatat the time it was
renderedit was to bepaidfor,andif it was a servicewhichwas to be
paid for,whenyou get in thesubsequentdocumentapromiseto pay,that
promisemay betreatedas anadmissionwhichevidences or as apositive
bargainwhichfixes theamountofthatreasonableremunerationonthe
faithofwhichthe service wasoriginallyrendered.
Inthatcase, / and T, the joint owners of apatent,wrotealettertotheir
managersaying: "We now havepleasureinstatingthatinconsideration
of your services as thepracticalmanagerinworkingbothourpatents,we
hereby agree to give youone-thirdshare of the patents". Thecourtheldthat
"here for past services there is ample justification for the promise to give the
thirdshare".
PollockandMullahave been heavily in favour of thisinterpretationof
Section2{d).Thelearnededitor,MrJ.L.Kapurexpressedhispreferencein
thesewords:"^
They (the words 'has done orabstainedfrom doing') declare the law
to bethatan act done by A at B'srequest,withoutanycontemporaneous
promise from B, may be a consideration for a subsequent promise from
BtoA....The use of the perfect tense in the clause embodies in the law
of India the exception to the general rule which is supposed to have been
made by the seventeenthcenturycase of Lampleigh vBrathwait}^^
The BombayHighCourtin Sindha Shri Ganpatsinghji vAbraham^^'^laid
downthatservicesrenderedto aminorat hisrequestandwhichwere con
tinued after majority at the same request, were good consideration for his
promiseto pay.
Pastandexecutedconsideration
Apastconsideration should, however, be distinguished from executed
consideration.Pastconsiderationalways consists of an act donewithoutany
promise. But executed consideration means an act which has been done in
110. (1942) 1 All ER 220 (CA). See"Proposal"or"Offer"in the firstchapter.
111. (1892) 1 Ch104(CA).
112.(9thEdn,1972)41-42.
113.Hob106:80ER255.
114.ILR(1896)20Bom755.https://t.me/LawCollegeNotes_Stuffs

264. 128Chapter3Consideration [S.2(d)]
response to a positive promise. Where, for example, a reward is offered for
findinga lost article, the offer can be accepted only byproducingthe article
to theofferorandthatis also aconsiderationfor thepromise.It is,thus,an
example of aconsiderationwhich has already been executed.Explaining
this in UnionofIndiavChamanLaiLoona& S.K. DasJ of the
SupremeCourtsaid: "Anexecutedconsiderationconsists of an act for a
promise. It is the act which forms theconsideration.Nocontractis formed
unless anduntilthe act isperformed,e.g., thepaymentfor arailwayticket,
but the actstipulatedforexhauststheconsideration,sothatanysubsequent
promise,withoutfurtherconsideration,is merely anudumpactum.In an
executedconsiderationtheliabilityisoutstandingon one side only; it is a
presentasopposedto afutureconsideration."
"Inanexecutoryconsiderationtheliabilityisoutstandingonbothsides.
It is in fact apromisefor a promise; onepromiseisboughtby theother.
Thecontractisconcludedassoonaspromisesareexchanged.Inmercantile
contractsthisis by far themostcommonvariety.""^
Executoryconsideration
Thusconsiderationmayconsistof an actwhichhasalreadybeen,or is
in the process of being done. It may alsoconsistof an actwhichis only
promised to be done at some future time. There may be a simple exchange
of promises and each promise is aconsiderationfor the other. For example:
A agrees to sell andBto buy aquantityof goods at a stated price. Inother
words, A has promised to sell and B haspromisedto pay. Until the goods are
actually delivered to B under thecontract,theconsiderationis executory.
Toputit in a fewwords,considerationmay,underSection 2{d),consistof a
past,presentor afutureact."^
"SUCHACT,ABSTINENCEORPROMISE
ISCALLEDCONSIDERATION"
Considerationmustbeofsomevalue
Consideration,as defined in the Act,meanssomeact,abstinenceor
promise on thepartof the promisee or anyotherpersonwhich has been
done at the desire of thepromisor."^Does it,therefore,meanthateven a
worthless act will suffice to make a goodconsiderationif it is only done at
115.AIR1957SC652:1957SCR1039.
116. UnionofIndiavChamanLaiLoona& Co, AIR1957SC 652;1957SCR 1039.
117.PankajBhargavavMohinderNath,(1991) 1 SCC 556wherethecourtinreferenceto Ss. 5
and 51 said that mere reciprocal promises are sufficient to constitute a contract. Unionof
Indiav ChamanLaiLoona& Co, AIR 1957 SC 652, promise of onepartyto the other and
by the other to the one, each promise is aconsiderationfor each other. S. 2(e) providesthat
every promise and set of promises forming the consideration for each other, is an agreement.
SultanaSafianaTahsin v Manoj Jajodia, (2006) 4 CLT 122 (Gau), mutual promises recog
nisedasconsideration.
118.MannaLaiVBankofBengal,ILK(m5-^0)1A11.309,311.https://t.me/LawCollegeNotes_Stuffs

265. [S. 2(d)] "Such act,abstinenceorpromiseiscalledconsideration"129
the promisor's desire. For example: A promises to give his new Rolls-Royce
car toB,providedB will fetch it from thegarage."'The act of fetching the
carcannotby anystretchofimaginationbecalledaconsiderationforthe
promise.Yet it is the only act thepromisordesired thepromiseeto do. Such
anactnodoubtsatisfiesthewordsofthedefinition,butitdoesnotcatchits
spirit. It is for thisreasonthatthe Englishcommonlaw has always insisted
that"considerationmustbe of some value in the eyes ofthelaw."^^°White v
Bluett^^^may be cited as anillustrationinpoint.
Thedefendantowed a sum of moneyunderapromissorynote to his
father. The defendantperpetually,day and night, complained to his father
thathehadnot beentreatedequallywithotherchildrenin thedistribu
tion of his property.Thereuponthe fatherpromisedto discharge him
from all liability in respect of the loan and the note, provided he would
stop complaining, which thedefendantaccordingly did. The question was
whether the defendant's promise to cease his complaints was a sufficient
considerationtosustainhisfather'spromise.
PollockCB said: "It would be ridiculous to supposethatsuch promises
could be binding. In reality there was no consideration whatever." In a later
case a judge saidthat"acontractfounded upon such an illusory considera
tion appears to be as invalid as a promise by a father made in consideration
thathissonwouldnotborehim"."^
In India also it has been laid down bySubbaRaoJ(afterwardsCJ) of
theSupremeCourt in acase^^^that consideration "shall be 'something'
which not only the parties regard but the law can also regard as having
some value". Similarly, it has been observed by theMadrasHighCourt:^^''
Though the Indian Contract Act does not in terms providethatconsid
eration must be good or valuable to sustain acontractit has always been
understoodthatconsiderationmeanssomethingwhichis of some value
in theeyesof law. It must be real and not illusory, whether adequate or
not....So long as the consideration is not unreal it issufficientif it be of
slight value only.
But thecourtshave been very liberal in this respect and have always tried
to find value in something to which parties attachvalue.Thus, a transfer of
property "inconsiderationthat the transfereeshall accepttheresponsibility
119.Thisproblemis posed in Smithand Thomas, ACasebookonContract(2nd Edn,1961)
144.
120. SeeAnson,PrincipleofTheEnglishLawofContract(22nd Edn by A.G. Guest, 1964)
91.
121.(1853) 23 LJ Ex36.
122.HoodJ inDuntonvDunton,(1892) 18 VLR 114 (SC of Victoria).
123.ChidambaraIyerv P.S. Renga Iyer, AIR 1966 SC193,197:(1966) 1 SCR 168.
124.Kulasekaraperumalv PathakuttyThalavanar,AIR 1961Mad 405:(1916)74LW16(Mad).
Seealso Sonia Bhatia v StateofU.P.,(1981)2 SCC585, where the court explained the mean
ing ofadequateconsiderationandheldthat itdoesnotincludelove,affectionor spiritual
benefitasinvolvedin a gift.https://t.me/LawCollegeNotes_Stuffs

266. 130Chapter3Consideration [S. 2(d)]
anddischargethoserecurrentreligious servicesandceremonies'V^^anda
promiseby a wife to pay off herhusband'sdebtsandtomaintainhismother
made inconsiderationof enjoyingcertainproperties,were held to be for
valuableconsideration.^^^
Value need not beadequate(adequacyofconsideration)
It isnot,however,necessarythatconsiderationshouldbeadequateto the
promise.Thecourtscanhardlyassumethejob ofsettlingwhatshouldbe
theappropriateconsiderationfor apromise.It isentirelyfortheparties.If a
partygetswhathe hascontractedforandif it is of some value,whichmay
begreator small, thecourts"willnotenquirewhetherit wasequivalentto
thepromisewhichhe gave inreturn".^^^"Theadequacyof theconsideration
is for thepartiestoconsiderat the time ofmakingtheagreement,notfor
thecourtwhen it is sought to beenforced.^^^This is the English rule and
is applicable in India also, forExplanation2attachedto Section 25 lays it
down so clearlythat"anagreement to which the consent of thepromisor
is freely given is not void merely because theconsiderationisinadequate".
This isfurtherfortified byillustration(/")which is as follows: A agrees to
sell a horseworthRs 1000 for Rs 10. A's consent to the agreement was freely
given. The agreement is acontractnotwithstandingtheinadequacyof the
consideration.
The bestknownEnglishauthorityis De La Bere v Pearson
Thedefendants,who were newspaperproprietors,offered to answer
inquiries from readers of the paper desiring financial advice.Theplaintiff
wrotetothemaskingfor a safeinvestmentandalso for thenameof a
good stock broker. The editorrecommendedapersonwho,unknownto
him, was, in fact, anundischargedbankrupt.Theplaintiff,in reliance on
therecommendation,sent sums for investment and they were immedi
ately misappropriated. In an action against the defendants, the question
waswhethertherewassufficientconsiderationfortheofferoftheadvice.
Holding that there was,VaughanWilliamJ said: "Such publication
might obviously have a tendency to increase the sale of thedefendant's
125.Ramacharyav ShivNivascharya,(1918) 20 Bom LR 441; 46IC19.
126.KulasekaraperumalvPathakuttyThalavanar,AIR 1961Mad405.
127. Anson,PrinciplesofTheLawofContract(22nd Edn, by Guest, 1964) 91.Desigowda
VKarnatakaIndustrialArea Development Board, AIR 1996 Kant 197, land acquisition,
landholdersagreed to receivecompensationunderS. 29(2) of theKarnatakaIndustrialArea
Development Act, 1966, such agreement could not by itself be regarded as unconscionable or
unreasonable, the court could notalsoexamine inadequacyof agreed amount of compensa
tion.VijayaMinerals (P) Ltd v Bikash Chandra Deb, AIR 1996Cal67, parties bargaining
power equal for settling their terms, it isunbelievablethat there would be inadequacyof con
sideration in such a situation and evenif it is there the contract cannot be rendered nugatory
onthatground.
128.BlackburnJ inBoltonvMadden,1873 LR 9 QB 55, 57.
129. (1908) 1 KB 280 (CA). See also A.LakshmanaswamiMudaliarvL/C,1963 Supp (2) SCR
887: AIR 1963 SC 1185, where the SupremeCourtdiscusses the concept of inadequacy.https://t.me/LawCollegeNotes_Stuffs

267. [S. 2(d)] "Suchact,abstinenceorpromiseiscalledconsideration"131
paper. I think that this offer,when accepted, resulted in a contract for good
consideration."
The principle has been followed in thiscountryalso. The transfer of the
goodwill and the whole of the assets of a business for a bareRslOOOhas
beenupheld.^^"
Inadequacyas evidence ofimposition
However,the Act provides in Explanation 2 to Section 25 that "inade
quacyofconsiderationmaybetaken into account bythe court in determining
the question whether the consent of promisor wasfreelygiven".Illustration
(g)explainsthis: Aagreesto sell a horse worth Rs1000 for Rs10. Adenies
that his consent to the agreement was freely given. The inadequacy of the
considerationis afactwhichthecourtshouldtakeintoaccountinconsider
ing whether or not A's consent was freely given.
"A partyseekingto setasidea transaction on the ground of inadequacy
of consideration, must show such inadequacy as willinvolvethe conclusion
thatheeitherdidnotunderstandwhathe wasabout,or was thevictimof
someimposition.""^For "oncea court issatisfiedthat a personhasentered
into anagreementfreelyand withknowledgeof its purport andeffect",the
agreementwill be vahdnotwithstandingtheinadequacyofconsideration.
Evenwhere atransactionis avoided under this principle, it is not because of
theinadequacyofconsideration,butbecauseof fraud orsomeother vitiat
ingelement.For "inadequacy of considerationmay in circumstances suggest
fraud,coercion,mistake and suchlike"."^The same result wouldfollow
where the consideration is so markedly inadequate as to be unconscionable
and there is a serious inequality of bargaining power between the parties. A
ladywasinjuredas aresultofthedefendant'snegligentdriving.Soonthere
after sheconfrontedaninsuranceadjuster and signed up a release agreement
of all herclaimsfor just $331.Subsequentlyshe sued the defendant in tort
and herdamageswereassessedat $21,000.Shewasheldto benot bound by
theagreement.Shewasstillsufferingfromherinjuries;shereceivednoinde
pendentadviceandwas,therefore,in amuchweakerpositionascompared
with a professional claimadjuster."^
Forbearancetosue
Forbearance to sue hasalwaysbeen regarded as valuable consideration.
It is,indeed,a kind ofabstinence,which is soveryclearlyrecognisedas
130.DeujiShivji vKarsandasRamji,AIR 1954 Pat 280.
131. Per LordWestburyin Tennent v Tennents, LR 2 Scot 6, cited inAdministratorGeneral of
BengalvJuggeswarRoy,ILR(1877) 3Cal192,196(PC): 1 CLR 107.
132. SeeHarrissCJ in Rai Bahadur H.P. Banerji vCIT,ILR(1940)20 Pat 202, 214: AIR 1941
Pat 59. See also BandaAliv Banspat Singh,ILR(1882)4All352: 1882 AWN 66 where the
AllahabadHigh Court setasidea bondexecutedfor inadequateconsiderationas the circum
stances revealed duress;Bhimbhav Yeshwantrao, ILR (1900) 25 Bom 126.
133.PridmorevCalvert,(1975)54 DLR (3d) 133 (BCSC).https://t.me/LawCollegeNotes_Stuffs

268. 132Chapter3Consideration [S. 2(d)]
goodconsiderationin thedefinitionitself."Forbearanceto sue"meansthat
theplaintiffhas acertainright of actionagainstthedefendantor anyother
person and on a promise by thedefendanthe refrains frombringingthe
action.ThePatnaHighCourtobservedin a casethat:^^''Wherea wife who
isreadyto sue herhusbandformaintenanceallowancehasforborneto sue
on husband's agreeing to pay her monthly allowance by way of mainte
nance,thecontractissupportedbyconsiderationas wife'sforbearanceto
sue amounts to consideration for husband's agreement for payment of main
tenanceallowance.
Another easy illustration is in a decision of the Kerala HighCourt:"^
Three depositors of a bank refrained from demanding payment of their
deposits, although they had matured and become payable, as the director
ofthe bank hadgiventhem a writtenagreementundertaking personal lia
bility to return the amount with interest at 6 per cent within 12 months.
This forbearance to withdraw the amount or press for itsrepaymentwas
heldto besufficientconsiderationfor theagreementwithin the meaningof
Section2{d)P^
An act orforbearanceon the part of the creditor, though it may not be
for adefiniteperiod, is a goodconsideration.Thecompromiseof doubtful
rightshas alsobeenregardedassufficientconsiderationfor anagreement."^
Buttheremust be abonafideclaimand notmerelyonewhichis set up
frivolouslyorvexatiously."If there is in fact aseriousclaimhonestlymade,
theabandonmentof the claim is good consideration for acontract.""®"If
a personbelievesthathe has a bona fide claim to enforce, his forbearance
fromtryingto put thatclaimin a court andtohaveitdecidedwillbea good
considerationfor a contract,howevertheclaim,ifbrought,may bedecid
ed.""'A claim set up on the basis of a false or forged "will"cannotsustain
anagreement.Rejectingaclaimof thiskindinKrishnaChandraDutta
Roy VHemaja SankarNandi^'*°the Calcutta High Court citedthefollowing
statementofLordBlackburn:Ofcourse,forbearanceof anon-existing
claimwouldnotbeforbearanceatall.^^
Againthere can be no realforbearanceunlessthe claim isimmediately
due. InMannaLaiv BankofBengal-}'^^
134. Debi Radha Rani v Ram Dass, AIR 1941 Pat 282. Also see Kastoori Devi v ChiranjiLai,
AIR 1960 All 446, where the withdrawal of a pending suit bya wifeagainst her husband was
held to be a good consideration for his promise to pay her maintenance.
135.M.Ramiah Pillai v P. A. Sankaranarayana Iyer, AIR 1958 Ker246:1958KLJ253.
136. See alsoDadabhoyDajibhoy vPestonji,ILR(1893)17 Bom 457, where forbearance of the
right torescinda contract was heldto be goodconsiderationfor anagreement.
137.RameshwarPrasad Singh v Lachmi Prasad Singh, ILR (1904) 31Cal111.
138.CottonLJ in Miles v NewZealandAlford Estate Co, (1886) 32 Ch D 266(CA)cited in
Krishna ChandraDuttaRoy v Hemaja Sankar Nandi, (1917-18) 22CWN463.
139.GulabChand vKamalSingh, AIR 1922 All 260.
140.(1917-18)22CWN463.
141.CookVWright, (1861) 1 B&S 559.
142.ILR(1875-80)1 All309.https://t.me/LawCollegeNotes_Stuffs

269. [S. 2(d)] Performanceofexistingduties133
Ahundidebt had not yetmaturedwhen the acceptor of thehundies
pledged his own house and shops as security for due payment in the event
oftheirdishonouronmaturity.
Thecourtquite obviously came to theconclusionthattherewas no con
siderationfor the pledge.
Compromisegoodirrespectiveof merits
Compromise of a pending suit is a goodconsiderationfor the agreement
of compromise. But here also it is essentialthatthe dispute should be bona
fide,althoughthe Patna HighCourthas held in a casethata compromise
is binding even if the "suit was based on a falseclaim"."^However, a com
promise is a good consideration "irrespectiveof merits of the claim of either
side", and even"wherethere is somedoubtin themindsof thepartiesas to
theirrespectiverights"."''
An agreement to accept a new mortgage in substitution and in considera
tion ofnot enforcingthe earlier mortgage, although the original was executed
only by one person and the substitute by fourpersons"^and an agreement
to release a debtor and to accept a new debtor in his place have been sus
tained."®"An agreement to avoid further litigation is not an agreement void
ofconsideration.""^Similarly, it has been heldthat"whereanagreement
has beenarrivedatbetweencertainmembersof afamilythatisdesignedto
promotegraceandgoodwill,this byitselfis a goodconsiderationto support
thetransaction.""^In a case before the SupremeCourt"^twobrotherswere
quarrellingoverthedivisionof their latefather'sproperty.Their mother
persuadedthejuniortogiveupthestruggleonthepromisethatiftheelder
one did not provide him a sum of money she wouldsubsidisehim. The
promisewas held to beenforceable.It wasgiventopurchasefamilypeace
andthatwassufficientconsideration.
PERFORMANCE OFEXISTINGDUTIES
Performanceof legalobligations
Consideration,it isgenerallysaid, must besomethingmorethan what the
promiseeisalreadyboundto do. Apersonmaybe boundto dosomething
143.RamesharMistrivBabutalFandit,AIR 1946 Pat 97; M.M.HussainvLaminatedPackage
P Ltd,(1999)6 Andh LT 529, the surrender of a disputed title was recognised as good con
sideration. It is not necessary that consideration should always be in the shape of money.
144. United Province Govt v ChurchMissionaryTrust Assn Ltd, ILR (1948) 22 Luck 93: AIR
1948 Oudh 54; Kailash Narain v Mahila Manbhota, AIR 1996 MP 194, compromise, alle
gation that it wasinducedby fraud not substantiated, the court entitled to passdecreein
termsofcompromise.
145.FanindraNarain Roy v KachhemenBibi, AIR 1918Cal816:ILR(1917)45Cal774.
146. MoheshChandraGuhavRajaniKantaDutt,(1915)31IC29.
147.Bhimav Nigappa,(1868)5 BHC 75(AppealCivil).See also Chidambara Iyer v P.S. Renga
Iyer,AIR1966SC193:(1966)1SCR168,whereacharitableinstitutiongaveup itsrights
for a transfer of a property to it, held, good consideration.
148. LatifJahanBegamv Mohd Nabi Khan, AIR 1932 All 174.
149.CWTvHerHighnessVijayaba,(1979) 2 SCC 213: AIR 1979 SC 982.https://t.me/LawCollegeNotes_Stuffs

270. 134Chapter3Consideration [S. 2(d)]
by law or bycontract."Performanceof a legaldutyis noconsideration
for apromise."Thisprincipleof English law wasadoptedbytheMadras
HighCourtin P.SashannahChettiv P.RamasamyChetti^^°evenbefore
theContractAct came into force,althoughthe Actcontainsnoprovision
on thepoint.
The facts of the case werethattheplaintiffhadbeen servedwithsum
mons requiring him to giveevidencebefore acourtof law.The defendant,
who was apartyto the case, gave him apromissorynotepromisingto pay
asumofmoneyfor histrouble.Thenotewas held to be void forwantof
consideration.
Thecourtobserved:"Itis quite clearthatif a subpoena(summon)had
been served, and the note had been given to compensate theplaintifffor his
loss oftimeorotherinconvenience,itwouldhavebeenwithoutconsider
ation,because hisattendanceandthe giving of evidencewouldhave been
merely theperformanceof a dutyimposeduponhim by law." Collins v
Godefroy^^^is an Enghsh authority to the same effect.Similarly,a promise
to pay a sum of money to a police officer for investigating a crime will be
without consideration if he is already bound to do so by law. "But doing or
agreeing to do morethanone's official duty will serve asconsideration."
Asvirasobserved by LordDenmanCJ inEnglandvDavidson-}^^"Ithink
theremay be serviceswhichtheconstableisnotboundtorenderandwhich
hemay,therefore,make the ground of a contract."Followingthisprinciple
the Court allowed in that case a policeofficer,who had given information
leading to the conviction of a criminal, to recoverthe reward offered by the
defendantforsuchinformation.Butinallsuchcasesthecourtmustmake
sure that the servicerendered is really beyond the scope of officialduty and
not a mere pretence for extracting money. An American Judge remarked in
acasethat;
If a constable for makingextraordinaryefforts to perform an ordinary
officialact, may not onlyreceive,but may also collect bylaw a compensa
tion beyond what the statute allows for the act, any other officermay do
thesame;andsheriffs,legislatorsandjudgesmight, and soon would, put
theirextraordinaryefforts in the market, to be had by the higher bidder.
This is a sickeningand revoltingview of thesubject:^^^
InanAmericancase:
A fireman was allowed toreceivea reward offered by a husband to
anyonewho wouldrescuehiswifefrom a burning building,dead oralive,
becauseat great peril to his life and health heaccomplishedthe rescue of
150.(1868)4MHC7.
151. (1831) 109ER1040:9 LJ KB 158.
152.(1840)9 LJ (QB)287.
153.HoganvStophelt,(1899) 170111150.https://t.me/LawCollegeNotes_Stuffs

271. [S. 2(d)] Performanceofexistingduties135
her dead body and because thecourtfoundthatas a fireman of the city
he was not legallyboundto risk his life inthatrescue.^-'"'
The English case ofGlasbrookBrosLtdvGlamorganCountyCounciP^^
isanotherillustrationof servicesrenderedoutside the scope of official
obligations:
Ontheoccasionof astrike,acollierymanagerappliedforpolice
protection for his colliery and insistedthatit could only beefficiently
protected by billeting a police force on the colliery premises. The police
superintendent was prepared to provide what in his opinion was adequate
protection by means of a mobile force, but refused to billet policeofficers
at the colliery except on the terms of themanageragreeing to pay for
the force so provided at a specified rate. It was held by a majoritythat
there was nothing illegal in the agreement, nor was it void for want of
consideration.
Thecourtlaid downthat"althoughthe policeauthorityisboundto pro
videsufficientprotection to life and property without payment, if in par
ticular circumstances, at the request of an individual, they provide a special
form of protection outside the scope of their public duty, they may demand
paymentfor it".
On the same principle, the mother of an illegitimate child, having been
separated from thechild'sfather, was allowedtoenforcethe father's prom
ise to pay £ 1 per week for looking after the child, although she was herself
under astatutoryobligation tomaintainthechild.^^^Similarly,a married
womanwhohaddesertedherhusbandwasallowedtoenforceherhusband's
promise to pay her aweeklysum if she would maintain herselfand lead a
chastelife."^Inthelast-mentionedcaseDenningLJ said: "Apromiseto
perform an existing duty is, I think,sufficientconsiderationto support a
promise,so long as there is nothing in the transaction which is contrary to
the publicinterest."
Performanceofcontractualobligations
A.Pre-existingcontractwithpromisor
Secondly,compliancewith legalobligationimposed by a contract with
the promisor can be no consideration for a promise. An illustration is sup
plied by the factsofRamchandra Chintaman vKaluRaju:"^
The plaintiffacceptedaVakalatnamafrom thedefendantto act for
him in a certain suit on receiving his usual fee. Subsequently the defend
antagreedto pay him a certain sumas aspecialreward(inam),if the suit
154. Costigan,CasesonContract(3rd Edn) 309.
155.1925AC270(HL).
156. Ward vByham,(1956) 1WLR496 (CA).
157.WilliamsvWilliams,(1957) 1WLR148 (CA).
158.ILR(1877)2Bom362.https://t.me/LawCollegeNotes_Stuffs

272. 136Chapter3Consideration [S. 2(d)]
wasdecidedin hisfavour.Thesuitwasdecidedinfavourofthedefendant,
who, however, did not pay theamount.Theplaintiff,therefore,brought
thepresentsuitagainsthim.
Rejecting theaction,WestroppeCJ said:"Theplaintiff,havingaccepted
aVakalatnamawas alreadyboundto render his best service as a pleader.
There was no freshconsiderationproceedingfrom theplaintiffwhen he
obtainedtheagreement."
Thebetterknownillustrationis the old English case ofStilkvMeyrick-}^^
In this case while a ship was on a voyage, two of theseamendeserted;
and thecaptain,having in vainattemptedto supply their places, entered
into anagreementwiththe rest of the crewthatif theyworkthe ship
home, they should have the wages of the two who haddesertedequally
dividedamongthem.
LordEllenboroughCJ heldthattheagreementwas void forwantof
considerationin as much as it was thecontractualduty of themarinerswho
remained with the ship to exert themselvesutmostin any emergency of the
voyage to bring the ship in safety to her destinedportand thedesertionof a
partof the crew was definitely an emergency of the voyage.
But where, in another case, sailors refused to complete a voyage because
of war risks, not originally contemplated, but remained on duty on the
promise of extra pay, they were allowed to recoverit.i®°The principle would
seem to bethat"where conditions have arisen under which apartyis enti
tled to refuse to go ahead with his contract, a promise to pay him extra
ifhewillnotdosoisvalid".^^^Wherethemaincontractorfoundthathis
sub-contractorwas slow in progress and it was partly due to the low rates
allowed to him. Partly for this reason andpartlyfor the reasonthatthe main
contractor would fall under heavy penalties if the work was not completed
in time, he promised more money to the sub-contractor for doing the same
work which he had alreadyundertakenand noadditionalwork. He was
held bound to pay thesub-contractoraccording to the increasedrates.'^^It
has beenobservedthat the caseprovidedan authority for the proposition
that a promise to perform an existing obligationcan amount to good con
sideration provided there are practicalbenefitsto the promisee. This state
ment was not accepted to be a working principle in a subsequent case in
which the payment of tax arrears wasrescheduledto theacceptanceof the
TaxCollector,but theagreementwas held to be notbinding.An aggravat
ing factor was that the taxpayer was not able to keep up the payment of
159. (1809) 2Camp317: 170 ER1168.
160. Liston v OwnersCarpathian,(1915)2 KB 42. See also Hartley v Ponsonby, (1857) 119 ER
1471: 26 LJ QB 322: 29 LT 195, where the number of deserters was so great that only a few
hands wereleft and, therefore, the captain's promise to pay them extra was heldenforceable.
161. A.L. Goodhart, Blackmailand Consideration in Contracts,(1928)44LQR436and Samuel
Williston, SuccessivePromises of the same Performance,(1894-95)8 Har LR 27.
162. WilliamsvRoffeyBros & Nicholls (Contractors) Ltd,(1991)1 QB 1: (1990) 2WLR1153
(CA).https://t.me/LawCollegeNotes_Stuffs

273. [S. 2(d)] Performanceofexistingduties137
instalments.^"Thecourtsaid:"Whenacreditorandadebtorwhoareat
arm's length reachagreementon thepaymentof the debt byinstalmentsto
accommodatethedebtor,thecreditorwill nodoubtalways see apractical
benefit tohimselfin sodoing."
Thecourtcontinuedto saythatiftherewere noauthority,likethedeci
sion inJohnWeston Foakes vJuliaBeer,^^'^therewouldhave been much to
be said for theenforceabilityof such acontract.The sameresultwasreached
inanothercase involvingpartpayment,namely C Re (Adebtor)}^^Aperson
was under astatutorydemand of the Legal Aid Board forabout£16,500.
He mailed a cheque for the lesseramountof £14,000witharequestfor the
Board toreturnthe cheque if it was not acceptable in full settlement. The
Board accepted the cheque but only "onaccount".Thus,it was not possible
for the debtor to prove a promise by the Board to accept the lesser sum.
These cases were distinguished from the decision in Williams v Roffey Bros
&Nicholls(Contractors)Ltd}^^Here money waspromisedto acontractor
in excess of theamountforwhichheundertooktocompletetheproject.The
promise was intended to ensure the completion of the work in time. There
was no evidence of any undue influence orexploitationby thecontractor.
Thecourtovercame the effect ofauthoritiesbyresortingto thedoctrineof
promissory estoppel. The best and simplest description of the doctrine and
how it works is to be found in the followingwordsof LordDenning:^^^
"Whena man, by his words orconduct,has ledanotherto believe
thathe may safely act on the faith ofthem—andthe other does act on
them—hewill not be allowed to go back onwhathe has said or done
when it would be unjust and inequitable to do so."
In aCanadiancase,^®^acontractorwascarryingoutconstructionwork
for the completion of which the plaintiff was to supplysteel at a fixed price.
The plaintiff then found that steel prices were rising and, therefore, asked
the contractor for an upward revision of the price for futuresupplies.The
contractororally accepted the revision and also accepteddeliveriesagainst
invoicesreflectingthe increased price. The contractor,however,did not pay
and the supplier sued for thedifference.It was held that the price revision
beingwithoutconsideration,the contractor was not bound. The fact that he
continued to accept supplieswithout repudiating theinvoicesdid not create
anypromissoryestoppelagainst
163.SelectmovLtd,re,(1995)1WLR474 (CA).
164.(1884)LR9 AC605.
165. May 11, 1994(unreported).Noted in Norraa J. Hird and AnnBlair,MindingYourOwn
Business—Williamsv RoffeyRevisited: Consideration Re-considered, 1996 JBL 254.
166. (1991) 1 QB 1: (1990) 2WLR1153 (CA).
167.TheDisciplineofLaw, 223. See forfurtherstudy Adams and Brownsword,Contract,
ConsiderationandCriticalPath,(1995)ModLR 536.
168.GilbertSteel Ltd v UniversityConstructionLtd, (1976) 12 OR (2d) 19 (CA).
169. Seealso SyrosShipping Co SAv Elaghill Trading Co,(1981)3 All ER 189 where a consign
ee'spromiseto payextramoneyto the carrier was notallowedto beenforced.https://t.me/LawCollegeNotes_Stuffs

274. 138Chapter3Consideration [S. 2(d)]
Promisetopaylessthanamountdue
On the sameprinciple,apromiseto pay lessthanwhatis dueundera
contractcannotberegardedas aconsideration.Thisrule,havingbeenlaid
downin an early case, wasthusformulatedinPinnel'scase.^^°
"Paymentof a lesser sum on the day insatisfactionof agreatercannot
be anysatisfactionfor the whole, because itappearsto the judgesthatby
nopossibilitycan a lesser sum be asatisfactionto theplaintifffor agreater
sum. But the gift of ahorse,hawkor robe, etc., insatisfactionisgood.For
it shall beintendedthata horse,hawkor robe, etc.,mightbe more ben
eficial to theplaintiffthanthe money inrespectof somecircumstances;
orotherwise,theplaintiffwouldnot haveacceptedof it insatisfaction."
The rule was criticised byJesselMRin acase^^^where hisLordship
said; "According to EnglishCommonLaw a creditor might acceptanything
insatisfactionof his debt except a lessamountof money. He might take a
horse,or acanary,or atomtithe chose,andthatwasaccordandsatisfaction
but, by a mostextraordinarypeculiarityof the EnglishCommonLaw, he
cannottake19s. 6d. in thepound."
Similarly, Earl ofSelborneLC said inWestonFoakes vJuliaBeer-}^^
"It might be (and indeed Ithinkit would be) an improvement in our law, if
a release or acquittance of the whole debt, on payment of any sum which
the creditor might becontentto receive by way of accord andsatisfaction
(though lessthanthe whole) where held to be, generally,binding,...."
Despite this criticism the rule wasunanimouslyaffirmed by theHouseof
Lordsintheabove-citedcase:
Dr Foakes was ordered by a judgment decree to pay£2000to Mrs
Beer. The doctor, not being able to pay up at once, made an agreement
with her under which he paid£200immediately and agreed to pay the
balance byinstalments and she in her turn agreed not to enforcethe judg
ment. When the balance was fully paid, she sued thedoctorto recover
interestonthejudgment-debt.
The House of Lords held that she was entitled to the payment of the
judgment-debt and to interest to the date of final payment as she accepted
lessin satisfaction of the whole and there was no considerationfor her prom
ise to acceptanythinglessthanthe sum towhichshe was entitled.
Exceptionstotherulein"Pinnelcase"
The Law Revision Committee in itsreportin 1937 recommended aboli
tionoftherule.^^^Thecourtshavetriedtoavoidtheawkwardresultsofthe
rule byadmittingexceptionsto it.
170.(1602)5 Co Rep 117a.
171.CoulderyvBartrum,(1881) LR 19 Ch D 394, 399 (CA).
172.(1884)LR9AC605.
173. 6thInterimReport,paras35, 40.https://t.me/LawCollegeNotes_Stuffs

275. [S. 2(d)] Performanceofexistingduties 139
1.Part-paymentbythirdparty
In thefirstplace,part-paymentby a thirdpartymay be a good consider
ation for thedischargeof the whole of the debt.
The father of adebtorwroteto thecreditor,offering anamountless
thanthatof the debt in fullsettlementof the debt, and enclosing adraft
forthatamount,and the creditor cashed andretainedthe proceeds of
thedraft,andafterwardsbroughtanactionagainstthedebtorfor the
balanceofthedebt.Itwasheldthatthecreditormustbetakentohave
accepted theamountreceived by him on the terms upon which it was
offered,andtherefore,hecouldnotmaintaintheaction.^^"*
Adebtor'swife has not beenregardedas athirdpersonfor thispurpose.
Theplaintiffhada claim of £ 480againstthedefendant.To theknowl
edge of thedefendanthe was indesperatefinancialstraits.Exploiting
thisknowledgetheyofferedhim only £300in fullsatisfaction,whichhe
accepted.Thepaymentwasmadeby thedefendant'swife.
Theplaintiffwasallowedtorecovertheremaining£180ontwogrounds,
first,therewasnoconsiderationforthesettlementand,second,therewas
notrueaccord because nopersoncan insistuponasettlementprocuredby
intimidation.^^^
2.Composition
Secondly,paymentof a lesser sum is a goodsatisfactionfor alargersum
where this is done inpursuanceof an agreement of compromise entered into
by thedebtorwithhiscreditors.
3.Paymentbefore time
Thirdly, payment of a lesser sum before time, or in a different mode or
at a different placethanappointed in the originalcontractor"thegift of a
horse,hawkorrobe,etc., insatisfactionisgood".^^^
4.Promissoryestoppel
The following statement ofBowenLJ is an instructive expression of the
principle ofpromissoryestoppel.^^^
If persons who havecontractualrights against others induce by their
conductthoseagainstwhom they have such rights to believethatsuch
rights will either not be enforced or will be kept in suspense or abeyance
174.HirachandPunamchandv Temple, (1911) 2 KB 330, 331 (CA).
175.D.&C.BuildersvRees,(1966)2 QB 617 (CA).
176. SeePinnel'scase. Also seeJesselMR inCoulderyvBartrum,(1881) LR 19 Ch D 394,
399(CA).
177: Birmingham &DistrictLand Co v London and North Western Rly Co,(1888)40 Ch D 268
(CA).https://t.me/LawCollegeNotes_Stuffs

276. 140Chapter3Consideration [S.2(d)]
for someparticulartime, those persons will not be allowed by aCourtof
Enquiryto enforce the rights until such time has elapsed —
This principle is well-known in the UnitedStates"^and seems to have
been first applied in England in Thomas Hughes vMetropolitanRailway
Co.'''
Alandlordhad given notice to histenanttorepairthepremiseswithin
sixmonths,failing which the lease was to be forfeited. Amonthafter
this thelandlordenteredintonegotiationsfor the sale of thelandto the
tenantand, consequently,duringthe period covered by thenegotiations,
thetenantcarriedout no repairs. Thenegotiationsfailed tomaterialise
andshortlythereaftertheperiodof sixmonthsexpiredandthelandlord
claimedtheleasetohavebeenforfeited.
But it was heldthatsixmonthswouldrunfrom the failure of thenegoti
ations. Theconductofenteringintonegotiationswas an impliedpromiseon
thepartof thelandlordtosuspendthe noticeandthetenanthadactedon it
bynotcarryingouttherepairs.
Anotherlandmarkin thedevelopmentof this principle is the much
debatedcase ofCentralLondonPropertyTrustLtdvHighTreesHouse
Ltd'^°whereDenningJasserted"thatapromiseintendedto bebinding,
intendedto be acted on and in fact acted on, isbindingso far as itsterms
properlyapply".^®^
Theplaintiffsgave to thedefendantsatenancyof a block of flats at
agroundrent of£2500a year for aperiodof 10 years. As aresultof
the2ndWorldWar,the flatscouldnotbe fully letand,therefore,the
plaintiffsagreedtoreducetherentbyhalftheamount.In1945,war
conditionsceased to exist, and the flats became fullyoccupied,but the
defendantscontinuedto pay only thereducedrent. Theplaintiffs'action
to recover the fullrentas reserved in theoriginallease from themiddleof
1945wassuccessful,butnotforthearrears.
One of thequestionswaswhatwas theconsiderationfor theagreementto
reduce the rent.Apparentlythere was none. But in theopinionofDenning
178. See forexample,G.H.L.Fridman,PromissoryEstoppel,(1957) 35 CBR 279.
179.(1877)LR2 AC439.
180.(1947)1 KB130.
181. Ibid at p. 136. Thisstatementof HisLordshiphas been the subject ofwhatseems to be an
unendingdebate. See, for example, J.F.Wilson,RecentDevelopmentsinEstoppel,(1951)
67 LQR 330. Cheshire & Fifoot,CentralLondonPropertyTrust Ltd v High Trees House
Ltd, (1947) 1 KB 130; L.A.Sheridan,EquitableEstoppelToday, (1952) 15ModLR 325,
328; A.G. Guest, The NewEstoppel,An EnglishDevelopment,(1956) 30AustralianLJ 187;
Fridman,PromissoryEstoppel,(1957) 35 Can B Rev 279. Forfurtherinsight see John P.
Dawson,GiftsAndPromisesandP.S.Atiyah,Promises:MoralsAndLaw. Thedoctrine
of promissory estoppel has no place in formally concludedcontracts.See C.V.Enterprisesv
Braithwaite& Co Ltd, AIR 1984Cal306. Wherecertainemployees were induced to change
theirDepartmentby holding out promises of better service conditions, the SupremeCourt
did notpermittheGovernmentto resile from its promise. Bhim Singh vStateofHaryana,
(1981)2see673:AIR1980SC768.https://t.me/LawCollegeNotes_Stuffs

277. [S. 2(d)] Performanceofexistingduties 141
J there was no necessity offindingconsiderationin a case like this where the
promise is not set up as cause ofaction,but only as a defence. Theplain
tiffs havingdeliberatelyagreed to forego the rent and thedefendantshaving
acted onthatpromiseup to the time ofaction,theplaintiffswereestopped
from allegingthathere was noconsiderationfor thepromise.
Referring to the above principle in hisjudgmentinCombevCombe,^^^
DenningLJ said:"Thatprincipledoesnotcreatenew cause ofactionwhere
none existed before. It only prevents apartyfrominsistinguponhisstrict
legalrights,whenitwouldbeunjustto allow him to enforcethem,having
regardto the dealingswhichhavetakenplacebetweentheparties."
In this case a wifeobtaineda decree nisiagainstherhusbandfor
divorce.Shereceivedaletterfromthehusbandinconfirmationofher
own, asexchangedthroughsolicitors,thathewouldmake her£100
allowancea year.Thehusbanddidnotmakethepaymentsandultimately
the wifebroughtanactionto enforce thepromise.
TheCourtof Appeal heldthatneithertherewas anyconsiderationfor ,
promisenor wasthereanypromissoryestoppelagainstthehusband.The
husbandnever made arequestthatsheshouldnotenforce hernormalright
tomaintenance,nor was there anyundertakingon herpartnotto do so.Her
abstinencewas not the result of anypromiseof thehusband.
Thoughpromissoryestoppel may notsustaina new cause of action, it is
notnecessarilyconfinedto cases where thepartiesareboundby asubsisting
contractand one of thempromisesnot to enforce hisnormalcontractual
rights. The decision of theCourtof Appeal in Evenden v Guildford City
AssnFootballClubLtd^^^marksafurtherextensionoftheboundariesof
promissoryestoppel. LordDenningMRstatedthatthedoctrineof estop
pel applies whenever a representation is made, whether of fact or law, pres
ent orfuture,whichisintendedto bebinding,intendedto induce aperson
to act on it and he does act on it. The facts werethattheplaintiffhad been
working since 1955 as agroundsmanin asupporters'club of a football club.
In 1968 the football club itself acquired his services on the same terms and
for thesamework.In1974he wasmaderedundant.Heclaimedredundancy
benefit right from 1955 whereas the club proposed to pay him only from
1968. The principle ofpromissoryestoppel was applied because there was a
representationthathis employment would be treated as continuous:
That representation was intended to be binding and intended to be
acted on. He did act on it. He did not claim from thesupporters'club
the redundancy payment to which he would otherwise have been entitled
fromthatclub. Sixmonthslater his claimagainstthesupporters'club was
barred by lapse of time. It would be most unfair for the football club to
182. (1951) 2 KB 215 (CA). But see, M.P.Thompson,FromRepresentationtoExpectation,
Estoppelas a CauseofAction,1983 Camb LJ 257.
183.1975QB917(CA).https://t.me/LawCollegeNotes_Stuffs

278. 142Chapter3Consideration [S.2(d)]
go back now onthatrepresentation.The employment must betreatedas
continuousfor 19 years.
TheHouseofLordsconsideredthislineofcasesintheirdecisioninTool
MetalMfg CoLtdv Tungsten Electric CoLtd,^^''and applied the principle
ofpromissoryestoppel to the facts of the case.TheirLordships heldthat
where apartyhassuspendedhisnormalrightsunderacontract,he can at
any time by givingreasonablenoticeto theotherresumethem;andacoun
ter-claimbased on those rights which v/as raised in anearliercasewas.asuf
ficient notice of theintentionto resume theoriginalrights.TheToolMetal
Companywasentitledto a fixed rate ofcompensationdependinguponthe
quantityofmaterialconsumedby the Electric Co. A newagreementbeing
underpreparation,the T.M. Co told theothercompanythattheywouldnot
claimcompensationin themeantime.The newagreementwasnotaccepted
by theElectricCoand,therefore,T.M.Cosoughttorestoreitsrightto
compensationand wasallowedto do so for thefuture.The final shape of
the principle ofpromissoryestoppel as it hasresultedfrom the line of cases
has beenstatedby LordHodsonwhile delivering theopinionof theJudicial
CommitteeofthePrivyCouncilinEmmanuelAyodejiAjajivR.T.Briscoe
(Nigeria)Ltd}^^
Theprincipleisthatwhenonepartyto acontractin theabsenceof
freshconsiderationagreesnotto enforce his rights anequitywill be
raised in favour of theotherparty.Thisequityis, however,subjectto the
qualifications;(1)thattheotherpartyhasalteredhisposition,(2)thatthe
promisorcan resile from hispromiseon givingreasonablenotice,which
need not be a formal notice, giving the promisee reasonableopportunity
ofresuminghisposition,(3)thepromiseonly becomes finalandirrevoca
ble if thepromiseecannotresume hisposition.
Apromiseto pay morethanthe sum dueunderanexistingcontractmay
be equally void. A recentillustrationisprovidedby aCanadiancase in
which there was an agreement to supply steel at a stated price for complet
ing aconstructioncontract.Onaccountof rising steel prices it was orally
agreed between partiesthatincreased price would be charged. Subsequent
deliveries were made and accepted on increased prices, but not paid for.
Thecontractorwas held to be notboundto pay theextraprice, the revision
agreementbeingwithoutanyconsideration.^^*^
Wherethepartycarryingoutworksto a vessel was toldthathewould
be paid an additionalamountby way of bonus, if he completed the works
within a certain date, and a certificatewas issued by anemployeeof the ship-
owning companythatthe works had beensatisfactorilycompletedwithin
the given time, the shipowner was not allowed to resile from the promise
184.(1955) 1WLR761.
185.(1964)1WLR1326(PC).
186.GilbertSteelLtdvUniversityConstructionLtd,(1976) 12 OR (2d) 19 (CA).https://t.me/LawCollegeNotes_Stuffs

279. [S. 2(d)] Performanceofexistingduties143
by saying subsequentlythatthe work was not satisfactory. No objection
was raisedaboutthecertificatefor aconsiderableperiodof time and the
shipownerhad also benefited from the timelycompletion.Itwouldnot have
been fair or just to allow theshipownerto deny thepromisedbenefit to the
otherparty.'^^
PositionunderIndianContractActdifferent
Luckily in India controversies of this kind are not likely to arise, for the
ContractAct in Section 63 clearly providesthat"every promisee may dis
pense with or remit, wholly or inpart,theperformanceof the promise made
to him, or may extend the time for suchperformance,or may accept instead
of it anysatisfactionwhich hethinksfit". The section has the following
illustrations:
[b)Aowes B5000rupees.A pays to Band Baccepts,insatisfactionofthewholedebt,2000
rupeespaid atthetimeand place at whichthe5000rupeeswerepayable.Thewhole
debtisdischarged.
(c)Aowes B5000rupees.Cpays toB1000rupees,and Bacceptsthem,insatisfactionof his
claim on A.Thispaymentisdischargeofthewholeclaim.
id) A owes Bunderacontract,a sum of money,theamountof which hasnotbeenascer
tained.A,withoutascertainingtheamountgives to B and B, insatisfactionthereof,
acceptsthesum of 2000rupees.This isdischargeof the wholedebtwhatevermay be
itsamount.
(e)A owes B 2000rupees,and is alsoindebtedtoothercreditors.A makes anarrange
mentwith hiscreditors,includingBto paythemacompositionofeightannasinthe
rupeeupontheirrespectivedemands.Payment to Bof 1000rupeesis adischargeofB's
demand.
There was adevelopment-agreementbetween an ImprovementTrust and
alandowner. A clause in theagreementprovidedthattheowneris totrans
fer the plot earmarked for a primary school to the Trust free of cost. It was
held to be not void for beingwithoutconsiderationor being opposed to
publicpolicy.The land owner had under theagreementderivedhugebenefit
by getting his land freed from acquisition and also gettingpermissionto
develop the land and put it to commercialuse.^^^
B.Pre-existingcontractwiththirdparty
Where a person hascontractedto do an act, and athirdperson promises
to pay him a sum of money if he would go ahead with the performance, is
there a consideration for the promise? A situation like this arose in Shadwell
VShadwell.
The plaintiffwas alreadyengagedto be married to a girl, named Ellen
Nicholl. His uncle, the defendant, sent him the following letter: 'I am glad
to hear of your intended marriage with Ellen Nicholl; and, as I promised
187. Aker Oil & Gas Technology UKPicv SovereignCorporateLtd, 2002 CLC 557 (QBD).
188. Narayanrao Jagobaji Gowande Public Trust v State of Maharashtra, AIR 2016 SC 823.
189. (1860) 9 CB (NS) 159: 142 ER 62:127RR 604.https://t.me/LawCollegeNotes_Stuffs

280. 144Chapter3Consideration [S. 2(d)]
to assist you atstarting,I amhappyto tell youthatI will pay to you £ 150
yearlyduringmy life, and until yourannualincome derived from your
professionof aChancerybarristershallamountto 600guineas.'
Thequestionwaswhatwas theconsiderationfor the uncle'spromise.The
majorityjudgmentwas delivered byErleCJwhofoundsufficientconsider
ationtosustainthepromise.Accordingto hisLordshipthepromiseof the
annuitymighthave beenintendedas aninducementto themarriage."The
plaintiffmay have made themostmaterialchanges in hisposition...and
haveincurredpecuniaryliabilitiesresultinginembarrassments,whichcould
be in every sense a loss, if the incomewhichhadbeenpromisedshouldbe
withheld."His lordship also notedthatthere was some benefit to theprom
isor asthemarriageof anearrelative is always an object ofinterest.
BylesJ dissented. In hisopiniontheletterdisclosed noconsideration.
"Marriageof theplaintiffat thetestator'sexpress request would be, no
doubt, an ampleconsideration;but themarriageof theplaintiffwithout
thetestator'srequest is noconsiderationto thetestator...,for theplaintiff
before the letter had alreadyboundhimself to marry, by placinghimselfnot
onlyunderamoralbutundera legalobligation,tomarryandthetestator
knewit."^®"
To the same effect is the decision in Scotson vPegg-}^^The plaintiffs were
carryinga cargo of coalaboardtheirship andhadcontractedwiththechar
terertodeliverittohisorder.Thechartererorderedthecoaltobedelivered
to the defendant. Thedefendantpromised tounloadthe ship at a specified
rate if theshipownerwould deliver the coal to him. This theshipowner
agreed to do, but thedefendantdelayedunloadingfor a few daysputting
the plaintiffs to loss. In an action by the plaintiffs to recover the loss, the
defendant contendedthatthere was no consideration for his promise as the
shipownerwasalreadyboundby hiscontractwiththechartererto deliver
the cargo to him. Nevertheless thecourtheld for the plaintiff.WildeB
observed asfollows:I accede to the propositionthatif a personcontracts
withanotherto do acertainthing, hecannotmake theperformanceof it
aconsiderationfor a new promise to the same individual. But there is no
authority for the propositionthatwhere there has been a promise to one
person to do a certain thing, it is not possible to make a valid promise to
another to do the same thing. Therefore, decidingthis matter on principlesit
is plain to my mindthatthe deliveryof the coals to the defendant was a good
consideration for his promise, although the plaintiffs had made a previous
contractto deliver them to the order of other persons.
The principle of these cases has beenfollowedin India by the HighCourt
ofMadhyaPradesh in FirmGopalCoLtdv FirmHazarilal The
190. Followed in India inIndermalv Ram Prasad, AIR 1970 MP 40, where a person who had
agreed to executea sale-deeddid so only when a third person promised to givehim a prom
issory note for Rs30,000held,thatthe promise was forconsideration.
191.(1861)6H&N295:158ER121:123RR516.
192.AIR1963MP37.https://t.me/LawCollegeNotes_Stuffs

281. [S.2(d)] Performance of existing duties 145
plaintiff was under acontractto purchase some bales ofcottonfrom a mill,
but refused to fulfil a substantialpartof his contract as the prices of cloth
had fallen down. The defendants, who were the sole selling agents of the
mill and who had guaranteed the performance of the contract, requested the
plaintiff to take the whole of the quota of bales fixed fordeliveryin the first
month and promised that they would buy from the plaintiff apartof such
bales at the contract price or pay himRs25,000at his option. The plain
tiffcompliedwith their requestandelectedto takeRs25,000.Thedefend
antscontendedthattheirpromisewas void forwantofconsiderationas the
plaintiff was already bound to take the cotton. The courtreviewedEnglish
authorities and said: "From these decisionsit appearsthatthe second agree
ment brings into existence a newcontractbetween different parties and
therefore a promise to do a thing which the promisee is alreadyboundto do
under a contract with athirdpartycan be good consideration tosupporta
contract."
Here also thecourtshave tosafeguardapartyfrom beingblackmailed
intoextrapayment.
A vessel wascharteredtocarryaconsignmentoftractorsto Yemen.
The freight wasprepaidby the consignees. Thecharterers,however,
defaulted in their payment of hire to theshipowners,because there was
congestion at theportof discharge and the ship had proceeded toother
ports.Duringthis period the shipownersnegotiatedanextrapayment by
the consignees for the discharge of cargo. The consignees agreed to pay,
but, after the cargo was discharged, refused to make the payment.
It was heldthatthe promise ofextrapayment did not create any estoppel
againstthe consignees.Therebeing noconsiderationfor thepromise,it was
notenforceable.^'^
Considerationandmotive
Considerationshouldbedistinguishedfrom motive or a pious desire to
fulfil anobligation."Motiveisnotthe samethingwithconsideration."This
well-knownphraseoccursin thejudgmentofPattersonJ inThomasv
Thomas-P'^Atestator,on the day of hisdeath,hadverballysaidinfrontof
witnessesthathe was desirousthathis wifeshouldenjoycertainpremises
for her life.Theexecutors,who were also theassignees,"inconsideration
of such desireandof thepremises,"agreedwiththewidowto convey the
premises to herprovidedshewouldpay to theexecutorsthe sum of £ 1
yearlytowardstheground"rentandkeep thesaidhouseinrepair.Onthe
questionofconsiderationfor theagreementbetweentheexecutorsand the
widowthecourtpointedoutthatthemotivefor theagreementwas,unques
tionably,respectfor the wishes of thetestator.Butthatwas nopartof the
193. SyrosShippingCo SA vElaghillTradingCo,(1981)3AllER189.
194.(1842)2 QB851,859.https://t.me/LawCollegeNotes_Stuffs

282. 146 Chapter 3 Consideration [S.25]
legalconsiderationfor theagreement.Motiveshould not beconfounded
with consideration. The agreement was,however,held to be binding as the
undertaking to pay the ground rent was asufficientconsideration.^'^
Absenceofconsideration
In a case where the promissory note was apparently genuine, neither
forged, nor fabricated, the lender was allowed to recover the loanamount
withinterest.Thecourtsaidthata bare denial of thepassingofconsider
ation does not make anydefence.Something which is probable has to be
brought on record so that the court may eitherbelievethatconsideration
did not exist orthatits non-existence was so probablethataprudentman
would, under thecircumstancesof the case, act on the beliefthatit did not
exist.^'^
EXCEPTIONSTOCONSIDERATION
Contractsunderseal inEnglishLaw
In English law acontractunder seal is enforceablewithoutconsideration.
In the words of Anson:"EngUshlaw recognises only two kinds ofcontract,
thecontractmade by deedthatis under seal, which is called a deed or spe
ciality, and the simplecontract.""^Acontractunder seal means acontract
which is inwritingand which is "signed, sealed and delivered".
ExceptionsunderSection 25,ContractAct
Indianlaw,however,doesnotrecogniseany suchexception.But
Section25 of theContractAct laysdowna fewexceptions.
S.25.Anagreementmadewithoutconsiderationisvoid,unless.—
(1) it is inwritingandregistered.— It isexpressedinwritingandregis
teredunderthelaw forthetimebeingin force forregistrationof [doc
uments],andismadeonaccountofnaturalloveandaffectionbetween
partiesstandingin anearrelationtoeachother;orunless
(2)oris apromisetocompensateforsometliingdone.—Itis apromise
tocompensate,wholly or inpart,a.personwhohasalreadyvoluntarily
donesomethingforthepromisor,orsomethingwhichthepromisorwas
legallycompellableto do;unless
(3)oris apromisetopayadebtbarredbylimitationlaw.—Itis aprom
ise,madeinwritingandsignedbythepersonto bechargedtherewith,
or by hisagentgenerallyor speciallyauthorisedinthatbehalf, to pay
wholly or inpartadebtof whichthecreditormighthaveenforcedpay
mentbutforthelawforthelimitationofsuits.
195.Thedistinctionthusdrawnbetweenamoralobligationandconsiderationwasapprovedby
theMadhyaPradeshHighCourtin FirmGopalCoLtdv FirmHazarilalCo, AIR 1963 MP
37 at p.40.
196.AtmaSingh vLachmanDass,(2009) 4 SCC 668P&H.
197.A.G.Guest,PrinciplesofTheLawofContract(22ndEdn,1964)65.https://t.me/LawCollegeNotes_Stuffs

283. [S.25] Exceptions toconsideration147
In any ofthesecases, such anagreementis acontract.
Explanation7.—Nothing in this section shall affect thevalidity,asbetween
thedonoranddonee,of any gift actually made.
Explanation2.—Anagreementto whichtheconsentofthepromisor isfreely
given is not void merelybecausetheconsiderationisinadequate;buttheinade
quacy oftheconsiderationmaybetakenintoaccountbytheCourt indetermin
ingthequestionwhethertheconsenttothepromisorwas freely given.
Illustrations
(a)Apromises,for noconsideration,to give to B Rs1000.This is a voidagreennent.
(b)/\,fornaturallove and affection, promises to give his son,B,Rs1000./Aputs hispromise
to Bintowritingandregistersit. This is acontract.
(c)Afinds B'spurseand gives it to him. 6promisesto give ARs50.This is acontract.
(d)AsupportsB's infant son. Bpromisestopay/A'sexpensesin sodoing.This Isacontract.
(e)Aowes BRs1000,butthedebtisbarredbytheLimitationAct.signsawrittenpromise
topaySRs500onaccountofthedebt.This is acontract.
(0 Aagreesto sell ahorseworthRslOOOforRs10./4'sconsenttotheagreementwas freely
given. Theagreementis acontractnotwithstandingtheinadequacyoftheconsidera
tion.
(g)Aagreesto sell ahorse worthRs1000 for Rs10.yAdeniesthathisconsenttotheagree
mentwasfreelygiven.
1.Naturalloveandaffection
Theessence of thefirstexceptionisthatawrittenandregisteredagree
mentbasedonnaturalloveandaffectionbetweennearrelativesisenforce
ablewithoutconsideration.^'^Whois anearrelative?TheActprovidesno
guidance,nor has theexpressionbeen judiciallyconstrued.Theexpression
willwithoutdoubtincludepartiesrelatedby blood ormarriage.Again,
whatismeantbynaturalloveandaffection?Thereis always somedegreeof
instinctiveloveandaffectionbetweenpartiesnearlyrelated.But thisinstinct
may sometimes beoverruledbyexternalcircumstances.Thus,forexample,
inRajlukhyDabeevBhootnathMookerjee-P^
Thedefendantpromised to pay his wife a fixed sum of money every
monthfor herseparateresidence andmaintenance.Theagreementwas
containedin a registereddocumentwhich mentionedcertainquarrels and
disagreementsbetweenthe two.
TheCalcuttaHighCourtrefused toregardtheagreementas one cov
ered by theexception.Thecourtcould find no trace of love andaffection
betweenthepartieswhosequarrelshad compelled them toseparate.^""
198. Love andaffectionhas to be the basis of thepromisebecauseotherwiseemotionalexpres
sions andhumansentimentscannottalcethe place ofconsiderationin thematerialsense of
theword.SeeSurendraBehariLaivJodonath,1984All LJ 21(NOC),transferof ahouse
allottedto amemberto hisbrother-in-law,heldvoid forwantofconsideration.
199.(1899-00)4CWN488.Prize chits are notwithoutconsideration,notnecessarytoattractS.
25.SanchaitaInvestmentvStateofW.B.,AIR 1981Cal157.
200. See also Appa Pillai vRangaPillai,ILR(1882) 6 Mad 71. In this case a member of an undi
videdHindufamily by aregistereddocumentrenouncedall rights in the familypropertyinhttps://t.me/LawCollegeNotes_Stuffs

284. 148Chapter3Consideration [S.25]
Withthisshouldbecontrastedthe decision of the BombayHighCourtin
BhiwaVShivaram-?-^'^
A sued B, hisbrother,for ashareincertainlands.Butthesuitwas
dismissed as B solemnlyaffirmedthatthepropertywas not ancestral; B
then agreed by registeredwritingto giveAone-halfof the sameproperty.
The present suit wasbroughttoobtainthatshare.
The plaintiff admittedthathe and his brother had long been on bad
terms. But in spite of the strained relations, thecourtheld"thatthis is just
the case to which Section 25(1) should be held to apply. Thedefendanthad
suchnaturalloveandaffectionforhisbrotherthatinordertobereconciled
to him, he waswillingto give him hisproperty."^"^
A familysettlementbetween a man and his wife was made forproviding
maintenancetowife.Thiswasheldtobeenforceablebecauseitwasmeant
for deriving satisfaction and peace of mind from family harmony. So it could
beinterpretedeither as aconsiderationor as love andaffection.^"^Thecourt
followed the decision of the SupremeCourtinRamCharanDasvGirja
NandiniDevt'-°'^where it wasobservedthat"thecourtsgive effect to a fam
ilysettlementupon the broad and generalgroundthatits object is to settle
existing orfuturedisputesregardingpropertyamong members of a family.
Theword'family'in thiscontextisnotto beunderstoodin thenarrowsense
of being agroupofpersonswho arerecognisedin law ashavingtheright
of succession or having a claim to asharein thepropertyindispute....The
considerationfor such asettlement,if one mayputitthatway, is theexpec
tationthatsuch asettlementwill result inestablishingorensuringamityand
goodwillamongpersonsbearingrelationshipwithoneandanother.That
considerationhaving passed by each of thedisputants,thesettlementcon
sistingofrecognitionof therightassertedby eachothercannotbepermitted
to beimpeachedthereafter."The same view was againreiteratedinMaturi
PullaiahvMaturiNarasimhamp-^^
favourof theothermemberswhoagreedtomaintainhimin the family.Thispromisewas
held to be void as theplaintiffdid not seem to have been moved by loveandaffectionin
renouncinghisshare.
201.(1899)1BomLR495.
202. See also Ram Dass vKishanDev, AIR 1986 HP 9, a familysettlementbetweencousins
(brotherandsister) to resolvedisputesregardingfamilypropertyonaccountofnaturallove
andaffection,heldbinding.Thecourtrecognisedacousin(brother)as anearrelative.
203.ManaliSinghalvRaviSinghal,AIR1999Del 156.
204.AIR1966SC323:(1965)3SCR841.
205. AIR1966SC 1836;RadhakrishnaJoshivSyndicateBank,(2006) 1 AIRKant692:(2006)2
All LJ (NOC) 403 (Kant), loanadvancedtodefendant'ssonunderselfemploymentscheme,
father executeddocumentsundertakingandacknowledgingto pay. He was held liable
thoughhe was not aguarantor.The case camewithintheexceptionbecausenatureobliges
parentstoprovideforchildren.Therewas alsoconsiderationbecausehepurchasedhis fam
ily peace by saving theattachmentof his sons estate. 6 per centinterestwas allowed to the
bankand not 14 per cent.RanganayakammavK.S.Prakash,(2005) AIR Kant 2654:2005
AIHC4410 (Kant), familypartition,inadequacyofconsiderationwithoutfraud,notsuffi
cient,pointnot raised in pleadings and raised onlyafter21 years, not tenable.https://t.me/LawCollegeNotes_Stuffs

285. Exceptionstoconsideration149
Apowerofattorneywasexecutedbyasister,relinquishingherrightto
share in jointfamilyproperties in favour of her brother on token of Re1 but
outofloveandaffectionforthebrotheralsoauthorisingthebrothertoenter
intopartitionagreementonherbehalf.Thedocumentwasinwritingand
registered.Shewasheldtobeboundbyherpromise,itbeingwhollycovered
by theexception.^°^
2.Pastvoluntaryservice
Secondly,apromisetocompensatewhollyor in part, apersonwhohas
alreadyvoluntarilydonesomethingforthepromisor,isenforceable.In other
words,apromisetopayfora pastvoluntaryserviceisbinding.It isneces
sary toattractthis exceptionthatthe service should have been rendered
voluntarily^"''and also for thepromisor.Thus whereserviceswererendered
foracompanynottheninexistence,asubsequentpromisetopayforthem
couldnot bebroughtwithintheexception.Butapromisemadeafterattain
ingmajorityto payforgoodssuppliedto thepromisorduringminorityhas
been held to be within theexception.^"^The court in that case said: "It is
nowsettledlaw that apromiseby an infant is in law amerenullityand
void,butwefailtoseehowanagreementmadebyapersonoffullageto
compensateapromisee,who has alreadyvoluntarilydonesomethingfor the
promisoreven at a time when thepromisorwas aminordoes not fallwithin
the purview of Section 25(2) of the IndianContractAct. As at the time when
the thingwasdonetheminorwasunabletocontract,thepersonwho didit
fortheminormust,inlaw,betakentohavedoneitvoluntarily.Buthehasin
factdonesomethingfortheminor,andifwordsmeananythingatall,surely
hiscasemustbedeemedtocomewithinthescopeof theAct."
EarliertheBombayHighCourthadheldinSindhaShriGanpatsinghjiv
Abraham^°^that"servicesrenderedatthedesireoftheminorexpresseddur
inghisminorityandcontinuedat thesamerequestafterhismajorityforma
goodconsiderationforasubsequentexpresspromisebyhiminfovourofthe
personwhorenderedtheservices".^^°
Anothersituationcoveredby theexceptioniswherethepromiseehas
donesomethingforthepromisor"whichthepromisorwaslegallycompel-
lableto do". Asubsequentpromiseto pay for the act isenforceable.
206.RanganyakammavKSPrakash,(2008) 15 SCC 673.
207. SeeT.V.Krishna Iyerv OfficialLiquidator of Cape Comorin GeneralTrafficCo,AIR 1952
TC 99, where it was held that the payment of bonus will notcomeunder S.25(2)as the
employeesrenderservicesin return forwagesand notvoluntarily.SeealsoKalipDas v
DurgadasRoy,(1922-23)27CWN769;Raja ofVenkatagiriv RaoBahadurKrishnayya,
(1948)61LW545;AIR1948PC150.
208. Karam Chand v Basant Kaur, 1911 Punjab Rec No 31, p. 91.
209.ILR(1896)20Bom755.
210. See alsoAbdullaDarakhanvPurshottamDarakhan,ILR 1947 Bom 807: AIR 1948 Bom
265, where it was pointed out that a promise given for any motive other than the desire to
compensate the promisee would not be within the exception.https://t.me/LawCollegeNotes_Stuffs

286. 150Chapter3Consideration [S-25]
3.Time-barreddebt
Lastly,apromisetopayatime-barreddebtisenforceable.^"Thepromise
shouldbeinwriting.Itshouldalsobesignedbythepromisoror "byhis
agentgenerallyorspeciallyauthorisedinthatbehalf".^'^Thepromisemay
betopaythewholeoranypartofthedebt.Thedebtmustbesuch"ofwhich
thecreditormighthaveenforcedpaymentbutforthelawforthelimitation
ofsuits".
Is itnecessarythat thepromiseshouldbegivenbythepersonwhowas
liablefortheoriginaltime-barreddebt?TheBombayHighCourthasheld
that "apromisemadebyapersonwhoisundernoobligationtopaythe
debts ofanother...does not fallwithintheclause."^"But in theopinionof
theMadrasHighCourt"thewords'bythepersontobechargedtherewith'
inSection25(3)are wide enough toincludethe case of a person whoagrees
tobecomeliableforthepaymentof a debtduebyanotherandneednot be
limitedto the personwho wasindebtedfrom thebeginning."^^'^
Anadmissionby thelegalheir of adeceaseddebtor in hisdepositionin
the court to the effectthat he was willing to pay the principal time-barred
amount was held to be a promiseto pay making himliable.^"
"Thepromisereferredto inSection25(3)mustbeanexpressoneand
cannot be held to be sufficientif the intention to pay is unexpressed and has
to begatheredfromanumberofcircumstances.Theremust be adistinct
promisetopaybeforethedocumentcanbesaidtofallwithintheprovisions
of thesection."Thusadebtor'sletterto hiscreditor"tocomeandreceive"
what was due to him, was held todisclosenoexpresspromise.A brief note
bythepromisoronthebackofthepromissorynotewrittenattheexpiryof
theperiodoflimitationthathehadtakentheloanandunaccompaniedby
anywordspromisingorundertakingtopay,washeldto be notsufficient
toattractSection25.^^^Inanothercasetherewas ademandby alandlord
for rentincludingtime-barred rent. The tenantrepliedthat the rent may
211.It isdifferentfromacknowledgmentof liabilitybecausethat has to be within the period of
limitation,whereasunder thisexceptionthe matter is exhypothesian already time-barred
debt. Hence, thepromiseegets newcauseof action.UmeshChandra Chakravarty v Union
BankofIndia,(1991)1GauLR223.Apronoteexecutedforatime-barreddebtwasheldto
be enforceable,IndianBank v C.K. SyedMohammed,(1997) 2 KLJ 290.
212.A.Y.Murthy vB.S.Nagabasawanna,(2002)3BomCR 13(SC),distinctionbetween
acknowledgmentbeforeexpiryoflimitationandpromiseto payafterexpiryoflimitation.
Rakesh Kumar Dinesh Kumar v UG Hotels & Resorts Ltd, AIR 2006 HP 135, the buyer of
goodsdefaultedinpayment,hemadeanofferinwritingtopayacertainamountinfulland
final settlement, the seller accepted part payment. The court said that a new contract as to
payment arose, the plea of time bar was notavailable.
213. Pestonji Manekji Mody v Bai Meherbai, AIR 1928 Bom 539.
214.PuliyathGovinda Nair v ParekalathilAchutan Nair, AIR 1940 Mad 678.
215. SBI VDilipChandraSingh Deo, AIR 1998 Ori 129.
216. TulsiRam v SameSingh,AIR 1981Del 165;SBIv Dilip ChandraSinghDeo, AIR 1998 Ori
129,nodefiniteunderstandingwas speltout that thedefendantwouldcleartheduesof his
late mother. He had made onepaymenttowards theover-drawnaccount and undertook in
writingtoclearthedues.Suchundertakingwasdistinguishedfromapromise.NarendraV.https://t.me/LawCollegeNotes_Stuffs

287. Exceptionstoconsideration151
becollectedbycashorcheque,butmentionednoamount.Thiswasnot
regardedbythecourtasapromisetopayatime-barreddebt.^"Asagainst
it, inanothercase,whereanacknowledgmentofadebtwascoupledwith
anagreementto payinterest,itwasheldto beanagreementwith apromise
topaywithinthemeaningofSection25(3).^^^Similarly,whereatenantin a
letter to the landlord referred to the arrears of time-barred rent and said: "I
shallsendbythe endof theVysakhmonth",it washeldthat thedocument
containedtheingredientsrequiredbySection25(3).^"Where,inareplyto
anotice,theauthorisedadvocatestatedthat onreceivingpaymentfroma
thirdpersontheaccountwiththeplaintiffwillbesettled,itwasheldthat
thisamountedto apromisetopay.^^"
TheBombayHighCourthasgivenanewturntothisexceptionbyhold
ingthatastatementinthebalancesheetofafirmsignedbyapartnershovv-
ingthat thefirmwasindebtedto theplaintiffinrespectof thestatedsum
becameanimpliedpromisetopay.^^^Inreplyto awinding-uppetition,the
companyadmitteditsliabilityandalso,promisedto pay by a letter to the
creditor.The debt beingtime-barred at the time, the letterrevivedit.^^^
Achequeissuedforatime-barreddebtwouldstillfallwithinthepurview
ofSection138,NegotiableInstrumentsActinviewofSections25(3).^^^
Anacknowledgementof adebtissomethingdifferentfromapromise
ofthiskind.Anacknowledgementhastotakeplacebeforeexpiryofthe
period of limitation only then the period of limitationbecomesextend-
ed.^^''Section25(3)requiresapromisetopayatime-barreddebt.Itthereby
becomesanewcontract.Itisnotjustmerelytheacknowledgementof an
existingliability.
KanekarvBardezTalukaCoopHousingMortgageSocietyLtd,(2006)6BomCR874,issue
of achequeforatime-barreddebtdoesnotcreateliabiUtyunderS.138oftheNegotiable
InstrumentsAct, that sectionrequiresanenforceabledebt orliability.-
217.DaulatRamvSomNath,AIR1981Del354.It is notnecessarythat the newpromiseshould
expresslymentionthetime-barreddebt.BishambharDayalvVishwanath,AIR1985All12;
CanaraBankvVijayShamraoGhatole,(1996)5BomCR338,amereadmissionofliability,
notsufficientto attract thesection.KadirVsmanMalawarv Dattatraya BhaskarSinkar,
(2005)4 MahLJ1076,signedpromiseinwritingmadewithknowledgethat itwasfor pay
ment of past debt, binding.
218. DebiPrasadvBhagwatiPrasad,AIR 1943 All 63.
219.AppaRaovSuryaprakaohRao,ILR(1899) 23Mad94.
220. Panicker v Prabhakaran, (1993) 2 KLJ 380:(1993)2 KLT 417. The court followed Noor
Mohammad Rawther v Charu, 1959KLJ168; Puliyath Govinda Nair v Parekalathil
AchutanNair, AIR 1940 Mad 678whereit washeldthat "apromiseto pay a part of the
barreddebtcannotbetakento beapromisetopaythewholeofthedebt.If apersonprom
isedto pay a portion of a barred debt, hecan onlybe suedfor that portion alone and not for
thewholedebt."
221. R.Sureshchandra& Co v VadnereChemical"Works,AIR 1991 Bom 44.
222.BusinessFormsLtdvAshokaAgencies,AIR1996Cal153.
223. Ramakrishanan v Gangadharan Nair, AIR 2007 NOC 2033(Ker):2007 Cri LJ 1486.
224. Madishetti Shekar v Puliyala Komurelli, (2008) 1 APLJ9 SN.
225. MNS Charities vPillaRamarao, (2009) 2APLJ226; Bank of Baroda v D Radha Krishna
Reddy,(2008)1ICC633AP,a bankercanexerciseits right of lienevenin respectof a claim
whichistime-barred.https://t.me/LawCollegeNotes_Stuffs

288. 152Chapter3Consideration [S-
Gift actually made[S.25(Expln.I)]
Theprovisionsastoconsiderationdonotaffect,asbetweendonorand
donee,thevalidityofanygiftwhichhasactuallybeenmade.Agiftofmova
bleswhichhasbeencompletedbydeliveryandgiftofimmovableswhichhas
beenperfectedbyregistrationcannotbequestionedastotheirvalidityonly
onthegroundoflackofconsideration.Theymaybequestionedotherwise.
Whereagiftofpropertywasmadebyregistereddeedandattestedbytwo
witnesses,itwasnotallowedtobequestionedbythedonorontheground
that she was the victim of fraud which she was not able toestablish.^^®
Inadequacyofconsideration[S.25(Expln.II)]
For notes see under "Adequacy of Consideration" [supra). '
TheinadequacyoftheconsiderationisafactwhichtheCourtshouldtake
intoaccountinconsideringwhetheror not A'sconsentwasfreelygiven.
226.VasantRajaramNaruekarvAnkushaRajaramNarvekar,(1995)3BomCR196;K.
BalakrishnanvK.Katnalam,(2004)1SCC581,gift bymotherto her minorson undergift
deedwiththerightto bein thepropertyuptoherlifetime.Thesonkeptitwithhisfather
anddidnotrepudiateonattainingmajority.Thus,acceptedandbecameirrevocable.
Visitebcexplorer.comto access cases referred
tointhebookthroughEBCExplorer™on ||j||||||||^^
SCCOnline®;alongwithupdates,articles,videos, FxplOTPK
blogsand a host of different resources. companionresources for legal research
The following cases from thischapterareavailable
throughEBCExplorer™:
• Abdul Aziz v MasumAH,AIR 1914 All 22:ILR(1914)36 All 268 case pilot
• Doraswami Iyer v ArunachalaAyyar,AIR 1936 Mad 135
• Kedarnath Bhattacharji v Gorie Mahomed, ILR(1986)14Cal64
•NaivabKhwaja Muhammad Khan v Nawab Hussaini Begum,
(1909-10)37lA152https://t.me/LawCollegeNotes_Stuffs

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290. 4
CapacitytoContract
Section10oftheContractActrequiresthatthepartiesmustbecompe
tenttocontract.CompetencetocontractisdefinedinSection11:
S.11.Whoarecompetentto contract.—Everypersoniscompetentto
contractwhoisofthe age ofmajorityaccordingtolawtowhichheissubject,
andwhoisofsoundmind,andisnotdisqualifiedfromcontractingbyanylaw
to which he is-subject.
Thus,thesectiondeclaresthefollowingpersonstobeincompetentto
contract—
(1)minors,
(2)personsofunsoundmind,and
(3)personsdisqualifiedbylaw to which they aresubject.'
MINOR
Age ofmajority
Theageofmajorityisgenerallyeighteen,exceptwhena guardian of a
minor's person orpropertyhas been appointed by the court, in which case it
is21} Theageofmajorityofapersonisto bedetermined"accordingto the
law to which he issubject".^
In Englandthe ageof majorityformerlywas 21 years. Butnow under the
FamilyLawReformAct,1969,"aminoris apersonundertheageofeight
een years". Formerlya minor was referred to as an"infant",but this Act has
changedthetermto"minor".
1.AshokKumarJ.PandyavSuyogCoopHousingSocietyLtd, AIR2003NOC118(Guj):2002
AIHC3401, ahousingsocietyagreedto selllandbeforeitbecamea legalperson by registra
tion.Notenforceable.
2. The IndianMajorityAct, 1875, S. 3, which reads:
"Every person domiciled in India shall be deemed to have attained his majority when he
shall havecompletedhis age ofeighteenyears, and not before.In the case,however,of a minor
of whoseperson or property or both a guardian has been appointed by a court, or of whose
propertythe superintendence is assumed by acourtof wards, before the minor hasattained
the age of eighteenyears, when he has completedthe age of 21 years."
3. The sectiondefinesinherentcompetenceto be a party to a contract, and notcompetencefor
being an agent orrepresentative,etc. Dharmeshwar Kalita v Union of India, AIR 1955 Ass
86.
[153]https://t.me/LawCollegeNotes_Stuffs

291. 154Chapter4CapacitytoContract [S-H]
Natureofminor'sagreement
Section10requiresthatthepartiestoacontractmustbecompetentand
Section11declaresthat a minorisnotcompetent.Butneithersectionmakes
itclearwhether,if aminorentersintoanagreement,itwouldbevoidable
athisoptionoraltogethervoid.Theseprovisionshad,therefore,quitenat
urallygivenrisetoacontroversyaboutthenatureofaminor'sagreement.'*
Thecontroversywasonlyresolvedin1903bytheJudicialCommitteeof
thePrivyCouncilintheirwell-knownpronouncementinMohoriBibeev
DhurniodasGhose.^SirLordNorthobserved:"LookingatSection11
theirLordshipsaresatisfiedthat theActmakesitessentialthat allcontract
ingpartiesshouldbecompetenttocontractandexpresslyprovidesthata
personwhobyreasonofinfancyisincompetenttocontractcannotmakea
contract within the meaning of the Act. The question whether a contract is
voidorvoidablepresupposestheexistenceofacontractwithinthemeaning
of the Act, and cannot arise in the case of an infant."
Eversincethisdecisionithasnotbeendoubtedthataminor'sagreement
isabsolutelyvoid.InEnglandalsotheInfants'ReliefActof1874declares
thefollowingcategoriesofaminor'sagreementto be"absolutelyvoid".
(1)contractforrepaymentofmoneylent or to belent, or
(2)contract forgoodssuppliedor to besupplied(otherthannecessary),
and
(3)contractfor accountsstated.®
Anyotherrulewouldhavemadethelawasymmetricalleavingit to the
whimofachildtopickandchoosebetweenagreementsmadebyhimwhich
he will and which he will not enforce. A child may showpoorjudgment in.
makingaparticularcontract,anditisaprotectionagainsthisownignorance
andimmaturity—notmerelyfraudulentmanipulationbyothers—thatthe
lawaffords.Thegeneralpresumptionthateverymanisthe bestjudgeofhis
own interests is suspended in the case of children.^
The ruling of the PrivyCouncilin the MohoriBibeecasehas been gener
allyfollowedbythecourtsinIndiaandappliedboth to theadvantageand
disadvantageofminors.Anotherdecisionof thePrivyCouncilin lineisMir
SarwarjanvFakhruddinMahomedChowdhury}"Acontracttopurchase
4. There is no provision as to the effect of incompetency.
5. (1902-03) 30lA114:ILR(1903)30 Cal 539(PC);LakhwinderSinghvParamjitKaur, AIR
2004P8cH6: (2004) 1ICC151, sale deed of property of minor executed by the minor's
powerofattorneyholder,heldnotbinding,thebuyermadenoinquiriesinto thematter.Ram
Ashish Chaudhary v State ofU.P.,2003 All LJ 330, appointment of persons below age as
teachers held, void abinitio. M.S.Madhusoodhanauv KeralaKamnudiP Ltd, (2004) 9 SCC
204, minor'sshare of property sold bylegalguardian to his father who in turntransferredit
further,valid.
6. Apartfromthesecategories,thecontractof an infantmaybeeithervalidorvoidableat his
option. Anson'sPrinciplesofTheEnglishLawofContract(1964)178.
7.AnthonyT.Kronman,Paternalismand the Law ofContract,(1988)92YaleLJ763,786.
8.(1911-12)39lA1;(1912)39 Cal232 PC.Alsofollowedin Ma Hnitv Fatima Bibi,(1926-27)
54lA145(PC).https://t.me/LawCollegeNotes_Stuffs

292. Minor155
certainimmovableproperty hadbeenmade by a guardian on behalf of a
minor,andtheminorsuedtheotherpartyforadecreeofspecificperfor
mance to recover possession. Hisactionwasrejected."
The court saidthat itwasnot within thecompetenceeitherof the man
ageroftheminor'sestateor oftheguardianoftheminor,to bindtheminor
ortheminor'sestatebyacontractforthepurchaseofimmovableproperty;
thatastheminorwasnotboundbythecontract,therewasnomutuality;
and thatconsequentlytheminorcouldnotobtainspecificperformanceof
thecontract.
In itssubsequentpronouncementinSirkakulamSubramanyamvKurra
SubbaRao^the Privy Council overruled earlier decisions andentertainedno
doubtthat itwaswithinthepowersofthemotherofaminorasguardian
to enter into a contract of sale for the purpose ofdischarginghis father's
debts.FollowingthisdecisiontheOrissaHigh Courtheldthatendowment
ofpropertyforreligiouspurposesbyguardiansonbehalfofminors,being
withintheircompetence,wasspecificallyenforceable.^"TheotherHigh
Courtshavealsoexpressedtheviewthat thedoctrineofmutualityshould
not have beenimportedinto thematterwhere thecontractwaswithinthe
competenceof the guardian and that there is noscopefor this doctrine
under Section 20 of theSpecificRelief Act,1963."If thecontractis within
the competence of theguardianand it is for the benefit of the minor it is
specificallyenforceable.'^
Intoday'ssocietyitdoesnotseemto bepossible,muchlessdesirable,
forlawtoadhereto thecategoricaldeclarationthat aminor'sagreementis
always"absolutelyvoid".Minorsareappearinginpubliclifetodaymore
frequentlythanevenbefore.A minor has totravel,to get hisdressestai
lored,orcleaned,tovisitcinemahalls anddeposithiscycleat a stand. He
has todealwitheducationalinstitutionsandpurchasesomanythingsfor
thefacilityoflifeandeducation.If, in any one ofthesecases,the other
party to the contract could brushasidethe minor on the ground that the
engagementis void, the legalprotection against contractual liability would
be too dear tominors.ThePrivyCouncilhad,therefore,to modifyits ear
lierdecisions.This trend isevidencedbythedecisionof theirLordshipsin
SrikakulamSubrahmanyamv KurraSubbaRao}^Inorderto pay off the
debtsofhisfather,whichwerepromissorynotesowingto theappellantsand
a mortgage to another, a minor son and his mother sold a piece of land to
9.(1947-48)75lA115;AIR1948PC25.
10.DurgaThakuraniBijeNijigarhvChintamoniSwain, AIR 1982 Ori 158.
11.VadakattuSuryaprakasamv AkeGangaraju,AIR 1956 AP 33. For the power of the man
ager of a family to contract on behalf of the family including minor members, seeCITv
HukumchandUannalal& Co, (1970) 2 SCC 352; AIR 1971 SC383:(1971)1 SCR 646.
Properties belonging to certain minors were contracted to be sold to raise money for their
marriages.Specificenforcementallowed.
12.GopalkrishnaGovindvTukaramNarayan,AIR 1956 Bom 566;CITv ShahMohandas
Sadhuram,AIR1966SC 15.
13.(1947-48)75lA115:ILR1949Mad141PC.https://t.me/LawCollegeNotes_Stuffs

293. 156Chapter4CapacitytoContract [S.H]
theappellantsinsatisfactionofthenotes,requiringthattheappellantspay
offthemortgagedebt.Theappellants,accordingly,paidoffthemortgagee
and tookpossession.Afterwardstheminorbroughtanactiontorecover
back the land. It was found as a factthatthe transaction was for the benefit
of theminorand theguardianhad thecapacitytocontractonhisbehalf.
LordMortonsaid that Section 11 and the Mohori Bibi case leaveno doubt
that a minor cannot contract and that if the guardian and the mother had
takennopartinthistransactionitwouldhavebeenvoid.Thecontractbeing
for thebenefitof the minor and within the power of the guardian was held
to be binding upon him.
Effectsofminor'sagreement
Aminor'sagreementbeingvoid,ordinarilyitshouldbewhollydevoidof
alleffects.'"*If there is no contract, there should, indeed, be no contractual
obligationoneitherside.Consequently,all theeffectsof aminor'sagree
ment must be worked out independently of any contract.
1. Noestoppelagainstminor
Supposethat aminorbymisrepresentinghisageinducesanotherto con
tract withhim,willtherebeanyestoppelagainsthim,or, in otherwords,
willhe beprecludedfromdisclosinghistrueagein alitigationresulting
from the contract?Eventhis questionhad at one time createdacontroversy.
Butit is nowsettledby apreponderanceofauthoritythat there is no such
estoppelagainsttheminor."Theinfantis notestoppedfromsettingup
thedefenceofinfancy.The reasonisverysimple.Therecan be noestoppel
against a statute. The policy of the law of contract is to protect persons
belowagefromcontractualliabilityandnaturallythedoctrineofestoppel
cannot be usedto defeatthatpolicy.Thus, in a casebeforetheBombayHigh
Court,'^BeaumontCJreviewedtheearlierauthoritiesandconcludedby
saying:"Thecourtisofopinionthatwhereaninfantrepresentsfraudulently
or otherwisethathe is of age and thereby inducesanotherto enter into a
contractwithhimtheninanactionfoundedonthecontracttheinfantisnot
estopped from setting up infancy."
14. Anagreementwhichconfersbenefitson a minor is not onlynotvoid,but isenforcedat his
instance.A minor'sconsent,beingnullity,it cannotchangematters,in this case,mattersrelat
ing tovalidityofpossession.SeePadmaVithobaChakkayyav Mohd Multani, AIR 1963 SC
70, 74;(1963)3 SCR229; minorreleasingrights in a property,infructuous,seeWaltSinghy
SohanSingh,AIR1954SC263;familysettlementsarebinding,butminor'spositionunderit
will depend upon the principlethat a minor's agreementis void.
15.See,forexample,/agarNaffcSinghvLalta Prasad,ILR(1908-10)21 All21, wherethe courts
said: "the law of estoppel cannot be invoked in aid to validate that which is void under the
law". Kanhayalal v Girdharilal,(1912)9 All LJ 103 pleading minority against a promissory
note,allowed.
16.GadigeppaBhimappaMeti vBalangowdaBhimangowda,AIR1931Bom561,wherethe
courtreviewedallauthoritiesonthispoint.https://t.me/LawCollegeNotes_Stuffs

294. [S. 11] Minor157
2. No liability incontractor intortarisingoutofcontract
Aminor'sagreementis, ofcourse,inprincipledevoid of all legal effects.
"Aminoris in lawincapableof givingconsent,and,there being no con
sent, there could be no change in thecharacter"orstatusof theparties.^^
InEnglandit was laiddownas early as 1665 inJohnsonvPye^^that"an
infantwhoobtainsa loan of money by falsely representing his agecannot
be made to repay theamountof the loan in the form of damages for deceit".
Thecourtpointedoutthatifinfantswere held liable ontheircontractsby
means ofactionsintort,all theinfantsofEnglandwouldberuined.Hence
aminorcannotbe heldresponsibleforanythingwhichwouldbe anindirect
way ofenforcinghisagreement."Youcannotconvertacontractintoatort
toenableyou to sue aninfant.""Thisprinciplehas beengenerallyfollowed
inIndia.TheCalcuttaHighCourt,forexample,refusedto hold aminorlia
ble intortfor money lent on abond.^"Thecourtsaid:"Ifthetortisdirectly
connectedwiththecontractand is the means of effecting itandis aparcel
ofthesametransaction,theminorisnotliableintort."^^
Butwherethetortisindependentof thecontract,the mere factthatacon
tractis also involved, will not absolve theinfantfrom liability.Thus,where
aninfantborrowedamareforridingonly, he was held liable when he lent
her to one of hisfriendswhojumpedandkilledher.^^Similarly, inanother
case,aninfantwasheldliableforthetortofdetenuefor hisfailuretoreturn
certaininstrumentswhichhe hadhiredandthenpassedon to a friend.
AtkinJ's (as hethenwas)judgmentinFawcettvSmethurst^'^explainsthe
earliercasesandalso thetestforascertainingwhetherthetortinquestion
isindependentof thecontract."Theprincipleof law applicable to this case
isthatwhichisreferredto in Leslie (R)LtdvSheill^^whereKennedyLJ
in hisjudgmentciteswithapprovalthe following passage fromPollock
ONCoNTRACTS:^^'He(i.e., theinfant)cannotbe sued for awrongwhen
thecauseofactioninsubstanceis excontractu,or is sodirectlyconnected
withthecontractthattheactionwouldbe anindirectway ofenforcing
thecontractBut if aninfant'swrongfulact,thoughconcernedwiththe
subject-matterof acontract,and suchthatbut for thecontracttherewould
have been noopportunityof committing it, is nevertheless independent of
17.PadmaVithobaChakkayyavMohdMultani,AIR 1963 SC 70, 74; (1963) 3 SCR 229.
18. (1665) 1 Sid258:82 ER1091.
19. Jennings vRundall,(1799) 101 ER 1419:(1799)8 TR 335; also cited in Leslie (R) Ltd v Sheill,
(1914) 3 KB607(CA), 618.
20.HarimohanvDuluMiya,ILR(1934) 61Cal1075.
21. Foranotherillustrationof the same principle seeRadheyShiamvBiharilal,ILR (1918) 40All
558: (1918) 48IC478. An agreement by a minor to release his rights in apropertyis equally
infructuous.WaliSingh vSohanSingh, AIR1954SC263,265.
22.BurnardvHaggis,(1863) 4 CBNS 45: 8 LT 328.
23.BalletvMingay,1943KB 281 (CA).
24. (1914) 84 LJKB473:112 LT309.
25.(1914)3 KB607(CA),618.
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295. 158Chapter4CapacitytoContract [S. 11]
thecontractin the sense ofnotbeing an act of the kindcontemplatedby it,
then theinfantisHable.'In the present case the car was hired for thepurpose
of going to Cairn Ryan and back, but was in fact driven further. In my opin
ion nothingthatwas done uponthatfurtherjourney made the defendant
an independent tortfeasor; and, if any damage was done to the car onthat
journey, the defendant would only be liable if he were liable under the con
tractmade....InBurnardvHaggis,"thedefendantwho was aCambridge
undergraduateand aninfant,hired a horse for thepurposeof going for a
ride, expresslystatingthathe did notwanta horse for jumping. The defend
antlet the horse to a friend, who used it forjumping,withtheresultthat
it fell and was injured. Thedefendantwas liable on thegroundthatthe act
resulting in injury to the horse was one which was quite outside thecontract,
and couldnotbe said to be an abuse of thecontract.InJenningsvRundall,^^
on theotherhand,wherethedefendant,aninfant,hadhiredahorseto be
riddenfor ashortjourneyandtookit on amuchlongerjourney,withthe
resultthatit wasinjured,thecourtheld thedefendantnot liableuponthe
groundthatthe action was founded incontractandthattheplaintiffcould
notturnwhatwasinsubstanceaclaimincontracttooneintort."
3.Doctrineofrestitution
If aninfantobtainspropertyor goods bymisrepresentinghis age, hecan
be compelled to restore it, but only so long as the same istraceablein his
possession. This isknownas theequitabledoctrineofrestitution.Wherethe
infanthas sold the goods orconvertedthem, hecannotbe made to repay
the value of the goods, becausethatwouldamounttoenforcinga void con
tract.^'Again, thedoctrineofrestitutionis not applied where theinfanthas
obtainedcashinsteadofgoods.Thewell-knownauthorityisLeslie(R)Ltd
VSheill:^°
Aninfantsucceededin deceiving somemoney-lendersbytellingthem
a lieabouthis age, and so gotthemto lend him£400on thefaithof his
beinganadult.
Theirattemptto recover theamountofprincipalandinterestasdam
ages forfraudfailed for the reasonsexplainedabove.Theythenclaimed
thereturnof theprincipalmoneysunderaquasi-contractas"moneyhad
and received to theplaintiff'suse". To this LordSumnerreplied:"Further,
underthestatute^^theprincipal,whichatcommonlaw relieved aninfant
27.(1863)4CBNS45: 8 LT328.
28.(1799)8TR335:(1799)101ER1419.
29. There has been, however, one case inEngland,namely.Stocks v Wilson, (1913) 2 KB 235,
whereaninfantwasheldliabletoaccountforthevalueofcertainfurnitureandotherarticles
which he had resoldafterobtainingthem from theplaintiffbymisrepresentationof age. The
decisionwascriticiseda yearlaterbyLordSumnerin Leslie(R)Ltdv Sheill, (1914) 3 KB 607
(CA), 618,andis not likely to befollowed.
30.(1914)3 KB607(CA), 618.
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296. [S. 11] Minor159
fromliabilityfor atortdirectlyconnectedwitha voidablecontract,namely,
thatit was impossible to enforce in aroundaboutway an unenforceable
contract,equally forbids thecourtsof law to allow,underthenameof an
impliedcontractor in the form of anactionquasiexcontractu,aproceed
ing toenforcepart of a contract, which the statutedeclaresto be wholly
void."^^
Finally, the money-lenders relieduponthe.doctrineofrestitution,con
tendingthattheinfantshouldbecompellableinequitytorestorethe money.
Rejecting thiscontention.LordSumnersaid:
"Ithinkthatthewholecurrentofdecisionsdownto1913...wentto
showthat,whenaninfantobtainedanadvantageby falselystatinghim
self to be of full age, equityrequiredhim to restore his ill-gotten gains, or
to release thepartydeceived from obligations or acts in law induced by
the fraud, but scrupulously stoppedshortof enforcingagainsthim a con
tractualobligation, entered into while he was aninfant,even by means of
afraud....Restitutionstoppedwhererepaymentbegan.
... the money was paid over in order to be used as thedefendant'sown
and he has so used it and, I suppose, spent it. There is no question of trac
ing it, no possibility of restoring the very thing got by the fraud,nothing
but compulsionthroughapersonaljudgment to repay an equivalent sum
out of his present and futureresources....Ithinkthis would be nothing
butenforcinga voidcontract."^^
Minorseeking relief, compellable to restore
However, where aninfantinvokes the aid of thecourtfor thecancellation
of hiscontract,thecourtmaygrantthe relief subject to theconditionthat
he shall restore all benefitsobtainedby him under thecontract,or make
suitablecompensationto theotherparty.^"*
This aspect of the doctrine of restitution found expression in Section 41 of
the originalSpecificReliefAct.of1877.^^The section authorised the courts
to order any compensationthatjustice required to be paid by thepartyat
whoseinstanceacontractwascancelled.Thefirstwell-knowncasedecided
underthesectionisthatofMohoriBibeevDhurmodasGhose?^
32.Leslie(R)LtdvSheill,(1914) 3 KB607(CA), 613.
33.Ibid,618.
34. See, for example,JagarHath Singh vLaltaPrasad,ILR(1908-10)21 All 21, where a minor
was allowed to recover possession ofpropertysold by him only subject to the condition that
he restored the consideration. This principle was approved by the Privy Council inMahomed
SyedolAriffinvYeohOoi Gark, (1915-16) 43lA256: AIR 1916 PC 242. Padinhare Veetil
MadhavivPachikaranVeetilBalakrisbnan,AIR 2010 KerHI,mothersoldminor'sshare
without court permission, suit for setting aside by minor on attaining majority, minor refused
restorationof benefitsobtained,no reliefallowed.
35. The section ran as follows:"Onadjudging the cancellation of aninstrument,theCourtmay
require the party to whom such reliefis granted to make any compensationto the other party
whichjustice mayrequire."
36.(1902-03)30lA114: ILR (1903) 30Cal539 (PC).
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297. 160Chapter4CapacitytoContract [S. 11]
Theplaintiff,aminor,mortgagedhis houses in favour of the defend
ant,a money lender, to secure aloanof Rs20,000.Apartofthisamount
wasactuallyadvancedto him.Whileconsideringtheproposedadvance,
theattorney,who wasactingfor the money lender, receivedinformation
thattheplaintiffwas still aminor.Subsequentlytheinfantcommenced
thisactionstatingthathe wasunderagewhenheexecutedthemortgage
andthesameshould,therefore,becancelled.
The relief ofcancellationhad to begrantedas theplaintiffwasentitled
to itunderSection 39 of the Specific Relief Act,1877[S. 31 of 1963]. The
moneylender'sonlyrequestwasthatthereliefshouldbemadesubjectto the
conditionof theminorrepayingtohimthesumof Rs10,500advancedas
partof theconsiderationfor themortgage.He first relieduponSection 64 of
theContractAct.Accordingtothis'section,apersonwho,havingtheright
to do so,rescindsavoidablecontract,heshallhavetorestoretotheother
partyany benefit received by himunderthecontract.The PrivyCouncil
heldthatthis section applies only to voidablecontractsandcannotapply
to theagreementof aminor,whichis absolutely void. Similarly no relief
wasallowedunderSection65oftheAct.Theessenceofthissectionisthat
apartyreceivinganybenefitunderacontractshallhave torestoreit if the
contractbecomes void or is discovered to be void. Quite obviously the Privy
Councilsaid"thatthissection,likeSection64,startsfromthe basis of
there being an agreement orcontractbetweencompetentparties,and has no
applicationto a case inwhichtherenever was,andnevercouldhave been,
anycontract."^^
Finally, the money-lender relied upon Section 41 of the Specific Relief
Act, 1877[S.33 of 1963], which was as follows:"Onadjudging the can
cellationof aninstrumentthecourtmayrequirethepartytowhomsuch
relief is granted to make any compensation to the other which justice may
require." As to this their Lordships said:"Thissection nodoubtgave a
discretion to the court; but thecourtof first instance and subsequently the
AppellateCourt,in the exercise of suchdiscretion,cameto theconclusion
thatundercircumstancesof this case justice did not require them to order
thereturnby the respondent of money advanced to him with full knowledge
of his infancy, and their Lordships see no reason forinterferingwiththe
discretionsoexercised."
There was alienation of a minor'spropertyby a de factoguardian.The
minor repudiated the sale onattainingmajority. The purchaser was fully
awarethatthe de factoguardianwasincompetentto alienate. It was held
thatthe minor was nothableto restore to the purchaser benefits obtained
by him. Purchaser's remedy was to proceed against the de factoguardian.
37.MohoriBibee vDhurmodasGhose,(1902-03)30lA114:ILR(1903) 30Cal539 (PC).
38.ManiyanNadarvHatikuraar,AIR2015Ker 183.https://t.me/LawCollegeNotes_Stuffs

298. [S. 11]
Thesecondlandmarkdecisioninthislineofcasesontheextentofrelief
available against a fraudulent minor was the decision of the Lahore High
CourtinKhanGulvLakhaSingh-?^
Thedefendant,while still aminor,byfraudulentlyconcealinghis age,
contractedto sell a plot of land to the plaintiff. He received the consid
erationof Rs 17,500 and thenrefusedtoperformhispartof thebargain.
Theplaintiffprayed for recovery of possession orrefundof considera
tion. There could be no question of specific enforcement, thecontractbeing
wholly void. The only question, therefore, was:"Cana.minorwho has
entered into acontractby falserepresentationrefuse toperformthecontract
and at the same timeretainthe benefit he may have receivedtherefrom?"
Section 41 of theSpecificRelief Act, 1877, would not help the plaintiff as
SirShadilalCJadmittedthat"thelanguageof thesectionnodoubtshows
thatthe jurisdiction conferred thereby is to be exercised when the minor
himselfinvokes the aid of thecourt."Norwouldtheprincipleofrestitution
as explained by LordSumnerin Leslie (R)LtdvSheill'^°be of any help
unless it wasextendedinIndiato cover cases of money also. Thelearned
Chief Justice found sufficientreasonfor thisextensionas he said:"Thereis
no real differencebetweenrestoringthepropertyandrefundingthe money,
except that thepropertycan be identified but cashcannotbetraced....It
mustberememberedthat,whileinIndiaallcontractsmadebyinfantsare
void, there is no such general rule in England. There should therefore be a
greater scope in India than in England for the application of the equitable
doctrineofrestitution."'*^
Referring to Sections 39 and 41 of the Specific Relief Act, 1877 [now
Ss. 31 and 33 of Act 1963], HisLordshipsaid:"Thedoctrineofrestitutionis
not howeverconfinedto cases covered bythosesections. Thedoctrinerests
upon the salutary principle that an infant cannot be allowed by a court of
equity to take advantage of his own fraud."Accordingly,the learned Chief
Justice orderedrefundof theconsideration.'*^
This opinion was notfollowedby the Allahabad High Court in another
landmarkon the subject, namely,AjudhiaPrasadvChandanLal^^
A sum of money was borrowed by two minors under a mortgage deed.
They were morethan18 but lessthan21 years of age, but fraudulently
concealed the factthataguardianhad beenappointedfor them. The
question was whether the lender could get a decree for the principal
money or sale ofmortgagedproperty.
SuLAiMANCJ who delivered the judgment of the Full Bench, refused to
follow the enlarged view ofrestitutionas applied by SirShadilalCJ in
39.ILR(1928) 9 Lah 701: AIR1928Lah 609.
40.(1914) 3 KB607(CA), 618.
41.KhanGulvLakhaSingh, ILR (1928) 9 Lah 701,715-19.
42. SeealsoDattaramvVinayak,ILR (1903) 28 Bom 181.
43.AIR1937All610 (FB).
Minor161
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299. 162Chapter4CapacitytoContract [S. 11]
KhanGulvLakhaSinghHisLordshipfeltthatthecourtsinIndiawere
probablyboundby theprincipleofrestitutionasexplainedandrestrictedby
LordSuMNERin Leslie (R)LtdvSheill,'^^as ithadalreadybeenapproved
by the PrivyCouncil.In theopinionof hisLordship,anyother"viewwould
becontraryto thegreatpreponderanceofauthoritybothinEnglandand in
Indiaandwouldignore thewell-recogniseddistinctionbetweenthe posi
tion of aminorwhen suing as aplaintiffandwhen he is being sued as a
defendant.'"'^ ThelearnedChief Justice added:"Wherethepropertyisnot
traceableandthe only way tograntcompensationwouldbe bygrantinga
moneydecreeagainsttheminor,decreeingtheclaimwouldbealmosttanta
mounttoenforcingtheminor'specuniaryliabilityunderthecontractwhich
is voidThereis no rule of equity, justiceandgoodconsciencewhich
entitles acourtto enforce a voidcontractof aminoragainsthimunderthe
cloakofrestitution."
TheAndhraPradeshHighCourthadaligneditselfwiththeAllahabad
HighCourt.''^Afteranextensivereviewofauthorities,SubbaRaoCJsaid
thatthe effect of theauthoritiesis"thataperson,who haspartedwithhis
goodscantracetheminto thehandsof thequondamminorandrecover
themback in specie, for he has not lost his title to them. But hecannotseek
to recovertheirprice ordamages,for, ifallowedto do so, thecourtwould
beenforcingthecontractofloan".
In thematterof amortgagein favour of aminor,it has been held by the
SupremeCourtthattheminorityof themortgageerendersitvoidabinitio.'^^
Amendedprovisionsin the SpecificReliefAct,1963
The LawCommissionofIndiapreferredthe view of SirShadilalCJ
and accordingly the controversy has now been set at rest by the newSpecific
RehefAct, 1963. Theprincipleofrestitutioniscontainedin Section 33 of
the new Act. The net result of theamendmentmay bestatedin terms of the
following twopropositions:
(1)Where a void or voidablecontracthas been cancelled at theinstance
of apartythereto,thecourtmayrequirehim torestoresuch benefits
as he has received under thecontractand to make any compensation
to the otherpartywhich justice may require.
(2)Whereadefendantsuccessfully resists any suit on thegroundthatthe
contract,byreasonof his beingincompetent,is voidagainsthim,he
may berequiredto restore the benefits, if any,obtainedby himunder
thecontract,butonlyto theextenttowhichhe or hisestatehas bene
fitedthereby.
44.ILR(1928)9Lah701:AIR1928Lah609.
45.(1914)3 KB607(CA),618.
46.AjudhiaFrasadvChandanLai,AIR1937All610, 617 (FB).
47.GokedaLatcharaovViswariadhamBhimayya,AIR 1956 AP 182.
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300. [S.ll] Minor163
Sub-section(1)of the above provision, as noted before,incorporates
the principlethathe who seeks equity must do equity. Thecourtshave the
discretiontorequiretheminor-plaintifftorestoretheadvantageshe has
obtainedundera voidagreement.Agoodillustrationof thecircumstances
inwhichthispoweris to be exercised isJagarNathSingh vLaltaPrasad,^^
whereBanerjiJ of theAllahabadHighCourtsaid:"Wherepersonswho
are in factunderageinduceotherstopurchasepropertyfromthem,they
are liable inequityto makerestitutionto thepurchasersfor the benefit they
haveobtainedbefore they can recoverpossessionof thepropertysold."^°
But thecourtwill not compel anyrestitutionby aminoreven whenheis a
plaintiff, where theotherpartywas aware of the infancy sothathe was not
deceived,orwhere theotherpartyhas beenunscrupulousin his dealings
withtheminor,orwhere,thoughtheminorhadmisrepresentedhis age,
theotherpartywas so zealous to enter into thetransactionthatthe false rep
resentationexertedno influence onhim,^^or where theotherpartylays no
materialbefore thecourtforcomingto theconclusionthatjusticerequires
returnof the moneypaidto the minor.
Section 33(1) of the Specific Relief Act, 1963 does not alter the earlier
law.If theminorcomes to thecourtas aplaintiff,he can becompelledto
disgorge his gains under the agreement. Sub-section (2), however, makes
this differencethatif aminorisbroughtbefore thecourtas adefendant,he
can be compelled toaccountfor suchportionof the money oranythingelse
received by him as has gone to benefit him personally, such aseducationor
training,or hasresultedin anaccretionto his estate.
Beneficialcontracts
The law declared by the Privy Council in theMohoriBibicase"that
a minor's agreement is "absolutely void" has been generally followed, but
it has been growingly "confined to cases where a minor is charged with
obligations and the othercontractingpartyseeks to enforce those obli
gations against theminor."^^It was observed byAbdurRahimJ of the
MadrasHighCourtthat"whatis meant by the propositionthatan infant
49.ILR(1908-10)21 All 21.
50.LaltaPrasadvJagarNathSingh, ILR 1909 All 21 at p. 27.
51.BhimMandalv Mangaram Corain, AIR 1961 Pat 21;ShiamlalvKamPiari, ILR (1910) 32
All 25;RadheyShiamv BihariLai,ILR(1918)40 All 558:(1918)48IC478;Harimohanv
DuluMiya, ILR (1934) 61Cal1075. In all these cases the minor hadcommittedno fraud and,
therefore,he was allowed to recover thepropertysoldwithoutrestoringtheconsideration
obtainedbyhim.
52.MohdSaidvBishamberNath,AIR1924All156.
53. K.Maungllv MaHdaOn,1939 Rang 545.
54.KampaPrasad v SheoGopalLai,ILR(1904)26 All 342; T.S. Bellieraj v Vinodhini
Krishnakumar,(2004)2 CTC 510,transferof aminor'spropertyby theguardianwith
out obtaining an order of court was held to be violative of S. 8 of the Hindu Minority and
GuardianshipAct.
55.MohoriBibee vDhurmodasChose,(1902-03)30lA114: ILR (1903) 30 Cal 539 (PC).
, 56. A.T. Raghava Chariar v O.M. Srinivasa Raghava Chariar, ILR (1916)40 Mad 308.https://t.me/LawCollegeNotes_Stuffs

301. 164Chapter4CapacitytoContract [S. 11]
isincompetenttocontractorthathiscontractis void isthatthelawwill
not enforce anycontractualobligation of an infant".Accordingly,a minor
isallowedtoenforceacontractwhichisofsomebenefittohimandunder
which he isrequiredto bear no obligation. InRaghavaChariarvSrinivasa,^'^
the following question was referred for the decision of a Full Bench of the
MadrasHighCourt:"Whetheramortgageexecuted in favour of aminor
who has advanced the whole of the mortgage money is enforceable by him
or by anyotherpersonon hisbehalf."
Theunanimousopinionof the Full Bench wasthatthetransactionwas
enforceable by or onbehalfof the minor.WallisCJ said:
"The provision of law which renders minors incompetent to bind them
selvesby contract was enacted in their favour and for their protection,
and it would be a strangeconsequenceof this legislation if they are to
take nothing under transfers inconsiderationof which they have parted
withtheirmoney.
The same opinion wasexpressedbyBeaumontCJ of theBombayHigh
Court:^'"The provisions of the law which make a contract by a minor not
binding were no doubt intended to be for the benefitof the minors, and the
courtsin thiscountrywhenfacedwithacontractwhichhas beencarried
out by or on behalf of the minor, the performance of which by the other
party is then resisted on the ground of minority, have struggled hard to
avoid holding thecontractwholly void to thedetrimentof the minor."
Accordingly, the learned Chief Justice rejected the defence of an insur
ance company that the person on whose behalf certain goods were insured
was a minor and allowed the minor to recover the insurancemoney.®"
On thesameprincipleit hasbeenheld that "a minor iscapablefor pur
chasingimmovablepropertyand hemaysuetorecoverthepossessionofthe
property purchased upon tender of the purchasemoney."®^A transfer which
has already been executed in favour of a minor can, of course, be much less
impeached.®^
57.Ibid.
58. A.T. Raghava ChariarvO.A. Srinivasa Raghava Chariar,(2011)3MWN(Civ)1(FB),noth
ing in the ContractActpreventsan infant frombeingpromisee,whereconsiderationpasses
from minor, he can enforce the promise of the adult promisor; if the consideration for the
promiseistransferof property byminor,promisewouldbeunenforceable.Minor iswholly
incompetentto transfer property. Minor can seekcancellationof the transfer of property to
him by returning the considerationto the other party.
59.GreatAmericanInsuranceCoLtdvMandanlalSonulal,ILR(1935) 59 Bom 656.
60. The decision achievessubstantialjustice, there is no fault with it. It would have been absurd
to allowaninsurertoescaperesponsibilityhavingacceptedtheproposalwithfullknowledge
oftheplaintiff'sminority.ChekhaAdinarayanav OrientalFire&GeneralInsuranceCoLtd,
AIR 2006 NOC 479 (AP),MarineInsuranceAct, S. 3 insurance of boat, insured were minors
at the time, this fact was not brought to the noticeof the insurer,claimwasrejectedbecause
thefactofaccidentwasdoubtful,rejectionofthe casebythe trial court,insurancebeingvoid,
was held to be proper.
61.ThakarDasvPulli,AIR1924Lab611.
62.UlfatRai v GauriShankar,ILR(1911)33 All657,wherethe court saidthat "thereis nothing
in the Transfer of Property Act which makes a minor incapable of being the transferee ofhttps://t.me/LawCollegeNotes_Stuffs

302. [S. 11] Minor165
"A lease, however, is not like other transfers ofpropertyand a lease to a
minorhas been held to bevoid."^^Aminormay enforce apromissorynote
executed in hisfavour/''"Thereisnothingin theContractAct to prevent an
infantfrom being thepromisee.""Thelaw does notregardaminoras inca
pable of accepting abenefit."®^A gift of somepropertyunder a deed exe
cuted by themotherin favour of herminorchild was held to bebindingon
themother.The factthatthemotherhadreserved to herself thepossession
andenjoyment of thepropertydid notdestroythe effectiveness of thegift.®®
All these casesproceedon theprinciplethattheminorhasalreadygiven
the fullconsiderationto besuppliedbyhimandthereisnothingthatremains
to be done byhimunderthecontract.He isnowa merepromiseeandprays
thecourtfor recovering the benefitstipulated.But where thecontractis still
executoryor theconsiderationis still to besupplied,theprincipleof the
MohoriBibicase®^willthwartanyactionon thecontract.InRajRaniv
PremAdib:^^
Theplaintiff,aminor,wasallottedby thedefendant,a filmproducer,
the role of an actress in aparticularfilm. Theagreementwas madewith
her father. Thedefendantsubsequentlyallottedthatrole toanotherartist
andterminatedthecontractwiththeplaintiff'sfather.
The BombayHighCourtheldthatneither she nor her father could have
sued on the promise. If it was acontractwiththeplaintiff,she being a
minor, it was nullity. If it was acontractwithher father it was void for
beingwithoutconsideration.The promise of aminorgirl to serve, being not
enforceableagainsther,cannotfurnishanyconsiderationfor the defend
ant's promise to pay her asalary.®'
Where aminorhas givenconsiderationunder acontract,but the consider
ation given to him has failed, he may haverestitution.Thus, where aminor
bought azamindaripropertyon payment of money, but he was ousted on a
suit by athirdparty,it was held"thattheminorwas at any rate entitled to
recover from the vendor the sumwhichhehadpaidaspurchasemoney".^°
For this principle to apply there should betotalfailure ofconsideration.
Where, for example, a minor purchased shares in a company and then repu
diatedthemand also asked forrefundof thepartlypaidpurchaseprice,
thecourtheldthatthe pricewhichhe hasalreadypaidwas notrefundable.
immovable property. Hecannottransfer immovable property, it is true, but that is a different
thingfrom recovering astransferee".
63.JaykantHarkishandasShah vDurgashankarYiljiPandya, AIR 1970 Guj 106.
64.SharfathAlivNoorMahomed,AIR1924Rang136.
65. Ibid; VijayakumarMotilalv NewZealandInsuranceCo Ltd, AIR 1954 Bom 347, right to
recoverunderinsurance.
66. K.Balakrishnanv K.Kamalam,(2004) 1 SCC 581: AIR2004SC 1257; K.Balakrishnany K.
Kamalam,(2004)1 SCC 581:AIR2004SC1257.
67.MohoriBibee vDhurmodasGhose,(1902-03)30lA114:ILR(1903) 30Cal539 (PC).
68.AIR1949Bom215.
69.Ibidat p. 217, byDesaiJ.
70.WalidadKhanvJanakSingh, AIR 1935 All 370.https://t.me/LawCollegeNotes_Stuffs

303. 166Chapter4CapacitytoContract [S. 11]
becausetherewasevidencethattheshareswereofsomevalue.Iftheshares
weretotallyworthlesstherewouldhave been atotalfailureofconsideration
entitling theminorto refund. But he was not liable to payfurtherdemands
or calls forpayment.^^
"Whenaninfanthaspaidforsomethingand hasconsumedor used it, it
iscontrarytonaturaljusticethathe should recover back the money which
he has paid." This is the principle of thewell-knowncase of Valentini v
Canali-7^
Theplaintiff,aminor,agreedwiththedefendantto become atenant
of his house and to pay£100for the furniture therein. He paid £68 in
cash and gave a promissory note for the balance. The plaintiff occupied
the premisesand used the furniture for somemonths and then brought an
action for the refund of the consideration paid by him.
Thecourtordered the cancellation of the promissory note, but refused to
order refund of the sum paid. "The infant plaintiff had the quantity use of
furniture for some months. He could notgiveback thisbenefitor replace
the defendant in the position in which he was before thecontract....The
legislature never intended, in making provisions for this purpose (for the
protectionof infants), tosanctiona crueljustice."^^
Contractsofmarriage
A contract for the marriage of a minor is also prima facie for his or
her benefit. "It is customary amongst most of the communities in India for
parentstoarrangemarriagesbetweentheirminorchildrenandthelawhas
to adapt itself to the habits and customs of thepeople."It has, therefore,
becomewell-established,almost without anycontroversy,"thatwhile the
contract of marriage could beenforcedagainst the other contracting party
at the instance of the minor it cannot be enforced against theminor".'^"'
Where theagreementfor marriage of a minorinvolvesstatutory violation,
e.g.the Hindu Marriage Act, 1955,the age of the girl has to be 18 years, the
agreementislikelyto beavoided.In this case,on the date ofengagementthe
girl was not of 18 years but on the datefixedfor marriage she would have
completed18years.Theagreementwasheldto bevalid.The otherparty ran
awayfrom the agreement.The court allowedher compensation ofRs27,000
71.SteinbergvScala{Leeds) Ltd, (1923) 2 Ch 452 (CA).
72.LordColeridgeCJ inValentiniv Canali,(1889)24 QBD 166: (1886-90) All ER Rep 883:
59 LJ QB 74.
73.BeaumontCJ,commentingon this case inKhimjiKuverijiShah vLaljiKaramsiRaghavji,
AIR1941Bom129.
74.KaniaJ (1941) Bom 211, 221. The Bombay HighCourtallowed such actions in the fol
lowingcases:Abdul Razak v MohdHussain,ILR(1916)42 Bom 499; Rose Fernandez v
Joseph Gonsalves, ILR (1924) 48 Bom 673;JanakPrasad v Gopi Krishna Lai, AIR 1947 Pat
132.Thosedecisionsare,however,subjectto theprovisionsofapplicablelawsas to age of
marriage.https://t.me/LawCollegeNotes_Stuffs

304. [S. 11] Minor167
for mental pain and suffering, lowering of esteem in society andamount
spentonengagementceremony/^
MarriageofMuslimminorgirl
Partieswere governed byShariatlaw. The medicalreportshowedthatthe
girl had notattainedthe age of majority. She had, therefore, no right to enter
into thecontractofmarriageon her own free will. Shecould have been given
inmarriageonly by her father orguardian.The Kazi whoperformedthe
ceremonyofmarriagewas inknowof things. Themarriagewasnotvalid.
She couldnothave been forced to livewithherhusbandagainstthemandate
ofQuranSharif. Thefatherwasentitledto hercustody.^^
Contractsofapprenticeship
Contractsofapprenticeshipisanotherspecies ofcontractswhichare for
the benefit ofminors.TheIndianApprentices Act, 1850 provides for con
tractsin thenatureofcontractsof servicewhicharebindingonminors.The
Act waspassed,as thepreambleof the Act shows:"Forbetterenablingchil
dren,andspeciallyorphansandpoorchildrenbroughtup by publiccharity,
tolearntrades,craftsandemployments,by which, when they come to full
age, they maygainalivelihood."
TheActrequiresthecontractto bemadeby aguardianonbehalfof the
minor.[S. 9]
"InEnglishlawcontractsof serviceandapprenticeshipareputon the
samefootingand in the samecategoryascontractsfornecessaries."The
well-knownEnglish case on the subject isRobertsvGray7^
Thedefendant,aninfant,agreedwiththeplaintiff,anotedbilliards
player, to join him in abilliards-playingtourof the world. Theplaintiff
spent time and money inmakingarrangementsfor billiards matches, but
thedefendant repudiatedthecontract.Theplaintiffsucceeded in recover
ingdamagesfor the breach of thecontract.
Thecontractwasheldtobeonefornecessariesasitwasfortheinfant's
"good teaching orinstructionwhereby he may profitafterwards".The most
importantpartof thecontractwas theinstructionthatwould be received
75.TulshiramvRoopchand,(2006) 2MahLJ 647; AIR2006Bom 183;FunjabraoDeoraov
Sheshrao,AIR1962Bom 175:1960NagLJ302,giving away aminorinmarriageisopposed
to public policy. InRajendraBahadurSingh v Roshan Singh, AIR 1950 Ail 592, thecourt
heldthatbetrothalitselfwas in thenatureof acontract.MaPwaKywevMaungHmatGyi,
AIR 1939 Rang 86, a Buddhist girl sought to enforce a promise to marry made to her, when
she was lessthan18 years. Thecourtheldthatshe could not enforce such a promise. Here,
the question was not of specificperformance of promise to marry. The question was of getting
damages for breach of promise.KhimjiKuveriji Shah vLaljiKaramsiRaghavji, AIR 1941
Bom 129, thecourtcategoricallyruledthataguardiancan enter into acontractofbetrothal
onbehalfofminorchildrenandalsocansueforbreach.
76.KumariShahnoorMd Tahssen vStateofU.P., AIR2007NOC437 (All).
77. See thejudgementofDesaiJ in RajRanivPremAdib, AIR 1949 Bom 215,218-19.
78. (1913) 1 KB520(CA).https://t.me/LawCollegeNotes_Stuffs

305. 168Chapter4 Capacity toContract [S.11]
by the defendant from playing constantly with the plaintiff under the con
ditions of a worldwide tour, a thing which a distinguished billiards player
apparentlycontemplates aspartof hiscareer^'
It has been suggested byDesaiJ of the Bombay HighCourtin RajRani
VPremAdib^°that"thoughaccording to English Law the minor would
beliableinthecaseofacontractofservicewherethecontractwasforhis
benefit, it is clearthatunderSection 11, theminor'scontractbeing void, the
minorwouldnotbeheldliable".
Tradecontractsnotincludedinbeneficialcontracts
This category of beneficialcontracts does not includeordinarytrade con
tracts.InCowernvNield^'^,forexample,aminorwascarryingon business
as a hay andstrawmerchant. He received a cheque from theplaintifffor
the supply of clover and hay. He delivered the clover which was rejected as
bad and failed to deliver hay. Theplaintiff'saction for recovering back the
amountof the cheque failed.PhillimoreJ observed:"Ina general sense
contractswhichcan bebroughtwithincertaincategoriesandare also for
the benefit of theinfantcan besupported.Atradingcontractdoesnotcome
withinany of these categories. The onlycontractsof aninfantwhichcan
be enforced are which relate to theinfant'sperson,ascontractsbywhich
he provides himself with clothes, food,oflodging orcontractsofmarriage,
apprenticeshipandservice."
Optionto retirefrombeneficialcontractsonmajority
Aminorwill have theoptionofretiringfrom acontractof beneficial
natureonattainingmajorityprovidedthathe exercises theoptionwithin
areasonabletime.Whereaminorinpursuanceof amarriagesettledhis
after-acquiredpropertyandafterattainingmajorityhe received a largesum
ofmoneyunderthe will of hisfatherwhichcameunderthesettlement,and,
therefore,heattemptedtorepudiatethesettlement,theHouseof Lords held
thattherepudiationcomingfive yearsafterattainingmajoritywastoolate.^^
Ratification
Apersoncannotonattainingmajorityratifyanagreementmadebyhim
duringhis minority.Ratificationrelates back to the date of themakingof
thecontractand,therefore,acontractwhichwasthenvoidcannotbemade
valid bysubsequentratification.^''"Itwouldbe acontradictionintermsto
saythata voidcontractcanberatified."'^'If it isnecessary,a freshcontract
79. To thesameeffectDoylev White CityStadiumLtd,(1935) 1 KB 10.
80.AIR1949Bom215.
81.(1912)2 KB419.
82.JohnEdwardsandHenryIsaacsvRobertBrudenellCarter,1893 AC360(HL).
83.NazirAhmadvJiwanDas,AIR1938Lah159.
84.TukaramRamjiShendre vMadhoraoManajiBhange, AIR 1948 Nag 293.
85.BholaRamHarbansLaivBhagatRam,AIR1927Lah 24.https://t.me/LawCollegeNotes_Stuffs

306. [S. 11] Minor169
should be made onattainingmajority. And a newcontractwill also require
a fresh consideration. "The consideration which passed under the earlier
contractcannotbe implied into thecontractintowhichtheminorenters on
attainingmajority."Ina case before the Full Bench of theAllahabadHigh
Courtthefactswere:^^
A minorborroweda sum of money, executing a simple bond for it, and
afterattainingmajorityexecuted a second bond in respect of theoriginal
loanplusinterest.It was held by amajorityof two asagainstonethatthe
suituponthesecondbondwasnotmaintainable,asthatbondwaswith
outconsiderationanddidnotcomeunderSection25(2) oftheContract
Act.SuLAiMANCJ said:"Section25,sub-clause(2),appheswhenthereis
apromisetocompensatewhollyor inpartapersonwhohasalreadyvol
untarilydonesomethingfor thepromisor.Theword'compensate'has been
usedadvisedlyanddoesnotconnotethesameidea as aloan.Theword'vol
untarily'alsoindicatesto mymindthatsomethinghas been donewithout
anypromiseofcompensation....Similarly theexpression'donesomething
for' doesnotmean'advancemoneytoanotherperson'.Doingsomethingfor
apersonisnotpaying money tohim."^^
"Where,however, aperson,afterattainingmajorityhasnotonlyratified
but also paid the debtincurredby him during minority, hecannotafter
wardsrecoverit back. In the view of theAllahabadHighCourtsuch adebt
is only voidandnotunlawful.®^
Where,inadditionto theconsiderationalreadygivenduringminority,
afurtheradvanceismadeor a freshconsiderationgivenaftermajority,a
promise to pay the whole of theamount,in theopinionof theCalcutta'"
andAllahabad'^HighCourts,becomes binding."Thereis no question of
ratification in suchcases.'"^A person can alwaysmake a fresh promise after
attainingmajorityin terms of the promise made during minority. Allthatis
necessary isthatthere should be some freshconsiderationforit.'^
Somewindof change is reflected by the following decision. The defend
antwasminoratthetimewhenheexecutedadeedabouthisinterestinthe
estate. The suit was filed at a time when hehadattainedmajority. He did
not repudiate the agreement onattainingmajority. He rather admitted it.
Thecontractbecameenforceabletotheextentoftheminor'sinterestinthe
estate.
86.HazirAhmadv]iwanDas,AIR 1938 Lah 159.
87.SurajNarainvSukhuAhir,ILR(1928)51 All 164.
88. Overruling its earlier decision in Narain Singh v Chiranjilal, AIR 1924 All 730: ILR (1924)
46All568.
89. Anant Rai v Bhagwan Rai, AIR 1940 All 12; Maganlal Kishordas Shah vRamanlalHiralal
Shah, 1942 SCC OnLine Bom 151: AIR 1943 Bom 362, ratification ofpartnership.
90.KundanBibi vShreeNarayan,(1906)11CWN135.
91. Narain Singh v Chiranjilal, AIR 1924 All 730: ILR(1924)46 All 568.
92.SuLAiMANCJ in SurajNarainvSukhuAhir, ILR (1928) 51 All164,166.
93. Anant Rai v Bhagwan Rai, AIR 1940 All 12, payment of mortgage debt after attaining
majority.
94. MCNagalakshmiv MA Farook, AIR 2007 Kant 105.https://t.me/LawCollegeNotes_Stuffs

307. 170Chapter4CapacitytoContract [S. 68]
Liabilityfornecessaries[S. 68]
Section 68 of theContractAct provides for theUabilityfor necessaries
suppHedtopersonsincompetenttocontract.
S.68.Claimfornecessariessuppliedtopersonincapableofcontract
ing,oronhisaccount.— Ifapersonincapableofenteringinto acontract,or
anyonewhomhe is legallyboundtosupport,issuppliedbyanotherperson
withnecessariessuitedtohisconditionin life,thepersonwhohasfurnished
suchsuppliesisentitledto bereimbursedfromthepropertyofsuchincapable
person.
Illustrations
{a)AsuppliesB,a lunatic, withnecessariessuitableto hislife./Aisentitledto bereimbursed
fromB'sproperty.
[b)Asuppliesthewifeandchildrenof6,alunatic,withnecessariessuitabletotheircondi
tion in life.A isentitledto bereimbursedfrom B'sproperty.
Meaningof"necessaries"
Thehabihtyis only fornecessaries,butthereis nodefinitionof theterm
"necessaries"in the Act. We mayconsequentlyturntojudicialdecisions
todetermineits preciseimport.'^Anillustrativestatementof themeaning
of thetermis to be found in thejudgmentofAldersonB inChappiev
Cooper:^^
"Thingsnecessaryarethosewithoutwhichanindividualcannotrea
sonablyexist. In the first place, food,raiment,lodgingandthe like.About
thesethereis nodoubt.Again, as thepropercultivationof themindis as
expedientas thesupportof the body,instructioninartortrade,or intel
lectual,moralandreligiouseducationmay benecessaryalsoThenthe
classes beingestablished,the subject andextentof thecontractmayvary
according to the state andconditionof theinfanthimself. His clothes may
be fine or coarse according to hisrank;his education may vary according
to thestationhe is to fill; and the medicines will depend on the illness
withwhichhe is afflicted, and theextentof hisprobablemeans when of
fullage....But in all these cases itmustfirst bemadeoutthatthe class
itself is one inwhichthethingsfurnishedareessentialto the existence
and ofreasonableadvantageandcomfortof theinfantcontractor.Thus
articles of mereluxuryare always excluded,thoughluxuriousarticles of
utilityare insomecasesallowed."
Thus,"whatisnecessary"is a relative fact to bedeterminedwithref
erence to thefortuneandcircumstancesof theparticularminor; articles,
therefore,thatto onepersonmightbe mere conveniences ormattersoftaste
may, in the case of another, be considered necessaries, where the usage of
society rendersthemproperfor apersonin therankof life inwhichthe
95.JagonRamMarwarivMahadeoProsadSahu,ILR(1909-10)36Cal768, 776.
96.(1844)13M&W252,258:153ER105.https://t.me/LawCollegeNotes_Stuffs

308. [S. 68] Minor171
infantmoves.Theinfant'sneedofthingsmayalsosometimesdependupon
thepecuharcircumstancesunderwhichtheyarepurchasedand theusesto
whichthey areput.'^Forinstance,articlespurchasedby an infant for his
weddingmay bedeemednecessary,while under ordinarycircumstancesthe
same articles may not be soconsidered."...Weddingpresents for the bride
ofthe infant maybenecessaries."'^Butwheresuchmarriageisforbiddenby
law,thepositionwill bedifferent.Where"the fundsaresuppliedto a minor
forthemarriageofaminorfemaleinthefamilythelendermaybeableto get
himself reimbursed from thepropertyof theminor."''"The debt incurred
for performing the funeralobsequiesof the father of a minor" is a neces
sary.^""Where a minor isinvolvedin a litigation threatening hisproperty^°^
orliberty,^"^expensesreasonablyincurred on hisdefencemay berecovered
fromhisestate.
"In Peters vPleming^°^thecourttook judicial notice that it wasprima
facie not unreasonable that an undergraduate at acollegeshould have a
watch and consequentlya watch chain; and that therefore it was a question
of fact whether the watch chain supplied on credit was such as was neces
sary tosupporthimself properly in his degree.ParkeB says: 'All sucharti
clesas are purely ornamental are to be rejected, as they cannot be requisite
for anyone.'Possiblythere may be exceptional cases in which things purely
ornamentalmay benecessary."^"''The burden lies upon the supplier to prove
thattheornamentalthing is specially necessary for the minor.Thus,where
aminorwas supplied a pair of jewelled solitaires and an antique goblet and
though he moved in high society,he was held not liable as the plaintiff could
not provethatthe articles were specially necessary for theminor.^"^
Torenderaninfant'sestateliablefornecessaries"twoconditionsmust
be satisfied, namely:(1)thecontractmust be for goods reasonably necessary
for his support in his station in life, and(2)he must not have already a suf
ficient supply of thesenecessaries".^"^The 'supplier has to prove,"notonly
thatthe goods supplied weresuitableto theconditionin life of theinfant,
butthathe was not sufficiently supplied with the goods ofthatclass". This is
the principle of Hash vInman}^'^where an undergraduate in the Cambridge
97.KunwarlalDaryavSingh vSurajmalMakhanlal,AIR 1963 MP 58,educationalneeds,house
provided.
98.]agonRamMarwarivMahadeoProsadSahu,ILR(1909-10)36Cal768,111.
99. TikkiLaiJaithuTelivKomalchand,AIR 1940 Nag 327: ILR 1940 Nag 632.
100. Bechu Singh vBaldeoPrasad,AIR 1933Oudh132.
101. Thus inKedarNathvAjudhiaPrasad,1883 Punj Rec 165 at p.522,moneyadvancedto save
aminor'sestate fromexecutionsale was held to be necessary.
102. ShyamCharanMaivChoudharyDehyaSinghPahraj,ILR (1894) 21 Cal 872, where a
minor was facing acriminalprosecutionfor dacoity, thecourtsaid;"Thelibertyof theminor
being atstake,themoneyadvancedmustbetakento have beenborrowedfornecessaries."
103.(1840)6M&W42: 151 ER 314.
104.WiLLESJ inRydervWoombwell,(1868)38 LJ Ex 8.
105.Ibid.
106.BuckleyLJ inNashvInman,(1908)2 KB 1,12.
107.Ibid.https://t.me/LawCollegeNotes_Stuffs

309. 172 Chapter4Capacityto Contract [S.68]
University,who wasamplysuppliedwith properclothesaccordingto his
position,wassuppliedbytheplaintiffwith anumberofdresses,including
elevenfancywaistcoats, the pricewas held to beirrecoverable.
Natureofliability
There are two theories relating to the liability of a minor's estate for nec
essaries.Accordingto one of the theoriesthe liabilitydoesnot depend upon
theminor'sconsent.It arises because the necessaries have beensuppliedto
him and is,therefore,^M^sf-contractualin nature. The beststatement of this
theory isthatofFletcherMoultonLJinNashvlnman}°^
"Aninfant, like a lunatic, is incapableofmaking a contract of purchase
instrictsense of the word; but if a man satisfies the needs of theinfantor
lunatic bysupplyingto himnecessariesthe law will imply an obligation
to repayhim for theservicessorendered,and willenforcethatobligation
againstthe estateofthe infant orlunatic.Theconsequenceisthatbasisof
the action is hardly contract. The real foundation is an obligationwhich
the lawimposeson the infant to make a fairpaymentinrespectofneeds
satisfied. Inotherwords, the obligation arises re and notconsensus
In India the subject has been dealt with in the chapter on"Certain
RelationsResemblingThose Created by Contract". The chapter provides
for obligations of^MflsZ-contractualnature. Further, the hability is not per
sonal, but is only that of the minor's estate. Thus it has a very little contrac
tualelement.
The other view of the liability in England is that it iscontractual.An.
infant is not absolutely destitute ofcontractualcapacity. Acontractfor nec
essaries is just one of those categories of contracts which an infant is per
mittedtomake."®
PERSONSOFUNSOUNDMIND
English Law
In English law apersonofunsound mindiscompetenttocontract,
althoughhe may avoid hiscontractif he satisfies thecourtthathe was inca
pable ofunderstandingthecontractand the otherpartyknew it. The con
tract is voidable at his option. It becomes binding on him only if he affirms
it."°In this case LordEshersaidthatalunatic(nowsuchapersonisknown
as mentally disordered) can only set aside acontractentered into with a per
sonofsoundmindinthefollowingcircumstances:
"Whena person enters into acontractandafterwardsallegesthathe
was soinsaneat the timethathe didnotknowwhathe wasdoing,and
proves the allegation, thecontractis as binding on him in everyrespect.
108.Ibidat p. 8.
109.Ibidat p. 12.
110.ImperialLoan Co v Stone, (1892) 1 QB 599 (CA). See the judgment of LordEsherMR at
p.601.https://t.me/LawCollegeNotes_Stuffs

310. [S.68] Persons ofunsoundmind 173
whether it is executory or executed, as if he had been sane when he made
it, unless he can prove further that the person with whom he contracted
knew him to be so insane as not to be capable ofunderstandingwhatit
wasabout."
The position of adrunkenperson is also the same. If he makes acontract
while drunk, he may,when sober, electto avoidthe contract or to affirmit."^
As regards the general effect of mental incapacity on thecontractualcom
petence of a person,Halsbury'sLawsofEnglandstates thefollowing:"^
"Theremustbe a freeandfullconsenttobindpersonsincontract.Consent
is an act ofreasonand ofvolitionor choice, and it is on thegroundthatthere
is awantofrationalanddeliberateconsentthatthecontractsofmentally
disordered persons may be invalidated. A valid contract cannot be made by
a personsufferingfrom suchincapacityof mind as not to understand the
natureofwhathe isdoing....
A fair contract with a person who was apparently of sound mind, but
who in fact was sufferingat the time of the contract from such mentaldisor--
der as rendered him incapable of entering into the contract, is voidable but
not void. If thecontractis not to be enforced against him, thepersonmen
tallydisorderedmustprovethat the other party eitherknew that he was of
unsoundmind or knew of such facts as would justify theCourtininferring
suchknowledge."^"
In Campbell vHooper,whereamortgageesought adecreedirecting
repaymentandforeclosureindefaultofsuchrepaymentandwheretherewas
evidencethatat the time the mortgage was executed themortgagorwas a
lunatic,StuartVC said:
"I do notunderstandthat the simple fact of lunacy, if established,
woulddeprivethemortgageeof allrightstoequitablerelief.I am not
aware of any case in which it has been soheld....
Even at law thecontractof alunaticisnotnecessarilyvoid. Even at law
theplaintiffin anactionatlaw,seekingtorecoverunderthecontractofa
personwhoselunacyisestablished,hasbeenheldtobeentitledtorelie£.r.
Mr JusticePatteson,in Dane vViscountessKirkwalF'^^in directing
the jury laiddownthe lawthus:'It is notsufficientthatLadyKirkwall
was of unsound mind, but you must be satisfiedthat the plaintiff knew it,
and tookadvantageof it.' It would be a strange thing if a Court of Equity
indealingwith contractswereto deal on anydifferentprinciple."
111. Mahews v Baxter, (1873) LR 8 Exch 132. See the judgement ofMartinB at p. 134.
112.Paras1005-06,Vol30 (4thEdn).
113. Quoted in CheSomBinteYipv Maha P Ltd,(1989)2 CLJ802 High Court,Singapore.It is-
opinedinthiscasethattheword"fair"intheabovestatementmayhaveto bedeletedinview
of thedecisionof the Privy Council in Hart v O'Connor, 1985 AC 1000, on appeal from
New Zealand. In the Maha P Ltd case the mortgage executed by a person who was mentally
unsound was enforcedbecauseit was not proved that the mortgagee bank hadknowledgeof
hismentaldisorder.
114. (1855) 3Sm&G153.
115.(1838)8C&P679.https://t.me/LawCollegeNotes_Stuffs

311. 174Chapter4 Capacity toContract [S.12]
PositioninIndia
In India, on the other hand, the agreement of a person ofunsoundmind
is,Hkethat of minor,absolutelyvoid."^AccordingtoSection12 "a person
is said to be of sound mind for the purpose of making a contract if, at the
time when he makes it, he is capable of understanding it and of forming a
rationaljudgmentas to itseffectsupon hisinterest.""^However,a person
who is usually of unsound mind may make acontractwhen he is of sound
mind. But a person who is usually of sound mind may not make a contract
whenheisofunsoundmind.
S.12.What is asoundmind forthepurposesofcontracting.—Aperson
is said to be of sound mind forthepurposeof making acontractIf,atthetime
when he makes it, he iscapable of understanding it and of forming arational
judgmentas to itseffectuponhisInterests.
A person whoIsusuallyof unsound mind, butoccaslonaliyof sound mind,
maymakeacontractwhenhe is ofsoundmind.
A person whoIsusually of sound mind, but occasionally ofunsoundmind,
maynotmakeacontractwhenheIs ofunsoundmind.
Illustrations
(a)Apatient in alunaticasylum,who isatintervalsof soundmind,maycontractduring
thoseintervals.
(b) Asaneman,whoisdeliriousfrom fever, orwhois sodrunkthathecannotunderstand
the terms of a contract, or form a rationaljudgmentas to its effect on his interests, can
notcontractwhilstsuchdeliriumordrunkennesslasts.
Disabilityatthe timeofagreement
For the purpose of declaring an agreement to be void what is relevant is
that the personinquestionwassufferingfrom thedisabilityon the date of
executionof theagreement,the report ofmedicalunfitnessof the year 1989
beingmuchlaterinpointoftimewasheldtohavenobearingontheagree
mentsenteredinto in the years 1985 and 1987respectively."®
Anillustrationis thedecisionof the Patna High Court inInderSinghv
ParmeshwardhariSingh}'^'^Apropertyworth about Rs 25,000 wasagreed
116.MachaimanvUsmanBeari,(1907)17MLJ78;AminaBibivSaiyidYusuf,ILR(1922)44
All748,a case of leasewhichwas held to bevoid.
117.Hecanbefavouredwithbenefits.SheoratanvKaliCharan,79IC955,Oudh,mortgagein
favour of a person suffering from mental disorder.
118.NilimaGhosh vHarjeetKaur,AIR 2011 Del 104.
119.AIR 1957Pat491.SeealsoJyotindraBhattacharjeev SonaBalaBora,AIR 1994 Gau 99,
the person inquestionfiledcasesagainstfamilymembers,remainedawayfromhousefor
longperiods,transferredfamilypropertiesto theextentofmakingthefamilyhomeless,the
courtsaidthatall this was sufficient toindicatethatthe vendor was notnormaland was
not mentally sound at the time of sale. The purchaser adduced no evidence that the vendor
wasofsoundmind.KimtuvLachhiDevi,1999AIHC2533(HP),sellingthepropertyofan
insane by wifewhosepowerof attorney was not valid, the purchaseralso did not take care
toverifyfacts,heresoldit, thepropertywasrecoveredbackwithouthavingtopayanything
forimprovements,etc.https://t.me/LawCollegeNotes_Stuffs

312. [S. 12] Personsofunsoundmind175
to be sold by a person forRs7000only. His mother provedthathe was
a congenital idiot, incapable ofunderstandingthetransactionandthathe
mostly wandered about.Holdingthe sale to be void,SinhaJ explained the
effect of Section 12 in the following passage: "According to this section,
therefore, the person entering into thecontractmust be a person who under
stands what he is doing and is able to form arationaljudgment as towhether
whathe isaboutto do is to his interest or not. The crucialpoint,therefore, is
to find outwhetherhe isenteringinto thecontractafterhe hasunderstoodit
and has decided to enter intothatcontractafter forming arationaljudgment
inregardto hisinterest....It does notnecessarilymeanthatamanmust be
sufferingfrom lunacy to disable him fromenteringinto acontract.Aperson
may to allappearancesbehave in anormalfashion,but, at the same time, he
may beincapableofformingajudgmentof hisown,as towhetherthe act he
isaboutto do is to hisinterestor not. In thepresentcase (he) wasincapable
ofexercisinghisownjudgment."
Illustration(b)appendedto Section 12 showsthatadrunkenpersonis
in the same category as a person ofunsoundmind. A sale deed ofproperty
wasexecutedat a timewhenthetransferorwassufferingfromalcoholic
psychosiswhichwas proved by medical certificate. A very valuablelandwas
sold for apaltryamount.The sale deed wasorderedby the SupremeCourt
to be set aside.Thecourtsaidthatunsoundnessofmindis afindingof fact.
Therecouldbe nointerferenceinsecondappeal.^^"
AmarriagebetweenaHindugirl andMuslimmanwasdeclaredto be no
marriageat allwhenthe evidence showedthatthe girl wasunderintoxica
tionat thematerialtimeandwasnotconsciousofongoingconversionand
nikahceremony. She also provedthatshehadnot livedwiththemaneven
for a single day.Registrationof themarriageundertheHinduMarriage
Act, 1955 was also illegal. The FamilyCourtwas held to becompetentto
declare thestatusof thepartiesand declare themarriageto bevoid.^^^
120.ChackoVMahadevan,(2007)7 SCC363.
121. AsfaqQureshiv AyshaQureshi(NiveditaYadav), AIR 2010 Chh 58 (DB).
Visitebcexplorer.comtoaccesscasesreferred
tointhebookthroughEBCExplorer™on ||||||||H
SCCOnline®;alongwithupdates,articles,videos, ExplorGT^
blogsand a host ofdifferentresources. companionTisourcesforlegalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
• KhanGulvLakhaSingh,ILR(1928) 9Lah701:AIR192SLah609
CASEPILOT
•MohoriBibeevDhurmodasGhose,(1902-03)30lA114:
ILK (1903) 30 Gal 539 (PC)https://t.me/LawCollegeNotes_Stuffs

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314. 5
FreeConsent
DEFINITIONOFFREECONSENT [S.14]
Accordingto Section 10 freeconsentis anessentialrequirementof a con
tract.Section14defines"freeconsent".
S.14."Freeconsent"defined.—Consentissaidtobefreewhenit isnot
causedby:
(1)coercion,asdefinedinSection15,or
(2)undueinfluence,asdefinedinSection16,or
(3)fraud,asdefinedinSection17,or
(4)misrepresentation,asdefinedinSection18,or
(5)mistake,subjecttotheprovisionsofSections20,21and22.
Consentis saidtobesocausedwhenitwouldnothavebeengivenbutfor
theexistenceofsuchcoercion,undueinfluence,fraud,misrepresentationor
mistal<e.
Vitiatingfactorsandtheireffect
Whereconsentto anagreementiscausedbycoercion,undueinfluence,
fraudormisrepresentation,theagreementis acontractvoidableat the
optionof thepartywhoseconsentwas socaused.'If, forexample,a per
son isinducedto sign anagreementbyfraud,he may, ondiscoveringthe
truth,eitherupholdthecontractor reject it. If heconfirmsit, thecontract
becomesbindingonboththeparties.It is acontractwhichisenforceableat
the option of only one of theparties,namely, thepartyv/hoseconsent was
not free. Giving themeaningof a voidablecontract,Sectionl{i)saysthat
"anagreementwhichisenforceableby law at theoptionof one or more of
thepartiesthereto,but not at theoptionof theotherorothers,is a voidable
contract.^
1. Ss. 19 and19-A.For an example ofcompulsoryconsentunderastatuteseeMangaldas
RaghavjiRuparelvStateofMaharashtra,AIR1966SC 128: (1965) 2 SCR 894,906.Krishna
Frasadv ShyamNarayanPrasad,AIR2006Sikk 25, in a deed of exchange, thestandtaken
by one of theexecutantswasthatonly the business was included and not RCC building.Oral
evidence alsosupportedsuch astand.ThecourtsaidthatRCC building could not be said to
havebeenincludedonthebasisoftherecitalinthedeedalone.
2. SeeNokhiavStateofH.P.,AIR1985HP 88,whereit wasobservedthatconsentto an
acquisitioncannotbedescribedas arealconsent.In the absence of thesevitiatingfactors
thecontractbindsandno onecanget rid of it byunilateralaction.Thusa siteallottedand
[176]https://t.me/LawCollegeNotes_Stuffs

315. [S. 15] Coercion177
Where consent is caused by mistake, the agreement is void.[Ss.20-22]
A void agreement is not enforceable at the option of either party.[S.2(g)]
COERCION
Definition[S. 15]
Anagreementtheconsenttowhichis caused by coercion is voidable at
theoptionof thepartywhoseconsentwas so caused."Coercion"is defined
inSection15.
S.15."Coercion"defined.— "Coercion" isthecommitting,orthreatening
tocommit,anyactforbiddenbytheIndian Penal Code(XLVof 1860), orthe
unlawfuldetaining,orthreateningtodetain,anyproperty,totheprejudiceof
anypersonwhatever,withtheintentionofcausinganypersontoenterinto an
agreement.
Explanation.— It isimmaterialwhethertheIndianPenalCode(XLVof 1860), is
or isnotin force intheplacewherethecoercionisemployed.
Illustrations
A, onboardan English ship onthehighseas,causesBtoenterinto anagreementby an
actamountingtocriminalintimidationundertheIndianPenalCode(XLVof 1860).
AafterwardssuesBforbreachofcontractatCalcutta.
A hasemployedcoercion,althoughhisactisnotanoffencebythelaw ofEngland,and
althoughSection506 oftheIndian PenalCode(XLVof 1860), wasnotin force atthetime
whenorplacewheretheactwasdone.
Techniquesofcausingcoercion
Consentis said to be caused by coercion when it isobtainedbypressure
exertedbyeitherof thefollowingtechniques;
(1)committingorthreateningtocommitany actforbiddenby theIndian
PenalCode;or
(2)unlawfullydetainingorthreateningtodetainanyproperty.
ActsforbiddenbyIPC
It is clearthatcoercion as thus defined implies acommittingorthreat
ening to commit some act which iscontrarytolaw.The section has given
rise to few decisions. The PrivyCouncilobservedinAskariMirzav Bibi
accepted by the allottee by performance of all the requirements for the purpose of establishing
a nursing-home was not allowed to be cancelled by theallottingauthority, KailashCh/andra
KotiaVRajasthanStateIndustrialDevelopment&InvestmentCorpn,(1991) 1 Raj LR 174
JodhpurBench.SheoRatanPrasadGuptavPremaDevi, (1997) 1 BLJR 695, acompromise
agreementsigned by thepartiesand their counsels, thecourtdecided the suit by relying on
it, not allowed to be questioned on the ground of lack of free consent unless there was proof
ofthatfactavailable.HasinaBanovAlamNoor,AIR2007Raj 49. Therightofmek/arcan
be relinquished by the wife conditionally providedthatit is donevoluntarilyand with free
consent. Facts disclosedthatshe hadrelinquishedher claim. She could not claim it on being
divorcedundertheMuslimWomen(ProtectionofRightson'Divorce)Act,1986.https://t.me/LawCollegeNotes_Stuffs

316. 178Chapter5 FreeConsent [S. 15]
JaiKishorPthat "cases brought under thisparticularbranch of Section 15
oftheContractActmustbeofrareoccurrence".Aclearillustrationwould
be consent obtained at the point of pistol, or bythreateningto causehurt,
or byintimidationor bythreateningto burn a man's house or slashing his
valuable picture. An intriguing question in this connection was before the
MadrasHighCourtinChikhamAmiraju v ChikhamSeshamma-.':
Bythreatof suicide, aHinduinduced his wife and son to execute a
release in favour of hisbrotherin respect ofcertainpropertieswhich they
claimedastheirown.
It was held by a majority"thatthethreatof suicideamountedto coercion
withinSection15andthereleasedeedwas,therefore,voidable".Thediffer
ence of opinion related to whether suicide is an act forbidden by theIndian
Penal Code. An attempt to commit suicide is punishable under the Code,
but there is nopunishmentprovided forsuicide.^Themajorityconsisting
ofWallisCJ andSeshagiriJ believedthatthemanwhocommitssuicide
goesunpunished,not because the act is not forbidden, but because there is
nobody left to be punished.OldfieldJ dissented on thegroundthatunless
an act is made punishable itcannotbe said to be forbidden.
"Whenacriminalprosecutionisinstitutedagainstapersonand such per
son fearing the result of theprosecutionenters into an agreement in favour
of thecomplainantinconsiderationof hisabandoningtheprosecution,it
cannotbe held simply upon these factsthatthe consent of suchpersonwas
caused by coercion."^ "Tothreatenacriminalprosecutionis notperse an
actforbiddenby theIndianPenal Code. Such an act could only be one
forbidden by theIndianPenal Code if itamountedto athreatto file a false
charge." This waspointedout by the Privy Council inAskariMirzav Bibi
JaiKishori-7
Aminor,havingborrowedon twomortgagedeeds, agreed to acompro
mise decreealthoughthemortgageswere void.Subsequentlyhepleaded
thatheenteredintothecompromisebecausehe wasthreatenedwithpros
ecutionfor falselymisrepresentinghis ageandthatthisamountedtocoer
cion.TheirLordshipsobserved;"Thelaw ascontainedinSection15 is
muchwiderthananythingto befoundin theEnglishauthoritiesandin
Indiait isnotcorrectto saythatacontractisvitiatedmerely byproofof
athreattobringacriminalcharge.Ofcourse,if thechargeofcheating
3.(1912)16IC344.
4.ILR(1918) 41Mad33, 36.
5. S.309,IndianPenalCode.
6.MasjidivAyisha,1880Punj RecNo135,p.398.
7. (1912) 16 IC344.ManapragadaKrishnaMurthyvSavantTransport(P)Ltd,AIR2006AP
78, thedefendant(cashier)misappropriatedmoney,admittedit andmadeapromissorynote
inpayment,notallowedto get rid of hisliabilityto repay bysayingthathe was thevictimof
coercion.GangadeepPratisthan(P)LtdvMechano,(2005) 11 SCC 273: AIR2005SC1958,
nocoercionfoundbehindaconsentdecree.https://t.me/LawCollegeNotes_Stuffs

317. [S. 15] Coercion179
was a true one, there is an end to the plaintiff's case, for a threat to bring
such a charge would not be an act forbidden by the Indian PenalCode."^
As the court below recorded nofindingas to thetruthor falsity of the
charge, the case wasreferredback forre-trial.
The plea was that the plaintiff wasdispossessedof promisesforcibly
underthreatthathewouldbearrestedanddetainedundertheMaintenance
ofInternalSecurity Act. Thecourtsaidthatsuchthreatswould fallwithin
themischiefofSection15.^
Detentionofproperty
Anillustrationofdetentionofpropertyis provided by an early case. The
plaintiffhad pledged his plate with the defendant for£20.When he went
to redeem it the pledgee insistedthatanadditional£ 10interestwas also
owed. Theplaintiffpaid this to redeem his plate and thensiiedto recover it
back.Thecourtallowedit.Hewasinimmediateneedofhisarticleandthe
defendant extracted from him an extra amount by refusing to deliverit.^°
Refusal by aGovernmentdepartmentto release the payment of acontractor
unless he gave up his claim forextraratesamountedto coercionunderthe
categoryofdetentionofproperty.^^Acompanyenteredinto acontractwith
aGovernmentcompany(GAIL), forpurchaseof gas. The buyercompany
constructedthe pipeline for carriage of gas and was also responsible for
itsmaintenance.EventhenGAILdemandedfrom thecompanytranspor
tationcharges. The demand was also found to be against the price struc
turefixed by theGovernment.It was heldthatGAIL wasactingdehors
theGovernmentpricingorderand,being an agency of theGovernment,it
shouldnothavedoneso.Itshouldnothaveactedinacommercialandarbi
trarymanner.GAILhadincurredno cost intransportation.^^
ComparisonwithEnglish Law
Thefollowingcomparisonhas beenattemptedby theMadrasHigh
Court;"
"WhattheIndianLaw calls'coercion'is called in English Law'Duress
orMenace'.Duressissaidtoconsistinactualorthreatenedviolenceor
8.Compulsorysalesprescribedby an Act, for example,thatthe grower will sell all hisproduct
only to aparticularmill, there is no coercion in it. For asubsequentdecision seeSalarJung
Sugar Mills vStateofMysore, (1972) 1 SCC 23: AIR 1972 SC 87.
9.KishanLaiKalravNDMC,AIR2001Del402:(2001)92DLT67.
10.AstleyvReynolds,(1731) 2 STR 915: 93 ER 939.
11.IrrigationDepttvProgressiveEnggCo, (1997) 4 ALD 489 (AP); U.P.CoopCaneUnions
Federationsv West U.P. Sugar Mills Assn, (2004) 5 SCC 430: AIR2004SC 3697, fixation of
sugarprices in the exercise ofstatutorypower,nocoercion.
12.EssarSteelLtdv UnionofIndia,(2006) 1 GLH 609:(2006)1 Guj LR 436, thus thedemand
was of coercivenatureandwas,therefore,set aside.StateofKeralavM.A.Mathai,(2007) 10
SCC 195: AIR2007SC 1537, a claim of damagesundersupplementalwork,contentionthat
thesupplementalagreementwas the result of coercion, award of damageswithoutconsidering
the fact ofcoercionwas held to benotproper.
13.KaruppayeeAmmalvKaruppiahPillai, (1987) 2 MLJ 138.https://t.me/LawCollegeNotes_Stuffs

318. 180 Chapter 5 Free Consent [S.16]
imprisonmentofthecontractingparty or hiswife,parent or child, bythe
other party or by anyone acting with hisknowledgeand for his advan
tage.ButcoercionasdefinedinSection15ismuchwiderandincludesthe
unlawful detention of property also. Further, coercionmay be committed
by any person, notnecessarilya party to the contract. Again, it need not
be directed against the contractingparty^or his parent, wife or child.
It may be directed against any person, even if he is a stranger. While in
EnglishLaw,duressmust be such as will cause immediateviolenceand
also unnerve a person ofordinaryfirmness of mind, these requisites are
notnecessaryinIndianLaw."
UNDUEINFLUENCE
Definition[S. 16]
S.16."Undueinfluence"defined.—(1)Acontractis saidtobeinducedby
"undueinfluence"wheretherelationssubsistingbetweenthepartiesare such
thatoneofthepartiesis in apositiontodominatethewilloftheotheranduses
thatpositiontoobtainan unfairadvantageovertheother.
(2)Inparticularandwithoutprejudice tothegeneralityoftheforegoingprin
ciple, apersonisdeemedto be in a position todominatethewillofanother—
[a]wherehe holds a real orapparentauthorityovertheotherorwherehe
standsin afiduciaryrelationtotheother;or
(fa)wherehemakesacontractwith apersonwhosementalcapacityistem
porarily orpermanentlyaffectedbyreasonofage,illness, ormentalor
bodilydistress.
(3)Whereapersonwhois in apositiontodominatethewillofanother,enters
intoacontractwithhim,andthetransactionappears,onthefaceof it or on evi
denceadduced,to beunconscionable,theburdenofprovingthatsuchcontract
wasnotinducedbyundueinfluenceshall lieuponthepersonin apositionto
dominatethewilloftheother.
Nothingin thissub-sectionshallaffecttheprovisionofSection111ofthe
IndianEvidenceAct,1872(1of1872).
. Illustrations
(a)A,havingadvancedmoneyto hisson,B,duringhisminority,upon6'scomingofage
obtains,bymisuseofparentalinfluence,abondfrom Bfor agreateramountthanthe
sumdueinrespectoftheadvance.Aemploysundueinfluence.
(b)A, amanenfeebledbydiseaseorage,isinduced,by 6'sinfluenceoverhim as hismed
icalattendant,toagreeto pay 6 anunreasonablesumfor hisprofessionalservices.6
employsundueinfluence.
(c) A,beingindebtto 6,themoneylenderof his village,contractsa fresh loan onterms
whichappeartobeunconscionable.It lies on 6 toprovethatthecontractwasnot
inducedbyundueinfluence.
(d)Aappliestoabankerfor aloanatatimewhenthereisstringencyinthemoneymarket.
Thebankerdeclinestomaketheloanexceptat anunusuallyhighrateofinterest.A
acceptstheloan ontheseterms.This is atransactionintheordinarycourseofbusiness,
andthecontractisnotinducedbyundueinfluence.https://t.me/LawCollegeNotes_Stuffs

319. Undueinfluence181
Ability todominatewillofother
Sometimes the parties to an agreement are so related to each otherthat
oneofthemisabletodominatethewilloftheother.Thepersonwhooccu
pies the superior position may prevail upon the other to obtain his consent
to anagreementto which he, but for theinfluenceso exerted, would not
haveconsented.Therelationshipbetweenthepartiessoastoenableoneof
themtodominatethewilloftheotherisa sinaqua nonforundueinfluence
tocomeintoplay."A spiritualadviser(guru),forexample,in a casebefore
theAllahabadHighCourt,^^inducedtheplaintiff,hisdevotee,togifttohim
the whole of hispropertyto securebenefitsto his soul in the next world.
Suchaconsentissaidtobeobtainedbyundueinfluence."Wouldanyrea
sonableman," the court said, "in fullpossessionof hissensesand not under
unusualinfluenceofsomekind or the otherdo suchathing?"
Consentunderpressure
In amediclaiminsurancepolicy,theinsuredwasforcedandpressurised
toconsenttoexclusionofcoverforcardiacailments.Itwasheldthatthe
consentbeingnot lawful, it had no bindingeffect.^^
Subtle speciesoffraud
"Undueinfluenceissaidto beasubtlespeciesoffraudwherebymasteryis
obtainedoverthemindofthevictim,byinsidiousapproachesandseductive
artifices.Sometimestheresultisbroughtaboutbyfear,coercion,importu
nity or otherdomination,calculatedtopreventexpressionof thevictim's
truemind.It is aconstraintunderminingfreeagency,overcomingthepow
ersofresistance,bringingaboutasubmissionoftheother."i^Thefollowing
statementbearsoutthedistinctionbetweencoercionandundueinfluence:
"Thelawdrawsadistinctionbetweenduressandundueinfluence.
Duress(coercion)intheexecutionof acontractordeedoccurswhen
thereis aphysicalcompulsionof theperson,whichmustbeveryrare, or
whenthereis a threat to theperson'slifeorlimb,or threatof aphysical
beating or ofimprisonment.It may also take into account threats of a
wrongfulimprisonmentorprosecutionof thepersonandpossiblyof the
person'snearrelative.
Incontrastto duress, undue influence may existwithoutviolence or
threats ofviolenceagainst the victim. Itdependsupon theexistenceof a
relationship between two parties which, while it continues, causes one to
place aconfidencein the other which produces anaturalinfluenceover
the one which that other abusesto his ownadvantage."^®
14.Bellachiv Pakeeran, (2009) 12 SCC 95: (2009) 4 SCC(Civ)640.
15.MannuSingh vUmadatPande,ILR(1888-90)12 All523.
16. Akshoy KumarPatilv NewIndiaAssurance Co, AIR2007Del 136.
17. Mahboob Khan v Hakim AbdulRahim,AIR 1964 Raj 250.
18.SaxonvSaxon,(1976) 4WWR300,305,306(BC SC).https://t.me/LawCollegeNotes_Stuffs

320. 182 Chapter 5 FreeConsent [S.16]
Relationswhichinvolvedomination
When can it be said that one party is able to dominate the will of the
other? The answer is, in all cases where there is active trust andconfidence
betweenthe parties or the parties are not on equalfooting.^^Theprinciple
appliestoeverycasewhereinfluenceisacquiredandabused,whereconfi
denceisreposedandbetrayed.Itapplies"to allvarietyof relationin which
domination may beexercisedby one person overanother."^""The rela
tionshipswhich maydevelopadominatinginfluenceof one over another
areinfinitelyvarious. There is nopreciselydefinedlaw setting limits to the
equitablejurisdictionof a court torelieveagainst undueinfluence.This is a
world doctrine, not of neat and tidy rules. The courts of equity havedevel
oped a body of learningenablingreliefto be granted where the law has to
treat the transaction as unimpeachable unless it can be held to have been
procured by undueinfluence.It is theunimpeachabilityat law of a disad
vantageoustransaction which is the starting-point from which the court
advances to considerwhetherthetransactionis theproductmerely of one's
ownfollyor of the undueinfluenceexercisedby another. A court in the
exerciseof this equitable jurisdiction is a court ofconscience.Definition is a
poorinstrumentwhen used to determine whether atransactionis or is not
unconscionable:this is a question which depends upon theparticularfacts
of thecase."^^For example, in Williams vBayley}^
A son forged his father's signature on several promissory notes and
paid them into his banking account. When the truth came to light, the
manager of the bank threatened prosecution of the son and"transporta
tion" if a satisfactory solution were not found. To avert thisthreat,the
father agreed to give an equitable mortgage to the bank on hisproperty
in return for the promissory notes.Subsequentlythe father sought to have
thisagreementcancelledon the ground that he wasinfluencedby the
threat.
The House of Lords held the agreement to be voidable. LordChelmsford
expressedthe opinion that the negotiationproceeded upon an understanding
thatthe agreement to give security for the promissory notes would relieve
the son from the consequences of hiscriminalact; and the fears of the father
werestimulatedandoperatedon to anextentto deprive him of free agency,
and toextortan agreement from him for the benefit of the bankers. There
19. Theordinarytrade buyers and sellers are on equal footing and not related in fiduciary capac
ity. SeeDevkiNandanvGokliBat,(1886)90 PLR 325(P5cH).
20. SirSamuelRomillyinHugueninv Basely, (1807) 14 Ves 273: 9 RR 283;Krishnamoorthy
VSivakumar,(2009) 3 CTC446,an electioncandidatecannotberegardedas being in a posi
tion to influence the will of voter, nor inthatprocess they aremakinganyagreement.Any
such agreement, if at all, would becontraryto law and public policy.
21.LordScARMANinNationalWestminsterBankP&CvMorgan,(1985) 2WLR588(HL).
22.(1866)LR 1HL 200. It has been observed by the SupremeCourtthat S. 16 is based on English
law ofundueinfluence.SubhasChandraDasMushibvGangaPrasadDasMushib,AIR1967
SC878:(1967)1SCR331.https://t.me/LawCollegeNotes_Stuffs

321. [S-16] Undueinfluence183
wasinequalitybetweenthepartiesand oneofthemtookunfairadvantage
ofthesituationoftheotherandusedundueinfluencetoforceanagreement
fromhim.
Inparticular,however,and withoutprejudiceto thegeneralityof the
principle,theActlaysdown,insub-section(2)ofSection16that apersonis
deemedtobein apositiontodominatethewillofanotherinthefollowing
cases—
{a)where he holds a real or apparent authority overthe other, or where he
stands in fiduciary relation to the other; or
(b)wherehemakesa contract with a personwhosementalcapacityis
temporarily or permanently affected by reason of age, illness, or men
tal or bodily distress.
Real orapparentauthority
A person in authority isdefinitelyableto dominatethe will of the person
over whom the authority is held. The authority may be real or apparent.
Persons inauthoritywouldinclude an IncomeTaxOfficer inrelationto an
assessee;a magistrate or police officer in relation to an accused person and
the like. The expression"apparentauthority"would include cases in which
a person has no real authority, but is able to approach the other with a show
orcolourofauthority.
Fiduciaryrelation
Fiduciaryrelations are of severalkinds. Indeed everyrelationship of trust
andconfidence is a fiduciaryrelation.^^And confidence is at the base of innu
merable transactions of mankind. This category is, therefore, a very wide
one. It includes the relationship of solicitor andclient,^'^trusteeand cestui
quetrust^^spiritualadviser and hisdevotee,^®doctorandpatient,^^woman
and her confidentialmanagingagent,parentorguardianandchild,^'and
23. See Subhas Chandra Das Mushib v GangaPrasadDasMushib,AIR 1967 SC 878: (1967) 1
SCR331.
24.PushongvManiaHalwani,1868 BLR AC 95, where a poor woman agreed to giveone-halfof
thepropertywhich she might recover with the assistance of herMookhtaar.See, forexample.
MoodyVCox, (1917) 2 Ch 71, where asolicitorsold atrustpropertyto one of his clients who
subsequentlysoughtrescission on thegroundthatthepropertywasconsiderablyovervalued.
TheCourtof Appeal heldthatwhen undue influence is allegedagainstasolicitorhe has to
prove that hedisclosedall the material facts and that the transaction was of advantage to the
client.
25.RaghunathvVarjivandas,(1906)30 Bom578.
26.MannuSingh vUmadatPande,ILR(1888-90)12 All523.
27.MitchellvHomfray,(1881) LR 8 QBD587(CA).
28.WajidKhan v Raja EwazAliKhan,(1890-91)18lA144;SubbammavMohdAbdulHafiz,
AIR 1950 Hyd 55.
29.LakshmiDoss v RoopLaul,ILR(1906-08)30Mad169;Sugunav Vinod G.Nehemiah,
(2008) 2 CTC 433, fortwentylong years thedaughterwastakingcare of her aged faither, the
lattersettledhispropertyupon her. Thecourtfeltthatburdenofprovingthatno influencehttps://t.me/LawCollegeNotes_Stuffs

322. 184Chapter5FreeConsent [S-16]
creditor anddebtor.^"Therelationshipof trust andconfidencepresents a
verygoodopportunitytothepersoninwhomconfidenceisheldtoexploitit
to his ownuse.Acontractbetweenpersonssorelatedis,therefore,voidable
if theconsentwas obtainedbyabusingtheconfidence.The duty of the per
sonin whomconfidenceisreposedwasexplainedbythe Court ofAppealin
MoodyVCox.^^Asolicitorsoldcertainpropertytooneofhisclients.The
clientsubsequentlyallegedthat thepropertywasconsiderablyovervalued.
ScRUTTONLJproceededasfollows;"Generallywhenyouhavemadealegal
contractandcorrectlyexpressedit inwriting,and it has notbeenobtained
byanymisstatementoffacts,innocentorfraudulent,thecontractstands,
and the fact that one party or the other knows facts about which he says
nothing,whichmadethecontractunprofitableoneto theotherparty,isof
nolegalconsequence.But there are certainrelationsand certain contracts
inwhichahigherdutyisimposeduponthe parties and theymustnotonly
tellthe truth, but theymust tell thewholetruth so far as it is material, and
they must not only not misrepresent by words, they must not misrepresent
bysilenceiftheyknowofsomethingthat ismaterial.Someof thosecases
dependontherelationshipbetweentheparties,and,generallyspeaking,are
cases where therelationis suchthatthereis confidencereposedby oneparty
andinfluenceexercisedby the other. In that class of relation of parties you
mayget theduty,firstof all, that the party who hasinfluencemustmake
a full disclosure of everything that he knows material to the contract, and,
secondly,that the party who has theinfluencemust not make a contract
with the partyoverwhom he hasinfluenceunlesshe cansatisfythe court
thatthecontractis an advantageous one to theotherparty."
Mentaldistress
The last categoryof personswhosewill isvulnerableto all sorts of influ
encesis that of "persons in mental distress". A person is said to be in distress
when his mental capacityis temporarily or permanentlyaffected.It may be
due to extreme old age or mental or bodily illness or any other cause. Such
a person iseasilypersuaded togiveconsent to a contract which may be
unfavourableto him. Accordingly, if acontractis madewithhim bytaking
advantage of his distress, it is voidableon the ground of undueinfluence.In
a case, for example, before theMadrasHighCourt,a poorHinduwidow,
who was in great need of money to establish her right tomaintenance,was
persuaded by amoneylenderto agree to pay 100 per cent rate ofinterest.^^
Thisis aclearinstanceofundueinfluencebeingexerteduponapersonin
distress,andthecourtreducedtheinterestto 24percent.
was exerted on the father's mind was upon her. Thepresumptioncould not bedethronedand
thereforethesettlementwasliabletobesetaside.
30.DialaRamvSarga,AIR1927Lah 536.
31.(1917)2CH71.
32. RanneeAnnapurniNachiarvSwaminathaChettiar,ILR(1909-11) 34 Mad 7.https://t.me/LawCollegeNotes_Stuffs

323. [S. 16] Undueinfluence185
Urgent needofmoney, no distress
But mere urgent need of money on thepartof theborroweris not, of
itself,asufficientevidenceof mentaldistress.Thus,wherea person was
facingcriminal prosecutionat the instance of his father andborrowedon
exorbitantterms a sum of money to defend himself, it was heldthathe
was not in such mental distress as would enable a moneylender to dominate
hiswill.^^Similarly,wherea person,fearingthe result of theprosecution
pending against him, enters into an agreement in favour of the complainant
in consideration of his abandoning the prosecution, itcannotbe held sim
ply upon these,facts that the consent of such person was caused by undue
influence.^''
Statutorycompulsion,nodistress
Acontractmade understatutorycompulsioncannotbe regarded as one
made under undueinfluence;In a case before the SupremeCourt,a cane
growerhadthe freedom to offer canes to thefactoryof his area ornotbut if
he made an offer, the factory was bound under an Act to accept. Thecourt
pointed outthatin such a case the consent, though compulsory, is not caused
by undue influence, fraud, misrepresentation or mistake. The compulsion of
law is not coercion. "Asa result of economic compulsions and changes in the
political outlook, the freedom ofcontractis now being confined gradually to
narrowerandnarrowerlimits. Here is a case where onepartytocontractof
saleis compelled to enter into it on rigidly prescribed terms andconditions
and has no freedom ofbargaining.But, in the eyes of the law, the agree
ment is freelymade."^^Where thepartiesvoluntarilyexecuted a powerpur
chaseagreementpursuantto an order passed by theElectricityRegulatory
Commission,avoidanceof theagreementon thegroundof duress,coercion
orundueinfluencewasheldtobenotsustainable.^®
Burdenofproof
In anactionto avoid acontracton thegroundofundueinfluencethe
plaintiffhas to prove twomainpoints.He must show, in the first place,that
theotherpartywas in apositiontodominatehis will,and,secondly,thathe
actuallyused his influence toobtaintheplaintiff'sconsentto thecontract:
Thelaw saysthat:(1)notonlymustthedefendanthave adominantposition,
but(2) hemustuseit.^^It isnotenough,for apersonto avoid thecontract,
33.RaghunathPrasadSahuvSarjuPrasadSahu,(1924) 19 LW470:AIR1924PC 60.
34.MasjidivAyisha,1880Punj Rec No. 135, p. 398.
35.AndhraSugarsLtdvStateofA.P.,AIR 1968 SC 599: (1968) 1 SCR 705;U.P.CoopCane
UnionsFederationsv West U.P.SugarMills Assn, (2004) 5 SCC 430: AIR2004SC 3697,
compulsorypricingfor sale is notundueinfluence,nor does itaffectthecharacterof thetrans
actionasasale.
36.AlvaAluminiumLtdvGabrielIndiaLtd,(2011) 1 SCC 167: (2011) 98AIC228.
37. Both theserequirementsmustcoexistfor thereversalof the rule as toburdenofproofunder
thissectionandS.Illof theEvidenceAct,1872.SundariDevivNarayanPrasad,AIR2011
Pat 89, forprovingcoercion(S. 15) andundueinfluence,thedefendantin his evidencestatedhttps://t.me/LawCollegeNotes_Stuffs

324. 186 Chapter 5 Free Consent [S.16]
to showthat the other party is his father who couldhaveinfluencedhim. He
must go further and show that his father actually didinfluencehim.^®
Presumptionofundueinfluence
But in certain cases presumption of undueinfluenceis raised. The effect
of the presumptionis that onceit is shown that the defendantwas in a posi
tion to dominate the will of the plaintiff it will be presumedthathe must
haveusedhispositionto obtain anunfairadvantage.It will be then for
the defendant to show that the plaintiff freelyconsented.^^For example, in
LancashireLoansvBlack:^°
The defendant was a married girl of full age. She gave a security for
the loan which hermothertookfrom a company. The only advice she had
was from thesolicitorof the company.
ScRUTTONLJ held that "in the case of thebenefitof contractual advan
tage obtained from a person comingwithin certain definedrelations, such as
the relation ofparentand young child, solicitor and client, religious superior
that signatures were taken on blank papers and the agreement created, but this was not sup
ported by pleadings. Under S. 102 of the EvidenceAct, 1872, onus was upon him to prove the
facts alleged, but he could not do so, theagreementwas enforceable.
38.AnjadennessaBibi vRahimBuksh,ILR(1915) 42Cal286. All theparticularsmust be given
as in the case of fraud. SubhasChandraDasMushibvGangaPrasadDasMushib,AIR1967
SC 878: (1967) 1 SCR 331; AlecLobb(Garages)Ltdv Total OilGreatBritainLtd,(1983) 1
WLR87 (Ch D). Everypersonoccupyingapositionof influence does not necessarily abuse it.
Thus where finance wasprovidedtwice over to a garage subject tocertainprotectiveclauses
but with a genuineconcernto help its business, no undue influence was foundthoughapart
of the agreement was struck down asunreasonablerestraintof trade. Afsar Sheikh v Soleman
Bibi, (1976) 2 SCC 142: AIR1976SC 163, the fact ofundueinfluencemustbemadeoutof
theparticularspleaded by theplaintiffand not from thewrittenstatement.Where an ailing
father executed a sale deed in favour of his two sons who werecaringfor him and thethird
livingapartquestionedvalidity, thecourtheldthatthoughtheburdenwas on those who were
favoured, thetransactiondid not disclose any element of influence or fraud.SukhdeoRaiv
ChampaDevi, (1986) 34BLJR90, gift deed in favour ofgrandsonupheldthoughexecuted
by thedonoronly a few daysbeforehisdeath.ThecourtfollowedtheremarkinHalsbury's
LawsofEnland,Vol17 (3rd Edn) 678, to theeffectthat:"Thereis nopresumptionofundue
influencein the case of gift to ason,grandsonorson-in-law,althoughmadeduringthedonor's
illnessanda few days before hisdeath."ShrimativSudhakarR.Bhatkar,AIR1998Bom122:
(1997) 4 Bom CR 237, the mere factthatthepersonin whose favour apropertywas gifted by
registered deed was thetenantof theownerwas held to be not sufficient toshifttheburden
ofproofon the donee.KartickPrasadGoraivNeamiPrasadGorai, AIR 1998 Cal 278, there
was noconsiderationandthe sale deed seemed to be fake, hencepresumptionandshiftingof
burdenofproofon to the beneficiary of the sale deed.SavithrammavH.GurappaReddy,
AIR 1996 Kant 99,allegationof undue influence, level ofproofrequiredisextremelyhigh,
it isratedon aparwithcriminaltrial.DalbirSingh v Vir Singh,AIR2001P&H216, sale
ofland,agreementbetweenanadatiaandhiscustomer,theformercouldinfluencethelatter
and,therefore,betterproofoffairnesswasexpected.NTPCLtdvReshmiConstructions,
Builders&Contractors,(2004)2 SCC 663:AIR2004SC1330:(2004)1 KLT1065,conduct
of thepartiesisrelevantforarrivingat aconclusionwithrespecttoallegationsofcoercionand
undueinfluence.Thecaseinvolvedfullandfinalsettlement.
39.KrishnaMohanKul vPratimaMaity,(2004) 9 SCC468:AIR2003SC 4351,burdenon the
personstandinginfiduciaryrelationship.
40.(1934)1 KB380(CA).https://t.me/LawCollegeNotes_Stuffs

325. Undueinfluence187
andinferior,bytherelatedmemberofthatclass,itisenoughtoprovethe
existenceofsucharelationtothrowontherecipientoftheadvantagethe
burdenofprovingindependentadvicetothedonorandinotherrespects
justifyingthetransaction."HisLordshipthenpointedout that amarried
vi^omanis not necessarilyindependentof the influence of her mother. Such
casesshouldbedealtwithontheirownfacts,and not onanygeneralpre
sumption.Onthefactsofthecasethecourtfoundthatshewasunderthe
influenceofhermother."*^
Similarly,wherea pardaladyof70years,havingthreedaughters,was
supposedto havegiftedher entire land to the defendant,who wasthe tenant
ofthatland,itwasheldthatfromthepositionofhispossessionoftheland
hemusthavedominatedthewomanandburdenlayuponhimtoshowthe
circumstancesof the gift. Hebeingnotableto do so, the gift deedwas set
aside.
Thepresumptionis raisedat leastin thefollowingcases:
1.Unconscionablebargains, inequality of bargaining power or
economicduress
Unconscionableness
Whereone of the parties to a contract isin a positionto dominatethe will
of the other and the contractisapparentlyunconscionable,that is,unfair,
the lawpresumesthatconsentmusthavebeenobtainedbyundueinfluence.
Theburdenisshiftedto thestrongerparty toprovethat he didnothingto
overbearthe will of theother.Aninstructiveillustrationisthedecisionof
the Privy Council inWajidKhan v Raja EwazAliKhan:'*^
An old and illiterate woman, incapable of anybusiness,conferred on
herconfidentialmanaging agent, without anyvaluableconsideration,an
importantpecuniarybenefit under the guise of atrust.
TheirLordshipssaidthat "all the facts of the case go to show that there
wasactiveundueinfluence.The onus is on the grantee to showconclusively
that the transaction ishonest,bonafide,well-understood,the subject of
independentadvice and free fromundueinfluence".
Someinstancesofunconscionableness
The presumption of undueinfluencewas raised where a poor Hindu
widow, having no means formaintenance,borrowed,in order to establish
41. For a survey of a large number of such cases see CheSomBinte Yip vMahaP Ltd, (1989) 2
CLJ 802,906-911,HighCourt,Singapore.
42. ChandSinghv RamKaur,(1987)2 PLR70;SurjitSinghvBimlaDevi, AIR2008_NOC969
(HP),old,illiterate lady was taken by her collateral, in whom she had confidence, to his house
and put under "dhooni" (somekind of smoke treatment), she said that in that state her signa
tures were taken on two papers that were represented to her as pension papers, on realising
thatpapers were gift deeds, shepromptlytookaction,gift deeds set aside.
43.(1890-91)18lA144.https://t.me/LawCollegeNotes_Stuffs

326. 188Chapter5FreeConsent [S-16]
herrighttomaintenance,asumofmoneyat100percentrateofinterest;'^''
whereaperson,withouthavingthemeansofsubsistence,inordertoprefer
anappealagainstajudgment,borrowedRs3700on abondpromisingto
payRs25,000withinayearfromrecoveryofthepossessionofanestate;"*^
whereayouthof18yearsofage,spendthriftandadrunkard,borrowed
Rs900on a bond bearingcompoundinterest at 2 per cent per mensem
withmonthlyrests,the courtsayingthat "theinstrumentitselfbearsupon
itsfacetheimpressofunconscionabledealing,therateofinterestcharged
beingsoexorbitant'^®whereapersonoftheageofsome28years,theson
ofaweahhyman,butofprofligatehabitsandgreatlyinneedofmoney,his
fatherhavingrefusedtosupplyhim,executedabondtosecureasumof
Rs500with 37%per centinterestwithsix-monthlyrests,the bondfurther
providingthatthesumwouldnotberepayablewithinthreeyearsandeven
ifitwasrepaidtheinterestwouldrunforthreeyears.''^Inallthesecasesthe
courtgavereliefbyscalingdowntherateofinteresttowhatappearedto be
reasonable in the circumstances. Gift in favour of a religiousorganisationby
apersonweakinmindandsufferinginhealthhasbeenheldtobeonewhich
carries the apparent impress of undueinfluence."'^
Unconscionablenessinmoneylendingtransactions
Unconscionablebargainshavebeenwitnessedmostlyinmoneylending
transactionsand ingifts.But theprincipleis notconfinedto such transac
tionsonly.In acasebeforetheBombayHighCourt,''^a poorfarmer,being
unableto paybackaloan,executedasaledeedinfavourofthecreditorof
hispropertythreetimesthevalueofthesumdue,thecourtgrantedreliefby
settingasidethesaleandallowingthefarmerto paybackthelenderwithin
a fixedperiod.
Positionofdominancenecessary forpresumptionto arise
It should,however,be borne in mind that the presumption of undue
influenceon the ground ofunconscionablenessof the bargain is raised only
when one of the parties is in a position to dominate the will of the other.
As between parties on equal footing the mereunconscionablenessof the
bargaindoesnotcreatethepresumptionof undueinfluence.Themerefact
that the bargain is a hard one is no ground in itselffor grantingrelief.This
44. RanneeAnnapurniNachiar v SwaminathaChettiar,ILR (1909-11) 34 Mad 7.
45.ChunniKuarvRupSingh, ILR(1888-90)11 All 57.
46. Kirpa Ram v Sami-ud-din Ahmad Khan, ILR (1901-03) 25 All 284,StanleyCJ at p. 285.
47.BalkishanDasvMadanLai,(1907)29 All303.
48.PhilipLukkavFranciscanAssn, AIR1987Ker204.
49.Bhimbhav Yeshwantrao, ILR (1900) 25 Bom 126; UnionofIndiav M.V.Damodar,AIR
2005 Bom 137, a loantransactionfor purchase of sea going vessels was finalisedthroughthe
medium of the Shipping Development Fund Committee. It could not be said that there was
economic duress because of themonopolisticstatusof the FundCommittee.https://t.me/LawCollegeNotes_Stuffs

327. [S.16] Undueinfluence189
was pointed out by the Privy Council inRaghunathPrasadSahu v Sarju
PrasadSahuJ°
The defendantand his father were equal owners of a vast jointfamily
propertyover which they had quarrelled. Consequently the father had
institutedcriminalproceedingsagainstthe son. Thedefendant,in order
to defendhimself,mortgaged his properties to the plaintiff and borrowed
from him about ten thousand rupees on 24 per cent compound interest.
Inelevenyears this rate of interest had magnified the sum covered by the
mortgagemorethanelevenfold,viz., Rs1,12,885.Thedefendantcon
tendedthatthe lender had, by exacting high rate of interest,takenuncon
scionableadvantageof hismentaldistressand,therefore,thereshouldbe
presumptionofundueinfluence.
TheirLordships, however, heldthatthere could be no suchpresumption
in thecircumstancesof the case. Referring tosub-section(3)of Section 16,
which provides forpresumptionof undue influence, LordShawobserved as
follows: "By thissub-sectionthreemattersare dealt with. In the first place,
therelationsbetweenthepartiesto eachothermust be suchthatone is in a
position todominatethe will of the other. Oncethatpositionissubstanti
ated the second stage has beenreached,viz., the issuewhetherthecontract
has beeninducedbyundueinfluence.Uponthedeterminationof this issue
athirdpointemerges,whichisthatof theonusprobandi.Theburdenof
provingthatthecontractwasnotinducedby theundueinfluenceis to lie
uponthepersonwho was in apositiontodominatethe will of theother.
Errorisalmostsure to arise if theorderof thesepropositionsbechanged.
Theunconscionablenessof thebargainisnotthe firstthingto beconsidered.
The firstthingto beconsideredis therelationsof theseparties.Were they
such as toputone in apositiontodominatethe will of theother?"
Theborrowerfailed to provethatthe lender was in apositionto dom
inatehis will. The onlyrelationbetweenthepartiesthatwasprovedwas
simplythatthey were lenderandborrower.The firstrequirementof Section
16 was,therefore,notfulfilledand,therefore,theborrowergot norelief.^^
Unconscionablegifts
Where apersonwas suffering from anumberof ailments which con
fined him to anursing-homeandfrom there he made a deedgiftingall his
50.(1924)19 LW 470: AIR1924PC 60. SeealsoMariaEudariaApoloniaGonsalvesvShripad
VishnuKamatTarcar, AIR 1998 Bom 46,agreementfor sale ofproperty,immaterialthatit
waswritteninPortuguese,seller's son knewthatlanguage,noparticularsofundueinfluence
alleged,agreementenforceable,the price was found byexpertsto bereasonableand fair.
51. See alsoKaniSundarKoervRaiShamKrishen,ILR(1906-07)34lA9:(1907)34Cal150.
Their Lordships distinguished the case fromDhanipalDas v RajaMaheshwarBakhsh Singh,
(1905-06)33lA118: ILR (1906) 28 All 570 and RajaMaheshwarBaksh Singh vShadiLai,
ILR(1908-09)36lA76: (1909) 31 All 386, on thegroundthatin these cases theborrower
was placed under theCourtof Wards and was, therefore, under apeculiardisability. This
enabledthelendertodominatehiswill.
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328. 190 Chapter 5FreeConsent [S.16]
propertiesto one of his sons to theexclusionof others, theSupremeCourt
heldthat thepresumptionofundueinfluencewasproper/^Giftsofthis kind
areoftenmadeunderinfluence.Inanothercase before the PrivyCouncil:^^
An old Malaywidow,whollyilliterate,was the owner ofconsiderable
rent-producinglandedproperty.Shegiftedallherpropertyto her nephew
who washelpingher,leavingfor her an incomeonly of about 30 dollars.
The deed of gift waspreparedwith the help of a lawyer.
On these facts the LordChancellorobserved:"Inthepresentcasetheir
Lordships do not doubt that the lawyer acted in good faith, but he seemsto
have receiveda good deal of hisinformationfrom the respondent(nephew);
he wasnotmadeawareof thematerialfactthatthepropertywhichwas
beinggivenaway constituted practically the whole estate of the donor, and
he certainly does not seem to have brought home to her mind the conse
quencesto herself of what she was doing, or the fact that she could more
prudently and equallyeffectively,havebenefitedthe donee without undue
risk to herself by retaining thepropertyin her own possession during her
life and bestowing it upon him by her will. In their Lordships' view the
facts proved by the respondent are notsufficientto rebut the presumption of
undueinfluencewhichisraisedby therelationshipprovedto have been in
existence between the parties; and theyregardit as mostimportantfrom the
point of view of the public policy tomaintainthe rule of law which has been
laiddownand to insistthata gift madeundercircumstanceswhichgave rise
to the presumption must be set aside unless the donee is able to satisfy the
courtof the facts sufficient torebutthepresumption."^''
Inanothercaseofbenefitswithoutconsiderationandwhichwasalso
before the PrivyCouncil,awoman,who wasdescribedas a submissive
wife and who at thebiddingof herhusband,gavesecurityof herstridhan
(personalproperty),whichcomprisedsomeland,to secure thegrowing
indebtednessof herhusband.LordGoddardexpressedtheopinionthat
"itisunnecessarytoenterintoadiscussionas to theburdenofproofin
sucha case asthisastheevidencehereabundantlyjustifiesapresumption
thatshe wasactingundertheinfluenceof herhusbandforwhosebenefitthe
mortgagewas beingexecuted".HisLordshipcontinued:"Itwouldcertainly
1issBisa/ 52. Lakshmi AntntavTalengalanarayana,(1970)3 SCC 159; AIR 1970 SC 1367. In another
^ caseof gift of entirepropertyby an old ladyto theexclusionof her sons the court said that
CASEPILOT the age of thedonorisdefinitelyone of themostimportantfacts to betakenintoaccount
in thetotalityof thecircumstancessurroundingthetransaction.M.KarunnakaraKurupv
VaniyarambathLakshmikuttyAmma,1984KLT83 (SN).
53.IncheNoriahBinteMohdTahirv SkAllie,AIR1929PC 3;HamelavJangSherSingh,AIR
2002P&H147, 99yearleasesignedby aladywhowasold,illiterateandsick,alsovictimof
fraudbecausenominalconsideration,heldvoidable.
54.RamuMahabirvGhurhooSamu,AIR2006All273:2006AIHC3035(All)vendor,oldman
of 70years,livingwithhisnephewwhodominatedhim,transferredhiswholepropertyto the
nephewto theexclusionof thewholenumberof hisdaughters,burdenon thenephewto prove
bonafidesandgenuinenessofconsiderationin thetransaction,burdennotdischarged.
55.TungabaiBhratarPurushottamShamjiKumbhojkavvYeshvantDinkarJog,AIR1945PC 8.https://t.me/LawCollegeNotes_Stuffs

329. [S. 16] Undueinfluence191
not be true to saythatthere is a presumption in every case where a wife
confers abenefiton her husband without consideration. Equally it is not
necessary in order to establish the presumptionthatthe parties should stand
in someparticularcategory of relationship to each other. Thepresumption
nodoubtcan be more easily established and indeed may be assumed in such
cases astransactionsbetweenparentandinfantchild, solicitorandclient, or
spiritual adviser andpenitent,but it will arise in any case in which the facts
show that the circumstances are suchthatinfluence can fairly be inferred."
Relationshipofblood,marriageoradoptionnotsinequanon
Thus,whatisnecessarytoestablishthepresumptionis notthatthepar
tiesshouldberelatedbyblood,marriageoradoption,butthattheirrela
tions are, orpositiontowardseachotheris, suchthatone is in asuperior
positionover theother.^®Even where they are sorelated,thepresumption
maynotarise for the influence may as well be fairly and wisely exercised.
This has beenpointedoutby the SupremeCourtinSubhasChandraDas
MushibVGangaPrasadDasMushib:"
Someagriculturalpropertywasgiftedby apersonto his onlygrandson
throughone of histwosons to thetotalexclusionof his sons.Although
thedonorwas ofgreatage, he wastakingactiveinterestin hisproperty.
Four yearsafterthe gift he died and still four yearsafterthattheother
sons questioned the validity of the gift on thegroundof undue influence.
Thecourtapproved the principles laid down by the Privy Council in
RaghunathPrasadSahu v SarjuPrasadSahu^^and also noted the factthat
Section 16 of theContractAct is based on the Englishcommonlaw asnoted
in the judgment of the SupremeCourtinLadliPrasadJaiswalvKarnal
DistilleryCoLtd^^andheldthaton the facts of the case nopresumption
ofundueinfluencecouldarise."Thecircumstancethatagrandfathermade
a gift of aportionof hispropertiesto his onlygrandson(onaccountof
naturallove and affection) a few years before his death is not on the face
56. See, for example, AvonFinanceCo vBridger,(1985) 2 All ER 281 (CA). An elderly couple,
willing to purchase a retirement house, signedcertaindocuments at the bidding of their son
which were prepared by the finance company's solicitors and executed at the solicitor's office,
the son acting as an agent toprocuresignatureand did so bycommittinga fraud on hispar
ents, theCourtof Appeal unanimously heldthatthe charge should be set aside. Similarly, in
Kingsworth Trust Ltd v Bell, (1986) 1WLR119, theCourtof Appeal set aside thetransaction
of a mortgage which was executed by a wife upon herpropertyundermisrepresentationfrom
her husband whose company had been provided the loan and who was authorised by the lend
ingcompanyto get thedocumentsexecuted.
57. AIR1967SC 878: (1967) 1 SCR 331; M.RangasamyvRengammal,(2003) 7 SCC 683: AIR
2003 SC 3120,presumptionof undue influence only because of near relationship has been
held to be not permissible.MunnaKumari v Umrao Devi, AIR 2006 Raj 152, gift deed in
favour of adopted son influenced by a woman with whom the adoptive father had been living
since 35 years. The donor died within a year after the gift. Undue influence,transactionset
aside.
58.(1924)19LW470:AIR1924PC60.
59.AIR1963SC1279:(1964)1SCR270.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

330. 192 Chapter5Free Consent [S.16]
of it anunconscionabletransaction."Where,ontheotherhand,aperson
made a verynegUgibleprovisionfor his third wife and the daughters borne
by her, and donated the wholeof his property only to one of his grandsons,
theSupremeCourt held that, in theabsenceof any explanation from the
side of the donor for thediscrimination,thepresumptionof undue influence
arose/"
Inequalityofbargainingpower
The presumption of undue influence may also arise from the factthat
there is such an inequality of bargaining power between the partiesthatone
can cause economic duress to the other. The decision of theCourtofAppeal
in Lloyds Bank vBundy^^is a remarkable illustration of the concept of ine
qualityofbargainingpower.
60.LakshmiAmma vTalengalanarayana,(1970) 3 SCC 159: AIR 1970 SC 1367. See alsoTakri
Devi VRama Dogra, AIR 1984 HP 11, where the donor was aniUiterateladyseparatedfrom
herhusbandand the donee was her legal advisor, held,presumptionof undue influence.Marci
CelineD'SouzavRenieFernandez,AIR 1998 Ker280,thepersonexecutingsettlementof
propertyin favour of the defendants was ill and totally dependent on them for existence.
Thedefendantshad nootherclaimto orinterestin theproperty.Held,thedocumentwas
vitiatedbyundueinfluence.KennedyAlemasvExecutiveEngineer,(1998) 2 Bom CR320,
thedoctrineofinequalityofbargainingpowerdoesnotapplywheretheGovernmentis a
partyto thecontract.A tender forone-yearsupply system wasapprovedfor 3months'sup
plies with right toextendup to 12months.Noextensionwasgrantedafterfirstextension.
No illegality on thepartof theGovernment.Thecourtdistinguishedthe case fromCentral
InlandWaterTransportCorpnvBrojoNathGanguly,(1986) 3 SCC 156: AIR1986SC
1571;ShrilekhaVidyartbivStateofU.P.,(1991)1 SCC 212: AIR 1991 SC537andL/Cv
ConsumerEducationandResearchCentre,(1995)5SCC482:AIR1995SC 1811whereit
wasobservedthattheStatecouldnotbeallowedtoenforceacontractwhichhasbeenentered
intowithacitizen-wheretheredid not existequalityofbargainingpower.NirmalChandra
HaldarvSumitraNaskar,AIR2007NOC1978(Cal),donor60 years old, she wasunder
treatmentat the house oftwoof thedefendants,thoughthehusbandwaspresent,thegiftdeed
wasnotattestedby him.Attestationwas by one of thebeneficiaries.Theburdenofproving
thatthegiftdeed wasexecutedwithoutfraudorcoercionnotdischarged.
61. (1975) 1 QB 326. See alsoMidlandBankPicvMassey,(1995) 1 All ER 929 (CA),wherethe
womanborrowerfor the benefit ofanotherhad theindependentadvice of hersolicitors.The
bankwasentitledtotreatthesolicitorsasrespectablesolicitorswhowouldtakeseriouslytheir
obligationto give MsMasseyindependentadvice. It wasnotfor thebankto check upandfind
outexactlywhatadvicehadbeengiven.BancoExteriorInternationalvMann,(1995) 1 All
ER 936 (CA), wifemortgagingherjointpropertywithherhusbandfor thehusband'sloan.
Thecourtsaidthatthebankwas notrequiredtoconductameticulousexaminationof the
advicegivenby thesolicitor.Oncethebankknowsthatthe wifehadreceivedadvicefroma
solicitor,thebankwasentitledtothinkthatthesolicitor'sadvicewouldbesuchas areasona
blycompetentprofessionalpersonwouldgive. TSBBankpicvCamfield,(1995) 1WLR430
(CA), thehusbandmisrepresentedtoinducehis wife tochargeherpropertyfor thehusband's
loans.She had no advice. Thewholetransactionwas set aside andnotmerely theextentto
whichshe was toldthatherestatewouldbeburdened.BarclaysBankPicvO'Brien,(1994)
1 AC 180: (1993) 3WLR786 (HL), wifestandingsuretyfor thehusband'sdebtwithout
independentadvice, held voidable because of undue influence ormisrepresentation.C.I.B.C.
MortgagespicvPitt,1994 AC200;(1993) 3 WLR 802 (HL), wife told loan needed for buy
ingholidayhome,sheagreedto give herpropertyinmortgage,moneyspentbyhusbandon
investmentinshares,loss, wifeallowedtoavoid,for thefinancecompanydidnottakecareto
seethatshe hadindependentadvice.D.N.JeevarajvStateofKarnataka,(2016) 2 SCC 653,
aninfluentialpoliticalpersoncannotbyitselfbetakentomeanthathe will have theabilityhttps://t.me/LawCollegeNotes_Stuffs

331. [S. 16] ::.-Undueinfluence193
Acontractorborrowed a sum of money from a bank. He could not pay
back in time. The banker pressed for payment or for security. He sug
gestedthathis father mightmortgagethe family's only residential house.
The bank officer visited the father and obtained his signatures upon
readymade papers. Thecontractorstill could not pay and thebanker
sought to enforce the mortgage which might havemeantthrowingout of
the family from its only residence.AccordinglyMr Bundy relied upon the
unfaircharacterof themortgage.
He was allowed to set aside themortgage.LordDenningMRtriedto
locate the principlewhichrunsthroughall the variedsituationsinwhich
relief is allowed onaccountofunequalbargainingpower. He said:"English
law gives relief to one who,withoutindependentadvice, enters into a con
tractupontermswhichare veryunfair,ortransferspropertyfor aconsider
ationwhichis grosslyinadequate,when hisbargainingpoweris grievously
impairedbyreasonof his own needs or desires, or by hisownignoranceor
infirmity,coupledwith undueinfluenceorpressurebroughtto bear on him
by or for the benefit of theother."
-Thebankexploitedthevulnerabilityof thefather,causedby his desire
to. help his son,tosuch anextentthathecharged,hishouseto hisruinfor
a veryshortmoratorium,whichwas ahighlyinadequateconsiderationfor
themortgage.
Influencedistinguishedfrompersuation
"Influence"has to bedistinguishedfor thispurposefrompersuation.
Thisdistinctionwasputtoworkby the BombayHighCourt^^in a case in
whichthe onlyrelationshipbetweenthepartieswasthatthedefendantwas
a'tenantof apartof theplaintiff'spremises. The owner was an illiterate
widow, but shehadbeenmanagingheragriculturalpropertyfor over two
decades.Thetenanttreatedher as hismotherandpersuadedher togiftto
him her entireproperty.The gift deed, as dulyexecutedby her, was regis
tered.Thecourtfeltthatitcouldnotbesaidthatthetenantwas in aposition
todominateher will. The gift deed was not the result of undue influence.
Thecourtsaid:^^"Influence in the eyes of the law has to becontradistin
guished withpersuation.Everypersuationis not the samethingas influence.
One may by his actsandconductconvinceandpersuadetheotherpartyto
do aparticularact and if theotherpartydoes such an act freely and out of
own volition, may be to his prejudice ordisadvantageor peril, itcannotbe
saidthatsuch act wasinfluencedbytheother."^''
to influence thejudgmentof thehousingland developmentauthority.Possibility of influence
mustbesubstantiatedwithsufficientmaterialandsurroundingcircumstances.
62.ShrimativSudhakarR.Bhatkar,AIR1998Bom122:(1997)4 BomCR237.
63. At p.125.
64. The court distinguished the case from ShivgangawaMadiivalappaVulavivvBasangouda
GovindgouraPatil,AIR 1938 Bom 304. In this case a widow's husband's brother was living
with her. Theyquarrelledand the man threw her out. She recovered the premises with thehttps://t.me/LawCollegeNotes_Stuffs

332. 194 Chapter 5 Free Consent [S.16]
Economicduress by forcing renegotiationofterms
TheHouseofLordsintheirdecisioninUniverseTankshipsIncv
InternationalTransportWorkers'Federation^^allowed the shipping com
panytorecoverbackfromthe Workers'Federation80,000USDollars which
were paid under an agreement and which agreement the shipping company
had to execute because the workers did notpermitthe ship to leavewith
out signature. It amounted to economic duress upon the shipowners. The
conduct was socatastrophicas toamountto coercion of the shipowner's
willwhichvitiatedtheirconsenttothoseagreementsandpaymentsmade
bythem.
The BombayHighCourt^^followed this case so as to holdthatwhere a
supplier of raw materials to the ONGC, which was animportsubstitution,
gave a bank guarantee to theONGC,which was to be enforced only when
the customs duty paid by the supplier was refunded to him, and he was sub
sequently asked to drop this condition and make the guarantee enforceable
absolutely andthattheconditionwould be orally observed, itamounted
toeconomicduressandfraud.ThecourtcitedLordDiplockinPaoOnv
LaoYiuLong^'^as sayingthattherationalebehind the developing law of
economic duress wasthattheapparentconsent of thepartyaggrieved was
induced by pressure exercised upon him by theotherpartywhich the law
doesnotregardaslegitimatewiththeconsequencethathisconsentwas
treatedas revocable unlessapprobatedexpressly or byimplicationafterthe
illegitimate pressure had ceased to operate onmind.^^His Lordshiptook
specificprecautiontodistinguishtheconceptofeconomicduress from mere
help of aninfluentialWatandarPatil,whostartedlivingwithher inimmorality.He drove
her outafter obtainingfrom her thegiftof herproperty.Thecourtobservedthatthegift
waspresumablyobtainedthroughundue influence. ThecourtalsodistinguishedMitiBewa
VDaitariNayal,AIR1982Ori174,wherethe sale deed wasexecutedby anilliteratelady
thinkingthatit was apowerofattorneyinfavourof herson-in-lawwho was livingwithher
andmanagingherproperty.Theburdenwas on thelatterto provethattherewas noundue
influence.SimilarlyinTakriDevivRamaDogra,AIR1984HP 11, anilliteratelady, living
separatelyfrom herhusband,donatedher appleorchardto her loverandthesamewas held
to be theresultofundueinfluence.AnnarpurnaBarikDeivIndaBewa, AIR 1995Ori273,
deedexecutedbyilliteratewoman,burdenis on theotherpartyto provethattermswere fair
andequitable,thatshe hadindependentadviceandthatthedocumentwasexplainedtoand
understoodby her.
65. (1983) 1 AC 366: (1982) 2WLR803 (HL). Forfurtherstudy, see,M.H.Ogilvie,Economic
Duress,InequalityofBargainingPowerandThreatenedBreachofContract,(1980) 26
McGillLJ 289.
66.Dai-IchiKarkaria(P)LtdvOilandNaturalGasCommission,AIR1992Bom309.Followed
inB& SContractsandDesignsLtdvVictorGreenPublicationsLtd,1989 ICR 419where
it wasobservedthatfor thepurposeof this case it wassufficientto saythatif theclaimant
had beeninfluencedagainsthis will to paymoneyunderthethreatofunlawfuldamageto his
economicinterest,hewouldbeentitledtoclaimthatmoneyback.
67.1980AC614:(1979)3WLR435.
68. Forexample,inNorthOceanShippingCoLtdvHyundaiConstructionCoLtd,1979QB
705: (1979) 3WLR419, theshipbuildersrefusedtohonourthecontractunlessthestipulated
paymentwasincreasedby 10 per cent. They made the finalpaymentwithoutprotestand
thereafterclaimedrefund.But theirconductwas held asamountingtoratification.Thepres
sureonmindhadceasedtoexistwhenfinalbillswereunderconsideration.https://t.me/LawCollegeNotes_Stuffs

333. [S. 16] Undueinfluence195
commercial pressure which in some degree always exists whenever one
partyto a commercialtransaction is in a stronger bargaining position than
the other party. Commercial pressure by itself does notamountto economic
duress.In the view ofthePrivyCouncil,twoelementswerenecessaryto
constitute duress, i.e.(1)pressureamountingto compulsion of the will of
the victim, and(2)the illegitimacy of the pressure exerted. For all practical
purposes the victim of the duress must have no otherchoice.
Inanothercase on thesubject,^'anationalroadcarrierbacked out of the
contract already entered into and compelledthe other side to renegotiate the
terms of thecontract.Thedefendantswere heavilydependenton theretail
chain'scontractandwereunableatthetimetofindanalternativecarrier.
They agreed to the new terms but later on refused to pay at the new rate.
The court observed: "Where apartyto acontractwas forced by the other
party tore-negotiatethe terms of the contract to hisdisadvantageand had
no alternative but to accept the new terms offered, his apparent consent to
the new terms wasvitiatedby economic duress."
ThecourtcitedthedictumofLordDenninginD.&C.BuildersvRees-7°
"No person can insist on a settlementprocured by intimidation."
The party had tosurrenderto the demand ofincreasedchargesfor car
riagebecausethey had to meet theircommitmenttocustoms.Accordingly,
there was no consideration for the promise to pay increased charges and the
samewasheldtobenotenforceable.
Where agovernmentdepartmentrefusedto extend time forcompletion
of theongoingworksunlessthe contractoragreedto do thesametype of
furtherwork at the old rates, thecourtsaidthatitamountedto economic
duress.
Exploitationofneedy
Thisapproachhas beenusedinsomeothercasesalso.One of them isA.
SchroederMusicPublishingCo vMacaulayP
Therewas anagreementbetweena youngsongwriterand amusicpub
lishingcompany.Thearrangementwas to remain inforcefor 5 years
and was to be automatically extended for anotherfiveyears should the
boy'sroyaltyreachthefigureof£5000. The companycouldterminate the
agreementat anytimebyamonth'snotice.Theboyhadnosuchrightand
hewantedto getoutof it.
TheHouseofLordsorderedhisliberationfromthebond.Thecontract
was on the terms ofcompany'sstandard terms and was, therefore,the result
of thecompany'sdictation.
69. Atlas Express Ltd vKafco(Importers and Distributors) Ltd, 1989 QB 833:(1989)3WLR
389.
70.(1966)2 QB 617(CA).
71. IrrigationDepttv Progressive Engg Co, (1997) 4 ALD 489(AP).
72.(1974) 1WLR1308.https://t.me/LawCollegeNotes_Stuffs

334. 196Chapter5 FreeConsent [S. 16]
Asimilarrelief wasallowedin a case where asongwriter'scopyrightwas
purchasedon termsthathe was not to publish his songsthroughanyother
companybut thecompanyhadtherightto reject hissongs/^"Indetermin
ing the respectivebargainingpositions of theparties,thecourtswill look at
anumberof factors, such as age, poverty,illiteracyandemotionalstate."^''
WiththeseshouldbecontrastedNationalWestminsterBankP&Cv
MorganJ^A self-employedbusinessman'sjointhomewithhis wife was
mortgagedto a building society who werethreateningforeclosure. Abank
provided him money with which he paid off the society and a new charge
on the house was created in favour of the bank for all his present and future
liabilities. When his wife was called upon to sign the papers, she was told
thatit covered only theloanandnotbusinessliabilities.TheHouseofLords
were not able torelieveher from the consequences of her signature. The
charge had conferred reasonably equal benefit on both parties. The relation
ship of banker and customer is not automatically characterised as one to
whichthedoctrineofundueinfluenceattaches.
Techniqueofjudicial intervention in unfair bargains
These developments showthatundue influence or duress has become
a technique of judicial intervention in unfairbargains.^^Thetraditional
approach of confiningduressto threats to the person and to goods is about to
undergo expansion to include other threats,particularlythose forms of eco
nomic coercion which force a person to enter or vary a contract against his
will.^^Forcinga person to acceptlessmoneythan is due to him byexploiting
hiseconomicstringencyis anexampleof thiskind.''®Theprinciplehas been
73. Clifford Dav Management Ltd vW.E.A.Records Ltd, (1975) 1WLR61(CA).An illiterate
donortransferringall herpropertyto her lawyer, held, unconscionable. Takri Devi v Rama
Dogra,AIR1984HP11.
74. Nicholas Rafferty, Recent Developments in the Law of Contract,(1978)24 McGillLJ
236,271.
75. (1985) 2 WLR 588 (HL);noted.TheLimitsofUndueInfluence,(1985) 48ModLR 579.
76. VinayakappaSuryabhanappaDahenkarvDulichandHariramMurarka,AIR 1986 Bom
193, consideration for a multistorey commercial complexunnaturallylow.
77. For one-timespurt of literature on the subjectsee, Waddam, Unconscionabilityin Contract,
(1976)39 Mod LR 369; Ogilvie, Swiss Atlantique Revisited: How Long,O'LordsHow
Long? (1980) 5 Can Bus LJ 100; Dalzell,DuressbyEconomicPressure,(1942) 20 NCarolina
LRev237,341.
78. D.&C. Builders v Rees,(1966)2 QB617(CA);Llewellyn,Bargaining,Duress and Economic
Liberty,(1943)43ColumLR 603 and What Price Contract,(1931)40 YaleLJ 704. Beatson,
Duress by Threatened Breachof Contract,(1976)92 LQR496. Sutton, Duress by Threatened
Breach of Contract,(1974)20 McGill LJ 554. Adams,ContractLaw at Sea, (1979) 42 Mod
LR 557:(1979)95 LQR 475; Coote, (1980) Camb LJ 40; Charles Fried,Contractsas
Promises: ATheoryofContractualObligations,where it isobserved:"Many lawyers
have a growingconvictionthat somedegreeof paternalistic protection ofunsophisticated
and unskilful bargains is necessary to avoid results that shock the conscience and this has
ledto thedevelopmentofdoctrinesofunconscionabilityand a host of ad hocstatutorypro
tections that violate the basicprinciple of freedom of contract"; MelvinAvonEisenberg,The
Bargain Principle and its Limits, (1982) 95 Harv LR 741; P.S. Atiyah, The RiseAndFall
ofFreedomofContract,where it is observed that society should not tolerate the resultshttps://t.me/LawCollegeNotes_Stuffs

335. [S. 16] Undueinfluence197
applied to grant of licences as apartof the principle of distributive justice.
In this case there was a large disparity in the bargaining power of the appli
cantand thegrantingauthority. Theapplicanthad no choice but to give his
consent to the terms andconditionsimposed by the authority. In such cases
mostof the tirneapplicantsareexpectedto sign ondottedlines.^^
Rescuing employeesandothersfromunreasonableterms
Picking up themeaningof theword"unconscionable"from adiction
ary^"the SupremeCourthasnotedthatitmeanssomethingthatshows no
regardfor conscience andwhichisirreconcilablewithwhatisrightor rea
sonable.Thematterbeforethecourtwasaservicecontract.Aclauseinthe
contractempoweredthe employer (aGovernmentundertaking)to remove
an employee bythreemonths'notice or pay in lieu. The employee, who
contestedthevalidityof thisclause,wasremovedbyhandinghimover a
threemonths'paypacket.The SupremeCourtregardedthe clause to be
constitutionallyas well ascontractuallyvoid.Thecourtaddedthatanyterm
whichis sounfairandunreasonableastoshocktheconscienceofthecourt
wouldbeopposedto public policyandthereforealso voidunderSection 23.
Thecontractwasnotbasedupona realconsent.It wasratheranimposition
upon a needyperson.®^The term wasunconstitutionalbecause it was so
absolutethatany officer could be made a target irrespective of his conduct,
good or bad.
Commentingupon thisexpandingpower of thecourtto relieve aparty
from the consequences of his owncontract,alearnedwritersaysthat"free
dom ofcontractturnsout to be amisleadingguide when somanycontracts
are not free in the economic sense. Thenotionofcontractasprivatelegisla
tion appears less attractive when legislation is always drawn upone-sidedly.
Judges are empowered to read in terms which are not there, or read out
terms which are there. They are to impose reasonableness.Whateveris not
reasonable is not law. If thepartieshave agreed tosomethingunreasonable,
they should be treated as if they have not agreed at all andreleased."®^
of unequalstartingpoints for the trading process as the lottery ofnatureor as the price of
civilisation.
79.MahavirSingh v StateofHaryana,(2005)4ICC47(P&H).See further, Lord Steyn, Common
law:FulfillingtheReasonableExpectationsofHonestMen,(1997) 113LQR433.
80.ShorterOxfordEnglishDictionary,VolII (3rd Edn)2288.
81.CentralInlandWaterTransportCorpnv BrojoNathGanguly,(1986) 3 SCC 156,206.
82. Thecourtconsultedthe following on the subject ofunconscionablebargains:Chittyon
Contracts,Vol I, Para 4 (25th Edn), wherecontractsby way ofimpositionareconsidered;
Black'sLawDictionary(5th Edn)38,fordefinitionofAdhesionContract;Restatement
OFTheLaw by the American LawInstitute,107, Sec. 28, Vol II forUnconscionableContract
Terms-,John R. Peden,TheLawofUnjustContracts,28-29(1982); thecourtnoted the
influence of the emerging doctrines of distributive justice and unfairness and their impact
upon the law of contract at pp. 210-211; as to relationship between unfairness and public
policy under S. 23 see the judgment ofMadonJ at p.217.Reaffirmed in DTC v Mazdoor
Congress,1991 Supp (1) SCC600:AIR1991 SC 101.
83. J.H. Baker, From Sanctity ofContractto ReasonableExpectation,Current Legal Problems
1979.The law playsin this respectthe role of a parent. SeeAnthonyT. Kronman, Paternalismhttps://t.me/LawCollegeNotes_Stuffs

336. 198Chapter5 Free Consent [S.16]
Naturaljustice
Theprocessof contracting has also beensubjectedto the requirementsof
naturaljustice. The acceptance of a revised price by a low bidderwithout
giving any suchopportunityto the highest bidder was held by the Supreme
Courtto be adenialofnaturaljusticerenderingtheauctionto bevoid.^'*
2.Contractswithpardanashinwomen
Acontractwithapardanashinwomanispresumedto have been induced
by undue influence. She can avoid thecontractunless theotherpartycan
showthatit was her"intelligentandvoluntaryact".^^Thereis, however, no
statutoryor judicialdefinitionof theterm"pardanashinwoman".In the
opinionof the BombayHighCourt®®awomandoesnotbecomepardan
ashinsimply because "she lives in some degree of seclusion". Theconcept
probably means awomanwho istotally"secluded fromordinarysocial
intercourse".The followingobservationof the PrivyCouncilexplainsthe
conceptto acertainextent.®^"ItisabundantlyclearthatMrsHodgeswas
not apardanashin.Thetermquasi-pardanashinseems to have beeninvented
for thisoccasion.TheirLordshipstakeit tomeanawoman,whonotbeing
of thepardanashinclass, is yet so close totheminkinshipandhabits,andso
secluded fromordinarysocialintercourse,thata likeamountofincapacity
for businessshouldbeascribedto her,andthe sameamountofprotection
whichthe law gives topardanashinsmustbeextendedto her.Thecontention
is a novel one,andtheirLordshipsare notfavourablyimpressedby it. As
to acertainwell-knownandeasilyascertainedclass ofwomen,well-known
rulesoflawareestablishedwiththewisdomofwhichwearenotnowcon
cerned; outsidethatclass it mustdependin each case on thecharacterand
positionof theindividualwomanwhetherthosewhodealtwithher are or
are notboundtotakespecialprecautionsthatheractionshall beintelligent
andvoluntary,and to provethatit was so in case ofdispute."
In a casebeforetheBombayHighCourt:®®
It wasfoundthata ladyappearedbeforetheRegistrarforregistration
ofcertaindocuments,thatshestoodas awitnessintheboxin asuit,that
andtheLawofContracts,(1988)32 Yale LawJournal763. Apersonwhowouldgive away
too much of hisownlibertymustbeprotectedfromhimself,nomatterhowrationalhis
decision orcompellingthecircumstances.Hamelav]angSher Singh, AIR2002P&H147,
plaintiff,illiterate,old and sick lady, wastakingguidancefrom thedefendantconsultinghim
off and on, thecourtsaidthathe must betakento be in apositionto influence her. She was
told thatshe^^wassigning a one-year lease but the same was in fact for 99 years, consideration
wasRs2500per year and eventhatwas not paid to her. Thecourtrescued her bycancelling
thedocument.
84.Ram&ShyamCo vStateofHaryana,(1985) 3 SCC 267: AIR 1985 SC 1147.
85. Bellachi v Pakeeran, (2009) 12 SCC 95: (2009) 4 SCC (Civ) 640, burden of proving genuine
ness of thedocumentis on theotherparty. But in the case ofregisteredinstrumentsthere is
equallythepresumptionthatit wasexecutedinaccordancewiththe law.
86.ShaikIsmailyAmirBibi,(1902) 4 Bom LR146,148.
87.HodgesvDelhi&LondonBankLtd,(1899-1900)27lA168,175-76.
88. ShaikIsmailvAmirBibi, (1902) 4 Bom LR 146.https://t.me/LawCollegeNotes_Stuffs

337. [S. 16] Undueinfluence199
she put intenantsand fixed and recovered rents fromtheminrespectof
her house. Thecourtheldthatshe couldnotbetreatedas apardanashin
lady.
Onceit isshow^nthatacontractismadewithapardanashinwoman,the
law presumes undue influence. Theburdenlies on theotherpartyto show
thatnoundueinfluencewas used,thatthecontractwas fullyexplained
to her andthatshe freelyconsented.The followingstatementof the Privy
Council inKalibakhshSingh vRamGopalSingh^^explainstheextentof
this onus: "In the first place, the lady was apardanashinlady, and the law
throwsaroundher a special cloak ofprotection.It demandsthatthe burden
ofproofshall in such a case rest, not with those whoattack,but those who
found upon the deed, and theproofmust go so far as to show affirmatively
and conclusivelythatthe deed was not only executed by, but wasexplained
to, and was reallyunderstoodby, thegrantor.In such cases it must also, of
course,beestablishedthatthe deed wasnotsignedunderduress,butarose
from the free andindependentwill of thegrantor."
Inthiscase:
Abouttwomonthsbeforeherdeath,aHinduwidow(whowasapar
danashinwoman) gifted half of her landed properties to the son of her
paramour,who was also the manager(mukhtar)of her estate.
This, it wascontended,combined with the factthatshe had no independ
ent advice, was sufficient to showthatthe gift was the result of the influence
themukhtarhad over the lady. Their Lordships, however, heldthatthere
is no rule of lawwhichmakesindependentadvicenecessaryin every case.
"Thepossessionof independentadvice,or theabsenceof it, is a fact to be
taken into consideration and will be weighed on a review of the whole of
thecircumstancesrelevantto the issue ofwhetherthegrantorthoroughly
comprehended,anddeliberatelyand of her ownfreewill carried out the
transaction.If she did, the issue is solved and thetransactionisupheld."^"
The extent of burden was further explained by the Privy Council in more
concretetermsinMoonsheBuzloorRaheemvShumsoonisaBegum.^^A
widowremarriedandendorsedanddeliveredtohernewhusbandcertain
valuable Government papers. In an action to recover them back from him
she provedthat shelivedinseclusionand that she hadgivenoverthe papers
to him forcollectionofinterest.Hecontendedthathehadgiven her full con
siderationforthenotes.Itwasheldthatthemerefactofendorsementand
theallegationofconsiderationwerenotsufficientto lift thepresumptionof
undueinfluence.Heshouldprovethat thetransactionwasa bonafidesaleand
that hegavefullconsiderationforthe paperwhichhereceivedfromhiswife.
89.{1913-14)41lA23,28-29.
90. KaliBakhshSinghv Ram GopalSingh,(1913-14)41lA23, 31. See also L/C v Nandarani
Dassi,AIR1970Cal200.
91. 1867 MIA 551 (PC). SeefurtherKharbujaKuervJangbahadurRai, AIR 1963 SC 1203:
(1963)1SCR456.https://t.me/LawCollegeNotes_Stuffs

338. 200Chapter5 FreeConsent [S.19-A]
Rescission[S.19-A]
Rescission ofcontractfor undue influence is allowed under the provisions
ofSection19-A.
S.19-A.Powertosetasidecontractinducedbyundueinfluence.—When
consentto anagreementiscausedbyundueinfluence,theagreementis a con
tractvoidableattheoptionofthepartywhoseconsentwas socaused.
Anysuchcontractmay be set asideeitherabsolutely or, ifthe party who was
entitledto avoid it has received anybenefitthereunder,upon suchtermsand
conditionsas totheCourtmayseemjust.
Illustrations
(a)A'sson has forged 6's name to a promissory note.B,under threat of prosecutingyA's
sonobtainsbondfrom Afortheamountoftheforgednote. IfBsues on this bond,theCourt
maysetthebondaside.
(b)A,a moneylender advancesRslOOtoB,anagriculturistand, by undueinfluence,
inducesBto executea bond forRs200withinterestat 6 per cent per month.TheCourtmay
set the bond aside,orderingBto repayRs100with such interest as mayseem just.
[Forcommentssee notes onSections19 to 19-A under the heading
"Limits of Rescission", infra.]
MISREPRESENTATION [S. 18]
Definition
A contract the consent tovvrhichis induced bymisrepresentationis void
ableat the option of thedeceivedparty.Misrepresentationmeansmis-
statement of a fact material to the contract.Misrepresentationisdefinedin
Section18;
S. 18."Misrepresentation"defined.—"Misrepresentation"means and
includes—
(1)thepositiveassertion,in a manner not warranted by theinformationof
the person making it,of that which isnot true,thoughhe believes it to be true;
(2)any breach of dutywhich,without an intent todeceive,gains an advan
tage to the personcommittingit,oranyoneclaimingunderhim,bymisleading
another to hisprejudice,or to the prejudiceof anyoneclaimingunderhim;
(3)causing, howeverinnocently,a party to anagreement,to make a mistake
asto the substance ofthe thingwhichisthe subjectofthe agreement.
Thesectionincludesthefollowingtypesofmisrepresentation:
1.Unwarrantedstatements
When apersonpositively assertsthata fact is true when hisinformation
doesnotwarrantittobeso,thoughhebelievesit tobetrue,thisismisrep
resentation.'^In a Bombaycase'^forexample:
92. Seeillustrations(a)and(c)to S. 19.
93. Oceanic Steam Navigation Co v Soonderdas Dharamsey,ILR(1890)14 Bom241.https://t.me/LawCollegeNotes_Stuffs

339. [S. 18] Misrepresentation201
The defendantschartereda ship from theplaintiffs,who statedthat
the ship wascertainlynot morethan2800tonnageregister. As amatter
of fact the ship had never been in Bombay and was whollyunknownto
theplaintiffs.Sheturnedout to be of theregisteredtonnageof morethan
3000tonnes.
It was heldthatthedefendantswereentitledto avoid thecharterparty.
"There was the positive assertion by theplaintiffsaboutthe size of the
ship—anassertion notwarrantedby anyinformationthe plaintiff had at
thetime,andwhichwasnottrue."'"*
Astatementis said to bewarrantedby theinformationof theperson
making it when hereceivestheinformationfrom atrustworthysource. It
shouldnotbe a mere hearsay. In aCalcuttacase:'^
B told theplaintiffthatone C would be thedirectorof a company. B
hadobtainedthisinformationnot from Cdirect,but fromanotherper
son, called L. Theinformationproveduntrue.
The judgesaid: "I am not inclined tothinkthat if B relied on second-hand
informationhe derived from L, he waswarrantedinmakingthe positive
assertionthatCwouldbeadirector."
Where a representation acquires the status of being a term of thecontract,
and itturnsout to beuntrue,thedisadvantagedpartymay,notonly avoid
thecontractbut also sue for damages for breach. Where in the course of
negotiations for the sale of lamb, the seller stated that the whole of the lot
was fully serviced, whereas this was not so, the buyer was allowed damages
for the breach of thewarranty.^^In anothercase'^the plaintiff was orally
assuredthathiscontainerswouldbecarriedunderthe deck,butbymistake
they were loaded on deck and were lost. The defendant was not allowed to
claim the protection of a clause in the contract limiting his liability only to
wilfulmisconduct.Theoralassurancehadoverriddenthewrittenclauses.
A land was purchasedexpresslyfor the construction of a duplex. The
sellerrepresentedthat he saw nodifficultyin any such use of the land. But
a permission to build such a complex was refused unless a sewage cost
ing some 3000 dollars was provided. Though the misrepresentation was
94.ParsonsJ at p. 248. Contrast this with Howard Marine & Dredging Co Ltd v Ogden & Sons
(Excavations) Ltd, 1978 QB 574;(1978)2WLR515 (CA), where the sellers of the barges
were convinced about their dead weight capacity having seen it in theLloyd'sregister and,
therefore, they were not held guilty ofmisrepresentationthough Lloydentries were found to
bewrong.
95.Mohanlalv SriGungajiCottonMills Co,(1899-90)4CWN369.
96. RichviewConstructionCo v Raspa, (1975) 11 Ont CA (2d) 377. Seealso Birch vParamount
Estates Ltd,(1956)167 EG 396 (CA), oral warranty that the house would be of the same
standard of workmanship as the company's show house. The buyer was allowed compensa
tionforinferiorpaintworkwhichdeterioratedfaster.Thecourtsaidthat "theverypurposeof
havinga showhousewasthat aprospectivepurchasermightbe attracted bywhat he saw and
might have theopportunityof knowing what he was to get".
97. /. Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd,(1976)1 WLR 1078.https://t.me/LawCollegeNotes_Stuffs

340. 202Chapter5 FreeConsent [S. 18]
innocent,the buyer wasallowedto avoid thesale.®^Whereanadvertisement
in a localnewspapersaid the land to be9000/5600squarefeet,andthat
ithada"beautifulreflectivepool",butitturnedoutthatthepropertywas
notbeautifulandthatthe reflectivepoolshoweda massivecrackandwater
seepage, the buyer wasnotallowedtorescindtheoptiontopurchase.The
courtsaidthatthestatementin theadvertisementhadnot becomeincorpo
ratedas an implied term of theoptionto buyandtheplaintiffshadseen the
reflective pool before they made the offer topurchase.''
Wherethe seller of acarstatedthatthecarhaddone only20,000miles,
therepresentationbeinguntrue,the buyer was allowed to recovercompen
sationfor the misrepresentation.^""
2.Breachofduty
Any breach of dutywhichbrings anadvantageto thepersoncommit
ting it bymisleadingtheotherto hisprejudiceis amisrepresentation."This
clause isprobablyintendedto meet all those caseswhichare called in the
courtofequity—casesof'constructivefraudinwhichthereis nointen
tion to deceive, but where thecircumstancesare such as to make theparty
who derives abenefitfrom thetransactionequallyanswerablein effect as
if hehadbeenactuatedby motives offraudordeceit".^°^Inthatcase, for
example:
Theplaintiff,havingno time to read thecontentsof a deed, signed it
as he was given the impression by the defendantthatitcontainednothing
but formalmattersalready settled between them. The deed, however,
containedareleaseinfavourofthedefendants.
Accordingly, theplaintiffwasallowedto set aside the deed."Thedefend
ant," thecourtsaid, "was under no obligation, legally or morally, to com
municate the contents of the deed. But theplaintiffplaced confidence. It
98.AlessiovJovica,(1973) 42DLR(3d)242,Canada.
99.ChuanBee Realty Pte Ltd v Teo CheeYeow,(1996) 2SLR758. See LuhLuhLan, An
Overview of the Advertising Laws andRegulationsinSingapore, 2001 JBL 399.
100.DickBentleyProductionsLtdvHaroldSmith(Motors)Ltd,(1965) 1WLR623.
101. It was observed inDynamicsCorpnofAmericavCitizensandSouthernNationalBank,
356 Fed Supp 991thatfraud had a broader meaning in equity than atlawand an intention
to defraud or tomisrepresentwas not anecessaryelement."Fraud,indeed, in the sense of
acourtofequityincludesallacts,omissionsandconcealmentswhichinvolve abreachof
legal or equitable duty,trustor confidence justly reposed and are injurious toanotheror
by which an undue or unconscientious advantage is taken of another." Applying this to the
facts of a case before it,Dai-IchiKarkaria P Ltd v Oil andNaturalGas Commission, AIR
1992 Bom309, theBombayHigh Court held that to force a person, at the pain of stopping
business with him, to change the conditions attached to the encashment of his bank guar
antee was a fraud on him. OilandNaturalGas Commission vDai-ichiKarkaria(P) Ltd,
1994 Mah LJ1084, no fraud or coercion could be proved, encashment of bank guarantee not
stayed.
102.OrientalBankCorporationv John Fleming,ILR(1879)3 Bom 242, perSargentLJ at
p.287.https://t.me/LawCollegeNotes_Stuffs

341. [S. 18] Misrepresentation203
then became hisdutyto state fullywithoutconcealment,allthatwas essen
tial to a knowledge of thecontentsof adocument."
A femalepatientwastoldthathersterilisationwouldbe irreversible, but
was not toldthatthere was theminuterisk (lessthan1 per cent) of fail
ure and of pregnancy. She conceived again, delivered a child and sued the
gynaecologistfor his breach ofcontract.Therepresentationthattheopera
tionwas"irreversible"was held as notamountingto an expressguarantee
thattheoperationwasboundto achieve itsacknowledgedobject of ster
ilising the plaintiff. Therepresentationmeant no morethanthisthatthe
operativeprocedureinquestionwasincapableof being reversed. Thecourt
would be slow to imply a termthatthe expected result wouldactuallybe
achieved.^"''Where,on theotherhand,ahusbandundergoingvasectomy
operationwas notwarnedthatthere was a slight risk of his wife becoming
pregnant, the surgeon was held responsible to the man and his wife for the
pains of unwanted pregnancy. Thecourtsaidthatthe plaintiffs were entitled
to damages for distress, pain and suffering, since the personal distress of
both plaintiffs and the pain and suffering of the birth was a separate head
of claimwhichwas notcancelledout by the relief and joy feltafterthebirth
of a healthy baby and there was no reason in principle why damages could
not be recovered for thediscomfortandpainof anormalpregnancyand
delivery.i"^
Persons of full age andunderstandingwho subscribe theirsignatureto
adocumentcannotbeheardto saythattheyhadaffixed thesignatureson
blank papers or that they signed without appraisingthemselvesabout the
recitals. Personsso imprudent as that haveto take theconsequencesof such
imprudence.^"^
3.Inducingmistakeaboutsubject-matter
Causing, howeverinnocently,a party to an agreementto make a mistake
as to thesubstanceof thethingwhich is the subject of the agreement is also
misrepresentation.[S. 18(3)]
103. Ibid.KhanduCharan Polley vChanchalaBhuinya,AIR 2003Cal213, the illiterate lady
signed a document which she was given tobelieveby trusted agents was creating a licence
but was in fact asettlement.Thisamountedto breach of duty. She had the right to cancel the
licence.
104. Eyre vMeasday,(1986) 1 All ER 488 (CA),distinguishing Thake v Maurice, (1985) 2WLR
215, where the husband became fertile after vasectomyoperationand his wife conceived and
on the facts thedoctorwas held liable.StateofPunjabv Shiv Ram, (2005) 7 SCC 1: AIR
2005 SC3280, pregnancydespiteoperation of sterilization, compensationcould be awarded
only if the failure of operation was attributable to doctor'snegligence,not when failure was
due to natural causes, no compensation for upbringing if the couple opted for bearing the
child.
105. Thake v Maurice, 1986 QB 644(CA).See further Parkinson v St James and Seacroft
UniversityHospital NHS Trust, 2002 QB 266;(2001)3 WLR 376(CA),liability for failed
sterility operation, disabled and deformed child attributable tonegligence.
106.Chokkammalv K.Balraj,(2008) 5CTC690.https://t.me/LawCollegeNotes_Stuffs

342. 204Chapter5FreeConsent [S. 18]
Thesubject-matterof everyagreementissupposedby thepartiesto pos
sesscertainvalue or quality. If one of thepartiesleads the other, however
innocently,to make amistakeas to thenatureorqualityof thesubject-mat-
ter, there ismisrepresentation.Forexample,in a Bombaycase;^"^
Thedirectorsof a company, whileactingwithintheirauthority,sold on
the company's behalf a bill of exchange to a bank. Thecompanydenied
liabilityon the bill.
Butthebankwasheldentitledtorecovertheamountofthebillfromthe
companyas money received to the use of thebank."Thebill wasdifferent
fromwhatit was expresslyrepresentedto be by the agents of thecompany."
TheGovernmentauctionedcertainforest coupes. Apartof thelandwas
occupied bytenants.TheForestDepartmentknewthis fact but didnotdis
close it to thepurchaser.Thecontractwas held to bevitiatedby misrep
resentation.Thepurchaserwasallowedto recoverdamagesforloss."®
Asecond-handcardealerattachedadisclaimertothecarundersalestat
ingthatthe mileagereadingwasincorrect.The dealerknewthetruemileage
ofthecarbutdidnotdiscloseit.Itwasheldthatthedealerwasboundto
disclosetherealpositionbecauseheknewitandalsoknewthattheodome
termateriallyunderstatedthe mileage. Thecourtsaidthatalthough,in the
ordinaryway, dealers wereunderno positivedutyto disclose the defects
anddisadvantagesoftheirwares,they wererequiredtovolunteerthetruth,
in so far as they knew it with regard to theinaccuratemileage reading. The
disclaimer seriouslyunderstatedthe fact. The defendants knew not onlythat
the reading wasincorrectbutthatit was grossly andpotentiallymislead-
inglyso."'
Suppressionofvitalfacts
Misrepresentationmay alsoarisefromsuppressionofvitalfacts. Cases
ofconcealmentorsuppressionwill fall eitherundersub-section(2), when
itamountsto abreachofdutyorundersub-section(3)whenitleadsthe
otherpartyto make amistakeaboutthesubject-matterof the agreement.
For example, in R. vKylsant,™theprospectusof a companystatedthatthe
company had regularly paid dividends, which created the impressionthat
the company was making profits, whereas thetruthwasthatthe company
had beenrunninginto losses for the last several years and dividends could
only be paid out ofwartimeaccumulatedprofits. The suppression of this
fact was held to be a misrepresentation.Similarly,where in the negotiations
for amarriagecontract,thosespeakingfor the girl failed to disclosethatshe
107.NurseySpg & Wvg CoLtd,re,ILR(1880)5 Bom92.
108.DambarudharBeheraVStateofOrissa,AIR1980Ori 188.
109.FarrandvLazarus,(2002) 3 All ER 175 (QBD).
110.(1932)1 KB442.https://t.me/LawCollegeNotes_Stuffs

343. [S. 18] Misrepresentation205
was suffering from epilepticfits,the engagement was held to be voidable, a
very material fact having beensuppressed."^
The fact that the girl was married before and was a widow at the time of
remarriage was held to be a vital fact. Its non-disclosure enabled the hus
band,to get a decree ofnullity."^
Ofmaterialfacts
Misrepresentationshould be of factsmaterialto thecontract.Mere
"commendatory expression" such as men of business will habitually make
about their goods are not sufficient to avoid the contract. In a sale of land,
for example, "a mere general statementthatthe land is fertile and improv
able, whereaspartsof it had beenabandonedas useless,cannot,except in
extremecases, as, forinstance,where aconsiderablepartis coveredwith
water, orotherwiseirreclaimable,beconsideredsuch amisrepresentationas
to entitle a purchaser to be discharged.""^ But, when, in the sale of a hotel,
thetenantwasdescribed"as amostdesirabletenant",whereashisrentwas
inarrears,this was held to be amaterialmisrepresentation."'^
In themattersofmatrimonyit has been heldthatqualifications of the
spouseare a material fact. Where the girlwas in possessionof high academic
qualificationsand agreedto matrimonybecauseshewas told that her match
was in an attractive job whereas he was only an apprentice in a factory, the
court ruled that it was a misrepresentationand,therefore, annulment of the
marriage would have to bedecreed."^Where the factsuppressedwas that
the girl wasincapableof child bearingbecauseofoperationforexcisionof
fallopiantube, this washeldto be a materialmisrepresentationenablingthe
courtto pass a decree of nullity."^
A fact is said to bematerialif itwouldaffect thejudgmentof areasona
blepersonindecidingwhetherto enterinto the contract and, if so, on what
111.Haji AhmadYarkhanv AbdulGaniKhan,AIR1937Nag 270.A56-year-oldman got him
selfinsured and died within 2 years of heart attack.LICrefused to pay on the ground that he
suffered from diabetes and carbuncle, but did not disclose. The family doctor produced by
LICcouldnotgiveany informationabout thefamily.Held, fraud wasnotproved.Insurance
ofa man ofthat agecarriesits ownrisksand LIChadaccept^it witheyeswideopen.Kamla
WantiVLIC, AIR 1981 All 366. A person authorising an agent to sell but prohibiting him
from making any representation andexcludinghis liability if the agent makes any, protects
him fromliability,ExcludingLiabilityforMisrepresentation,(1981)97 LQR522, consider
ing Overbrooke Estates Ltd vGlencombeProperties Ltd,(1974)1WLR1335.
112. AshaQureshiv AfaqQureshi,AIR2002MP 263.
113. Dimmock vHallettt,(1866)LR 2 Ch App 21, perTurnerLJ at p. 27. See further, Amina
VHasanKoya,1985KLT596: 1985 Cri LJ1996,"where the fact that the girl was running
pregnancywasconcealedfromthewouldbegroomand itwasheldthat no factcouldbe
more material than this, for it would possiblyhavedeterred the groom from goingahead and
when he avoidedthe marriage, it becamenullity ab initio, as if it never existed.
114. SmithVLand& HousePropertyCorpn,(1884)LR 28 Ch D 7 (CA).
115. Bindu Sharma v Ram Prakash Sharma, AIR 1997 All 429; Anurag Anand v Sunita Anand,
AIR 1997Del94, monthlyincomeand propertystatus of groommisrepresented,annulment
ofmarriage.
116.BenjaminDoming Cardozav GladysBenjaminCardoza,(1997)3 BomCR 553.https://t.me/LawCollegeNotes_Stuffs

344. 206Chapter5 FreeConsent [S. 18]
terms.Misrepresentationof the age of a car,showingit to befiveyears
younger, was held to bematerialbecause itaffectedthe pricewhicha will
ingpurchaserwouldhavelikedto pay for it. Butputtingforthexaggerated
measurementoflandby2.3percent was held to benotmaterial."^
Peptic ulcer is acommondiseasewhichappearsandwhichgetscuredon
propertreatment.Thisisnotaseriousdiseasewhichmayresultindeath
andit is only in cases wherepropercare isnottaken,it may prove fatal.
Therefore,non-disclosureby the assured deceasedthatat aparticularpoint
of time, he wassufferingfrompepticulcer didnotamounttodeliberatesup
pressionofmaterialfact so as to enable theinsurancecompanytorepudiate
thecontract.^^^
Expressionofopinion
A mereexpressionofopinioncannotberegardedas amisrepresentation
of facts even if theopinionturnsout to bewrong.But in some cases, astate
ment ofopinionmay alsoamounttomisrepresentation.One suchsituation
was stated byBowenLJ in Smith vLand& HousePropertyCorpn^^^"It
is often fallaciously assumedthatastatementofopinioncannotinvolve a
statement of fact. In a case where the facts are equally well-known to both
parties, what one of them says to the other is frequently nothing but an
expression of opinion. But if the facts are not equallywell-knowntoboth
sides,thenastatementofopinionby one whoknowsthe facts best involves
very often a statement of a material fact, for he impliedly statesthathe
knows facts which justify his opinion."
Thisstatementwas affirmed by the Privy Council inBissetYWilkinson.™
Certain lands were sold. The sellerwas aware that the land was required
for sheep-farming and, therefore, expressed the opinionthat"the land had
acarryingcapacityof2000sheep". Thelandturnedout to beunsuitablefor
sheep-farming and the purchaser refused to pay the price.
Their Lordships found no ground for enabling the buyers to avoid the
agreement. LordMerrivalefeltthatwhere relief is sought on the basis of
misrepresentation,it is necessarythatthere should berepresentationof a
specificfact. Arepresentationoffact may beinherent in a statementof opin
ion. Butit depends upon the material facts of the transaction, the knowledge
of the parties respectivelyand their relativepositions, etc. The most material
fact in the case wasthatbothpartieswere awarethatthe vendor had not
and no other person had carried on sheep-farming inthatunit of land. "In
thesecircumstancesthepurchaserswerenotjustifiedinregardinganything
117.Bakerv AsiaMotorCo Ltd, 1962 MLJ 425.
118.L/CVBeniBat,(1998)2 BC157(MP)(DB).
119.(1884)LR28ChD7(CA).
120. 1927 AC 177 (PC).RajshreeSugars & Chemical Ltd v Axis Bank Ltd, (2009) 1 CTC 227
(Mad),representationmade by the bank that the USDollar would neverreach the stipulated
level of exchange rateagainstthe Swiss Franc was held to be not thestatementof a fact
because both parties knew how currency behavesand no body has any control on it.https://t.me/LawCollegeNotes_Stuffs

345. [S.18] Misrepresentation207
said by the vendoras to the carrying capacityas being anything more than
an expression ofopinionon the subject."
Where a claim was made through an advertisement that the defendants
were the "topflightcabaret performers in Europe", the court said that it
was a statement of opinion. The hotel whichengagedthem on thebasisof
theclaimcouldnotterminatethecontracton thegroundofmisrepresenta-
tion.^^iAn advertisement for sale of residentialpropertyclaimedthatfor
eignerswereeligibletopurchaseit. This was heldto be thestatementof an
existingfact.^^^"Thereis adifferencebetweenanindiscriminatepraiseand
specificpromises or assertion of verifiablefacts."^^^
Representationof state of mind
Arepresentationof one'sstate of mind is also arepresentationof fact. In
EdgingtonvFitzmaurice,^^"^theprospectusof acompanymisstatedthe pur
pose to which the money to be borrowed byissuingdebentureswas going
to beapplied.Thedirectorscontendedthat therepresentationrelatedto the
state of their mind as to what use the money was going to be put and they
couldchangetheir mind and,therefore,it was not amisrepresentationof
aspecificfact.The Court ofAppeal,however,pointed out that the state
of aman'smindis asmucha fact as thestateof hisdigestion.Amisrep
resentationas to the state of a man's mind is, therefore, amisstatementof
fact.
The intentionofthe parties isveryimportant in the matter ofcontracting.
"The intention of the partiesgovernsin the making and in the construction
of allcontracts.If the parties so intend, the sale may beabsolute,with a
warrantysuperaddedor thesalemaybeconditional,to benullandvoidif
thewarrantyisbroken."
Changeofcircumstances
Apetroleumcompanyacquiredasiteon a main road forconstructinga
petrolpumpestimatingitsannualconsumptiontobe2,00,000gallonsfrom
the third yearofoperation.Theplanningauthority,however,permittedthe
pumptobeerectedonlyatthebacksideofthesitewhichwasaccessible
onlyfromthesidestreetsand not at allvisiblefromthebusymainroad
and thisconsiderablyaffectedthe sale potential. Butevenso they failed to
121.HoteldeL'EuropeLtd vCur^ie-Freyer,(1956)3 MC89(SingaporeCA).Thehotelwasable
toprovethat thedefendantshadgivenonlyoneperformancepreviouslyat aprivateparty.
122.TebPek CheongvWongSoonKwong,SingaporeHC(unreported).See2001 JBL403.
123. Treitel GH, LawofContract,(9th Edn, 1995).
124. (1885) 29 Ch D 459, 476 (Ch).
125.ErleCJinBannermanvWhite,(1861)10CBNS844,thebuyerofhopsparticularlyasked
thesellerwhethersulphurhadbeenusedingrowthortreatmentof thecropand hewastold
that nosulphurhadbeenused.Afterdeliverythebuyerfoundthatsulphurhadbeenused
in thecultivationof a portionof thehopsonlybut thewholecrophadbecomeinseparably
mixedup.Thebuyerwasallowedtorejectallthehops.Thecourtsaidthattheintentionof
thepartiesappearedto bethatthecontractshouldbenullifsulphurhadbeenused.https://t.me/LawCollegeNotes_Stuffs

346. 208Chapter5 FreeConsent [S. 18]
point this out to the lesseeof the pump who in consequence invested money
on the basis of the originally intimated estimates and suffered loss. They
were held liable for theplaintiff'sloss. Thecourtlaid downthatwhere dur
ing the course of precontractual negotiations, one party, who had special
knowledge and expertise concerning the subject-matter of the negotiations,
made a forecast with the intention of inducing the otherpartyto enter into a
contract,andtheotherpartydid so, thecourtcanconstruethattheforecast
was not merelyan expression of opinion but as constituting awarrantyand
accordingly they were liable for the breach of the warranty. Every person
who offers an advice, information or opinion of this kind is under a duty of
reasonable care to seethat it is true, and this duty was not limited to persons
carrying on the profession or business of givingadvice.^^®
There is often a gap of time between the representation of a fact and the
ultimate conclusion of the contract. Any change of circumstances in the
meantime affecting the fact represented must be brought to the knowledge
of the other party. This was pointed out by the Court of Appeal inWithv
O'Flanagan-}^'^
In the negotiations for the sale of his medical practice, the defend
ant represented that his practice had brought in£2000per annum for
theprecedingthreeyearsand that he had aspecifiednumber of patients
on his panel.Negotiationsresultedin acontractinaboutfivemonths.
Duringthistimethedefendantbecameillandcouldnotattendto his
practice.This resulted in aseriousloss of practice, but the purchaser
could learn about it only after the completion of the sale. It was heldthat
the plaintiff wasentitledtorescindthe contract. The courtemphasised
that the change ofcircumstancesshould have been brought to the notice
of thepurchaser.^^^
Inducement
It is further necessarythatmisrepresentation must be the cause of the
consent, in the sensethatbut for the misrepresentation the consent would
not have beengiven.^^'The explanation to Section19provides:
126. EssoPetroleumCoLtdvMardon,1976 QB 801(CA).
127.1936Ch 575 (CA).
128. LordWrightreliedupon Daviesv London & ProvincialMarine Insurance Co,(1878)LR
8ChD469.
129. SeeHimsEnterprises vIshakBin Subari, (1992) 1 CLJ 132 (HC), Johor Bahru, where the
agreementbetweenthe parties was made on terms with which the plaintiffswerefamiliar,
as theyweretermspreviouslyusedby theplaintiffsin theirearliercontracts,thatbeingso,
thetermscontainednosurprisefor theplaintiffsandhencenoculpablemisrepresentation.
County NatWestLtd v Barton,(2002)4 All ER 494(CA)(Note),the appealconsidered
issues concerning the rebuttable presumption that arises from the making of a fraudulent
representation,namely,that if a falsestatementis of such a nature that it would belikelyto
play a part in the decisionof a reasonableperson, it will be presumed to have done so unless
the representor satisfiesthe court to the contrary.https://t.me/LawCollegeNotes_Stuffs

347. [S.18] Misrepresentation 209
A fraud or misrepresentation which did not cause the consent to a con
tract of the party of whom such fraud was practised, or to whom such mis
representationwasmade,doesnotrenderacontractvoidable.
If the plaintiffwould haveconsentedin any case,he can hardlycomplain.
Again therepresentationmustbe madewiththeintentionthatitshallbe
acted upon by the other party. The plaintiff must have been affected by
the false representation. There would be no misrepresentation, even if the
advertisementwas false, if the buyer had inspected the goods before buying
themunlesshewasthevictimofsomeconcealeddefectwhichcouldnot
be known by externalexamination.^^"If a person to whom the statement
was not addressed voluntarily chooses to act upon it, he is not entitled to
rescission.^^^
Meansofdiscoveringtruth
Apartycannotcomplainofmisrepresentationif "hehadthe means of
discovering thetruthwithordinarydiligence."^^^This is recognised by way
of an exception stated along with Section 19. The statement is asfollows:
If such consent was caused bymisrepresentationor by silence,fraudulent
withinthemeaningof Section 17, thecontract,nevertheless,isnotvoidable,
if thepartywhose consent was so caused had the means of discovering the
truthwithordinarydiligence.
A person who bought aquantityof rice, was precluded from alleging
misrepresentationaboutits quality because he lived very near the place
where the goods were lyingand,therefore,mighthave discovered thetruth
withordinarydiligence."^Butwherethetruthcannotbediscoveredwith
ordinarydiligence, thepartyguilty ofmisrepresentationcannotrely on the
defence. Thus, for example, in acase^^'*thedirectorof a company falsely
told abankthatthe bill they were selling to thebankwas one onwhich
the company was liable, it was heldthat"noordinarydiligence would have
enabled thebankto discoverthatthe company was not liable on thebill.""^
130.ChuanBeeRealtyPteLtdv Teo Chee Yeow, (1996) 2 SLR 758.
131. PeekVGurney,(1873) LR 6HL377.
132. See Balraj Chibber vNOIDA,1995 All LJ 1513: (1996) 27 ALR 10,allotmentof plots
tomembersof asociety,allotmentto some of theallotteeswascancelledon theground
thattheymisrepresentedto be members, thecancellationwas set aside because they proved
theirmembershipin fact; evenotherwisethetruthof theirmembershipcould have been
easily discovered.NasiranBibi vMohdHasan,(1996)All LJ 1648, apersonwho him
selfappearedbefore theRegistrarto receive apartof theconsiderationandacknowledged
receipt of notice ofexecutionof sale deed, not allowed to saythathe was the victim of fraud
ormisrepresentation.
133.ShoshiMohunPalChowdhryvNoboKrishtoPoddar,ILR(1874) 5Cal801. See
Misrepresentation,WarrantyandEstoppel,9AustLJ 347.
134.NurseySpg & Wvg CoLtd,re, ILR (1880) 5 Bom 92.
135. Ibid.U.P.StateSugarCorpnKaramchariAssn vStateofU.P.,1995All LJ 937, aperson
enteringinto acontractwithacompanywhichisunderindustrialsicknessproceedings,and
if he did sobecausehe waskeptin thedark,he isentitledto be relieved of thebargainand,
if he did sowithfullknowledge,no reliefcanbegrantedto himbecausehe wasnotinducedhttps://t.me/LawCollegeNotes_Stuffs

348. 210 Chapter5FreeConsent [S.17]
Adifficultquestionabout thisexceptionis thatwherea person has the
meansofdiscoveringthe truth, butdoesnot usethem and contracts in reli
anceuponthestatementsmadeto him,whetherthecontractwouldbevoid
able?In suchcasestheprincipleseemsto be that if hereliesupon those
means he cannot afterwards complain of the misrepresentation. But if he
does not use the means and relies upon the statements made to him, he can
avoid. This was laid down by the Court of Appeal in Redgrave vHurd}^^
Here also amedicalpractice was under sale. Thesellermisrepresentedthe
incomewhichit produced, butgavedocumentsto the purchaser from which
he could have verified,but he did not do so and having only cursorily looked
at them,purchasedthebusiness.On learning the truth he sought toavoid
thecontractandwasallowedto do so. SirGeorgeJesselMRremarked:
"Ifamanisinducedtoenterintoacontractby falserepresentation,it isnot
sufficient answer to him to say: Tf you had used due diligence, you would
have found out that the report was untrue. Youhad the means afforded you
ofdiscoveringitsfalsity,whichyou did not chooseto availyourselfof.' One
of themostfamiliarinstancesinmoderntimesisthis.Menissue aprospec
tus containing false statements, and then say the contractsthemselvesmay
be inspectedat theofficeof thesolicitors.It hasalwaysbeenheld that those
who accept those false statements as true are not deprived of their remedy
merelybecause they neglected to go and look at the contractsthemselves.
Anotherinstancewithwhichwearefamiliaris afalsestatementastothe
contentsof a lease; in such a case as amansayingthattherewas nocovenant
orprovisionin the leaseto preventthe carrying on, in the house to be sold,
the trade which the purchaser was known by the vendor to be desirous of
carrying on therein. Althoughtheleaseitselfmight be produced at the sale
or might have been open to the inspection of the purchaser, it was heldthat
the vendor could not beallowedto say: 'You arenotentitledto givecredit
to my statement.' It is not sufficient, therefore, to say that a man has had the
opportunityof investigating the real state of the case, but has not availed
himselfofthatopportunity."
FRAUD
Definition
Intentional misrepresentation of facts, speaking broadly is called "fraud".
AccordingtoSection17;
S.17."Fraud"defined.— "Fraud"meansandincludesany ofthefollowing
actscommittedby apartyto acontract,or with hisconnivance,or by hisagent.
by fraud ormisrepresentation.OrientalInsuranceCoLtdvGowramma,AIR1994Kant
29,motorvehicleinsurancepolicy issued after due verificationabouttheownershipof the
vehicle. After accident, thecompanywas not allowed to take the pleathatthe policy was
obtained bymisrepresentationand that theclaimantwas not the owner of the vehicle.
136.(1881)LR20ChDl.https://t.me/LawCollegeNotes_Stuffs

349. [S. 17] Fraud211
with intent to deceiveanotherpartytheretoor his agent, or to induce him to
enterintothecontract—
(1)thesuggestion,as a fact, ofthatwhich is not true, by one who does not
believeittobetrue;
(2)the activeconcealmentof a fact by one havingl<nowledgeor belief of
thefact;
(3)a promise madewithoutany intention of performing it;
(4)anyotheractfittedtodeceive;
(5)any such act or omission asthelawspeciallydeclares to be fraudulent.
Explanation.—Meresilenceas to factslikelyto affect thewillingnessof a per
sontoenterintoacontractisnotfraud,unlessthecircumstancesofthecaseare
such that, regard being had to them, it isthe duty oftheperson keeping silence
tospeak,or unless his silence is, in itself,equivalenttospeech.
Illustrations
(o)Asells,by auction, toB,a horse which Aknowsto be unsound. Asays nothing to Babout
thehorse'sunsoundness.Thisisnotfraudin A.
ib) BisyA'sdaughter,and hasjustcomeof age. Here,therelationbetweenthepartieswould
makeit/A'sdutyto tell B ifthehorseisunsound.
(c)Bsays to/I—"Ifyou do not deny it, Ishall assumethatthe horse is sound". Asays noth
ing. Here>A'ssilenceisequivalenttospeech.
id) A andB,beingtraders,enteruponacontract.A has private information of achangein
priceswhichwouldaffectS'swillingnesstoproceedwiththecontract.A isnotbound
toinformB.
Assertionoffactswithoutbeliefintruth
In English law"fraud"was defined in thewell-knowndecision of the
Houseof Lords inDerryvPeek}^'^LordHerschellsaid:
"Fraudis proved when it isshownthata falserepresentationhas been
made,—
(1)knowingly,or
(2)withoutbeliefin itstriith,or
(3)recklesslycarelesswhetherit betrueor false."
Inthiscase:
Acompany'sprospectuscontainedarepresentationthatthecompany
hadbeenauthorisedby aspecialAct ofParliamenttoruntramsbysteam
ormechanicalpower. Theauthorityto usesteamwas, in fact,subjectto
theapprovalof theBoardofTrade,butnomentionwasmadeofthis.The
Boardrefusedconsentandconsequentlythecompanywaswoundup. The
plaintiff,havingboughtsomeshares,sued thedirectorsfor fraud. But
they were heldnotliable.
They werenotguiltyoffraudas theyhonestlybelievedthatonce the
Parliamenthadauthorisedtheuse ofsteam,theconsentoftheBoardwas
137. (1889) LR 14 AC337at p. 374.https://t.me/LawCollegeNotes_Stuffs

350. 212 Chapter5FreeConsent [S.17]
practicallyconcluded.Itfollows,therefore,that thepersonmakingafalse
representationisnotguiltyoffraudif hehonestlybelievesin itstruth.Thus
intentionalmisrepresentationis of theessenceoffraud.The first three
clausesofSection17dealwiththiskindoffraud."^
Activeconcealment
"Activeconcealment" is something different from mere "passiveconceal
ment"."'Passiveconcealmentmeansmeresilenceastomaterialfacts.An
activeconcealmentof amaterialfact is a fraud; mere silence, excepting the
few casesnotedbelow, doesnotamounttofraud.
The expression "any other act fitted todeceive"naturally means any act
whichis donewiththe obviousintentionofcommittingfraud. Forexample,
a husband persuadedhis illiteratewifeto signcertaindocumentstellingher
that by them he was goingto mortgage her two lands to secure his indebt
edness and in fact mortgaged four lands belonging to her. This was an act
done with the intention of deceivingher."°Where a person surrendered his
land to the State which was accepted after inquiry, but the land had already
been acquired under the LandAcquisitionAct, it was held that the fact of
inquiry could not wipe out theconsequenceof fraud. The transaction of
surrenderwas a nullity. Where the seller ofpropertydid not disclose to the
buyer pending litigation about the property, the buyer was allowed refund
of his moneywith6 per centinterest."^
Meresilenceisnofraud
False impression is ordinarily conveyed by deliberate misstatement of
facts. But it may also be done by active concealment of material facts. "I
do not care," said LordHalsbury,"bywhatmeans a false impression is
conveyed—bywhat trick or device or ambiguous language, all those are
expedients by whichfraudulentpeople seem tothinkthatthey can escape
from the realsubstanceof thetransaction.""^Ordinarily,ofcourse,mere
silence is nofraud,even if itsresultis toconceal"factslikely toaffectthe
138.A.L.MustaneerEstablishmentvVarunaOverseas(P)Ltd,(1998)72 DLT186,fraud
is a facet ofdishonesty,fraudinconnectionwithlettersofcredit.Santhakumariv
Lakshmiammal,(2004) 2 CTC 259, a lessee in possession and whohad'putup abuilding
also and hadpurchasedthe lessor'sinterestwas not allowed to saythatthe lessor had made
fraudulentmisrepresentations.He could not recover back the money paid by himwithout
seekingcancellationof the sale deed.
139.GowrishankarvJoshiAmbaShankarFamilyTrust,(1996) 3 SCC 310:AIR1996SC2202.
140.HingawwavByrappaShiddappaHireknrabar,AIR 1968 SC956,958: (1968) 2 SCR 797;
VisveswaranvState,(2003) 6 SCC 73: AIR2004SC1227monthsoldpregnancycouldnot
have beenconcealed.Thedefendantmarriedher,acceptedthe child and some 4 yearslater
divorced her. Bound to paymaintenance.B.R.ChowdhuryvIndianOilCorpnLtd,(2004)
2 SCC 177,concealmentof the fact ofpreviousemploymentundertheGovernmentfor get
tingdealership,allowedto beterminated.
141. P.L.RajuVDrNandanSingh, (2005) 5 ALD402.
142.Aaron'sReefs vTwiss,1896 AC273,281 (HL).https://t.me/LawCollegeNotes_Stuffs

351. [S.17] . Fraud213
willingnessof apersontoenterinto acontract.""^Acontractingparty is
undernoobligationtodisclosethewholetruth to the otherparty or togive
him thewholeinformationin hispossessionaffectingthesubject-matterof
the contract. It is under thisprinciplethat a trader maykeepsilentabouta
changeinprices.Asellerwho puts forth an unsoundhorsefor sale,butsays
nothing about its quality,commitsno fraud. In a casebeforetheSupreme
Court,"''a candidate, who had full knowledge of the factthathe was short
ofattendance,didnotmentionthisfact in hisexaminationform.Thiswas
held to be no fraud, it being the duty of theUniversityto scrutinise forms
and to call forverificationor information in case of doubts. TheUniversity
having failed to do so, was estopped from cancellingthe examination of the
candidate.
A house was let out for three years withoutdisclosingto the tenantthat
it was in such a ruinous and dangerous state as to be dangerous to occupy,
a fact in the landlord's knowledge. When thetenantdiscovered this fact he
applied to have thecontractset aside, arguingthatthe landlord should have
disclosedtherealstateofthehouse.Thecourtdidnotallowtherelief.There
was nowarrantythatthe house was fit for immediateoccupation.No mis
representation was made, nor it was the casethatthe plaintiff was acting on
the.impression produced by any conduct on thepartof the owner as to the
state of the house or that he was not to make investigation before he began
to reside in it. There was no obligation on the owner to say anything about
thestateofthehouse."^
Misdeclarationinapplicationform
In an application for dealership of petroleum products, the applicant
made a misdeclaration about his income in the application form. It was
heldthatcancellation of the letter of intent issued to him was proper. The
contentionthatthe fact wrongly declared had no hearing on the eligibility
criterionwasnotaccepted."^
Whensilenceisfraud
But then how far may silence go? Silencemay become deceptive incertain
cases.
1.Dutytospeak(contractsuberrimafides)
The first such case is when the person keeping silence is under duty to
speak.Dutytospeakarises where onecontractingpartyreposestrustand
confidence in theother.A father, forexample,selling a horse to his sonmust
tell him if the horse isunsound,as the son is likely to relyuponhis father.
143. S. 17(Explanation).See, forexample,Illustrations(a)and{d}.
144.ShriKrishnanvKurukshetraUniversity,(1976)1 SCC 311: AIR1976SC 376.
145.KeatsvEarlofCadogan,(1851) 20 LJ CP 76CommonPleas.
146. ShivKantYadav vIndianOHCorpn,(2007)4 SCC 410: AIR2007SC1534.https://t.me/LawCollegeNotes_Stuffs

352. 214Chapter 5 FreeConsent [S.17]
Buttheprincipleis not soconfined.The dutytodisclosethe truth will arise
in allcaseswhereone partyreposes,and the otheraccepts,confidence.^''^
Duty to speak alsoariseswhereone of the parties is utterly without any
meansofdiscoveringthe truth and has todependon the goodsenseof the
otherparty.Aninsurancecompany,forexample,knowsnothingabout the
life orcircumstancesof the assured. It has to depend on the disclosures
made by theassured.It is,therefore,the duty of the assured to put the
insurer inpossessionof all the materialfactsaffectingthe riskcovered.A
contract of insurance is, for this reason, called acontractof absolute good
faith, uberrimafides}'^^Where false answers as to the state of health were
givenin aproposalforUfeinsurance,thepolicywasheldto bevoidableand
it was notmaterialthatthe medical officer of thecorporationhadcertified
the life assured asgood."'Where a person got his motorvehicleinsured in
theevening,when in the morning, thevehiclehad met with anaccident,the
policywasheldto be notenforceable,the duty of the insurer tocheckthe
vehiclenotwithstanding.""Burden of proof lies on the insurer to show that
the fact misstated or suppressed was of material nature to the risk covered
andthatthe same was done to causemisconceptionaboutthe risk under
takenbytheinsurer."^
In the absence of any such relationship there is no duty to speak and mere
silence even if itamountstomisrepresentation,will be no fraud. For exam
ple, inHajiAhmadYarkhan v Abdul GaniKhan-}^^
The plaintiff spent a sum of moneyto mark theengagementof his son.
He then discoveredthatthe girl suffered from epileptic fits and so broke
off the engagement. He sued the otherpartyto recover from them com
pensation for the loss which he had suffered on account of their deliberate
suppression of a vital fact which amounted to fraud.
Thecourtrelied upon the decisionof the House of Lords inNoctonv Lord
Ashburton}^^where it waspointedoutthata mere passivenon-disclosureof
147. See for example,NurseySpg &WvgCoLtd,re,ILR(1880) 5 Bom 92, SriAlamvNewaires,
(1994) 1CurrentLJ32 (Malaysia); SarojAgarwalvL/C,(2004) 4 CLT 490(Jhar),positive
"No"answer was given to the question of anytreatmentabout the state ofheart,the answer
being false, the claim failed.
148. See Reuben Hasson, The SpecialNatureof theInsuranceContract:AComparisonofthe
AmericanandEnglishLawofInsurance,(1984) 47ModLR 523.
149. P.SarojamvL/C,AIR 1986 Ker 201; P./. Chacko vL/C,AIR2008SC 424,non-disclosure
ininsuranceproposalthattheinsuredhadundergoneoperationfor athyroidadenoma;
held, policy voidable, the insured was estopped from saying that even if that fact had been
disclosed,itwouldnothaveaffectedthetransaction.
150. George P. Varghese v G. Daniel, AIR 1998 Ker 120; Rajesh KumarChoudharyv United
IndiaInsuranceCoLtd,(2005) 3 CCC 64 (Gau),non-disclosurethatanearlierproposal
ofinsurancefor the samepropertyand on the samegroundhad been refused by the same
company, held suppression of material fact. The subsequent insurance wasobtainedby sup
pressingthatfact.
151.L/CvB.KusumaT.Rai,(1989)1KantLJ52.
152.AIR1937Nag270.
153.(1914) AC932(HL).https://t.me/LawCollegeNotes_Stuffs

353. [S. 17] Fraud215
thetruth,however deceptivein fact, does notamountto fraud, unless there
is a duty to speak.Referringto the facts the court said that thelawimposes
no general duty on anyone tobroadcastthe blemishes of his female relations;
not even to those who arecontemplatingmatrimonywith them. There was
no fiduciary relation between the parties. The engagement was, however,
held to bevoidableby reason of the misrepresentation, but the plaintiff was
not entitled to recover anycompensationunder Section 75 of theContract
Act.
2. Where silence is deceptive
Silenceis sometimesitself equivalentto speech. Aperson who keeps silent,
knowingthathis silence is going to be deceptive, is no less guilty of fraud.
Where, for example, the buyer knows more about the value of the property,
which is the subject of sale, but prefers to keep theinformationfrom the
seller, thelattermay void the sale.[Illustration[d),S. 17]
3.Changeofcircumstances
Sometimesarepresentationistruewhenmade,but,it may, onaccount
of a change ofcircumstances,become false when it is actually acted upon
by the other party. In suchcircumstances,it is the duty of thepersonwho
made therepresentationtocommunicatethe change ofcircumstances.In an
Englishcase,"''for example:
A medicalpractitionerrepresented to theplaintiffthat'his practice
wasworth£2000a year'. Therepresentationwastrue.But fivemonths
later when theplaintiffactuallyboughtthe practice, it had considerably
gonedownonaccountof thedefendant'sserious illness.
It was heldthatthe change ofcircumstancesoughtto have beencommu
nicated.Similarly, in a case before theMadrasHighCourt:"-'
"Acompany'sprospectusrepresentedthatcertainpersonswouldbe
thedirectorsof the company. This was true. But before theallotment
tookplace, there were changes in thedirectorate,somedirectorshaving
retired."
Thatwasheldtobesufficienttoentitleanallotteetoavoidtheallotment.
4.Half-truths
Evenwhenapersonisundernodutyto disclose afact,hemaybecome
guiltyoffraudbynon-disclosureif hevoluntarilydisclosessomethingand
thenstopshalfthe way. Apersonmay keep silence,butif hespeaks,aduty
arisesto disclosethewholetruth."Everybodyknowsthatsometimeshalf
154. WithVO'Flanagan,1936Ch575(CA).
155. T.S.RajagopalaIyer vSouthIndianRubberWorks Ltd,(1942)2 MLJ 228.https://t.me/LawCollegeNotes_Stuffs

354. 216 Chapter 5 Free Consent [S.17]
atruthis no better than a downright falsehood.""^ In aUScase,"^for
example:
The plaintiffpurchaseda tract ofland. The contract of salestatedthat
the land was subject to a right of the Borough to open two streets within
the area. But as a matter of fact the Borough had the right to open three
streets.
Holdingthat theplaintiffhad the right ofrescission,CordozoCJsaid:
"We do not say that the seller was under a duty to mention the projected
streets at all. That question is not here. What we say is merely this,that
having undertaken orprofessedto mention them, he could not fairly stop
halfway."
As in misrepresentation, so in fraud bysilence,if the plaintiff had means
to discover thetruthbyordinarydiligence, hecannotobtainrescission.
But in any other case the fraudulent party cannot say that the other could
have discovered thetruth.In a case, for example, before theGujaratHigh
Court:"8
Falseestimatesof the costs ofconstructionwere given in a tender.The
contractoragreed to some reduction on the beliefthatthe estimate was
correct. Thecourtheld that the representations contained in the tender
werefraudulentandthatit was no defencethattheplaintiffcould have
discovered thetruecosts byreasonableeffort.
Promisemadewithoutintentionofperforming
To tie-up a person to a promise with no intention of performing from
one's side and with theintentionof only preventing theotherfrom deal
ing with others, is an example of a promise madewithoutthe intention of
performing it. This is the third type of fraud included in the definition in
Section 17.A purchase of goodswithoutany intention of paying the price is
a fraud of thisspecies."'A builder entered into a large number of bookings,
nearlythreetimes the available units ofaccommodationandcollectedmon
eys.This was held by the SupremeCourtto be fraud because he should have
knownthathewouldnot be able toperformthecontractwithall of them.
There was no provision for interest on the deposit money. Inspite of this he
was held liable to pay interest. TheCourtsaidthatthere was fraud causing
inducementforbookingby thepurchasers:suchfraudcreatesliabilityeven
outsidetheagreement.^®"
156.PerLordMacnaughtaninGlucksteinvBarnes,1900AC240,250.
157.JuniusConstructionCorpn v Cohen, (1931) 257 NY 393. Facts and opinion collected from
ThurstonandSeavey,CasesofTorts,677(1942).
158.R.C.ThakkarvBombayHousingBoard,AIR 1973 Guj 34. But see M.Hassanji& Sons v
StateofM.P.,AIR1965SC 470, 472: 1963 Supp (2) SCR235.
159. CloughVLondon& N.W.RlyCo, (1871) LR 7 Exch 26; Whitaker, ex p, (1875) LR 10 Ch
449.
160. DDAVSkipperConstructionCo (P) Ltd, (2000) 10 SCC 130.https://t.me/LawCollegeNotes_Stuffs

355. [S-17] Fraud217
Anyotheract fitted to deceive
Thefourth kind of fraudidentifiedbySection17is any act whichisfitted
todeceive.In acasebeforetheCalcuttaHigh Courtwhereapractitioner
castaspersionson the court and also on the opposite lawyer, the court cited
generallythefollowingstatementabouttheconceptoffraud:Fraudhas been
definedinSection17oftheContractAct,1872.Asperinterpretationofthe
statute, two kinds offraud arementioned,[i]actual orpositivefraud which
includescasesofintentionalandsuccessfulemploymentof anyrunnings
deception,orartifice,usedtocircumvent,cheatordeceiveanother; and[ii)
constructiveorlegalfraud whichincludessuch contracts or acts as though
not originating in any actual evildesignor contrivanceto perpetrate a fraud
yet,by theirtendencytodeceiveormisleadothers,or toviolateprivate
or publicconfidence,are prohibited by law(CommentariesonEquity
JurisprudencebyJusticeStory).^^i
Any act oromissionspeciallydeclaredto befraudulent
The last categoryincludescasesin whichthe lawspeciallydeclaresan act
oromissionto befraudulent.Forexample,theInsolvencyActand Companies
Actdeclarecertain kinds of transfer to be "fraudulentpreference".
The fifth and the last category of frauds included in the definition of
Section 17 is intended to cover all such acts which under any other branch of
law are regarded asfraudulent.Ininsolvencylaw there is, forexample,the
concept of fraudulentpreferenceand in the Transfer of Property Act, there
is theconceptoffradulenttransfer.
These words seem to have been inserted for ensuring that all kinds of
intentional cheating iscoveredand nothing of the sortescapes.^^^
Distinctionbetweenfraud andmisrepresentation
Misrepresentationandfraudhavemanypointsincommon.Forinstance,
both render the contractvoidable;there is a false representation in both; in
either case it is necessary that the consent should have been caused by the
fraud or misrepresentation andfinally,where there is a fraud bysilence,the
fact, that there were "means ofdiscoveringthetruthby ordinarydiligence",
is a gooddefence.^^^This is so inmisrepresentationalso. Damages for loss
caused by innocent misrepresentation are assessed on the same principles as
in the case of a deliberatefraud.^^"*Yet the following points of distinction
arealsonoticeable:
161.HungerfordInvestmentTrustLtdvTurnerMorrison& CoLtd,(2009) 2CHN330.
162.Applicationforallotmentof premisescontainingfalseparticulars,fraud,allotmentliable
to be set aside,Ponnurangamv SlumClearanceBoardofT.N.,1986 SCCOnLineMad20:
AIR 1996Mad274.NedungadiBankLtdvEzhimalaAgrlProducts,AIR2004Ker 62,
courtsale at gross under value,purchaserson of one of the judgment-debtors and the joint
purchaser was a relative of the judgment-debtor, fraud, upon the process of the court.
163. S. 19(Exception).
164.RoyscotTrustLtdvRogerson,(1991) 2 QB 297: (1991) 3WLR57(CA).https://t.me/LawCollegeNotes_Stuffs

356. 218 Chapter 5 Free Consent [Ss.19&c19-A]
Firstly,fraud is more or less an intentional wrong, whereas
mis-representationmay be quite innocent.
Secondly,fraud, in addition to rendering the contract voidable, is a
cause ofactionintortfordamages.Simplemisrepresentationisnota
tortbutunderSection 75 of theContractAct, "apersonwhorightfully
rescinds acontractis entitled tocompensationfor any damage which he
has sustained through the non-fulfilmentof thecontract."^^^The(English)
Misrepresentation Act, 1967, also enables the court to award damages
instead ofrescission.^^^A person whopurportedto sell his wife'sproperty
without obtaining her consent and she refused to sign the deed, was held
liable to the buyer for hisloss.^^^A purchaser of premises completed the
purchase even after discoveringthata tenancy agreement affecting one
oftheflatswasconcealedfromhim.Hewasneverthelessallowedtosue
for damages for the loss caused to him,thoughhe had intortthe right to
rescind.^®®
Lastly, a personcomplainingofmisrepresentationcan be metwiththe
defencethathehad"themeansofdiscoveringthetruthwithordinary
diligence",[S.17, Exception] but excepting fraud bysilence,itdoes not
lie in themouthof thepersoncommittingfraudto saythathisvictimwas
too easily deceivedor had the means of discovering thetruth."Fools have
to beprotectedagainstknaves."
Limitsofrescission[Ss.19and19-A]
Acontracttheconsenttowhichiscausedbycoercion,undueinfluence,
fraud ormisrepresentationis voidable at theoptionof thepartywhose con
sent was socaused.^^"Section 19 provides:
165. The section givesillustration[Seeunderthe Section]. There is no such right if thedamageis
not.causedbynon-fulfilmentof thecontract.SeeHajiAhmadYarkhan vAbdulGaniKhan,
AIR1937Nag270.
166. S. 2(2). See WilliamSindallpicvCambridgeshireCountyCouncil,(1994) 1WLR1016
(CA), loss in value oflandbecauseof foul sewerunderit,compensationfor lossinsteadof
rescission.
167. WattsVSpence,1976 Ch 165: (1975) 2WLR1039.
168.ProductionTechnologyConsultantsvBartlett,(1988) 25 Eg 121 CA(Estate'sGazette):
1988CLY460.
169.Ibid.SeeJohnMinasApcarvLouisCairdMatchus,AIR1939Cal473.ThePScHHigh
Courtlaid emphasis inSardaravStateofHaryana,1995AIHC1163(P&cH)upon the fact
thatthereare noothergroundsforcancellingandrescindingacontractthanthoseprovided
in the Actandthatanyotherkindofcancellationwouldbe abreach.Arescissionofcontract
notifiedbyunauthorisedfunctionariesof theStatewassetaside.P.AnasuyammavCommr
ofLandRevenue,1995AIHC2082(AP),theperiodoflimitationfor filing a suit for rescis
sion isthreeyears. A suitcommenced12 yearsafteranassignmentwasquashed.
170. Ss. 19and19-A.Burdenis on thepartyallegingfraudtoestablishit.HajraBai vJadavabai,
AIR1986MP 106. He has also to disclose in hisplaintthe fullparticularsof the actsthat
constituteany of thevitiatingfactorsentitlinghim to avoid thecontract.See G.Subhashini
VP.LakshmiBai, (1987) 1 MLJ 107. Vagueandgeneralallegationsareinsufficient.Theviti
atingfactorsmustbeseparatelypleadedwithspecificity,particularityandprecision,(1987)
1 All LJ 64,followingBishundeoNarainvSeogeniRai,AIR 1951 SC280:1951 SCR 548;
KuluwaVPunia,1995AIHC8 All, anilliteratepersonwho was thevictimoffraudwas heldhttps://t.me/LawCollegeNotes_Stuffs

357. [Ss. 19 &19-A] Fraud219
When consent to an agreement is caused bycoercion,fraud or misrep
resentation,the agreement is acontract-voidableat the option of the party
whoseconsentwassocaused.
Theprovisiondoesnot referto "undueinfluence"becausethisisspecially
dealtwith bySection19-A.Section19furthergoeson toprovidesomething
special about the effect of fraud and misrepresentation. Itsays:
Apartyto acontract,whoseconsentwascausedby fraud ormisrepresenta
tion, may,ifhethinl<sfit, insistthatthecontractshall beperformed,andthathe
shall be put in the position in which he would have been ifthe representation
madehadbeentrue.
Thepartyaffected by the factorsthatmake thecontractvoidable, has
toavoiditbecauseotherwiseitremainsvalid.Itisnotlikethatofavoid
agreementthatdoes not require to beavoided.^^^He has the option either
to avoid thecontractor, alternatively, to affirm it. When fraud is proved,
the whole proceedings fails. The suit and execution proceedings are all a
nullity.^^^The onus is on the plaintiff to prove fraud, etc. For this purpose
he has to plead the preciseparticularswhich constitute the alleged fraud.
This onus is quite as high as the burden to prove in criminal lawthatthe
accused is guilty beyond a reasonabledoubt.^^^He canexercisehis option
only once. If thecontractis affirmed, it becomes enforceable by both the
partiesand, if it is avoided, it becomes void asagainstboth.^^''The effect of
rescission isthatthecontractis set aside and thepartiesare restored to their
original position. Where a State FinancialCorporationhadtakenover the
entitled to the sameamountofprotectionas apardanashinwoman, namely, burden ofproof
on the otherpartyto prove fairness of thetransaction.UpendraMohantv Champa, 1996
AIHC3449(Ori), anilliteratewomanentitled to theprotectionof apardanashinwoman.N.
NarayaniAmmalv P. Sanjeev, AIR 2001 Ker 305,documentobtainedby fraud is voidable
and not void.RajinderSingh vJoginderSingh, (2003)1ICC705(P&H),afraudulentdecree
canneither createnortakeaway anyrights.
171.HDHanumanthappavMohdSab, (2011) 1KantLJ 49.
172. T.Vijayendradasv M.Subramanian,2006SCCOnLineMad1315:(2006)2 LW572;
HarmeshKumar v Maya Bai, AIR2006P8cH1, illiterate widowauthorisedspecial power
ofattorneytoattendtolitigationagainsther,transferredherpropertyto his son infraud,
held,non-est.
173.KrishnaWantivL/C,AIR2000Del 63, theLICcould not provethattheassuredhad con
cealed orsuppressedknowledgeabouthisheartconditionat the time oftakingoutthe policy.
JibrailMianvLaluTuri, AIR2004Jhar139,fraudonilliteratewomanbyfraudulentsale
deed, whole deed, set aside, it could not be avoided in onepartonly unless it was severable
from the rest.DamodarTukaramGaunkarvGopinathRamaGaunkar,(2006) 6 Bom CR
454 (Panaji Bench),settingaside ofconsentdecree on thegroundoffraud,pleadingsshould
giveparticularsoffraud,mere vague andsweepingallegationsare of no avail.SorabanBewa
VJinnathBibi, (2004) 1 ICC 273(Cal),fraud or undue influence to be specificallypleaded
in themannerrequiredunderOrder6, Rule 4, CPC. In the absence of such specificpleading
fraudulentintentionorundueinfluencecannotbeinferred.
174. Ss. 2(/')and64whichsaythatwhenapersonatwhoseoptionacontractisvoidablerescinds
it, theotherpartyneednotperformhispartof thepromise.TheSupremeCourthas gone to
theextentofholdingthata licenceobtainedbymisrepresentationisvoidableandremains
goodtill it isavoidedby thelicensingauthorityin themannerprescribedby law.EastIndia
CommercialCoLtdvCollectorofCustoms,AIR1962SC 1893: (1963) 3 SCR 338.https://t.me/LawCollegeNotes_Stuffs

358. 220Chapter5FreeConsent [Ss.19&19-A]
unit of the borrower, but an offer was made to the defaulting borrower to
takebackthe unit onpayingcertainpricewhichofferwasacceptedby his
widow bymaking the payment,butsubsequentlythe Corporation came out
with arevisedand a higher claim, it was held that the earlierfigurewas a
misrepresentationonwhichthewidowacted.Shehad the righttohavethe
deal set aside and recover back the amount paid by her which could not be
.consideredasrepaymentof theloan."^Apurchaserofimmovableproperty
whoallegedthat therewerefraudulentstatementsin the saledeedwas not
allowedtorecoverback the purchasemoneywithout havingthe documents
set aside because offraud.^^®Moreover, the right to rescind is subject to cer
taininfirmitieswhichdefeatit in thefollowingcircumstances:
Lossofrightofrescission
1. Byaffirmation
Where the party, afterbecomingaware of his right to rescind, affirms
the contract, the right ofrescissionis lost. Affirmation may be express or
implied.Animpliedaffirmation takes place when he does some act incon
sistent with his right torescind,for example, where he appropriates to his
usethegoodsreceivedunder avoidablecontractor has soldor attemptedto
sellthem. An interestingillustration ofimpliedaffirmationis to be found in
LongvLloyd}''''
The defendant induced the plaintiff to buy his lorry by falselyconvinc
ing himthatit was "in excellentcondition". On the very first journey the
plaintiffdiscoveredseriousdefects,butacceptedthedefendant'sofferto
bear half the cost of repairs. The lorry completelybroke down on the next
journey and he then claimed rescission.
The court held that on the first breakdown the plaintiff cameJoknow
that the representation wasfalse.But, instead of asking for rescissionthen,
he accepted the offer of repair and sent the lorry on a second trip. This
amounted to "a finalacceptance...for better or for worse andconclusively
extinguished any right of rescission remaining to the plaintiff after comple
tionofthesale."^'^®
Similarly,it has been observed by the SupremeCourtthat"if it can be
shownthatthepartydefrauded has at any time after knowledge of the fraud
either by express words or by unequivocal acts affirmed thecontract,his
election isdeterminedforever. Thepartydefrauded may keep thequestion
175. Ska Devi v Bihar StateFinancialCorpn, AIR 2003 Pat 92;MarkandevSudamaChaubey,
AIR 2007 All 70,plaintiffconsented to execution of power ofattorneybut fraudulently it
wasconvertedintoasaledeed.Allowedtobecancelled.
176.SanthakumarivLakshmiammal,(2004)2CTC259.
177. (1958) 1WLR753 (CA);BroadwayCentrevGopaldasBagri,AIR2002Cal 78,allegation
by thepartnerthat he signed the retirement deed while in police station was rejected, he had
alreadytakena big sum of moneyundertheretirementdeed.
178. See P.S.Atiyah,(1959)22MLR76andJ.D.Davies,75LQR32.https://t.me/LawCollegeNotes_Stuffs

359. [Ss.19&19-A] Fraud221
open so long as he does nothing to affirm thecontract.^^'Theprovision
is notappUcableto aconcludedcontract when thepartychallengingit
had voluntarily chosen to implement it knowing all the relevant facts and
circumstances.^®"
1. By lapseoftime
Rescissionmust be claimed within reasonable time after discovering the
misrepresentation. Thus where shares were allotted to a person on the basis
of a misleadingprospectusin July and in December he moved to set aside
the contract, it was heldthat the unexplaineddelayoffivemonthsprecluded
him fromobtainingtherelief.^®^
The challenge to anarbitrationaward on thegroundof fraud is to be
established by filing an independent suit or filing an application under
Section 34 of theArbitrationand Conciliation Act, 1996. A writ petition on
the ground of fraud, that too after inordinatedelay,created a question mark
aboutbonafides of thepetitioner.Thecourtrefusedto set aside theaward
on thegroundoffraud.^®^
In respect of defences of thisnature,includingthatof mistake, it is nec
essarythatthey should be raised whilecontractingor immediatelythereaf
ter. Once thecontracthasrunits full period, such a plea may cease to be
available.^®^
3.Interventionofrightsofthirdparties
The right of rescission is lost assoonas athirdparty,actingingoodfaith,
acquires rights in thesubject-matterof thecontract.Thus, where aperson
obtainsgoodsbyfraudand,beforethe seller is able to avoid thecontract,
disposesthemoff to abonafideparty,the sellercannotthenrescind.
Modeofrescission
The usualmethodofrescindingacontractis by giving a notice to the
otherpartyof theintentionto rescind. Butwhatshould he do if theother
partycannotbecontacted?Theansweris to befoundinCar&Universal
FinanceCoLtdvCaldwell-}^'^
Theplaintiffgave thepossessionof his car to a buyer for his cheque.
The chequeturnedout to beworthless.Theplaintiffwantedto give notice
to the buyer of hisintentionto avoidthecontractandtotakebackhis
car, but couldnottrace him. Hethereuponinformedthe policeandthe
179.NingawwavByrappaShiddappaHireknrabar,AIR 1968 SC 956, 958: (1968) 2 SCR 797,
800-01,quotingfromCloughvLondon& N.W.RlyCo, (1871) LR 7 Exch26,34.
180.GangaRetreat& TowersLtdvStateofRajasthan,(2003)12 SCC 91.
181.ChristinevilleRubberEstatesLtd,re, (1911) 81 LJ Ch 63;JagannathPrasad,re, AIR 1938
All193.
182.GuwahatiMunicipalCorpnvInternationalConstructionLtd,AIR 2014 Gau 101.
183.OrientalInsuranceCoLtdvMantoraOilProducts(P)Ltd,(2000)10SCC26.
184.(1965)1 QB525:(1964)2WLR600(CA).https://t.me/LawCollegeNotes_Stuffs

360. 222Chapter5 FreeConsent [S. 66]
AutomobileAssociationtotracehiscar.Sometimelaterthefraudulent
buyer sold the car to thedefendantandtheplaintiffsoughtto recover it.
It was heldthatbyinformingthe police and the Association theplaintiff
haddone anovertactclearlyshowinghisintentiontorescindandthesale
ofthecarafterrescissioncouldnotconvey to thedefendantagoodtitle.To
holdotherwise,saidSellersLJ"wouldinvolvethatthedefraudingparty,if
skilfulenoughto keepoutof the way,woulddeprive theotherpartyto the
contractof hisrighttorescind.Thatanotherinnocentpartyorpartiesmay
suffer doesnotjustifyimposingon adefraudedseller animpossibletask.He
has toestablishclearlyandunequivocallythatheterminatesthecontract
andis nolongerto beboundby it. If hecannotcommunicatehisdecision
he may stillsatisfya judgethathehadmadea finalandirrevocabledecision
andendedthecontract."
Asimilarproblemwas before theAllahabadHighCourtinOfficial
ReceivervJugalKishoreLachhiRamJaina-}^^
Under anagreementfor sale ofcertaingoods,theplaintiffreceived
throughabanktherailwayreceiptssupposedtorepresentthe goods
andobtainedthemfrom thebankafterpayingRs15,000.Theamount
was sent to the seller'saccountat his place of business.Meanwhilethe
plaintiffdiscoveredthattherailwayreceipts were bogusandimmediately
informedthebanknot topartwith theamountwhich was accordingly
withheld.But before theplaintiffcouldinformeither thefraudulentseller
orfilea suit for rescissionan insolvencyjudge ordered the bank not to pay
theamountto eitherparty.
Theplaintiffthenfiled a suit fordeclarationthathe wasentitledto his
money.The Full Bench was of the viewthatthe plaintiff hadpartedwith
his money under a fraud. Thus the money came into the insolvent'saccount
under a defeasible title and theplaintiffhad defeated it when hedirectedthe
banker to stop payment which was done before the insolvencyjudge's order.
Even if he had rescinded by filing the suit, he was entitled to the money,
because hehaddonenothingtoaffirmthecontract.
Section 66 laysdownthe way inwhichthecommunicationofrescission
istobemadeeffective.
S.66.Modeofcommunicatingorrevokingrescissionofvoidablecon
tract.—Therescission of avoidablecontractmay becommunicatedor revoked
inthesame manner, andsubjecttothesame rules,as apply tothecommunica
tionorrevocationof aproposal.
Restitution
Rescissionis always subject to the conditionthatthepartyseeking rescis
sion must be in a position to restore the benefits he may haveobtainedunder
thecontract.Section 64 requires him to do so.
185.AIR1963All459.https://t.me/LawCollegeNotes_Stuffs

361. [S. 64] Fraud223
S. 64.Consequencesofrescissionofvoidablecontract.—Whena per
son at whose option a contract isvoidablerescindsit,the other party thereto
need not perform any promise thereincontainedin which he is promisor. The
party rescinding a voidablecontractshall, ifhe has received any benefitthere
underfromanother party to such contract, restore such benefit, so far as may
be,tothepersonfromwhomitwasreceived.
A person avoiding a loan bond on thegroundof undue influence has to
pay back the loan, the court onlyreducesthe rate of interest to what may
seemto bereasonablein thecircumstances.^^^A corporationsupplied,after
taking payment in advance, aquantityof rapeseedoilwhich turned out to be
mixed with water, thecorporationhad to refund the money withinterest.^®^
Even where thepartyseeking rescission is not in a position to restore to
the defendant his status quo ante, the court may allowrescissionby doing
whatispracticallyjust in thecircumstances.^^®Thus,where a wifewanted
to set aside on the ground of misrepresentation the separation deed made
with herhusband,under which she had already received somemaintenance,
but she was not able to restore the money, thecourtallowed her relief hold
ingthatthe money may be set-off.againstcosts to which she wasotherwise
entitled.^®'SwinfenEadyLJ said:"Thegeneral rule isthatas acondition
of rescission there must berestitutioninintegrum,but at the same time the
courthas the full power to make all just allowances. It was said by Lord
BlackburninErlangarv NewSombreroPhosphateCo,"°thatthe prac
tice had always been for acourtof equity to give relief by way of rescission
whenever by the exercise of its power it can dowhatispracticallyjust,
though itcannotrestore the parties precisely in the state that they were
in before the contract. On the other hand, where both parties had spent
money on thepropertyin terms of thecontractin suchmannerthatresti
tutionwas not possible, rescission was not allowed eventhoughthere was
innocentmisrepresentationon thepartof the seller of theproperty."^The
position is thussummarisedbyTreital;^^^"As in cases ofmisrepresentation,
186. See, forexample,BechuvBabhutiPrasad,AIR 1931 All 201;MuralidharChatterjeev
InternationalFilm CoLtd,(1943) 56LW283:AIR1943PC 34andthecasescitedthere
under"UndueInfluence." MhowHosiery(P)LtdvJitendraNirlanSingh, (2005) 3 MP LJ
179, employercompanyin financial difficulties,obtainedresignationof200-50employees
bypressuringthem,thecourtset aside theresignations,awardedreinstatementwithfull
back wages. The HighCourtawarded compensation of Rs30,000to eachworkmanin place
reinstatementand back wages.
187.AshokVandhanBhagatv W.B.EssentialCommoditySupplyCorpnLtd,AIR1992
Cal135.
188.NeillVMorley,32 ER687andMoltonvCamrous,154ER 1107: (1848) 2Exch487,mental
patient'soptionto avoid, in,Englandsuchcontractbeing onlyvoidable.
189.UultonVHulton,(1917)1 KB 813.
190. 1878 AC 1218. S. 64cannotbeinvokedwherethepartyhasabandonedthe plea ofmisrep
resentationandadmittedbreach; ShreeHanumanCottonMills vTataAircraftLtd, (1969)
3see522:AIR1970SC1986.
191.LagunasNitrateCo vLagunasSyndicate,(1899) 2 Ch 392 (CA).FollowedinSpencev
Crawford,(1939) 3 All ER 271 (HL).
192.LawofContract(7thEdn)321.https://t.me/LawCollegeNotes_Stuffs

362. 224 Chapter 5 Free Consent [S.64]
the partyseekingrescissionmustrestorebenefitsthat he has obtained under
the contract, buthe'isnot required to make precise restitution: the principle
ofallowingrescissionformisrepresentationso long as equity canachievea
result that is 'practically just'appliesalso whererescissionis sought on the
groundof undue influence."
Following this position of law in a case, it was held that where aparty
receivednothing under themortgagewhich was setasideon the ground of
undue influence, there wasnothingfor him to makerestitution.
Damagesforinnocentmisrepresentation
A person who is the victim of a fraud is entitled to sue for damages,
fraud being atortalso. But the victim of aninnocentmisrepresentationwas
not allowed to recover anycompensationfor any lossthatmight have been
occasioned to him by themisrepresentation.Liability intortfor negligent or
innocent misrepresentation is still groaning for recognition. However, much
of the suffering of the victims of innocent misrepresentations have now been
relievedby the(English)MisrepresentationAct, 1967. Section 2 of the Act
provides:
(1)A person who has entered into acontracton account of a misrep
resentationwill have the samerightto recovercompensationfor loss,
if any, caused to him as if the misrepresentation had been made to him
fraudulently. The defendant will not be liable if he had areasonable
ground tobelieveand did up to the time of thecontractbelievethat
the factsrepresentedweretrue.
(2)Whereit is alleged in anyproceedingthatthecontractoughtto be or
has beenrescinded,thecourtmay,instead,declare thecontractto be
subsisting and award damages in place of rescission, if it is equitable
todoso.
(3)Provisionsin thecontractwhichexcludeorrestrictliabilitywouldbe
of no effect, unless they are fair andreasonablein thecircumstances
ofthecase.
The vendor of apropertyrelied on herhusbandto dealwithher business
affairs.Thehusbandstatedto thepurchaserthatto thevendor'sknowledge
there was no disputewithanyneighbouroverboundary.In facttherewas
a dispute of thiskind,thoughthehusbanddid notknowit. Hisstatement
amountedto aninnocentmisrepresentation.Thepurchaserwasallowed
rescissionandrefundofdeposit.
HewasfurtherentitledunderSection2(1) to aninquiryintodamages
sufferedarisingout of the loss ofinterestfor theperiodbetweenthe date of
depositand itsplacementin aninterest-earningaccount.^'^
193.Walkerv Boyle, (1982) 1WLR495. SeeAntheaCameron,MeasuringDilectualDamages
forFraudulentMisrepresentation,(1982) 99 SALJ 99.McGrathv Shah, (1989) 57P&CR
452 Ch D,misrepresentationsin abuildingcontract.Thecourtheldthatacontractcan
Ihttps://t.me/LawCollegeNotes_Stuffs

363. [S. 75]
Rescission for failure toperformwithintime[S.75]
Acontractforconstructionof a bridge was atime-boundwork.The con
tractorfailed to complete theworkwithinthestipulatedtime. The State
rescindedthecontract.Thecontractordidnotchallenge it. Thecontractwas
allottedtoanotherparty.The State was heldentitledto recover the loss of
moneytherebycaused.^®"*
containaprovisionthatitcontainsitsentireterms.Such anexhaustiveclause doesnot
invalidatethecontract.
194.ShivConstructionvPWD,AIR2015MP42.
IHHebc
Fraud225
Visitebcexplorer.comto accesscasesreferred
to intiiebool<throughEBCExplorer™on
seeOnline®;alongwithupdates,articles, videos,
blogsandahostofdifferentresources.
Explorer"
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•LakshmiAmmavTalengalanarayana,(1970) 3 SCC 159
•RaghunathPrasadSahuvSarjuPrasadSahu,(1924)19LW470:
AIR1924PC60
•SubhasChandraDasMushibvGangaPrasadDasMushib,
AIR1967SC878:(1967)1SCR331
CASEPLOThttps://t.me/LawCollegeNotes_Stuffs

364. 6
Mistake
Definitionof"consent"[S. 13]
The provisions of theContractActrelevantto astudyof the effect of
"mistake"upon acontractthatthepartieshavepurportedto make may be
notedfirst.Mistakemayoperateuponacontractintvi^ow^ays.It may, firstly,
defeat theconsentaltogetherthatthepartiesaresupposedto have given,
thatis to say, theconsentisunreal.Secondly, themistakemaymisleadthe
partiesas to thepurposewhichtheycontemplated.
Thecasesinwhichtheconsentisdefeatedorisrenderedunrealfallunder
Section13.Thissectiondefines"consent"asfollows:
Two ormorepersonsare said toconsentwhentheyagreeuponthesame
thinginthesamesense.
Anagreementuponthe samethingin the same sense isknownastrue
consentorconsensusadidem, and is at therootof everycontract.
This seems to have been picked up from apassage^in the judgment of
LordHannenin Smith vHughes.^"It is essential to thecreationof a con
tractthatboth parties should agree to the same thing in the same sense.
Thus if two persons enter into an apparentcontractconcerning aparticular
person or ship, and it turns outthateach of them, misled by a similarity
of name, had a different person or ship in mind, nocontractwould exist
betweenthem:RafflesvWichelhaus".^
Definitionof"mistake"
Where the mistake does not defeat consent, but only misleads theparties.
Section 20 shall apply. This section provides:
1.CentralNationalBankLtdv UnitedIndustrialBank Ltd, AIR 1954 SC 181: 1954 SCR 391.
Once "consent" has been proved, itcannotbe defeated by application of criminal law. See,
for example, Kaur v Chief Constable,Hampshire,(1981) 1WLR578, where it was held that
a mistake as to price induced by wrong marking was not so fundamental as to destroy the
validityofcontractof sale.
2.(1871)LR6QB597(DC).
3. (1864) 2H&C906: 159 ER 375. If athingis notunderstoodby thepartiesin the same sense,
the agreementwould be invalidatedat the inceptionstage itselfevenif the communicationgap
is discovered at a later stage, Tarsem Singh vSukhminderSingh, (1998) 3 SCC 471: AIR 1998
SC1400.
[226]https://t.me/LawCollegeNotes_Stuffs

365. [Ss.21-22] Definitionof"Mistake"227
Whereboththepartiesto anagreementareunderamistakeas to amatterof
factessentialtotheagreement,theagreementis void.
Explanation.—Anerroneousopinionas tothevalueofthethingwhich forms
thesubject-matteroftheagreement,isnotto bedeemedamistakeas to a
matteroffact.
Illustrations
(o)Aagreesto sell to S a specificcargoofgoodssupposedto be on its way from England
to Bombay. Itturnsoutthat,beforetheday ofthebargain,theship conveyingthecargo
hadbeencast away, andthegoodslost. Neitherpartywas aware ofthesefacts. The
agreementis void.
(fa)Aagreesto buy from Ba certain horse. Itturnsoutthatthehorse wasdeadatthetime
ofthebargain,thoughneitherpartywas aware ofthefact. Theagreementis void.
(c)A,being entitled to anestateforthelifeof S,agrees to sell it toC.Bwas dead atthetime
of theagreement,but both parties wereignorantof the fact. Theagreementisvoid.
Section 20 will come into play:
(1)when both the parties to an agreement are mistaken,
(2) their mistake is as to amatterof fact, and
(3)the factaboutwhich they aremistakenis essential to the agreement.
Supplementaryprovisions
Two of these points are further supplemented by Sections 21 and 22.
Section21emphasisesthat mistake should be of fact.and not of law.
S.21.Effectofmistakesastolaw.—Acontractisnotvoidablebecauseit
was caused by a mistake as to any lawinforce inIndia)but a mistake as to a law
notinforceinIndiahasthesameeffectasamistakeoffact.
Illustration
Aand Bmakea contract grounded on the erroneous beliefthata particulardebtisbarred
by the Indianlawoflimitation;the contract is not voidable.
Section 22 dealswithasituationwhere only onepartyis mistaken:
S. 22.Contractcausedbymistakeofonepartyastomatteroffact.—A
contractis not voidable merelybecauseit was caused by one oftheparties to it
being under a mistake as to amatterof fact.
Whatfactsareessential
Whatfiactsare essential to anagreement?The answer is naturally,linked
with the nature of promisein eachcase.The plaintiffwas awholesaledealer
underaRationingOrder.Hewasentitledtotransportchargesvariable
accordingtodistanceforcollectinggoodsfromGovernmentgodowns.He
waspaidat the rateapplicableto azonelessthan 25milesindistance.-The
distance in fact,exceeded25 miles but both parties were unaware of it. As
soon as the mistake wasdiscoveredfuture payments were made according
to the actualdistance.Theplaintiff'sclaimfor the arrears up to the time of
rectification was dismissed, the court sayingthatthe mistake did not relatehttps://t.me/LawCollegeNotes_Stuffs

366. 228Chapter6Mistake [S. 22]
to an essentialfact."'Thusessentiahtydependsuponeach case. In the above
casethemistakerelatedtoaminordistance.Thefactwouldhavebecome
moreimportantandessentialto thecontractif a longerdistancehadbeen
involved.Speakingbroadly,certainfacts areessentialto everyagreement.
Theyare:
(1)Theidentityof theparties;
(2) theidentityandnatureof thesubject-matterof thecontract;and
(3)thenatureandcontentof the promise itself.
The present study of the effects ofmistakeproceeds along these lines and
includesthecombinedeffectofSections13and20.
MISTAKEASTOIDENTITY
Assumptionof falseidentity
Mistakeas to identity occurs where one of thepartiesrepresents himself
to be some person other than he really is. Thus, for example, inJaggan
NathVSecyofState forIndia:^A person, called S, a brother of the plaintiff,
represented himself as plaintiff, and thereby induced a Government agent to
contractwithhim.
The court, findingthatthe Government's agent wasdeceivedby the con
duct of the plaintiff and his brother as to the person with whom he was deal
ing, held that there was no valid contract. The defendant's agent intended to
contractonlywithS'sbrotherandnotwith5andSknewthis.
Intheabovecase,theGovernment'sofferwasmeantfor Sandhisbrother
posingas Sacceptedit.Thispreventedrealconsent.Itmeansthatan offer
which is meant for one personcannotbe accepted by another.
Mistakecaused bytakeoverof business
In England there is a long line of cases on the subject.In Boulton vJones^
the mistake arosenaturallyin the course of business.
Theplaintiffhadtakenover thebusinessof oneBrocklehurst.The
defendant usedto deal withBrocklehurstand not knowing of the change
sent him an order for certain goods.The order wasreceivedby the plain
tiff who sent the goods.The defendantcameto know of the changeonly
when hereceivedaninvoiceand by that time he had already consumed
the goods. The defendant had a set-off against Brocklehurst and, there
fore, refused to pay the price. The plaintiff sued him.
Fourunanimousjudges held thedefendantnot liable."Now,"said
PollockCB, "the rule of law is clear,thatif you proposetomake a contract
4.A.P.KochudevassyvStateofKerala,AIR 1982 Ker 90.
5.(1886)21 Punj Rec No 21, p. 37. TheSupremeCourt observed that mistake of identity
will prevent consent in the sense of an agreement of two persons in the same sense. Central
NationalBankLtdv UnitedIndustrialBank Ltd, AIR 1954 SC 181: 1954 SCR 391.
6. (1857) 27 LJ Ex 117: 2H&N564:(1857)157ER232.https://t.me/LawCollegeNotes_Stuffs

367. [S.22] Mistakeas toidentity229
withA,thenBcannotsubstitutehimself for Awithoutyour consent and
to yourdisadvantage,securingtohimselfall thebenefitof thecontract."^
Similarly,BramwellB said:"Whenanyone makes acontractin which the
personality, so to speak, of theparticularpartycontractedwith is impor
tant,for any reason,whetherbecause it is to write a book orpaintapicture
or do anyworkofpersonalskill, orwhetherbecausethereis aset-offdue
fromthatparty,no one else is atlibertyto step inandmaintainthathe is
thepartycontractedwith."
Mistakeofidentitycausedbyfraud
Theprincipleof this case foundfurthersupportinHardmanvBooth-}
Theplaintiffs,meaningto dealwithThomasGandell&Sons, went
totheiroffice andtookan order from apersonwhorepresentedhimself
to be apartnerin the firm. He told theplaintiffsthatthe goodsshould
be sent in thenameofEdwardGandell&Sons. Hereceivedthegoods,
carriedthemawayandsoldthemto thedefendant,abonafide buyer.The
plaintiffssued thedefendantto recovertheirgoods.
PollockCBexplainedtheprinciplethus:"Thereare some cases inwhich
it is veryclearthatthereis nocontractat all;andthepresentcase seems to
be one ofthosecases. It isarguedthatthecontractwasmadepersonally
withtheparticularindividualwho made thecommunication:it is verytrue
thatthewordswereutteredby and to him; butwhattheyimportedwas a
contractwithGandell& Co, the facts beingthathe was not amemberof
the firm,andhadnoauthorityto act astheiragent, andGandell&Co,
therefore,werenotthe buyers;and,consequently,at no time weretheretwo
consentingmindsdrawntogetherto the sameagreement."
The principle established by this case was affirmed by the House of Lords
inJamesCundyvThomasLindsay:^
The plaintiffs received orders inwritingfrom afraudulentman,called
Blenkarn.The order papers had aprintedheading:"Blenkarn& Co,
37WoodStreet'.Therewas awell-knownandrespectablefirm,named
Blenkiron& Co in the samestreet.Theplaintiff'sbelievingthatthe
orders had come from this firm, sent a largequantityofhandkerchiefs.
Blenkarnreceived the goodsanddisposedthemof to thedefendants,who
acted in good faith. Theplaintiffssued thedefendants.
It was heldthattherewas nocontractbetweentheplaintiffsandBlenkarn
and,therefore,hehadnorightto sell the goods. Theplaintiffsintendedto
contractwithBlenkiron& Co andconsequentlynocontractcouldhave
arisenbetweenthemandBlenkarn."Ofhimtheyknewnothing,andof
him they neverthought.With him they never intended to deal.Theirminds
7. (1857)27LJ 117,118-19.
8. (1862) 1H&C803:32 LJ Ex 105.
9. (1878)LR3 AC459:38 LT573:47LJ QB481.https://t.me/LawCollegeNotes_Stuffs

368. 230Chapter6Mistake [S.22]
CASEPILOT
never for aninstantof time rested upon him, and as between him and them
therewasnoconsensusofmindwhichcouldleadtoanyagreementorany
contractwhatever.Asbetweenhimandthemtherewas merely one side
to acontract,whereas, in order to produce acontract,two sides would be
required."
Distinctionbetweenidentityandattributes
Adistinctionhas been made for thispurposebetweenaperson'sidentity
andhisattributesandamistakeaboutthelatterhasbeenheldnottoavoid
the agreement. There can be a mistake of identity only when apersonbear
ing aparticularidentity existswithinthe knowledge of theplaintiff,and the
plaintiffintends to deal with him only. If the name assumed by theswindler
isfictitious,therewill be nomistakeofidentity.Forinstance,inKing's
NortonMetalCoLtdvEdridge,Merrett& CoLtd-}'^
AmannamedWallisadoptedthe name of'Hallam&cCo', anon-existent
firm,andby letters placed order for some goodswiththeplaintiffswho
compliedwiththeorderbysendingthe goods. Wallis sold the goods to
thedefendants,who acted in good faith. Theplaintiffssued the defend
ants for thevalueof thegoods.
The facts of this case weredifferentfromthoseofCundyvLindsayas in
thatcaseBlenkiron& Co was aseparateentityandtheplaintiffsintended
tocontractonlywithit. But in this casetherewas noseparateHallam&
CoAccordinglythecourtsaid:Withwhomdidtheplaintiffscontractto sell
the goods? Clearlywiththewriterof theletters.If it could have beenshown
thattherewas aseparateentitycalledHallam& Coandanotherentity
calledWallisthenthe casemighthave comewithinthedecisioninCundy
VLindsay.ThecontractwithWallis was,therefore,only voidable forfraud
and it could not be disaffirmed after the defendants hadacquiredthe prop
ertyin good faith.
The scope foroperativemistakeas toidentityisfurtherreducedwhenthe
partiesare in eachother'spresence.InPhillipsvBrooksLtd}^
Aman,calledNorth,enteredtheplaintiff'sshop and selected some
pearlsandsome ringsworth£3000.Heproducedachequebookand
wroteoutachequefortheamount.Insigningit he said: 'You seewho
I am, I am SirGeorgeBullough'andfindingonreferenceto adirectory
thatSir George Bullough lived at the address mentioned, theplaintiff
let him have a ring. Hepromisedto come for theotherarticlesafterthe
cheque was cleared. Before thefraudwas discovered he pledged the ring
withthedefendantswhoadvancedmoneybonafide, andwithoutnotice.
Theplaintiffsued thedefendantsfor the ring or its value.
10.CourtofAppeal,(1897) 14TLR98 (CA).
11.(1919)2 KB243.https://t.me/LawCollegeNotes_Stuffs

369. [S. 22] Mistakeas toidentity231
It asheldthattheplaintiffintended tocontractwith the person present
beforehim.HorridgeJ said: "The followingexpressions used in the judg
mentofMorton seemstometofitthefactsinthiscase:'Theminds
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 factthatthe seller was induced to sell by the fraud of the buyer made
the sale voidable, but not void. He could not have supposedthathe was sell
ing to anyotherperson; hisintentionwas to sell totlieperson present, and
identified by sight and hearing, it does not defeat the sale because the buyer
assumedafalsename...'
Theauthorityof this case seems to have beenconsiderablyshakenby the
decision of theCourtofAppealinIngramvLittle-}'^
Threeladies, thejointownersof a car,advertisedit for sale. Aperson
called attheirhouse and offered to pay anacceptableprice. But,whenhe
pulledouta chequebook,the ladies told himthatthe deal was over as
theywouldnot accept a cheque. Hethenpersuadedthemto believethat
he was oneHutchinson,aleadingbusinessman,andquotedanaddress
andatelephonenumber.Onverificationoftheparticularsfromadirec
tory, the ladies gavehimthecarfor acheque.Heresoldthecarto the
defendantandabsconded.The cheque provedworthlessand theplaintiffs
suedthedefendantforthecaroritsvalue.
Thedefendantwas held liable. In theopinionof thecourtthe decision
must dependupontheintentionof the ladies. Thequestionwaswithwhom
did theyintendtocontract,withthemanpresentintheirdrawingroom
orwiththerealHutchinson?Did theidentityofHutchinsonor the physi
cal presence of the man in the roompreponderate?Can it be saidthatthe
primafaciepredominanceof the physical presence of the falseHutchinson
identified by sight andhearingwas over-borne by theidentityof the real
Hutchinsonon the facts of thepresentcase? Inanswerto thesequestions
thecourtsaidthattherecould be nodoubtthatthe offerwhichtheplaintiffs
made.wasone madesoleyto,andonewhichwas capable of beingaccepted
only by, thehonestHutchinson.So far as theroguewasconcernedtherewas
no offer made to himandconsequentlythere could be nocontractwithhim.
His right to the car was no morethanthatof a thief or a finder and he could
notconvey agoodtitle to thedefendant.^^
12.EdmundsvMerchantDespatchCo, (1883) 135Mass283, 286.
13. For acriticismof thisdecisionseeE.C.S.Wade,MistakenIdentityin theLawofContract,
38 LQR 201, 204; A.L.Goodhart,Mistakeas toIdentityin theLawofContract,(1941) 57
LQR228,241. See also 35LQR289.
14. (1961) 1 QB 31 (1960) 3 WLR 504 (CA).Notedin A.L.G.:Mistakeas toIdentityin theLaw
ofContract,(1961) 77 LQR 31; J.C. Hall: NewDevelopmentsin MistakeofIdentity,(1961)
CambLJ 86.
15. See alsoHardmanvBooth,(1862) 1H&C803;LakevSimmon,1927AC487(HL);Macleod
VKerr, 1965 SLT 358 and Car &UniversalFinanceCoLtdvCaldwell,(1965) 1 QB 525:
(1964) 2 WLR 600 (CA), noted in 1966Journalof Business Law, pp. 79 and 259.https://t.me/LawCollegeNotes_Stuffs

370. 232 Chapter 6 Mistake [S.22]
Wherefrauddoesnotleadtomistakeofidentity
In the dissenting judgmentDevlinLJ emphasised the need for a new
approach. In his viewcasesUkethese pose a problemof practical justice,and
theoreticalconsiderationssuchaswhetherthecontractisvoidorvoidable
should not stand in the way of doing practical justice. Why should the title
of theinnocentbuyer be made to depend on the state of acontractbetween
third parties? It was this approachthatfound favour with theCourtof
Appeal inLewisvAveray}^
Lewis, the plaintiff, had a car to sell. A man, described in the judg
mentas'rogue',came along andintroducedhimselfasRichardGreen, a
famousfilmactor.Hetestedandlikedthecarandofferedacheque.The
plaintifftold him towaittill the cheque was cleared, but when his resist
ance wasbroken,hedemandedproofof identity. The rogueproduceda
special pass of admission to a film studio which showed hisphotograph
andthe officialstamp.Thisconvincedtheplaintiffand heallowedthecar
to betakenaway for the cheque. The rogue lost no time in disposing of
thecarto aninnocentbuyer, thedefendant.Theworthlesschequecame
backandtheplaintiffsued thedefendanttorecoverhis car.
TheCourtofAppealheldthatthecarwas deliveredunderacontract
voidable byreasonof thefraudand thecontracthavingnotbeen avoided
beforethecarpassedintothehandsof aninnocentbuyer, heacquiredagood
title.LordDenningfeltthatthe facts ofPhillipsvBrooksLtd,"Ingramv
Little^^and those of thepresentcase wereindistinguishableandthatthe
contradictorydecisionsin thesetwoearliercasescannotbereconciled.In
each case, hisLordshippointedout, aninnocentseller is visited by arogue,
who by the usual tricks of histrade,convincesthathe is amanofstanding
and creditandtherebyinduces the seller topartwithhispossessionfor a
cheque.In each case hedisposesof thegoodsto aninnocentbuyer.Whose
failurehasbroughtaboutthismisfortuneuponthetwoinnocentparties?
Should the title of theultimatebuyer be made todependuponfinequestions
astowhetherthefraudwascommittedbeforeorafterthecontractwas
struck,orwhetherthemistakerelatedtoidentityasopposedtoattributesor
whetherthecontractwas void or voidable?Referringto theseneedlesssub
tleties LordDenningsaid:"Forinstance,inIngramvLittle,themajority
of thecourtsuggestedthatthedifferencebetweenPhillipsvBrooksLtd^°
andIngramvLittlewasthatinPhillipsvBrooksthecontractof sale was
concludedafterthe rogue made thefraudulentmisrepresentation^^whereas
inIngramvLittlethe rogue made thefraudulentrepresentationbefore the
16.(1972)1 QB109:(1971) 3WLR603 (CA).
17('1919) 2 KB243.
18. (1961) 1 QB 31:(1960)3WLR504(CA).
19.Ibid.
20.(1919)2 KB243.
21. See (1961) 1 QB 51, 60: (1960) 3 All ER 337,343.https://t.me/LawCollegeNotes_Stuffs

371. [S. 22] Mistakeas toidentity233
contract was concluded. My own view isthatin each case the property in
the goods did not pass until the sellerletthe rogue have the goods."
"Again it has been suggestedthata mistake as to theidentityof a per
son is onething;andamistakeas to hisattributesisanother.Amistake
as toidentity,it issaid,avoids acontract,whereasamistakeas toattrib
utes does not. But this is adistinctionwithouta difference. Aman'svery
name is one of hisattributes.It is also a key to his identity. Ifthen,he
gives a false name, is it amistakeas to his identity? Or, amistakeas to his
attributes?These finedistinctionsdo no good to the law.
As Ilistenedto theargumentsin this case, Ifeltitwrongthataninno
centpurchaser(whoknewnothingofwhatpassedbetweenthe sellerand
the rogue)shouldhave his titledependon suchrefinements.Afterall he
hasactedwithcompletecircumspectionandinentiregoodfaith;whereas
it was the seller who let the rogue have the goods and thusenabledhimto
committhe fraud. I do notthereforeaccept thetheorythatamistakeas
toidentityrendersacontractvoid."
When thepartiesare present face to face, thepresumptionisthatthe con
tractis made with the person actually present, eventhoughthere is a fraudu
lentimpersonationby the buyer representing himself as a different manthan
he is. Thisapproachwas heralded byPearceLJ and also byDevlinLJ in
Ingramv Little, insupportof whichDevlinLJ quoted not only the English
case of Phillips v Brooks Ltd, but also cases in the United Stateswhere:^^
"Thecourtsholdthatif Aappearedinpersonbefore B,impersonatingC, an
innocentpurchaserfrom A gets thepropertyin the goodsagainstB."
PhillimoreLJ andMegawLJ also subscribed to the viewthatthere
was nothing in the conduct of the plaintiff to overthrow the presumption of
contractingwith the person who was present inperson.^^
Whereidentityspeciallyimportant
Where, however, the identity of the otherpartyis of vitalimportanceto
the offeror, amistakeas toidentitywill prevent anagreementfrom arising.
Importance of identitymust dependupon the nature of the promisein each
case. InSaidvButt^'^,for example:
^The plaintiff knewthaton account of his adverse criticism of some
members of atheatre,he would not be allowed to be present at the first
performanceof a playat the theatre. Aticketwas obtained for him byone
of his friendswithoutdisclosingthatit was for him. But the defendant.
22. This quotation is fromCorbinonContracts,Vol3, S. 602.
23. The sameapproach was adopted wherea person byforgeryof signature of a customer induced
the banker to issue adraftwhich wasuhimatelyreceived by an innocent person and it was
held that the issuing bank must suffer this loss. Citibank N.A. v Brown Shipley & Co Ltd,
(1991) 2 All ER690.
24.(1920)3 KB497.https://t.me/LawCollegeNotes_Stuffs

372. 234Chapter6Mistake [S. 22]
themanagingdirectorof thetheatre,refused him admission on the night
in question. And the plaintiff sued him for inducing breach ofcontract.
Butitwasheldthattherewasnocontractbetweenhimandthetheatre.
"Thenon-disclosureof the factthattheticketwasboughtfor theplaintiff
prevented the sale of the ticket from constituting acontract,the identity of
theplaintiffbeing in thecircumstancesamaterialelement in theformation
ofthecontract."
YetanotherillustrationisSowlervPotter-?^
Thedefendantwasconvictedforpermittingdisorderlyconductin
a cafe. She subsequently assumed a false name andobtainedfrom the
plaintiffa lease of premises in the sameneighbourhoodwitha view to
conductingarestauranttherein.Theplaintiffcontendedthatif hehad
knownhertrueidentityhewouldnever havegrantedthe leaseandthe
samewasthereforevoidformistake.
It was heldthattheconsiderationof thepersonwithwhomtheplaintiff
wasenteringinto the lease was a vital element inthatagreementsothatthe
plaintiffhaving beenmistakenwithregardto theidentityof thedefendant,
theleasewasvoidabinitio.
In aGermancase,^®aroomwasbookedin aprivatehotel.Whenthe
plaintiffand his lady arrived, the hotelier discoveredthatthey were affi
ancedbutnotmarried.Theroomwasrefused.Thehotelierwasheldnot
liable for damages for breach ofcontract:"Thedefendant,when accepting
the plaintiff's booking, had acted on theassumptionthathe and his lady
were amarriedcouple,whereasin fact they were not. In view of the defend
ant's ownfeelingsand the effect which it might have on other guests if they
learnedthatthe defendant rented out double rooms tounmarriedcouples,
themistakewas amaterialone andnegatedconsent."
MISTAKEASTOSUBJECT-MATTER
Anotherfact essential to every agreement is the identity orqualityof the
subject-matterof thecontract.Mistakeas tosubject-mattermay take vari
ousforms.
1.Non-existentsubject-matter
In the first place, thesubject-mattermay have ceased to exist before the
contractwas made. ThishappenedinGustavusCouturiervRobertHastie-?'^
Thedefendantwas employed to sell theplaintiff'scargo which was on
voyage.After the defendant had sold the cargo to athirdperson, it was
discovered that the cargo, having been damaged by bad weather, had
25.(1940)1KB271.
26. Noted in H.R.Hablo,Morality Vindicated,(1975)SALJ440.
27.(1856)5HLCas673:10ER1065.https://t.me/LawCollegeNotes_Stuffs

373. [S. 22] Mistakeas tosubject-matter235
beensoldat an intermediate port. The buyerrepudiated the contract and
the defendant, being a del credere agent was sued for the price.
But he was held notUable.LordCranworthsaid: "Thecontractplainly
importsthatthere wassomethingwhichwas to be sold at the time of the
contract, and something to be purchased." But as the goods had been totally
lost before thecontractwas made, thecontractwas voidabinitio(from the
very beginning). On the same principle, thesaleof a horse which,unknown
to theparties,was dead at the time of thebargainand the sale of the life
estate of apersonwho,unknowntoparties,was dead at the time of the sale,
wouldbevoid.
2.Mistakeas to title or rights
"Correspondingtomistakeas to the existence ofsubject-matteris mis
take in cases where,unknownto theparties,the buyer is already the owner
ofthatwhich the sellerpurportsto sell to him. Thepartiesintend to effectu
ate atransferofownership:such atransferis impossible
In such a case, however,equityonlyallowedtheagreementto be set
aside. This wasaffirmedby theHouseof Lords in 1867 in thegreatcase of
CooperVFhibbs?^Inthatcase an uncle hadtoldhis nephew, notintending
tomisrepresentanythingbutbeing in fact inerror,thathe (the uncle) was
entitled to a fishery,andthe nephew,afterthe uncle'sdeath,actingin the
belief of thetruthofwhatthe unclehadtold him,enteredinto anagreement
torentthe fishery from theuncle'sdaughter,whereasitactuallybelongedto
thenephewhimself. TheHouseof Lords heldthatthemistakewas such as
not only to make theagreementvoidable, but also liable to be set aside on
suchtermsasthecourtthoughtfit toimpose.
The principle wasfurtherexplainedby theCourtofAppealinSollev
Buthcher^°whereDenningLJstatedthepositionthus:
"All previous decisions on this subjectmustnow bereadin the light
of Bell VLeverBrosLtd^^.Thecorrectinterpretationofthatcase, to
mymind,isthatonce acontracthas beenmade,thatis to say, once
theparties,whatever theirinmoststates of mind, have to alloutward
appearancesagreed with sufficientcertaintyin the sameterms,on the
samesubject-matter,thenthecontractisgoodunless anduntilit is set
aside for breach of someconditionexpressed or implied in it, or for fraud,
or on some equitableground.Neitherpartycan rely on his ownmistake
to say it was anullityfrom thebeginning,nomatterthatit was amistake
28.LordAtkinin Bell vLeverBrosLtd,1932 AC 161, 218 (HL). HisLordshipcitedCooperv
Phibbs,(1867)LR 2 HL 149: 16 LT 678 (HL),"whereAagreedtotakea lease of fishery from
B,thoughcontraryto belief of bothpartiesat the timeAwastenantfor life of the fishery and
B appears to have had no title at all". The agreement was set aside. But the decision is criticised
by hisLordship.
29.(1867)LR 2HL149:16 LT 678(HL).
30. (1950) KB671(CA).
31.1932AC 161(HL).https://t.me/LawCollegeNotes_Stuffs

374. 236Chapter6Mistake [S.22]
whichto hismindwasfundamental,andnomatterthattheotherparty
knew he was under a mistake. Afortioriif theotherpartydidnotknow
themistake,butsharedit."
Inthiscase:
Alandlordcarried out repairs to a house which waswithatenanton
astandardrentfixedin 1939. Thetenantexpressed theopinionthatafter
thereconstructionthestandardrentwouldnot be applicable. If it was
applicable thelandlordcould have increased it by notice to thetenant
bytakinginto account the costs of improvement.Withoutgiving such
notice thetenancywasrenewedin favour of thetenantfor seven years on
the increased rent. Thetenantpaid the increased rent for some time and
thenstartedproceedings forrestoringtheoriginalrent and for recovering
overpaidrent.
Thecourtheldthatthestandardrent was still applicable and theplaintiff
was prevented from giving notice by themisrepresentationmade by the ten
ant. It was liable to be set aside, but was not anullityfrom the very begin
ning. "Thepartiesagreed in the same terms on the samesubject-matter.It is
truethatthelandlordwasunderamistakewhichwastohimfundamental.
Butwhetheritwashisownmistakeoramistakecommonbothtohimand
thetenant,it is not agroundfor sayingthatthe lease was from the begin
ning a nullity." HisLordshipfurtherpointedoutthatwhatthetenantsaid
was not merely anexpressionofopinionbut anunambiguousstatementas
to private rights and amisrepresentationas to private rights is equivalent to
amisrepresentationof fact for thispurpose.
Thisopinionhas been expresslydisapprovedby theCourtofAppealin
GreatPeaceShippingLtdvTsavlirisSalvage(International)Ltd?^The
courtappliedtherulinginBellvLeverBrosLtd^^to the facts ofthecase.
ThefactsanddecisionintheGreatPeacecasehavebeendiscussedunder
therulingin Bell case.
Nocontractwouldfollowwherethoughthe buyer isnotowner,the ven
dor also doesnothave therightto sellandthepartieshavemistakenly
believedthathe has theright.^''Whereavendorpurportedto sell all his
rightsin aland,includingtherightstomineminerals,theagreementwas
held void when it wassubsequentlyfoundthatthevendor'srightssimply did
notincludetherightto mine.Withoutthisrightthelandwasworthlessfor
thebuyerwhoseonlyobjectwas toworkthemines.Amistakeofthiskind
must bereasonablein thecircumstances.Where,forexample,"theposition
wastoonotoriousandwell-knownto allconcernedin thelocalitythatthe
CASEPILOT
32.2003QB 679: (2002) 3WLR1617:2002EWCACiv1407(CA).ConsideredbyAdrian
Chandler,JamesDevenneyandJillPoole,CommonMistake:TheoreticalJustificationand
RemedialInflexibility,2004JBL 34.
33.1932AC161(HL).
34.RaniKunwarvMadhubBaksh,132IC39; U. Pan vMaungPo Tu, AIR1927Rang90.
35.RamchandravBisraGoneshChandra,39 IC 78.https://t.me/LawCollegeNotes_Stuffs

375. [S.22] Mistakeas tosubject-matter237
tenants of an estate, which was thesubject-matterof sale, had the right to
sellTenduleavestowhomsoevertheypleased",thebuyer'signoranceof this
right was not reasonable and consequently thecontractwasvalid.^^In a case
before the Bombay HighCourt:^^
C mortgaged the property of his brother L.M. fraudulently represent
ing himself to be L.M. The defendant, who was the mortgagee trans
ferred his interest to the plaintiff. The plaintiff insisted that the owner of
the property should join the transfer and C again committing the same
fraud, executed the transfer. Ondiscoveringthe fraud, the plaintiff sued
the defendant for thereturnof the purchasemoney.
It was heldthathe must succeed. "Both the parties being in the belief
thatthe realownerhadjoined in thetransferwereunderamistakeof fact
essentialto theagreementwhich was,therefore,avoidedunderSection 20."
3.Differentsubject-mattersinmind
Wheretheparties,due to areasonablemistakeof fact, havedifferent
subject-mattersinmind,theagreementwill be void forwantoftrueconsent.
As, forexample,in Raffles vWichelhaus:^^
Thedefendantboughtof theplaintiffaquantityofSuratCotton"to
arrive ex Peerless from Bombay". Two shipswiththe name Peerless sailed
from Bombay, one inOctober,whichthedefendanthadinmindand the
otherinDecemberwhich theplaintiffhad in mind.
Thecourtsaid: "thedefendantmeantone Peerless and theplaintiff
another.Thatbeing so, there was noconsensusadidem andthereforeno
bindingcontract."
Wherethe buyer believedthatthelandwas being sold at thestatedprice
per bigha and the sellerthoughtthe price was applicable perkanal,it was
heldthattherewas noagreementon thematterof anessentialfactand,
therefore,nocontract.^^
4.Mistakeas tosubstanceofsubject-matter
Anotherkindofmistakeas tosubject-mattermay relate to itssubstance,
natureorquality.Thepartiesmay bemistakenas"totheexistenceof some
fact or factsforminganessentialandintegralelementof the subject-matter."''®
36.StateofOrissavKhanSahebMohdKhan,AIR 1961 Ori 75.
37.IsmailAllarkhiavDattatraya,ILR(1916) 40 Bom 638.
38.(1864)2H&C906:159 ER 375. In asalebyauction,the sellerintendingto selltowandthe
buyerintendingto buy hemp and thejuryfoundthatthetwocommoditieswerecommercially
different,the sellercouldnotrecoverthe price,ScrivenBros &Co\Hindley& Co, (1913) 3
KB564.
39. Tarsem Singh vSukhminderSingh, (1998) 3 SCC 471. Thecourtaddedthatnopartof the
agreementisenforceableunless it is severable from the void features and is capable ofsupport
ing anindependentcontractualtie.
40. SeeHalsbury'sLawsofEngland,(2ndEdn,Vol23), p. 135andpara89.'https://t.me/LawCollegeNotes_Stuffs

376. 238 Chapter 6 Mistake [S.22]
The decision of the Privy Council in Seikh Bros Ltd vOchsner,'^^on appeal
fromKenyaand decided under Section 20 of the IndianContractAct, pro
videsaninstructiveillustration.
Theappellant-company,the lessor of a forest inKenya,granted a
licenceto the respondent to cut, process and manufacture all sisal grow
ing in theforest.The respondent, in return, undertook to manufacture
anddeliverto the appellant 50 tons of sisal fibreper month. But it turned
out that the leaf potential of the sisal area was not sufficientto permit the
manufacture of the stipulated quantity and the respondent was sued for
thebreach.
Theagreementwas held to bevoid.TheirLordships,relyingupon the
statementsin Bell vLeverBrosLtd,^^came to theconclusionthat"having
regard to the nature of the contract, which was a kind of joint adventure,
it was the very basis of the contract that the sisal area should be capable of
producinganaverageof 50 tons a month throughout the term of thelicence,
andthemistakewas as to amatterof factessentialto theagreement".''^
On the same principle an agreement for the sale of land was held void
as, unknown to the parties, the land had beennotifiedfor acquisition at the
time of thecontract.'*'*An agreement to compromise a suit already decided
in favour of the plaintiff, butunknownto the parties, is void for the same
reason."*^The acquisition of a land, which is the subject-matter of a sale,
afterthecontractis made willnotupset thecontract,'*^so also acontract
for the sale of goods oncertainpricecannotbe avoided by the seller on the
groundthata new excise tax hasniadethe goods dearer and the buyer is
unwilling to pay theextraprice.'*^This will be so even if thepartieshave
made the bargain in theexpectationthatthere will be no upward revision of
taxes.'*^Where theexpectationsof thepartiesarefrustratedbysubsequent
events, theircontractmay fall under Section 56 butcannotbe declared void
ab initiounderSection20.'*'In such casesthereis nomistakeas toexisting
facts. Thedistinctionwasemphasisedby theCalcuttaHighCourt^"in a
casewhereacontractwasenteredintoupontheassumptionthattheJute
ControlOrder,whichwas due toexpire,wouldbecontinuedandextended,
butit wasnotextended.Rejectingthe plea ofmistake,HarriesCJobserved
as follows:"Thedifferencebetweenamistakeas to anexistingfact and a
mistakeas to afutureoccurrenceis clearandtheconsequencesare very
41.1957AC136:(1957)2WLR254(PC).
42.1932AC 161(HL).
43.At p.147
44.NursingDassKotharivChuttooLallMisser,ILR(1923) 50Cal615.
45.BibeeSolomanvAbdoolAzeez,ILR(1881) 6Cal687.
46.JodhaMaiKuthaliavAssociatedHotelsofIndiaLtd,AIR 1950Lah106.
47. ChinGwan& Co vAdamjeeHajiDawood& Co, AIR 1939Rang79.
48.BabshettivVenkatramana,ILR(1879) 3Bom154.
49. ShreeChandDagavSohanlalDaga,AIR 1943 Cal 257.
50.Ibid.https://t.me/LawCollegeNotes_Stuffs

377. [S.22] Mistakeas tosubject-matter239
different.A mistake as to an existing fact will render the contract void ab
initio. In short, if the parties have entered into a contract upon such a mis
take, there is and never has been anycontractat all between them. On the
other hand, if the mistake is as to some futureevent,a binding contract is
entered into between the parties. Thecontractmay be avoided or rescinded
at some future date if the expected event does or does not happen."
The factaboutwhich thepartiesaremistakenmust be "essential" to their
agreement.A mistake as to a collateralfact, whichleavesthesubject-matter
substantially what it was supposed by the parties to be, does notnegative
the contract. Thus the leaseof a mining estatewhichwas known byreputa
tion to measure 100 bighas was not regarded as void on discoveringthatthe
area was actually less."Theexact area of100bighas more or less was not
essential for the colliery purpose for which agreement was arrived at and,
therefore, there was no common mistake with regard to an essentialfact."^^
Similarly,acontractfor the sale of goods "to arrive by a certain ship" is
not void, if the ship does not bring thegoods.Since,land acquired under
statutorypowercannotbe divested infevourof anyperson,muchless in
favour of the person from whom it was acquired, any such divesting under
mistakennotionof the rights was held to be void. The agreement was also
opposed to publicpolicy.Handingover by ZilaParishadof the right to
collect fee to the highest bidder was held to beagainstlaw.-'"'
Aroadbuilder, whiletendering,calculatedhis costs on the basisthat
necessarymaterialwouldbe available from anearbyquarry.Butthatturned
to be wrong. He had to go to moredistantquarry.Thatcost him more. The
courtsaidthatthiswasnotamistakewhichwouldenablehimtoavoidthe
contract.A special clause in thecontractcarriedaprovisionthatthe con
tractorhadtomakehisownarrangementforobtainingmaterial.^^
Mistakeas toqualityofsubject-matterasdistinguishedfromsubstance
Amistakeas to thequalityof thesubject-matterasdistinguishedfrom
itssubstancemaynotrendertheagreementvoid. Smith vHughes^^is well-
knownfor thisdistinctionbetweenqualityandsubstance.
51.SoorathNathBanerjeevBabasankerGoswami,AIR1929Cal547.
52.BhailalChaturbhaiPatelvKalyanrai,63IC952.
53.SethSrenikbhaiKasturbhaivSethChandulalKasturchand,AIR1997Pat179.
54.SurendraKumarRat vZilaParishadJhansi,AIR1997All387, thecollectionswerenot
accountedfor by theperson,thatamountwas held to berecoverable.But theamountcould
notberecoveredasarrearsoflandrevenue.Inanothersimilarcase,MaheshChandravZila
PanchayatMainpuri,AIR1997All248,theParishadauthorisedabiddertherightto remove
anddisposeofdeadanimals.Theamountwhichbecamedue from himcouldnotberecovered
asarrearsoflandrevenue. Suchauthoritycanbe given to theCollectoronlyunderastatute.
StateIndustrialandInvestmentCorpnofMaharashtraLtdvNarangHotels(P)Ltd,AIR
1995Bom 275, amistakeas towhetheraparticulartypeofindustrywasincludedin the sub
sidy scheme of abackwardarea didnotmakethecontracttoprovidesubsidy by theFinancial
Corporationvoidable.
55.StateofKarnatakavStellarConstructionCo, AIR2002Kant6: (2002) 5KantLJ474.
56.(1871) LR 6 QB597(DC).https://t.me/LawCollegeNotes_Stuffs

378. 240 Chapter 6 Mistake [S.22]
The defendant wanted to buy old oats for his horses. The plaintiff
showed him the sample of the oats he had, but said nothing about their
age.Thedefendantkeptthesamplefortwenty-fourhoursand thenplaced
an order for the oats. After a portion of them wasdeliveredto him he
found that they were new and, therefore, rejected them on the ground
thathe wasmistakenabouttheirquality.
But thecourtcould find nogroundentitlingthe buyer to reject.Cockburn
CJ summed up bysaying;"All that can be said is that the two minds were
not ad idem as to the age of the oats; they certainly were ad idem as to the
sale andpurchaseofthem."^^
The effect of mistake as to quality was further explained by the House
ofLordsinBellvLeverBrosLtd^^whereLordAtkinsaid:"Mistakeasto
quality of the thing contracted for raises more difficult questions. In such a
case amistakewillnotaffectassentunlessit is themistakeofbothparties,
and is as to existence of somequalitywhich makes the thingwithoutthe
qualityessentiallydifferentfrom the thing as it wasbelievedtobe."^^The
factsofthecasewereasfollows:
LeverBros,appointedone Bell as amanagingdirectorforfiveyears on
an annual salary of £ 8000 to manage one of their subsidiaries in Africa.
Much before the expiry of this term his serviceshad to be dispensed with
onaccountof the merger of thesubsidiarywithathirdcompany. Bell
agreed to retire on a compensation of£30,000.After this sum was paid,
it was discoveredthatduringhistermof service, Bellhadmade secret
profits and was, therefore, guilty of breach of duty which entitled the
company to dismiss himwithoutcompensation.The company, therefore,
claimedthereturnof the inoney on thegroundinteraliathatit waspaid
underamutualmistakeoffact.
Buttheiractionfailed. It was held by amajority"thatthemutualmis
takerelatednotto thesubject-matter,but to thequalityof the service con
tract".The plaintiffscontendedthatthey agreed to paycompensationon the
assumptionthatthe servicecontractwas onewhichcouldnotbeterminated
withoutcompensation,whereasthetruefact wasthatthedefendantcould
have beendismissedwithoutcompensation.Referringto thiscontention.
LordAtkinsaid:®°"I have come to theconclusionthatitwouldbewrong
to decidethatanagreementtoterminatea definite specifiedcontractis void
if itturnsoutthattheagreementhadalreadybeenbrokenandcould have
beenterminatedotherwise.Thecontractofreleaseistheidenticalcontract
inbothcases,andthepartypayingfor release getsexactlywhathebargains
for. It seemsimmaterialthathecouldhave gotthesameresultinanother
way, orthatif hehadknownthetruefacts hewouldnothaveenteredinto
57. SmithVHughes,1871 LR 6 QB 597, 606.
58.1932AC 161(HL).
59.BellVLeverBrosLtd,1932AC 161, 218(HL).
60. Atpp.223-24.https://t.me/LawCollegeNotes_Stuffs

379. [S. 22] Mistakeas tosubject-matter241
the bargain." The mistake was mutual as the jury foundthatat the time of
negotiatingthecompensationagreementthedefendanthadnotinmindhis
breaches ofduty.^^
Thisruhngwas apphed by theCourtof Appeal inGreatPeace Shipping
LtdVTsavliris Salvage(International)Ltd.^^In this case two vessels were
hiredtoreachforastrickenvesseltosavethelifeofitscrew.Itwasbelieved
at the time of thecontractthatthe two vessels were in closeproximityto
eachother,locatedat adistanceof 35 miles.Unknowntoboththeparties,
thetwovesselswereatadistanceof410milesanditwouldhavetaken
39hoursfortherescuevesselstoreachthestrickenvessel.Thedefendants
lookedforothervesselswhichthey gotandtheycancelledthecontract.This
washeldtobeabreachofthecontract.Thedefenceofmistakefailed.The
courtsaidthatthemistakeastothedistancebetweenthetwovesselshad
notrenderedthe servicesthatthedistantvessel was able to provide some
thingessentiallydifferentfrom thosewhichthepartieshadagreed. The ves
selwouldhavearrivedin time to provide several days ofescortservice. The
factthatthe vesselswerefurtherapartthanboththepartieshadappreciated
did notmeanthatit was impossible toperformthecontractualventure.
In a sale of tablenapkinsunderamistakethatthey were ofhistoricvalue,
it has been suggestedthatthetransactioncould be regarded in two ways:
"1. Thepartieshaveintendedto buy and selltable-linen:in this case a
mistakeas to its age or valuewouldbeirrelevant—itwouldbe amistake
as toqualityandthereforenot anoperativemistake.
2.Thepartiesmay haveintendedto buyandsell aCaroleanrelic, i.e., a
mistakeas tosubstance;inthatcasetheirmistakewouldbefundamental
andmakethecontractvoid."^^
Misapprehensionas toparties'respectiverights
TheCourtofAppealhasreiteratedin Magee vPennineInsuranceCo
Ltd^'^thatacommonmisapprehensioneither as to facts or as to theparties'
relativeandrespective rights will not make thecontractvoid but only void
able providedthatthemisapprehensionwasfundamentalandthattheparty
seeking to set aside was nothimselfat fault. The facts of the case were:
Theplaintiffboughtacarfor his18-year-oldson.Thesonhadaprovi
sionaldrivinglicence.Theproposalformfor theinsuranceof thecarwas
filled by themanagerof the firmfromwherethecarwasboughtandhe
happenedtostatethattheplaintiffhadaprovisionaldrivinglicencewhen
in fact hehadnone.Thesonmadeanaccidentandtheplaintiffclaimed
61. See also Kennedy vPanamaHewZealandandAustralianRoyalMailCo, LR 2 QB580,
whereit was heldthatamaterialmisrepresentationin acompany'sprospectsdoesnotmake
the shares anapplicantobtainedadifferentthinginsubstancefrom those which he applied
for.
62.2003QB679:(2002)3WLR1617;2002EWCACiv1407(CA).
63.Nicholson& Venn vSmith-Marriott,(1947)177LT 189 (KB).
64. (1969) 2 QB 507: (1969) 2WLR1278(CA).https://t.me/LawCollegeNotes_Stuffs

380. 242Chapter6Mistake [S. 22]
£600for it. The company compromised the claimundertakingto pay
£385.But before paying, the company came to know of themisstatement
anddeclinedto pay.
The agreement of compromise was entered into under the common and
fundamentalmistakethatthe original policy was valid and binding, when
in fact it wasvoidableforthemisstatement.In Bell vLeverBros,theorigi
nalcontractof employmentwas supposed by the parties to be binding when
in fact it wasterminablefor the breaches of duty. The only difference was
thatin Bell the compromise amount had already been paid. TheCourtof
Appeal heldthatthe agreement was liable to be set aside on thegroundthat
thepartiesweremistakenas to afundamentalassumption.
Inanothersimilarcase before theCourtofAppeal^^afteracontracthad
been made for thepurchaseof apropertyat a relatively high price because
of itssuitabilityforoccupationand redevelopment, thepropertywas listed
by the State as being ofarchitecturalor historic interest. The purchaser
sought to avoid thecontracton the ground of common mistake because
unknownto thepartiesat the time ofthe'contractthepropertywas already
underconsiderationfor thepurposeof listing. But he was not allowed to
do so. Thepropertywas listed only after thecontracthad already been
signed. No relief was allowed under thedoctrineoffrustrationalso. Listing
was aninherentrisk, ofwhicheverypurchasershouldberegardedas being
aware. Theplaintiffshadbeen awarethatthe riskexistedandit was a risk
they had to bear. It couldnotthereforebe saidthattheperformanceof the
contractthatwouldbe called forwould,inconsequenceof the listing, be
radicallydifferentfromthatwhichhadbeenundertakenby theparties.The
principle would, therefore, seem to bethatacontractis void ab initio if its
subject-matteris essentially and radically different fromwhatbothcontract
ingpartiesbelieved it to be, providedthatthepartyrelying on themistake
hasreasonablegroundsfor hismistakenbelief.^^
To the same effect is thedecisionof theSupremeCourtinKalyanpur
LimeWorksLtdvStateofBihar-.^^
The State of Bihargrantedthe lease of a hill to one K. Co forquar
ryinglimestone.Thelease wasnotassignabletoanyoneelsewithoutthe
approvalof theGovernment.K.Co went intoliquidationanditsliquida
torassignedthe lease toanotherwithouttheapprovalof the State.This
provokedthe State toforfeitthe leaseandto offer it to theplaintiffsfor
aperiodof 20 years.K.Costartedproceedingsagainsttheforfeiture
andthesamewas held by the PrivyCouncilto beinvalid.K. Co was
65.AmalgamatedInvestment&PropertyCoLtdvJohnWalker & Sons Ltd, (1977) 1WLR164
(CA).
66.AssociatedJapaneseBankvCreditDulNuroS.A.,(1989) 1WLR255 (QB).Theprinciple
of this case was applied in WilliamSindallpicvCambridgeshireCountyCouncil,(1994) 1
WLR1016 (CA)wherethepartywasheldto beentitledtorescindthecontractfor acommon
mistakeastotheexistenceofasewer.
67. AIR1954SC 165;DalmiaJain& CoLtdvKalyanporeLime WorksLtd,AIR1952Pat 393.https://t.me/LawCollegeNotes_Stuffs

381. [S.22] Mistake as to nature of promise 243
restored to its lease and vacated after the expiry of its full term, that is
after about 11 years. The plaintiffs now claimed the lease in terms of the
agreementmadebeforetheforfeiturewasdeclaredto beinvalid.Butthe
Government allotted the same toanotherperson and the plaintiffstarted
the present proceedings.TheSupremeCourt held that the agreementwas
not void by reason of any mistake. The Government had the right to for
feitand to re-allot.Theforfeiturehavingbeendeclaredvoid,its right was
not wholly gone; it wasrestrictedonly by reason of the lease which had
still severalyears to run. In these circumstances it might have been open
to the plaintiffs to repudiate thecontractif they so liked, but the defend
ant could not certainly pleadthatthecontractwas void on thegroundof
mistakeandrefuse toperformthatpartof the agreement which it was
possible for it toperform.
Similarly, where the Governmentallottedcertainplots assumingthatthe
sittingtenantswould vacate them, but they refused to oblige, it was held by
the Allahabad HighCourt^®that"Section 20 does not apply to a case where
thecontractingparties have made no mistake as to any fact existing at the
makingof thecontractand it is complainedthatone of them is unable to
carryout hispartof thecontractonaccountof theunexpectedrefusal of a
thirdperson tocarryout his obligation underanotheragreement."
MISTAKEASTONATUREOFPROMISE
Theprincipleis wellestablishedbyauthoritiesthatwhenadeedof one
characterisexecutedunderthemistakenimpressionthatit is of adifferent
character,thenit is wholly voidandinoperative.^^Thuswhere a gift deed is
signedundertheimpressionthatit is only apowerofattorney,the deed is
inoperative.^" If amistakeof thiskindiscommontobothparties,the agree
mentis voidunderSection 20, thepartiesbeingmistakenaboutthe very
natureof thepromise.But morefrequentlyamistakeof thiskindisbrought
aboutby thefraudof oneparty.One of theparties,beingunderadutyto do
so, fails to disclose to theotherthetruenatureof thedocumentandthereby
induces him to sign the sameunderthe beliefthathe is signing someother
instrumentof adifferentnature.In such a casethereis norealagreement
as theconsentisnullifiedby themistake.Thisdistinctionhasbeenthus
indorsedby the SupremeCourt:^^"Thoughacontractorothertransaction
inducedbyfraudisnotvoid, but only voidable at theoptionof theparty
68. U.P.GovernmentvLalaNanhooMaiGupta,AIR1960All420.
69.Appannav]amiVenkatappadu,AIR 1953Mad611. See alsoMandakiniPundalikSalkerv
ChandrasenRaiker, AIR 1986 Bom 172 where theallegationthatunknownto him the girl
whom hemarriedwasillegitimateof herparentswas not proved and even ifproved,thecourt
heldthatitwouldnot have been amaterialfact.PremSingh vBirbal,(2006)5 SCC 353:
(2006) 2 KLT 863: (2006) 5MahLJ441,fraudulentrepresentationas to thecharacterof the
documentmakesit void,whenit is as to itscontents,thedocumentisvoidable.
70.SaratChandravKanailal,AIR1929Cal786.
71.DulariaDevi vJanardanSingh, 1990 Supp SCC 216: AIR1990SC1173:1990 All LJ 245.https://t.me/LawCollegeNotes_Stuffs

382. 244Chapter6Mistake [S.22]-
CASEPILOT
defrauded,there is a cleardistinctionbetweenfraudulentmisrepresentation
as to the character of the document as opposed to its contents. While in the
formercase thetransactionis void, in thelatterit is onlyvoidable."
There is not the type of "consent" as is required by Section 13. In a case
of thiskindbefore thePatnaHighCourt:^^
The plaintiff appointed the defendant to look after his cultivation
and his affairs, as he had become too old to manage them himself. The
defendant asked him to grant him a lease of his land. The plaintiff agreed
to it and placed his thumb-impression upon a deed which was in fact a
gift of the land.
Thecourtheldthedeedtobevoidabinitio.
In asimilarcase before theMadhyaPradeshHighCourt,^^anilliterate
lady who was the owner of farming land generally consulted her uterine
brotheron allimportantmatters.Once, findingthatsomestrangerswere
occupying her lands, she approached her brother, who advisedthatan appli
cationshouldbemadetotheCollector.HetookhertotheCollector'soffice
andobtainedherthumb-impressionsupon someblankpapers. These were
then registered as sale deeds in the name of some persons. On discovering
hermistakeshechallengedthetransactionandobtainedanorderthatthe
transactionwasvoidandthatshewasstilltheownerofherlands.Thecourt
said:"Thereis acleardistinctionbetweenafraudulentmisrepresentation
as to thecharacterof adocumentandas to itscontents.Wherethemisrep
resentationis as to thecharacterof thedocument,thetransactioniswholly
void."
Thisdistinctionwas developed by the SupremeCourtinNingawwav
ByrappaShiddappaHireknrabar^'*following the principleenunciatedin
FostervMackinnonJ^Followingtheserulingsagain inanothercase of the
same kind, where an illiteratewomanwas called upon by her son-in-law and
hisbrotherstoputherthumb-impressionupontwostamp-paperstelling her
thatshe wastherebygiftingheragriculturallandto herdaughter,whowas
heronlychildandone ofthepaperswasa saledeedtothembywhichthey
became theregisteredownersof theland,the SupremeCourtheldthatthe
documentwas anullitybyreasonof thefraudulentmisrepresentationas to
itscharacter.^^
Anagreementto pay money in finalsettlementunderacontractofinsur
anceinwhichtherewere falsestatementshas been held by theCourtof
Appealto bevoidableat theoptionof theinsurancecompany.^^
72.RajaSinghvChaichooSingh,AIR1940Pat201.
73.PartapvPuniyaBai,AIR1977MP108.
74.AIR1968SC956,958:(1968)2SCR797.
75.('1869)LR4CP704.
76.DulariaDevivJanardanSingh, 1990 Supp SCC 216: AIR 1990 SC 1173: 1990 All LJ 245.
77.MageevPennineInsuranceCoLtd,(1969) 2 QB 507: (1969) 2WLR1278,considered
EffectiveMistakeinLawofContract,(1963) 85 LQR 454. See alsoKaurvChiefConstable,
Hampshire,(1981)1WLR578,whereit was heldthatamistakeas to the priceinducedbyhttps://t.me/LawCollegeNotes_Stuffs

383. [S;22] Mistakeas to natureofpromise245
Wherethe contractfailstoexpressparties' intention
Whereanagreementasfinallymadefailstoexpressorembodytheagree
ment between the parties as originally made, it can be had rectified so as to
bringitinaccordwiththeintentionoftheparties.Aneasyillustrationisthe
decisionof the Court ofAppealin Hartog vColinandSheilds-7^
Thedefendantscontractedtosellto theplaintiff3000Argentinehare
skins,but by amistaketheyofferedthegoodsat somuchper pound
insteadof somuchperpiece.Thepriceperpiecewasroughlyone-third
that of apound.Thenegotiationsprecedingtheagreementtookplace
on thebasisofpriceperpieceand thatwasalsotheusualpracticeof the
trade. The buyers suedforthe goods.
SingletonLJ feltsatisfied"that it was a mistake on thepartof the
defendantswhichcausedtheofferto goforwardinthatway,and I am sat
isfiedthat anyone with any knowledge of the trade must have realisedthat
there was amistake.... The offerwaswronglyexpressed,and thedefend
ants bytheirevidence,and bythecorrespondence,havesatisfiedmethat the
plaintiff could not havereasonablysupposed that the offer contained the
offeror'srealintention."
Ifreliefofthis kindwasnotallowedtheresultwouldbe thatoneparty
would take an unconscentious advantage of the mistake of the other known
tohim.TheCalcuttaHigh Courtfollowedthisprincipleingrantingrelief
inNewIndiaRubberWorks (P)LtdvOrientalFire &GeneralInsurance
CoLtd-7'
Apolicyofinsurance,which hadexpired,coveredrisksarisingout
of fire, riot and strike. The company sent a renewal form to the assured
showing the premium for the above risks. The assured sent lesseramount
beingequal tocoverthefireriskonly.Thecompanyissuedapolicyin
usual termscoveringthe risks offire,riot and strike. Thefactorywas
destroyed by fire due to riot. The company contended that in so far as
the policypurportedto cover the risk of riot and strike, it was void for
mistake.
It was heldthatthe company was entitled to raise this defence. Thecourt
considered the principles of equity under which documents executedunder
mistakeareallowedtoberectifiedandthatinreferencetoaninsurance
policy such rectification would be possible even after the loss has occurred
becauseequity treats as done that which ought to have been done. The court
then consideredthe effectofSection26oftheSpecificReliefAct,1963,which
provides that an instrument can be rectified if through fraud or a mutual
mistake of the parties, thecontractdoes not express their real intention. The
wrong marking was not so fundamental as to destroy the validity of the contract of sale, but
merelyrendereditvoidable.
78.(1939) 3 Ail ER566.
79. (1969) 1CompLJ 153(Cal).https://t.me/LawCollegeNotes_Stuffs

384. 246Chapter6Mistake [S.22]
courtheldthatwhere onaccountof an error on thepartof apartyawritten
documentfailstoexpresstheircommonintentionit willbeacaseofmutual
mistake.The court further pointed out that thedefenceof mutual mistake
can beraisedeven where thedocumenthas becomeredundantbyreasonof
the occurrence of the loss and there is nothing left to be rectified, for other
wise the assured will be allowed to take the advantage of amistakewhich
ifpointedoutwouldhavebeenrectifiedat thepropertime.Thecourtrelied
uponitsownearlierdecision®"wherethedefendantwasallowedtoseekthe
rectificationof aconveyancein whichhe bymistakehappenedtoincludehis
homesteadwhenthatwasnottheintentionof theparties.
Theprinciplesrelatingto this matterhaverecentlybeenre-examinedby
the Court of Appealin JoselynevMssen,"where the court cited a passage
from an earlierjudgment,®^whereinit wasobservedthat "it is notsufficient
to showthatthewritteninstrumentdoes not represent their common inten
tion unlesspositivelyalso one can show what their common intention was".
Thefactsofthecasewere:
Theplaintiff,who shared ahousewith hisdaughter,proposedthat
sheshouldtakeover hiscar-hirebusiness.It wasmadeclearin the very
earlystageofnegotiationsthat if the proposal wasaccepted,the daughter
shouldpay all thehouseholdexpenses,includingtheelectricity,gas and
coal bills due in respect of the part of the houseoccupiedby herfather.
Thewrittencontractwhichfollowedfromthesediscussions,however,
failedtoimposeanyliabilityon thedaughterinrespectof thehousehold
charges.Afterhonouringthe oralagreementforsometime, sherefused
to meet theexpensesalthough she continued to draw the profits of the
business.
The plaintiffwas held entitledtorectificationso asspecificallyto impose
that liability on the daughter. One of thedifficultieswas the remarks of
DenningLJ in an earliercase,®^to the effectthatmere commonintentionis
not sufficient, it must have found expression in anoutwardagreement. He
said:"Therecould be nocertaintyat all in businesstransactionsif aparty-
whohadenteredintoafirmcontractcouldafterwardsturnroundandclaim
to have it rectified on the ground that the parties intended something differ
ent. He is allowed to prove if he can,thatthey agreed somethingdifferent."^'*
Referring to this passageRusselLJ commentedthatif this means to sug
gestthat an antecedent concludedcontract isnecessary,it would be contrary
to the views in Crane v HegemanHarrisCoInc.^^The view supported by
80.MahendraHathMukherjeevJogendraNathRoyChaudhury,(1897-98)2CWN260.
81.(1970)2 QB 86: (1970) 2WLR509 (CA).
82.SiMMONDSJ inCranevHegemanHarrisCoInc,(1971) 1WLR1390.
83.FrederickE. Rose(London)Ltdv William H. Pirn.Junior& Co Ltd, (1953) 2 QB 450 (CA).
84. See LovellandChristmasv Wall, (1911) 104 LT88,93per LordCozensHardyMRandper
BuckleyLJ but not that theyintendedsomething different.
85. (1971) 1WLR1390.https://t.me/LawCollegeNotes_Stuffs

385. [S. 22] Mistakeas tonatureof promise 247
otherjudgmentsis thatthereshouldbe aconvincingproofof anoutward
expressionofaccord.
Centrovincial'ssoHcitorsinvitedMerchantInvestorstoagreeto the
appropriate rental value of£65,000per annum at the review date of 25
December 1982 which should have read£12,600but Merchant Investors
werenotawareof themistake.MerchantInvestorsagreedto thefigureof
£65,000perannum.Centrovincialcontendedthatnocontractwas formed
becauseofmistakeandMerchantInvestorscontendedthatacontracthad
beenformed.It washeldthat it is awell-establishedprinciplethat ordinar
ily anoffer,whereunequivocallyacceptedaccordingto itspreciseterms,
willgiveriseto alegallybindingagreementas soon asacceptanceiscom
municatedtotheofferorandcannotthereafterberevokedwithoutthe
consentof the other party.Althoughthe law isconcernedwith theobjec
tive appearance as well as the actual fact of agreement, if the intention
of thepartiesisclearthen theirintentionwillprevailoveranyobjective
appearance.
Where neitherpartyhad disclosed hisintentionas to the effect of the
agreementbutcoincidentallyboth entertained the same thought as to the
effect of theirbargain,it was heldthatsuch undisclosedintentionwas
irrelevant for the purposes of interpretation of their contract. It is neces
sary that eachpartyshould know what is agreed at the time the contract is
made.®^
Documentsmistakenlysigned ornonestfactuni
Thedefenceof non estfactumenablesa person who hassigneda contract
to saythatit is not his document because he signed it under some mistake.
It wasevolvedby the courts torelieveilliterate or blind people from the
effect of a contract which they could not read and which was not properly
explained tothem.'®But subsequently it was extended to others. This exten
sionoccurredthroughthe judgment ofBylesJ inFostervMackinnon-P
"It seems plain, on principle and onauthority,that,if a blindman,
or anianwho cannot read, or who for some reason (not implying negli
gence)forbears to read, has awrittencontractfalsely read over to him,
the readermisreadingit to such a degreethatthewrittencontractis of a
naturealtogetherdifferent from thecontractpretendedto be read from
the paper which the blind or illiterate manafterwardssigns; then, at least
iftherebe no negligence, thesignaturesoobtainedis of no force. And it
is invalidnotmerely on thegroundof fraud, wherefraudexists but on
the groundthatthe mind of the signer did not accompany the signature;
86.CentrovincialEstatesPic.vMerchantInvestors'AssuranceCoLtd,1983 ComLR158.
87. NewHampshireInsuranceCo vMGN,The Times, July 25, 1995 (CA).
88. Noorudeen v Umairathu Beevi, AIR 1998Ker171, signature of blind person by telling that
the document was ahypothecationdeed whereas in fact it was a sale deed ofproperty,nullity.
89.{1869)LR4CP704.https://t.me/LawCollegeNotes_Stuffs

386. 248Chapter6Mistake
in otherwords,that heneverintendedtosignandthereforeincontempla
tion oflawneverdidsign,the contracttowhichhisnameisappended."
Thelearnedjudgedidnotmakeanydistinctionbetweenmistakeastothe
nature or character of the contract as opposed to its terms, for in a laterpart
ofhisjudgmenthesaid:"Butthepositionthat,ifagrantororcovenantorbe
deceived or misled as to theactualcontentsof the deed, the deed doesnot
bind him, is supported by manyauthorities."®"
The facts of the case were that a person was induced to sign the back
ofapaper,thefaceofwhichwasnotshowntohim,andhewastoldthat
itwasanordinaryguaranteethelikeofwhichhe hadsignedbeforeand
under whichnoliabilitycameto him,when,in fact, the paper was a bill
ofexchangeand hewassuedbyaholderinduecourseas anindorser.
Thecourtheldthat"thedefendantneverintendedto signthatcontract
or any such contract. He never intended to put his name to any instrument
that then was or thereafter might become negotiable. He wasdeceivednot
merelyas to thelegaleffect,but as to the actualcontentsof thedocument.
It was as if he hadwrittenhis name on a sheet of paper for the purpose of
franking a letter, or in alady'salbum, or on an order foradmissionto the
TempleChurch,or on theflyleafof abook,andtherehadalreadybeen,
without hisknowledge,a bill ofexchangeor a promissory notepayableto
orderinscribedon theotherside ofthepaper."
Theprincipleof thiscasehasbeenwithsomequalificationaffirmedby
theHouseof Lords in Gallie vLee}'^
Mrs G, a widow, then agedseventy-eightyears, wanted to help her
trustednephewandintendedto transfer to him herhouseon the condi
tion that he was to permit her toresidethere for the rest of her life and
shehandedthe title deeds to him. The nephew came to her with one Lee
and Leetold her to sign a document sayingthat it was a deed of gift to the
nephewandeverythingwasinorder.Shehad brokenherspectaclesso she
could not read. Sheput her signature which was witnessed by her nephew.
The document was an assignment in favour of Lee. He mortgaged the
house with the building society and, having defaulted in payment, the
society claimed possession. She pleaded non est factum.
The House of Lords, affirming the decision of theCourtof Appeal, held
thatshe was bound by the contract. It was only voidable by reason of the
misstatements made by Lee, but it was too late to avoid once the building
society had advanced a sum of money on the house in good faith. In her
ownstatementsto thecourtshe saidthatshethoughtthathernephewand
Lee would raise money on the house andthatshe would do anything to
help hernephew.She was not, therefore, mistaken about the character of
90. SeeEdwardsvBrown,(1863) 2H6cC175: 9 LJ (OS) Ex 84.
91.(1970)3WLR1078(HL).https://t.me/LawCollegeNotes_Stuffs

387. [S. 22] Mistakeas tonatureofpromise249
the document. The only thing wasthatit was put to a use which she did not
expect. Relying on this evidence in theCourtof AppealSalmonLJ feltthat
shewouldhave executed theassignmenttoMrLee even if thetransaction
had been properly explained to her. LordDenningMRreached the same
conclusion but was notpreparedto be fettered by thedistinctionbetween
characterandcontents.But LordHodsonwasnotpreparedto accept this
rejection of a principle which issupportedbyauthoritiesand is sound in
principle."Thedistinctionis avaUdone inthatit emphasisesthatpoints of
detailin thecontentsof adocumentarenotto be relied on insupportof a
plea of non est factum. LordDenningMR did, however,demonstratethat
using the words as terms ofartfor testpurposesmay produceludicurous
results; e.g., a mistake as to theamountof money involved may be described
as a mistake as to contentsalthoughthe difference between two figures may
be so great as to produce a document of an entirely different character from
the one the signerintended."
His Lordshipfurtherpointedoutthatthe plea of non est factum, requires
clear and positive evidence before it can be established, and cited with
approval the statement ofDenovanLp-that "the plea of non est factum
is a plea which must necessarily be kept withinnarrowlimits". To take an
example, the man who in the course of his businesssigns a pile of documents
withoutchecking them takes the responsibility for them by appending his
signature. It would be surprising if he was to be allowed to repudiate one of
those documents on thegroundof non est factum. The person signing has
totakecare.^^
LordWiLBERFORCEemphasisedthatthe law in this respect mustretain
flexibility because it has to reconcile two conflictingobjectives:relief to a
signer whose consent isgenuinelylacking; and protection to innocent third
party who have acted on an apparently regular and properly executed docu
ment. Trying to work out the principleson which the plea of non est factum
should be admissible,his Lordship said: "In my opinion, a document should
be held to be void (asopposed tovoidable)only when the elementof consent
to it is totally lacking, i.e. moreconcretely,when the transaction, which the
documentpurportsto effect isessentiallydifferent in substance or in kind
from thetransactionintended. Many other expressions, or adjectives could
beused—'basically',or'radically'or'fundamentally'."
His Lordship then added three qualifications to the principle.Firstly,in
the case of fraud, the principle of Foster v Mackinnon will apply and the
transactionwould be void. Secondly, a mancannotescape from the conse
quences,asregardsinnocentthird parties, ofsigningadocument,ifbeing
92.MuskhanFinanceLtdvHoward,(1963)1 QB904(CA).
93. TheSupremeCourt hassimilarlylaid downin BiharState ElectricityBoard v Green Rubber
Industries, (1990) 1 SCC 731; AIR 1990 SC 699 that a person who signs a document which
containscontractualterms is normally bound by them though he had not read them or was
ignorantof precise legal effects.https://t.me/LawCollegeNotes_Stuffs

388. 250Chapter6Mistake [S. 22]
amanofordinaryeducationandcompetence,he chooses to sign itwithout
informinghimselfof itspurportsand effect.Thirdly,there is the case where
the signer has been careless, in nottakingordinaryprecautionsagainst
beingdeceived.'''
Commentingon this case it isobservedinChittyonContracts:'^"The
law on this subject was completely reviewedandrestatedby theHouseof
Lords inSaundersv AngliaBuildingSociety^^and thedistinctionbetween
thecharacterornatureofadocumentandthecontentsofthedocumentwas
rejected asunsatisfactory.It was stressedthatthe defence ofnonestfactum
was not lightly to be allowed where a person of full age and capacity had
signed awrittendocumentcontainingcontractualterms. But it was never
theless heldthatin exceptionalcircumstancesthe plea was available so long
as thepersonsigning thedocumenthadmade afundamentalmistakeas to
thecharacteror effect of the document.TheirLordshipsappearedto have
concentratedon thedisparitybetween the effect of thedocumentactually
signedandthedocumentas it wasbelievedto beratherthanonthenature
of the mistake, stressingthatthedisparitymust be'radical','essential','fun
damental'or 'verysubstantial'."
The SupremeCourtof India considered the principle ofFosterv
MackinnoninNingawwav ByrappaShiddappaHirekurabar^''and con
cluded on the factsthatwhere ahusbandobtainedthesignatureof his wife
to a gift deedwithoutmakinganymisrepresentationas to itscharacter,but
subsequently included two more plots in the deed, thetransactionwas only
voidableandnotvoid.
The SupremeCourtdid not approve the finding of thearbitratorthatthe
signaturewasmistakenlyaffixedon thedocumentandthereforenotbind
ing. Thecourtsaidthatwhen a person signs a document, thepresumption
is that he has read the document properly and understood it and only then
affixed his signature unless there is a proof of force or fraud. Such a pre
sumption is stronger in the case of businessmen. There was no allegation of
force or fraud in thepresentcase.'®
LIMITATIONS
Mistake operates to avoid an agreement subject to the following
limitations:
94. TheprincipleofFostervMackinnon,(1869) LR 4 CP 704 has been followed inSaniiiBibiv
Siddik Hossain, AIR 1919Cal728 and Brindaban Mishra Adhikary v Dburba Charan Roy,
AIR 1929 Cal 606 and considered inNingawwav ByrappaShiddappaHireknrabar,AIR
1968SC956,958:(1968)2SCR797.
95. 194-95 (15th Edn)Vol1, Chap 5 under S. 343, cited by S.S.SubramaniJ, inSelvaraju
RoundervSahademRounder, 1997 SCC OnLine Mad 126: (1997) 2LW197.
96.(1970)3WLR1078(HL).
97. AIR 1968 SC 956: (1968) 2 SCR 797. An illiterate woman signing under the impression that
it was wakf, when, in fact, it was a sale deed. Held, void,AsbokKumar v Gaon Sabha, AIR
1981All222.
98. GrasimIndustriesLtdvAgarwalSteel, (2010) 1 SCC 83.https://t.me/LawCollegeNotes_Stuffs

389. [S.22] Limitations251
1. Mistake ofbothparties
UnderSection20 anagreementisvoidby reason of mistakewhen both
parties are mistaken as to a matter of factessentialto theagreement.This
is further supplemented by the declaration in Section 22that"acontractis
notvoidablemerelybecauseitwascausedbyoneof thepartiesto itbeing
underamistakeastomatteroffact".Thus,wheretheGovernmentsoldby
auction the right offisheryand the plaintiffofferedthehighestbid under
theimpressionthat the right was soldfor three years,when in fact it was for
one year only, he could not avoid the agreement because it was his unilateral
mistake.''Asto whatisthe nature ofaunilateralmistakeasprovidedunder
Section22 oftheContractAct,wouldbebestexplainedbythecaseofHaji
AbdulRahmanAllarakhiavBombayandPersiaSteamNavigation
There theplaintiffschartered asteamerwhich was to sail from Jedda on
"10thAugust,1892(fifteendaysafter the Haj)".The plaintiffsbelievedthat
"10thAugust,1892"correspondedwith thefifteenthdayafter the Haj. The
defendanthad no suchbeliefandcontractedonlywithrespectto theEnglish
date,viz.,"lOthAugust,1892".Theplaintiffssubsequentlydiscoveredthat
theirbeliefwasmistakeninasmuchasfifteendaysafter Hajfellon adiffer
ent day and on the basis ofthatthey sued the defendants forrectification
of thecharterparty.Thecourtheldthatit was aunilateralmistakeand the
plaintiffswerenot entitledto anyrelief.Similarly,whereatenderer,in calcu
lating the pricewhich he wanted to charge, happened, by mistake, to insert
wrongfigures,and the authorityacceptedthe tender without knowing the
mistake,norectificationwasallowed.^"^
It should,however,be borne in mind that where the mistake, even if
it is of onepartyonly, has the effect of nullifying consent as defined in
Section13,nocontractwillarise.Thereis norealconsentwheremistake
preventsthe parties from coming to anagreementupon the same thing in
the same sense. For an agreement to be avoided on the basis ofunilateral
mistake, it must be shown: first,thatonepartyerroneously believedthatthe
documentsoughtto berectifiedcontaineda particular term orprovision,or
possiblydid not contain a particular term orprovisionwhich,mistakenly,
it did not contain; second,thatthe otherpartywas aware of the omission
or theinclusionand that it was due to amistakeon the part of one party;
third,thatthepartywho wasawareof themistakeomittedtodrawthe
mistake to the notice of theotherpartyand there must be afourthelement
involved, namely,thatthemistakemust be onecalculatedto benefit one
party.Applying these principles to the facts of the case inThomasBates
& SonLtdVWyndham(Lingerie)Ltd^°^thecourtcame to theconclusion
thatwherealeasedeedcontainedarbitrationclausebutthenewdeedwhich
99.A.A.Singh vUnionofIndia,AIR1970Mani16.
100.ILR(1892) 16Bom561.
101. Higgins vNorthamptonCorpn,(1927) 136 LT 235.
102.(1981) 1WLR505(CA).https://t.me/LawCollegeNotes_Stuffs

390. 252 Chapter 6 Mistake [S.22]
was prepared by the landlord did not contain thatprovisionwithout the
knowledgeof the landlord and though thelesseewas aware of the omission
he did notdrawit to theattentionof thelandlord,thelandlordwasentitled
to seekrectificationof thedocumentforinsertingarbitrationclause.
The mistake of both parties of which Section 20 speaks may be either
commonormutual.Theclassificationofmistakesintermsof"common",
"mutual"and"unilateral"is adopted by Cheshire and Fifoot,TheLawof
Contract.The expression "common mistake" is thus explained in this
learned work: "In common mistakebothpartiesmake the same mistake.
Each knows theintentionof theotherand accepts, but each ismistaken
aboutsome underlying andfundamentalfact. Theparties,for example, are
unawarethatthesubject-matterof theircontracthas alreadyperished."^"^
Commonmistakewill definitelyrendertheagreementvoid if theparties
aremistakenaboutthe existence of thesubject-matter.This type ofmistake
occurredinCouturiervHastie^°''where thesubject-matterunknownto the
parties was extinct at the time of the agreement; inStriklandvTurner^^^
payment of annuity upon the life of a person who was already dead; in
PritchardvMerchantsandTradesmenMutualLifeAssuranceSociety,^^^
where a premium was paid for the revivalof a lapsed policy at a time when
theassuredwasalreadydead; inGallowayvGalloway,wheretheparties
made aseparationdeed under themistakenassumptionthatthey were in
factmarried.
The scope of this kind ofmistakeas to the validity of thecontracthas
been considerably reduced since the decision of the House of Lords in Bellv
Lever BrosLtd^°^and itsinterpretationbyDenningLJinSollevButcher.^°^
Itsoperationhas been growingly confined to cases where thesubject-matter
does not exist or is vitallydifferentincharacter(asopposedto quality)than
what it was supposed by the parties to be. Thus in McRae vCommonwealth
DisposalsCommission,^'^'^the defendants were not allowed to escape from
the consequences of selling a ship supposed to bestrandedat a described
place when theplaintiffdiscovered at a considerable expensethatthere was
no such ship. ThecourtcitedDenningLJ in Solle vButcher^^^to the effect:
"Neitherpartycan rely on his own mistake to say it was a nullity from
thebeginning."DenningLJreinforcedhis views inLeafvInternational
103.LawofContract.{8thEdn,1972)202.M.RathnamvSusheelamma,AIR2009Kant79,
bothpartiesthoughtthatDevelopmentAuthority'sletterofallotmentwasequivalentto title
to thepropertyand theyenteredinto saletransaction.The sale was held to be voidbecause
theallotteewasnotatthetimetheowner.
104.(1852)8Exch40:155 ER1250.
105.(1852)7Exch208.
106.{a858)'3CBNS622.
107.(1914)30TLR531.
108.1932AC 161(HL).
109. {1950) KB571(CA).
110.(1951)84 CLR377(Aust);Reported,SmithandThomas,A-CasebookonContract{4th
Edn) 345andnoted,{1952) 68LQR30-34:15ModLR229-32.
111.(1950)KB671:(1949)2 All ER1107(CA).https://t.me/LawCollegeNotes_Stuffs

391. [S.22] Limitations253
Gallories}'^^A picture was sold, thesellerrepresentingthat it was byJohn
Constable, when it turned out to be different. The picture was thus essen
tially different from what it was supposed to be, yet thecontractwas held
to be only voidable. In a still subsequent case Frederick E. Rose (London)
LtdVWilliamH. Pirn.Junior& CoLtd,^^^where the parties were confused
between"horsebeans"and "feveroles".DenningLJ explained the effect of
commonmistakeinthesewords:"Whatistheeffectinlawofthiscommon
mistake on thecontractbetween the plaintiff and defendant? I am clearly
of opinion that the contract was not a nullity. It is true thatbothparties
wereunderamistakeandthatmistakewasofafundamentalcharacterwith
regardto thesubject-matter.The goodscontractedfor—horsebeans—were
essentiallydifferentfromwhatthey were believed tobe—'feveroles'—Ne
vertheless, the parties to alloutwardappearances were agreed. They had
agreed with the quite sufficientcertaintyon acontractfor the sale of goods
bydescription,namelyhorsebeans."
Theexpression"mutualmistake"is thus defined in the samework:'"
"Inmutualmistake,thepartiesmisunderstandeachotherandare at
cross-purposes.A, forexample,intendsto offer his FordCortinacar for
sale, butBbelievesthatthe offer relates to the FordZephyralso owned by
A."RafflesvWichelhaus^^^involved amistakeof thiskind."^
2.Erroneousopinionaboutvalue ofsubjectmatter
Theexplanationto Section 20 providesthat"anerroneousopinionas
to the value of thethingwhichforms thesubject-matterof theagreement
isnottobedeemedamistakeastoamatteroffact".Inacasebeforethe
Travancore-CochinHighCourt:"''
Apropertywhichwas subject to asubsistinglease was sold. The lessee
hadtherightto receive value of theimprovements,but theagreementof
sale was silentaboutthis. The buyerwantedto have theagreementset
aside on thegroundofmistakeaboutthis right.
Butthecourtheld"thattherewasnomistakeandthateveniftherewasa
mistakeit wasnotas to amatterof factessentialto theagreementfor sale.
It could only be anerroneousopinionwhichthepartieshadformedas to the
real value ofthesubject-matterandwouldnotbedeemedto be amistake
vitiatingtheagreement."
112.(1950)2 KB 85 (CA).
113.(1953) 2 QB450(CA).
114.Cheshire&Fifoot(8thEdn1972)203.'
115.(1864)2H&C906:159ER375.
116.ExCh(1864) 2H&C906:159ER375.
117.KochavareedvMariappa,AIR1950TC 10;StateofKarnatakavStellarConstructionCo,
AIR2002Kant6, aroadbuildingcontractorwasnotallowedtoclaimadditionalpayment
byreasonof the factthathe wasmistakenaboutthedistancefromwhichthematerialhad to
bebrought.Thecontractrequiredhim to study the work site andavailabilityofmaterial.https://t.me/LawCollegeNotes_Stuffs

392. 254Chapter6Mistake [S. 22]
3.Mistakeoffactandnotoflaw
Mistakeshouldbe of factandnotof law, forSection21declaresthat"a
contractis not voidable because it is caused by a mistake as to any law in
forceinIndia".Thesectioncarriesanillustration:
A and B make acontractgrounded on the erroneous beliefthatapar
ticulardebt isbarredby theIndianLaw ofLimitation;thecontractisnot
voidable.
A mistake as to the effect ofregistrationupon the validity of adocument
has been regarded by theSupremeCourt as a mistake oflaw."^But a mis
take as to a foreign law will avoid. In the case of a Governmentgrant,the
grantee claimedperpetualright of possession under the wrong assumption
of factual aspects. The court said that a mistake in construing the terms of
a grant could not be termed as "mistake of fact". The contract would not
beavoided.^"
118.KalyanpurLime Works Ltd v State of Bihar, 1954 SCR 958: AIR 1954 SC 165; Ganga
Retreat& Towers Ltd v State ofRajasthan,(2003) 12 SCC 91, at the time of sale build
ings were in accordance with the law. No guarantee could be given that laws would not be
changedfor thefuture.
119.M.R.BalakrishnanvGovtofKarnataka,AIR 2010NOC1063 (Kant).
EBC
Explorer'
-Visitebcexplorer.comtoaccesscasesreferred
to inthebookthroughEBCExplorer™on
SCCOnline®;alongwithupdates,articles,videos,
blogsandahostofdifferentresources.
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•BellVLeverBrosLtd,(1932) AC 161 (HL)
•NingaivwavByrappaShiddappaHireknrabar,AIR1968 SC 956:
(1968)2SCR797
• PhillipsVBrooksLtd,(1919) 2 KB 243
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

393. 7
LegalityofObject
The fourth and the last requirement for the formation of a validcontract
is that parties mustcontractfor a lawfulobject.Anagreementthe objectof
whichisopposedto the law of the land may be either unlawful orsimply
void,dependingupon theprovisionof the law to which it isopposed.
UNLAWFUL AGREEMENTS
Section 23 renderscertainconsiderationsand objects asunlawful.
S. 23.Whatconsiderationsandobjectsarelawful,andwhatnot.—The
considerationorobjectof anagreementis lawful, unless —
it isforbiddenby law; or
is of such a nature that, ifpermitted,it woulddefeattheprovisions of any
law;or
isfraudulent;or
involves or implies injury tothepersonorpropertyofanother;ortheCourt
regardsit as immoral, oropposedto public policy.
Ineachofthesecases,theconsiderationorobjectof anagreementis said to
be unlawful. Everyagreementof whichtheobjectorconsiderationis unlawful,
isvoid.
Illustrations
[a) Aagreesto sell hishouseto Bfor10,000rupees.HereB'spromise to paythesum of
10,000rupeesistheconsiderationfor/A'spromiseto sellthehouse,and,yA'spromiseto
sellthehouseistheconsiderationfor B'spromiseto paythe10,000rupees.Theseare
lawfulconsiderations.
(fe)Apromisesto pay B 1000rupeesattheendof sixmonths,if C,whoowesthesum to6,
fails to pay it. Bpromisestogranttimeto Caccordingly. Here,thepromiseof eachparty
istheconsiderationforthepromiseoftheotherparty, andtheyare lawfulconsidera
tions.
(c)Apromises,for acertainsum paid to him byfi,to makegoodto Bthevalue of his ship if
it iswreckedon acertainvoyage.Here A'spromiseistheconsiderationfor B'spayment,
andB'spaymentistheconsiderationfor/A'spromise,andtheseare lawfulconsidera
tions.
(d)ApromisestomaintainB's child, and6promisesto pay A1000rupeesyearly forthe
purpose.Here,thepromiseofeachpartyistheconsiderationforthepromiseofthe
otherparty.They are lawfulconsiderations.
(e) A,BandCenterinto anagreementofthedivisionamongthemofgainsacquired,or to
beacquired,bythembyfraud.Theagreementis void, as itsobjectisunlawful.
[255]https://t.me/LawCollegeNotes_Stuffs

394. 256Chapter7LegalityofObject [S.23]
(f)Apromisesto obtain forBan employment in the publicservice,and Bpromisesto pay
1000rupeestoA.Theagreement isvoid,astheconsiderationforit isunlawful.
(g)A,beingagent for alandedproprietor,agreesformoney,withouttheknowledgeof
hisprincipal,to obtain for Ba lease of land belonging to hisprincipal.The agreement
between Aand Bisvoid,as it impliesa fraud by concealment, byA,on his principal.
(/))ApromisesBto drop aprosecutionwhichhehas institutedagainst Bfor robbery and
Bpromisesto restorethe valueofthings taken.The agreement isvoid,as its object is
unlawful.
(/)/I'sestate is sold for arrears of revenue under theprovisionsof an Act of theLegisla
ture,bywhichthe defaulterisprohibitedfrompurchasingthe estate.B,upon an under
standing withA,becomes the purchaser, and agrees to convey theestateto A upon
receivingfrom himthe pricewhichBhas paid.The agreement isvoid,as it renders the
transaction,in effect, a purchase by the defaulter, and would sodefeattheobjectof the
law.
(J)A,who isB'sMukhtar,promisestoexercisehisinfluence,assuch,with BinfavourofC,
and Cpromisesto pay1000rupees toA.The agreement isvoid,because it isimmoral.
(k)A agrees to let her daughter to hire to B for concubinage. The agreement is void,
because it isimmoral,though the letting may not be punishable under the Indian Penal
Code(XLVof1860).
Objectandconsideration
The sectioncoversthe illegalityof both the object of the contract and the
considerationfor it. The"object"and"consideration"may in some cases
be the same thing but usually they are different. For example, where money
is borrowed for the purpose of the marriage of a minor, the consideration
for thecontractis the loan and the object, themarriage.In a case of this
kind before theMadrasHighCourt,^thecourtfoundthatthemarriagein
questionwas hit by theprovisionsof the Child Marriage Restraint Act of
1929. "The purpose for which the guardian borrowed the money is to cele
brate the marriage of a child which is anoffenceunder the Act." Thus, the
object was to defeat the provisions of the Child Marriage estraint Act. The
court relied upon the earlier decision of the Calcutta High Court inJaffar
MeherAliv Budge BudgeJute MillsCo^where a debtortransferredcertain
property to one of his creditors, the object being to give him preference
overothercreditorsandSaleJstatedthe differencebetween"object"and
"consideration":
The word 'object' in Section 23 of theContractAct was not used in
the same sense as'consideration',but was used asdistinguishedfrom con
sideration and means'purpose'or 'design'. If then thepurposeof the
parties was to defeat the provisions of the Bankruptcy Law, there can be
1.ChandraSreenivasaRao vKorapattiRajaRamaMohanaRao, AIR 1952Mad579. There is
nopresumptionofillegaHty.Such apresumptioncannotbe raised except where it iswarranted
by rules relating to presumptions. Apresumptionoflegality—notapresumptionof illegality
is the rule. The mere possibility oftransgressionof law is not a ground for sayingthatthe
agreement offends S. 23. The agreement must be shown to be ex facie illegal or capable of
being performed onlythroughillegal means.MathaiGeorge vMathewChacko, (1987) 1 KLT
342.
2.ILR(1906)33Cal702.https://t.me/LawCollegeNotes_Stuffs

395. [S. 23] Unlawfulagreements257
nodoubtthatthetransferwouldbeinoperativeunderthe provisions of
Section 6 of theTransferofPropertyAct.
1.Forbiddenbylaw
Wheretheobjectof anagreementisforbiddenby law,theagreementis
void."Law"inthisconnectionmeansthelawfor thetimebeing in force in
Indiaand,therefore,includesHinduandMohammedanlawsalsoandalso
principlesofunwrittenlaw.^A simpleillustrationis the sale ofliquorwith
outlicence.Thesale is voidandthepriceirrevocable.''
Violationoflicencesandpermits
Cases on thispointhave mostly been found inagreementsinvolvingbreach
of laws enacted for theprotectionorpromotionof public interest. Reference
may be made to only one such casebeforetheMadrasHighCourt.^
Theplaintiffwas licensed under an Excise Act to work a liquor shop.
TheActforbadethesale,transferorsub-leaseofthelicenceorthecre
ation of apartnershiptorunthe shop. Theplaintifftook thedefendant
intopartnership.
Thepartnershipwas held void as it would defeat the policy of the law if
unapproved persons could find their way into working liquorshops.®An
agreementindirectlydefeating the provisions of an Act would be equally
void.^Much, however, depends upon the object of aparticularstatuteand
the object of the agreement as interpreted by the court. If the intention of
Legislature is to forbid an act in public interest, an agreement to do the
forbidden act will obviously bevoid.^But if theintentionis merely to reg
ulate an act by prescribingcertainterms andconditionsand formalities, a
3.GherulalParakhvMahadeodas,AIR1959SC781,786:(1959) 2SCR406,417.
4.BoistubChurnNaunvWoomaChurnSen, ILR(1889-90)16Cal436. See alsoKateshwar
MittalKamathv K.RangappaBaliga& Co, AIR 1959 SC 781: (1959) 2 SCA 342; Ajit
Singh V Kakbhir Singh, AIR 1992P&cH193, a clog on the equity of redemption (95 yrs)
violates Transfer ofPropertyAct and is, therefore, unlawful under S. 23; Denzyl Winston
Ferries v AbdulJaleet,AIR 1992 AP 246: (1992) 2 An LT 144, sale of excess landwithout
obtaining permission of competent authority under Urban Land (Ceiling and Regulation)
Act, 1976, held unlawful.GopalLaiv BabuLai,(2004) 4 CLT 161 (Raj DB), a kind of
compromise which is barred by Order 23, Rules 3, 3-A and S. 96(1), CPC, not allowed to be
enforced.
5.NandlalvThomasJ.William,171IC948.
6.ThithiPakurdasuvBheemudu,ILR (1903) 26Mad430,involvinganagreementforbidden
byMadrasAbkari Act (1886). Apartnershipfor conducting business under a Government
licencegranted to an individual for retail sale of country spirit which was contrary to the pro
hibitioncontainedin therelevantStateExciseAct was held to beunlawfulandvoid,BiharHal
JaiswalVCIT,(1996) 1 SCC 443.
7. BehariLallShaha vJagodish Chunder Shaha, ILR (1904) 31 Cal 798. A restraint on sub-let
ting, sale or transfer does not,however,excludethe taking in of a partner. See Gauri Shanker
VMumtazAliKhan, ILR(1980)2All 411;ChampseyvGordhandas,1917 SCCOnLineBom
64: AIR 1917 Bom 250, which went up to the PrivyCouncil,AIR 1921 PC 137.
8. Pollock,PrinciplesofContract,adopted by Full Bench of theHyderabadHighCourtin
BabiahvMohdAbdusSubhanKhan,AIR1954Hyd156.https://t.me/LawCollegeNotes_Stuffs

396. 258Chapter7LegalityofObject [S. 23]
contractto do the actwithoutfulfiUingthestatutoryrequirementsmay not
itself be void, even if thepartieshave to pay apenakyfor thebreachof the
statute.^ABombayHighCourtdecision^"illustratesthepoint:
Theplaintiffwas a lessee ofcertaintollsundertheBombayTolls
Act,1875.Oneoftheconditionsoftheleasewasthatthelesseeshould
not sublet the tolls to anyotherpersonwithoutthepermissionof the
Collector.A fine ofRs200waspayablefor abreachof thecondition.The
plaintiffcontractedwiththedefendanttosubletthe toll tohimwithout
obtainingthenecessarypermission.
Thequestionwaswhetherthe sub-lease was void. Thecourtheldthatit
wasnot.Theobjectofthestatutewasnottoforbidsuchtransactions.Itwas
"anAct passed for the benefit of the revenue and not an Act for theprotec
tionof publicmorals".Thetransactionmay be void asagainsttheCollector,
butbetweenthepartiesitstands."
Where an Act or Rules madethereunderprohibitsale ortransfer,the
licenseecannotform apartnershiptoworkthe licence asthatalsoamounts
to atransfer.^^In asubsequentFull Benchdecision"theMadrasHighCourt
furtherpointedoutthat"irrespectiveof the factswhetherthecontractfor
partnership was entered intobeforethelicencehad been granted or subse
quent to the issue of the licence, the result would be the same. Thepartner
shipmustbedeemedto be voidabinitio.
The decisions of the BombayHighCourt,however, havestrucka differ
ent note. In Champsey vGordhandasKessowji,^'*a licence granted under
9. See, for example,AmritsarRayon & Silk Mills Ltd v Amin Chand Sajdeh, (1987) 2 PLR 253,
violation of the regulatory requirements of S. 299 of the Companies Act, 1956 does not make
thecontractunlawful.
10. Bhikanbhai vHiralal,ILR(1900) 24 Bom 622; Waman Shrinivas Kini v Ratilal Bhagwandas
& Co, AIR 1959 SC 689; 1959 Supp (2) SCR 217, an agreementcontraryto tenancy laws.
11!See alsoXJmacharanShaw & Bros vCIT,(1959)37ITR271(SC),where an agreement to
take apartnerforrunninga route permit was held valid. Followed inDayabhai& CovCIT,
AIR1967MP 13. Anagreementto leaseequipmentinsteadof selling it would beunlawfulif
the dominant purpose was evasion of sales tax laws. See B-Trak Sdn Bhd v Bingkul Timber
Agencies, (1989) 1MalaysiaLJ 124HighCourtof KotaKinabalu.NutanKumarvAddl
DistrictJudge, (2002) 8 SCC 31: AIR2002SC 3456, anagreementof lease of land in viola
tion of the Rent Control Act was held to be void. Thelesseehad no status and wasejectable.
He was like a trespasser. A suit for his ejectment was not barred by S. 23.
12. So held by a Full Bench of the Madras High Court in ChavaRammanayuduv Suryadevara
Seetharamayya, ILR(1935)58 Mad 727. The decision was under the Madras Abkari Act,
1886.SatchidanandaSamantavRanjanKumarBasu, AIR 1992Cal222,cinemahall
licence, partnership formed to run it, held void.WBCinemas (Regulations) Act, 1954 and
rules framed under it; MotiLaiChunniLaiv CIT,(1987)1 Raj LR 737,liquorlicencegranted
jointly to two persons, admitting more into partnership, void.
13.VeluPadayachivSivasooriamPillai,ILR 1950Mad987.
14. AIR 1917 Bom 250.MacleodJ relying uponAllahabadFull Bench decision inGauri
ShankervMumtazAltKhan,ILR (1980) 2 All 411. ACalcuttadecisionis to thesameeffect.
Gobardhan Chakraborty v Abani Mohan, AIR 1991 Cal 195. A partnership to run a munic
ipalstall,held illegal.RasamoyChowdhuryvAnilKrishnaDawn,AIR 1988 Cal 55. But an
agreementby theholderof amotorvehiclelicensedundertheMotorVehiclesAct tosharehishttps://t.me/LawCollegeNotes_Stuffs

397. [S. 23] Unlawfulagreements259
the Bombay Salt Act, 1890,whichalsoprohibitedtransferof every kind and
the licenseeadmittedhisbrothersintopartnershipwith him to work the
licence, thecourtheld"thattheadmissionof apartnertosharein theprofits
couldnotbeconsideredas asublettingoralienatingapartof theprivilege
unlesstherehadbeen adocumentdirectlytransferringto thepartnersa
partof therighttomanufactureor vend".Theauthoritiesofthiskindwere
held by theCalcuttaHighCourtto benotapplicable to a case inwhichthe
statuteor the rules madeunderitprovidedexpresslythatthetakingin of a
partnerwouldamountto a deemedtransferof the licence.
All suchauthoritieswerereviewedbytheCalcuttaHighCourtin
MafizuddinKhanChowdhuryvHabibuddinSheikh,^^wherethecourt
emphasisedthatdecisions must rest on the definiteness ofprohibition
againstsale etc. Here a licence wasgrantedunderthe Bengal SilkControl
Order,1945,toworkrawsilkbecauseatthattimetheOrderprohibited
working of raw silkwithouta licence.Althoughthe licence wastakenin one
name, theunderstandingwasthatitwouldbeworkedwithanotherperson
underpartnershipandthatotherpersonbroughtan action for accounts and
dissolution.Thecourtallowedtheaction,becausetheOrderdidnotimpose
anyrestrictionupontransferetc. Where apartypurchasedamotorcar in
the name of apermit-holderso as to make use of hispermit,thearrange
mentwasheldtobenotavoidone.^^
Regulatory laws also giverise to the question whether astatuteimpliedly
prohibits the making of a contract. In Hughes v Asset ManagersPlc-}^
Atransactioninsecuritieswasmadethroughthemediumof aperson
whosefirm waslicensedbuthehimselfdidnotholdtherepresentative's
licence asrequiredby the Prevention of Frauds (Investments) Act, 1958
(English).
It was heldthatthe Act did notamounttoautomaticallyinvalidatingsuch
transactionsbecause inthatcase publicinterestwould suffer moreinstead
of beingprotected.
profitswith another is not illegal.MohitMohanChoudhuryv AbdulRoufMia,(1991)1Cal
LT 361. Sale of a buswithouttransfer of permit is not illegal. B.RatnasabhapathyChetti v
M. Veerappa, (1989) 1 An LT 588.BalachandranvSundaraGounder,(2003) 2 KLT (SN) 31,
thedefendantwas to be the licencee of atoddyshop and theagreementwasthatthe plain
tiff should conduct it, held, an independent agreement,plaintiffentitled to recover back the
amountpaidby him.
15.GoutamHazravPinakiHazra,(2005) 3CHN364: (2005) 3ICC344(Cal).
16. AIR 1957 Cal 336. See also theobservationsof the SupremeCourton thisdistinctionin
MannalalKhetanvKedarNathKhetan,(1977)2 SCC424:AIR1977SC536.M.G.Bros
LorryService vPrasadTextiles,(1983)3 SCC 61: AIR 1984 SC 15, aconditionin a carriage
contractagainst S. 10 of the Carriers Act was held to be void.
17.ParakkateShankaranKeshavanv T.A.Sukumaran,AIR1997Bom 381. S.Mohammed
AnwarudinvDrSabinaSultana,(2005) 4 ALD 566, where the Rules andRegulationsof a
Housing Authority did not prohibit retransfer by house allottees, any such transfer could not
regardedasopposedto law or public policy.
18. (1995) 3 All ER 669 (CA).https://t.me/LawCollegeNotes_Stuffs

398. 260Chapter7LegalityofObject [S. 23]
Carryingon moneylending businesswithoutregistrationand licence
underanyMoney-LendersAct has been held to becontraryto theenactment
and,therefore,void."
Aprovisionin the ForeignExchangeRegulationAct, 1973 [S. 31] (now
repealed and replaced by FEMA)thata non-resident Indian sellingproperty
inIndiawouldbe liable to apenaltyif the sale is madewithoutpriorper
missionof theReserveBank,wouldnotaffectthevalidityofthesaletrans
actionitself. Thepurchaserwouldbeentitledto a validtitle.^"
Wherea stagecarriagepermitwasgrantedto a StateRoadTransport
Corporation,it wasnotallowedtoallotthe same to aprivateoperatorfor
workingit as anominee.^^Permissiongrantedby aStateRoadTransport
Corporationto privateoperatorstooperateonnationalisedrouteswhen
theirbuseswerenotlicensedforthoserouteswasheldtobeviolativeofthe
prohibitionsof theMotorVehiclesAct.^^
A suit forrefundof pricepaidin advance for the sale of awomanwas
heldtobenotmaintainable.^^
Violationofenactments
Acontractfor the sale of jaggerypowder(a form of gur) abovecontrol
pricecouldnotbeenforcedbecause"itwastaintedwithallthatanti-social
desireagainstwhich theControlOrdersattemptedtofight".^'*Where a
19.HaesenBanuv SyedHabeebSayeeduddin,1997AIHC135 (AP). KeralaHighCourthas dif
fered from thisopinion.SeeBalakrishnanvBabu,(1994) 1 KLT 947, where it was heldthata
suit forrecoveryof theloanamountwouldbemaintainableeven if thelenderhadno licence
undertheMoney-LendersAct.
20.JaswinderSingh vSanjogtaNanda,1996 AIHC4477(P&H).AjitPrasadJainv N.K.
Widhani,AIR1990Del 42, specificperformanceof acontractof the abovekindwasordered.
A.LakshmanaRao v P.RamaK.Raju,(1993) 1AndhWR (NOC) 5,underthe bye-laws of
the society, the members could alienate the house only to any other member with the permis
sion of theboardof directors. Not void.SebastianvMathai,(2006) 1 CLT 147 (Ker), prop
ertypurchasedinviolationof FERA (New FEMA).Regulationsheld to be not void because
theirregularitywas curable.MusliarakathAbdullavAbdulAzeeaNaha,(2006)2 CCC 507
(Ker),underForeign Exchange Rules, a carbroughtinto thecountrywasnotallowedto be
soldwithintwoyears,recoveryof salepricewasallowed.
21.BrijMohanPariharvM.P.SRTC,(1987)1SCC13:AIR1987SC 29. SeefurtherK.M.
Jose v D.AnanthaBhat, AIR 1987 Kant 173, sale ofagriculturalland fornon-agricultural
purposes,thoughforbiddenbyKarnatakaLandReformsAct(Xof 1962) was heldnotvoid
under S. 23 because the Act prescribed aninquiryfor investigation as to the buyer'spurposes
and no inquiry had beenundertakenup to the date of the suit.SunilPannalalBanthiav City
andIndustrialDevelopmentCorpnofMaharashtraLtd, (2007) 10 SCC 674,transferof plot
byoriginalallotteeapprovedbyCorporationinaccordancewithRegulations.Thetransferee
tookpossessionand raisedconstruction.Cancellationsubsequentlyof thetransferon the
groundof public policy was held to be notproper.
22. PremChandvStateofU.P., 1987AllLJ 1320. G.Anabalganv T.N. Civil SuppliesCorpn
Ltd, (2004) 2 CTC 135 (TN), the DM couldappointmore than onetransportersfor lifting
food-grains depending upon work load and other conditions. Two were already working.
Appointmentof a thirdtransporterwithoutexplaining the need for it wasstruckdown by the
court.
23.NihalSingh vRamBai, AIR1987MP126.
24. Sita Ram v KunjLai,AIR 1963 All 206. Atransferwithoutobtainingproperpermissionsof
materialimportedonactualuser's licence is illegal.CanaraBank vGokuldasShenoy, (1989)https://t.me/LawCollegeNotes_Stuffs

399. [S. 23] Unlawfulagreements261
company and its customer knowingly entered into acontractfor supply of
electricity incontraventionof the Bihar ElectricityControlOrder,1942,the
customer could not recover the money paid in excessthoughthe payment
was made underprotest.^^TheAllahabadHighCourtheldthatacontract
to supply electricity on the conditionthatthe consumer would be liable to
replacethe transformer if it is stolen is void, beingcontraryto the Electricity
(Supply)Act, 1948 which providesthatthe Board mustmaintainthe distri
bution lines andtransformersarepartsofit.^®TheMadhyaPradeshHigh
Courtheldthatthegroundsspecified by a RentControlAct for the eviction
of atenantcannotbe changed by an agreement or compromise becausethat
would becontraryto theAct.^^TheHighCourtof Delhi refused togrant
specificenforcement of acontractof lease under which a land meant for
residential purposes was to be handed over to a bank for commercial pur
poses in violation of Section 14 of the Delhi Development Act,1957.^^An
agreementto purchase an area of land beyond the statutory limit was held
to be notspecificallyenforceable but refund of advance with interest was
ordered.^^Transfer of a minor'spropertyby theguardianwithouttakinga
1 KLT 281. Buttransferof a licensedtheatre,the buyerundertakingtoobtainhis own licence
is not unlawful. K.SrinivasaMurthyv P.AnandaRao, (1985) 1 AnLT53 (NOC);Malladi
Seetharama Sastry v NaganathKawliwar& Sons, AIR 1968 AP 315, transfer of telephone
connectioninviolationof S.20-Aof theTelegraphAct,hitby S. 23.
25. Jharia Coal Field Electric Supply Co Ltd vKaluramAgarwala,AIR 1951 Pat 463.
26.UPSEBvLakshmiDeviSehgal,AIR1977All 499.
27. Hubbilal Sadashiv v Mohd. Maqbool Ahmed Khan, AIR 1977 MP 65. To the same effect
inShankarlalLaxminarayanRathi v VdaisinghDinkarraoRajukar, AIR 1976 Bom 237;
Murlidhar Aggarwalv State ofU.P.,(1974)2 SCC472 and Nagindas Ramdas v Dalpatram
Ichharam,(1974)1 SCC 242: AIR 1974 SC 471. New India Assurance Co Ltd v Kesavan
Ramamurthy,(1997)2ALD446, thereis nothingwrongin avehicleinsurancepolicyprovid
ing that nocompensationwouldbepayableif thevehiclewasbeingdrivenby anunlicensed
person or learninglicence-holder.NavayugaExports Ltd vA.P.Mineral Devp Corpn,(1998)
4 An LT 505, a licence to work a mine for precious stones cannot be questioned as to its
legalityonly on the ground that it was for too short a period of sixmonths.MatruAshish
Coop Housing Society Ltd vBhavanaMaternityHome, (2004) 2 Bom CR 864, recovery
ofnon-occupancychargesnotallowedto be more than the maximumprescribedunder the
Rules.MatruAshish CoopHousingSociety Ltd v BhavanaMaternityHome, (2004) 2 Bom
CR 864, realising more house tax from the owner than permitted by theapplicablestatute
was held to be wrongirrespectivethat the owner had himself opted to pay more. Namdeo
ShamraoWaghmarev RamdasShripatWaghmare,(2005)2BomCR829,saleofagricultural
land found to be not in violation of Bombay Prevention ofFragmentationandConsolidation
of Holdings Act, 1947, hence not unlawful. A.E. Aboobacker v P.P.Yasu,2004AIHC551
(Ker),demandfor pagreeunlawful.
28.SBlVAdityaFinance & LeasingCo (P)Ltd, AIR 1999 Del 18.Unlessthere is prohibitionof
transfer of a house allotted under hire-purchases, the property is transferable, Khair Mohd
Khan v S. Eramani, (1998)4 An LT 66. Netyam Venkataramanna v MahankaliNarasimhan,
AIR 1994 AP 244, purchase of land inexcessof limit permitted by AP AgriculturalLands
(Prohibition of Alienation) Act, 1972 which was repealed before judgment in this case, spe
cificenforcement not refused. The only consequencewould have been surrender of extra land
onredetermination.
29. BalbirSinghvArjunSingh,AIR2000 All37:2000AIHC1350.National Insurance Co Ltd v
New Darjeeling UnionTea Co Ltd,(2001)1CalLT218, S. 64V-Bof the Insurance Act, 1938
prohibitsthe insurerfromenteringinto a contractunlessthepremiumis paid inadvance.It
was heldthatsuchconditioncouldbewaived.ParmanandSetiavSomlal,AIR2003Raj54,https://t.me/LawCollegeNotes_Stuffs

400. 262Chapter7 Legality of Object [S.23]
court order was held to be in violation of Section 8 of the Hindu Minority
and GuardianshipAct.^°A compromise between family members for distri
bution of the family pension which was against Pension Rules was held to
be void. The state was bound to pay only in accordance with the Rules.
Asolicitor'sagreementoffeesharingwith a personintroducingclientshas
been held to be void being in violation of rules[(English)Solicitors' Practice
Rules, 1990, Rule 7]. The court said that the only alternativeremedyof the
personwhointroducedaclientwas to sue forreasonableremunerationfor
services ifrenderedinignoranceof theviolation.^^
Assignmentofcopyright
TheCopyrightAct,1957permitsassignmentofcopyrightin anypresent
or future work. Thestatutorypermission was held to be not violative of
public policybecausethere are safeguards for the protection of the owner
withintheframe-workoftheActitself.^^
Stayorder
Astayorderonconstructionwhichwasobtainedotherwisethanunder
the allegationthatthe object of thecontractwas unlawful was held as not
amountingto illegality of object. It may bethataconstructionunderdis
putedcircumstancesmaynotfindbuyers,yetthecontractorcannot get rid
under the doctrine ofillegalityorimpossibility.^''
2.Defeatany law
Sometimesthe object of, or theconsiderationfor, anagreementis such
thatthoughnotdirectlyforbiddenbylaw,itwould,ifpermitted,defeatthe
provisionsof anylaw.Suchanagreementis alsovoid.Easyillustrationsare
to be found inagreementsrelating to bail bonds.
An accused isrequiredundertheCriminalProcedureCode tofurnish
a surety in the sum offivethousand rupees for his goodbehaviour.He
depositsthesumwiththedefendantandpersuadeshimtobecomesurety.
relinquishraentof rights whichrequiresstamp duty and registration is a violation of law if
notcompliedwith, notenforceable.ShirishFinanceandInvestmentP Ltd v M.Sreenivasulu,
(2002)1BomCR419,acquisitionofsharesinviolationofSecuritiesandExchangeBoardof
IndiaRegulationsheld to be void.
30. T.S.Bellierajv Vinodhini Krisbnakumar, (2004) 2 CTC 510.
31.Chongtuokhawiv UnionofIndia,AIR 2008 Gau 6.
32.MohamedvAlaga&Co,(2000)1WLR1815(CA).MarcoShippingAgencyvRPiyarela!
International, (2008)4 CHN 520, charges of bribery could not be allowed to be considered
also in an arbitration of proceedings.
33.PrenticeHall India(P)Ltd vPrenticeHallInc,AIR2003Del236:(2003)1CLT576(Del),
Ss.2(/),18 and 30. Theagreementwasbetweentwopublishers.HolyfaithInternational(P)
LtdVShivKumar,AIR2006AP198:(2006)3 AnLT216:(2006)3ALJ319,editingon
paymentoriginalworksunderanagreementwith a personwhodeclaredthat all rightswere
vestedin thepublisheronlywasheldto benotviolativeofanybody'scopyright.
34. Tenet Homes & Resorts (P)LtdvErnakulam,AIR 2001 Ker 279.https://t.me/LawCollegeNotes_Stuffs

401. [S.23] Unlawfulagreements 263
After the period of suretyship is over, the accused sues the defendant for
theamount.
TheAllahabadHighCourtheld the agreement void and theamountirre
coverable. Theintentioninrequiringa surety isthatthesuretyshall at his
ovi^nrisk see to theappearanceof the accused. Thispurposeis definitely
defeated by an agreement of the above sort. Acontracttoindemnifythe
suretyagainsthisHabilityis illegal for the samereason.^®
The debt of anagriculturalborrowerinrespectof hisagriculturalland
becamedischargedbyvirtueofcertainstatutoryprovisions.Subsequentto
that,the same land was sold wherein the discharged debt was alsotreated
as apartof theconsideration.Thetransactionwas held to beunlawfulas
itwouldhave defeated the policy of relievingagriculturalborrowersfrom
debtburdens.The factthatonly apartof theconsiderationhadthe effect of
defeating law wasnotconsideredto bematerialbecause thetransactionwas
for oneinseparableconsideration.^^
Whereastatuteprovidespenaltyfor anact,it isimplicitthatthestatute
intendsto forbidthatact.^®Atransactionforexchangeofpropertiesto be
performedafterthecompoundingof acriminalcasebetweentheparties
washeldtobenotenforceable.^^
Aperson,who was elected as asarpanchfor aperiodof five years, made
anagreementwithanothermemberthatthelatterwouldbe given two year
termandtheelectedone, theremainingthreeyears.Theagreementwas held
to be void as itwouldhave defeated thepurposeandprovisionsof thePunjab
PanchayatRaj Act,1994.''°Anagreementto secure votes in favour of a per
son to enable him to get elected to astatutorybody inconsiderationofshar
ingpowerorquitingofficeafterspecifiedperiodwas held to beviolationof
Section 8 of the Advocates Actwhichprescribesa five yeartermofoffice.'*^
Lawoffriendlycountry
An agreement which defeats the law of a friendlycountrywould be
equally void. AnillustrationisRagazzonivK.C.Sethia^^
TheGovernmentofIndiahad,byregulationsmadeunderthe Sea
Customs Act, 1878,prohibitedtheexportof goods to South Africa. The
plaintiff and the defendant, being aware of the prohibition and in a bid to
overcome theembargo,agreedthata largerquantityof jute bagswould
be shipped from India and made available in Genoa for resale to South
35.fatehSingh vSanwalSingh,ILR(1875) 1 All 751.
36.SunderSingh vKishenChand,1889 Punj Rec 1 p. 1.
37.KommineniSeetharamaiahv K.Punnaiah,1996AIHC4384(AP).
38.NutanKumarvAddlDistrictJudge,Banda,AIR 1994 All298,lettingof premiseswithout
allotmentor releaseorderinviolationof UPUrbanBuildings(RegulationofLetting,Rentand
Eviction)Act,1972.
39.SrihariJenavKhetramohanJena,AIR2002Ori195: (2002) 94 CLT 201(Ori).
40.MohinderSingh vStateofPunjab,AIR2009NOC434(PScH).
41. D. Selvam vBarCouncilofT.N.andPondicherry,(2008) 4CTC97.
42.(1956) 2 QB490:(1956) 2WLR204.https://t.me/LawCollegeNotes_Stuffs

402. 264Chapter7 Legality of Object [S.23]
Africanbuyers.The defendant failedtodeliverthe goods and the plaintiff
sued fordamages.
TheCourtof Appeal heldthatwhile the English courts will not enforce
foreign revenue or penal laws, they will notentertainan action based on a
transactionwhich isknowinglyintended to involve a breach of such laws.
DenningLJ said;"...iftwo peopleknowinglyagreetogetherto breach the
laws of a friendlycountryor toprocuresomeone else tobreakthem or to
assist in the doing of it, then theycannotask thiscourtto give its aid to the
enforcementoftheiragreement."
AnotherillustrationisFostervDriscollf'^Here theagreementwas to buy
whisky in Great Britain and to smuggle it into the United Statesagainstthe
law ofthatcountry. TheCourtof Appeal held the agreement to be illegal.
It involved thecommissionof an offence in a foreignandfriendlycountry
and so abreachofinternationalcomity. It didnotmatterthattheparties
hadnotsucceeded intheirattemptandthey could havelawfullytakentheir
goodstoanothercountry.
Innocentviolations
Wheretheviolationof a home or foreign lawwouldnot be anaffrontto
public conscience, enforcement may be allowed. Such a possibility was rec
ognised by theCourtofAppealinHowardvShirlstarContainerTransport
Ltd.''
Theownerof anaircraftagreed to pay theplaintifffor successfully
removing hisaircraftfromNigerianterritorialairspace.Theplaintiff
did sowithoutpermissionofNigerianauthoritiesandlandedit in Ivory
Coast.Theplaintiffdid sounderthebeliefthattherewasimminentdan
ger to life inNigeria.TheIvoryCoastGovernmentreturnedtheaircraft
toNigerianauthorities.But theplaintiffsued for his fee.
He wasallowedto recover. Hehaddone the job ofremovingandsafe
landingandsince his fee waspayableoncompletionof the flightoutof
Nigeria,hehadearnedhis fee. As for theillegalityinvolved, thecourtsaid
thatalthoughthecourtwouldnotnormallyenforce acontractwhichwould
enableaplaintifftobenefitfromhiscriminalconduct,since to do sowould
be anaffrontto thepublicconscience,therearecircumstanceswhereit
wouldbewrongtodisqualifyaplaintifffromrecovering,eventhoughhis
claim was derived fromconductwhichconstitutedastatutoryoffence. One
suchcircumstanceiswheretheplaintiffcommitsacriminalact inorderto
escape danger to his life. Accordingly,althoughtheplaintiff'sclaim would
otherwisebeunenforceablein Englishcourtsbecause his breach ofNigerian
airtrafficcontrolregulationswascentralto theperformanceof hiscontract,
thepublicconsciencewouldnotbeaffrontedifthecontractwasenforced
43.(1929)1 KB470(CA).
44.(1990)1WLR1292(CA).https://t.me/LawCollegeNotes_Stuffs

403. [S. 23] Unlawfulagreements265
against thedefendantbecause theplaintiff'sconductwas designed to free
himself and his wirelessoperatorfrom pressingdanger.'^^
Where a deposit of money wastakenin excess of the Post OfficeMonthly
Income Rules,1987andinterestpaidon it, recovery of suchinterestamount
from thedepositorwasnotallowed.Therewasnothingimmoraloragainst
public policy.Therewas only thetechnicalviolationof a rulewhichit was
inthehandsoftheCentralGovernmenttowaiveortoalter."*®Abankwas
allowed to recover back money lentwithoutknowingwhethertheborrower
was licenced for his business ornotand hisguarantorswereallowedtotake
backtheirtitledeedsfromthebank.''^
Scopeoftheterm"law"
"Law"in thisconnectionmeansthe rules oflawfor the time being in
force inIndiaandincludesHinduandMuslimlaws.TheBombayHigh
Court, for example, held in acase''®thataccording to theMohammedan
Law, it isnotcompetenttopartiescontractingamarriagetoenterintoa
separation deed by which the husband covenantedthathis wife might live
with her parents.Similarly,accepting a son in adoption in consideration of
a sum ofmoneyisunlawful."*^
Moneyandpropertyinvolved intransactionsdefeating law
TheSupremeCourt considered thispartof Section 23 in Surasaibalini
DebiVPhanindraMohanMazumdarJ°
The plaintiff, anemployeeof the Court of"Wards,started thebusiness
of running a boarding house. The rules ofserviceprohibited him from
engaging in any trade orbusiness.The premises were leased nominally
in the name of hisfather-in-law,but themanagementandfinance was
the concern of the plaintiff. The business ran for quite a few years. The
plaintifffellill and had toleaveCalcutta for sometime.He transferred
the business wholly to his father-in-law on theunderstandingthaton
hisreturn,the father-in-law would hand back the business and would
45. The court applied the decisionsinEuro-DiamLtd vBathurst,(1988)2WLR517(CA).
46.RajatKumar Rath v Govt of India, AIR 2000 Ori 32; Thirumalai v Gomathi Animal, 2000
AIHC1000 (Mad), gift under marriage being not void at the time, allowed to be retained.
M.A.JabbarvLlCHouse Building Employees Society, (2000) 1 An LT 385, entering into
an agreementwithout obtaining prior approval of the Registrar of CooperativeSocietieswas
held to be notopposedto public policy.
47. Andhra Bank v Vattikuti Sreemannarayana, (2004) 5 ALD 111(DB).The court cited author
ities;GauriShankarvNathuLai,AIR 1951 All 589, money lent under a mortgage allowed to
be recovered though the mortgage was not registered as it ought to have been.
48. Abdul Piroj Khan Nobab v Hussenbi, (1904) 6 Bom LR 728.
49. Narayan LaxmanChandvadkarv Gopalrao Trimbak Chandvadkar, 1922 SCC OnLine Bom
11:ILR(1922) 46 Bom 908; Neminath Appayya vJambooraoSateppa Kochtevi, AIR 1966
Mys154,wherethe courtallowedspecificperformanceof anagreementfor thepurchaseof
landbeyondthe ceiling fixed by an Act.
50.AIR1965SC1364:(1965)1SCR861.https://t.me/LawCollegeNotes_Stuffs

404. 266Chapter7LegalityofObject [S. 23]
alsoaccountfor its profits. Theplaintiffcame back but hisfather-in-law
refusedto obligehim.
Theplaintiffbroughtanactionto recover back his business.Thedefend
antcontendedthatthe business was illegal because itdefeatedthe service
rules and also the Income Tax Act. The SupremeCourtheldthatthe service
ruleswerenotstatutoryand,therefore,theirviolationdidnotrenderthe
businessillegal.Theonlyotherquestionwas theevasionofincometax.On
thispoint,AyyangarJfoundthatthelawundoubtedlywasthatwherea
benamitransactionisenteredintofor theevasionoftaxes,thelawwould
not give its help to eitherpartyandwouldleavethemwhere theyare.^^In
such cases, recovery is possible only if either the illegalpurposehasnot
beencarriedout"or theplaintiffhas not to rely upon the illegaltransac
tion.^^Theplaintiffhadleft thebusinessin thehandsof hisfather-in-law
onaccountof his illness and not because of the illegality. Hisactionwas to
enforce his ownership interest and for thispurposeit was not necessary for
himto rely on the illegaltransaction.Accordingly, he wasallowedto recover
thepossessionof hisbusiness.
Moneysent fromabroadthroughunauthorisedchannelshas beenallowed
toberecovered.^'*
Agreementtoevadetaxes
Anagreementbetweenthepartnersof a firm toconcealincomeincertain
respectsso as to evadeincometaxhasbeenheldto beunlawful.^^It hasbeen
heldthatthere is subterfuge in entering into a composite workscontract
containingelementsbothoftransferofpropertyin goods as well aslabour
andservices.
Undercuttingofstatutoryprivileges
A term in acontractof carriage requiring that notice of loss must be given
within 30 days of the arrival of the goods has been held by the Supreme
Courtto becontrarytoanddefeatingSection 10 of theCarriersAct, 1865,
whichprescribesaperiodof sixmonthsfor thepurpose.^^
51. Apart from this, benami transactions are so common in India that there is no illegality in
itself, seeKedarNathMatanivPrahladRai,AIR 1960 SC 213: (1960) 1 SCR 861.
52. So ruled by the Privy Council in T. P. Petherpermal Chetty vR.MuniandiServai, (1907-08)
35lA98 andGuruNarayanv SheoLaiSingh,(1918-19)46lA1 (PC).
53. So held by the Privy Council inV.SardarAliv Sajan Singh, 1900 AC 167 (PC).
54. AbdulJabbarv Abdul Muthaliff, AIR 1982 Mad 12. The recipientconstructed a ricemillwith
the money; the mill wasallowedto berecovered.
55.RamSewakvRamCharan,AIR1962Ail 177.
56. CCEandCustomsvLarsen&ToubroLtd,(2016) 1 SCC 170.
57. M.G. BrosLorryService vPrasadTextiles, (1983) 3 SCC 61. Since thepurposeof bribery is
to defeat law, it would also fallunderthe section.GulabchandvKudilal,AIR 1966 SC 1734:
(1966)3SCR623.As towhencertainunfairclausesin aGovernmentcontractwoulddefeat
the normal legal rights of contractors, seeV.RaghunadhaRao v StateofA.P.,(1988) 1 AnLT
461. The clauses in question were an attempt to relievethe State of its liability and the court
said that a State is not free to impose arbitrary or unjust.clauses in a public contract.https://t.me/LawCollegeNotes_Stuffs

405. [S. 23] Unlawfulagreements, 267
3.Fraudulent
Anagreementmade for a"fraudulent"purposeis void.Wherethepar
ties agree to impose a fraud on athirdperson,theiragreementisunlawful.
Where,forexample,adebtoragreed to pay aseparatecommission,or to
give preference to acreditorin order to induce hisconsentto a composi
tionwhichisproposedwithothercreditors,the object of theagreement
isfraudulent.Inanothercase, there were two decree-holdersagainstthe
debtorand one of them, theplaintiff,had thedebtor'spropertyattached
andbroughtto sale. Theplaintiffagreedwiththedefendant,aprospective
buyer,thathewouldnotbidagainstthedefendantandthatthedefendant
would pay him off. Thepropertywas thusknockeddownto thedefendant
for a very small price. It was heldthatthe whole object of thearrangement
wasfraudulentas it deprived theotherdecree-holderofwhathewouldhave
got if the sale had been competitive. Accordingly, theplaintiffcouldnot
recoveranythingfrom thedefendant.^'Similarly, anagreementtodefraud
creditors,or to givefraudulentpreference to acreditoror todefraudrevenue
authorities,^"or investors in acompany,"are illegal. Acompromisedecree
obtainedbypractisingfraud on thecourtwas held to bevoid.^^
"Intentionto deceive" seems to benecessaryfor anagreementto fall in
this category. A decision of the English Court of Appeal, however, shows
thatthe same result may follow where one of thepartieshad no such inten
tion, but madehimselfaninnocentinstrumentoffraudat thesuggestionof
theotherparty.®^
A shipowner informed the shipperthatthe barrels containing the
orange juice were old and frail and that some were leaking and, there
fore, a clean bill of lading could not be granted. The shipowner, however,
issued a clean bill after a promise of indemnity from the sender. The bill
statedthatthe barrels were shipped in good order and condition. On
58.AtamalRamoomalvDeepchandKessurmal, AIR 1939 Sind 33; Mallalieu v Hodgson,(1851)
16 QB 689. Indian Hotels Co Ltd v Bhaskar Moreshwar Karve, 1993 Cri LJ 3370 Bom, sale
of a company's property at a throw-away price may be of fraudulent nature and, therefore,
against publicpolicy.Munesh v Anasuyamma, AIR 2001 Kant 355, a document containing
compromiseof maritalproceedingson whichthewife'ssignaturewasforgedwas againstlaw
and, therefore, could not be the basis of any matrimonialremedy.Laxman Lahanuji Lende
VHarichandDomaji Kulharkar, (2006) 3 Bom CR 864 (NagBench),deed of family parti
tion, alleged to be fraudulent, Karta is a necessary party, other coparceners desirable but not
necessary.
59.Ram Nath Misra v Rajendranath Sanyal, 142IC525:ILR(1933)8 Luck 233. Kedar Nath
MatanivRrahladRat, AIR 1960 SC 213, 216: (1960) 1 SCR 861.
60.AlexandervRayson,(1936) 1 KB 169 (CA).
61.Begbiev Phosphate Sewage Co Ltd,(1876)LR 1 QBD 679(CA).
62. Ashis Kumar Ghosh vGopalChandra Ghosh, (2004) 3 CHN 146, the plaintiffs allegedthat
they were never parties to the suit which ended in the compromise.
63. BrownJenkinson& Co v Percy Dalton (London) Ltd,(1957)2 QB 621:(1957)3WLR403
(CA).Naraindas vBhagwandas,1993MPLJ1005,deliberatestatement of incorrect facts
resultinginexerciseofjurisdictionwhichotherwisewouldnothavebeenexercised,fraudon
statute.https://t.me/LawCollegeNotes_Stuffs

406. 268Chapter7LegalityofObject [S. 23]
arrivalat thedestination,thecontentsof the barrels hadsufferedconsid
erable leakage and the shipowner had to make good the loss thus caused
to the buyer of the barrels. Theshipownerthen sought to enforce the
indemnityagainstthe sender.
It was held by amajorityof twoagainstonethattheindemnitybondwas
notenforceable.MorrisLJstatedthe effect of theagreementthus; If you
make a falserepresentationthatthe goods have been received in good order
when you knowthatthey are not so and which will deceiveendorsees of the
bill, we will notindemnifyyouagainstconsequences.Thus,theshipowner
hadmadehimselfa vehiclenotmerely forconveyanceofgoodsbutalsofor
carryinga falserepresentation.This made the whole schemeunlawfuldis
entitlinghim from relyinguponanypartof it. Theargumentthatit was a
commonpracticeof theshipownerswas shelved by thecourtby sayingthat
it mayexplainwhy he didwhathe did, butnotmake anunlawfulthinglaw
ful.Wherethepartiesto acontractconspiredtodefraudaninsurancecom
panyby agreeing to aninflatedestimateforrepairworkinorderto claim
alargersum,it was heldthatthecontractwasvitiatedbyillegality.The,
legitimatepartof the claim couldnotbeseparatedfrom the illegalportion
becauseit was a singleindivisiblearrangement,itcouldnotbeenforced."
Anagreementbetweentwobiddersnotto bidagainsteachotherwithan
understandingthatthe successful bidderwouldconveyhalfthepropertyto
theother,has been held to be notagainstpublicpolicy."
4,Injurioustopersonorproperty
An agreement between two persons to injure the person orproperty
of another is unlawful. In the same way, if the object of an agreement is
suchthatit involves or implies injury to the person orpropertyofanother,
theagreementisunlawfuland void. Apersonborroweda sum ofhundred
rupees and executed a bond promising to work for theplaintiffwithout
pay for a period of two years. In case of default, the borrower was to pay
exorbitantinterestand theprincipalsum at once. Thecourtheldthatthe
contractcontainedin the bond wasindistinguishablefrom slavery, which
involvesinjury to the person and was, therefore,void.''^Similarly,a bond to
pay anexorbitantlyhighrateofinterest,in case, theborrowerleftthelend
er's service, has been held to bevoid.^^An agreement to commit a crime or
a civil wrong, for example, to assault or beat a person or todeceivehim^®or
to publish a libel againsthim,®'all fall in this category.
64.TaylorvBhail,TheIndependent,Nov 20, 1995 (CA).
65.SujanSinghSadhanavMohkamChandJain,AIR 1983P&H180.
66.RamSarupBhagatvBansiMandar,ILR(1915) 42Cal742.
67.Ibid.
68. Brown Jenkinson & Co v Percy Dalton (London) Ltd, (1957) 2 QB 621: (1957) 3 WLR 403
(CA).
69.Clayv Yates, (1856) 1H&N73:156ER1123.https://t.me/LawCollegeNotes_Stuffs

407. [S.23] Unlawful agreements 269
Fruitsofcrime
Law does not help a person to recover anything under his own crime.
The fruits of a crime are irrecoverable. No person is allowed to benefitfrom
his own crime. It is on this principle that a person is not permitted to par
ticipate in a successionwhichhe hasbroughtaboutthroughmurder.^"An
insured person committed suicide to enable his representatives to get the
insurance money, but they were not allowed to recover. It was an attempt to
confer a benefitthrough his owncrime.^^This brought about an undeserved
punishmentof the representatives. The position was, therefore, changed by
theSuicideAct, 1961 [Enghsh]. The principle was again applied to pre
vent a person, who hadtakenout a policy in respect ofHabilityfor bodily
injurycaused by accident, from recoveringanythingforliabilityfordeath
causedbyhimthoughinvoluntarilybutas aresultof anunlawfulandvio
lentattack.^^Criticisingsuchresults,it has beenobservedinCheshireand
Fifoot:''^"Theprinciplethatno benefit can accrue to acriminalfrom his
owncrime, however, must obviously not bepushedtoo far.Nowadays,there
aremanystatutoryoffences, some oftheminvolving nogreatdegree oftur
pitude,whichrankascrimes,andit has several tiines beendoubtedwhether
they are allindiscriminatelyaffectedby the rule ofwhichtheBeresfordcase
is anexample."^"*
5.Immoral
The law doesnotallow anagreementtaintedwithimmoralityto be
enforced.Consequently,everyagreementthe object of orconsideration
forwhichisimmoral,isunlawful.Whatis"immoral"dependsuponthe
standardsofmoralityprevailingat aparticulartime and asapprovedby the
courts.Butcertainkinds of acts have beenregarded-asimmoralsince times
immemorialand willperhapsalways be soregarded.
Interferenceinmaritalrelations
Onesuchactisinterferencewithmaritalrelations.Thus,whereamarried
womanwas given money to enable her toobtaindivorce from herhusband,
the lender promising tomarryher subsequently, it was heldthatthe money
couldnotberecovered.^^Similarly, apromisetomarryamarriedwoman
70. Giles VGiles,1972Ch544,awomankillingherhusband.
71. Beresford v RoyalInsuranceCo Ltd, 1938 AC 586 (HL); affirmed on appeal, 1938 AC 586:
(1938)2 All ER 602. The position in India is different. Here suicide is not a crime and there
fore payment under an insurance policy is not against public policy even if the claim arises by
reasonofsuicide.ScottishUnion&NationalInsuranceCo v N.RousbanJahanBegam,AIR
1945Oudh152:ILR(1945) 20Luck194.
72.GrayvBarrPrudentialAssuranceCoLtd,(1971) 2 QB 554: (1971) 2WLR1334..
73. LawofContract(9th Edn byFurmston,1976) 335.
74. Recoverywould, for example, be allowed to the victim of a motor accident even if intention
allyinduced.
75.BaivijlivNansaNagar,ILR (1885) 10 Bom 152;RoshunvMuhammad,1887PunjRec No.
46.https://t.me/LawCollegeNotes_Stuffs

408. 270 Chapter 7 Legality of Object [S.23]
afterthedeathofherhusbandoraftersheobtainsdivorcefromhimis
immoral.In the same way, a promise by amarriedman tomarryawoman
after the death of his wife or afterobtainingdivorce from her is illegal. But
if she does not know the man to bemarried,she can bring anactionfor
breach.^®In Fender vJohnMildmay^^the House of Lords had to face a dif
ficultcaseonthispoint.
Thedefendant,who was amarriedman at the time, met theplaintiffat
a nursing home where she was a nurse. He told her that he was unhappy
withhiswifeandlateraskedherwhether,if his wifedivorcedhim,she
wouldmarryhim after the divorce. She consented andthereuponsex
ual relationstookplace between them. The wifepetitionedfor a divorce
on the ground of this adultery and a decree nisi waspronounced.^®The
defendant then promised tomarrytheplaintiffas soon as the decree was
made absolute. But hecommittedbreachof thispromisebymarrying
anotherwoman.Theplaintiffsued him.
The claim was resisted on thegroundofimmorality,but she was held enti
tledtorecover.Whatisimmoralisinterferencewithmaritalstatus,whereas,
in the present case,"afterdecree nisi thebottomhasdroppedout ofmar
riage:nothingbut a shell is left". Accordingly, thecircumstanceswhich lead
tomischiefwereabsenthere.
Dealingswithprostitutes
Dealingswithprostituteshave always beenregardedasimmoral."Ifarti
cles are sold orsomethingishiredto aprostitutefor thepurposeofenabling
her tocarryon herprofession,neitherthe price of thearticlessold nor the
rent of thethinghiredcanberecovered."^^"Ifawomantakes a house in
order to live in it as themistressof amanand to use it forthatpurpose,and
thelandlordatthetimewhentheleaseisexecutedknowsthatitistakenfor
thatpurpose,thelandlordcannotrecovertherent."®°
Illegalcohabitation
Apromiseto pay forpastsexualimmoralityor illegalcohabitationhas
been held inEnglandto beenforceableifunderseal. If it isnotunderseal,
itcannotbeenforcedaspastconsiderationis noconsideration.®^The
76. Shaw VShaw,(1954)2 QB 429:(1954)3 WLR 265 (CA);mlsonvCarnley,(1908) 1 KB 729
(CA).
77.1938AC 1,723(HL).
78.Decreenisi is madeabosoluteaftersixmonthsandthenfinal divorcetakesplace. In themean
timethemartialstatuscontinues.
79.PearcevBrookes,(1866) LR 1 Exch 213;BholiBakshvGulia,(1876)Punj RecNo64;
GangammavCuddapahKupammal,AIR1939Mad139.
80.BucknillJ inUpfillv Wright, (1911) 1 KB 506;ChogalalvPiyari,ILR(1908-10)31 All 58.
Thelandlordmay, however, recover if he did notknowthepurpose.SultanvNaner,1877
PunjRecNo64.
81.BeaumontVReeves,(1846)8 QB483.https://t.me/LawCollegeNotes_Stuffs

409. [S.23] Unlawfulagreements271
AllahabadHighCourtallowed awomanto recoverarrearsof allowance
promised to her for pastcohabitation.®^But in a subsequent decision, the
same HighCourthas heldthatwherecohabitationisadulterous,thatis
tosay,where either party is married, whether past or future, it will not
support a promise. Adultery is not merely immoral, but is alsoillegal.^^
Contraryviews have also been expressed."InHussainaliCasanvDinbai,^'^
MacleodCJandCrumpJ heldthatacontractwhichwasimmoralatthe
time, and, therefore, could not support an immediate promise to pay, did
not becomeinnocentby merely being pastconsideration.There can be no
differencewhether A says to B: 'I willgiveyouRslOOOa month if you live
with me for a year,' or 'I will give you Rs1200because you have lived with
me for a year'." Theconsideration,therefore, for pastcohabitationis unlaw
ful as being immoral or opposed to public policy.
A promise to pay for future cohabitation is unenforceable. A promise to
pay for pastcohabitationfor thepurposeof securing thecontinuanceof
the cohabitation is also unenforceable. Where a promise was given for past
cohabitation"witha viewthatshe may continue in my service", it was held
to be opposed to publicpolicy.^^But a promise to pay for pastcohabitation
only isenforceableeven if thecircumstancesdonotruleoutthecontinuance
ofthecohabitation.®^
The principles which have thus crystallised from the variousHighCourt
decisions have been approved by the SupremeCourtinDivarampudi
NagaratnambavKunukuRamayya}^Certainpropertieswere gifted in
considerationof pastcohabitation.The SupremeCourtfoundthatthe prop
erties belonged to the joint family, which theKartahad no power to gift
and, therefore, the gift was void. Butapartfrom this,BachawatJ recog
nised pastcohabitationas a good consideration. TheRajasthanHighCourt
has put the same thing on morerationalbasis.®'A gift deed was executed by
apersoninfavourof awomanwithwhomhehadadulterouscohabitation.
Holdingthe gift deed to be enforceable, thecourtsaidthatthe word"object"
as used in Section 23 meanspurposeor design. Pastcohabitation,even if
adulterous,is no longer the object of the gift. It only supplies a motive. Gift
is atransferwithoutconsideration. Hence, no question ofunlawfulconsid
erationcanarise.
82.Dhiraj-KuarvBikramjitSingh,ILR(1831) 3 All 787.
83. AliceMaryHill v William Clarke, ILR (1905) 27All266. Patna HighCourthasexpresseda
similarview. SeeGodfreyvParbati,AIR 1938 Pat308.
84.AIR1924Bom135.SeealsoKisendasvDhondu,ILR(1920)44Bom542.
85. PerAnantanarayanCJ inManickaGoundervMuniammal,AIR1968Mad392;
SubhashchandravNarbadabai,AIR 1982 MP 236 (pastcohabitation).
86. AliceMaryHillv WilliamClarke,ILR(1905)27 All266.
87. So held inB.V.KamaRao vJayamma,AIR 1953 Mys 33.
88.AIR1968SC253:(1968)1SCR43.
89. PyareMohanvNarayani,AIR 1982 Raj 43.SandhyaChatterjeevSalilChandraChatterjee,
AIR1980Cal244,thereisnothingimmoralin theagreementof ahusbandtoprovidesepa
rateresidence to his wife.A.E.ThirumalNaiduvRajammal,AIR 1968Mad201.https://t.me/LawCollegeNotes_Stuffs

410. 272 Chapter 7Legalityof Object [S.23]
Dancinggirls
Helpgivenorpromisedto adancinggirlis not tainted withimmorality.'"
"Immorality"to be limited to sex outsidemarriage
The scope of the word "immoral" has been explained by theSupreme
CourtinGherulalParakhvMahadeodas^^SubbaRaoJ(afterwardsCJ) said:
The case-law both in England and India confines the operation of the
doctrine to sexual immorality. To cite only some instances: settlements
in consideration of concubinage, contracts of sale or hire of things to be
used in a brothel or by a prostitute for purposes incidental to her profes
sion, agreements to pay money for future illicit cohabitations, promises in
regard to marriage forconsiderationor contractsfacilitatingdivorceare
held to be void on the groundthatthe object is immoral.
The learned judgepointed out that the word"immoral",being a very com
prehensiveone, must begivenrestrictedmeaningand it has beenrestricted
to mean sexual immorality. Accordingly, thecourtheldthata wagering,
agreement could not be regarded as immoral.
6. Public policy
An agreement is unlawful if the court regards it as opposed to public
policy.The term "publicpolicy"'^in its broadest sense means that some
times thecourtswill, onconsiderationsof public interest, refuse to enforce
acontract.'^Thenormalfunctionofthecourtsis toenforcecontracts;but
considerations of public interest may require the courts to depart from their
primary function and to refuse to enforce acontract.^'*Interpretation of
the concept of public policy is the function of the court and notthatof the
executive. A StateAmendmentof theRegistrationAct,1908empowered
the Registrar to refuse registration of a power of attorney authorising the
attorney to transfer specifiedimmovable properties because the registration
of suchdocumentswasopposedto publicpolicy.'^
Observationsin EnglishLawaboutpublic policy
Thecircumstancesinwhichacontractis likely to bestruckdownas
one opposed to public policy are fairly well-established in England."...So
acontractofmarriagebrokerage,thecreationof aperpetuity,acontract
inrestraintof trade, a gaming or wageringcontract,or the assisting of the
90.KhubchandvBerain,ILR(1888)13Bom150.
91.AIR1959SC781:(1959) 2SCR406.
92. The subject of public policy has been considered in a number of learned articles and essays.
See generally Lord Wright,LegalEssaysAndAddresses;Winfield,Public Policy in the
EnglishCommonLaw,(1928) 42HarL Rev76-102.
93.Thomson-CSFvNationalAirportAuthorityofIndia,AlK1993 Del252,grantofGovernment
contracts,nationalinterestdemandsthatnationalcontractorsshouldbepreferredif they are
equallyequipped.
94. SeeLordWrightinFendervJohnMildmay,1938AC 1, 723 (HL).
95.StateofRajasthanvBasantNahata,(2005) 12 SCC 77: AIR2005SC 3401.https://t.me/LawCollegeNotes_Stuffs

411. [S. 23] Unlawfulagreements273
King's enemies, areallunlawfulthings"on thegroundof publicpolicy.^®
Theordinaryfunctionof thecourtsis to rely on the well-settled heads of
public policy and to apply them to varyingsituations.'^If thecontractin
question fits into one or theotherof these pigeon-holes, it may be declared
void.'^Thecourtsmay, however,mouldthewell-settledcategories of public
policy to suit newconditionsof achangingworld.''But may acourtinvent
a new head of public policy?
Accordingto LordHalsbury,the categories of public policy areclosed.^""
"I deny", he said,"thatanycourtcan invent a new head of public policy".
"Fromtime to time judges of thehighestreputationhaveutteredwarning
notes as to the danger ofpermittingjudicialtribunalsto roam unchecked
in thisfield."^°^For example, a judgeprotestingagainstpublic policy in an
early case, said, "it is a veryunrulyhorse, and when once you getastride
it, you never know where it willcarryyou".^"^A few other opinions may be
cited. " 'Public policy' is a vague andunsatisfactoryterm."^"^"Certainkinds
ofcontractshave been held void atcommonlaw on thisground—abranch
of the law, however,whichcertainlyshould not beextended,as judges are
more to betrustedasinterpretersof the lawthanasexpoundersofwhatis
called publicpolicy."^"''" 'Public policy' is always an unsafe andtreacherous
ground for legal decisions, and in the present case it would not be easy to
say on which side the balance of conveniencewouldincline."^"^Yet the rule
exists. In thewordsofLordAtkin,"thedoctrineshouldonly beinvokedin
clear cases in which theharmto the public issubstantiallyincontestable,and
does not depend upon the idiosyncratic inference of a few judicialminds".^°^
IndiancasesadoptingEnglish view
"TheIndiancases also adopt the sameview."^°^The following words of
SubbaRaoJ (afterwards CJ) in Gherulal Parakh vMahadeodas^°^enshrine
the present position of the doctrine of public policy in India:
96. Earl ofHalsburyLC inJansonv Driefontein Consolidated Mines Ltd,1902AC 484.
97. SeeSubbaRaoJ (as he then was) inGherulalParakh vMahadeodas,(1959) 2 SCR 406.
98.AsquithjinMonklandvJackBarclayLtd,(1951) 2 KB252.
99. LordWrightinFendervJohnMildmay,1938 AC 1, 723 (HL).
100. SeeParkeB inEgertonvBrownlow,10 ER 359, 408: (1853) 4 HLC 1, 123.
101.LordAtkininFendervJohnMildmay,1938 AC 1, 723 (HL).
102.BorroughjinRichardsonv Mellish, (1824) 2 Bing 229, 252: 130 ER 294.
103.ParkeB inEgertonvBrownlow,(1853) 4HLC1,123.
104.CaveJ inMirams,re, (1891) 1 QB594,595.
105. Lord Davy inJansonvDriefonteinConsolidatedMines Ltd, 1902 AC 484, 500.
106. InFendervJohnMildmay,1938 AC 1, 723 (HL).
107. Per SubbaRaoJ (as he then was) in the Gherulal case, AIR 1959 SC 781. Indian Oil Corpn
VRajUnocalLubricantsLtd, (1997) 2 Mah LJ 281, public policy connotes somematter
which concerns public good and public interest. See also Transocean Shipping Agency (P)
LtdVBlack Sea Shipping, (1998) 2 SCC 281: AIR 1998 SC 707, appointment of a foreign
arbitrator and application of foreignlaws, but enforcementof the award in India was held to
benot ipsofactoopposedto publicpolicyof India.The matterwasundertheForeignAwards
(RecognitionandEnforcement)Act, 1961 (nowrepealedby the Arbitration and Conciliation
Act,1996).
108.AIR1959SC781:(1959)2SCR406.https://t.me/LawCollegeNotes_Stuffs

412. 274Chapter7LegalityofObject [S. 23]
"ThedoctrineofpubUcpoHcymay besummarisedthus: Public policy
or the policy of the law is an illusiveconcept;it has beendescribedas an
"untrustworthyguide","variablequality","unrulyhorse",etc.; theprimary
duty of acourtof law is to enforce apromisewhichthepartieshave made
and to uphold thesanctityofcontractwhichforms the basis of society; but
incertaincases, theCourtmay relievethemoftheirdutyon arulefounded
onwhatiscalledthepublicpolicy; forwantofbetterwordsLordAtkin
describesthatsomethingdonecontrarytopublic policyis aharmfulthing;
but thedoctrineisextendednotonly toharmfulcases but also toharmful
tendencies; thisdoctrineof public policy is only abranchofcommonlaw,
and just like anyotherbranchofcommonlaw, it is governed byprecedents;
the principles have beencrystallisedunderdifferentheads andthoughit is
permissible forcourtstoexpoundand apply them todifferentsituations,
itshouldonly beinvokedin clearandincontestablecases ofharmto the
public;thoughthe heads are not closed andthoughtheoreticallyit may
bepermissibleto evolve a new headunderexceptionalcircumstancesof a
changingworld,it isadvisablein theinterestofstabilityofsocietynotto
make anyattemptto discover new heads in these days."
Explainingthe scope of theexpression"publicpolicy"and the role of the
judge, C.ReddyJ of theAndhraPradeshHighCourtobserved:^"'Thetwin
touchstones of public policy are advancement of the public good and pre
vention of public mischief and these questions have to be decided by judges
notas men of legallearningbut asexperiencedandenlightenedmembers of
thecommunityrepresentingthe highestcommonfactor of publicsentiment
andintelligence.
Endorsingthis view, the SupremeCourtaddedthatgoing byprevailing
social values, anagreementhavingtendencyto injure publicinterestor pub
lic welfare is opposed to publicpolicy."°
Surrenderofrights
A wife who is entitled tomaintenancecan give up her right in considera
tion of a lump sumpayment,but thesurrenderof therightto claim revision
of theamountin thecontextof rising prices would be opposed to public
policy.^"
109.RatanchandHirachandvAskarNawazJung,AIR 1976 AP 112.
110.RattanChandHiraChandvAskarNawazJung,(1991) 3 SCC 67.Refundof salestax
moneyalreadycollectedundervarioussalestransactionswouldbe abreachoftrustwith
the peopleandaviolationofpublic policyand,therefore,cannotbeallowedas anarticle
of incentive to new industry. AmritBanaspatiCo Ltd v State of Punjab, (1992) 2 SCC 411;
AIR 1992 SC 1075. There is nothing wrong essentialy in providing for theappointmentof an
arbitratorfrom among employees of thedepartment.Vijay SinghAmarSingh vHindustan
ZincLtd, AIR 1992 Raj 82; M.K.UsmanKoya v C.S.Santha,AIR 2003 Ker 191, the term
"public policy" has an entirely different and more extensivemeaning than the meaning of the
term "policy of law". It does not remain static. Judges have tointerpretit taking asubstantial
guidancefromprecedent.
111.Muniammalv Raja, AIR 1978Mad103.BhaskarTanhajiDhokratvParwatbaiBhaskar
Dhokrat,(1996) 1 Bom CR 311, acustomto the effectthatlegal right tomaintenancewouldhttps://t.me/LawCollegeNotes_Stuffs

413. [S. 23] Unlawfulagreements275
Giving effect to an agreement which overrides Section 125 CrPC would
tantamount to not onlygivingrecognitionto something which is opposed
topublicpolicybut would also amount tonegationof the statutory provi
sions.The court said that pubhc policycan broadly be equated with policy
oflaw."^A marriage was dissolvedon consent terms, one of which was that
the wife would not claim alimony or maintenance. It was heldthatsuch
consent terms could not prevent thecourtfrom granting maintenance on the
applicationof the wifemadesubsequently.Suchrightsare the larger parts of
the right to life. It is against public policy to snatchthem."^
An agreement to give up one's legal right is not hit by Section 23. The
agreementinquestionwasbetweenthelandlordandtenant.It wasentered
into during thependencyofevictionproceedingsand stipulated thatevenif
an evictionorderwas passed, thelandlordwouldnotevict thetenant.This
was held to be not illegal or against publicpolicy.^"Thecourtfollowed
theSupremeCourt ruling to the effectthat what makes an otherwise legal
agreement to be void isthatits performance is impossible except by disobe
dienceoflaw."^
The Employees' StateInsuranceAct, 1948 has beenenactedforbenefitof
all the workerscoveredby it. Its provisions are meant to protectemployees
fromemployers.It is a matter of underlying publicpolicy.Suchbeneficial
rights cannot be contracted out either byemployersoremployees'union.
Such contracts are void andunenforceable.Waiverof advantages conferred
by law is opposed to publicpolicy."^
Marriageofminorgirl
Where the consideration for acontractof sale was the expenses of the
marriage of a minor girl, the arrangement was held to be opposed to public
policy, being in violation of the ChildMarriageRestraintAct.
Faymentoutofblackmoney
The Delhi HighCourthas heldthatacontractfor the sale of goods whose
tenor showsthatthe price was intended to be paid out of black money is not
opposedto public policy and is,therefore,valid andenforceable."^The con
tractinvolvedtransferof goods and payment of price and neither is opposed
becomesurrenderedwould becontraryto law if it isdestructiveof those rightswithoutalter
nativesecurity.
112.HanamantBasappaChoudharivLaxmawwa,(2002) 5KantLJ 405.
113.GeetaSatishGokarnavSatishShankerraoGokarna,AIR2004Bom 345.Hanamant
BasappaChoudharivLaxmawwa,(2002) 5 Kant LJ 405,surrenderof rightsunderS. 125
CrPC,againstpublic policy. YinitaDevanganvRakeshKumarDevangan,AIR 2010NOC
117 Chh-,MaheshChandraDwivedivStateofUP,A1R2009NOC205 (All),consentdivorce,
right tomaintenanceremains.It islostonly onremarriageor becoming self-sufficient.
114.M.K.UsmanKoya v C.S.Santha,AIR2003Ker 191:(2003)3 CLT12.
115.BOIFinanceLtdvCustodian,(1997)10SCC488:AIR1997SC1952.
116.RCC(Sales) (P)LtdvESICorpn,AIR 2015 Hyd 134.
117.AnandPrakashOmPrakashvOswalTradingAgency, AIR 1976 Dei 24. CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

414. 276 Chapter 7 Legality of Object [S.23]
to publicpolicy,nor can it be said to bedesignedto hoodwink therevenue.
And evenif it could be so said, the sellerwho had deliveredhis goods, could
alwayscall for payment out of the innocent money of thebuyer.An agree
ment to exclude the land of a company from notifiedurbanareas has been
held to benotagainstpublicpolicy."^
Grabbingofprivileges byextraneousinfluences
A sale of seats in a public institution, e.g., a medicalcollege,is equally
opposedto publicpolicy.TheSupremeCourt has heldthat charging of cap
itationfee inconsiderationofadmissiontoeducational institutionsis illegal
andimpermissibleas it amounts to denial ofcitizen'sright to educationand
is arbitrary andviolativeof Article 14 of theConstitution."'The Madras
High Court did not permit the recovery of a sum of money paid to a per
son to enable him toprocurea seat in a medical college. Anyattemptto
pervert selection by merit is highly injurious to publicinterest.^^"Money
promised to a person to get the promisor declared as the heir of a wealthy
Nawabhasbeen.heldto benotrecoverable.^^^Thefulfilmentof thepromise
involved influencing statesmen for private gain, which is the same thing as
corruption. Money promised to be paid to a person for using his influence
for obtaining a Government order in favour of a manufacturer for supply of
spareparts,or to secure a mining right are in the samecategory.^^^A con
tractbetween A and B for wielding influence with theGovernmentauthor
ities to secure a decision in favour of B has been held by the SupremeCourt
to be opposed to publicpolicy.^^^Money paid under such acontractis not
allowedtoberecovered.^^''
Priceescalationandinterestclauses
Onaccountof priceinstabilities,it has become usual to allow suppliers
and project contractors the benefit of price adjustment where the market
price increases to such anextentthatit would beunreasonableto ask any
bodyto go onperformingat theoriginallyreservedprices.TheDevelopment
Authoritiescan make suchadjustmentsaccordingas themarketof selling
plots or houses fluctuates. If anAuthorityis forced under acourtorder
to pay morecompensationfor acquisition, it can recoup from allottees
withwhomthe deal is stillnotfinalised.TheAuthoritycanalsocategorise
the beneficiaries of its service's, forexample,intoauction-purchasersand
118.AssociatedCementCompaniesLtd vStateofRajasthan,AIR 1981 Raj 133. T.T.Augustine
VChanganacherryMunicipality,AIR 1982 Ker 307, raffles are notopposedto public policy.
119.MohitiiJainvStateofKarnataka,(1992) 3 SCC 666: AIR1992SC 1858.
120. N.V.P.PandianvM.M.Roy, AIR1979Mad42.
121.RatanchandHirachandvAskarNawazJung,AIR 1976 AP 112.
122.KujuCollieriesLtdvJharkhandMinesLtd,(1974) 2 SCC 533: AIR 1974 SC1892;SitaRam
VRadhaBai,AIR1968SC534:(1968)1SCR805.
123.RattanChandHiraChandvAskarNaivazJung,(1991) 3 SCC 67.
124.MontefiorevMendayMotorComponentsCoLtd,(1918) 2 KB 241.https://t.me/LawCollegeNotes_Stuffs

415. [s. 23] Unlawful agreements 277
allottees. Demanding more price from allottees only does not constitute a
discrimination.Theallotteesmay be furthercategorisedintoeconomically
stronger or weaker sections. Lesser prices from weaker sections does not in
itself violate theconstitutionalguarantee ofequality.^^^
Agreementscontrarytopublicpolicyoffriendlyforeignstate
The public policy of a friendly foreigncountrywhere the agreement in
question has to be performed can be taken into account while enforcing
the agreement in England. This principle was laid down by the court of
Queen's Bench Division inLemendaTrading CoLtdvAfricanMiddleEast
Petroleum CoLtd}^^An oil company in England wanted renewal of a sup
ply contract with the Qatar National OilCompany.For this purpose, it
entered into an agreement with the plaintiff company whichundertookto
bring about the renewal by using theirinfluencewith theofficersofQatar
and this, inreturn,for a commission on oil supplies. Such commission was
against public policy under the law of Qatar. The supply was renewed and
anactionwascommencedinEnglandto recover theagreedcommission.
Thecourtsaidthatrecovery would not be allowed. The public policy of a
friendly foreign Statecannot,of course, of itself prevent the enforcement
of acontractin England, but even so, an Englishcourtwould not enforce
acontractrelated to atransactionwhich iscontraryto English public pol
icy founded on general principles of morality and the same public policy is
applicablein the friendly foreign country where the contract was to be per
formedsothatthecontractwouldnotbeenforceableunderthelawofthat
country, because in suchcircumstancestheinternationalcomity combined
withthe English domestic public policy would militateagainstenforcement.
Sinceacontractfor the use of personal influence inreturnfor money in cir
cumstanceswhere the person to be influenced is likely to beunawareof the
pecuniarymotive involved iscontraryto public policy inbothEnglandand
Qatar,suchcontractwould not be enforced inEngland.^^^Thecourtcited
the following passage from the judgment ofHalsbury "Wherea
125.VipulRaiSharmavLudhianaImprovementTrust, AIR 1992P&cH42.
126.1988QB448.
127. ThecourtnotedNormanv Cole, (1800) 3 ESP 253: 170 ER 606, money paid for using the
influence of the recipient forsecuringpardonformurdernot allowed to be recovered back;
MontefiorevMendayMotorComponentsCoLtd,(1918) 2 KB241,aclaimforcommission
forprocuringfrom the Government a loan to be used formanufacturingaircraftcompo
nents,notallowed.
128.MissouriSS Co, re, (1889) LR 42 Ch D 321, 336 (CA). Thecourtalso citedKaufmanv
Gerson,(1904)1 KB 591 (CA). Inthatcase:"AFrenchmancoercedaFrenchwomaninto
signing acontractin France by thethreatthatif she refused to sign he wouldprosecuteher
husbandfor a crime of which he was accused." Thecontractwas valid by French law, but
anactionbroughtfor itsbreachinEnglandwasdismissedon thegroundthattoenforceit
"wouldcontravenewhatby the law of thiscountryis deemed anessentialmoralinterest".
Presumably,therefore,anEnglishcourtwouldapply the rulethathas been laiddownin the
United States of America and would refuse to enforce anycontractwhich tended to promotehttps://t.me/LawCollegeNotes_Stuffs

416. 278Chapter7LegalityofObject [S. 23]
contractis void on thegroundofimmorality,or iscontraryto such positive
law aswouldprohibitthemakingof such acontractat all,thenthecontract
-wouldbe void all over theworld,andno civilisedcountrywouldbecalled
ontoenforceit."
Alienationoflandbymemberofdepressedclass
Aportionoflandwas assigned by theGovernmentto adepressedclass
member infulfilmentof itsConstitutionalobligationunderArticle39(b).
Thegrantwas subject to the specificconditionthatthelandwouldnot
bealienated.Becauseoftheviolationofthisconditionandbecauseofthe
public policyimplication,thealienationof thelandwas held to be of no
effect.^^^Alandallottedon the basis of Scheduled Caste wasputunder20
yearrestrictionondisposal.Thiswas held to be valid. Atransferinviolation
of theapplicableRules wasnaturallyinvalid.TheRulespermittedmortgage
infavourof bankingcompaniesandrecognisedfinancialinstitutions for
raisingaloan.^^"
Suchrestrictionsare in theinterestof the assignees of lands and are based
uponpublic policyto meetguaranteedsocialneeds.Theydonotoperateas
a clog.Theyareintendedtomakeassigneesfullowners."^Any suchrestric
tionwhichisnotin theinterestof the class towhichtheassigneebelongs is
likely to bedeclaredvoid.^^^
Chitty
Theconductof achittyinviolationof Actsenactedin theinterestof
uniformityofpracticeswas held to benotopposedto public policywithin
themeaningof Section 23. The cheques issuedunderthe scheme werefound
to be issued forpaymentof legallyenforceabledebts. Thedishonourof
such chequesamountedto an offenceunderSection 138 of theNegotiable
InstrumentsAct,.1881."^
corruptionin thepublicaffairsof aforeigncountry,howeverirreproachablesuchconduct
mightbe in the view of the foreign law asnotedinCheshire,FifootandFurmston,Lawof
Contract,pp.370-71.
129.PapaiahvStateofKarnataka,(1996) 10 SCC 533:AIR1997SC2676.InParesarv
MunicipalBoard,Mt. Abu,1997AIHC1897 Raj,regularisationofencroachmentcolo
nies for 10 years withrestrictiononalienation,notagainstpublic policy.Presumptionthat
State decisions are in publicinterestand for public good.JaipurDevelopment Authority
vDaulatMaiJain,(1997) 1 SCC 35,allotteeof landafteracquisition,subsequentsale of
thatland toothersdescribedassub-awardeesor nominees was held to beopposedto public
policy.
130.JitSinghVPiara,(2003) 4ICC275(PScH).JayammavMariaBai,(2004) 7 SCC 459:AIR
2004SC 3957,transferby will also fallswithinthe spell ofprohibition.
131.LandAcquisitionOfficervMekalaPandu,(2004) 3 CTC 19(LargerBench).
132.BhavaniAmmaKanakadevivCSlDekshinaKeralaMahaIdavaka,AIR2008Ker 38, a
saledeedcontainedaprovisionthattheassigneewouldreturnthelandif hefailedtobuild
a college and not otherwise transfer it, hold against public policy, not enforceable, free right
oftransferringpropertyisprotectedby S. 10 of theTransferofPropertyAct.
133.NadarajanvNadarajan,(1999) 2 KLT512.https://t.me/LawCollegeNotes_Stuffs

417. [S. 23] Unlawfulagreements279
Arbitrationawardinduced byfraudorcorruption
Anarbitrationaward induced by fraud orcorruptionhas been held to be
againstpublicpolicy. It isthereforeliable to be set asideunderSection34(2)
{b){lVi,Explanationof theArbitrationandConciliationAct,1996."''
Things doneunderstatutoryprovisions
Bankingbusiness includes recovery. Theassignmentof a debt and a
non-performing asset bySBIto a banking company under the provisions
of an Actwithrightto recover the debt was held to be a validtransaction.
ThetransactioninquestionwasneitherprohibitedundertheTransferof
PropertyAct nor it was violative of public policy."-' Things expressly per
mittedby lawcannotbe held asopposedto public policy. In this case there
was atransactioninderivatives,whichis afinancialinstrumentusedto
transferor hedge the risk. This waspermittedbyMasterCircularsissued by
the Reserve Bank from time to time andRegulationsframedunderFEMA,
1999."«
Divorcebymutualconsent.—^Thepartiesto amarriageenteredinto a
compromiseovertheirmarriagewhichhadalreadysufferedirretrievable
breakdownwithno chance ofreunionbetweenthem.Accordingto the terms
of thesettlement,thehusbandhadalreadydepositedthe entireamountof
permanentalimonyandreturnedallarticlesofstreedhanto the wife.The
compromisewasvoluntaryandwithoutanycoercionorundueinfluence.
Thecourtgranteddivorce."^
Headsofpublicpolicy
1.Tradingwithenemy
"TheKing'ssubjectscannottradewithan alien enemy, i.e. aperson
owingallegianceto aGovernmentatwarwiththe King,withouttheKing's
licence.""'"ItisnowfullyestabHshedthatthepresumedobjectofwar
being asmuchto cripple the enemy'scommerceas tocapturehisproperty,
adeclarationofwarimpartsaprohibitionofcommercialintercourseand
correspondencewiththeinhabitantsof the enemy'scountry,andthatsuch
intercourse,exceptwiththe licence ofCrown,isillegal"."'"Thedoctrine
applies to allcontractswhich involveintercoursewiththe enemy or tend to
assist the enemy, eventhoughno enemy be apartyto thecontract."""
134.VentureGlobalvSatyamComputerServicesLtd,(2010) 8 SCC 660: AIR 2010 SC 3371.
135.KotakMahindraBankLtdvChopraFabricator& Mfr. PLtd,AIR 2011All19.Thetrans
fer wasundertheSecuritisationandEnforcementofSecurityInterestAct,2002.
136.RajshreeSugarsandChemicalsLtdv AxisBankLtd,AIR 2011Mad144.
137.BipinKumarSamalvMinarvaSwain,AIR2016Ori41.
138. LordMacnaghteninJansonvDriefonteinConsolidatedMinesLtd,1902AC484,499.
139.EspostioVBowden,110RR822,823.
140.BadischeCo, re, (1921) 2 Ch 331, 373. ForIndianauthoritiessee;BanghyAbdulRazakv
KhandiRao,40IC851, 852; R.K.MotishawvMercantileBankofIndia,37IC258;Wolf
& SonsVDadybhaKhimji& Co,ILR(1919) 44 Bom 631.https://t.me/LawCollegeNotes_Stuffs

418. 280 Chapter 7 Legality of Object [S.23]
2.Traffickinginpublicoffices
An agreement by which it is intended to induce a public officer to act
corruptly is contrary to publicpolicy.Anagreement,for example, bywhich
a sum of moneywas providedto a charity on the condition that latter would
procure a knighthood for the plaintiff was held void and the money irre
coverable."^Similarly,an agreement to provide money to a member of
Parliament to influencehis judgment isvoid."^Sale of public offices,thatis,
appointments in consideration ofmoney,are also against public policy.The
sale of the office of a Shebait has been heldinvalid."^Chargingofcapita
tion fee for admission to prestigiouseducationalinstitutionsiscontraryto
publicpolicy.TheSupremeCourt has described it as unreasonable, unjust
andunfair."''
3.Interferencewithadministrationofjustice
Acontract,theobjectof which is to interfere with theadministrationof
justice, is obviously opposed to public policy. It may take any of the follow
ing forms:
{a)InterferencewiththeCourseofJustice.—Anyagreementwhich
obstructstheordinaryprocess of justice isvoid."-'An agreement to delay
the execution of adecree,"®and a promise to give money to induce aperson
to give false evidence,"^ have been held void. An extremeillustrationis an
agreement toperform"puja" to secure success to thedefendantin a litiga
tion,whichwas heldvoid."^
{b)Stiflingprosecution.—Itis in publicinterestthatcriminalsshouldbe
prosecuted and punished. Hence, an agreement not to prosecute an offender
or towithdrawapendingprosecutionis void if the offence is of public
141.Parkinsonv CollegeofAmbulanceLtd,(1925) 2 KB 1.
142.MarshallvBaltimore&OhioRailroadCo,14 L Ed953:57US (16How)314(1853).There
should be a clearproofof illegalintention.SeeManindraChandraNandivAswiniKumar
Achariya,AIR 1921Cal185andShivsaranLaivKeshavPrasad,AIR1917 Pat92.
143.NarasimmaThathaAcharyavAnanthaBhatta,ILR(1881) 4Mad391; cf.Mancharanv
PranShanker,ILR (1882) 6 Bom298.See alsoRuppaGurkulvDorasami,ILR (1882) 6
Mad76; Wahid Alt vAshrafHussain,ILR (1882) 8 Cal 732andAnjaneyaluvVenuegopala
Rice MillsLtd,ILR (1922) 45Mad620; in all ofwhichsale ofreligiousoffices was.disap
proved. Forotherillustrationsof sale of publicappointmentsseeRanjitsinghMurlisinghv
RamlalShivlal,AIR1951 MB 113;LeduCoachmanvHiralalBase,(1914-15)19CWN
919: (1915) 29IC625;SaminthaAiyarvMathusamiPillai,ILR (1907) 30Mad530,where
anagreementtoinduceapublicservanttoretirewasstruckdown.Wheremanagingagents
wereinducedtotakeapartnerbybribetheagreementwas held void.GulabchandvKudilal,
AIR1966SC1734:(1966)3SCR623.
144.MohiniJainvStateofKarnataka,(1992) 3 SCC 666: AIR1992SC 1858.
145.FryLJremarkedinWindhillLocalBoardofHealthv Vint, (1890) LR 45 Ch D351,366that
"wecannotgive effect to theagreement,theconsiderationofwhichisdivertingthecourseof
justice".
146.NandKishorevKunjBehariLai,AIR 1933 All303.
147. Ko Pa Tu vAzimulla,AIR1940Rang73;AdhirajaShattyvVittilBhatta,AIR1914
Mad366.
148.BhagwanDasShastriv Raja Ram, AIR 1927 All 406.https://t.me/LawCollegeNotes_Stuffs

419. [S. 23] Unlawfulagreements281
nature.Suchagreementsare calledagreementsto stifleprosecution."You
shall not make atradeof afelony.""'"Nocourtof law cancountenance
or give effect to anagreementwhichattemptstotaketheadministration
of law out of thehandsof the judgesandputit in thehandsof theprivate
individuals."""However,the law allowscompromiseagreementsinrespect
ofcompoundableoffences."^ But thecompromiseof anon-compoundable
offenceisnotallowed.Anillustrationistobefoundinthedecisionofthe
SupremeCourtinNarasimharajuvGurumurthyRaju}^^
In thedissolutionandsettlementofaccountsof apartnershipfirm, one
of thepartnersfiledcriminalcomplaintsagainsthisco-partnersalleg
ing forgery in andmanipulationofaccountsbytakingin a fakepartner.
Subsequently, thepartnersenteredinto anagreementto refer thematter
toarbitrationinpursuanceofwhichthecomplainantdidnotoffer any
evidence and hiscomplaintwasaccordinglyrejected.Whenthequestion
ofenforcementof thearbitrator'sawardarose,it wasallegedthatthe ref
erence toarbitrationwas the result of anagreementto stifleprosecution.
GajendragadkarJ(afterwardsCJ) held theagreementto beopposedto
public policy. He said:"Ifa person sets themachineryofcriminallaw into
action on the allegationthattheopponenthascommittedanon-compound-
able offence and by the use of the coercivecriminalprocess, he compels the
opponent to enter into an agreement,thatagreement would be treated as
invalidfor thereasonthatitsconsiderationisopposedtopublicpolicy".The
learned judge referred to the decision of the Privy Council inBhowanipur
BankingCorpnLtdvDurgeshNandiniDassi,^"where a mortgage was
executed by therespondentas apartof theconsiderationfor a promise
by the bank towithdrawcriminal proceedings instituted by it against the
mortgagor's husband and the bond was held invalid,notwithstandingthat
thedebtitselfwasrealandvalid.LordAtkinobserved:
149. LordWestburyin Williams v Bayley,(1866)LR 1HL200,220. See also Keir vLeeman,
(1846)9 QB 371, 392: (1844) 6 QB 308, where at pp. 316 and 322 LordDenmakLC
cited the principle laid down byWilmotCJ in Collins v Blantern,(1767)2Wils341 that
a contract to withdraw a prosecution for perjury, and consent to give no evidence against
theaccusedisfoundedon anunlawfulconsideration.NewarMarbleIndustries(P)Ltdv
Rajasthan SEB, 1993 Cri LJ 1191 (Raj),compounding the offence of theft of energy, held to
beagainstpublicpolicy.
150.MukherjiJ inSudhindraKumar v GaneshChandra,ILR(1939) 1Cal241, 250.
151. See S.345,CrPCandSs.213-14,IPG.
152. AIR 1963 SC 107:(1963)3 SCR 687. See also Marai Packiam v Vallaimmal, 1989 SCC
OnLine Mad 301: (1990) 1LW449, criminal proceedings whichcannotbe compromised
without courtpermission;]ohn Jacob v Joseph Joseph,(1990)1KLT75 where the court
observed that a document executed by parties to settle the disputes between them and
therebyto bring peace and goodneighbourlyrelations can, under no stretch of imagination,
be considered as an agreement to stifle litigation. Srihari Jena v Khetramohan Jena, AIR
2002 Ori 195: (2002) 94 CLT 201 (Ori), a deed executed with theintentionof compro
mising some criminal cases between the parties pending before courts, hit byprovisions
ofS.23.
153. (1941) 54 LW529:AIR1941PC 95.https://t.me/LawCollegeNotes_Stuffs

420. 282Chapter7LegalityofObject [S. 23]
Toinsistonreparationas aconsiderationforpromisetoabandon
criminalproceedingsis a serious abuse of therightofprivateprosecu
tion. The citizen whoproposestovindicatethecriminallawmustdo
sowhole-heartedlyin theinterestof justice, and must not seek hisown
advantage."''
Whereacompromiseagreementis made before anycomplaintis filed, it
would notamountto stiflingprosecution,even if it isimplementedafterthe
filing of acomplaintwhichis thenwithdrawn.This waspointedoutby the
SupremeCourtinOusephPoulovCatholicUnionBankLtd}^^
Abankfoundthatthe goods in a godown, which was pledged to it
againsta loan, were eitherfraudulentlyovervaluedorwithdrawnin col
lusion withbankofficials. Theborrowersagreed to make up for thedefi
ciencyby hypothecating more property. Some delay having taken place in
thehypothecation,thebankfiled acomplaintwhich waswithdrawnafter
thehypothecationwascompleted.
GajendragadkarCJ did not agree with thecontentionthatthe agree
ment involved any idea of stiflingprosecution.The agreement was entered
intobefore thecomplaintwas filed,andso, itwouldbeunreasonableto
suggest merely from the sequence of subsequent eventsthatthedocuments
in question was executed with theobjectof stifling thecriminalprosecution.
Approving cases of this kind in its decision in Union Carbide Corpn v
UnionofIndia,^^^the SupremeCourtpointed out the distinction between
"motive" and "consideration" forwithdrawinga prosecution. "Where
dropping of the criminal proceedingsis a motivefor entering into the agree
ment—andnot itsconsideration—thedoctrine of stifling of prosecution
is not attracted. Where there is also a pre-existing civil liability, the drop
ping of criminal proceedings need not necessarily be a consideration for the
agreement to satisfy thatliability."^Where withdrawal of a prosecution is
themotivebut not the object orconsiderationof the contract, public policy
is not affronted. The settlement of the Bhopal gas disaster was, therefore,
valid."
Anagreementnottoappearas awitnessisvoid."^
(c)Maintenanceandchamp£RTY.—Explaining"maintenance"Lord
Haldanesays:"It is unlawful for a stranger to renderofficiousby money
154.ElammavFrJoseph ArnachaniOlikkan,(2003)2KLT536;(2003)4ICC279, thefalsity
was known to both parties, threat of filing a false suit is really a form of blackmail and can
not be regarded as good consideration for an agreementto abstain from doing so.
155. AIR 1965 SC166:(1964)7 SCR745.To the sameeffectisR.Sivaramv T.A.John, AIR 1975
Ker 101, where price was accepted from an employee whocommittedtheft of articles.
156. (1991) 4 SCC584;AIR1992SC 317,288.
157.Citing AdhikandaSahuv Jogy Sahu, AIR 1922 Pat 502; Deb Kumar Ray Choudhury v
AnathBandhu'Sen,AIR 1931Cal421 where it was held that a contract for payment of
money in respect of a criminal prosecution waspermissible,was not by itself opposed to
public policy; BabuHarnarianKapur v Babu Ram Swarup Nigam, AIR 1941 Oudh 593.
158.StateofU.P. vKapilDeoShukla,(1972) 3 SCC 504:AIR1973 SC 494.https://t.me/LawCollegeNotes_Stuffs

421. [S.23] Unlawfulagreements283
orotherwiseto another person in a suit in which that third person has
himselfnolegalinterest,for itsprosecutionordefence.""^"Champerty"
in its essence means "abargainwhereby onepartyis to assist theother
in recoveringproperty,and is to share in the proceeds of theaction".""
"Agreements by which a stranger advances money for maintenance of lit
igation with a view toobtainingan unconscionable gain are called cham-
pertousagreements.""!The MPHighCourtobservedthatinIndiathere
is no law prohibiting champertous agreements as that in England. But a
number of High Courts in India have been of the view that theEnglish
principleisapplicable."^InHarilalNathalalTalativBhailalPranlalShah^^^
the Division Bench of the BombayHigh Court dealt with an agreement in
which a person had agreed togivehalf share of the property to the finan
cier, valued atRs30,000from such property as he might get whether by a
suit or by privatesettlementor in any othermannerfrom his father's estate.
Thecourtheldthattheagreementwasextortionateandunconscionableand
opposed to public policy. An agreement which providedthatthe financier
should get%of thepropertywas not regarded as reasonable orfair."'*A fair
agreement to assist a person in the enforcement of his legal rights may be
held valid even if thepersonprovidingtheassistanceis to bereimbursedout
of the proceeds of theaction."^Much, however, depends upon thequantum
of share which the financier hasstipulatedto get in the fruits of the action.
Astipulationfor 3/4th share in the property, if recovered, has been held to
make the agreement champertous."® On theotherhand,in RamSwarup
VCourtofWards,whichwent up to the Privy Council, the agreement
providedthatthe financier should bear all the expenses of the case and in
returntherefore get athree-annashare of the immovablepropertyrecovered
providedthatit should be increased to fourannas,should the case go to the
159.NevillevLondonExpress,1919 AC 368.
160.HutleyvHutley,(1873) LR 8 QB 112,perBlackburnJ.KamrunnisavPramodKumar
Gupta,AIR1997MP106,agreementtofinancelitigationon theconditionthattheentire
share of thedecretalpropertywould go to the financier, held,extortionateandagainst
equityandjustice,couldnotbeenforcedspecifically.VatsavayaVenkataSubhadeayyamma
JagapatiBahadurGuruvPoosapatiVenkatapatiRajuGaru,(1924-25)52lA1: (1924) 20
LW298: AIR1924PC 162 to the effectthatchampertyby itself doesnotmakethe agree
mentunlawful.RajahMokhamSingh vRajahRup Singh,(1892-93)20lA127,champerty
becomesopposedto publicpolicyif theagreementis not justandequitable.
161.KhajaMoinuddinKhanv S.P.RangaRao,AIR2000AP344at p.346.
162.GayahaivShriram,(2005) 3 Civ LT 420 (MP).
163.AIR1940Bom143.
164.NuthakiVenkataswamivKattaNagiReddy,AIR1962AP 457, TheAllahabadHighCourt
inBabuRam vRamCharanLai,AIR1934All 1023dealtwithanagreementwhichpro
vided for 50 per centsharefor thefinancierandheldthatthesuitwasopposedtopublic
policy. InVatsavayaVenkataJagapativPoosapatiVenkatapati,(1924-25)52lA1,where
theagreementwasfoundto bechampertousbut theamountactuallyspentby thefinancier
wasallowedto berecoveredbycreatingachargein hisfavouron theproceeds.
165.FischervKamalaNicker,(1860) 8MIA170;BhagwatDayalSingh vDeviDayalSahu,
(1907-08)35lA48.BanwarilalvDeenanath,ILR1954MP337.
166.NuthakiVenkataswamivKattaNagiReddy,AIR1962AP 457.
167.ILR1940Lah1 (PC).https://t.me/LawCollegeNotes_Stuffs

422. 284Chapter7LegalityofObject [S. 23]
Privy Council, the agreement was held to be valid. Similarly, agreements to
pay 3/6thshare;^^®l/4thshare^^^and l/8thshare""have been upheld. But an
agreement to payl/6thpartof thepropertyto be inherited has been held
to beunlawful.The estate being very vast, evenl/6thwould net Rs 3 lakhs
for the promisee and this isexorbitant."^Principlesthatensure justice, fair
play,transparency,objectivity andprobityindischargingpublicfunctions
are facets of public policy, i.e. any rule,contractorarrangementthatis in
public good and publicinterest."^Anagreementto pay to thefinancier40
per cent of the value of thepropertyinquestionor its saleproceedswas
held to be ofchampertousnature."^Wherethepropertyformingthe sub
ject-matterof litigation is agreed to be sold to the financier, the mere fact
thattheconsiderationfor the sale isinadequate,maynotrenderthe agree
mentchampertous."''
Anagreementby a client to pay his lawyeraccordingto theresultof the
case isagainstpublic policy."Itisprofessionalmisconductfor anadvocate
tostipulatefor or agreewithhis client to accept as his fee orremunerationa
shareof thepropertysued orothermatterinlitigationuponthe successful
issuethereof.""^Anagreementfor solicitorretainershipon the basisthat
thesolicitors'standardremunerationwouldbepaidon successful casesand
therewouldbe 20 per centreductionoftheirfee for lost cases has been held
to bechampertous.Neithertheamountnotpaid,could be recovered,nor
the feeamountsalreadypaidcould beclaimedback. Thecourtsaidthata
contingencyfeewhichiscontraryto public policy isnotconfinedto adirect
orindirectshare of the spoils but it includes a differential feedependenton
theoutcomeof thelitigation."^
4.MarriageBROKAGEcontracts
Anagreementtoprocurethemarriageof apersoninconsiderationof
a sum of money is calledmarriagebrokagecontract.Such agreements are
void. A typicalillustrationwould be an agreement for the sale of agirl."^
Thecustomof paying bride price to theparentsof a girl iswell-knownin
India.Accordingto decisions of thePunjab,"^Calcutta"'andMadras^'"
168. Vatsavaya VenkataSubhadeayyammaJagapatiBahadurGuruvPoosapatiVenkatapati
RajuGaru,(1924-25)52lA1:(1924)20 LW298:AIR1924PC162.
169.ValluriRamanammavMarinaViranna,(1931) 33MLW757:AIR1931 PC100.
170. RajahMokhatnSingh v Rajah Rup Singh,(1892-93)20lA127.
171.RatanchandHirachandvAskarNawazJung, AIR 1976 AP 112.
172.BCCIVCricketAssnofBihar, (2015) 3 SCC 251, members of a decidingcommitteecannot
havepersonalinterest.
173. KhajaMoinuddinKhan v S.P. Ranga Rao, AIR2000AP 344.
174.UnnaoCommercialBankvKailashNath,AIR1955All393.
175. KathuJairamGujafyVishvanath GaneshJavadekar,AIR 1925 Bom 470.
176.AratraPotatoCoLtdvTaylorJoynsonGarrett,(1995) 4 All ER 695.
177.GirdhariSingh vNeeladharSingh, (1972) 10 All LJ 159.
178.WazarimalvRallia,1889PunjRec No. 128.
179.BaldeoDasAgarwallavMohamayaPersad,(1911)15CWN447.
180.KalavaguntaVenkataKristnayyavKalvaguntaLakshmiNarayana,ILR(1909) 32Mad185.https://t.me/LawCollegeNotes_Stuffs

423. [S. 23] Unlawfulagreements285
High Courts, an agreementto pay money to the parent of a minor to induce
him togivethe minor in marriage isvoid.Where,however,the money has
already been paid, but the marriage fails to go through, it has been heldin.a
few casesthatthe money may be takenback.^^^
Anattemptto make gain ofmaterialnatureout of amarriagewould be
equally opposed to public policy. When a father or otherguardianof a boy
or girl has to betroth his ward, his primary and only consideration ought
to be happiness and welfare of the child. The stipulating for a monetary
payment for himself is an incentive to theparentor otherguardianto have
regard to other considerationsthanthe child's happiness inmarryinghim
or her intoanotherfamily. Such an agreement would clearly beinvalid.^®^
A decision of the OrissaHighCourtprovides a suitableillustration:"^
Thedefendantproposedthemarriageof hiswidowedniece to the
plaintiffand offered to give her gold and jewels and land. Themarriage
took place, but the defendant refused to fulfil the rest of his promise.
Thecourtobserved:Wewouldliketomakeitclearattheoutsetthatif
gifts or presents to the groom or the bride are madevoluntarilyitcannotbe
attackedasanythingimmoraloropposedto public policy. But ifpecuniary
gain is made theconsiderationofmarriage,it isboundto becondemnedas
reprehensibleto all sense of decentmorals.In thepresentcase,monetary
gain was the soleconsiderationfor themarriagebetweenthetwo."''
Inter-castemarriagearrangementshave been held to bevalid."^
5.Unfair,unreasonableorunconscionabledealings
[Dealingswithemployees]
Wherethepartiesarenoteconomicallyonequalfootingandthereis a
wide gap in thebargainingpowerof theparties,where one ofthemis in a
positiontoexploitandtheotherisvulnerableandthecontractmadewith
thatotherisapparentlyunfair,itcanincircumstancesbe alsoregarded
asopposedto public policy. Forexample,the SupremeCourtlaiddown
inCentralInlandWaterTransportCorpnvBrojoNathGanguly^^^that
181.GanpatvLahana,AIR 1928Nag89;GopiKrishnaPrasadvJanakFrasad,AIR 1951
Pat519.
182.PerFarranCJ inDholidasvFulchandChhagan,ILR22 Bom658.
183. A.SuryanarayanMurthiv P.KrishnaMurthy,AIR1957Ori 125.
184.MohpatraJ who relied uponKalavaguntaVenkataKristnayyavKalvaguntaLakshmi
Narayana,ILR (1909) 32Mad185. For areappraisalof theconceptofpublicpolicyas it
affectsinsuranceclaims and theprinciplethatno one should benefit from his ownwrong,see
JohnShand,Unblinkeringthe Unruly Horse;PublicPolicy in theLawofContract,(1972-A)
CambLJ 144. See alsoGoodhart,EnglishLawandtheMoralLaw, p. 10andDevlin,
TheEnforcementofMorals,pp.43-44.
185.AmirchandvRamRattanchand,1903PunjRecNo.50.
186. (1986) 3see156: AIR1986SC 1571. In itsjudgmentinSethanivBhana,1993 Supp (4)
see639: AIR 1993 SC 956, theSupremeCourtheldthatwherea sale deed of herproperty
was executed by an old,illiterateand blindtribalwomanin favour of thepersonon whom
she wasdependenttill death, the donee would have to prove bona fides of thetransaction.
GujaratWater Supply & SewerageBoardv PagiMalabhaiAndarbhai,(2004) 2 GCD 923
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

424. 286Chapter7LegalityofObject [S. 23]
aGovernmentcorporationimposingupona needy employee atermthat
hecanberemovedjust bythreemonths'noticeor pay in lieu ofnotice
andwithoutanygroundis anexploitationandeveryruthlessexploitationis
againstpublicpolicy.^^^TheAllahabadHighCourtdistinguishedthis case
inJagatBahadurvDistrictSupply Officer,Allahabad}^^where thecontract
was for theallotmentof a fair price shop fordistributionoffoodgrainsand
itcontaineda clause forterminationof theagreementandwithdrawalof
the privilegewithoutassigninganyreasons.The same was held to beneither
opposedto public policy nor violative of Article 14 of theConstitution.A
personaspiringfor thegrantof a fair price shop isperfectlyfreenottoenter
into such acontractbecause he has all theopportunitiesoftradingin the
freefoodgrainmarket.His positioncannotbecomparedwiththatof an
employee.^®'
A rulepermittingadministratorsofBoardofControlforCricketinIndia
(BCCI)to havecommercialinterestin eventsconductedbyBCCIwas held
to be capable of defeating high ideals of fairness and objectivity in discharge
of a publicfunctionand therefore opposed to public policy. It is liable to
be struck down. Thecourtsaidthatprinciplesthatensure justice, fair play,
transparency,objectivity andprobityin discharge of public functions are
facets of publicpolicy.A rule, contract or arrangement which is in public
good and interestcannotbe regarded as opposed to publicpolicy.^'"
Surreptitioustransferofshares
Inreferenceto the conduct of public financial institutions holding shares
in companies, it has been held by the SupremeCourtthatasurreptitious
transfer of a bulk of shares in one companywithoutcaring to see whether it
would result in the creation of a monopoly adverse to public interest, if it is
done with a mala fide intention, the deal would beillegal."^
(Guj), thecourtswouldstrikedownandrefusetoenforcecontractswhichareunfairand
unreasonable and employeeis not in apposition of an equal bargaining power. A term which
prevents anemployeefrom enforcing his legal rights is taken to be contrary to public policy.
K.Madhuv Dugar Finance India Ltd, (2006) 3 MLJ 713,financeforvehicle,reserving
power of seizure of vehicle,againstpublic policy.
187. SeealsoBCPPMazdoor Sangh v NTPC, (2007) 14 SCC234: AIR 2008 SC336, agreement
under which service conditions of employees were altered and they weretransferredfrom
a public sector undertaking to aprivateconcern was held to beopposedto publicpolicy.
Bharti Airtel Ltd v Union of India,(2015)12 SCC 1,licenceto provide a telecomserviceis
acontractbetween the licensee andgovernment.
188.AIR1990All113.
189. Seefurther,DTCyMazdoorCongress, 1991 Supp(1)SCC 600: AIR 1991 SC 101, where a
term in a contract ofemploymentthat a permanent worker wasremovablewithout inquiry
CASEPILOT was held to be opposed to public policy.HindustanTimes v StateofU.P.,(2003) 1 SCC 591:
AIR 2003 SC 250, deduction of 5 per cent amount fromadvertisementbill of newspapers
imposedby the StateGovernmentwhich amount to form part ofpensionfund of working
journahsts,heldarbitraryand violative of Art. 14.
190.BCCIVCricketAssnofBihar, (2015) 3 SCC 251.
191. N.Parthasarathiv Controller of Capital Issues,(1991)3 SCC 153, arising out of theL&T
megaissue.https://t.me/LawCollegeNotes_Stuffs

425. [S.23] Unlawful agreements 287
Partieswithmatchingbargainingpowers
As between parties whose bargaining power is fairly matched and the
standard contract with all its clauseshas not only been duly signed but also
is one which has been widely used over the years, this will create a presump
tion offairness."^Where experienced businessmen are involved in a com
mercial contract and there is no inequality of bargaining power, the agreed
termsmustordinarilyberespectedas thepartiesmustbetakento havehad
regard to the mattersknownto them. The sellers and buyers in this case
were businessmen and they had agreed on all the terms on the basisthatthey
were inconformitywithinternationaltradeandcommerce.Theclause for
reimbursementfor or repayment of the price if the seller couldnotdeliver
the goodswithinthe specified time was neitherunreasonablenor unjust.
It was also notextravagant.The SupremeCourtsaidthatthearbitration
awardon its basis couldnotberegardedascontraryto publicpolicy.^'^
A clauseenablingthecontractingauthoritytovarythequantumofwork
upwardsordownwardsto becomputedbyaddingup allvariationsboth
upwardsanddownwardshas been held to be based on goodreasonsand
thereisnothingunconsionableif thepoweris exercised forlegitimatecaus-
es.^^"*A clause in acontractofhiringofthreevessels for aperiodofthree
yearsentitledthehirertoterminatetheagreementafteroneyearwithout
assigninganyreason.Theclausewasheldto benotunconscionableor
opposedto public policy. It was also covered by Section14(l)(c)and[e]of
the Specific Relief Act,1963."^
IntheopinionoftheKarnatakaHighCourt"®inordertoattract
Section 23 of the Act, it is notnecessarythatthecontractshouldbetainted
withillegality. Itwouldbeenoughif itcontainstermswhichare sounfair
andunreasonablethattheyshockthe conscience of thecourt.But this gen
eralobservationhas been held to be not applicable where aguarantoragrees
nottoclaimthebenefitofSections133,134,135,139and141 oftheAct
whichgive to theguarantorcertainprotectiverights. Such rights being var
iablewiththeconsentof thesurety,thereis noviolationof the Act if he
agreesnottoclaimany ofthoserights."^
192.BiharStateElectricityBoardvGreenRubberIndustries,(1990)1 SCC731,740:AIR1990
SC699.
193.PhulchandExports(P)LtdvO.O.O.Patriot,(2011) 10 SCC300.
194.NationalFertilizersvPuranChandNangia,(2000) 8 SCC 343: AIR2001SC 53.Societe
PepperGrenoldevUnionofIndia,AIR2004Del 376, a clausethatonly onepartywill
appointarbitratorhas been held to be valid.
195.ONGCLtd v Streamline Shipping Co (P) Ltd, AIR 2002 Bom 420.
196. CityMunicipalCouncilv C.Ramu,ILR1989KAR 2138andSureshMahajanvMyveneers,
ILR1990Kant2910.
197. T.RajuSettyvBankofBaroda,AIR1992Kant108, notagreeingwithUnionofIndiav
PearlHosieryMills,AIR1961 Punj 281whereit was heldthattheoperationof S. 133could
notbeousted.FollowedinCentralBankofIndiavMultiBlock (P)Ltd,AIR1997Bom
109,whereit was heldthatwaiver ofsurety'srightsunderSs. 133,134,135, 139and141
was notagainstpublic policy.PrenticeHallIndia(P)LtdvPrenticeHallInc,AIR 2003 Delhttps://t.me/LawCollegeNotes_Stuffs

426. 288 Chapter 7 Legality of Object [S.24]
A clausein a loan agreementpermitting the financierto seizethe financed
vehiclein the event of default in paymentv^^asheld to bevoid.^'®A clause
inabankloan agreementthatin the event ofpre-paymentanextrainterest
would be charged was held to bearbitraryandunreasonable.^'^
An agreement for selling the recognition and no-objection certificate is
opposed to public policy as the educationalinstitutionis granted recog
nition for the benefit of the public and if such right is sold like atradable
commoditywithoutapproval of thecompetentauthority, it would be an act
opposed to public policy and forbidden under Section 23 of theContract
Act.^°°
VOIDAGREEMENTS
Giving themeaningof a voidagreement,the Act says in Section2{g):
Anagreementnotenforceableby law is said to be void.
The following types ofagreementaredeclaredto be void:
(1)Agreementsofwhichconsiderationand objects areunlawfulinpart,
[S. 24]
(2)Agreementswithoutconsideration,[S. 25]
(3)Agreements inrestraintofmarriage,[S. 26]
(4)Agreements inrestraintoftrade,[S. 27]
(5) Agreements inrestraintof legalproceedings,[S. 28]
(6)Unmeaningagreements,[S. 29]
(7) Wageringagreements,[S. 30]and
(8)Agreementsto doimpossibleacts. [S. 56]
Agreementsinwhichapartofconsiderationorobjectisunlawful
S.24.Agreementsvoid,ifconsiderationsandobjectsunlawfulin
part.— Ifanypartof asingleconsiderationforoneormoreobjects,or anyone
or anypartof anyoneofseveralconsiderationsfor asingleobject,isunlawful,
theagreementisvoid.
236,assignmentofcopyrightispermissibleevenundertheCopyrightActand,therefore,
therewasnothingcontrarytopubhcpoHcyin suchassignments.ThakarKanaiyalalRasiklal
VStateofGujarat,AIR2003Guj 14,underasettlement,theplaintiffswereallowedto
performpoojafor 20 years in a temple.Theyenjoyedthatrightbutaftertheexpiryof 20
years, theyclaimedahereditaryrighttocontinuepooja.Thecourtsaidthattheclaimwas
barredbyOrder23, Rule 1, CPC and was alsoagainsttheprinciplesofpublicpolicy. K.E.
AboobackervYasuP.P. ,2004AIHC551 (Ker); AIR2004NOC262(Ker)demandof pre
miumipakidi)bylandlordfor givingpremiseswas held to be not onlypenalbut alsoagainst
moralsandpublicpolicy.RohitDhawanvG.K.Malhotra,AIR2002Del 151,doctrineof
perpetuitycouldnotbeappliedto an agency,becauseotherwiseonepartymaycompletely
ruinthebusinessoftheother.
198.TarunBhargavavStateofHaryana,AIR2003P8cH98:ILR(2003) 1P&H26.
199.MahavirIce&ColdStorageLtdvSmallIndustriesDevelopmentBankofIndia,AIR2009
NOC1218(OriDB).
200.EvvaMemorialTeacherTrainingInstitutevNationalCouncilforTeacherEducation,
(2008)1CTC625.https://t.me/LawCollegeNotes_Stuffs

427. [S. 24] Voidagreements289
Illustration
Apromisestosuperintend,onbehalfof S, a legalmanufacturerof Indigo,andan illegal
traffic inotherarticles. Bpromisestopay/\,a salary of 10,000rupeesa year. Theagreementis
void,theobjectofyA'spromise,andtheconsiderationfor B'spromise,beinginpartunlawful.
The working philosophy behind the provision wasstatedbyWillesJ
in thesewords:^"^Whereyoucannotsever the illegal from the legalpartof
acovenantthecontractisaltogethervoid,butwhereyoucanseverthem
whetherthe illegality becreatedbystatuteor bycommonlaw, you may
reject the badpartandretainthe good.
Thesectioncomes into playwhenapartof theconsiderationfor an object
ormorethanoneobjectsofanagreementisunlawful.Thewholeof the
agreementwouldbe void unlessunlawfulportioncan be severedwithout
damagingthe lawfulportion.A promises to pay a fixed sum of money on
monthlybasis to amarriedwomanfor living in adulterywiththeprom
isor,whichisunlawful,andfor keeping his house,whichislawful,the
whole agreement was held to be void because it was impossible toapportion
the singlelumpsum between the lawful object and theunlawfulone.^°^A
licence wasgrantedto a person for sale of opium andganjawith this restric
tionthathe would not take anypartnerin the ganja businesswithoutthe
permission of the collector. Without such permission he admitted apartner
into the whole business on receiving from him a fixed sum as his share of
capital.Differencesarose between them. The new entrantfileda case for
dissolution and refund of his money. His claim was not allowed. Thecourt
said that "it isimpossibleto separate the contract or to sayhow much capital
was advanced for the opium and how much for theganja^'?°^A Municipal
Corporation granted to a contractor for a lumpsumthelicenceto collecttoll
from pilgrims andvehiclesand animals. It had no power to authorise col
lection of fees from pilgrims. The wholetransactionwas held to bevoid.^""*
Where the legalpartof an agreement isseverablefrom the illegal, the
former would be enforced. A Muslimhusbandagreed by a registered deed
to handover to his wife thetotalityof his earnings and not to do anything
without herpermissionand, if he did so, she would be at liberty todivorce
him. The latterpartof theagreementwas unlawful. It wasseveredfrom
that part under which hepromisedtohandoverallearningsand this part
was enforced giving it this meaningthathe was bound to give only mainte
nanceamountandnotevery bitthathemightearn.^"^Transactionsarising
out of anagreementto do anillegalact, if they are such that when taken
201. Pickering vlllfracombeRlyCo, (1868) LR 3 CP 235, 250.
202. Alice Mary Hill v William Clarke,ILR(1905)27All266.
203.GopalraovKallappa,(1901) 3 Bom LR 164.
204.SaundattiYellamaMunicipality vShripadbhatSeshbhat Joshi, AIR 1933 Bom 132: ILR
(1933)57 Bom 278. See also Tong Kheng Bros v Anuarul Aini,(1990)2 CLJ 715 High
Court,Penang,anagreementto leasealicensedforest contract and itssawmill,held to be
unlawful, such transfer being possible only with prior written approval.
5. Poonoo Bibi v FyazBuksh,1874 SCC OnLineCal59:(1874)15 L BengLR App 5.https://t.me/LawCollegeNotes_Stuffs

428. 290Chapter7LegalityofObject [S. 26]
separately from the illegal act, they would be valid, they wouldremainvalid
and enforceablenotwithstandingthe illegality of theagreement.^"®
Aprohibitionofforwardtransactionsinsecuritieswas held to benot
applicable uponthatpartof thetransactionwhich was for ready delivery
(spotdelivery),thispartbeing separable from the otherpart.^"^If acontract
is, on the face of it, capable of legal performance, the factthatoneparty
wasentertainingan undisclosedintentionofperformingitunlawfullyor of
usingit as apartof an unlawful scheme,would not disentitlethe otherparty
fromenforcingit. If there is any doubt about the real nature orpurportof
the agreement,thatconstructionshould be preferred which admits of lawful
performance.The fact that one party entertains themotiveofdefeatingthe
execution of the decree which may be passedagainsthim isimmaterial.^"'
Agreementswithoutconsideration[S.25]
Section 25 declaresthatan agreementwithoutconsiderationis void. This
is, of course, subject to a fewexceptions,which have already been consid
eredalongwith"consideration".
Restraintofmarriage[S. 26]
S. 26.Agreementinrestraintofmarriagevoid.—Everyagreementin
restraintofthemarriageof anyperson,otherthana minor, is void.
It is the policy of law to discourage agreements whichrestrainfreedom
ofmarriage.Therestraintmaybegeneralor partial, that istosay,the party
mayberestrainedfrommarryingat all,orfrommarryingforafixedperiod,
orfrommarryingaparticularperson,or aclassofpersons,theagreement
is void. The only exception is in favour of aminor.^"^
A penalty upon remarriage may not be construed as arestraintof mar
riage.Thus, anagreementbetweentwoco-widowsthat if any of them
renfarried,she should forfeit her right to her share in thedeceasedhus
band'spropertyhasbeenupheld,the courtpointingout that no restraint
was imposed upon either of the two widows for remarriage. "All that was
providedwas that if awidowelectedtoremarry,shewouldbedeprivedof
herrights."^"Similarly,agreementsthat uponremarriage,thewidowwould
losethe righttomaintenance^"anduponthehusbandmarryingasecond
wife,thefirstwouldgettherighttodivorcehim,havebeenupheld.^^^
206.BOIFinanceLtdvCustodian,(1997) 10 SCC 488: AIR1997SC 1952.CanbankFinancial
ServicesLtdvCustodian,(2004) 8 SCC 355: AIR 2001 SC 2601.
207.BOIFinanceLtdvCustodian,(1997) 10 SCC 488: AIR1997SC 1952.
208. M.K. UsmanKoya v C.S. Santha, AIR 2003 Ker 191:(2003)3 CLT12.
209.LotvevPeers,(1768)4 Burr2225;MaharamAlivAyshd.Khatun,(1914-15)19CWN1226,
whereaconditionin amarriagearrangementthat if thehusbandmarriedanotherwoman,
the first wife would divorcehim was upheld.
210.RaoRanivGulabRani,ILR1942MI 810.
211.Latafatunnissav Shaharbanu Begam, AIR 1932 Oudh 108.
212.BaduvBadarnessa,(1919) 29 CLJ 230.https://t.me/LawCollegeNotes_Stuffs

429. [S.24] Voidagreements289
Illustration
Apromisestosuperintend,onbehalfofB,alegalmanufacturerofIndigo,andanillegal
trafficin other articles.Bpromisestopay/A,a salaryof 10,000rupees a year.Theagreementis
void,the objectofyA'spromise,andtheconsiderationforB'spromise,beinginpartunlawful.
Theworkingphilosophybehindtheprovisionwas stated byWillesJ
inthesewords:^°^Whereyoucannotsevertheillegalfromthelegalpart of
a covenant the contract is altogether void, but where you canseverthem
whethertheillegalitybecreatedby statute or bycommonlaw,you may
rejectthe bad part and retain the good.
Thesectioncomesinto playwhena part oftheconsiderationfor anobject
ormorethanoneobjectsof anagreementisunlawful.Thewholeof the
agreementwouldbevoidunlessunlawfulportioncanbeseveredwithout
damagingthelawfulportion.Apromisestopayafixedsumofmoneyon
monthlybasisto amarriedwomanforlivinginadulterywith theprom
isor,whichisunlawful,andforkeepinghishouse,whichislawful,the
wholeagreementwasheldto bevoidbecauseitwasimpossibletoapportion
thesinglelumpsumbetvveenthelawfulobjectand theunlawfulone.^°^A
licencewasgrantedto apersonforsaleofopiumandganjawiththisrestric
tion that he would not take any partner in the ganjabusinesswithout the
permissionofthecollector.Withoutsuchpermissionheadmittedapartner
into thewholebusinessonreceivingfromhim afixedsum as his share of
capital.Differencesarosebetweenthem.Thenewentrantfiledacasefor
dissolutionand refund of hismoney.His claimwas notallowed.The court
saidthat"itisimpossibletoseparatethecontractortosayhowmuchcapital
wasadvancedfor theopiumandhowmuchfor theganja"AMunicipal
Corporationgrantedtoacontractorforalumpsumthelicencetocollecttoll
frompilgrimsandvehiclesandanimals.Ithadnopowertoauthorisecol
lectionoffeesfrompilgrims.Thewholetransactionwasheldto bevoid.^"'^
Wherethelegalpart of anagreementisseverablefromtheillegal,the
former would beenforced.A Muslim husband agreed by aregistereddeed
tohandoverto hiswifethe totality of hisearningsand not to do anything
withoutherpermissionand,ifhedidso,shewouldbeatlibertytodivorce
him.Thelatterpart oftheagreementwasunlawful.Itwasseveredfrom
thatpartunderwhichhepromisedtohandoverallearningsandthispart
wasenforcedgivingit thismeaningthat hewasboundtogiveonlymainte
nance amount and noteverybit that he mightearn.^"^Transactions arising
outofanagreementtodoanillegalact,iftheyaresuchthatwhentaken
201.PickeringvIllfracombeRlyCo,(1868)LR3 CP235, 250.
202.AliceMaryHill vWilliamClarke,ILR(1905)27 All266.
203. Gopalrao v Kallappa,(1901)3 BomLR 164.
204.SaundattiYellamaMunicipalityvShripadbhatSeshbhatJoshi,AIR1933Bom132:ILR
'v (1933)57Bom278.SeealsoTongKhengBrosvAnuarulAini,(1990)2CLJ715High
\ Court,Penang,anagreementtoleasealicensedforestcontractanditssawmill,heldtobe
unlawful,suchtransferbeingpossibleonlywithpriorwrittenapproval.
"^>^05.PoonooBibivFyazBuksh,1874SCCOnLineCal59:(1874)15LBengLRApp5.
\
\https://t.me/LawCollegeNotes_Stuffs

430. 290 Chapter 7Legialityof Object [S.26]
separatelyfrom the illegalact, they would be valid, they would remain valid
andenforceablenotwithstanding theillegalityof theagreement.^"^
Aprohibitionofforwardtransactionsinsecuritieswasheldto benot
applicableupon that part of thetransactionwhichwas forreadydelivery
(spotdelivery),this partbeingseparablefromthe otherpart.^°^If a contract
is, on thefaceof it,capableoflegalperformance,the fact that one party
was entertaining anundisclosedintention of performing it unlawfullyor of
usingit asa part ofanunlawfulscheme,wouldnotdisentitlethe otherparty
fromenforcingit. Ifthereis any doubt about the real nature or purport of
theagreement,that construction should bepreferredwhich admits of lawful
performance.Thefactthat onepartyentertainsthemotiveofdefeatingthe
executionof thedecreewhich may be passed against him isimmaterial.^"^
Agreementswithoutconsideration[S.25]
Section 25 declaresthatan agreementwithoutconsiderationis void. This
is, ofcourse,subjectto afewexceptions,whichhavealreadybeenconsid
eredalongwith"consideration".
Restraintofmarriage[S.26]
S. 26.Agreementinrestraintofmarriagevoid.—Everyagreement in
restraintoftliemarriageof anyperson,otherthana minor, isvoid.
It is the policy of law to discourage agreements which restrain freedom
ofmarriage.Therestraintinaybegeneralorpartial,thatistosay,theparty
mayberestrainedfrommarryingatall,orfrommarryingforafixedperiod,
orfrommarryingaparticularperson,or aclassofpersons,theagreement
is void. The only exception is in favour of aminor.^"'
A penalty upon remarriage may not be construed as arestraintof mar
riage.Thus, anagreementbetweentwoco-widowsthat if any of them
rerriarried, she should forfeit her right to her share in the deceased hus
band'spropertyhasbeenupheld,the courtpointingout that norestraint
wasimposedupon either of the two widows for remarriage. "All that was
providedwasthat if awidowelectedtoremarry,shewouldbedeprivedof
herrights."^^°Similarly,agreementsthat uponremarriage,thewidowwould
losetherighttomaintenance^"anduponthehusbandmarryingasecond
wife,thefirstwouldgettherighttodivorcehim,havebeenupheld.
206.BOIFinanceLtdvCustodian,(1997) 10 SCC 488: AIR1997SC 1952.CanbankFinancial
ServicesLtdvCustodian,(2004) 8 SCC 355: AIR2001SC2601.
207. BOI FinanceLtdvCustodian,(1997) 10 SCC 488: AIR 1997 SC 1952.
208.M.K.VsmanKoyav C.S. Santha, AIR 2003 Ker 191:(2003)3 CLT 12.
209.LowevPeers,(1768)4Burr2225;MaharamAHvAyshaKhatun,(1914-15)19CWN1226,
whereaconditionin amarriagearrangementthat if thehusbandmarriedanotherwoman,
the first wife would divorcehim was upheld.
210.RaoRanivGulabRani,ILR1942All 810.
211.Latafatunnissav Shaharbanu Begam, AIR 1932 Oudh 108.
212. Badu v Badarnessa, (1919)29 CLJ230. /https://t.me/LawCollegeNotes_Stuffs

431. [S. 27] Restraintoftrade291
RESTRAINTOFTRADE[S.27]
S. 27.Agreementinrestraintoftradevoid.— Everyagreementby which
anyoneisrestrainedfrom exercising a lawful profession,tradeor business of
any kind, is tothatextentvoid.
Exception1.—Savingofagreementnottocarryonbusinessofwhich
goodwillissold.— Onewhosellsthegoodwill of abusinessmayagreewith
thebuyerto refrain from carrying on a similarbusiness,withinspecifiedlocal
limits, so long asthebuyer, or anypersonderivingtitle tothegoodwillfrom.
him,carriesona likebusinesstherein:
ProvidedthatsuchlimitsappeartotheCourtreasonable,regardbeinghad
tothenatureofthebusiness.
Protectionoffreedomoftradeandcommerce
Freedom oftradeandcommerceis aright protectedby theConstitution
of India. Just as the Legislaturecannottake away individual freedom of
trade,so also theindividualcannotbarterit away byagreement."Theprin
cipleoflawis this: Publicpolicyrequires that everyman shall be at liberty to
workfor himself,andshallnot be atlibertyto deprivehimselfor the State of
hislabour,skill ortalent,by anycontractthathe entersinto."^""Everyman
should haveunfetteredliberty to exercise his powers and capacities for his
own and thecommunity'sbenefit."^^'*Section 27, therefore, declares inplain
terms that: Every agreement by which any one isrestrainedfrom exercising
a lawful profession, trade orbusinessof any kind, is, to that extent,void.^"
Allrestraintscoveredwhetherpartialorgeneral
MadhubChanderv RajCoomar^^^is the first case in which the scope of
the section came up for consideration before the Calcutta High Court.
The plaintiff and the defendant were rival shopkeepersin a locality in
Calcutta. The defendant agreed to pay a sum of money to the plaintiff if
he would close his business inthatlocality. Theplaintiffaccordingly did
so, but thedefendantrefusedto pay.
The plaintiff sued him for the money contending that the restraint in
question was onlypartialas he was restrained fromexercisinghis profession
onlyin one localityand that suchrestraints had been upheldin Englishlaw.
CouchJ, however, held the agreement to be void and laid down: The words
"restrainedfrom exercising a lawful profession,tradeor business", do not
213. Per James VC in Leather Cloth Co v Lorsont,(1869)LR 9 Eq 345, 354: 39 LJ Ch 86.
214. VancouverMalt& Sake Brewing Co Ltd v Vancouver Breweries Ltd, (1934) 39 LW 618:
AIR1934PC101.
215. Electrosteel Castings Ltd v Saw Pipes Ltd, (2005) 1 CHN 612, the words "lawful profes
sion" in S. 27 include both an independent professional and a salaried professional. Self
employmentand allmodesofeconomicsurvivalor of earning one'slivelihoodarecovered.
216.(1874) 14BengLR76.https://t.me/LawCollegeNotes_Stuffs

432. 292Chapter7LegalityofObject [S. 27]
meananabsoluterestriction,and areintendedto apply to apartialrestric
tion,arestrictionlimitedto someplace.^^^
Thelearnedjudgedrewsupportfrom the use of theword"absolutely"
in Section 28,whichdealswithrestraintof legalproceedings.As thisword
isabsentfromSection27,therefore,heconcluded,thatitwasintendedto
preventnotmerely atotalrestraintbut also apartialrestraint.Thisinterpre
tationof thesectionhas been generally accepted."Thesectionhasabolished
thedistinctionbetweenpartialandtotalrestraintsoftrade.Whetherthe
restraintis general orpartial,unqualified or qualified, if the agreement is in
.thenatureof arestraintoftrade,it is void."Thus,anagreementto close a
mill for 3 months in ayear,^^^and an agreementthatonepartywould sell
beef for 14 days in amonthandtheotherfor therestof themonth,have
beenheldvoid.
DevelopmentsinEnglishLaw
In England the law relating torestraintoftradewas elaborately consid
ered by the House of Lords inNordenfeltvMaximNordenfeltGuns&
Ammunition
The case involved a sale ofgoodwillby aninventorand amanufacturer
of guns andammunitionwho agreed with the buyer company:(1)not to
practise the same trade for 25 years, and(2)not to engage in any business
competingor liable tocompetein any waywiththe business for the time
being carried on by the company. He afterwards entered into agreement
with another manufacturer of guns and ammunition and the company
broughtanactiontorestrainhim.
It was held that firstpartof the agreement was valid being reasonably
necessary for theprotectionof thepurchaser'sinterest. But the rest of the
covenant by which he was prohibited fromcompetingwith the company
in any businessthatthe company mightcarryon was held asunreasonable
and, therefore, void. LordMacnaghtenlaid down: "The public have an
interestin everyperson'scarryingon histradefreely: so has theindividual.
All interferencewith individual liberty of action in trading, and allrestraints
of trade ofthemselves,if there is nothing more, are contrary to public pol
icy and, therefore, void.Thatis the general rule. But there are exceptions.
Restraint oftrade...may be justified by the special circumstances of a par
ticularcase. The onlyjustificationisthattherestrictionshould bereason
able—reasonablein reference to the interest of the parties and reasonable
in reference to the publicinterest.Therestrictionshouldbe soframedand
217. PerMookerjeeandCandruffJJin ShaikhKaluvRamSaranBhagat,(1908-09)13CWN
388:lie94.
218.KhemchandManekchandvDayaldasBassarmal,AIR1942Sind 114.
219.MohammadvOnaMohdEbrahim,AIR1922Upper Burma 9.
220.1894AC535.https://t.me/LawCollegeNotes_Stuffs

433. [S.27] Restraintoftrade293
guardedastoaffordadequateprotectiontothepartyinwhosefavourit is
imposedwhileatthesametimeitisinnowayinjurioustothepublic."
Generalprinciplein India and England same
Thusboth inEnglandand inIndiathegeneralprincipleis thesame,
namely,thatallrestraintsoftradewhetherpartialortotal,arevoid.^^^The
onlydifferenceisthatinEnglandarestrictionwillbevalidifitisreasonable.-
In India it will be validif it falls within any of the statutory, or judiciallycre
atedexceptions.Totheextenttowhichtheseexceptionsareanembodiment
of the situations in which restraints have been found reasonable in England,
the two laws are identical and not "widelydissimilar".^^^TheEnglishlaw
maybealittlemoreflexibleastheword"reasonable"enablesthecourtsto
adaptit tochangingconditions.AsLordWilberforceremarkedinEsso
PetroleumCoLtd vHarper'sGarage(Stourport)Ltd}^^"theclassification
(ofagreementsinrestraintoftrade)mustremainfluidand thecategories
canneverbeclosed".Thefollowingpassagein a judgmentof theSupreme
Court^^"shows the effect of absence of the test of"reasonableness":"The
questionofreasonablenessofrestraintisoutsidethepurviewofSection27
of the Contract Act and need not be gone into. Therefore, the present case
hastobeproceededonthebasisthatanenquiryintoreasonablenessof
therestraintis notenvisagedbySection27.On thatview,insteadofbeing
requiredtoconsidertwoquestions^^^asinEngland,thecourtsinIndiahave
221.See,forexample,ChittyonContract(GeneralPrinciples)(21stEdn)481-82,where
thelearnedwritersaysthat"allcontractsinrestraintoftradeareprimafacievoid,unless
theyarereasonable."ForIndianauthorityseePigotandMcphelsonJJinHurAltDubash
VAbdulAli,ILR(1892)19Cal765,773,"S.27doesawaywiththedistinctionbetween
partial and total restraints of trade."
222.MookerjeeandCarnduefJJ inSkKaluvRamSaranBhagat,(1909)8CWN388,392.
ThelearnedJudgessaidthatasaresultofthedecisionintheNordenfeltcase"theruleas
embodiedinS.27presentsanalmoststartlingdissimilaritytothemostmodernphaseofthe
English rule on thesubject".
223.1968 AC 269; (1967) 2WLR871 (HL).
224.GujaratBottlingCoLtdvCocaColaCo,(1995)5SCG545;,AIR1995SC2372:(1995)84
Comp Cas 618. :
225.ThefollowingpassageinthejudgmentoftheSupremeCourt(ibid.)explainstheposition
oftwoquestionsunderEnglishlaw:"UnderthecommonlawinEnglandtraditionallythe
doctrineofrestraintof tradeappliedtocovenantswherebyanemployeeundertakesnot to
competewithhisemployerafterleavingtheemployer'sserviceandcovenantsbywhicha
traderwhohassoldhisbusinessagreesnotthereaftertocompetewiththepurchaserofthe
business.Thedoctrineis,however,notconfinedinitsapplicationtothesetwocategoriesbut
covenantsfallinginthesetwocategoriesarealwayssubjectedtothetestofreasonableness.
Thegeneralprincipleonceapplicabletoagreementsinrestraintoftradehasconsequently
beenconsiderablymodifiedbylaterdecisionsinEngland.Therulenowis thatrestraints,
whethergeneralorpartial,maybegoodiftheyarereasonableandanyrestraintonthe
freedomofcontractmustbeshownto bereasonablynecessaryforthepurposeoffreedomof
trade.Acovenantin restraintof trade mustbereasonablewithreferenceto thepublic policy
anditmustalsobereasonablynecessaryfortheprotectionof theinterestof thecovenantee
andregardmustbehadtotheinterestsofthecovenantor.Contractsinrestraintoftrade
areprimafacievoidandtheonusofproofisonthepartysupportingthecontracttoshow
thattherestraintgoesnofurtherthanisreasonablynecessarytoprotecttheinterestofthehttps://t.me/LawCollegeNotes_Stuffs

434. 294Chapter7LegalityofObject [S,27]
only toconsiderthe questionwhether the contract is or is not in restraint of
trade."
"Profession,tradeorbusiness"
ButtheIndiancourtshavenotbeenrenderedentirelysterileinthemat-
ter.2^«Thus,forexample,whereitwasnecessarytodoso,theHighCourt
ofKutchregardedanagreementtomonopolisetheprivilegeofperforming
religiousservicesinavillageasbeingopposedtopublicpolicyandvoid
underSection27,thoughitmaybedoubtedwhetherthewords"profes
sion, trade orbusiness"as used in the section were intended to cover the
religiousservicesofapriest.Ontheotherhand,theAllahabadHighCourt
in Pothi Ram v IslamFatima^^^upheldasvalidarestrictivecovenanton
thegroundthattheactivityrestrainedwasnotinthenatureof"profession,
tradeorbusiness".
Twolandlordsinthesameneighbourhood,inordertoavoidcompeti
tion, agreed that a market for sale of cattle shall not be held on the same
day onthelandsofbothofthem.
The High Courtsaid:"Itseemsto us that alandlordwhoin return for
tollsorfees,allowsacattlemarkettobeconductedonhislandisnotthereby
exercisingtradeorbusinessofsellingcattle.Heisonlyalandholderandan
agreementonhispartnottousethelandonacertaindayforacertainpur
posedoesnotamounttorestraintof'profession,tradeorbusiness'."
Thestrangecontrastinthesetwocasesisthatwhilelettingoutlandfor
commercialpurposesisnota"profession,tradeorbusiness",theperfor
mance of religious services is.
TheMadrasHighCourttooktheleadprovidedbytheAlkhabadHigh
Courtandcametotheconclusionthatsubmissionoftendersforthepurpose
ofobtainingacontractisnot"atradeorcalling".^^®
covenanteeandifthisonusisdischargedtheonusofshowingthattherestraintisneverthe
lessinjurioustothepublicisonthepartyattackingthecontract.Thecourthastodecide,as
amatteroflaw,{/')whetheracontractisorisnotinrestraintoftrade,and(ii)whether,ifin
restramtoftrade,itisreasonable.Insteadofsegregatingtwoquestions,(i)whetherthecon
tract is inrestraintoftrade,(«)whether,if so, is it'reasonable',thecourtshaveoftenfused
thetwobyaskmgwhetherthecontractisin'unduerestraintoftrade'orbyacompound
findingthatitisnotsatisfiedthatthiscontractisreallyinrestraintoftradeatallbut,ifitis,
ISitreasonable."Anotheraspectofthiscasewas,thatoneofthetermsoftheagreementwith
thecompanywasthatitsshareholderswouldnottransfertheirsharesduringthecurrencyof
theagreement.ThiswasheldtobenothitbyS.27becauseshareholderswerenotpartiesto
theagreementandthecompanyhadnomeanstopreventthemfromsellingtheirshares.
226.See,SandhyaOrganicChemicalsPLtdvUnitedPhosphorusLtd,AIR1997Guj177,where
thecourtobservedthattheprinciplesofEnglishcommonlawcanbeusedwherethestatu
toryprovisionscannotbeunderstoodwithouttheaidofEnglishlaw,butnotbeyondthat.
227.RevashankerShamjivVeljiJagjivanKukama,AIR1951Kutch56.
228.AIR1915All94(2).ZaheerKhanvPerceptD-markIndia(P)Ltd,AIR2004Bom362,a
contractrestrictingtheparty'sfuturefreedomto carryon hisaffairsina mannerhelikesand
withpersonsof hischoice,held,unreasonablerestraint of trade.
229. MohdIsackv Daddapaneni, AIR 1946 Mad 289.https://t.me/LawCollegeNotes_Stuffs

435. [S.27] Restraintof trade 295
A postal authority invited tenders forlicencefor carrying mails.
The plaintiff, a bus owner, abstained from tendering on the promise of
the defendant,anotherbus owner, to pay him somemoney.The latter
obtainedthecontractbutrefusedto pay the money.
The court saidthattendering toobtainacontractis not in the nature of
a trade or calling. The court compared the case with an agreement between
intendingbiddersand said that such anagreementwasconsideredas being
not opposed to public policy in a fewpreviouscases.Specialstress was
laid upon adecisionof thePrivyCouncilwhereit washeldthat a court
salebypublicauctiondoesnotbecomevoidif a personhaddeterredothers
frombidding.^^^But, it is submitted with respect, that thedecisionis not
an authority for thepropositionthat thecollusionagreementbetweenthe
biddersisitselfvalidandenforceable.IntheUnitedStatessuchagreements
have been heldillegal.^^^
Whenthe Madras High Courtfaceda problemofthis kind againin a sub
sequentcase,^^^itreluctantlyheldthat "theprecedentsarefar toonumerous
to begotover,evenifoneshouldbedisposedtodisagreewiththeunderly
ingreasoningtherein".Thefactswerethat onanauctionsaleoffishery,the
villagerscolludedthatonlyoneofthemshallbidforallofthemandthereby
thepublicauthoritywasmisguidedasto therealvalueof thefishery.The
agreementbetweenthevillagerswasheldto bevalid.
All these matters hadsubsequentlyto be taken in the light of the provi
sion in Section33(l){jb)of theMonopoliesandRestrictiveTradePractices
Act,1969[nowrepealed]to theeffectthat anagreementas tomakingof
bids,orexcludingapersonfrombidding,at anauctionforsaleofgoods,
shall be arestrictivetrade practice and, therefore,void unless it wasneces
saryinpublicinterestasspelledout inSection38 ofthatAct.Nowbythe
virtue of thisclause,suchcollusiveagreementscan be heldto be voidunless
theyarenecessaryinpublicinterestwithinthemeaningofSection38.The
clauseis wide enoughtocovercasesof secretagreementsas to participation
230.HariBalkrishnaJoglekarvNaroMoreshwarJoglekar,ILR(1893)18Bom342 and bythe
PrivyCouncilinMohdMiraRowtherySavvasiVijyaRoghunanda,ILR(1900)23Mad227.
231. Ibid. (Privy Council decision)
232. SeeRestatementofTheLawofContract,Ch. 18, p. 1002, where the rule is thus stated:
"Abargainnottobidat anauction,oranypubliccompetitionforasaleorcontract,having
asitsprimaryobjecttostifflecompetition,isillegal".Illustration1givenin theRestatement
is asfollows:"Aand Battendinganauctionofcurious,makemutualpromisesbywhich
eachagreestorefrainfrombiddingforspecifiedarticlesinorderthat the othermayacquire
themtoocheaply.Theagreementisillegal."Illustration4comesverycloseto thefactsof
theMadrascase: "Aadvertisesfor bids for theconstructionof abuilding.B, acontractor,
promises$1000eachto CandDiftheywillrefrainfrombidding.Theydoso.Thebargains
areillegal."
233.PattipatiRamalingaiahvNagulaguntaSubbarami,AIR1951Mad390.
234.Followingthis,ithasbeenheldbytheP&HHighCourtinSujanSinghSadhanavMohkam
ChandJain,AIR1983P8cH180,that anagreementbetweentwobiddersnottobidagainst
eachother with anunderstandingthat thesuccessfulbidderwouldconveyhalf the property
to the others is not against public policy.https://t.me/LawCollegeNotes_Stuffs

436. 296Chapter7 Legality ofObject [S.27]
in an auction according to pre-planned terms. Thoughcollusivetendering
has not beenspecificallyincluded in the clause, it is likely to be covered by
the wide ambit of the clause because it is often difficult to distinguish an
auction from a tender when secret bids are invited in the shape of tenders.
Forexample,in thePerfectCircle VictorLtdcase^^^theMRTPCommission
issuedcease and desist orders against three respondents manufacturing gas
kets whowereacting in concert by quoting thesameoridenticalprices
against tenders floated by the Director General ofSuppliesand Disposals.
Though the MRTP Act has been repealed, thesedecisionsare likely to
remain valid because of theparallelprovisions in Sections 3 to 6 of the
CompetitionAct,2002which is a replacement of its predecessorMRTPAct.
Knock-outagreements
In UnitedKingdom,the "knock-out"agreementsarecoveredby the
Auctions(BiddingAgreements)Act,1927.The Actprovidesthat if any
dealeragreestogiveorgivesoroffersanygift orconsiderationto any other
person as an inducement or reward for abstaining or having abstained from
biddingat asalebyauction,eithergenerallyor for any particular lot or if
anypersonagrees to accept or accepts orattemptstoobtainfrom any dealer
any such gift orconsiderationasaforesaid,he shall be guilty ofoffence
under the Act. There is no specialprovisionrelating tocollusivetender
ing or bidding in the Restrictive Trade Practices Act, 1976. But it seems
clearthat suchbidagreementsfallwithinSections6{l){a)andll{2){a)ofthe
RestrictiveTradePracticesAct, 1976, asrelatingto thepricesto be quoted
forgoodsorservices.Theagreementbywhichpartiescoriferauthority
upon an association, or an individual, to adjust prices which they are to
quote are alsowithinthese provisions.
In a case of this kind,P&HHighCourtstatedthus:^^^
"Anagreementbetween 'A' and 'B' to purchase certain property at an
auctionsalejointlyandnottobidagainsteachotherat theauctionisper
fectlylawful, though the objectmay be to avoidcompetitionbetweenthe
two.However,if there is anagreementamongall thecompetingbidders
at theauctionand theyformeda ringto pegdownpriceand topurchase
theGovernmentlargessatknock-outprice,thepurposeordesignof the
agreementis todefraudtheGovernmentandthenitcanbesaidthatthere
235.RTPEnquiry,120of1984,24-4-1988.Similarly,inExcelIndustriesLtd,(1988)1CompLJ
53,threerespondentswhoweremajormanufacturersofaluminiumphosphidequotediden
tical rates in responseto tenders floated by Food Corporation of India and reduced the rates
byanidenticalamountduringnegotiations,theCommissionpassedceaseanddesistorders.
236.Thereportof theUKMonopoliesCommissionnotedthatanycommunicationofprices
betweencompetitorsandstillmoreanyadjustmentoftheamountsoftendersbyarrange
mentbetweenbidderswouldfrustratethepurposeof thesystemoftendering.Sincesuch
tendersceaseto beindependentoffersastheyareheldouttobe,thepracticesareprimafacie
contrarytopublicinterest.
237.Anti-Corruptionand SocialWelfareOrganisationv State of Punjab,(1997)1 BC262 (P&H
DB).https://t.me/LawCollegeNotes_Stuffs

437. [S.27] Restraint of trade 297
is animpliedinjury to theGovernment.Thepublicpolicyis notstatic.
It isvariablewith thechangingtimesand theneedsof thesociety.The
marchof lawmustmatchwiththefactsituation.Acontractwhichdoes
notcauseanylossto theGovernmentor thepublicauthority,nor thereis
anythingtoinferthat thebiddershadformeda ringto pegdowntheprice
at an auction sale, the auction cannot beinvalidatedor cannot be said to
beinjurioustopublicinterestorpublicwelfareorfraudulenttodefeatthe
rightsof theGovernmentor the localauthority."
In theUSthepracticeofcollusivetenderingattracts thegeneralprovision
ofSection1 of the ShermanAct whichprovidesthateverycontract, combi
nationorconspiracyin restraintof tradeorcommerceisillegal.
Restrictionsfor longperiod
TheprincipleoftheNordenfeltcasewasappliedbytheHouseofLordsin
McEllistrimvBallymacelligottCoopAgricultural&DiarySociety"^where
anagreementcontainedintherulesofasocietybywhichaformermember
agreedthatforanunlimitedtimehewouldsellallthemilkheproducedtoa
creameryrunbythesocietywasheldtobeinvalid.Thedoctrineofrestraint
of trade hasbeenreconsideredby theHouseofLordsinEssoPetroleum
CoLtdVHarper'sGarage(Stourport)LtdP^Inthiscase,theirLordships
struckdownanexclusivedealingagreementbecauseitextendedto aperiod
of21years,whichwasunreasonable.Afive-yearperiodwouldhavebeen
heldto bereasonable.Inholdingthat thedoctrineappUedtoexclusivedeal
ingagreementstheyopenedupthepossibilitythatitmightbeextendedto
everysortofcontractbecauseallcontractsmustneedinvolvearestraintof
somesort.Theysaidthatthedoctrineappliedonlyifamancontractedto
giveupsomeexistingfreedomwhichhehad.^"*®
Restriction upon use of trade mark
ArestraintupontheuseofatrademarkdoesnotattractSection27,it
beingnotarestrictionuponcarryingonanytradeorbusiness.Thetrade
mark was thesubject-matterof thedispute.^''^
Restrictionsinlease
Restrictionscontained in aleaseagreementas to theusesto which the
premisescanbeputandwhatbusinesswouldbedoneandinwhatnameand
stylehavebeenheldtobenotviolativeofSection27.^"'^
238.1919AC548(HL).
239. 1968 AC 269: (1967) 2WLR871 (HL).
240.SeeJ.D.Heydon,TheRestraintofTradeDoctrinereviewed,89LQR292.AlecLobb
(Garages)LtdvTotalOilGreatBritainLtd,(1983)1WLR87(ChD),exclusivedealing
agreementforanextendedperiodof21yearswasheldvoidasunreasonablerestraintoftrade
howevergreatthejustificationfortherestofthetransactionwhichwasfoundtobevalid.
241.SureshDhanukavSunitaMohapatra,(2012) 1 SCC 578.
242.VidyaWativ Hans Raj, AIR 1993Del187.https://t.me/LawCollegeNotes_Stuffs

438. 298 Chapter 7Legalityof Object [S.27]
EXCEPTIONS
Thereare twokindsofexceptionsto the rule,thosecreatedbystatutes
and those arising from judicialinterpretation of Section27.
Statutoryexceptions
1. Saleofgoodwill
The onlyexceptionmentionedin the proviso to Section27 oftheContract
Act isthatrelating to sale of goodwill. It is thus stated:
Onewhosellsthegoodwillofabusinessmayagreewiththe buyertorefrain
fromcarryingon asimilarbusiness,withinspecifiedlocallimits,solongasthe
buyer,or any personderivingtitle to thegoodwillfromhim,carrieson alike
businesstherein:
Providedthatsuchlimitsappeartothecourtreasonable,regardbeinghadto
thenatureofthebusiness.
Apparentlytheobjectistoprotecttheinterestofapurchaserofgoodwill.
"Itisdifficuhtoimaginethatwhenthegoodwillandtradeofaretailshop
weresold,thevendormightthe nextdayset up ashopwithinafewdoors
anddrawoffallcustomers."^''^Therefore,somerestrictiononthelibertyof
thesellerbecomesnecessary.Indeed,therestrictionistheonly"meansby
which asaleablevalueisgivento thegoodwillof abusiness".^'"'Far from
beingadversetopublicinterest,therestriction,bygivingarealmarketable
valueto thegoodwillof abusiness,operatesas anadditionalinducementto
individualstoemploytheirskillsandcapitalintradeandthustendto the
advantage of public interest.
Meaning of goodwill.—Thereshouldbe a realgoodwillto besold.
"Goodwill"beinganabstractproperty,is noteasytodefine.In thewords
ofLordEldON:
Thegoodwillwhichhasbeenthesubjectofsaleisnothingmorethan
theprobabilitythat theoldcustomerwillresorttooldplace.^"*^
ButintheopinionofLordMacnaghten,asexpressedinasubsequent
case,goodwillmeansmuchmorethanthis:Oftenithappensthatgoodwill
is the very sap and life of thebusiness,without which thebusinesswould
yieldlittleornoprofits.Itisthewholeadvantage,whateveritmaybe,ofthe
reputationandconnectionoffirm,whichmayhavebeenbuiltupbyyears
ofhonestworkorgainedbylavishexpenditureofmoney.
243.LordMacnaghteninAnnTregovGeorgeStratfordHunt,1896AC7,23citingPlumber
VC inHarrisonvW.Gardner,369 F 2d 172.
244.D.W.AuchterlonievCharlesBell,(1868)4 Mad HCR 77,79.
245.CruttwellvLye,(1810)17VesJun335:34ER129,citedbyLordHerschellinAnnTrego
VGeorgeStratfordHunt,1896 AC 7, 16.
246. AnnTregov GeorgeStratford Hunt, 1896 AC7,23-24.https://t.me/LawCollegeNotes_Stuffs

439. [S. 27] Exceptions299
Theseopinionswere adopted bythe.Judicial Committee in an appeal
from a decision of theCalcuttaHighCourt.^"*^
The plaintiff and the defendant were carrying on business as carriers
ofpassengersbyboats.The plaintiffsoldhisbusinessto the defendantfor
a sum of money and agreed to abstain from carrying on a boatbusiness
there for a period of three years.
The suit was brought torecoverthe promised sum. Allowing the plain
tiff's action LordHaldanesaid:"TheirLordshipsentertainnodoubtthat
what took place was the sale of goodwill within the meaning put on the
expressionin such cases as Trego v Hunt.'"
Where the aim of an agreement is prevention of competition, it will be
void even if its nakedness is concealed behind the"imposingfacade of a
sale" of goodwill. An attempt of this kind was inevidencein Vancouver
Malt & Sake Brewing Co Ltd v Vancouver BreweriesLtd.^'^^
Acompanywaslicensedto manufacture liquor and beer but it con
fineditsbusinessto produce only 'sake', a Japanese liquor made from
rice. Its only customer was the Government. It entered into an agreement
with another wine and beermanufacturingcompany by which it sold its
businessand goodwillof manufacturing wine andbeer,but not the right
toproducesake.
Theagreementwas heldto bedevoidof anycontent."The onlybusiness
in which it wasengagedwas thebrewingof sake, and thegoodwillof its
licenceso far as relating to sake wasexpresslyexcludedfrom sale. It had
nogoodwilltosellso far asregardsthebrewingofbeer.Nothinghasbeen
sold.It issimplya case of theappellantundertaking to therespondentin
considerationof a sum of moneythatit will not for 15 yearscarryon a
particularbranchofbusiness.Iftherewasanysale,itwasasalebythe
appellantofitslibertytobrewbeerandapurchasebytherespondentofpro
tectionagainstthepossiblecompetitionof theappellantin thebrewingof
beer." LordMacmillanthen referred to the judgment of Lord Chancellor
Birkenheadin McEllistrim vBallymacelligottCoop Agricultural & Dairy
Society,that"therespondentswerenotentitledto beprotectedagainst
merecompetition",andcontinuedtosaythat"covenantsrestrictiveofcom
petition whichhavebeensustainedhaveall been ancillary tosomemain
transaction, andhavebeenfoundjustifiedbecausetheywerereasonably
necessary to renderthattransactioneffective.
Limits ofrestraint.—Theagreement has to specify the local limits
oftherestraint.Thesellercanberestrainedwithincertainterritorialor
geographicallimitsand thelimitsmustbereasonable.Reasonablenessof
247. Parasullah Mullik v Chandra Kanta Das,(1916-17)21 CWN 979. On appeal Chandra
KantaDasvParasullahMullick,ILR(1921) 48Cal1030(PC).
248. (1934) 39 LW 618: AIR1934PC 101.
249.1919AC548,563(HL).https://t.me/LawCollegeNotes_Stuffs

440. 300Chapter7 Legality ofObject [S. 27]
restrictionswill depend upon many factors, for example, the area in which
the goodwill is effectivelyenjoyed and the price paid forit.^^°
The seller can only berestrainedfromcarryingon asimilarbusiness and
also only for such period for which the business sold is actually carried on
either by the buyer or by any person deriving title to the goodwill from him.
2.PartnershipAct
There are four provisions in the Partnership Act which validate agree
ments inrestraintof trade. Section 11 enablespartnersduring the continu
ance of the firm to restrict their mutual liberty by agreeingthatnone of them
shallcarryon anybusinessotherthanthatof thefirm.^^^Section36enables
them to restrain an outgoingpartnerfrom carrying on a similar business
within aspecifiedperiod or withinspecifiedlocal limits. Such agreement
shall be validif the restrictions imposed are reasonable. A similar agreement
may be made by partners upon or in anticipation of dissolution by which
they may restrain each other from carrying on a business similar tothatof
thefirm.^^^
It isnecessaryfor thevalidityof arestraintunderSection 36 or 54that—
(1)theagreementshouldspecifythe local limits or the period of
restraint,and
(2) therestrictionimposedmust bereasonable.
An agreement by aretiringpartnernot tocarryon similar business on the
land belonging to him and adjoining the factory of the firm, has been held
to bereasonableand binding on the personsbuyingthe land fromhim.^^'*
Under judicialinterpretation
1.Tradecombinations
It is now almost a universal practice for traders ormanufacturersin the
samefineofbusinessto carry on their trade in an organisedway.^^^Thus,
therearecombinationsoficemanufacturers,^^^grainmerchants,sugarpro-
ducers,^^^etc. The primary object of suchassociationsis toregulatebusi
nessandnottorestrainit.Combinationsofthiskindareoftendesirable
in the interest of trade itselfand also for the promotion ofpublicinterest.
250. SeeDamodar Laxman Lele v KashinathWamanLele,(1906)9 BomLR 312; Deva Sharma
VLaxmiNarain,AIR 1956 Punj 49.
251.SeeFirm Daulat Ram v Firm DharmChand,AIR 1934 Lah 110,wheretwo icefactory
owners constituting a partnership agreed that only one factory will be worked at a time and
its profitsdistributedamongthem.The restraint was heldto bejustified.
252. S. 54 of thePartnershipAct.
253.SeeKrishnaraovShankar,1954SCCOnLineBom61:ILR1954Bom1409,whereDesaiJ,
explainedthe rules as toreasonablenessofrestrictionsat pp. 978-79.
254.HukmiChand vJaipur Ice and Oil Mills, AIR 1980 Raj 155.
255. Bom Ice Co v S.B.Fraser& Co, (1904) 6 Bom LR 23.
256.BholaNath Shankar Das v Lachmi Narain,(1931)29 All LJ 84.
257. Carew & Co Ltd vNorthBengal Sugar Mills, ILR (1951) 2Cal386.https://t.me/LawCollegeNotes_Stuffs

441. [S.27] Exceptions 301
They bring about standardised goods, fixed prices and eliminate ruinous
competition. Thus, "regulations as to the opening and closing ofbusiness
in the market, licensing of traders, supervision and control of dealers and
themodeofdealingare notillegal,"^^^evenif there isincidentaldeprivation
of tradeliberty.But the courts would not allow a restraint to beimposed
disguisedas traderegulations.Thus, anagreementbetweencertain persons
to carry on business with the members of their casteonly,"'and an agree
ment torestrictthe business of asugarmillwithina zoneallottedto it, have
been heldvoid.^^"An agreement between two companies that one would not
employthe formeremployeesof the other has been held to be void by reason
of itsgenerality.This was the situation in Kores Mfg Co Ltd vKolokMfg
CoLtd:-''
Both companies were engaged inmanufacturingsimilar products
involving technical processes in which theemployeeswere likely to
acquireknowledgeoftradesecretsandconfidentialinformation.The
companiesagreedthatneitherwouldemploy,withoutthewrittenconsent
of the other, any person who had been theemployeeof the other for any
timeduringthe previous five years.
Thoughthe agreement was between two employers who were dealing at
arm's length and on equal terms, it was held to be void. Itprohibitedthe
appointmentof any person by any one company or the other who had been
in the service of one or the other for any period, however short, and in any
capacity, however humble. The ban was applicable as much to an unskilled
manual labourer who might have been employed even for a single day as to
a highly skilled and long-term employee, as much to a dismissedservantas
to one who might have resigned; as much to a lay employee as to one who
mighthaveacquiredconfidentialknowledge.
Agreements as toregulationof prices andoutputare generally upheld as
valid.Thusin aBombaycase:^"
Fourginningfactoriesenteredintoanagreementfixinguniformrate
forginningcotton,andpoolingtheirearningsto be dividedbetween
them incertainproportions.
Theactionwas for division of profits and there beingnothingin the
agreementagainstSection27, it wasallowed.
Referringto theotherpartof theagreement,whichfixeduniformrates,
FarrenCJsaidthatanagreementofthisdescriptionwherebytradersagree
amongstthemselvesto selltheirwaresat a fixedprice,orlabourersso agree
tolabouronly at thestipulatedwage have in theEnglishcourtsusuallybeen
258.MunicipalCommittee,KhuraivFirmKaluramHiralal,AIR1944Nag73.
259.VaithelingavSaminada,ILR(1872) 2Mad44. •
260.Carew& CoLtdvNorthBengalSugarMills, ILR (1951) 2Cal386.
261. 1959 Ch 108: (1958) 2WLR858 (CA).
262.HaribhaivSharafali,ILR (1897) 22 Bom 861.https://t.me/LawCollegeNotes_Stuffs

442. 302 Chapter 7Legalityof Object [S.27]
held void. ButCandyJ disagreed with him. Hebelievedthattheapparent
objectwrasto preventcompetition.^"
Thequestionagainarose inS.B.Fraser & Co vBombayIceMfgCo.^^'^
Anagreementbetween certain ice manufacturersfixedthe minimum
price for sale of ice, the proportion of the manufacture which each was
to bear and of profits which each was toreceive,some of them were
restrainedfrom selling at Poona and some others at steamers.
RusselJ heldthatthe agreement was not within the terms of Section 27,
the whole object being to regulate business and not to restrainit.^"
The Allahabad High Court faced the problem inBholaNath Shankar
DasVLachmiNarain.^^^
The rules of anassociationoftradersandweighmenprovidedthat
members shall not deal with outsiders, the penalty for breach being fine
and expulsion.The legalityof the association was attacked on the ground
thatitsobjectsand methods were unlawful as it aimed at the creation of a
monopoly by shutting out all competition and was adefianceof the spirit
ofSections23and27.
Rejecting this contention, Sen J quoted BaronAldersonin Hilton v
Eckersley^^''assaying:"primafacie it is theprivilegeof a trader inafree
country in all matters not contrary to law, to regulate his own mode of car
rying it on according to his own discretion andchoice."^®®
2. Solusorexclusivedealingagreements
Anotherbusiness practice in vogue isthataproducerormanufacturer
Ukestomarkethis goodsthrougha sole agent ordistributorandthelatter
agrees inturnnot to deal with the goods of anyothermanufacturer.A pro
ducer may, for example, agree to sell all hisoutputto oneconsumerwho, in
turn,agrees not to buy his requirements from any other source. As long as
the negative stipulation is nothing butan-ordinaryincident of or ancillary
to the positivecovenant,thereishardlyanythingobnoxiousto Section 27.
263. At p. 868. ThelearnedJudgequotedthatspeech of LordColeridgein Mogul SS CoLtdv
McGregor Gow & Co, (1889) LR 23 QBD 598 (CA), "it seems it was no more inrestraintof
tradethanif twotailorsin a village agreed to give theircustomersfive per cent in their bills
onChristmasonconditionoftheircustomersdealingwiththemandthemonly".Followed
by the Allahabad High Court inKubernathvMohateRam,ILR(1912) 26ILRAll 587. Now
this has to betakenin the light of the provisions of theMonopoliesandRestrictiveTrade
Practices Act, 1969, [now repealed] which provide in S.33{l){d)thatprice fixation for goods
or service is deemed to be arestrictivetradepracticeunless it was saved by S. 38 ofthatAct
whichpermitscertainrestrictionsin public interest. MRTP Act has now beensupersededby
theCompetitionAct,2002.Ss. 3 to 6 are now therelevantprovisions.
264.ILR(1904)29Bom107.
265. ThelearnedJudge cited anumberofdecisionsfrom theUnitedStatesinwhichit has been
heldthatcompetitionis not always a publicbenefaction.See at pp.30-31of 6 Bom LR1904.
266.(1931) 29 All LJ 84.
267.(1855)6E&B47.
268.(1931) 29 All LJ 84 at p. 87.https://t.me/LawCollegeNotes_Stuffs

443. Exceptions303
Indeed"inonesense,everyagreementforsaleofgoodswhetherinesseor
inposseisacontractinrestraintoftradefor,ifABagreestosellgoodsto
CD,heprecludeshimselffromsellingthemtoanybodyelse".^^'Thus,an
agreementbyamanufacturerofdhotistosupply1,36,000pairsofcertain
descriptiontothedefendantandnottosellgoodsofthatkindtoanyother
personfor afixedperiod;^^"anagreementby apersontosellall the salt
manufacturedbyhimto afirmforfiveyears;^^^anagreementbyaperson
to sendall the micaproduced byhim to the plaintiffs, and not to send them
toanyotherfirm,nor tokeepanyinstock^^^and anagreementbyabuyer
ofgoodsforCalcuttamarket,not tosellthemin Madras,haveallbeen
heldtobeoutsidethescopeofSection27andthereforevalid.Suchnegative
stipulationsdo not havethe effectof restraining the manufacturer. "On the
contrary,he is encouraged to exercise his business because he is assured of a
certainmarketfor theproductsof hislabour."^^^
Butw^hereamanufacturerorsupplier,aftermeetingall therequirements
ofabuyer,hassurplustoselltoothers,hecannotberestrainedfromdoing
so.^^'*The buyercannot restrain thesellerfrom dealingw^ithothers unlesshe
can acquire the whole stock during the period of theagreement.The court
may not countenance the agreement particularly where the buyer intends to
corner ormonopolisethecommodityso that he mayresellat his own price
or where he binds thesellerfor anunreasonableperiod of time. Thus, in
ShaikhKaluv Ram SaranBhagat-}''^
A seller of combs entered into an agreement with all themanufacturers
ofcombsin the city of Patnawherebythe latter undertook during their
lifetime to sell all theirproductsto R.S., and to his heirs and not to sell
the same to any one else.
Holdingthe agreement void under Section 27, thecourtsaid: "It bound
the manufacturers from generationto generation;it was unrestricted both as
to time and place;it wasoppressive;it wasintendedto createamonopoly."^^^
TheHouseofLordshasheldthat21-yearperiodofexclusivedealing
would beunreasonablylong.'ThecasebeforetheirLordshipswas Esso
Petroleum Co Ltd vHarper'sGarage (Stourport)Ltd.^^''
Esso Co had an agreement with two garages which was to bind one for
about four and ahalfyears and the other for 21 years. During this period
269.HandleyJ in Mackenzie vStriramiah,ILR(1890) 8 Mad 472, 474. PerceptD'Mark(India)
(P) Ltd VZaheerKhan, (2004) 2 Bom CR 47, negative covenant in acontractthatthe cove-
nantee would not sell a similar product of a competitor was held notnecessarilyin restraint
oftrade,itcouldalsobe infurtheranceoftrade.
270. Carliles Nephews & Co vRicknauthBucktermull,ILR (1882) 8Cal809.
271.MackenzievStriramiah,ILR (1890) 8Mad472.
272. SubhaNaiduv Haji Badsha Sahib, ILR (1902) 26 Mad 168.
273.AbdulKarimv Sk.Dubar,AIR1937Oudh445.
274.HarBilasvMahadeoPrasad,AIR1931 All 539.
275.(1908-09)13CWN388:1IC94.
276. Ibid at p. 396. See also Abdul Karim v Sk. Dubar, AIR1937Oudh 445.
2771968AC269:(1967)2WLR871(HL).https://t.me/LawCollegeNotes_Stuffs

444. 304Chapter7LegalityofObject [S-27]
theyhadtobuythewholeoftheirrequirementsfromEssoandtooperate
thegaragesinaccordancewithEssoco-operationplan.Thegaragewhich
wasboundfor21yearswasalsomortgagedtoEssoagainsta loanwhich
wasrepayableininstalmentslastingfor21yearsand notearher.
The HouseofLordsunanimouslyheldthat theagreementfellwithin the
spheretowhichthedoctrineofrestraintappliesandtheperiodof21years
beingnotreasonable,itwasvoid,butthetiewiththeothergarageforfour
yearsandfivemonthswasreasonable.LordPearcelaiddown:-"Thedoc
trinedoesnotapplytoordinarycommercialcontractsfortheregulation
andpromotionoftradeduringtheexistenceof thecontractprovidedthat
anypreventionofworkoutsidethecontractviewedasawholeisdirected
towardsabsorptionof theparties'servicesand not theirsterilisation.Sole
agenciesareanormalandnecessaryincidentofcommerce,andthosewho
desirethe benefitof a sole agencymust deprivethemselvesthe opportunities
of otheragencies.Sotoo, in thecaseof afilmstar whomaytiehimselfto a
companyinorderto obtainfromthemthebenefitsofstardom."^^®
Where acontractis reasonable and fair at the beginning, but circum
stanceshavearisenwhichshowthatit is beingenforcedby onepartyin a
mannerwhichisprejudicialto theinterestoftheother,the courtswillhold
theagreementto beunenforceable,thoughnotvoidorinvalid.This opinion
hasbeenexpressedby the Court ofAppealinShellU.K.Ltd vLostock
GaragesLtd.'"^
ApetrolpumpwastiedtoShellfor aperiodwhichthe courtfoundto
be reasonable.Subsequently,on account of a sharp rise in petrol prices
salessufferedandinordertocounteractthis,some of thepetroleumcom
paniesencouragedtheirpumpsto cutprices.TheShellCompanydid not
do so, butinsteadadopteda support plan tocompensatetheir pumpsfor
lossessufferedby them insellingatcompetitiveprices.This support plan
didnotapplytoLostockbecausehissaleshad notsufferedto the extent
contemplatedbythe supportplan.Lostockattemptedto getsuppliesfrom
other companies and an injunction was sought against him. No injunc
tion was,however,granted.
LordDenningMRfirstremarkedthat"itis nowsettledbeyonddoubt
that asolusagreementis a contract in restraint of trade. As such itcomes
within thatspecialclassin whichthe courts caninvestigatethe terms of the
contract and seewhether they are fair andreasonable.If they are unfair and
unreasonable, the courts may refuse to enforce them". His Lordship found
that there was nothing unreasonable in the contract, it being only forfive
years."Atthat timethe parties did notanticipatethatcircumstanceswould
arise inwhichShell would subsidiseneighbouringgarages to such anextent
278.GaumontBritishPictureCorpnLtdvAlexander,(1936) 2 All ER 1686. SeeRestrictive
Trade Practices, 87 LQR 481: (1937)35 Mod LR 651; Rudolf Graupner, SoleDistributorship
Agreements,(1969) 18ICLQ879.
279. (1976) 1WLR1187(CA).https://t.me/LawCollegeNotes_Stuffs

445. [S*27] Exceptions305
astoforceLostocktotradeat aloss.Thatcontingencywassoimprobable
andextravagantthatit would not invalidate the tie at the time it was made."
HisLordshipthenlaiddownthatthecourtshouldnotenforceacovenant
inrestraintoftradeifcircumstancesafterwardsariseinwhichitwouldbe
unreasonableorunfairtoenforceit.
Anagencyfor sale of the goods of a Germancompanyin India which
carried a termrestrainingthe Indiancompanyfromsellinggoodsforfive
yearsaftertheterminationofthecontractwas held to benotenforceable.^™
Anagreementof this kind was okayed by theSupremeCourt where it was
confined to the currency of the agreement. The case before the court was
GujaratBottlingCoLtdvCocaColaCo.^^^
Anagreementfor grant offranchisebyCocaColaCo to GujaratBottling
Co to manufacture, bottle, sell and distributebeveragesunder trade marks
heldbythefranchisercontainedthenegativestipulationrestrainingthefran
chisee to"manufacture,bottle,sell, deal orotherwisebeconcernedwiththe
products,beveragesof any other brandsor trademarks/tradenamesduring
subsistenceof this agreement including the period of one year's notice". It
was held that thenegativestipulation was intended to promote the trade.
Moreover, operation of the stipulation wasconfinedonly to subsistence of
theagreementand not after terminationthereof.Hence stipulation could
notberegardedas inrestraintoftrade.
Thecourtproceeded as follows:
"Astipulationin acontractwhichisintendedforadvancementoftrade
shall not be regarded as being in restraint of trade.Similarly,except in
cases where thecontractis wholly one-sided,normallythedoctrineof
restraint of trade is not attracted in caseswhere the restriction is to oper
ate during the period the contract is subsisting and it appliesin respect of
arestrictionwhichoperatesaftertheterminationof thecontract."
"There is a growing trend to regulate distribution of goods and ser
vicesthrough franchiseagreementsproviding for grant of franchise by
thefranchiseroncertaintermsandconditionstothefranchisee.Such
agreementsoftenincorporateaconditionthatthefranchiseeshallnot
deal with competing goods. Such a condition restricting the right of the
franchisee to deal with competing goods is for facilitating thedistribution
of the goods of thefranchiserand itcannotberegardedas inrestraintof
trade.
The agreement in question in this case was an agreement forgrantof
franchisebyCocaCola to GBC tomanufacture,bottle,sellanddistribute
the variousbeveragesfor which the trade marks were acquired by Coca
Cola. It was thus, a commercial agreement whereunder both the par
ties haveundertakenobligations forpromotingthetradein beverages for
280.TaproggeGesellschaftMBHvlAECIndiaLtd,AIR1988Bom 157.
281. (1995) 5see545: AIR 1995 SC2372:(1995) 84eompGas 618.https://t.me/LawCollegeNotes_Stuffs

446. 306 Chapter7LegalityofObject [S.27]
their mutualbenefit.The purpose of thenegativestipulationcontained
in theagreementwas thatGBCwill workvigorouslyanddiligentlyto
promoteandsolicitthesaleof theproducts/beveragesproducedunder
thetrademarks of Coca Cola. This would not be possible if GBC were to
manufacture, bottle, sell, deal or otherwise beconcernedwith the prod
ucts,beveragesor any other brands or trade marks/tradenames.Thus,
thepurposeof the saidagreementis topromotethe trade and the neg
ative stipulation seeks toachievethe said purpose by requiring GBC to
wholeheartedlyapply to promote the sale of the products of Coca Cola.
Moreover, since the negative stipulation is confined in its application to
the period ofsubsistenceof theagreementand the restrictionimposed
thereinisoperativeonlyduring the period theagreementissubsisting,the
said stipulation cannot be held to be in restraint of trade so as toattract
thebarofSection27oftheContractAct."
3.Restraintsuponemployees
Restraintsduringemployment.—Agreementsof service oftencontain
negativecovenantspreventingtheemployeefrom workingelsewhereduring
the periodcoveredby theagreement."Tradesecrets,the names of custom
ers, all such things which in sound philosophical language are denominated
as objectiveknowledge—thesemay not be given away by a servant; they
are his master's property, and there is no rule of public interest which pre
vents atransferof themagainstthe master's will beingrestrained."^^^A
servant may, therefore, be restrainedfrom.takingpartin any business in
direct competition with that of hisemployer.^®^Thus, inCharlesworthv
MacDonald-}^'^
A agreed to become assistant for three years toBwho was a physician
and surgeon practising at Zanzibar. The appointment was subject to the
clause against practising. A left the service within a year and began to
practisethere on his ownaccount.
282.HerbertMorrisLtdvSaxelby,(1916) 1 AC 688, 714 (HL),perLordShaw.
283.ElectrosteelCastings Ltd v Saw Pipes Ltd, (2005) 1CHN612, where an employee agrees
with his employer, e.g. to work with him faithfully for five years and not to work with any
competitor during that period. The court said: The clause is a good one, because it is not in
restraintof any profession, trade or business. Therestrictionagainst working with a com
petitor during the period of one's parent employment is not arestrictionagainst profession
but it is arestrictionagainst breach of faith and loyalty. A whole-time employee, if he is to
be diligent and loyal, can obviously serve only one master. The clause only enforces this con
dition of employment and is not inrealityrestrictive.VPSGlobalServices (P)LtdvSuprit
Roy,2007SCC OnLine Bom 1083: (2008) 3MahLJ266,a clauseprohibitingan employee
fromdisclosingcommercialortradesecretsis not inrestraintoftradebecausetheemployee
isnottherebyrestrainedfromcarryingon anylawfulprofession,tradeorbusiness.
284.ILR(1898) 23 Bom 103. SeefurtherSociedadeDeFomentoIndustrialLtdvRavindranath
SubrayaKamat,(2000) 1MahLJ 148, acontractofretainershipcontaineda clausethatup
to thecurrencyof theengagementthe employee would notundertakedirectlyorindirectly
by himself or by family members or by anypersonas his agent any activitycompetingwith
the business of theplaintiffcompanies;this was held to be not void.https://t.me/LawCollegeNotes_Stuffs

447. Exceptions307
Buthewasrestrainedfromdoingsoduringtheperiodofthreeyears.
FarranCJexplainedtheprinciplethus:"Anagreementofthisclassdoes
notfallwithinSection27.Ifitdid,allcontractsofpersonalservicefora
fixedperiodwouldbevoid.Anagreementtoserveexclusivelyforaweek,
aday,orevenforanhour,necessarilypreventsthepersonsoagreeingto
servefromexercisinghiscallingduringthatperiodforanyoneelsethanthe
person with whom he so agrees.
TheprinciplewasappliedbyKaniaAGCJ(ashethenwas)oftheBombay
High Court inV.N.Deshpande v Arvind Mills Co
Thedefendanttookemploymentas aweavingmasterin amilland
agreednottoserveinthatcapacityforthreeyearsforanyoneelseinany
part of India. Aninjunctionwas granted to restrain him in terms of the
agreement.^^^
Agreementsforprotectionofconfidentialityandtradesecretsare not
one-sidedorunfairorunreasonable.Anybreachofsuchclausesonthepart
oftheemployeecanalsobetreatedasamisconduct.Thepetitionerwas
inthiscase,afterresignation,workingforacompetitor.Thepossibilityof
usingtheclientlistsandconfidentialinformationjustcannotberuledout.
Though, there is no directevidenceon record but in view of the admitted
breachandfactsandcircumstancesthepetitionerisliabletopaylumpsum
damages/compensation.It isclearbreachoftheagreedclausesasconfiden
tialinformation/datamusthadtraversedout oftheprivatedomaintothe
competitor's domain through the petitioner. The sufferer needs to be com
pensatedinviewoftheadmittedbreachitself.Theelementofbreachrelating
285.IndiaCharlesworthvMacDonald,ILR(1899)23Bom103.Seeforfurtherstudy:J.Finch,
RestraintClausesinGeneralMedicalPractitioner'sPartnership,132NewLJ27.
286.AIR1946Bom423.SeealsoLalbhaiDalpatbhai& CovChittanznjanChandulalPandya,
AIR1966Guj 189.
287.TheAg.ChiefJusticereviewsatpp.425-28alltheleadingEnglishcasesonthesubject.For
otherillustrationsseePragjivPranjiwan,(1903)5BomLR878;MadrasRlyCovRust,ILR
(1890)4 Mad18;SubhaNaiduvHajiBadshaSahib,ILR(1902)26 Mad168;Burn & Co
VMcdonald,ILR(1909)36Cal354:9CalLJ190.In thiscaseanengineerMacdonaldwas
broughtbythecompanyfromEnglandtoworkforthemforfiveyears.Incaseofhisleaving
employmentearlierhewastopaydamagesof£100.Heleftemploymentandrefusedtopay
damages.TheCourtdidnotpermithimtocontinuehisworkwiththenewemployer.The
Courtopinedthat theemployee,couldnot act insuchanoverbearingmanner.The Court
proceededon theillustrations(c)and(d)of S. 57 of theearlierSpecificReliefAct,1877.It
didnotadverttoS.27atall.NiranjanShankarGolikarivCenturySpg&MfgCoLtd,AIR
1967SC 1098:(1967)2 SCR378, a restraint duringfiveyears' term ofservice,held reason
able.NumericPowerSystemsLtdvMohd.Muzaffar,2006SCCOnLineMad697:(2006)
4LLN385,anegativecovenantcanbeenforcedduringthecontinuanceoftheemployment
and itcontinuesfor thispurposetill theemployeeisreleased.Thestipulationin the con
tract that thenegativecovenantwasto bindtheemployeefor oneyear afterterminationof
employmentwasnotenforced.NazirMaricarvMarshallsSons& Co(India)Ltd,(2005)
2 CTC478,sectioncomesinto playevenwhenthereis onlya partialrestriction.Justifiable
restrictionsarepermissible.Trainingexpenseswereincurred,employeeput onfiveyear
term,Rs30,000payable if he left earlier. He worked for 18 months.Rs30,000would have
to be reducedproportionally.https://t.me/LawCollegeNotes_Stuffs

448. 308Chapter 7 Legality of Object
[S. 27]
CASEPILOT
toconfidentialinformationwith otherelementsoflossof profit, etc., just
cannotbeoverlooked.Asthereislegalinjury,itshouldbecompensated.^ss
Restraintsafterterminationofemployment.—Butanagreementto
restrainaservantfromcompetingw^ithhisemployerafterthetermination
ofemploymentmaynotbeallowedbythecourts.Thus,inBrahmaputra
TeaCo Ltd v E.Scarth,^^^wherean attemptwas madeto restrain a servant
fromcompetingforfiveyearsaftertheperiodofservice,thecourtobserved:
"Contractsbywhichpersonsarerestrainedfromcompeting,aftertheterm
oftheiragreementisover,withtheirformeremployerswithinreasonable
limits,arewellknowninEnglishlaw,andtheomissiontomakeanysuch
contractanexceptionto thegeneralprohibitioncontainedinSection27
indicatesthat it was not intendedtogivethem legaleffectin this country."
TheprinciplesthusestablishedhavebeenapprovedbytheSupremeCourt
inNiranjanShankarGolikarivCenturySpg&MfgCoLtd.^^"
Acompanymanufacturingtyrecordyarnwasofferedcollaboration
byaforeignproducerontheconditionthatthecompanyshallmaintain
secrecyofallthetechnicalinformationandthatitshouldobtaincorre
spondingsecrecyarrangementsfromitsemployees.Thedefendantwas
appointedforaperiodoffiveyears,theconditionbeingthatduringthis
periodheshallnotserveanywhereelseevenifhelefttheserviceearlier.
ShelatJheldtheagreementtobevalid.Thedefendantwasaccordingly
restrainedfromservinganywhereelseduringthecurrencyoftheagreement.
"Theevidenceis clear that the appellant has torn theagreementtopieces
onlybecausehehasbeenofferedahighremuneration.Obviouslyhecannot
beheardtosaythatnoinjunctionshouldbegrantedagainsthimtoenforce
thenegativecovenantwhichisnotopposedtopublicpolicy.Theinjunction
issuedagainsthimisrestrictedastotime,thenatureofemploymentand
as to area andcannottherefore be said to be too wide or unreasonable or
unnecessaryfortheprotectionoftheinterestoftherespondentcompany."
Thelearnedjudgedistinguishedthecasefromthedecisionof A.N. Ray
J(ashethenwas)oftheCalcuttaHighCourtinGopalPaperMillsLtdv
SurendraK.GaneshdasMalhotra^^^where aninjunctionto enforce a nega
tivecovenantduringtheperiodofemploymentwasrefusedastheagreement
288.AnindyaMukherjeevCleanCoats(F)Ltd,(2011)1 Mah LJ573.
289.ILR(1885)11Cal545.
290. AIR1967SC1098:(1967)2 SCR378.Furtherfollowedin R. Babuv TTKLigLtd,(2004)
2CTC684:(2004)2CCC565,so as toholdthatsuchinjunctionsareallowable.Thecourt
said in this casethat noinjunctioncouldbe grantedagainstanemployeeaftertermination
ofhisemploymentrestraininghimfromcarryingoncompetitivetrade.Theorderrestraining
himfromjoiningthenewemployercouldnotbesustained,histerminationbeingtheresult
ofabreachofagreement.AmbianceIndia(P)Ltd vNaveenjain,(2005)81DRJ538:(2005)
122DLJ421(ShortNotes,Case70),theemploymentbeingdeterminable,theemployeeleft,
theprohibitionontakingemploymentelsewherenotenforced,anirreparablelosswouldbe
causedtotheyoungemployeewhereastheemployercouldbecompensatedforbreach,ifany,
intermsofmoney.
291.AIR1962Cal61.https://t.me/LawCollegeNotes_Stuffs

449. [S.27] Exceptions 309
was for a period oftwentyyears and its terms were also unconscionable.
ShelatJ said:
The period ofcontractthere was as much as 20 years and thecontract
gave the employer anarbitrarypowertoterminatethe servicewithout
notice...such acontractwould clearly be held void as being one-sided.
A servicecontractcarrieda clause to the effectthatthe employee was not
to discloseconfidentialinformationto any person after cessation of employ
ment with the employer(applicant)and was not to take up any employment
or involve himself with anyotherperson a bodycorporateinsimilarfield
of activity which was of competitive nature. This was held to becontraryto
the provisions of Section 27. An order of injunction could not be granted to
enforce it at theinterimstage itself.
InEnglandthepositionof suchrestrictivecovenantshas beendescribed
tobe"stillanuncertainfield".LordWilberforceobservedintheEsso
Petroleumcase:
Certaincontractsof employment, withrestrictionsappropriateto their
character against undertaking other work during theircurrencymay be
acceptable. Here too, however, if it is foundthattherestrictionis purely
limitative or sterilising, it may be subject toexamination.
Recoveryoftrainingexpenses
The agreement wasthatthe employee would put in service for aperiodof
fiveyears afterreturningfromtrainingabroadat the cost of the employer.
Anindemnityclausequantifieddamages at Rs30,000if the service was
left earlier. The employee left after 18 months. Thetrialcourtawardedto
the employerthe whole amount of Rs30,000.The HighCourtreduced the
amounttoRs20,000keeping in mind theproportionaterecoveryalready
effected during theactualperiod of service. Such agreements, thecourtsaid,
are for the benefit of employees becausetrainingprovided to them increases
theiracceptabilityin the jobmarket.Thereis norestraintalsobecausethe
employee is free to go away after paying unrecoveredportionof expenses of
training.^'^
Protectionoftradesecrets.—Oneoftheprinciplesisthatamaster
is notentitledtorestrainhisservantaftertheterminationofemployment
from offeringcompetition,but he is entitled toreasonableprotectionagainst
exploitationof tradesecrets.InMasonvProvidentClothingandSupply
CoLtd^^^theHouseof Lords didnotallowan employer torestrainhis
292.SanmarSpecialityChemicalsLtdvBiswajitRoy, AIR2007Mad237.
293.NazirMaricarvMarshallsSons& Co(India)Ltd,(2005)2CTC478.
294.YoungerLJ inAttwoodvLamont,(1920)3 KB571. /
295. 1913 AC724(HL). See alsoMarshallvN.M.FinancialManagementLtd,(1995) 1WLR
1461. In this case, a sales agent wasworkingon theconditionthatfor one-yearperiodafter
theterminationofemploymenthewouldnot become anindependentintermediaryorbecome
employed in anydirectorindirectcompetitor.Thiswas held to be aninvalidrestraintofhttps://t.me/LawCollegeNotes_Stuffs

450. 310Chapter7 Legality of Object [S.27]
canvasser for a period of three years after theterminationof his service.
ViscountHaldaneLC pointed out that capacity for canvassingis anatural
gift and not due tospecialtrainingprovidedby theemployer."Hadthey
beencontentw^ithasking him to bind himself not to canvassw^ithinthe area
where he had actually assisted in building up thegoodwrillof their busi
ness, or in an area restricted to places where the knowledge which he had
acquired in his employment could obviously have been used to their preju
dice, they might have secured a right to restrain him within these limits."
On theotherhand,in Fitch vDewes^^^theHouseof Lordsalloweda
covenant by which a solicitor's clerk wasrestrainedfrompractisingwithin
7 miles of the city, it beingreasonablynecessary forprotectingtheinterest
of bothparties.But in no case thecourtwould allow covenantsagainst
competition. InAttwoodvLamonf-^'^the employer wasrunningseveral
departments in connection with tailoring etc. and theemployeewas the
superintendent only of the tailoring department. The agreement with him
wasthatafter ceasing to be an employeehe would not engage himselfwithin
10 miles in any of the business beingrunby the employer inadditionto
tailoring.TheCourtofAppealheld theagreementnotonly to beunnatu
rally wide but also inrestraintofcompetition.YoungerLJ cited the fol
lowing passage from the speech of LordParkerin Morris vSaxelby}^^
"The reason and theonlyreason for upholding such arestrainton thepart
of anemployeeis that the employer has someproprietaryright, whether
inthenatureofthetradeconnectionor inthenatureoftradesecrets,for
the protection of which such arestraint,is, having regard to the duties of
anemployee,reasonablynecessary.Such arestrainthas never been upheld,
if directed only to the prevention ofcompetitionoragainstthe use of the
personalskill and knowledgeacquiredby the employee in his employer's
business."
In asubsequentcase:^'®
Thedefendantswere employed by theplaintiffsas agents for debt col
lectionfor the city ofBirmingham.A clause of theagreementprovided:
"For a period of sixmonthsafter thedeterminationof employment the
trade.It was far widerthanwas reallynecessaryforprotectingthe employer's clientage. The
restrictionwas preventive ofcompetitionover a much wider rangethanwas necessary. The
employer waspermittedto forfeit his arrears of commission. SandhyaOrganicChemicals P
LtdV UnitedPhosphorusLtd, AIR 1997Guj177, an employee wasundercovenantnot to
divulge anyconfidentialand secretinformation,thecourtsaidthatit would not go beyond
thetermofemployment;injunctionrefused.CertactPtcLtdv TangStewChoy, (1991) 3
CLJ 2269HighCourt,Singapore, list of suppliers andcustomersispropertyof employer,
employee can berestrainedfrom using suchtradesecrets andconfidentialinformation.
296.(1921) 2 AC 158 (HL). Arestraintupona ladieshairdresserthatsheshouldnotworkafter
theterminationof heremploymentat acompetitiveplace for 12monthsandwithinhalfa
mile of the place, was held to bereasonable.White (Marion)LtdvFrancis,(1972) 1WLR
1423.
297.(1920)3 KB571.
298.(1916)1AC688,710.
299.FinancialCollectionAgenciesLtdvBatey,TheTimes,May1973:1973NewLJ 469.https://t.me/LawCollegeNotes_Stuffs

451. Exceptions311
defendantswouldnotsolicitbusinessfromanyperson,firmorcompa
nies who shall at any time have been a client." The defendants left and
starteda debtcollectionagencyof theirown.Theplaintiffprayedfor an
injunction.
It washeldthat the injunctionwouldnot begranted, for the covenantwas
far toowideandwasanunreasonablerestraint of trade,sinceitextended
to thewholearea of the plaintiffs' operation whereas thedefendantswere
employed inBirminghamalone.
Arestraintupon a ladies'hairdresserthatsheshouldnotworkafterthe
termination of heremploymentat acompetitiveplace for 12 months and
withinhalfa mile of the place, was held to bereasonable.^""
InaCanadiancase:^°^
Thedefendantswereemployeesof acompanywhich carried on a
topographicalsurveybusiness.Duringtheirservicetheyattemptedto
obtain avaluablecontract for the plaintiffcompany,butfailedto do so.
Thereafter, the defendants resigned and obtained the contract for them
selves,butwithoutusinganyconfidentialinformationof theplaintiff.
Thecourtheldthatthereis animpliedtermin a contractofemployment
that aformeremployeemaynotmakeuseof hisformeremployer'strade
secrets,but with thisexception,he is entitledtocompeteand thatevenif the
contract ofemploymenthad containedacovenantnot tocompeteinrespect
of possible futurecontracts,such covenant would have been anunreasona
blerestraintoftradeandvoid.^°^
300. Marion White Ltd v Francis, (1972) 1WLR1423; Hi-Tech Systems and Services Ltd v
Suprabhat Ray, 2015 SCC On LineCal1192; AIR 2015Cal261,employeesresignedin
quicksuccessionone after the other, formed a partnership, shared information with third
parties with the clear object ofcausingdiversionof thebusinessofformeremployer,an
injunctionwasgrantedagainstthemtorestrainbreachofcontractterms.
301. CanadianAeroServiceLtd v O'Malley,(1971)23 DLR(3rd)632, Ontario Court ofAppeal.
302. For a discussion of the subject and case seeVoonuswami,PublicInterestandRestrictive
TradePracticesinIndia,(1963)IndianYearbookIntll.Affairs256-280.MeritScada
Automation (P) Ltd v Sanmar Industrial SystemsLtd, (2004) 5 CTC 81 (Mad),senior engi
neer signed secrecy agreement with plaintiffcompany,he promoted a new company while
still in hisemploymentand the newcompanywas tocompetewith hisemployercompany.
Held, he and his company could be prevented fromcompetitivebidding in the samelineof
work. CommercialPlastics Ltd v Vincent,(1965)1 QB 623(CA)"the use of mere general
technicalknowledge,acquired in the course ofemployment,must be carefully distinguished
from confidentialinformation and it is not a valid interest which theemployercan claim to
protect by arestrainingcovenant."AmbianceIndia(P)Ltd vNaveenJain,(2005)81DRJ
538: (2005) 122 DLJ421: routine day-to-day affairs of employerwhich are in the knowledge
of many and arecommonlyknownto otherscannotbe calledtradesecrets. Atradesecret
can be a formulae, technical know-how or a peculiar modeor....In a business house, the
employeesdischarging their duties come across so manymatters,but all these matters are not
trade secrets or confidential matters or formulae, the divulgence of which may be injurious
to theemployer.If the defendant on account of his employmentwith the plaintiff has learnt
some businessacumenor ways of dealing with thecustomersor clients, the same do not
constitute trade secrets or confidentialinformations,the divulgence or use of which should
be prohibited. American Express Bank Ltd v Priya Puri, 2006 SCC OnLine Del 638: (2006)
110 FLR 1061 cited inNumericPowerSystemsLtdv Mohd.Muzaffar,2006SCCOnLinehttps://t.me/LawCollegeNotes_Stuffs

452. 312Chapter7LegalityofObject [S.27]
Arestriction,evenwlienotherwisejustified,for aperiodoffiveyears
was held to be unreasonable in the case of anemployeewho earned only a
modestwage.^°^Arulein thetermsofemploymentprovidingthat incasea
servanttookemploymentwith acompetitorhispensionbenefitswouldbe
forfeited has been held to be void.3°''Withinthree months of leaving employ
ment,thedefendantjoinedthecompetitor.Thecourtsaidthat therightof
employeestoseekemploymentandrightoflivelihoodmustprevail.The
agreementwastorestrainemploymentwithanemployerdealingincom
petitivebusinessforaperiodoftwoyears.Suchrestraintwasnotallowed.
Therecouldbeinjunctiononlytorestrainthedefendantfromapproaching
theplaintiff'ssuppliersandcustomersforsolicitingtheirbusiness.
Negativecovenantstiedupwithpositivecovenantsduringthesubsist
ence of the contract, be it ofemployment,partnership, commerce, agency
orlike,are notnormallyregardedasbeingin restraint of trade,business
orprofessionunlessthesameareunconscionableorwhollyone-sided".No
employeecanbeputinasituationwherehehaseithertostaywiththepres
ent employer or face idleness.
Theprincipleenvisagedunderthesectionisapplicableto alltypesof
contracts or transactions and notmerelyto contracts ofemployment.The
court further said that in construing suchcovenantsor restrictions neither
the test ofreasonablenessnor the fact of partial restrictionisapphcable.The
case should fall within the exception engrafted in Section 27.
Agreementbetweenemployers.—Anagreement between two employ
ersthatneitherwouldemployanypersonwhohad beenthe other'semployee
withinaperiodoffiveyearshasbeenheldto bevoidasitimposedtoowide
and unreasonable restriction upon freedom ofemployment.^"®An agree
mentbetweentwoemployersthat oncessationof theirrelationship,neither
Mad697:(2006)4 LLN 385, one Bank cannot restrain another bank from dealingwith its
customers.The court said: Information will only be protected if it can properly beclassified
as a trade secret or as material which, while not properly to be described as a trade secret, is
in all the circumstances of such a highly confidentialnatureas to require the sameprotection
as a trade secret. Electrosteel Castings Ltd v Saw Pipes Ltd, (2005) 1 CHN 612 that the
restrictionagainstworkingwith acompetitorduring the period of one'sparentemployment
is not a restriction against profession,it is a restriction against breach of faith and loyalty.
303. M & SDrapers(firm) vReynolds,(1957) 1WLR9.
304. BullVPitney-BowesLtd,(1967)1 WLR273. ProvidentFinancialGrouppicv Hayward,
(1989)3 All ER 298(CA),an injunctionwas not to be granted wherethedefendantdid not
haveanyrelevantconfidentialinformationoftheplaintiffswhichwouldbeofuseto the rival
companyand there was no realprospectofseriousorsignificantdamageto theplaintiffs
from the defendantworking as financialcontroller for the rival companyfor the short period
whichremainedofhiscontract.
305.DesiccantRotorsInternational(P) Ltd vBappadityaSarkar, (2009) 112 DRJ14(Del).
306.WiproLtd vBeckmanCoulterInternationalSA,(2006)131DLT681;YFSGlobalServices
(P) Ltd VSuprit Roy, 2007 SCC OnLine Bom 1083: (2008) 3 Mah LJ 266, a garden leave
clausewhich prohibits theemployeefrom taking up anyemploymentduring the period of
three months on the cessation of the employmenthas been held to be in restraint of tarde.
307. PerceptD'Mark(India) (P) Ltd v Zaheer Khan, (2006) 4 SCC 227.
308. KoresMfgCo Ltd vKolokMfg Co Ltd, 1959 Ch 108:(1958)2 WLR 858(CA).https://t.me/LawCollegeNotes_Stuffs

453. [S.27] Exceptions 313
would induce orsolicitetheemployeesof the other to leave jobs and join
pre-offered jobs in other competing firms was held to be not falling within
the scope of Section 27 as it did notenvisageany restriction onemployers.
Theemployeeswere free to move out of their jobs and join rivals and no
injunction could be issued against the otherpartyrestrainingit from taking
in suchturn-awayemployees. If the employees can leave here and go there
withoutsolicitation, how can there be aninjunctionwhen they do so on
solicitation.^"^
Effectofprematureremoval.—Arestrictionofthiskindwillceaseto
be effectiveagainstan employee who has beenprematurelyremovedwith
outhisfault.^^"The SupremeCourtalsopointedoutthatarestraintbeyond
the term of service would beprimafacie void andthatthe onlygroundon
which it could be justified is by bringing itwithinthe scope of the exception,
thatis, by showingthatit is necessary for theprotectionof the employer's
goodwill.Thecourtfurthersaidthateven if such arestraintisvalid,it
will only applyaftertheexpiryof the term in itsnaturalcourse,andnot
when the employee iswrongfullydismissed earlier. It could also apply if the
employee left his service earlier. But leaving a service is different from pre
maturetermination.Therestraintclause becameinapplicable.^"
Norestrictionwasallowedto beimposeduponan employeewhenhis
term ofemploymentwasnotfor a specifiedperiodand hehadleft thejob.^^^
An employee of Star TVwantedto resign, but hisresignationwasnotbeing
accepted.Onthecontrary,a case was filedagainsthimfor adeclaration
thathehadnorightto resign or to join a rival firm.Thecourtrefusedto
issue aninjunctionforenforcinganegativecovenant.Thecourtsaidthatthe
questionwhetherthe employeehadgainedknowledgeof sometradesecrets,
whetherhe wasimpartedspecialtrainingand was inpossessionofconfiden
tialinformationwerematterswhichcouldbedeterminedatthetrialandtill
all this wassortedout,anegativecovenantinmattersofpersonalservice
couldnotbeenforced.Freedomofcontractincludesfreedomofoccupation.
There was nothing tosuggestthat theemployerwaslikelyto suffer irrepa
rable losswithouttheinjunction.Merely because the employer could face
309. WiproLtdvBeckmanCoulterInternationalSA, (2006)131DLT 681;V.V.Sivaram v
FOSECOIndiaLtd,2005SCCOnlineKar595:(2006)1AIRKantR120,theemployee
hadaccess toconfidentialinformationpertainingtoseveralproductsincludingthepat
ent"Turbostop".Heleftundervoluntaryretirementscheme.Injunctionrestraininghim
frommanufacturingandmarketingaproductsimilarto"Turbostop"was held to be not
violatingS. 27.
310.SuperintendenceCoofIndiavKrishanMurgai,(1981) 2 SCC246:AIR1980SC 1717.
SanmarSpecialityChemicalsLtdvBiswajitRoy, AIR2007Mad237, clauseagainstdisclo
sureofconfidentialinformationaftercessationofemploymentandtakinganycompetitive
job,injunctionagainstemployee not issued at theinitialstage of the case forenforcingthe
clause.VPSGlobalServices(F)LtdvSupritRoy,2007SCCOnLineBom1083:(2008)3
MahLJ266,anothersimilaragreement.
311. AparallelEnglishauthorityisGeneralBillpostingCoLtdvAtkinson,1909 AC 118 (HL).
312.WeilerInternationalElectronics(F)LtdvFunitaVeluSomasundaram,(2003) 3 Bom
CR59.https://t.me/LawCollegeNotes_Stuffs

454. 314Chapter7 Legality of Object [S.28]
some inconvenience orcompetitionwas not agroundfor enforcing a nega
tive covenant. It is not in public interest to restrain healthycompetition.^"
Restraintof legalproceedings[S.28]
It is awell-knownrule ofEnglishlawthat"anagreementpurportingto
oust the jurisdiction of the courts is illegal and void on grounds of public
policy".^^''Thus, any clause in an agreement providingthatneitherparty
shall have the right to enforce the agreement by legal proceedings isvoid.^"
Anarrangementmay, however, stipulatethatthere is nointentionto con
tract,orthatit is only agentleman'sagreement.In such a case, noactionis
possibleundertheagreement.
Section28 of theIndianContractActrendersvoidtwokindsofagree
ment,namely:
(1)An agreement by which apartyisrestrictedabsolutely from enforcing
his legal rights arising under acontract,by the usual legal proceedings
in theordinarytribunals.
(2) Anagreementwhichlimits the timewithinwhichthecontractrights
may beenforced.
S. 28.Agreementsinrestraintoflegalproceedingsvoid.—^'^[Every
agreement,—
[a] by which anypartytheretoisrestrictedabsolutelyfromenforcinghis
rightsunderor inrespectof anycontract,bytheusual legalproceedings
intheordinarytribunals,orwhichlimitsthetimewithinwhichhe may
thusenforcehisrights;or
(b)whichextinguishestherightsof anypartythereto,ordischargesany
partytheretofrom any liability,underor inrespectof anycontracton
theexpiryof aspecifiedperiodso astorestrictanypartyfromenforcing
hisrights,
isvoidtothatextent.]
Exception1.—Savingofcontracttorefertoarbitrationdisputetliat
mayarise.—Thissectionshallnotrenderillegal acontract,bywhichtwoor
morepersonsagreethatanydisputewhichmay arisebetweentheminrespect
of anysubjector class ofsubjectsshall bereferredtoarbitration,andthatonly
theamountawardedinsucharbitrationshallberecoverableinrespectofthe
disputesoreferred.
Suitsbarredbysuclicontracts.—^''^Whensuch acontracthasbeenmade,
a suitmaybebroughtfor its specificperformance;andif a suit,otherthanfor such
313.StarIndia(P)LtdvLaxmirajSetharamNayak,(2003) 3 Bom CR 563: (2003) 3MahLJ726.
314.Halsbury'sLawsofEngland,Vol9, 352.
315. SeeBakervJones,(1954) 1WLR1005.
316. Rose &FrankCo vJ.R.Crompton& BrosLtd,(1923) 2 KB 261 (CA).
317.Subs,by Act 1 of1997,S. 2.
318. The second clause ofException1 to S. 28 wasrepealedby the Specific Relief Act,1877(1 of
1877),S. 2 and Sch. I. The clause is, however,printedhere initalics,becausetheContract
Act is in force incertainScheduledDistrictstowhichthe Specific Relief Act does not apply.https://t.me/LawCollegeNotes_Stuffs

455. Exceptions315
specificperformance,orfortherecoveryoftheamountsoawarded,isbroughtby
onepartytosuchcontractagainstanyothersuchparty inrespectofanysubject
which they have soagreedtorefer,the existenceof suchcontractshall be a bar to
thesuit.
Exception2.—Savingof contract to refer questionsthatliavealready
arisen.—Norshallthissectionrenderillegalanycontractinwriting,bywhich
two or morepersonsagreeto refer toarbitrationanyquestionbetweenthem
whichhas alreadyarisen,or affectanyprovisionof any lawinforceforthe time
beingastoreferencestoarbitration.
^^'[Exception3.—Savingof aguaranteeagreementof abankor a finan
cialinstitution.—Thissectionshallnotrenderillegalacontractinwritingby
whichanybankorfinancialinstitutionstipulateaterminaguaranteeorany
agreementmakingaprovisionfor guarantee for extinguishment of the rights
or discharge of any party thereto from anyliabilityunder or in respect of such
guaranteeoragreementontheexpiry of aspecifiedperiodwhich isnotless
than one yearfrom the date ofoccurringornon-occurringof aspecifiedevent
forextinguishmentordischargeofsuch partyfromthe saidliability.
Explanation.—H)In Exception 3,theexpression "bank" means —
(a)a"bankingcompany"as defined inclause(c)ofSection5 oftheBanking
RegulationAct, 1949 (10 of 1949);
(b)"acorrespondingnew bank" asdefinedinclause{da)ofSection5 ofthe
BankingRegulationAct, 1949 (10of 1949);
(c)"StateBankofIndia"constitutedunderSection3oftheStateBankof
IndiaAct, 1955 (23of1955);
id)"asubsidiarybank" asdefinedin clause(/f)ofSection2 oftheStateBank
of India (Subsidiary Banks)Act, 1959 (38 of 1959)
(e)"aRegionalRuralBank"established under Section 3oftheRegionalRural
BankAct,1976(21of1976);
if)"aCo-operativeBank"asdefinedinclause{cci)ofSection5oftheBanking
RegulationAct,1949(10of1949);
ig)"amulti-Stateco-operativebank"asdefinedinclause(cc//7o)ofSection5
oftheBankingRegulationAct,1949(10of 1949);and
(//)In Exception 3,theexpression "afinancialinstitution" means any public
financialinstitution within the meaning of Section 4-A oftheCompanies Act,
1956(1of1956).]
Restrictionon legalproceedings
Explaining the section,GarthCJ of theCalcuttaHighCourtobserved
inKoeglervCoringaOil CoLtd:^^""This section applies to agreements
whichvi^hollyorpartiallyprohibit the parties from having recourse to a
court oflavi^.If, for instance, acontractwere tocontaina stipulationthatno
319 . Ins. by Act 4 of 2013, S.17andSch;(w.e.f. 18-1-2013).
320.ILR(1876) 1Cal466,468-69.https://t.me/LawCollegeNotes_Stuffs

456. 316Chapter7 Legality of Object [S.28]
action should be brought upon it, that stipulationwould...be void, because
it wouldrestrictbothpartiesfrom enforcing their rightsunderthecontract
in theordinarylegaltribunals."
The right to appeal does not comewithinthepurviewof the section. A
partyto a suit may agree not to appealagainstthe decision.
Compromiseoutsidecourt
The claim in question was under the Recovery of Debts due to Banks
andFinancialInstitutionsAct, 1993. Thepartiesenteredinto acompromise
outside thecourtregardingwithdrawalof proceedings. Thecourtsaidthat
it was not hit by Sections 28, 57 and 59 of theContractAct because no
restraintwas being placeduponinstitutionofproceedings.
Limitationoftime
Anotherkindofagreementrenderedvoid by thesectioniswherean
attemptis made bythepartiestorestrictthe timewithinwhichanaction
may bebroughtso as to make itshorterthanthatprescribedby the law of
limitation.Accordingto theLimitationAct,1963,forexample,anaction
forbreachofcontractmay bebroughtwithinthreeyears from thedate
of breach. If a clause in anagreementprovidesthatnoactionshould be
broughtafter two years, the clause is void. Thus, a clause in a policy of life
insurancedeclaringthat"nosuit torecoverunderthispolicyof lifeinsur
anceshallbebroughtafteroneyearfromthedeathof theassured"was
heldvoid.^^^Similarly, clauses in thestandardfireinsurancepolicyofthe
insurercurtailinglimitation to 12 months of the occurrence of the event or
3monthsof therejectionof the claim by theinsurerwerenotpermittedto
beinvokedtobartheclaimfiledwithinthreeyears.However,in asimilar
case before theBombayHighCourt,a clauseprovidingthat"nosuitshall
bebroughtagainstthecompanyinconnectionwiththesaidpolicylater
thanoneyearafterthetimewhenthecauseofactionaccrueswasheldvalid,
thecourtsayingthattheeffectoftheagreementwasnottolimitthetimebut
toprovidefor thesurrenderofrightsif noactionwasbroughtwithinthat
321. SeeMunshiAmirAlivInderjitKoer, (1871) 9 Ben LR460,a decision of the PrivyCouncil
before theContractAct was passed. It has been followed by theAllahabadHighCourtin
Ashburner&CovAnantDas,ILR(1876) 1 All 267.
322.SashiAgarwalvDebtrRecoveryAppellateTribunal,AIR 2010 All 24: (2009) 76ALR
372.
323. Ma Ywest v ChinMutualLifeInsuranceCoLtd,91IC622,but cf.HirabhaiNarotamdasv
ManufacturersLifeInsuraticeCo, 16 IC1001:(1912) 14 Bom LR 791.
324. AscontemplatedbyArt.44(6)of theLimitationAct,1963.SeeHarsudCoopMktgSociety
LtdVUnitedIndiaFireandGeneralInsuranceCo'Ltd,AIR1992Bom341.NewIndia
AssuranceCo vFoodCorporationofIndia,1996SCCOnLineMad38: (1996) 1 CTC 375,
noticeissuedwithinsixmonthsasrequired,filing of suitwithinthreeyearsthereafter,held,
withintime.https://t.me/LawCollegeNotes_Stuffs

457. [S. 28] Exceptions317
time.^"The case has beenadverselycriticised.Butthatview seemsto have
beenaffirmedbytheSupremeCourt inVulcanInsurance Co Ltd v Maharaj
Singh,^^^where the courtobservedthat "it has beenrepeatedlyheld that
sucha clauseis not hit by Section28 and is vahd". This was furtheraffirmed
inNationalInsuranceCoLtdv Sujir GaneshNayak&Co?^^The clause in
questionprovidedthat "in no casewhatsoevershall thecompanybeliable
for anylossor damage after the expiration of 12 months from the happen
ing oflossor damage unless the claim is the subject of pending action or
arbitration".Theclaimantnotified theinsurerregardingthe strike which
caused theloss,but did not commence proceedings within the stipulated
time. Thecourtreversed the decision of the KeralaHighCourtand held
thatthe clause was valid and its operation had ended the plaintiff'sclaim.^^'
A suit wasfiledforrecoveryof the amount due under an insurancepolicy.
Aclausein thepolicyprovidedthatsuitsmust befiledwithin 12 months
fromthedateofdisclaimer.Theclausewasheldto benotvalid.Asuitfiled
within three years from that date was heldto bemaintainable.""
Effectofamendment
Theamendmentof the section in1997hasbroughtaboutthis changethat
all clauses which reduced the normal period of limitation would be void to
that extent. Thus, theartificialdistinctionbetweenaclausecutting short
theperiodoflimitationandaclauseprovidingforextinctionofrightsafter
aspecifiedperiod has beeneliminated.^^^
325. Hirabhai Narotamdas v Manufacturers Life Insurance Co, 16IC1001:(1912)14 Bom
LR791.
326.SeeBarodaSpg&WvgCoLtd vSatyanarayanMarine&FireInsuranceCoLtd,AIR1914
Bom25(2):ILR(1914)38Bora344.SeealsoNewAsiaticInsuranceCov BiharStateCoop
Bank,AIR1966Pat69,aclauserequiringnoticeoflosswithintendayswasupheld.
327.(1976)1see943:AIR1976SC287;BarodaSpg&WvgCoLtd vSatyanarayanMarine&
Fire Insurance Co Ltd, AIR 1914 Bom 25(2):ILR(1914)38 Bom 344.
328.(1997)4SCC366:AIR1997SC2049:(1997)89CompGas131.SeealsoFoodCorporation
ofIndiavHewIndiaAssuranceCoLtd,(1994)3SCC324,wherethenatureoftherestric
tion in S. 28 wasconsideredin thecontextof therestrictiveclauses. The SC decision was
relieduponinRelianceIndustriesLtdv P&OContainersLtd,2006AIHC793:AIR2006
Bom65,suitagainstcarrierin atransactionforimportofgoods,liraitationclauseofHague
Ruleswasmadeapplicableprovidingoneyearperiodoflimitation.Port ofshipmentwas
outsideIndia,hencetheIndianCarriageofGoodsbySeaAct,1925wasnotapplicable.The
clausevalid.
329.TheKeraladecisionisreportedinSujirGaneshNayak&CovNationalInsuranceCoLtd,
AIR1996Ker49.
330.StateofA.P.vUnitedIndiaInsuranceCoLtd,(1998)2AnLT74.MuniLaivOrientalFire
& General Insurance Co Ltd, (1996) 1 SCC 90: AIR 1996 SC 642, prohibiting prescription
of shorter limitation than prescribed by the Limitation Act, 1963.
331. ContinentalConstructionLtd v FoodCorporationof India, AIR 2003 Del 32, a contract
made before the amendment under which the work was also executed before the amendment,
wastobegovernedbytheunamendedsectionandwasnottobedeclaredvoidunderthenew
provision.RajeshKumarMiddavStateofPunjab,(2004)2CalLT362,theconditionof
limitation in the arbitrationagreementreducedthe period of limitationfrom three years to
six months. Thearbitrator'srefusal to entertain the claim after expiry of six months held to
bewrongful.Theconditionwascontrarytolawand,therefore,noteffective.https://t.me/LawCollegeNotes_Stuffs

458. 318Chapter7 Legality ofObject [S. 28]
Forfeitureandsurrenderofrights
Cases of this sort have been distinguished from those which provide for
surrender or forfeiture of rights if no action is brought within the stipulated
time. A clause in a policy of lifeinsuranceprovided:
If a claim be made and rejectedandanactionor suit benotcom
mencedwithinthree months after suchrejection...all benefitsunderthe
policy shall be forfeited.
Theclausewas held valid.Similarly,aclausethat the companyshall not
be liable if no suit werebroughtwithin12 months after theoccurrenceof
theloss;^^^and aclausein a bill of lading providing that "in any event the
carrier and the ship shall bedischargedfrom all liability in respect of loss
ordamageunlessa suit is broughtwithin one year after thedeliveryof the
goods,havebeen upheld. The reason why clauses of this kind have been
allowed is that the extent of loss or damage can be measured with a certain
amount of accuracy when the matters are fresh. "Lapse of time in such cases
may result in all kinds of claims which are not capable of determination
with any amount ofexactitudeand whenmemoriesof men maybecome
ratherhazy."^^^
TheJammuandKashmirHigh Courtextendedthesameprincipleto
Governmentcontracts.Inacasebeforeit:^^^
A clause in a Governmentcontractprovidedthatthe President of India
shall be discharged from all liability under thecontractunless an arbi
tration or a suit iscommencedwithin six months from the expiration of
theperiod.
Theclausewas held to bevalid.Explaining the distinction between
extinctionof rights andlimitationof time, thecourtsaid:^^^"Thedistinc
tionmay be a fine onebutit isnonethelessafundamentaldistinction.The
332.GirdharilalHanumanbuxvEagleStar &BritishDominionsInsuranceCo Ltd,(1923)27
CWN955;DDAvBhardwajBros,2014SCCOnLineDel1581:AIR2014Del147,anagree
mentprovidingforforfeitureorwaiverof rightif no actioniscommencedwithinthe period
stipulatedin theagreementhas been held to be not void.
333. A. N. GhosevRelianceInsurance Co,ILR11 Rang 475;Ruby GeneralInsurance Co Ltd v
BharatBankLtd,AIR1950EP352;PearlInsuranceCovAtmaRam,AIR1960Punj236.
334.HajiShakoor Gany v H. E.Hinde& Co Ltd, AIR 1932 Bom 330.
335.KapurJ in Ruby General Insurance Co Ltd v Bharat Bank Ltd, AIR 1950 EP 352.
336. Prithvi Nath Malta v Union of India, AIR 1962J&cK15.
337.Followed,KasimAliv New India Insurance Co, AIR 1968J&K3. See also Governor
GeneralinCouncilvFirmBadriDas GauriDutt,AIR1951All702.Aclausein bankguar
anteethat actionshouldbefiledwithinsixmonthsofexpiryofthe guarantee,held,it wasnot
availableafter theexpiryof sixmonths.KeralaElectricandAlliedEnggCo Ltd v Canara
Bank,AIR 1980 Ker151,followingState of Maharashtra v M.N.Kaul,AIR 1967 SC1634.
Thearbitrationclausein anagreementprovidedthat alldisputesinconnectionwith the
contract shall be submitted to arbitration not later than 28daysafter the architect's final
certificate.Held,that therighttoreferceasedafter28days.ButinRajasthanHandicrafts
Emporiumv PanAmericanWorldAirways,AIR1984Del396, aclausein anairwaybill
that"no action shall becommended"aftercertaintime was held to be void. It was not a mere
forfeitureclause.https://t.me/LawCollegeNotes_Stuffs

459. [S. 28] Exceptions319
arrangementin the one casetakesit forgrantedthattherightas well as the
liabihtyexists, but the time forenforcingit issoughtto behmited.Whilein
theothercase, thepartiesagreethattherightas well asliabilityshallstand
extinguishedif a specified eventoccurs."
"WhatSection28forbids,isnotextinguishmentof therightsor lia
bilities of apartyto acontracton thehappeningof a specified event,but
thelimitingof the timewithinwhichapartymayenforcehisrights.It
is obviousthatapartywill have no right to enforce, if the rights have
alreadybeenextinguishedunderthecontract.In such a case, there can
be noquestionof the time for theenforcementof the rights beinglimited.
Whathappensisthatthe right itself ceases to exist."
Wherethe need forreductionof time to sue hasalreadybeentakencare
of by astatute,therecannotbefurtherreduction. Under Section 10 of the
CarriersAct,1865notice of loss ordamagemust be givenwithinsixmonths,
otherwise the right to sue is lost. Acontractprovidedthatsuch notice must
be givenwithin30 days of the arrival of the goods. This beingcontraryto
statutoryprovisions was held to bevoid.^^^
"Absolutely":partialrestriction as to jurisdiction
Section 28 will come into play when the restriction imposed upon the
right to sue is "absolute" in the sense that the parties are wholly precluded
from pursuing their legalremediesin the ordinarytribunals.Apartial
restrictionwill bevalid.^'*"Anillustrationofpartialrestrictionis the deci
sion of the Calcutta High Court inContinentalDrug & Co Ltd vChemoids
&IndustriesLtd?'^^
The contract in questionfellunder the concurrent jurisdictionof both
theBombayandAliporecourts, but the contractprovidedthat "any dis
putearisingbetweenthe parties,settlementof thesamelegallyor other
wise, will bedecidedin Bombay.
Holding theclauseto be valid and binding,LahiriJ said: "If there
are twocourtswhich are equallycompetentto try the suit, an agreement
338.M.G.Bros Lorry Service v Prasad Textiles,(1983)1 SCC 61: AIR 1984 SC 15.
339.EmmsonsInternationalLtdvMetalDistributors(UK),2005AIHC1190 (Del): (2005) 116
DLT 559, a unilateral covenant depriving the party of the right to sue under the contract
eitherthroughordinarytribunalsor throughalternativedisputeresolutionmechanism,void.
TapashMajumdarv Pranab Dasgupta,AIR2006 Cal 55, the rule of aclubauthorisedthe
executivecommittee to take action against any member who approached the court to chal
lenge the election process, held void.
340. RaigarhJute andTextileMillsLtd vNeiuHaryana Transport Co, 1994MPLJ626, parties
bymutualagreementchoosingone out ofseveralcourtshavingjurisdictionto try the suit,
is notagainstpublicpolicy.DilipKumarKayv TataFinanceLtd, AIR 2002 Ori 29, hire
purchaseagreementspecifyingplaceofsuitwhichwasvalid.Suitat anyotherplacewasheld
tobenotmaintainable.
341. AIR 1955 Cal 161.Wheretheselectionof theforumis valid,thatforumcannotbeexcluded
from entertaining the suit onlybecausethe amountinvolvedis paltry six hundred rupees.
EastIndiaHatCo v Prakash Roadlines (P) Ltd, (1986) 10 DRJ 133: (1986) 2 PLR 39 (Del).https://t.me/LawCollegeNotes_Stuffs

460. 320Chapter7LegalityofObject [S. 28]
betweenthepartiesthatthe suitshouldbeinstitutedin one ofthosetwo
courtscannotbe said to be an absoluterestrictionon therightoftaking
legalproceedings.It has beenestablishedby a long line ofjudicialdecisions
thatsuch anagreementdoes notcontravenetheprovisionsofSection28 if
thechosencourthasjurisdictiontotrythesuitunderordinarylaw."^''^
This has beenaffirmedby the SupremeCourtinHakamSingh vGammon
{India) The courtlaiddown:^"'''"It isnotopen to thepartiesby
342.ThelearnedJudge cited:AcharatlalKesavlalMehta& Co vVijaram& Co,AIR1925
Mad1145;KondepuElukkoruRaghavayyavVasudevayya,AIR1944Mad47;Tilakram
ChaudharivKodumalJethanand,AIR1925Bom 175; A.Milton& Co vOjhaAutomobile
EnggCo, AIR 1931Cal279. Seefurthercases cited at p. 418 ofPonnuswamiandPuri,Cases
ANDMaterialsonContract.AcontractprovidingforjurisdictionofDhanbadcourts
onlyhas been held to be binding. The excludedcourtcannotconsider thebalanceof con
venience.GanpatraiAgarwallvFertiliserCorpn,AIR 1984 Cal 35. UniquePharmaceutical
Laboratoriesv StalcoFreightInternationalCo, (2005) 6 Bom CR 829, goodsbookedfrom
Bombayto aportin UAEcontractprovidedforjurisdictionof UAEcourts.Choiceof the
parties prevailed because the courts there hadconcurrentjurisdiction with Bombay courts
Dallah.
343.(1971)1see286:AIR1971SC740:(1971)3SCR313.
344.Ibid.A consignment note signed neither by the consignor nor consignee and containing a
clause on the back excluding the jurisdiction of all the courts except one was held to be
not binding. There was nopropernotification.RoadTransportCorpnyKirloskarBros
Ltd, AIR 1981 Bom 299. A lottery ticketcontainingat the reverse in smallprintconditions
about jurisdiction, held not binding as there was no proper notice. Govt ofRajasthanv
VenkataramanaSeshiyer,AIR 1984 AP 5. However, parties can opt for any available juris
diction and exclude others. GlobeTransportCorpn v Triveni Engg Works, (1983) 4 SCC
707; All BengalTransportAgency v Hare Krishna Banik, AIR 1985 Gau 7, acontractof car
riage allowing the sender only onejurisdictionout of several available under CPC,heldvalid.
KumudAgarwallav Fertilizer Corpn of India Ltd, AIR 1985 Cal 89, contract provided
for jurisdiction of Gorakhpur courts. Held, action could lie only at Gorakhpur. The court
may however relieve a party from clauses where the court finds that jurisdiction permitted
by the agreement is so inconvenient that it would be oppressive, inequitable and unfair for
the party.PattnaikIndustries (P) Ltd v Kalinga Iron Works, AIR 1984 Ori 182. Parties'
choice of forum under anarbitrationagreementdoes not violate S. 28.IndianRareEarths
LtdvUniqueBuildersLtd,AIR1987Ori 30wherea clausethatthecourtsofMaharashtra
only would have jurisdiction has been held to be valid and not vague or uncertain. See also
BiswanathChowdhuryv U.P.ForestCorpn,AIR 1986Cal334, a clausethatsuitswould
be filed at Lucknow was held to be binding and an action allowed atCalcuttaon balance of
convenience was revoked.EconomicTransportOrganisationv UnitedIndiaInsuranceCo
Ltd, 1986 KLT220: (1986) 2 TAC 25, mere delivery of a printed document does not consti
tute acontractso as to exclude jurisdiction. Shriram City Union FinanceCorpnLtdv Rama
Mishra,(2002)9 SCC 613:AIR 2002 SC2402, it is open to parties to choose any one of the
two competent courts to decide their dispute. It is not opentoany of thepartiesto choose
a different jurisdiction afterwards.HanilEra Textiles (P) Ltd v Puromatic Filters (P) Ltd,
(2004) 4see671: AIR 2004 SC 2432, apartof the cause of action arose at Bombay and a
part at Delhi, clausein the agreementprovided forproceedingsto be taken atBombay,held
not opposed to publicpolicy.Order was placed atBombayand also accepted there and part
payment also made there. Also to the sameeffect.New MogaTransportCo v UnitedIndia
InsuranceCoLtd,(2004)4 SCC 677;KotakMahindraFinanceLtdv T.ThomasEducation
Trust, (2003) 5 BomCR 579, no part of the cause of action had arisen at Bombay,a provision
in the contract that it was subject to Bombay jurisdiction was held to be not valid, the fact
that the plaintiffresidedor carried onbusinessthere, did not havethe effectofconferring
jurisdiction on the Bombaycourts. Nailesh H. Doshi v O.P. Pharma, (2003)1ICC152(AP),
jurisdictioncannotbe conferred on acourtby agreement which does not otherwise have it.
SwasticGases (P) Ltd vIndianOil Corpn Ltd, (2013) 9 SCC 32: (2013) 4 SCC Civ 157,https://t.me/LawCollegeNotes_Stuffs

461. [S.28] Exceptions 321
agreementtoconferjurisdictionon a court, whichitdoesnotpossessunder
theCivilProcedureCode.^'*^Butwheretwocourtsormorehaveunderthe
CodeofCivilProcedurejurisdictionto try a suit, anagreementbetweenthe
partiesthat thedisputebetweenthemshall be tried in one ofsuchcourts
is not contrary to publicpolicy.Such an agreement does not contravene
Section28oftheContractAct."^'"'
Generally,threejurisdictionsareavailable:theplaceof themakingof
a contract, that of its performance and thedefendant'splace ofbusiness
orresidence.If, out of these threejurisdictions,at least one is left open,
competentunder theCivilProcedureCodeit will notoffendSection28,
providedthat the jurisdiction which is left open is aconvenientone, i.e.
availableatreasonableexpenseand notinaccessible.^''^A clause of an
varioustypesofexclusionclausesand theirconsiderationsurveyedbytheSupremeCourt in
thejudgmentin thiscase.R.K.Maheshwariv.NagarjunConstructionCo Ltd, AIR 2007
NOC 1119(MP),suit forrecoveryof dues,wforkorder wasdeliveredat a placeat which the
paymentwasalsosettledto bemade.Thedefendantwasnotabletoprovethat thecontract
wasmadeatsomeotherplace.The court said that parties cannotconferjurisdictionby
agreementona courtinwhichthereisnojurisdiction.Itwaswrongforthetrialjudgetohold
that the court at the placeofdeliveryof order and paymenthad nojurisdiction.
345.RelieduponinPatelRoadwaysLtd v PrasadTradingCo,(1991)4SCC270:AIR1992SC
1514 so as to holdthatif thecarrierhas asubordinateoffice at the place where the goods
weredeliveredfortransport and thecauseofactionalsoarosetherebecausethegoodswere
destroyedbyfireat thatplace,anactionwouldlieonlythereandnotat thecompany'shead
officeasprovidedin thecontractbecausethecourtstherewouldhavehad nojurisdiction.
RanjanaNagpalv DeviRam,AIR2002HP 166,theagreementcannotvestjurisdictionin
a court which otherwise doesnot haveit. The agreementrelated toimmovableproperty. The
suit could be filed before the court where the property was situate and nowhere else, what
evermay be the agreement between the parties.
346.Theprincipleenunciatedinthiscasecanalsobeseenatworkin thefollowingcases:L.T.
SocietavLakshminarayanan,AIR1959Cal669,abillofladingprovidedthat allrequests
forcompensationto besubmittedattheplaceofdischargeandindicatedtwootherplacesfor
claims,heldvalid;M.B.T.CoMadrasv A.N. Rao,(1968)1 AnWR424,forwardingnote
providingforonejurisdiction;PatelBrosvVadilalKashidasLtd,AIR1959MadT11-,the
printedtermsas toBombayjurisdictionwereheldto benotbindingbecausepropernotice
ofthetermswasnotgivento theotherparty;C^SatyanarayanavKanumarlapudiLakshmi
Narsimham,AIR 1968AP 330,wherealso the printingdid notbecomea part of the con
tract;KanpurSugarSupplyCovHarsukhLai,AIR1971All502,mereprintingonbillsof
exchangeandlettersthatthetransactionswouldbe"subjecttoRajkotCourtsonly"didnot
havetheeffectofanagreementonthepoint;GrandhiPitchaiahVenkatraju&CovPalukuri
Jagannadham&Co,AIR1975AP32;SurajmallShiwbhagawanvKalingaIronWorks,AIR
1979 Ori 126, astatementonpurchaseorder as tojurisdiction,notbinding;Jagannath v
Nanakkal,1972MPLJ981,printedheadingonsaleofgoodsdocumentsas tojurisdiction,
noagreement;PrakashRoadLines(P)LtdvHMTBearingLtd,AIR1999AP106,contract
ofcarriage,agreementprovidingforjurisdictionat aplacewherenojurisdictionotherwise
existed,heldnotbinding.
347.E.LD.Parry(India)Ltd vSavaniTransport(P)Ltd,AIR1980AP30;GlobeTransport
CorpnVTriveniEnggWorks,(1983)4SCC707;A.B.C.Laminart(P)LtdvA.P.Agencies,
(1989)2SCC163:AIR1989SC1239;AllBengalTransportAgencyvHareKrishnaBanik,
AIR1985Gau7,actionallowedatNewGong,theplaceofbusiness,townMatta,which
washighlyinconvenientbeingveryremote,wastheonlyjurisdictionallowedbythecontract;
PrakashRoadlines(P) Ltd v P.MulhuswamyGounder & Co, AIR 1985 Mad 84, action
allowedatMadrasthoughthecontractprovidedforBangaloreasexclusivejurisdiction.
Burn Standard Co Ltd v ONGC Ltd, AIR 2000 Cal 283, a clausein a bank guarantee pro
videdforexclusivejurisdictionofthecourtsattheplacewherethecontractandtheguaranteehttps://t.me/LawCollegeNotes_Stuffs

462. 322 Chapter 7 Legality of Object [S.28]
agreementbetweenthepartiesprovidedthatthe venue ofarbitrationwas to
be Hyderabad and courts there would haveexclusivejurisdiction to adjudi
cate the dispute between the parties. The court said that partiescannotlaw
fully confer jurisdiction on a court which it does not possess under the Civil
ProcedureCode.Theclausewasvoid.Nocauseof action orevena part of
thecauseof action had arisen at Gujarat andthereforeonly the competent
court therehadjurisdiction.^"*^Abilateralagreementunderwhichan option
is provided for choosing the jurisdiction of aparticularcountry was held to
be not opposed to publicpolicy.^'*'
It is necessary that serious terms of this nature must bespecifically
brought to the notice of the parties whose rights are sought to be cur
tailed.^^"Somethingmore must be done thanmerelyprinting the terms on
consignmentdocuments.Thelawrequiresthatbeforemaking a person
boundbyanysuchterm(aclausein aconsignmentnoteastoexclusivejuris
diction)it must beprovedthat thesamewasbroughtto theknowledgeof
the consignor in such a waythatit should seem to be the result of amutual
assent.^^^Where aconsignmentway billcontainedthewords"subjectto
Calcutta jurisdiction", thecourtignored it since it was not one to which the
plaintiffassented.Wheretheoriginalcontractingparty,i.e.theconsignor
wereexecuted.Anapplicationfor stayofenforcementcouldnot befiledat any otherplace.
RajaramMaizeProductsvM.P.ElectricityBoard,AIR1999MP44, the contractprovided
forsettlementofdisputesonlyatplace"J"whichwasone.ofthepossiblejurisdictions.Asuit
filedat another placewas heldto be not proper though the causeof action had arisen at that
place.A.V.M.SalesCorpnvAnuradhaChemicals(P)Ltd,(2012)2SCC315;(2012)1SCC
(Civ)809,theagreementprovidedforjurisdictionat CalcuttaCourtsexcludingVijayawada
Courts, butevenso aVijayawadaCourt entertainedthe suit, theSupremeCourt directed it
to betransferredtoCalcuttaCourt.
348.DIC-NCC(JV)—AJointVentureofDaelitnIndustrial CovM. Sahai&Associates(P)Ltd,
AIR2010NOC843 (Guj).
349. Nirmala Balagopal v Venkatesulu Balagopal, AIR 2004 Mad 255.
350. Road Transport Corpn v Kirloskar Bros Ltd, AIR 1981 Bora 299.
351.Oriental Fire &GeneralInsuranceCo Ltd v New Suraj TransportCo (?) Ltd, AIR 1985
All136.Thuswheretheconsignmentnotewasnotevensignedbythebookingparty or his
agent,theconsignorwasnot boundbya printedtermabouttheexclusivejurisdiction.South
EasternRoadwaysvUnitedIndiaInsuranceCoLtd,AIR1991Ker41.Provisionsrelating
toexclusionof the jurisdiction of courts are very strictly construed. Theexclusionis not
to bereadilyinferredand,therefore,musteitherbeexplicitlyexpressedorclearlyimplied.
Bismillah v Janeshwar Pandit, (1990) 1 SCC 207, 210: AIR 1990 SC 540. In the matters of
internationaltrade and thechoiceofforumseeBritishIndiaSteamNavigationCo Ltd v
ShanmughavilasCashewIndustries,(1990) 3 SCC 481.RhodiaLtdv NeonLaboratories
Ltd, AIR2002Bom502 at p. 513,the partiesagreedthat theirdisputeswouldberesolved
throughEnglishcourts.Theywereboundbytheiragreement.Theagreementwasexecuted
in acountrytowhichthepartiesdid notbelong.Theirchoiceof the lawof a thirdcountry
was held to be binding on them. Thecourtconsidered its own earlier decision inNTPCv
SingerCo,(1992)3SCC551:AIR1993SC998,theagreementprovidedthat theEnglish
lawwastoapplytotheinterpretationoftheiragreement.HariShankerJainvSoniaGandhi,
(2001)8see233:AIR2001SC3689,theforeignlawwouldhaveto bepleadedandproved
like anyotherfact.
352. RoadTransportOrganisationof India v BarunaiPowerloomWeavers'CoopSocietyLtd
(1994)84CutLT174.
353. Grandhi PitchaiahVenkatraju& Co v PalukuriJagannadham & Co, AIR 1975 AP 32. Tohttps://t.me/LawCollegeNotes_Stuffs

463. [S. 28] Exceptions323
has been adequatelyinformed,it will be a question of fact in each case
whether the parties subsequently acquiring his rights will also be bound
by the notified terms. Thecarrierwouldhave noopportunityofknowing
abouthim and much lessofgiving him any notice. A Bench of theAndhra
PradeshHighCourt,therefore,came to theconclusionthatthe consignee to
whom the booking documents areindorsedto enable him toobtaindeliv
ery at the destination would also be bound by the terms. If the original
party is not bound by those terms, neither would be those who acquire their
rights under thedocument.^^^Followingthese principles in another case, the
AndhraPradesh HighCourtcame to the conclusionthata term as to the
place of suit was not binding on the insurer who had paid out the consignee
and who was then suing thecarrierfor the negligent loss of the goods unless
it could be proved that the insurer too was made or was otherwise aware of
theterms.
An agreement made subject to the jurisdiction of a statedcourtwould not
have the effect of ousting thejurisdictionofothercourts.Anouster clause
in acontractcan oust theterritorialjurisdictiononly of a civilcourtbut not
thatof a High Court. The factthatthecontractclause does not use the
word "alone", "only" or"exclusively"does not ipso factowarrantthatthere
was no intention to provide forexclusivejurisdiction of thecourtspecified
intheclause.Thecourtmustconsiderallthefactsandcircumstanceswhile
construingtheclause.^^'
Wherethe termsandconditionsattachedto thequotationcontainedan
arbitrationclause provided that: "any order placed against thisquotation
shallbedeemedto be acontractmadeinCalcuttaandanydisputearising
therefrom shall be settled by anarbitratorto be jointlyappointedby us", it
was heldthatit merely fixed the situs of thecontractatCalcuttaand it did
not mean to confer anexclusivejurisdiction on the Court at Calcutta, and
when a part of the cause of action had arisen atSalem,the Court there had
also jurisdictionto entertain the suit under Section20(c)ofthe Code ofCivil
Procedure.
TheSupremeCourt inAngileInsulations v Davy Ashmore IndiaLtd,^''^
heldasunder:
the same effect is Road Transport Corpn v Kirloskar Bros Ltd, AIR 1981 Bom 299. The
court said that it is for the carrier to plead and prove that the print on the receiptwas brought
to the notice of the consignor and that he had agreed to and accepted the same.
354.V.RajaRaovA.P.T.Co, (1969) 2 APLJ 151.
355. GovtofRajasthanvVenkataramanaSeshiyer,AIR 1984 AP5, a term as tojurisdictionin a
lottery ticket, held not binding on a buyer of the ticket.
356. East India Transport Agency vNationalInsurance Co Ltd, AIR 1991 AP 53.
357.CheemaEnterprisesvMayuEnterprises,AIR 1998 Gau 86.
358. P.R. Transport Agencyv Union of India, (2005)All LJ 3568: AIR 2006 All 23(DB).
359. PacificRefractories Ltd v SteinHeurtey India Projects (P)Ltd, (2006)3 Mah LJ438: (2006)
4BomCR311.
360.SalemChemicalIndustriesvBird& Co (P)Ltd,AIR1979Mad16.
361.(1995)4see153: AIR 1995 SC 1766; Maharashtra State Road Development Corpn v
Larsen & Toubro Ltd, (2004) 5 Bom CR 186, jurisdiction otherwise available under thehttps://t.me/LawCollegeNotes_Stuffs

464. 324Chapter7LegalityofObject [S. 28]
"So,normallythatCourtalsowouldhavejurisdictionwherethecause
ofaction,wholly or inpart,arises. But it will be subject to thetermsof
thecontractbetweentheparties.In thiscase.Clause (21)readthus:
'Thisworkorder is issued subject to thejurisdictionof theHighCourt
situatedinBangalorein the State ofKarnataka.Any legalproceeding
will,therefore,fallwithinthejurisdictionof the aboveCourtonly.'
Areadingofthisclausewouldclearlyindicatethattheworkorder
issued by theAppellantwill be subject to thejurisdictionof theHigh
Courtsituatedin Bangalore in the State ofKarnataka.Any legal pro
ceeding will, therefore, beinstitutedin aCourtofcompetentjurisdiction
withinthejurisdictionofHighCourtofBangaloreonly."
Anousterclausebecomeseffectivewhenacontractisformed.Itremains
ineffective when thecontractformationprocess ends prematurely. The
tender which was submitted by thecontractoralong with earnest deposit
permittedjurisdictionofcourtsat two places and at nootherplace. But
thisparticulartender was not accepted. Nocontractcame into being. The
contractorwas free to file his case at all places availableunderthe Civil
ProcedureCode.^®^
Where thecontractprovided for jurisdiction in respect of purchase orders
at thecourtin Pune, and theplaintifffileda case there which was of compos
ite nature, because it included disputes not arising out of purchase orders,
it was heldthatthe Punecourtacquired jurisdiction to try the whole case
because of thejoinderof causes ofaction.^"
Right toapproachcourts onmattersofcompensation
A provision in a supply agreement wasthatthepurchaserwould have uni
lateral right to determine theamountof liquidated damages which would be
recoverableand that such quantification would be final and not challengable
by the supplier. Thecourtsaidthatthe provision was clearly inrestraintof
legal proceedings. It was anattemptto oust the jurisdiction of the courts
and the right of thepartyto seek judicialadjudication.^®"*
Provisionforforeignjurisdiction
Acontractstatedtobeaninternationalcommercialcontractcontaineda
clause which provided for dispute redressal mechanism througharbitration
and that the contract to be construed and governed by English law. The
courtsaidthatthe effect of the provision wasthatonly English courts would
haveexclusivejurisdiction.The Indian party was thusdeprivedof its rights
CivilProcedureCode was allowed where thejurisdictionclause in thecontractwas found to
beambiguous.
362. Orissa AgroIndustriesCorpnLtdv KCS (P) Ltd,2004AIHC1788 (Ori).
363. Bajaj Auto Ltd v Sandeep Polymers (P) Ltd, (2004) 4MahLJ 396.
364.BSNLVMotorolaIndiafPJLtd,'{2009)2SCC337:(2009)1SCC(Civ)524:AIR2009
SC357.https://t.me/LawCollegeNotes_Stuffs

465. [S. 28] Exceptions325
to proceed beforecourtsin India. Thecourtcould notpermitit because it
violatedSection28oftheContractAct.^^^Thecourtcitedoneofitsown
earlierdecisions.^®®Theprovisionin thecontractwas for reference to arbi
trationby thecompanybefore anarbitratorto beappointedby thecompany
but theawardwas to bebindingonbothparties.Thecourtsaidthatthe
effect of the clause wasthatit was aunilateralagreementandconsequently
notenforceablethroughacourtoflaw.
In the case of acontract,theavailablejurisdictionwaseitheratChennai
orHyderabad.Thecontracthadnothingto dowithDelhiandyetDelhiwas
the onlypermittedjurisdiction.Aproceedinginstitutedin LokAdalatat
Hyderabadwas held to bevalidbecauseLokAdalat,beingnotacourt,the
restrictionwasnotapplicabletoit.^®^
Exceptions
1. Referenceoffuturedisputestoarbitration
Thesectiondoesnotrendervoid acontractbywhichtwoormoreper
sons agreethatany dispute which may arise between them shall be referred
toarbitrationandthatonly theamountawardedin thearbitrationshall be
recoverable. An agreement between thepartiesto refer disputes toarbitra
tion is perfectlyvalid.^^®Thus in Koegler v Coringa Oil CoLtd:^^^
A clause in an agreementthatall disputes would be referred toarbitra
tion of twocompetentLondonbrokers and their decision would be final,
washeldvalid.
GarthCJsaid:^^°"Ifacontractwere tocontaina doublestipulationthat
any dispute between the parties should be settled byarbitration,andthat
neither party should enforcehis rights under it in a court of law, that would
be a valid stipulation so far as regards its first branch, viz.,thatall disputes
between the parties should be referred to arbitration, because that of itself
would not have the effect of ousting thejurisdictionof thecourts,but the
latter branch of the stipulation would be void because bythatthe jurisdic
tionof thecourtswouldbenaturallyexcluded."
The right to proceed against thearbitrator'saward, for example, to have
it set aside,cannotbeexcludedbycontract.
365.EmmsonsInternationalLtdvMetalDistributors(UK),2005AIHC1190(Del):(2005)116
DLT559.
366.A.V.N. TubesLtdvBhartiaCutlerHammerLtd,(1992) 46 DLT 453: (1992) 2 Arb LJ 8
(DB).
367.InterGlobeAviationLtdvN.Satchidanand,(2011) 7 SCC463:(2011) 3 KLT 295: (2011)
3 CPJ 1(SC).
368.GaindalalvRameshwarDas,171IC584;GopinathDaulatDalvivStateofMaharashtra,
(2005) 1MahLJ 438, a settlement oflabourdisputecontainedanarbitrationclause over any
dispute or as to interpretation of the settlement, neither void nor contrary to S. 28.
369.ILR(1876) 1Cal466.
370.Ibid,pp.466-68.https://t.me/LawCollegeNotes_Stuffs

466. 326Chapter7LegalityofObject [S. 28]
A provision in acontractthatthe decision of the conservator of forests
shallbefinaP^^andaclauseinacontractofinsurancethatarbitrationwould
be aconditionprecedentfor anyactionagainstthe company, have been held
to bevalid.^^^Anarbitrationclauseremainsbindingevenwherethecontract
has ended by breach orotherwise.It is,therefore,theoreticallypossiblethat
acontractmay come to an end,andthatarbitrationagreementmaynot.It
is also possiblethatthearbitrationclause may not be valid but the rest of
thecontractmay bevalid.^^^It has been held by theSupremeCourtthat
expressionsany dispute"arisingout of" or"concerning"or"inconnection
with",or"inconsequenceof" or"relatingto" thiscontract,are sufficiently
wide to compelpartiesto refer even thismattertoarbitrationwhetherthe
contractisitselfvalid.
A clauseprovidingforarbitrationanddeclaringthattheArbitrationAct
wouldnot apply was held to be void. Thearbitrationclause was held to
be valid.ThepartwhichexcludedtheapplicationoftheArbitrationAct
beingseverablefromtherestof theagreementwasalonestruckdown.^^^A
contractclauseprovidedthattherightto claimarbitrationwouldcome to
an endaftertheexpiryof 90 daysfromthedateofintimationofthefinal
bill being ready forpayment.Thematterwasraisedwithinthedesignated
time.Theawarddidnotcontainadecisiononmerits.Itwasheldthatthe
rightof thecontractorto seekarbitrationremainedalive.Theawardwas
set aside. Thearbitratorwas asked to decide the claim of thepetitioneron
merits.
WheretheheadofficeoftheinstitutionwassituateatDelhiandthecon
tractprovidedforresolutionof disputes byarbitration,aninterimrelief
obtainedby filing a suit atChennaiwas held to be an abuse of the judicial
process and, therefore,againstpublic policy. A suit could beinstitutedonly
at the place of theregisteredoffice.
2. Referenceofexistingquestionstoarbitration
Thisexceptionsavescontractsto refer toarbitrationquestionsthat
have alreadyarisen.^^®Where thepartiesagreed to refer their disputes to
371.MukteshwarSingh vStateofBihar, AIR 1979 Pat 40; SatishKumarvSurinderKumar,
AIR1970SC 833: (1969) 2 SCR244.WorldSportGroup(Mauritiifs)Ltdv MSMSatelite
(Singapore)FteLtd, (2014) 11 SCC 639: AIR 2014 SC 968, anarbitrationagreementrestrict
ing right ofpartiestoapproachcourt,notopposedto public policy, nor it is inrestraintof
legalproceedings.
372.NationalInsuranceCoLtdvCalcuttaDockLabourBoard,AIR1977Cal492.
373.JawaharLaiBarmanvUnionofIndia,AIR1962SC378;(1962) 3 SCR 769.
374.KhardahCoLtdvRaymon& Co(India)(P)Ltd,AIR1962SC 1810: (1963) 3 SCR 183.
375.RajasthanHousingBoardvEngineeringProjects (India) Ltd, AIR2000Raj200;Universal
PetrochemicalsLtdvRajasthanSEB, AIR 2001 Cal 102, anagreementcannotoverride the
applicationofstatutoryprovisions.
376.J.K.AnandvDDA,(2001)92DLT598.
377.NationalCouncilofYMCAsofIndiav C. Raja Singh Warrior, 1999AIHC885 (Mad).
378. See UnionofIndiavKishorilalGupta& Bros, AIR 1959 SC 1362: (1960) 1 SCR 493, where
acontractis valid, thearbitrationclause is binding.https://t.me/LawCollegeNotes_Stuffs

467. [S. 29] Exceptions327
arbitration,they were held to be bound to do so. The factthatthearbitrators
were situated in a foreigncountrycould not by itself be enough to nullify the
arbitrationwhen thepartiesaccepted thearrangementwiththeir eyes wide
open andwillingly.More so when the parties appointedarbitratorsand
participatedinproceedings.^^'
Uncertainagreements[S. 29]
S. 29.Agreementsvoidforuncertainty.—Agreements,themeaningof
which isnotcertain,orcapableofbeingmadecertain,are void.
Illustrations
{a)Aagreesto sell to B"ahundredtons ofoil".There isnothingwhateverto showwhat
kind of oil wasintended.Theagreementis void foruncertainty.
(b)Aagreesto sell to B onehundredtons of oil of a specifieddescription,known as an
article ofcommerce.Thereis nouncertaintyheretomaketheagreementvoid.
(c)A,who is a dealer incoconutoil only,agreesto sell to B"onehundredtons ofoil".The
natureof/A'stradeaffordsanindicationofthemeaningofthewords,andA hasentered
intoacontractforthesaleofonehundredtonsofcoconutoil.
(d)Aagreesto sell to B"allthegrain in mygranaryat Ramnagar". There is nouncertainty
heretomaketheagreementvoid.
(e)A agrees to sell to B"onethousandmaunds of rice at a price to be fixed byC".As the
price is capable of being made certain,thereis nouncertaintyhere to make the agree
mentvoid.
(f)Aagrees to sell to B"my white horse for rupees fivehundredor rupees one thousand".
There isnothingto show which ofthetwo prices was to be given. Theagreementis
void.3®°
The reason why certainty is necessary appears from the following state
mentoftheHouseofLords:^^^
It is a necessary requirement that an agreement in order to be binding
must besufficientlydefiniteto enablethe court togiveit a practical mean
ing.Its termsmust besodefinite,orcapableofbeingmadedefinitewith
out further agreementof the parties, and that promises and performances
to be rendered by eachpartyare reasonablycertain.
Aninterestingillustrationis GuthingvLynn.^^^A horsewas bought for
a certainpricecoupledwith apromisetogive£5 more if the horseproved
lucky.Theagreementwas held to be voidfor uncertainty.The court has no
machinery to determine what luck, bad or good, the horse had brought to
thebuyer.Suchcaseshavegenerallyariseninconnectionwith saleofgoods,
therebeinguncertainty as to theprice.Forexample,wheregoodsare sold,
379. AtlasExportIndustriesv Kotak & Co, (1999) 7 SCC 61.
380. See Dhanrajmal Gobindram vShamjiKalidas & Co, AIR 1961 SC 1285:(1961)3 SCR
1320, 1035. Panchanan Dhara vMonmathaNathMaity,(2006) 5 SCC 340: AIR 2006 SC
2281, thedefenceof uncertainty not allowedto be raisedfor the first time beforetheSupreme
Court.Evenotherwisethecourtfound nouncertaintyon the facts of the case.
381.ScammellvOusto,1941 AC 251,268-69per LordWright.
382.(1831)2B&Ad232.https://t.me/LawCollegeNotes_Stuffs

468. 328Chapter7LegalityofObject [S. 29]
the price being payablesubjectto"hirepurchaseterms^^^orclause"^^''or at
such price asshouldbe agreeduponbetweentheparties,theagreement
in each case was held to be void foruncertaintyas to price.Wherethe price
is left to be fixed by athirdparty,there is nouncertaintyand theagreement
will be enforceable. Similarly, if the agreement istotallysilent as to price, it
will bevalid,for, inthatcase.Section9 of the Sale ofGoodsAct,1930will
apply andreasonableprice shall bepayable.^'^
Agreementtoagreeornegotiate
Anagreementto agree in thefutureis void, forthereis nocertainty
whetherthepartieswill be able toagree.^^^In thewordsofAnson:^®®
The law is generallyanxiousto uphold thecontractwherever possible
lest it shouldincurthereproachof being the destroyer ofbargains;^^'but
thecourtmust be satisfiedthatthepartieshave in factconcludeda con
tractandnotmerelyagreedtocontractin thefuture.
The decision of theHouseof Lords inMay&ButcherLtdv laid
downaguidingprinciple.
383.ScammellvOusto,1941AC251.
384.Bishop&BaxterLtdvAnglo-EasternTrading&IndustrialCo,1944KB 728;British
Electrical&AssociatedIndustries(Cardiff) Ltd v Patley Pressing Ltd,(1953)1WLR
280.
385. May & Butcher Ltd v R, (1934) 2 KB17n.See alsoITCClassic Finance Ltd v Grapco
Mining & Co Ltd, AIR 1997Cal397, an agreement for arbitration provided for appoint
ment ofarbitratorby an appointing authority but the identity of such authority was not
indicatednor was it capable of being made out,agreementvoid.
386. M.S.Madhusoodhananv KeralaKaumudiP Ltd, (2004) 9 SCC 204: AIR2004SC 909,
transfer of shares,considerationleft to be determined at a later date, transfer held not void
for uncertainty. S. 9 of the Saleof Goods Act, 1930 allowssuch transfers.JharnaMajumdar
VSuprobhat Bhowmick, (2002) 4ICC959 (Cal), uncertain tenancy terms, contract must be
specific,the court cannot undertake to supply defects or remove ambiguities.Claude-Lila
ParulekarVSakalPapers (P)Ltd,(2005)11SCC73:(2005)124 CompCas 685,acceptance
of proposal forsaleof goods without payment or agreement as to price, which was to be
determined by a third party valuer, valid agreement, the argument that the buyer could hold
the seller to ransom was not tenable because not the buyer but a third party had to fix the
price and quite naturally the price had to be reasonable and not exploitative.
387. PunitBeriwalav SuvaSanyal,AIR 1998 Cal 44, a sum ofmoneypaid inadvancefor pur
chasingproperty on termsto befinalised.No suchfinalisationhavingtaken placefor bring
ing about a registered sale-deed, the court ordered refund of the earnestmoney.Leisure
Complex VMalaysia Credit Finance Berhad,(1994)1 Current LJ 185(Malaysia),a rec
ommendation to the board of directors that an oral proposal should be accepted, did not
amounttoacceptance.
388. LawofContract(23rdEdn by Guest, 1972)25. See,forexample.Unionof India v Philips
Construction,(1980) 1 KLT 42 (Case No. 78), where the agreement was for theconstruction
of a railwayline and the contractor was notallowedto run awayfrom it bysayingthat the
land wasyetto be acquired,particularlywhentheGovernmentwaspreparedtogivehim the
benefitofextendedtime.
389. Quoting LordTomlininHillas& CoLtdvAreas.Ltd, (1932) 147 LT 503, 512 (HL). See
R.A. Samek, Requirement of Certainty of Terms in theFormationof Contract, 48 Can BR
233.
390.(1934)2 KB17n.https://t.me/LawCollegeNotes_Stuffs

469. [S. 29] Exceptions329
There was an agreement for the sale of tentage with a stipulation that
the price, dates of payment and manner ofdelivery"shall be agreed upon
fromtimetotime".
The agreement was held to be void for uncertainty. LordBuckmaster
remarked: "It has long been a well-recognisedprinciple ofcontractlawthat
an agreementbetweentwo parties to enter into an agreementin which some
criticalpartof the contract matter is left undecidedis no contract atall....It
is not open to them to agreethatthey will in the future agree upon a matter
which is vital to the arrangement between them and has not yet been deter
mined." The law requires for the making of a good contract aconcluded
bargain, "and aconcludedcontract is one which settles everything to be
settled andleavesnothing to be settled by agreement between the parties".
Thus, if the execution of a further contract is a condition or term of the
bargain, nocontractarises because the law does not recognise acontractto
enter into acontract.^'^This view findsfurthersupportin the decision of
the Court of Appeal in Courtney & Fairbairn Ltd v Tolaini Bros(Hotels)
Ltd.'''
A property owner and a propertydeveloper-cum-buildingcontrac
tor sat together to arrange a collaboration between them. The contrac
torwrotealetterto theownerthathe was willing tointroducepersons
whowould finance the development of the site and that his own interest
was only in thebuildingwork. The letterconcludedthat if asuccessful
arrangementwas made with thefinanciersintroduced by him, the owner
will enter into negotiations for a fair and reasonable building contract.
Thenegotiationsbroke downbecauseof adisagreementas to the price.
The owner thenenteredinto building contracts with others while still
using those very sources of finance.
Thecontractorsuedforthebreachofthecontractwhichhadeitherbeen
made or wascontractedto be made. TheCourtof Appeal did not accept his
case.Priceis averyimportant term ofeverycontract and the parties in this
caseneithercouldagreeupon it nor did they laydown anymeansbywhich
it could be ascertained. LordDenningemphasisedthatthere could neither
be acontracttoenterintoacontractnoracontracttonegotiate.
P contracted to purchasesuppliesof propane from D and voluntarily
offeredto pay ahigherprice"on theunderstandingthat theywouldbe
abletorenegotiatea new contract for thefollowingyear based on eco
nomic value at that time". D did not reply to P's letter but did billFat a
higherpriceinaccordancewith P'soffer.DrefusedtorenewP's contract.
P claimed for breach ofcontractand,inthe alternativethatD received
391. LordParkerin VanHatzfeldtWildenburgv Alexander,(1912)1Ch284, 288-89.
392.(1975)1WLR297(CA).SeealsoKeshavlalLallubhaiPatelvLalbhaiTrikumlalMills,AIR
1958 SC 512: 1959 SCR 213 where the contract providedfor extension of time in such man
nerthatthewholecontractwouldbecomeuncertain.https://t.me/LawCollegeNotes_Stuffs

470. 330Chapter7LegalityofObject [S. 29]
excesspaymentintrustto the use of P. It was heldthatnobindingcon
tractregardingtherenegotiationof theoriginalcontractevercameinto
existence. Afundamentaltermwas to fix the price intermsof"economic
value" which had a different meaning to each party.Therefore,there was
noacceptanceby D ofP'soffer. P wasentitledtorecovertheamountof
overpayment.^^^
Where at the time of the agreement for sale of property, aportionof the
propertywas likely to be acquired for road widening and the agreement
fixedthe price per square yard for whateverarea was left after the acquisi
tion, it washeldthatthe agreement suffered from nouncertaintyand was,
therefore,specificallyenforceable.^®''
Undefinedproperty
The land promised to be sold was to be out of the land still to be acquired
or out of the existing property upto the value of one lakh rupees. The price
was to be agreed upon at a later date. There was still no certainty upto
the time of the suit for specificperformanceas toidentificationof the land
and pricefixation.Theagreementwas held to be void foruncertainty.^®^
The court said in another case that for seekingspecificperformance, the
contractin question must becorrectand precise. Theplaintiffhad failed
to identify the property by givingits Khasra number or boundary number.
Theagreementof sale beingvoidfor uncertainty, it could not bespecifically
enforced.^®®
393.Hidrogasv Great Plains Devp Co of Canada,(1972)5WWR22 (All Sup Ct). See also
RadhakrishnaSivaduttaRai vTayeballiDawoodbhai, AIR 1962 SC 538: 1962Supp(1)
SCR 81, bought and sold notes differedin contents. No contract resulted.Nircon Developers
(P) LtdVZohrabaiFakhruddin,(1998) 1 Bom CR 153, agreement for sale of landwithout
prior sanction ofI.T.authorities, vital entries like names, amounts and places still in blank,
held no agreement and nospecificenforcement.Old World Hospitality (P) Ltd v India
Habitat Centre, (1997)73DLT374, a completeagreementin all respects, agreementoverall
theessentialterms. B.D.A. Ltd v StateofU.P.,AIR 1995All111,renewalofagreementfor
assignmentof trade to be on terms agreed by mutual consent, did not create anyobligation
upon either party for renewal. ArmyWelfareHousingOrganisationv Sumangal Services
(P) Ltd,(2004)9see619: AIR 2004 SC 1344, apromisethat the builderwould get the
building plan approved by the authorities, void for uncertainty. An agreement to obtain a
statutory order from a statutory Authority is notenforceablesincethe promisor cannot have
anycontroluponAuthorities.
394. Sughra Bee vKaneezFatima Qureshi,(2004)3ALD821; Shobatdei v Devipal,(1972)3
see495: AIR 1971 SC2192, price to be paid for the instrumentsofhusbandry,it was pro
videdthat thebuyerwouldpaythepricefixedbythe firstdefendant,heldnouncertainty.
395. P. Panneerselvan v A. Baylis,(2005)5CTC17; Ganesh Industries v Bharath Rubber Co,
(2006)2 CTC 182, property notidentifiable,no time limit forperformance,evenprice was
not mentioned, no concludedcontract. N.K. Giriraja Shetty v N.K. Parthasarathy, (2006) 3
AIR Kant 136 (DB): AIR2006Kant 180,agreementof sale nowherementionedtheextent
ofrespectivesharesofsellersand whatconsiderationwasto be paid tothemrespectively,
the extentof propertyto besoldwasalsovague,the plaintiffwasalsonot ableto offerany
explanation, noenforcement;UmashankerSao v Sonsai Sahu, AIR 2006 Chhat 102, sale of
land,evidenceof identityof land was placedon record, noinfirmity,mentioningof Khasra
number, etc was not necessary, agreement not vitiated.
396.SurendraKumarGuptavNarayanRam, AIR 2011 Chh 138.https://t.me/LawCollegeNotes_Stuffs

471. [S.29] Exceptions331
Preliminarynegotiations taking definiteshape
Where,on the other hand, thepreHminarynegotiationshave crystal-
hsedinto adefiniteshape, the parties can becompelledto contract on those
terms. This is borne out by the following two decisions. One of them isthat
oftheHouseofLordsinHillas&CoLtdvArcosLtdJ^''
Thecontractwas to purchase for the year 1930"22,000standardsof
soft wood goods of fairspecification",with an option to buy1,00,000for
the year 1931.When the option for 1931 was sought to beexercised,the
seller saidthatthispartof the agreement was not enforceable because it
did not specify anyparticulars.
The agreementwas,however,allowedto be enforced.The dealing for the
previous year indicated theintentionto have asimilardealing and also made
itunnecessaryfor theparticularsto berepeated.
Theothercase isMallozzivCarapelliJ^^
The contract was for the sale of oats and maize to be shipped from
Argentina to the WestCoastof Italy. Theportof discharge was to be
agreed between thepartieswhen the ship would cross the Straits of
Gibraltar. The seller ordered, without consulting the buyer, the cargo to
be discharged at Naples. The buyer suffered two-fold loss, viz., owing to
congestionatthatportandfurthertransport.The sellercontendedthat
thatterm being left to future agreement thecontractwas void.
But thecourtsaw no element ofuncertainty.There was a definite agree
mentthattheportof discharge would be settled bymutualagreement and it
was thisagreementwhichthe seller hadbroken.
InasimilarcasebeforeaCanadiancourt^'^amotorvehicledealerwas
negotiatingwithhismanufacturerforshiftinghis agency tolargerpremises.
As apartof thesenegotiationsthemanufacturerundertooktoabsorbthe
dealer's losses tilltheirnewarrangementwasconcluded.Howthe losses
would beabsorbedwasnotstated.Even so theagreementwas held to be
binding.Howthe losseswouldbeabsorbedwas themanufacturer'sconcern
andnotthatofthedealer.Themanufacturerhadcommittedhimselftoa
definiteobligation.
Withthisshouldbecontrastedthe case'""' inwhichasumofmoneywas
depositedwitha car dealer forpurchasinga used carwhichthedepositor
wasultimatelyunableto buy.Thepartiesthenagreedthatthedealershould
hold theamounttill thedepositorwas able to buy a car at astatedprice or
more. Thedepositorthensoughtrefundof hisdepositand was allowed. The
typeofcar,thetimeofpurchase,themodeoffinancewere alluncertainand
theseuncertaintiespreventedthepartiesfrom beingbound.Adocumentfor
397.(1932)147LT503,512(HL).
398. (1976) 1 Lloyd's Rep407(CA).
399.MaclvervAmericanMotors,(1976) 70DLR(3d)473.
400.DwinellvCustomMotors,(1975) 12 NSR (2d) 524 (SC App Div).https://t.me/LawCollegeNotes_Stuffs

472. 332 Chapter 7Legalityof Object [S.29]
sale of certain lands provided that the sale and purchase agreement was to
besignedon orbeforethespecifieddate and it was to incorporate all the
termsofthesaleandotherusualtermsandconditionsandthatiftheagree
ment was notsignedby the cut-off date, the amount of deposit was to be
refunded.Thecourtsaidthatthedocumentdidnotmatureintoacontract.
Nospecificenforcementof the sale could beordered.'"'^
Partialuncertainty:"Capableofbeingmadecertain"
Where only apartor a clause of the contract is uncertain, but the rest
iscapableof bearing areasonablycertainmeaning,the contract will be
regardedasbinding.In a contract to sell3000 tons of steelreinforcingbars,
the buyeraccepted, but subjectto "the usual conditions of acceptance only".
There being noevidenceof any such usual conditions, the buyer was held to
beboundby the rest of the contract.''"^
In acontractfor the purchase of land, the price was payable in three
phasesand the land was also to bereleasedfor further construction in three
phases. The contract was held to be void by reason of uncertainty as to
which part of the land was to bereleasedin thesuccessivephases. Should
the power be vested in the purchaser, the vendor might be seriously preju
diced by the manner in which the power wasexercised.In the absence of
any express term as to how the land to be included in each phase was to be
selected, thecontractwas void foruncertainty.'"'^But in acontractfor sale
401. Kant Mah Theatre v Tan Lay Soon, (1994) 1 Curr LJ 1 "The correspondence between
the parties after the date of the document was relevant for finding out whether there was
any contract at all, Hussey v Horne-Payne,(1879)LR 4 AC 311 at p. 316. The question
whether the parties have entered into contractual relationship with each other essentially
depends upon the proper understanding of the expressions they have employed in commu
nicating with each other considered against thebackgroundof the circumstances in which
they have beennegotiatingincluding in thosecircumstancestheprovisionsof any appli
cablelaw.Where they have expressed themselves in writing, the properconstructionof
the writing against thebackgroundwill answer the question." Cited by thecourtfrom the
Privy Council decision inDaimanDevelopmentvLCTMathew,(1981) 1MalasiyaLJ 56 at
p. 58.
402.NicoleneLtdv.Simmonds,(1953) 1 QB 543: (1953) 2 WLR 717.MaybanFinancevAik
SoonAuto,(1994) 1CurrLJ 273(Malaysia),nodiscountrates werestated,receivedmoney
on discount, thecontracthaving been acted upon with knowledge that discount rates would
have to besettledbyagreement,contractbinding,nouncertainty.KalyanSingh vRanjot
Singh, AIR2002HP 180, theundertakingthattheplaintiffwould not enforce thepayment
of a cheque till goods were delivered was held to be void because there was no definite time
fixed forperformance,but it was valid to theextentto which thedefendantadmittedthathe
hadactuallyreceived the goods.RajkishorMohantyvBanabehariFatnaik,AIR 1951 Ori
291.
DamodharTukaramMangalmurtivStateofBombay,AIR 1959 SC 639, thecourtcan
construethe terms of anagreementin fairandequitablemannerin case ofuncertainty.
KhivrajChordiav EssoStandardEasternInc,AIR 1975Mad374,'rentto be fixedwith
referencetorentprevailingin thelocality.Suchrentcouldbeascertained.VeeraExportsv
T.Kalavathy,(2002) 1 SCC 97: AIR2002SC 38uncertaintyin achequecanberemoved
byparties.
403.BusbwallPropertiesLtdv VortexPropertiesLtd,'(1976) 1WLR591 (CA).Dwinellv
CustomMotors,(1975)12 NSR(2d)524(SCAppDiv).Anagreementto paywhen the partyhttps://t.me/LawCollegeNotes_Stuffs

473. [S,29] Exceptions333
of"oneacreoffront land", out of a tract of5acres,the contractwasheldto
benotuncertain,itbeingpossibletofindout what wasthemeaningof the
partiesbythewords"frontland".''®'*Atthetimewhentheagreementtosell
apropertywasmade,itwasknownthataportionofthepropertywaslikely
tobeacquiredforroadwidening.Theagreement,therefore,stipulatedthat
whateverpropertywasleftbehindafteracquisitionwouldbesoldatagreed
rate.Theagreementwasheldtobecapableofperformance.Thereliefof
specificperformancewasallowed.""^Apersonwishedtopurchasecornfeed
pelletsandhisbrokerscarriedoutnegotiationswithasellerthroughinter
mediarybrokers.Therewerevarioustelexmessagespursuanttowhichthe
sellercontendedthat abindingcontract had beenconcluded,but thebuyer
contendedthatmanypointshadstillto besettled.The courtsaidthat the
partieswereadidemastothemaintermsoftheproposedcontractandit
wasperfectlypossibleforpartiestomakeaninterimagreementforthesale
ofgoodswhichrequiredfurthernegotiationsto ironout thelessimportant
details of thetransaction.'"'®Where an agreement providedthataproperty
injointnamesshouldbesoldat apriceagreedbetweentheowners,andif
notsoldwithinsixmonths,shouldbe placed atauction,it wasnecessaryto
implyatermthattheagreedpriceshouldbeareasonableprice.Thecontract
was clear andworkablein itsexistingform.'"'^Wherethe vital terms of the
contractlikethepriceandtheareaoflandandthetimeforcompletionof
salewereallfixed,theSupremeCourtheldthat themerefactthat themode
ofpaymentofthepricewasnotsettleddidnotrenderthecontracttobe
ineffective.""®Whereacontractfor the sale ofbearingspringsover acourse
oftimegavelatitudetothesellerastoquantityofdeliveryineachinstal
ment,itdidnotmaketheagreementuncertain.'"'®Sometimestheprinciple
ofbusinessefficacyisusedtolendsupporttotheagreementtomakeiteffec
tiveinconsonance"with theparties'intention.Thiscan bedoneonlywhen
isinapositiontopayhasbeenheldtobevoidforuncertainty.PuspabalaRayvLJC,AIR
1978Cal221.
404.KandamathCineEnterprises (F) Ltd vJohnPhilipose,AIR 1990 Ker 188.
405.SughraBeevKaneezFatimaQureshi,(2004)3ALD821.
406.PagnanSpav FeedProducts,(1987)2Lloyd'sRep601(CA).
407. MillervLakefieldEstates, The DailyTelegraph,May 8, 1988(CA).
408.KolliparaSriramuluvT.Astuathanarayana,AIR1968SC1028:(1968)3SCR387.Alsosee
DhanrajmalGobindramvShamjiKalidas&Co,AIR1961SC1285:(1961)3SCR1320
whereitwasheldthat asaleagreementsubjectto theusualForceMajeureclausewasnot
void forvagueness.
SeealsoUttamSinghDugalandCo(P)LtdvHindustanSteelLtd,AIR1982MP206,
wherethecourtheldthatdepositbyacontractorofinsurancebondsinsteadofGovernment
securitieswhichwasputunderconsiderationdidnotpreventthecontractfromarising;the
factthatpenalty'fordelayedcompletioncouldbeonthebasisoftotalcostorcostofthe
incompletepartascouldbedecidedbytheheadofficeanddifficultiesofinterpretationdid
not make theagreementuncertain.
409.JamnaAutoIndustriesvUnionofIndia,AIR1984Del235.RemingtonRandofIndiav
SohanlalRajgharia,AIR1984Cal158,tenancyonthebasisofmarketrent,whichthecourt
found to beascertainable,heldnotuncertain.https://t.me/LawCollegeNotes_Stuffs

474. 334 Chapter7LegalityofObject [S.29]
theagreementor its terms are eitherambiguousor notclear.''^°Contracts
are notreadilydeclaredto beinvalidfor uncertainty orvagueness.The
courtfoundinthecasebeforeit acontractwhichwas for sale ofimmovable
propertybut the parcel of land was not identified, nor it was ascertainable.
Hencetherewas nocontractwhichcouldbeenforced.''"In a casebefore
theAllahabadHighCourt,thefactsanddecisionappearfromthefollowing
passage:"*^^
The terms of the agreement werethatthetenantwas toconstructa sit
ting place and install a new gate and deduct the cost from rent which was
enhanced fromRs5toRsll/8per month. The cost of construction was
notknownto thepartiesat thetime,but it isobviousthattheyagreed
thattheentirecost,whatevertheamount,wouldbeadjustedagainstrent.
Theagreementwas,therefore,capableofbeingmade certain and did in
effectbecomecertainwhentheconstructionswerecompletedand the
amount spent was known. The purpose of Section 29 is to ensurethatthe
parties should be aware of theprecisenature andscopeof their mutual
rights andobligations.
Agreementto increase wages
An act of the State toincreasewagesof itsemployeesis awelfaremeas
ure.Whensuchincreasetakesplacewithretrospectiveeffect,itsvaliditycan
beupheldbecauseit isforthebenefitofitsemployees.Suchagesturecould
not be enforced against a licencee of the State. The licencee would have been
bound if there was aspecificterm in thelicenceto that effect. Section 29
wouldnotpermitenforcementofthetermsofaschemewhicharesovague
andindefinitethat it may not bepossibleto ascertain with reasonable cer
tainty theintentionof the parties. Themeaningof a contract must be clear
on itsface.Furthermore,whateverincreasewasagreedtobegivenin this
casehadalreadybeengranted. A newliabilitycannot beenforcedunder a
contractwhich had already been workedout.''^^
Agreement not capableofbeing enforced
Thishappenswhentheagreementisinthestateofamess.Theplaintiff
inthiscasewastheowneroftwohouseswhichwerenotconstructedbyhim
withhisownfundsandhepermittedhisbrother(defendant)tooccupyone
ofthehouses.Thedefendantpleadedaboutanagreementwhichcontained
410.SatyajainvAnisAhmeddRushdie,(2013)8SCC131:(2013)3SCC(Civ)738.
411.PawanKumarDutt vShakuntalaDevi,(2010)15SCC601:(2013)2SCC(Civ)235.
412.ChandraSheikharvGopiNath,AIR1963All248;KovuruKalappaDevaravKumar
KrishnaMitter,ILR1945Mad521;AIR1945Mad10,agreementtopayacertainsumafter
twoyearswith interestanddeductionsto be agreedupon,void.SaminaVenkataSureswara
SarntavMeesalaKotaMuvullayya,AIR1996AP440,saleofpremiseswithinstipulated
time,tenantsto beevictedwithinthattime,failureto doso buteffortsbeingmade,didnot
make theagreementuncertainand void.
413.Govtof Maharashtra v Deokar's Distillery, (2003) 5 SCC 669: AIR 2003 SC 1216.https://t.me/LawCollegeNotes_Stuffs

475. [S. 30] Exceptions335
atermthattheconstructionwascarriedoutwithcontributedfundsandthe
plaintiff agreed to transfer one house to the defendant on a settlement of
the account. Anendorsementwas made in theagreementthattheplaintiff
relinquished his share in the property in favour of his mother. The mother
executeda will bequeathing the property in favour of two sons, plaintiff and
defendant.Thus theagreementbecameinexecutable.'*"
Lock-outagreement
A lock-out agreement by which onepartyfor goodconsiderationagrees
for aspecifiedperiod of time, not to negotiate with anyone(saleofbusiness
and premisesin thiscase)except the other party for the sale of his property,
canconstitutean enforceable agreement. Such an agreement enables the
would be buyer to purchase, for a price, anexclusiveright of negotiations
for finalising the deal. However, an agreement to negotiate in good faith for
anunspecifiedperiod is notenforceableand nor can a term to that effectbe
impliedin alock-outagreement,sincethevendoris notobligedunder such
anagreementtoconcludea contract with thepurchaser.He would not be
able to know when he canwithdrawfrom on-goingnegotiations.Thecourt
cannotalso be expected to decide whether,subjectively,a proper reason
existedfortheterminationofnegotiations.''^^
Optionforrenewaloftenancy
An option for renewal of a tenancy orleaseis anenforceableoption.''^®
But an optionclausewhichprovidesfor renewal of a lease on such terms
as may be agreed upon by the parties at the time of renewal would make it
invalidandunenforceableforuncertainty.''^^
Contractlinkedwithrepealofan Act
Wheretheperformanceof anagreementcouldbedemandedonly on the
repealof an Act, whichpreventedfragmentationofholdings,the samewas
held to be void because repeal was anuncertainevent and the object was in
violationof anexistingAct.'*^®
Wageringagreements[S. 30]
Section30dealswithwageringagreements.
S.30.Agreementsbyway of wager, void.—Agreements bywayofwager
are void;and no suit shall bebroughtfor recovering anything alleged to be won
on anywager,or entrusted to any person to abide bythe resultof any game or
otheruncertaineventon which anywagerismade.
414. D.Narasimhamurthyv D.KrishnamurthyRao, (2005) 1 AnLD75: (2005) 1 CCC 566(AP).
415.Walfordv Miles, (1992) 2 AC 128: (1992) 2WLR174 (HL).
416. Caltex (India) Ltd v Bhagwan Devi Marodia, AIR 1969 SC 405: (1969)2 SCR 238, option
ofrenewaloflease.
417.AboobackerKeyi vGovindanSons, (1990) 2 KLT 551.
418.FarvathammavXJma,AIR2011Kant58.https://t.me/LawCollegeNotes_Stuffs

476. 336Chapter7LegalityofObject [S. 30]
Exceptioninfavourofcertainprizesforhorseracing.—Thissectionshall
notbedeemedtorenderunlawful asubscriptionorcontribution,oragreement
tosubscribeorcontribute,madeorenteredinto for ortowardsanyplate,prize
or sum of money, ofthevalue oramountof fivehundredrupeesorupwards,to
beawardedtothewinnerorwinnersof anyhorserace.
Section294-AoftheIndianPenalCodenotaffected.—Nothingin this
sectionshall bedeemedto legalize anytransactionconnectedwithhorse-rac-
ing, towhichtheprovisionsofSection294-A oftheIndianPenalCode(XLVof
1860)apply.
Requirementsofdefinition
Section 30 only saysthat"agreements by way of wager are void". The
section does not define"wager".SubbaRaoJ(afterwardsCJ) inGherulal
ParakhvMahadeodas'^^^said: "Sir William Anson's definition of "wager"
As apromiseto givemoneyormoney'sworthuponthedetermination
orascertainmentof anuncertainevent, brings out the concept of wager
declaredvoid bySection30oftheContractAct."
The most illustrative definition of "wager" is that given byHawkinsJ in
CarlillVCarbolicSmokeBallCo^^°
A wageringcontractis one by which two persons professing to hold
opposite viewstouching the issue of a futureuncertainevent,mutually agree
that, dependent on the determination of that event, one shall pay or hand
over to him, a sum of money or other stake; neither of the contracting par
ties having anyotherinterestinthatcontractthanthe sum orstakehe will
so win or lose, there being no other real consideration for the making of
such contract by either of the parties. It isessentialto awageringcontract
thateachpartymayunderit either win or lose,whetherhe will win or lose
beingdependenton theissueof theevent,and,therefore,remaininguncer
tain untilthatissue is known. If either of the parties may win butcannot
lose, it is not a wageringcontract."*^^
Thisstatementhas the merit of bringing out all the essential featuresthat
make atransactiona wager.
1.Uncertainevent
The first thingessentialto wager is that the performance of the bargain
must depend upon the determination of an uncertainevent.A wager gen
erally contemplates a future event; but it may even relate to an event which
has already happened in the past, but the parties are not aware of its result
or the time of itshappening.'^^^
419.AIR1959SC 781: (1959) 2SCR406.
420.(1893) 1 QB256(CA).
421.Thisstatementhas beencitedwithapprovalin anumberofcasesin India.Seeforexample,
JethmalMadantalJokotiav Nevatia & Co, AIR 1962 AP 350, 352.
422. See Anson'sPrinciplesofTheEnglishLawofContracts(22nd Edn by A.G. Guest,
1964) 301 where the learned writer says that the parties may bet upon the "result of anhttps://t.me/LawCollegeNotes_Stuffs

477. [S. 30] Exceptions337
2.Mutualchancesofgainorloss
The second essential feature isthatupon thedeterminationof the con
templated event eachpartyshouldstandto win or lose. If there are no such
mutualchances of gain or loss, there is no wager.Thus,inBabasahebv
Rajaram-^^^
Twowrestlersagreed to play awrestlingmatchonconditionthatthe
partyfailing toappearon the dayfixedwas to forfeit Rs 500 to the oppo
siteparty,andthewinnerwas to receive Rs1125outof the gate money.
Thedefendantfailed toappearin the ringandtheplaintiffsued him for
Rs500.
It was heldthattheagreementcouldnotbelookeduponas one ofwager
ing in law."Itis of the essence of wagerthateach sideshouldstandto win
or loseaccordingto theresultof theuncertainevent.'"'^''In thepresentcase
neithersidestoodto loseaccordingto theresultof thewrestlingmatch.
"Thestakes did not come out of the pockets of theparties,but had to be
paidfrom the gate moneyprovidedby thepublic.'"'^^The prizewouldnot
have beenrecoverableif it was to besubscribedby thecompetitorsthem
selves. Accordingly, where each of thepartiesdeposited£200withastake
holderto abide the issue of awalkingmatchand the loser was to forfeit
his£200,''^^and where eachpartydeposited£100to abide the result of
abilliardmatch,theagreementswere held to be ofwageringnature.In
contrasttoitthetransactioninCarlillvCarbolicSmokeBallCowasheldto
be not a wager. The company had no chance ofwinning,neitherMrsCarlill
anychanceoflosing.''^'
A chit fund does not comewithinthe scope of"wager".It is nodoubt
truethatsome chance gain may come to some of the members, but none
ofthemstandsto lose his money, for hisperiodicaldeposits arerefunded
to him at the end of the scheme. This was so held by theMadrasHigh
CourtinNarayanaAyyangar v K. VallachamiAmbalam^^^RamesamJ
said:"Itistruethatinmostchitfundtransactions,nosubscriberlosesthe
money he has contributed; and so long as getting back the actualamountof
subscription is assured, the interval of time, howeverlong.itmay be, is
immaterial."
election which is over, if the parties do not know in whose favour it has gone". See also
Cheshireand Fifoot, LawofContract(6th Edn 1964)232,where it is saidthat"wager
mayrelatetopast,presentorfutureevents".
423.AIR1931Bom264.
424.BarleeJquotedthisdefinitionfromSassoonv Tokersey,ILR(1913)28 Bom 616.
425.MadgavkarJ quoted fromShoolbredvRoberts,(1899) 2 QB 560.
426. DiggleVHiggs, (1877) LR 2 Ex D 422.
427.ShoolbredvRoberts,(1899) 2 QB560.
428.CarlillvCarbolicSmokeBall Co, (1893) 1 QB256(CA). See alsoEllesmerev Wallace,
(1929)2Ch1 (CA).
429.ILR(1927)50Mad696.https://t.me/LawCollegeNotes_Stuffs

478. 338Chapter7LegalityofObject [S. 30]
Thetransactionbeingvahd,amemberwas allowed to recover his sub
scriptions when the organisers refused torunthe scheme up to thepromised
schedule.
3.Neitherpartyto havecontrolover theevent
Thirdly, neitherpartyshould havecontrolover thehappeningof the event
one way or theother."Ifone of thepartieshas the event in hisownhands,
thetransactionlacks an essentialingredientof awager.'"*^"
4.Nootherinterestintheevent
Lastly,neither party should have any interest in the happening of the
eventotherthanthesumorstakehewillwinorlose.Thisiswhatmarks
the difference between a wagering agreement andcontractofinsurance.
Everycontractofinsurancerequires for its validity the existence of insurable
interest.Aninsuranceeffectedwithoutinsurableinterestisnomorethana
wageringagreementand,therefore,void.''^^"Insurableinterest"meansthe
risk of loss to which the assured isHkelyto be exposed by the happening
of the event assured against. In awager,on the other hand, neither party
is running any risk of loss exceptthatwhich is created by the agreement
itself.''^^
"Whetheran agreement is of a wagering nature depends upon the sub
stance and not the words of theagreement."*^^The real object of the parties
mustbediscovered."Itmakesnodifferencethattherewasrealintentionto
partwith the goods. If a horse of £ 100 is to be sold and the buyer and seller
agreethat upon one eventthe priceshall benothing and upon another£200,
that is a wager, though there may be real intention of sellingthehorse.'"'^''
The facts of thecase''^^in which the above passage occurs werethata
sellerand buyerdisagreed respecting whether or not payment had been made
for some goods in the past. They mutually agreed that one price would be
payableif the buyerwas correct and another price would be paid if the seller
wascorrect.The seller'smemoryprovedbetter,but he could not recover
anythingfrom the buyeras the court heldthe arrangementto be ofwagering
nature.
Rightto seekperformance
Wherethe contractconferredthe right toseekactualdeliveryofgoods
and, therefore, the plaintiff could compelactual performance, the court said
430.BirdwoodJ in Dayabhai Tribhovandas v Lakshmichand,ILR(1885)9 Bom 358, 363.
431. SeeAlamianiv Positive GovtSecurityLife Assurance Co, ILR(1898)23 Bom 191.
432. SeeBlackburnJ in Wilson vJones,(1867) LR 2Exch139. See alsoManishankarvAlliam
UndStutlagarterLife AssBankLtd,193IC155.
433. Ismail LebbeMarikarEbrahimLebbe vBartlett& Co, (1942) 55 LW332: AIR 1942 PC 19:
199 IC 574 anappealfromCeylon.
434.LordCampbellCJ inRourkevShort,(1856) 5 El &B1904:119 ER 717.
435.RourkevShort,(1856) 5 El&;B1904:119 ER 717.
i
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479. [s. 30] Exceptions 339
that the contract could not be termed as a wager. Common intention of the
parties to enter into a wageringtransactionis a sine qua non for atransac
tionto bedumpedaswager."*^^
Speculativetransactions
An agreement to settle the difference between thecontractprice and mar
ket price of certain goods on aspecifiedday has been repeatedlyheldto
be awager.But, as transactions of this kind arealwaysexpressed in the
. form of an agreement for the sale or purchase of goods, it oftenbecomes
difficult toascertainthe real object of theparties.Yet theintentionof the
parties is the only deciding factor, for the Privy Council ruled in 1901 in an
appealfromBurma"*^^underSection30 of theContractActthat"wherethe
circumstancesas tocontractsfor sale,purchaseand delivery of goods are
such as towarrantthe legal inferencethatthepartiesneverintendedany
actualtransfer,but only to pay or receive differences, thecontractsmustbe
deemed to be by way ofwager"."*^^"Thus,there must be from the outset a
commonintentionofboththepartiesto makeandaccept no deliveryand
to deal only in differences. From the mere factthatthe delivery of the goods
was nottaken,no inference can bedrawnthatthecontractwas a wagering
contract.'"*^'If it isintendedand is possiblethatthe goodscontractedforcan
be delivered then, the mere factthatincertaincircumstanceseitherparty
wouldbe liable to make good to theotherthe difference in price,cannot
makeit a wager.'''"'
Wageringagreementsarespeculativeinnaturebuteveryspeculationneed
notnecessarilybe wager.Derivativescontractssatisfyfirstingredientas
therearetwoparties.Secondingredientthatone maystandto lose may be
absentasplaintiffin event of losing in theunderlyingcontractonaccountof
currencyfluctuationmay getcompensatedbyhedgingandvice versa.Third
testofwagerisabsentasbothpartiesdefinitelyhaveactualinterestinrate
ofexchangehittinghighor low.Derivativestransactionresemblescontract
ofinsurance.In a wager there must becommonintentionto wagerandsuch
intentionisabsentinderivativescontracts.Derivativestransactionsfollow
scientificpatternon basis offinancialmathematics.Derivativescontracts
arenotwageringcontracts.'*'''
Theintentionof thepartiesisgatheredfrom thecircumstancessurround
ingtheiragreement.Thus,where a rice millowneragreed to sell1,99,000
436.RajshreeSugarsandChemicalsLtdv AxisBankLtd,AIR 2011Mad144.
437. KongYeeLone & Co v Lowjee Nanjee,(1900-01)28lA239:ILR(1902) 29Cal461.
438.MukarjiJ'ssummingupon the ratio of the PrivyCouncildecision inBadridasKothariv
MeghrajKothari,AIR1967Cal 25.
439.HagamiLaiRamPrasadvBhuralalRamNarain,AIR 1961 Raj 52.
440.BuddulalGoerlalMahajanvShrikisanChandmal,AIR 1961 MP 57.MorganGrenfell&
CoLtdVWelwynHatfieldDistrictCouncil,(1995) 1 All ER 1, one of theinterestrates in
swap cases, where thecourtheld thattransactionsentered into by way of business under the
FinancialServices Act,1986(English) are out of the scope ofwageringtransactions.
441. Rajshree Sugars & Chemical Ltd v Axis Bank Ltd, (2009) 1 CTC 227 (Mad).https://t.me/LawCollegeNotes_Stuffs

480. 340Chapter7 Legality of Object [S.30]
bags of rice,worthabout a crore of rupees, when his actual capacity was
much less, the Privy Council held the agreement to be awager.''''^Their
Lordships said: "Now the output of the firm itself would not be much over
60,000 bags during the currency of the contracts. The capital of the com
pany was a trifle more than a lakh of rupees. The cost of goods would be
thatamountmultiplied byfivehundred fold. It is possible for traders to
contemplatetransactionsso far beyond their basis of trade but it is very
unlikely.In point of fact, they nevercompletednor were they called on to
complete any one of the ostensibletransactions.Therationalinference is
thatneitherpartyeverintendedcompletion."
Similarly,where acontractwas made for the sale of certain goods in
amarketwhere such goods neverappeared,it was heldthatthecommon
intentionwas towager.'*'*^
InanotherPrivyCouncildecision, deliveryordershaving been issued
whichcouldhave beenconvertedintoactualdelivery if apartysodesired,it
was heldthatthetransactioncouldnotbedescribedas awager.'*'*''Similarly,
where out of a largenumberoftransactions,thecourtfoundthaton occa
sions delivery of goods was made andaccepted,makingitdifficulttoknow
beforehandwhichway aparticulartransactionwas going to end, the inten
tiontowagerwas held to benotestablished.''''^ In anAndhraPradeshcase,'*'*®
apuccaaddatia,whomthecourtfound to be anindependentcontractor
andnot an agent, receivedordersfrom hisprincipaltopurchasecertain
goods.Hecontractedto do sobutsubsequentlysettledthedifferencewith
the seller and claimed the loss and hiscommissionfrom theprincipal.The
courtsaid: Thecircumstancesdonotwarrantthe inferencethattheplaintiff
intendedto deliver or thedefendantintendedtotakedelivery of thewagon
ofgroundnutoil. In fact thedefendanthadno shop orgodownatAdoniand
isnoteven aresidentof the place.
Accordingly,noactionlay for theenforcementof the transaction.'''*^
Effects ofwageringtransactions
Awageringagreementbeingvoidcannotbeenforcedin anycourtof law.
Section 30 expressly declaresthat"no suit shall bebroughtforrecovering
anythingalleged to be won on any wager, orentrustedto anypersonto
abide theresultof any game orotheruncertainevent onwhichanywager
is made".Thustheamountwon on a wagercannotbe recovered. In a case
beforetheCalcuttaHighCourt:'*'*^
442.KongYeeLone&CovLowjeeNanjee,(1900-01)28lA239:ILR(1902)29Cal461.
443.DoshiTalacshivShahUjarsiVelsi,ILR (1899) 24 Bom 227.
444.SukdevdossRamprasadvGovindossChathurbujdoss& Co,(1927-28)55lA32:AIR1928
PC 30; also seeDuniChandRatariavBhuwalkaBrosLtd,AIR 1955 SC 182: (1955) SCR
1071;BashirAhmadvGovtofA.P.,AIR1970SC 1089.
445.ArjunsaRaghusavMohanlalHarakchand,AIR 1937 Nag 345.
446.T.G.LakshmiNarayanaChettyv K.V.NanjaiahChetty,AIR1965AP 136.
447.ComparewithKishanlalvBhanwarLai,AIR1954SC500(1955).
448.BadridasKotharivMeghrajKothari,AIR1967Cal 25.https://t.me/LawCollegeNotes_Stuffs

481. [S. 30] Exceptions341
Two persons entered into wageringtransactionsin shares and one
became indebted to the other. A promissory note was executed for the
paymentofthatdebt.
The note was held to be notenforceable.'''^^A subsequent substituted
agreement of the same consideration, namely, the amount won on a wager,
is also notenforceable.''^®In other words, a new promise to pay money won
upon a wager is equally void.Similarly,money deposited with a person to
enable him to pay to thepartywinning upon a wagercannotbe recov
ered.Thewinnercannotrecover the money, but before it is paid to him,
the depositor may recoverfrom thestakeholder."*^^But where the money has
already been paid over, itcannotbe recoveredback.''^^
Collateraltransactions
It has been laid down by the SupremeCourt,following previous authori
ties, inGherulalParakhvMahadeodas'^^^that"thougha wager is void and
unenforceable, it is not forbidden by law". Hence a wagering agreement is not
unlawfulunderSection 23 of theContractAct,''^'*and,therefore,thetrans
actions collateral to the maintransactionare enforceable. "Accordingly an
agent who paid the losses on wageringtransactionswas.allowed to recover
theamountpaid by him from hisprincipal.'"'^'^Similarly, inanothercase,
"theplaintiffwho lent money to the defendant to enable him to pay off
agamblingdebt was given a decree to recover the same from the defend-
ant"."*^^"Wheretwopartnersentered into acontractof wagerwithaparty
and onepartnerhadsatisfied hisownandhisco-partner'sliabilityunder
thecontract,theNagpurHighCourt''^^heldthatthepartnerwho paid the
amountcouldlegally claim theotherpartner'sshareof the loss." Similarly,
the SupremeCourtheld inGherulalParekh vMahadeo'^^^thatfor apart
nership to enter into wageringtransactionsis not illegal under Section 23 of
the Act and therefore apartnerwho has paid the losses on wageringtrans
actionsmay recoverproportionateindemnityfrom hisco-partners.
Exceptions
1.Horserace[S.30(exception)]
Thesectiondoesnotrendervoid asubscriptionorcontribution,or an
agreementtosubscribeorcontribute,towardanyplate,prize or sum of
449.MukherjiJ reviews at p. 28 all theearlierauthorities.
450.HillVWilliamHills(ParkLane)Ltd,1949AC530(HL).
451. SeeRatnakalliGurannavVachalipu,AIR1923Mad434.
452. SeeBowenLJ inBridgerv Savage,(1885)LR 15 QB363,367.
453.AIR1959SC781:(1959)2SCR406.
454.Thiswas so held as early as 1883 inPringlevJafarKhan,ILR (1883) 5 All443.
455.ShibhoMaivLachmanDas,ILR(1901)23 All 165.
456.BeniMadhoDasvKaunsalKishoreDhusar,ILR(1900)22All452.
457.MohdGulamMustafaKhanvPadamsi,AIR1923Nag48.
458.GherulalParakhvMahadeodas,AIR1959SC 781: (1959) 2 SCR406.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

482. 342 Chapter 7 Legality of Object [S.30]
money,of thevalueor amount offivehundredrupeesorupwardsto the
winnerorwinnersof anyhorseraces;
2.Crosswordcompetitionsandlottery
"If skillplaysa substantial part in the result andprizesare awarded
according to the merits of the solution, the competition is not a lottery.
Otherwise itis.'"^^'Thus, literary competitions whichinvolvethe application
ofskillandinwhichaneffortismadetoselectthebestandmostskilful
competitor, are not wagers But where prizes depend upon a chance, that
is alottery.'*®^The Madhya Pradesh HighCourthas characterised lotteries
as wager. An agreement for payment of prize money on a lottery ticket came
withinthe category of wagering agreement ascontemplatedby Section 30.
Thecourtfurthersaidthatthe provisions of neither aCentralAct northat
of a State Act controlling the activities relating to lottery would change the
basicnatureof thetransaction.''^^Asuitforrecoveryof theprizemoneywas
not allowed. Thelotteryin question wasorganisedby the RaffleCommittee,
Indore, for raising funds for a Table Tennis Trust with due permission from
theStateGovernment.
ILLEGALANDVOIDAGREEMENTS
TheContractAct draws adistinctionbetweenanagreementwhichis
only void and the one in which theconsiderationor object is alsounlawful.
"Section 23 points out inwhatcases theconsiderationof an agreement is
unlawful,and in such cases theagreementis also void,thatis,notenforce
able atlaw.'"*^^Sections25 to 30 refer to cases inwhichtheagreementis
only void,thoughtheconsiderationis not necessarily unlawful. An illegal
agreement is one which isactuallyforbidden by the law; but a void agree
ment may not be forbidden, "the law may merely saythatif it is made, the
courtswill not enforceit".''^''Thus,every illegalcontractis also void, but
459.LordHewardCJ inColesvOdhamsPressLtd,(1936) 1 KB 416 (DC).
460.MoorevElphick,(1945) 2 All ER 155 (CA).
461.BoucheryRowsell,(1947) 1 All ER 870 (DC).
462.SubhashKumarManwanivStateof M.P., AIR2000MP 109. The DB upheld thedismissal
of asimilarsuit based on alotteryticketby relying on thedecisionof theBombayHigh
Courtin the case of SirDorabjiJamsetjiTataLtdvEdwardP.Lance,AIR1917Bom 138.
Inthatcase(ShekharChandJain)it was astatelotteryanda suitfoundedon aticketsold in
thelotterywasdismissedholdingthatthoughtheStatelotterywasnotillegal,it was none
theless in thenatureof a wager. Thecourtcited thedecisionof theSupremeCourtinB.R.
EnterprisesvStateof U.P., (1999) 9 SCC 700: AIR 1999 SC 867, the SupremeCourtrefused
torecogniselotteryas atradeorprofession.Even the Statesponsoredlotterieshave thesame
element of chance asprivatelotteries,there being noapplicationof skill in either case. The
Statesponsorshiponly creates public confidence byrulingout fraud, etc.Imposingataxon
lotterydoesnotgive it thestatusof atradeorprofession.
463. SeePringlevJafarKhan,ILR(1883)5 All443,445.
464.SirWilliamAnson'sPrinciplesoftheEnglishLawofContract(20thEdn,1952)
205, cited bySubbaRaoJ (as he then was) inGherulalParakhvMahadeodas,supra at
p.341.https://t.me/LawCollegeNotes_Stuffs

483. ^0] Illegalandvoidagreements343
avoidcontract is notnecessarilyillegal.How^ever,thedistinctionis not
aWaysclear.
Maintransactionvoidineithercase
Anothersimilaritybetweenanillegaland avoidagreementis that in
eithercase,themainortheprimaryagreementisunenforceable.Nothing
canberecoveredundereitherkindofagreementandifsomethinghasbeen
deliveredor somepayment made, it cannot berecoveredback.
Noactionunderthemaintransaction
As laid down by the Supreme Court:
The principle of public policy is this: exdolomala nonorituractio.
No courtwilllenditsaidto a manwhofoundhiscauseofactionuponan
immoralor anillegalact.If thecauseofactionappearstoariseex turpe
cause,or thetransgressionof apositivelaw,there the courtsaysthat he
has no right to beassisted."*®^
Thus,aguiltypartyhasnorightofactiononanillegalcontract.Aperson
whocontractedtohireapremises,unknownto thelandlord,forholding
a meeting for ablasphemouspurpose, was not allowed to sue the land
lordforbreachofcontractwhenthelandlord,onlearningthe real pur
pose,refusedtogivethepremises."*^®Moneylent for anillegalpurpose is
irrecoverable."*^^Arenewedpromiseto pay anillegaldebt will beequally
tainted by theillegality.''^^In suchcasesthe lawleavesthe partieswhereit
findsthem. "The court will help neither party. 'Let the estate lie where it
falls'.'"*®Whereapersonpaidasumofmoneyto acharitableorganisation
and promisedto pay more if a knighthood was procured whichnevermate
rialised,hecouldnotrecoverbackthemoney.''^""Whereasumofmoney
was paid to secure aGovernmentjob throughhigh-profilepolitical leaders
andtherebeingnosuccess,an attemptwasmadeto takebackthemoney.
Therecipientissuedachequeinrefund.Thepaymentof thechequewas
notallowedto beenforced.NoprosecutionunderSection138Negotiable
InstrumentsAct was allowed because there was no legally enforceable debt
orliability.'*^^Wherea contractislawfulat itsinception,but isperformed
in anunlawfulmanner,no recovery may be allowed. Thus, in acontractof
transport,thelorrywasoverloaded,whichwas an offenceundertheRoad
TrafficAct, 1988 and the goods having been damaged during thejourney,
465.KedarNathMatanivVrahladRai,AIR 1960 SC 213, 217: (1960) 1 SCR 861;Koteswar
VittalKamathv K.R. Baliga & Co, {1969) 1 SCC 255, 265: AIR 1969 SC 504.
466.CowanvMilbourn,(1867) 36 LJ Ex 24.
467. C.H.T. Ltd V Ward,(1965)2 QB 63:(1963)3WLR1071(CA),money lent for betting
purposes.
468. HillVWilliam Hills (Park Lane)Ltd,1949 AC 530 (HL).
469.SurasaibaliniDebivPhanindraMohanMazumdar,AIR1965SC1364.
470.Parkinsonv CollegeofAmbulanceLtd,(1925) 2 KB 1.
471.VirenderSingh vLaxmiNarain,(2006)135 DLT 273.https://t.me/LawCollegeNotes_Stuffs

484. 344 Chapter 7Legalityof Object [S.30]
theconsignorwasnotallowedtorecovertheloss.Hismanagerhadknowl
edge of theoverloading.''^^
"When it is apparenton thefaceof a contractthat it is unlawful,it is the
duty of thejudgehimselfto take anobjectionand that too, whether or not
the parties take orwaivetheobjection.It is,therefore,open to the court
evenwithout a pleading toconsiderthe question whether the agreement
relied on or proved in the case isimmoral.'"'^^
Exceptions
1.Wherethecontractisstillexecutory
Where thecontractis still executory, in the sense that nopartof the ille
galpurposehasbeencarriedintoeffect,themoneypaid orgoodsdelivered
under it mayberecovered."But if he waitstill theillegalpurposeis carried
out, or if heseekstoenforcetheillegaltransaction, in neither case can he
maintainanaction."Inthatcase,''^'*adebtorexecutedatransferto deceive
his creditors, but before any creditor could bedeceived,he repented and
sought torecoverback the property, which he wasallowedto do. Itseems
that the repentance of the debtor was due to the failure of his design. After
executingthe transfer he had summoned a meeting of his creditors to effect
a compromise, but the creditors did not turn up. In subsequent cases the
principle of locus poenitentiae has been confined to cases where the repent
ance is not due to the failure of the illegal object, but occurs much before
any attempt is made to carry out theillegality.''^^This seemsto emergefrom
BigosVBowsted'^'^^where the court did not allow certain share certificates
to berecoveredwhichwere delivered as asecurityunderanagreementto
exchange privately the English currency with Italian, onepartyhaving
backed out.PritcharedJ stated the effect of theauthoritiesin the fol
lowing words: "The defendant and the plaintiff were in pari delicto, which
meansthatthey were equally guilty.The law isthatthecourtwill help a per
son who repents, provided his repentance comes before the illegalpurpose
has beensubstantiallyperformed."
The learned judge thenpointedoutthatthe present case showedfrustra
tion,notrepentance.
Wheremoney ispaidto apersonto induce him tocommitacrime,canit
be recovered before he doesanythingtocommitthe crime? In such cases, the
answer will depend upon the degree of criminality. It is suggested in Anson:
472.Ashmore,Benson,Pease & CoLtdv A.V.DawsonLtd,(1973)1WLR828;Jagannath
TewarivGopalPrasad,(1983) 31 BLJR 17 (Pat), where rent paid over and abovecontrolled
rent with full knowledge could not be recovered back.
473.KotharajuNarayanaRao vTekumallaRamachandraRao, AIR 1959 AP 370.
474.MellishLJ inTaylorvBowers,(1876)LR1 QBD291,300.See alsoShantaAgarwalv
BaldotaBros, 1971 SCCOnlineBom 134. Blackmoneyallowed-toberecovered.
475. SeeKearleyvThomson,(1890) LR 24 QBD 742 (CA).
476. (1951) 1 All ER 92. Anillegalitycannotbewaivedbyprivateagreement,WarmanSriniwas
Kim vRatilal,AIR1959SC 689:1959Supp(2) SCR 217.https://t.me/LawCollegeNotes_Stuffs

485. [S. 30] Illegaland voidagreements345
"ItseemshighlyunHkelythat thecourt willallowanylocuspoenitentiae
atallin themostseriouscasesofmoralreprehensibility,asforexample,
where money is paid toanotherto commit murder.
The parties' conduct andrelativemoralcapabilitycould berelevantin
determiningwhether,as a matter ofpublicpolicy,the courtwouldtake
noticeof theillegality.On thefactsof thecasethe courtdisregardedthe
plaintiff'sillegalitybecausehe had anunanswerableclaimagainstthe
defendantfor fraudulent misrepresentationand becausethe defendant's own
moralculpabilitygreatlyoutweighedthat of theplaintiff's."^'
Whereafathertransferredsomeofhissharesto hissonwithoutreceiving
any price, for the purpose of defeating his creditors, and the son refused to
return thesharesto thefather,the father wasallowedrecovery.The court
said that one of the major exceptionsto the pari delictorulearises where the
transferor repentsbeforethe transaction is carried intoeffect.In this case,
the illegalpurposewas to defraud the creditors but no creditor could be
defrauded.Accordingly,it wasnot too latefor the fathertochangehismind
andrecoverthesharesfromhisson."'^'
2.Partiesnot"inparidelicto"
It issettledlaw that wherethe parties are not in pari delictothe lessguilty
may be able to recover money paid, orpropertytransferred, under the con
tract.Thispossibilitymay arise inthreesituations:
First, thecontractmay be of a kind made illegal by a statute in the interest
of aparticularclass of persons of whom the plaintiff is one.
Secondly, theplaintiffmust have beeninducedto enter into thecontract
by fraud or strong pressure.
Thirdly, there is some authority for the view that a person who is under
afiduciaryduty to the plaintiff will not be allowed to retain property,
or to refuse to account for moneyreceived,on the grounds of an illegal
transaction."*'"
One illustration is the decision of the Privy Council in Mistry Amur Singh
VKulubya^^^Certainland was given to anon-Africanunder a lease in viola
tion of a law for the protection of Africans in Uganda. The action was by the
Africanpartyforrecoveryof rent andpossession.The other party pleaded
illegality. Allowing the action, their Lordships quoted the following passage
from the judgment of LordMansfieldin Browning vMorris:'^^'^
But wherecontractsortransactionsareprohibitedby positivestatutes
for the sake ofprotectingone set of men fromanotherset of men, the
one, from their situation and condition, being liable to be oppressed or
477. LawofContract(23rd Edn byGuest,1972) 359.
478.SaundersvEdwards,(1987) 1WLR1116 (CA).
479.TribevTribe,1996Ch107(CA).
480. SeeFakirChandSeth vDatnbarudharBania,AIR1987Ori50.
481.1964AC142 (PC).
482.(1778) 2Coup790,791.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

486. 346Chapter7 Legality of Object [S.30]
imposedupon bythe other; there, the parties are not inparidelicto;and
infurtheranceof thosestatutes,the person injured may bring hisaction
anddefeatthecontract.
Where one of the parties was induced by a fraud to make payments under
acontract,which,unlcnownto him was ofchampertousnature,and
where an agent of an insurance company fraudulently induced a woman to
take out an illegalinsurance,"'^''in either case the payments were allowed to
berecoveredback.Theresultwouldhavebeenotherwiseifnofraudwas
involved."'®^Where payment was made in advance for purchasing a paddy
crop not knowing that a control order was being violated, it was allowed to
berecovered.''^^Whereadditionalpayment was made to acreditorto induce
him to accept a scheme of compromise because his acceptance would have
influencedtheothercreditors,thedebtorwasallowedtorecoverbackthe
same. Thecourtsaid:''^^"Itis saidthatbothpartiesare inparidelicto. It is
truethatbothare in delicto, because the act is afraudupon theothercredi
tors, but is notpardelictum, because, one has the power to dictate, theother
noalternative,buttosubmit."
Paymentsobtainedby a person in breach of hisfiduciaryduty can also
berecoveredbackeven if thetransactioninvolved illegality.Thus,alaw
yer would be bound to refund the moneyobtainedby him from his client
under achampertousagreement."*®^In anexporttransaction,the goods were
falsely invoiced to enable the buyer to evadeimporttax. Theconsignment
was stolen. Theinsurer'sattemptto escapeliabilitybecause of the illegality
involved did not succeed.Therewas nodeceptiontowardstheinsurer,nor
was theinsuranceclaim baseduponthe illegalcontract.''®'
The SupremeCourtrefusedtointerferein amatterof rentfixation
becauseit wasfoundthatwhateverrentthepartieswerepayingandaccept
ing was theresultoftheirvoluntaryunderstanding."Thereis no element of
compulsionorexploitationandbothpartieshave byconsensuscontravened
the provisions of law fortheirmutualadvantage.'"*'"
Causeofactionundervoidcontract
Apartyto a voidcontractisentitledto file asuitfor itsenforcement
andin thealternativetoprayforrefundofmoneypaidunderthecontract.
Itcannotbe saidthattheplaintundersuch acontractdoesnotdisclosea
causeofactionorthatitshouldberejectedornotentertained.Thecourt
483.ReynellvSprye,(1852) 1 De GM&G660: 42 ER 710.
484.HughesvLiverpoolVictoriaLegalFriendlySociety,(1916) 2 KB482.
485.HarsevPearlLifeAssuranceCo,(1904)1 KB558.
486.FakirChandSethvDambarudharBania,AIR1987Ori50.
487.AlkinsonvDenby,[1861)6'ir{&cN77S;affirmedAtkinsonvDenby,(1862)7H&;N934:158
ER749.
488.Helsby,re, (1894) 1 QB742.
489.Euro-DiamLtdvBatburst,(1988) 2WLR517 (CA).
490.BudbwantivGulabCbandPrasad,(1987) 2 SCC 153: AIR1987SC1484,^7erNATRAjANJ.https://t.me/LawCollegeNotes_Stuffs

487. Illegal and void agreements 347
hastodecideto what extent and for what reason the contract isvoid.
TherecanbedecisiononvoidnessorillegaHtyonlyaftertakingthesuiton
record.''®^
3.Whererecoverypossiblewithoutrelyingonillegalcontract
Transactionsarisingoutofanagreementtodoanillegalact,iftheyare
suchthatwhentakenseparatelyfromtheillegalact,theywouldbevalid,
theywouldremainvalidandenforceablenotwithstandingtheillegalityof
theagreement."*'^InMistryAmurSinghvKulubya'^"wheretheactionwas
torecoverpossessionof propertyleasedout inviolationof a statute, their
LordshipsofthePrivyCouncilobserved:"Hewouldhavepresentedhis
claimwithoutbeingunderanynecessityofsettinguptheunlawfulagree
mentsin hisplaint.Herequiredno aidfromtheillegaltransactioninorder
toestablishhiscase.Itwassufficientforhimtoshowthathewasthereg
istered proprietor of the plots oflandand that the defendant was in occu
pation,withoutpossessingtheconsentinwritingof theGovernorfor such
occupation,and,accordingly,thedefendanthadnorighttooccupy."
Similarly,machinetoolsdeliveredunderanillegalsalewereallowed
toberecovered.'"''TheCourtofAppeallaiddownthat aman'srightto
hispropertywillbeenforcedasagainstapersoninpossessionevenifhe
obtainedpossessionunderanunlawfulagreement.TheSupremeCourt
of Indiaappliedthisprinciplein Surasaibalini Debt v Phanindra Mohan
Mazumdar^^^Thecourtallowedapersontorecoverpossessionofhisprop
erty and business,whichhehadmade over to hisbrother-in-lawfor evasion
oftaxes.InacasebeforethePrivyCouncilonappealfromMalaya:''^®
Theplaintiffpurchasedalorryfromthedefendantandoperatedit
on his own account. But it had to beregisteredin the defendant's name
becauseonlyhe had ahaulagelicenceinrespectof it. Thedefendant
snatched the lorry from the plaintiff without the latter's consent and the
plaintiff sued him torecoverback hispossession.
Theactionwasallowed.LordDenningsaid:"Althoughthetransaction
betweentheplaintiffandthedefendantwasillegal,neverthelessitwasfully
executedandcarriedout; and on thataccountitwaseffectivetopassthe
491.GovindGoverdhandasDagav FieldMining&IspatLtd,(2009)6 Mah LJ398.
492.BOIFinanceLtdvCustodian,(1997)10 SCC 488: AIR1997SC 1952.
493.1964AC 142 (PC).
494.BowmakersLtd v Barnet Instruments Ltd, 1945KB65(CA).
495.AIR1965SC1364:(1965)1SCR861.SaudagarChaudharyvBipati,AIR1986Pat211,
recoveryallowedwithoutbringingin the unlawfulagreement.GhanshyambhaiDattaramv
BabubhaiShankarlal,1984 GLH 247, allowed alandlordto sue for eviction of atenantwho
enteredpremisesbypayingadditionalconsiderationinviolationofanAct.TinsleyvMilligan
(1994)1AC340(HL),heldbyamajoritythatwherea propertyistransferredbyoneperson
toanotherinpursuanceofanunlawfulpurpose,thetransferorcanrecoverbacktheproperty
under the doctrine of resultingtrust and without havingto rely on the transaction whichis
illegal.
496. Singh vAli,1960 AC 167 (PC).https://t.me/LawCollegeNotes_Stuffs

488. 348Chapter7LegalityofObject [S-30]
propertyinthelorrytotheplaintiff.Therearemanycaseswhichshowthat
whentwopersonsagreetogetherin aconspiracytoeffectafraudulentor
illegalpurpose—andoneofthemtransfersthepropertytotheotherinpur
suanceoftheconspiracy—then,assoonasthecontractisexecutedandthe
fraudulentorillegalpurposeisachieved,thepropertywhichhasbeentrans
ferredbyoneto theotherremainsvestedinthetransferee,notwithstanding
itsillegalorigin.Thereasonisthatthetransferor,havingfullyachievedhis
unworthyend,cannot beallowedto turnroundandrepudiatethemeans
bywhichhedidit—hecannotthrowoverthetransfer.Andthetransferee,
havingobtainedtheproperty,canasserthistitletoitagainstalltheworld,
notbecausehe has any merit of his own, butbecausethere is no one who
canassertabettertitle to it. Thecourtdoes notconfiscatepropertybecause
ofillegality—ithas no power to do so."
When a contract isrepudiatedon account of itsillegality,the innocent
partymayrecovercompensation"proportionatetotheamountofwork
done".InClayvYates,'^^'^abookhavingbeenprinted,theprinterrefused
to printthededicationbecauseitwaslibellous,itwasheldthat thepainter
couldrecoveron quantum meruitbasisfor the work donebyhim.
4.Collateraltransactions
The onlymaterialdifferencebetweenanillegalandvoidagreement
relatesto theireffectupon thecollateraltransactions.Acollateraltransac
tion means a transaction subsidiary to the main transaction. For example,
wheremoneyisgivento apersontoenablehimto payawageringdebt,the
wageris the maintransactionand the loan issubsidiaryto it. If the main
transaction isillegal,forexample,smuggling,acollateraltransaction like
moneygiventoenableapersontosmuggle,willalsobe tainted with the
sameillegalityand the moneywill beirrecoverable.''^®Butif the main trans
actionisonlyvoid,itscollateraltransactionwillremainenforceable.Thus,
inGherulalParakh vMahadeodas,'^^^the SupremeCourtallowed apartner
torecoverfrom his co-partner his proportionate indemnity forlossessuf
feredby him in entering intowageringtransactions on behalf of the firm,
wageringbeing only void.
TheSupremeCourt has alsoemphasisedthat a landlord and his tenant
cannot be regarded as on par inallrespectsand,therefore,where the ten
ant had to payRs2000to thelandlordto secure possession, incontraven
tion of the Rent Act, the landlord's assurancethattheamountwould be
adjustedtowards rent was bindingonhim.^""The court,however,took care
to point out that the doctrine of in pari delictowould not be attracted when
497. C1856) 1H&N73: 156 ER1123.
498. SeeC.H.T.Ltd v Ward, (1965) 2 QB 63: (1963) 3 WLR 1071 (CA), money lent forbetting
was held to beirrecoverable,ChandraSreenivasaRao vKorapattiRajaRamaMohanaRao,
AIR 1952Mad579, money given for an illegalmarriage,not recoverable.
499.AIR1959SC781:(1959)2SCR406.
500.Mohd Salimuddin vMisriLai,(1986) 2 SCC 378: AIR 1986 SC 1019.https://t.me/LawCollegeNotes_Stuffs

489. [S.30] Illegal and void agreements 349
there is noelementofcompulsionor exploitation and both parties have by
consensuscontravened the provisions of law for their mutual advantage.
Followingthis, theSupremeCourt did not allow adjustment for an amount
which thetenanthad been paying inadditionto thestandardrent. There
was no evidence of anycompulsion.^"^
5.Severance
Where anagreementis only partlyillegal,the court willenforcethepart
which is not illegal provided that it isseverablefrom the rest of the agree
ment. Where a partnership was created in a truck alongwith a route per
mit whichamountedto apartsale of both, thecourtheldthatthe whole
agreement was vitiated,althoughit was only the sale ofpermitwhich was
illegal butthatwas not severable from the rest of theagreement.^°^A con
tractto provide money to apersonto enable him to establish his share in
an estate inreturnfor a promise to pay back the money, and also a share in
the amountthatwould be recovered from the estate, has been held by the
SupremeCourtto be a compositecontractfor one consideration making the
two types ofpaymentnotseverable.^"^
In manycasesofcontractsrelatingto trade or legalproceedingsthe courts
knockout the objectionable clause of the agreement and allow the rest to
be enforced. For example, Section 27 saysthatthe agreement shall be void
tothatextent, i.e. to the extent of unreasonablerestraint.InNordenfeltv
MaximNordenfeltGuns &Ammunition thatpartof thecontractwas
held to be not binding which imposed unreasonable restraint. Similarly, in
twocases^"^relatingtoseparationdeedsbetweenahusbandandwifewhich
imposedrestraintupon legal proceedings, theCourtof Appealstruckout
therestrainingpart.
Applying these principles to the facts, theCourtof Appeal heldthatthe
wife's covenant not to sue was the onlyconsiderationshe gave for the hus
band's promise of annuity, the whole of the agreement became void.
Wherethecontractisseverable,itwouldmakenodifferencethatthe
partieshadknowledgeof the factthattheircontractcontainedan illegal
element.
Ahousewasleasedoutonrentsubjecttotheconditionthatthelessee,
inadditionto paying thecontrolledrent,wouldalsopurchasecertain
chattelsfrom the lessor for an agreed price. The price, being much more
thanthenaturalvalue ofthegoods,thetransactionin essenceamounted
to paying apremiumfor thepossessionof the house. The lesseeoccupied
thepremisesbutofferedto pay only thenaturalprice of thegoods.
501.BudhwantivGulabChandPrasad,(1987)2SCC153:AIR1987SC1484.
502.GhulamAhmedvMohdIqbal,AIR1970J&K165.
503.RattanChandHiraChandvAskarNawazJung,(1991) 3 SCC 67.
504.1894AC535.
505.GoodinsonvGoodinson,(1954) 2 QB 118 (CA).https://t.me/LawCollegeNotes_Stuffs

490. 350 Chapter 7 Legality of Object [S.30]
The lessor sought eviction on the ground that the whole agreement was
unlawful. The court did not agree with him. Thearrangementhad two
aspects,namely,the agreement of lease and the promise to pay a premium.
The latter part was unlawful and it beingseverablefrom the rest, the lease
wasvalid.
Inanothercase,^°^ahusbandpromised to his wifeseparatemaintenance,
sheagreeingon her part not to sue him as long as he paid, nor to sue for
divorce even if he lived inaduhery.The husband defaulted with the pay
ments and contended, as against the wife's action, that, owing to the exon
eration for adultery, the whole agreement was unlawful. The court allowed
the wife's action sayingthat only that clause of the agreementwas unlawful
by which the husband had bought hisfreedomfrom theconsequencesof
adultery.^"*^
To secure the performance of a contract for purchase of shares, aguaran
tee and mortgage were provided by way of additional security.They turned
out to beillegal.Sincethey were collateral and,therefore,severable,the
maintransactionremainedenforceable.^"^
506.AilionvSpickermann,(1976) 2WLR556.
507.GoodinsonvGoodinson,(1954) 2 QB 118(CA).
508.SeealsoBennetvBennet,(1952) 1 KB249(CA).
509. Carney v Herbert, 1985 AC 301:(1984)3 WLR 1303(PC).BOIFinance Ltd v Custodian,
(1997) 10see488: AIR 1997 SC 1952, notified persons under the SpecialCourt(Trial
of Offences Relating to Transactions in Securities) Act, 1992, a transaction for transfer of
shares, falling partly within the category of transfer by notified persons, rest of the transac
tion being severable was valid.
Visitebcexplorer.comtoaccesscasesreferred
tointhebookthroughEBCExplorer™on ||||||««^
seeOnline*;alongwithupdates,articles,videos, ExplOTGr^
blogsand a host of differentresources. companionresourcesforlegalresearch
Thefollowingcasesfrom thischapterareavailable 2^
throughEBCExplorer™:
•BOIFinanceLtdvCustodian,(1997)10 SCC488 casepilot
•CentralInlandWaterTransportCorpnv BrojoNathGanguly,
(1986)3SCC156
•DTCVMazdoorCongress,1991Supp (1) SCC600
•FakirChandSethvDambartidharBania,AIR1987Ori50
•GherulalParakhvMahadeodas,AIR1959SC 781: (1959) 2SCR406
•NiranjanShankarGolikarivCenturySpg & Mfg CoLtd,AIR1967SC1098:
(1967)2SCR378https://t.me/LawCollegeNotes_Stuffs

491. 8
DischargeofContract
Modes of discharge
After theformationof a contract, the nextstageisreached,namely,the
fulfilmentof the objectthe parties had in mind.Whentheobjectisfulfilled,
the liability of eitherpartyunder thecontractcomes to an end. Thecontract
is then said to bedischarged.But "performance" is not the only way in
which a contract isdischarged.A contract may bedischarged:
(1)byPerformance;[Ss.31-67]
(2) by Impossibility of Performance;[S.56]
(3) by Agreement; [Ss.62-67]and
(4) byBreach.^
PERFORMANCE OFCONTINGENT CONTRACTS
Definition
The expression"contingentcontracts"is defined in Section 31 of the
ContractAct:
S.31."Contingentcontract"defined.—A"contingentcontract"is a con
tracttodoornottodosomething,ifsomeevent,collateralto suchcontract,
doesordoesnothappen.
Illustration
Acontractsto pay SRs10,000 ifB'shouseis burnt. This is acontingentcontract.
Conditionalcontract
Itis asortofaconditionalcontractandtheconditionisofuncertain
nature. Acontractwhich is subject to a certain or an absolute type of condi
tioncannotbe regarded as a contingent contract. A contract, for example, to
pay a sum of money on the expiry of a time or on the death of a person is not
acontingentcontractbecausetheseeventsare of acertainnature.Thetime
or the person in question will definitely expire and the money will become
1. Ss. 39 and 73. Expiry of the period of limitation for enforcement of rights and obligations
under acontractis not a mode of discharge recognised by theContractAct. Lapse of time does
not put an end to rights and obligations under the contract, MahadeoNathujiPatilvSurjabai
KhushalchandLakkad,(1994)MahLJ 1145.
[351]https://t.me/LawCollegeNotes_Stuffs

492. 352Chapter8DischargeofContract [S.31]
payable.Whentheconditionisofuncertainnature,thenonlythecontract
can beregardedas trulycontingent.Forexample,a contract to pay a sum
ofmoneyon thedestructionof apremisesbyfire,is acontingentcontract,
forthatcontingencymayormaynothappen.Fromthis point ofview,all
contracts of insurance, are contingentcontracts.^Ordinarily, therefore, a
contingentcontractwillcontemplateafutureevent.Butacontractmayalso
relate to an eventwhich has already happened and the only thing uncertain
beingthat thepartiesdo not knowwhichwayithappened.
Contingency to be collateral tocontract
Thesectionemphasisesthat thecontingencycontemplatedbythe contract
must becollateralto thecontract.It meansthatacontracthasalreadyarisen
or asubsistingcontractisthere,but itsperformancecannot bedemanded
unlessthecontemplatedeventhappensordoesnothappen.Sucha contract
has to bedistinguishedfrom a proposal which does not result in a contract
unless the condition is first fulfilled. For example, an offer to pay a sum of
moneyon thediscoveryof amissingdog is not a contract at all. Itbecomes
a contract only when the dog is searched out and then it is no more contin
gent.On theotherhand, acontracttopayasumofmoneyon thelossof a
shipisacontingentcontract.Thecontractisalreadythereandisnottoarise
onloss,but theperformancecan bedemandedonly on the lossof theship.
Acontractto payasumofmoneyin returnforsomeworkor labourisalso
notcontingent,no contractexistsand nowagescan bedemandedwithout
performingtheworkfirst.In anagreementforsaleofland,thecondition
wasthatthesale,deedwouldbeexecutedafterthe sellerobtainedpermis
sion for use of the land as.village land. It was heldthatthecontractwas not
contingent.Theagreementmatured into a bindingcontract oncepermission
wasobtairied.It wasspecificallyenforceable.The suitfiledwithin three
years after obtainingpermissionwas not timebarred.^
A contract to buy land which is under dispute made with a party to the
dispute and to becomeoperativeif he wins the case, is a contingent contract,
its performance beingwhollydependentupon the result of the litigation. A
contingentcontractfailedbecausepermissionwasrequired(environmental
permission)from the authorityconcernedbut was not granted. Theneces
sity of such clearance was clearly anticipated in thecontractas a prerequisite
to its performance. TheSupremeCourt held that consequent restoration
of the parties to the position in which they werebeforethe contract was
2.ChandulalHarjivandasvCIT,AIR 1967 SC 816, 818: (1967) 1 SCR 921, 925. Commission
payableonsuccessoflitigation,this part washeldto be acontingentcontract.N.Peddanna
OgetiBalayyavKottaV.SrinivasayyaSettiSons,AIR1954SC26. Acontractoflifeinsurance
is also a contingentcontract. SeeCommr of Excess Profits Tax v Ruby General Insurance Co
Ltd, AIR 1957SC669.ParvathammavUma,AIR 2011Kant 58, a contract for transfer of a
fragmentedpieceof land to beimplementedon the repealof an Actwhichpreventedfragmen
tationwas held to be void because thecontingencywas of anuncertainnature.
3. RojasaraRamjibhaiDahyabhaivJani Narottamdas Lallubhai,(1986)3 SCC300: AIR 1986
SC1912.https://t.me/LawCollegeNotes_Stuffs

493. [S.31] Performance of contingent contracts 353
proper.''The courtdistinguishedsuchfailurefromimpossibihtyof perfor
mance.Thefailureof acontingentcontract is due tonon-happeningof an
anticipatedevent.Whereas impossibilityis due to happening of an unantic
ipatedevent.^A contract forsaleof property was subject to the condition
that itwouldbeapprovedby theseller'slabour.No suchapprovalbecame
available.The contract failed. Earnest money directed to be refunded with
18percentinterest.^
A, whosepropertywasattached,contractedto sell the same to B and
undertook to apply to the court for the approval of the sale. A did apply
to the court in the performance of his undertaking, but the courtrejected
hisapplication.ThereuponA sold thelandto C. B suedhimfor theland.
It was held that the contract of sale to B was a contingent contract, being
subject to ,the approval of the court, andthatapproval having not been
given, the contingency did not happen and hence its performance could not
be demanded.^ Acontractto sell a piece ofagriculturalland which was the
subject-matterof the ongoingconsolidationproceedings was held to be of
contingentnaturebecausenobodycouldtellbeforehandtowhomtheland
mightbecomeallotted.It wasnotenforceableuntilandunlesstheconsoli
dationwouldleavethelandinthehandsoftheseller.®
Contingencydependinguponwill of aperson
Acontractwill be no lesscontingentwhere thehappeningornon-hap
peningof thecontingencydependsuponthe will of aparty.Acontractthe
performanceofwhichdependsuponthepromisee'smarriageis acontingent
contract,thoughhismarriageis acontingencyexclusivelywithinhis con
trol. Asituationof thiskindwas before theMadrasHighCourtin Secyof
StateforIndiav A.].Arathoon.^The case involved supply oftimberto a
GovernmentDepartment.Thetimberwas to beapprovedbythesuperinten
dent of a factory. He didnotapprove thetimberactuallysupplied. The sup
plier sued theGovernmentforbreachofcontractcontendingthatthetimber
correspondedwithitsdescriptionin thecontractand,therefore,itshould
have beenapproved.Therearetwopossibleapproachesto thesolutionof a
problemof thiskind.Oneis toregardthecontractasabsolutesubjectonly
4.SAILVTycoonTraders,(2015) 5 SCC 767.
5.GianChandv YorkExportsLtd,(2015) 5 SCC609:(2015)3 SCC (Civ) 189.
6.NandkishoreLalbhaiMehtavNewEraFabrics(P)Ltd,(2015)9 SCC 755:AIR2015SC
3796.
7.DalsukhM.PancholivGuaranteeLifeandEmploymentInsuranceCoLtd,AIR1947
PC182.
8.TirthanandSingh v SkZerMohammad,(2001) 2 BLJR 1499 (Pat).MilleniaRealotes(P)Ltd
VS]RInfrastructure(P)Ltd,(2005) 6KantLJ 36,contractforsub-leaseofallottedsiteafter
obtainingpermissionof the Board, notcontingent,enforceableas it is lessor'sresponsibility
toobtainpermissionor faceconsequencesofbreach.
9.ILR(1869-70)5Mad173; J.P.Buildersv ARamadasRao,(2011) 1 SCC 429,contingency
dependinguponthe act of aparty(endogenouscontingency)oruponhappeningsindependent
of theparties(exogenous),contingencylinkedwitha party'sconductcannotbeavailablefor
invokingimpossibility.https://t.me/LawCollegeNotes_Stuffs

494. 354 Chapter8Dischargeof Contract [S.31]
toapproval,inwhichcasethecourtshouldbeabletoseewhetherthegoods
answeredtheirdescriptionin the contract and the rejection being arbitrary,
it should be setaside.An argument in the support of this approach is that
ifgoodscan berejectedarbitrarilyatone'sownpleasureandsweet-will,
thenitcanaswellbesaidthatthereis nocontractat all.Theso-called
contractwouldreduce itself to thisthattheGovernmentwouldbuy if the
SuperintendentsoUkes.This can hardly bedescribedas a contract. Hence,
togivesomemeaningto the contract, it would benecessaryto hold that
approval should not be arbitrarily refused.
The secondpossibleapproach is to regard the contract as contingent. The
fact of approval being collateral to the performance of the contract, its per
formance could not bedemandedtill such approval. The trialcourtadopted
the first approach. It feltthatthe Superintendentbeinghimselfapartyto the
contract,his decision could be biased and, therefore, his decision shouldnot
be final. But theMadrasHighCourtrejected thisapproachand followed
the other approach of regarding the contract as contingent. The contingency
was not fulfilled and hence there was no question of any action for breach.
The position would be different where the goods have already been sup
plied and the only thing that the contract says is that buyer shall pay when
he is in apositionto pay. This is not acontingentcontract.The liability to
pay has already arisen. The making of payment at one's ease was only a
personalconcession and it would have been an abuse of this concession to
prolong the payment for anunreasonabletime. Hence, the money was pay
ablewithinreasonabletime.
Acontractfor sale of, goods prescribing theconditionthatthe goods
would be inspected before despatch was held to be a firmcontract.The
importof materialspursuantto such acontractwasvalid.^"
Contingencyto beconditionprecedent
Generally, theconditionwhich is collateral to theperformanceof a con
tractis aconditionprecedent,thatis, it has to be satisfied first and then
performancecan be demanded. It has to be distinguished from acondition
subsequent, namely, aconditionwhich has to be satisfied after the forma
tionof thecontract.Where,forexample,apersonappliedforsharesin a
company subject to his beingappointedas a cashier in the company, it was
heldthatsharescouldnotbeallottedtohimwithoutfirstmakinghima
cashier. On theotherhand,where theapplicationfor shares wassubjectto
theconditionthattheapplicantwouldpaynothinguntilthecompanypaid
dividends,thecontractwas held to benotacontingentcontract.A valid
contracthadarisenalready;only thepaymentunderit wasdeferredto the
fulfilmentof acondition.Whereapersonagreed totransferhis vehicleand
permit,it was held to be a validcontractandnotcontingentorincomplete
10.CollectorofCustomsvRakeshPress, (1997) 10 SCC 457.https://t.me/LawCollegeNotes_Stuffs

495. [S.32] Performance of contingent contracts 355
onlybecausepermissionunder the MotorVehiclesAct wasnecessary.He
becomes bound to sign papers for applying fortransfer."
Similarly,wherea validcontracthasarisenbutis liable to bedefeated
on the happening of some subsequent condition, it will not be a contingent
contract.Where, for example,certainland is sold subject to aconditionof
repurchase on the happening of some event, it is not a contingent contract.
The SupremeCourthas laid down that a contract, stipulatingthaton the
day of the redemption of the mortgaged house by the plaintiff, the defendant
would execute a sale deed of the house in favour of the plaintiff, is a typical
illustrationof acontingentcontractwithinthemeaningof Section31.^-
Acontractfor the sale of an unspecified share inproperty;the sale deed
to be executed on actualpartitionof thepropertyhas been held to be not a
contingentcontractand is,therefore,capable of specificenforcement.^^In
anauctionofminingleave, thestatutoryprovisionwasthatbiddersshould
first get approval of thecompetentauthority. A bid was accepted subject to
theconditionofapproval.It was heldthatthenon-approvalof the bidder
preventedacontractfromarisingmakingitnotenforceable."
Whereenforcementdependsuponhappeningof an event[S.32]
S.32.Enforcementofcontractscontingentonaneventhappen
ing.—Contingentcontractstodoornottodoanythingif anuncertainfuture
eventhappens,cannotbeenforcedby lawunlessanduntilthateventhas
happened.
Iftheeventbecomesimpossible,suchcontractsbecomevoid.
Illustrations
[a) AmakesacontractwithBtobuyfi'shorseif AsurvivesC. Thiscontractcannotbe
enforcedby law unless and until C dies in A's lifetime.
{b)AmakesacontractwithBto sell ahorsetofiataspecifiedprice, if C,towhomthehorse
hasbeenoffered,refusesto buy him. Thecontractcannotbeenforcedby lawunless
anduntil Crefusestobuythehorse.
(c)Acontractsto pay 6 a sum ofmoneywhenBmarriesC.C dieswithoutbeingmarriedto
B.Thecontractbecomesvoid.
Thesectionlaysdowntwobasicprinciples.First,acontractto do an act
on thehappeningof afutureuncertainconditioncannotbeenforcedunless
anduntilthateventhappens."Second,if thehappeningofthatevent has
become impossible, thecontractbecomes void. Theillustrationsappended
to thesectionclarifyboththeprinciples.Anoptionto buysharesof abank
ifandwhenthebankisconvertedintoafinancialcorporationis acontingent
11.KhawazaBuxVMirzaMohammadIsmail,AlK19S4Alli3.
12.RamzaiivHussaini,(1990)1SCC104:AIR1990SC529.
13.HarbakhshSingleGill vRamRattan,AIR 1988P&H60.
14.AbhilashSingh vStateofU.P.,2004All LJ 557:2004AIHC1456.
15. On thehappeningof the requisite contingency, specificperformanceof thecontractcan be
demanded.RojasaraRamjibhaiDahyabhaivJaniNarottamdasLallubhai,(1986) 3 SCC
300;AIR1986SC1912.https://t.me/LawCollegeNotes_Stuffs

496. 356 Chapter 8 Discharge of Contract [Ss.33-34]
contract of this kind,namely,which is to be performed on the happening of
afutureuncertainevent.^^Acontractforthesale oflandwithafactorywas
to beperformedonly if the labour unionsagreedto the sale and further if
thechangeof landusewasapprovedby theappropriateauthority.None of
thesecontingenciescould befulfilledbecauseneither there was approval by
the labour unions nor by the relevant authority. Thecontractwas accord
ingly not allowed to be enforced against theseller.^^
Thecontractwouldalsonotbeenforceablewheretheeventdoesnot
happen in the waycontemplatedby the contract. Where a car was insured
against loss in transit, the car was damaged without being put in the course
oftransit,the insurer was held to be notliable.^®Once the event has hap
pened, the contingentcontractripens into an absoluteone."
Whenperformancedepends uponnon-happeningof an event[S.33]
S.33.Enforcementofcontractscontingentonaneventnothappen
ing.—Contingentcontractsto do or not to doanythingif anuncertainfuture
eventdoesnothappen,can beenforcedv^^henthehappeningofthatevent
becomesimpossible,andnotbefore.
Illustration
Aagreesto pay Ba sum ofmoneyif acertainshipdoesnotreturn.The ship issuni<.The
contractcanbeenforcedwhentheship sinks.
Wheretheperformanceof acontractdependsuponthenon-happeningof
an event,naturallythepartieshave towaittill thehappeningofthatevent
becomes impossible. When suchcircumstancescome to passthatshowthat
the event can no morehappen,thenonly theperformanceof thecontractcan
bedemanded.Theillustrationappendedtothatsectionmakes the sense of
thesectionclear. Anagreementto selllandprovidedthattheearnestmoney
wouldbereturnedin case thelandisnotifiedforacquisition.Unknownto
theparties,thelandwasalreadyundernotification.Thecontractbecame
impossible ofperformanceand,therefore,void ondeclarationunderSection
6 oftheLandAcquisitionAct.^°
Eventslinkedwithhumanconduct[S. 34]
S.34.Wheneventonwhichcontractiscontingenttobedeemed
impossible,if it isthefutureconductofalivingperson.—ifthefutureevent
onwhichacontractiscontingentisthewayinwhichapersonwillactat an
unspecifiedtime,theeventshallbeconsideredtobecomeimpossiblewhen
16.JethalalC.ThakkarvR.N.Kapoor,AIR 1956 Bom 74.
17.NandkishoreLalbhaiMehtavNewEraFabrics(P)Ltd,(2015)9SCC755:AIR2015SC
3796.
18. V.P.DesavUnionofIndia,AIR1958MP297.
19. N.PeddannaOgetiBalayyavKottaV.SrinivasayyaSetti Sons, AIR 1954 SC 26;Bashir
AhmadvGovtofA. P., AIR 1970 SC 1089. Where thecontingencywas neither pleaded nor
put inargumentat thetrialstage,thesame,was notallowedto beraisedinappeal.
20.GianChandvGopala,(1995) 2 SCC528.https://t.me/LawCollegeNotes_Stuffs

497. [S. 35] Performanceofcontingentcontracts357
suchpersondoesanythingwhichrendersit impossiblethathe should so act
within any definite time, orotherwisethanunderfurthercontingencies.
Illustration
Aagreesto pay Ba sum of money ifBmarries C.C marries D.ThemarriageofBto Cmust
now beconsideredimpossible,althoughit is possiblethatD may die, andthatC may after
wardsmarry B.
When the eventfor which the parties are waiting is linked with the future
conduct of a person, that is to say,where the contract is enforceableif a cer
tain person is to act in a certainway,the eventshall beconsideredto have
becomeimpossibleif that person does something which makes itimpossible
thathe should act inthatway in any definite time orwithoutfurthercon
tingenciesbeingfulfilled.Forexample,in Frost vKnight,thedefendant
promisedto marry the plaintiff on the death of his father. While the father
was still alive, hemarriedanotherwoman. It was heldthatit had become
impossiblethat he shouldmarry the plaintiffand shewas entitledto suehim
for the breach of the contract.Similarly,where a person promised to sell
certain land to the plaintiffwithin a certain time, but soldto another within
that time, it was held that the performance had becomeimpossibleor was
possibleonlyuponthefurthercontingencyofthedefendantbuyingbackthe
land in order to perform hiscontractwith the plaintiff.
Where there was a written agreement to buy thebenefitsof plaintiff's
invention if it was approved by theengineer,it was held that there was no
concludedcontractbecause theinventionwasnotapprovedby theengineer.^^
S.35.Whencontractsbecomevoid,whicharecontingentonhappen
ing ofspecifiedeventwithin fixed time. —Contingent contracts to do or
not to do anything ifaspecifieduncertain event happensvyithinafixedtime,
become voidif,at the expirationofthe timefixed,such event has nothappened,
orif,beforethetimefixed, sucheventbecomesimpossible.
Whencontractsmay beenforced,whicharecontingentonspecified
eventnothappeningwithin fixed time. —Contingent contracts to do or not
to doanything,ifaspecifieduncertain event does not happenwithinafixed
time, may be enforced by lawwhen the timefixedhas expired and such event
has not happened, or, before the timefixedhas expired, if it becomes certain
thatsucheventwillnothappen.
Illustrations
(a)Apromisesto payBa sumofmoneyifa certainship returnswithinayear.Thecontract
may be enforced ifthe ship returnswithintheyear,and becomesvoidifthe ship is
burntwithintheyear.
(b)Apromisesto payBa sumof moneyifa certainshipdoes not returnwithinayear.The
contract maybe enforcedifthe shipdoes not returnwithintheyear,or is burntwithin
theyear.
21. (1872)LR7 Exch 111.
22. Pym v Campbell, (1856) 6El&Bl370: 119 ER 903.https://t.me/LawCollegeNotes_Stuffs

498. 358Chapter8DischargeofContract [Ss.36-37]
S.36.Agreementscontingentonimpossibleevents,void.—Contingent
agreementsto do ornotto doanything,if animpossibleeventhappens,are
void,whethertheimpossibilityoftheeventisknownornottothepartiestothe
agreementatthetimewhenit ismade.
Illustrations
{a)Aagreesto pay61000rupeesif twostraightlinesshouldencloseaspace.Theagree
mentisvoid.
(b)Aagreesto pay B 1000rupeesif 6willmarry/A'sdaughterC.Cwasdeadatthetime of
theagreement.Theagreementis void.
These provisions are selfexplanatory.
PERFORMANCE OFCONTRACTS
Section 37 saysthat"thepartiesto acontractmust eitherperformor
offer to perform, theirrespectivepromises...."Thus, eachpartyis bound
to perform his obligation under the contract, unless the performance is dis
pensedvi^ithor excused under the provisions of theContractAct, or of any
otherlaw.^^Section 37 which laysdow^nthe obligation to perform proceeds
asfollows:
S. 37.Obligationofpartiestocontracts.—Thepartiesto acontractmust
eitherperform, or offer to perform theirrespectivepromises, unless such per
formanceisdispensedwith orexcusedundertheprovisions of this Act, or of
anyotherlaw.
Promises bindtherepresentativeofthepromisorsin case ofthedeathof
such promisorsbeforeperformance,unless acontraryintentionappearsfrom
thecontract.
Illustrations
(a) A promises to delivergoodstoSona certain day onpaymentofRs1000.yAdiedbefore
thatday./A'srepresentativesare bound to deliverthe goods to S,and Sisbound to pay
Rs1000to/A'srepresentatives.
(b)A promises to paint a picture for S by a certain day, at a certain price.Adies before the
day.The contract cannot be enforced eitherby/A'srepresentatives or by6.
Obligationofpartiestoperform
The buyer of property retained some money so as to compel the seller to
perform certainobHgations,likeevictingtenants and handing over vacant
possession.Therelevantdocumentrevealedthetransactionto be a salewith
consensus ad idem. The court said that non-payment of apartof the sale
considerationcould not give a cut at the veryrootof thecontract,since it
23. S. 37.Performancemay bedispensedwith, forexample,byagreement[S.62] or it may be
excused under S. 56 by superveningimpossibilityof performance. Syndicate Bank vR.
Veeranna,(2003)2 SCC 15: (2003) 5 Kant LJ 1, the bank had the right under the agreement
to vary interest upwards up to a certain percentage.The exerciseof this power did not require
that the borrower should have been put on notice.https://t.me/LawCollegeNotes_Stuffs

499. [S.37] Performanceofcontracts359
was a concludedcontract.^''Anagreementwas signed by thepartiesand
fully acted uponwithoutthe need forexecutinganyfurtherdocuments.The
agreementwasdescribedat its foot as apreliminaryandtentativedraftfor
discussionpurposesonly. It was held to be a completeagreemententitling
theclaimanttorelief.^^
Submissionoftenderisproposal
When a tender issubmittedinresponseto aninvitationit is aproposal
andnotacontract.Itrequiresto be accepted. Thevalidityperiodof the
tender as specified in thetenderitself was fourmonths.Naturallyno accept
ance could be made after expiry of such period. The forfeiture of the secu
rity depositamountby accepting the tender after validity period and failure
ofperformanceby tenderer was notproper.^^
Promisesbindrepresentatives
The proviso to the section says that a promisebinds.therepresentatives
of thepromisorsin case of his death, unless acontraryintentionappears
from thecontract.TheCuttackHighCourtcame to theconclusionthat
this principle would apply evenif the promisor has left behind no legal heir.
Thecourtsaid: "If thecontractis legal, and enforceable, then even if one of
the parties to the contract dies leaving no heir, the persons, who acquired
interest over thesubject-matterof thecontractthroughthatdeceasedparty
would be bound by thecontractandspecificperformance can be enforced
against such persons." However, this legalproposition in no way helped the
appellant as she had failed to establish existenceof the alleged agreement.
Clauseforrenewal
Acontractcontaineda clause for renewal. Thepartyhaving theright
to do sounderthecontract,invoked therenewalclause. Theotherparty
24. M.Kamalakannanv M.Manikanndan,(2011) 4 CTC 139, thecourtorderedspecific
performance.
25. Geo-Group CommunicationsIncvJOLBroadband Ltd, (2010) 1 SCC 562; Govind Frasad
DalmiavW.B.SEB, 2014 SCCOnLineCal22090:AIR 2015NOC1084(Cal),supplies on
agreed rates, noevidenceto show that the other party accepted supplies at escalated rates.
Supplierdelayeddeliveriesbecauseof expectation that escalatedpriceswould bepaid. Agreed
penalty amount chargedand notdamagesfor breach,deductionfrom bills heldto be proper.
SBIVLalsangbera,AIR 2015 Gau 67, the bank had the right under the loan agreement to
publish the names of defaulting buyers. The court said that this did not include the right to
publish photograph of the defaulter also. Photographwas capableof doing greater damage.
26. GreatEasternEnergy Corpn Ltd v Jain Irrigation Systems Ltd, (2010) 4 Mah LJ 759.
27. Basanti Bai v Prafulla Kumar Routrai, (2006) 101 Cut LT 686 (Ori); United India Insurance
Co LtdVKiran Combers & Spinners, (2007) 1 SCC 368: AIR 2007 SC 393, the insurer hav
ingcertifiedthat the insuredbuildingwas a firstclassconstruction, it was held that it could
not be giventhe benefitof any structural defectnot noticed by it. Kunwar SinghRawatv State
of Uttaranchal, AIR 2007 NOC 1789(Utt).Governmentcontract for construction ofclass
rooms, construction completed,beforethe balance amount could be paid, the school building
becamedamagedInquiry reportrevealedthat thedamagewas due to rains andlandslideand
not due to poor construction, the contractor was allowedto recoverthe balance amount.https://t.me/LawCollegeNotes_Stuffs

500. 360Chapter8DischargeofContract , [S. 38]
refused to accept renewal. The SupremeCourtsaidthatthe best course for
thepartywas to get the right of renewal declared and enforced by acourt
of law or to get adeclarationthattheagreementstoodrenewedascontem
platedby therenewalclause.^^
Offer ofperformance[S. 38]
Thepromisor,mustoffer toperformhisobligationunderthecontractto
thepromisee.Thisoffer iscalled"tenderofperformance".^^It isthenfor
thepromiseetoaccepttheperformance.If he doesnotaccept,"thepromisor
isnotresponsiblefornon-performance,nordoes hetherebylose hisrights
underthecontract".Inotherwords,thetenderofperformance,ifrejected
by theotherparty,excuses thepromisorfromfurtherperformanceand enti
tles him to sue thepromiseeforbreachof thecontract.Thus,atenderof
performanceisequivalenttoperformance.This is the effect of Section 38.
S.38.Effectofrefusaltoacceptofferofperformance.—Whereaprom
isor hasmadean offer ofperformancetothepromisee,andtheofferhasnot
beenaccepted,thepromisorisnotresponsiblefornon-performance,nordoes
hetherebylose hisrightsunderthecontract.
Every such offermustfulfilthefollowingconditions—
(1) itmustbeunconditional;
(2)itmustbemadeat apropertimeandplace,andundersuchcircum
stancesthatthepersontowhomit ismademay have areasonable
opportunityofascertainingthatthepersonbywhomit ismadeisable
andwillingthereandthento dothewholeofwhathe isboundby his
promisetodo;
(3)iftheoffer is an offer to deliveranythingtothepromisee,thepromisee
musthave areasonableopportunityofseeingthatthethingofferedis
thethingwhichthepromisorisboundby hispromiseto deliver.
An offer tooneof severaljointpromiseeshasthesamelegalconsequences
asanoffertoallofthem.
28.HardeshOres(P)LtdvHede& Co, (2007) 5 SCC 614.
29. Apartywhopromisedto sellpropertyonobtainingpermissionfromIncomeTaxAuthorities
was not excused from offeringperformanceby sayingthathe could notmanagetheclearance
certificate. The contract remained aliveand enforceable.The buyer had been put in possession
of a part of the premises. The seller could not be allowed to take advantage of his own wrong.
RaghunathRat vJogeshwarPrashadSharma,AIR1999Del 383.TravancoreRubber& Tea
Co LtdVCIT,(2000) 3 SCC 715; AIR 2000 SC 1980, the obligation of the parties to perform
continues till thecontractis determined according to its terms; JaiDurgaPinvest (P)Ltdv
StateofHaryana,(2004) 3 SCC 381: AIR 2004 SC 1484, the contract under the mining lease
could not be performed because of certain acts and omissions on thepartof the Government;
forfeiture of security money not allowed. FoodCorporationofIndiav SuranaCommercial
Co, (2003) 8 SCC 636, where theobligationof thecontractingpartywas forconversionof
arhar, whole pulse intodaland the work was completed and accepted by the other party, the
obligation of the contractor came to an end. United India Insurance Co Ltd v Pushpalaya
Printers,(2004) 3 SCC 694: AIR2004SC 1700, insurance cover against damage to building
by"impact"among other things, damage caused by a close-by passing bulldozerwithout
actually touching the building, held, it was damage by impact.https://t.me/LawCollegeNotes_Stuffs

501. [S. 38] Performanceofcontracts361
Illustration
AcontractstodelivertoBathiswarehouse,onthe1stMarch,1873,100balesofcotton
of aparticularquality. Inorderto make an offer ofperformancewiththeeffectstatedin this
section,yAmustbringthecottontoB'swarehouse,ontheappointedday,undersuch circum
stancesthat6may have areasonableopportunityofsatisfyinghimselfthatthethingoffered
iscottonofthequalitycontractedfor, andthatthereare 100 bales. ,
The tender ofperformance,in order to have his effect, must fulfil the
followingconditions:
1.Tenderofperformancemustbeunconditional[S. 38(1)]
The tender of performance must be unconditional. A tender becomes con
ditionalwhenitisnotinaccordancewiththetermsofthecontract.For
example, a tender of an amount less than what is due under thecontractis
notaneffectivetender.^"
2. The tenderofperformance must be made at proper timeandplace,
andundersuchcircumstancesthatthepersonto whom it ismade
may havea reasonable opportunity of ascertaining that the person
by whom it is made is able and willingthere and then to do the
whole of what he is bound by his promise to do
Often the time and place of performance are fixed by the parties in their
contract. The tender of performance must be made within the time and at
theplacesofixed.If it is somade,the promisoris under no further respon
sibility,^^if the tenderis notaccepted.This wasestablishedas earlyas1843
inStartupvMacdonald-?^
The defendantbought of the plaintifften tons oflinseedoilto bedeliv
ered within the last 14 days of the month of March. The plaintiff ten
dered on the last of the fourteen days at 9 o'clock at night. The defendant
refused to accept owing to the lateness of the hour.
He was held liable for the breach as the jury foundthat,thoughthehour
wasunreasonable,yetthere was time for the defendantto havetaken in and
weighedthegoodsbeforemidnight.Heshould,therefore,haveaccepted
the tender and"thenno doubt, thecontractwould have been literally
performed".
Wherein aninternationaltradecontract,theagreementwasthatpay
mentshouldreach on the14thof themonth,thecourtheldthatbefore
30. HajiAbdulRahman v Haji NoorMahomed,ILR(1892)16Bom141;wherethehighest
figureascertainedthroughtenderswasfoundto belowand,therefore,ameetingof all the
tendererswas calledso as to givethem an opportunity of revisingtheirfigures,the acceptance
of the bestfigurethusobtainedwasheldto be notarbitrary.FoodCorporationof India v
KamdhenuCattleFeedIndustries,(1993) 1 SCC 71: AIR 1993 SC 1601.
31. SeeP.L.S.A.R.S. Arunchelam Chetty v Krishna Iyer, AIR 1925 Mad 1168: 90IC481.
32. (1843) 64 RR 810: 12 LJ Ex 477: (1843) 6 Man & G 693.https://t.me/LawCollegeNotes_Stuffs

502. 362Chapter8DischargeofContract [S. 40]
repudiatingthecontractthedefendantshould havewaitedup tomidnight
ofthe14th.^^
Further,thetendermustbemadeundersuchcircumstancesthattheother
partygets areasonableopportunityofascertainingwhetherthepersonmak
ing thetenderis ableandwillingto fulfil the whole of hisobligationunder
thecontract.If thetendererhas to deliversomethingto thepromisee,the lat
ter must have areasonableopportunityof seeingthatthethingoffered is the
thingwhich thepromisorisboundby hispromiseto deliver. Inotherwords,
the goodstenderedmust be of thecontractdescription,otherwisethetender
isnotvalid.Ifthereare severaljointpromisees,it isnotnecessaryfor the
promisorto offerperformanceto every one of them. A tender made to any
one ofthemhas the same legalconsequencesas atenderto all ofthem.^^
In the case of an obligation to pay a debt, the mere factthatthe payment
was tendered and refused does not discharge the debtor from his hability
to pay thedebt.^®This principle of oldstandinghas been indorsed by the
SupremeCourtin acase^^where thedebtorhad therighton paying back his
loan to recover vacant possession of his premises, and his tender having been
refused, thecourtheld that he was not discharged from his obligation to pay
before he could recover his possession.
Obligationtoreturnsecuritydocumentsonpayment
A loantransactionwasbroughtto an end by repayment. It then becomes
the duty of the lender toreturnthe security documents. He was not allowed
toretainthem on thegroundthatsome litigation was pending between the
parties.
Obligation to return security money on rejection of bid
Where a bid was rejected after an unreasonable period of two years and
only then the security deposit was refunded, the court directed payment of
interestat 12percentp.a.^'
By whomcontractsmust beperformed[S.40]
S. 40.Personbywhompromiseistobeperformed.— Ifitappearsfrom
the nature ofthe case that itwasthe intention ofthe parties to any contract that
anypromisecontainedin itshouldbeperformedbythepromisorhimself, such
33.AfovosShipping Co v R. Pagnan,(1982)1WLR842:(1982)1Lloyd'sRep 562(CA).
34.SeeCarlos Federspial & Co v Charles, 1957Lloyd'sRep 230; ONGC Ltd v Assn of Natural
Gas ConsumingIndustries, (2004) 5 SCC253: AIR 2004 SC2327, ONGC increasedits sup
ply price, GAILhad to demand more from consumers, held justified. On accumulated arrears
simpleinterestwasallowed.
35. S. 38, lastpara.SeeAlconConstructionsvBoardofTrustees,AIR 1982 Goa 9.
36.DixonVClark,136 ER919;(1847) 16 LJ CP 237.
37. Vidya Vati vDeviDas,(1977) 1 SCC293;AIR1977SC 397.
38. Eco Ceramics vKarnatakaStateFinancialCorpn,AIR 2001 Kant 167: (2001) 4 Kant LJ463.
39. ShankerLaiv State ofRajasthan,AIHC2548 (Raj).https://t.me/LawCollegeNotes_Stuffs

503. [S.41] , Performanceofjointpromises363
promisemust beperformedbythepromisor. Inothercases,thepromisoror his
representativemayemployacompetentpersontoperformit.
Illustrations
(a) Apromisesto pay 6 asurriofmoney.A mayperformthispromise,eitherbypersonally
payingthemoneyto 6, or bycausingit to be paid to Bbyanother;andif/Adiesbefore
thetimeappointedforpayment,hisrepresentativesmustperformthepromise,or
employsomeproperpersontodoso.
(b)Apromisestopaintapictureformustperformthispromisepersonally.
S.41.Effectofacceptingperformancefromthirdperson.— When a
promiseeacceptsperformanceofthepromisefromathirdperson,hecannot
afterwardsenforceitagainstthepromisor.
If there issomethingin thecontractto showthatpersonalperformance
wasintended,thenthecontractwill have to beperformedby thepromisor
himself. Sometimes thenatureof thepromiseis anindicationby itselfthat
thepromisormustperformpersonally. This usuallyhappensin cases where
the use of thepersonalskill of thepromisoris involved, forinstance,a con
tracttopaint,sing ormarryandcontractsoftechnicalnature.In such cases
thedeathof thepromisorputsan end to thecontract.Thepromisecannot
be enforcedagainsthis legalrepresentatives,neithercan they enforce the
promise.
Ordinarily,however, the rule as laiddownin Section 37 isthat"prom
ises bind the representatives of the promisors in case of the death of such
promisors beforeperformance".Thus, unless acontraryintentionappears
from thecontract,apromisecan be enforcedagainstand also by the legal
representatives of the seller or the buyer. There isnothingpersonalin the
sale ofgoodsorpaymentof price.'"'
"Thereis some Englishauthorityto the effectthatdischargeof acontract
by a third person is effectual only if authorised or ratified by the debtor.
InIndia,however, thewordsofSection41 of theContractAct leave no
roomfordoubtthatwhen theappellantshaveacceptedperformanceof the
promise from a third person, theycannotafterwards enforce it against the
promisor.'""
PERFORMANCE OFJOINTPROMISES
According to English law, if one of the several jointpromisorsdies, the
rights and liabilitiesunderthecontractdevolve upon thesurvivingjoint
promisors. The representatives of the deceasedpromisorneitherobtainany
rights nor assume any liability, unless they are the representatives of the last
surviving promisor. This rule may sometimes cause injustice, inasmuch as
40. Yaman Trimbak Joshi v ChangiDamodarShimpi,ILR(1925) 49 Bom 862.CITIBank N.A.
VStandardCharteredBank,(2004)1 SCC 12:AIR2003SC4630:(2003)117CompCas554,
the performance must be of the originalcontractunless there is proof of itssubstitution.
41.KapurchandGodhav MirNawabHimayatalikhanAzamjah,AIR 1963 SC 250, 254: (1963)
2SCR168.https://t.me/LawCollegeNotes_Stuffs

504. 364 Chapter 8 Discharge of Contract [Ss.42-43]
the creditor losesthe security of the solvencyof a promisor. Section 42 of the
ContractAct, therefore, lays down a different rule;
Devolutionofliabilities
S. 42.DevolutionofJointliabilities.—Whentwo or morepersonshave
madea joint promise,then,unless acontraryintentionappearsbythecontract,
all such persons, during theirjointlives,and, afterthedeathof any ofthem,his
representativesjointly withthesurvivor or survivors,and,afterthedeathofthe
last survivor,therepresentativesof all jointly,mustfulfilthepromise.
According to this section joint promisors must, during their joint lives,
fulfil the promise. And if any of them dies, his representatives must, jointly
with the survivingpromisors,fulfil the promise and so on. On thedeathof
the last survivor, the representatives of all of them must fulfil the promise.
But this is subject to any privatearrangementbetween theparties.They may
expressly or impliedlyprescribeadifferentrule."*^
Anotherimportantaspect of joint promises is codified in Section 43.
Jointandseveral
S.43.Anyoneofjointpromisorsmaybecompelledtoperform.—When
twoormorepersonsmake ajointpromise,thepromiseemay, intheabsence
ofexpressagreementtothecontrary,compelany (one or more) ofsuchjoint
promisorstoperformthewholeofthepromise.
Eachpromisormaycompelcontribution.— Each oftwoormorejoint
promisorsmaycompeleveryotherjointpromisortocontributeequallywith
himselftotheperformanceofthepromise,unlessacontraryintentionappears
fromthecontract.
Sharingoflossbydefaultincontribution.—Ifanyoneoftwoormore
jointpromisorsmakesdefaultin suchcontribution,theremainingjointpromi
sorsmustbearthelossarisingfromsuchdefaultinequalshares.
fxp/anaf/o/1.—Nothingin thissectionshallpreventasuretyfromrecover
ing,fromhisprincipal,paymentsmadebythesuretyonbehalfoftheprincipal,
orentitletheprincipaltorecoveranythingfromthesuretyonaccountof pay
mentsmadebytheprincipal.
Illustrations
{a)/A,SandCjointlypromiseto pay D3000rupees.0 maycompeleither/AorBor C to pay
him3000rupees.
{b)/A,fiandCjointlypromiseto pay Dthesumof3000rupees.C iscompelledto paythe
whole.A isinsolvent,buthisassetsaresufficientto payone-halfof hisdebts.C Is enti
tledtoreceive500rupeesfrom/A'sestate,and1250rupeesfromB.
42.GannmaniAnasiiyavParvatiniAmarchandChowdhary,(2007)10 SCC 296: AIR2007SC
2380,jointventure,thequestionofdeterminationofshares,the termsandconditionswere
notreducedtowriting,theconductofparties,how theydeahwiththeaffairsofbusinesswere
heldtoberelevant.https://t.me/LawCollegeNotes_Stuffs

505. [S.43] Performanceof joint promises 365
(c)A,Band Care under a joint promise to pay D 3000 rupees. Cis unable to pay anything
and/Aiscompelledto pay thewhole./Aisentitledto receive 1500rupeesfromB.
id)A,Band Care under a joint promise to pay D 3000 rupees. A and Bbeing only sureties
forC.Cfailsto pay.A and Bare compelled to pay the whole sum. They are entitled to
recoveritfromC.
This section laysdownthreerules:
Any onecompellabletoperform
Firstly, when ajointpromiseis made, andthereis no expressagreement
to thecontrary,thepromiseemay compel any one or more of the jointprom
isors toperformthe whole of the promise.''^ "A, B and C jointlypromise
to pay D,3000rupees.D maycompeleitherAorBor C to payhim3000
rupees".'*''
Rightofcontribution[S. 43 (Para 2)]
Secondly, ajointpromisorwhohas beencompelledtoperformthewhole
of thepromise,mayrequiretheotherjointpromisorstomakeanequal
contributionto theperformanceof the promise, unless a differentintention
appearsfrom the agreement. A, B and C areundera jointpromiseto pay D,
3000rupees. D recovers the wholeamountfrom A. A mayrequireB and C
to make equalcontributions.
Sharingofdeficiency [S. 43 (Para 3)]
Thirdly,if any one of thepromisorsmakes adefaultin suchcontribution,
theremainingjoint promisors must bear the deficiencyin equal shares. A, B
and C areundera jointpromiseto pay D,3000rupees. C isunabletopay'
anything.The deficiencymustbesharedby A and B equally. If C's estate is
able to pay one-half of his share, the balance must be made up by A and B
in equalproportions.''^
The first rule is atvariancewiththe EnglishCommonLaw.Referring
to the Enghsh rule as laid down in R. vHoare'*^and Kendall vHamilton'*'^
StracheyCJ of theAllahabadHighCourtsaid, asexplainedinthosejudg
ments thedoctrinethatthere is, in the case of a jointcontract,a single cause
43.Para1, S. 43.RamaShankarSingh vShyamlataDevi,AIR1970SC 716: (1969) 2 SCR360;
MukundDasRajaBhagwanDas vStateBankofHyderabad,(1970) 2 SCC 766: AIR 1971
SC449.
44.Illustration(a)to S. 43. SeeRamaShankarSinghwShyamlataDevi,AIR1970SC 716: (1969)
2 SCR 360,contributionbetween lessees. Thecourtcannotsaythatitsjudgmentshould be
enforced against one joint promisor in the first instance and against other thereafter. Mukund
Das Raja Bhagwan Das v State Bank ofHyderabad,(1970) 2 SCC 766: AIR 1971 SC 449.
HemmoPharmavDawoodShoes (P) Ltd, (2003) 3 Bora CR 781, if one of severalpersons
liable makes payment, it does not give a fresh period of limitation against other personsvifho
were jointly and severally liablewithhim.
45. Seeillustration(b)and (c).These provisions as tocontributiondo not apply tocontributions
between mortgagors. KedarLaiSeal vHariLaiSeal, AIR 1952 SC 47: 1952 SCR 179.
46.'.{1844)13M&:W494:67RR664..
47. (1879) LR 4 AC504(HL).https://t.me/LawCollegeNotes_Stuffs

506. 366 Chapter 8 Discharge of Contract [Ss.44-45]
of action which can only be once sued on, isessentiallybased on the right of
joint debtorsinEnglandto haveall their co-contractorsjoinedasdefendants
in any suit to enforce a jointobligation."
But Section 43 allows an action to bebroughtagainst any one of the
joint promisors without impleading the others as defendants. Suppose now
that the creditor sues only one joint promisor, can he subsequently sue the
others? According to English Law he cannot."Whatis the position inIndia.'
According toStracheyCJ there is no such bar in the words of Section 43
and, therefore, a subsequent suit against other promisors should be allowed
toproceed.''^Pollock andMullaobserve: "the reasoning ofStracheyCJ
seems to us conclusive.'"'' But someotherHighCourtshavedisallowedsuch
actions.^"
Releaseofonejointpromisor
Thecreditoris also given the right to release anyone of the jointpromisors
from his liability and this does notdischargetheothersfromtheirliability.
Section44isasfollows:
S.44.Effectofreleaseofonejointpromisor.—Wheretwoormoreper
sonshavemadeajointpromise,areleaseofoneofsuchjointpromisorsbythe
promiseedoesnotdischargetheotherjointpromisororjointpromisors;nei
therdoesitfreethejointpromisorsoreleasedfromresponsibilitytotheother
jointpromisororjointpromisors.
This alsomarksadeparturefrom the EnglishCommonLaw,according
to which adischargeof one jointpromisoramountsto adischargeof all,
unless thecreditorexpresslypreserveshisrightsagainstthem.
Jointpromisees[S. 45]
Devolutionof joint rights is governed byalmostthe same kind ofprinci
ples as thedevolutionofjointliabilities.Whenapromiseismadetomore
thanonepersonjointly, therighttoclaimperformancerestswithall ofthem
jointly. Ifanyoneofthemdies, it restswithhis legalrepresentativesjointly,
withthe survivors andafterthedeathof the lastsurvivor,withthe repre
sentativesof all jointly.Section45 is as follows:
S.45.Devolutionofjointrights.—Whenapersonhasmadeapromise
totwoormorepersonsjointly,then,unlessacontraryintentionappearsfrom
thecontract,therighttoclaimperformancerests,asbetweenhimandthem,
withthemduringtheirjointlives,and,afterthedeathof any ofthem,withthe
48.MohdAskarivRadheRam Singh,ILR(1900) 22 All 307,311-12.
49. TheIndianContractAct, (1957), p. 311.
50. See, forinstance,CalcuttaHighCourt'sdecisionmHemendroCoomarMullickvRajendrolall
Moonshee,ILR (1878) 3Cal353. See alsoLuckmidasKhimji vPurshotamHaridas,ILR
(1882) 6 Bom700;NeelratanMitkhopadhyavCooch-BeharLoanOfficerLtd,ILR (1941) 1
Cal 171, wheredifferentviews have beenexplained.https://t.me/LawCollegeNotes_Stuffs

507. [Ss.46-47] Performanceof jointpromises367
representative of such deceased person jointly with the survivor orsurvivors,
andafterthe deathofthelastsurvivor,withtherepresentativesofalljointly.
Illustration
A,inconsiderationof 5000 rupees, lent to him and BandC,promisesBand Cjointlyto
repaythem that sum with interest on a dayspecified.Bdies.The righttoclaimperformance
rests with B'srepresentativejointly with Cduring C's life,and, afterthedeathof C,withthe
representativesof6and Cjointly.
TheSupremeCourt hasheldthatwherea jointpromiseerefusesto join
as a co-plaintiff, he should be taken on record as pro-forma defendant. The
courtcannotcompel any person to be aplaintiffif he does notwantto be
so."
The joint promisee and not the legatee under a will was held entitled to
the amount payable under a joint termdeposit."
Eitherorsurvivorsavingaccount
The saving account was originally opened by thehusbandand wife on
either or survivor basis. Subsequently thismandateof either or survivor was
withdrawnbecauseofstrainedrelations.Thehusbanddied.Thebankdid
not allow the wife tooperatetheaccountwithoutsuccessioncertificate.
Thecourtsaidthatthere was no illegality in it. If the legal heirs consented
on an affidavit topermittheirmothertowithdrawtheamount,thebank
should allow it. Banks are supposed to have ahumanface and alsoadopta
consumerfriendlyapproach.^^
Timeand place forperformance[Ss.46-50]
S.46.Timeforperformanceofpromise,wherenoapplicationistobe
madeandnotimeisspecified.—Where,bythecontract,apromisoris toper
form hispromisewithoutapplicationbythepromisee,and notimeforperfor
manceisspecified,theengagementmustbeperformedwithinareasonable
time.
Explanation.—Thequestion"whatis areasonabletime"is, ineachparticular
case,aquestionof fact.
S. 47.Timeandplaceforperformanceofpromise,wheretimeisspeci
fiedandnoapplicationtobemade.—Whenapromiseistobeperformedon
acertainday,andthepromisorhasundertakentoperformitwithoutapplica
tion bythepromisee,thepromisormayperformit at anytimeduringtheusual
hoursofbusinessonsuchdayandattheplaceatwhichthepromiseoughtto
beperformed.
51.JaharRoyvPremjiBhimjiMansata,(1977)4 SCC562:AIR1977SC2439.]osevJoseph,
(1993) 2 KLJ712,devolutionon legalrepresentativesof therightto sue.
52.AbhraSinhavIndiaExplosivesLtd,(2003)2ICC157(Cal).
53.ShantiDevivBhojpurRohtasGraminBank., AIR2007DOC102(NCC).https://t.me/LawCollegeNotes_Stuffs

508. 368Chapter8DischargeofContract [Ss.48-50]
Illustration
Apromisestodelivergoodsat8'swarehouseonthe 1stJanuary.Onthat dayAbringsthe
goodsto e'swarehouse,butaftertheusualhourforclosingit,andtheyarenotreceived.A
has notperformedhispromise.
Whenapromisehasto beperformedwithinacertaintime,itmustbe
performedon any daybeforethelapseof thattime/'*Whereno time was
specifiedforperformanceof-thepromise,the court said that in suchcases
performancemust beofferedwithinreasonabletime.The period of three
yearsasprescribedinArticle54 of theLimitationAct,1963,can be taken
asreasonabletime/^
S. 48.Applicationforperformanceoncertaindaytobeatpropertime
and place.—When a promise is to be performed on a certainday,and the
promisorhas not undertaken to perform itw/ithoutapplicationby the promi
see, it isthe duty ofthe promisee to applyfor performance at a proper placeand
withintheusualhoursofbusiness.
Explanation.—The question "what isapropertime and place"is,in each par
ticularcase, aquestionof fact.
S. 49.Placeforperformanceofpromise,wherenoapplicationtobe
madeandnoplacefixed forperformance.—Whena promise is to be per
formedwithoutapplicationbythepromisee,and no place is fixed fortheper
formanceof it, it isthedutyofthepromisortoapplytothepromiseetoappoint
areasonableplace fortheperformanceofthepromise, and to perform it at such
place.
Illustration
Aundertakesto deliver athousandmaundsofjuteto S on a fixed day. Amustapplyto B
toappointa reasonable place for the purpose of receiving it, and must deliver it to him at
suchplace.
Debtortoseekhiscreditor
Thecommonlawruleisthatadebtorshouldseek hiscreditorandpay
him. In keeping with thibts rule the section imposes a duty on apromiserto
apply to his promisee forfixinga reasonable place for performance. Under
theNegotiableInstrumentsAct,1881,it is the duty of the payee (promisee)
topresenttheinstrumentforpayment.
S.50.Performanceinmannerorattimeprescribedorsanctionedby
promisee.—Theperformanceof anypromisemay bemadein anymanner,or
at anytimewhichthepromiseeprescribesorsanctions.
Illustrations
(a)Bowes A 2000 rupees. A desires S to paytheamountto/A'saccountwithC,a banker.
B,whoalsobankswithC,orderstheamounttobetransferredfromhisaccountto/I's
54.SaraswatTradingAgency vUnionofIndia,AIR2002Cal51: (2002) 1ICC1038.
55.NakubaiValuDhokanevBhagwanSinghPrakashChandra,(2008) 6 AIR Bom 392: AIR
2009NOC385(Bom).
56.JosePaulVJose,(2002) 2 KLT540.https://t.me/LawCollegeNotes_Stuffs

509. [S.50] Performanceof jointpromises369
credit, and this isdoneby C. Afterwards, and before A knows ofthetransfer, C fails.
There has been a good payment byB.
(b)Aand Baremutuallyindebted. AandBsettle an account bysetting offone itemagainst
another, and6pays/Athe balance found to be due from him upon suchsettlement.This
amountsto apaymentby A and6,respectively, of the sums which they owed to each
other.
(c)Aowes B2000 rupees.6accepts someof/\'sgoodsin reduction of the debt. The deliv
ery ofthegoodsoperatesas apartpayment.
(d)A desiresB,who owes himRsTOO,to send him a note forRs100 by post. The debt is
discharged as soon as Bputs into the post a letter containing the note duly addressed
to/4.
Whereno time specifiedandperformance is to bewithoutapplication
The first principleas laid down in Section46 is that where the promisor is
to performwithout anyapplicationbythepromisee,and no time for perfor
mance is specified, the engagement must beperformedwithinareasonable
time. Theexplanationto the section saysthat"whatis areasonabletime"
is, in eachparticularcase, aquestionoffact.^^
Unreasonablylong delaycannotberegardedasreasonable.Thus,where a
personundertookto discharge the debt ofanotherbut no time for payment
was fixed, it was heldthatthe offer of payment after three years was too
late.Thatamounted to breach. Acontractto keep a ship insured was held to
have been broken although there was only a delay of three days. In the case
of a ship much canhappeninthreedays. But in acontractof sale ofshares
twomonths'time was held to be reasonable for completing it.
Usualbusinesshours
The second general principle is stated in Section 47. Where the promisor
has undertaken to perform without any application from the promisee, but
the day of performance is fixed, the promisor may perform the promise dur
ing the usual business hours of the day and at the place where such promise
ought to beperformed.Since only the day ofperformanceisstatedbut not
the place, the promise should be performed attheplace where itsnature
demands, that is, where it ought to be performed. In a promise, for example,
to deliver goods at the buyer's warehouse, the tender of performance must
be made atthatplace. The promisor should bring the goods atthatplace
duringtheusualbusinesshours.If he brings the goodsafterthe business
hours and they are notreceived,itcannotbe saidthatthe promise has been
performed. When the day on which a promissory note or bill of exchange is
atmaturityis a public holiday, theinstrumentshall be deemed to be due on
the next preceding businessday.^^But in other cases much depends on the
usages of theparticulartrade. If such usage allowsperformanceon thenext
succeeding day, it will be quite reasonable to offerperformanceonthatday.
57. The passing of a decree does not wipe out the responsibility of the promisor to offer per
formancewithinreasonabletime.HungersfordInvestmentTrustLtdvHaridasMundhra,
(1972)3see684;AIR1972SC1826.
58. S. 25 of theNegotiableInstrumentsAct, 1881.https://t.me/LawCollegeNotes_Stuffs

510. 370 Chapter 8Dischargeof Contract [S.50]
Applicationfor performance to beat proper place and time
The thirdgeneralprincipleis to befoundinSection48.Wherethe day
ofperformanceisfixed,but thepromisorhas not toperformwithout
applicationfromthepromisee,it is thedutyof thepromiseetoapplyfor
performanceat aproperplaceand within theusualbusinesshours.The
explanation to the sectionsaysthat "what is a proper time and place" is a
question of fact in each case.
Application for reasonable placeofperformance
The fourth generalprincipleis in Section 49.Whena promise is to be
performedwithout anyapplicationby thepromisee,and noplaceisfixed
for performance, it is the duty of the promisor to apply to the promisee to
appoint areasonableplacefor the performance of the promise, and to per
form it at such place. The illustration appended to the section supposes a
case in which there is acontractto supply aquantityof jute on a fixed day.
The sellermust apply to the buyerto appoint a reasonable place for the per
formance of the promise and then to perform the promise at such a place.
A promissory noteexecutedatBangalorestated that it would bepayable
at Bangalore or at any place in India. The payee settled in New Delhi and
demanded payment at New Delhi. It was held that under Section 49 it was
the duty of the debtor to seek his creditor and to pay himthere.^'
Timeandmannerofperformance,promisee'schoice
The next general principle is stated in Section 50. The sectionleavesthe
whole question as to the time and manner of performance upon the choice
of the promisee.It saysthat the performance of any promise may be made in
any manner, or at any time which the promisee prescribes or sanctions. The
illustrations appended to the section deserve to be noted. If a person owes
anothera sum of money and the creditor tells him to pay theamountinto his
accountin abank,whichis done; andafterwards,before thecreditorcomes
to know of the fact of payment, the bank fails, sothatthe creditor does not
get thebenefitof the payment; even so the debtor is discharged from his
liability.Where two persons are mutually indebted and they agree to set off
their debts against each other, the balance being paid off by one to the other.
Bothstanddischarged from their respective hability. Where thecreditor
accepts goods from the debtor in payment, the debtor stands discharged to
the extent of the value of the goods. Where the creditor desires the debtor to
send the money by post, the debtor will be discharged as soon as he posts a
properly addressed and stamped letter containing themoney.^°
59.L.N.Guptav TaraMani,AIR 1984 Del 49.
60. SeeCITvOgaleGlass Works Ltd, AIR 1954 SC 429:(1955)1 SCR 185, a cheque posted as
desired by the promisor. See also Union of India v Radha KissanAgarwala,(1969) 1 SCC
225: (1969) 2 SCR 28: AIR 1969 SC 762. Theresponsibilityofpostinga dividendwarrantis
satisfied when thewarrantis posted. H.P. Gupta vHiralal,(1970) 1 SCC 437: 1970 SCC (Cri)
190: AIR 1971 SC 206: 1970 SCR 788. Payment may be made by entries in books of account.https://t.me/LawCollegeNotes_Stuffs

511. [S.51] Performance of joint promises 371
Performance of reciprocal promises[Ss.51-54]
When a contract consists of an exchange of promises, they are called
reciprocal promises. Sectionl{f)saythat"promises which form the con
sideration or part of the consideration for each other, are called reciprocal
promises."When such promises have to be simultaneously performed, the
promisor is not bound to perform unless the promisee is ready and willing
toperformhis promise. This principle is laid down in Section 51.
S.51.Promisornotboundtoperform,unlessreciprocalpromisee
readyandwillingtoperform.—Whenacontractconsistsof reciprocal prom
ises to besimultaneouslyperformed,nopromisorneedperformhispromise
unlessthepromiseeisreadyandwilling toperformhisreciprocalpromise.
Illustrations
{a) AandBcontractthatAshalldelivergoodsto Bto be paid for by Bon delivery.
Aneednotdeliverthegoods,unlessB Isreadyandwilling to pay forthegoodson
delivery.
Bneednotpay forthegoods,unlessA isreadyandwilling todeliverthemonpayment.
ib]/landscontractthatyAshall delivergoodsto S at a price to be paid byinstalments,the
firstinstalmenttobepaidondelivery.
Aneednotdeliver,unlessBisreadyandwilling to paythefirstinstalmentondelivery.
Bneednotpaythefirstinstalment,unlessisreadyandwilling todeliverthegoodson
paymentofthefirstInstalment.
In acontract,forexample,forthesale of goods onpaymentof price, the
seller neednotdeliver thegoodsunless the buyer isreadyandwillingto
pay for the goods on delivery. Similarly, the buyer need not pay unless the
seller is ready and willing to deliver the goods onpayment.If the price is
to bepaidininstalmentsand the firstinstalmentis payable on delivery, the
seller need not deliver unless the buyer is ready and willing to pay the first
instalmentand the buyer need not pay theinstalmentunless the seller is
ready and willing to deliver the goods.Certainmaterialwas supplied. The
terms andconditionsof the supply orderstatedthat90per cent of the cost of
thematerialwas to be paid on delivery and theremaining10 per cent after
a favourable testreportaboutthematerialwas received from theIndian
Instituteof Packaging. A negativereportwas received, in the form of a copy
as the original was not available. The copy of thereportshowedtampering.
Evidence also showedthattestingrules of theInstitutewere not followed.
NarayandasShreeramSomaniv Sangli Bank Ltd, AIR 1966 SC 170: (1965) 3 SCR111-.
(1965) 35 Comp Cas 596. Canara Bank vYijayKumar Arora, AIR2004Del 304, encash
ment ofdraftby discounting it, discountingbanlcbecame owner, loss of thedraftintransit
could not be loss of original owner.PanchananDharavMonmathaNath Maity, (2006) 5
see340: AIR2006SC 2281, the time forperformancebecameextendedbyconductof par
ties. Breach ofcontractoccurredwhenaftersuchextensionof time, thepartycame toknow
thatthe other has refused toperform.Theperiodoflimitationstartedfrom this event.
61. SeeRadhakrishnaSiuaduttaRai v TayeballiDawoodbhai,AIR 1962 SC 538: 1962 Supp (1)
SCR 81, 96;JiwanLaiv BrijMohanMehra,(1972) 2 SCC 757: AIR 1973 SC 559. Noseparate
considerationhas to be shown in such cases because such promisesconstitutetheconsidera
tion for eachother,VarghesePaulvNarayananNair,(1999) 2 KLT 571.https://t.me/LawCollegeNotes_Stuffs

512. 372 Chapter 8 Discharge of Contract [S.52]
Hence, it could not be saidthatthereportwas negative.The defendant was
boundto pay the balance of theprice."
There was an agreementfor reconstruction of the tenanted premises with
the additional feature of providing a toilet. The tenant agreed to pay higher
rentonreconstruction.Reconstructionwas overbuttoiletfacilitywasnot
provided. TheSupremeCourt held that the tenant was not obliged to pay
higher rent though he was put in possession of thereconstructedpremises.
Orderofperformance
The order in which reciprocal promises must beperformedmay be fixed
by thecontractand the order so fixed must be followed. But where the order
is not expresslyfixed, they will have to be performed in the order which the
natureof thetransactionadmits.TherelevantprovisionisSection52.
S. 52.Orderofperformanceofreciprocalpromises.—Wheretheorder
in which reciprocalpromisesare to beperformedisexpresslyfixed bythecon
tract,theyshall beperformedinthatorder; andwheretheorderisnotexpressly
fixed bythecontract,theyshall beperformedinthatorderwhichthenatureof
thetransactionrequires.
Illustrations
(a)AandBcontractthatyAshall build ahousefor6at a fixed price./A'spromiseto buildthe
housemustbeperformedbeforeB'spromiseto pay for it.
(b)Aand6contractthatA shallmakeoverhisstock-in-tradeto Sata fixedprice,and
8promisesto givesecurityforthepaymentofthemoney.A'spromiseneednotbe
performeduntil.thesecurityisgiven,forthenatureofthetransactionrequiresthat/I
shouldhavesecuritybeforehedeliversup hisstock.
In a casebeforetheAllahabadHighCourt:^"*
Thedefendanttooka lease oflandfromtheMunicipalityof atownon
conditionthathe paysRs630for levellingchargesandpossessionwas to
be deliveredafterlevelling.Thequestionarosewhetherthesumwas to be
paidbefore orafterthe levelling. Theagreementwas silent on thepoint.
Thecourtheldthat"intheordinarycourseofbusinessworkisnotusu
ally paid for before it is done. It is thecustomin some cases forpayment
to bemadeininstalmentsas theworkprogressesbutthepersonforwhom
workis done is notexpectedto pay theentirecost inadvancewithoutan
expressagreementtothateffect".
62. AjeetInternationalv HPHorticultureProduceMktg&ProcessingCorpnLtd, AIR2002HP
159.
63.MohammedvPushpalatha,(2008)8 SCC 335.
64.HashmanvLucknowImprovementTrust,(1927) 101IC847. SeealsoK.Abdulkhaderv
State,(1993) 2 KLJ 977, failure on thepartof theGovernmentto pay for apartof the com
pleted works inaccordancewith theagreement,delay on thepartof thecontractorwas held
to beattributabletothatdefault.AmarjeetS.VidhyarthivSushiladeviK.Pillani,(2002) 2
Bom CR 694, agreedpaymentto be made beforeclaimingto be put in possession.https://t.me/LawCollegeNotes_Stuffs

513. [S. 53] Performanceofjointpromises373
Section 53laysdown the principlethatwhere one of the parties to recip
rocal promises prevents the other fromperforminghis promise, thecontract
becomes voidable at theoptionof thepartyso prevented; and he is entitled
tocompensationfrom theotherpartyfor any losswhichhe maysustainin
consequenceof thenon-performanceof thecontract.
S. 53.Liabilityofpartypreventingeventonwhichcontractistotake
effect.—Whenacontractcontainsreciprocalpromises,andonepartytothe
contractpreventstheotherfromperforminghispromise,thecontractbecomes
voidableattheoptionofthepartysoprevented;andhe isentitledtocompen-
.sationfromtheotherpartyfor any losswhichhe rnaysustaininconsequenceof
thenon-performanceofthecontract.
Illustration
AandBcontractthatBshallexecutecertainwork for for a1000rupees,B isreadyand
willing toexecutethework accordingly,butApreventshim fromdoingso. Thecontract
isvoidableattheoptionof 6; and, if heelectsto rescind it, he isentitledtorecoverfrom A
compensationfor any loss which he hasincurredby itsnon-performance.
Liabilityofpartypreventingperformance
Thesameresultwouldfollowwheretheobstructiontoperformanceis
caused by the inadequacy of the machinery or material supplied by one of
theparties.For example, in a case before the PrivyCouncil,wherein order
to get his mine cleared of a rock, the defendant had to supply a crusher. The
crusher supplied was too inadequate for the job. This was held to be such an
obstructiontoperformanceas enabled thecontractorto recover his expenses
and loss of profits.Similarly,in a case before the SupremeCourt,^®a bidder
towhomacoalminewasknockeddownwasallowedtohaverefundofhis
deposit when the coal commissionerrefused to permit him to take the coal
to U.P., any such restriction being not present in the terms of the auction.
Wherethecontractwas formakingacanaland thepromiseedepartment
had to supply cement, etc., and while the contractor had started digging,
thematerialwas not supplied nor he waspermittedtopurchasein the open
market,theworkingstopped. Thedepartmentconsidered this as a breach.
The security deposit and earnest money was forfeited. The payment for
work already done was withheld. All this was held to be wrong. Theamount
forfeited andwithheldpayment were ordered to be releasedwithinterestat
9percent.®^
65.Kleinertv AbossoGoldMiningCo, (1913) 59 Sol Jo 45, onappealfrom the SupremeCourt
ofGoldCoast.
66.HarPrasadChoubey v Union of India, (1973) 2 SCC 746: AIR 1973 SC 2380. Uberoi
MohinderSingh v StateofHaryana,(1991) 2 SCC 362, in acontractfor Yamunaquarrying,
thecontractorwas prevented fromperforminghispartbecause of the failure of the Flood
Control Deptt. to giveno objection and, therefore, it was held that the contractor was entitled
torefundof hisdepositmoney.
67.RamachandraNarayanNayak vKarnatakaNerravariNigamLtd, (2013) 15 SCC 140:
(2014) 5SCC(Civ) 159.https://t.me/LawCollegeNotes_Stuffs

514. 374Chapter8DischargeofContract [S. 54]
"Wherethenatureof the reciprocal promises is suchthatonecannotbe
performed,or itsperformancecannotbe claimed unless theotherparty
performs his promise in the first place, then if thelatterfails toperform,he
cannotclaimperformancefrom theother,but must makecompensationto
him for his loss.Section54incorporatesthisprinciple.
S.54.Effectofdefaultastothatpromisewhichshouldbefirstper
formedincontractconsistingofreciprocalpromises.—Whenacontract
consistsofreciprocalpromises,suchthatoneofthemcannotbeperformed,or
thatitsperformancecannotbeclaimedtilltheotherhasbeenperformed,and
thepromisorofthepromiselastmentionedfailstoperformit,suchpromisor
cannotclaimtheperformanceofthereciprocalpromise,andmustmakecom
pensationtotheotherpartytothecontractfor any loss which suchotherparty
maysustainbythenon-performanceofthecontract.
Illustrations
{a)A hires B'sshiptotakeinandconvey, fromCalcuttatotheMauritius,acargoto be pro
videdhyA,Breceiving acertainfreightfor itsconveyance./Adoesnotprovideanycargo
fortheship. Acannotclaimtheperformanceof B'spromise,andmustmakecompensa
tion to S fortheloss which Ssustainsbythenon-performanceofthecontract.
(b)Acontractswith Btoexecutecertainbuilders'work for a fixed price, Bsupplyingthe
scaffoldingandtimbernecessaryforthework. B refuses to furnish anyscaffoldingor
timber,andtheworkcannotbeexecuted.Aneednotexecutethework,andB isbound
tomakecompensationto A for any losscausedto him bythenon-performanceofthe
contract.
(c) Acontractswith S todeliverto him, at aspecifiedprice,certainmerchandiseonboarda
ship whichcannotarrive for amonth,and6engagesto pay forthemerchandisewithin
aweekfromthedateofthecontract.Bdoesnotpay withintheweek./I'spromiseto
deliverneednotbeperformed,andBmustmakecompensation.
id) A promises Bto sell him onehundredbales ofmerchandise,to bedeliverednext day,
and BpromisesA to pay forthemwithin amonth.Adoesnot deliveraccordingto his
promise.B'spromiseto payneednotbeperformed,andAmustmakecompensation.
Effectofoneparty'sdefault
Anotherillustrationis the SupremeCourtdecision inNathulalv
Phoolchand:^^
Theplaintiffwas the owner of a ginning factoryconstructedon agri
culturallandandnominallyheld in thenameof hisbrother.Hesold
the factory to the defendant who paid half the price at once and was
put in possession, the balance being payable on afixeddate. The buyer
defaultedin paying up onthatdate and the sellerrescindedthecontract
andbroughtanactionforpossession.
68. (1969) 3see120: AIR 1970 SC 546: (1970) 2 SCR 854. VegiVenkateswaraRao v Vegi
Venkatarama Rao, AIR 1998 AP 6, in a suit for specificperformanceof a reciprocal promise,
thepartyseeking relief has to show that he was ready and willing to do hispartof the con
tract.Following,VairavanChetliarvKannappaMudaliar,AIR1925MadPC 91; Tan Ab
BoonVStateofjohore,AIR1936PC236;AbdullahBeyChedidvTenenbaum,AIR1934PC
91.https://t.me/LawCollegeNotes_Stuffs

515. [S.54] Performanceof joint promises 375
ShahJspeakingforhimselfandHegdeJheldthatthenatureof the
contractrequiredthe seller to havehadhisownnamerecordedas theowner
and haveobtainedpermission from the StateGovernmentfortransferof
theagriculturalland, before he could claim the final payment. If, therefore,
under the terms of thecontractthe obligations of thepartieshave to be
performedin acertainsequence, one of thepartiesto thecontractcannot
requirecompliancewiththeobligationby theotherpartywithoutin the
firstinstanceperforminghis ownpartof thecontractwhichin the sequence
ofobligationsis to beperformedby him earlier. So long asNathulal(seller)
didnotcarryouthispartof thecontract,Phoolchandcouldnotbecalled
upon to pay thebalanceof the price.
The offer toperformareciprocalpromiseindifferenttermsthancon
templated by thecontract,for example, an offer of payment before the time
fixed, is not validperformanceso as todemandperformancefrom the oppo
siteside.^°
Underacontractualarrangementtheplaintiff-respondentwas tosupply
to theotherdefendant-appellantTVsignalsandtheappellantwas tosupply
them to cableoperatorsafter decoding. Theappellantinformedthe supplier
thatit wasdiscontinuingthe service to cableoperatorsbecause ofnon-pay-
ment bythem andthatit would also not be able to pay to the supplier. Because
of this the supplier stopped sending the signals. The supplier subsequently
broughtan action for damages for theunexpiredperiod of the agreement
which was not used by the appellant. ThecourtsaidthatSection 54 would
not help the supplier. He acquiesced in the act of the appellant and stopped
sending signals. He had the full right to rescind thecontractand bring an
actionforbreach,but he did notadoptthiscourse.^^
Wherethecontractorhad tosubmitabankperformanceguarantee
withinacertaintime, and onlythentheotherpartycould be calledupon
to perform hispartof the contract, but he failed to do so and the letter of
credit submitted by him was also conditional, it was heldthatsince the other
party had not ended the contract, it remainedalivefor thebenefitof both
parties. There was no breach and nodispute.This aspect was notreferable
toarbitration.^^
Where a cheque issued by the owner of a motorvehiclefor payment of
premium for its insurance came back dishonoured and the insurer neither
69.NathulalvPhoolchand,(1969) 3 SCC 120: AIR 1970 SC 546: (1970) 2 SCR 854. Followed
in ChandneeWidyaVatiMadden v C.L. Katial, AIR 1964 SC 978: (1964) 2 SCR 495, where
also theconditionfor sale of plots wasthatthe vendor shouldobtainplanningpermission
from theGovernmentwithintwomonths.BishambarNathAgarwalv KishanChand,AIR
1998 All 195, the seller of land subject to ceiling permission mustobtainsuch permission first
beforeaskingforpayment.
70. Vidya Vati v Devi Das, (1977) 1 SCC 293: AIR1977SC397
71.JabalpurCable Network (P) Ltd v ESPN Software India (P) Ltd, AIR 1999 MP 271.
72. State Trade Corpn of India Ltd v Marpro Ltd,UK,(2000) 86 DLT 361. Saraswat Trading
AgencyvUnionof India, AIR 2002Cal51:(2002)1ICC1038, the Unionof India did not
keepitspromiseof payingan agreedamount within the stipulatedtime, it could not objectto
the award beingmade a rule of the court becausethe promiseinvolveda reciprocal duty.https://t.me/LawCollegeNotes_Stuffs

516. 376 Chapter 8 Dischargeof Contract [Ss.57-58]
cancelled the policy nor sent any information to the owner about the dis
honour of his cheque, it was held that the insurer could not deny liability to
indemnify the insured for loss caused to thevehicle.The insurer had givenno
opportunityto the owner to make payment after dishonour of hischeque/^
Promisescomprisingoflegalandillegalparts
S. 57.Reciprocalpromisetodothingslegalandalsootherthingsille
gal.—Wherepersonsreciprocally promise, firstlyto do certainthingswhich are
legal, and, secondly,underspecifiedcircumstancesto do certainotherthings
which are illegal,thefirstsetofpromisesis acontract,butthesecondis a void
agreement.
Illustration
Aand6agreethat>4shall sellBahousefor 10,000rupees,butthat,ifBuses it as agam
blinghouse,he shall pay 1,50,000rupeesfor it.
The firstsetforreciprocalpromises,namely, to sellthehouseandto pay 10,000rupees
forit, is acontract.
Thesecondsetis for anunlawfulobject,namely,thatBmay usethehouseas agambling
house,andis a voidagreement.
Section 57 applies to cases where two sets ofpromisesaredistinct.When
the voidpartof anagreementcanbeproperlyseparatedfrom the rest, the
latterdoesnotbecome invalid. Theready-forwardtransactionconsists of
twoparts.In the ready legthereis apurchaseor sale ofsecuritiesat astated
price which isexecutedonpaymentofconsiderationfor spot delivery of the
securitycertificatestogetherwithtransferforms.Thefullandabsoluteown
ership of the title insecuritiesvests in thepurchaser,the entirepropertyin
thesecuritypassingimmediatelyuponsuch delivery andpayment.The seller
is divested of all therights,titleandinterestsin thesecurities.Theforward
leg is to beperformedat a later date on the stated price being paid. The
securitiesaretobedeliveredbackwhenthetitleininterestthereinwould
pass to theoriginalseller.''''
S.58.Alternativepromise,onebranchbeingillegal.— Inthecaseof an
alternativepromise,onebranch of which is legal andtheotherillegal,thelegal
branchalonecanbeenforced.
Illustration
AandBagreethatA shall pay B1000rupees,for which B shallafterwardsdeliverto A
eitherrice orsmuggledopium.
This is a validcontracttodeliverrice, and a voidagreementas totheopium."
73.UnitedIndiaInsuranceCoLtdvAbbisettiVenkatarao,AIR2008AP 8. Thecourtdis
tinguishedthe case from the decision of the SupremeCourtinNationalInsuranceCoLtd
VSeemaMalhotra,(2001) 3 SCC 151: AIR2001SC 1197,becausehere theinsurerhad
informed the owner of thevehiclesabout the dishonour of his cheque and consequent cancel
lationof the policy.
74.BOIFinanceLtdvCustodian,(1997)10 SCC488:AIR1997SC1952.
75. SeeBOIFinanceLtdvCustodian,(1997) 10 SCC 488: AIR1997SC 1952, when the void
partcan beseparatedfrom the valid, thelatterdoesnotbecome void.https://t.me/LawCollegeNotes_Stuffs

517. [S. 55] Timeforperformance377
TIMEFORPERFORMANCE [S.55]
Sometimesthe parties to acontractspecify the time for its performance.
Ordinarily it is expectedthateitherpartywill perform his obligation at the
stipulated time. But if one of them fails to do so, the question arises what is
the effect upon thecontract.Section 55containsthe answer.
S. 55. Effect offailuretoperformatfixedtime,incontractinwhichtime
isessential.—Whenapartyto acontractpromises to do acertainthing at or
before a specified time, or certain things at or before specified times, and fails
to do any such thing at or before the specified time, the contract, or so much
of it as has notbeenperformed,becomesvoidableattheoptionofthepromi
see, iftheintentionoftheparties wasthattime should be oftheessenceofthe
contract.
Effectofsuchfailurewhentimeisnotessential.—Ifitwasnottheinten
tion of the partiesthattime should be of the essence of the contract, the con
tractdoes notbecomevoidable bythefailure to do such thing at or beforethe
specifiedtime; but the promisee isentitled to compensation from the promisor
for any lossoccasioned to him by suchfailure.
Effect ofacceptanceofperformanceattimeotherthanthatagreed
upon.—If,in case of a contractvoidableon account of thepromisor'sfailure
toperformhispromiseat the time agreed, the promiseeaccepts performance
of such promiseat anytime other than that agreed, the promisee cannotclaim
compensationfor anylossoccasionedbythenon-performanceofthepromise
at the timeagreed,unless,at the timeofsuchacceptance,hegivesnoticeto the
promisor of hisintentionto do so.
Factorswhichmaketimeofessence
Accordingto thissection,if theintentionof the parties was that time
should be theessenceof the contract, then a failure to perform at the agreed
time renders thecontractvoidable at the option of the opposite party. "Time
isgenerallyconsideredtobeoftheessenceofthecontractin thefollowing
threecases:
(1)Wherethepartieshaveexpresslyagreedto treatit as oftheessenceof
thecontract;
(2)Wheredelayoperatesas aninjury;
(3)Wherethenatureandnecessityof thecontractrequiresit tobeso
construed,forexample,wherea partyasksforextensionoftimefor
performance."^®
76.SeeR.K.PrasadJ,OrissaTextileMillsLtd vGaneshDas,AljR.1961Pat107.Unlessthe
contractprescribesatimeforperformance,thereis noquestionofanyparticularmoment
oftimebeingregardedasoftheessenceofthecontract,D.S.ThimmappavSiddaramakka,
(1996)8see365;AIR1996SC1960.Themerefactoftimebeingmentionedwithastate
mentthatdelaywouldhaveto becompensateddoesnot ofitselfmaketimeof theessence.https://t.me/LawCollegeNotes_Stuffs

518. 378Chapter8DischargeofContract [S. 55]
ThewellknownauthorityisBhudraChandvBettsJ'^
Theplaintiffstipulatedwiththedefendantto engage hiselephantfor
thepurposeof Khedaoperations(tocapturewild elephants). The con
tractprovidedthattheelephantwouldbe delivered on the 1stOctober,
1910;butthedefendantobtainedanextensionoftimetillthe6thOctober
and yet did not deliver the elephant till the 11th. Theplaintiffrefused to
accept theelephantand sued fordamagesfor the breach.
He was heldentitledto recover as thepartiesintendedthattimeshould
be of theessenceof the contract. "This conclusion is confirmed by the cir
cumstancethatthedefendantobtainedanextensionof the time; if the time
werenotof the essence of thecontract,he neednothaveaskedforextension
oftime."^®
non-performance on the stipulated date did not givethe party the right to treat the contract as
ended and forfeit earnestmoney.ThakorlalV.Patelv Lt. Col. SyedBadruddin,(1993)1 Guj
LR 28. The court said (at p. 35): "The language of the agreement must show in most unmis
takable terms that the intention of the parties was to make their rights todependupon the
observation of the time-limit. Intention may also be inferred from the nature of the property
to be sold and the conduct of the parties and the surrounding circumstances at or before the
contractand notwhattakesplaceafterthecontracthas beenenteredinto. Evenwherethe
parties haveexpresslyprovided that time is of theessenceof the contract, otherprovisions
may exclude the inference that the completion of the work by aparticulardate was intended
to be fundamental, for example,if the contract wereto includeclausesprovidingfor extension
of time in certaincontingenciesor for paymentof finefor everyday or weekthe work remains
unfinished,suchclauseswouldbeconstruedasrenderingineffectivetheexpressprovision
relatingto the timebeingof theessenceof the contract." The courtpickedup these obser
vations from thedecisionof theSupremeCourt inGomathinayagamPillaivPalaniswami
Nadar,AIR 1967 SC 868:(1967)1 SCR227.Vairavanv K.S.Vidyanandam,AIR 1996 Mad
353, sale ofimmovableproperty with no stipulation that time was of theessence,there was
stipulation forcompletionwithin six months failing which theadvancepaid was not to be
returned.Thecourt said that thiswouldnotmaketimeof theessence.Recoveryof property
allowed by order ofspecificperformance.BadruNisha vYogendraPrasadSinha,AIR 2006
Pat 71: (2006) 1BLJR637 (Pat), in a contract for sale of immovable property, the date of
performancewasfixedwith aprovisionfor penaltyif there wasfailure to keepthe time, time
was held to be theessence.Next day after the expiry of the date, purchaser sent a notice to
theseller.Thus the conductof the partiesalsoshowedthat theyattached importanceto time.
HaryanaTelecomLtd v Union of India, AIR 2006 Del 339, supply of cables, failure, the
departmentclaimeddamagesfornon-supply,procuredfromothersourcesatcheaperrates,
awardofdamageswassetaside.Timewasoftheessencebecausetherewasaclausethatevery
delay would be liquidated damages clause. CoromandelIndagProducts (P) Ltd v Garuda
Chit&TradingCo(P)Ltd,(2011)8SCC601,thesellerofpropertywasinneedofmoney,
only short termextensionwasallowed,thisshowedthat the short term periodallowedfor
payingthe priceconstitutedtime as of the essence.
77. (1915) 22CalLJ566:33IC347.
78.MookerjeeJ at p.567.FollowedinCollesCranesofIndia Ltd vSpeedeoSparesCorpn,AIR
1970 Cal 321. Acontractcontainingprovisions for extension of time in certaincircumstances
often has the effect of reducing the value of time of performance. Abdulkhader vPlantation
CorpnofKeralaLtd, 1982KLT928.Wheredelayis dueto-the-Gonductof the party whohas
tosupplymaterial,penaltyfordelaycannot beimposed.ONGCvS.S.Agarwalla& Co,AIR
1984Gau11.https://t.me/LawCollegeNotes_Stuffs

519. [S. 55] Timeforperformance379
In businessmatterstime generally of essence
Businessmenattachimportanceto time
The matter depends upon the intention of the parties. Evenwhere "a spe
cific date is mentioned for the completion of thecontract/'one has not to
look at theletterbut at thesubstanceof theagreementin order toascertain
the real intention of theparties".^®"In commercial contracts time is ordi
narily oftheessenceof thecontract."^^This issobecausethebusinessworld
requirescertainty^^and alsobecause"merchantsare not in the habit of
placingupon their contracts stipulations to which they do not attach some
valueandimportance".^^Thus, in a contract tosupplyimportedgoodsin
October orNovember;^'*in acontractfor the purchase of chassis for a diesel
truck to besuppliedwithin twomonths®^and in an auctionpurchase,where
thepricewasto bepaid within 15days,®^timewasheldto be of theessence
of the contract.Similarly,in a contract for the sale or purchase of goods the
pricesofwhichfluctuaterapidlyin themarket,thetimeofdeliveryand of
paymentareconsideredto be of theessence.In Mahabir Prasad Rungta v
DurgaDatf^theSupremeCourtheldon thefactsof thecasethattimeof
paymentwasoftheessenceofthecontract.Thefactsofthecasewerethat a
transportercontractedwithRungta,acollieryowner,totransportcoalfrom
acollieryto therailwaystation.Thecolliery-ownerhad tokeepthe road in
repair and to arrange for petrol. He had also to pay for the transportation
on the10thof the next month. It was allegedthatthese things were not
done in time and,therefore,the transporter could not go on with his work.
Thetransporterrescindedthe contractandbroughtanactionfordamages.
It was heldthatincommercialtransactionstime isordinarilyof the essence
of the contract. In this contract the time of payment and ofarrangingother
thingswas,particularly,suchanimportantconditionofthecontractthat
79. Henceitbecomesa mixedquestionof law and fact. MCDvJuganNathAshokKumar,(1987)
4see497:AIR1987SC2316.
80. SeeSachidananda Patnik v G.P. & Co, AIR 1964 Ori 269. StateofKaniatakav Coimbatore
Premier Constructions,(1988)1 Kant LJ 249,wherethough time wasdescribedas of the
essence,additionalworkallottedto thecontractorwasmoreextensivethan themainwork,
thestipulatedtimelostitscharacterofbeingessential.U.K.RamakrishnanvR.Raveendran,
(2004)1KLT(SN7) 6(Ker),wheretime,thoughspecified,isnot oftheessence,performance
must be offeredwithinreasonabletime.LakshmiAmma vAyyappan,(2003) 3 KLT 577,
stipulationwasthattheplaintiffcouldfileasuitwithinoneweekofthedateofexpiryofthe
agreement.Thecourtsaidthatthiscouldnotdeprivetheplaintiffoftherighttofileasuit
withintheperiodoflimitation.S.55takesnoteoftheeffectoftimeas toperformanceand
not as to filing of suits.
81. China Cotton Exporters v Beharilal Ramcharan Cotton Mills Ltd, AIR 1961 SC 1295.
FollowedinFeecoHydraulic(P)Ltd v EastAngliaPlastics(India)Ltd,(1987)1CalLT551,
sale of machinery, commercial deal, time of essence.
82.HitkariMotorsvAttarSingh, AIR 1962J8cK10.
83. Botves vShand,(1877) LR 2 AC 455, 463.
84. ChinaCottonExportersvBeharilalRamcharanCottonMillsLtd, AIR1961SC1295.
85.HitkariMotorsvAttarSingh, AIR1962J&K10.
86. P.S.Duraikannoov M.SaravanaChettiar,AIR 1963Mad468.
87.AIR1961 SC990:(1961) 3 SCR639,-645.https://t.me/LawCollegeNotes_Stuffs

520. 380Chapter8DischargeofContract [S. 55]
Section 55 could be invoked by the aggrievedpartyand thetransporterwas
entitledtorescindthecontract.
Constructioncontracts
Time schedule in aconstructioncontractis likely to be of the essence
becauseconstructionis acommercialservice.Where24months'timewas
given to the builder with astipulationthatif he failed to deliverwithin
the stated time, he would pay 10 per cent per annum of the purchase price
measured by the period ofdelay,time was held to be of theessenceentitling
recovery of thestipulatedamount.®®Similarly, where a builder'scommit
ment with a bank wasthathe would make their building ready within six
months,butcouldnotdo so, thebankwasallowedtoterminatethecon
tract. The factthatthe bank exercised this right after about two months
after the expiry of thestipulatedtime did notamountto anextensionof
time.®9
Theterminationof acontractwas held to be proper where thecontractor
was not able to do anything to carry out the repair of a flood-protection
dam inspite of theextensionof time. The matter of time was a very impor
tantfactor in thecontract.'"The SupremeCourtobserved that in construc
tion contracts, the time of completionwould be of theessencewhen special
featuresexist.'^
In ajointventureagreement,one of the clauses wasthatthedefendants
were to perform certain formalities withinfiveyears, and that, on failure to
doso,theagreementwastobecomenullandvoid.Neitheranyapprovalwas
obtained within that time, nor sanction of the building plan. Thedefend
antscouldnotstarttheconstructionwithintime.Thecourtsaidthatthe
provision in thecontractforpenaltyand extension of time was of no use.
Thecontracthad ended by the efflux oftime.^^Where theconstructionof a
warehouse could not becompletedwithin the stipulated time and extensions
weregrantedseveraltimesandevenso the work couldnot becompleted,it
was heldthatthepartycould put an end to thecontractat the end of the last
extension if the work was still notcompleted.'^
88.ChyeFook v Teh TengSeng Realty,(1989)1MaiLJ308(IpohHC).
89. United CommercialBank vJawaharlal Mill,(1989)2CalLJ246.
90.NevilalRohitaConstruction(P) Ltd v State of Bihar, AIR 2005 Pat 190.
91.McDermottInternationalIncv BurnStandardCo Ltd, (2006) 11 SCC 181.
92. R.K.Apartments(?)LtdvArunaBahree, (1999) 77 DLT 193.
93. Pood Corporation of India v AnupamaWarehousingEstablishment, AIR 2004 Ker 137.
Municipal Corpn v Baluram, (2006) 4 CLT 178(P&H),time was found to be of essence
subjecttoavailabilityofcement,cementwasnotavailable,the plaintiffarrangedcementafter
expiry of time forcompletion,thereafterthe work wascompletedpromptly,performance
good.-IndianOil Corpn vLloydsSteelIndustriesLtd, AIR2008 NOC 866(Del),contractfor
designing,erectionofPetroleumProductsTerminalDepots,16months'periodwasgranted
for theTerminalatJodhpur,delaycouldresultinpostponingof theproject,timewas,there
fore,specifiedto be ofessence,findingof the arbitrator was that inviewofextensions,the
conditionthattimewasofessencelost itsvalidity,courtrefusedtointerferein thefinding.
VenkateshConstruction Co v Karnataka Vidyuth Karkhane Ltd,(2016)4 SCC 119: AIRhttps://t.me/LawCollegeNotes_Stuffs

521. [S. 55] Timeforperformance381
Saletransactions
The courts would have to see on the facts of each case involving a sale
transactionwhethertimefactorwasessentialtoperformanceor not. In a
contractof sale of goods, the time ofshipmentis of the essence.Thereis
aconsiderableauthorityinsupportof this ruleandit has beenrecognised
andacceptedin Bowes vShand.^'^Here in acontractof sale of rice to be
shippedatMadrasduringMarchor April, 1874, by a ship of thenameof
RajahofCochin,thestipulationinregardtoshipmentwas held to be a
conditionof thecontractand thecontractwas held to benotsatisfied by
shipmentamonthearlier,thatis, in February. Acontractfor sale of goods
requiredfifteendays'loadingnotice. Thecourtregardedit as aconditionof
thecontract.Thecourtsrequireprecisecompliancewithstipulationsas to
timewheneverthecircumstancesofthecaseindicatethatthatwouldfulfil
theintentionof thepartiesandthat,ingeneral,time is oftheessence in
mercantilecontracts.^^
A leading SupremeCourtauthorityis ChinaCottonExportersvBeharilal
RamcharanCottonMillsLtd.^^Theappellantswhocarriedonanimport
business at Bombaycontractedto supply to therespondentmill aquantity
ofItalianstaple fibrecotton.Theshipmentwas totakeplace inOctoberor
November.Thecontractconcludedby theremark:"Thiscontractissubject
toimportlicenceandthereforetheshipmentdate isnotguaranteed".Apart
of the goods weresuppliedandaccepted,but the rest werenotsupplied in the
timementioned.The buyerwantedto avoid thecontracton thisground.It
was heldthatin spite of theremarkthatshipment date was notguaranteed,
time was of the essence and the buyer wasentitledto avoid thecontract.
DasGuptaJ said:Remembering,as wemust,thatincommercialcontracts
time isordinarilyof the essence of thecontractand giving the word"there
fore" itsnaturalgrammaticalmeaning, we must holdthatwhattheparties
intendedwasthatto theextentthatdelay inobtaininglicencestandsin the
way of keeping to the shipment date,October/November,1950, this ship
ment date wasnotguaranteed,butwiththisexception,October-November,
1950, wasguaranteed.Thesellerscontendedthatthepartiesweremention
ing only one of the many reasons which might cause delay in shipment and
theconjunction"therefore"was used only to show theconnectionbetween
one of themanyreasons—byway ofillustrationandageneralagreement
thatthe shipment date was not guaranteed. We do not consider this expla
nationof the use of theword"therefore"acceptable.If thepartiesintended
thatquiteapartfrom delay inobtainingimportlicence, shipment date was
2016 SC 553, in acontractwith fixed time frame, there was change in thenatureofworkand
also involvement ofadditionalworkadmittedby theparties.It was heldthatthepartiescould
not be expected to go into a fresh round of negotiations and reframe terms of thecontract.The
suit waspendingfor over two decades.
94.(1877)LR2 AC455(HL).
95.BungeCorpnvTradaxExportS.A.,(1981) 1WLR711 (HL).
96.AIR1961SC1295.https://t.me/LawCollegeNotes_Stuffs

522. 382Chapter8DischargeofContract [S. 55]
not guaranteed, thenaturalway to expressing such intention would be to
say: "Thecontractis subject toimportlicence and the shipment date was
not guaranteed." The ordinary rules of grammar would not use the word
"therefore"in such acontextexcept to meanthatonly to theextentthat
delay was due to delay inobtainingimportlicence, shipment time was not
guaranteed.
The delay in this case was due to the failure of the seller's own supplier to
supply in time. Thiscannotbe a defenceunless it was a condition of the con
tractthatthe goods would be supplied only when received from the sources
of supply. In a similar case before theGujaratHighCourt:^^
Theundertakingwas to ship by aparticularship inAugust,1954.
Theplaintifffailed to ship in August and on their request the defendants
extendedthe time toSeptember10. Theplaintiffsfailed tomakegood
theirdefaultevenwithintheextendedtimeand,therefore,thedefendants
finallyrepudiatedthecontract.Theplaintiffsued them for breach.
BhagwatiJ, followingChinaCottonExporters,above, heldthatthe
time ofshipmentwas of the essence and it was theplaintiffandnotthe.
defendantswhowereguiltyofbreach.
Anapplicationforextensionof time does nottakeeffect unlessaccepted
andthefactthatanextensionforaweekwasofferedwouldnotamountto
a waiverwithinthemeaningof Section 63 of therightto insistuponthe
stipulatedtime.
Therewas acontractfor the sale of red oxide ofqualityandquantitystip
ulatedwithin45 days, the time wasdescribedto be as of the essence.There
were provisions forrepudiationon defaultandalso forliquidateddamages
andpenalty.Consideringthese terms as also thecommercialnatureof the
contract,thetimewasheldto be as oftheessence.'®Thecontractwaswith
a public sectorundertakingfor supply ofironores. Thepetitionerwas inti
matedto pay theconsiderationwithinseven days of theletterofintent.He
couldnotdo so. In themeantimeironorepricesincreasedconsiderably.Thus
timewasheld to be oftheessence.Theactionoftherespondenttorelease
supplies atincreasedratescouldnotbequestionedin awritpetition.'®
Landandpropertydealings
In acontractfor the sale oflandorimmovableproperty,theSupreme
Courthas laiddownthat"itwouldnormallybepresumedthattime wasnot
oftheessence ofthecontract.Mereincorporationinthewrittenagreement
of a clauseimposingpenaltyin case ofdefaultdoesnotbyitselfevidencean
97.WasooEnterpriserv J.J.OilMills, AIR 1968 Guj 57.
98.YenkateswaraMineralsv]ugalkishoreChiranjitlal,AIR1986Kant14. SeefurtherDevender
Singh VStateofU.P., AIR1987Ail306,whereanapplicationforextensionoftimewas
rejectedaftera long gap, thecontractorwas not allowedcompensationfor thewaitingperiod.
Inhire-purchasetransactionstime ofpaymentof hireinstalmentsis of the essence.
99.ManjunathaOverseasGraniteLtdvMysoreMineralsLtd,AIR 2010NOG69 (Kant).https://t.me/LawCollegeNotes_Stuffs

523. [S-55] Time forperformance383
intention to make time of theessence".^""In such cases, therefore, the time
factorwouldnotbeofessenceforobtainingthereliefofspecificperfor
mance.'"^Intentionof thepartiescan beascertainedfrom factors likenature
of thepropertyagreedto besold,thepossibilityofpricefluctuation,the
needforenteringinto the contract,conductof the partiesbefore,at the time
of andsubsequentto the contractatidothersurroundingcircumstances.A
declaration that the stipulated time shall be of the essence would have to
be taken in thelightof otherprovisionsandsuchotherfactorsmayeither
exclude orstrengthenthe inferencethattime was to be of theessence.'"^
Wheretheagreementincleartermsprovidedthat it was to beperformed
within six monthselsethe earnest money would standforfeited.The time
washeldtobeoftheessence."^Inacontractforsaleoflandtherewas
anexpressstipulation that time was of theessence.Theconsequencesof
non-performancewithintimewerealsostipulated.Therewassomesurplus
100. Gomathinayagam Pillai v Palaniswami Nadar, AIR 1967 SC 868, 871:(1967)1 SCR 227,
231-32;GovindPrasadChaturuedivHariDuttShastri,(1977) 2 SCC 539: AIR1977SC
1005; RamKishanDassvBhaviChatidSharma,AIR 1988Del20. In acontractfor the sale
of plotsof land, 30months'timewasreservedby thesellerforobtainingplanningpermis
sions, that was considered to be a sufficiently long period to disentitle the vendor from seek
ing any further time. Mohd Nazran vAl-EkhwanConstruction,(1991)3 Current LJ 2324,
HighCourt,Singapore. E.S. Rajan v R. Mohan, 1995AIHC3218 (Kant), the mere fact that
time forperformanceis specified does not make it of the essence of thecontract.Certainacts
may be of such a nature that they may or may not becompletedwithin thespecifiedtime.
Tatavarthi Jagannadham v Akkineni Radhakrishna,(1997)6 ALD 261(DB).Jayalakshmi
VAnilkumar, 1996 AIHC 4353(Ker),in a sale ofimmovableproperty, the performance of
the contract was dependent upon the fulfilment of certain requirements, and, therefore, it
was held that the time reserved for completion of thetransactioncould not be of the essence
of the bargain. Ranganatha Gounder v Sahadeva Gounder, AIR 2004 Mad 520, the time
limit specified in the agreement cannot be regarded as irrelevant and can be ignored with
impunity. But even so timecannotbe regarded as of the essence in toto because the discre
tion vested in thecourtunder Ss. 10 and 20 of the Specific Relief Act would be nullified.
Amteshwar Anand v VirenderMohanSingh,(2006) 1 SCC148;AIR 2006 SC 151, parties
never treated time to be animportantfactor. Payments under the agreement were asked for
much after the dates had expired. Time was held to be not of theessence.YogeshMehta v
Custodian,(2007)2 SCC624,balanceamountofconsiderationundertermsof thecontract
was 60 days fromgrantof sanction of the offer by the SpecialCourt,butconfirmationof
the sale was to be given by the Supreme Court. Hence 60 days were to run from the date of
confirmation.Timenotoftheessence.
101.PanchananDharavMonmathaNath Maity, (2006) 5 SCC340;AIR 2006 SC 2281.
102.KochappuvSomasundaramChettiar,(1991) 1 KLJ 525. In anagreementto sell immovable
property, apartpayment was to be made within a specified time and this thepurchaser
was not willing to make except uponfurtherconditions,time was held to be of the essence.
Specificenforcementwas not allowed.ChandRanivKamalRani, (1993) 1 SCC 519: AIR
1993 SC 1742.CitadelFinePharmaceuticalsvRamaniyamRealEstates(P) Ltd, (2011) 9
SCC 147; AIR 2011 SC 3351,commercialcontractfor sale of immovablepropertyto builder,
such purchaser could not keep time, he was not allowed to seek specificperformance.
103.CeeanInternational(P)LtdvAshokSurana,AIR2003Cal263.M.K.Watts vUsha
Sharma, AIR 2004P&H295, in atransactionfor sale of immovableproperty,the earnest
money was not paid on the specified date. The payment was essential to the vendor for paying
out hisoutstandingliabilities, express clause in the agreement described time to be of the
essence held, time to be essence. SyedQuadriv SyedMujeebuddin,AIR 2010NOC67 (AP),
timeprescribedforpayment,otherwiseconsequencesprescribedsuch asforfeiture,time
regardedas of theessence.https://t.me/LawCollegeNotes_Stuffs

524. 384Chapter8DischargeofContract [S.55]
landwhichrequiredpermission.Thepurchaserwasputundertheobhga-
tiontogetpermission.Hecouldnotdoso.Thecourtsaidthattimebeing
of theessence,thepurchaserwasnotentitledget thedecreeofspecific
performance.^"'*
In anagreementtoselllandtherewasastipulationthat thesaledeed
wouldbeexecutedwithinonemonthofthedateofsecuringpermission
fromthe LandCeilingAuthorities,buttherewas nostipulationas to the
effectoffailureofkeepingthedate.It washeldthat thevenderwasentitled
tospecificperformance.Thestipulatedtimewasnot of theessence.^"^In
anothercasetheagreementwhichspecifieda dateforperformancewassub
stituted by a newagreementwhich did notmentionany date forexecution
of thesaledeed.Theagreementwas made todependupon the result of a
case which wasfiledagainst the vendor by his brother and sister. No time
wasfixedforexecutionofthesaledeedafterdecisioninthesuit.Thecourt
naturally said that time was not of theessenceof the contract. Thevendee
served notice. The vendor refused. Suit filedwithinthree yearsaftersuch
refusal was held to bewithintime.^°®Thecontractprovidedthatthe vendors
would get theleaseholdpropertyconvertedintofreeholdprior to execution
of sale deed. Butthey failed to fulfil this obligation.The court said that time
ofgettingthepropertyconvertedintofreeholdwas not of theessence.The
buyerscouldnot be calledupon to pay thebalancepricetillthem.^°^
Where in an agreement for sale ofimmovableproperty, there was no
mentionoriginallyof the time ofperformancebeingof theessenceand the
buyerwas ready andvvillingand had already paid two instalments, it was
held that a unilateral attempt on the part of the vendor to make time as of
theessence,wasimproper."®As against this, a contract provided that the
balance amount has to be paid and sale deedregisteredwithin a particular
timeandinnocasethetimewouldbeextended.Butthevendeefailedto
pay.Thevendorgavehimnoticegivingtendaysfurther time forpayment
of the balance amount failing which the agreement would stand cancelled.
Evenso, the vendeefailed to keep the date of payment. The vendee served on
him the final notice ofcancellation.Thecourtsaidthatthe time ofpayment
was of theessence.The defaultingvendeewas not entitled to ask forspecific
performance."'
104.CitadelFinePharmaceuticalsvRamaniyamRealEstates(P) Ltd, (2011) 9 SCC 147: AIR
2011 SC 3351; A.K.Lakshmipathyv Rai SahebPannalalH.LahotiCharitableTrust,(2010)
1 SCC 287: AIR 2010 SC 577, clear condition incontractthat the purchasers would have to
definitelydeposit the balance amount by the date stipulated in the contract for sale. Held,
timeoftheessence.
105.RakhaSingh vBabuSingh, AIR2002P8cH270.
106.DalipSinghv Ram Nath, AIR 2002 HP 106, the contract wasspecificallyenforceable.
107. Kuldip Gandotra v Shailendra Nath Endlay, AIR 2007 Del 1.
108.SwarnamRamachandranvAravacodeChakungalJayapalan,AIR2000Bom 410, the
vendeehad paid the instalments and was ready to pay the balance money without seeking
indefiniteextensionoftime.
109. Vatsavayi VenkataSuryanarayanamaRaju v Metta Veerabhadra Rao, (1999) 1 ALD 308.
Badru Nisha vYogendraPrasad Sinha, AIR 2006 Pat 71: (2006) 1 BLJR 637 (Pat), therehttps://t.me/LawCollegeNotes_Stuffs

525. [S. 55] Timeforperformance385
The SupremeCourthastakennote of changedcircumstancesand
observedthatthe age-old principlethatin acontractrelating to immova
bleproperty,time isnotof essencerequiresto be revisited in view of the
changedcircumstancescreated by inflation and steep increase in the price
structureof suchproperties(obiter). Thecontractcontaineda schedule spec
ifying the periods forpaymentofconsideration.The clause alsoprovided
thatpaymentwouldbe made on thenextdate if the date specifiedturned
outto be a holiday.Theexecutionof sale deed wasdelinkedfromthe time
schedule forpayment.Thecourtsaidthatpartiesintentionmust have been
totreattime ofpaymentas oftheessence.""
Wherea decision wastakento sell ahouseimmediatelyto raiseurgently
needed funds and sixmonths'time was specified forpayment,it was held
thattime ofpaymentwas of essence. The vendee's failure to makepayment
in timedisentitledhim fromclaimingspecificperformance."^
Under the agreement, thepurchaserhad to pay the balanceamountof
considerationat any timeaftertheagreementwithintheouterlimit of one
year.Thereafterhis right under the agreement to paywithinone year was to
ceaseandhe was to lose all rightsundertheagreement.Thecourtsaidthat
the agreement showedthatthepartiesintendedthattime was of essence.
Suit filing after seven years from the date of the agreement was held to be
timebarred."^
The vendors pleaded that they were in dire need of money andthatis
why they were selling, but they failed to adduce any evidence about the
pressing need which goaded them to enter into the contract. Their conduct
showedthatthey were notattachinganyimportanceto time. The vendee
showed sufficient balance in account to pay the balance money. Specificper
formancewasnotrefused."^
The conduct of the parties plays animportantrole in determining impor
tance oftime ofperformance.Where both the parties seemedto haveignored
the failures on thepartof each other in the matter of implementation of their
agreement,the court was of the view that it could not be said about such
parties that they consideredtime to be of the essence."''
Allotmentofplots
ADevelopmentAuthority allotted plots through auction sale. The auc
tion-purchaser was granted time to make a late payment with interest. Even
then he could not make it. The payment made by him after the expiry of
was a clear stipulation that the sale should be completedwithin thespecifiedtime limit, no
evidenceto show that the plaintiff was ready and willing to complete her part, nospecific
performance.
110.SardamaniKandappanv S.Rajalakshmi,AIR 2011 SC 3234.
111. Nanjachary v P.Chenrtaveerachari,AIR 2015 Mad 73.
112.NarayanSharmav Devender KumarSharma,AIR 2014 NOC 219(All).
113.MohdAbdulAzeem vSouthIndiaPrimeTannery(P)Ltd,AIR 2016 Hyd 170.
114.VishalkumarNemichandKakadvShankarMahadeoKubde,AIR2009NOC258(Bom).https://t.me/LawCollegeNotes_Stuffs

526. 386Chapter8DischargeofContract [S. 55]
time with interest was accepted by the Authority. Thecourtsaidthatthere
was adeemedextensionof time.Thecancellationof thewholethingwas
notproper."^
Rightofrenewalandotherpersonalprivileges
But therenewalof a lease issomethingdifferentfrom sale ofimmovable
property. This waspointedout by the SupremeCourtin Caltex (India)Ltd
VBhagwanDeviMarodia-}'^^
In this case, the lessee of apetrolpumphad to apply for therenewalof
the leasewithina timefixedby thecontract.He was late by ten days in
hisapplicationfor renewal. Thelandlordrefused to renew.
Thecourtheldthatthe time so fixed was of the essence ofthebargain.
Equitywouldnot relieve him of theconsequencesof hisownneglect:
"Anoptionfor therenewalof a lease, or for thepurchaseorrepurchase
of aproperty,mustin all cases beexercisedstrictlywithinthetimelim
ited for thepurpose,otherwiseit will lapse.Thereasonisthattherenewal
is a privilege and if thetenantwishes to claim the privilege hemustdo
sostrictlywithinthetime-Hmitfor thepurpose.In such casesreUefis
notgiven inequitysaveuponthegroundofunavoidableaccident,fraud,
surprise,ignorance(not wilful) orinequitableconducton thepartof the
lessorprecludinghim fromrefusingto give therenewal."^^^
Agreementofreconveyance
Similarly, astipulationin acontractof sale ofpropertythatthe.buyer
wouldreconvey thepropertyto the seller if thelatterrefundedthe con
siderationwithinastipulatedtime,wouldconstitutethe time schedule to
be of the essence and therightof reconveyancewouldbe lost if the time is
missed."^
115.R.K.SaxenavDDA,(2001)4SCC137:AIR2002SC2340.
116. AIR 1969 SC 405: (1969) 2 SCR238.InGovindPrasadChaturvedivHariDuttShastri,
(1977) 2 SCC 539: AIR1977SC 1005, reserving twomonths'time onpaymentof ear
nestmoneyif thepropertywas notpurchasedwithinthattime,the time washeldto be of
essence.
117.Apropertywastransferredwith a condition of reconveyance and that if reconveyance was
not done within a certain time, the clause would become nullified, held, that some delay in
repayment taking place was not to deprive theplaintiffof his right of reconveyance.
118.BibiAnwarurtisavDaulatRai,AIR 1988 Pat 229.BismillahBegum vRahmatullahKhan,
(1998) 2 SCC226:AIR 1998 SC970,where also therightto seekreconveyancewas lost
because of the expiry of time. Thecourtcited with approval the FederalCourtdecision in
ShanbhushamFilialvAiitialakshmiAinmal,AIR 1950 FC 38: 1949 FCR 441whereit was
held that in contracts relating toreconveyanceof property, time factor has always been held
to be of the essence of thecontract.CitingHalsbury'sLawsofEngland,Art. 281(Vol3,
3rd Edn) 165, to the effect: "An option for renewal of lease, or for purchase or repurchase
of property, must in all cases be exercised strictly within the time limited for the purpose,
otherwiseit will lapse."QuotedwithapprovalinHarevNicoll,(1966) 2 QB 130, 145:
(1966)2WLR441(CA). Asimilarstatementoflawis to befoundinFoa'sGeneralLaw
OFLandlordandTenant,Art.453(8thEdn)310;alsoinHillandRedman'sLawofhttps://t.me/LawCollegeNotes_Stuffs

527. [S. 55] Time forperformance387
Carriageby air
Acomplainantunder theConsumerProtectionAct allegedthathis
cargo wasnotairliftedby thecarrierwithinthetime-limit.TheNational
Commissionagreedwiththeairlinerthatweightycargo blocks couldnot
becarriedin time because the safety of theaircraftwas animportantfactor
at all times. Thecomplainanthadfailed toestablishthattime was of the
essenceofthecontract."^
Completionofterm
A licence wasgrantedtorunatelephoneboothin acentralbustermi
nus. Thegrantwas for alimitedperiod.At the time of thelimitedperiod
allotment,theallotteemade no grievance. On theexpiryof thetermthe
Corporationinvited fresh bids. Theexistinglicencee's challenge to this pro
cedurewasheldtobenottenable.^^°
Saleofshares
Atransactionforsaleofsharesisofcommercialnature.Thetimeof
completionof thetransactionis likely to be animportantfactor.Wherethe
agreementwas for the sale of shares ofunquotedprivatecompaniestrading
in a volatile sector, it was heldthatif acompletiondatehadbeennamedin
theagreement,thatwouldhave been of the essence.Therefore,assoonas
the scheme waspreparedandcompletioncouldtakeplace, it was open to
thepartyto give notice to theotherto complete thetransactionspecifying
areasonabletime forcompletion.Thus,where timewouldhave been of the
essenceif specified,there onepartycan make time of the essence by serving
areasonablenoticeupontheothertocomplete.^^^
Timeofreporting
A singer agreed toperformat athreatrefor acertainseason and to be
present at least six days before the commencement of the engagement. But
hereportedonly two days before. Thetheatreowner sought to put an end
to thecontract.But he was notallowedto do so. It was only abreachof a
warrantyand not of a term orconditionwhich touched thesubstanceof the
contract.Hence, theplaintiffcould only recovercompensationfor loss, if
any,sufferedbyhim.^^^
LandlordandTenant(14th Edn) 54.RajKishorevPremSingh, AIR 2011 SC382,in a
contractofreconveyance,time of essence.
119. S.L.ExportsvSingaporeAirlines,2004All LJ 202 (NC)ConsumerProtectionAct,1986[S.
2(l)(g)].
120. G.GurunadhaReddyv A.P.RTC,AIR1999AP 179.
121.BritishandCommonwealthHoldingspicvQuadrexHoldings,1989QB 842:(1989)3WLR
723 (CA). SeefurtherClaude-LilaParulekarvSakal.Papers(P)Ltd,(2005) 11 SCC 73:
(2005) 124 Comp Cas 685, though thepartycan give notice to the other to performwithin
reasonabletime butcannotunilaterallyprescribetime forperformancewhere theoriginal
agreementissilentaboutit.
122.BettinivGye,(1876)LR1 QBD183.https://t.me/LawCollegeNotes_Stuffs

528. 388Chapter8 Discharge ofContract [S.55]
Non-commercialmatters
"Incasesotherthancommercialcontractstheordinarypresumptionis
thattime isnotof the essence of thecontract."^^^Accordingly,"inacontract
for the sale of immovable property, time would not be regarded as of the
essence unless it isshownthatthepartiesintendedso."^^"*
Extensionoftime
The SupremeCourtheld in a case before itthatthe time ofperformance
was extended by the parties and therefore it was not to be considered as of
theessenceofthecontract.^^^
Thecontractwas to provide a rig for acertainperiodwhichwas to be
extendedin case of anybreakdowninworking.Therig brokedownfor some
time and,withouttakingthis into account, the owner of the rigwantedto
withdrawit on theexpiryof theperiod.Thecourtsaidthatthoughthere
cannotbeunilateralextensionof time, in this case, there was theagreement
thatthe period would be extended so as to cover thebreakdownperiod.The
owner of the rig could not saythathe should bepermittedtowithdrawthe
rig subject to hisliabilityfordamages.Themachineryinquestionwasrare
andnot easily available.Compensationwouldhave served nopurpose.^^^
Wherearoadbuildingcontractcouldnotbecompletedin time due
tosecurityreasonsandabnormallybadweather,amongothers,andthe
Authorityrefusedtoextendtime despite the factthatthecontractorwas
ready to give theundertakingthathewouldcompletetheprojectwithinone
monthofextensionoftime,thecourtsaidthatextensionshouldbegranted
becausethe onlyotheralternativewascancellingthecontractandretender-
ing,whichwas likely totakefivemonths.Thecontractor'sworkwasfound
to besatisfactory.^^^
123.LucknowAutomobilesvReplacementPartsCo, AIR1940Oudh443.
124.MullaBadruddinv TufailAhmed,AIR 1963 MP 31. SeealsoHindustanConstruction
CoLtdVStateofBihar, (1999) 8 SCC 436: AIR 1999 SC 3710 onappeal,Hindustan
ConstructionCoLtdvStateofBihar, (1999) 8 SCC 436: AIR 1999 SC 3710,affirmedby the
SupremeCourtinGomathinayagamPillaivPalaniswamiNadar,AIR1967SC 868: (1967)
1 SCR 227. Inconstructioncontractsalso time isgenerallyof the essence. Sinceconstruction
involvesseveralfactors,one ofwhichmayoperatetocausedelay, thecontractoftencontains
fenced-roundprovisions forextension.Thisdoesnotdiminishtheimportanceof the time of
completion.It remains of the essence unlessextended.SeeK.N.ChowdharyvHindustan
Steel Works, AIR 1934 AP 110. The mere fact, however,thatthecontractprovides a pen
alty for delay is notsufficientin itself toshowanintentiontomaketime as of the essence.
GomathinayagamPillaivPalaniswamiNadar,AIR1967SC 868: (1967) 1 SCR111.
125.ManKaurvHartarSinghSangha,(2010) 10 SCC512.
126.SaipemSPA vJindalDrilling&IndustriesLtd,(2003) 6 Bom CR 347.U.P.StateBridge
ConstructionCorpnLtdvBangaloreDevelopmentAuthority,AIR2005NOC421 (Kant):
(2005) 5KantLJ112,penaltyfor delay,extensionof timebecauseofobstructions,held, time
notof essence.HewIndiaAssuranceCoLtdvKusumanchiKameshwaraRao,(1997) 9 SCC
179,suretybond by aninsurancecompanyto pay the seller for his supplies.
127.RamakantSingh vUnionofIndia,(2004)1 BLJR 173 (Pat). S.Brahmanandv K.R.
Muthugopal,(2005) 12 SCC 764,originalagreementfixed date forperformance,requestfor
postponingwithoutspecifyingperiod,noactioninresponse,thatamountedtopostpone
mentofperformance.Timebecameextended.https://t.me/LawCollegeNotes_Stuffs

529. [S. 55] Time forperformance389
Consequencesoffailure
Section 55furtherdeclaresthat"if it wasnottheintentionof theparties
thattimeshouldbe of the essence ofthecontract,thecontractdoesnot
becomevoidableby the failure to do such things at or before thespecified
time". It meansthatthe innocentpartywill have to accept performance
even if it isdelayed.He does not have the right to reject. But he may sue
the other party for any loss caused by thedelay.In an Andhra Pradesh
case,^^^there was some delay on thepartof a contractor to supply to the
StateElectricityBoard certain goods by the prescribed date and the court,
findingnoevidencewhatsoeverof the parties' intention to regard time as
ofessence,held that the Board was bound to acceptdelayeddeliveries.The
right torecovercompensationfor thedelaywould be there. TheSupreme
Courthas heldthatno notice would be necessary for exercising the right to
seekcompensation.^^'
Where, on the other hand, the time of performance is of theessenceof
the contract,anydelaywillrenderthe contractvoidableat the option of the
otherparty.Hemayrejecttheperformanceandimmediatelysuefor the
breach.Buthe mayat his optionacceptthedelayedperformance.If he does
so he cannot afterwards recover compensation for thedelay,"unless, at the
time of suchacceptance,hegivesnoticeto the promisor of his intentionto
doso"."°Delayby itselfdoesnot put an end to thecontract."^In a case
beforetheSupremeCourt,inabuildingcontracttimewasdescribedto be
128. A.P.SEB VPatelandPatel,AIR 1977 AP172. K.C.Skariav Govt of State of Kerala, (2006)
2SCC285,completiontime18months,Govtdelayedsupplyofcementandsteelby15 to 26
months,contractorjustifiedin not beingabletocompleteworkwithin time,Governmentnot
entitled to recover from the contractor extra costs for getting the work done through other
contractors.
129.McDermottInternationalIncv BurnStandardCo Ltd, (2006) 11 SCC 181; MeconLtdv
PioneerFabricators(P) Ltd, AIR 2008 NOC 870(Del),contractor's claim for extra payment
forexpenditurebecauseofdelay,delaywasattributableto bothparties,thecontractorwas
allowedonlyhalftheamount,hecouldnot beallowedto takeadvantageofhisowndefault.
130. StateofA.P.vAssociatedEnggEnterprises,AIR1990AP294,acceptedsiteforconstruc
tion out of time withoutgivingnoticeof intentionto sue forconsequencesofdelay,no com
pensationwasrecoverable.BazpurCoopSugarFactoryLtd vSurendraMohanAgarwal,
AIR1984 All174,buyerinsistinguponsuppliesevenafter theexpiryof theperiod,he
cannotsaythattimewasof theessence.SindBiscuitsMfgCovDelightEnggWorks,1984
AllLJ964,wheredelayedsupplyofmachinerywasacceptedwithoutprotestand,therefore,
no claimfordamageswas entertained afterwards.SuperintendingEngineerv K. Bapiraju,
(1997)4ALD701:(1997)5 AnLT146(AP),Governmentdelayedinhandingoversitebut
evenso the contractor went on working without protest. This amounted to waiver of his
right.Hisclaimforcompensationfordelayandthearbitrator'sawardforitwereheldto be
unjustified and without jurisdiction.
131. Jain Millsand ElectricalStoresv State of Orissa, AIR 1991 Ori117.
132. Hind Construction Contractors v State of Maharashtra,(1979)2 SCC 70; AIR 1979 SC
720;K.KallaiahvNinegegowda,AIR1982Kant93;ArosanEnterprisesLtd vUnionof
India,(1999)9SCC449,acontractdescribedtimeto beoftheessencebutalsoprovidedfor
extensionof time. The sellersoughtextension.The effectofsilenceon the part of the buyer
wasthat theapplicationforextensionwasnotaccepted.Withoutevidenceofanyrenewed
date,thecourtcouldnotdeterminewhatwasthefuturedateofperformance.Therecannot
beanypresumptionaboutextension.Ithasto befixedorrefixedincategoricalterms.Inthishttps://t.me/LawCollegeNotes_Stuffs

530. 390Chapter8DischargeofContract [S. 56]
of the essence of the contract. Thecontractorwas given the facility to seek
extension of time in advance on reasonable grounds, failingw^hicha penalty
was payable for each day of default. Thesestipulationswereconstruedby the
court as not making time to be of theessence.Thecontractor'sapplication
for extension was rejected and, on his failure to complete the works within
the specified time, theDepartmentrescinded thecontract.The rescission
was not approved by the Supreme Court. Some further period should have
been allowed to thecontractortelling himthatthe extended time would be
of theessenceand that it would neither be extended, nor excusable on pay
ment offine.Then only it would have been possible to rescind the contract.
In a contract for sale of land the vendor wanted payment to be made
within a week, but on the insistence of thevendee,10 days' period was
agreed upon. The vendee offered money after ten days. The vendor refused.
Thecourtallowed no remedy to thevendee.^^^
IMPOSSIBILITYOFPERFORMANCE ANDFRUSTRATION
Initialimpossibility[S.56]
Section 56 first lays down thesimpleprinciple that "an agreement to do
an actimpossiblein itself is void". For example, an agreement to discover a
treasure by magic, being impossible ofperformance,is void.
Subsequentimpossibility[S.56]
Thesecondparagraph ofSection56laysdown theeffectofsubsequent
impossibility of performance.Sometimesthe performance of a contract is
quitepossiblewhen it is made by the parties. Butsomeeventsubsequently
happens which renders its performanceimpossibleor unlawful. In either
casethe contractbecomesvoid.Where,forexample,aftermakinga contract
of marriage, one of the parties goes mad, or where a contract is made for
the import ofgoodsand the import isthereafterforbiddenbyaGovernment
Order, or where a singercontracts to sing andbecomestoo ill to do so, the
contractineachcasebecomesvoid.^^'*
S. 56.Agreementtodoimpossibleact.—Anagreementto do an act
impossibleinitselfisvoid.
Contracttodoactafterwardsbecomingimpossibleorunlawful.—A
contract to do an actwhich,after the contractismade, becomesimpossible.
casethecontractwasforsupplyofimportedsugar.Thebuyergavenoresponseto theseller's
requestforextension,norrescindedthecontract.Theeffectwasthat thebuyerlosttheright
toinsistupontimeto be of theessence.
133.KamalRanivChandRam,AIR1980Del 188.
134.Illustration{b),(d)and(e)to S.56.ChamanLaiJain vArunKumarJain, AIR1996Del108,
acompromisefordissolvingpartnershipconvertedintodecree,notallowedto bechallenged
onthegroundthatthepartnershiphadalreadyfrustrated.RajKumarGuptavDesRaj,AIR
1995HP 107,sale of agriculturalland, sanction fromGovernment,notpossiblebecauseof
subsequentchangeof law,frustration.https://t.me/LawCollegeNotes_Stuffs

531. [S. 56] Impossibilityofperformanceandfrustration391
or, byreasonofsomeeventwhichthepromisorcouldnotprevent,unlawful,
becomesvoidwhentheactbecomesimpossibleorunlawful.
Compensationforlossthroughnon-performanceofactknowntobe
impossibleorunlawful.—Whereonepersonhaspromisedto dosomething
whichhe knew, or, withreasonablediligence,mighthaveknown,andwhich
thepromiseedidnotknow, to beimpossibleorunlawful,suchpromisormust
makecompensationto suchpromiseefor any losswhichsuchpromiseesus
tainsthroughthenon-performanceofthepromise.
Illustrations
(a)AagreeswithBto discovertreasureby magic. Theagreementis void.
(b)A and Bcontractto marry eachother.Beforethetimefixed forthemarriage,Agoes
mad.Thecontractbecomesvoid.
(c)Acontractsto marryB,being already married to C,and beingforbiddenbythelaw to
which he issubjecttopractisepolygamy. A must makecompensationto Bfortheloss.
causedto her bythenon-performanceof his promise.
(d)Acontractsto take incargofor6at a foreignport./A'sGovernmentafterwardsdeclares
war against the country in which the port issituated. Thecontractbecomesvoid when
warisdeclared.
(e) Acontractstoactat atheatrefor sixmonthsinconsiderationof a sumpaidinadvance
byB.On several occasions A is tooillto act. Thecontractto act onthoseoccasions
becomesvoid.
General principle of judicial non-interference
In the first-known English case ofParadinevJane^^^it was pointed out
thatsubsequenthappeningsshould not affect a contract already made:
There the defendant hadtakenan estate on lease from the plaintiffs.
The defendant wasdispossessedof it by alienenemiesfor some time and,
therefore, refused to pay the rent for the period of dispossession.
It was heldthat"when thepartyby his owncontractcreates a duty, he
is bound to make it good, if he may,notwithstandingany accident by inev
itablenecessity,because he might have provided against it by his contract;
though the land besurroundedorgainedby theseas,or made barren by
.wildfire,yet the lessor will have his whole rent".
In the subsequent case to Taylor vCaldwell^^^BlackburnJ laid down
that the above "rule is onlyapplicablewhen the contract is positive and
absolute, and not subject to any condition either express or implied".
In this case, the defendants had agreed to let the plaintiffs the use of
their music hall betweencertaindates for thepurposeof holding a con
cert there. But beforethatfirst day on which aconcertwas to be given,
the hall was destroyed by firewithoutthe fault of either party.
Theplaintiffssuedthedefendantsfor theirloss.It washeldthat the con
tract was notabsolute,as its performancedependedupon the continued
135. King's Bench, (1647)Aleyn26; 82 ER 897.
136.(1863) 3B&S826:122ER309.https://t.me/LawCollegeNotes_Stuffs

532. 392Chapter8DischargeofContract [S. 56]
existence of the hall. It was,therefore,"subjectto an impliedconditionthat
thepartiesshall be excused in case, before breach,performancebecomes
impossible from theperishingofthingwithoutdefaultof thecontractor".
Withthisdecisionbeganthestrugglebetweenthetwoprinciples,namely,
the principle ofsanctityofcontractwhichsupportstheprincipleofabsolute
liabilityandtheprinciplethatacontractbedischargedwhentheshared
contractualassumptionhas beendestroyedbychangeofcircumstances.^^^
Frustration
In the abovecase"®theperformanceof thecontracthad become physi
cally impossible because of thedisappearanceof thesubject-matter.But the
principle is notconfinedto physical impossibilities. It extends also to cases
where theperformanceof thecontractis physically possible, but the object
thepartieshadinmindhas failed tomaterialise.Thewell-knowncorona
tion cases ofwhichKrellvHenryisone,illustratesthis:
Thedefendantagreed to hire from theplaintiffa flat for June 26 and
27, on which days it had beenannouncedthatthecoronationprocession
would pass alongthatplace. Apartof the rent was paid in advance.
But the procession having been cancelled owing to the King's illness, the
defendantrefused to pay the balance.
It was heldthatthe realobjectof thecontract,as recognised bybothcon
tracting parties, was to have a view of the coronation procession. Thetaking
place of theprocessionwas,therefore,thefoundationof thecontract.The
object of thecontractwas frustrated by non-happening of thecoronation
andtheplaintiffwasnotentitledtorecoverthebalanceof therent.""
Thus, the doctrine offrustrationcomes into play in two types of situa
tion,first,where the performance is physically cut off, and, second, where
the object has failed. The SupremeCourtof India has heldthatSection
56 will apply to both kinds of frustration. Referring to the section, B.K.
MukherjeaJ of the SupremeCourtobserved inSatyabrataGhose v
MugneeramBangur&Co"^asfollows:"Thismuchisclearthattheword
'impossible' has not been used here in the sense of physicalor literal impos
sibility.The performance of an act may not be literallyimpossiblebut it
may be impracticable and useless from the point of view of the object and
purpose which the parties had in view; and if anuntowardevent or change
of circumstances totally upsets the very foundation upon which the parties
CASEPILOT
137. See S.H.Goo,(1996) JBL 223reviewingProfessorTreitel'sbook.FrustrationandForce
Majeure(1994 Edn). Govindbhai GordhanbhaiPatelvGulamAbbasMullaAlUbhai,
(1977) 3see179: AIR 1977 SC 1019, acontractbecomes void byfrustrationonly if some
thingsupervenesafteritsexecution.
138.TaylorVCaldwell,(1863) 3B&S826:122ER 309.
139. (1903) 2 KB 740 (CA).
140. SeeMcEloryandWilliams,TheCoronationCases, 4ModLR 241.
141.AIR1954SC44:1954SCR310.https://t.me/LawCollegeNotes_Stuffs

533. [S. 56] Impossibilityofperformanceandfrustration393
rested their bargain, it can very well be saidthatthepromisorfindsit impos
sible to do the actwhichhepromisedtodo.""^
Explaining the concept"frustrationof thecontract"in Cricklewood
Property& Investment TrustLtdv Leighton'sInvestmentTrustLtd^'^^
ViscountSimonLCsaidthatitmeans"occurrenceofaninterveningevent
or change of circumstances sofundamentalas to be regarded by the law
both as striking at therootof the agreement, and as entirely beyond what
was contemplated by the parties when they entered into the contract". To
the same effect is the following statement of LordWright:"''"The word
frustrationis here used in a technical legal sense. It is a sort ofshorthand:
it meansthatacontracthas ceased to bind thepartiesbecause thecommon
basis on which by mutualunderstandingit was based has failed. It would
be more accurate to say, notthatthecontracthas beenfrustrated,butthat
there has been a failure of what in the contemplation of both parties would
be the essentialconditionorpurposeof theperformance."
This principle was applied byTejaSinghJ of the Punjab High Court in
ParshotamDasvMunicipalCommittee,Batala}'^^
AMunicipalCommitteeleasedout certain tonga stands to the plaintiff
forRs5000.But no tonga driver came forward to use the standthrough
out the year and the plaintiff could not realize anything. He sued for the
refundof his money.
It was held that "the plaintiff obtained the lease and the committee
grantedthesameto him on theassumptionthat the tongastands would be
used bydriversand the plaintiff wouldrecoverfeesfrom them, but for rea
sons which both sides could not help the drivers did not use the stands, the
doctrineoffrustrationapplied with full force".
Acontractfor sale of land fornon-agriculturaluse was held to have frus
trated when theapplicationfor such usewasrejectedbytheauthorities."^
142.Theseprincipleshavebeenaffirmedby theSupremeCourt in Dhruv Dev Chand v
HarmohinderSingh,AIR 1968 SC 1024, whereShahJ(afterwardsCJ)heldthat the doc
trine does not apply tocompletedtransfers.Indian Rare Earth Ltd v Southern Electric
.SupplyCoofOrissa,AIR2010Ori 115,nosupplytofactorybecauseofuprootingoftowers
by super cyclone, no liability.
143.1945AC221(HL).
144. InTwentscheOverseas Trading Co Ltd v Uganda Sugar Factory Ltd, (1945) 58LW315:
AIR1945PC144.
145.air1949EastPunjab301,304.
146.Naimudin1.BharmalvCharotarGramoddharSahakariMandliLtd,(1997)1 Guj LR 547.
CentralBankofIndia StaffCoopBuildingSocietyLtd vDulipallaRamachandraKotesewara
Rao, AIR2004 AP18:(2003)5ALD116(DB),saleof vacantland for whichpermissionwas
necessary,but nottaken,lawchanged,alienationprohibited,thebuyerremainingsilentfor
19years,notenforceable,frustrationwitheffluxoftime.N.SatyanarayanavVedprakash
Dusaj,(2003)3ALD884,transferoflandsubjecttopermissionofCantonmentBoard,per
missionnot granted,contractimpossibleofperformance,hencenospecificrelief.A. Mohd
Basheerv State ofKerala,(2003)6SCC159,auctionofforest,beforeconfirmationof bid,
partlydestroyedbyfire,reauction,fetchingless,shortfallcouldnot berecoveredfromfirst
bidder.https://t.me/LawCollegeNotes_Stuffs

534. 394Chapter8DischargeofContract [S. 56]
Commercialhardship
Thealterationofcircumstancesmust be "such as to upsetaltogetherthe
purposeof thecontract.Some delay or some change is verycommonin all
humanaffairs,and itcannotbesupposedthatanybargainhas been made
on the tacitconditionthatsuch athingwill nothappenin anydegree"."^
This makes thecourtrathercautiousindischargingpartiesfromtheircon
tract.Anillustrationin line is the decision of theCalcuttaHighCourtin
SachindraNathvGopalChandra}'^^
Theplaintiffletcertainpremises to thedefendantfor arestaurantat
somewhathigher rent. The defendant agreed to pay high rent because the
British troops werestationedin the town and a clause in the agreement
specially providedthat"this agreement willremainin force so long as
Britishtroopswillremainin this town". After somemonths,the locality
was declared out of bounds to the Britishtroops.
The question waswhetherthisfrustratedthecontract.HendersonJ
relied upon the above cited passage of LordLoreburnand heldthatthough
it was possiblethatthe defendant would not have paid such a high rentapart
from the expectation of deriving high profits from the British troops,that
wasnotsufficienttomakeoutacaseoffrustration.
A situation like this has been described as one of commercial hardship,
which may make the performance unprofitable or more expensive or dila
tory, but is not sufficientto excuse performance, for it does"notbring about
afundamentallydifferentsituationsuch as tofrustratetheventure".^'*'The
doctrine offrustrationor impossibility does not apply to a situation so as to
excuseperformance "where performance is not practically cut off, but only
renderedmoredifficultorcostly.^^°Suchcasesmay not fall within the pur
view of Section 56 and this is amply shown by the Privy Council decision in
HurnandraiFulchandv PragdasBudhsen}^^
By acontractinwritingtheplaintiffboughtof thedefendantsanum
ber of dhotis to bemanufacturedby specified mills and to be delivered
asandwhen the same may be received from the mills. The sellers deliv
ered onlypartof the goods owing to the mills failing to perform their
147. Per LordLoreburninF.A.TampUnSteamship Co Ltd v Anglo-Mexican Petroleum
ProductsCoLtd,(1916) 2 AC 397.
148.AIR1949Cal240.
149. See Anson's LawofContract(22nd Edn by Guest, 1964) 459.TravancoreDevaswont
Board v Thanath International,(2004)13 SCC 44;(2004)1KLT56, it is not a ground
fornon-performancethatperformancehadbecomeonerousor forclaimingenhancement
ofconsideration.PremierExplosivesLtd vSingareni'CollieriesCo Ltd, AIR 2010 AP 107,
prospectsofdwindlingprofit from contract due to inflation ofprocurementprice of raw
material, onerous performance, held to be not a factor falling within purview of S. 56.
150. PerThomasJinMeganVUpdikeGrain Corpn, 94 F2d 551(1938),collectedfrom Shepherd
andWellington,ContractandContractRemedies, CasesandMaterials(4th Edn,
1957)718, 721.
151. (1922-23) 50lA9, on appealfrom theBombayHigh Court:HurnandraiFulchand v Pragdas
Budhsen,(1922-23)50lA9: AIR 1923 PC 54 (2).https://t.me/LawCollegeNotes_Stuffs

535. [S. 56] Impossibilityofperformanceandfrustration395
contractwith thedefendantsas they were engaged infulfilHngcertain
Governmentcontracts.Thedefendantspleadedfrustration.
The Privy Council heldthatthe adventure was notfrustrated,as the stip
ulationas to delivery did not make delivery by the mills aconditionprec
edent. It was a simple case of breach."Theclosing or even thedestruction
of the mills would not affect acontractbetweenthirdparties,which is in
termsabsolute."
"Itwas suggestedthatthe words 'as and when the same may be received
from the mills', should beconstruedas if they were 'if and when the same
may be received from the mills'.Thisis toconvertwords,whichfixthe
quantitiesandtimes for deliveries byinstalmentsintoaconditionprecedent
to theobligationto deliver at all,andvirtuallymakea newcontract.The
wordscertainlyregulatethemannerofperformance,but they donotlimit
the sale to such goods as the millsmightdeliver."
Theprincipleof this case was followed by theSupremeCourtinGanga
SaranvFirmRamCharanRamGopal}^^
Acontractwas made for supplyingcertainbales of clothmanufactured
by theNewVictoriaMills,Kanpur.Thecontractadded: "We shall go on
supplying goods to you of theVictoriaMills as soon as they aresupplied
to us by the said mills." The mill failed to supply the goods to the sellers
and,therefore,the sellers pleadedfrustration.
But they were held liable:"Theagreementdoesnotseem to us to convey
themeaningthatthe delivery of the goods was madecontingentontheir
being supplied to therespondentsby theVictoriaMills. We find itdifficult
to holdthatthepartiesevercontemplatedthepossibilityof the goodsnot
being supplied at all. The words'preparedby the Mills' are only a descrip
tion of the goods to be supplied, and theexpression'as soon as they are
prepared'and 'as soon as they are supplied to us by the saidMills',simply
indicatetheprocessof delivery."
It wasaccordinglyheldthatthecontractwasneithercontingentunder
Section 32, nor did it fallwithinthe secondparagraphof Section56."^
To the same effect is the decision of theMadrasHighCourtinSamuel
Fitz &CoyStandardCottonandSilkWvgCo."'*
The defendants placed an order with the plaintiffs for the supply of
tapestries of certain kind, making it clearthatthey intended to sell them
inAustralia.But theAustrahanGovernmentprohibitedtheimportof
such goods. The defendants lost their market and, therefore, cancelled
theirorder.
152.AIR1952SC 9:1952SCR36 at p. 11.
153. A person who contracts to supply has to assure his stock. His inability to replenish his
stock is his problem and not that of other party.StandardChemicals Co (P) Ltd vPalakol
CooperativeSugarsCoLtd,(1988) 25 Rep 60.
154.AIR1945Mad291 at p.293.https://t.me/LawCollegeNotes_Stuffs

536. 396Chapter8 Discharge ofContract [S.56]
In anactionforbreachofcontract,"HorwillJ heldthatthecourts
should not read into acontractan implied termthatthe enforceability of the
contractwas dependent upon the ability of the purchaser tofindcustomers
for the goods. "We are unable to say that the foundation of thecontract
wasthatthese goods should be resold by the defendants to their clients in
Australia."
Similarly, acontractby aHindufather to givehisdaughterinmarriageto
the plaintiff was held by the BombayHighCourtto be notfrustratedsimply
because the girl had expressed her unwillingness tomarrythe plaintiff. The
defendant had to pay damages for thebreach."^In the same way, where
the performance of acontractfor the sale of grain was made moredifficult
byGovernmentrestrictionson sale andstorageimposedsubsequently;"^a
contractgiven by anauthorityto acontractorof therightto collect tolls at
the ghats of a bridge and theGovernmentsubsequentlyprohibitedthe traffic
offoodgrainsover the bridgeresultingin loss to theplaintiff;"^the tempo
rarysuspensionof traffic on a bridgeowingtobreakdown;"^in acontract
to supply a ship, the increase in shippingrates;"^in acontractfor the sale
ofland,the local officer's insistencethatStatepermissionfor thetransfer
should beobtained;^®"theworkersoftoddyshops going onstrikeafterthe
contractorhadobtainedbybiddingat anauctionthe licence torunthe
shops;^®^in acontractfor supply of machinery, the failure of the source from
which thesuppliersub-contractedtopurchase;^^^failure to supply the con
tractedquantityinassortedvarietyofeucaplyptusfirewood owing to the
forest,whichwasunderthesupplier'slease, not helping him up to the requi
sitequantity,aggravatedfurtherbyshortageoflabourandtransportfacility
in thearea,all these werethingswhichthecontractorshouldhavecon
sidered before giving hiscommitments;^"and, therefore, in all these cases
theperformancewas held not to have become impossible."Disappointed
expectationsdonotleadtofrustratedcontracts."^''''
155.PurshotamdasTribhovandasvPurshotamdasMangaldas,ILR(1896)21 Bom 23. See also
AmuruviPerumalvSabapathi,AIR1952Mad253.
156.SahasKaramvNathMai,AIR 1951 Ajm 65; See alsoGurditSingh v SecyofState,AIR 1931
Lah347.
157.DistrictBoard,SouthKanarav G.SanthappaNaik,AIR1925Mad907:(1925)86 IC362.
158.SankaranvDistrictBoard,Malabar,AIR1934Mad85.
159.Karl EttlingervChagandas& Co, ILR (1915) 40 Bom 301.
160.GovindbhaiGordhanbhaiPatelvGulamAbbasMullaAllibhai,(1977)3 SCC 179.
161.StateofKeralavPailyChandy,1984KLT260:AIR1984NOC70(Ker).
162.MTUAsiaPteLtdvBrightside-WohHup,(1989) 1MaiLJ 10HighCourtofSingapore.
163.GiualiorRayonSilk Mfg(Wvg)Co vShriAndavar& Co, AIR 1991 Ker 134.
164.DavisContractorsLtdvFarehamUrbanDisttCouncil,1956AC696,715;(1956) 3WLR
37 (HL), cited byPearlCycleIndustriesLtdvA.N.Kaul,AIR1964Punj482.Licensingof
atradesubsequenttocontractis notfrustration.SethMohanLaivGrainChambersLtd,
^ AIR1968SC111.Acontracttoruntoddyshop,strikebytoddytappersandsuppliers,S. 56
notapplied.StateofKeralav PailyChandy,1984KLT260:AIR1984NOC70 (Ker).With
1j thisshouldbecontrastedPunjSons(P)LtdvUnionofIndia,AIR1986Del158,wherethe
materialinquestion(hot dip tin) wasneitheravailablein themarket,nor theGovernment
CASEPILOT made anyarrangementforsupplyingit, thecontractorwasreleasedfromhisresponsibilityhttps://t.me/LawCollegeNotes_Stuffs

537. [S. 56] Impossibilityofperformanceandfrustration397
Specificgrounds offrustration
"The principle offrustrationof contract, or of impossibility of perfor
mance is applicable to a great variety ofcontracts.It is, therefore, not pos
sible to lay down an exhaustive list ofsituationsin which thedoctrineis
going to be applied so as to excuseperformance.The law upon thematteris
undoubtedly in process of evolution."^" Yet the following grounds of frus
trationhavebecomewell-established.
1.Destructionofsubject-matter
The doctrine of impossibility applies with full force "where the actual
andspecificsubject-matter of the contract has ceased toexist".^""Taylor v
Caldwell^^''is the best example of this class." There, a promise to let out a
musichallwasheldtohavefrustratedonthedestructionofthehall.Another
illustrationisHowellvCoupland}^^
The defendantcontractedtosella specifiedquantityofpotatoesto be
grown on his farm, but failed to supply them as the crop was destroyed
by a disease.
Deliveringthe judgment of the Court of Appeal,MellishLJsaid:
"Supposethe potatoes had beenfullygrown at the time of the contract,
andafterwardsthe disease had come anddestroyedthem;accordingto
the authorities it is clearthatthe performance would have been excused;
and Icannotthinkit makes any differencethatthepotatoeswere not then
in existence. ... Here there was an agreement to sell and buy two hundred
ofsupplyingto the Government milk containers quoted with that material. C.T. Xavier v
P.V.Joseph, AIR 1995 Ker140, delayin construction of godownsfor Food Corpn, clausefor
extension of time was there, no evidencethatthe Corpn would not have taken the godowns
even if provided late, this cannot be described asimpossibilityso as to enable any party to
get rid of the contract. C.J. International Hotel Ltd v NDMC, AIR 2001 Del 435, alicence
land for hotelpremisestaken at an open auction, thelicenceewas notallowedto say that
licencefee should be reduced because the project was not economicallyviable. The Authority
was not restrained from taking any coerciveaction. Gujarat Housing Board vVipulCorpn,
AIR 2004 Guj 319, contract for water proofing work of houses, contractor had knowledge
that the houses were inpossessionof allottees, the court did not regard denial of access by
allottees as animpossibility.N.G.VigneshatvaraBhat v P. Srikrishna Bhat, AIR 2006 Ker
322, vendor's failure to make out title for all the properties agreed to be sold did not frus
trate the contract because the properties under the absolute ownership of the vendor were
definitelytransferable.H.P.State CooperativeBank Ltd vU.P.State Financial Corpn, AIR
2016 HP 29, inability by a financial corporation to pay interest on its bonds is not the same
as animpossibilityofperformance.
165. See A.L. Corbin, RecentDevelopmentsinContracts,(1937) 50HarvL Rev 549,465-66.
166. SeeMcCardieJ in Blackburn Bobbin Co vT.W.Allen & Sons,(1918)2 KB 467(CA);
MarkfedVanaspati& AlliedIndustries v Unionof India, (2007)7 SCC679, forcemajeure
clause can be invoked when it pertains to the contractual obligation that has purportedly
become impossible ofperformance.
167. (1863) 3B&S826:122ER309.
168.(1876)1QBD258(CA).State ofA.P.vTanguduVaraprasadaRao,(2004)4 ALD528, for
est sufferingfrom natural calamity or vandalismbyacts of third parties, effectupon contract
andindemnity.https://t.me/LawCollegeNotes_Stuffs

538. 398Chapter8DischargeofContract [S. 56]
tonsoutof a crop to begrownon a specificland,thatit is anagreement
to sellwhatmay be called specificthings;thereforeneitherpartyis liable
if theperformancebecomes impossible."
AparalleldecisionunderSection 56 isthatof theMadrasHighCourtin
V.L.Narasuv P.S.V.lyer^^^whereacontracttoexhibita film in acinema
hall was held to have become impossible ofperformancewhen onaccount
of heavy rains the rear wall of the hall collapsed killing three persons and its
hcence was cancelleduntilthebuildingwasreconstructedto thesatisfaction
of the chief engineer. Theownerwasundernoliabilitytoreconstructthe
hall and even if he didreconstructand ittookhimsome time, bythattime
the filmwouldhave lost its appeal.
Wherethetenantedpremisescomprisedlandandbuilding,thecourt
saidthatonce thestructurewas completelydestroyed,thetenancyceased.
Norightwas available to thetenantto apply forpossessionif thelandlord
re-constructedthepremises.^^"
The same result followed where a shipranaground."^The resultwould
also be the same where the subject-matter of thecontractthough intact has
ceased to be available to theparties.Thus, where a ship wascharteredfor
twelvemonthstorunfrom April to April and before it could be delivered, it
was requisitioned and was released only in September, the House of Lords
held that thecharterpartyhad frustrated, for a September to September
term was notcontemplatedby theparties.^^^Where thepartiescan still
performtheir main obligation despite the factthatthesubject-matterhas
gone out of their hands,frustrationmay notfollow.Thus, where a ship was
chartered forfiveyears and three years after that, it was requisitioned by the
Government,thelatterpaying more moneythanthe freight agreed between
theparties,it was heldthatthecontractwasnotfrustrated.Thecharterer
was bound to pay the freight andthathe could still pay and, therefore,
he was entitled to collect the money from theGovernment.^^^Similarly, an
agencyfor dealing with the goods "manufactured or sold" by the principal
was notfrustratedwhen the principal's factory was destroyed, for the agent
could still deal with the goods sold by theprincipal.^^"*
In acontractfor carriage of goods by sea, a vessel sank with cargo. There
was evidenceto showthatthevesselhadstartedtaking in water. When the
vesselwas discovered to be tilting, the water in the bilge was pumped out
169.AIR1953Mad300.
170. West Bengal KhadiandVillageIndustriesBoardv SagoreBanerjee,(2003) 1 ICC 991 (Cal),
S.108(c)of the Transfer of Property Act applies only when the tenancy is notcompletely
destroyed.
171. Jackson v Union Marine Insurance Co Ltd, (1874-80) All ER Rep 317.
172. Bank LineLtdvArthurCapel& Co, 1919 AC 435(HL).
173. Tampling S.S. Co Ltd v Anglo-Mexican PetroleumProductsCo Ltd, (1916) 2 AC 397 (HL).
174. Turner v Goldsmith,(1891)1 QB 544 (CA).S.S.Internationalv Union ofIndia,(2005) 125
DLT 287, tender for supply of Kishmish. A largequantityof Kishmish was consumed after
delivery without any complaint and did not become unwholesome or bad, S. 56 was held to
benotapplicable.https://t.me/LawCollegeNotes_Stuffs

539. [S. 56] Impossibilityofperformanceandfrustration399
but no action wastakento go to thenearestportto have the vesselberthed
and theconditionof the vessel checked.Insteadofthat,afterpumpingout
water, the vesselattemptedtocontinueon its course. Thecourtsaidthat
thesinkingof the vessel could not be described as aninevitableaccident.
Reasonablecare had not beentakento prevent thesinkingof the vessel. The
defenceoffrustrationfailed."^
2. ChangeofCircumstances
Acontractwillfrustrate"wherecircumstancesarise'whichmake the per
formanceof thecontractimpossible in themannerand at the timecontem-
plated.^^^KapurJ of thePunjabHighCourtinPameshwariDasMehrav
RamChandOmPrakash^'^^explainedtheprinciplethus:"Itis clearthat
if there is entirelyunanticipatedchange ofcircumstancesthequestionwill
have to beconsideredwhetherthis change ofcircumstanceshasaffectedthe
performanceof thecontractto such an extent as to make itvirtuallyimpos
sible or even extremely difficult orhazardous.Ifthatbe the case, the change
ofcircumstancesnot having beenbroughtaboutby the fault of eitherparty,
thecourtswillnotenforcethecontract."Inthatcase:
Acontractedto supply to Bcertainclasses and quantities of American
piece goods. Thecontractwasc.i.fKarachi. The goods arrived there
after some delay.B refused to accept on thegroundthatboththe qualities
and quantities offered for delivery were not according to theparticular
contract.A called upon B to refer the dispute to thenominatedarbitrator
who was residing atKarachi.Thencamepartitionwhichmade it impos
sible fornon-Muslimsto go toKarachi.
Holdingthatthecontractwas not thereby frustrated, thecourtsaid: "If
it was necessary for the parties to go to Karachi and to take witnesses there,
the performance of the arbitration agreement would have been rendered
impossible.But, as going to Karachi was notnecessary,the change of cir
cumstancesdidnothaveamaterialeffectonthecontract."^^®
As against this, where a ship was chartered to load a cargo but on the day
before she could have proceeded to her berth, an explosion occurred in the
auxiliary boiler, which made it impossible for her toundertakethe voyage
at thescheduledtime, theHouseof Lords heldthatfrustrationhad, in fact,
occurredinthecircumstances.^^®
175. Ghee SengMotorv Ling, (1994) 1 Curr LJ 382 (Malaysia).
176. ViscountMaughamin JosephConstantineSteamship Line Ltd vImperialSmelting Corpn
Ltd,1942AC154(HL).
177. AIR 1952 Punj 34, 38. Thus, a normal change of circumstances, such as price rise, does not
frustratethecontract.ContinentalConstructionCoLtdvStateofM.P.,(1988) 3 SCC 82,
87:AIR1988SC1166.
178. At p. 88. NagnathKaulwar& Sons v Govindram Shyamsunder, AIR 2004 Bom271; (2004)
3 Mah LJ 457, non-availability of wagons was held to be no excuse to a supplier of rice to
fulfilhiscontractualcommitments.
179. Joseph Constantine Steamship Line Ltd v Imperial Smelting Corpn Ltd, 1942 AC 154 (HL).https://t.me/LawCollegeNotes_Stuffs

540. 400Chapter8DischargeofContract [S. 56]
But"thereis no general liberty reserved to thecourtsto absolve aparty
fromliabilitytoperformhispartof thecontractmerely because, onaccount
of anuncontemplatedturnof events, theperformanceof thecontractmay
becomeonerous".^^°"Thepartiesto anexecutorycontractareoftenfaced,
in thecourseofcarryingitout,withaturnof eventsw^hichthey didnotat
allanticipate—awhollyabnormalrise or fall in price, asuddendepreciation
of currency, anunexpectedobstacle to execution, or the like. Yet this does
not in itself affect thebargainthey havemade."^^^The SupremeCourtlaid
down this principle inAlopiParshad& SonsLtdv Unionoflndia}^^
Theplaintiffswereactingas the agent to theGovernmentofIndiafor
purchasingGhee for the use of armypersonnel.Theywere to be paid
on cost basis fordifferentitems ofworkinvolved. Theperformancewas
in progress when the Second World Warintervenedand the rates fixed
in peace time were entirelysupersededby thetotallyalteredconditions
obtaininginwartime. The agentsdemandedrevision of rates but received
no replies. They kept up the supplies. TheGovernmentterminatedthe
contractin 1945 and the agentsclaimedpaymentonenhancedrates.
Buttheycouldnotsucceed."Gheehavingbeensuppliedby theagents
underthetermsof thecontract,therightoftheagents was to receiveremu
nerationunderthetermsofthatcontract."
Law has toadaptitself to economic changes.Marginalprice rise may
be ignored. But when prices escalate out of allproportionfromwhatcould
have been reasonably expected by thepartiesandmakingperformanceso
crushingto thecontractoras tobordervirtuallyonimpossibility,the law
wouldhave to offer relief to thecontractorintermsof price revision.The
SupremeCourthasrecognisedthis inTarapore8c Co vCochinShipyard
Ltd.'''
In this case there is noroomfordoubtthatthepartiesagreedthatthe
investmentof thecontractor(forimportofequipmentandknow-how,in
foreign exchange) would be two crores and the tendered rates were pred
icateduponandco-relatedto thisunderstanding.Whenanagreement
ispredicateduponan agreed factsituation,andthatsituationceasesto
exist,theagreement,tothatextent,becomesirrelevantorotiose.The
ratespayableto thecontractorwererelatedto theinvestmentofRs2
croresby thecontractor.Oncethe ratesbecame irrelevantonaccountof
circumstancesbeyond thecontrolof thecontractor,it was open to him to
make a claim forcompensation.
CASEPILOT
180.AlopiParshad& SonsLtdvUnionofIndia,AIR1960SC 588: (1960) 2 SCR 793.
181. Ibid.StateofA.P.v V.NarenderReddy,(2003) 4 ALD 345, a licencee for sale ofarrackfiled
a suitagainstthe State sayingthatthe licence had become impossible ofperformancebecause
ofthreatsofnaxalites.Thegroundwas notestablishedandat thesametime the licencee was
preparedtoparticipatein thereauction.His suit wasdismissed.
182.AIR1960SC588:(1960)2SCR793.
183. (1984) 2see680: AIR1984SC1072at p. 715.https://t.me/LawCollegeNotes_Stuffs

541. [S. 56] Impossibilityofperformanceandfrustration401
Anothercase of commercialhardshipof this kind was before the House
ofLordsinDavisContractorsLtdvFarehamUrbanDisttCouncil.^^'^
Therewasacontracttobuildcertainhousesforacouncilforafixed
price and tobe-completedwithineightmonths.Badweatherandlabour
strikesintervenedand ittooktwenty-twomonthsto complete and at a
cost much morethanthecontractprice. Thecontractorclaimedthatthe
contractwasdischargedonaccountofinordinatedelayand,therefore,he
should be paid onquantummeruitbasis,thatis, hisactualcosts should
be paid.
But theHouseof Lords didnotagreewithhim. LordRadcliffe,after
reviewing theauthoritiesandanthologyofcircumstancesin which frus
trationis deemed tooccur,observed: "So,perhaps,itwouldbe simpler to
say at theoutsetthatfrustrationoccurswhenever the law recognisesthat,
withoutdefault of eitherparty,acontractualobligationhas become impos
sible of beingperformedbecause.thecircumstancesin whichperformance
is called forwouldrenderit athingradicallydifferentfromthatwhichwas
undertakenby thecontract.'Thedatafor decision are, on the onehand,the
terms andconditionsof thecontract,read in the light of thesurrounding
circumstances,and,on theotherhand,the eventswhichhaveoccurred.'It is
nothardshipor inconvenience ormaterialloss itself which calls the principle
offrustrationinto play.Theremust be as well such a change in the signifi
cance of theobligationthatthethingundertakenwould,ifperformed,be
adifferentthingfromthatcontractedfor. If this is the law, theappellants'
case seems to be alongway from a case offrustration."
The ruling in this case was applied inCTlGroupIncv Transclear
Thedefendantcontractedinunqualifiedterms to supply a cargo ofcement
f.o.b. on theclaimant'svessel inFarEast.Thedefendantmadearrangement
with local suppliers to provide the cargo. The suppliers decided not to make
the cargo available owing to the commercial pressure applied byanother
supplier. The defendant had no other source for supply of cement in the Far
East. The question was whether the supplier's failure to make goods avail
ableconstitutedafrustratingevent. Thecourtdid not accept theargument
thatthis could be so because where the deliveryremainedphysicallyand
legally possible but the seller's suppliers chose, for whatever reason, not to
make the goods available, thecontractwas not frustrated.Accordingly,the
suppliers' choice not to make the cargo available had not discharged the
defendant's obligation toprocuredelivery of it.
Where there was a 400 per cent escalation of prices owing to a war as
compared with the original prices on which certain transformers wereunder
taken to be supplied on a firm basis, thecontractwas held to haveended.^'^
184.1956AC696,715:(1956)3WLR37(HL).
185.(2008)Bus LR1729:(2008)EWCA856.
186. Easun Engg Co Ltd v Fertilisers and Chemicals TravancoreLtd, AIR 1991 Mad 158.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

542. 402Chapter8DischargeofContract [S. 56]
Where the possibility ofalterationofcircumstanceswaswithinthe con
templationof thepartiesat the time of thecontract,they canhardlycomplain
of any suchalteration.^^^Thus,where a railway company accepted goods for
transportandhappenedto conveythemto awrongdestination,whichon
account'ofpartitionfell inPakistanand the railways couldnotbringthem
back intoIndia,they werenotpermittedto pleadfrustrationtotheirliability
to pay for the loss of thegoods.^^^MeharSinghJ said;"Whenthe defend
antacceptedthe goods, there was no such legalimpediment,andsince the
date ofpartitionwasknownatthattime, such acontingencycannotbe said
to be outside thecontemplationandforesightof theparties."
Thelearnedjudge,withrespect,shouldnothavetakensupportof the
fact"thattherewas no such legalimpedimentat thetime",for inapplying
thedoctrineoffrustrationthecourtshave to go by theimpedimentsarising
subsequently. The decision is, however, just because it was therailway'sown
faultthatthegoodswerecarriedto awrongpoint.
3.Non-occurrenceofcontemplatedevent
Sometimes theperformanceof acontactremainsentirely possible, but
owing to thenon-occurrenceofaneventcontemplatedbybothpartiesas
thereasonfor thecontract,the value of theperformanceisdestroyed.Krell
VHenry^^^is an aptillustration.There,acontractto hire aroomto review
aproposedcoronationprocessionwas held to havefrustratedwhen the pro
cession waspostponed.For this result to follow it isnecessarythatthe hap
pening of the eventshouldbe thefoundationof thecontract.This isshown
byHerneBaySteamBoatCo vHutton^^°whichalso arose from thepost
ponementof thecoronation.The RoyalNavalReview wasproposedto be
held ontheoccasion.Thedefendantcharteredasteamboatfortwodays"to
takeout apartyof paying passengers for thepurposeof viewing the naval
reviewandfor aday'scruiseroundthefleet". Butthereviewwascancelled
and thedefendanthadno use of the ship. Yet he was held liable to pay the
unpaid balance of the hire less theprofitwhich theplaintiffhad made by the
use of the ship in theordinarycourse.VaughanWilliamsLJ said: "I see
nothingthatmakesthiscontractdifferfroma casewhere,forinstance,a
personhas engaged abraketotakehimselfand apartyto Epsom to see the
races there, but for somereasonorother,such as thespreadof aninfectious
disease,the races arepostponed.Insucha case itcouldnotbesaidthathe
should be relieved of hisbargain.So in thepresentcase it is sufficient to
187. See S.VedantacharyavHighwaysDepttbySouthArcot,(1987)3 SCC400wherethe
HighwayDepartmentwas notpermittedto absolve itself from responsibility for an accident
on thegroundof the heavy rain and flood, there beingnothingto showwhatpreventive
measuresweretakenanticipatingsuchrainandflood.
188. UnionofIndiavChananShah MaheshDass,AIR 1955 Pepsu 51.
189.(1903)2 KB740(CA).
190.(1903)2 KB683(CA).https://t.me/LawCollegeNotes_Stuffs

543. [S. 56] Impossibilityofperformanceandfrustration403
saythatthehappeningof the naval review wasnotthefoundationof the
contract."
4.Deathorincapacityofparty
"Apartyto acontractis excused fromperformanceif it depends upon
the existence of a given person, ifthatperson perishes" or becomes tooilh
toperform.Thus,where thenatureor terms of acontractrequirepersonal
performanceby the promisor, his death or incapacity puts an end to the
contract.RobinsonvDavison^^^is thewell-knownauthority.
Therewas acontractbetweentheplaintiffandthedefendant'swife,
who was aneminentpianist,thatsheshouldplay thepianoat aconcert
to be given by theplaintiffon aspecifiedday. On themorningof the day
inquestionsheinformedtheplaintiffthatshe was too ill toattendthe
concert.Theconcerthadto bepostponedand theplaintifflost a sum of
money.
Theplaintiff'sactionfor breach ofcontractfailed. Thecourtsaidthat
underthecircumstancesshe was not merely excused fromplaying,but she
was alsonotatlibertyto play, if she was unfit to do so. Thecontractwas
clearly subject to theconditionof her being wellenoughtoperform:"The
wholecontractis based on theassumptionof thecontinuanceof life, and on
theconditionswhichexistedatthetime.Thatassumptionismadebyboth;
it is really thefoundationof thecontract.It does notrequireclosereasoning
to provethatif thefoundationfails, the wholecontractmust fail. Here the
foundationwaswantingfortherewas onMrsDavison'spartanentireand
totalincapacity to do the thingcontractedfor."
Inanothercase:"^
A person entered into service as manager for ten years, andundertook
not toundertakeany professional engagementwithoutthe consent of the
employer.Beforethe expiry of ten years he was called up for military ser
vice. After the war heundertookprofessional engagements and was sued
by the employer for breach ofcontract.
Itwasheldthatthecontractofservicehadfrustratedwhenhisservices
were requisitioned for military purposes and thereafter he was free from the
covenantsofthecontract.
Applicationtoindustrialrelations.—Theapplicationof thedoctrine
offrustrationtoindustrialrelationswasexaminedby the (English)National
IndustrialRelationsCourtinMarshallvHarland&WolffLtd.^"
M was in a company's employment since 1946. In 1969 he fell ill and
did not attend till April 1971 when thecompanyretrenched him after
191. (1871) LR 6 Exch 269: 40LJEx 172: 24 LT755;(1861-73) All ER Rep 699.
192.MorganvManser,(1948) 1 KB 184.
193.(1972)1WLR899.https://t.me/LawCollegeNotes_Stuffs

544. 404Chapter8DischargeofContract [S.56]
givingusualbenefits.M had still to undergo an operation before he could
resumework.
Evensoitw^asheldthatthecontractofservicehadnotfrustrated.The
President of thecourtpointedoutthatin consideringwhetherfurtherper
formance has become impossible, regard must be had to the terms of the
employment, the nature of the illness, its duration and prospects ofrecovery,
and theperiodofpastemployment:
Wherethecontractprovidedfor sick pay, there couldnotbefrustra
tion if theemployeeappeared likely toreturnto work within the period
in which sick pay was payable. Where the employee occupied a keypost
which had to be filled on apermanentbasis if his absence wasprolonged,
it was easier to inferfrustrationif the employee was one of the many in
the same category. Again, arelationshipof longstandingwasnotso eas
ilydestroyedas onewhichhadbutashorthistory.
Thepresentcontractprovidedthatno wages were payableduringsick
ness. It wasnotthecompany'spolicy to dismiss employees on theground
of sickness.Therewas no medical evidencethatM waspermanentlyinca
pacitatedor as to how long hewouldbe away fromwork.Inthosecir
cumstances,therewas nogroundforholdingthatfurtherperformanceof
hisobligationin thefuturewouldbe either impossible or athingradically
differentfromthatwhichhehadacceptedunderhiscontractof employ
ment.Accordingly,thecontracthadnotfrustrated.
In asimilarcase before theCourtofAppeal:"''
S was employed as aworksmanagerundera five-yearcontract.After
twoyears hebecameillandwasabsentfromworkfor fivemonths.The
employerterminatedtheemploymentafterfourmonthsofabsenceandS
suedforbreachofcontract.
It was heldthata five-yeartermcontractof servicecouldnotbedeemed
to havefrustratedby fivemonths'illness.
5.Government,administrativeorlegislativeintervention
Acontractwill bedissolvedwhenlegislative or"administrativeinterven
tionhas sodirectlyoperatedupon thefulfilmentof thecontractfor a spe
cificworkas totransformthecontemplatedconditionsofperformance"."^
Thus,whereavendoroflandcouldnotexecutethesale-deedbecausehe
ceasedto be theownerbyoperationof law, it was heldthatthecontract
194.StoreyvVulhamSteelWorksCoLtd,(1907)24TLR89(CA).
195. SeeMcCardieJ inBlackburnBobbinCo v T.W. Allen & Sons, (1918) 2 KB467(CA).
ArmyWelfareHousingOrganisationvSumangalServices(P)Ltd,(2004) 9 SCC 619:AIR
2004SC1344,contractornot liable wherefurtherconstructionwork wasstoppedunder
Municipalintervention.T.Lakshmipathiv P.NithyanandaReddy,(2003) 5 SCC 150:
(2003) 5 ALT 26 (SC),buildingalonedemolished,it did notdeterminelease or tenancy,
contractnotfrustrated.https://t.me/LawCollegeNotes_Stuffs

545. [S. 56] Impossibilityofperformanceandfrustration405
had become impossible ofperformance.^^®Inanothercase, acontractby the
State to give a monopoly was held to have become void on the enforcement
of theConstitution."^Similarly, acontractbetweencertainpartiesfor the
sale of the trees of a forest wasdischargedwhen the State ofRajasthanfor
bade thecuttingof trees in thearea."®Awell-knownEnglishauthorityis
MetropolitanWaterBoardvDickKerr& CoLtd.^^^
By acontractmadein July1914,a firm ofcontractorscontractedwith
a Water Board toconstructareservoirto becompletedwithinsixmonths.
But by anoticeissuedundertheDefence of theRealmActs,thecontrac
tors wererequiredto ceaseworkontheircontractandtheystoppedthe
workaccordingly.Theyclaimedthatthe effect of the notice was toputan
endtothecontract.
TheHouseof Lords heldthattheinterruptioncreatedby theprohibi
tionwasofsuchacharacteranddurationsoastomakethecontractwhen
resumedadifferentcontractfromthecontractwhenbrokenoff,andthat
thecontracthadceasedto beoperative.^""
But aninterventionof atemporarynaturewhichdoesnotuprootthe
foundationof thecontractwillnothave the dissolving effect. This isshown
by the decision of the SupremeCourtinSatyabrataGhose vMugneeram
Bangur&Co^°^
Thedefendantcompanystarteda scheme for the development of a
tractoflandinto a housing colony. Theplaintiffwasgranteda plot on
payment ofearnestmoney. The companyundertooktoconstructthe
roadsanddrainsnecessaryformakingthelandssuitableforbuilding
and residentialpurposesand as soon as they were completed, thepur
chaser was to be called upon to complete the conveyance bypaymentof
the balance of the purchase money. But beforeanythingcould be done, a
considerableportionof the land wasrequisitionedby the Stateduringthe
Second World War formilitarypurposes;
The companyattemptedto cancel thecontracton thegroundthatby
reason of the supervening events itsperformancehad become impossible.
MukherjeaJ heldthatthecontractwasnotfrustrated.Thelearnedjudge
said:"Undoubtedlythe commencement of the work was delayed but was the
196.ShiamSundervDurga,AIR1966All 185;RozanMianvTaheraBegum,(2007)12 SCC
175: AIR2007SC2883,transferof aparticulartype oftenancywasprohibitedby an Act
enforcedduringpendencyof the suit. The SupremeCourtheldthatthetransferbecame
impossible ofperformance.No specific relief could be allowed.
197.HamaraRadioandGeneralIndustriesvStateofRajasthan,AIR1964Raj205.
198.ManSingh vKhazanSingh, AIR 1961 Raj 277.
199.1918AC119(HL).
200.See also C.CzarnikowLtdvCentralaHandluZagraniczneoRolimpex,1979AC 351:
(1978) 3 WLR 274 (HL), thecontractof aGovernmentMonopolyCorporationended on
ban on exports. Syed KhursedAliv State of Orissa, AIR 2007 Ori 56, beef could not be
supplied under the contract because of the Orissa Prevention of Cow Slaughter Act, 1960,
excused fromperformance,there was no volition orintentionalfailure of supply.
201.AIR1954SC44:1954SCR310.https://t.me/LawCollegeNotes_Stuffs

546. 406Chapter8DischargeofContract [S. 56]
delay going to be so great and of such acharacterthatit wouldtotallyupset
the basis of the bargain and the commercial object which the parties had
in view? The requisition orders, it must be remembered, were, by their very
nature,of atemporarycharacter
"Ifthere was a definitetime-limitagreed to by thepartieswithinwhich
theconstructionworkwas to be finished, it could be saidwithperfectpro
prietythatdelay for an indefinite period would make theperformanceof
thecontractimpossiblewithinthe specified time and this would seriously
affect theobjectandpurposeof theventure.But wherethereis notime-limit
whatsoeverin thecontract,noreven anunderstandingbetweentheparties
onthatpointand whenduringthewarthepartiescouldnaturallyanticipate
restrictionsofvariouskindwhichwouldmakethecarryingoutof these
operationsmoretardyanddifficultthanin times ofpeace,we donotthink
thattheorderofrequisitionaffectedthefundamentalbasisuponwhichthe
agreementrestedorstruckat therootsof theadventure."
The effect of anadministrativeinterventionhas to be viewed in thelight
of thetermsof thecontract,and,if thetermsshowthatthepartieshave
undertakenan absoluteobligationregardlessofadministrativechanges,
theycannotclaim to bedischarged.This has been so held by the Supreme
CourtinNaihatiJuteMillsLtdvKhyaliramJagannath-?'^^
Therewas anagreementtopurchaserawjute to beimportedfrom East
Pakistan(now Bangladesh). The buyer was to supply theimportlicence
withinNovember,failingwhichit was to be suppliedwithinDecemberat
thepainof alittlemore priceandif he failed inDecemberhe was to pay
the differencebetweenthecontractandmarketprices. The buyerapplied
foralicencewhichwasrefusedbecausehehadstockinhismillsufficient
for twomonths.He applied again. He was advised this timethatthe
ruleshadbeenchangedandtoobtaina licence hemustshowthathehad
used an equalquantityofIndianjute. Thus the buyer failed to supply the
licence and was sued for breach. Hepleadedfrustrationcaused by the
changeinGovernmentpolicy.
,But he was held liable.ShelatJpointedoutthatiftheGovernmenthad
completelyforbiddenimports.Section 56wouldhave applied. But the pol
icy of theGovernmentwasthatthe licensingauthoritywouldscrutinisethe
case of the eachapplicanton. its own merit.Referringto thetermsof the
contract,thelearnedjudgesaid:^"''"Theseclausesclearlyindicatethatthe
appellantswere conscious of thedifficultyofgettingthe licence in time.
CASEPILOT
202.Ibidat p. 49. Followed inMugneeramBangur&CovGurbachanSingh, AIR 1965 SC 1523:
(1965) 2 SCR630.NirmalaAnandvAdventCorpn(P)Ltd,(2002)5 SCC 481:AIR2002
SC2290,agreementforpurchaseof a flat in a buildingconstructedon alandleased out by
theMunicipality.Thebuildercancelledthe dealsayingthattheMunicipalityhadterminated
the lease deed. The facts however showedthatthere was apossibilityof renewal. The relief
of specificperformancewas notrefusedto the buyer.
203.AIR1968SC522:(1968)1SCR821.
204. Ibid at p. 528;(1968)1 SCR 821, 830.https://t.me/LawCollegeNotes_Stuffs

547. [S. 56] Impossibilityofperformanceandfrustration407
The question would depend upon whether the contract which the appel
lants entered into was that they would make their best endeavours to get
the licence orwhetherthecontractwasthattheywouldobtainit or else be
liable for breach ofthatstipulation.There isnothingimproperor illegal for
apartyto take upon himself an absolute obligation toobtainapermitor a
licenceandinsucha case if hetooktherisk,hemustbe heldboundto his
stipulation."
TheLearnedJudge relieduponthe followingobservationof LordSumner
in Bank LineLtdvArthurCapel&Co:^°^"Wherethecontractmakes pro
vision (that is, full and completeprovision,so intended) for a givencontin
gency, it is not for thecourttoimportinto thecontractsomeotherdifferent
provisionsfor the samecontingencycalledbydifferentname."
Wheretheinterventionmakestheperformanceunlawful,thecourtswill
have no choicebuttoputan end to thecontract.Thiskindofsituationwas
before theSupremeCourtinBoothalingaAgencies v V.T.C.Poriaswami
Nadar.^"'
Thedefendanthada licence toimportchicoryformanufacturingcof
feepowder.Thelicence wassubjectto theconditionthathewoulduse
thechicoryonly in his factory. Heagreedto sell thewholeshiploadtothe
plaintiff.Before thearrivalof the ship, the sale of suchimportedgoods
wasbanned.
Thecontractwasaccordinglyheld to have become void."Itwas,how
ever,arguedonbehalfof therespondentthat,in any event, theappellant
could havepurchasedchicory from the openmarketand supplied it to the
respondentin terms of thecontract."RamaswamiJ rejected thisargument:
Lfnderthecontractthequalityofchicoryto be sold was thechicory
of specificdescription—"Egbertschicory, packed in 495woodencases,
each casecontaining2 tins of 56 lbnett".It ismanifestthatthecontract
was for the sale ofcertainspecific goods and it was not open to the appel
lantto supplychicoryof anyotherdescription.^"^
205.1919AC435(HL).
206.AIR 1969 SC 110: (1969) 1 SCR 65.CITvA.K.Menon,(1996) 6 Bom CR564,penaltiesand
interestundertheIncomeTaxActnotallowedto be levied on apersonwhocouldnotpaytax
amountin advance because of restrictions imposed upon him under the SpecialCourt(Trial
ofOffencesRelatingtoTransactionsinSecurities)Act,1992.
207. B.S. Vedera v UnionofIndia,AIR 1969 SC 118.MalikarjunappaBasavalihgappaMamie
Desai vSiddalingappa,(1973) 3 SCC 180; AIR 1973 SC 190.Frustrationdoes not apply
to licences. SeeSunnamSatishvState,AIR1980AP 18. Anauctionfor the sale oftrust
property was held to have been frustrated on a stay order being issued by a court. Shanti
Vijayand Co v Princess Fatima Fouzia, (1979) 4 SCC 602: AIR 1980 SC 17. Contracts for
export of silverwere deemed to have ended with the ban on export of silver. Union of India v
C.Damani& Co, 1980 Supp SCC 707: AIR 1980 SC 1149.Frustrationby theGovernment
taking over an oil concession. B.P.ExplorationCo (Libya) Ltd vHunt(No. 2), (1979) 1
WLR783 (QB).Frustrationby thecourtstaying theperformanceof acontract.Shanti Vijay
andCo vPrincessFatimaFouzia,(1979)4SCC602:AIR1980SC 17.https://t.me/LawCollegeNotes_Stuffs

548. 408Chapter8 Discharge ofContract [S.56]
WhereDevelopmentAuthority allotted land to a builder for housing
development, but Forest Authority did not permit because the landw^asin
the ridge area of the protected forest, the contractw^asheld to have ended
byimpossibility.The builder was allowed refund of the entire money paid
underthecontractwith6 per centinterest.^"®
6.Interventionofwar
Interventionofwarorwarlikeconditionsin theperformanceof a con
tracthas often created difficult questions. The closure of the Suez Canal
following the Anglo-French war with Egypt, for instance,interruptedthe
performance of many contracts. One such case was Tsakiorglou & Co Ltd
VNoblee &Thorl The followingstatementof facts was given by
LordReid:
The appellants agreed to sell to the respondents three hundred tons
of Sudan groundnutsc.i.fHamburg.The usual and normal route at the
date of thecontractwas via SuezCanal.Shipmentwas to be inNovember/
December,1956,but,onNovember2,1956,theCanalwasclosedto
traffic and it was not reopened until the following April. It isstatedthat
the appellants could havetransportedthe goods via the Cape ofGood
Hope. The appellants refused to ship goods via the Cape. The question
now iswhetherbyreasonof the closing of the Suezroute,thecontract
hadbeenendedbyfrustration.
Theappellant'sargumentwasthatit was an implied term of thecontract
thatshipmentshouldbe via Suez. But it was heldthatsuch atermcouldnot
be implied. Thecustomaryor usualroutevia the SuezCanalbeing closed,
theappellantswerebound[by the Sale ofGoodsAct, 1893, S. 32(2)] to ship
thegroundnutsby areasonableandpracticalrouteand,thoughthe appel
lantsmightbeputtogreaterexpense byshippingthegroundnutsvia the
Cape ofGoodHope,thatdidnotrenderthecontractfundamentallyorrad
icallydifferent,andtherewasnot,therefore,frustrationofthecontract.^^"
Iftheinterventionofwarisdue to the delaycausedbythenegligenceof a
party,theprincipleoffrustrationcannotbe reliedupon.^"
Ifthereare morethanone ways ofperformingacontractandthewar
cuts off only one of them, thepartyis still bound to perform by the other
way, howeverinconvenientor expensive. Thisappearsfrom the decision of
the PrivyCouncilinTwentscheOverseasTradingCoLtdvUgandaSugar
FactoryLtd.^^^Therewas acontractfor supplying"Krupps"steel rails. The
restof the factsappearfrom thefollowingwordsofLordWright:"The
208.DDAVKennethBuilders&DevelopersLtd,2016 SCCOnLineSC 627: (2016)230DLT
706.
209.1962AC93:(1961)2WLR633.
210. See alsoOceanTrampTankersCorpnv VOSorfracht,TheEugenia,(1964) 2 QB226:
(1964)2WLR114,whichisanotherSuezcaseofthesamekind.
211.GambhirmuUMahabirprasadvIndianBankLtd,AIR1963Cal163.
212.AIR1945PC144.https://t.me/LawCollegeNotes_Stuffs

549. [S. 56] Impossibilityofperformanceandfrustration409
appellant claimedthatthe rails specified under thecontractwere to be rails
manufacturedby a German firm and bythatfirm only. On this they based
theirclaimto beexcusedfromtheirfailureto deliver thegoodsbecauseto
do so would have involved a dealingwithalien enemies due to theoutbreak
of World War II and hence theperformanceof thecontractbecameimpos
sibleandillegal."
Their Lordships held that it was not open to the supplier to invoke the
doctrineoffrustration.There wasnothingin thecontractwhich called for
the rails to be obtained from Germany only. The reference to "Krupps" did
not indicate a source of supply, but merely a specification of the rails. There
were many other sources of supply, and thecontractleft the supplier with a
freehandinthematter.
In a case before the Patna HighCourt,thefurtherperformance of a
contractof lifeinsurancehadbecome impossible because theinsurerwas a
Germancompanyand on the outbreak of war itsbusinesswas closedby the
Government of India and the disposal of pending policies was handed over
to a firm ofcharteredaccountants.Theassuredwasaccordinglyallowedto
recover the money paid by him under thepolicy.In a Calcutta case, a con
tract of carriagebyriverwasinterceptedbytheenemyseizingthe boat along
with cargoduringhostilitiesbetweenIndiaandPakistan.Thecourtallowed
thecarrierthe plea ofimpossibility.^"
7.Applicationto leases
Englishcases.—The question whether the doctrine of frustration applies
to aleaseof land is not yetfinallysettled in England. In the leadingcase of
Crickelwood Property & Investment Trust Ltd vLeighton'sInvestment
TrustLtd^^^whichcamebeforetheHouseofLords,thedecisionwasunan
imous that on the facts of the case,irrespectiveof anycontroversy,frus
trationwould not have arisen because a lease for 99 yearscannotbe said
to have been upset by a few years' disturbance, but contradictory opinions
wereexpressed.
Abuildingleasewasexecutedfor ninety nineyears,more rentbeing
payableaftererectionofbuildings.Butbeforeanycouldbeerectedand
whilethe leasehad still 90 years to run, building activitywassuspended
by the Government because of the war.
ViscountSimonLCsaid:
The lease at the time had morethanninetyyears to run, andthough
we do not know howlongthe presentwar, and theemergencyregulations
which have been made necessary by it, are going to last, length of the
interruptionsocausedispresumablyasmallfractionof thewholeterm.
213. A.F. Ferguson &CoyLalitMohan Ghose, AIR 1954 Pat 596.
214.BasantiBastralayav RiverSteamIndiaNavigationCo Ltd, AIR 1987Cal271.
215.1945AC221(HL).https://t.me/LawCollegeNotes_Stuffs

550. 410Chapter8DischargeofContract [S. 56]
Here,the lease itselfcontemplatesthatrent may be payablealthough
nobuildingis going on, and Icannotregardtheinterruptionwhichhas
arisenas such as todestroytheidentityof thearrangementor tomakeit
unreasonabletocarryout the leaseaccordingto its terms assoonas the
interruptioninbuildingis over.
But hisLordshipwas notpreparedto accept the viewthatbecause a lease
is morethanacontractandamountsto anestate,therefore,itcannever end
prematurelybyfrustration,forexample,where thesubject-matterof the
lease is swallowed by some vast concussion of nature or buried in the depth
of the sea. "Suppose, for example", his Lordship continued,"thatlegislation
were subsequently passed which permanently prohibited private building in
the area, or dedicated it as an open spaceforever,why should this not bring
to an end the currency of a building lease, the object of which is to provide
for the erection on the area, for the combined advantage of the lessor and
lessee of buildings which itwouldnow beunlawfultoconstruct."
Referringto the previousauthorities.ViscountSimonLCcharacterised
it aserroneoustosupposethatthere isauthoritybindingon theHouseof
Lords to the effect that a leasecannotin any circumstances be ended by
frustration.InMattheyvCurling?^^
There was the demise of a house for twenty-one years. The lesser had
to keep the building in repair, to insure and in case of any destruction by
fireetc. to expend the insurance moneyin rebuilding.In 1918the military
authorities took possession of the premises and remained in possession
until the expiry of thelease.In February, 1919, the house was destroyed
byfireand in March the terms of the lease expired. It was held by the
House of Lords affirming the majoritydecisionof the Court of Appeal,
(AtkinLJhavingdissented)that thelesseewas liable both for repairs and
for rent even during the period of dispossession.
Commentinguponthiscase.ViscountSimonLC said:"Thedecision
there wasthatrequisitioningby theGovernmentwas no answer to a claim
on the covenant for rent, any more than ouster by a trespasser would be:
theremedyof the tenant was against theGovernmentforcompensation.
Equally,destruction by fire, after the Government had requisitioned the
place,leftthe tenants still liableon his covenanttodeliverup in proper con
dition,forthe tenantcouldhavecoveredthe risk byinsurance.HisLordship
also pointed out that the Court ofAppealwasmistakenabout Matthey
V Curling as a clearauthoritythatthedoctrineoffrustrationcannotbe
appliedto ademiseof real property.His Lordshipquoted with approvalthe
statementfrom thedissentingjudgmentofAtkinLJin which hisLordship
said that there is no legal absurdity in implying a termthata lease shall be
determinedabsolutelyon thehappeningof aneventwhichin an ordinary
contract works as a frustration. LordWrightalso expressedthe sameview.
216.(1922)2 AC 180(HL).https://t.me/LawCollegeNotes_Stuffs

551. [S. 56] Impossibilityofperformanceandfrustration411
But LordsRusselandGoddardexpressed thecontraryview. LordRussel
proceededas follows: "A lease ismuchmorethanacontract.Itcreatesand
vests in the lesseeanestateorinterestintheland,achattelinterest,it is
true,but a vestedestateorinterestnonetheless."As was said byLushJ in
London&NorthernEstatesCo vSchlesinger-}^^"Itis notcorrecttospeak
of thistenancyas acontractandnothingmore. Atermof years wascreated
by it and vested in theappellant,and I can see no reason for sayingthat
becausethisOrder(the lessee being aGermanwasorderednottostayin the
premisesduringthe war)disqualifiedhim frompersonallyresiding in the
flat itaffectedthechattelinterestwhichwas vested in him byvirtueofthe
agreement.In myopinion,itcontinuesvested in him still...."
"Whenacontractisfrustrateditisbecausewhatiscalledthe'venture'or
'undertaking'which thepartieshavecontractedto engage in, can no longer
becarriedout.Thecourtinsuchcircumstancesdeclaresthecontracttobe
no longer binding on theparties.Thatis the end of the matter. But when
a lease is in question, it is the lease which is the'venture'or'undertaking'
upon which thepartieshave embarked. Thecontractualobligations there
under of eachpartyare merely obligations which are incidental to the rela
tionship oflandlordandtenantcreated by the demise and which necessarily
vary with thecharacteranddurationof theparticularlease. It may well be
thatcircumstancesmay arise during the currency of the term which render it
difficult, or even impossible, for onepartyor theothertocarryout some of
its obligations as landlord andtenant—circumstanceswhich might afford
a defence to a claim for damages for theirbreach—butthe lease would
remain."
"The position would, therefore, seem to be that unless the matter is
decided by the House of Lords, the decisions of theCourtof Appeal repre
sentthelawandtheireffectisthat"thedoctrineisexcludedinthecaseof
alease".
In the still subsequent case ofNationalCarriers Ltd vPanalpina
(Northern)Ltd^^^the House of Lords have reiteratedthatthedoctrineof
frustration was in principle applicable to leases, though the cases in which
it couldproperlybeappliedwerelikelyto be rare. Restatingthe basisof the
applicationof the doctrine of frustration, theirLordshipssaid that the frus
trationof acontractoccurswhenthenatureoftheoutstandingrightsand
obligationsare sosignificantlydamaged by some supervening event from
what the parties could reasonably have contemplated at the time of the exe
cutionthatit would be unjust to hold them to theperformance.Quitenatu
rally,such a changein the rights andobligationsunder a leaseislikelyto be
ofrareoccurrence.Thefactsofthecasewere:
Awarehousewasdemisedto thedefendantfor aperiodof tenyears.
The premiseswere not to be usedfor any other purpose than warehousing
217.(1916)1 KB20.
218.1981AC 675: (1981) 2WLR45(HL).https://t.me/LawCollegeNotes_Stuffs

552. 412Chapter8DischargeofContract [S. 56]
unless it waswiththe lessor's consent. The onlyvehicularaccess to the
warehousewas by a street which the localauthorityclosed because of the
dangerous condition of a derelict Victorian warehouse opposite tothat
demised to the defendants. The period between the closure of the street
and its reopening after demolition of the Victorian-warehouse was likely
to beabout20months.Duringthatperiodthe demisedwarehousewas
renderedunless for thedefendants'purposes.Theyrefusedto pay any
furtherrent as theyclaimedthatthe leasehadfrustrated.
But they were held liable. Thenatureof thetransactionandthe obliga
tionscreatedby it hadnotsignificantlychanged.Havingregardinparticu
lar to the likelylengthofcontinuanceof the leaseaftertheinterruptionof
user inrelationto the termoriginallygranted,on the facts thedefendants
hadfailed to raise atriableissue as to theapplicabilityof thedoctrineof
frustration.
Indiancases.—InIndiathequestionwasconsideredby the Supreme
CourtinRajaDhruvDevChandvRajaHarmohinderSingh,^^^where
ShahJ(afterwardsCJ) at onceobserved:"Authoritiesin thecourtsinIndia
havegenerallytakenthe viewthatSection56 of theContractAct isnot
applicablewhenthe rightsandobligationsofthe parties ariseunder a trans
fer ofpropertyundera lease".
It was one of the cases arisingoutof thepartitionof thecountryinto
India andPakistan.The lease in question wasthatof anagriculturalland
for one yearonly.The rent was paid and the lessee was given possession.
Before the land could be exploited for any crops, camepartitionwhich
left the land inPakistanand thepartiesmigratedto India. Theactionwas
torecovertherentpaid.
But no such recovery was allowed.ShahJ who spoke on behalf of him
self andRamaswamiandMitterJJpointedoutthatcompletedtransfers
are completely outside the scope of Section 56.
In a case before theAllahabadHighCourt,^^°the roofs of a premises
whichwas leased outcollapsedowingtotheirdilapidatedconditionand
heavyrainsandrequirednewconstruction,thatwasnottakento be a frus
trationofthelease.
On the other hand, where on account of an event beyond theparties'
control, the lessor is not able totransferpossession to the lessee, the lessee
would be entitled to take back his rent. This was so held by the PunjabHigh
CourtinGurdashanSingh v BishenSingh.^^'^To this extent the Supreme
Courtapproved the decision, but theobservationof the HighCourtthat
"the broad principle offrustrationof contracts applies to leases" was
219.AIR1968SC1024:(1968)3SCR339.
220.ShyamKumarivEjazAhmadAnsari,AIR1977All 376.
221.(1962)2Punj5 (FB).https://t.me/LawCollegeNotes_Stuffs

553. [S. 56] Impossibilityofperformanceandfrustration413
rejected,ShahJ saying: "We are unable to agreewiththatobservation."
Thelearnedjudgecontinued:
Under a lease oflandthereis atransferofrightto enjoythatland. If
anymaterialpartof thepropertybe whollydestroyedorrenderedsub
stantiallyandpermanentlyunfit for thepurposefor which it was letout,
because of fire, tempest, floods, violence of any army or a mob, orother
irresistible force, the lease may at theoptionof the lessee be avoided. This
rule isincorporatedin Section 108(c) of the Transfer ofPropertyAct.
Where thepropertyleased isnotdestroyedorrenderedsubstantiallyand
permanentlyunfit,thelesseecannotavoid the leasebecausehe doesnot
or isunableto use thelandfor thepurposeforwhichit is letouttohim.^^^
In the subsequent case ofSushilaDevi vHartSingh,theSupremeCourt
heldthat:"Intheinstantcasethereisnoconcludedcontractsincenodeed
waswrittenorregistered.It was anagreementto lease andthatcamewithin
the scope of Section 56. There wasfrustrationof thecontractas theparties
couldnotgo toPakistanto give ortakepossession."
TheJammuandKashmirHighCourtallowedinHariSingh vDewani
Vidyawati^^'^the recovery of rent paid in advance under a lease which could
not becompletedonaccountofpartition.The recovery wasallowedunder
Section65asbenefitsreceivedunderacontractwhichbecamevoid.
The impossibility must be suchthatkills thecontractitself and not merely
onethatkeeps thecontractalive and capable of beingperformedat a fur
therdate. Thecontractin this case was forwaterproofing.Theworkwas
assigned to thecontractorwithout the wishes of house allottees. The allot
tees were already in possession. They did not allow thecontractorto do the
work. Thecourtheldthatit could not be saidthatperformancehadbecome
impossible.Thearbitraltribunalrightly awarded damages to the contractor.
Security deposit was ordered to berefundedand damages awarded covered
miscellaneousexpensesandwagespaidto idlinglabour.^^^
Theoriesoffrustration
Many possible explanations have been put forward as a justification for
thedoctrineoffrustrationas apartof the law ofcontract.Two theories are
mostwell-known.
1.Theoryofimpliedterm
Thetheoryofimphedtermwasexplainedby LordLoreburnin F.A.
TamplinSteamship CoLtdv Anglo-Mexican PetroleumProductsCoLtd^^^
.inthesewords:
222.See alsoMahadeoProsadShaw vCalcuttaDyeing&CleaningCo, AIR 1961Cal70.
223.(1971) 2see288 at pp.291-92:AIR 1971Se1956.
224.AIR1960J&K91.
225.GujaratHousingBoardvVipulCorpn,AIR2004Guj319.
226.(1916)2 AC397,408.https://t.me/LawCollegeNotes_Stuffs

554. 414Chapter8DischargeofContract [S. 56]
ACourtcan and ought to examine thecontractand thecircumstances
inwhichit was made,notof course to vary, but toexplainit, inorderto
seewhetheror not from thenatureof it thepartiesmust havemadetheir
bargain on the footingthataparticularthing or state of things would
continue to exist. And if they must have done so, then a term tothateffect
will be implied,thoughit be not expressed in thecontractIt is in my
opinionthe true principle, for noCourthas absolving power, but it can
inferfromthenatureof thecontractandthesurroundingcircumstances
thataconditionwhichwas notexpressedwas afoundationonwhich
thepartiescontracted.... Were the altered conditions suchthat,had they
thoughtof them, they would havetakentheir chances of them, or such
thatas sensible men theywouldhave said:"Ifthathappens,ofcourse,it
isalloverbetweenus"?
Thisexplanationof thedoctrineoffrustrationhas beenconstantlycited
in a largenumberofdecisions.But it has also beencriticisedassomething
unreal.Forinstance.LordWrightsaidin acase:^^^"To mymindthethe
oryof theimpliedconditionisnotreallyconsistentwiththetruetheoryof
frustration.It has never beenactedon by thecourtas agroundofdecision,
butis merelystatedas atheoreticalexplanation.""Thecourthasformulated
thedoctrinebyvirtueof itsinherentjurisdiction,just as it has developed the
rules ofliabilityfor negligence, or for therestitutionorrepaymentof money
whereotherwisetherewouldbeunjustenrichment.I find thetheoryon the
basis of the rule in thepregnantstatementofLordSumnerthatthedoctrine
offrustrationis really a device bywhichtherulesas toabsolutecontractsare
reconciledwiththe specialexceptionswhichjusticedemands".^^^Inanother
case^^®hisLordshipsaid:"Inascertainingthemeaningof thecontractand
itsapplicationto theactualoccurrences,thecourthas to decide,notwhat
thepartiesactuallyintendedbutwhatasreasonablemen theyshouldhave
intended.Thecourtpersonifies for thispurposethereasonableman."
2.Justandreasonablesolution
In asubsequentcase^^°DenningLJattemptedtoexplainthedoctrineof
frustrationon a different basis. He said;"Thecourtreally exercises a qual
ifyingpower—apowertoqualifytheabsolute,literalor widetermsofthe
contract—inorderto dowhatis justandreasonablein thenewsituation.
The day is done when we can excuse anunforseeninjustice by saying to
thesufferer'it isyourownfolly, yououghtnotto havepassedthatformof
words,yououghtto haveputin a clause toprotectyourself.We no longer
creditapartywiththeforesightof aProphetor hislawyerwiththedrafts
manshipof aChalmers."But thisstatementwasnotapprovedwhenthe case
227.Denny,Mott&DicksonLtdvJamesB.Fraser& CoLtd,1944AC265,275 (HL).
228.HirjiMuljivCheongYue S.S. CoLtd,1926AC497(PC).
229. JosephConstantineSteamshipLineLtdvImperialSmeltingCorpnLtd, 1942 AC 154 (HL).
230.BritishMovietoneivsLtdvLondon&DistrictCinemasLtd,1952AC 166 (HL).https://t.me/LawCollegeNotes_Stuffs

555. [S.56] Impossibility of performance andfrustration415
wentbeforetheHouseofLords.TheobservationofLordLoreburnthat
"no court has an absolving power", wasre-emphasised.Viscount Simon
said: "Theprincipleremains the same. Particularapplicationsof it may
greatly vary andtheoreticallawyers may debatewhetherthe rule should
be regarded as arising from implied term or because the basis of the con
tract no longer exists. In any view it is a question of'construction'as Lord
Wrightpointed out in JosephConstantineSteamship Line Ltd vImperial
Smelting CorpnLtd^^^and as has been repeatedly asserted by other masters
oflaw."^^2
TheoriesnotapplicableinIndia
Referring to the theories B.K.MukherjeaJ of the SupremeCourtsaid in
SatyabrataGhose vMugneeramBangur&Co^^^"Thesedifferences in the
way offormulatinglegal theories really do not concern us so long as we have
statutoryprovisionin theIndianContractAct. In deciding cases inIndia,
the only doctrinethatwe have to go by isthatof supervening impossibility
or illegality as laid down in Section 56 of theContractAct,takingthe word
'impossible'in itspracticalandnotliteralsense. Itmustbeborneinmind,
however,thatSection 56 lays down a rule of positive law and does not leave
thematterto bedeterminedaccording to theintentionof theparties."
Effectsoffrustration
"Itiswell-settledthatifandwhenthereisfrustrationthedissolutionof
thecontractoccurs autornatically. It doesnotdepend, as does rescission of
acontract,on thegroundofrepudiationorbreach,or on the choice or elec
tion of eitherparty.It depends on the effect ofwhathasactuallyhappened
on thepossibilityofperformingthecontract."^^"*
1.Frustrationshouldnotbeself-induced
Explainingtheprinciplethatfrustrationshouldnotbeself-induced,Lord
WrightsaidinMaritimeNationalFishLtdvOceanTrawlersLtdP^
"Theessenceof'frustration'isthatitshouldnotbeduetotheactor
election of theparty.Theredoesnotappearto be anyauthoritywhichhas
been decideddirectlyonthispoint."Thereis, however, areferencetothe
questionin thespeechof theLordSumnerinBankLineLtdvArthurCapel
&Co.^^^Whathe says is: "Ithinkit isnowwell-settledthattheprinciple
offrustrationofanadventureassumesthatthefrustrationariseswithout
231.1942AC154(HL).
232.BritishMovietonewsLtdvLondon&DistrictCinemasLtd,1952AC166(HL).
233.AIR1954SC44:1954SCR310.
234.PerLordWrightinDenny,Mott&DicksonLtdvJamesB.Fraser& CoLtd,1944AC 265
(HL).CitedbyMukherjeaJ inSatyabrataGhosevMugneeramBangur& Co, AIR1954
SC44:1954SCR310.
235.1935AC524(PC).
236.1919AC435(HL).https://t.me/LawCollegeNotes_Stuffs

556. 416 Chapter 8 Dischargeof Contract [S.56]
blame or fault on either side. Reliancecannotbe placed on a self-induced
frustration."^^^
InMaritimeNationalFishLtdvOceanTrawlersLtd}^^thefactswere:
Theappellantshiredthe respondents'trawler,calledthe"5i.Cuthbert"
to beemployedinfishingindustryonly.Bothparties knewthat the trawler
could be used forthatpurpose only under a licence from theCanadian
Government. The appellants were usingfivetrawlers and, therefore,
applied forfivelicences.Only three were granted and the Government
asked the appellants to name three trawlers and they named trawlers
other than the St. Cuthbert. They then repudiated thecharterand pleaded
frustrationin response to the respondents' action for the hire.
The judicialCommitteeof thePrivyCouncilheldthat thefrustration
in this case was the result of the appellants' own choice of excluding the
respondents' ship from thelicenceand, therefore, they were not discharged
fromthecontract.
Inanothersimilarcase, thecontractwas toexport1500tons ofsugar
beet pulp pellets with a further option for the same quantity. Thesellers
obtained anexportlicencefor 3000 tons. They also contracted withanother
buyer to supply him 1500 tons. But theGovernmentrefused tograntany
furtherlicences.They shipped the whole agreed quantity to the first buy
er240xj^eywerenow left with theexportlicence for 1500 tons only, but
were under two obligations, one to supply1500tons to the first buyer under
the option given to him and other under thecontractwith the second buyer
for the same quantity. As a face saving device they apportioned the supply
between the two buyers givingabouthalf to either. The second buyer sued
for breach ofcontract.The suppliers pleadedfrustration.They were held
liable. TheCourtof Appeal found no legalauthorityjustifying theproposi
tionthatwhere a seller has a legalcommitmentto A and anon-legalcom
mitmentto B and he canhonourtheobligationtoAor toBbut not toboth,
he is justified inpartiallyhonouringbothobligations.^'*^Thecourtreferred
to theprinciplestatedin theAmericanUniformCommercialCode^''^that
in such asituationthe seller mayallocatesupplies in anymannerwhich
isreasonableandfair,butfoundno basis forimportingtheprincipleinto
English law. There is, however, an Englishauthorityto,theeffectthatif the
seller had beenundera legal duty, hewouldhave been justified inmaking
fairapportionment.Thecourtsaidthatwhen a supplier hasmanycontracts
237.SushilaDevivHariSingh, (1971) 2 SCC288:AIR1971SC1956.
238.1935AC524(PC).
239. Followed in India inJwalaFrasadvJwalaBankLtd,AIR 1957 All 143 andconsidered:V.L.
Narasuv P.S.V.Iyer,AIR1953Mad300.
240.SatyabrataGhosevMugneeramBangur& Co,AIR1954SC 44, 48:1954SCR 310.
241.MaritimeNationalFishLtdvOceanTrawlersLtd,1935AC524(PC).
242.FancommerceS.A. vVeecheemaB.V., (1983) 2Lloyd'sRep304(CA).
243.Para2-615.https://t.me/LawCollegeNotes_Stuffs

557. [S. 56] Impossibilityofperformanceandfrustration417
to fulfil, but only has enough of the goods to fulfil one of them, then, if he
reasonably appropriates what he has tothatone, he can rely on force mae-
jeure as to others. Thus, there is no principle of law preventing onepartyto
a contract taking advange of its own acts to defeat the other's rights unless
thepartyis in breach of duty in so acting. Where the defendant company
having the right to do so and lawfully exercisingthatright, sold its subsid
iary with the result that theemployees'stock options lapsed, the defendant
company was held not liable for the lapse because it was under no duty not
to sell itssubsidiary.^''''
In order toattractthe principlethatapartyis not entitled to rely on his
own act in not fulfilling a condition subsequent and thereby bringing a con
tractto an end, the act has toamountto a breach of duty owed to the other
party under the contract. If a term cannot beimpliedinto a contract that a
party wouldnot do an actwhich,if done,wouldpreventthefulfilmentof a
conditionprecedentor wouldcauseaconditionsubsequentto befulfilled,
thecontracttakeseffectaccordingto itstenor.
Applyingthisprincipleto the caseof acompanywhichofferedsharesto
its ownemployeesand to those of itssubsidiaryand after anemployeeof
asubsidiaryhadacceptedtheoffer,thecompany'ssubsidiarywas soldto a
bidder and theemployeewas informed that theschemelapsed but he sued
thecompanyforbreachofcontract,the courtcameto theconclusionthat
thecompanywas not, byreasonof thescheme,under a duty not to deal
with the undertaking of thesubsidiaryin a way that would frustrate the
scheme.^"^
2.Frustrationoperatesautomatically
Frustration operates automaticallyto dischargethe contract "irrespective
of the individuals concerned, their temperaments and failings, their interest
andcircumstances".^''^"The legal effect of frustration does not depend on
theirintentionor theiropinions,orevenknowledge,asto theevent."^''^"The
belief,knowledgeandintentionof thepartiesareevidence,butevidence
onlyonwhichthe court has toformitsconclusionwhetherthechanged
circumstancesdestroyedaltogetherthebasisoftheadventureand its under
lyingobject."^''^Thisisparticularlytrue ofIndianlawasSection56 ofthe
Contract Act "laysdown a rule ofpositivelaw and doesnotleavethe matter
to be determined according to the intention of the parties."
244.ThompsonwASDA-MFl,Grouppic,(1988)2WLK1093;AlghusseinEstablishmentvEton
Co/Zege,(1988) 1WLR587 (HL).
245. Thompson vASDA-MFI,Grouppic,(1988) 2WLR1093.
246. LordLoreburninDavisContractorsLtdvFarehamUrbanDisttCouncil,1956 AC 696,
715:(1956) 3WLR37 (HL).
247.LordLoreburnin ibid, citingfromDahlv Nelson,(1881)LR 6 AC38, per LordWatson.
248.MukherjeaJ inSatyabrataGhosevMugneeramBangur& Co,AIR1954SC44:1954SCR
310.https://t.me/LawCollegeNotes_Stuffs

558. 418Chapter8DischargeofContract [S. 65]
A case,however,showsthatincertaincircumstancesfrustrationmaybe
waived by onepartyandthentheotherwill beboundby thecontract.In
HR& SSainsburyLtdvStreet-}'^^
There was the sale of 275 tons (5 per cent more or less) of feed barley to
begrownon seller's land. The cropamountedto only 140 tons.Theseller
resold it toanotherandcontendedthathehadtherightto do sobecause
thecontracthadended byfrustration.
But he was held liable for breach of contract. There wasfrustrationonly
to the extent of crop failure. The buyer could waive it and claim delivery of
whatever little crop the seller's land hadproduced.""
The SupremeCourthas laid downthatfrustrationputs an end to the
liabilitytoperformthecontract.It does notexterminatethecontractfor all
purposes. For example, whetherthe'doctrineoffrustrationwould apply or
not has to be decidedwithintheframeworkof thecontractand, if the con
tractcontainsanarbitrationclause, thearbitratorcoulddecide thematter
offrustration.
3.Adjustmentofrights
The rights of thepartiesare adjusted under Section 65 of the Act.
S. 65.Obligationofpersonwhohasreceivedadvantageundervoid
agreement,orcontractthatbecomesvoid.—Whenanagreementis discov
ered to be void, or when acontractbecomesvoid,any person who has received
anyadvantageundersuchagreementorcontractisboundtorestoreit, or to
makecompensationfor it, tothepersonfromwhomhe received it.
Illustrations
ia)A paysB1000rupees in consideration ofB'spromisingto marryC,/\'sdaughter. C is
dead at the time of the promise. TheagreementIsvoid, but8must repay Athe1000
rupees.
ib)AcontractswithBto delivertohim250maunds ofricebeforethe firstofMay.Adelivers
130maundsonlybeforethatday, andnoneafter. Bretainsthe130maundsafterthefirst
ofMay.He isboundto pay Aforthem.
(c)A,a singer, contracts withB,the manager of a theatre, to sing at histheatrefor two
nightsInevery week during the next two months, and Bengages to pay her a hun
dred rupees for each night's performance.Onthe sixthnight,Awilfullyabsents herself
fromthe theatre, andB,inconsequence,rescindsthe contract.Bmustpay/Aforthefive
nightson which she hadsung.
{d)Acontracts to singfor6at a concert for1000rupees,whichare paidInadvance.AIstoo
illtosing./AIsnot bound to makecompensation to Sfor the lossof the profitswhichB
wouldhavemade ifAhad been abletosing,but mustrefundto Sthe1000rupees paid
inadvance.
249.(1972)1WLR834.
250. See G.D. Goldberg, "Is Frustration InvariablyAutomatic",(1972)88 LQR 464.
251.NaihatiJute Mills Ltd v KhyaliramJagannath,AIR 1968 SC 522:(1968)1 SCR 821.
LiabilityunderS. 65 alsosurvives.BombayDyeing& MfgCoLtd v State ofBombay,AIR
1958SC328:1958SCR1122.https://t.me/LawCollegeNotes_Stuffs

559. [S. 65] Impossibilityofperformanceandfrustration419
The effect of the principle laid down in the section isthatwhen thepar
ties have entered into anapparentlyvalidcontractand some benefits have
been passedunderit, andsubsequentlythecontractis either discovered to be
void or becomes void, thepartywho has received the benefits mustrestore
themto theother.^^^Thus,thesectiondoesnotapply to acontractwhichthe
partiesknew at the time ofmakingit to bevoid."^The section also does not
apply to a case where the benefits are passed at a time when thecontracthas,
thoughunknownto theparties,alreadyceased.tobe enforceable. This was
the position inJagadishProsadPannalalvProduceExchangeCorpnLtd.^^'^
Therewas acontractfor the sale of onewagonofmaizestarchat the
rate ofRs77per cwt., thecontrolprice beingRs78.The goods were
delivered onJanuary3 and paid for. A few days earlier, viz. on December
16, a new order was passed by theGovernmentmakingRs48as the price
and this was to apply to allcontractsin which delivery was to be given on
or afterJanuary1. The buyerbroughtan action to recover the difference
between the revisedcontrolprice and the price he paid.
Thecourtagreed with him to this extentthatthecontracthad become
void by the change in thecontrolprice and, therefore, neitherpartywas
compellableto perform, but that the buyer,having paid up, was not entitled
to any refund under Section 65. For this section to apply the advantage must
have been received under"contract",whereas, in the present case, the excess
price was paid after the contract had already becomevoid and ceased to be
enforceable.^^^
Discoveredtobevoid
Thefirstpartis concerned with an agreement which never amounted to
a contract, it being void ab initio. But the parties discovered this at a later
stage."The word'discovered'connotes thepre-existenceof that which is
discovered".Thiswill covercasesof"initialmistake".Whereforexample,
money is paid for the sale of goods, which unknown to the parties, have
already perished at the time, the money isrefundable.Theprinciplewill
applywhethertheagreementisvoidbyreason of law or byreason offacts.^^®
252. Action for recovery or restitution of amount paid has to be filed within three years from the
dateonwhichcontractceasesto beenforceable,AmriDevivRidmal,AIR1998Raj 25.
253. Joginder Singhv Registrar of CoopSocieties,AIR 1965J&K39. Seealso Naihati Jute Mills
LtdVKhyaliram Jagannath, AIR1968SC 522: (1968) 1 SCR 821. Subsequent restrictions
notrenderingthecontractvoid.
254.ILR(1945) 2Cal41: AIR1946Cal245.
255. RamaIyerv Jacob,(2003)3KLT(SN),excavation work, 36 per cent completed, further
stopped byGovernmentintervention,plaintiff entitled torecoveronly such amount for
which working had beencompleted.Polymat India (P) Ltd v National Insurance Co Ltd,
(2005)9see174: AIR 2005 SC 286, terms of the policy of insurance could not be departed
from.
256.UttamchandvMohandas,AIR 1964 Raj 50. This principle was also applied to a case in
which certainnon-existentvehicles happened to be insured by mistake. The premium paid
was held to berefundable.NewIndiaAssuranceCoLtdvIttyKurian,(1997) 2 KLT 830.https://t.me/LawCollegeNotes_Stuffs

560. 420Chapter8DischargeofContract [S. 65]
Thus,forexample,where aminorgave a shopunderapartnershipto the
defendant,theagreementbeing void, itvv^asheldthathe could recover back
the shop."Theintentionof Section 65 is topreventapartyto a void agree
menttoretainbenefits receivedunderit."^^^Similarly,considerationgiven
on apromissorynotewhichwasnotenforceableforinadequacyofstamps,
was held to berefundable.Likewise,the money paidunderacontract
withamunicipalitynotexecutedin themannerlaiddownby theMunicipal
Act, was held to berefundable.^^'Paymentmadeinadvanceto acontrac
torunderacontractwhichisnotinaccordancewithArticle299(1)ofthe
ConstitutionrelatingtoGovernment contractshas beenallowedby the
OrissaHighCourtto berecoveredbackunderSection65 of theContract
Act.^fioPaymentreceived by apersonforproposedsale oflandwhichhehad
no right to sell, had to bereturnedby him to the otherparty.^®^Taxes realised
by acontractorundertheauthorityof State were held to berefundableto the
tax-payers when itturnedoutthatthe levy itself wasinvalid.^®^Money paid
to apersonforpurchasinghisrightofreversion,whichisnottransferable,
being merely anexpectancy,was held by the PrivyCouncilto berefunda
blewith6 per centinterestfrom the date ofsuit.^^^SirLawrenceJenkins
examinedthe scope of the section:"Thesectiondealswith{a)agreements
and[b]contracts.Thedistinctionbetween them isapparentfrom Section 2.
Byclause(e)every promise and every set of promises forming the considera
tion for each other is an agreement, and by clause{h)an agreement enforce
able by law is acontract.Section 65, therefore, dealswith(<3)agreements
enforceable by law, and(b)with agreements not so enforceable. Byclause(g)
anagreementnotenforceableby law is said to be void."
"Anagreement,therefore,discoveredto be void is onediscoveredto be
notenforceableby law,andon thelanguageof thesection,wouldinclude
ThecourtfollowedKujuCollieriesLtdvJharkhandMinesLtd,(1974)2 SCC 533: AIR1974
SC1892.
257. In such cases, thepartyseeking relief has to restore the benefits, if any,obtainedby him.
Thus a minor seekingrestorationof his lands disposed of by his mother was required to
refundthe sale price of which he had the benefit.DevinderSingh v ShipKaur,AIR 1970
Punj 549.RashamoyChowdhury v Anil Krishna Dawn, (1998) 1CalLJ295, where apart
nership was discovered to be void, thepropertycontributedby apartnerwas allowed to be
recovered.
258.MohdJamalSahab vMunwarBegam,AIR 1964 AP 188.
259. KishangarhMunicipalityvMaharajaKishangarh Mills Ltd, AIR 1961 Raj 6.
260.StateofOrissavRajballavMisra,AIR1976Ori 19.
261.OrissaSEB vIndianMetals& Ferro Alloys Ltd, AIR 1991 Ori 59.
262.TownAreaCommitteevRajendraKumar,AIR1978All103:1978ALR78.Theholder
of a forgedpromissorynotecannotrecoveranythingunderthe note, but he can recover his
moneyunderS. 65 if he himself was not apartyto the forgery. Brij Basi vMotiRam,AIR
1982 All 323. Non-compliance of the requirements of the U.P. Municipalities Act renders the
contract void ab initio. S. 65 applied giving the Municipality the right to recover Tehbazari
dues collected by thecontractor.IshwarDayalHingwasiav RathMunicipality,AIR 1980
All143.
263.HarnathKaurvIndarBahadurSingh,(1922-23)50lA69 PC; AIR1922PC403.https://t.me/LawCollegeNotes_Stuffs

561. [S.65] Impossibilityofperformanceand frustration421
anagreementthat wasvoidin totalsensefromitsinceptionasdistinct
fromacontractthatbecomesvoid."
Applyingtheseprinciplesto thefactsofthecasetheirLordshipsobserved
that theagreementwasmanifestlyvoid from its inception but the parties
werenotable toknowof this fact till thedemandfor thepropertywas
resisted.
WheretheOrissaHigh Court found that the plaintiff whoadvanced
moneyto thedefendantforsupplyofpaddywasnotawareon thedateof
theagreementthat itwasinviolationoflaw/®''hissuitforrefundofmoney
wasallowed.^®^TheSupremeCourt allowedrecoveryunder the category
"discovered to be void" of theamountofearnestmoney which was paid for
purchasingapieceofland.Theagreementturnedouttobevoidbecausethe
sellerthoughthewasreceivingthepriceat therateofperkanalwhereasthe
buyerwasundertheimpressionthat hewaspayingthepriceperbigha?^^
Where it wasdiscoveredthat the party who had agreed to sell property
and had received advance, had no title to the property, thepartyreceiving
the advance was held to be under an obligation to refund the amount. The
contract was void ab initio but discovered by the parties subsequently. The
obligationtorefundexistsevenwherethereisnoprovisionintheagreement
to thateffect.Theobligationisfoundedon theequitableprincipleof res
titution andpreventionofunjustenrichment.^®^Aladyadvocateactingas
anAssistantDistrictCounselon therequestof theDistrictMagistratewas
allowed to recover her remuneration for the working period eventhoughthe
appointmentwasdiscoveredtobevoidunderSection24(2)oftheCriminal
ProcedureCode,1973.^®^
Thepartyto avoidcontractwouldstillbeentitledtoinstituteasuitfor
specificenforcementandinthealternativetoprayforrefundofmoneypaid
under it.Rejectionof the plaint was notproper.^®'
AZilaParishad awarded to the highest bidder the contract ofcollecting
entryfeefromvehicles.ThecontractordidnotaccountfortotheParishad
fora part ofthecollectionandtookshelterbehindtheillegalityofsuch
authorisation. The court allowedrecoverybut not in the manner of recover
ing asarrearsof land revenue.
264.OrissaRice and PaddyControlOrder,1965.
265. Fakir Chand Seth v Dambarudhar Bania, AIR 1987 Ori 50,followingtheobservationsof
theSupremeCourtinKujuCollieriesLtd vJharkhandMinesLtd,(1974)2SCC533:AIR
1974SC1892anddissentingfromBhaskarraoJageshwarraoButyvSarujadharaoTumble,
AIR1978Bom322.
266.TarsemSinghvSukhminderSingh,(1998)3SCC471:AIR1998SC1400.
267.M.Venkatesh v KishoreJataram,(1999) 2 Kant LJ 535.
268.InduMehta v State ofU.P.,AIR 1987 All 309.
269. Govind GoverdhandasDaga v FieldMining&IspatLtd,(2009)6 Mah LJ398.
270. Surendra KumarRaiv Zila ParishadJhansi,AIR 1997 All 387. S. 65 was held to be not
applicableto asituationinwhichatthetimeofenteringintotheagreementtheparties
wereawareofthe factthat theagreementwasopposedto aparticularprovisionoflaw.The
respondentwasnotentitledtorecoveranythingfromthepetitioner.OrientalInsuranceCo
LtdVV.D.Jhunjhunivala, (2001) 91 DLT496.https://t.me/LawCollegeNotes_Stuffs

562. 422 Chapter 8 Discharge of Contract [S.65]
Partdelicto
The principle has also been held to apply in cases where acontractis void
by reason of "unlawful object", but the parties were not aware of it. Thus,
for instance, in acase^^^beforethe Rajasthan High Court:
The parties made a forward contract inhydrogenatedgroundnut oil, not
awareoftheexistenceofanorderissuedundertheDefenceofIndiaRules
prohibitingsuchcontracts.
The court held that "the parties are not in pari delicto, and, therefore,
it is a contract which issubsequentlydiscoveredto bevoid.The purchaser
who has advanced money under thecontractis entitled to arefundofit."^^^
The doctrine of paridelictowas stated in thefollowingwords in
OnkarmalvBanwarilal-}^^
The principle behind the doctrine of pari delicto is that where each
party is equally at fault, the lawfavourshim who is actually in posses
sion, or that where both parties are equallyculpable,the lawwillleave
themwhereitfindsthemandwillnotengageitselftodeterminetherights
asbetweenthem. But thisprincipleissubjecttowell-known exceptions,
one ofwhichis that it will notapplywherethe parties are not or cannot
be said to be really inparidelicto.'"'^
Thus,thereareat leasttwoexceptionsinwhichthebenefitspassedunder
an agreementwhich is void byreason of illegalityof object can berecovered.
Firstly,wherethepartiesarenot atequalfault,thelessguiltymayrecover
anythingthathe has given to theotherunder thecontract.Where awoman
wasinducedbyaninsuranceagenttopaypremiumsuponanillegalandvoid
policy, she was held entitled to recover, as she wasinnocent.^^^
Thedoctrineof paridelictois notdesignedtorewardthewrong-doer
or topenalisethewrongedbydenyingto thevictimaccesstojustice.The
doctrine is attracted only when none of the parties is avictimand both
parties havevoluntarily and by their free will joined hands to flout the law
for theirmutualgain.Applyingthisprincipleto thelandlord-tenancyrela
tionshipThakkarJ of theSupremeCourtheldthatadvancingasumof
moneybywayofloanbythetenantto thelandlordinorderto getposses
sionofpremisesunderanunlawfulagreementisanexploitationof aneedy
personand,therefore,hewasentitledto'havetheadvanceadjustedtowards
rent asagreed.^^®Section65 is not attractedwhereanegotiableinstrument
271. Ram SinghvJethanandWadhuinal& Co, AIR 1964 Raj 232.
272.SeealsoFukirChandSethvDambarudharBania,AIR1987Ori50,advancepaymentfor
paddy in ignorance of a control order, allowed to be recovered.
273.AIR1962 Raj127.Ss.32 and 56 do not permitconditionsto be read into the contract.
V.C.K. BusServiceLtdv RTA, AIR1957SC 489:1957SCR 663.
274.Citedin RamSinghvJethanandWadhumal& Co,AIR1964Raj232.
275.Hughesv LiverpoolVictoriaLegalFriendlySociety,(1916)2KB482.
276.MohdSalimuddinvMisriLai,{1986)1SCC378:AIR1986SC1019followingV.S.Rahiv
RamChambeli,(1984)1 SCC612:AIR 1984 SC595;(1984)2 SCR290.https://t.me/LawCollegeNotes_Stuffs

563. [S. 65] Impossibilityofperformanceandfrustration423
is rendered void by material alteration in inserting a date in an undated
instrument.
Secondly,w^herenopartof the illegal purpose has been executed, that
is, the agreement is still executory, any benefits passed under the agreement
may berecoveredback. In a case before the Patna HighCourt:^^^
Where in a contract of marriage which was illegal, the father of the
bride refused to perform the marriage, he was held entitled to the refund
of the money paid by him to the father of the bridegroom.
Quantummeruitclaims
Claims under thewell-knownEnglish lawdoctrineofquantummeruit
have been allowed by the courts under this section. The SupremeCourt
observedin State of Madras v Gannon Dunkerley & that a claim for
quantummeruitisaclaimfordamagesforbreachofcontract.Thevalueof
the materialused orsuppliedis a factor whichfurnishesabasisforassessing
the amount ofcompensation.The claim is not for price of goods sold and
deliveredbut for damages. That is also the position under Section 65. In
anothercase^^°reasonablecompensationwas awarded on theimplicationof
a contract. It will not displace an express stipulation on the point.
In asubsequentcase,theSupremeCourtexplainedtherequirementsof
the claim. The original contract must be so discharged by the opposite party
that theplaintiffisentitledto treathimselfasfreefromtheobligationof
furtherperformanceand he musthaveelectedto doso.Theremedyis not
availableto the party who breaks the contracteventhough he mighthave
partlyperformedit. Theremedyisrestitutory,it is arecompensefor the
valueofthe work done bythe plaintiffin orderto restorehim to the position
whichhewouldhavebeenin if thecontracthadneverbeenenteredinto.In
thisrespectit isdifferentfrom aclaimfordamageswhich is acompensa
toryremedy.The courtaccordinglydid notallowtheclaimof acontractor
forextrapaymenton thegroundthat he had toprocurethe rawmaterial
from alongerdistancethan thatrepresentedin the tenderdocuments.
Thematerialwas in factavailablewithinthestateddistance,butitsremoval
requiredpermissionofCantonmentAuthoritieswhichthecontractorcould
notmanagetoget.^^^
Explainingthe nature ofjusticethatSection65strivesfor,theSupreme
Courthasobserved:^^^
"We do not have the slightest doubt that net profits realised by the
companyasaresultof itsvariousbusinessactivitiescanneverbe the
277.JayantilalGael vZubedaKhanum, AIR 1986 AP 120.
278.DharindharvKanhjiSahay,AIR1949Pat250.
279.AIR1958SC560:1959SCR379.
280.AlopiFarshad&SonsLtd vUnionofIndia,AIR1960SC588:(1960)2SCR793.
281.PuranLaiSah vStateofU.P., (1971) 1 SCC 424.
282.Seefurther,Srinivas& Co vIndenBiselers,(1971)3 SCC725: AIR 1971 SC2224.
283.StateofRajasthanvAssociatedStoneIndustries,(1985)1SCC575,580:AIR1985SC466.https://t.me/LawCollegeNotes_Stuffs

564. 424Chapter8DischargeofContract [S. 65]
measureofcompensationto beawardedunderSection 65. It isnotas
if Section 65 works in onedirectiononly. If onepartyto thecontractis
asked to disgorge theadvantagereceived by himundera voidcontract,
the otherpartymay ask him to restore the advantage received by him.
The restoration of the advantage and the payment of compensation have
necessarilyto bemutual.InGovindramSeksariavEdwardRadbone^^'*
the PrivyCouncilpointedoutthattheresultofSection65 wasthateach
of the parties became bound to restore to the other any advantage which
therestoringpartyhadreceivedunderthecontract.As aresultof the
contractbeing void, the Statecouldat themostrecoverfromthecontrac
tor the value of the rough stone excavated from the quarries. But then it
would haveto make good to thecompanythe expenditure incurred by it
inquarryingoperationsandextractionof theroughstone."
Thecontractwas for thegrantof a quarry. It was found to be void because
the parties were mistaken about the application of income tax laws in the
area.
Becomesvoid
The second type of situation covered by Section 65 is where a valid con
tract is made in the beginning, but it subsequently becomes either unlawful
orimpossibleof performance. Anybenefitswhich have been passed under
the contract from one party to other must be restored. This is subjectto the
expenseswhich have already been incurred by the other party in the per
formanceof the contract. Where a contract for purchase of granite stones
becameinoperativebyreason of theseller'sdelayin obtainingpermit from
the Mining Department forremovalof the material, the purchaserbecame
entitled to refund of the whole of the money paid by him. No interest was
allowedbecausehe hadhimselfdepositedthemoneywithsomedelays.
EnglishLaw.—Theprinciples of English law before the Law Reform
(FrustratedContracts)Act, 1943, werethoselaiddownin the two coro
nationcases, one of them is,KrellvHenry^^^where thecourtheldthatthe
rent which had been paidbeforethe contract to hirepremisesbecamevoid
by reason of the postponement of the procession was not refundable and
theoutstandingrentwasnotrecoverable.The courts left the partieswhere
theywere.Theyalsodid notliketo disturb therightswhichthe parties
hadacquiredbefore thecontractbecame void.Ofthis theillustrationis
284. (1946-47) 74lA295: AIR 1948 PC 56.Confederationof RealEstateDevelopersAssnof
IndiaVStateofM.P.,2015SCOOnLineMP2839:AIR2015MP25, a caseofunjustenrich
mentcausedbyanillegallevyof amunicipaltax. An orderwaspasseddirectingrefundof
the amount collected with interest at 9 per centp.a.
285.PallavaGraniteIndustriesIndia(P)Ltd vA.P.MineralDevelopmentCorpnLtd,(2005)4
ALD230.TulsabaivRajani,(2010)6 MahLJ371,agreementtosellland,earnestmoney
paid,agreementbecamevoidbecauseof theCollector'srefusaltopermitsale,liabilityto
refund earnest money or to pay compensation.
286.(1903) 2 KB 740 (CA).https://t.me/LawCollegeNotes_Stuffs

565. [S.65] Impossibilityofperformanceandfrustration425
Chandler vWebster.-^''The plaintiff sued for refund of the rent which he
hadpaidinadvanceandthelandlordcounter-claimedforthebalancewhich
was due.RomerLJstated the principle and said:"Applyingthis to the facts
here, as soon as it was ascertained that theprocession,though no fault of
either of the parties, could not take place, they wereimmediatelyfree from
anysubsequentobligationunder the contract, but the contract couldnot be
considered as rescinded ab initio.Thatbeing so, many legal rights previ
ouslyaccruedtoeitherofthepartiesremained,andcouldnot bedisturbed,
and one of thoserights was the right of the defendantto be paid £141.15s."
The hardship that this principle is likely to cause was to a certain extent
mitigatedby theHouseofLordsinFibrosaSpolkaAkeyjnavFairbairn
LawsonCombeBarbour LordRussellofKillowenatonce
observedthatChandler v Webster was wrongly decided. Their Lordships
accordinglyallowedthe £1000to berecoveredwhichwerepaidinadvance
forpurchasingamachineryand theperformancehavingbeenrenderedille
galbytheinterventionofwar.HisLordshipcontinued:
Themoneypaidwasrecoverable,ashavingbeenpaid for aconsider
ationwhichhadfailed.Therulethatonfrustrationtheloss lieswhereit
fallscannotapplyinrespectofmoneyspaid inadvancewhenthe con
siderationmovingfrom thepayeefor thepaymenthaswhollyfailed,so
as todeprivethepayerof his right torecovermoneysso paid asmoneys
receivedto hisuse;but the rule will,unlessalteredbylegislation,apply
in allotherrespects.
LawReform(FrustratedContracts)Act(English).—Theexpected
legislationcamewithinayear.Nowtherightsofpartieswhosecontracthas
endedbyfrustrationareadjustedundertheprovisionsoftheLawReform
(FrustratedContracts)Act,1943.Themainprovisionsof the Act are as
follows:
Allsumsofmoneywhichhavebeenpaidunderafrustratedcontractshall
berefundableand thosewhichare stillpayableshallceaseto bepayable.If
anypartyhasincurred,expensesbeforethetimeofdischargeintheperfor
manceofthe contract, the courtmay,if it thinks justto do so, allowhim to
deductsuchexpensesfromtherefundabledepositorallowhimtorecover.
Thesameprinciplewillapplytoanybenefitsreceivedotherthanmoney.In
estimatingtheamountofexpensesthecourtmaytakeintoaccounttherea
sonableoverheadexpensesand theworkorservicespersonallyperformed
287. (1904) 1 KB 493: (1904) 73 LJ KB 401 (CA).
288.1943AC32(HL).Comrnr,KadayanallurPanchayatUnionvA.PuthuranPadayacht,
(2006)2CTC392(Mad),plaintiffobtainedatauctiontherighttofishingin apondand
madepaymentaccordingtoauctionrules.Theauctionwasnotconfirmed.Therewasno
waterinthepondduetofailureofrains.Thedecreedirectingrefundofauctionpriceheld
sustainable.BaldevSinghvKeshwaNand,(2011)2ICC414(P8cH),under anagreement
tosellland,thesellerreceivedearnestmoneyfromthepurchaser,rightthenthegovernment
startedtheprocessofacquiringthelandinquestion,held,thecontractwasfrustrated,the
purchaserbecameentitledto refund of his earnestmoney.https://t.me/LawCollegeNotes_Stuffs

566. 426Chapter8DischargeofContract [Ss.59-61]
by the party.Benefitsreceivedunder an insurance policy are not to be taken
intoaccountunless there is an expressobligationto insure.
APPROPRIATION OFPAYMENTS [SS.59-61]
When a debtor owingseveraldistinct debts to one person, makes a pay
ment, which is notsufficientto discharge all the debts, the question arises to
whichparticulardebt the payment is to be applied. The Act, in Sections 59
to 61, lays down the underlyingprinciples:^''
S. 59.Applicationofpaymentwheredebttobedischargedis indi
cated.—Wherea debtor, owing several distinctdebtsto one person, makes a
payment tohim,either with expressintimation,or undercircumstancesimply
ing,that the payment isto be applied to the discharge of some particular debt,
the payment,ifaccepted, must be appliedaccordingly.
Illustrations
(o)AowesB,among other debts,1000rupees upon a promissory note, whichfailsdue
onthefirstJune.HeowesBno otherdebt ofthat amount.OnthefirstJunepaysto B1000
rupees.The payment isto be applied to the dischargeof thepromissorynote.
(£>)Aowes to 6 among other debts, the sum of 567 rupees. Bwrites to Aand demands
paymentofthissum.Asendsto B567rupees.Thispaymentisto beappliedto thedischarge
of the debt of which S haddemandedpayment.
S. 60. Application ofpaymentwheredebtto bedischargedisnotindi
cated.—Wherethedebtorhasomittedtointimate,andthereare noothercir
cumstancesindicatingto whichdebt the payment isto be applied,the creditor
mayapplyitathisdiscretionto anylawfuldebtactuallydue andpayableto him
fromthedebtor,whetheritsrecoveryisorisnotbarredbythelawinforcefor
thetimebeingas tothelimitationof suits.
S. 61. Application ofpaymentwhereneitherpartyappropri
ates.—Where neither partymakesanyappropriation,the paymentshallbe
appliedindischargeofthe.debtsinorderoftime,whethertheyareor not
barred by the law in force for the time being as to the limitationof suits. Ifthe
debts are ofequalstanding,thepaymentshallbeappliedindischargeofeach
proportionately.
1.Appropriationbydebtor
ThefirstprincipleislaiddownbySection59whichconferstheright
ofappropriationupon the debtor. If the debtor owes several distinct debts
tothesamecreditorandmakespayment,hehastherighttorequestthe
creditortoapplythepaymentto thedischargeofsomeparticulardebt.If
thecreditoracceptsthepayment,heisboundbytheappropriation.^'"^This
289.JaharRoy vPremjiBhimjiMansata,(1977) 4 SCC 562: AIR 1977 SC 2439.
290.Wherethecreditoracceptedaconditionalpayment,hewasnotallowedtorepudiatethe
condition,KapurchandGodhav MirNawabHimayatalikhanAzamjah),AIR1963SC250:
(1963)2SCR168.https://t.me/LawCollegeNotes_Stuffs

567. [S. 61] Appropriationofpayments427
principle was laid down as early as(1816)inClayton, and has since
beenincorporatedin the section and also followed in anumberof cases.
This principle applies to several distinct debts and not to a single debt pay
able byinstalments.^^^This set of sections is applicable only in cases where
morethanone debts are due from thedebtorto thecreditor.Theyarenot
attractedwhen there is only one debt, or, as in this case, the debt has become
merged into adecree.^'^The debtor may exercisethis right and may specify
his appropriation expressly or his intention may be implied fromsurround
ing circumstances indicatingthathisintentionat the time of payment was
to appropriate the amount deposited by him to aparticulardebt or to the
account ofthatdebt.^'''The payment of a money decree was directed to be
in monthlyinstalments.The judgment debtorremittedmonthlyinstalments
with a covering letter that theamountbe appropriated towards principal.
Thebankdidnotrefuseitandremainedsilentaboutit.Thebankbecame
bound by the appropriation. He could not appropriate the paymentsfirst
towardsinterestandcosts.
These sectionscontaina general rule forappropriationof payments
towardsseveraldistinctdebtsandnottowardsvariousheadsofonedebt.^'®
It was not applied to a case in which the principal and interest amount were
due on a single debt. The rule applicable in such cases isthatpayment is
firstappliedto wipe out interest and the balance is appropriated towards
principal.^^^An arbitration award waspassedagainst therespondentfor
theprincipalsum with futureinterest.The awardwaschallengedunder
Section 34 of theArbitrationand ConciUation Act, 1996.Duringpendency
of suchproceedingthe respondentdepositedcertain amount in the court.
The depositwas"recordedasrepresentingthe principalamount due and pay
ableundertheaward.Thecourtsaidthatthe factthattheappellantmade
noobjectiondidnot meanthat he hadacceptedtheappropriation.He there
fore had the right to appropriate it towards the interest amount which was
duetillthatdate.^'^
291. (1816) 1Mer572:15RR161.
292.MunnoBibi vCIT,AIR1952All 514.
293.GurpreetSinghvUnionofIndia,(2006)8SCC457;HaribhauS.WatanevRajuD.Borkar,
(2004) 4AIHC2728(Bom),rent paid by tenant to landlord could be appropriated towards
otherduesbecausethetenantdidnotindicateanyappropriation.
294.PremNathKapurv National Fertilizers Corpn of India Ltd,(1996)2 SCC 71.
295.SmithabenH.PatelvIndustrialCreditandDevelopmentSyndicate,AIR1997Kant 188;
Delhi State Coop Bank Ltd v DSCO Coop Industrial SocietyLtd,(2001)91 DLT555.
296. Industrial Credit & Development Syndicate v Smithaben H. Patel,(1999)3 SCC 80; AIR
1999 SC 1036.The rules applybeforethe stage ofdecreeand not to theexecutionof court
decree. Haryana Urban Development Authority v Devinder Kaur, AIR 2002 NOC 268
(P&H),compensationamountfor landacquisitiondepositedby theCollectorat hisdiscre
tion, the claimant notallowedto take thebenefitof S. 60 and claim appropriation of that
amount.
297.PunjabNationalBankvSurinderSinghMandyal,AIR1996HP 1.Thecourtfollowed
Meghraj v Bayabai,(1969)2 SCC 274: AIR 1970 SC 161.
298.LeelaHotels Ltd v Housing&CUrban Development Corpn Ltd,(2012)1 SCC 302.https://t.me/LawCollegeNotes_Stuffs

568. 428Chapter8DischargeofContract [S. 61]
2.Appropriationbycreditor
The second principle is laiddownin Section 60, which enables the credi
tor to makeappropriation.If thedebtormakespaymentwithoutanyappro
priation,thecreditormay use thepaymentat hisdiscretionto wipeoutany
debt which is due. He may, forexample,use it inpaymentof atime-barred
debt,^^'or inpaymentof a debtwhichcarriessimple or lesserinterest.^""
Whereamortgagordeposited someamountin thecourtwithoutindicat
ingwhetherit was forprincipalorinterest,thecourtheldthattheordinary
principlethatsuch money shouldfirstbe applied to interest and costs and
then toprincipal,wouldapply.^°'
3.Appropriationby law
Thethirdprinciple is in Section 61. The section applies when neither
partymakes anappropriation.In such asituationthe law gets the right to
appropriatethe payment and the law prefers to wipe out the debts in the
order of time in which they wereincurred.The section says:"Whenneither
partymakes any appropriation the payment shall be applied in discharge of
the debts in order of time,whetherthey are or arenot(time-barred)....If
the debts are of equal standing, the payment shall be applied in discharge of
each,proportionally."
ASSIGNMENT OFCONTRACTS
Section 37 which enablespartiesto dispense withperformanceshould
also enable them to assign theircontractualobligations. "Assignment"
means transfer ofcontractualrights or liability by apartyto thecontractto
some other person who is not aparty.^°-For example, if A owesBRs500
and B owes C a like amount, B has the right toreceivefrom A and is under
299.KamaleshwariPrasadvGangadharMai,AIR 1940 Pat 52. State of Gujarat v Bank of
Baroda, AIR 1997 Guj 130, the debtor while making payment into his bank account did not
indicate the particular loan to which he wanted the payment to be applied. Appropriation
by the bank held to be proper. PNB Dharamshala v Prem Sagar Chaudhary, AIR 1996 HP
86, absence of instruction by judgment-debtor as to manner of appropriation, decree-holder
entitledtoappropriateunderS. 60.
300.RameshwarKoervM.Mehidi,ILR(1898)26Cal39.S. 60 cannot beappUedindependently
of S. 59. Itgivesdiscretion to the creditor and not to the judgmentdebtor.Industrial
Credit &DevelopmentSyndicate v Smithaben H.Patel,(1999) 3 SCC 80: AIR 1999 SC
1036. Waterbase Ltd v K. Ravindra, 2003 Cri LJ 967(AP),prosecution for dishonour of
cheque,when theaccusedowedlarge sums to the complainant, any amount paid subse
quently could beappropriatedtowards any otheramountof a lawful debt at the choice of
the complainant as envisagedin S. 60 and not merelyagainst the amount of the dishonoured
cheque.
301.MeghrajvBayabai,(1969) 2 SCC 274: AIR1970SC 161.
302. SeeR.K.Associates v Channappa, AIR 1993 Kant 247, change of name of firm, old firm
assignedthe right to purchase a land to the newfirm,which paid the price,assigneefirm
couldenforcethe sale and demand arbitration in terms of theprovisionsin theagreement.
ZoroastrianCoopHousingSocietyLtdv Coop Societies (Urban), (2005) 5 SCC 632: AIR
2005 SC2306,prohibitionofassignmentas apartof thecontract,valid.https://t.me/LawCollegeNotes_Stuffs

569. [S. 61] Assignmentofcontracts429
liability to pay C. B can ask A to pay directly to C and if A accepts,thatwill
be an assignment ofB'sright to C.
Assignmentofliabilities
Animportantprincipleaffectingassignmentsisthattheburdenof or
liabilityunderacontractcannotbeassigned.Thepromisorhas therightto
insistthatperformanceshall be theresponsibilityof thepromisee.^"^The
promisormay havecontractedwithhim byreasonof thepersonalconfi
dencewhichhereposedin himand,therefore,thepromisor,can object to
thecontractbeingperformedby anyotherperson.This is moreparticu
larlytrueof cases inwhichtheengagementis ofpersonalnature,such as,
theengagementto sing or topaint.In such cases there is noquestionof
vicariousperformance.Inothercases it should notmatterto thepromisor
whethertheperformanceis offered by the promisee himself or by someone
else acting for him, provided, of course,thatthe promisee is responsible for
theperformanceby hisagent.^®''Explainingthis inDaviesvCollins,Lord
GreeneMRsaid:"Inmanycontractsallthatisstipulatedfor isthatthe
workshallbedoneandtheactualhandtodoitneednotbethatofthecon
tractingpartyhimself; the otherparty,will beboundto acceptperformance
carriedout bysomebodyelse. Thecontractingparty,ofcourse,is the only
partywho remains liable. Hecannotassign his liability to asub-contractor,
but his liability in those cases is to seethatthe work is done, and if it is not
properlydone, he isliable."^"''
A vicariousperformanceis not an assignment in the real sense of the
word. "It is quite a mistake to regardthatas an assignment of thecontract,
itisnot."
Wherewiththeconsentof thepromisor,thepromiseedropsout and
someotherperson takes over his obligation,thatis also not an assignment.
It is anovation,thatis, change ofpartieswithmutualassent. In the words
ofVenkataramaAiyarJ of the SupremeCourt:^"^"As a rule obligations
under acontractcannotbe assigned except with the consent of the prom
isee, and when suchconsentis given, it is really anovationresultingin a
substitutionofliabilities."^"^
303.Robson&SharpevDriimmond,(1831) 2 B & Ad 303.
304. See, for example, British Waggon Co v Lea & Co, (1880) LR 5 QBD 149 (DC). Theparty
who actually performs has a right to ask the otherpartynot to pay or to stop paying the main
contractor till his dispute with the main contractor is resolved.YabKeeSeong v Teguh Bina,
(1992) 1 CLJ 525HighCourtof ShahAlam.
305.(1945)1 All ER 247.
306. This principle has been accepted by the Supreme Court in Khardah Co Ltd v Raymon &
Co(India)(P)Ltd,AIR1962SC 1810: (1963) 3 SCR 183whereat p.201,Venkatarama
AiyarJ said; "Thecontractin question is one for the sale of goods. It is of no consequence
to the buyer as to who delivers the goods.Whatmatters to him is that the goods delivered
shouldbe inaccordancewiththespecifications."
307. InKhardahCoLtdvRaymon& Co (India) (P) Ltd, AIR 1962 SC 1810: (1963) 3 SCR 183.
308.Ibidatp.202.https://t.me/LawCollegeNotes_Stuffs

570. 430Chapter8DischargeofContract [S. 61]
Assignmentofrights
"Ontheotherhand,rightsunderacontractare assignable unless the con
tractispersonalin itsnatureor the rights are incapable ofassignmenteither
the law or under an agreement between theparties."Theintentionof the
partiesis to be gathered from thenatureof the agreement and thesurround
ingcircumstances.The leadingauthorityis the decision of the Supreme
CourtinKhardahCoLtdvRaymon& Co(India)(P)Ltd.^°^
The dispute arose out of acontractfor thepurchaseby a mill of
Pakistaniraw jute from a dealer, who failed to supply the goods as agreed.
Thecourtheldthatthecontractfor thepurchaseof foreign jute wasnot
assignable because the goods had to beimportedundera licencewhichwas
nottransferableandwhichalsorequiredtheutilisationof theimportedraw
materialonly by the mill inquestion.The onlyotherquestionwaswhether
the dealer could assign hisrightto the price on delivery of the goods. The
courtconcededthatordinarilythere isnothingpersonalaboutacontract
for the sale of goods. Thecourtfurtherpointedoutthat"it issettledlaw
thatanarbitrationclause does nottakeaway therightof apartyto assign
if it isotherwiseassignable".^^"In theopinionof thecourttherightsof the
unpaidseller also donotstandin the way of theassignabilityof acontract.
Therewas noprovisionin thecontractprohibitingassignment,buteven
so thecourtheldthatthecontractinvolved somanypersonalobligations
on.thepartof the seller,whichstronglysuggestedthattheintentionof the
partieswasthatneitherofthemshouldassign thecontract.Thecourt
alsotookoccasiontopointout:"Thereis in law a cleardistinctionbetween
assignmentof rightsunderacontractby apartywho hasperformedhis
obligationsthereunder,andassignmentof aclaimforcompensationwhich
onepartyhasagainsttheotherforbreachofcontract.Thelatteris a mere
claimfordamageswhichcannotbeassignedin law, theformeris abenefit
underanagreement,which is capable ofassignment."
Therightsunderalotteryticketareassignable.Explainingthis,
TulzapurkarJsaid:^!^
A sale oflotteryticket confers on thepurchaserthereof two rights{a)a
right toparticipatein the draw and{b)a right to claim a prizecontingent
uponhis beingsuccessfulin the draw.Bothwouldbebeneficialinterests
in movable property, the former "inpraesenti",latterin future depending
on acontingencylotterytickets,not as physicalarticles,but as slips of
paperormemoranda,evidence,notonebutboththesebeneficialinterests
309.AIR1962SC1810:(1963)3SCR183.
310. VideShaylervWoolf,1946Ch 320 (CA) andRusselonArbitration(16th Edn) 65.
311.NamasivayaGurukkalvKadirAhmad,ILR (1894) 17Mad168.Contra:JefferMeher Alt v
BudgeJuteMillsCo,ILR(1906)33Cal702;DelhiCloth&GeneralMillsCoLtdvHarnam
Singh,AIR1955 SC590:(1955) 2 SCR402,425.
312. H.AnrajvGovtofT.N.,(1986) 1 SCC 414, 432, 433: AIR1986SC 63.https://t.me/LawCollegeNotes_Stuffs

571. [S.61] Assignmentof contracts431
inmoveableproperty which areobviouslycapableofbeingtransferred,
assignedor soldand on their transfer,assignmentor sale, both these ben
eficialinterestsare madeoverto thepurchaserfor aprice.
The matteraroseout of the attempt of the T.N.Governmenttosubject
thesaleof lotteryticketstoSalesTax.Suchticketsbeinggoodsw^ithinthe
meaningoftheSaleofGoodsAct,1930,theStatew^asheldtobecompe
tent to do so. Dealing withagreementswhich are in the nature of grants,
the courtsaid:"It iswellsettled that rights andbenefitsarisingthereun
der,unlessof apersonalnature,partake of thecharacterofpersonality
asopposedto reality and,therefore,movablepropertycapableofbeing
assignedortransferred."^"
Another illustration of a contractinvolvingpersonal element and, there
fore, incapable of being assigned is to be found in the decision of theCourt
of Appeal in Kemp vBaerselman.^^'^
Thedefendantagreedtosupplya cakemanufacturerwith all theeggs
that he might require for a year and the latter was not to purchaseelse
where.Deliverieswere to be made at three differentplacesand payment
was to be by drawing bills of exchange on the manufacturer. The man
ufacturer'sbusinesswas taken over by a company in which he was the
principalshareholder,buteven so thedefendantrefusedtocontinuewith
the supplies.
It was heldthatthe contract, being of personal nature inthatit involved
the personalcreditworthinessof the buyeras to the mode of payment, was
notcapable of being assigned.
The Central Governmentassigneda piece of land to its own corporate
undertaking with rights, liberties andprivilegesone of which was exemp
tion from land revenue. It was heldthatthe assignee became entitled to the
exemptionas asuccessorininterestoftheCentralGovernment.^"
Unilateralcancellationofsale deed
It isnotpossiblefor thevendortomakea deed ofcancellationof the sale
deed made and registered earlier and get it registered, evenif the ground is
thatfullconsideration was not received by the vendor. Such deed amounts
to rescission of thecontract.Itwouldrequirean order of thecourtunder
Section31 of the Specific Relief Act,1963.^^^
313. QuotingSalmond'sJurisprudence(12th Edn) 412, para 108, under the heading
"Proprietoryrights".SeeDarlingtonBoroughCouncilvWiltshierNorthernLtd,(1995)
1WLR68 (CA), the assignee's right to recover damages for breach ofcontractwould be as
extensive as that of the assignor. The case involved the assignment of rights in a building
underconstructionandthe-actionby the assigneevv^asfor defectiveconstruction.
314.(1906)2 KB604:(1906)75 LJ KB 873 (CA).
315. SAILVStateofM.P., (1999) 4 SCC 76: AIR 1999 SC 1630.
316.E.R.KalavianvInspectorGeneralofRegistration,AIR 2010Mad18;G.D.Subramaniam
VSub-Registrar,Sidco Nagar, (2009) 1 CTC 709, a salecannotbeunilaterallycancelled,
registrationof any suchcancellationdeed was held liable to be set aside.https://t.me/LawCollegeNotes_Stuffs

572. 432Chapter8DischargeofContract [S.61]
^Effectandformalitiesofassignment
Consideration
In thefirstplace,anassignmentrequiressomeconsiderationbetweenthe
assignorandassignee.In theabsenceofanyconsiderationbetweenthem,
theassignmentwill berevocablebytheassignor.^^^Butwhen anassignment
made as a gift hasbeencompletedbyfulfillingtheessentialformalities,it
cannot be revoked. This is true of all gifts. This is borne out by the follow
ingstatementofTurner "In order tomakeavoluntarysettlement
valid andeffectual,the settlor must havedoneeverything,whichaccording
to the nature of thepropertycomprised in the settlement, was necessary to
be done in order to transfer the property and render the settlement binding
uponhim."
Subjecttoequities
Secondly,the title of theassigneeshall be subjectto allequitiesthat exist
at the time between the assignor andassignee,or that arise up to the time
that the notice of assignment isgivento thedebtor.^^'Where, for example,
theassignorhadinducedbyfraud the other party to contractwith him, the
other party willhavethesameright ofrescissionagainst theassigneeas he
would have had against theassignor.But theassigneewill not be affected
by any equity of personal nature between theassignorandassignee.For
example,the right to claimdamagesfor the fraud committedbythe assignor
cannotbe usedtodefeat theirightof theassignee.^^°
Noticeofassignment
Thirdly, notice of assignmentshould be givento the debtor. Sucha notice
isusefulfromseveralpoints ofview.It binds the debtor. In theabsenceof a
notice, the debtor can make payment to the assignor himself andthatwill
be a good discharge. Another advantage of giving notice is that the assignee
will not beaffectedby any equitythat may arisebetweentheassignorand
the debtor after notice. Notice is alsoimportantfrom the point of view of
priorities.If, forexample,theassignormakesmore than oneassignmentsof
the same claim, the assignee whogivesnotice of the assignment to him first
in point of time will have priority over the other, even if the assignment to
himcamelaterintime.
317.GleggVBromley,(1912) 3 KB 474. SeeParkerJ at p. 491.
318.MiloryvLord,(1862)4 De GF & J 264, 274: (1862) 31 LJ Ch 798; 7 LT 178.
319. For example, after an effective assignment, a garnishee order issue against the assignor was
held to be not effective on abankbalance whichalreadystoodassigned to the assignee. Tan
WayBoom vOmarMarican Holdings, (1990) 2CurrLJ 700 High Court, Penang.
320.StoddartvUnionTrustLtd,(1912)1 KB 181(CA).https://t.me/LawCollegeNotes_Stuffs

573. [S.62] Dischargebyagreement433
DISCHARGE BYAGREEMENT
Contractswhich need not beperformed
Section 62 providesthat"if thepartiesto acontractagree tosubstitute
a newcontractfor it, or to rescind or alter it, the originalcontractneednot
beperformed".
S.62.Effectofnovation,rescissionandalterationofcontract.— Ifthe
partiesto acontractagreetosubstituteanewcontractfor it, ortorescindor
alterit,theoriginalcontractneednotbeperformed.
Illustrations
{a)Aowesmoneyto Bunderacontract.It isagreedbetweenA,Bar\dCthatBshallthence
forthacceptC as hisdebtor,insteadof A.The olddebtofyAto Bisatanend,andanew
debtfromCtoShasbeencontracted.
(fa)A owes810,000rupees.yAentersinto anagreementwith Band gives Bamortgageof
his(/A's)estatefor 5000rupeesinplaceofthedebtof 10,000rupees.This is anewcon
tractandextinguishestheold.
(c) Aowes61000rupeesunderacontract.BowesC1000rupees.Borders/\tocreditCwith
1000rupeesin hisbooks,butCdoesnotassenttotheagreement.B stillowesC1000
rupees,andnonewcontracthasbeenenteredinto.
Novation
Whenthepartiesto acontractagree tosubstitutetheexistingcontract
withanewcontract,thatiscallednovation.^^^Inthewell-knowncase of
ScurfyJardine^^^LordSelborneexplainedthemeaningandeffect of nova
tionin thefollowingwords:
...therebeing acontractin existence, some newcontractissubstituted
for it eitherbetweenthe samepartiesorbetweendifferentparties,the
321.Wherethepartieschangeonly apartof thecontractandthe newcontractis soinconsistent
with theexistingcontractthattheycannotstandtogether,there is no goodnovation.Lata
ConstructionvRamesijchandraRamniklal,(2000)1 SCC586:AIR2000SC380.United
BankofIndiavRamdasMahadeoPrashad,(2004)1 SCC 252: (2004) 1 CLJ 147, a mem
orandumofunderstandingdoes notamounttonovationasenvisagedunderthissection.
Therespondentshadalreadycommitteda 'breach ofcontract,they couldhardlyseek to
enforcethecontract.CITIBankN.A.vStandardCharteredBank,(2004)1 SCC 12:AIR
2003 SC4630:(2003) 117 Comp Cas 554,novationcannotbebroughtaboutunilaterally.
It requiresconsentofbothparties.There was no evidence of anytripartitearrangement
underwhichthethirdpartywas totakeoverliability.The case wasrathergovernedby S. 63
under which a promisee canunilaterallyaccept an alteredpositionanddischargetheother
partyfrom liability. Thepartyhad accepteddishonouredbondsknowinglyandvoluntarily.
VijaykumarKhandre(Dr) vPrakashKhandre,AIR2002Kant 145, areturnedcandidate
was alicensedcontractorandwasholdingseveralcontractswiththeGovernment.Hetried
tohandthem over toothersbut atripartiteagreementcould not be proved. Hencedisquali
ficationremained.JayKarnatakaNewsPrintersLtdvSyndicateBank, (2001) 2 BC 27 (Kar
DB),substitutionof newcontractfor the old is the very essence ofnovation,meredepositof
amountby athirdpartytowardsliquidationof theoutstandingamountcannotconstitute
novationbetween lender andborrower.PolymatIndia(P)LtdvNationalInsuranceCo Ltd,
(2005) 9 SCC 174: AIR2005SC286,terms ofcontractreduced towriting,could not be
changedwithoutmutual agreement, amendments in the approvedproposalnot agreed to by
theinsurer,ineffective.
322.(1882)LR7 AC345,351.https://t.me/LawCollegeNotes_Stuffs

574. 434 Chapter 8 Discharge of Contract [S.62]
considerationmutuallybeing the discharge of the oldcontract.A com
mon instance of it in partnership cases is where upon the dissolution of a
partnership the persons who are goingto continue inbusinessagree and
undertakeas between themselves and theretiringpartner,thatthey will
assume and discharge the whole liabilities of the business, usually taking
over the assets; and if, inthatcase, they give notice ofthatarrangement
to a creditor, and ask for his accession to it, there becomes acontract
betweenthecreditorwhoaccedesandthenewfirmtotheeffectthat
he will accept their liability instead of the old liability, and on the other
hand,thatthey promise to pay him forthatconsideration.
Hencenovationis oftwokinds,namely:
(1)anovationinvolving change ofparties;and
(2)a novation involvingsubstitutionof a newcontractin place of the old.
1. Changeofparties
The firstillustrationto Section 62 is a case ofnovationbychangeof
parties. If A is a debtor and the creditor agrees to acceptBin his place as
the debtor, the originalcontractbetween the creditor and A is at anend.^^^
A novation of this kind usually takes place when a newpartnerisadmitted
into an existing firm or when apartnerretires from afirmand the new firm
asconstitutedafteradmissionorretirementaccepts theliabilitiesof the old
firm and this is approved by the persons dealing with the firm.Concurrence
of all the parties isnecessary.Allthe parties to the earliercontracthave to
give their consent. One or more of the parties to the novatedcontractmust
be new persons whoundertakethe responsibility under the newcontract.^^^
Novationandrescission
Anorderofarrestof thesupplier'svessel was passed in anAdmiralty
suit. Theplaintiffmade an out ofcourtsettlementwiththe owner of the
vessel.Under a subsequent agreement, the debtor agreed to pay not only the
amountclaimedinthesuitbutcostsandinterestalso.Thepaymentunder
theagreementwasguaranteedby athirdparty.It was heldthattheexistence
323.ShrikantvVasantrao,(2006)2 SCC 682: AIR2006SC 918,afteranelection,acontractof
thereturnedcandidatewiththe State wastransferredto astatutorycorporation,contract
withStateended.
324.BhaskaruniYenkatanarayanavBhaskaruniLakshmibayamma,AIR1929Mad309.Godan
NamboothiripadvKeralaFinancialCorpn,AIR1998Ker 31,hire-purchase,defaultin pay
ment,seller seized the vehicle, athirdpersonundertookto pay theunpaidbalanceandgot
the vehiclereleased,theoriginaldebtorceasedto be thedebtor.SBI v T. R.Seethaverma,
(1994) 2 KLT 18:AIR1995Ker 31, thecourthas to seenotonlywhetherthenewdebtorhas
consentedtoassumeliabilitybut alsowhetherthecreditorhasacceptedtheliabilityof the
newdebtor.
325.SasidaranvIndiaCementsCapitalsLtd,(2011) 1MWN(Civil) 561,promisewasfoundto
benotapartyto the newagreement,hence nonovation.ColgatePalmoliveIndiaLtdv T.J.
George,(2011) 1LW732 (Mad),afternovation,thepartiescannotfall backuponthe old
contract.Damageswere not to beawardedon thetermsof the oldagreement.https://t.me/LawCollegeNotes_Stuffs

575. [S.62] Dischargebyagreement435
causeofactionbecamesubstitutedbyanewcausearisingout of theagree
ment. Admiralty claim was no longer maintainable. Thevesselbecame the
property of the defendant free from liability to the plaintiff.
2.Substitutionofnewagreement
When the parties to a contract agree to substitute a new contract for it,
the original contract isdischargedand need not be performed. It isneces
sary for theapplicationof thisprinciplethat the original contract must be
subsistingandunbroken.Thesubstitutionof a newcontract is notpossible
after there has beena breachof the originalcontract. An earlyillustrationis
ManohurKoyalvThakurDasNaskar}^'^
Theplaintiffsued torecoverthe sum of Rs 1173 due on abond.After
the due date of the bond, the plaintiff agreed to acceptRs400in cash and
a new bond of Rs700 payable by instalments. Subsequentlythe defendant
neithergaveRs400northebond.
The plaintiff thereupon sued him on the original bond. The Calcutta
High Court held that the original contract was discharged, not by novation,
but by breach, and theplaintiffwas entitled to sue for the breach of the
originalcontract.
Another illustration is provided by a case in which an engineering con
tract for extraction of coal became affected by major slides leading to stop
page.Anotherarea wasallottedto thepetitionerin place of the affected
area. Heaccepteditthoughit was lessthantheoriginalallottedarea. The
court said that originalcontractbecame discharged. Tenders could validly-
beinvitedforthatarea.^^®
The petitioner was appointed in response to an advertisement but placed
at a lower scalethanthatmentioned in the advertisement. He accepted his
placement. He then claimed the promised pay scale. He was not allowed to
do so. The principle of novation applied. Theappointmentand acceptance
at the lower scalesubstitutedtheoriginalproposedscale.
Acontractor'sbill was lyingunpaidforabout4Viyears. Forthatreasonhe
wasexposedto huge lossesandgraveeconomicduress. Hesettledhisclaim
under amemorandumofunderstandingunder which he acceptedpayment
in full and finalsatisfaction.Hethenraised adisputeandsoughtarbitration
forclaimingintereston latepayment.It was heldthatthememorandum
ofunderstandinghadputan end to theoriginalcontractandthereforethe
contractorcould not claimarbitrationin terms of theoriginalcontract.^^°
326.MJRSteels (?)LtdvChrisomarCorpn,AIR2007NOC234(Cal)(DB).
327.ILR(1887-88)15Cal319.
328.BGRMining&Infra(P)LtdvSingareniCollieriesCoLtd,AIR2012AP 71.
329.NagendraKumarBrijrajSinghvHindustanSaltsLtd,(2001) 1CCD532.
330.LloydsSteelIndustriesLtdvOil&NaturalGasCorpnLtd,AIR1997Bom 337.The
courtfollowedDamodarValleyCorpnv K.K. Kar, (1974) 1 SCC 141:AIR1974SC158;
UnionofIndiavKishorilalGupta& Bros, AIR 1959 SC 1362: (1960) 1 SCR 493; VO
ChidambaranarPortTrustv PSASicalTerminalsLtd,2015SCCOnLineMad2905:AIRhttps://t.me/LawCollegeNotes_Stuffs

576. 436 Chapter8Dischargeof Contract [S.62]
InthewordsoftheSupremeCourtinLataConstructionvRameshchandra
RamniklaP^'^asspokenby S.SaghirAhmadJ;
"One of theessentialrequirementsofnovation,ascontemplatedby
Section 62, is that there should be completesubstitution of a new contract
inplaceoftheold.Itisinthatsituationthattheoriginalcontractneednot
beperformed.Substitutionof a new contract inplaceof the old contract
which would have the effect of rescinding or completelyaltering the terms
of theoriginalcontracthas to be byagreementbetweenthe parties.The
substitutedcontractshouldrescindor alter orextinguishthe previous
contract.But ifthetermsof thetwocontractsareinconsistentandthey
cannot stand together, thesubsequentcontract cannot be said to be in
substitutionoftheearliercontract."
Thecontractin the case was to provide a flat. A subsequentcontract
betweenthe partiesprovidedthat the rights of thebuyerunder the original
contract would be extinguished only on payment by him of the stipulated
amount. He failedto make the payment. It was held that he could invokethe
terms of the originalcontractand claim before theConsumerCommission
thatthere was a deficiency in service on thepartof the builder.
It isfurther necessary that the new agreement should be vahd and enforce
able.Thus, where an existing mortgage was replaced by a new agreement of
mortgage,the newagreementbeingnotenforceablefor want ofregistration,
it was held that the parties were still bound by the originalmortgage."^In a
contract to provide land free of encumbrances for a housing project, the site
.had to begivenup becauseof the inability to removehutment occupation of
thelandand the rateshadto beincreasedbecause of theescalatedprice of
the new site, the Bombay HighCourtheldthatitamountedto novating the
oldwithanewcontract.
It has also been pointed out in a judgment of the Calcutta HighCourt
that"Section 62 requires an agreement which necessarily implies consid
eration".^^'*Itisalsoobviousthattherecannotbeunilateralalterationofa
2015 Mad 175, thecontractprovided that the place ofarbitrationwould be at Tuticorin.
Thearbitratorwith theconsentof thepartiesdecided to sit atChennai.Theagreementwas
not altered. Held, the place for questioning the award was to be Tuticorin, proceedings at
Chennaiwere of noconsequence.
331. (2000) 1see586: AIR2000Se380 at p. 383.McdermottInternationalInc vBurn
StandardCo Ltd, (2005) 10See353,tripartiteagreementbetween head,intermediateand
sub-contractor,underwhich theintermediatecontractor,at theinstanceof the headcontrac
tor, varied the terms,sub-contractorcomplied with thealteredtermswithoutprotest,this
amountedtoacceptanceby silence.
332. See for example,ShankerLaiDamodharvAmbalalAjaipal, AIR1946Nag 260.
333.AndheriBridge View CoopHousingSociety vKrishnakantAnandraoDeo, AIR 1991
Bom129.
334. UnionofIndia v KishoriLaiGupta & Bros, AIR 1953Cal642, 644,contractwhich is
terminatedby agreement, puts an end to itsarbitrationclauses also.DadriCement Co v
BirdandCo (P) Ltd, AIR 1974 Del223,a Division Bench heldthatthepartiesbyentering
into the newarrangementintended tosubstitutethe originalcontractof sale bysubstituted
arrangement consisting of the agreement, the deed of guarantee, the deed of pledge and thehttps://t.me/LawCollegeNotes_Stuffs

577. [S. 62] Dischargebyagreement437
contract.Wherethepartieshadfixedbymutualagreementthe rates ofhir
ing a cinema hall, one ofthemwas not allowedsubsequentlyto alterthem
unilaterally.T.V.operators,who were beingsubjectedto revisedrates,
were heldboundto pay new rates at theexpiryof fiveyearsperiodforwhich
thesanctionwasalreadyinexistence.^^^
In analreadyconcludedconstructioncontract,requiringthat10 per cent
would be paid to thecontractorin advance subject to theconditionthathe
wouldsubmitabankguarantee,this being not there in theoriginalcontract,
was held to benotsuch aconditionaswouldalterthe verynatureof the
originalcontract.^^^
Analterationof the entire design of the rail overbridge was held to be a
substantialalterationof theplanitselfamountingtoconvertingthe same
into a completely new project. Such analterationcould not fall into the
increaseor decrease clause of thecontract.It waswrongon thepartof the
government to invite new tenders at the cost of the contractor. The govern
ment was ordered to pay for the work already done by thecontractor.
It was opined by their Lordships of the Privy Council as far back as the
year 1893 in Commercial Bank of Tasmania vJones^^^that "novation of
debt operates as a complete release of the original debtor and cannot be
construedasamerecovenantnottosuehim."
Where there was a provision in the originalcontractgiving parties the
option to terminate the contract and the parties by means of a supplemen
tary contract agreed to postpone the termination, it was held that this did
notamounttonovationofthecontract.^'"'
irrevocablepower of attorney. The substitution operated to bring about novation of the orig
inal contract and that the original contract of sale becameinoperativeandunenforceable.
335. Magnum Films v Golcha Properties (Pj Ltd,AIR1984 Del 162. A settlement under S.
62 puts an end to the whole contractincludingarbitrationclauses.VipinbhaiR. Parekh
VWesternRly,AIR 1984 Guj 41."Wherethe original agreement containing an arbitration
clause was substituted by a new agreement, the arbitration clause in the earlier agreement
was not allowed to be resorted to.VisakhapatnamPortTract v UmaConstructions,(1988)
25 Reports 126(AP).Where the suitor agreedto acceptlesssum thanclaimedby him, the
compromisebrought an end to the original contract andwhateverwas due under it includ
inginterest.Central Bank of India vV.Guruviah Naidu, AIR 1992 Mad 139. Hindustan
Petroleum Corpn v Universityof Hyderabad, AIR 2003 NOC 448(AP),contract in writing,
novationwould have to be inwriting,meredisclaimernot sufficient to provenovation.In
this case, the termsstated that pricesruling on the date ofdeliverywould beapplicable.Seller
demandedfull paymentwhich was made,deliveryto be made in 34 months which could not
be done. The buyeragreed to accept latedeliveries.The court said that he was bound to pay
pricesprevailingon actual dates ofdelivery.Therewas a pricehike in themeantime.
336.SubramanianvKeralaSEE,(2003)2 KLT 38.
337.DeviEnterprisesv State ofUP,AIR 2009 NOC1213(All).ShriramEngg Co v State of
Chattisgarh,AIR 2015 Chh 183, thecontractorperformedonly theprofitablepart of the
contract and left unfinished the part which was lessprofitable.Rescissionof contract after
dueinformationto thecontractorwas held to beproper.
338. Union of India v Tantia Construction (P) Ltd,(2011)5 SCC697.He could not have been
required to do a new project at old rates.
339.1893AC313(PC).
340.UnikolBottlersLtdvDhillonKoolDrinks,AIR 1995 Del 25.https://t.me/LawCollegeNotes_Stuffs

578. 438Chapter8DischargeofContract [S. 67]
Where the rights under the oldcontractare kept alive even after the sec
ond agreement, then there is nosubstitutionof thecontractand hence no
novation.^''^
In a supplycontract,an escalation of price, orreductioninquantityof
supply order, orextensionof date of supply has been held as notamounting
tonovation.It has been soreiteratedby theSupremeCourt.^"'^
No effectuponarbitrationclause
Wherethesignatureto asettlementagreementwereprocuredby coer
cion, it was heldthatthearbitrationclause in theoriginalagreementdidnot
becomedischarged.Thedisputewas of anaturewhichwasarbitrableunder
theoriginalcontract.It made no differencethatasettlementagreementwas
enteredintobetweentheparties.
S. 67.Effectofneglectofpromiseetoaffordpromisorreasonable
facilitiesforperformance.— Ifanypromiseeneglectsor refuses to affordthe
promisorreasonablefacilities fortheperformanceof hispromise,thepromi
sor isexcusedby suchneglector refusal as to anynon-performancecaused
thereby.
Illustrations
Acontractswith B torepairB'shouse.
Bneglectsor refuses topointoutto Atheplaces in which hishouserequiresrepair.
A isexcusedforthenon-performanceofthecontract,if it iscausedby suchneglector
refusal.
Interdependentpromises
Where promises are interdependent sothatonepartycannotperform
without cooperation of the other, if the latter does not provide reasona
blefacilitiesfor performance, the former is excused from his obligation to
perform. The illustration appended to the section is based upon Makin v
Watkinson.^'^'*AnotherillustrationisElianvTopp?"^^
Aninfantwas placed by hisfatherunderamastertolearnhisthree
trades.Subsequentlythe mastergaveup one of his trades. The apprentice
gave up histrainingforthatreason.
Themastersuedforbreach.Thecourtcametotheconclusionthatthe
contractwas on the basis ofpickingupthreetradesandtheabandonment
of one would notleaveit to be the samecontract. "If the master is not ready
to teach in the very trade which he has stipulated to teach, the apprentice is
not boundtoserve.If, on the otherhand, theapprenticehad leftthe training
341.H.R.BasvarajvCanaraBank,(2010) 12 SCC458.
342. Purbanchal Cables & Conductors (P) Ltd v Assam SEB,(2012)7 SCC 462:(2012)4 SCC
(Civ)245.
343. S.K.SharmavUnionofIndia,AIR2009NOC2057(Del).
344.(1870)LR6Exch25.
345.(1851)6Ex424.https://t.me/LawCollegeNotes_Stuffs

579. [S-63] Remissionof performance 439
without anyjustification,the master would be free from any further obli
gation.It isevidentthat the masterwouldnot beliablefor notteachingthe
apprentice if the apprentice will not betaught."^'*^
Rescissionandrestoration
Thesectionalsopermitsthepartiestorescindtheircontract.TheSupreme
Courtallowedthepartiestorescindunderthis section acontractfor sale
of forestcoupesbecauseof the substantial variance betweenthe particulars
ofquantityand quality of timber held out at the time of the auction and the
timer actuallyavailable.The contractor was allowed refund of his deposit.
But nocompensation,wasallowedto him for his lossbecausethecontract
contained a clause against compensation in such circumstances.
Where anoldcontract is rescinded and is replaced by a new one, the old
onewill notreviveonlyfor the reason that there has beena failureto keepthe
new promise.The parties may,however,by mutual consent, restore the orig
inal and then the original willreviveandbecomebinding on the parties.
Where the relationship between the parties was purelycontractualand
whollynon-statutoryand the parties had by agreement ended their contrac
tual obligations long back, it was heldthatif there was any dissatisfaction
about the matter, it could have been resolved by reopening the settlement.
WritjurisdictionunderArticle226of theConstitutionwasnotavailablein
suchmatters.^'*®
REMISSIONOFPERFORMANCE
Section 63 allows apartyto acontractto dispensewiththeperformance
of thecontractby the other party, or to extend the time for performance or
to accept anyothersatisfactioninsteadofperformance.
S.63.Promiseemaydispensewithorremitperformanceofprom
ise.—Everypromiseemaydispensewith or remit, wholly or inpart,the
performanceofthepromisemadeto him, or mayextendthetimeforsuchper
formanceor mayacceptinsteadof it anysatisfactionwhich hethinksfit.
Illustrations
(fl)Apromisestopaintapicturefor B. Bafterwardsforbidshim todoso. A is nolonger
boundtoperformthepromise.
[b]AowesB5000rupees.A pays to BandBacceptsInsatisfactionofthewholedebt,2000
rupeespaidatthetimeandplaceat whichthe5000rupeeswerepayable.Thewhole
debtisdischarged.
346.RaymondvMinton,(1866) LR 1Exch244.MunicipalCorpnofChandigarhvShantikunj
Investment(P)Ltd,(2006)4 SCC 109: AIR2006SC1270,allotmentofcommercialplots,
instalmentdelayed,chargeofinterestandpenaltyasprovidedin theconditionsofallotment,
valid.Therewas norequirementthatallamenitiesshouldbe firstprovidedbeforedemanding
instalments.
347. SyedIsrarMasoodvStateofM.P.,(1981) 4 SCC 289: AIR1381SC2010.
348.R.N.KumarvR.K.Soral,(1988)2SCC508,511:AIR1988SC1205.
349.BirenPoddarvSBI,(1995) 2 BLJR912(Pat).https://t.me/LawCollegeNotes_Stuffs

580. 440Chapter8DischargeofContract [S.63]
(c)Aowese5000rupees.CpaystoB1000rupees,andBacceptsthem, insatisfactionofhis
claimonA.Thispayment isa discharge of the whole claim.
(d)Aowes 6, under a contract, a sum of money, the amount of which has not been ascer
tained.A,without ascertaining the amount gives to 6, andB,in satisfaction thereof,
acceptsthe sum of 2000 rupees.Thisis adischargeof the whole debt, whatever may
be itsamount,(e)Aowes B2000 rupees and isalso indebted to other creditors.Amakes
an arrangementwith hiscreditors,includingB,to paythem a^^"[composition]of eight
annas in the rupee upon their respective demands. Payment to Bof 1000 rupees is a
dischargeof S'sdemand.
Theeffectof theprovisionis that the party who has the right todemand
theperformanceof acontractmay—
(1)remit or dispense with it, wholly or inpart;or
(2)extend the time forperformance;or
(3)accept any other satisfaction instead of performance.
Acceptanceof less sum
Theacceptanceof alesssum of money where more is due, is a good
dischargeof the whole of theliability.TheSupremeCourtdecisionin
Kapurchand Godha v Mir NatvabHimayatalikhanAzamjaP^^illustrates
this:
The liability was abovetwenty-sevenlakhs of rupees. Hyderabad
having been taken over, a committee was appointed to clear matters. It
offeredtwenty lakhs to the creditor in full satisfaction and he accepted it.
Afterwardsthecreditorsuedthedebtorforthebalance.
S.K. Das J heldthatthe facts of the case are completely covered by
Section 63 andillustration(c)thereof. Theappellanthaving accepted the
payment in full satisfaction of his claim was not entitled to sue. The court
also relied upon Section 41 which providesthatwhen a promisee accepts
performance from a third person, he cannot afterwards sue the promisor.
Similarly,inHariChandMadanGopalv StateofPunjab^"the Supreme
Courtheld:"TheGovernmenthaddecidedtorecoveronly 40percentand
no more.TheGovernment'sdecisionwouldamounttoremittingapartof
the debt due by the appellants. Therefore, theGovernmentcannotask to
recovermorethan40percent."
There must beproofthatless sum has been accepted. Where the rail
ways sent a cheque for anamountlessthanwhatwas claimed by aparty
and,thoughthepartyretainedthe cheque, he did not issue any receiptthat
he was accepting it in full and finalsatisfactionand neither did he stop
^I—
CASEPILOT
350. This word wassubstitutedfor the word"compensation"by S. 2 and Sch. II of theAmending
Act,1891 (XII of1891).
351. Thewholethingishnkedwithpromisee'sconduct.CITvShantilal(P)Ltd,(1983) 3 SCC
561:AIR1983SC952..
352.AIR1963SC250:(1963)2SCR168.
353.(1973)1SCC204:AIR1973SC381.https://t.me/LawCollegeNotes_Stuffs

581. [S. 63] Remissionofperformance441
pursuinghismatter,it was heldthattherewas no evidence of anagreement
to acceptlesssum.^^"'
Acceptanceofpaymentunderprotestandadditionalwork
Thecontractoraccepted theamountmentionedin the final billunderpro
test. Thecontractorcompanyhadperformedadditionalworkon the direc
tions of theDepartment.Thecourtsaidthatthecontractorwasentitledto
additionalamount(or by way of damages) as per the terms of theagreement.
The mere factthatthecontractorhadacceptedthe final bill, it couldnotbe
deprived of its right to claimdamagesfor theadditionalworkwhichwas a
provablefact.^"
Waiver
To "dispense with" meansthatthepartyentitled to claimperformance
may waive it. The SupremeCourthas already laiddown^^®thatwaiver is the
abandonmentof arightwhichnormallyeverybody is atlibertyto waive. "A
waiver isnothingunless itamountsto a release. It signifiesnothingmore
thananintentionnotto insistupontheright."^^^
An extension of time forperformancebymutualconsent is not the same
thing as a waiver. Thisdistinctionwas emphasised by the SupremeCourtin
M. Sham Singh vStateofMysore.^^^
M was granted scholarship by the State for higher studies in the United
States upon a bond that he would serve the State on his return, provided
thatthe State offered him ajobwithin six months of hisreturn,failing
whichthebondwas to betakenaswaived.If M failed tocomplyhe
was torefundthe scholarship money. On his request the State agreed to
anextensionof his stay in the States forpracticaltrainingfor one year.
During this year he came to India for a domestic visit, but was allowed
by the State to rejoin his practical training. On completion of his training
he joinedservicein the UnitedStatesand the State claimedrefund of the
scholarshipmoney.He pleaded waiver on thepartof the State.
ThecourtheldthattherewasnowaiverwhatsoeverandMwasliableto
refund. The extension was mutually agreed upon and there was no conduct
on thepartof the Stateshowinganintentionto waive.
354. UnionofIndiavGangaramBhagwandas,AIR1977MP 215.
355. R.L. Kalathia & Co v State of Gujarat,(2011)2 SCC 400: AIR 2011 SC 754;National
Insurance Co Ltd v Boghara Polyfab (P)Ltd,-{2009)1 SCC 267: AIR 2009 SC 170, appli
cation for arbitration cannot be rejected on the ground that a settlement agreement or dis
chargevoucherwasexecutedbythe claimantespeciallywhenhewasdisputingvalidityof the
agreement.Anundatedreceiptwhichwasobtainedin full andfinalsettlementascondition
forreleasingthe claimin return for a lessoramountwas heldto be unfair andillegal.
356.WamanShrinivasKini vRatilalBhagwandas& Co,AIR1959 SC 689.
357. Jagad Bandhu Chatterjee vNilimaRani,(1969)3 SCC 445, 446:(1970)2 SCR 925, 926.
358.(1973) 2 SCC303:AIR1972SC2440.https://t.me/LawCollegeNotes_Stuffs

582. 442Chapter8DischargeofContract [S. 63]
Thepartywho has waivedcompUancewithaparticularrequirementmay
incircumstancesand by givingreasonablenoticewithdrawhis waiver.The
Courtof Appealrecognisedthis in CharlesRichardsLtdvOppenheim?^^
Thecontractwas to supply a car chassisandto build a body on it
withinsevenmonths,time being of the essence of thecontract.The bod
yworkwasentrustedto athirdpersonwho was totakehisinstructions
directlyfromthe buyer.Thecontractorcouldnotdeliverwithintimeand
the buyerliberallyextendedtimeuntilafterabouttwomonthshe gave
noticethatif thecarwasnotdeliveredwithin4weeks,hewouldbeuna
ble toacceptit.Deliverywasofferedstillthreemonthsafterthis.
It was heldthatthe buyerhadtherighttomaketimeas of the essence
again by givingreasonable noticeandthatthe notice given by him was rea
sonable.Hehadrightfullyrescindedthecontractandwasentitledtodam
ages forbreach.
Such notice must in all thecircumstancesof the case give areasonable
opportunityto theotherpartytoperformhispartof thecontract.If time is
nototherwiseofanessenceofthecontract,thenoticecannotmakeit so. A
partycannotunilaterallyamendthetermsof thecontract.^*""
Waiver is indeed an instance of theapplicationof the principle of promis
sory estoppel. In the words of LordDenning:^""Theprinciple of waiver is
simply this: If oneparty,by hisconduct,leadsanotherto believethatstrict
rights arising under thecontractwill not be insisted upon, intendingthatthe
other should act on that belief,and he does act on it, then thefirstpartywill
notafterwardsbe allowed to insist on thestrictlegal rights when it would
be inequitable for him to do so. There may be no consideration moving from
him whobenefitsby thewaiver.There may be no detriment to him by acting
on it.Theremay benothinginwriting.Nevertheless,the one who waives
his strict rights cannot afterwards insist on them. His strict rights are at any
rate suspended so long as the waiver lasts. He may, on occasion be able to
revert to his strict legal rights for the future by giving reasonable notice in
thatbehalf, orotherwisemakingitplainby hisconductthathe willthere
after insist upon them. But there are cases where no withdrawal is possible.
It may be too late to withdraw; or itcannotbe donewithoutinjustice to the
other party. In that caseheis bound by his waiver. He will not beallovi^ed
to revert to hisstrictlegal rights. He can only enforce themsubjectto the
waiverhehasmade."
"Instancesof these principles are ready tohandoncontractsfor the sale
of goods; A seller may, by his conduct, lead the buyer tobelievethat he is
not insisting on the stipulated time forexercisinganoption.^^^A buyer may
byrequestingdelivery,leadthesellertobelievethat he is not insistingon the
359. (1950) 1 KB 616 (CA).
360.BehzadivShaftesburyHotels Ltd, 1992 Ch 1: (1991) 2 WLR 1251 (CA).
361. Allan W.J. & Co Ltd v ElNasrExport&ImportCo, (1972) 2 QB 189: (1972) 2 WLR800.
362.BurnervMoore,(1904)1Ch305.https://t.me/LawCollegeNotes_Stuffs

583. [S.63] Remissionofperformance443
contractualtime for delivery.^"A sellermay accept a less sum for his goods
than the contracted price, thus, inducing the buyer tobelievethathe will not
enforce payment of the balance. In none of these cases does thepartywho
acts on the belief suffer anydetriment.It isnotadetriment,but abenefit
to him, to have an extension of time or to pay less, or as the case may be.
Neverthelesshehasconductedhisaffairsonthebasisthathehasthatbene
fit and itwouldnot beequitablenow to deprive him of it."
In this case, acontractfor sale ofgoodscontainedastipulationforbank
creditfor the price in acertainmanner.Rut the offer made by theconfirming
bankdidnotcomply, in severalrespects,withwhatthe sellers wereentitled
torequire.Forexample,theconfirmingbank'soffer was intermsofsterling
currency. The sellers accepted it bysendingtheirinvoices anddraftsetc.
Afterwardsthesterlingwas devalued andTanzaniancurrencywasnotand
the sellerwantedto enforce hisrightas topaymentinTanzaniancurrency.
But he wasnotallowedto do so.MegawLJ said:"Itwasnotaconcession
for a specificperiodof time or onewhichthe seller couldoperatefor as long
as they chose andthereafterunilaterallyabrogate,any morethanthe buyers
wouldhavebeenentitledtoalterthetermsofthecreditortohavedemanded
arefundfrom the sellers if,afterhiscredithad beenpartlyused, the relative
values of thecurrencieshadchangedin theoppositeway."^^'*
Extensionoftime
Section 63 also permits apartyto extend time forperformance.The
SupremeCourt has pointed out inKeshavlalLallubhaiPatelvLalbhai
Tnkumlal thatthe promiseecannotbyunilateralactextendthe
time of performance of his own accord and for his own benefit. Consent of
theotherpartyisnecessary.
The Privy Council held, in a case, that any of these things may be done
without agreement and, therefore, also withoutconsideration.^^^The com
monestillustrationis the release of a debt. Acreditormay accept a less
sum of moneythanwhat is due, in satisfaction of the whole debt. Another
363.CharlesRichardsLtdvOppenheim,(1950) 1 KB 616 (CA).
364. An auction sale of scrap held by the Railway Administration was subsequently revoked and
the auction purchaser accepted refund of his deposit. Held, acquiescence and no further
right. Mohd Usman v Union of India, AIR 1982 Raj 100.CITIBank N.A. v Standard
CharteredBank,(2004) 1 SCC 12: AIR2003SC4630:(2003) 117CompCas 554,accept
ance ofalternativescheme ofinvestment,binding. E.A.Thirugnanamv V.P.Rajagopal,
(2006) 1 CTC 809 (Mad), the purchaser of property sought refund of price which meant that
he had given up his right to recover property.BhagawatiOxygen Ltd vHindustanCopper
Ltd, (2005) 6see462;AIR 2005 SC 2071, continued acceptance ofsub-standardoxygen
and short supply without protest amounted to waiver of the right to insist upon original
terms.
365.AIR1958SC512:1959SCR213.
366. FirmChhunnaMaiRamNathv Firm MoolChandRamBhagat,(1927-28)55lA154:AIR
1928 PC 99, 102, overruling the decision of BombayHigh Court in Abaji Sitaram Modak v
TrimbakMunicipality,ILR(1904) 28 Bom 66. Approved by the Supreme Court in the case
cited in M. Sham Singh vStateofMysore, (1973) 2 SCC 303: AIR1972SC2440.https://t.me/LawCollegeNotes_Stuffs

584. 444Chapter8DischargeofContract [S. 63]
illustrationis the decision of theMadrasHighCourtinMathewHenry
AbrahamvLodge''Goodwiir-.^"
Theplaintiffwas the holder of apromissorynoteexecutedin his
favour by thedefendants.He agreed toabandonhis claim if the"Lodge
Goodwill"whichwasburntdownwasresuscitated.Thebuildingwas
completed.
Hissubsequentclaimuponthepromissorynote was dismissed. One of
theimportantquestionswaswhetheraconditionalremissionof thiskind
waswithinthe scope of the section. Thecourtsaid:"Theillustrations
appendedto thesectionare nodoubtcases inwhichperformanceis dis
pensedwithunconditionally.But thewordsof thesectionitself are wide
enoughto coverconditionalreleases, andthereis noreasontothinkthatthe
IndianLegislaturecontemplatedadepartureon thispointfrom the English
lawunderwhicha releasecontingenton thehappeningof afutureevent is
a good release. ThepointonwhichSection 63 differs from the English law
isthatit does notrequireconsiderationtosupporta release whileunder
English law a releasewithoutconsiderationis anudumpactum."
The same difference between English andIndianlaws wasstatedby the
CalcuttaHighCourtinManohurKoyalvThakurDasNaskar?^^Thecourt
said: "It is quite clearthatSection 63 not onlymodifiesbut is in direct
antagonismto the law in England. It was laid down, aspointedout in the
case ofJohnWeston Foakes vJuliaBeer,^^^thatfor the lastprettynearly
threehundredyears it has been the law inEnglandthatif A owes B five
thousand rupees, and B consents to take two thousand rupees in payment
of the debt that is what is called a nudum pactum, and that B after taking
twothousandrupees can subsequently bring his action for the unpaid three
thousandrupees. The law in thiscountrybyvirtueof Section63^^°of the
ContractActisdifferent."
Animportantdifference between Sections 62 and 63 isthatthe former,
which provides for novation, requires an agreement based on some consid
eration.But Section 63requiresneither. Under thissection,thepromisee
may before breach gratuitously release the promisor from the obligation to
perform thepromise.Thepromisee may after breach gratuitously release
the promisor from his hability arising on suchbreach.Asagainstthis.
367.ILR34Mad156.
368.ILR(1887-88)15Cal319.
369.(1884)LR9 AC605.
370. SeealsoIshaqAbdul Karim vMadanLai,AIR.1965All 34; Shyamnagar Tin Factory (P)
LtdVSnowWhiteFoodProductCoLtd,AIR1965Cal 541.
371.JitendraChandra RoyChowdhuryv S.N.Banerjee,AIR 1943 Cal 181, 184 and 187.
372. SeeManohurKoyal vThakurDasNaskar,ILR(1887-88)15Cal319,325-27and also
GovindjiVathalLaiBhojam vGujaratHousingBoard,(1982) 1 SCC 412 where a works
contractwas prematurelyterminatedon account ofunsatisfactoryperformanceand subse
quently the balance work was allotted to the same contractor for an agreed lump sum. The
Departmentwas notafterwardspermittedto make anydeductionsfor the earlierunsatisfac
toryperformance.https://t.me/LawCollegeNotes_Stuffs

585. [S. 63] Accordandsatisfaction445
under Section 62novationagreement must be made before the breach of the
originalpromise.
ACCORDANDSATISFACTION
The accord is an agreement made after breach whereby some considera
tion otherthanhis legal remedy is to be accepted by thepartynot in fault,
followed byperformanceof thesubstitutedconsideration.The liability aris
ing out of breach ofcontractmay be discharged by accord andsatisfaction.
The validity of accord andsatisfactionmust be judged by the general law of
contractquiteapartfrom the provisions of Sections 62 and 63. The principle
andeffect of accord andsatisfactionwere thusexplainedin a decision of the
PrivyCouncil:^^^
"Thereceipt given by theappellantsandacceptedby therespondents
and acteduponbybothproves conclusivelythatall thepartiesagreed to
asettlementof alltheirexistingdisputesby thearrangementformulated
in the'receipt'.It is aclearexampleofwhatused to bewell-knownin
CommonLawpleadingas'accordandsatisfactionby asubstitutedagree
ment'.Nomatterwhatwere therespectiverightsofpartiesinterse,they
areabandonedinconsiderationof theacceptanceby all of a new agree
ment. The consequence isthatwhen such an accord andsatisfactiontakes
place the prior rights of thepartiesareextinguished.They have, in fact,
beenextinguishedby the new rights;andthe newagreementbecomes a
newdepartureand the rights of all thepartiesare fully represented by
it."374
Acontractingpartyin respect of his obligation towardsanotheris released
from suchobligationif there is anaccordandsatisfactionbetweenthe two
parties.The obligation need not be executed and can beexecutory.^^^In
P.K.Ramaiah&CovNTPC^''^the SupremeCourtheldthatin view of the
fullandfinalsettlementof theclaim,therewas anaccordandsatisfaction
and there was no existingarbitrabledispute. Where a claim for damages
wassettledby theRailwaybysendinga cheque in fullandfinalpayment
and which was to bereturnedif not acceptable, but theclaimantencashed
373. PayanaReenaLayanaSaminathanChetty v PanaLanaPanaLanaPalaniappaChetty,
(1913-14)41lA142: 18CWN617,619-20(PC).
374. The question whether there has been an accord and satisfaction arises out ofcontractand
canbereferredtoarbitration.BHELvAmarNath,(1982)1SCC625.
375.AmusuPropertiesvMuruchadayah,(1989) 1 MLJ 451(Ipoh)HighCourtofIpoh.
376.1994Supp (3) SCC 126. See alsoNathaniSteelsLtdvAssociatedConstructions,1995
Supp(3)SCC 324, parties arrived at a settlement in respect of their dispute. Lloyds Steel
IndustriesLtdv Oil &NaturalGasCorpnLtd, AIR1997Bom 337,paymentdueundera
contract, accepted in full and final satisfaction under a memorandum of understanding, held,
rights under the oldcontractceased. Kelkar & Kelkar vIndianAirlines, (1996) 2 Bom CR
303, full and final settlement, payment made and accepted, no dispute left for reference to
arbitration.CamaraMunicipalde Bardez v V.M.SalgaonkareIrmaoLtd,(1996) 5 Bom CR
434, rejection of the contractor's final bill on the ground that there had already been final
payment was held to be wrongful because there was a factual dispute.https://t.me/LawCollegeNotes_Stuffs

586. 446Chapter8DischargeofContract [S. 63]
thechequeinproteststatingthatobjectionstoencashmentmay be com
municatedwithin10 days, it was heldthatbecausetherewas no replyfrom
Railway, there was nomutuallyagreed accord andsatisfaction.
An example of accord andsatisfactionis to be seen inKapurchandGodha
VMirNawabHimayatalikhanAzamjah.^'^^Theplaintiffaftersomeinitial
protestexpressedreadinesstoacceptthesumsentin fullsatisfactionof
hisclaimanddischargethepromissorynotemakingendorsementof full
satisfactionand received thepayment.In thesecircumstancesit was held
thatthe case was completely covered by Section 63 of theContractAct.
Anotherexample is the decision inSitowViewPropertiesLtdvPunjab
&CSindBank.^^^The bank launched recovery proceedingsagainstthe bor
rower but compromised it if theborrowerpaid acertainsum of money. The
borrower accepted it and paid the amount. The claim of the bank ended by
accord and satisfaction. The bank was required by thecourttoreturnto the
borrowerhis mortgage andhypothecationdocuments.
In a claim under afireinsurance policy, the policy holder accepted an
amountby way of fullandfinalsatisfactionof hisclaimon the basis of the
second surveyor report. The insurance company was held to be discharged
from itsliability.^^®
"Wherethe creditor agreed that if a lesser sum than due was paid by the
debtor before thespecifieddate, it would be accepted in full satisfaction
of allclaims,but the debtor paid stilllessersum within thespecifieddate,
the court said that the debtor could not insist that his payment should be
recordedasfullsatisfactionofalltheclaims.
An illegalcontractcannotsupportan accord andsatisfaction.^^^
Estoppel:Acceptanceoffinal bill
Where a contractor accepted the final bill without any objection and
under the terms of the contract, such act had bindingefficacyagainst him,
it was held that the claim of the contractor for additional payments and
damagesraised two years afteracceptanceof the final bill was barred by
estoppel.
377. Unionof India v Navilakha & Sons,AIR 1997Bom209. The courtfollowedUnionof India
VBabutalUttamchand Bhandari, 1967 SCC OnLine Bom 62: AIR 1968 Bom 294, where
the chequesent in full and final payment by the Railwaywas encashed by the claimant with
out even notifying that he would claim the balanceamount,the claim for the balance was
allowed.Paymentof shorter amount could not be equatedwith fullpaymentwithout proper
acceptance. FoodCorporationof India vRatanlalN.Gwalani,AIR 2004 MP 215: (2004)
2 CCC 393 (MP), final bill was accepted without protest, plea was not taken in the written
statement against it, not allowed to be raised in appeal. The appeal was allowed in part for
reducing interest from 12 to 9 per cent.
378.AIR1963SC250;(1963) 2 SCR 168.
379.AIR2010Cal94.
380. SalimaJabeenvNationalInsurance Co Ltd, AIR 1999J&K110.
381.SaraswatTrading Agency v Union of India, AIR 2002 Cal 51: (2002) 1ICC1038.
382. UnionCarbideCorpnv UnionofIndia,(1991) 4 SCC 584: AIR 1992 SC 317.
383. Govt of Gujarat v R.L. Kalathia & Co, AIR 2003Guj185.https://t.me/LawCollegeNotes_Stuffs

587. [S.63] Materialalteration447
TheSupremeCourt has laid down thatunless,whileacceptingthefinal
billthecontractorunequivocallydeclaresthat hewouldnotraiseanyfur
therclaim,he would not be stopped orprecludedfromdoingso. Themere
acceptanceof the final billdid not havethe effectofpreventingthe contrac
tor fromraisingotherclaims.^®''Anysettlementbetweenthe parties also
doesnothavethateffectunlessthe contractbecomesaclosedchapterunder
thesettlement.Ifnot,thearbitrationclause in thecontractremainsand
could beactivatedif theaggrievedparty has anything more to claim.
Thesettlementwassigned"withoutprejudice".Explainingthemeaningof
this phrase, theSupremeCourt said: "Theclassicdefinitionof thephrase
'withoutprejudice' is contained in the judgment ofLindleyLJ in Walker
VWilsher.^^^They (the words 'withoutprejudice')mean withoutprejudice
to the position of the writer of the letter if the terms he proposes are not
accepted.If the terms proposed in the letter are accepteda completecontract
isestablishedand the letter, although written 'withoutprejudice',operates
to alter the old state of things and to establish a newone."^®^
MATERIALALTERATION
"Good faith is a continuing obligation inasmuch as even after entering
into the contract, no material alteration can be made by apartyin the terms
ofthecontractwithouttheconsentoftheother."^^^Whereacontractis
embodied in a deed and thepartywho has the custody of the deed alters it
withoutthe consent of the other in a materialparticular,the effect would
exactly be the same asthatof cancelling the deed. Both parties will be dis
charged from their respective obligations. The meaning of the expression
"material alteration" was considered by the SupremeCourtinKalianna
GoundervPalaniGounder?^^
384.BharatCoking CoalLtdvAnnapurnaConstruction,(2003) 8 SCC 154: AIR2003SC 3660.
385.NTPCLtdvReshmiConstructions,Builders&Contractors,(2004) 2 SCC 663: AIR2004
SC 1330: (2004) 1 KLT 1065.RenukaDatlav SolvayPharmaceuticalB.V., (2004) 1 SCC
149: AIR2004SC 321, a very specificsettlementdrawnundercourtorder,contractended.
CauveryCoffeeTradersvHornorResources(International)CoLtd,(2011) 10 SCC420,
full and final settlement was received after acceptance of reduced price forsub-standard
materialsupplied. Thecontractorbecameboundbyestoppel,not entitled toanythingafter
settlingand receivingpaymentfor the final bill. Apartycannotbepermittedto blow hot and
cold at the same time, fast and loose orapprobateandreprobate.FoodCorporationofIndia
VRatanlalN.Gwalani,AIR2004MP 215: (2004) 2 CCC 393 (MP), nopleadingand nor
issue before thetrialcourtthatfinalpaymentwasacceptedunderaccord andsatisfaction,
it could not be raised for the first time before the HighCourt.FoodCorporationofIndiav
RatanlalN. Gwalani, AIR 2004 MP 215: (2004) 2 CCC 393 (MP), defence of estoppel by
acceptanceof final billwithoutprotest,not raised inwrittenstatement,not allowed to be
raisedinappeal.
386.(1889)LR23 QBD 335 (CA).
387.NTPCLtdvReshmiConstructions,Builders&Contractors,(2004)2 SCC663:AIR2004
SC1330.
388. UnitedIndiaInsuranceCoLtdv M.K.J.Corpn,(1996) 6 SCC 428: AIR1997SC408.
389.(1970)1SCC56:AIR1970SC1942.https://t.me/LawCollegeNotes_Stuffs

588. 448Chapter8DischargeofContract [S. 63]
Amemorandumofagreementfor the sale oflandunderwhichRs2000
were paid in advance was with the plaintiff. Thedefendantrefused to
convey the land and pleadedthattheplaintiffhad altered the deed by
adding the wordsthatthe seller shall "clear the debts and execute the sale
deedfreefromencumbrance".
The plea was dismissed because the allegedalterationcould not be proved,
butShahJtookopportunitytopointout: "Even if it be assumedthatthe
sentenceregardingencumbranceswaswrittenafterthe deed wasexecutedit
willnotinvalidatethe deed.Ordinarily,whenpropertyis agreed to be sold
for a price, it would be the duty of the vendor to clear it of allencumbrances
beforeexecutingthe sale deed. Thealternation,if any,cannotthereforebe
regardedasmaterial."
AsobservedinHalsbury'sLawsofEngland;^'""Amaterialalteration
is onewhichvaries therights,liabilities or legalpositionof thepartiesas
ascertainedby the deed in itsoriginalstate,orotherwisevaries the legal
effect of theinstrumentasoriginallyexpressed."^^^
Thesameprinciplehas beenacteduponwhere,withouttheconsentof
theotherparties,theword"partner"wasdeletedfrom adeed,thedateof
paymentwaschangedfrom1st to10thandtheword"and"wassubstituted
by"or".Thepartymakingsuchalterationswas notpermittedtoputthe
deed in theaction.^'^Alterationof anagreementby thepurchaserofland
foraccommodatingtwosignaturesofwitnessesandto make itacceptableas
asacrosanctdocumentwas held to havedischargedtheagreement.^^^This
judgment was reversed by the SupremeCourton appeal. Thecourtsaid
thatthe twoindependentpersonswereintroducedasmarginalwitnesses.
Such a change did not affect the validity orenforceabilityof the agreement.
It wasnotamaterialalteration.It didnothavetheeffect ofavoidingthe
agreement.^'''
Materialityof theunilateralamendmentis themostimportantfactor. In
acontractcontaininganarbitrationclause, theGovernmentmade the uni
lateralamendmenttotheeffectthatthearbitralawardmustbereasoned.
Thealterationwas held to be not binding upon theparties.TheGovernment
was notallowedto avoid theawardon thegroundthattheawardwaswith
outastatementofreasons.
390.VolII, 3rd Art. 599 at p. 368.
391.Appliedby the PrivyCouncilinNathuLaivGomtiKuar,(1939-40)67lA318.
392.LoonkaranSethiyavIvonE.John,(1977) 1 SCC 379: AIR1977SC 336. Animmaterial
alterationdoes notdischarge.M.S.AnirudhanvThomco'sBank Ltd, AIR 1963 SC 746:
(1963) 1SCR63; (1963) 33CompCas 185.
393.SardarvRamKhilona,AIR1998All268.
394.RamKhilonavSardar,(2002)6 SCC 375:AIR2002SC2548.
395.BuildIndiaConstructionSystemvUnionofIndia,(2002) 5 SCC 433: AIR2002SC 2437.https://t.me/LawCollegeNotes_Stuffs

589. Visitebcexplorer.comto access cases referred
to inthebookthroughEBCExplorer™on
seeOnline®;along withupdates,articles, videos,
biogs and a host of different resources.
EBC
Explorer'
companion resources for legal research
The following cases from thischapterare available
throughEBCExplorer™:
•AlopiParshad&SonsLtdVUnionofIndia,AIR1960SC58S: casepilot
(1960) 2 SCR 793
•EasunEnggCoLtd vFertilisersandChemicalsTravancoreLtd,
AIR1991Mad158
•KapurchandGodhavMirNatvabHimayatalikhanAzamjah,
AIR 1963 SC250:(1963) 2 SCR 168
• NaihatiJuteMillsLtd vKhyaliramJagannath,AIR1968SC522:
(1968) 1SCR821
• PunjSons(P)Ltd vUnionofIndia,AIR1986Del158
•SatyabrataGhosevMugneeramBangur&Co,AIR1954SC44:1954SCR310
449https://t.me/LawCollegeNotes_Stuffs

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591. 9
DischargebyBreach
DISCHARGE BYBREACH
"Abreachof contractoccurswhen a party theretorenounceshishabil-
ityunderit, orbyhisownactmakesitimpossiblethatheshouldperform
hisobhgationsunderit ortotallyorpartiallyfailstoperformsuchobliga
tions."^Thefailuretoperformorrenunciationmaytakeplacewhenthe
timeforperformancehasarrivedorevenbeforethat.Thus,breachis oftwo
kinds,namely:
(1)anticipatorybreach,and
(2)presentbreach.
ANTICIPATORY BREACH
Meaning
"Ananticipatoryrepudiationoccurswhen,.priortothepromiseddate
ofperformance,thepromisorabsolutelyrepudiatesthecontract."^It is an
announcement by the contractingpartyof his intention not to fulfil the
contractandthathewillnolongerbeboundbyit.Thiskindofanticipatory
renunciationhascertaineffectsupontherightsoftheparties.
Effectuponrights
Innocent partyexcusedfrom further performance
In thefirstplace,the other party isexcusedfromperformanceorfrom
furtherperformance.Theobligationundertheoriginalcontractcomesto an
1.ThisdefinitionofbreachappearsinAssociatedCinemasofAmerica,IncvWorldAmusement
Co,(1937)201Minn94(MinnesotaSC);CollectedfromShepherdandWellington,
ContractsandContractRemedies(4thEdn,1957)805.Chowgule& CoLtd vRizvi
EstatesandHouses(P)Ltd,(1997)4BomCR648,premiseswerehandedoverto thebuilder
fordevelopment.Foryears(oversixyears)thebuildercommencednowork,contractbroken
byhimbyabandonment.LiabilityfixedinthecontractatRs10,000permonthforbreachwas
reducedtoRs3000.U.P.StateSugarCorpnvMahalchandM.Kothari,(2005)1SCC348:
AIR2005SC61,breachofcontractonthepart ofreceiverofproperty.
2.SeeASuggestedRevisionoftheContractDoctrineofAnticipatoryRepudiation,(1954)64
YaleLawJournal 85. It isnecessarythat therefusalshouldhavebeencommunicatedto the
otherpartyandshouldmaketheintentionnottoperform-quiteexplicit.DhanrajMillsLtd
LiabilityCovNarsinghPrasadBoobna,AIR1949Pat270:(1949)27Pat723;E.E.Masterv
Garret&TaylorLtd,(1931)131IC220:AIR1931Rang126.PratapConstructionsvState
ofJharkhand,(2005)1BLJR492(Jhar),prematurecancellationoftransportationcontract
withoutanyjustification,thecourtsaidthatthecancellationwasnotjustified.
[450]https://t.me/LawCollegeNotes_Stuffs

592. [S.39] Anticipatory breach 451
endand isreplacedbyoperationoflawbyanotherobligation,namelyto pay
moneydamages.The onlylegalnexus that remains betweenthe parties is to
paythedamageswhichareassessedaccordingto the oldobligationbut the
old obligation no longer exists as anobligation.^
Optionsofinjuredparty
Immediaterightofaction.—Secondly,it entitles the injuredpartyto
anoptioneithertosueimmediatelyor to waittillthetimetheactwasto be
done. That an anticipatory breachgivesanimmediateright of action was
recognisedas earlyas(1853)in Hochester v De LaTour:'*
Theplaintiffwasacourier.Hewasengagedbythedefendantto
accompanyhimona tourtocommenceonJune1,1852.Nearlyamonth
before this date the defendant wrote to the plaintiffthathe had changed
his mind, anddeclinedhisservices.The plaintiff sued him fordamages
for breach. The defendant's counsel very powerfully contended that there
could be no breach of theagreementbeforethe day when the perfor
mancewasdue.
But LordCampbellCJ ruled out the objection. His Lordship said; "It
cannotbe laiddownasuniversalrulethat,wherebyagreementan act is to
be done at a future date, no action can be brought for a breach of the agree
ment till the day for doing the act has arrived. If a man promises to marry
a woman on a futureday,andbeforethat daymarriesanother woman, he
isinstantlyliableto anactionforbreachofpromiseofmarriage.^If a man
contracts to executea leaseon and from a future day for a certain term, and
beforethatdayexecutesaleasetoanotherpersonforthesameterm,hemay
beimmediatelysuedforbreakingthecontract.^So,if a mancontractedto
sellanddeliverspecificgoodson afuturedayandbeforethedayhesells
anddeliversthem to another, he is immediatelyhableto an action at the suit
ofthepersonwithwhomhefirstcontractedtosellanddeliver—^Itseems
strangethatthedefendant,afterrenouncingthecontract,andabsolutely
declaringthathewillneveractunderit,shouldbepermittedtoobjectthat
3.MoschiVLepAirServicesLtd,1973AC331:(1972)2WLR1175(HL).Apartycannotby
refusingtoacceptedrepudiationcreateliabilityinperpetuity.SeePusapatiKrishnaMurthy
RajuVA.P.SEB,(1996)4 AnLT822,electricitypermanentlydisconnectedwithin2years
whereasthesupplywasagreedto beforatermof 10years.Thecourtallowedrecoveryof
minimumchargesonlyforaperiodof5yearsandnotforthewholeperiodof10years.
4. Court ofQueen'sBench,(1853)2EllisandBlackburn678:95 RR747:118ER922. Nannier
VN.M.RayaluIyer,AIR1926Mad778:ILR(1925)49Mad781,groundsofrefusalto
acceptgoodscannotafterwardsbechanged.BritishandBeningtonsLtdvN.W.CacherTea
Co,1923AC48, 62,totalrefusal;NarasimhaMudalivNarayanaswamiChetty,1925SCC
Online Mad157:(1925)22LW637;BhaiJawaharSinghvSecyofState,AIR1926Lah292,
repudiationconclusiveagainstparty.Arightofthiskindwasinrecognitionevenbeforethe
ContractAct.MansukDas vRangayyaChetti,1MadHC162and insubsequentcasealso.
Steel Bros & Co Ltd vDayalKhatao & Co, ILR(1923)47 Bom924.
5.ShortVStone, (1846) 8 QB 358: 15 LJ QB 143.
6.FordVTiley,6B&C325.
7BowdellVParsons,(1808) 10 East 359: 103 ER 811.https://t.me/LawCollegeNotes_Stuffs

593. 452Chapter9 Discharge by Breach [S.39]
faith isgivento his assertion, and that anopportunityis not left to him of
changing hismind....The man who wrongfully renounces a contract into
which he hasdeliberatelyenteredcannot just complainif he isimmediately
suedfor acompensationindamagesby the man whom he has injured."
Anticipatorybreachofacontingentcontract.—Evenwhen the per
formanceof acontractisconditionaluponthehappeningof acontingency,
animmediateaction fordamageswill lie,ifbeforethe happeningof the con
tingency,thepromisordisableshimselffromperformance.FrostvKnighfis
thewell-knownillustration.
The defendant promised to marry the plaintiff on the death of his
father. The father still living,the defendant announced his intention of not
fulfillinghispromiseon hisfather'sdeath,andbrokeofftheengagement.
Theplaintiff,withoutwaitingfor thefather'sdeath,atoncebroughtan
actionforthebreach.
Thedefendantcontendedthat abreachcouldonlyariseonthehappening
of the contingency. ButCockburnCJ heldthat"the case falls within the
principleofHochesterv De LaTour^and thatconsequently,thepresent
actioniswellbrought".HisLordshipsaid thatwhenacontractingparty
announces his intention not tofulfilthecontract,thecontractshould be
takento bebrokenas all itsincidents"and thedamagesconsequenton
non-performancebeingassessedat theearhestmoment,manyof theinju
riouseffectsof suchnon-performancemaypossiblybeavertedor miti
gated.... To hold that the aggrievedpartymust wait until the timefixedfor
marryingshallhavearrivedwouldhavetheeffectofaggravatingtheinjury,
bypreventingthepartyfromforminganyotherunion,andbyreasonof
advancingagerenderingtheprobabilityofsuchaunionconstantlyless".^°In
anothercase"ofthiskind,ashipwasthesubject-matterofacharter-party.
Oneofthetermswasthat iftheshipwasrequisitionedforwarpurposes,
thehirewouldnotbepayableduringtheperiodofrequisition.Theship
wasrequisitionedandduringthat periodtheshipownersoldheraway.This
wasregardedasrepudiationbecausebysellingoff theship,he hadmadeit
beyondhispowertorestoreitbackunderthecharterparty.
Consequencesof aggrievedparty waitingfor performance
Theoptioniswiththeaggrievedpartytosueatonceorwaitforperfor
mance.^^"The promisee, if he pleases, may treat the notice of intention as
8.(1872)LR7Exchlll.
9. (1853) 2E&B678: 22 LJ QB 455.
10. PerCockburnCJ in Frost v Knight, (1872) LR 7 Exch 111.
11.OmniumD'EnterprisesvSutherland,(1919) 1 KB 618: 120 LT 265. A bankcannotunilater
allyterminateanoverdraftarrangementevenif it istemporary.Itwasnojustificationtosay
thatthearrangementhadalreadylastedfor4yearsorthatthecustomerwasnotrequiredto
executeanyformaldocument.IndianOverseasBank v NaranprasadGovindlalPatel,AIR
1980Guj158.
12. Forcometal SARL v Mediterranean Shipping Co SA, 1989 AC 788 (HL).https://t.me/LawCollegeNotes_Stuffs

594. [S.39] Anticipatorybreach453
inoperative,andawaitthetimewhenthecontractis to beexecuted,and
then hold the other partyresponsiblefor all theconsequencesof non-per
formance;but in that case hekeepsthe contractalivefor thebenefitof the
other party aswellas hisown;heremainssubjectto all hisobligations
andliabilitiesunder it, and enables the other party not only to complete
the contract, if soadvised,notwithstandinghispreviousrepudiationof it,
butalsoto takeadvantageof anysuperveningcircumstancewhich would
justifyhimindecliningtocompleteit.""Theacceptanceoftherepudiation
must be made clear to therepudiatingparty. "An act ofacceptanceof a
repudiationrequiresnoparticularform:acommunicationdoesnothaveto
becouchedin thelanguageofacceptance.It issufficientthat the communi
cation or conductclearlyorunequivocallyconveysto the repudiatingparty
that theaggrievedparty istreatingthecontractas at anend.Theaggrieved
partyneednotpersonally,orbyanagent,notifytherepudiatingpartyofhis
intentiontotreatthecontractas at an end. It issufficientthatthe fact of the
acceptancecomestotheaggrievedparty'sattention,forexample,notifica
tionbyanunauthorisedbrokerorotherintermediarymaybesufficient."^''
Iftheaggrievedpartydoesnotaccepttherepudiationandleavesthecon
tractalive,theconsequenceswill be asfollows:
Partyrepudiatingmaychoosetoperform.—Firstly,thepartyrepudi
atingthecontractmayneverthelesschoosetoperformwhenthetimecomes
andthepromiseewillbeboundtoacceptthesame."Thepartykeepingthe
contractaliveis notabsolvedfrom tendering further performance of his
ownobligationunderthecontract.Accordingly,ifarepudiationbyanticipa
torybreachisfollowedbyaffirmationofthecontracttherepudiatingparty
wouldescapeliabilityiftheaffirmingpartyissubsequentlyinbreachofcon
tract. In this case the charterer refused to load the ship but the owner of the
shipaffirmedthatthecontractwasstillaliveandyetfailedtomaketheship
readytoloadonthedayspecified,hebecameliableforbreachofcontract.^^
Prematureterminationofcontractofemployment.—Theprinciple
isapplicabletoprematureterminationofacontractofemployment."If
theemployeedoesnotaccepttherepudiation,thecontractremainsalive
whetherheispermittedtoperformhisdutiesornot.Amanagingdirector
wasremovedbeforetheexpiryofhisthree-yeartermandwassoughtto be
13.Oncetheaggrievedpartyhasexercisedtheoptionthepartyindefaultcannotsaythatcontract
stillsubsists.JhandooMai]aganMathvPhulChandFateshChand,AIR1925Lah217.
14.VitolS.A.VNorelfLtd,1996AC800:(1996)3WLR105(HL).Herethebuyerconfronted
withfallingpricesandsomedelayintheloadingoftheship,repudiatedthecontract.The
sellerreceivedthenoticeofrepudiationaftertheshiphadsailedaway.Hedidnothingfur
therandsoldthegoodstoanotherparty.Thiswasheldtobeasufficientacceptanceofthe
repudiation.
15.PhulChand Fateh Chand vJugalKishoreGulabSingh,AIR 1927Lah 693.
16. Fercometal SARL v Mediterranean Shipping Co SA, 1989 AC 788 (HL).
17.Contractsofemploymentarenoexceptiontothegeneralrule.SeeThomasMarshall(Export)
LtdVGuinle,1979Ch111andGuntonvRichmond-Upon-ThomesLondonBorough
Council, 1981 Ch 448: (1980) 3 WLR 714(CA).https://t.me/LawCollegeNotes_Stuffs

595. 454 Chapter 9 Discharge by Breach [S.39]
replacedbyanotherappointee.He did not acceptthe termination. The court
saidthat noinjunctioncouldbegrantedto himtopreventtheemployerfrom
committing breach of contract of personal servicethe performance of which
cannot bespecificallyenforced.Butwrherea contract of personalservice
containsbothpositiveandnegativecovenantseitherexpressorimplied,an
injunction to enforce thenegativecovenant is often granted. As such, the
injunctiontoenforcethepositivecovenant,i.e. toemploythe plaintiff as
managing directorv\fasnotallovi^ed.How^ever,the injunction toenforcethe
impliednegativecovenant,i.e.nottoappointsomeoneelseuntiltheexpira
tion of theplaintiff'speriodvi^asallov^^ed.^®
Anemploymentisalsothesubject-matterof acontract.Unlessit isgov
ernedotherwisebya statute orrulesframedunderit, theprovisionsof the
ContractAct would be applicable to theformulationandterminationof a
contractofemployment.Subjecttocertainexceptions,evenspecificper
formanceof such a contract by way of a direction for reinstatement of a
dismissedemployeeis also permissible inlaw.^'
Terminationofthecontractoccursnot on thedatewhentherepudiatory
act isdone,butfromthetimethe party whoissinnedagainstelectsto treat
thewrongfulact of theotheras abreachof thecontract.^"
Negative injunction.—This is the othersideof the oldprincipleof
LumleyvWagner^^where it wasconsideredaswell-settledthatthecourts
havejurisdictiontoforbidtheinfringementof anegativestipulation,even
thoughitisnecessarytoapositivecovenantfortheperformanceofpersonal
services.In thatcase,thedefendanthadagreedthatshewouldsingat the
plaintiff'stheatreforthreemonthsandwouldnotsingelsewhereduring
thatperiod.Thisnegativesideofthecovenantwasenforced.Suchanega
tivemay,perhaps,produceapositiveresponsetogototheopeningat hand
whenall othertheatresarefore-closed."Thusinjunctionshavebeenissued
inthecaseofagreementsnottosingelsewherethanattheplaintiff'stheatre,
not,duringtheperiodofemployment,toengageinanybusinesssimilarto
thatcarriedonbytheemployer^^,andnot,duringtheperiodofemploy
ment,to act as afilmartiste for anymotionpicturecompanyother than the
employers."^^
Wherenegativeinjunctionnotissued.—Thecasesinwhichanegative
injunctionwouldnotbeissuedwereexplainedinacasewhereaninjunction
18.DatuAbdullahbinAhmadvSyarikatPermodalanKebangsaan,(1990)2 CurLJ48.
19. Bank of India v O.P. Swarnakar, (2003) 2 SCC 721: AIR 2003 SC 858.
20.PerBowenLJinBostonDeepSeaFishing&IceCovAnsell,(1888)LR39 ChD339,365
(CA).ThePrivyCouncilcaseo{JeromeFrancisvMunicipalCouncillorsofKualaLumpur,
(1962)1WLR1411(PC),mustbeviewedin its properperspective.
21.(1852)1 DeGM& G604.
22.WilliamRobinson& CoLtd vHeuer,(1898)2 Ch451(CA).
23.WarnerBrosPicturesIncvNelson,(1937)1KB209;MarcoProductionsLtdvPagola,
1945KB111.The quotation is fromCheshire& Fifoot,LawofContract(9th Edn, 1976)
615-16.https://t.me/LawCollegeNotes_Stuffs

596. [S. 39] Anticipatorybreach455
was soughtagainstthe boxer who was leaving and themanagerwho was
takinghimin.^'*Thecourtsaid:
Where athirdpartyinduced a breach of acontractforpersonalser
vicesbetweenamasterand aservantor amanagerandaperformerand
thecontractinvolved theservantorperformerexercising some special
skill ortalentandcontainedbothpositive and negativeobligationsby the
servant orperformer(e.g.not to enter into an agreement with anyother
master or manager), thecourtought not to enforce theperformanceof
the negative obligations if enforcement of them would have the effect of
compelling the servant or performer to perform his positive obligations
under thecontract.Whetherthegrantof aninjunctionwould be held to
result in compulsion directed towards the servant or performer depended
on thecourttaking a realistic approach on the facts of each case, to the
probable effectof an injunction on thepsychological,material or physical
need of theservantorperformertomaintainhis skill ortalent,but com
pulsion would be more readily inferred where a longer terminjunction
was sought by the master ormanageror where thethirdpartywas the
only other available master or manager for the servant or performer or
where the original master or manager was likely to seek injunctive relief
against anyone elsewho attempted to replace him as master or manager.
Furthermore,thecourtwouldbe less likely tograntaninjunctionwhere
thecontractof servicecontainedobligations ofmutualtrustand confi
dencebetweenthemasterandservantormanagerandperformerand the
servant orperformerhad genuinely lost confidence in the master or man
ager. Moreover, since damages as an alternative remedy to an injunction
were invariably assessed by thecourtit ought not to be assumedthatan
award of damages for inducing breach of acontractforpersonalservices
would always be an inadequate alternative to the grant of an injunction.
On theotherhand,having regard to thesanctityofcontracts,thecourt
ought to scrutinise mostcarefullyandevenscepticallyany claim by the
servant or performerthat he was under the humannecessityof maintain
ing his skill or talent or that his trust in the master or manager had been
betrayed or that hisconfidencein him hadgenuinelygone. On the facts,
the grant of the injunctions sought would have the effect of compelling
the boxer to perform his positiveobligations under the contract if he was
tomaintainhis skill or talent as a boxer when he had genuinely lost confi
dencein the plaintiff's abilityto act as hismanager.The injunctionshad,
therefore, rightly been discharged.
Dischargebyanyothereventmaybenefitboth.—Secondly,ifwhile
the contract is lyingopen, someeventhappens which dischargesthe contract
otherwisethan byrepudiation,forexample,bysuperveningimpossibilityor
frustration,thepromisorwould also beentitledto take theadvantageof
24.WarrenvMendy,(1989) 1WLR853 (CA).https://t.me/LawCollegeNotes_Stuffs

597. 456 Chapter 9 Discharge by Breach [S.39]
the changedcircumstances.The most appropriate illustration is Avery v
Bowden}^
The defendant chartered the plaintiff's ship and agreed to load it with
a cargo at Odessa withinforty-fivedays. On arrival of the ship there the
defendanttold the captain that he had no cargo for him andrequested
him to goaway.The captain,however,stayedthere in the hope that the
defendantwouldfulfilhis contract. But,beforethe expiry offorty-five
days,a warbrokeoutwhichrenderedtheperformanceillegal.Theplain
tiff thenbroughtanactionfor breach.
It was held that the contract had ended byfrustration and not by breach.
It was open to thecaptainto accept therenunciationand inthatcase "he
wouldhavehad a right to maintain an actionon the charterparty torecover
damages equal to the loss hehadsustainedfrom breach of thecontracton
the part of thedefendant".Buthecontinuedtoinsistuponhavingacargo
infulfilmentof the charterpartyand,therefore,the contractwas still open
whenthewarintervened.
Where no other eventintervenestodischargethe contract otherwise, the
innocentparty who keptwaitingup to the last day ofperformance,may
nowsueforbreach.^®
Dateof assessmentofdamages.—Thirdly,in casethe anticipatoryrepu
diation is accepted, damages for breach would be assessed at the time when
repudiation takesplace.In Ramgopal vDhanjiJadhavjiBhatia-P
The defendants, the owners of a ginning mill, contracted with the
.plaintiff,acottonmerchant,tousehalf themill'sworkingcapacityfor
ginninghiscotton.Butthedefendantrepudiatedthecontractbeforeany
cottonwas supplied or ginned.
Theplaintiffwasheldentitledtorecovertheestimatedlossofprofitsat
thetimeofrepudiation.LordSummersaid:"Thiswasacaseofanticipatory
breach.Thecontractwasrepudiatedalmostassoonasitwasmade,and, the
intended operation being thus baulked, the plaintiff was entitled to measure
hisdamagesastheythenstoodandcouldnot berequiredbythedefendants
tobuythecotton,whichtheyhadannouncedinadvancetheywouldnotgin
forhim."
Where,ontheotherhand,thepromiseedoesnotaccepttheanticipatory
repudiation,damageswillbeassessedat thetimefixedforperformance
and thepromiseetakesthe risk of marketratefallingand in themeantime
25.(1855)5 E 6cB714:25 LJ QB49; 103 RR 695:119 ER 647:27 LJ119.
26.CleaShippingCorpnvBulkOilInternationalLtd,(1984)1AllER129,theownerkept
waiting up to the last day of the time charterparty. Ishwarappa v Arunkumar, 2004 AIR Kant
HCR 2273:AIR2004 Kant417,an ordinarypowerof attorneyfor constructionof housewas
heldtoberevocablebecausetheagentwasnotauthorisedtospendanythingfrompocketor
toraiseloans.
27.(1927-28)55lA299:AIR1928PC200; MilletvVanHeek& Co,(1921)2KB369(CA).https://t.me/LawCollegeNotes_Stuffs

598. 39] Anticipatorybreach457
he willhaveto take allreasonablestepstokeephislossto theminimum.^®
Thus,thelawisasstatedinplainandsimpletermsinthespeechofViscount
Simon LC in Heyman vDarwinsLtd:^^
...repudiationbyonepartystandingalonedoesnotterminatethecon
tract. It takes two to end it, by repudiation, on the one side, and accept
ance of the repudiation, on the other.
Whethertheotherpartyacceptsisamatterforhisoption;ifhedoesnot,
the contractremainsalive,as wasemphasisedby the House of Lords in
White &Carter[Council)LtdvMcGregor.^°
Acontractfordisplayadvertisementfor 3yearsof a motorgarage
businesswas struck between advertisement contractors and the agent of
thegarageowner,butthelatterrepudiatedthecontractbywritingaletter
of cancellation. The contractors refused this request and displayed the
advertisement.Thecontractprovidedforannualpaymentsandindefault
thepaymentforallthethreeyearswastobecomedue.Accordingly,the
contractorsclaimed fullpayment.
The House of Lords held that the contractors were only claiming what
was due to them under the contract and,therefore,were entitledto it. They
hadtherighttorejecttherepudiation.LordHodsonconsideredtheprinci
pleto bewell-established;
It is settled as a fundamental rule of the law of contract that repudia
tionbyoneofthepartiestoacontractdoesnotitselfdischargeit....
InHowardvPickfordToolCoLtd^'AsquithLJsaid:"Anunaccepted
repudiationisathingwritinwaterandofnovaluetoanybody:Itconfers
nolegalrightsto.anysortorkind."Itfollowsthat,if,ashere,therewasno
acceptance,thecontractremainsaliveforthebenefitofbothpartiesandthe
partywhohasrepudiatedcanchangehismindbutitdoesnotfollowthat
28.MackertichvNoboCoomarRoy,ILR(1903)30Cal477.Wherethecontractwastobeper
formedininstalments,thedateofeachinstalmentwouldbethedayfortakingthedifferences
inmarketandcontractprices.BrownvMuller,(1872)LR7Exch319.RopervJohnson,
(1873) LR 8 CP 167.
29(1942)AC356,361.Similarly,ithasbeenheldbytheSupremeCourtmStateofKeralav
CochinChemicalRefineriesLtd,AIR1968SC1361:(1968)3SCR556,thatbyrefusing
toadvancetheloanwhichtheStatehadundertakentoadvance,itsobligationtopurchase
groundnutcakefromthecompanycametoanend.Thecontractdoesnotterminateunlessthe
repudiationisacceptedby the other party.
30. 1962 AC 413; (1962) 2 WLR 17 (HL).
31.(1951)1KB417.ForastudyofthiscaseseeNienaber,TheEffectofAnticipatoryRepudiation:
'PrincipleandPolicy,(1962)CambLJ213;Tabachunik,AnticipatoryBreachofContract,
1972CurrentLegalProblems,149.TheSupremeCourtofIndiahasheldinAslhingvL.S.
John,(1984)1SCC205:AIR1984SC988,thatwhateverimplicationstheacceptancebythe
otherpartymayhaveforremedialpurposes,sofarastherepudiatingpartyisconcernedhe
becomesfreefromthecontracttothesameextentasifthecontracthasended.Thedisqualifi-
cation,ifany,forelectionpurposesbyvirtueofthecontractwouldimmediatelyend.Magnum
FilmsVGolchaProperties(P)Ltd,AIR1984Del162,unilateralalterationoftermsamounts
tobreach.https://t.me/LawCollegeNotes_Stuffs

599. 458Chapter9DischargebyBreach [S.39]
thepartyatthereceivingendofthepreferredrepudiationisboundtoaccept
itbeforethetimeforperformanceandislefttohisremedyindamagesfor
breach.
Prematureterminationoflease
Whereathree-yearuseofpremisesonleasewasterminatedbythelessee
beforetheexpiryoftheperiod,thecourtallowedthelease-moneyforthe
unexpiredperiodbywayofdamages,thespecificenforcementbeingnot
possible.^^
Whatconstitutesacceptanceof repudiation
Inacase"wherethebuyersrefusedtoacceptthecargobecauseofdelay
inloadingandthesellerremainedsilentaboutthematterandthequestion
waswhethertherepudiationhadbeenaccepted,thecourtexplainedthe
requirementof acceptance as follows:
"Itisthisabilityoftheinnocentpartytochoosebetweenacceptance
oftherepudiationandaffirmationofthecontract,coursesattendedby
immediateanddifferingconsequences,thatmakesitnecessary,asithas
repeatedlybeenheld,forthechoiceoftheformertobeclearandunequiv
ocal.Whileinhumanaffairs,achoicemaybemadebythought,wordor
deed,itcanonlybemanifestedbywordorde.ed.Achoice,howeverreso
lute,whichgainsnoexpressionoutsidethebosomofthechoosercannot
beclearandunequivocalinthesensethatthelawrequires.Silenceand
inaction,beinginthegeneralityofcasesequallyconsistentwithanaffir
mationofthecontract,cannotconstituteacceptanceofarepudiation."
What amounts to repudiation
Inconsideringwhethertherehasbeenarepudiationofacontractbya
party,thewholeconductofthatpartyhastobeassessedobjectivelyinorder
toseewhethertherewasanintentiontoabandonandrefuseperformance
ofthecontract.Repudiationisadrasticconclusionwhichshouldonlybe
heldtoariseinclearcasesofarefusal,inamannergoingtotherootofthe
contracttoperformcontractualobligations.^''Everyminorirregularityin
32. FoodCorporationofIndiavBabulalAgarwal,AIR1998MP23.
33.VitolS.A.VNorelfLtd,1996AC800;(1996)3WLR105(HL).
34.SeetheobservationofLordWilberforceinWoodarInvestmentDevpLtdvWimpey
ConstructionUKLtd,(1980)1WLR277(HL).Applyingthistothefactsofthecase,the
courtheldthatapartygivingnoticeofrescissionintermsoftheprovisionsofthecontractfor
purchasinglandentitlinghimtorescindthecontractifthelandcameundercompulsoryacqui
sitionunderastatutorypower,wouldnotamounttorepudiationeveniftherewasamistaken
notionastothelegalpositionofacquisition.ThedecisioninNottinghamBuildingSocietyv
EurodynamicsSystemspic,1995FSR605(CA)alsoshowstheimportanceofcontractterras
inthematterofrepudiation.Thecontractwasforsupplyofcomputersoftware.Thecontract
providedthatthesupplierwoulddeliverupthesoftwareandotherdocumentation(including
sourcecodes)inspireofanyterminationofthecontractbythepurchaser.Thesupplierfailed
tomaintaindeliverytime-scheduleuntilhewasprovidedwithfurtherfundswhichthepur
chasercouldnotdo,anddemandeddeliveryupofthesoftwareanddocumentation.Thecourthttps://t.me/LawCollegeNotes_Stuffs

600. [S.39] Anticipatorybreach 459
the performance of acontractcannot be seized upon as a repudiation so as
to put a premature end to the contract. Thecourthas to take into account
the effect of the breach upon thecontractas a whole. Thus, in acontract
for the supply of 100 tons of flock of Government standard to be deliv
ered by instalments, the sixteenthdeliverywas below the standard and the
buyer attempted to treat this as a repudiation, but the court held that the
seller'sconductdid not show anintentiontothrowaway thecontractand,
therefore, the buyer should have to be content with damages fordefective
goods.LordHewartCJ concluded:
With the help of these authorities we deduce that the main tests to
beconsidered...are,first the ratio quantitatively which the breach bears
to thecontractas a whole, and, secondly, the degree ofprobabilityor
improbabilitythat such a breach will berepeated.On the first point the
deliverycomplained of amounts to no more than'^htons out of a con
tractfor 100 tons. On the secondpoint,our conclusion isthatthe chance
of the breach being repeated is practically negligible— The deliverycom
plained of was an isolated instance out of twenty satisfactorydeliveries
actually made bothbeforeand after the instalmentobjectedto; we hold
that itcannotreasonably be inferred that similar breaches would occur in
regard to subsequent deliveries.
Similarly,in a contract for supply of iron by two instalments, payment
to be made within fourteen days ofdelivery,the buyer claimed reduction
in price on account of thedelayin the firstdeliveryand thesellertreating
this as repudiation refused to make furtherdeliveries,it was held that the
conduct complained of did not amount to an intimation of an intention to
abandon and altogether refuse performance of thecontract.^^
In a subsequentcase,^^the Court of Appeal pointed out"thatto consti
tute repudiation, a breachof contract must go to the root of thecontract....
Thisconstitutesthe test even where there arerecurringbreaches—produc
ing different resultsaccordingto thedegreeofnon-compliance— Notice
that a breach is likelyto occur or recur cannot, of course, be treated as being
arepudiationunlessitwouldhavethateffectwhenit did occur orrecur."^^
said that there was no repudiation on the part of the purchaser and he was entitled under the
contract terms to a mandatory injunction for the supply.SeealsoSaphenaComputing v Allied
CollectionAgencies,1995FSR616 DC, where the contract forsupplyof software for debt
collection business wasterminatedby mutual consent, yet litigation arose because of copy
rightproblemsin the materialalreadysupplied.Vaswaniv Italian Motors(SalesandServices)
Ltd,(1996)1 WLR 270, here a car was booked at a stated price with some money deposited
in advance. The seller asked the buyer to pay the increased price and on his refusal to do so,
forfeited the advance. The Privy Council held that the terms of thecontractdid not permit
recoveryofincreasedprice, but that there was no repudiationon the part of thesupplier,the
buyer was bound to take the vehicle at the booked price.
35. Maple Flock Co Ltd v UniversalFurniture Products(Wembley)Ltd,(1934)1KB148(CA).
36.FreethvBurr,(1874) 43 LJ CP 91.
37.Decro-WallInternationalSA vPractitionersinMktgLtd,(1971) 1WLR361 (CA).
38. In M.P. Mines Ltd v RaiBahadurShriram DurgaPrasad(P) Ltd, (1972) 3 SCC 180: AIR
1971 SC 1983, theSupremeCourt held that wherethesamplesofmanganeseto besuppliedhttps://t.me/LawCollegeNotes_Stuffs

601. 460Chapter9Dischargeby Breach [S. 39]
Applying this test to the facts of the case before him, his Lordship heldthat
repeated delay in paymentrangingfrom 2 to 20 days and averaging 8 days
and causing anominalloss to theplaintiffwhich he could have debited to
the defendant's account but did not do so, such defaults even if repeated
could not go to therootof thecontract.The plaintiffs, a French firm, were
marketingtheir goods in the United Statesthroughthedefendantfirm.
Failure to perform as the occasion arises under thecontractmay entitle,
depending upon the terms of the contract, the otherpartyto treatthatas a
repudiation.
A shippingcontractincorporatedthe rulesrequiringsellers to have
the cargo ready fordeliveryat any time within the contract period. The
buyers gave apropernotice oftheirreadinessto take the load. The sellers
failed todeliverthe cargo on presentation of buyers'vessel.The buyers
tookthis failure as arepudiationandterminatedthecontract.
It was held that the rule in question imposed an additional obligation
on thesellersto have the cargo ready for the buyers to begin loading with
outdelayor interruption as soon as thevesselwas ready to load the cargo
inquestion.Thejustificationfor this rule isthatmercantilecontractsare
concluded with a reasonably long period ofdeliveryand at a price which
presupposes the buyers' right to call fordeliveryat any time having given
reasonable notice. That was a valuable option which thebuyerswould lose
if thesellerswere entitled todeliverwheneverthey were willing and able
to do so within the delivery period.Accordingly,the sellers were in breach
of their obligation. This entitled the buyers to put an end to the contract.
They were allowedto recover by way of damages thedifferencebetween the
market price of the replacement cargo and the original contract price and
loss ofdispatch.
In an agreement for sale of certain shares at a price to be fixed by a
third party valuer, theSupremeCourt held that a challengeto the valuation
did not amount to a repudiation of the contract. Suchchallengeis only an
attemptto ensure a fair price. An act toconstituterepudiationmust be such
as indicates an intention to refuse to perform thecontractand to set the
otherpartyfree from performing hispart.'"'
Section 39 of theIndianContractAct gives expression to thedoctrineof
anticipatorybreach.
S. 39. Effect ofrefusalofpartytoperformpromisewholly.—Whena
party to acontracthas refused to perform, or disabled himselffrom performing
his promise in its entirety,thepromiseemayputan end tothecontract,unless
he has signified, bywordsorconduct,hisacquiescencein itscontinuance.
under a contract wereto beapprovedby both parties, theseller'sdefaultingivingthe oppor
tunity to the buyer to check them was a breach on his part.
39.CompagnieCommercialeSucresEt Denrees v C.CzarnikowLtd, (1990) 1WLR1337 (HL).
The term was inaccordancewith Rule 14(1) of the RSA rules.
40.Claude-LilaParulekarvSakalPapers (Pj Ltd,(2005)11SCC73;(2005)124 CompCas 685.https://t.me/LawCollegeNotes_Stuffs

602. [S. 39] Anticipatorybreach461
Illustrations
{a)A,a singer,entersinto acontractwitiiB,themanagerof atheatre,to sing at histheatre
twonightsineveryweei<duringthenexttwomonths,andBengagesto pay herTOO
rupeesfor eachnight'sperformance.Onthesixthnight/Awilfullyabsentsherselffrom
thetheatre.Bis atlibertytoputanendtothecontract.
(b)A, a singer,entersinto acontractwith B,themanagerof atheatre,to sing at histheatre
twonightsin everyweekduringthenexttwomonths,and Bengagesto pay her atthe
rate ofTOOrupeesforeachnight.Onthesixthnight,A wilfullyabsentsherself.Withthe
assentof 6,/Asings ontheseventhnight. Bhas signified hisacquiescenceinthecontin
uanceofthecontract,andcannotnowputanendto it,butisentitledtocompensation
fordamagesustainedby himthrough/4'sfailure to sing onthesixth night.
Breachinentirety
Thepartyindefauhmust have refused altogether toperformthecontract
and therefusalmust go to the whole of thecontract,otherwisetheother
partywould not be justifiedin putting an end to the contract. Thus, in Rash
BeharyShahavNirttyaGopalNundy.'^'^
A agreed to purchase from B under twocontracts300tons of sugar to
be delivered atdifferentdates. A having failed totakedeliveryunderthe
firstcontract,Bclaimedtorescindbothcontracts.
The Calcutta HighCourtheld that as there was no refusal on thepartof
A to perform his promise in its entirety within the meaning of Section 39,
Bwasnotentitledtorescindthecontract.Thedecisionofthesamecourtin
Schiller vSooltanChand'*^emphasises the samepoint.
Therewas acontractfor the sale of200tonsoflinseedoil inApril
and May, to be paid for ondelivery.Somedeliverieswere made and the
plaintiffsmade partpaymentfor thesamewithholdingthebalancefor
adjustment of their claims. But the defendants, takingthatas an anticipa
tory repudiation, refusedto make furthersuppliesand the plaintiffs sued
themforthebreach.
It was held that the withholding of apartpayment under a bona fide
claimcannotbe regarded as a refusal toperformthecontractin its entirety.
At first sight thesedecisionsseemto be at variance with the illustrations
in Section 39. According to theillustrationsif a singer agrees to sing at a
theatre for two nights in a weekfor a period of two months and then absents
herselfon one night, the other party is at liberty to put an end to the con
tract. Referring to the illustrations.GarthCJ observed asfollows:
That illustration is perhaps not a happy one, because it may lead to
misapprehension.Thesingerbywillfullyabsentingherself,though on
one nightonly,did in factrefusealtogetherto perform an integral and
41. (1928-29) 33CWN477. P.C. Rajput v State of M.P., AIR 1993 MP 107:(1994)1 MPLJ
387,delayon the part of theGovernmentin handing over site to the contractor does not
constitutesuch afundamentalbreach or breach in entirety to entitle thecontractorto sue the
Government for breach afterputtingan end to thecontract.
42.ILR{1878)4Cal252.https://t.me/LawCollegeNotes_Stuffs

603. 462Chapter9DischargebyBreach [S. 39]
essentialpartof hercontract.By doing so she put it out of her power to
performhercontractin its entirety. But here theplaintiffshave never
refusedtoperformanypartoftheircontract.They werewillingto pay
thesumdue assoonastheircross-claimswereadjusted.'*^
Partialfailuregoingto theroot
Whetherapartialfailure goes to therootof thecontractor not is a ques
tionof fact in each case. In a case before the Supreme Court:'*''
TherewasacontractforthesaleofBTwillandHessiandeliverablein
themonthsof April, May and June. April and Mayquotaof B Twill and
April quota of Hessian were delivered and they were accepted and paid
for by the buyer. For the rest the sellers sent to the buyers delivery orders
oncertainmillsaskingthemtotakegoodsdirectlyfrom the mills. The
orders reached the buyersthroughthe hands of several middlemen. They
containedconditionsdifferentfrom thecontractandrequiredthe buyer
to take goods subject to theconditionsimposed by the mills. The buyer
refused to accept. Thecourtheldthatthe sellers were in breach oftheir
contract.'*^
Acontractwas made for supply ofhumanalbumin.Deliveries were to
be effectedwithinthe course of one year by monthlyinstalments.Time of
deliverywas to beimportant.No monthlyquantitywasfixed.Anyshortfall
in onemonthcould be made up in subsequent months. The sellers failed.
Nothingresulted from correspondence between the parties. The buyer ulti
mately repudiated the contract. He was allowed to recover damages for the
breach of the whole of the contract. It was one contract and not a conglom
erationofseparatecontracts.''^
Where apartyabandons a project before its completion, he is, of course,
liable to pay the cost and expense of completion. Butwhetherhe would be
entitled to recover anything for the actual work done depends upon a num
ber offactors.One of them is that if theaggrievedparty had an option to
reject the work but nevertheless accepted it in itspartialstate, he would be
bound to pay to the other an amount worked out on thebasisof quantum
meruit. Things may be different where there is no such option. In a case of
thiskind:''^
43.SchillervSooltanChand,ILR(1878) 4Cal252,256.
44.JuggilalKamlapatvPratapmalRameshwar,(1978) 1 SCC 69: AIR 1978 SC 389.
45. Once therepudiationhas been accepted thecontractbecomes rescinded. Anauction-bid
derrefusedto acceptthe propertybecauseitmeasuredlessthan what wasrepresented.The
Government accordingly cancelled the auction and realised much greater price at reaction.
The first purchaser got no relief. Bhagat Ram Batra v Union of India, (1976)2 SCC 416: AIR
1976SC2128.
46. Andard Mount(London)Ltd vCurewel(India) Ltd, AIR 1985 Del 45;VysyaBank Ltd v
A.P. State Agro Industries Devp Corpn Ltd, AIR 2004 AP 10, no liabilityto pay interest by
bank towards holder for delayedpayment of cheques. Delay was due to the instruction of the
partywhohadissuedthem.
47.Sumpterv Hedges, (1898) 1 QB 673 (CA).https://t.me/LawCollegeNotes_Stuffs

604. [S- Anticipatorybreach463
A buildingcontractorhad done a little morethanhalfthe work for
which hereceivedpartpayment. He informed the owner that he had no
money and could not go on with the work. The owner finished the build
ing himself using the building materials which the contractor had left on
theground.
Thejudgmentofthecourtwasthatthecontractorwasentitledtogetthe
valueofthematerialssousedbut not toanyamountforworking.He had
abandonedthecontract.Theownercompletedandoccupiedwhateverhe
foundontheground.Thatcouldnotberegardedasacceptingorenjoying
thebenefitoftheworkdonebythecontractor.Theclaimforquantummer
uitwasnotjustified.
Wherethe contract is for work and labour and thecompletionof the
entire work is not a condition precedent, payment would have to be made
for the work actually done. In a case of this kind:
The contract was todecoratea flat and to provide it with some fur
niture. The payment was to be net cash as the workproceededand the
balance oncompletion.The owner paid something more than half the
contractmoneyandmovedintohis flatandusedthefurniture.Herefused
to pay thebalancemoneysayingthattherewas badworkmanshipand
faultydesign.Theofficialrefereereported that there had beenasufficient
compliancewith thecontractand that theownerwasbound to pay the
whole amount less the cost remedying the defects which he worked out
to be£56,roughly about 13 per cent of the total value of the contract.
Thecourtdidnotinterferewiththeworkofthereferee.Itwasnotacom
positecontractUkea building or work project. It was more in thenatureof
a labour contract. The payment had to be measured by the amount of work
done.''^
A contract was awarded for four laning of a road on "build, operate,
transfer"basis. Theawardingauthorityterminatedthecontracton the con
tractor's failure to providefinancialguarantee as required under the contract
within thestipulatedtime.It was anessentialtermrelatingto theeligibility
of thecontractor.The court saidthat the actioninterminatingthe contract
couldnotbefaultedwith.''^
Aggrievedparty'sliabilityto offerrestitution
Theaggrievedpartymay,after putting an end to the contract, bring an
actionfordamagesforbreach,buthe will beboundunderSection64 to
48.HoenigvIsaacs,(1952) 2 All ER 176 (CA). This should becontrastedwithCutterv Powell,
(1775-1802) All ER Rep 159(KB).The payment was promised for working as second mate for
the wholeof thevoyage.The mate died en route and, therefore,could not completethevoyage.
No recovery in terms ofpartpaymentonquantummeruitbasis was allowed. See alsoBolton
VMahadeua,(1972)1WLR1009(CA),where a contract for central heating of a house at a
cost of £560 was completed in such a way that it required £ 174 to put it right. This was held
to be not asubstantialcompliance.
49. SirmauliInfrastructure(F)Ltd v State ofMaharashtra,(2011) 5MahLJ 274.https://t.me/LawCollegeNotes_Stuffs

605. 464Chapter9DischargebyBreach [S.39]
restoreto theotherpartythebenefitshemighthavereceivedunderthecon
tract. This has been so held by the Privy Councilin Muralidhar Chatterjee
VInternationalFilmCoLtdJ°
Thedefendants,afirmoffilmimporters,agreedwith theplaintiffsto
supplythemfilmsattherateofaboutoneinamonth.Theplaintiffswere
topaythemafixedamountforrentand,ofcourse,someothercharges.
Onefilmwassuppliedand a sum ofRs2000Waspaidagainstit, but on
account of exhibition difficulties, the film wasreturnedto the defend
ants.Subsequentlyanother sum of Rs2000 was paidagainstwhichno
filmwassupplied.Theplaintiffswroteto thedefendantsthat onaccount
ofdelayandbreachofcontract,allbusinessdealingswouldbestopped.
Thedefendantsacceptedthisrepudiationandplaintiffssuedthemfor the
refundoftheirmoney.
It was heldthattheamountwasrefundableunderSection 64,subject,of
course,to the right of thedefendanttoclaimdamagesfor thebreach.The
case was referred back to the High Court for the determination of dam
ages.ExplainingtherelationshipbetweenSections39 and 64,SirGeorge
Rankinsaid: "The contract which may be 'put an end to' under Section 39
is'voidable'.The right torecoverdamagesincaseswherethe contract has
beenrendered'voidable' bythe wrongfulact of a party thereto and has been
rescindedby the other partyaccordinglyis a rightexpresslyconferredby
the statute. But the right todamagesis noobjectionto theapplicationof
Section64 to cases ofrescissionofcontractunderSection39andtheliabil
ity to makerestitutionattachesto the party putting an end to the contract
underSection39."
Referringto themoneypaidunderthe contracthisLordshipsaid:"The
moneywas paid by the plaintiff in partdischargeof theconsiderationor
tobecomedue tothemfromhimunderthecontract.Itwasabenefitor
advantagereceivedunder the contract whichthedefendantswerebound to
restore, though they may set off against the plaintiff's claim such damage as
they hadsustained.The fact that themoneyhadbeenspent by thedefend
ants for the purposes of the contract was whollyimmaterial."^^
A contract forprovidingCCTV at railway stations was terminated
because vulgar and immoral clips were being telecast. The contractor gave
noresponseto thetermination.The TV operator admitted that suchclips
werebeingtelecast.The termination was held to be proper. The authorities
forfeitedwholeofhis depositfor assuringproper performance. He contended
that hehaddepositedallhislife'searningsand that hewouldberuined.The
50. (1943) 56LW283:AIR1943PC 34 at p. 37.
51. Ibid at p. 40. See also Gurdial Singh v PeareyLaiMalhari,AIR 1982 Del 120, where the
vendor of property cancelledthe contract,held,bound to refundbenefitsobtained. De-Smet
(India) (P) Ltd v B.P. Industrial Corpn (P) Ltd, AIR 1980 All 253, where the repudiating
party wasallowedrefundof theadvancepaid byhimtowardsthepurchaseofasolventextrac
tion plant. Such an advance is not paid as aguaranteeor earnest.https://t.me/LawCollegeNotes_Stuffs

606. [S.73] Damagesfor breach 465
courtsaidthatforfeiture of the whole of the deposit wasdisproportionateto
anylossthat could havebeencaused by breach of thecontract."
DAMAGESFORBREACH[Ss.73-74]
A contract is not a property. It is only a promisesupported by somecon
siderationupon whicheithertheremedyofspecificperformanceor that of
damagesisavailable.Theparty who isinjuredbythebreachof a contract
may bring an action fordamages.^''"Damages" meanscompensationin
termsofmoneyfor thelosssufferedbytheinjuredparty.Burdenlieson the
injuredparty toprovehisloss.^^Everyactionfordamagesraisestwo prob
lems.Thefirstis theproblemof"remotenessofdamage"and thesecond
thatof"measureofdamages".
Remotenessofdamage
Everybreachofcontractupsetsmanyasettledexpectationoftheinjured
party.Hemayfeeltheconsequencesforalongtimeand in avarietyof
ways.Apersoncontracts.tosupplyto ashopkeeperpuremustardoil, but
52. SugarVisionAdvertisingv East CoastRly,AIR 2015 NOC 349 (Ori).
53. Sunrise Associates v GovtofNCTof Delhi, (2006) 5 SCC 603: AIR 2006 SC 1908.
54. This is the onlyremedywhichthe ContractActaffords.Someotherremediesareaffordedby
theSpecificReliefAct,1963,e.g.,aninjunctiontopreventbreachorspecificenforcementof
the contract, i.e. an action forspecificrecoveryof the thingpromisedto be sold. P.R. & Co
VBhagwandas,ILR(1909)34Bom192;FinlayMuir &CoyRadhakissenGopikissen,ILR
(1909)36Cal736.Specificrecoveryisnotallowedwhenthethinginquestionisfreelyavaila
blein the market.The injuredparty shouldmeethisrequirementbypurchasingelsewhereand
then claimdamagesfor thedifferenceinprices.This approachwas adopted by theSupreme
Court in StateBankofSaurashtrav P.N.B.,(2001)5SCC751:AIR2001SC2412,the order
forrecoveryofsecuritieswasnotupheld.Therewasthealternativeprayerfordamages.The
purchaserhadalreadypaidthepriceto thebank.Thelatterwasdirectedtorefundthemoney
with areasonableamount ofcompensation.GunvantlalRatanchand vRameshbhaiP.Patel,
(2001)2 CCD1518(Guj),theoriginalclaimwas forspecificperformance.Thatbeingnot
available,an abruptshifttoclaimfordamageswithoutanypriorpleadingand proofofloss
was notallowed.C. PandurangaRao vShyamalaRao, 1999AIHC3715(AP),specificrecov
eryofpropertynotorderedinfavourof apersonwhodidnotpaynorshowedhisreadiness
andwillingnesstopay.DataAccessIndia Ltd vMTNL,(2006)126DLT617,writremedy
isgenerallynotallowedbecauseeverybreachofcontractgiwesriseto anumberoffactual
questionslikemeaningofbreach,remotenessofdamage,etc.Thiscaseinvolvedmultiparty
arrangementinvolvinganumberofbankguarantees.CityMunicipalCouncilvS.A.Lateef
and Co,AIR2004 Kant HCR 3032, the claimanthas to showbreachon the part of the other
party.Theplaintiffherecomplainedthatsub-standardmachinerywassuppliedtohim,but
evenso heaccepteddelivery,no expertopiniontaken,hencenoevidenceof anymanufactur
ingdefect.RadheshyamvLalchand,(2005)4MahLJ441,saleofproperty,thebuyeragreed
that hewouldmanagepermissionofcompetentAuthoritybutnothingwasdoneby him in
thatrespectup to the timethat thesellerresoldtoanother,the firstbuyernotallowedto sue
for specific performance.
55.SudeshPrabhakarVolvoikarvGopalBabuSavolkar,(1996)5BomCR 1, booking clerk of
theatremisappropriateda sum ofmoneymeant for deposit in thefilmexhibitor's account,
employerliable,buttheplaintiffhadtoproveloss.Thecourtsaidthat ifthelocusstandiand
quantumofdamageswasnotproved,thecasecouldnotstand.ONGCLtdvSawPipesLtd,
(2003)5SCC705:AIR2003SC2629,breachofcontractandlossmustbeproved.ChiefSecy,
StateofGujaratvKothariAssociates,(2003)3GujLR2177,principlesas todamagesstated
andappliedtobuildingcontracts.Thecourt alsosurveyedauthorities.https://t.me/LawCollegeNotes_Stuffs

607. 466 Chapter 9 Discharge by Breach [S.73]
hesendsimpurestuff, which is abreach.The oil isseizedby an inspector
and destroyed. The shopkeeper is arrested, prosecuted and convicted. He
suffersthelossof oil, thelossofprofitsto begainedonsellingit, theloss
ofsocialprestigeand ofbusinessreputation, not to speak of the time and
money and energywasted ondefenceand the mental agony and torture of
theprosecution.^^
Thus, theoretically theconsequencesof a breach may be endless,but there
must be an end to liability. Thedefendantcannotbe held liable for allthat
followsfromhisbreach.Theremust be a limit toliabilityandbeyondthat
limit the damage is said to be too remote and, therefore,irrecoverable.-'''The
problemiswheretodrawtheline.
The rule in"HadleyvBaxendale"
A very noble attempt was made as early as(1854)in the well-known case
ofHadley vBaxendale^^tosolvetheproblembylayingdowncertain rules.
CASEPILOT Theplaintiffscarriedon an extensive business as miller.Theirmill was
stopped by a breakage of thecrankshaftby which the mill was worked.
Thedefendants,a firm of carriers, wereengagedto carry the shaft to the
manufacturers as a pattern for a new one. The plaintiffs' servant told
the defendants that the mill was stopped, and that the shaft must be sent
immediately.But thedefendantsdelayedthedeliverybysomeneglect,
and the consequence was,thatthe plaintiffs did notreceivethe new shaft
for several days after they would otherwise have done. The action was
broughtfor thelossofprofitswhichwouldhavebeenmadeduringthe
periodof the delay.
AldersonB laid down the following rule:
Now we think the proper rule in such a case as the present is this:
Wheretwopartieshave made acontractwhichone ofthemhas bro
ken,thedamageswhichthe other partyoughttoreceiveinrespectof
suchbreachof contractshouldbe such as mayfairlyandreasonablybe
considered either arising naturally, i.e., according to the usual course of
things,fromsuchbreachof contractitself,or suchas mayreasonablybe
supposed to have been in the contemplation of both parties, at the time
they made the contract, as the probable result of the breach of it.
56. SeeKamKumarAgarwalavLakshmiNarayanAgarwala,AIR 1947Cal157. Inanothersim
ilar case,Bostock& Co Ltd vNicholson& Sons Ltd,(1904)1KB725, sulphuricacid sold
underfalsewarranty,sellernotknowingwhat thebuyerwanteditfor,notliableforbuyer's
lossofgoodwilland hisliabilityto hiscustomers,butonlyfordefectivegoodsanddamageto
othergoods.
57. SeeTransworth, LegalRetnediesfor Breach of Contract, 70 ColumnLR1145;Priest, Breach
and Remedyfor the Tenderof Non-confirming Goods under the UniformCommercial Code:
An Economists Approach(1978)91 Harv LR 960. Remoteness of Damages and Judicial
Discretion, (1978) Camb LJ 288; Restitution as a Remedy for Breach of Contract: The case
of a partially performing seller, (1982) YaleLJ 16.
58.(1854)9Exch341.https://t.me/LawCollegeNotes_Stuffs

608. [S. 73] Damagesforbreach467
On the basis of this principle thedefendantswere held not liable for the
loss of profits, because in the great multitude of cases of millers sending off
brokenshaftsforrepair,it does not follow in theordinarycircumstances
thatthe mill isstopped.Eventhoughit waspointedoutthatthe mill was
stoppedthere could have existed several reasons for thestoppingof the mill.
The factthatthe mill was out ofactionforwantof theshaftwas a special
circumstanceaffectingtheplaintiff'smillandthe same should have been
pointedoutto thedefendantsinclearterms.Itshouldalso have been com
municatedthattheplaintiffswouldhavesufferedunreasonableloss by way
of delay.
Thisdecisionhas always beentakenas layingdowntworules.
(i)Generaldamages
Generaldamages are thosewhicharisenaturallyin the usualcourse
ofthingsfrom the breach itself.Anothermode ofputtingthis isthatthe
defendantis liable for allthatwhichnaturallyhappensin the usualcourse
ofthingsafterthebreach.^'
[ii]Specialdamages
Specialdamages are those which arise on account of the unusual circum
stances affecting the plaintiff. They are not recoverable unless the special
circumstanceswerebroughtto the knowledge of the defendant sothatthe
possibility of the special loss was in the contemplation of the parties.
No recoveryofspecial damages when specialcircumstances
notknown
Lack of knowledge of special circumstances once again prevented recov
ery of special damages inHomevMidlandRailwayCo.^°
The plaintiffs, a firm of shoe manufacturers, contracted to supply a
quantity of shoes to a firm in London for the use of the French army at
an unusually high price. The shoes were to bedeliveredby the 3rd of
February.They consignedthe shoes with the defendant railway company
telling them that the consignment must reach by the 3rd, but notthat^
there wasanythingexceptional in thecontract.Theconsignmentwas
delayedand theconsigneerefused to accept it. The plaintiffs had to sell
theminthemarketatabouthalftheircontractprice.
In the action against the defendants for the delay indeliveringthe
shoes, they paid into the court asufficientsum tocoverany ordinary loss
59. See George T. Washington, Damages in Contract and Common Law(1932)48 LQR 90; FE
Smith, The Rule in Hadley v Baxendale(1900)16 LQR 275; Shriram Pistons and Rings Ltd
VBuckeyeMachines(P)Ltd, AIR2007 NOC 1844(Del),damagescan beclaimedfor breach
of contract if not completed evenwithin the extended period. Extension of time is not a waiver
of allrights.
60. (1873) LR 8 CP 131.https://t.me/LawCollegeNotes_Stuffs

609. 468Chapter9DischargebyBreach [S. 73]
occasionedthereby, but theplaintiffsfurtherclaimed the differencebetween
the price at which they had contracted to sell the shoes and the price which
they ultimately fetched. But it was heldthatthiswas a damage of an excep
tionalnatureand it couldnotbesupposedto have been in thecontemplation
of the railway company when itcontractedto convey the goods by the 3rd.
For the same reason loss ofprofitswas not allowed to be recovered in
BritishColumbiaSawMillCo vNettleship.^'^
Thepartsof a saw millmachinery,packedin cases, were given to the
defendant,acarrier,forcarriagetoVancouver.Oneofthecases waslost
andconsequentlyacompletemillcouldnotbeerectedandoperated.The
plaintiffclaimedthe cost of lostmachineryandtheprofitswhichcould
havebeenearnedifthemillhadbeeninstalledintime.
Thecourtallowedonly thecostinVancouverof thearticleslost.The
loss of profits to be made from theintendeduse of the mill was held to
be too remote.WillesJ gave the followingillustrationinsupportof this
conclusion:
Take the case of abarristeron his way topracticeat theCalcuttaBar,
where he may have a largenumberof briefsawaitinghim;throughthe
default of thePeninsularandOrientalCompany he isdetainedin Egypt
or in the Suez boat, and consequently sustains great loss; is the company
to be responsible forthat,because theyhappenedto know thepurposefor
which thetravellerwasgoing?^^
WillesJfurtherpointedoutthatspecial damages are recoverable only
when the special purpose of thecontract"is brought home to theparty
soughtto becharged,undersuchcircumstancesthathemustknowthatthe
person hecontractswith reasonably believesthathe accepts thecontract
withthespecialconditionattachedtoit."®^
Specialcircumstancesalreadywithinknowledgeofcontractbreaker
But in thesubsequentcase ofSimpsonvLondon&NorthWestern
RailwayCo®''the above suggestion was qualified to thisextentthatif the
special circumstances are already within the knowledge of thepartybreak
ing thecontract,the formality ofcommunicatingthem to him may not be
necessary.
61.(1868)LR3 CP499;18 LT604.
62. Corresponding to Illustration (r).This is not applicable when the contract is for sale of goods,
KandappaMudaliarvMuthuswamiAyyar,ILR(1927) 50Mad94: AIR1927Mad99.
63.Similarly,in Dominion of India v All IndiaReporterLtd, AIR 1952 Nag 32, loss by railways
of three volumes of a set of books without which the set became useless, recovery allowed
only for the lostvolumes,the goods were described only as a bundle of books without any
indication of the importance of avolume.Compare this with Hydraulic Engg Co vMcHaffie
Goslett & Co,(1878)LR 4 QBD 670, the defendant failed to supply an essential part of a
machineabout which he knew that his buyer was under a contract to supplyto a third party,
he was held liable for theplaintiff'sloss of profit.
64. (1876)LR1 QBD274.https://t.me/LawCollegeNotes_Stuffs

610. [S.73] Damages for breach 469
The plaintiffwas in the habit ofexhibitingsamplesof hisimplements
at cattleshows.Hedeliveredhissamplesto the defendant company for
consignment to the show grounds at New Castle. The consignment note
said: "must be at New Castle on Monday certain". But no mention was
made of the intention to place the goods in the exhibition. On account of
negligencethe goods reached only after the show was over.
But as the company was already aware of the object of carrying the
goods there, the plaintiff was allowed to recovernot only the loss of freight
but also the profits he would have made by placing the goods at the show.
CoCKBURNCJ said:
The principle is now well-settled that, whenever either the object of
the sender is speciallybroughtto the notice of thecarrier,or thecircum
stances are known to the carrier, from which the object ought in reason
to be inferred, sothatthe object may betakento have been in the con
templationof bothparties,damages may be recovered for thenatural
consequencesof the failure ofthatobject.
In anothercase^^a fragmentiser was purchased by the plaintiff under
ahire-purchaseagreement.Itsrotorbrokedownbeforenormallife. The
plaintiff had no means to replace it at cash price. He had to arrange it again
at a hire-purchase price and claimed the same as damages. The defendant
contended that the plaintiff had to pay hire-purchase price because of his
lack of means. This contention wasrejected.The fact that in the present cir
cumstances of economy business has to depend upon hire-purchase system,
was held to bewithinthecontemplationofparties.
Relationshipbetweentworulesre-examined ^
The relationship between the rules wasre-examinedinVictoriaLaundry
(Windsor)LtdvNewmanIndustriesLtd^^LordAsquithworkedouta
number ofpropositions^froma consideration of the leading authorities. The
substance of the propositions is asfollows:Only such loss is recoverable
as was at the time of thecontractreasonablyforeseeable as liable toresult
from the breach. Foreseeability depends upon knowledge. Accordinglywhat
was atthattimereasonablyforeseeable depends upon the knowledge then
possessedby thepartiesor,atall events, by thepartywholatercommits
the breach. For thispurpose,knowledge "possessed" is of two kinds: one
imputed, and theotheractual. Every one as areasonableperson,istaken
toknowthe"ordinarycourseofthings"andconsequentlytoknowwhat
loss is liable to result from a breach of thecontractinthatordinarycourse.
This is thesubject-matterof the "first rule" inHadleyvBaxendale.But to
thisknowledgewhichthedefendantisassumedto possessmustbe added
65. B.P.ExplorationCo (Libya)LtdvHunt(No. 2), (1981) 1WLR232 (CA).Wherethelessor
knew thepurposefor which the lesseerequiredthe premises, he was held liable for the loss of
thatpurposeduringthe delayedperiod.Jacquesv Miller, (1877) LR 6 Ch D 153.
66.(1949)2 KB528(CA).
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

611. 470 Chapter 9 Dischargeby Breach [S.73]
his actualknowledgeof thespecialcircumstances'of the case showing the
possibilityof morelossarisingfrom thebreach.Sucha case attracts the
operationofthe"secondrule" so as to maketheadditionallossrecoverable.
Thejudgmentemphasisesthat both the rulesare basedupontheprinciple
of"foreseeability".Thisgivesa "new look for Hadley v Baxendale". Now
it has been clearlyso stated byDiplockLJin C. Czarnikow Ltd vKoufos.^''
Thatthere are not two rulesformulatedinHadleyvBaxendalebut
only two different instances of the application of a single rule.
Similarly,SalmonLJobserved:^'^
Any damage actually caused by a breach of any kind of contract is
recoverableprovided that when the contract was made such damage was
reasonablyforeseeableas liable to result from the breach.
The facts of VictoriaLaundry(Windsor) Ltd vNewmanIndustriesLtd^^
wereasfollows:
A firm of launderers and dyerswantedtoexpandtheir business and,
therefore, ordered with the defendants for the supply of a boiler of much
greatercapacity.The defendants agreed todeliveron June 5, 1946, but
delayed delivery until November 8. The plaintiffs claimed as damages
the loss of profits which would have beenearnedif their business was
expanded in time as there were at the time unique businessopportunities.
Thecourtallowed£110as general damages but disallowed loss ofprof
its. On appeal the case was referred to an official referee to determinewhat
damages, in addition to £ 110, should be allowed on the basis of the knowl
edge then possessed by the parties.AsquithJ said"thatno supplier who
has promised delivery of a boilerofan unusually large size by aparticular
date, with knowledgethatit was to be put into use immediately on delivery
can reasonably contendthathe could not foreseethatloss of business would
be likely toresultfromthe delay".
TothesameeffectisthedecisionoftheHouseofLordsinMonarchSS
CoLtdVKarlshamnsOljefabriker(AIB)7°
A British vessel wascharteredin April 1939, by a Britishcompanyfor
carryingcargo of soyabeans fromManchuriato aportin Sweden. But
owing to delay caused by the vessel'sunseaworthiness,she did notreach
thatportbefore theoutbreakof war between Great Britain and Germany.
Consequently, the ship wasprohibitedfrom going to itsdestinationand
orderedtodischargeat Glasgow. Theplaintiff,who neededsoyabeans
fortheirbusiness as they were not locally available,incurredexpenses in
forwardingtheminneutralships.
67. (1966) 2 QB 695; (1966) 2 WLR1397,1497;onappeal.Heron11,The Koufos v C.Czarnikow
Ltd,(1969) 1 AC350:(1967)3WLR1491(HL).
68.Ibidat p.1422.
69.(1949)2 KB528(CA).
70.1949AC196(HL).https://t.me/LawCollegeNotes_Stuffs

612. [S- Damagesforbreach471
Itwasheldthat thelosswasduetounseaworthinessof theshipand the
defendantswereliableforit,because,inviewoftheinternationalsituation,
they shouldhaveforeseenthat war might break out and causeloss or diver
sionofthevessel.
HouseofLords restore original vitalityoftwo rules
Theinterpretationput upon theHadleyvBaxendaleprinciplesby the
Court ofAppealin theVictoriaLaundrycasehad virtuallyreplacedthe
expression"contemplationof theparties"with"reasonableman'sfore
sight" and thisbeingtheprinciplein the lawof tortalso,hardlyanydistinc
tion remained between tort and contract principles relating to remoteness
of damages. But the House of Lords in their decision in the Heron II, The
KoufosVC.CzarnikowLtd^^haverestoredthedistinctionby againlaying
emphasis upon the "contemplation of the parties".
Avesselwas chartered to proceed to Constanza, there to load a cargo
of three thousand tons of sugar; and to carry it to Basrah, or, at the char
terers' option, to Jeddah. Thevesselleft in time. A reasonably accurate
prediction of the length of thevoyagewas twenty days. But thevesselin
breach of contract made deviation which caused a delay of nine days. If
thevesselhad arrived in time, the charterer would have obtained roughly
£1 more per ton than what he actually obtained. The shipowner knew
thatthere was amarketfor sugar at Basrah, but did not knowthatthe
charterer wanted to sell the sugar promptly on arrival. The shipowner
also knewthatsugar prices were apt to fluctuate from day to day, but had
noreasontosupposethatfluctuationwouldbedownwardsratherthan
upwards. He was sued for the loss due to fall in market price. The umpire
allowed this loss. But the trial judge allowed as damages only the interest
on the value of the cargo during the period ofdelay.TheCourtof Appeal
reversed this order and restored the award of the umpire and the House of
Lords unanimously affirmed the decision of theCourtof Appeal.
LordReidemphasisedthatthe rule (or rules) laid down inHadleyv
Baxendale and which for over a century have been used for determining
remoteness of damage should not be subjected to aninterpretationwhich
would result in acontrarydecision ofthatcase. His Lordship laidparticu
lar emphasis upon the factthatinthatcase the loss of profit was caused
by the delay,buteven so thedefendantwas heldnotliablenotbecausethe
loss was not forseeable but because asAldersonB put it "it is obvious
that,in thegreatmultitudeof cases of millerssendingoffbrokenshaftsto
thirdpersonsby acarrierunderordinarycircumstances,suchconsequences
wouldnot, in allprobability,haveoccurred...".AldersonB clearly did
not and could notmeanthatit wasnotreasonablyforeseeablethatdelay
mightstop theresumptionof work in the mill. He merely saidthatin the
71.(1969)1 AC350:(1967)3WLR1491(HL).https://t.me/LawCollegeNotes_Stuffs

613. 472Chapter9DischargebyBreach [S.73]
greatmultitude—whichcanbetakentomeanthegreatmajority—ofcases
itwouldnothappen.Hewasnotdistinguishingbetweenresultswhichwere
foreseeableor unforeseeable, but between results which were merely likely
becausetheywouldhappenin thegreatmajorityofcases,andresultswhich
wereunlikelybecausetheywouldonlyhappenin asmallminorityofcases.
Heclearlymeantthat aresultwhichwillhappenin the greatmajorityof
casesshouldfairlyandreasonablyberegardedas havingbeenin the contem
plationof theparties,but that aresultwhich,thoughforeseeableas asub
stantialpossibilitywouldhappenonlyin asmallminorityofcasesshould
not be regarded as having been in their contemplation.
Applyingthistestto thefactshisLordshipconcludedthathavingregard
to theknowledgeavailableto the shipowner when he made the contract,
anyreasonablepersonin hispositionwouldhaverealisedthatsuchlosswas
sufficientlylikelyto resultfrom the breachof contract thus making it proper
to holdthatthe loss followednaturallyfrom the breach orthatthe loss of
thatkindwouldhave beenwithinhiscontemplation.
LordHodsonalso presentedthe same viewof Hadley v Baxendale.
I find guidance in the use of theexpressionin the great multitude of
caseswhichis to be found in morethanone place in thejudgmentin
Hadley v Baxendale. Itindicatesthat the damagesrecoverablefor breach
ofcontractare such as flownaturallyin most cases from the breach,
whetherunderordinarycircumstancesor from specialcircumstances
due to the knowledge either in the possession of or communicated to
the defendants. This expression throws light on the whole field of dam
agesfor breach of contract, and points to a different approach fromthat
taken intortcases. The approach intortwill normally be different sim
ply because the relationship of the parties is different. The claim against
thetortfeaserwho has inflictedtortiousdamageisnotthe same as the
claim against an oppositepartyfor breach ofcontract,for thelatterclaim
depends on the contemplation of the parties to the contract and question
ofremotenessas such doesnotarise.Consequently,liabilityintortmay
oftenbeofawiderkind.
Physicalinjuryresultingfrom breach
Thewisdomof thedistinctionbetweentortandcontractprinciples,at
any rate in reference to physical injury caused by the breach, has again
been questioned by LordDenninginParsons(H) (Livestock)Ltdv Uttley
Ingham& CoLtd7^
72. 1978 QB 791: (1977) 3WLR990(CA);H.Farsons(Livestock)Ltdv UttleyIngham& Co,
1978 QB 791:(1977)3 WLR 990,notedPersons(H) (Livestock)Ltdv UttleyIngham& Co
Ltd, 1978 QB 791: (1978) 94 LQR 171. An earlierauthorityto the same effect, Smith vGreen,
(1875) LR 1 CPD92,cow soldwarrantedas free fromdiseases,but it wasdiseased,thebuyer's
otheranimalsinfected,seller liable for the loss oflivestockandnotonly for theanimalsold.https://t.me/LawCollegeNotes_Stuffs

614. [S. 73] Damagesforbreach473
The plaintiffs were pig farmers and theypurchasedfrom the defend
ants a largehopperfor storage of pig nuts. They had alreadypurchased
one fromthemearlierand it was servingthemwell. Thehopperwas
ventilated at the top, but theventilatorhad to be kept closed and was
to be openedafterthehopperwasinstalledat theplaintiff'sfarm. The
defendantsnegligentlyforgotto open itandtheplaintiffscouldnotknow,
it being too high. The nuts stored in thehopperbecame mouldy and with
out any knowledge of the danger, they were served to the pigs. They suf
fered from a rare type ofintestinalinfection and 254 of them perished.
The defendants were held liable for the loss of the pigs but not for loss of
profits from future sales of pigs. The loss of pigs was a physical injury and
the court, feelingthatfor such injuries the principle should be the same as
intort,thedefendantswere liablefOralldamagewhichcouldreasonably
have been foreseen at the date of the breach as a possible consequence of the
breach. The loss of profits was an economiclossand the defendants were
notliable for it because it could not have beenwithintheparty'scontempla
tion at the time of thecontract.Thus, theopinionof theCourt.ofAppeal
is that Hadley vBaxendaleshould be confined to economic loss and for
physicalinjuriestheprincipleofforeseeabilitywhichoperatesin tort should
apply.^^
Damagesfor negligent surveyreport
Theapplicableprincipleshavebeen stated by the Court ofAppealin
Watts vMorrowJ'^The plaintiffs purchased a country home for £177,500
in reliance on a survey prepared by the defendant surveyor in which he
stated that overall dwelling house was sound, stable and in good condition
-althoughtherewereminordefectswhichcouldbedealtwith as part of ordi
naryongoingmaintenanceandrepair.After takingpossessionthe plain
tiffsdiscoveredsubstantialdefectsnotmentionedin thedefendant'sreport
whichrequiredurgentrepair,includingtherenewalof theroof,windows
andfloorboards.Theplaintiffscarried out repairstoremedythedefectsat
a cost of £33,961 and sought torecoverthis amount. The surveyor admit
tedliabilitybutpleadedthat itshouldnot bemorethan £15,000,beingthe
differencebetweenthepricepaid and the pricethat thehomewasworth if
thedefectsweretakenintoaccount.Thecourtheldthatthepropermeas
ure ofdamageswas thediminutioninvaluerather than the cost ofrepairs.
Applyingtheprincipleofrestitutionto thetermsofthecontract,the amount
requiredto puttheplaintiffin thepositioninwhichhewouldhavebeenif
thesurveyorhad carriedout the contractofsurveyproperlywasthe amount
bywhichhewascausedto paymorethan thevalueof thehousein its true
condition.
73. Distinction between tort and contract is breaking down at many points. SeeFridman, (1977)
LQR482.
74. (1991) 1WLR1421 (CA).https://t.me/LawCollegeNotes_Stuffs

615. 474Chapter9DischargebyBreach [S. 73]
CASEPILOT
Section73oftheContractAct
The same principles are applicable inIndia.The PrivyCouncil,for
example,observedinA.K.A.S.JamalvMoollaDawoodSons& that
Section 73 isdeclaratoryof thecommonlaw as todamages.Similarly,
PatanjaliSastriJ(afterwardsCJ) of the SupremeCourtobservedin
PannalalJankidasvMohanlaF^"thatthepartyin breach must make com
pensationin respect of the direct consequences flowing from the breach and
not in respect of loss or damageindirectlyor remotelycaused".^^The section
provides:
S. 73.Compensationforlossordamagecausedbybreachofcon
tract.—Whenacontracthasbeenbroken,thepartywho suffers by suchbreach
isentitledto receive, fromtheparty who has brokenthecontract,compensa
tion for any loss ordamagecausedto him thereby, which naturally arose inthe
usual course of things from such breach, or which the parties knew, when they
madethecontract,to be likelyto result fromthebreachofit.
Suchcompensationis not to be given for anyremoteand indirect loss or
damagesustainedbyreasonofthebreach.
Compensationforfailuretodischargeobligationresemblingthosecre
atedbycontract.—Whenan obligation resemblingthosecreatedbycontract
has been incurred and has not been discharged, any person injured by thefail
ure to discharge it isentitled to receivethe same compensation from the party
in default, as ifsuch person hadcontractedto discharge it and had broken his
contract.
Explanation.—Inestimatingthelossordamagearisingfrom a breach of con
tract, the meanswhichexisted of remedyingtheinconveniencecaused by the
non-performanceofthecontractmustbetakenintoaccount.
Illustrations
[Marketpricecriterion].—(o)A contracts to sell and deliver 50 maunds of saltpetre tofi,
at a certain price to be paid on delivery. A breaks his promise. Bisentitledto receive from A,
bywayofcompensation,the sum,ifany,bywhichthe contractpricefallsshort ofthe price
for whichS might have obtained 50 maunds of saltpetre oflikequality at the time when the
saltpetreoughtto havebeendelivered.
[Extracostofhiringalternativeship].—{b)AhiresB'sshipto go toBombay,and there takes
on board, on the firstofJanuary,a cargo,which,Aisto provide and to bring itto Calcutta,the
freightto be paid when earned.B'sship does not go toBombay,but Ahas opportunities of
procuring suitable conveyance for the cargo upon terms asadvantageousas those on which
75.(1915-16)43lA6;ILR(1916) 43Cal493: (1916) 1 AC 175.
76. AIR 1951 SC 144, 153: 1950 SCR 979:(1951)21 Comp Cas 1.
77.Similarly,KaniaCJ of theSupremeCourt observed in PannalaljankidasvMoiianlal,AIR
1951 SC 144: 1950 SCR 979:(1951)21 Comp Cas 1 that the rule stated byAldersonB has
consistentlybeenacceptedascorrect;the onlydifficultyhas beeninapplyingit. TheSupreme
Court held inAslhingv L.S. John,(1984)1 SCC 205: AIR 1984 SC 988 that repudiation
by one party puts an end to the contract although the right to sue fordamagessurvives.
Accordingly,thedisqualificationby virtue of aGovernmentcontract of holding anofficeof
profit under the Statevi^ouldend as soon as the contractorgivesup the contract.https://t.me/LawCollegeNotes_Stuffs

616. [S. 73] Damagesforbreach475
he hadcharteredtheship. A avails himself ofthoseopportunities,butisputtotroubleand
expenseindoingso. A isentitledto receivecompensationfrom Binrespectof suchtrouble
andexpense.
[Seller's loss on resale], — (c)Acontractstobuyof S, at astatedprice, 50maundsof rice,
notimebeingfixed fordelivery.Aafterwardsinforms6thathe willnotaccepttherice if
tenderedto him. Bisentitledtoreceivefrom A, by way ofcompensation,theamount,if any,
by whichthecontractpriceexceedsthatwhich Bcanobtainfortherice atthetimewhenA
informsBthathe willnotacceptit.
[Shipseller's loss on resale ofship],—(d)AcontractstobuyB'sship for60,000rupees,but
breakshispromise.A must pay to8,by way ofcompensation,theexcess, if any, ofthecon
tractpriceovertheprice which 6 canobtainfortheship atthetimeofthebreachofpromise.
[/.OSSof valuecausedby delay in transit],—(e) A,theownerof aboat,contractswith B to
takeacargoofjutetoMirzapur,for sale atthatplace,startingon aspecifiedday. Theboat,
owingtosomeavoidablecause,doesnotstartatthetimeappointed,wherebythearrival
ofthecargoatMirzapurisdelayedbeyondthetimewhenitwouldhavearrivediftheboat
hadsailedaccordingtothecontract.Afterthatdate,andbeforethearrival ofthecargo,
theprice ofjutefalls. Themeasureofthecompensationpayableto Sby/Aisthedifference
betweentheprice which Bcouldhaveobtainedforthe'cargo atMirzapuratthetimewhen
itwouldhavearrivedifforwardedinduecourse,anditsmarketpriceatthetimewhenit
actuallyarrived.
[Deficienthouserepairingservice],— (0 AcontractstorepairB'shousein acertainmanner,
andreceivepaymentinadvance./!repairsthehouse,butnotaccordingtocontract.Bisenti
tledtorecoverfrom Athecostofmakingtherepairsthatconformtothecontract.
[Differencein hiring charges ofship],—{g)Acontractsto let his ship to Bfor a year, fromthe
first of January, for a certain price. Freights rise, and on the first of January,thehireobtain
ablefortheship ishigherthanthecontractprice. Abreakshispromise.Hemustpay to 6,
by way ofcpmpensation,a sum equal to the differencebetweenthecontractprice andthe
price for which Bcould hire a similar ship for a year on and fromthefirst of January.
[Buyer'sbreach, differencebetween marketandcontract prices],—(h) Acontractsto supply
Bwith a certainquantityof iron at a fixed price, being ahigherpricethanthatfor which A
couldprocureand delivertheiron. Swrongfullyrefuses to receivetheiron. Bmustpay to A,
by way ofcompensation,the differencebetweenthecontractprice of the iron and the sum
forwhichAcouldhaveobtainedanddeliveredit.
[Delaycaused by carrier,Hadley v Baxendale module],—(/) A delivers toB,acommoncar
rier,a machine, to beconveyedwithoutdelay, to A'smill,informing Bthathis mill isstopped
forwantofthemachine.Bunreasonablydelaysthedelivery ofthemachine,and A inconse
quence, loses a profitable contract with the Government. Ais entitled to receivefromB,by
way of compensation, the average amount of profit which would have been made by the
workingof themillduring the time that deliveryof it was delayed, but not the losssustained
throughtheloss oftheGovernmentcontract.
[Knowledgeof resale,lossofprofit],—{])A,havingcontractedwith Bto supply Bwith1000
tons of iron at100rupeesa ton, to be delivered at astatedtime,contractswithCforthepur
chaseof1000tonsof iron at 80rupeesa ton, telling Cthathedoesso forthepurposeof per
forming hiscontractwithB,Cfailsto perform hiscontractwith A,whocannotprocureother
iron, ande,inconsequence,rescinds the contract. Cmust pay to A20,000 rupees, beingthe
profit which Awould have made by theperformanceof hiscontractwithB,
[Where no knowledge of resale agreement, no more than market difference recovera
ble].—(/f)contractswith S to make and deliver tofi,by a fixed day, for aspecifiedprice a
certain piece of machinery.Adoes not deliverthe piece of machinery at the time specified,
and, inconsequenceof this, S is obliged to procureanotherat a higher price thanthatwhich
he was to have paid to A,and ispreventedfrom performing acontractwhich B had made
with a thirdpersonatthetime of hiscontractwith A (but which had notbeenthencommu-https://t.me/LawCollegeNotes_Stuffs

617. 476Chapter9DischargebyBreach [S. 73]
nicatedtoA],andiscompelledtomakecompensationforbreachofthatcontract.Amust
pay to B,by way ofcompensation,thedifferencebetweenthecontractprice ofthepieceof
machineryandthesum paid by Bforanother,butnotthesum paid by Btothethirdperson
bywayofcompensation.
[Buildingcontract],—(/)A, abuilder,contractstoerectandfinish ahousebythefirst of
January,inorderthatB may givepossessionof it atthattimeto C,towhom6 hascontracted
to let it. A isinformedofthecontractbetweenB and C.A buildsthehouseso badlythat,
beforethefirst ofJanuary,it fallsdownandhas to berebuiltby B,who, inconsequence,loses
therentwhichhewastohavereceivedfromC,andisobligedtomakecompensationto C
forthebreachof hiscontract.AmustmakecompensationtoBforthecostofrebuildingthe
house,fortherentlost,andforthecompensationmadeto
[Breachofwarrantyas toqualityofgoods],—(m)A sellscertainmerchandiseto B,warrant
ing it to be of aparticularquality,and6, inrelianceuponthiswarranty,sells it to Cwith a sim
ilarwarranty.Thegoodsprove to be notaccordingtothewarranty,and Bbecomesliable to
pay C a sum ofmoneyby way ofcompensation.Bisentitledtobereimbursedthissumby A,
[Defaultinpaymentofmoney],—(n)Acontractsto pay a sum ofmoneyto 6 on a dayspec
ified. Adoesnotpaythemoneyonthatday; 6, inconsequenceof not receivingthemoney
onthatday, isunableto pay hisdebts,andistotallyruined.A isnotliable tomakegoodto
Banythingexcepttheprincipal sum hecontractedto pay,togetherwithinterestup tothe
day ofpayment."
[Marketpriceandnot loss of profit],—(o)Acontractstodeliver50maundsofsaltpetreto B
onthefirst of January, at acertainprice. Bafterwards,beforethefirst ofJanuary,contractsto
sell thesaltpetreto Cat a pricehigherthanthemarket price ofthefirst ofJanuary./Abreaks
hispromise.Inestimatingthecompensationpayableby A to B,themarketprice ofthe1
January,andnottheprofitwhichwouldhavearisento BfromthesaletoC, istobetaken
intoaccount.
[Defaultingsellernotliable for closure of mill],—(p) Acontractsto sell and deliver 500 bales
ofcottontofion a fixed day. A knowsnothingof B'smodeofconductinghis business. A
breaks his promise, andB,having nocotton,isobligedto close his mill.A is notresponsible
to Bforthelosscausedto B bytheclosing ofthemill.
[Defaulting sellernotliable for loss of season],—{q) Acontractsto sell anddelivertoS, on
thefirst of January, certain cloth which Bintendstomanufactureinto caps of aparticular
kind, for whichthereis nodemand,exceptatthatseason.The cloth isnotdeliveredtillafter
theappointedtime, andtoolate to be usedthatyear in making caps, Bisentitledto receive
from A, by way ofcompensation,thedifferencebetweenthecontractprice ofthecloth
and itsmarketprice atthetimeof delivery,butnottheprofits which heexpectedtoobtain
by making caps, northeexpenseswhich he hasbeenputto in makingpreparationforthe
manufacture.
[Carrierofpassengers causingdelay],—(r)A,a ship-owner,contractswith S to convey him
from Calcutta to Sydney in/A'sship, sailing on the first of January, and Bpays to A,by way of
deposit,one-halfof hispassage-money.The ship does not sail on the first of January, and
B,after being inconsequence,detainedin Calcutta for some time, andtherebyput to some
expense,proceedsto Sydneyinanothervessel, and, inconsequence,arrivingtoo late in Syd
ney, loses a sum of money. Ais liable to repay to Bhisdeposit,withinterest,andtheexpense
78. First Consolidated vFaduEhsan, (1994) 1 Curr LJ375 (Malaysia),in computing loss of prof
its in their claim for damages theplaintiffsubmittedthe costing done by a witness who was
not a qualified surveyor, neverthelessholdingexperiencein this work. Thedefendantdid not
offer evidence of what would be the fair costing. In thecircumstances,the submission of the
plaintiffwasaccepted.
79. JayContainerServicesShipping(P)LtdvS,D,S,Shipping(P) Ltd, (2003) 3 Bom CR 163,
future rent not allowed to be recovered either as damages or as money due.https://t.me/LawCollegeNotes_Stuffs

618. [S.73] Damages for breach 477
to which he is put by hisdetentionin Calcutta, andtheexcess, ifany, ofthepassage-money
paid for the second ship overthatagreedupon for the first, but not the sum of money which
6lost by arriving in Sydneytoolate.
Section 73 incorporates two rules of "Hadley v Baxendale"
The section declaresthatcompensation is not to be given for any remote
or indirect loss or damage sustained by reason of thebreach.^"The section
alsoprovidesthat the sameprincipleswill apply where there has been a
breach of aquasi-contractualobligation.®^
Thesectionthus clearly laysdowntwo rules.Compensationis recovera
ble for any loss ordamage—
[i]arising naturally in the usual course of things from the breach, or
{ii)which the parties knew at the time of the contract aslikelyto result
fromthebreach.
The first rule is "objective" as it makes the liability to depend upon a
reasonableman'sforesightof the loss that will naturallyresukfrom the
breach of thecontract.The second rule is "subjective" as, according to it,
the extent of liabilitydependsupon theknowledgeof the parties at the time
of the contract about the probable result of thebreach.®^
80. State ofRajasthanvNathuLai,AIR2006Raj19,recoveryofamountforbreachof con
tract without taking decision on the fact of breach not proper.U.P.State Sugar Corpn v
Mahalchand M. Kothari, (2005)1 SCC348: AIR 2005 SC61,receiverof sugar mill appointed
forrecoveringduesof canegrowersas arrears of landrevenue,hecontractedtosupplysugar
but failed to do so. The other party could not sue him. Suit could lie against the corporation
into which the sick sugar mill was merged.
81.Therightofactiondependsuponproofofbreach.InStateofKarnatakavShreeRameshwara
RiceMills,(1987)2SCC160:AIR1987SC1359,the contractprovidedthatdamageswould
beassessedbytheGovernmentand it washeldthat theGovernmentwasnot the properparty
todeterminewhether a breachhad taken placeor not. To the sameeffect,VairappaThevar
VTehsildar,(1989)1 MLJ 387; P.O. Rajput v State of M.P., AIR 1993 MP 107:(1994)1
MPLJ387,roadbuildingcontract,Governmentcausingsomedelaybutextendingtime,the
contractorthereafterneglectedthe-work,held,no breachon the part of theGovernment,writ
remedynotallowedtoenforceacontractbetweentheStateandcitizen.AmarSinghv UT
ofChandigarh,AIR1993P&H100.Butinitialdepositamountwasorderedto berefunded
underwritjurisdictionwhentheGovernmentstoppedworkingandthedisputewasnotabout
damagesforbreachofcontract.Krishna&CovGovtofA.P.,AIR1993AP1.Theplaintiff
hasalsotoprovehisloss.Wherelossisnotprovable,reasonablecompensationisawardedon
the basis of the material before the court, English Electric Co of India Ltd v Cement Corpn
of India Ltd, 1996AIHC1875(Del).
82.SeeMurrayPickering,TheRemotenessofDamagesinContract,(1968)31Mod LR203,
where the learned writer considers the decision of the House of Lords in theHeronII, The
KoufosVC.CzarnikowLtd,{1969)1AC350:(1967)3WLR1491(HL)andtracesthe
"objective"and"subjective"natureof therulesinHadleyvBaxendale,(1854)9Exch341.
ForexamplesofbreachseeM.P.MinesLtdv RaiBahadurShriramDurgaPrasad(F)Ltd,
(1972)3SCC180:AIR1971SC1983;StateofKeralavCochinChemicalRefineriesLtd,
AIR 1968 SC 1361:(1968)3 SCR 556; Ganpati Salt Worksv State of Gujarat, AIR 1995 Guj
61,nocompensationongroundofequitywheretheclaimanthaddupedthepartytothelease
andhadgrabbedtheGovernmentleaseforhimself.FoodCorporationofIndiavBabulal
Agrawal,(2004)2SCC712,agreementtoprovidepremisesonleaseforthreeyearsafter
construction,refusedto do so,heldbreachactionableindamages.Ex-ServicemenSecurityhttps://t.me/LawCollegeNotes_Stuffs

619. 478Chapter9DischargebyBreach [S. 73]
The burden of proof lies on the plaintiff to showthatdamage has been
sustained and what shall be the measure of converting the loss into money,
A claim for damages becomes liable to be rejected where thisburdenis not
discharged.^^
Liabilityinordinarycases
The extent of liability inordinarycases is what may be foreseen by "the
hypothetical reasonable man", as arisingnaturallyin the usual course of
things.OneillustrationisthedecisionoftheMadrasHighCourtinMadras
RailwayCoVGovindaRau}"^
The plaintiff, who was a tailor, delivered a sewing machine and some
cloth to the defendant railway company to be sent to a place where he
expected to carry on his business with special profit by reason of a forth
comingfestival.Through the fault of thecompany'sservants the goods
weredelayedin transmission and were notdelivereduntil some days after
the conclusion of the festival. The plaintiff had given no notice to the
company of his specialpurpose.
Heclaimedasdamagestheexpensesoftravellingup to the placeof festi
val and of staying there and the loss of profits which he would have earned.
Thecourtheldthatthe damages claimed were too remote. All of these were
due to the frustration of the special purpose andthatwas not known to the
company.FazalIlahivEastIndianRly isanotherillustrationof the
samekind.
The plaintiffdeliveredto thedefendantrailwaycompany'sparcel
officeatCawnporefourboxesofChinesecrackersforconsignmentto
Allahabad where he needed them for afestivalon 5th June, but he did
notdisclosethe purpose.Thecompany'sservantsconsideringitunsafeto
sendcrackersbyparceltrain,actuallysentthembygoodstrain and they
reachedonly after theconclusionof thefestival.Thecompanyrequired
himto takedeliveryonpaymentofadditionalfreight,whichherefusedto
pay and,therefore,thecompanysold the goods at a nominal price.
Hesuedtherailwaycompany.The courtdisallowedthe claimforprofits
whichwouldhavebeenmade,as theplaintiff'sspecialpurposewas not
Bureauv T.N. ElectricityBoard,AIR2003 NOC 13(Mad),securitypersonnelwereprovided
bytheplaintiffs(Bureau)to thedefendants(SEE).Oneof thetermswasthat theplaintiffs
wouldbeliablefor anylossdue to theinvolvementof thepersonnel.Theft tookplace.No
allegationsofinvolvementofpersonnel.No FIR againstthem. The plaintiffswereentitledto
theirsecuritycharges.
83.DraupadiDeviVUnionofIndia,(2004) 11 SCC 425.
84. ILR(1898)21 Mad 172.Damagescannot berecoveredby a person who does not do his
dutyunderthecontract,e.g.apersonwhoseelectricitysupplyissuspendedfornon-payment
ofbills.PatelDadubhaiNarsibhaiv GujaratEB,(1990)1GujLR673.Butdamageswere
allowedwheretherewasa longdelayinrestoringsupplyafter allrequirementswerefulfilled.
GujaratElectricityBoardvK.R.Patel, (1988) 2 GLH 169.
85.ILR(1921)43All623.https://t.me/LawCollegeNotes_Stuffs

620. [S.73] Damagesforbreach479
withintheknowledgeofthecompany.®^Butthe plaintiffsucceededinrecov
eringthecostpriceofhisgoodssoldbythecompanyinbreachofthe con
tractand Rs 100 as damages and other incidental expenses.
Evenwherethegoodsarealtogetherlostintransit,thecarrierisnotliable
forthelossofprofitswhichwouldhavebeenmadebysellingthegoodsat
theirdestination.®^
Proofofloss isnecessary
In aclaimforgeneraldamagestheplaintiffhas toassertthat he has
sufferedsomelossbut for thepurposeofclaimingspecialdamageshe has
specificallytopleadandprovethathehassustainedsuchspecialloss.®®In
aclaimofcompensationfordamagetoconsignment,nodetailsas toloss
werementionedintheplaint.It isnecessarythatsomelossshouldbeshown
byevidence.Themerefactthatthecarrieradmitteddamagewasheldtobe
notsufficientto entitle theconsigneeto obtain a decree for compensation
without proof of actualloss.®^
Buildingcontracts
Sinceworks andbuildingcontracts are undertaken only with aviewto
earningprofits,thepartycommittingthebreachwouldbeliableforthecon
tractor'slossintermsofexpectedprofits.TheSupremeCourtcameto this
conclusioninA.T.BrijPaulSinghv State ofGufarat.^°
AGovernmentbuildingcontractwasallottedthroughtenders.Itfellto
the share of a Poona-based contractor whotransportedhismobile work
shopfromtheretoworksiteatRajkotinGujarat.Hehaddoneonlya
partoftheworkwheintheGovernmentunjustifiablyrepudiatedthecon
tract. Thecontractorsuedfor loss of profits.
ItwasnotdisputedbeforetheSupremeCourtthatwherein aworkscon
tractthepartyentrustingtheworkcommitsbreach,thecontractorwould
beentitledtoclaimdamagesforlossofprofitwhichheexpectedfrom
theproject.The courtnoted,anobservationinHudson'sBuildingand
EngineeringCoNTRACTS^^thatin major contracts subject to competitive
86.UnionofIndiawHariMohanGhosh,AIR1990Gau14:(1990)1GauLR(NOG)31,railyvay
administrationheldnotliablefortrader'sexpectedprofitsforthelossofhiscbnsigh^i^t.
when theadministrationwashotaware of the object of his dispatch.
87.Ibid.Aconsigneetowhomaconsignmenthadbeendelayedwasnotallowedtorecoverdam-.
agescausedbytheclosiireofhisfactory.UnionofIndiavPanipatWoollenMillsCoLtd,AIR
1967Punj497^-ShawWallace&CoLtdvUnionofIndia,(2004)5GTG308,partofthe.
goodsweredeliveredina,damagedcondition.PortTrustadmittedthedamagedcondition,
damagebeing-inthe'courseofconsignment,theconsigneewasentitledto.claimdamages.
UnionofIndiavHariShdnkerGauriShanker,2005AllLJ2200,thecargowasdamageddue
topercolatidnofrainwaterintpthewagon.Itshowedthatthewagonwasdefective.Railway
could not be absolvedof itsiiability.-
ChiefSecy,'StateofGuiaratyKothari&Associates, CCD2,71
89.ShippingCorpnofIndiaLtdvBharatEarthMoversLtd,(2010)2MWN(Civ)1. ..
90.(1984)4SCG55:AIR1984SC1703. '",
91.(10thEdn,1970).'.5;;https://t.me/LawCollegeNotes_Stuffs

621. 480 Chapter 9DischargebyBreach [S.73]
tender on a nationalbasis,theevidencegiveninlitigationon many occa
sionssuggeststhat the headofficeoverheadsand profitisbetween3 to 7 per
cent of thetotalprice of costw^hichis added to the tender. Thecourtaccord
inglyallowedRs2lakhsascompensationunderthehead"lossofprofits"
overandaboveotherclaims.'^
In a contract for the construction of aswimming-pool,the depth of the
poolhappenedto beonly6feet9incheswhereasthebuildingcontract
requiredit to be 7 feet 6 inchesand at thedivingpoint it was not more than
sixfeet.This resultedin a claimfordamagesfordefectiveconstruction. The
TrialJudgefoundthat the poolwasperfectlysafefordivingand that the
shortfallin depthmadenodifferenceto thevalueofthepool.Healsofound
that itwouldcostabout£21,000tocurethedefectbydiggingthepool
deeper.Itwasquitelikelythatevenafterreceivingtheaboveamount,the
ownermightnotspendonrepair.Heheldthat theappropriatemeasureof
damageswasthedifferenceinvaluebetweenthepoolasitwasandthepool
as itshouldhavebeenif the contractwasproperlyperformedandallowed
£2500.The Court of Appeal reversedthis and allowed the full cost of cure.
ButtheHouseofLordsrestoredthedecisionof the trialjudge.®^
Some earlier cases on the subject were also decided either on the basis of
costofcure ordifferenceinvaluedependingon whetherin thecircumstances
of thecase,curewouldbereasonableorwhetherrecoveryon thebasisof
difference in valuewouldbereasonable.Thelatterwouldbe morereasona
blewherethebuilding,thoughdefective,isneverthelesssubstantiallyuseful.
Thecostsofrectificationevenifrecovered,maynot besoused.^'*
Anapproach,of thiskindwas also to be seen in aNewYorkdecision
where two principles were stated: "first, the cost of reinstatement is not the
appropriatemeasureofdamagesiftheexpenditurewouldbeout ofallpro
portionto thegoodstobeobtained,and,secondly,theappropriatemeasure
92. See further State of Kerala v K. Bhaskaran, AIR 1985 Ker 49. In a works contract the
Governmentundertook theresponsibiHtyofsupplyingcementbut failed to do so. The con
tractor wasallowedtorecover10 per centestimatedprofitsas theGovernmentdid not con
trovertit. InBasildonDistlCouncilvJ.E.Lesser(Properties)Ltd,1985QB839:(1984)3
WLR812,in abuildingcontractunderwhichitwastheresponsibilityof thecontractorto
designandconstructdwellings,hewasnotallowedthedefenceofcontributorynegligence
againsthisliabilityfordefectivedesignandexecution.PishoriLaiMaggovDDA,1997
AIHC1579(Del),thearbitratorallowedrecoveryto theextentof10percentprofiton the
estimatedcosts,thecourtaffirmedtheaward.MetroElectricCovDDA,AIR1980Del266,
clauseprovidingfor10percentextracosts,upheld.GovtofA.P.vV.SatyamRao,AIR1996
AP288,contractorpreventedfromcompletingcontractbecauseofbreachonthepartofthe
Government,awardofdamageson thebasisoflossofprofitswhichthe contractorcouldhave
derivedfromtherestofthework.C.T.XaviervP.V.Joseph,AIR1995Ker140,10percent
ofthetotalvalueofthecontractallowedtothecontractorbywayofdamagesforbreachof
contract.
93.RuxleyElectronicsandConstructionLtd vPorsyth,1996AC344:(1995)3WLR118.
94.SeeEastHamBoroughCouncilvBernardSunley&SonsLtd,1966AC406(HL)andJacob
&YoungsIncvGeorgeE.Kent,(1921)230NY239,NewYorkCourtofAppeal.https://t.me/LawCollegeNotes_Stuffs

622. [5.73] Damagesforbreach481
ofdamagesisthedifferenceinvalue,eventhoughitwouldresultin anom
inalaward."'^
Delay suffered by builder
Thebuilderwasrequiredtocompletetheworkwithin18monthsbutby
reasonofdelayscausedbytheDepartment,it took 27monthsto becom
pleted.Thebuildersuffereditemiseddamageswhichheprovedbyleading
oralevidence.The amount claimedbeingreasonablewasdecreed.^*^
Scheme forallotmentof plots
Damagesformentalpainandanguishcannotbeawardedin acasein
whichthereis abreachon the part of adevelopmentauthorityindelaying
thecompletionofthescheme.Itisnotaheadofdamagesinordinarycom
mercialcontracts.The court,however,allowedinterest at the rate of 12
percentontherefundableamountthoughtherewasnoprovisioninthe
contractto thateffect.Itwasjustifiableonequitablegrounds.Thebrochure
of theschemeclearlyexcludedtheliabilityof theauthorityto payinterest
incasesof refund ofconsideration.It was heldthat thisclausewouldapply
onlytocasesinwhichtheclaimanthimselfhasbroughtaboutthecircum
stancesofrefund.'^
Aworkscontract wasrescindedon thegroundthat thecontractorhad
notcompletedwithinthestipulatedtimeeven10percentoftheworks.But
evidenceshowedthat the contractwasimproperlyrescindedand,therefore,
it amounted to a breach of contract. The contractor claimedRs20,000as
compensation,being10percentofthevalueofthecontract.Thecourtsaid
that thecontractorwasentitledtoclaimdamagesforlossofprofitwhichhe
expectedfromtheproject.Hisclaimwasheldtobefullyjustified.TheHigh
Courterredinholdingthattheclaimshouldhavebeenbasedonactualloss
suffered.'^
957Ja^^F&Y^gsIncvGeorgeE.Kent,(1921)230NY239.LordLloydextractedthis
statementfromthejudgmentofCardozoJ, intheabovecase.SeeRuxleyElectronicsand
ConstructionLtdvForsyth,1996AC344i(1995)3WLR118.SeealsoAndrewPhang,
Subjectivity,ObjectivityandPolicy—ContractualDamagesintheHouseofLords,(1996)
JBL.GautamConstructions&FisheriesLtdvNationalBankforAgricultureandRural
Development,(2000)6SCC519:AIR2000SC3018,basementareanotallowedtobe
equatedwithofficeareaforratepurposes.ArmyWelfareHousingOrganisationvSumangal
Services(P)Ltd,(2004)9SCC619:AIR2004SC1344,statementoffactorsrelevantfor
determiningdamagesinabuildingcontract.PremierExplosivesLtdvSingareniCollieries
CoLtd,AIR2010AP107,contractorrefusedtogofurtherwithperformancebecauseof
hardship,thecourtdidnotacceptthedefenceofimpossibility,theaggrievedpartyinvoked
bankguaranteeandalsoriskpurchaseclause,thecourtregardedthisasproper.
96.ChiefSecy,StateofGujaratvKothari&Associates,(2003)1GCD372(Guj),1270interest
wasallowedfromthe date of legalnotice.
97.GDAVUnionofIndia,(2000)6SCC113:AIR2000SC2003.Thecourtnoteditsowndeci
sioninSovintorg(India)LtdvStateBankofIndia,(1999)6SCC406:AIR1999SC2963,
whereinsimilarcircumstancestheNationalConsumerDisputesRedressalCommission
directedtheamountdepositedbytheclaimanttobereturnedwithinterestat12percentand
theSupremeCourt enhanced it to 15 per cent.
98.DwarakaDas vStateofM.P.,(1999)3SCC500:AIR1999SC1031.https://t.me/LawCollegeNotes_Stuffs

623. 482Chapter9DischargebyBreach [S.73]
Wherefullpaymentwasreceivedforthehousebutthesamewasnotpro
vided,compensationcould not beawardedbecause theallotteesubmitted
no particulars of hisloss.He was allowed18per centinterest on the amount
paid.''
Auctionsaleofproperty
Thehighestbidderwas tomakepaymentof a part of theconsideration
money.Buthecouldnotdosoevenafterextensionoftime.Subsequentlyhe
himselfsurrenderedhisclaimandaskedforrefundofhisinitialdeposit.His
prayerthat heshouldnotbecompelledto handovertheassetsgivento him
undertheprojectto othertendererwasrejected,butforfeitureofhisearnest
moneywasheldto be arbitrary andillegal.^""
Differencebetweeiimarketpriceandcontractprice
(saleandsupplytransactions)
In asaletransaction,damagesaregenerallyawardedon thebasisof the
differencebetweenthecontractpriceandmarketprice.Ifthesellerdefauhs,
thebuyermayhavetobuyelsewhereatanextracost.Ifthebuyerdefauhs,
thesellermayhavetomakeaforcedsalewhichmaybringhimlessmoney
than what he would have obtained under the contract.Suchdifferenceis
recoverableasdamages.Thefactthatbecauseoftheseller'sdefault,the
buyercouldnotcarryoutproductioninhisfactoryandsufferedlosses,
suchlosseswereheldtobenotrecoverablebeingaremoteconsequence.
Thebuyerwasunderadutytokeephislosstotheminimumbybuyinghis
materialelsewheresoastokeephisbusinessgoing.^°^
TheSupremeCourthasbeengenerallyfollowingtheseprinciplesinitsvar-
iousdecisions.OnesuchdecisionisMurlidharChiranjilalvHarishchandra
Dwarkadas}°^
TherewasacontractforsupplyingcanvastobeconsignedtoCalcutta,
freeonrail(f.o.r.)'"^Kanpur;Thetransportandlabourchargeswereto
bebornebythebuyer.ThesellerfailedtosupplyatKanpurandtheques
tionwaswhetherdamagesweretobeassessedaccordingtoKanpuror
Calcuttapricesandwhetherthesellerwasentitledtoprofitswhichhe
couldhavemadeonresaleatCalcutta.
WanchooJ(afterwardsCJ)heldthat thegoodsweredeliverableat
Kanpurand,therefore,damagesshouldbeassessedaccordingtothediffer
encebetweencontractandmarketpricesatKanpur,forthatwastheonly
99.KrishnaD.SinghvPavanT.Puniabi,.{2004)1BomCR551.
100.AshokKumarSinhayBiharStateFinancialCorpn,AIR2009Jhar42.
101.SarvarayaTextilesLtdvN.Rajagopal&Co,2005AIHC3372(AP).
102. AIR 1962 SC 366: (1962) 1 SCR 653.
103.Thatis,thegoodsweretobedeliveredatKanpurwherethesellerwasresponsibleforloading
thegoodsontothetrainforCalcutta.Thiswasthepointofdivisionofresponsibilitybetween
the seller and the buyer.https://t.me/LawCollegeNotes_Stuffs

624. [S,73] • Damagesforbreach483
losswhich would be said tohavearisen naturally in the usualcourseof
thingsfromthebreach.Thelearnedjudgereferredtotwoprincipleswhich
he considered to be well-settled. One isthatas far as money can do it, the
aggrievedpartyistobeputinasgoodasituationasifthecontracthadbeen
performed.Thisisqualifiedbythesecondprinciplewhichimposesupon
thebuyerthedutytotakereasonablestepstomitigatetheconsequencesof
thebreach.Thesetwoprinciplesalsofollowfromthe lawaslaiddownin
Section73readwiththeExplanationtherefor.Herethecontractwasto be
performedatKanpurand,therefore,thebuyershouldhaveprovedthedif
ferenceinpricesatKanpurwhichhedidnotdoand,accordinglythecourt
said: "On this state of theevidenceit could not be said that any damage
naturally arosein the usualcourseofthings."
Thebuyercontendedthatthesellerknewthatthegoodswererequired
atCalcuttaand,therefore,itwasinhiscontemplationthatthelosswould
besufferedat Calcutta. He reliedupon R.&H. Hall Ltd vW.H.PirnJunior
Go'sArbitration^"^and VictoriaLaundry(Windsor)LtdvNewman
IndustriesLtd^°^Distinguishingthepresentcasefromthese,thelearned
Judge observed:
Theyarecasesofaspecialtype;inonecasethepartiesknewthat
goodspurchasedwerelikelytoberesoldbeforedeliveryandtherefore
anylossthatbythebreachofcontractmayeventuallyresultmayinclude
lossthatmayhavebeensufferedbythebuyersbecauseofthefailureto
honour theintermediatecontract of resale made by them; in theother
case,thegoodswerepurchasedbythepartyforhisownbusinessfora
particularpurposewhichthesellerswereexpectedtoknowandifany
lossresultedfromthedelayinthesupply,thesellerswouldbeliablefor
thatloss,iftheyhadknowledgethatsuchlosswaslikelytoresult.
Inthepresentcase,ontheotherhand,theonlythingthatthesellerknew
wasthatthegoodsweretobebookedtoCalcuttafromwhichthecourt
refusedtoinferthatthegoodsweremeantforresaleorforresaleinCalcutta
alone.ThebuyercouldhavesoldtherailwayreceiptatKanpuritself,orat
any otherplace."®
104.1928All ER Rep 763.
105. (1949) 2 KB 528(CA).
106.Wherethegoodscontractedtobesoldarenotmarketablemthesensethattheycannot
besoldelsewhere,thepricefixedinthecontractistheappropriatemeasureofdamages.
TheStateElectricityBoardhadrefusedtotakegoodsafteracceptingtender,PunjabSEBv
^^AbnashTextileTradingAgencies,AIR1986P&H323;PravaraSahakariSakharKarkhana
LtdVExpressIndustrialCorpn,AIR2002Bom185,sellerfailedtodeliverbalanceofthe
goods,thebuyerwasnotabletoshowanylossinproduction,hewasallowedRs25,000
(estimatedamount)becauseofthebreachofthecontract.ThyssenStahlunionGmbHv
SAIL,AIR2002Del255,thepartytothearbitrationprovednoloss,thearbitratorcouldnot
haveawardeddamages.InternationalGeneralElectric(India)LtdvHaradhanSasmal,AIR
2005Cal308buyerrefusingtotakegoodswhichweremadetohisorder.Boundtopaythe
pricewithinterestforlatepayment.V/OTvazhpromexportvMukandLtd,(2005)5Bom
CR130,thesellerfailedtosupply,thebuyerboughtthematerialathigherprice,difference
allowedirrespectiveofthefactthatthebuyerresoldathigherpriceand,therefore,mightnothttps://t.me/LawCollegeNotes_Stuffs

625. 484Chapter9DischargebyBreach. [S.73]
A bid was made at anauctionforcollectionandremovalofresidueoftree
growth andfirewood.Beforeitsconfirmation,afiredestroyedtheresidue.
The bidder asked forcancellationof the bid or forreductionof itsamount.
Buthisbidwasacceptedandhewascalledupontodepositthebidamount.
On hisrefusalto do so, theworkwasreauctionedfor a loweramount.The
bidderwassuedforthedifference.TheSupremeCourtrejectedtheclaim.It
saidthatwhethertherehadbeenacontractor itsbreachrequireddecision
of ajudicialauthority and then onlydifferencecould beclaimed.Before
acceptanceof his bid, the bidderhad appliedfor cancellationorrevisionof
his bid because of theinterventionof an act of God. There was nocontract
and no question of realising the shortfall from thebidder.^®^
Thedefendantfailedtosupplygoodsandcancelledordersofthebuyers
inviewofthefirm'sinabilitytocomplywiththem.Thefirmpromisedto
refundtheadvancemoneybutfailedto doso.Chequesissuedforrefundof
theprincipalamountandinterestbounced.Thebuyershadfailedtoinvoke
bank guarantees. Their claim was decreed to the fullamountwith interest
at 18percentp.a.^"^
Whetheractualpurchaseorsaleofgoodsnecessary
TheHighCourtofDelhiwasoftheviewinUnionofIndiavCommercial
MetalCorpn^°^thatitisnotnecessarythatondefaultbythesellertodeliver,
theplaintiffshouldhaveactuallyboughtthegoodselsewhereandonlythen
claimthedifference.Thecourtsaidthatdamagescouldbeclaimedonmar
ketbasis.ThesamerulingwasrepeatedinSarayaDistilleryvUnionof
India™thecourtsayingthattheinjuredpartycanrecovercompensation
onthebasisofthedifferencebetweenthecontractandmarketpriceswith
outactuallypurchasingthegoods.Allthathastobeprovedisthebuying
priceatwhichtheinjuredparty canobtainsubstitutegoods.InIsmailSuit
havesufferedanyloss.DevidayalSales(P)LtdvStateofMaharashtra,(2006)4MahLJ
662,delayindeliveryofgoodsnotdisputed,theotherpartyheldtobejustifiedintakingoff
from thecontractor'sbill theamountof losscaused.
107.A.MohdBasheervStateofKerala,(2003)6SCC159.T.N.CivilSuppliesCorpnLtdv
OswalSolvenExtraction(Madras)Unit,AIR2002 Mad 35,failureto lift ricebranaccord
ing to terms of tender,liabilityfordamages.
108.ExploreComputers(P)LtdvCalsLtd,(2006)131DLT477.TheDelhiHighCourtin
BhushanIndustrialCo(P)LtdvCimmcoInternational,(1983)54CompCases157,carved
outthedistinctionbetweenaperformanceguaranteeandanadvancepaymentguarantee
toholdthatunderaperformanceguarantee,thebankisliabletomakepaymentonlyafter
breachofcontractandaftertheaffectedpartyhassufferedlossordamageduetobreach.
Hovi^everinanadvancepaymentguaranteethereisabsoluteobligationonthebanktomake
paymentto theaffectedparty in theeventofnon-performanceof the contractand the bank
is notconcernedwith the reasonfornon-performanceof the contract
109.AIR1982Del267.
110.AIR1984Del360.StateofOrissavPratibhaPrakashBhawan,AIR2005Ori58,inacon
tractforsupplyofmaterial,personclaimingdamageshastospecificallypleadthemanner
mwhichhesufferedloss.Withoutsuchstatement,thereisnoautomaticclaimtodamages.
Blockingofmoneyisnotitselfaclaimfordamages.https://t.me/LawCollegeNotes_Stuffs

626. [S.73] Damagesfor breach 485
& SonsVWilson &Co"^theMadrasHighCourtheldthatthe provisions
contained in Section 73 did not envisagethatthe injured buyer must resort
to actualpurchaseandsufferlossbeforeclaimingdamages."^TheBombay
High Court hasexpressedtheview^thatneitherSection73 northeserulings
w^ouldapplyw^herethepartiesprovidefor adifferentrule. They can lay
down their ownremedialsystem.Thedifferencewhichthe court sawin this
casewastheprovisionin thecontractthat in theeventofpartdelivery,"the
purchasershallpurchasegoodsfromtheopenmarketandthenclaimdam
ages."Itwasonthebasisofthisclausethat thecourtheldthat theplaintiff
was not entitled to anycompensationwithout actually acquiring the mate
rialelsewhereand then showing hisloss."^Thus special circumstances may
justifydeparture from the rule that actualpurchaseis notnecessary.In a
casebeforethe Calcutta HighCourt,""thesellerdid notsupplyanything
becausehe wantedincreasein price to which the buyer did notagree.The
buyer,however,purchasedsomequantityfromthesellerat theenhanced
priceas aspecialcaseoutsidethecontract.Therestofthecontractwascan
celled.Thebuyerhad notpurchasedanythingfromthemarket.Hisclaim
fordamageswasnotallowed.Atleastthemarketpriceshouldbediscovered
andproducedbeforethecourt.Quantificationofdamageswithoutitwas
notproper.
Getting work done through other sources
The contractorfailedtocompletethe work within 4 months from the
date of contract.Thedelaywasthe resultof his owndoingsand not that of
theotherparty.Thecorporationhadto gettheworkcompletedbyinviting
freshtenders.Extra amount paid to the other contractor wasallowedto be
recovered.Theconsequencesofdelaywerecompensatedbyallowinginter
est at 6 per cent on the amount of extra payment.
Frematureterminationofcontract
Aclausein the contractprovidedforcompensationfordelayincomple
tion. Thecontractwasterminatedbefore it could be completed and also
beforethecompletionperiodwasover.The court said that nocompensa
tion could be claimed from thecontractor.No evidence was also offered of
additionalcost,ifany,for settingthe workcompletedfrom othersources."^
Incompleteexecution
Aroadbuildingcontractwastobeexecutedin twophases.Thesecond
phasewasneverexecutedbythecontractor.Hewasfullypaidforcompletion
111.AIR1919Mad1053.
112.ThecourtagreedwithsimilarviewexpressedinVishwanathvAmarlal,AIR1957MB190.
113. Maharashtra SEE v Sterlite Industries (India) Ltd, AIR 2000 Bom 204: (2000) 2 Mah
LJ 181.
114. UshaDeltronLtdvHandKishoreParasramka,AIR 2001Cal137.
115.EnggProjects(India)Ltd vB.K.Constructions(BKC),AIR2012Kant35.https://t.me/LawCollegeNotes_Stuffs

627. 486 Chapter 9 Discharge by Breach [S.73]
of the first phase. The contractor was notallowedto claim compensation
for not doing the work on the secondphase just by showingtechnicalities."^
Awardofinterestondifference
Where because of the purchaser's breach, the supplier had to resell the
goodselsewhereand became entitled to recover thedifference,the court
allowed future interest at 20 per cent p.a. from the date of the suit till the date
of judgmentand 6 per cent p.a. from the date of judgmenttillrealisation."^
Interestby wayofdamages
Payments ofrunningbills were delayed in breach ofcontractterms. The
contractorhad taken loan at 13.25 per cent interest. He was awarded inter
estfor theperiodofdelayat 12.5 percent.Thiswasheldto beproper,the
timeperiodbetweenraisingof billandpaymentbeingnotverylarge."^
Loss of profits is special loss
Thus, loss of profitswhich are to accrueupon resalecannot berecovered
unlessit iscommunicatedto the other party that thegoodsare forresale
upon aspecialcontract. This is borne out by thedecisionof theSupreme
Court inKarsandasH.Thackerv Saran Engg CoLtd}^^
CASEPILOT Therewasa contracttosupply200tonsofscrapiron.Thebuyerunder
took tosupplythe same quantity to the Export Corporation, Calcutta.
Thesellerfailedtosupplyand inconsequencethebuyercouldnotkeep
his date with the Corporation. The Corporationrecoveredfrom him the
differencebetweenthe contractpriceand the marketprice.Theseller
contendedthat he shouldnot be heldliablefor anythingbecausecontrol
priceof ironscrapwas still thesameand he had noknowledgeof the
contract of resale to theCorporation.
Thecourtfoundthefactsofthecaseto besimilartoillustration(k)accord
ingtowhichthesellerhas not to payanycompensationthat thebuyermay
have to pay to his sub-buyers by reason of the breach unless he was made
aware of the buyer'spurposeat the time of thecontract.RaghubarDayal
Jsaid:Onaccountofnon-deliveryofscrapiron he[thebuyer]couldhave
purchasedthescrapironfromthemarketat thesamecontrolledpriceand
similarincidentalcharges.Thismeansthathedidnotstandtopayahigher
116.MSKProjects(1)(JV)Ltd vStateofRajasthan,(2011)10SCC573:(2012)3SCC(Civ)818.
Thelossofexpectedprofitsisrecoverableas aspeciallossbut in thepresentcaseit wasnot
allowedbecauseof the facts of the case.See,Lon L FullerandW.R.Perdue,TheReliance
Interest in Contract Damages, (1936)46 YaleLJ52-92,noted and cited in2011SCYD 419.
PramodBuildingsandDevelopers(P) Ltd v Shanta Chopra,(2011)4 SCC741:AIR 2011
SC1424.
117.CottonCorpnof India Ltd vAlagappaCottonMills,AIR2001Bom429:(2001)3 Mah
LJ415.
118. Mecon Ltd v Pioneer Fabricators (P) Ltd, AIR 2008 NOC 870(Del).
119.AIR1965SC1981.https://t.me/LawCollegeNotes_Stuffs

628. [S.73] Damagesforbreach487
pricethanwhathewastopayto therespondent[theseller]andthereforehe
couldnothavesufferedanylossonaccountofthebreach....The actualloss
whichhesufferedonaccountofthebreachwastheresultof hiscontracting
tosell200 tons ofscrapiron for export to the ExportCorporation.Asthe
sellerdid not know this contract, he could not haveknown of the likelihood
of the loss actuallysuffered.^^"
Whereapersonwasdispossessedofhisleasedpremisesprematurely,he
was allowed to recover retrenchment compensation which he had to pay to
labourandlossofprofitscalculatedon thebasisoffiguresprovidedbythe
plaintifffortheperiodheactuallydidbusiness.Thecourtsaidthatthatwas
the bestindicator.Theperiodforlossofbusinesswouldbe theunexpired
periodofthelease.^^^Thecourtsaidthattherecannotbeadirectandcon
creteevidenceoflossofprofits.Damagesonaccountoflossofprofitare in
the nature ofprospectivedamagesand,therefore,necessarilycontingent.It
isnowwellestablishedprincipleoflawthat themerefactthatdamagescan
not beassessedwithcertaintydoesnotrelievethewrongdoeroftheliability
to paydamages.^"
Lossofexpectedprofit.—^TheSupremeCourtreiteratedthatlossof
expectedprofitattributabletobreachofcontractisrecoverable.Thecourt
distinguishedthecontractualmeasureofdamagesfromreimbursementor
compensation.Thecontractinthiscasewas"build-operate-andtransfer"of
anadjoiningroad.Thecontractorwastocollecttollmoneyfromoperation.
Thisrequiredgovernmentnotificationwhichwasdelayed.Theclaimforloss
of expected profit wasallowed.^^^
Consequences of delay intransit
ConsequencesofdelayintransithavebeennotedbytheSupremeCourt
insomecases.Aconsignmentofgoodswiththerailwaysreacheditsdesti
nationafterinordinatedelay,causedbygrossnegligence,ofsevenmonths.
Theplaintiff'smoneyremainedblockedfortheperiod.Hewasallowedto
recoverintereston themoneybywayofdamagesfor theloss.^^"*In another
120.SeealsoModiSugarMillsvUnionofIndia,1984SuppSCC338:AIR1984SC1248,where
liabilitywasimposedfornotreturningthecontainersinwhichthegoodsweresent.Some
principlesrelatingtomeasureofdamageswererestatedbytheSupremeCourtinTrojan&
CoVNagappaChettiar,AIR1953SC235:1953SCR789.Wherenotimefordeliveryof
goodsisspecified,themeasurewouldbepricesonthedateofrefusal,P.S.N.S.Ambalavana
ChettiarvExpressNewspapersLtd,AIR1968SC741:(1968)2SCR239.Therighttosue
fordamagesdoesnotgiverisetoadebtwhichisimmediatelyduesoastoentitletheplain
tiffto aset-offagainsthisownliabilitytopaybacktheloan.MirzaJavedMurtazavU.P.
FinancialCorpn,AIR1983All235.Asfor theeffectofinflationondamagesseeDuncan
Wallace,InflationandAssessmentofConstructionCostDamages,(1982)98LQR406.
Acceptanceofearnestmoneyunderprotestdoesnotputanendtotherightoftheinjured
partytorecoverdamagesforbreach.MohdUsmanvUnionofIndia,AIR1984Raj156.
121. KishanLaiKalrav NDMC, AIR 2001 Del 402:(2001)92DLT67 at p. 409.
122. Citing Chaplin v Hicks,(1911)2 KB786(CA).
123.MSKProjects(I)(}V)LtdvStateofRajasthan,(2011)10SCC573:(2012)3SCC(Civ)818.
124.UnionofIndiavSteelStockHolders'Syndicate,(1976)3SCC108:AIR1976SC879.https://t.me/LawCollegeNotes_Stuffs

629. 488 Chapter 9 Discharge by Breach [S.73]
case of delay and damage, the railways have been held liable to the extent to
which thevalueof the goods haddiminished.^^^Where the goods are dam
agedbytherailwaysthemeasureofdamageswouldbe the marketpriceat
thetimeofdamageand not thepriceatwhichtheinjuredpartypurchased
thegoods.^^®Regard must also be had to the type of market and setback to
price because of the taste andprejudicesof a special customerclass.Ina
fireinsurancecontract,thedamagedgoodsweresoldbyauctionunderdue
intimation to the insurer, who did notturnup, the court allowed the differ
ence between the insured price and theamountrealised.^^^
Meaningofmarketprice
Inalmostallsalestransactionswhichfailto gothroughthenormalyard
stickforworkingout thesumofmoneytowhichtheaggrievedparty is
entitledisthedifferencebetweenthecontractandmarketprices.^^'Thisrule
presupposestheexistenceofamarketandthepossibilityofascertainingthe
priceofthegoodsin thatmarket.Boththeseconceptswerethesubject-mat
ter ofsomeexplanationin acasewherethebuyerrefusedtoacceptthe
goods.""Thecourt dealtwith thequestionin thefollowingway:
125.Unionof India vB.Prahlad& Co,AIR1976Del236 that is tosay,themarketvalueof the
goodsminustheirvalueintheirdamagedstate;theplaintiffmustdoallthathereasonably
can tomitigatehisloss;if thedamagedgoodsarestillsaleablethoughat alowerprice,the
measureofdamageswillbe themarketpriceof thegoodsminuswhattheywouldhave
fetchedintheirdamagedstateif theplaintiffhadsoldthem.SavaniTransport(P)Ltd v
GangadharGhosh,AIR1986Cal330,thecourtlaidstressuponthefactthat thesalvage
valueof thegoodscannotbeignoredand thatwhateverbe thedifficultythe court can
notshrinkfromascertainingthesalvagevalue;Dunn vBucknallBros,(1902)2KB614,
623(CA).
126.UnionofIndiavWestPunjabFactoriesLtd,AIR1966SC395:(1966)1SCR580;Unionof
IndiawJolly SteelIndustries (P) Ltd, 1980 SuppSCC436: AIR 1980 SC 1346. Seealso M.
LachiaSetty&SonsLtd vCoffeeBoard,(1980)4SCC636:AIR1981SC162,wherethe
auctionpurchaserrefusedto takethegoodsand theCoffeeBoardhad toreauctionthem,the
latterallowedtorecovertheshortfallfromthedefaulter.UnionofIndiavK.H.Rao,(1977)
1 SCC 583: AIR 1976 SC 626, failure to supply onions; Government allowed to recover
the difference at which they purchased onions elsewhere. M.S. Desai & Co vHindustan
PetroleumCorpnLtd,AIR1987Guj19,whereitwasheldthat aprematureterminationofa
privilegedbusiness,suchastheprivilegeofdistributingpetroleumproducts,bythegrantor,
aGovernmentUndertakingin thiscase,can bechallengedby a writpetitionas itinvolves
non-contractualquestionsalsoandcompensationcan beawardedin thesamepetition.
127.MadeshwaraCargoMoversvHindustanCocoaProductsLtd,(1993)2BomCR154,sensi
tivegoodslike"five-star","doubledecker"wereundertransport.
128.HarsudCoopMktgSocietyLtd vUnitedIndiaFireandGeneralInsuranceCo Ltd,AIR
1992Bom341.
129.HajeeIsmail &SonsvWilliams&Co,ILR(1918)41 Mad709;MackayvKameshwar
Singh,(1931-32)59IA.398:AIR1932PC196;VishwanathvAmarlal,AIR1957MB190.
Whereno marketexistedtoenablethebuyertoeffecthispurchaseof the coalof the contract
quality,thedefaultingseller'srates with otherbuyersfrom him weretaken into account for
guidance.JugmohandasVurjiwandasvNusserwanjijahangirKhambatta,ILR(1901-02)
26Bom744.
130.ShearsonLehmanHuttonIncvUaclaineWatson&CoLtd,(1990)3AllER723(QBD).
(CommercialCourt)Seealso A. P. PaperMillsLtd vPrincipalSecy,(1997)3 An LT 649
(DB),buyerrefusedsupplyofhardwood,salebyauctionat his risk,lossrecoverable.https://t.me/LawCollegeNotes_Stuffs

630. [S.73] Damages for breach 489
Inassessingdamages for failure to perform a contract for the purchase
of goods the measure ofdamagespayableby thedefaultingbuyer is the
difference between thecontractprice and thecurrentormarketprice at
the date of breach; based on a hypothetical sale of theparticularamount
of the goods in question in the available market, but disregarding any
characteristics of the seller which might have led to a lower price being
obtained. In determining whether there is an 'available market' for the
goodsinquestion,if theselleractuallyofferedthegoodsfor sale,there is
no availablemarketunless there is oneactualbuyer onthatday at a fair
price.If, on the other hand,thereisonlyanotionalorhypotheticalsale
there is no availablemarketunless on therelevantday there were in the
marketsufficienttraders, potentiallyin touch with eachother, toevidence
amarketin which the seller could if hehadwished have sold the goods.
Furthermore, the market price on a hypothetical sale is the fair market
priceforthe totalquantityofthegoodsiftheyhad to besoldon therel
evantday,but taking intoaccountthepricewhichmightbenegotiated
within afewdayswith otherpotentialbuyerswhowerenot part of the
marketon that dayonlybecauseofdifficultiesincommunication.Itfol
lowedthat theplaintiffswereentitledtodamagesbasedon the fair mar
ketorcurrentpriceonthedateofthebreachfor7755tonnesofstandard
gradetin, butthatpriceinturnwouldbebasedon boththepricewhich
would havebeenobtained bya saleof all the tin on 12 March, 1986, and
thepricewhichwouldhavebeenobtainedbysalesnegotiatedoverashort
periodbeforeor after thatdate."^
Escalationofcosts
A works contract was in writing. Delayincompletingthe works was due
to thecontractor'sfault. It seemedthathe was delaying things in order to
takeadvantageofescalationofprices.Fullpaymentwasalreadymadeto
himaccordingto theoriginallyagreedrates.Aquantummeruitsuitfor
131. Thecourtfollowed;GarnacGrain Co Inc v HMF FaureandFairclougbLtd,(1968)AC
1130;(1967)3WLR143(HL).SeefurtherRajasthanRajyaSahkariKrayaVikrayaSangh
Ltd VRam Mohan,(1988)2 Raj LR 962 where it wasobserved:It is not necessaryto prove
actualloss.Anticipatedlossofprofitcan bedeterminedbythe courtwhileawardingcom
pensation.Whatisnecessaryisthattheplaintiffshouldestablishwhatwasthecontractual
rateofpurchaseandwhatwastherateofarticleonthedateonwhichitwastobesupplied.
Thedifferencebetween the two is a loss to the purchaser, if it is not supplied by the seller to
thepurchaser.Thisissobecausethebuyercannotbeallowedto beputin abetterposition
than he would have been if the contract had beenperformed.Wertheimv ChicoutimiPulp
Co,1911AC301:(1908-10)AllERRep707(PC).Inthiscasegoodsweredeliveredbythe
sellerlatewhentheywereworthRs50pertonin themarketasagainstthecontractpriceof
Rs80,butthebuyergotRs70pertononresale.HewasallowedRs10pertonbywayofhis
loss. GauriDattBasdeo vHanikRam Chauthmal,(1916)14 All LJ 597, where no time for
deliverywasfixedandthebuyerhavinggivennoticefixingthetime,thetimesofixedwas
thedayonwhichpricesweretobecompared.EngellvFitch,(1869)LR4QB659(Exch).on
deliberaterefusaltosellland, thevalueofresaleby thesellerwas taken as theevidenceof
marketvalue.https://t.me/LawCollegeNotes_Stuffs

631. 490Chapter9Dischargeby Breach [S.73]
recoveringescalatedcosts was held to benotmaintainable."^"Wherein a
schemeforallotmentofhousesthelimitofescalationcostwasfixedinthe
schemeitself,the Authority was not allowed to charge anything in excessof
the limit by way ofescalation."^
Agreementtoprovidefinance
An arrangement to provide funds for an approved project is not a typical
contract; it isonlyafacility.Where, after releasing some instalments, the
lendinginstitutionrefusesto go further, the borrower cannotcompelit, nor
hold it liableindamagesfor the loss of his expectations, nor claim a set-off
against its demand for interest on the money alreadyprovided,his right, if
any, todamages."''
Commercialparties are free to vary their contracting terms and to with
draw creditfacilitieswithout constitutingduress.There is noeconomic
duresswherethere are an arm's lengthcommercialdealingsbetweentwo
companieshavingequalityofbargainingpower.Thisprinciplewas laid
downinacaseinwhichfactswere:
Acompanyboughtcigarettesin bulkfroma personwhohappenedby
a mistake todeliverthem to a wrongaddress.Beforethey could be col
lectedfromthatplace,theywerestolen.Thesupplierinvoicedthebuyer
for thepricethinking that thepropertyin thegoodshadpassedto the
buyer and threatened to cut off thebuyer'screditfacilitiesif he did not
pay.Thebuyerpaid tosecurehis creditfacilitiesand brought an action
forrepaymentsayingthat thepaymentwasunderpressureamountingto
economicduress.Thiswasnotallowed."^
Compensationfor liability to third party beforepayment
Where,onaccountoftheseller'sdefault,thebuyerwasnotabletokeep
hiscommitmentunderasub-saleandbecameliabletocompensatethe third
party, the court said that there is no rule of law that aliabilitywithout
132. Gujarat Housing Board v Harilal Jethalal, AIR 2001Guj259.
133.KanpurDevelopmentAuthorityv Sheela Devi, (2003) 12 SCC 497: AIR 2004 SC 400.
BareillyDevelopmentAuthorityvVrindaGujarati,(2004)4SCC606:AIR2004SC1749,
escalationofcostsofflatsinaccordancewithRulesdulyintimatedto andacceptedbyallot
tees.FoodCorporationofIndia v Ratanlal N.Gwalani,AIR2004 MP215:(2004)2 CCC
393(MP),delaysinworkingbecauseofobstructionscausedby theDepartment,contract
providedforescalationifdelaywas not due to contractor's fault,escalationallowed.
134. Industrial Finance Corpn ofIndia vSehgalPapers Ltd, AIR 1986P&H21. This is so because
theliabilitytopaydamagesisnotadebtwhethertheclaimisforliquidatedorunliquidated
damages.Debtiscreatedbyadecree.SeeTextileMachineryCorpnLtdvKichchaSugarCo
Ltd,(1989)2CalLT101,the courtreliedonUnionofIndia v A.L. RalliaRam, AIR1963
SC1685:(1964)3 SCR164;KesoramIndustries & Cotton MillsLtd vCWT,AIR 1966 SC
1370; Union of India v Raman Iron Foundry,(1974)2 SCC 231: AIR 1974 SC 1265.
135. CTN Cashand CarryLtd v GallaherLtd,(1994)4 AllER714(CA).Nagnath Kaulwar &
SonsVGovindramShyamsunder,AIR2004Bom271:(2004)3 MahLJ457,actioncouldlie
at theplacewherethegoodswereto bereceivedbypayingforconsignmentdocumentsand
receiving delivery.https://t.me/LawCollegeNotes_Stuffs

632. [S.73] Damagesforbreach491
paymentdoesnotconstitutearecoverableloss.Whereasellerofgoods
breacheshiscontractwith thebuyerso as toresultin thebuyerbeingliable
to athirdpartytowhomhehadagreedtoresellthegoods,thebuyerhas
aclaimforsubstantialdamagesagainst thesellerprior to hisdischarging
theliabilitytothethird partybypayment.Inthiscasethefirstbuyerhad
becomeimpecuniousand,therefore,unabletopay.Hisclaimagainstthe
sellerwasassignedto thesub-buyerwhohadbroughttheclaimin theright
ofthebuyer.Thecourtheldthattheliabilityto thethirdpartywasenforce
able evenbeforeit wasdischarged.^^®
Unfair or wrongful dismissal ofemployee
In anactionfordamagesforbreachofcontractarisingout ofwrongful
dismissalof anemployee,theEmploymentTribunalupheldtheclaimand
awardeddamagesforunfairdismissal.Theemployeesubsequentlybrought
acivilsuitforfinanciallossarisingfrompsychologicalinjurycausedbythe
manner ofdismissal.It was held that anemployeehad no right of action
at common law to recover financial losses arising from the unfair man
ner of his dismissal. Aconclusionto thecontrarywouldbeinconsistent
withthestatutorysystemfordealingwithunfairdismissalsestablishedby
theParliamentin1971toremedythedeficienciesin law as it thenstood.
([English]IndustrialRelationsAct,1971)."^
Agreementbyemployeetoreleaseallclaims
Anemployeeagreedtoreleaseallclaimsthathemighthaveagainstthe
employer.Theemployeesubsequentlybroughtanactionforaclaimwhich
was not known to exist when thereleasewassigned.The House of Lords
held that the claim wasallowable.TheirLordshipssaid that although a
partycouldinacompromiseagreementsupportedbyvaluableconsideration
agreetoreleaseclaimsorrightsofwhichhewasnotandcouldnotbeaware,
the court would be slowto infer that he had done so in the absenceof a clear
languagetothateffect.Inthiscase,neitherthebanknortheemployeecould
haverealisticallysupposedthataclaimforstigmadamageslaywithinthe
realmofpracticalpossibility.On afairconstructionofthedocuments,it
wasimpossibletoconcludethatthepartieshadintendedtoprovideforthe
releaseofrightsandsurrenderofclaimswhichtheycouldneverhavehad
incontemplationatall.If thepartieshadsoughttoachievesoextravagant
aresuh,theyshouldhaveusedlanguagewhichleftnoroomfordoubtand
whichmightatleasthavealertedtheemployeetotheeffectofwhathewas
agreeing.^^®
136. Total Liban Sa v Vital Energy Sa, 2001 QB 643(QBD).
137.JohnsonvUnisysLtd,(2001)2WLR1076(HL).
138.BankofCreditandCommerceInternationalS.A.vAli,(2002)1AC251:(2001)2WLR
735(HL).https://t.me/LawCollegeNotes_Stuffs

633. 492 Chapter 9DischargebyBreach [S.73]
MEASUREOFDAMAGES
Once it is determined whether general orspecialdamageshaveto be
recoveredtheyhaveto beevaluatedintermsofmoney.This is theproblem
ofmeasureofdamagesandisgovernedbysomefundamentalprinciples.
Claim for damages is not debt
Aclaimfordamagesarisingout ofbreachofcontract,whetherforgen
eralorliquidateddamages,remainsonlyaclaimtill itsadjudicationbythe
court and becomes a debt only after thecourtawards it. Till then and on
thebasisoftheclaimalone,theclaimantisnotentitledtopresentawinding
uppetitionof thedefendantcompanyon thegroundof itsinabilityto pay
debts."'
Damages arecompensatory,notpenal
InthewordsofAsquithJ: "Itiswell-settledthat thegoverningpurpose
ofdamagesis to put the party whose rights have been violatedin the same
position, so far as money can do so, as if his rights have beenobserved."^''°
"The primary aim orprincipleof the law ofdamagesfor abreachof con
tract is to place the plaintiff in the same position he would be in if the con
tract hadbeenfulfilled,or toplacetheplaintiffin thepositionhewould
have occupied had the breach of thecontractnotoccurred.When this is
accomplished,theprimaryaimorprincipleofthelawofdamageshasbeen
fulfilled.""^Inacaseinvolvingtheconstructionofaswimming-poolwhere
thedepthofthepoolhappenedtobelessthanwhatwasspecified,thepool
beingotherwiseuseful,thecourtallowedthedifferenceinvalueofthepool
asprovidedand itsvalueas itshouldhavebeenprovided.The court did
notallowthecostofsettingrightthepoolbecausethatwouldhavegiven
therecipientwindfallprofitswhichareimpermissiblebecausethe awardof
damagesistocompensatetheclaimantandnottopunishthepayer."^
RobinsonvHarman^'^^isanaptillustration.Thedefendant,having
agreedto grant aleaseof acertainpropertyto theplaintiff,refusedto do
139.GreenhillsExports(P)Ltd vCoffeeBoard,(2001)4 KantLJ158(DB).
140.InVictoriaLaundry(Windsor)LtdvNewmanIndustriesLtd,(1949)2KB528(CA).Chief
Secy,StateofGujaratvKothari&Associates,(2003)1GCD372(Guj),damagesmust
becommensuratewithinjurysustained;awardofdamagesbeingcompensatoryandnot
retributive.
141.SeeHawthorneinFriedmanIron &SupplyCovJ.B.Beaird&Co,(1952)63SO2d 144
(SCofLouisiona);CollectedfromShepherdandWellington,ContractandContract
Remedies(1957)912;MurlidharChiranjilalvHarishchandraDwarkadas,AIR1962SC
366:(1962)1SCR653.
142.RuxleyElectronicsandConstructionLtdvForsyth,1996AC344:(1995)3WLR118.The
court was of theviewthat the ownerwould beunjustlyenrichedif he wereallowedthe cost
ofbuildinganewpoolandwereneverthelessallowedtoretaintheexistingone.Thakorlal
V.PatelVLt. Col.SyedBadruddin,(1993)1 GujLR28,motiveand manner of breachirrel
evant, defendant is not to be punished.
143. (1848) 18 LJ Ex202.https://t.me/LawCollegeNotes_Stuffs

634. [S. 73] Measureofdamages493
so. Thecourtallowedtheplaintiffby way ofdamagesthe expensesincurred
by him on thepreliminarylegal work and also for theprofitswhich he
would haveearnedif the leasehadbeengrantedto him.ParkeBstatedthe
principlethus:
Whatdamages is theplaintiffentitled to recover? The rule of the com
mon law isthatwhere apartysustains a loss by reason of a breach of con
tract,he is, so far as money can do it, to be placed in the samesituation,
with respect to damages, as if thecontracthad beenperformed.
Thus, damages are given by way ofcompensationfor the loss suffered
by theplaintiffand not for thepurposeofpunishingthedefendantfor the
breach.""*Motiveforandthemannerofbreacharenottakenintoaccount
because generally "punitive damages are not recoverable for breach of
contract"."^
Inconveniencecausedbybreach
But the inconvenience caused by the breach may betakenintoaccount.
Thus,for example, inHobbsvLondon&South-WesternRlyCo,"^where a
train pulleditspassengersto a wrong direction and consequentlythe plaintiff
and his wife, finding no otherconveyance,nor a place to stay, had to walk
home atmidnight,the jury allowed £ 8 as the damages for the inconvenience
suffered by the plaintiffs in being obliged to walk and£20in respect of the
wife's illness caused by catching a cold. On appeal, thecourtof Queen's
Bench heldthatthe £ 8 was properly awarded but not£20.
The inconvenience of walking back must betakento have beenwithin
the reasonablecontemplationof thepartifjs.But the wife's cold was not
the necessary or even the probable consequence of the breach.
ButinthesubsequentcaseofMcMahq;jivFields^'^^theabovedecisionwas
criticisedand damages were allowedwhen the plaintiff's horses were turned
outof thedefendant'sstableinbreach,ofcontractandtheycaughta cold
beforeanalternativeaccommodationcouldbefoundforthem.
144. For example, delayin payment of moneywill entail interest on remittances but other conse
quences are not taken into account. Graham v Campbell,(1878)LR 7 Ch D 490(CA).
145.TheAmericanRestatementofTheLawofContracts,S.342entitledN.Sukumaran
Nair v P.Narayanan,1996 SCC OnLine Mad 83:(1996)2 LW 40, punitive damages may
beallowedinspecialcases like breach ofpromiseof marriage as in this case. Exemplary
damageswereallowedfor loss of reputation and injuredfeelings.The future of the frus
trated woman would be bleak, chances of marriage remote. Suresh Babu Nath vHargovind
Batham, AIR 1995 MP 82, compensation for breach of promise of marriage and for fraud
for duping into sex on promise of marriage and resulting pregnancy.
146.(1875)LR 10 QB 111.Hamlinv GreatNorthernRly Co, (1856) 1H&N408:156ER 1261.
147.(1881)LR 7 QBD 591(CA)."Theassessmentof damages cannot be based on the economic
policyof the countryfromwherethegoodsare to beimported."NaihatiJuteMillsLtd v
KhyaliramJagannath, AIR 1968 SC522:(1968)1 SCR821.Quoted fromI.C.Saxena,Law
of Contract,AnnualSurvey ofIndianLaw(1967-68).Anarbitratoris alsoboundbythe
provisionsof S. 73. BungoSteelFurniture (P) Ltd vUnionof India, AIR 1967 SC 378.https://t.me/LawCollegeNotes_Stuffs

635. 494Chapter9DischargebyBreach [S. 73]
Loss caused bymisrepresentation
The price at which athingispurchasedand its difference with the real
value, whenmisrepresentationaboutit is discovered, is theyardstickfor
compensation.A horse waspurchaseddescribedas fit for races. But itturned
out to be ofdifferentbreed.Thatwas discoveredaftera long process oftrial
anderrorandafterdiscoveryitsmarketvalue wasmuchless. It was held
thatwhere anarticlepurchasedas aresultofmisrepresentationcould have
been resoldimmediatelyafterthe sale for the pricepaidbut by the time the
misrepresentationwas discovered its valuehadfallen byreasonof a defect
in it which had then becomeapparent,theappropriatemeasure of damages
wouldbe the differencebetweenthepurchasepriceandits value at the time
whenmisrepresentationisdiscoveredandnotthedifferencebetweenthe
purchaseprice and itsactualvalue at the time ofpurchase.^''^Thecourt
referredto the decision inDoylevOlby(Ironmongers)Ltd^'*^whichdeals
withcases inwhicha business or anarticleis notpurchasedforimmediate
resale. Thecourtcited the followingdictumofWiNNLJ:
Itappearsto methatin a casewheretherehas been abreachofwar
rantyofauthority,and still more clearly where there has been atortious
wrong consisting of afraudulentinducement, theproperstartingpoint
for anycourtcalled on to considerwhatdamages are recoverable by the
defrauded person is to compare his position before therepresentationwas
made to him with his position after it,broughtaboutbythatrepresenta
tion, always bearing in mindthatno element in the consequential posi
tion can be regarded asattributableloss and damage if it be too remote a
consequence. It will be too remote not necessarily because it wasnotcon
templated by the representor but in any case where the person deceived
has not himself behavedwithreasonableprudence,reasonablecommon
sense orcanin anytruesense be said to have been theauthorof his
ownmisfortune.Thedamagethathe seeks to recover must have flowed
directly from the fraudperpetratedon him.
WiNNLJ then assessed the damages inthatcase by reference to precisely
what the plaintiff had done after acquiring the business including selling the
businessatsomelatertimeandgivingcreitforthatsaleprice.Itisperhaps
also useful to refer in thisconnectiontoJohnsonvAgnew^^°in which Lord
WiLBERFORCE Said:
"The generalprinciplefor theassessmentofdamagesiscompensa
tory, i.e. that the innocentpartyis to be placed, so far as money can do
so, in the same position as if the contract had been performed. Where
thecontractis one of sale, this principlenormallyleads to assessment of
damages as at the date of the breach, a principlerecognisedand embodied
148.NaughtonvO'Callaghan,(1990) 3 AllER191.
149. (1969) 2 QB158.
150.1980AC 367: (1979) 2WLR487(HL).https://t.me/LawCollegeNotes_Stuffs

636. [S. 73] Measureofdamages495
inSection51 of theSaleofGoodsAct, 1893. [S. 59 of theIndianSale of
GoodsAct, 1930] But this isnotanabsoluterule; if to follow itwould
give rise to injustice, thecourthaspowerto fix suchotherdate as may be
appropriatein thecircumstances.In cases where abreachof acontract
for sale hasoccurred,andtheinnocentpartyreasonablycontinuesto
try to have thecontractcompleted,itwouldto meappearmore logical
and justratherthantie him to the date of theoriginalbreach,to assess
damagesas at the datewhen(otherwisethanby his default) thecontract
is lost.Supportfor thisapproachis to be found in the cases.InOgle v
EarlVane^^^the date was fixed by reference to the time when theinnocent
party, acting reasonably, went into the market; inHickmanvHaynes^^^
at areasonabletimeafterthe lastrequestof thedefendants(the buyers)
towithholddelivery.InRadfordv DeFroberville^^^where thedefendant
hadcovenantedto build a wall, damages were heldmeasurableas at the
date of thehearingratherthanat the date of the defendant's breach,
unless the plaintiff ought reasonably to have mitigated the breach at an
earlierdate."
A person owned two neighbouring hairdressing salons. He sold one of
them. He deliberatelyand falselytold the buyer beforethe salethathe would
not work at theothersalon except in cases of emergency. Thisstatement
was particularly important sinceit meant that theclientelewould notfollow
him to the neighbouring business. After the sale was completed, the buyer
discoveredthatthe seller wasworkingfull-time at hisotherneighbouring
business. Anawardof£10,000was allowed to the buyer for theconsequen
tialloss ofbusiness.BeldamLJobserved:"'*
"If in fact the plaintiffs lost the profits which they could reasonably
have expected from running abusinessin the area of a kind similar to
the business in this case, I can see no reason why they do not fallwithin
the words of LordAtkinin Clark vUrquhart,^^^'actualdamage directly
following from the fraudulent inducement'."
The court noted the developmentin thisfieldto this effect as shown by a
numberofdecisionswhichmakeitclearthatthetortiousmeasureofdam
ages is thetrueone."^
Incidenceoftaxation
Sincetheprincipleis that ofcompensation,and no more thancompensa
tion, thebenefits,ifany,that the plaintiff hasreceivedagainst thelosssuf
fered are to betakeninto account. For example, where a dismissed employee
151. 1868 LR 3 QB 272;affd.Ogle vEarlVane, 1868 LR 3 QB 272.
152.(1875)LR 10 CP598.
153.(1977)1WLR1262.
154.EastvMaurer,(1991) 1WLR461 (CA).
155.1930AC 28(HL).
156.OnesuchdecisionwasChesneanvInterhomeLtd,(1983)114NLJ341.https://t.me/LawCollegeNotes_Stuffs

637. 496Chapter9DischargebyBreach [S. 73]
receivesunemploymentbenefit, hiscompensationis reduced bythatamount.
If he is givencompensationfor loss of prospectiveearnings,theamountof
incometaxwhichhevifouldhave to pay on theamountif received asearn
ingswouldgo toreducethecompensation.Thisprinciplewas laiddownby
theHouseof Lords inBritishTransportCommissionvGourley^^'^andwas
followedby theCourtofAppealinParsonsvBNMLaboratoriesLtd^^^
whereHarmanLJstatedtheeffectoftheHouseofLords'decisioninthese
words;
Thecase[Gourleycase) decidesthatin anactionwhetherintortfor
injuries arising from negligence or incontractforwrongfuldismissal
where the loss of theplaintiffconsists wholly or inpartin a loss ofearn
ings, and where the sum to beawardedindamageswillnotsuffer deduc
tion oftaxin hishands,theninascertainingtheplaintiff'sloss histax
liability,thatis to say, the sumwhichhewouldhave had to pay in income
taxincludingsurtaxinacquiringthe lostearnings,must bededucted
from his loss in assessing thedamage...Unemploymentinsuranceis a
sum receivable bycontractmade by the employed man and his employer
each of whomcontributesto the State on the footingthatif and when
^ the servant is unemployed the State will make goodpartof his earnings
to him. I do notthinkthatsuch apaymentistrulyanalogous to insur
ance money, as in theleadingcase ofBradburnvGreatWesternRail
Co"'where there was a purely voluntarycontractmade by the plaintiff.
This is a contribution which he is bound to make with the very object
of mitigating the damage which inability to work will do him. It is just
as if his employer continued to paypartof his wages. The loss he suf
fers is pro tanto diminished and thereforecannotbe charged against the
wrongdoer.^^"
Nominaldamages(no losssituation)
Where theplaintiffsuffers no loss thecourtmay still award himnominal
damagesinrecognitionof hisright.But this is in thediscretionof thecourt.
Thecourtmayaltogetherrefuse to award any damages or may award even
substantialdamages."Thecourtiscompetentto awardreasonablecom
pensation in case of breach, even if no actual damage is proved or shown
to have been suffered in consequence of breach ofcontract."It has been
pointed out by the Delhi High Court, following some earlier HighCourt
decisions,^^^thatSection 73 does not give any cause of action unless and
157.1956AC 185:(1956)2WLR41 (HL).
158.(1964) 1 QB 95: (1963) 2WLR1273(CA).
159.(1874)LR10Ex1.
160. Damages allowed in an arbitration award reflect business loss not speculation loss.CITv
Shantilal(?)Ltd,(1983) 3 SCC 561:AIR1983SC952.
161. T.A.Choudharyv StateofA.P., (2004) 3 ALD 357 (DB).
162.SitaramBindrabanvChiranjilalBrijlal, AIR 1958 Bom 291.https://t.me/LawCollegeNotes_Stuffs

638. [S. 73] Measureofdamages497
until damage is actually suffered. The case before thecourtwas Unionof
IndiavTribhuwanDasLaljiFatel}^^
Acontractfor the supply of sleepers to therailwayadministrationcon
tainedanumberof clausesincludingthisthatirrespectiveofwhetherthe
Governmentsufferedany loss ornotonaccountof thecontractor'sfail
ure to supply, theGovernmentwas entitled todamages.Thecontractor
failed to supply, but the railways did not suffer any loss. Even so anaction
fordamageswasinstitutedagainstthecontractor.
It wasarguedon thestrengthof someHighCourtdecisions^^''and illus
tration{a)to Section 73thatit is notnecessaryfor the aggrievedpartyto
provethathepurchasedthe goods from analternativesourceandsuffereda
loss; he isentitledto the difference in thecontractandmarketprices in any
case.Rehancewas also placeduponthe PrivyCouncildecision inMackayv
KameshwarSingh^^^where it was observedthatthe difference, if themarket
price exceeds thecontractprice, is the soledamagein general recoverable
andacontractof resale orrepurchaseisimmaterial.PrakashNarainJ
didnotagreewiththiscontention.Hetookthe PrivyCouncildecision to be
noauthorityfor thepropositionthatirrespective ofwhetherthere was any
loss, damages must still be paid andthatthe decision is only in thecontext
ofquantumof damages. Thus, he refused tocountenancethe viewthat
compensationcan beawardedwhen there has been no loss or damage."If
thecontraryview was to betaken",he said, "the provision of Section 73 will
becomenugatoryand apartywould bepenalised,thoughtheotherparty
hassufferednoloss."
Even so the category ofnominaldamagescannotbe ruled out.Thus,
where aGovernmentcontractforbuildingroads wasterminated,before the
expiry of the notice period asprescribedin thecontract,incircumstances
whichdid not entitle thecontractorto recover loss ofprofit,he wasallowed
nominaldamages.^^^
Wherea seller oflandsuffered no loss from the buyer'srefusalto per
form, and, on thecontrary,made a huge windfall profit by selling the land
to another person, he was not permitted to forfeit the buyer's advance and
this in spite of the fact that the land remained vacant till the new buyer was
found.^^^A piece of land was sold. As apartof the sale agreement, the buyer
163. AIR 1971 Del 120. CitingVishwanathvAmarlal,AIR 1957 MB 190. PremLatav MCD,
AIR 2003 Del 211, alleged delay in supply, but no loss shown to have been caused. Claim
for damages not allowed.MaharashtraSEB v SterliteIndustries(India), (2001) 8 SCC 482:
(2002) 1 Bom CR 415: (2002) 1 ICC 178,arbitrator'sfinding that damages could not be
awardedunderS. 73notdisturbedby thecourt.
164.Disagreeingwith the above cited Madhya Bharat case and the decisionof the Madras High
CourtinIsmailSait&SonsvWilson& Co,AIR1919Mad1053.
165.(1931-32)59lA398: AIR 1932 PC 196.
166. StateofM.P.vRecondoLtd, 1989 MPLJ822. Electronic Enterprises v Unionof India, AIR
2000Del 55, the Government used the goods supplied, no damages claimed or proved for
alleged latedeliveries.The Government was not allowed to withhold payment.
167.MohanlalvDayaldas& Co, AIR1976Raj 68.https://t.me/LawCollegeNotes_Stuffs

639. 498 Chapter9DischargebyBreach [S.73]
covenantedto buildonly 72 houseson the land. In breachof theagreement,
thebuyerbuilt 77houses.Thesellersued him for breach of thecovenant.
Thequestionwasv^^hatshouldbe thecorrectmeasureofdamagesw^here
there is thefollov^ringset ofcircumstances:{a)There has been adeliber
ate breach of contract,[b)the party in breach has made a profit from that
breach, and(c)the innocent party is in financial terms in the same position
as if the contract had beenfullyperformed.^^®StynLJproceededasfollow^s
stating and applying the first principles:
"Anavi^ardof compensation for breach ofcontractserves toprotect
three separateinterests.The startingprincipleis that theaggrievedparty
ought to be compensated for loss of his positive or expectation interests.
In other words, the objectis to put theaggrievedparty in the samefinan
cialpositionas ifthe contracthadbeenfullyperformed.Butthe lawalso
protectsthenegativeinterestoftheaggrievedparty.Iftheaggrievedparty
is unable to establish the value of a loss ofbargainhe may seek com
pensationinrespectof hisreliancelosses.The object of such an award
is tocompensatetheaggrievedparty forexpensesincurred andlosses
suffered in reliance on thecontract.These twocomplementaryprinciples
share one feature. Both are pure compensatoryprinciples.If the aggrieved
party hassufferednolosshe is notentitledto becompensatedby invok
ing these principles.The application of these principlesto the present case
wouldresultin anawardofnominaldamagesonly.
There is, however, athirdprinciple which protects the aggrieved par
ty's restitutionary interest. The object of such an award is not to com
pensatethe plaintiff for a loss, but todeprivethe defendantof the benefit
he gained by the breachof contract. Theclassicillustration is a claimfor
thereturnof goods sold anddeliveredwhere the buyerhas repudiated his
obligation to pay the price. It is not traditional to describea claim for res
titutionfollowinga breach of contract as damages.What matters is that a
coherent law of obligations must inevitably extend itsprotectionto cover
certainrestitutionaryinterests. How farthatprotectionshould extend is
the essence of theproblembeforeus."^^^
The object of the award in this case was not to compensate the plaintiff
for financial injury but to deprive thedefendantof an unjustlyacquiredgain.
As to this hisLordshipsaid:
"Theintroductionofrestitutionaryremediestodeprivecynicalcon
tractbreakersof thefruitsoftheirbreachesofcontractwillleadtogreater
uncertaintyin theassessmentofdamagesincommercialandconsumer
disputes. It is ofparamountimportancethatthe way in which disputes are
likely to be resolved by thecourtsmust be readily predictable. Given the
premisethatthe aggrievedpartyhas suffered no loss, is such adramatic
168. SurreyCountyCouncilv BrederoHomesLtd, (1993) 1WLR1361 (CA).
169. CitingMacGregoronDamagesand Professor PBH Birke,CivilWrongs,aNewWorld
(ButterworthLectures,1990-91).https://t.me/LawCollegeNotes_Stuffs

640. [S. 73] Measureofdamages499
extensionofrestitutionaryremedies justified inorderto confer awindfall
in each case on the aggrieved party? Ithinknot. In any event such a wide
spreadavailabilityofrestitutionaryremedies will have atendencyto dis
courageeconomicactivityinrelevantsituations.In arangeof cases, such
liabilitywouldfall on theunderwriterswhohaveinsuredrelevantliabil
ity risks.Inevitablytheunderwriterswouldhave to becompensatedfor
the new species ofpotentialclaims.Insurancepremiumswouldhave to
go up.That,too, is aconsequencewhichmitigatesagainsttheproposed
extension.Therecognitionof theproposedextensionwill in my viewnot
serve the publicinterest.It issoundpolicy toguardagainstextendingthe
protectionof the law ofobligationstoo widely. Thepresentcase involves
nobreachof fiduciaryobligations.It is a case of breach ofcontract.The
principles governingexpectationor reliance lossescannotbe invoked.
Given the fact of the breach ofcontractthe onlyquestioniswhetherresti
tutionis anappropriateremedy for this wrong. The case does not involve
any invasion of theplaintiff'spropertyinterests even in thebroadestsense
ofthatword.Iwouldthereforerulethatnorestitutionaryremedy is avail
able and there iscertainlynootherremedy available."
In such a case, however, thecourtmayawardnominaldamages.The
decision of theCourtof Appeal inChartervSullivan""is an aptillustration.
Thedefendant,havingcontractedto buy aHillmancar from a car
dealer,ultimatelyrefused to buy.Withina week the car was sold to
anothercustomer.Indeed;the dealer was able to sell asmanycars as he
wantedand lostnothingon account of thedefendant'sbreach. Even so he
wantedto recover the loss of his profit.
Thecourtheldthathe was entitled only tonominaldamages and 40 shil
lings were allowed.
As against it, in anothercase^^^on account of the customer's breach in not
lifting the car in terms of his agreement, the dealer had toreturnthe car to
themanufacturer.He wasallowedto recover the profitwhichhewouldhave
made on sale of the car to thedefaultingcustomer.
Compensationin no losssituations
An action was brought for breach ofcontractarising out of overuse of
musical recordings. The courtgenerallyorders in such cases an account of
profitsmade inoverusebut in this case the breach had caused noeconomic
loss.^''^Thecourtsaid:
Although the court could order an account of profits for breach of
contractwhere theclaimantcould not provethatit had suffered any
170.(1957)2 QB 117: (1957) 2WLR528 (CA).
171.W.L.ThompsonLtdv Robinson (Gunmakers) Ltd, 1955 Ch 177.
172.ExperienceHendrix LLC v PPXEnterprisesInc,2003EWCACiv323: TheTimes,April
19,2003(CA).https://t.me/LawCollegeNotes_Stuffs

641. 500Chapter9DischargebyBreach [S.73]
financial loss, this would only be done inexceptionalcircumstancessuch
asnationalsecurity, exceptional profits and fiduciary breaches. Damages
couldbeawardedfor abreachof arestrictionwhichhadbeenimposedto
protect the claimant's property, where an injunction was refused, because
thecourtwas onlyconcernedwithpastprofits.^^^Thiswasnotan excep
tionalcasewhichjustified anaccountof profits. Even so, thedefendant
should make areasonableandsubstantialpaymentfor theunauthorised
useofthemasterrecords.
Where the highest biddercommitteddefault in payment but the forest
authoritiessuffered no serious prejudice due to the default,the-courtsaid
thatforfeitureof thewholeof thedepositmoneywasnotjustified.Thecourt
orderedrefundoftheactualamountwithoutinterestorcosts.^^''
Refundonpartialcancellationofcontract
Theagreementwas for sale ofdamagedfoodgrains.Thepurchaser
depositedacertainamountwiththeFoodCorporation.Anapplicationwas
made forcancellationacertainpartof theagreementwhichwasnotcapable
of beingperformed.This was conceded and somerefundwas made. The
purchaserwasnotallowedto suethecorporationforbreachofcontractin
thematterofrefund.Therewas noproofof any suchbreach.^^^
Pre-contractexpenditure
Pre-contractexpendituremay be recovered as damages if it waswithin
thecontemplationof theparties.TheCourtof Appeal laid down this princi
ple in AngUa TelevisionLtdvReed"^Here, a televisionartistewho having
been engaged as aleadingactorfor a television film,repudiatedthecontract.
Theproducerwasunableto find asubstituteand,therefore,hadtoabandon
the project. The loss of profit was incapable of being estimated. Thecourt
allowed him as damages the money spent by him in engaging a director, a
designer, etc., as this kind of expenditure was within the contemplation of
theparties.LordDenningMRexplainedtheprinciplethus:
Theplaintiffin such a case asthishas tomakeelection:hecaneither
claim for his loss of profits; or for his wastedexpenditure.But he must
elect between them. Hecannotclaim both. If he has not suffered any loss
173. ModiEntertainmentNetwork v WSG Cricket Pte Ltd, (2002) 3 Bom CR 634, spillover of
signals which wasnaturalinto theterritoryofotherlicensedbroadcastersdid notconstitute
breach of contract. Inspire of the efforts to prevent, overspill continued but, no loss of reve
nuewascaused.
174.StateofA.P. v SingamSettyYellamanda,(2003) 2 AnWR154: AIR 2003 AP 182;State
ofT.N.VT.R.Surrendranath,AIR 2008 NOC 974 (Mad), road building contract, tenderer
deposited earnest money and additional security, default by tenderer, the Highway Authority
could prove no loss, liable torefundearnestandsecurityamountsasotherwisethere would
beunjustenrichment.
175.FoodCorporationofIndiavLaxmiCattleFeedIndustries,(2006) 2 SCC 699: AIR2006
SC1452.
176. (1972)l.QB60: (1971) 3WLR528:(1971) 3 All ER690(CA).https://t.me/LawCollegeNotes_Stuffs

642. Measureofdamages501
ofprofits—orifhecannotprovewhathisprofitswouldhavebeen—he
canclaiminthealternativetheexpenditurewhichhasbeenthrownaway,
thatis,wastedbyreasonofthebreach.ThatisshownbyCullinanev
BritishRemaMfg CoLtd."'^
If theplaintiffclaimsthewastedexpenditure,he is notlimitedto the
expenditure incurred after thecontractwas concluded. He can claim also
theexpenditureincurredbeforethecontract,providedthat itwassuch
aswouldreasonablybeinthecontemplationofthepartiesaslikelyto
bewastedifthecontractwasbroken....He(theparty,committingthe
breach)mustpaydamagesfor alltheexpendituresowastedand thrown
away.ThisviewissupportedbytherecentdecisionofBrightmanLJin
Lloyd VStanbury."^There was a contract for the sale of land. In antic
ipationofthecontract—andbeforeitwasconcluded—thepurchaser
wenttosuchexpenseinmovingacaravantothesiteandingettinghis
furniture there. The seller afterwards entered into a contract to sell the
land to the purchaser, but afterwards broke his contract. The land had
notincreasedinvalue,so thepurchasercouldnotclaimforanylossof
profits.ButBrightmanJheldthathecouldrecoverthecostofmoving
thecaravanandfurniture,becauseitwas"withinthecontemplationof
the partieswhenthe contractwassigned".Thatdecisionisinaccordwith
correctprinciple,namely,that wastedexpenditurecan berecoveredwhen
it waswastedbyreasonof thedefendant'sbreachofcontract.It istrue
that, if thedefendanthadneverenteredintothecontract,hewouldnot
beliable,andtheexpenditurewouldhavebeenincurredbytheplaintiff
withoutredress;but,thedefendanthavingmadehiscontractandbroken
it, itdoesnotHein his mouth to sayhe is notliable,whenit wasbecause
of his breachthat the expenditure has beenwasted.
Competitivetenderinginvolvesconsiderableexpenditureof time and
money.Thetenderersdo not getpaidforit.Wherea partytenderedfora
construction work, andbeforeanything, wasgiventobelievethat the work
wouldbeallottedtothem.Theywereencouragedto dofurtherworkinesti
mating and tendering, butultimatelythe contract was awarded tosomeone
else.Forsuchfurtherworkthepartywasallowedtorecoverpayment.^^^
Whereaquotationforaresidentialdevelopmentwasaccepted"subjectto
contract"but nocontractcouldfollowbecausein theinterveningperiod
landpricescrashedandtheprojecthadto beabandoned,it washeldthat the
bidder'sexpenditureinpaymentoffeestoprofessionalpeopleforpreparing
plansofdevelopmentwasnotrecoverable.Theyhadincurreditvoluntarily
and not on encouragement. Thecourtsaid:^®°
177. (1954) 1 QB292(CA).
178.(1971)1WLR535.
179.WilliamLacey(Hounslow)LtdvDavis,{1957)1WLR932.Expenditurewasallowedto be
recoveredunder the doctrine of restitution as explained inMarstonConstruction Co Ltd v
KigassLtd,(1989) 15ConLR 116.
180.RegalianPropertiespicv London Dockland Devp Corpn,(1995)1 WLR212.https://t.me/LawCollegeNotes_Stuffs

643. 502Chapter9DischargebyBreach [S-73]
"Eachpartytosuchnegotiationsmustbetakentoknowthatpending
theconclusionofabindingcontractanycostincurredbyhiminprepara
tion for the intendedcontract will be incurred at his own risk in thesense
thathewillhavenorecompenseforthosecostsifnocontractresults."
Agreementtoprovidescientificprocess
Theagreementwasforsettingupaprojectforconvertingmenthonsto
menthol.Theagreementshowedthattherequisitetechnicalknow-howwas
tobeprovidedbytheIndianInstituteofPetroleum(IIP).Ahugeexpenditure
wasincurredinsettinguptheplant.ButtheIIPfailedinitsexperimentof
convertingthematerialevenuptofiveyears.Itwassomethingwhichhad
to bedoneunder the contractwithinfivemonths.The arbitratorawarded
compensationofRs90lakhsforthelosssufferedinsettinguptheplant.
TheCourtsaidthattherewasnothingagainstpublic policyin theaward.^^^
Mentalpainandsufferingandpunitivedamages(non-pecuniaryloss)
Inordinarycasesdamagesformentalpainandsufferingcausedby
thebreachare notallowed.^^^It is notappropriateto awarddamagesfor
anguishandvexationcausedbybreachofcontractwhenthecontractis
anordinarycommercialone.^®^Buttheymaybeallowedinspecialcases.
AccordingtotheAmericanRestatementsuchdamagesmaybeallowed
where "the breach was wanton or reckless and caused bodily harm" and
where the defendant had reason to know that the breachwould causemental
suffering.^'"'AnillustrationisfoundinacasebeforetheSupremeCourtof
Colorado,U.S.^^^
Thedefendant,abankingcorporation,agreedtoloantheplaintiff
moneyforatriptoCaliforniabycreditinghisaccountwithsuchsums
ashemightneedafterreachinghisdestination.Theplaintiffreached
California,butthedefendantrefusedtogivehimthepromisedcredit.,
The courtalloweddamagesforhumiliationandmentalsuffering.The
bankercouldhaveforeseenthat theplaintiff,havinggoneawayfrom home
andamongstrangersonthebasisofthepromise,wouldnaturallysuffer
mentalanguishif hischequewasnothonoured.
181.CouncilofScientificandIndustrialResearchvGoodmanDrugHouse(P)Ltd,AIR2007
Utt58.
182.WithersvGeneralTheatreCorpnLtd,(1933)2KB536(CA);BangaloreDevelopment
AuthorityvSyndicateBank,(2007)6SCC711,compensationformentalagonyandsuf
fering,suchacompensationcannotbeawardedunderthegenerallawofcontract,itcanbe
awardedbyapplyingtheprincipleofadministrativelaw,wheretheseller(houses)beinga
statutoryauthorityactsnegligently,arbitrarilyorcapriciously.
183.HayesvJames&CharlesDodd(afirm),(1990)2AllER815,826(CA);BlissvSouthEast
ThamesRegionalHealthAuthority,1987CLY1304:1987ICR700;PerryvPhillips,1982
CLY2164.
184.S.341oftheRestatement.
185.WestosenvOlatheStateBank,(1925)78 Colo 217.https://t.me/LawCollegeNotes_Stuffs

644. [S- Measureofdamages503
Threecaseslistedby the House of Lords
TheHouseofLordsinAddisvGramophoneCoLtd^^^listedthreesitua
tions in which mental pain andsufferingcan be taken into account:
Therearethreewell-knownexceptionsto thegeneralrule,namely,
actionsagainsta bankerforrefusingto payacustomer'schequewhenhe
has in his handsfundsof thecustomer,to meet it;actionsforbreachof
promise of marriage(nowabolishedinEngland),and actions like that in
FlureanvThornhill^^'^wherethevendorof real estate,failsto maketitle.
LordAtkinsonthenaddedthat heknewofnoneotherandthat anyten
dencyto create a fourth exceptionshould be checkedrather than stimulated.
HisLordshipwarned thatapiplicationoftortprinciplesto contract would
leadtoconfusion,uncertaintyandanomaliesandoccasionallytoinjustice
andmakethelawastillmore'lawlessscience'thanitissaidtobe.Suppose,
forexample,thatadebtorrefusedtopayhiscreditor,shouldthedamagesbe
reducedif thedebtorishelplessandapologeticandincreasedif therefusal
isfromamaliciousdesiretoinjurethecreditor.'HisLordshipexpressedthe
opinion that these matters should not play anypartin the law of contract
wheretheprincipleisthat theaggrievedparty "isto bepaidadequatecom
pensationinmoneyfor the loss ofthatwhichhe.wouldhave receivedhadhis
contractbeen kept, and no more". The facts of the case were:
The plaintiff wasemployedby the defendantcompanyat a certain sal
ary andcommissionon tradedone.He couldbedismissedbysixmonths'
notice; He was given sixmonths'noticeandat thesametimeanother
person was appointed to his place, thuspreventinghim from acting as
manager even for the notice period and earning his commission.
TheHouseofLordsrejectedtheclaimfordamagesfor thehumiliating
manner ofdismissal,but alloweddamagesfor thecommissionand salary
which he had lost. LordAtkinsonexplainedtheprinciplesthus:
The damages the plaintiff sustained by his illegal dismissal were:
(1)thewagesfor the period of sixmonths...;(2)the profits oncommis
sion which would in all probability have been earned by him; and possi
bly(3)damagesinrespectof.timewhichmightreasonablyelapsebefore
he couldobtainotheremployment.
HisLordshipthenreferredto thesumof£600whichwasawardedto
him not in respect of these heads ofdamage,,but in respect of the harsh and
humiliating way in which hewasdismissed,includingthepkinhe experi
enced by reason of theimputationupon him conveyedby the manner of his
dismissal. This kind of compensation was accordingly not allowed.
186. 1909 AC 488: 78 LJ KB 1122: 1010 LT 466. Followed inHaronBinMundirv Singapore
Amateur Atheletic Assn, (1992) 1SLR18 High Court Singapore so as to hold that in busi
nessmattersdamagesforemotionalloss are notallowed.
187.(1776)2WB1078.https://t.me/LawCollegeNotes_Stuffs

645. 504Chapter9DischargebyBreach [S-73]
The reasonfor thisconservativeapproachand reasonw^hyit wouldhave
to be diluted in the modern circumstances of life appears from the following
statement.
"In anagewherestresshas,generallyspeaking,clearlyincreased-and
hasbecomemore of a reality in the perception of peoplegenerally,it is,
perhaps,notsurprisingthattherehasbeenincreasingdissatisfactionwith
thisgeneralapproach.However,itisalsoclearthatthecourtshavetobe
vigilanttoguardagainstinflatedand(moreimportantly)bogusclaims,
lest thereleaseof thefloodgatessweepaway allsemblanceof reason,
commonsenseandjustice."^^^
This line ofreasoningwasapprovedbythe House of LordsinJohnson v
Unisys HerealsotheirLordshipsdidnotallowdamagesforunfair
dismissalas aspecialcount ofHabilityunder the headpsychologicalinjury
causedbythemannerofdismissal.Theclaimwasforsummarydismissal
after anirregularity.TheirLordshipsobservedby amajoritythat there is
no right ofactionatcommonlawtorecoverfinanciallossesarisingfrom
unfair manner ofdismissal.Any otherconclusionwould be contrary to the
statutorysystemfor dealing with unfairdismissals.Parliament in creating
thenewsystemundertheEmploymentRightsAct,1996(English)had not
leftanyscopeforcontractualdamageswherethepowerofdismissalwasnot
exercisedin goodfaith orfairly.TheParliamenthasestablishedanentirely
newsystemoutsidethe ordinary courts with tribunalsstaffedbyamajority
oflaymembersapplyingnewstatutoryconceptsandofferingstatutory rem
edies.Manyofthe newrulessuchas the limiton theamountofthe statutory
award, are not based upon any general principles which the courts used to
apply.
Breach ofpromiseofmarriage
A sum of Rs27,000was awarded for breach of promise of marriage. The
amount covered lowering esteem in society, mentaltortureand expenses on
engagement ceremony.""
Mentaldistress caused by negligent surveyreportor advice
The same principle wasfollowedwhere mental distress was caused by a
negligentsurveyreport as a result of which a house was purchased at a price
higher than it was worth andconsiderabletime and moneyhad to be spent
on makingithabitable.Asum of£ 8000(being£4000to eachplaintiff)was
awarded at the trial, but theCourtof Appeal heldthatdamages for breach
188. AndrewPhang,Subjectivity,Objectivity andPolicy—ContractualDamages in the House
ofLords,(1996)JBL362.
189.(2001)2 WLR 1076(HL).For another case in which damagesfor humiliatingmanner of dis
missal were not allowed seeJohnsonv Unisys Ltd, (2001) 2 WLR 1076 (HL),compensation
awarded by theindustrialcourt was supposed to cover that aspect also.
190.TulshiramvRoopchand,(2006)-2MahLJ 647: AIR2006Bom 183.https://t.me/LawCollegeNotes_Stuffs

646. Measureofdamages505
ofanormalcontractofsurveyareonlyrecoverablefordistresscausedby
physical consequences of the breach and not for mental distress not caused
byphysicaldiscomfortorinconvenienceresultingfromthebreachandthat
accordinglytheplaintiffswerenotentitledtodamagesfordistressand
inconveniencebutinsteadtheyw^ouldeachbeawardeddamagesof£750for
physicaldiscomfort."^
In Hayes v James & CharlesDodd(a the courtwas of the view
that thelawonthispointwouldseemtobeinsomedoubt,butfeltthat, if
thelawneedsclarification,itmaybeprovidedbytheHouseofLordsorby
theLawCommission.Damagesawardedfornegligenceorwantofskill,
whetheragainstprofessionalmenoranyoneelse,mustprovidefaircom
pensation,but no morethanthat.Thecourtbelievedthatin one or more
AmericanStatesdamagesareawardedforwrongfullydefendinganaction
insteadofadmittingit, butfeltthattherewasnosuchremedyinEngland.
In Perry v SidneyPhillips& Sons (afirm)^^^damageswere awardedfor the
distress,worry,inconvenienceandtroublewhichtheplaintiffhadsuffered
whilelivinginthehousehebought,owingtothedefectswhichhissurveyor
hadoverlooked.LordDenning MRconsideredthattheseconsequences
werereasonablyforeseeable.KerrLJ stated anarrowertest:"''
So far as the question of damages for vexation and inconvenience is
concerned,it should benoted that the deputyjudgeawardedthesenot for
thetensionorfrustrationof apersonwhoisinvolvedin alegaldispute
inwhichthe other partyrefusestomeetitsliabilities.If he haddoneso,
itwouldhavebeenwrong,becausesuchaggravationisexperiencedby
almostalllitigants.Heawardedthesedamagesbecauseof thephysical
consequencesof thebreach,whichwere allforeseeableat the time.The
fact that in suchcasesdamagesunder this head may berecoverable,if
theyhavebeensufferedbutnototherwise,issupportedbythedecisionof
thiscourtinHutchinsonvHarrisP^
Applyingtheseprinciplesto the case of Hayes v James & Charles Dodd
(afirm)^^^StaughtonLJ said:
191. WattsVMorrow,(1991)1WLR1421(CA).FollowingPerry v Sidney Phillips & Sons (a
firm),(1982)1 WLR 1297(CA)where the principle of modest compensation in such cases
was adopted; Hayes v James & Charles Dodd (a firm),(1990)2 All ER 815, 826(CA)
agreeingwith the remark inBlissv South EastThamesRegionalHealth Authority, 1987
CLY 1304: 1987 ICR 700, 718 that damages of this kind are only recoverable where the
subject-matter of the contract or duty in tort is to provide peace of mind and freedom from
distress. The other cases in which awards were modified and adjusted for inflation since the
date of award: Roberts v Hampson & Co,(1990)1 WLR 94; Cross v Martin & Mortimer,
(1989)1 EG LR 154; Steward v Rapley,(1989)1 EGLR159; Biggy Howard Son & Gooch,
(1990) 1 EGLR 173;Hipkinsv]ackCottonPartnership,(1989) 2 EGLR 157.
192.(1990) 2 Ail ER 815 (CA).
193.(1982) 1WLR1297(CA).
194.Ibidat p. 712: 1307.
195. (1978) 10BuildLR 19 (CA).
196.(1990)2 All ER815,825 (CA).https://t.me/LawCollegeNotes_Stuffs

647. 506Chapter9DischargebyBreach [S.73]
I am not convincedthat it is enough to ask whether mental distresswas
reasonablyforeseeableas aconsequence,orevenwhetheritshouldrea
sonablyhavebeencontemplatedasnotunlikelytoresultfromabreachof
contract.It seems to methatdamages for mental distress incontractare,
as a matter ofpolicy,limitedto certainclassesofcase.Iwouldbroadly
followtheclassificationprovided byDillonLJ inBlissv South East
ThamesRegionalHealthAuthority}^^
'...wherethecontractwhichhasbeenbrokenwasitselfacontractto
providepeaceof mind orfreedomfromdistress....'
Itmaybethat theclassissomewhatwiderthan that. Butitshouldnot,
in myjudgment,includeany casewherethe objectof the contract was not
comfort or pleasure, or the reliefof discomfort, but simplycarrying on a
commercialactivitywith a viewto profit.SoI would disallowthe itemof
damages for anguish and vexation.
The facts werethatthedefendantsolicitor told theplaintiffswho were
shifting their motor repairgaragethat they wouldhavethe right of way
from thebacksideofthesite. Butthatwasnotto be.Thesupposedpassage
was veryquicklyblocked aftercompletionof the purchase. The plaintiffs
were unable to carry onbusinesswithoutaccessto the site. They claimed
damagesfor wasted expenditure and for anguish and vexation. The court
heldasfollows;
The judge had been entitled in the circumstances to award damages on
the basis of comparing the plaintiffs' actual situation with the position in
which they would have been if they had never entered into thetransaction
at all ratherthanwith the position they would have been in had the trans
actionbeensuccessful.Hehadthereforebeenentitledtoawarddamages
on the basis of the capital expenditurethrownaway in the purchase of the
business and the expenses incurred. However, damages for anguish and
vexation arising out of a breach ofcontractwere not recoverable unless
the object of thecontractwas to provide peace of mind or freedom from
distressandaccordingly,werenotrecoverableforanguishandvexation
arising out of the breach of a purely commercial contract. It followedthat
the damages would be reduced by theamountawarded foranguishand
vexationand tothatextenttheappealwouldbeallowed.^^®
The decision of theHouseof Lords inKuddusvChiefConstableof
LeicestershireConstabulary'^^^showsthatlimits set by the decision in
Addis may no longer keeparrestingthe progress of law. The decision of their
197.1987ICR700,718.
198. See also Allied MaplesGroupvSimmons&Simmons,(1995)1 WLR 2117 (CA), which con
sidered the question of the liability of a solicitor for negligent advice in thematterof takeover
ofbusiness;BrownvK.M.R.ServicesLtd,(1995) 4 All ER598,in thecircumstancesof the
case it was proper to assess damages on the basis of what, on the balance ofprobabilities,
the plaintiffs would have probably done in thematterof investment if they had been properly
advised.Evidenceshowedthattheywouldhavereducedtheinvestment.
199.(2002)2 AC122:(2001)2WLR1789(HL).https://t.me/LawCollegeNotes_Stuffs

648. Measureofdamages507
^oidships}nMalikVBank of Credit andCommerceInternationaP-°°is an
example.ofthisforwardmovement.Stigmacompensationwasawardedin
thiscaseto anaggrievedemployeeforanunworthyremoval.Alearnedcom
mentatorencompasses this development in thecontextof the law inCanada
in thefollowingwords^®^:"Bycontrast theSupremeCourt of Canada has
nowfullyembracedit(theprinciple)inseveralrecentcasesandespecially
inWhitenvPilotInsurance...It isstillfarfromcertainthatpunitive
damageswillbe awarded for 'pure' breach of contract between commer
cialpartiesofsimilarcommercialexperienceandsophistication,rathereven
afterWhittenitisstillthecasethatsuchawardsmaybelimitedtosituations
wherehurtfeelingsordamagedpeaceofmind,areatstake,forexample,in
wrongfuldismissalorinsuranceclaimdenialcasesrespectively."
Compensationfornon-pecuniaryloss
The House ofLordsin theirdecisionin FarleyvSkinner/°^heldthat there
is no reason whycompensationfor non-pecuniary damage should not be
allowed..Inthiscase,theclaimantwasconsideringthepurchaseofatranquil
countryproperty. Heinstructeda surveyor toreporton the volume of air
craftnoisein thearea.Thesurveyornegligentlyreportedthat theproperty
wasunlikelyto beaffectedbythenoise.Theclaimantboughttheproperty
andsubsequentlydiscoveredthat itwassignificantlyaffectedbysuchnoise.
Hestayedin the property and brought an action against thesurveyorto
recover compensation for non-pecuniary loss caused byinconvenience,etc.
TheirLordshipsapprovedthe award of£10,000 asdamagesforbreachof a
contractualdutyofcareinrespectofthesurveyreport. TheirLordshipssaid
thatwhereasurveyorgivesacontractualundertakingtoinvestigatea mat--. -
ter important to thebuyer'speaceof mind, the buyeris inprincipleentitled
to recover non-pecuniary damages for breach of that undertaking. There is
no reason why the scope ofrecoveryshould depend upon the object of the
contractas ascertained from all its constituent parts. It is sufficientthata
major orimportantobject of the contract is to give pleasure, relaxation,
or peace of mind. Such a claim is also not barred by the fact that the sur
veyorundertook only toexercisereasonablecare rather than to guarantee
theachievementof a result. It would be asingularlyunattractive result if a
professionalpersonwhoundertakesa specific obligation to exercise reason
ablecaretoinvestigateamatter,whichhischenttoldhimtobeimportant^
couldpleasehimselfevenbynon-performancewhen his very payment was
apartof theconsiderationforthatperformance.The factthattheclaimant
200.1998AC 20:(1997)3WLR95 (HL).
201.M.H.Ogilvie:AfterWhiton:Punitive Damages for Breach ofContractinCanada,2004
JBL549.
202. (2002) 1 SCR 595: (2002) 209 DLR (4th) 257 (Canada), citingG.H.L.Fridman:Punitive
Damages for Breach of Contract: A Canadian Innovation,(2003)119 LQR 20, heavycom
pensatoryawardwas madeagainstthe insurer.
203.(2001)4UKHL49(HL).https://t.me/LawCollegeNotes_Stuffs

649. 508 Chapter 9DischargebyBreach [S.73]
neverthelesschoseto stay there could notdeprivehim of his rightbecause
itvv^asnojustificationfor thesurveyor'sbreachofduty.LordSteynadvised
a caution that awards of non-pecuniary damages should be restained and
modest. It is important that logicalandbeneficialdevelopmentsin the law
shouldnotcontributeto thecreationof a society bent onlitigation.
Their Lordships cited the principle of law as stated byBinghamLJ in
'WattsVMorrow^"'^to the effectthatacontractbreakeris not in general
liable for any distress,frustration,anxiety, displeasure, vexation, tension, or
aggravationwhich his breach of contract may cause to the innocent party,
butthatthisruleisnotanabsoluteone.Itisbasedonaconsiderationof
policy.Anexceptionalcategoryiswheretheverypurpose of the contract
is toprovidepleasure,relaxation, peace of mind, orfreedomfrommoles
tation.ThelearnedLord Justice, however addedthatacontractto survey
the condition of a house for a prospectivepurchaser does not fall within the
exceptionalcategoryand,therefore,in such casesdamageswould berecov
erable only for physicalinconvenienceand discomfort caused by the breach.
It wasobservedinanothercasethatsentencesandphrasesin a single
speechof ajudgecannot be treated as if they wereprovisionsin an Act of
Parliament. Judges are not supposed to frame definitions or to lay down
hardandfastrules.
Animportantdevelopmentfor this branch of the law was Ruxley
ElectronicsandConstructionLtdvForsyth,^'^^LaddingfordEnclosures
Ltd VForsyth?^^The plaintiffspecifiedthat the swimming pool should at
the deep end be 7'6" deep. The contractor did not complywith thisspecifi
cation. The pool had the depth of only the standard 6'. The House of Lords
found the usual"costofcure"measureofdamagesto be whollydispro
portionate to the loss suffered and economicallywasteful. Their Lordships
awarded the moderate sum of£2500for theplaintiff'sdisappointmentin
not receiving the swimming pool he desired. InKnottvBotton^°''an archi
tect was asked to design a wide staircase for a gallery and an impressive
entrancehall. He failed to do so. Theplaintiffspent money inimprovingthe
staircaseto someextentandherecoveredthecostof thechanges.Healso
claimed damages fordisappointmentand distress in the lack of an impres
siveentrancehall. TheCourtof Appeal disallowed thispartof the claim.
Housingservice
Thecomplainantfiled apetitionbefore theMonopoliesand Restrictive
Trade PracticesCommissionagainstaDevelopmentAuthorityon the \
grounds ofexcessivedelay and failure tohandover possession of the plot.
Commissionawarded,amongothercounts,Rs50,000asdamagesfor men
tal agony suffered by thecomplainant.The SupremeCourtheldthatthis
204.(1991) 1WLR1421 at1445(CA).
205.1996AC344:(1995)3WLR118.
206.Ibid.
207.(1995)45ConLR127.https://t.me/LawCollegeNotes_Stuffs

650. [S. 73] Measureofdamages509
was an error on thepartof theCommission.^"®In such cases, thecourtsaid,
thenormalrule should apply which isthatthe vendor should pay damages
for thepurchaser'sloss ofbargainby paying themarketvalue of the prop
erty at the time fixed for completion less thecontractprice. Thepurchaser
may claim loss ofprofitwhich he intended to make from aparticularuse
of thelandif thevendorhadactualorimputedknowledgeof such use. For
delay in performance the normal nature of damages is the value of the use
of the land for theperiodof delay, viz., usually its rental value.Interestcan
be awarded on equitable grounds in appropriate cases. The rate of interest
should neither be too high nor too low. Interest at the rate of 12 per cent p.a.
should be just andproperand would meet the ends of justice in this case.
Negligentsurgicaloperation
A24-year-oldfemale was surgicallyoperatedfor sterilisation. The opera
tion was performed in a crude and primitive mannerwithoutadministering
evenlocalanaesthesia.
The doctor showed incompetence in cutting small intestine instead of
fallopian tube which becamethe direct cause of death. Rs1,60,000 with 12
per cent interest were awarded. The amount was directed to be paid to the
husbandandminorchildrenofthedeceased.^"'
Negligence inmaintenanceofelectricity lines
Where the petitioner's sole son, who was blind, died of electrocution by
coming incontactwith a pole which was livedue to inefficientmaintenance,
the Municipal Corporation was directed to pay Rs50,000 with 12 per cent
interest.^^"
Contracts for providing peace of mind or preventingmental distress
But now the principle is revolvinground to thisthatin every proper case
damages for mental distress can be recovered.
Photographer'sfailure toappearat wedding
In a Scottish case, a photographer who had agreed to take photographs
at awedding,failedin breachof his contract to appear there. As a result the
bride had no photographs of herwedding.Shewas alloweddamagesfor the
resultinginjuryto herfeelings.^"
Failure bybandtoattendweddingreception
A businessman of somestandingin hiscommunityengaged a top 12 men
band for his daughter's wedding reception to which some 1200 guests came.
208.GDAVVnionofIndia,(2000)6 SCC 113: AIR2000SC2003.
209. Joseph v George Moonjely, AIR 1994 Ker 289.
210. Xavier v StateofT.N.,AIR 1994 Mad 306, interest running from the date of petition till
payment.ThecourtfollowedKumariv State ofT.N.,(1992)2 SCC223: AIR 1992 SC2069.
211. Diesen v Samson, 1971 SLT 49; noted inCurrentLaw, November 1971.https://t.me/LawCollegeNotes_Stuffs

651. 510Chapter9DischargebyBreach [S. 73]
The band was to play for four hours during the reception, the meal and then
fordancing.Suchmusicwaspart oftheexpectedhospitality,On theday,the
band-mastertelephoned,half-an-hourafter theyshouldhavearrived,to say
that they had broken down 200milesawayandwerenotcoming.Friends
of the hostassistedhim byarrangingtwo localmusiciansand byplaying
tapes but that wasstartedlater and was no proper substitute for the band.
It was held that a daughter's wedding is a veryspecialday for any father.
It was a matter of personalprestigefor the fathertoofferthespecialband
aspartof his hospitality to bothsides'familiesandhismanybusinessand
socialfriendsand hesufferedaconsiderablehumiliation by theevents.The
courtorderedrefund ofadvancedepositand £800 asgeneraldamagesfor
disappointmentandhumiliation.^^^
Cancellationofwedding reception
Amotelwasbookedfor theplaintiff'sdaughter'sweddingreceptionto
which105guestshadbeeninvited.Themotelcontractedtoprovidea three-
coursemeal,sherryreceptionand a roomwherea bandwouldplay for
dancing.Themotelcancelledthis 48hoursbeforethewedding.Theonly
alternativewas a smallfunction room at a publichouse where a cold buffet
waslaidon.Theroomwascrampedandtherewasnospacefordancing.It
washeldthat anonlydaughter'sweddingreceptionisofuniqueimportance
for a parent. General damages of £ 750 were awarded forinconvenienceand
disappointmentplus £265specialdamagesfor thecancellationfeeof the
bandandtelephonecallstonotifyguestsofthechangedvenue.^"
Holidaycases
InJarvisvSwanToursLtd^^'^LordDenningMRdescribedtheprinciple
thatdamagescannotberecoveredformentalpainandsufferingcausedby
thebreachtobeoutofdate.
Theplaintiffwantedtospendhisholidays.Hewasattractedbythe
representationsheldout bya touristagencythat certainkind offacilities,
recreation, company, etc., would be provided by them on tours conducted
bythem.Thepromisesturnedoutto beunrealandtheplaintiffwasmuch
disappointed.Hewasalloweddamagesfordisappointedexpectations,
the courtsayingthat in a propercasedamagesfor mentaldistresscan be
recoveredand onesuchcaseis a contract forholiday.
212.DharnivDhami,1988 CLY 409.
213.Hotson&Hotsonv Payne, 1988 CLY 1047.
214.1973QB233:(1972)3WLR954(CA).Inanothercase,WilsonvPegasusHolidays
(London),1988CLY1059,ahotelwasdescribedinitsbrochureasofferinga"superbstand
ardofaccommodation",butinfactithadinadequatetoiletandbathingfacilities,exposed
electricwiringandwasinaverypoordecorativeorder.Itwasbookedforskiingholiday,but
theslopeswereatsomedistanceandthebusservicewaserratic.Followingkindsofdamages
wereawarded:£125forlossofenjoymentanddiminutionin thevalueoftheholiday;£400
for extra stress, worry andresponsibility.https://t.me/LawCollegeNotes_Stuffs

652. [S. 73] Measureofdamages511
HisLordshiplaid down:"Inapropercasedamagesformentaldistress
can be recovered incontractjust as damages for shock can be recovered
intort.Onesuch case is acontractfor aholiday,or anyothercontractto
provideentertainment.If thecontractingpartybreaks hiscontract,damage
canbe given fordisappointment,thedistress,theupsetandthefrustra
tioncausedby thebreach.(Such loss may be)difficultto assess intermsof
money,butit is nomoredifficultthantheassessmentwhichthecourtshave
tomakeeverydayinpersonalinjurycases for loss ofamenities."
ThiswasfollowedinJacksonvHorizonHolidays-?^^
Theplaintiffenteredintoacontractfor aholidayforhimself,his wife
andtwochildren.Inmanymaterialrespects thedefendantfailed to pro
vide theholidayinaccordancewiththeirdescription.Thecourtallowed
damagesnotmerely for thedistressto theplaintiffbutalso for the wife
andchildren.
ACanadiancourtalloweddamagesformentaldistress where amotor
home wascontractedto beborrowedto thedefendant'sknowledgefor hol
idaypurposesand he failed toprovideit.^^^Wherethe buyercommunicated
to the sellerthatone of his reasons for buying the car was aforthcoming
touringholiday but problemswiththe car spoilt the holiday. The disap
pointmentof a spoilt holiday was asubstantialelement in the award sanc
tionedby theCourtofAppeal.^^^
Packagetour
Thetouristagency owes responsibility not only for its own services but
also for serviceshiredfromothersforfurtherstages of the package. The
plaintiff booked a package tour of mainland China for his daughter. The
service was offered by aHongKong travel company. At theborderwith
mainlandChina,thetourwas joined by a guide of a Chinese travel com
pany. One of the items was to visit and cross a lake. The party missed the
ferry. An alternative arrangement was made by hiring a speedboat of athird
agency.The boat was small. It could carry only eight at one time out of 24.
The driver of the boat completed two trips and refused to go for the third.
Anotheremployeeof the third agency was to drive the boat. This driver
negligentlyoperated too fast, caused a crash in which the plaintiff's daugh
ter wasthrownoverboardand lost indrowning.TheoriginalHongKong
agencytried to saveits skin by sayingthat the tragedy was not due to any act
on the part of theiremployees.Holding themUablethe courtsaid:^^®
215.(1975)1WLR1468(CA).Thirty-three hours dislocation caused to a tourist party being con
ducted under packageholidaywhich obstruction was due to air traffic control problems,was
heldto be not a breach and, therefore, an action forinconveniencewas dismissed.Compton
VI.L.G.Travel,1990CLY625.
216.Elderv Koppe, (1974) 53 DLR (3d) 705 (NSSC).
217.JacksonvChryslerAcceptancesLtd,1978 RTR 474.
218.WongMeeWanv Kwan KinTravelServicesLtd,(1996)1 WLR 38(PC).For a study of
Statutory and Case Lawdevelopmentsin thisfieldsee, David Grant, Tour Operators,https://t.me/LawCollegeNotes_Stuffs

653. 512Chapter9DischargebyBreach [S. 73]
"Takingthecontractas a wholetheirLordshipsconsiderthatthe first
defendanthereundertookto provide and not merely toarrangeall the
services included in theprogramme,even if some activities were to be car
riedoutbyothers.The firstdefendant'sobligationunderthecontractthat
the serviceswouldbeprovidedwithreasonableskillandcareremains
even if some of the services were to be rendered by others, and even if
tortiousliabilitymay exist on thepartof thoseothers."
Solicitor'sfailure
Theprincipleis now no moreconfinedtoholidaycases. The decision of
the EnglishCourtofAppealinHeywoodv Wellers (afirm)^^^hasrendered
it to be a principle of generalimport.
The plaintiff engageda firm ofsolicitors toobtainan injunction against
a man who washarassingher. The solicitorsobtainedaninjunctionbut
failed to.bring the man before thecourtwhen he molested her again with
theresultthattheharassmentremainedunabated.
She was allowed to recoverdamagesfrom the solicitors for thecoiise-
quential mental anguish. Thecourtexpressed the opinionthatthis kind of
loss is no different from any other loss, for any reasonable man could have
foreseenthatcontinuedmolestationwouldcausefurthermentaldistress.
JamesJproceededas follows:
It is also the law that where, at the time of making a contract, it is
within the contemplation of the contracting parties that aforeseeable
result of a breach of thecontractwill be to cause vexation,frustration
ordistress,then if a breach occurs which does bring about that result,
damagesarerecoverableunder that heading. Not ineverycase of breach
of contract on the part of asolicitortowards hisclientwilldamagebe
recoverable under this head. It is only when the servicescontracted'for
aresuchthat bothsolicitorandclientcontemplatethat afailureby the
solicitorto perform the contract willforeseeablyoccasionvexation, frus
trationordistress.
A solicitorwasemployedby the client to prevent removal by the father
oftheclient's-childrenfromtheUnitedKingdom.Thesolicitoraccordingly
notified thepassportagency but failed to renew the notification. The father
added children to his passport and took themaway.The mother sued the
solicitor.Thecourtsaidthatthesolitor'sfailuretorenewthenotification
was a breach ofcontractualduty. There was a casual connection between
thenegligenceandremovalof thetwinsfromUK.Thefactthatdamages
PackageHoliday Contracts and Strict Liability, 2001 JBL253.
219. 1976 QB446:(1976)2 WLR 101. Baileyv Bullock,(1950)2 All ER 1167,in a case of solic
itor's negligence it was held that damages for inconvenience and discomfort could be recov
eredforthesolicitor'sfailureto getpossessionofprerriisesforhisclientbutnotdamagesfor
annoyanceandmentaldistress.https://t.me/LawCollegeNotes_Stuffs

654. [S.73] Measureof damages 513
for loss of a child's company were not recoverable in tort, did not mean
thatthere could be no recovery undercontracttoo. A claim founded on a
contractwhich had the object of providing pleasure,relaxation,peace of
mind or freedom frommolestationis an exception to the general rulethat
thecontractbreakercannotbe made liable fordamagesforinjuredfeelings
or distress.Accordingly,she was entitledto'recover damages for mental
distress.^^"
Lossofpets due tocarrier'snegligence
Thisprinciplewasappliedby a Canadian court to the distresscaused by
the loss of a pet due to acarrier'snegligence.^^^
The plaintiffs wanted to carry their two pet dogs with them in the
flight.The plaintiffs were willing to pay for the entire first class section
of theaircraftfor the purpose of keeping their pets with them. But the
defendants did not agree to that. They told the plaintiffsthatthe pets
would be carried in the cargocompartmentand assuredthatthey would
arrive in the first classcondition.But, as the luckwouldhave it, the pets
happened to be placed next to a container of dry .ice which threw out
fumes. One pet perished and the other was taken ill.
The plaintiffsuccessfullyclaimeddamages,apart from, for the lossof the
dog, for "the anguish and sadness".
Demotionofemployeewithoutreasonablecause
"Whereanemployeewas relegatedwithoutappropriate cause to a position
of lesser responsibility in breach of contract, it was held that since, it must
have been in the contemplation of the partiesthatthe breach,withoutrea
sonable cause, would expose the plaintiff to thevexation,frustration and
distress which he had suffered, the plaintiff was entitled to damages offive
hundred pounds. The plaintiff hadbecomedepressed,anxious, frustrated
andill.
Delayinpayment
The person whosepaymentisdelayedis entitledto loss of interest on the
money.Wherean insurer made payment of the lifepolicy money one-and-a-
half year after the policy becamea claim and there was nojustificationfor
thedelay,the claimant was allowedtorecoverthe moneywithinterest.^^^
Dishonourofcheques
Anaccountholder in a building society described himself as a
self-employedbusinessmanin export and importdealingsstating his
220. Hamilton Jones v David & Snape,(2004)1WLR924: 2003EWCH3147(Ch).
221.NeivellvCanadianPacific Airlines, (1976) 74 DLR (3d) 574 (Ont Cty Ct).
222.AdaramaniDevivLJC,1998AIHC3006(Ori).https://t.me/LawCollegeNotes_Stuffs

655. 514Chapter9DischargebyBreach [S.73]
incometo bebelow£5000. Heissuedachequefor £4500. Thebuilding
societyhappenedwronglyto dishonour thischeque.He claimedsubstantial
damages.
The Court of Appeal was of the view that it was too late in time(1996)
to draw adistinctionbetweentraders andnon-tradersfor the purposes of
assessmentofcompensationforlossofhonourinrespectofgeneraldamages
flowingfrom the dishonour of a cheque. The courtsaid:^^^
The creditrating ofindividualsis as important for their personal trans
actions,includingmortgagesandhire-purchaseaswellas bankingfacil
ities, as it is for those who are engaged in trade, and it is notoriousthat
centralregistersare now kept. I wouldhavenohesitationinholdingthat
what isineffectapresumptionofsomedamagearisesineverycase,inso
far as this is a presumption of fact.
Tradesecrets
Intellectualpropertyrights include trade secrets, confidentialinforma
tion,know-how,patents,trademarks,copyrights,designs,etc.Theserights
donothaveanyphysicalcorpus.Theyareintangible.Theyare thecreations
of brain andconstitutea vitalbusinesspropertyin thecompetitivemarket
economy.Acompleteprotection ofsuchrights isnecessaryforencourage
mentofcreativeandinnovativeabilities.Theprotectionaffordedbylaw is
exemplified in the followingstatementinCharlesworth:^^'^
Intellectual property rightsoverlap,protecting differentfacetsof a
product, forexample,the product itself may be patented, its method of
manufacturemay be protected as a trade secret; sales literature and soft
wareusedto run theproduct,maybeprotectedbycopyright;itsshape
orconfigurationmaybeprotectedbynewdesignright;and its name by
atrademark.
Theusualremediesforbreachofconfidenceare:actionforanaccount
ofearningsfrom the use of theinformation;action fordamagesand an
injunctionforpreventionof misuse. For anactionto succeed itwouldbe
necessarytoshowthattherewasinformationofconfidentialnaturewhich
wassharedunderanobligationofconfidencewith thepersonproceeded
againstandthattherewasanactualorthreateneduse ordisclosureofthe
information.If theinformationhasalreadybecomea part ofpublicknowl
edge,no actionmaylie.Everyinformationorgeneralknowledgeoffacts
whichcomesto be picked up by anemployeecannot be labelled as trade
secretorconfidentialinformation.A TVpersonalitywho leftemployment
ofonecompanyandjoinedanotherwhichproposedtoestablishacompeti
tivebusinesscouldnot berestrainedfromdoingso onlyfor the fear that he
223. Kpohraror vWoolwithBuildingSociety,(1996)4 All ER 199 at p. 124(CA).
224.Charlesworth'sBusinessLaw(5thEdn,1991) 637.https://t.me/LawCollegeNotes_Stuffs

656. [S.73] Measure ofdamages515
mightusehisexperiencegainedin thefirstemploymentinpromotingthe
business of thenextemployer.^^^
There is animpliedterm in a contract ofemploymentthat anemployee
maynot makeuseofhisemployer'stradesecrets.Anemployeewhocomesin
touch with suchinformationcan berestrainedfrom using it to the prejudice
of hisemployer'sinterest.^^®Secretsmayalso beshared with acollaborator
on the conditionthat the companyshall maintainsecrecyof all the technical
informationandthatit shouldobtaincorrespondingsecretarrangements
from its employees.
Aninjunctioncanbeissuedagainsta thirdpartyalsowithwhomthefor
meremployeegetsnewemploymentfromusingor furtherusingany infor
mation ofconfidentialnatureprovidedto him by theemployeein breach
of his duty ofconfidence.If he stillpersistsevenafter gettingnoticeof the
breach ofconfidence,he can be held liablein damages for the use of an intel
lectual property which did not belongto him.
Damages for breach of confidence
Damagesare also allowedfor breachofconfidence.
Three actresses formed a rock group. Theyconceivedan idea of pro-
-ducingatelevisionserial, basedon theirexperience,to focusattention on
their individual and group life so as to contrast theircollectivecharac
terwiththeirindividualcharacter.The idea was conveyed in thecourse
of oralnegotiationsto atelevisioncompany.Thisresultedin a written
agreementwhichprovidedsomepaymenttotheladiesbutforbadethe
companyfromusingtheideaunlesstheladiesweregiventhe opportunity
to act and theydeclinedit. Withoutgivingtheopportunity,thecompany
producedtheprogrammewith greatcommercialsuccess.
Thecompanywasheldliableindamagesto theladies.Theagreement
containedanimpliednegativecovenant.Thecircumstancesin whichit was
communicatedimportedanobligationofconfidence.Thecontentof the
ideawasclearlyidentifiable,original,ofpotentialcommercialattractiveness
and capable of reachingfruition.^^^
225. Star India (P) Ltd v LaxmirajSetharamNayak,(2003)3MahLJ726. For a study of the
objectshowingtheneedforandtechniquesofprotectionseeTerKahLengandSusannaHS
Leong,Contractual Protection ofBusinessConfidence,(2002)JBL513.
226. Canadian AeroServiceLtd v O'Malley,(1971)23 DLR(3rd)632, Onatrio CA, Canada,
herenouseofsecretknowledgewasinvolvedinobtaininga contractincompetitionwith the
formeremployer.AttwoodvLamont,(1920)3KB571,theemployeewasnotintouchwith
tradesecrets.
227.NiranjanShankarGolikarivCenturySpg&MfgCoLtd,AIR1967SC1098:(1967)2SCR
378.
228. Fraser v ThamesTelevisionLtd, 1984 QB 44(HL).Liability to damages is not excusable
onlybecauseit isdifficulttoassessthemwithprecision.Insuchcasesthebuyerisentitled
topresumptionsas tohisloss.SeeAndardMount(London)Ltd vCurewel(India)Ltd,
AIR 1985 Del 45. It was a contract for sale of human albumin. Prema Korgaokar v Mustak
Ahmed,AIR1987Guj106.Breachofpromiseofmarriageisactionable.Theamountofhttps://t.me/LawCollegeNotes_Stuffs

657. 516Chapter9DischargebyBreach [S.73]
In acasebeforetheHouseofLords:apartnershipfirmimportedgoods
andsoldthemtocustomersin theUnitedKingdom.Itsprincipalcustomer
wasEB.The firm andEBwere banking with the defendant bank. The same
bankusedtoissuetransferablelettersofcredit.ThoughEBwasintouch
withthedetails,itdidnotknowthepricesbeingpaidbythefirmtoitssup
pliers.Thebankhadtosendcertaindocumentsto thefirmbutbymistake
sentthemtoEBfromwhereEBcametoknowofthefirm'sprofitsmargins
and stoppedtakingthematerialfrom the firm. The firm sued the Bank for
wrongfuldisclosureofconfidentialinformation.It was heldthatthe loss
of profits on repeat business was not too remote. The firm was entitled to
recpverthe amountequalto theprofitslostduringtheperiodforwhichthe
businesswaslikelytohavecontinuedwithEB.TheirLordshipsupheldthe
awardwhichthejudgehadmade,onareducingbasisextendingoverafour-
yearperiod.^^'
Injunctiontorestrainbreachofconfidence
Wheredamageswouldnotbeanappropriateremedy,aninjunctionmay
beissuedagainstimproperuseofconfidence.AnillustrationisAttorney
GeneralvBarkerP°
Thefirstdefendantwasemployedin theroyalhousehold between1980
and1983ontermswhichincludedacontractualundertakingnottodis
close,publish or revealany incident,conversationor information concern
inganymemberof theroyalfamilyor anyvisitororguestwhichcarrieto
hisknowledgeduringhisemploymentoranyinformationrelatingtohis
employmentintheroyalserviceunlessdulyauthorisedinwritingtodo
so. The undertaking was perpetual and worldwide and the first defendant
expresslyacknowledgedthat itincludedanagreementonhispart notto
publishanysuchmatterin anybook.Theseconddefendant,whichwasa
Canadiancompanycontrolledbythefirstdefendant,plannedtopublish
in theUnitedKingdoma book written by thefirstdefendantabout his
serviceintheroyalhousehold.The bookwasaflagrantbreachofthefirst
defendant'sundertaking.Thefirstdefendanthavingrefusedtocomply
with thetermsofhisundertaking,theAttorneyGeneralissueda writ
applyingforworldwideinjunctionsagainstthedefendantsrestraining
publicationof thebook.
The courtheldasfollows:TheAttorneyGeneral'sclaim was not based
onabreachofconfidentialitybutonabreachofcontract,theconsideration
forthecovenantbythefirstdefendantnottopublishmattersconcerninghis
experiencesin the royalhouseholdbeingtheagreementto take him on the
staffoftheroyalhouseholdandtopayhimwagesorasalary.Accordingly,
compensationdependsuponcircumstancesamongwliichmentalpainandsufferingisone
factor.
229. JacksonvRoyalBankofScotlandPic,(2005)1WLR377(HL).
230.(1990) 3 All ER257(CA).https://t.me/LawCollegeNotes_Stuffs

658. [S.73] Measure ofdamages517
the firstdefendanthadfor aconsiderationenteredintoanegativecovenant
which was limited neither territorially nor in time and such a covenant was
enforceableprovidedit couldnot be attackedforobscurity,illegalityor on
public policygroundssuch asbeingin restraint of trade. Thecovenantwas
notvoidon any ground ofpublic policyor on the ground that itrestricted
thefreedomofexpressionabroad contrary toArticle10 of theConvention
for the Protection of Human Rights and Fundamental Freedoms and in the
circumstances the balance of justice requiredthatan interlocutory injunc
tionhavingextra-territorialeffectbe grantedagainstbothdefendants.
It was contended in a case before the BombayHighCourt^^^thatwhat
wasconveyedto the other party wasan ideain the abstract without any con
crete shape.TheDivisionBenchdidnotagreewiththecontentionandcited
thefollowingpassagefromCopingerandSkoneJamesonCopyright:^^^
"There is a broad anddevelopingequitabledoctrine that he who has
receivedinformationin confidence shall nottakeunfairadvantageof it
orprofitfromthewrongfuluseorpublicationof it. Hemustnotmake
anyuseof it to theprejudiceof himwhogaveit,withoutobtaininghis
consentor, at any rate, withoutpayinghim for it. It has for long been
clearthattheCourtscanrestrainabreachof confidencearisingout of a
contract or any right toproperty....The ground ofequitableintervention
isthatit is unconscionable for a person who hasreceivedinformation
on the basisthatit is confidential subsequently to revealthatinforma
tion.Acceptanceofinformationon thebasisthat itwillbe keptsecret
affectstheconscienceof therecipientof the information. In generalit is
inthepublicinterestthatconfidencesshouldberespected,evenwherethe
considercan pointtospecificfinancialdetrimenttohimself.If adefend
antisprovedtohaveusedconfidentialinformation,directlyorindirectly
obtainedfromaplaintiffwithouthisconsent,expressorimplies,hewill
beguiltyof aninfringementoftheplaintiff'srights."
In another casebeforeit, theBombayHigh Court said thatconfiden
tialitywastocoveronlysuchinformationaboutwhichthepartieshad
agreedinwritingthatitwouldbeconfidentialandnoteveryotherpieceof
information.^^^
Injunctionfor restrainingbreach of contract
Asupplysystemto theArmywhichhadbeengoingonsince1960wasnot
allowedto bescrappedall ofasuddenbyblacklistingthesupplier.Aperson
dealingwiththeGovernmentinmattersofsaleandpurchasedevelopslegiti
mateinterestandexpectations.Theorderofblacklistingamountedtodenial
ofequalityofopportunity.Beforeissuingsuchanordersomeexplanation
231.ZeeTelefilmsLtd vSundialCommunications(P)Ltd,(2003)5BomCR404.
232.13thEdn.
233.VillaModaGeneralTradingCoW.L.L.vChordiaFashions(P)Ltd,(2005)3CLT
331(Bom).https://t.me/LawCollegeNotes_Stuffs

659. 518 Chapter 9 Discharge by Breach [S.73]
shouldhavebeencalledfor.Thecourtvi^ouldnotinterfereinthematterifit
is decided again by givingopportunityto thesupplier.^^''
Injunctionforrestrainingalienationofproperty
ThepetitionerssucceedunderSection 9 of theArbitrationandConciliation
Act,1996inmakingout aprimafacie case of andbalanceofconvenience
in theirfavourand,therefore,aninjunctionwasissuedrestraining the
respondent from disposing of property which was comprised in the asset
purchaseagreement.
Writ remedy againstterminationof dealership
Adealershipagreementwasterminatedbyreasonofbreacheson the part
ofthedealer.Heappliedfor a writ againstthe orderexpectingthat contrac
tualobligationsshould be decided on the basis ofaffidavitevidence. The
court refused to entertain the petition. The matter related to contract, trade
andbusiness.It should beadjudicatedthrough an appropriatecivilaction.^^^
Termination of contract by Government and writ remedy
Theforeigncompanytowhomthe contractforconstructionof apublic
roadwasawardedcouldnotcompletetheprojectwithinthestipulatedtime
inspiteof the fact thatsufficienttime and opportunity wasprovidedfor
thesame.TheGovernmentterminatedthecontractinaccordancewithits
stipulations.This was questioned in a writ. Thecourtfoundthatthe termi
nation had become necessary in public interest. There was no violation of
Article 14 and, therefore, no scope forinterference.^^^
AnAuthoritywhichhadgrantedaflyovercontractto the writpetitioner
arbitrarilyrescindedit. Thecontractor'swritpetitionagainstit washeldto
bemaintainable.Awritcourtisnotalwaysboundtorelegatetheaggrieved
party to acivilsuit and thatmerelybecausethe other party has raised a
factualdispute.Themereraisingof adisputeabout a factdoesnot make
it adisputedfact.Thewrit court can go intosuchanattemptatdisputing
things, adjudicate it and grant appropriaterelief.
Directionforpaymentinwritjurisdiction
Theworkwasperformedbythecontractorinaccordancewiththeappli
cable terms and conditions asprescribedby the StateGovernment.The
amount of payment which was due for thecompletedwork was admitted
bytheStateAuthority.The courtsaidthat itwasnotappropriatefor the
Stateinstrumentalitytoavoidpaymentofadmittedamountandcompelthe
234.BombayMotor Storesv Unionof India,(2000)1BLJR23(Pat).
235. Geep Batteries (P) India Ltd v Gillette India Ltd, (2005) 120 DLT 387.
236.HowrahMotor Co Ltd v BharatPetroleumCorpn, (2000)3BLJR1854(Pat).
237. OJSC Corpn Transstroy v GovtofKarnataka,AIR 2005 Kant 351; 2005 AIR Kant 1492.
238.U.P.StateBridgeConstructionCorpnLtd vBangaloreDevelopmentAuthority,AIR2005
NOC421 (Kant); (2005) 5KantLJ 112.https://t.me/LawCollegeNotes_Stuffs

660. [S,73] Measureofdamages519
contractortopursuetheconventionalandcumbersomealternativeremedy.
Directionsforpaymentcouldbeissuedinwritjurisdiction.^^'Onthecom
pletionofaGovernmentcontract,theGovernmentbecomesliableforpay
mentof the amount accruedto the contractor. He getsa legalright toinvoke
thejurisdictionofthewritcourtprayingformandamusfordirectiontothe
Governmentto makepaymentof the admittedoutstandings.^''®
Withdrawalletterofintentandwritremedy
A letter of intent wasissuedin favour of the petitioner for granting him
aretailoutletforsaleofpetroleumproducts.Theletterwassubsequently
withdrawn withoutassigninganyreasons.Thiswasheldtofallfoulof
Article14 of theConstitution.Thecourtsaidthatinappropriatecases it
could interfere incontractmatters in the exercise of writ jurisdiction. The
respondentwasdirectedtorestoretheletterofintentandtakefurthersteps
in accordance with the law and prescribedprocedure.^'^^
Waiverandwritremedy
Waiverofcreditguaranteecommissioncharges,rebateandconcessional
rates of interest were held to beapart of the terms ofloan.They were con
tractualmattersbetweentheparties.Anydisputeas tosuchmatterscould
beresolvedthroughacivilsuitand not underwritjurisdiction.^"^
Non-performanceofGovernmentcontractbycontractorandwrit
AforeigncompanycontractingwiththeGovernmentfailedtocomplete
theroadbuildingprojectswithinthestipulatedperiods.Sufficienttimeand
opportunitieswereaffordedtothecompanytoamenddefaults.Butitcould
not do so. Termination of the contract by theGovernmentin accordance
withcontractstipulationswasheldto bejustifiedinpublicinterest.There
was no violation of Article 14 and no occasion for issuing awrit.^"*^
Impact of inflation ondamages
InDoylevNichols^'^''thecourttookintoaccountthelikelyimpactof
inflationwhileawardingdamagesto thewidowof adoctorinrespectof
his death in a road accident. The House of Lords had expressed theopinion
in an earliercase^"*^thatif there was a firm basis for the conclusionthat
theawardeewouldbeaffectedbyfutureinflation,the courtshouldtake it
239.SatishChandravStateofU.P.,AIR2006NOC529(All):(2006)2 AllLJ122(DB).
240. Damudhar Prasad Vermav State of Arunachal Pradesh, (2003)2 BC351 (Gau).
241.AlokPrasad Vermav Union of India, (2000) 3 BLJR1913(Pat).
242.DeviPrasadSteels(P)LtdvA.P.StateFinancialCorpn,(1999)1BC497(AP);National
TextileCorpnLtdvHariboxSwalram,(2004)9SCC786:(2004)3BC494:(2004)4SLT
487,contractualdutyisnot astatutoryduty,nowritjurisdiction.
243.0]SCCorpnTransstroyvGovtofKarnataka,AIR2005Kant351:2005AIRKant1492.
244. 1979 JBL 62. The Times, May 20, 1978.
245. TayloryO'Connor,1971 AC 115.https://t.me/LawCollegeNotes_Stuffs

661. 520Chapter9DischargebyBreach [S.73]
intoaccountasbestas itcould.Inthiscase thevictimoftheaccidentwasa
salariedemployee.Hissalarywouldhavenaturallyincreasedaccordingto
the rate ofinflation.Hisdependentswouldsufferobviousinjusticeif their
dependencyfigurewasnotincreasedaccordingly.
Inthecaseofthesaleofaflat,longperiodoftimerunningupto20years
elapsedbeforereliefcouldbeobtained.Takingthecalculationfromthe date
ofbreach,therealestatevaluationhadincreasedmanifoldtimes.Damages
wereaccordinglyawardedwithinterestat therateof15percentperannum
fromthetimeofbreachtilldate.^''^
Dutyto mitigate[S.73 (Explanation)]
TheexplanationattachedtoSection73providesforthedutytomitigate
damages. It says:
Inestimatingthelossordamagearisingfrom abreachof contract,
themeanswhichexistedofremedyingtheinconveniencecausedbythe
non-performanceofthecontractmustbetakenintoaccount.Theinjured
partyhastomakereasonableeffortstoavoidthelossesresultingfromthe
breachsothathislossiskeptto theminimum.Themostfrequentappli
cationofthisruletakesplaceincontractsforsaleorpurchaseofgoods.
Onthebuyer'srefusaltotakedelivery,thesellershouldresellthegoodsat
theprevailingmarketpriceandhemaythenrecoverfromthedefaulting
buyerasdamagesthedifferencebetweenthepriceherealisedand the
price hewouldhave receivedunderthecontract.^''^If the seller doesnot
resellthegoodsandhislossisaggravatedbythefallingmarket,hecannot
recovertheenhancedloss.Thewell-knownauthorityforthisproposition
isthedecisionofthePrivyCouncilinA.K.A.S.JamalvMoollaDawood
Sons&
Theplaintiffcontractedtosellto thedefendants23,500sharesto be
deliveredand paid for on December30,1911. The shares were tendered
onthisdate,butthedefendantsdeclinedtotakedeliveryor topayfor
them.At the marketpriceforsalesuponthatday,theshareswouldhave
realisedRs1,09,218lessthantheirpriceunderthecontract.Buttheplain
tiffsoldthesharesonlyafterFebruarywhenthemarketwasagainrising
and herealisedonlyRs79,862lessthan the priceunderthe contract. The
defendantscontendedthattheyshouldbeheldliabletopaythelossof
onlyRs79,862.Buthe was heldliablefor Rs1,09,218.LordWrenbury
explainedtheprinciplesoflawthus:It isundoubtedlawthat aplaintiff
whosuesfordamagesowesthedutyoftakingallreasonablestepstomit
igatethelosssubsequentuponthebreachandcannotclaimasdamages
any sum which is due to his ownneglect.But thelossto be ascertained
246.MohanLaiAhujavTarunChandra,(2009)107DRJ342(Del).
2'47.P.S^N.S.AmbalavanaChettiarvExpressNewspapersLtd,AIR1968SC741:(1968)2SCR
248. (1915-16) 43lA6 at pp. 10-11:ILR(1916)43Cal493.https://t.me/LawCollegeNotes_Stuffs

662. [5.73] Measureofdamages521
isthelossatthedate ofthebreach.If at thatdatetheplaintiffcoulddo
somethingordidsomethingwhichmitigatedthedamage,thedefendant
is entitled to the benefit ofit.^"*'If the sellerretainsthe shares after the
breach he cannotrecoverfrom thebuyerany further loss if the market
falls,nor isheliabletohavethedamagesreducedif the marketrises.
Wheregoodsweresold4%monthsafterbreachin acrashingmarket,
thatwas held to be not reasonable andF.C.I,was allowed to recover only
nominaldamages.ForfeitureoftheearnestmoneyofRslOOOwasconsid
eredtobesufficient.^^°
Similarly,whereasellerrefusestoperformthecontract,thebuyershould
buythegoodsiftheyareavailablefromanyalternativesourceandcannot
recoveranyfurtherlossthatmaybedueto his ownneglect.
Auctionsalesanddutyofmitigation
In theapplicationof thedutyofmitigationtosalesthroughauction,it
hasbeenheldthat ifthehighestbidderbacksout,andascomparedwiththe
bidsat reauctionthe bidofthe next higherbidderat the originalauctionwas
muchgreaterandiftherighttosellthegoodstohimwasstillheldinreserve
(inthiscasehisearnestmoneywasstillnotrefunded)thegoodsshouldbe
offered to him and the difference can be recovered from the defaulting bid
der.TheMunicipalitywasallowedtorecovernothingin thiscasebecause
insteadofacceptingthenexthigherbid,thegoodswerereauctionedat a
very lowvalue.^^^
Contract of employmentand duty of mitigation
Thedutyofmitigationalsofindsapplicationinreferencetopremature
terminationof acontractofemployment.Thus,whereonaccountof the
retirementof two out offourpartners,apartnershipfirmwasendedand
withit the services of themanagerbut theremainingtwopartnersrecon
stitutedthefirmandofferedhimemploymentonidenticaltermswhichhe
refusedtoacceptandinsteadbroughtanactionfordamages,itwasheld
thatheshould"haveacceptedtheemploymentinmitigationofhislossand
thathe was entitled tonominaldamagesonly.^"
249."StainforthvLyall,(1830)7Bing169,isanillustrationofthis".
250. BismiAbdullah& SonsvFCI,AIR 1987Ker56; Gujarat SRTCv Kay Orr Bros,AIR2000
Guj313,theGovernmentpurchasedtherequisitemachineryalmostoneyearafterthefailure
onthepartofthetenderer.TheGovernmentwasallowedthedifferencebetweentheratesof
thetendererwhosequotationwasacceptedandthatofthenexthighertenderer.
251.SeeRodocanachivMilburn,(1886)LR 18QBD67(CA)andWilliamsBrosvAguis,1914
AC510(HL).CitedinA.K.A.S.JamalvMoollaDawoodSons&Co,(1915-16)43lA6:
ILR(1916)43Cal493:(1916)1AC175,11.SeealsoSotirosShippingIncvSameiretSolholt,
1981ComLR201,acontractforsaleofship,thesellerdefaulted,butofferedalternativeship
whichthebuyerrefusedtoaccept,heldthebuyerhadreasonablyfailedtomitigatehisloss.
ForageneralstudyseeP.J.Davis,EconomicStringencyandRecoveryofDamages,(1982)
JBL21,wheretheauthorconsidersthegeneralaspectsofthedutyofmitigation.
252.A.R.KrishndmurthyvAmiMunicipality,1983SCCOnLineMad126:(1985)98LW187.
253. Brace v Calder,(1895)2 QB 253: (1895-99)AllER Rep 1196.https://t.me/LawCollegeNotes_Stuffs

663. 522Chapter9DischargebyBreach [S.73]
Butwherenoalternativeemploymentofequalstandingisavailableto
him,theex-employercannotaskthatheshouldhavemitigatedhislossby
accepting a lesser job. The Bombay High Court in K.G.Hiranandaniv
Bharat Barrel & Drum Mfg Co Pexplainedthe real nature of the
duty of mitigation.VimadLalJ said:
Thoughwhat theExplanationenactsispopularlycalledthe 'rule'
in regard to mitigation of damages, and has been so referred to even in
decidedcasesandstandardworks,andthoughitislooselycalleda"duty"
tomitigate,thepositionreallyis, as ourlegislaturehasrightlystated,
merely this, that what the Explanation means is not in the nature of an
independentrule or duty but ismerelya factor to be taken into accountin
assessingthedamagesnaturallyarisingfromthebreach,forthepurpose
of the mainpartof Section 73.
The learnedJudge then adopted apassagefromMayneonDamages^^^
totheeffectthattheexpressionissomewhatlooseone,sincethereisnoduty
whichisactionableorwhichisowedtoanyonebytheplaintiff,andcontin
uedtosaythattheproperconstructionoftheexplanationisthat themeans,
ifany,ofremedyingtheinconveniencecausedbythebreachof contractare
factorsthat gotoreducethedamagesthat mightotherwisehavearisen"nat
urally"fromthebreach.
Explainingtheprinciple'relatingtodamagesarisingfrombreachofa con
tract ofemployment,the learnedJudgeheld that "there is abundant author
ityforthepropositionthat incasesinwhichthecontractofemployment
wasforafixedperiod,thenormalmeasureofdamageswouldbethesalary
forthewholeoftheunexpiredperiodofservice.Theprincipleofawarding
damagesfor areasonableperiodorreasonableperiodofnoticecomesinto
playonlywhenthecontractofemploymentisnotforafixedperiod."The
learnedJudgefoundsupportin thedecisionof theSupremeCourt inS.S.
ShettyVBharatNidhiLtd^^^whereBhagwatiJdeliveringthejudgmentof
theBenchobserved[obiter)thatifthecontractofemploymentisforaspe
cificterm, theservantwouldbeentitledtodamagesthe amount ofwhich
wouldbemeasured,primafacieandsubjecttotheruleofmitigation,bythe
salary of whichthe masterhasdeprivedhim.^^^
254.AIR1969Bom373.Tothesameeffect,S.M.MurrayvFennerIndiaLtd,AIR1986Dei427,
employeewasnotcompellabletotakeupalesserjob,theamountofcompensationwasthe
remunerationwhichhewouldhaveearned.
255. 12th Edn, para 149,point2.
256.AIR1958SC12:1958SCR442.
257.Whereateacherwasremovedbythemanagementwithouthearingandlitigationpersisted
for20years,thecourt,takingnoteofthepossibilitythattheemployeemusthavepickedup
someemployment,awardedsalaryofthreeyearsconsideringthisasanadequatecompensa
tion,DeviKewalramMadranivPremierHighSchool,(1995)3BomCR229.Goetz(India)
LtdVH.R.ThimappaGowda,AIR2016NOC179(Kar),emphasisupondutyofmitiga
tion.Terminationwasbecauseofpoorworkingwhichmeantmisconduct.Butnoenquiry
conducted,noremployeeheard,hethusbecameentitledtocompensationand toretainthe
amountalreadypaid.https://t.me/LawCollegeNotes_Stuffs

664. [S.73] Measure ofdamages523
On the facts of the case, theemployercontended that the dismissed
employeedid not make anyseriouseffort tofindanalternativeemployment.
Referring to this the learned Judge saidthatthe defendantcannotimpose
new andextraordinaryduties on the aggrieved party; nor can he ask him to
take up justanyandeveryemploymentthat may beavailableto him, e.g.,
theemployeeis not expected to accept anemploymentin a lower status,
nor will he be expected to go to a differentpart of the country or in a dif
ferent type of work. Inconclusionthe learned Judge said that there was no
evidenceto show that ajobsimilar to that of a generalmanager of a factory
withsomewhat,similar status and pay scale as well as nature of work was
availableatoraboutthetimewhenthebreachoccurred.
Theburdenis on thedefendanttoshowtheavailabilityof analternative
job of equal status. It is not for the plaintiff to show theabsenceof such
opportunities. The court can take noticeof the fact that jobs are not a mar
ket commoditywhichcan be bought atconvenience.WadhwaJ ofthe Delhi
High Courtpermittedtheplaintifftoprovefor thepurposeofcalculating
hiscompensationanyremunerationwhichwasbeingpaidtohimin addition
totheamountmentionedinthecontract.^^^
Stigmacompensation
Anemployeeof a bank, which failed, was not allowed to maintain an
action against the bank fordamagesforlossof reputation in thefinancial
servicesindustry by reason of belongingto a bank of that kind, though the
damageto the reputation was such that he was not able to getemployment
inthatindustry.^^'
Itbecameclearfromthiscasethatanactioncouldlieatcommonlaw
under the heading "stigma damages" representingthe damage done to repu
tation.AclaimofthiskindwasraisedinBCClvAli}^°Thebankhadren
dered a number ofemployeesredundant. They wererequired to sign a form
of release under which they made the bank free of all their claims against
it connected with theterminationof their employment. They subsequently
claimed"stigmadamages"arguing that their image had been tarnished
becauseoftheirassociationwiththebankanditsfraudulentactivities.The
trialcourtwasoftheviewthatitcouldnotbesaidthatthebankwasunder
a duty ofdisclosureregarding the manner in which it had conducted its
business.The Court of Appeal allowed the claim. Thereleasedeed could
258.S.M.MurrayyFennerIndia Ltd, AIR 1986 Del427.The fact that anemployeebecomes
entitled to contributory provident fund does not change the character of theemploymentto
thisextentthathebecameentitledto betheretillretirementbysuperannuation.M.D.Rajan
VI.T.C.Ltd,(1985)2 MLJ 372; where theremovalwas on groundsdifferentfrom those
stated in the contract, the same was not upheld and new grounds were not permitted to be
added tojustifytheaction.PurnaChandraBora vCommr,AssamState HousingBoard,
(1991) 1 GujLR192.
259. Malik v Bank of Credit and CommerceInternational,1998 AC20:(1997)3WLR95(HL).
260.(2000)3 Ail ER 51 (CA).https://t.me/LawCollegeNotes_Stuffs

665. 524Chapter9DischargebyBreach [S. 73]
notapply to astateof facts ofwhichthereleaserwasunawareat the time.
It would be unconscionable to hold him bound to such a state of things. A
commentatoron this decision has expressed the followinglurkingfear:"If
theCourtof Appeal's decision iscorrect,then very many of these settle
ments could be set aside with huge repercussionsthroughoutthe industry
for the finality of these settlements. Finality in the face of potential litigation
. is of course acornerstoneof English law in thisarea."^"
Advantageoutofone's ownwrongnotallowed
The rulethata personcannotbepermittedto take advantage of his own
wrongis a.rule ofconstructionratherthana principle of law and therefore
it can be excluded by express terms of the contract.Accordingly,damages
for loss of share option cannot be claimed by anemployeewho is wrong
fullydismissedshortly before becoming entitled toexercisethe option if the
optionschemeexpresslystated that the option was to lapse if theemployee
ceased to be employed by theemployer.The option-holder is not entitled
to any compensation for loss of the option if the option-holder ceased to
be employed by the company for any reason whatsoever.Furthermore,the
courtsaidthattheterminationof acontractof employment destroys the
status or relationship between the employer andemployee,although cer
tain aspects of the contract may continue to exist, and since the option to
purchase the employer company's shares depended upon the status or rela
tionship of the employerto theemployeeit no longer continued in existence
when the employee wasdismissed.^®^
Aggrievedpartyincreasingloss byunreasonableconduct
Where the aggrievedpartyincreases his loss by unreasonable conduct, he
cannot hold the defendant liable for the same. For example, in Derbishire
VWarran^^^the plaintiff's car was damaged due to defendant's negligence.
Theplaintiffgot the carrepairedat a cost which was double the value
of a new equally good substitute car. TheCourtof Appeal did not allow
him to recover thedifferencebetween the insurance money and the cost
of repair, but allowed thedifferencebetween the insurance money and the
marketvalueof the car.HarmanLJdistinguishedthe case fromO'Grady
VWestminster ScaffoldingLtd^^'^where the plaintiff was held entitled to the
cost of repairing his car at a costconsiderablyexceeding its market value,
becausethe car was unique and could not be replaced.
The duty to mitigate damages in its essence meansthatthecourtcan
take into account the conduct of the injuredpartyso as to see what he
261. Duncan Sheehan, Unconscionabilityand Mistake in the Court of Appeal, 2001 JBL 107.
262.MicklefieldvS.A.C.Technology Ltd, (1990) 1WLR1002.Thetortdoctrineofcontribu
torynegUgenceis notappHcableto the breach of acontractualduty which is of strict nature.
Barclays BankPicv Fairclough Building Ltd, 1995 QB 214: (1994) 3 WLR 1057(CA).
263.(1963)1WLR1067(CA).
264.(1962) 2 Lloyd's Rep238.https://t.me/LawCollegeNotes_Stuffs

666. [S.73] Measureofdamages525
oughtinreasontohavedone,wherebyhislosshasbeenorwouldhavebeen,
diminished.^®^The substance of the rule was also indicated by the House of
LordsinBritishWestinghouseElectric&MfgCo vUndergroundElectric
RailwayCo ofLondon,whereLordHaldanesaid;
The fundamental basis thus is compensation for pecuniary loss natu
rallyflowingfromthebreach;butthisfirstprincipleisqualifiedbyasec
ond,whichimposeson aplaintiffthedutyoftakingallreasonablesteps
tomitigatethelossconsequentonthebreach,anddebarshimfromclaim
inganypart ofthedamagewhichisduetohisneglecttotakesuchsteps.
Wherea fivestarhotelaccommodationwasbookedsixmonthsin
advanceto suitpersonalandfamilyneedsandthoughonaccountofheavy
bookingandrushthehotelwasnotabletoprovidetheaccommodation,
theydidarrangeanalternativeaccommodationwhichtheguestrejected,she
wasgivenrefundofthewholemoneyshehadpaidandwasnotallowedto
recoveranythingmore.^^^
Thus,whatmattersis thereasonablenessof theconductof theinjured
party.^^®AcharacteristicillustrationisPayzuLtdvSaundars?^^
In a contract of sale of goods,deliverywas to be in instalments overa
periodofninemonthsandpaymentwastobemadewithinonemonthof
delivery.Thebuyerfailedtopayforthefirstinstalmentwithinthestated
time. Thesellerrefused todeliverany further instalments but offeredto
do so if cash was paid against eachdelivery.
Thebuyersuedhimforbreachofcontractclaimingasdamagesthediffer
encebetweenthe contractand marketprices.Thesellercontendedthat ifthe
buyerhadacceptedtheirproposalofdeliveriesagainstcash,theirlosswould
havebeenless.Thequestion,therefore,waswhataprudentpersonoughtto
have done in the circumstances. Thecourtlaid downthatthe buyer should
haveconsideredtheproposal."Theplaintiffswerein fact in a position to
paycashforthegoods,but,insteadofacceptingthedefendant'soffer,which
265.AsstatedbyCockburnCJinFrostvKnight,(1872)LR7Exch111;41LJEx78.Theduty
ofmitigationdoesnotcastanyobligationontheplaintifftoprovethathehadnomeansof
remedyingormitigatingthelosssuffered.SagarmullAgartvallavUnionofIndia,AIR1980
Sikk22,whereanauction-purchaserrefusedtotakethegoodsandtheywerereauctionedat
alesserprice,thesellerwasentitledtorecoverthedifference,thedutyofmitigationdoesnot
standintheway.M.LachiaSetty&SonsLtdvCoffeeBoard,(1980)4SCC636:AIR1981
SC162.
266.1912AC673,687.
267.ToubivInatsunHolidays,1988CLY423,1060.Inanothercasetheaccommodationwas
providedbutwithlesserfacilitiesthanrepresentedand£750fordiminutioninvalueof
holiday,£1000forgeneralinconvenienceanddisappointmentandinterestat12percent
allowed./o«esand Jones vVillaRamos, 1988CLY1061.
268.LeBlanchev L&N WRlyCo,(1876)LR1CPD286,309,313.SantoshKumarChopdav
StateofM.P.,(2003)1MPHT343,auctionofrighttocollecttenduleaves,thebiddercould
notpayafterdepositingearnestmoney,longdelayinreauctioning,leavesallowedtowhither
away,thebidderheldnotliableforshortfallonreauctionbecauseofunreasonablenessof
conduct,forfeitureofearnestmoneyheldto befullyjustified.
269.(1919) 2 KB581.https://t.me/LawCollegeNotes_Stuffs

667. 526 Chapter 9DischargebyBreach [S.73]
was made perfectlybonafide,the plaintiffspermittedthemselvesto sustain
alargermeasureoflosswhichasprudentandreasonablepeopletheyought
tohaveavoided."
Transactionsconcerningproperty
Thisresultwouldnotfolloweverywhere.Supposethat abuyeragreesto
buypropertyhavinga certainqualityand thesellerdeliverspropertywith
outthatquality.Thereisadifferencebetweenthemarketvalueoftheprop
erty with that qualityand without it. Thebuyerisclearlyentitledtorecover
thedifferencebetweenthe twovalues.Supposefurther that thesellerin
responseto thebuyer'snoticeproposesto buybackthe property and refund
theprice,but thebuyerrefuses.Doeshe lose the right torecoverthe dif
ferencebetweenthe twovalues?The Court ofAppealansweredinStruttv
WhitnelP^wherefactsof this kindwereinvolved,that thebuyerwouldbe
entitled to retain thepropertyand to recover the difference between the val
ues.Thesellercannotcompelhimtoforgohisrighttosubstantialdamages
as thepriceofretainingwhat hasbecomehis ownproperty.Thesellercan
notsaythat thebuyerhad no goodreasonforrefusingtoaccepthisofferto
buybacktheproperty."Thebuyerisentitledtoretainhispropertywithout
anyinvestigationof hisreasonsforwishingto do so and that his right to
recoverthedifferencebetweenthetwovaluesisnotcontingentonhishaving
actedreasonablyin the matter of theseller'soffertorepurchase."
Insuchcasestheoptionis withthebuyereithertoretainthegoodsand
recoverthedifferenceor to return thegoodsagainstrefundofpriceandthen
suefordamagesforbreach,ifany.Thesellercannotimposethechoiceofthe
option upon thebuyer.The court distinguished this case from the decision
in the Payzucase"^where the goods had not beendeliveredin breach of the
contractandwereofferedondifferentterms.
Section73 isuniversallyapplicableto property transactions also.There is
nootherspecialprovisionaboutsuchtransactions.InEngland,however,it
washeldbytheHouseofLordsin theearlycaseofBainvFothergilF^^that
apurchaserofrealestatecannotrecoverdamagesforthelossofhisbargain.
Heisentitledtorefundofhisdepositandtotherecoveryofhisexpenses.
Thevendor,whowasdeceivinghimmaybesuedfor the tort ofdeceitfor the
consequencesofdeceptionin notprovidinggoodtitleorinmakingaprom
isewithouttheintentionofperformingit.InIndia,ontheotherhand,it has
270. (1975) 1WLR870 (CA).
271.PayzuLtdvSaundars,(1919) 2 KB 581.
272.(1874)LR7 HL158.TheKarnatakaHighCourtheldinHappyHomeBuilders(P)Ltd v
DeliteEnterprises,(1995)2AIHC1320thatinatransactionforsaleofimmovableproperty
whichfailstogothrough,unlessthereisevidenceoflosstotheprospectivepurchaser,he
is notentitledtodamagesbut only torefundofadvancepaid withinterest.Thedoctrine
ofstatusquoantebecomesapplicable.AsagainstanadvanceofRs15,000forpurchaseof
propertywhichthesellerfailedtoperform,Rs2000peryearwereallowedascompensation
fordeprivationofmoney,SardarMoharSinghvMangilal,(1997)9SCC217;AIR1995SC
491.https://t.me/LawCollegeNotes_Stuffs

668. [s.73] Measureofdamages527
beenjudiciallyobservedthat "thelegislaturehasnotprescribedadifferent
measureofdamagesinthecaseofcontractsdealingwithlandfromthatlaid
down in the case of contractsrelatingtocommoditiesSoa frustrated
purchaserofimmovablepropertyinIndiaisentitledtodamagesequaltothe
amountoflossarisingnaturallyintheusualcourseofthingsfromthebreach
itselfsubject,ofcourse,to thedutyofmitigation.^^''The courtsaid:"As
Section73imposesnoexceptionontheordinarylawastodamages,what
everbethesubject-matterofthecontract,itseemsthat incasesofbreachof
contract for sale ofimmovableproperty throughinabilityon thevendor's
part tomakeagoodtitlethedamagesmustbeassessedintheusualway,
unlessit can beshownthat the partiesto the contractexpresslyorimpliedly
contractedthatthisshouldnotrenderthevendorliable indamages."Some
otherHighCourtshaveexpressedsimilarviews.Accordingly,wherethe
vendorguaranteedagoodtitlebutevensothevendeewasevicted,thelatter
was allowed to recover the value of thelandat the date ofevictionandnot
merely refund ofprice.^^^
Thecontractwas for theprovisionofpremisesof certain naturewhich
werepreparedforaspecialpurposeonleaseforaminimumperiodof
threeyears.Thelesseereturnedthepremisesearlier.Thecourtallowed
leasemoneytoberecoveredforthefullperiodofthreeyearsirrespectiveof
the factthatno lease deed wasexecuted.^^^Where the sale ofpropertyfell
throughbecauseofthelackoftitleonthepart oftheseller,itwasheldin a
suitfordamagesthat thefactthat thebuyerhadenjoyedtheentireproperty
forsomeperiodandalsoreceivedrents,hadto betakenintoaccountwhile
computingdamages.Thebuyerhadclaimedrefundofhalftheconsideration
paid byhim.Thesamewasallowedtohim.^''^
Negligentvaluation
Theplaintiffslostahugesumofmoneybecausetheyhappenedtoallow
loanstopurchasersofcommercialpropertyonthebasisofvaluationreport
givenbythedefendant.Thevaluationwasnegligentlydone.Thelossbecame
aggravatedbecauseofthecollapseofthepropertymarket.TheCourtof
273.NagardasvAhmedkhan,ILR(1895)21Bom175,FarranCJatp.185,contrarytotheear
lierobservationof thesamecourtinPitambarvCassibai,ILR (1886) 11 Bom272.
274.ThisviewwasapprovedbytheBombayHC inRanchhodvManmohandas,ILR(1907)32
Bom165wherethe courtexpressedtheopinionthat Bain vForthergill,(1874)LR 7 HLC
158 was not applicable in India.
275. Nabinchandra Saha Paramanickv Krishna Barana Dasi, ILR(1911)38 Cal458;/azKishen
DasvAryaPritiNidhiSabha,ILR(1920)1Lah380;MangalSinghvDialChand,AIR1940
Lah 159;AdikasavanNaiduvGurunathChetti,ILR(1918)40 Mad 338.
276.NagardasvAhmedkhan,ILR(1895)21Bom175.KolimiPeddaSamasHussainSahebv
GowdaraRajasekharaGowd,AIR2006NOC511(AP),propertysoldtoplaintiffwith
defectivetitle,hewasdispossessed,alloweddamagesassessedatmarketvalueon thedate
ofdispossessionandnotonthedateexecutionofsaledeed.Thevendorhadcategorically
agreedtoindemnifythevendeeincaseofanydisputeastotitle.
277.FoodCorporationofIndiavBabulalAgrawal,(2004)2SCC712:AIR2004SC2926.
278. RamAutarvRamPrasad,(2004) 3 All LJ3925.https://t.me/LawCollegeNotes_Stuffs

669. 528 Chapter9DischargebyBreach [S.73]
Appeal allowed recovery of the wholeamountlost. Thecourtsaidthatonce
it isestablished"that thevaluer'snegligenceledthelenderto make a loan,
hewouldnototherwisehavemadeit seems to usthatthelenderisentitled
to be compensated for all the damage he has suffered. If the marketmoves
upwards, the valuer reaps thebenefit;if itmovesdownwards, he stands to
lose."^75
Aggrievedpartynotto be inflicted withunusualburdens
The duty ofmitigationcannotimposeupon the plaintiffburdensof unu
sual nature. There was a transfer of apartof a plot of land, the transferee
undertakingto erect aboundarywall, which wall would have increased the
value of the seller'sremaining land. The buyerfailed to erect the wall. In an
action against him, the measure of damages would have been the cost of
constructingthewall.Hecontendedthat ifthewallhadbeenconstructedby
the plaintiff as soon as there was the breach, the cost would have been much
less;theplaintiffwaitedtill thedecisionin thecaseand, in themeantime,
inflationhadescalatedthecost.Thedefendantcontendedthatheshouldnot
be heldliablefortheincreasedcost.Thecourtfeltthatitwasreasonablefor
theplaintiffto wait aslongas hisright todamageswasdisputedand there
wasnoinjusticetothedefendantiftheresukofinflationwastoincreasethe
pecuniaryamountof his ultimateliability.^^°
Reluctanceof courts to expandscopeof duty ofmitigation
Thus courtshaveshown a greatreluctanceinexpandingthedimensions
of the duty of mitigation.
Thedistributorof adressmanufactureragreedtopurchaseagiven
numberofgarmentsin twoseasons.He hadcompletefreedomtochoose
garmentsof anyvarietyand toresellthem in his area at anyprice.The
distributorrepudiatedthecontract.Hewassuedforbreach.Heargued
that he shouldbe calledupon to paydamagesformanufacturer'slossof
profits on their cheapestgarments,because he had the freedom to choose
anygarments.
Thecourtsaidthatsinceitcouldnothavebeenin thecontemplationof
thepartiesthatthedistributorwouldstockonlytheminimumpricedgar
ments,whichwouldhavebeendestructiveof theirmarket,damagesmust
becomputedon the basis of areasonablecriterionwhichshouldalso be the
leastunfavourabletothedistributor.^"
279.BanqueBruxellesLambertSAvEagleStarInsuranceCoLtd,1995QB375:(1995)2WLR
,607 (CA).
280.Radfordv DeFroberville,(1977)1 WLR1262.
281.PaulaLeeLtd v RobertZahil & Co Ltd,(1983)2 AllER 390(QB).Acontractorwhose
application for extension of time was disposed of after some time was not allowed to claim
anycompensationon the ground that if hisapplicationhadbeendisposedofearlier,he
wouldhaveearnedsomethingelsewhere,DevenderSinghvStateofU.P.,AIR1987All306.https://t.me/LawCollegeNotes_Stuffs

670. [S. 73] Measureofdamages529
Contributorynegligence
Incontractclaims the duty to keep one's loss to theminimumis capable
oftakingcare of thematterwhere the loss is either caused orincreasedby
theclaimant'scontributorynegligence. But where thedefendant'sliabilityin
contractis the same as hisliabilityin thetortof negligence,independentof
the existence of anycontract,thecourthaspowertoapportionblame and
to reduce thedamagesrecoverable by theplaintiffeventhoughthe claim is
made incontract.Thisapproachwasadoptedin aprincipal'sactionagainst
his agent forbreachof agent's duty incircumstancesinwhichtheprinci
pal failed torectifythemattersduringthesubsequentopportunitiesavail
able tohim.^®^The defence ofcontributorynegligence is not available as
againsta claim for damages which is founded on a strictlycontractualobli
gation. Acontractorwas engaged for cleaning of roofs made ofcorrugated
asbestos sheets. He did not properlycontrolthe asbestos discharge. The
refusecontaminatedthe premisesnecessitatingextensiveremedialworks.
Asagainsttheowners'actionfordamages,thecontractorcontendedthat
the owners were also negligent because theirarchitecturaldepartmentdid
not providepropersupervision of the work. Thecourtfoundthatthe own
ers' claim was only incontractbeing based on a breach of twocontractual
terms. The defence ofcontributorynegligencewouldnot apply to such a
claim.2"
Arbitrator'saward
Thecontractwas for supply of batteries to acountof morethan15 lakhs.
The suppliersguaranteedthe performance and life of each battery. But the
batteries did not work up to theguaranteedperiod. Thearbitratorpassed
an award reducing the priceproportionatelyon the basis of a representative
samplepre-estimatingthe loss in the light of the formulastipulatedin the
contractclause. Thecourtheld theawardto beproper.^®"*
Recovery of damages asarrearsoflandrevenue
The SupremeCourthas upheld the validity of a clause in aGovernment
contractwhichauthorisedthe State to recover damages asarrearsofland
revenue.^®^Wheretherewas no such clauserecoveryof duesundera con
tractby way ofarrearsof land revenue was not allowed.
282.ForsikringsaktieselskapetVesta v Butcher, 1989 AC 852 (CA). Thecourtadopted the rul
ing inRowevTurnerHopkins&Partners,(1980) 2NZLR 550, but did not follow A.B.
MarintransvCometShippingCo Ltd, (1985) 1WLR170.
283. Barclays BankPicv Pairclough Building Ltd, 1995 QB 214: (1994) 3 WLR 1057 (CA).
284. GeepIndustrialSyndicate Ltd v Union ofIndia,AIR 2002NOC180 (Del): 2002
AIHC2201.
285.StateofKarnatakav ShreeRameshwaraRice Mills, (1987) 2 SCC 160: AIR1987SC 1359.
286.MohdUmar vNagarPalika,Khatima,AIR 1998 All 227.https://t.me/LawCollegeNotes_Stuffs

671. 530Chapter9DischargebyBreach [S. 74]
ExclusionofSection73:Arbitrationclause
Whether in the context of terms and conditions of a contract it is per
missible to providethatSection 73 would not apply and the special terms
of thecontractshould be applied formakingout recoverable loss, thecourt
saidthatit depends upon theappreciationof the facts of the case and if the
arbitratorhad followed the special provision, no fault in his award could be
foundforthatreasonalone.^®^
LIQUIDATEDDAMAGESANDPENALTY[S. 74]
EnglishLaw
Thepartiesto acontractmay determinebeforehandtheamountof com
pensation payable in the event of breach. According to English law a sum so
fixed may fall in any of the following two categories:
(1)Liquidateddamages,or
(2) Penalty.
If the sum fixedrepresents a genuinepre-estimate of the probable damage
that islikelyto result from the breach, it is liquidateddamages.A sumless
than the amount of probable damage is also regarded as liquidated dam
ages.Thewholeof suchsumisrecoverable.Awell-known illustrationis
DunlopPneumaticTyre CoLtdv New Garage &MotorCoLtd.^^^
Amanufacturerof tyres supplied aquantityof tyres to a dealer on the
condition that they would not be sold belowthe list prices and that liqui
dated damages, not penalty, of £5 would be payable for every tyre sold
in breach of the agreement. The dealer committed breach. The question
was whether the above sum was intended as a genuine compensation for
thelosssuffered.
The House of Lords held it to be liquidated damages. LordDunedin
stated the effect of cases in the following propositions:
(1)Theexpressionused by thepartiesisnotconclusive. Thecourtmust
find out whether the paymentstipulated is in truth a penalty or liqui
dated damages.
(2)Theessenceof a penalty is a payment of money stipulated as in ter-
rorem of the offending party; theessenceof liquidated damages is a
genuinecovenantedpre-estimateofdamage.^^°
(3)The question whether a sum stipulated is penalty or liquidated dam
ages is a question ofconstructionto be decided upon the terms and
inherentcircumstancesof eachparticularcontract.^'^
287.MaharashtraSEB v SterliteIndustries(India), (2001) 8 SCC 482: (2002) 1 Bom CR 415.
288. See CelluloseAcetate Silk Co Ltd vWidnessFoundry (1925) Ltd, 1933 AC 20 (HL).
289.DunlopPneumaticTyre Co Ltd v New Garage andMotorCo Ltd, 1915 AC 79 (HL).
290. Clydebank Engg & Shipbuilding Co Ltd v Don Jose Ramos Yzquierdoy Castaneda, 1905
AC6.
291. Public Works Commr v Hills, 1906 AC 368; Websterv Bosanquest, 1912 AC 394(PC).https://t.me/LawCollegeNotes_Stuffs

672. [S. 74] Liquidateddamagesandpenalty531
(4) To assist thistask,various tests have been suggested:
{a)Itvvrillbe held to bepenaltyif the sumstipulatedfor isextravagant
andunconscionableinamountincomparisonwiththegreatest
lossthatcouldconceivablybeprovedto havefollowedfromthe
breach.^'^
[b)It will be apenaltyif thebreachconsists only innotpaying a sum
of money and the sumstipulatedis a sumgreaterthanthe sum
whichoughtto have beenpaid.^'^
(c)There is apresumption(but no more)thatit ispenalty,when "a
singlelumpsumismadepayableby way ofcompensation,on the
occurrenceofoneormoreorall ofseveralevents,someofwhich
mayoccasionaseriousandothersbuttriflingdamage".^'"*
Court'spowertoreducespecifiedamount
If the sumfixedby thepartiesis found to beliquidateddamages,the
whole of it is recoverable. But if it is viewed as"penalty",it is rejected.
Damages will then becalculatedaccording to theordinaryprinciples. In
doing so the following"salutarywarning"ofDiplockLJ should be kept in
mind:^^^
Thecourtshouldnotbeastuteto descry apenaltyclause in every pro
vision of acontractwhichstipulatesa sum to be payable by onepartyto
theotherin the event of a breach by the former.
TothisCheshireandFifootadd:^'*"
Such astipulationreflects good business sense and isadvantageousto
both parties. It enables them toenvisagethe financial consequence of a
breach; and if litigation proves inevitable, it avoids the difficulty and legal
costs, often heavy, of provingwhatloss has in fact been suffered by the
innocentparty.
Anillustrationof"penalty"is FordMotorCo vArmstrong?'^''
Thedefendant,aretailer,received from theplaintiffs,supplies of cars
and parts and agreed not to sell any item belowthe listed price. A sum of
£250was payable for every breach as "agreed damages".
292.Illustrationgiven by LordHalsburyin Clydebank case, 1905 AC 6.
293.Kemblev Barren,(1829)6 Bing 141 andJesselMR inWallisv Smith,(1882)LR 21 Ch D
243(CA).
294. LordWatsoninElphinstonevMonklandIron & Coal Co, (1886) LR 11 AC 332 (HL).
FollowingthesepropositionstheSingaporeCAheldin GoldenBayRealtyPtc Ltd v Orchard
TwelveInvestmentsPtc Ltd, (1989) 2 MLJ 70 (Malaysia),thatliquidateddamages rate spec
ifiedin theagreementof 9 per cent per annum over 85 per cent of the purchase price of
property could not be said to be an extravagant orunconscionableamount.
295. Robophone Facilities Ltd v Blank, (1966) 1 WLR 1428, 1447(CA).
296.LawofContract(9thEdnbyFurmston,1976)611.
297.(1915)31TLR267(CA).https://t.me/LawCollegeNotes_Stuffs

673. 532Chapter9DischargebyBreach [S. 74]
A breach havingtakenplace, amajorityof theCourtof Appeal heldthat
the sum fixed was apenaltyas it mighthappenthatapartsold in breach was
of lesser valuethanthedamagespayable.
Applicationtohire-purchasecontracts
AnotherillustrationofpenaltyisLamdonTrustLtdvHurrel.^^^
A car waspurchasedonhire-purchaseterms,thetotalprice payable
byinstalmentsbeing£558.Theagreementprovidedthatif thepurchaser
returnedthecaror if, onaccountof hisdefaultthesellerretookit,the
totalsum,includingtheinstalmentsalreadypaid,of £ 425mustbepaid.
Thepurchaserpaidup to £ 302 andthendefaulted.The sellerretookand
resold it for£270,thus receiving atotalsum of£572,whichwas more
thanthecontractprice. Even so hebroughtanactionto recover £122,
being the differencebetween£425and theinstalmentspaid.
But his claim failed. Thecourtrejected the sum as being apenaltyand
nota genuinepre-estimateof theprobabledamage.Inarrivingat this con
clusionDenningLJtookintoaccountthesecircumstances:"The£425is
threequartersof thetotalprice. It isinsertedby thehire-purchasecompa
nies by rule ofthumbwithoutregardto themakeof car, its age, themarket
conditionsoranythingof thekind.It is the same for all." Inadditionto
theliabilityto pay£425,thepurchaserwas to keep the car ingoodorder,
repairandconditionand was to payindependentdamagesfor anybreach
of thiscondition,supposingthatthe car wastakenbackwithinamonth,
could anyonethinkthatthe hire ordepreciationwould go up to£425."In
thesecircumstances",hisLordshipconcluded,"Icannotregardthe figure
ofthree-quartersas a genuine pre-estimate of damage. If the parties had
genuinely tried to estimate the depreciation of thisparticularcar, the figure
wouldhavebeenmuchless."
In India also hire-purchase agreements are not immune from the appli
cabilityofSection74.Theyare also to betestedonthesameanvil. Inthis
case^^'interestat the rate of 18 per cent p.a. was added to theprincipalsum
in advance. There was afurtherstipulationto paycompensationat the rate
of2%per cent p.m. on theamountofhire-purchaseinarrears.Thetotal
rate came up to 30 per cent p.a. on anamountwhichalreadyincluded18
per cent p.a. This was held to beexcessive.Following the decision of the
SupremeCourtin K.P.SubbaramaSastriv K.S.Raghavan^°'^thecourtsaid:
"A weakcannotbe pushed to the wall because of theinequalityof
bargaining power. Hecannotbe held bound by terms in fineprintwhich
areundulyonerous,oppressiveandunreasonable."
298. (1955) 1WLR391; Sub nom.LamdonTrustLtdvHurrel,(1955) 1WLR391.
299. Pushpendra Motilal Singh v Commercial Automobiles, (1999) 2 MPLJ 319 at p. 324.
300.(1987)2see424:AIR1987SC1257.https://t.me/LawCollegeNotes_Stuffs

674. [S.74] Liquidated damages and penalty 533
Heavyamountas evidence ofpenalty
The House of Lords in their decision in Bridge v CambellDiscountCo
carried this principle further still by holdingthatwheretwo-thirdof
the price is made payable in the event of a default,thatshould be viewed as
a "penalty". TheCourtof Appeal pointed out in a subsequentcase,^°^that
where a hire-purchase agreement which, in the event of default, provides
for thepaymentof the fullamountor a fixedamountwhetherthedefault
takes place in the beginning or towards the end of the period of agreement,
is bound to be regarded as a penalty.Similarly,where the sum of money
payable being very small and the agreement providesthatin the event of
default a large sum wouldbecomepayable, that isobviouslya penalty. In
anoldcase;^"^
The defendant, an artiste, engaged himself to act as a principal come
dian at atheatrefor a fixed period on a charge ofaboutthree and a half
poundsper night. The agreement providedthatin the event of default
by eitherpartya sum of £ 1000 was payable. This was described in the
agreement as liquidated andascertaineddamages.
But even so thecourtheld this to be a penalty. Its effect wasthata failure
to pay a small sum of£3^^or for anyotherminordefault,a sum of £1000
would become payable. The amount thus bore no relation with the degree
orextentofbreach.
Fixed figureconstitutesceiling
Where the figure of compensation assessed by the parties carries some
sense, whether it is reasonable or not, it willconstitutethe ceiling, andnoth
ingmorethanthatwouldberecoverable.In a casebeforetheHouseof
Lordsr^"^
Acontractfor the delivery and erection of a certain machinery pro
videdthatthecontractorwould have to pay£20aspenaltyfor each day
of default. Thecontractordelayed the completion of the work bythirty
weeks. According to thecontracthis liability was£600,but thepurchas
ersclaimed£5850being theactualloss suffered bythembyreasonof the
delay.
They were held entitled to claim only£600.LordAtkin,pointingout
thatthecourtwasnotboundby theterminologyused by theparties,
said:
301. 1962 AC 600: (1962) 2 WLR 439.SahdeoMistryvJharkhandStateHousingBoard,(2003)
3 BC 506 (Jhar), a houseallotteewas not allowed to besubjectedtoexorbitantcharges for
hisdefaultinkeepingupinstalments,onlyinterestfor theperiodofdefaultwasallowedto
becharged.
302.Anglo-AutoFinanceCoLtdvJames,(1963) 1WLR1942(CA).
303.KemblevParren,(1829) 6 Bing 141, theCourtofChancery.
304. CelluloseAcetateSilk CoLtdvWidnessFoundry(1925)Ltd,1933 AC 20 (HL).https://t.me/LawCollegeNotes_Stuffs

675. 534 Chapter 9 Discharge byBreach [S.74]
Exceptthat it iscalledapenalty,whichon thecasesisfar fromconclu
sive,it appears to be an amount ofcompensationmeasured by the period
ofdelay,I agree that it is not a pre-estimate of actual damage. I think it
must have been obvious to both the partiesthatthe actual damage would
be much morethan£20a week; but it wasintendedto gotowardsthe
damage and it was all that thesellerswere prepared topay.^"^
Stipulation for payment oneventsextraneous to breach of contract
A contract providing for payment of money by one party on the occur
rence of a specified event, rather than on the breach of acontractualduty
owed by that party, cannot be a penalty. A person who guaranteed the pay
ment of promissory notes issued by acontractoragainst which loans were
provided,could notavoidhis liability by showingthat the amountcovered
by the promissory notes would have amounted to apenalty.^"^
Applicablewhether stipulation is for payment in cash or kind
There is no difference between a penalty for non-payment of money due
under acontractand a penalty for the non-performance of some other obli
gation and, furthermore, thereis,no distinction between a penalty which
requires the payment of money and a penalty which requires the transfer
of property. This observation occurs in acase^°^in which a clause in a sale
agreement required the purchaser to transfer the shares back to the vendor
for fixed sum if he defaulted in payment of instalments. The sum fixed for
transferbackdidnotreflect thetruevalue of theshares.Thepurchaser
defaulted inpaymentof instalments and wanted to escape the rigour of the
transactionby sayingthatitamountedto a penalty. Thecourtsaidthatthe
clausewould not permit recovery of anything morethanthe plaintiffs actual
loss.
Conditionsofmembership
A rule of anassociationas aconditionofmembershipand as amatterof
policy providedthatmembers should share equally in the benefits and bur
densoftheassociationandthatsomeonewhodeclinedtheburdenshould
not participate in the benefit. Thecourtsaidthata rule of this kind was not
305. SeeMcGregor,CompensationvPunishmentinDamagesAwards,(1965) 27 AllMahLR
629;HodginandVeitch,(1965) 27 MLR 629;Hodginand Veitch,PunitiveDamages,re-as-
sessed, (1972)12ICLQ119;Benjamin,Penalties,LiquidatedDamagesandPenalClausesin
CommercialContracts,(1960) 9ICLQ600.Thisis sounderS. 74 also.Thesectioncontains
the words not exceeding theamountnamed by the parties.NaitRam v ShibDat,ILR(1882)
5 All238.Wheretheamountsonamedismorethanreasonable,itwouldbereducedto a rea
sonableamount.AbbakkeHeggadthivKinhiammaShetty, ILR (1906) 29Mad491. Where
theamountspecified is in terms of"notlessthan"it would still be subject to thecourt's
discretiontoreduceit to areasonableamount.ChunilalV.MehtaandSonsLtdvCentury
Spg & Mfg CoLtd,AIR1962SC 1314.
306.ExportCreditGuaranteeDepttvUniversalOilProductsCo, (1983) 1WLR399(HL).
307.JobsonvJohnson,(1989) 1WLR1026(CA).https://t.me/LawCollegeNotes_Stuffs

676. [S.74] Liquidated damages and penalty 535
in the nature of a penaltyclause.The clause required the members under
aresolutionof the company to make additional subscription and provided
that if a member failed to do so, he would beprecludedfrom sharing the
benefits of any recovery that the association might make. This was held to
be not apenaltyclause.
Section74,ContractAct
Section 74 of theIndianContractAct lays down a slightly different rule:
S. 74.Compensationforbreachofcontractwherepenaltystipulated
for.—^°'[Whenacontracthasbeenbroken,if asumisnamedinthecontract
astheamountto be paid incaseof suchbreach,or ifthecontractcontains
anyotherstipulationby way ofpenalty,thepartycomplainingofthebreachis
entitled,whetherornotactualdamageor loss isprovedto havebeencaused
thereby,toreceivefromthepartywhohasbrokenthecontractreasonablecom
pensationnotexceedingtheamountsonamedor, asthecase may be,thepen
altystipulatedfor.
Explanation.—Astipulationforincreasedinterestfromthedateofdefault
may be astipulationby way of penalty.]
Exception.—Whenanypersonentersinto anybail-bond,recognizanceor
otherinstrumentofthesamenature,or,undertheprovisionsof any law, or
undertheordersofthe^^"[CentralGovernment]or of any^"[StateGovernment],
gives anybondfortheperformanceof anypublicdutyoractinwhichthepub
lic areinterested,he shall be liable,uponbreachof anyconditionof anysuch
instrument,topaythewholesummentionedtherein.
Explanation.—ApersonwhoentersintoacontractwithGovernmentdoes
notnecessarilytherebyundertakeanypublicduty, orpromisetodoanactin
whichthepublicareinterested.
Illustrations
[а]Acontractswith Bto pay B Rs1000,if he fails to pay B Rs500 on agivenday. Afails to pay
B Rs500 onthatday. B isentitledtorecoverfrom Asuchcompensationnotexceeding
Rs1000astheCourtconsidersreasonable.
(б)Acontractswith Bthat,if/Apractisesas asurgeonwithinCalcutta,he will pay B Rs5000.
Apractisesas asurgeoninCalcutta.Bisentitledtosuchcompensation,notexceeding
Rs5000,astheCourtconsidersreasonable.
(c) Agives arecognizancebindinghim in apenaltyof Rs500 toappearinCourton acertain
day. He forfeits hisrecognizance.He is liable to paythewholepenalty.
^"[(d)A gives Babondfortherepaymentof Rs1000 withinterestat 12 percentattheend
of sixmonths,with astipulationthat,incaseofdefault,interestshall bepayableat
therateof 75percentfromthedateofdefault.This is astipulationby way ofpenalty.
308.NuttmgvBaldwin,{1995)l^LK20T..
309. Theseparagraphsweresubstitutedfor the firstparagraphof S. 74 by S. 4 of theIndian
Contract(Amendment)Act,1899(Vl'of1899).
310. These words weresubstitutedfor the"Governmentof India" by the Government of India
(AdaptationofIndianLaws)Order,1937. '.
311.Subs,by the A.O. 1950 for"ProvincialGovernment".
312.Illustrations{d)to(g)addedby S. 4 of theIndianContract(Amendment) Act, 1899. 'https://t.me/LawCollegeNotes_Stuffs

677. 536 Chapter9DischargebyBreach [S.74]
and Bis only entitled to recover from Asuch compensation as the Court considers
reasonable.
(e)A,who owes money toB,amoney-lender,undertakes to repay him bydeliveringto
him 10 maunds of grain on a certain date, and stipulates that, in the event of his not
deliveringthe stipulated amount by the stipulated date, heshallbeliableto deliver
20 maunds. This is a stipulation by way of penalty and Bis only entitled to reasonable
compensationin case ofbreach.
if) Aundertakesto repay6a loan ofRs1000by five equal monthly instalments, with a stip
ulation that, in default of any instalment, the whole shallbecomedue. Thisstipulation
is not by way of penalty, and thecontractmay be enforced according to its terms.
[g)AborrowsRs100from Band gives hima bond forRs200payable byfiveyearlyinstal
ments ofRs40,with a stipulation that, in default ofpaymentof any instalment, the
wholeshallbecomedue. This is astipulationby way ofpenalty.]^'^
RulestatedinSection74
Theruleisthatwhereasumisnamedinacontractastheamountto
be paid in case of breach, regardless whether it is a penalty or not, the
party suffering from breach is entitled toreceivereasonable compensa
tion not exceeding theamountso named. The named sumconstitutes
themaximumlimit of liability. Thecourtcannotorder damages beyond
that."Thedistinction[betweenliquidateddamages and penalty] has
beenabolishedinIndia.Thecourtsawardreasonablecompensationnot
exceeding the stipulation. The courts knock down agreements which are
unconscionable andextravagant."^"Thecourthas thelatitudeto reduce
theamounttowhatappears to be reasonable in thecircumstances.^"
313.CustodianvEastWest TravelandTradeLinksLtd,(1995) 4 BomCR194compoundinter
est whichamountedtopenalty,but thecourtsaidthattheconductof thepartyin delaying
payment and suppressing the liability to pay was such that no sympathy could be shown and
thestipulatedinterestwas recoverable. H.P.FruitGrowers'CoopMarkProcessingSociety
LtdVH.P.HousingBoard,AIR 1996 HP 94, lease, leaseinstalmentsincludedinterestrates,
on default double rate payable over and abovethatalreadyincluded,heldpenalty,it could at
mostbe simpleinterestatnormalrates.
314.PushpendraMotilalSingh vCommercialAutomobiles,(1999) 2 MPLJ 319 at p. 324.Carl
Estate(P)LtdvJagdishJ.N.Counte,(2005) 4 Bom CR 630, for failure torefundearnest
money, thestipulationwasthatthedefendantwas to payRslOOOas daily fineafterexpiry
of 30 days' notice inadditiontocompoundinterestat 4 per cent. Thestipulationwas held to
bepenalinnatureandsonotenforceable.Only10 percentwasallowedon theamount.
315.Hence,therightis therightto sue for thebreachandnot for theamountreservedbecause
thecourthas toascertainitsreasonableness.StateofGujaratvM.K.Patel& Co,AIR
1985Guj179.Whereunderatermof thecontract,theGovernmentside wasauthorised
to assesscompensationforbreach,it was heldthatthe clausewouldapply onlywhenthere
was anadmittedbreach.Such a clausewouldnotenablethepartysoempoweredtoignore
therequirementsof S. 74 one ofwhichisthatonly areasonableamountwouldbeallowed.
HameedvJayabharatCreditandInvestmentCoLtd,AIR1986Ker206.In acontractto
supplyhydrogengascylinders,therateofRsl.25per week fordetentionof thecylinders
beyondthe firstthreeweeks'periodwas held to be apropermeasureofdamages.Indian
DrugsandPharmaceuticalsLtdvIndustrialOxygenCo (P)Ltd,1984MahLJ 690. A.P.
SEB V V.B.C.Foods(P)Ltd,AIR 1998 AP 177, atermin theenergy supplyagreementthat
2 percentpermonthinterestwouldbechargedon billamountsindefaultwas held to be
reasonablewithinthemeaningof S. 74.SahibRam& Co vRajasthanStateAgricultural
MarketingBoard,1995AIHC358,awardof fullamountprovidedincontractforfailurehttps://t.me/LawCollegeNotes_Stuffs

678. [S.74] Liquidated damages and penalty 537
Whether or not the party hasprovedtohavesufferedactualloss,is
immaterial.^^^
This has certain advantages over the Englishsystem.The section dis
penseswith thenecessityoflayingdown rulesfordistinguishingliquidated
damagesfrompenalty.Further,accordingtoEnglishlaw, the court must
either accept the amount in whole or reject it in whole. In India, the court
need not reject the amount. It may either accept the amount or reduce it
to what appearsreasonable.In theFatehChand case theSupremeCourt
observedasfollows:^^^"Section 74 isclearlyan attempt to eliminate the •
somewhat elaborate refinements made under the English Common Law in
distinguishingbetweenstipulationsprovidingfor payment of liquidated
damagesandstipulationsin the nature ofpenalty.... The IndianLegislature
sought to cut across the web of rules and presumptions under the English
Common Law by enacting a uniform principle applicableto all stipulations
naming the amount to be paid in case of breach and stipulations by way of
penalty."
The amount stipulated in the contract is notdecisivebut it is a good
attempt to avoid litigation. It is well knowthatassessment of compensation
with precision issomewhatdifficult task. The figure work provided by the
.partiesgives a goodstartto overcome the difficulty of proof. In this case the
courthad to reduce theamountstipulatedbecause neitherthatmuch loss
was proved nor it was in theneighbourhoodof probableloss.^^®
of or delay in.performance without assessment of loss suffered by the aggrieved party was
held to be in the nature of levying a penalty. John vOrientalKuriesLtd, (1994) 2 KLT 353,
provisionfor the whole number of instalments becoming immediately due on default, not a
penalty.M.M.T.C.Ltdv Sineximco (P) Ltd, (2006)135DLT 629, the buyer's failure in an
internationalcontractto accept delivery of goods because of a fail in prices was held to be not
justified. The seller was not entitled to recover the wholeamountspecified in the liquidated
damages clause. He is entitled only to be suitablycompensatedwithinthe limits specified in
.thecontract.
316. This section is notattractedby a penal provision in a consent decree.PunjabWoollen
Textiles Firm v BankofIndia,AIR 1992P&H158. For acontraryview, seeParvatiBai
VAyodhiaPrasadJain, 1985 MPLJ 703. But the provision is applicable to compromises,
, e.g. a truck driver's compromise agreement either to set right the damage done by negligent
. •drivingor to payRsl0,000.O.K. KesavamVKudaythoorPanchayath,{1990) 2KL]424.
Astipulationfor increased interest from the day of default may be astipulationby way of.
.penaltyandwhenever,itis so,reliefis to begrantedunderthesection.Therateofinterest
will be allowed by way ofcompensationin thediscretionof thecourt,PushpendraMotilal
.,>:SinghVCommercialAutomobiles,(1999) 2 MPLJ 319.JagsonInternationalLtdv Oil &
'NaturalGasCorpnLtd,(2003) 4MahLJ 733: (2004) 2 Bora CR272,theamountfixed in
thecontractasliquidateddamageswasallowedto berecovered,it seemed to have been fixed
withduecalculationsand was alsoreasonable.Theclaimanthadnottoshowany loss.Only
..thedefendanttoshowthattheclaimanthadsufferednoloss.Butthatwasnotthecaseofthe
defendanthere.
317FatehChandvBalkishanDass,AIR1963SC1405:(1964) 1SCR515.
318. VijayEngineers&DevelopersvSuryadarshanCoopHousingSocietyLtd,(2011) 5Mah
LJ 610(Bom).Similarstatementareto be seen inBSNLvRelianceCommunicationLtd,
. (2011) 1see394, thecourtemphasisedthedesirabilityofprovidingincommercialcon
tracts,compensatoryclausesparticularlywherecommercialactivitiesaresubjectedto regu
latoryregimesas in the case oftelecomindustry.https://t.me/LawCollegeNotes_Stuffs

679. 538 Chapter9DischargebyBreach [S.74]
One party not to be adjudicating authority
In acasebeforetheSupremeCourt^"aclausein a contract was to the
effect that for any breach of theconditionsof the contract the first party
shall beliableto paydamagesto thesecondparty as may beassessedby
thesecondparty.Thisclausewasheldto bevoidbecauseit hadtheeffectof
makinga party alsoajudgetodecidebreachandassessdamages.The court
said: "The power toassessdamagesis subsidiary andconsequentialpower
and not the primarypower.Evenassumingforargument'ssake that the
clauseafforded scope for being construed asempoweringtheofficerof the
Statetodecideupon the questionof breachas wellasassessthe quantum of
damages,we do not think thatadjudicationbytheofficerregardingbreach
can be sustained under the law because apartyto the agreementcannotbe
an arbiter in his owncause.Interestsofjusticeand equityrequire that where
a party to a contractdisputesbreach,adjudicationshould be by an inde
pendentperson or bodyand not bythe other party to the contract. The posi
tion will be different where there is no dispute or there is consensusbetween
the partiesregardingthebreachofconditions.In such acase,theofficer
of the State even though apartyto thecontractwill be within his rights in
assessingthe damages occasioned by thebreach."^^"The cumulative effect
ofthedecisionsisthatwhenbreachisnotadmitted,one ofthecontracting
parties cannot arrogate to itself the power to claimcompensationfor the
breach from the otherpartywithoutthere being any adjudication by an out
sideagencyas to whether there was any breach of contract. The State could
not be a judge in its own cause or its own arbiter.
Breach andrighttocompensationmust beestablished
The injured party has to prove that there has been a breach of contract on
thepartof the other party and, therefore, the remedial system provided in
thecontracthasbecomeexercisable.Theclaiminthiscasewasforrefund
of amount retained by the otherpartyas liquidated damages for breach. A
decree forrefundof theamountwaspassedwithoutgoing into the ques
tionwhetherdelay in completion of the work was caused due to lapses on
thepartof onepartyor the other or whether the guarantee had become
319.StateofKarnatakav ShreeRameshwaraRice Mills, (1987) 2 SCC 160: AIR1987SC 1359.
320.AnchorLines (P)LtdvCementCorpnofIndiaLtd, (2000) 4 Kant LJ 485, apartyto the
contractcannotbearbiterin hisowncause;adjudicationofdisputedquestionofbreachof
contractshould be by some independent person or body of persons. Thepartyholding bank
guarantee first encashed it and then gave notice to the other of the alleged breach of contract
and adjustment of theguaranteeamount against self-assessed damages. All this was held to
bewrong.
321.J.G.Engineers(?)Ltdv UnionofIndia,(2011) 5 SCC 758: AIR 2011 SC 2477, breach of
contractandterminationofcontractbased on exclusion clauses and exceptedmattersinvolv
ing thequestionas to whichpartycommittedbreach or delay andwhetherthecontractwas
validlyterminated,could be decided only by theadjudicatoryforum, i.e.courtorarbitral
tribunal,andnot by apartyto thecontract.https://t.me/LawCollegeNotes_Stuffs

680. [S. 74] Liquidateddamagesandpenalty539
invokable. The case was sent back to thetrialcourtfor fact -finding as to
breach and itsconsequences.Theplaintiff,aGovernmentundertaking,
was dealing inexportofmarineproducts.Itprovidedfinancialassistance
to thedefendantwho was engaged in the business of seafood.A clause in
theagreementprovidedthathewouldbe liable tocompensatetheplaintiff
if his goods were rejected by the foreign buyer. It was foundthatthe goods
were rejected not because of anyinherentdefect but because of themisfunc-
tioningof thecontainersinwhichthe goods were shipped.Theplaintiffhad
filed a suitagainsttheshippingagent but did notpursueit. Anactionagainst
thedefendantwasnotallowed. Theplaintiffcould nottakeshelter of the
clause whentherewas nobreachon thepartof thedefendant.^^^
Thecourthas tomakeitsownassessmentoftheamountof losscausedby
the breach. Itcannotblindly follow thecontractclause inawardingdamages
withoutanyadjudication.^^''
Unilateraldeductionfrom final billnotpermissible
It has been heldthatunilateraldeductionstowardsliquidateddamages
from thecontractor'sfinal bill are not permissible. Even if there is abreach,
the aggrievedpartycannotof its own work outliquidateddamages and
deduct theamountfrom the final bill. Thepartycarryingoutdeduction
is not free from the responsibility of showing evidence in justification of
deductions.Inthiscase,therewerevariousfactswhichweredeniedby the
contractor,thatwas clear from the pleadings and materials anddocuments
onrecord.Therewasalsothefindingbythe arbitrator thatdeductionswere
carried out on the basis of disputed facts and byattributingthe delay to the
contractorandthis wascontraryto therecbrd.^^^
Thecontractcarried a stipulation as to theamountof liquidated dam
ages.There was delayin execution of work by the contractor. The aggrieved
partybecameentitled toreasonablecompensationbutgavenoevidenceof
theamountof losscaused.Thecontractoralso didnotshowanyprecise
amount of possible loss. The courtawardedhalf of the amount claimed by
way ofreasonablecompensation.^^^
322. FACT Engg Works v KeralaIndustries,AIR 2001 Ker 326.
323.M.M.T.C.Ltdv S.MohamedGani, AIR2002Mad378.SAILvGuptaBrotherSteel Tubes
Ltd, (2009) 10see63, agreement specifieddamages for certain types of breach of contract,
the breaches alleged were of different nature, hence the clause as to liquidated damages was
notto apply.
324. UmaMineralsvMalabarCementsLtd, AIR 2003 Ker 146.ChennaiMetropolitanWater
Supply&SewerageBoard vAban Constructions (P)Ltd, (2006) 3 CTC 794 (Mad),contract
clausesclearlyprovided a formula for pre-estimation of damages in the event of breach, first
extension was granted to the contractor, second extension was granted subject to the levy
ofliquidateddamagesasprovidedin the contract. Arbitrator did not proceedaccordingly.
Awardsetaside.
325. Indian Oil Corpn Ltd v Megi Control Systems (P) Ltd,(2011)5 Mah LJ 892.
326.ConstructionandDesign Services v DDA,(2015)14 SCC 263: (2016) 2 SCC (Civ) 800.https://t.me/LawCollegeNotes_Stuffs

681. 540Chapter9DischargebyBreach [S. 74]
CommonfeaturesbetweenEnglishandIndianlaws
Yet thedistinctionbetweenliquidateddamagesandpenaltyisnotalto
gether irrelevant to the section. Its relevance, in the first place, arises from
the factthattheamountcontemplatedby thepartieswill be reduced only if
it appears to be by way of penalty.Otherwisethe whole of it is recoverable
as liquidated damages. Secondly, the firstexplanationto the section uses
the word"penalty".Itprovidesthat"astipulationforincreasedinterest
from the date ofdefaultmay be astipulationby way ofpenalty".Where,
forinstance,money isborrowedat 12 per centinterestpayablesix-monthly,
and theagreementprovidesthatin case ofdefaultaninterestof 75 per cent
shall be payable. This is astipulationby way ofpenalty.Similarly,where
a sum ofRslOOisborrowedbut abondis given forRs200,whichfur
therprovidesthatindefaultofpaymentof anyinstalmentthe whole shall
becomedue..This is apenalty.^^^But where a sum ofRslOOisborrowed
andit ispayablebyfive-monthlyinstalmentsandthebondprovidesthatin
defaultofpaymentof anyinstalmentthewholeshallbecomedue,thenit is
notapenaltyandthecontractisenforceable.Anillustrationofpenaltyis the
decisionoftheMadhyaPradeshHighCourtinGurubaxSinghGorowarav
BegumRafiyaKhurshidJ^^Thecontractinvolved the sale ofstandingtrees
for a sum of Rs60,000.Thecontractprovidedthatin the event ofdefault
by eitherpartyacompensationof Rs50,000would be payable. Thecourt
regardedthis to be apenaltyandrequiredtheplaintiffto prove hisactual
loss. It was not possible for thecourtto acceptthatacontractinvolving a
considerationof Rs60,000would cause a damage of Rs50,000if not per
formed.Wherethe whole of the money ispresentlydueandit is only for
the benefit of the debtor and for his conveniencethatthecreditoragrees to
accept payment ininstalments,a provisionthata default in thepaymentof
oneinstalmentwouldmakethewholeamounttobedueatoncewouldnot
amounttopenalty.""
327. Charging of compound interest at the same rate after default is not penalty per se,Mallavarapu
SuryanarayanaMurthyvBuddarajuSuryanarayanaRaju,AIR 1982 AP 313; following
VenkataHanumanthaBhushanaRaovGadeSubbayya,(1936) 44 LW 414;AIR1936PC
283.Accelerationofinterestis penalty, but notaccelerationofcapital.WadhamStringer
TinLtdvMeaney,(1981) 1WLR39.Wherea sum ofaboutRs16,000wasadvancedand
Rs28,000had to bepaidback ininstalmentsunderKuriChitFundScheme, thewhole
becoming due on default in paying a single instalment, the Supreme Court held the stipula
tion to be by way of penalty.K.P.SubbaramaSastriv K.S. Raghavan, (1987) 2 SCC 424:
AIR1987SC1257.
328.HariLahuPatilv RamjiValadPanda,ILR(1904) 28 Bom 371. "A compound interest is
in itself perfectly legal, butcompoundinterestat a rate exceeding the rate ofintereston the
principal moneys, being in excess of and outside theordinaryand usualstipulation,may
well beregardedas in thenatureof apenalty."RaniSundarKoer v Rai ShamKrishen,ILR
.(1906-07)34IA9:{1907)34Call50.
329.AIR1979MP66.
330.K.P.SubbaramaSastriv K.S.Raghavan,(1987) 2 SCC424:AIR 1987 SC 1257. There is a
statutorypower under the Usurious Loans Act, 1918 to relieve theborroweragainstexor
bitantinterest,NajafAliKhanvMohdFazalAliKhan,AIR 1928 All255,interestreduced
from 37 per cent to 12 per cent.Exorbitantinterestrates arereducedtoreasonableamount.https://t.me/LawCollegeNotes_Stuffs

682. [S.74] Liquidateddamagesandpenalty541
It has been heldthat a term of a loan agreementwhich providesfor imme
diaterepaymentofcapitalintheeventofadefaultbytheborrowerandfor
paymentofinterestdueupto thedateofdefauh,butnotfutureinterest,is
nofapenaltyclause.Aclauseinanagreementthatthespecialbenefitofa
sharein thepropertyat alowerpriceofferedto a partyunderthecontract
would not beavailableto a partydefaultinginpaymentof an instalment
within the statedtime, has beenheldas notamountingto apenalty.^^^
Still another common feature between the English common law and
Indianlawisshownby thedecisionof theSupremeCourt inChunilalY.
Mehta andSonsLtd vCenturySpg&MfgCoLtd,^^^whereit hasbeen
heldthat"byprovidingforcompensationinexpresstermstherighttoclaim
damagesunderthegenerallawisnecessarilyexcluded".
Anagreementfortheappointmentofmanagingagentsprovidedthat
their remuneration would beRs6000per month or 10 per cent of the
grossprofitsof ayearwhicheverwasmoreandalsothat intheevent
ofprematureterminationtheircompensationwouldbenotlessthan
Rs6000permonthforthewholeoftheunexpiredperiod.Theywere
removedbeforetheexpiryofthetermandclaimedcompensationat the
rate of 10 per cent of the grossprofits.
ButtheSupremeCourtheldthattheymustbecontentwiththerateof
Rs6000permonth.Theywereboundbytheclause."Itseemstousthatthe
intentionofthepartieswasthatiftheappellantswererelievedofthedutyto
workasmanagingagents,theyshouldnot beentitledtogetanythingmore
than Rs6000 per monthbywayofcompensation."^^"
Forfeitureofearnestmoney ordeposit
In theapplicationofSection74toforfeitureclauses,theSupremeCourt
has drawn distinction between "earnest money" and "security deposit".
Thedistinctionwas set to work in FatehChandv BalkishanDas.^^^
Forexample,75percentreducedto 15percentand60percentcompoundto 30percent
simple.
331.AngelicStar, The,(1988)1FTLR94(CA).
332.SovaRayvGosthaGopalDey,(1988)2SCC134:AIR1988SC981.
333.AIR1962SC1314:1962Supp(3)SCR549.Penaltycannotbeimposedwheredelayisdueto
theconductofthepartytryingtoimposepenalty.ONGCvS.S.Agarwalla&Co,AIR1984
Gau11.
334.Thereisnothingessentiallywronginawardingmaximumfixedbytheparties.ShwaJute
BalingLtdvHindley&CoLtd,AIR1959SC1357:(1960)1SCR569.Satyanarayana
ConstructionCovUnionofIndia,(2011)15SCC101,onceratehasbeenfixedinacontract
foraparticularwork,thecontractorisnotentitledtoclaimanyadditionalamountmerely
becausehe had to spend moreincompletingthe work.
335.AIR1963SC1405:(1964)1SCR515.HappyHomeBuilders(P)Ltd vDeliteEnterprises,
(1995)2AIHC1320.Forfeitureoflicencefeedoesnottakeplaceautomaticallyonviolation
of theconditionsof thelicence,theCommissionermayorderforfeitureeitherin full or in
part,butbeforethathemusthearthelicenseeandpassajudgmentinaccordancewiththe
lossto theGovernment.Automaticforfeiturewouldamounttopenalty,G.ShankarReddy
VProhibitionandExcise Supt, (1997) 5 An LT 177.https://t.me/LawCollegeNotes_Stuffs

683. 542 Chapter9DischargebyBreach [S.74]
Anagreementfor the saleofcertain land and bungalowfor Rs1,12,500
providedthat thebuyerwasto payRslOOOasearnestmoneyand
Rs24,000 ondeliveryofpossession.Thebuyermadethesepaymentsand
was put inpossession.Theagreementfurther provided that if the buyer
failedto paythebalancepriceand getthesaledeedregisteredby acer
tain date, the sum ofRs25,000wouldstandforfeited,theagreement
cancelledand thebuyershallreturnpossessionto theseller.Thebuyer
defaultedandthesellerforfeitedtheabovesumandbroughtanactionto
recoverpossessionand compensation for occupation and use.
HewasallowedtoforfeitRs1000beingearnestmoneyand to retain the
sumofRs24,000alsonotbyvirtueofhisrighttoforfeitbutasrepresenting
usevalue.ShahJrefutedthefallacyasshownbysomeHigh Courtdeci
sionsthatSection74appliesonlytocaseswheretheaggrievedpartyisseek
ing torecovera fixedamountonbreachofcontractandnottocaseswhere
an amount receivedunder thecontractis sought to be forfeited.
In ourjudgmenttheexpression"thecontractcontainsanyotherstipula
tionbywayofpenalty"comprehensivelyappliestoeverycovenantinvolving
apenaltywhetherit isforpaymentonbreachofcontractofmoneyordeliv
eryofpropertyinfutureorforforfeitureofrighttomoneyorotherprop
ertyalreadydelivered.Inallcases,therefore,wherethereisastipulationin
thenatureofpenaltyforforfeitureof anamountdepositedpursuantto the
termsofcontract,thecourthasjurisdictiontoawardsuchsumonlyas it
considersreasonable,butnotexceedingtheamountspecifiedin the contract
asliabletoforfeiture.
Neitherearnestmoneynor anyotherkind ofdepositwhichisliableto be
forfeitedcanbesubjectedtoforfeitureiftheunderlyingcontractisvoid.The
SupremeCourt laid down this principle in a case in which in a transaction
forsaleoflandthebuyerwasundertheimpressionthathewasgettingthe
landattheagreedpriceperbighawhereasthesellerbelievedhewasselling
336. Theprovisionisapplicabletoeverykindofdepositbywhatevernameitmaybecalled.The
words"anyotherstipulationbywayofpenalty"arewideenoughtocoverallkindsofforfei
tureprovisions.UnionofIndiavShaimSunderLai,1963AllLJ251.BombayScrapTraders
v PortofBombay,(1994)1BomCR266,failureonthepart ofthetenderertocomply
withtheworkorder,forfeitureofearnestmoney,heldjustified.StateofKarnatakavStellar
ConstructionCo,AIR2002Kant6;(2002)5 KantLJ474,theroadbuildingcontractorwas
notpaidextrachargesbecausetheclaiminrespectthereofwasnotfoundbytheDepartment
tobejustified.Hehadreceivedpaymentaspercontractualterms.Hestoppedworkingand
did not resumeit inspite of clear notice.The court said that this amounted to breach. He was
notentitledtoclaimrefundoftheforfeitedsecuritydeposit.NewMediaBroadcasting(P)
LtdVUnionofIndia,AIR2008NOC967(Del),contractenvisagedspecificationoffurther
details,byGovt,somechangesonrepresentationofbidderswerewithintenderterms,bidder
whosebidwasacceptedrefusedtosign,righttoforfeitearnestmoneyandclaimdamages
arose.WinmaxxManagementService(P)Ltd vUCOBank,AIR2011Gau217,the auction
buyerfailedtopaythewholeoftheearnestmoney.Forfeitureofmoneyactuallypaidby
himheldto bejustified.HaryanaFinancialCorpnvRajeshGupta,(2010)1SCC655:AIR
2010SC338,auctionsaleofunit,earnestmoneydepositedonassurancethatindependent
approachroadto unitwouldbeprovided,butnotactuallydone,thepurchaserdidnotmake
furtherpayment,forfeitureofhisearnestheldto benotproper.https://t.me/LawCollegeNotes_Stuffs

684. [S.74] Liquidated damages and penalty 543
perkanal.The partiesbeingatcross-purposesandbeingnot ad idem, the
agreementwas void.There was no question of forfeiting, the earnestmoney.
It wasrefundableunder Section.65, thecontracthaving been discovered to
bevoid.^^^
Similarly,there can be no forfeiture or encashment of bank guarantee
wherenocontractarises.Atenderwhichhasbeenrevokedbeforeaccept
ance cannot be acceptedand, therefore, the bank guarantee submitted along
withthetenderalsobecomesrevokedandcannotbeencashed.^^^
Whatever be the name ornatureof theamountdeposited by one
party with the otherwhichisliabletoforfeiturein theeventofbreach,
Section74 would comeinto playand onlythatpartof the amount would
beopentoforfeiturewhichisreasonablein thecircumstancesofthecase.
Anythingmorewouldtantamount topenalty.^^^Forfeitureofearnest
money ispermissibleby way of liquidated damages.
Thereisnoabsoluteright to forfeitthe entireamount without proof ofthe
total extent ofloss,when the material onrecordshowedthat the extent of
loss was lessthantheamountheld asearnest,forfeiture could not go beyond
that.Noonecanbeallowedtoenrichhimselfat the cost of theotherby
taking advantage of the forfeitureclause.^"*^
337.TarsemSinghv SukhminderSingh,(1998)3SCC471:AIR 1998SC1400. But see State
ofGujaratvDahyabhaiZaverbhai,(1997)9SCC34:AIR1997SC2701,thecontractor
abandonedtheproject,forfeitureofsecuritydepositheldjustified.].K.EnterprisesvStateof
M.P.,AIR1997MP68,forfeitureofearnestmoneyonfailureofbiddertoperform,justified.
338.Omprakash& CovCityandIndustrialDevelopmentCorpnofMaharashtraLtd,(1994)
1BomCR 30:(1993)MahLJ1419.V.Lakshmanan v B.R. Mandalagiri, 1995 Supp(2)
SCC33,forfeitureof earnestmoneyondefaultin saleof land.Thesamewasthepositionin
FoodCorporationofIndiavSujitRoy,AIR2000Gau61.Theearnestmoneyofatenderer
wasforfeitedbeforeacceptanceof thetenderandconclusionof the contractand thedispute
betweenthepartieswasalsonotrelatedwiththecontract,a writpetitionchallengingthe
forfeiturewasheldtobemaintainable.
339. ThakorlalV.Patelv Lt. Col. SyedBadruddin,(1993)1 Guj LR 28. See also P. Nagrajan v
SouthernStructurals Ltd,ILR(1995)1 Mad 337,agreementupon enteringintoservicethat
theemployeewouldserveforfiveyears,Rs15,000payableforbreachoftheterm,heldrea
sonablecompensation.
340.NarendrakumarNakhatvNandiHasbiTextile Mills Ltd, AIR 1997 Kar 185. Where a
contractforpurchaseofpropertyworthRs30lakhscarriedearnestmoneyofthreelakh
rupeesandadamageclauseofRs12lakhs,theclausewasheldtobeunreasonable,Roshan
LaiVManoharLai,AIR 2000 Del 31.H.Sowbhagyav NGEF Ltd, AIR 2004 Kant 155,
purchaserofpropertyat auctiondefaulted,reauctionbroughthigherprice,earnestmoney
notallowedto beforfeitedthoughreasonablecompensationwasallowed.AmarjeetSinghv
ZonalManager,FCI,(2002)4ICC47(P&H),a publicauthority has toexerciseits powers
evenunder the contract fairly andreasonably.Evenotherwise, namelywhere Governmentis
notaparty,thetermsrelatingtoforfeituremustbestrictlyfollowedandthecourtsshould
alsostrictlyconstruethem.
341.Gatta Rattaiah v FoodCorporationof India,AIR2011AP65;JalalNasar vOfficial
Liquidator,(2008)5CTC385(Mad),inabiddingprocess10percentofthetotalvalueof
the contract ofRs236crores,Rs23.60crores was required to be depositedas earnestmoney,
thebiddercoulddepositonlyRs10crores.Thenexthighestbidderdepositedwholeof the
earnestmoneybutfailedtodeposittherestoftheamountrequiredundertheadvertisement.
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685. 544Chapter9DischargebyBreach [S. 74]
Forfeitureofearnestmoney onnon-fulfilmentof
conditionsofe-auction
There wase-auctionof "Film Solar Photovoltaic Module". As per terms
andconditions,e-waste certificate and e-waste disposal was to beobtained
by the bidder. He did not do so. Forfeiture of earnest money as per forfeiture
clause was held to beproper.^''^
A provision in a contract for recovery of double the amount of sale con
siderationas a penalty for breachof contract was held to be notlegallyper
missible. It was vouched as a clearpenaltyfor breach. Evenotherwiseit was
clearlyin the nature of penalty and therefore notpermissible.^"'^
Withholdingofpaymentunderbills
There was e-tenderfor extraction of coal. Theequipmentcapacity of the
bidder was less than the requiredcapacity.The bidder could notachievethe
target. The result was huge shortage in extraction and transportation of
coal. The tender requirementofdeploymentofrequisiteequipmentwas not
fulfilled.It was heldthat withholdingof hisbillsandimpositionof shortfall
penaltywasproper.^'*''
Whetheractualloss necessary
Anotherquestionwhichthe courtconsideredwaswhetheractual proof
of loss is necessary to recover anything under Section 74. In the earlier
caseof ChunilalV.Mehta and Sons Ltd v Century Spg & Mfg CoLtd^'*^
MudholkarJsuggestedthat wherethe right torecoverliquidateddamages
underSection74isfoundto exist"noquestionofascertainingdamagereally
arises". The section also saysthatthe named sum is recoverable"whetheror
not actualdamageorlossisprovedtohavebeencausedthereby".Buteven
soShahJfeltthatthesewords of thesectiononlydispensewith proof of
"actuallossordamage".Thesectiondoesnotjustifytheawardofcompen
sation, when inconsequenceof the breach no legalinjury at all has resulted.
This is so becausecompensation can only be awarded under Section 73 for
losswhichnaturallyaroseorwasin thecontemplationofthe parties.Thus
Consequentlyforfeitureofearnestmoneyof both ofthem.It did not appearin thejudgment
whetherreasonablenessof theamountforfeitedwasconsidered.Reasonablenessislinked
withthelosscaused.
342.M.EswarivMSTCLtd,AIR2014Mad182.
343.MayaDevivLataPrasad,(2015)5 SCC588.
344. Sainik Mining & AlliedServicesLtd vMahanadiCoalfieldsLtd, AIR 2015 Ori 78.
345. AIR 1962 SC 1314: 1962 Supp (3) SCR 549. See alsoHindConstructionContractorsvState
ofMaharashtra,(1979)2SCC70:AIR1979SC720,wheretheStateillegallyrescindedthe
contract, it was not allowed to forefeit the contractor's deposit. Sukhdev Kaur v Hoshiar
Singh,(2004)2ICC55(P8cH),evenwherethereis aliquidateddamageclausethe party
claimingdamagesmayhavetoshowhislossthisbeingnecessarytoascertaintheelementof
reasonableness,thoughactual proof oflossmaynot benecessarywherethe partycommit-
' ting breach knew that loss was a likely result of the breach.https://t.me/LawCollegeNotes_Stuffs

686. [S.74] Liquidated damages and penalty 545
proof of some loss isnecessary,thoughit will not benecessaryto prove
theextentofit.
This view was reaffirmed byShahJ (acting CJ) inMaulaBuxv Union
oflndia?'^''
The plaintiff contracted to supplyto Military Headquarters,U.P.Area,
potatoes,poultry,eggsandfishforoneyearanddepositedRs18,500for
dueperformanceof the contract. The plaintiffhavingmadepersistent
defaultsin making regular and fullsupplies,theGovernmentof India,
inpursuanceofthetermsofthecontract,rescindedthecontractandfor
feited the amount deposited by the plaintiff.
The High Court of Allahabad was of the view that the deposit in ques
tion was in the nature of earnest money and theSupremeCourt decision
inFatehchandvBalkishanDas^'*^did notpurportto overrule the previous
trendofauthoritiesto the effectthatearnestmoney deposited by way of
securityforthedueperformanceof acontractdoesnotamounttopenalty
ascontemplatedbySection74. TheSupremeCourt did notcountenance
theviewthateverysuchdepositisnecessarilyanearnest.The courtcited
the meaning of earnest money asgivenin Earl Jowitt,TheDictionaryof
EnglishLaw:^"^
Givingan earnest or earnestmoneyis a mode ofsignifyingassentto
a contract of sale or the like by givingto the vendor a nominal sum(e.g.
ashilling)as atokenthat thepartiesare inearnest,havemadeup their
minds.
Thecourtalso cited the observation of the Privy Council in Chiranjit
SinghVHarSwarup^^"that"earnestmoneyis part of thepurchaseprice
whenthetransactiongoesforward:it isforfeitedwhenthetransactionfalls
throughbyreasonofthefaultorfailureofthevendee".Ifthisistheviewof
an earnestdeposit,then quiteobviouslythedepositin the presentcasewas
notbywayofearnestbecauseitwasnottobeappropriatedtowardsthepay
mentofprice,butwastobeheldasasecurity.Shah,actingCJ(afterwards
CJ),thenreferredtothecasestotheeffectthatSection74hasnoapplication
toforfeitureofdepositsandruledthat thisviewisnolongergoodlaw.The
learnedChief Justice continued:
346. Theclaimanthas toprovehisactualloss.KaramchandThapar&CBrosLtd v H.H.
Jethandani,76CWN38.PurePharmaLtd vUnionofIndia,ILR(2009)1Del272,there
mustbeproofoflegalinjurybeforecompensationcan beclaimed.
347.(1969)2SCC554:AIR1970SC1955.Followedin PoodCorporationof India v Gauri
PrasadGopal,1987AllLJ567vi'heretheFCIhadreservedthe right torecoverRs5000on
defaultbythesupplierplusexpensesanddifferenceinpricesintheahernativepurchaseand
was orderedto refund the security depositofRs5000becausethe Corpn did not show any
actualloss.
348.AIR1963SC1405:(1964)1SCR515.
349.At p. 689.
350.(1925-26)53lA11: AIR1926PC 1.
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687. 546 Chapter 9 Discharge by Breach [S.74]
Forfeiture of earnest money under acontractof sale, if theamount
isreasonabledoesnotfallwithinSection74.Thishasbeendecidedin
severalcases.Thesecases are easily explained, for forfeiture of a rea
sonableamount paid as earnestmoneydoesnot amount toimposinga
penalty.But ifforfeitureis of the nature ofpenalty.Section74applies.
Where under the terms of the contract the party in breach hasundertaken
to pay a sum of moneyor to forfeita sum of moneywhich he has already
paid, the undertaking is in the nature of a penalty.
Referringto theargurnentthat Rs18,500representagenuinepre-esti-
mate of the probable damage, the learned ChiefJustice said that the Union
has notprovedtohavesufferedanyloss.If nolossisprovedtohavebeen
suffered,theprovisionsoftheActinSections73and74relatingtodamages
forbreacharenotattracted.ThecourtconfinedthewordsofSection74
that "whether or not actualdamageorlossisprovedtohavebeencaused
thereby"tocasesinwhichit is notpossibletoprovethemonetaryvalueof
thelossand,therefore,thevaluefixedby thepartiesmaybe taken as the
reasonablemeasureofcompensation.Butwherethelossintermsofmoney
can bedetermined,the partyclaimingcompensationmustprovetheloss
sufferedbyhim.SincenoattemptwasmadebytheGovernmenttoprove
whetherthepricespaidto thealternativesourceofsupplywerelessormore
than thecontractprice,therefore,theGovernmentwasnotentitledtoany
compensationforthebreach.
Wheretheactuallosswasnotprovedand thewholeoftheactually
reservedamountof5 percentofthetotalprojectvaluewasleviedasliqui
dateddamages,thecourtsaidthat itamountedto apenalty.Theawardof
thearbitratorto thatextentwassetaside.Wherethecontractordelayed
suppliesofcablesand theGovernmenthad topurchasefromothersources
andcoincidentallyhappenedtoprocureatcheaperrates,theawardof the
arbitrator awarding damages for breach of contract was setaside.^^^
In another similarcase,the arbitratorawardedonlyhalf the amount that
wasspecifiedin the contractbecauseno actuallosswasshown,the court
refusedtointerfere.The award of 12 per cent interest was notinterfered
with.
Wheretherewasbreachof ariggingcontractand theamountpredeter
minedinthecontractwasrecovered,justifyingthisrecovery,itwasheldthat
it was notenoughtodefeatsuch a right to show that not enoughmaterial
wasplacedon record for exactassessmentof quantum oflossessuffered.
351.Followingcaseswerecited:ChiranjitSinghv HarSwarup,(1925-26)53lA11:AIR 1926
PC 1;RoshanLaiv DelhiCloth&GeneralMillsCo Ltd,ILR(1911)33 All 166; Mohd
HabibullahvMohdShaft,ILR(1919)41All324;BishanChandvRadhaKishanDas,ILR
, (1897-1900)19 All489.
T) 352.EnglishElectricCoofIndiaLtdvCementCorpnofIndiaLtd,1996AIHC1875(Del).
ONGCLtd VSawPipesLtd,(2003)5 SCC705:AIR 2003 SC2629 proof of loss notneces
sary whenagenuinepre-estimateof the lossis stipulatedin the contract.
CASEPILOT 353HaryanaTelecomLtdvUnionofIndia,AIR2006Del339.https://t.me/LawCollegeNotes_Stuffs

688. [S. 74] Liquidateddamagesandpenalty547
Burden ofprovingthatno losses wereactuallycaused to theotherpartywas
on thepartycommittingbreach. Thecourtsaidthatit was not necessary for
thepartyto lead evidence to show theamountof loss suffered by it unless
thebreachingpartycame to thecourtandprovedthatno loss was in fact
caused.
Wherenolosscaused
Anamountwas paid by apurchaserin advancetowardsthepurchase
price of the goods. Thecontractprovidedthaton default by thepurchaser
theamountwouldbeforfeited.Hedefaulted.Hewasallowedrefund.The
seller proved no loss. Thecourtsaidthatretentionof money for alongperiod
was sufficient to compensate the plaintiff. Where on default by the origi
nal bidder in paying the balance of the price, thematerialwasreauctioned
and the vendor Stateobtaineda higher price, thecourtsaidthatthe provi
sion for forfeiture of 25 per cent of the price paid in advance would have
operated as a penalty. Thecourtcould award only a reasonableamountas
damages, namely, interest on theamountin default from due date to receipt
of price from alternativebuyer.^^^
A clause in acontractpermittedestimationand recovery ofwrongful
gain, if any,made by the contractor. The contract was terminated becauseof
wrongful gain made bynot fulfillingthe conditions of the contract. Thecourt
did not permit the bank guarantee to be invoked becausethe Authority had
already made good its losses by forfeiting performance security furnished by
thecontractorandhadalsorecovered thepenaltyamount.
Where thearbitratorrecorded afindingthatthe supply ofmaterialbeyond
the stipulated period had not resulted in any lossto the Port Trust, the court
said that compensation was payable only when the breach had resulted in
a legal injury.Accordinglythe Port Trust was not entitled to retain any
amounttowardscompensation.^-'^
Exclusionofrighttocompensation
It may be possiblein some casesthat no compensation is payable because
theaggrievedparty hassufferedno loss, but it is notpossibleto say that no
354.JagsonInternationalLtd v Oil & Natural Gas Corpn Ltd,(2003)4 Mah LJ 733: (2004) 2
Bom CR272.Anothersimilardecisionis inONGCLtdvSawPipesLtd,(2003)5 SCC705:
AIR2003SC2629.
355. SabinaD'Costav Joseph Antony Noronha, AIR 1984 Kant 122. Similarly,where the seller
committed breach of the contract by sending defective goods which were rejected by the
buyer, the seller was not allowed to forfeit the money held by him by way of advance pay
ment. P.M.NainaMohammedRowthervKapporchandJain,1987 SCC OnLine Mad 293:
(1988) 1LW495. Vishal Engineers & Builders vIndianOil Corpn Ltd, AIR 2012 NOC 165
(Del),proof of lossisnecessary.If therewasabsenceof any lossandthereforewithout prov
inganysemblanceof loss,the party couldnot claimthatevenso it was entitledtoliquidated
damages.
356. H.Sowbhagyav NGEF Ltd, AIR 2004 Kant 155, the court alsoemphasisedthat the State
was expected to act in a fair andnon-arbitrarymanner.
357. A.S. Motors (P)LtdvXJniohofIndia,(2013) 10 SCC 114: (2013) 4 SCC (Civ) 660.
358.EnnorePortLtdvHindustanConstructionCoLtd,(2005)4 LW319.https://t.me/LawCollegeNotes_Stuffs

689. 548Chapter9DischargebyBreach [S. 74]
CASEPILOT
compensationis payable because there is a provision tothateffect in the
contract.It has been heldthatcontractclauses which disentitle an aggrieved
partyto theremedialbenefits of Sections 55and73wouldbe voidbecause
ofviolationof the veryintentandpurportof theContractAct. [S. 23]There
is public policyandpublicinterestelement in thesesections.Sections 73and
55 are the veryheart,foundationandbasis of thecontractualrelation.A
contract,which can be broken at will, will be destructive of the very edifice
ofthecontract.
Losscausedbymutualdelay
Bothpartiescontributedto causing delay in completion of work. It was
impossible to know what percentage of delay wasattributableto oneparty
or the other. Deduction of amounts fromrunningbills of thecontractorby
way of liquidated damages was held to be illegal andimproper.^^°
Whereprofitfollows
Where not only no loss was caused to the seller of land by the buyer's
refusal to perform, but, on the contrary, he resold it at a profit, the seller
was notpermittedto forfeit the advance paid by thebuyer.^®^The same
resultfollowedwhere 25 per cent of the auction purchase price was paid in
advance and it was not allowed to be forfeited for the default in payment of
the balance price. The reauction was at a higher price. The court, allowed
interest on the balance from the date of default till due date of payment by
the subsequentpurchaser.^^^
Forfeitureofearnestmoneyonlywhenreasonabletodoso.—In
thesubsequentcaseof ShreeHanumanCotton Mills v Tata AircraftLtd-?^^
The plaintiffs contracted with the defendants to purchase from them
aeroscrap for rupees ten lakhs and paidRs2,50,000,being 25 per cent
of the purchase price. One of the conditions, among others being, that
if he failed to pay the balance of the purchase price in accordance with
thecontract,thedepositwouldbe forfeitedandthecontractcancelled.
The buyer defaulted and the seller forfeited the deposit. The buyer sued
torecoverit.
359. Simplex Concrete Piles (India) Ltd v UnionofIndia,ILR(2010) 2 Del 699.
360. Mecon Ltd v PioneerFabricators(P) Ltd, AIR 2008 NOC 870 (Del).
361. Mohanlalv Dayaldas & Co,AIR 1976Raj 68.Comparethis withLaiChand v Chandigarh
Admn, AIR 1992P&H194where the earnest moneyof an allottee of a plot, who defaulted
in further payments,was held to be properlyforfeitedirrespectiveof anyconsideration of the
fact of loss, ifany,caused,or profit obtained uponreallotment.Perhapsthis isnecessaryto
excludeopportunistallottees.
362.H.SowbhagyavNGEFLtd,AIR2004Kant155.
363.(1969)3 SCC522: AIR 1970SC1986. DDA v Grihsthapana Coop Group HousingSociety
Ltd, 1995 Supp (1) SCC 751: AIR 1995 SC 1312,additionalamountdemanded towards
premiumon the cost of the land allotted to thesociety,not paid, theSupremeCourtjustified
forfeitureofearnestmoney.https://t.me/LawCollegeNotes_Stuffs

690. [5.74] Liquidateddamagesandpenalty549
Thecourtheldthat thedepositinquestionwasintendedasearnestmoney.
Theagreementclearlyprovidedthatthedepositwouldcarrynointerestand
wouldbeadjustedinthefinalbills.Itwasapartofthepriceandtheseller
wasentitledtoforfeitit.VaidialingamJ foundsufficientsupport in the
followingdecisionof thePrivyCouncil:
InChiranjitSinghvHarSwamp,thoughthecontractstipulatedthat
asumofRs20,000shouldbepaidasearnest,thebuyerdidnotpayany
amountbywayofearnest,assuch,buthepaidRs1,65,000againstthe
purchaseprice.But,nevertheless,theHighCourt,aswellastheJudicial
Committee,treatedasumofRs20,000out of thesumof Rs1,65,000,
asearnestmoneypaidunderthetermsoftheagreement,andaclaimto
recoverthatamountofearnestmoneywasnegatived.In thecasebefore
us,thecontractclearlyreferstotheearnestmoneybeingpaidandtothe
factofRs2,50,000havingbeenpaidasearnest.Therefore,thereisno
ambiguityregardingthenatureoftheabovepaymentandtherightofthe
respondentto forfeitthe same.
ThelearnedJudgerefusedtoconsidertheobiterobservationofthe
SupremeCourtinMaulaBuxvUnionoflndia^^^thatearnestmoneycanbe
forfeitedwithoutattractingSection74iftheamountthereofisreasonable
asbinding.HepointedoutthattheSupremeCourtitselfhadnooccasion
inthatcasetoconsiderthequestionofreasonablenessorotherwiseofthe
earnestdepositbeingforfeited.^"
Refundofearnestmoneywherewrongspecificationprovided
TheplaintiffcontractorinformedtheStateaboutdifficultiesthatarose
whilehewasexcavatingtheriverbankforconstructionofsubmersible
bridge.Theboringtestshowedthatthesandyclaywas18feetdeepbelow
the bedlevelwhereastheinformationsuppliedwasthat it wasonly12to 16
feetdeep.TheStaterefusedtoreviserates.DelayintheworkledtheStateto
invitefreshtendersfortheproject.Theplaintiffwasallowedrefundofhis
earnestmoneyandalsol/3rdofthecostofconstruction.^^^
Distinctionbetweenearnestanddeposit,how farreal.—Thus,it
appearsthatthecourthasgonemorebytechnicalconsiderationsthanby
thesubstanceofthebargainsinquestion.Ineithercasetheinitialpayment.
364. (1925-26) 53lA11: AIR 1926 PC 1.
365.(1969)2 SCC554: AIR 1970 SC 1955.
366.SeealsoNareshChandraSanyalvCalcuttaStockExchangeAssnLtd,(1971)1SCC50,58:
AIR1971SC422:(1971)2SCR483,494,whereupontheforfeitureofashare,theconse
quentpricerealisedwasmorethanthesumdueand,therefore,thecourtorderedthesurplus
to berefundedto theholderwhosesharewasforfeitedforotherwiseitwouldhavebeena
penalty.MohdSultanRowthervNamaMohammad,AIR1973Mad233,intheabsenceof
aforfeitureclause,nothingcanbeforfeited,onlyreasonablecompensationcanberecovered.
Afterdeductingreasonablecompensation,theremainderofthemoneyhastoberefundedto
thedepositor.
367.StateofBiharvS.Gheyasuddin,AIR2009NOC387(Pat).https://t.me/LawCollegeNotes_Stuffs

691. 550Chapter9DischargebyBreach [S.74]
whethernamedasearnestorsecuritydeposit,wasintendedas acoveror
protectionagainstinconvenienceorpossiblelosslikelytobecausedbythe
breach. If the deposit was named as earnest the court allowed it to be for
feited,butnototherwise,thusdefeatingthepurportofthebargainthat
thepartieshadvoluntarilymade.Thefactthatthepaymentof asumof
moneyin apurchaseagreementis notexpressedas adepositdoesnot for
thatreasonalonerenderthepaymentnotatruedepositorearnestmoney.
Theintentionofthepartieswithregardtothepaymentasearnestmoney
maybegatheredbyexaminingtheagreementasawhole.Evenifno timefor
completionofthesalebypayingthebalanceofthepricewasspecified,the
seller'snoticeforcompletingthesalewithinsevendaysbecameareasona
blespecificationoftime.Therefore,onthepurchaser'sfailuretodoso,the
moneypaidbyhimwasvalidlyforfeitedeveniftherewasnoprovisioninthe
original agreement for any suchforfeiture.^^^
ThefactsofMaulaBuxvUnionoflndia^^^werevirtuallyrepeatedbefore
;theSupremeCourtinUnionofIndiavRampurDistillery&ChemicalCo
withonlythisdifferencethatinsteadofeggsetc.,itwas"rum" that
thecontractorhadfailedtosupplyandtheSupremeCourtrefusedtoallow
thedeposittobeforfeitedorreasonablecompensationtoberecoveredas
the courtfoundthatbreachof contractcausednolossto theGovernment
andtheGovernmentmadenoattempttoestablishthatithadsufferedany
lossordamageonaccountofthebreach.^^iTheGujaratHighCourtinits
decisioninVarietyBodyBuildersvUnionoflndia^'^^followedtheSupreme
Courtdecisionsinreferenceto afailuretosupplyrubberandmetalto the
WesternRailway.Commentinguponthistrendofdecisions,alearnedwriter
says:
In thelightofthesedecisionsitisimportantfortheGovernment
departmentstoadviseofficersenteringintocontractswithcontractors
onbehalfoftheGovernmentthattheyoughtnottolullthemselvesinto
afalsefeelingofsecuritybytakingasecuritydepositandstipulatingfor
itsforfeitureupon default by the contractor. Under Section 74 all that
theGovernmentcanclaimisreasonablecompensationanditisalways
necessarythattheGovernmentshouldestabhshtheactualdamagesuf
feredbyit bythecontractor'sdefault.IfGovernmentofficersare not edu
catedonthesequestions,thedefaultingcontractorwillnotonlybeableto
recoverhissecuritydeposit,butwillbeabletogetawaywithoutpaying
368.YabKokHengvInternationalAutoEnterprise,(1994)1CLJ414(Malaysia).Thecourtsaid
thatexpressionshkeearnestmoney,partpaymentordepositaregenerallyusedinterchange
ably.SostatedinSunPropertiesvHappyShoppingPlaza,(1971)1MaiLJ89(Malaysia)
369. (1969) 2 SCC 554:AIR1970SC1955.
370.(1973)1SCC649:AIR1973SC1098.PranNathSurivStateofM.P.,AIR1991MP121,on
thefailureofthebiddertoexecutedocuments,theauctioneernotresellingduringthewhole
oftheperiod,notallowedtorecoveranylossbutentitledtoforfeitearnestmoney.
371.ShelatandChandraJJ see at p. 1099.
372.AIR 1973Guj256.https://t.me/LawCollegeNotes_Stuffs

692. [S. 74] Liquidated damages and penalty 551
anydamagesforbreachofcontract,asdidthecontractorinMaulaBux
and Variety BodyBuilder
Wherethepropertyof acompanywasauctionedbut theauctionpur
chaser madedefauhsand,thereforethe property had to be auctioned again
andthenitreahsedovertwolakhsmorethantheearlierbid money, it was
heldthatthe earnest money of the defaulting bidderrunningup to more
thanfiveand a half lakhrupeescouldnot beforfeited.It would have been
highlyarbitraryandunreasonableto doso.AcompensationofRs1,49,763
wasawardedtothecompany.
Noforfeiturewhereextracostsotherwiserecovered
Where,uponthefailureofthecontractortocompletethework,theState
gottheworkexecutedathisriskandalsorecoveredtheextraexpensesfrom
him,theStatewasnotallowedtoforfeithissecuritydeposit.Thiswould
haveamountedtopenakyandtheStatehadsufferednoloss.^^^TheAndhra
PradeshHighCourtallowedtheplaintifftorecoverthestipulatedamount
ofRs2000from a vendor of land who failed to perfect his title within the
prescribedtimealthoughnoproofwasgivenofanyactualloss.^^^
Noforfeiturewherecontractstillnotformulated
Therequirementoftenderingwassatisfiedbythehighestbidderbydepos
itingtherequisiteearnestmoney.Thebidwasnotconfirmedbytheauthor
itythoughaperiodofmorethanoneyearhadpassed.Thebidderwithdrew
his tender. Theauthoritiesthenconfirmedhisbidand forfeited hisearnest
moneyfornotdepositingthebalancemoneywithin30daysfromthedate
ofconfirmation.The court said that theabsenceof any time prescribed
foracceptancecouldnotgivetheauthorityanunlimitedandunreasonable
periodoftime.Theforfeiturewasnotproperandthereforetheamountfor
feitedwasrefundable."^
Afteracceptanceoftenders,thecontractorwasinformedthatanyfurther
saleoftheplotsbyhimwouldinvitepaymentofpremiumequivalentto20
percentofthesalevalueoftheplot.Suchconditiondidnotformpartof
publicadvertisementortermsofconditionofauctionsale.Thecontractors
wereheldentitledtogetrefundoftheearnestmoneydepositedwithinterest
at7.5percentinterestperannumfromthedateofwithdrawalofoffertill
dateofpayment.
373.Foranotherlearnedstudyofthesubject,seeI.C.Saxena,DepositForfeiture:AComparative
LegalPerspective,(1970)12JIL1441andtheSurveyoftheLawofContract,(1970)ASIL,
320,353-57.
374. H. Sowbhagya v NGEP Ltd, AIR 2004 Kant 155.
375.StateofU.P.vChandraGupta & Co,AIR1977All28.
376.MakkalaNarsimlu v Gunnala Raghunandan Rao, AIR 1977 AP 374.
377.CommrofHR&CEDepttvS.Muthekrishnan,AIR2012Mad43.
378.JayantShanitlalSanghvivVadodaraMunicipalCorpn,AIR2011Guj122(DB).
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

693. 552 Chapter 9 Dischargeby Breach [S.74]
Stipulation for refund of doubleamountof earnest and interest
Thestipulationin the contractwasthat if the partyfailedtoperform
fromhisside,hewouldrefundtheamountofearnestdoublingit up and
alsowithinterestat 12 per centp.a. Itwasheldthat theCivilJudgerightly
decreedthe suitofthe plaintifftoreceivethedoubleamount bywayofcom
pensation.It must bepresumedthat the parties at the time ofenteringinto
theagreementknewverywelltheamountoflosswhichtheplaintiffwas
likelytosustainin theeventofbreach.Wherethepartiesweresupposedto
knowthatbreachwouldcauselossinanycase,itwouldnotbenecessaryfor
theaggrievedpartytoshowanyactualloss.Thecourthastheamplepower
tograntcompensationfor loss caused by breach ofcontract.^^'
Securitymoneyunderothercontracts
Security money paid in respect ofothercontractscannotbe forfeited in
respectof the contract underdispute,butbill-moneydue to the contractor
under other contracts may be so used.
Aclausein acontractprovidedthat allmoneysorcompensationpaya
bletotheGovernmentunderthetermsofthecontractmayberealisedout
of thesecuritydepositormoneydue under any otheraccount.
The SupremeCourtcame to theconclusionthatthis clauseenabledthe
Governmenttorealiseitsclaimfrommoneydueto thecontractorinrespect
ofothercontractsand thesecuritydepositedunderthepresentcontractbut
not the security deposit belongingto othercontracts.^®"
Whereacontractforthesupplyofgasincylinderswasbeingperformedin
instalmentsandtherewassuchabreachinrespectofoneinstalmentwhich
entitledthepurchasertoterminatethecontract,hewasallowedcompensa
tion at the ratefixedin thecontractfor thefailuretosupplytheremainder.
ToattractSection 74 it is not necessary that a contract should be broken in
itsentirety.^^^
379. Sukhdev Kaur v Hoshiar Singh,(2004)2ICC55(P&H).
380.UnionofIndiavK.H.Rao,(1977)1SCC583:AIR1976SC626.In thesubsequentcase
ofH.M.KamaluddinAnsari&CovUnionofIndia,(1983)4SCC417:AIR1984SC29,
wherethecourtexpressedtheopinionthatmoneydueinrespectofothercontractsmaybe
forfeitedif there is a clear andexpressprovisionto that effectunder the contract. Where a
vendorhasbeengiventhe righttorepurchaseondefaultand hedoesso,it cannotbecalleda
penaltyondefault.Thecourtcannotprovideanyreliefagainstrepurchase.K.Simrathmull
VNanjalingiah Gowder, 1962 Supp(3)SCR 476: AIR 1963 SC 1182. In the sale of a forest
forRs60,000,damagesforfailuretoperformwerenamedasRs50,000,held,apenalty.The
sellerwasnotallowedevennormalcompensationbecauseheprovednoloss.GurubaxSingh
Gorowara v'BegumRafiya Khurshid, AIR 1979 MP 66. Where the Government wants to
debarandbacklistacontractor,thatbeingalsoapenalty,thecontractorshouldbegiven
anopportunitytoexplainhisposition.JosephVilangandanvExecutiveEngineer,(1978)
3SCC36:AIR1978SC930.FranNathGuptavUnionofIndia,AIR2004J&K135,
provisionforrecoveryofmoneydueunderearlierbillsfromsubsequentbills,itsvaliditynot
allowed to be tested under writ jurisdiction.
381.IndianDrugsandPharmaceuticalsLtdvIndustrialOxygenCo(P)Ltd,1984MahLJ
690.K.B.MachaishvAjjittiraS.Mandanna,AIR1997Kant 194, the partywhocausedhttps://t.me/LawCollegeNotes_Stuffs

694. [S_74] Liquidateddamagesandpenalty553
Show-causenotice beforeforfeiture
Forfeitureof earnestmoneywithoutinsuranceof ashow-causenoticeis
violativeof the principle ofnaturaljustice.
Consentdecrees
TheMadhyaPradeshHighCourtconsideredit tobewell-settledthat
principlesunderlyingSection74areapplicabletoconsentdecrees.Acon
tractembodiedin adecreeissubjectto all theincidentsof any other con
tract.Accordingly,if itcontainsanyclausewhichis ofpenalnature,it can
bestruckout.Applyingtheseprinciplesto acontractforsaleoflandfor
Rs2000halfofwhichwasdepositedbywayofearnestandwhichwascom
promisedunderwhichaconsentdecreewaspassedtotheeffectthatthe
defendantwouldpayRs2000pluscostsintwoinstalmentsandthatifhe
defaultedhewouldexecutethe saledeedinfavourof the plaintiff,the default
clausewasheldtobeapenalty.Thecourtsaidthattheexecutingcourtshall
alwayshavepowertoapplyequitableprinciplesembodiedinSection74and
relieveapartytothecontractagainstanyterminthedecreewhichoperates
asapenalty.^^^Ontheotherhand,wherethecompromiseaboutadecree
wasthat if thetenantwouldpayallthemoneyfounddueagainsthimbya
certaindate,thelandlordwouldnotenforcethedecreeofdispossession,this
was held to be as not amounting to apenahy.^^''
Acompromisedecreeprovidedforpaymentoftheprincipalsumwith
interestattherateof18percentp.a.fromthedateofsuittilldateofdecree.
Libertywasgiventothedecreeholdertoapplyforitsexecutionifthejudg
ment-debtorfailedtopaythedecreebythedatespecifiedin it.Thisstipu
lationwasheldto benot in the nature of apenalty.The court saidthat the
executingcourthadnojurisdictiontogointothequestionwhethertherate
of interestawardedwas excessiveorunreasonable.^^^
Wheretheplaintiff'ssuitwascompromisedonthebasisthathewould
paycertainsumofmoneybyinstalmentsandthatondefaultinpayment,
theplaintiff'ssuitwouldbedismissed,itwasheldthatthiswouldamount
topenaltyand,therefore,extensionoftimeshouldbegrantedforcovering
upthedelayinthepaymentofthefirstinstalment.^®®
Theburdentoestablishthat aclausein thedecreeis in the nature of
penaltyandisunenforceableunderSection74oftheContractActisonthe
judgment-debtors.Therecannotbeanydisputethatonaccountofthedelay
prematureterminationofacinematographicagreementagreedthattheaggrievedparty
wouldhavesufferedalossofRs25,000.AnawardRs10,000bywayofdamageswasheldto
be justified.
382.S.R.S.InfraProjects(P)LtdvGwaliorDevelopmentAuthority,(2010)2MPLJ142.
383.ParvatiBaivAyodhiaPrasadJain,1985MPLJ703!Foracontraryview,seePunjabWoollen
Textiles Firm v Bank of India, AIR 1992P8cH158.
384.PrithvichandRamchandSablokvS.Y.Shinde,(1993)3SCC271;AIR1993SC1929,
1934-35.
385.B.V.Basavarajv N.R. Chandran,(2000)3 Kant LJ195.
386.JollySteelIndustries(P)LtdvGuptaSteelIndustries,(1997)1BomCR192.https://t.me/LawCollegeNotes_Stuffs

695. 554Chapter9DischargebyBreach [S.74]
in getting back the collateralsecuritieson paymentof the entire debt dueto
thebankthedecree-holderwouldbeput toseriouslossashemightnotbe
abletoraiseanyfurtherloanforhisbusinessor todischargetheexisting
loans by sale of the other properties as the title deeds were with the bank.
Boththepartieswereawareoftheirrightsandliabilitiesandwithopen
eyestheyenteredinto acompromise.Whenthe partiessubmittedbefore
thecourtandagreedtoadecreeintermsofthecompromisespecifyingthe
liquidateddamages,andadecreewaspassedintermsoftheagreement,the
judgment-debtorcouldnotlaterturnroundandcontendedthatdamages
agreed to werepenalinnature.^^^
Amajorityviewofthe FullBenchoftheAllahabadHigh Court wasthat
a compromisedecreeis a creature of the agreement on which it is based and
it issubjectto all theincidentsof suchagreementand that it is a contract
withthecommandofaJudgesuperaddedto itandinconstruingitspro
visionsthefundamentalprinciplesgoverningtheconstructionofcontracts
areapplicable.Itwasalsoheldthatoneofthecardinalprinciplesinthe
constructionofcontractsisthatthe entirecontractmust betakenasconsti
tuting an organic synthesisembodyingprovisions which balance in the sum
ofreciprocalrights andobligations.^®®
Clear notice of clauserequisite
Tojustifyforfeitureofadvancedeposit,beinga part ofthepriceas"ear
nest"thetermsof thecontractshouldbesufficientlyexplicitandmustbe
madeknowntothepartymakingthedeposit.Inthiscasetheaggrieved
party has shownthatthe terms of auction were neither advertised nor were
theysuppliedto the intendingbiddersat the time of the auction. The auc
tioningauthority,therefore,couldnotcontendthatV4paymentwasmeant
asearnestandaguaranteemoneyforperformance.Northeauthorityhad
proved any loss upon the bidder'sdefault.^®'
Minimumcharges
Minimumchargesforsupplyofelectricityhavebeenheldtobenotby
wayofpenahy.Themaintenanceofasupplylinedoescostsomething
andifaconsumerdoesnotconsumetoacertainfigure,thesuppliermay
recoverfrom him thespecifiedminimum in order to meet his costs. This
requires that the minimum should be reasonable in the circumstances and
notarbitrary.^^°
387.Sukumaranv Anthony,(2005)2 KLT919.
388. HabibMianvMukhtarAhmad,AIR1969All296(FB).
389.Bhanwarlalv Babulal, AIR 1992 MP 6.
390. MahavirKhandsariSugarMillvMaharashtraSEB,AIR1993Bom279.Thecourtfollowed
GujaratElectricityBoardvShriRajratnaNaranbhaiMillsCoLtd,(1975)16GujLR90;
WatkinsMayor&CovJullundurElectricitySupplyCoLtd,AIR1955Punj133.Herethe
conceptofminimumchargewasthusexplained:"Aminimumchargeisnotreallyacharge
whichhasforitsbasistheconsumptionofelectricalenergy.Itisbasedontheprinciplethat
everyconsumer'sinstallationinvolvesthelicenseeinacertainamountofcapitalexpenditurehttps://t.me/LawCollegeNotes_Stuffs

696. [S-74] Liquidated damages and penalty 555
Interestby way of damages
Interest isgenerallynot awarded by way of damages. There has to bean
agreementto that effectorstatutoryprovisions.When money due is wrong
fullywithheld,interestcan bedemandedevenin theabsenceofagreement.
Butfor that purpose, a written demand is mandatory.In theabsenceof any
such,thing as that, the plaintiff wasallowedinterest at the rate of six per
cent. Thewithheldpaymentwas dueunderthecontract.^®^
Whereinthematterofacommercialtransactiontherewasaterminthe
contract providing that the defendant would be liable to pay interest at 20
percent p.a. in the event ofbreachandthefactsshowedthatthedefendant
committedbreach,the plaintiff was allowed interest at the specified rate
from the date of suit till the date of judgment. He was also allowedinterest
at 6 per cent tillpaymentasprayed.^^^
Bank's service charges
As per the terms andconditionsof the issue ofcreditcard,theholderof
the card had to pay a service charge if he did not pay to the bank within
thestipulatedtime theamountusedthroughthe credit. This was held to
be not a penalty. The factthatthebankwas not complyingwithcertain
requirementsof the Service TaxChargesActwouldnot alter thenatureof
thecharge.^'^
Compensationforgivingwrongdestinationto ship
Acharterpartywas entered into forcarriageof crude oil todestination
at anIndianport.Thechartererbymistakehappenedtomentionawrong
portwhere thematerialcould not belanded.The shiparrivedthere. Lay
days forunloadingbegan. The ship was then diverted to the rightport.The
arbitrationaward held thechartererliable for excess expenses and delay.
The SupremeCourtrefusedtointerferewiththeaward.^^''
Statutorycompensation
Wherecompensationispayableintermsof astatutoryprovision,the
SupremeCourthas heldthattheprovisionapplicablewouldbe onethat
isinforceatthetimeofcauseofactionandnotonethatwasinforce
at the time of thecontract.Theplaintiff'shusbandwaskilledby agoods
lorrywhichwasinsuredwiththedefendantinsurancecompany.Atthetime
of the policy, thestatutorycompensationfor loss of lifeundertheMotor
inplantand mains on which he has to have areasonablereturn.He gets areturnwhen energy
isactuallyconsumed...buttheminimumchargesare really areturnon hiscapitaloutlay
incurredfor theparticularconsumer."
391.Y.P.GanesanvT.N.CivilSuppliesCorpnLtd,(2006) 1CTC277(Mad).
392.CottonCorpnofIndiaLtdvRamkumarMills (P)Ltd,AIR2009NOC384(Bom).
393.CentralBankofIndiavManipurVasant Kini, (2000) 1MahLJ 744, the suit based on the
money usedthroughcreditcardwasallowedas asummarysuit.
394.ShippingCorpnofIndiaLtdvMareShippingInc,(2011) 8 SCC 39:AIR2011 SC2608.https://t.me/LawCollegeNotes_Stuffs

697. 556Chapter9DischargebyBreach [S.74]
VehiclesAct, 1939,wasRs20,000.Bythe time of the accidentthe Act had
beenamendedbyraisingthecompensationmoneyto Rs50,000. The court
allowed the revised figure. This did notamountto retrospective operation,
becausetheaccidenthad takenplaceafter theamendment.The resultwould
havebeendifferentif theaccidenthad happenedbeforethe amendment or if
the parties hadcontractedonlyon thebasisoflaw as it thenstood.^"
Where noceilingwasfixedon energyto beconsumedby consumersand
there was no breach of contract, nor any loss to the supplier, levy ofpenalty
onenergyconsumedinexcessof the contracteddemandwas held to be
illegal.^'^^
AStatutorycontractmeansthatit is acontractwithsomestatutorycon
tent whichgenerallycontainprovisionsregardingdetermination of tariff as
per,forexample.Section43-A(2)oftheElectricitySupplyAct, 1948 regard
ing determination of tariff. The courtwasdealing with a power purchase
agreement.^^^
Terminationofcontractforbreach
The Authority was entitled to terminate thecontracton any of the spec
ified grounds including delay in execution of the project. Thecontractor
could not complete the work in time. Termination of the contract for this
reasonwas held to be valid. The mere factthatawronggroundhappenedto
bementionedintheorderofterminationdidnothavetheeffectofinvalidat
ing the order oftermination.^'®
Jurisdiction
Asubstantialpartof thecontractremained unexecuted. The textile mills
weresituatedin Bombay and the supply of the goods under thecontractwas
to be made ex-factory atBombay.Accordingly proceedings could be taken
atBombay.^''
A ship wasmortgagedin a foreigncountrythecourtsaidthatunder
Section 11 of theAdmiralityAct, thejurisdictionof theIndianHighCourts
inadmiralitymattersisequivalenttothatof theHighCourtinEngland
Mattersas tomortgagedship can be dealt with by thecourtsinIndiapro
vided the mortgage is registered in accordancewiththe provisions of the
MerchantShipping Act, 1894 or of 1958. This was so. Thecourttherefore,
hadjurisdictiontotrythesuit.''®"
395.PadmaSrinivasanvPremierInsuranceCoLtd,(1982) 1 SCC613:AIR1982SC836.
396.SriVishnuCementsLtdvA.P.SEB,AIR1999AP103.
397.IndianThermalPowerLtdvStateofM.P.,(2000)3 SCC 379: AIR2000SC1005.
398. K.ProInfraWorks (P)LtdvStateofManipur,AIR2015NOC505(Mani).Information
aboutdelay was given to thecontractorfrom time to time, thedetailednotice oftermination
was served.Groundsmentionedby thecontractorwereconsideredandrejected.
399.NationalTextileCorpnLtdvHariboxSwalram,(2004) 9 SCC 786: (2004) 3 BC 494.
400.DallahAlbarakaInvestmentCoLtdvMT"Symphony"ex MT:ArabianLady,(2005) 5
BomCR589.https://t.me/LawCollegeNotes_Stuffs

698. \
\
Ap.75] Liquidateddamagesandpenalty557
Under the IndianContractAct this type of relief is provided under
Section75.
S. 75.Partyrightfullyrescindingcontractentitledtocompensa
tion.—Apersonwhorightfullyrescindsacontractisentitledtocompensa
tion for anydanfiagewhich he hassustainedthroughthenon-fulfilmentofthe
contract.
Illustration
A,a singer,contractswith B,themanagerof atheatre,to sing at histheatrefortwonights
in everyweekduringthenexttwomonths,and Bengagesto pay her 100rupeesforeach
night'sperformance.Onthesixth night, A wilfullyabsentsherselffromthetheatre,and B,
inconsequence,rescindsthecontract.Bisentitledto claimcompensationforthedamage
which he hassustainedthroughthenon-fulfilmentofthecontract.
A work order forrepairingthebankof a riverw^asissueddirectingthe
work to be completedwithin45 days. Thealignmentwas given after 10
monthsthatturnedout to be wrong.Correctalignmentwas given subse
quently when asubstantialportionof the work had already been done. The
work already done was nottakeninto account. The wrongalignmentbecame
the cause of washing away by devastating floods. Theplaintiff'sclaim for
compensationfor theworkalreadydone wastakento beestablished.'*"^
401.RaharmanProdhanvStateofW.B.,(2009) 4CHN701.
Visitebcexplorer.comtoaccesscasesreferred
tointhebookthroughEBCExplorer™on ||l|||||^^EBC
seeOnline®;alongwithupdates,articles,videos, ExplorGT^
blogsandahostofdifferentresources. companionrelourcesforlegalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•A.K.A.S.JamalvMoollaDawoodSons & Co,(1915-16)43lA6: case pilot
ILR(1916) 43 Gal 493: (1916) 1 AC 175
• H.SowbhagyavNGEFLtd,AIR2004Kant155
•HadleyvBaxendale,(1854) 9 Exch 341
•KarsandasH.ThackervSaranEnggCoLtd,AIR1965SC 1981
•MaulaBuxvUnionofIndia,(1969) 2 SCC 554
•ONGCLtdv SawPipesLtd,(2003) 5 SCC 705
• ShreeHanumanCottonMills vTataAircraftLtd,(1969) 3 SCC522
• Tarsem Singh vSukhminderSingh, (1998) 3 SCC 471
•VictoriaLaundry(Windsor)LtdvNewmanIndustriesLtd,
(1949)2 KB528(CA)https://t.me/LawCollegeNotes_Stuffs

699. 10
CertainRelationsResembling
ThoseCreatedbyContract
^ .i5a.
[QuasiContracts)\'
fi'
There are many situations in which law as well as justice requirethata
certain person be required to conform to an obligation, although he has
neither broken anycontractnor committed any tort. Forexample^,a person
in whose home certain goods have been left by mistake isbound-itorestore
them. Such obligations are generally described, forwantof abetteror more
appropriatename, as^Mtjsi-contractualobligations. .v'-,
O'
Rationale
Theoryofunjustenrichment 151
Thetheoryonwhichquasi-conUactVL&lobligationsarebased-isnotyet
finally settled. LordMansfieldwho is considered to be therealr^founderof
such obligations, explained them on the principlethatlaw aswell-.asjustice
should try to prevent"unjustenrichment",thatis,enrichmentof.oneperson
at the cost ofanother.HisLordshipoffered thisexplanation;^inMoses v
Macferlan-} o .7
Jacobissuedfour promissorynotesto Mosesand Mosesindorsedthem
toMacferlan,excluding, by awrittenagreement,hispersonaHiabilityon
theendorsement.EvensoMacferlansuedMosesontheendorsbmentand
he was held liable despite theagreement.Moses was thus corhpelled to
dischargealiabilitywhichhehadexcludedand,therefore,suedto recover
backhismoneyfromMacferlan. "
He wasallowedto do so.Afterstatingthatsuchmoneycannotbe recov
eredwherethepersontowhomit is givencan"retainitwitha safe con
science", LordMansfieldcontinued: i''
"Butit lies formoneypaidbymistake;oruponaconsiderationwhich
happensto fail; or for money gotthroughimposition;orextortion;or
oppression;or for an undueadvantagetakenof theplaintiff'ssitua
tion,contraryto laws made for theprotectionof personsunderthose
1.(1760)2Burr1005,1012. 'Jf'
[558]https://t.me/LawCollegeNotes_Stuffs

700. \^[S.68] Rationale559
\
^circumstances.In oneword,the gist of this kind ofactionis, that the
defendant, upon thecircumstancesof the case, isobUgedby ties ofnatu
raljustiqeandequitytorefundthe money."
A liability of thiskindishardto classify.Partlyit resemblesliabilityunder
the lawoftortinasmuchas it arisesindependentlyof anycontract.Partly
it resemblescontractinasmuchas it is owed only to onepartyandnot"to
persons generally". Thus it can be accounted for either under an implied
contractorundernaturaljustice andequityfor thepreventionofunjust
enrichment. LordMansfieldpreferred thelattertheory.
Theoryof"implied-in-fact"contract
Butbeginningwith the decision of the House of Lords inSinclairv
Brougham,^ it became fashionable to discard LordMansfield'sformula
tionand tp;relyuponanimplied-in-factcontract.
A building societyundertookbanking business which was outside its
objects^knd,therefore, ultra vires. The society came to be wound up.
Afteripkyingoff all theoutsidecreditors,amixedsum ofmoneywas
left which represented partly the shareholders' money and partly that of
the ultra vires depositors, but was not sufficient to pay both of them.
The depositors tried to get priority by resorting to the^wasf-contractual
action for recovery of money had and receivedfor the depositors' benefit,
forotherwisetheshareholderswouldbeunjustlyenriched.
The House of Lords allowed rateable {paripassu) distribution ofthe mixed
fund among the claimants, but did not allow any remedy under quasi-con-
tract.LorH^HALDANEmaintainedthatcommonlawknowspersonalactions
of only twoclasses,namely,those founded on contract and those founded
on tort. "When it speaks of action arising quasi ex contractu it refers only to
a class of action in theory which is imputed to the defendant by a fiction of
law."^Similarly,LordSumnerobserved that an action for money had and
receivedrests, not on acontractualbargain between the parties, but"upon
a notionaljor imputed promise torepay".''LordParkerexpresslypointed
out thatif-apromiseto pay back an ultra viresloan could be imputedto the
companyas^M<2s/-contractualobligation,the result would be tovalidate
atransactionwhichhas beendeclaredto be void on thegroundofpublic
policyand,thelaw would beenforcinga notional contract whereanexpress
contractwouldhavebeenvoid.^
Thisapproachdominateddecisionsfor a long time and thedecision
was taken to have settled that the juridical basis ofquasi-contxact.was the
2.1914A0392(HL).
3.JWrf.atp;i415.
4./Watp.452 (HL).
5.Ibidat'p.M40.TheSupremeCourtappliedtheprincipleofunjustenrichmenttocasesof
importedrawmaterialscaptivelyconsumedinmanufactureoffinalproduce.UnionofIndia
VSolarPesticides(P)Ltd,(2000)2 SCC 705: AIR2000SC 862.https://t.me/LawCollegeNotes_Stuffs

701. 560Chapter10CertainRelationsResemblingThoseCreatedbyContract [S. 68]
implied,notionalorfictionalcontract.Wherethecircumstancesof a case
donotleadtoaninferenceofthiskindorwheresuchaninferencewouldbe
againstthe law, noliabilitywill arise.
Restorationoftheoryofunjustenrichment
Theidentificationofquasi-conttzctswithimpliedcontractsrestrictedthe
scopeofrehefwhichwouldhave beenpossiblewithoutany suchhindrance
undertheprincipleof"naturaljusticeandequity".Thesuffocationwas felt
byHouseof Lords itself inFibrosaSpolkaAkeyjnavFairbairnLawson
CombeBarbourLtd.^A sum of money waspaidinadvanceunderacontract
for the supply of amachineor'forthe supply ofmachinery',andtheperfor
mance wasobstructedby theoutbreakof war.TheirLordshipsallowedthe
advanceto berecoveredbackashavingbeenpaidfor aconsiderationwhich
had wholly failed. LordWrightlentsupportto LordMansfield'stheory
ofunjustenrichment.He observed:^
"It is clearthatany civilised system of law isboundto provide remedies
for cases ofwhathas been calledunjustenrichmentorunjustbenefit,that
is, topreventamanfromretainingthe money of, or some benefit derived
from,anotherwhich it isagainstconsciencethathe should keep. Such
remedies in English law are generallydifferentfrom remedies incontract
ortort,andare nowrecognisedto fallwithinathirdcategoryof the com
mon lawwhichhas been calledquasi-contractorrestitution."
Referringto theratiodecidendi of the decision of theHouseof Lords
inSinclairvBrougham^LordWrightpointedoutthatthe caseturned
upon the principlethatit was against public policy to allow the recovery
of an ultra vires deposit, whether the claim be based uponcontractor qua-
s/-contract.The observations of their Lordships relating to thefoundationof
quasi-contractwere merelyobiterdicta. Indeed the Houseadoptedthepari
passu distribution of the available assets as a technique to prevent the unjust
enrichment of the shareholders at the cost of thedepositors.'
ProvisionsoftheIndianContractAct
ChapterV of theIndianContractAct dealswithsuchsituationsunder
the heading"Ofcertain relations resembling those created bycontract".The
chapteravoidsthe words"quasi-contmct",and in viewof the clearstatutory
6.1943AC 32(HL).
7. Fibrosa Spolka Akeyjna v Fairbairn Lawson CombeBarbourLtd, 1943 AC 32 (HL).
8. 1914 AC 392 (HL). R. Baskar Bhat vHindustanPetroleumCorpnLtd, AIR 2002 Mad 330,
a lessor notallowedtorecoverrent except from the date about which there was a proof of
delivery ofpossession.
9. The matter was considered by LordWrightin his article on the case in 57 LQR 200 and
included in hisLegalEssaysandAddressees,p. 1. Support for this approach is also to
be found in LordAtkin'sspeech in United Australia Ltd v Barclays Bank Ltd, 1941 AC 1,
27-29. LordDenninghas also voiced himself against the impliedcontracttheory. See (1949)
LQR37.https://t.me/LawCollegeNotes_Stuffs

702. [Ss.68-69] Conditionsofliability561
authorisationthecourtsinIndiaare not:hinderedinallowingreliefunder
thedifferentsectionsof Act by thetheoreticalconsiderationsconcerning
quasi-contmcts.ButEnglishcases do provide valuableguidancenot only as
to scope of relief but also as to the way theprovisionsshouldbeinterpreted
to keep them intunewiththechangingnotionsof justice. Sections 68 to 72
provide for five kinds of^Mi35/-contractualobligation.
1. Supply of necessaries [S. 68]
Where necessaries are supplied to apersonwho isincompetentto con
tractor tosomeonewhomheis legallyboundtosupport,thesupplieris
entitledto recover the price from thepropertyof theincompetentperson.^"
S.68.Claimfornecessariessuppliedtopersonincapableofcontract
ing,oronhisaccount.—Ifaperson,incapableofenteringinto acontractor
anyonewhomhe is legallyboundtosupport,issuppliedbyanotherperson
withnecessariessuitedtohisconditionin life,thepersonwhohasfurnished
suchsupplesisentitledtobereimbursedfromthepropertyofsuchincapable
person.
Illustrations
(a)suppliesB,a lunatic, withnecessariessuitableto hisconditionin life.Aisentitledto be
reimbursedfrom B'sproperty.
(b)Asuppliesthewife andchildrenof S, a lunatic, withnecessariessuitabletotheircondi
tioninlife.yAisentitledtobereimbursedfrom B'sproperty.
2. Payment byinterestedperson[S. 69]
S. 69.Reimbursementofpersonpayingmoneyduebyanother,inpay
mentofwhichheisinterested.—Apersonwhoisinterestedinthepayment
ofmoneywhichanotherisboundby law to pay,andwhothereforepays it is
entitledtobereimbursedbytheother.
Illustration
Bholds land in Bengal, on a leasegrantedby A,theZamindar.Therevenuepayableby/A
totheGovernmentbeing in arrear, his land isadvertisedfor sale bytheGovernment.Under
therevenuelaw,theconsequenceof such sale will betheannulmentof B's lease. B,to pre
ventthesaleandconsequentannulmentof his own lease, pays totheGovernmentthesum
duefrom A.A Isboundto makegoodto Btheamountso paid.
Conditionsofliability
Theconditionsof liabilityunderthis section may now be stated.
Payermustbeinterestedinmakingpayment
Firstly, the plaintiff should be interested in making the payment. The
interest which the plaintiff seeks to protect must, of course, be legally rec
ognisable.His honest belief that he has an interest to protect is enough."
10. This provision has already been considered in Chapter 4,"CapacitytoContract".
11. So held by the Allahabad High Court inMunniBibi v Triloki Nath,ILR(1932)54 All140.,
The interestin performingone's contract issomethingdifferent.AccordinglyinTransworldhttps://t.me/LawCollegeNotes_Stuffs

703. 562Chapter10CertainRelationsResemblingThoseCreatedbyContract [S. 69]
Where apartyhad agreed to purchasecertainmills, he was allowed to
recover from the seller theamountof already overduemunicipaltaxespaid
by him inorderto save thepropertyfrom being sold inexecution.By agree
ing to purchase thepropertyhe had acquired sufficient interest in it to safe
guard.^^LordRadclifferefusedto agreethatthepaymentinquestionwas
voluntary:"Thecompanyhadcontractedto buy these mills,andthey were
imminentlythreatenedwith a forced sale which would, of course, defeat its
purchase. Money had to be found for the taxes if the inills were to be saved.
TheMaharaja(seller)showedno sign of paying themunicipality.So the
appellantcompany paid. But to describe it in thosecircumstancesas having
made avoluntarypayment appears to their Lordships to involve some mis
use oflanguage."
Explainingthatthepurchaserwas sufficiently"interested"so as to
attractSection 69, hisLordshipcontinued:"Inanyordinaryuse of lan
guage thecompanywasinterestedin thetaxesbeingpaidat thetime...since
onlythroughapaymentcould it realise thefruitof thecontractthatithad
enteredinto.Thewords(of S. 69)themselvesdonotrequirethatapersonto
beinterestedin apaymentshouldat the time have a legalproprietaryinter
est in thepropertyinrespectofwhichthepaymentis made. It is nodoubt
truethattherehave beendecisionswhichhavetestedwhetherapersonwas
interestedin apaymentbyascertainingwhetherhehadsuch aproprietary
interest.It may be a good test inappropriatecircumstances.But itwould
be a bad fallacy to deduce from thecircumstancethatapersonmay be
interestedinpaymentbecause he has aninterestin thepropertytowhichit
relates theconclusionthatno onewhohasnotanyinterestin apropertycan
beinterestedin apaymentmade inrespectofthatproperty.Intruth.Section
69 invites no suchjudiciallimitation.Thesectionispartof aChapterof
theContractActdevotedto'Quasi-contract'.Thephraseitself is nodoubt
takenfrom afamiliarbranchof theEnglishcommonlaw,althoughthereis
noreasontosupposethattheIndianContractAct wasintendedto do no
morethantoreproduceincompendiousphrasestheprecisedoctrinesof
the English law ofcontract.But the generalpurportof thesectionis rea
sonablycleartoaffordto apersonwhopaysmoneyinfurtheranceof some
existinginterestanindemnityinrespectof thepayment,againstanyother
personwho,ratherthanhe,couldhave beenmadeliable at law tomakethe
payment."
Butshouldnotbeboundto pay
Secondly, it isnecessarythattheplaintiffhimselfshouldnotbeboundto
pay. He should only be interested inmakingthe payment in order to pro
tect his own interest. Where apersonis jointly liable with others to pay, a
ShippingServices(I) (P)LtdvOwners,1984SCCOnlineMad285:(1986) 99LW517 no
recovery from the owners of ship was allowed to apersonwhorepaireditunderhiscontract
withthecharterers.
12.GovindramGordhandasSeksariavStateofGondal,(1949-50)77lA156: AIR 1950 PC 99.https://t.me/LawCollegeNotes_Stuffs

704. [S-69] Conditionsofliability563
paymentbyhimoftheothers'sharewouldnotgivehimarightofrecovery
underthissection."Wherea portauthoritywasunderastatutoryliability
topay an injuredworkmanand paid him, it could not recover from the
defendant,acontractor,whosenegligencehadcausedinjury,becausethe
port authority was not only "interested" but was also bound in its own
independent obligation topay."
Defendantshould be underlegalcompulsionto pay
Thirdly,thedefendantshouldhavebeen"bound by law" to pay the
money.The words "bound by law" have been held, after some hesitation,
tomeanbound by law or bycontract.It is notnecessarythat theliability
shouldbeonlystatutory.It isenoughthat "thedefendantat the suit of any
personmight becompelledtopay".^^Explainingthe purport of the phrase
inGovindramGordhandasSeksariavStateofGondal,^^wherea Maharaja,
havingsold certain millswithout payingoverduemunicipaltaxes, was sued
by the buyer who had to pay tosavethe property from beingsold.Lord
Radcliffesaid":"The Maharaja was bound to pay this money in the sense
that he made alegallyenforceablecontract withSeksariato pay it.Unless
the words'boundby law to pay' where they occur in the section, exclude
thoseobligationsof lawwhichariseinter partes,whetherbycontract or by
tort, andembraceno more than those publicdutieswhich are imposed by
statute or general law, theMaharajawas a person from whom reimburse
ment could be claimed under the section. But their Lordships think that the
words extend to any obligationwhich is aneffectivebond inlaw.Certainly
the common law of England afforded a right of indemnity to one who had
paid 'undercompulsionoflaw' against the trueobligerwithout limitingthe
circumstances in which thelatter'sliability had arisen. Certainly, too, there
is authority in the courts of India for the propositionthat'boundby law'
coversobligationsofcontractortort."
Where a person is only morally bound and is notlegallycompellableto
pay,he will not be bound to pay thepartydischarging his moral obligation.
In a case before theMadrasHighCourt,a person had, before his death,
gifted certain claims to the defendant. Thetaxingauthorities, however,
addedtheclaimstotheestateofthedeceasedandrecoveredthetaxfromhis
13. VenkataSimhadriJagpatirajuv SriLakshmiNrusimhaRoopaSadrusannamaAradDugarazu
Dakshina Kavata Dugarazu, AIR 1916 Mad 980; Gopinath vRaghumnshKumar Singh,
AIR1949Pat522.
14.Portofthe Trust,MadrasvBombayCo (P)Ltd,AIR1967Mad318. UrbanImprovement
Co (P)LtdVUjagar Singh, AIR 1996P8cH167,increaseddevelopment charges paid by devel
oper,entitledto recover frompurchaser.KrishnaPillaiRajasekharanNairvPadmanabha
Pillai, (2004) 12 SCC 754: (2004) 2ICC89, subrogation to the position of mortgagee by
operation oflaw.The subrogatee does not become a mortgagee. He only getscertainrights on
redeeming the mortgage which include the remedies of redemption, foreclosure and sale. He
exercises these rights not as amortgagee,but by way of rightsakinto those of amortgagee.
15.RasappaPillaivMittaZemindarDoraisamiReddiar,AIR1925Mad1041.
16.(1949-50)77lA156: AIR 1950 PC 99; see alsoRaghavanvAlameluAmmal,ILR(1907) 31
Mad35.https://t.me/LawCollegeNotes_Stuffs

705. 564Chapter10CertainRelationsResemblingThoseCreatedbyContract [S.70]
widowdespiteherprotests.Thewidowthensoughttorecovertheamount
fromthedefendant,buthewasheldnotliable.If the taxingauthoritieshad
orderedhimtopay,onlythenitcouldbesaidthat hewasboundbylawto
CASEPILOT
pay.
17
Taymentshould be by one to another
Lastly,theplaintiffshouldhavemadethepaymenttoanotherperson
and not tohimself."Thus, where a certainGovernmentwas the tenant of a
landandpaidtoitselfout oftherentdueto thelandlordthearrearsofland
revenuedue to itself,theGovernmentcould notrecoverfrom the landlord.
It was a transfer of money from one head to another within the Government
and not'paymentto another' and thoughit wasdonetosavethe land from
beingsoldinexecution,it didnotcomewithintheprincipleofthesection.^®
Goodssentbyconsignerthrough a carrierwerelootedenroute.Theentire
amountofdamagewaspaid bythe insurerto theconsignee.It washeldthat
theinsurerbecameentitledtorecoverreimbursementfromthecarrieronthe
basisof the letter of subrogationissuedby theconsigneeto"the insurer. The
insurersteppedinto theshoesof the insuredforrecoveryof theamount.""
3. Liability to pay fornon-gratuitousacts[S.70]
Section70 creates liability to pay for thebenefitsof an act which the doer
did notintendto dogratuitously.
S. 70.Obligationofpersonenjoyingbenefitofnon-gratuitous
act.—Wherea personlawrfullydoes anything foranotherperson, or delivers
anything tohim,not intending to do sogratuitously,and such other person
enjoysthe benefit thereof, the latter is bound tomakecompensation to the
former in respect of,or to restore, the thing so done or delivered.
Illustrations
(o)A,atradesman,leavesgoodsat B'shouse by mistake.Btreatsthegoodsashisown. He
Isboundto pay forthem.
(b)Asaves B'spropertyfrom fire.A is not entitled tocompensationfromB,if,thecircum
stancesshowthatheIntendedtoactgratuitously.
Conditionsofliabilityunderthesection
GajendragadkarJ(afterwardsCJ)statedinStateofW.B.v B.K.
Mondal&Sons^°theconditionsonwhichtheliabilityunderthesection
arises:
"It isplainthatthree conditions must be satisfiedbeforethis section can
be invoked:(1)a person should lawfully do something foranotherperson
or deliversomethingto him;(2)in doing the said thing or delivering the
17.RaghavanvAlameluAmmal,ILR(1907) 31 Mad 35.
18. Secy of State forIndiavFernandes,ILR(1906-08)30 Mad 375.
19.EastIndiaTransportAgency vOrientalInsuranceCo Ltd, AIR 2014 NOC 456(Chh).
20.AIR1962SC779:1962Supp(1) SCR876.https://t.me/LawCollegeNotes_Stuffs

706. [S. 70] Conditionsofliabilityunderthesection565
said thing he must not intend to actgratuitously;and(3)theotherperson
for whomsomethingis done or to whomsomethingis delivered must
enjoy the benefitthereof."
"Notintendingto do sogratuitously"
Thus,one of thepurposesof thesectionis to assurepaymentto aperson
who has donesomethingforanothervoluntarilyand yetwiththethought
of being paid. He should havecontemplatedbeingpaidfrom the very begin
ning. AMunicipalCouncilwhichconstructedandmaintainedabus-stand
was allowed to recover some charges from busoperatorswho used thestand
thoughthere was noagreementtothateffect.^^An employer isboundto pay
for servicesrenderedby hisemployees.Auniversitycould not escape its
liabilitytoreimbursealecturerwhoworkedunderanappointmentgiven to
him by thevice-chancellorthoughthepostonwhichhe wasappointedwas
notsanctionedby theState.^^Thewords"doesanything"wouldinclude pay
ment of money.Makingpaymentforanothertantamountsto doing some
thingfor him. Accordingly, abankdiscountinganorderofpaymentand
givingcreditto thecustomerwasallowedreimbursementfrom thecustomer
for something done forhim.^''Where atenantbankoverstayed and also
did not pay the increased rent which it had acknowledged, thecourtsaid:^^
Having regard to the lawlaiddown in various decisions of the Supreme
Courtand HighCourtson the principle of"tenant-holdingover" and its
consequential effect making the tenant liable to pay damages or mesne prof
its to thelandlordforcontinuingin possessionwithoutanyauthorityof law
and similarly in view of the legal position as regards the principle of unjust
enrichmentunder the provisions of Section 70 of the Act, thecourtcame
to theinevitableconclusionthatthedefendantbankwas liable to pay the
plaintiffthe entireamountof the suit claim.
21. Municipal Council, Rajgarh v M.P. SRTC, 1991 MPLJ 910. Rs3 per bus was considered to
be quitereasonable.A. AbuMohammedv K. M.MohammedKunju Labba,(1994)2KLJ
664, amount paid during negotiations for a proposed marriage, proposal fell through, the
amourttallowed to be recovered back. FoodCorporationofIndiav AlleppeyMunicipality,
AIR 1996 Ker 241, services rendered by MunicipalCorporationin respect of buildings owned
by Central Government, payment is in the nature of compensation under S. 70.
22. Bihar NursesRegistrationCouncil vHarendraPrasadSinha, (1991) 1 PLJR 114: (1991) 2
BLJR1222.
23. Shyam BehariPrasadSingh v StateofBihar, (1991) 2 BLJR 1024.
24.FederalBankvJoseph,(1990) 1 KLT 889.
25. Bank of India vV.Swaroop Reddy, AIR 2001 AP 260:(2001)2 An LT 388; Syndicate Bank
VSeenu Traders, 1999AIHC1876 (Kant), borrower liable to pay interest irrespective of any
thing else because otherwise he would be enriching himself at the cost of the lender; B.N.
Venkataswamyv P.S. Rukminiamma, 1999 AIHC 1979 (Kant), interest isrecoverableeven
if there is no provisionto that effectin the loan agreement.Nannapaneni Venkata Rao Coop
Sugars Ltd vSBI,(2003) 6 An LT199:(2003)6 ALD 307, amount of loan was required to
be kept inSBA/c till utilisation,SBinterest allowed on the amount, nothing against it in RBI
directions'!Niranjan Das v Orissa SEB, (2003) 96 Cut LT 528, liability to pay for electricity
usedafterexpiryof licence.https://t.me/LawCollegeNotes_Stuffs

707. 566Chapter10CertainRelationsResemblingThoseCreatedbyContract [S. 70]
The plaintiff was singing for the firm of defendants. Her songs were
recorded by them. During the process of recording she did not seem to have
acted gratuitously. The defendantsenjoyedthe benefit of her recordings they
commerciallymarketedthe cassettes and CDs of her song recordings. There
was no formal contract. Defendants had no right to make any business by
use of herperformance.Thecourtsaidthatbecause they did make business
use of her work, aquasi-conudictarose under Section 70 making the defend
ants liable to pay for her services.
Section would not encourage officious interference
inaffairsofothers
Secondly,the person for whom the act is done is not bound to pay unless
he had thechoiceto reject theservices."If a persondeliverssomething to
another, it would be open to the latter to refuse to accept the thing and to
return it; in that case Section 70 would not come into operation.Similarly,
if a person does something for another, it would be open to the latter not
to accept what has been done by the former; in that case again Section
70 would notapply.In other words, the person said to beHableunder
Section70alwayshas the option not to accept the thing. It is only where he
voluntarilyacceptsthe thing orenjoysthe work donethat the liabilityunder
Section 70arises."^^In theapplicationof this principle, thecourtshave had
to strike a balance between two factors. One of them being that the rule
cannotbe used by anybody to make officious interference in the affairs of
another.^^And the other that the court will notcompela personto pay for
serviceswhich havebeen thrust upon him against his will.JenkinsCJ, deal
ing with the scope of Section 70 in Suchand Ghosal v BalramMardana/^
said:
"ThetermsofSection70 areunquestionablywide,butappliedwith
discretion;they enablethe courts to do substantialjusticein caseswhere
itwouldbedifficulttoimputeto thepersonsconcernedrelationsactually
created bycontract.It is, however, especiallyincumbenton finalcourtsof
fact to be guarded and circumspect in theirconclusionsand not to coun
tenanceacts orpaymentsthatare really officious."
Requestforservicescreatesimpliedpromise to pay
Yet, thirdly, it is necessarythatservices should have been renderedwith
out any request. Reasonablecompensationmay, however, be recovered for
26. NehaBhasinvAnandRaajAnand,(2006)132DLT196;CharuBhatnagarv H.P.M.C.,AIR
2006HP 119, supplier of fruits allowed to recover price. It wasimmaterialthat he was not
mutatedowneroftheorchardatthetime.
27. Ibid.HajiAdam SaitDharmasthapanamv Hameed, 1985 KLT 169.
28.MuthuRaman vChhinnaVellayan,ILR(1916) 39 Mad 965.
29.ILR(1911)38Cal1.'-https://t.me/LawCollegeNotes_Stuffs

708. [S.70] Conditions of liability under the section 567
servicesrenderedatrequest.^"This has been so held by theSupremeCourt
inStateofW.B. v B.K.Mondal&Sons:^^
The plaintiff, on the request of anofficerof the State of WestBengal,
constructedakutcharoad,guard-room,office, kitchen, room for clerks
andstorageshedsfor the use of theCivilSuppliesDepartment of the
Government.The State accepted thew^orksbut tried to escape liability
underthepretencethatnocontracthad beenconcludedinaccordance
with the requirements of Section175(3)of the Government of India Act,
1935 (now Article 299 of theConstitutionof India). Thecontractorwas
thusforcedto try his luckwith the StateunderSection70, and itproved
to be better than that of the State but at the cost offightingup to the
SupremeCourtfor a sum of Rs19,325.
GajendragadkarJ(afterwardsCJ),examinedtheconditionsof lia
bility under the section and found that they were allsatisfiedby the facts
and,therefore,held the State liable.Therewas nodoubtthattheStateeven
after having requested for the works had the right to reject. "It could have
called upon the contractor todemolishthe storageshedsand take awaythe
material used; but if the State accepted the storage sheds and used them
andenjoyedtheir benefit, then different considerations come into play and
Section70canbeinvoked."
Where an item of work in arunningcontractwas changed and the
builderworkedout thatitemalsobutreluctantlyand underpressureof the
Department,his claim for suchadditionalworking was allowed.
30. Sib Kishore Ghose v Manik Chandra,(1915)29IC453, lawyers entitled to reasonable fee
where none was agreed to. See, however, AbuMahommadv Mohd Kunju Lebba, (1994) 2
KLT 713whereThomasJ has been of the viewthatS. 70indicatesthatthereis nodistinction
between thegrantof a benefit toanotheron request or agrantwithoutrequest. In both cases,
the person whoenjoysthe benefit is liable to recompense the grantor. In this case payment was
made ondemandunderamarriageproposalwhich fizzled out.
31. AIR 1962 SC 779: 1962 Supp (1) SCR 876. Where the goods delivered have been accepted,
the remedy is a suit for price and not under this section. Union ofIndiav Sita RamJaiswal,
(1976) 4see505: AIR1977SC 329; MirAbdulJalilvStateofW.B., AIR 1984 Cal200,
contractwithoutcompliancewith Article 299. CivilEngineers(India) v DDA, (1995) 60
DLT 26, work done bycontractoron oralinstructions,nothinginwriting,workaccepted,
order of payment byarbitratorvalid.DinshawandDinshawv Indoswe Engineers (?) Ltd,
AIR 1995 Bom 180: (1995) 3 Bom CR548,in abuildingcontract,someadditionalworkwas
done which was not covered by thecontract,the otherpartyheld liable to pay for such work.
Inferiorpipes wereinstalledwhereas thecontractrequiredquality. Payment on the basis of
inferiorqualityordered. UnionofIndiav Col.L.S.N.Murthy,(2006) 4 ALD 368 aperson
whosecontractwas void was held entitled to compensation, if he established that the person
had enjoyed benefit of things delivered and the delivery was notintendedto begratuitouson
appeal.UnionofIndiav Col.L.S.N.Murthy,(2012) 1 SCC 718: (2012) 1 SCC (Civ) 368.
NationalFertilizersLtdvSomvirSingh, (2006) 5 SCC 493: AIR2006SC2319,remuneration
alreadypaid topersonswhoseappointmentwas notlawfulwas notallowedto berecovered.
32.ChiefSecy,StateofGujaratvKothari&Associates,(2003) 1 CCD 372(Guj).Municipal
Committee,PundrivBajrangRaoNagrath,AIR2006P&H142,workcarriedout by the
contractoronoralrequest of theCouncillor,Municipalitybenefited by it,liabilityto pay
arose.GopalChandraBhuivBankuraZillaParishad,2015SCCOnLineCal 261: AIR2015
Cal124,atenderforconstructionofpuccasechnalainvolvedadditionalexcavationof ahttps://t.me/LawCollegeNotes_Stuffs

709. 568Chapter10CertainRelations Resembling Those Created byContract [S.70]
Non-complianceofconstitutionalrequirements
ofcontractingwithState
The learned judge had still to face the mightyargumentthatthestatutory
formalities ofcontractingwith the State had not been observed andthatthe
enforcement of any suchcontractwould defeat the relevantstatute.This
difficultywas got over by holdingthatwhat was sought to be enforced was
not acontract,but a relation resembling those created by acontract.Thus,
in casesfaUingunderSection 70 the person doing something foranother
cannotsue forspecificperformance, nor ask for damages for breach and
this for the simple reasonthatthere is nocontractbetween the parties. All
thatSection 70 provides for isthatif the services or goods are accepted a
habilityto pay arises. Themandatoryprovisions of Section175(3)of the
GovernmentofIndiaAct,1935,couldbe said to becircumventedonlyif a
contractnot fulfilling therequirementswere to be enforced, and not when
a claim wasenforcedunderSection 70 which arises not byvirtueof any
contractbutratherby reason of the factthatthe work has been done by
onepartyand enjoyed by theotherwithoutanycontractat all. The mere
act ofconstructionand itsacceptanceby the Statecannotbe said to con
travene the provisions of Section175(3)."Onceit is realisedthata cause
of action for a claim forcompensationunder Section 70 is based not upon
the delivery of the goods or the doing of any work as such but upon the
acceptance and enjoyment of the said goods or said work, it would not be
difficulttoholdthatSection70doesnottreatasvalidthecontraventionof
Section 175(3) of the Act.Thatbeing so, theargumentthattherespondent's
constructionofSection70nullifiestheeffectofSection175(3) oftheAct
cannotbe accepted." "Anyotherapproachwould not only cause injustice
to a privateparty,butwouldalsohamperGovernmentbusiness.""Itis well
knownthatinfunctioningof the vastorganisationrepresentedby amod
ern State,Governmentofficers haveinvariablytoenterintoavarietyof
contractswhichareoftenof apettynature.Sometimestheyhave toactin
emergency,andonmanyoccasions,inpursuitofthewelfarepolicyofthe
State, theGovernmentofficers may have tocontractorally orthroughcor
respondence,withoutcomplyingwiththeprovisionsofSection175(3). If,
in allthesecases,whatisdoneinpursuanceof thecontractis onbehalfof
theGovernmentand fortheiruse andenjoymentand isotherwiselegitimate
andproper,Section 70wouldstep in andsupporta claim forcompensation
made by thecontractingpartiesnotwithstandingthe factthatthecontracts
hadnotbeen made asrequiredby Section 175(3)....Wearereferringto this
aspectof thematternotwitha view todetractfrom thebindingcharacterof
large heap ofearth.Thiswas done by thecontractoronverbalinstructionsof theAuthority.
For thisextraworkofgratuitousnaturethecontractorbecameentitledtocompensation.He
claimedanamountwhichappearedto beexorbitant.The case wasremandedbackto thetrial
courtfordeterminationofamountpayable.https://t.me/LawCollegeNotes_Stuffs

710. [S.70] Conditions of liability under the section 569
theprovisionsofSection175(3),but to point out that like ordinarycitizens
eventhe State Government is subject to the provisions of Section 70."
Thecourtalso laid downthatthe position of the Statecannotbe com
paredv^riththat of a minor. "The minor is excluded frorn the operation of
Section 70 for the reason that his case has beenspecificallyprovided for by
Section 68.WhatSection 70 prevents is unjust enrichment and it applies
as much tocorporationsandGovernmentas toindividuals....Besides, in
the case of a minor, even the voluntary acceptance of the benefit of the
work done orthingdelivered,whichis thefoundationof the claimunder
Section 70, would not be present and so, on principle. Section 70cannotbe
invokedagainstaminor."^^
The principle of this case has been reaffirmed by the SupremeCourtin
PilooDhunjishawSidhwavMunicipalCorpnofCityofPoona.^"^Here
too theCorporationtried to escape liability for spare motor parts supplied
to it on thegroundthatthecontractwasnotmade inaccordancewiththe
BombayMunicipalCorporationAct (59 of 1949). But theCorporationwas
held liable to pay under Section 70. The only question waswhafshouldbe
the measure of compensation.ShahJ (afterwards CJ) cited with approval
the decision of the Lahore HighCourtin SecyofState v G.T. Sarin &Co^^
where it was heldthat"apersonwithoutanenforceablecontractin his
favour supplying goods to a GovernmentDepartmentis entitled to a money
equivalent of the goods delivered, assessed at themarketrate prevailing on
the date on which the supplies were made". In the present case the rates
quotedby thesupplierin his invoice wereconsideredto be thefairmeasure
of compensation giving the State the right to showthatthe market price
was lessthanthat,but theCorporationdid nothing in thisrespect.^^Thus,
though the claim under Section 70 is not based upon anycontract,yet the
contractbetween thepartiesis relevant at least forindicatingthe fair meas
ure ofcompensation.
RecoveryunderOralornon-provablecontracts
A highway work wasallottedon emergency basis. The cost of work was
sanctionedby thesuperintendingengineer.But noallocationoffundswas
made. Theworkwas completed. It was heldthatthe state couldnotleave the
33.FollowedinNewMarineCoalCo vUnionofIndia,AIR1964SC 152: (1964) 2 SCR 859;
MulamchandvStateofM.P.,AIR 1968 SC 1218:(1968)3 SCR 214,wherenorestitutionwas
allowedbecausetheplaintiffcouldnot provewhatworkhe had done for theGovernment;
MangiLaivMewarTextileMillsStaffConsumersCoopSocietyLtd,1985Raj LR 274, the
costofconstructionofcanteenwasallowedtoberecoveredwhenbecauseoftheviolationof
thecanteenallotmentrules,thecanteenwastakenover by the State.
34.(1970)1see213:AIR1970SC1201.
35.ILR(1930)11Lah375.
36. AgainfollowedinPannalalvCommr,(1973) 1 SCC 639,wherethe State was held liable to
pay for theconstructionof ahospital.See at p. 643. Anexecutorycontractnotcomplying
withthestatutoryrequirementscannotbeenforced.KaramshiJethabhaiSomayyavStateof
Bombay,AIR1964SC 1714: (1964) 6 SCR 984.https://t.me/LawCollegeNotes_Stuffs

711. 570 Chapter 10 CertainRelationsResemblingThose Createdby Contract[S.70]
contractor high and dry.The statementcompensatehim. The-wrorkwas not
supposedtohavebeendoneongratuitousbasis.Theamountassanctioned
and recommendedmust be paid. Sucha claimant should not be compelledto
go intolitigation.Technicalitiesshould not come in the way of substantive
work.^^
TheSupremeCourt has further heldthatwherea contractorWhosework
has beenacceptedby the other party claimscompensationunder an oral
agreement,which he is not able to prove, he would still beenticle^dto com
pensationunderSection70.^^In anothercase,^'theSupremeCouttheldthe
Government liable to a person who, on the instructions of the Government,
transferredthe steelallottedto him in excess to athirdperson-whofailed
topay.
-^c.
-<.
Work doneafterterminationofcontract -j:
Anythingdone after the termination of a contract wouldcometwithinthe
scope of Section70.^^° -
ContractsvoidunderArticle299 ;•
Recoveryunderthe section is possible even if there was nocontractor
thecontractwasvoidunderArticle299oftheConstitution.'*^Thusthe
Governmentwas allowed to recover the cost oftrainingfroma'candidate
who refused to join the Government service. The Government^could have
waivedbuttherewasnoevidenceofwaiver.Hewassentontr^ining^onhis
agreeingto servethe Government.He could not saythat no advantage came
to him from thetraining.'*^It has been heldthatsalary or pension which
happens to be wrongfully paid isrecoverable.This is so irrespective of the
fact whether the payment was made either by reason of misrepresentation or
fraudorotherwise.''^
It is not necessarythatservicesshould have been rendered under circum
stancesofpressingemergency.'''' i''
37. Ram PraveshPrasadvStateofBihar, AIR2007Pat 26;PamparaPhilip"v-'Koorithottiyl
Kinhimohammed,AIR 2007 Ker 69, the buyer of a motor can misinformed about the year of
the model, he was allowed to recover bach the advance money paid by him, he had used the
vehicle for morethanamonthfor which he wasrequiredto pay Rs 100 perday'tothe seller.
38. V.R.Subramanyamv B.Thayappa,AIR1966 SC 1034; (1961) 3 SCR663VTheposition,
therefore, is that S. 70 does not require acontract.A person who purchased the equity of
redemptionandsavedthe property from beingsold out wasallowedtorecoveriproportionate
reimbursement from his co-owner. AsaarAHKhan v Baijnath Prasad, AIR1^83All 197. No
reliefcanbeallowedunderthissectionwherethereisneithercontractnoranyotherservice.
DeviSahaiPalliwalv UnionofIndia,(1976) 4 SCC 763.
39.UnionofIndiav J.K. GasPlant,(1980) 3 SCC 469; AIR1980SC1330.
40. Food Corporation of India vGopalChandraMukherjee,(2003)2ICC797jCal).
41. AnilHarishvGovtofMaharashtra,(2004) 6 Bom CR322,theGovernmentsecretarywas
notauthorisedtoenterintoleasedeedonbehalfoftheGovernment.Lease'wasalsonotin
writing.Art.299 notcompliedwith. '
42. P.C.WadhwavStateofPunjab,AIR1987P&H117.
43. State of Punjab v Rafiq Masih,(2014)8 SCC 883. ^'
44.DamodaraMudaliarv SecyofStateforIndia,ILR(1895) 18Mad88.https://t.me/LawCollegeNotes_Stuffs

712. [S*70] Conditionsofliabilityunderthesection571
"Lawfullyioes"
Fourthly,-servicesshouldhavebeenrenderedlawfully.Commentingupon
thisinStateofW.B.vB.K.Mondal&Sons,'^^theSupremeCourthassaid
that theword"lawfully"isnot asurplusageand mustbetreatedas an inte
gralpart,df^Section70 andevenif itistakentoreferto anobjectof con
siderationj?^hichisforbiddenbySection23 of theContractAct,it cannot
be takentOj'meanasrequiringtheStateto pay underSection70 for the ser
viceswhich.ithasenjoyedwassomethingforbiddenbySection175(3)ofthe
Governmeritof India Act, 1935. Paymentfor extraworkdone in connection
with a contract without any agreement has been allowed to berecovered
underthissection."*®
Ithasbeenapointofemphasisthatbetweenthepersonclaimingcompen
sationand thepersonagainstwhomit isclaimed,somelawfulrelationship
mustexist,andit should arise by reason of the factthatwhathas been done
for theformerhasbeenacceptedandenjoyedbythelatter.Actingon this,
theOrissaHigh Courtallowedapersontorecoverwhat he had paid to
anotherforpurchasinghispaddynotknowingat thetimethat hispurchase
wasinviolationof a StateControlOrder."*^Wherea ladyAdvocateaccepted
the requestlofthe District Magistrate and rendered services as an Assistant
District Counsel for a certain period, she was allowed to retain the remu
neration,alreadyreceivedand also torecoverthe remaining remuneration
for the period ofserviceevenif her appointmentwas found to be voidunder
Section24{2}.of theCriminalProcedureCode,1973.''®
Where,a,teacherdueforretirementat theageof 55 obtaineda stay order
contendingthat he was entitled to continue up to 60 and remained in service
beyond55.Ijeforethe matter wasdecidedagainsthim, he wasallowedto
recoverthe monetarybenefitsof hisentitlementfor theoverlappingperiod.
Hisconducjt^jwasnot unlawful. He remained inservicenot by usurpation
butundersuperiororders
Non-gratuitpusacts
In thefifth'place,thepersonrenderingservicesshouldnothaveintended
to act gratuitously. The decision of theMadrasHighCourtinDamodara
MudaliarvSbcyofState forIndia^°is the leading authority.
A number of villages were drawingirrigationwaters from atank.Some
of thevillageswere under direct State tenancy, others underZamindars.
45. AIR 1962 SC 779:1962Supp (1) SCR 876.
46. StateofU.P..yChandraGupta & Co,AIR1977All28.
47.FakirChand,SethvDambarudharBania,AIR1987Ori 50.
48.InduMehta'v.§tateofU.P.,AIR1987All309.
49.RamakrishnanNairv State of Kerala, (1989) 2 KLJ 100.AshwaniKumar v State, AIR 2015
J&K99,auctionamountwasdepositedfor all the12monthsof the year. The bidder could not
recoveranythingfor apartof the year because the State collected theamountitself. He was
allowedproportionalrefund out of the money deposited.
50.ILR(1895) 18Mad88.https://t.me/LawCollegeNotes_Stuffs

713. 572Chapter10CertainRelationsResemblingThoseCreatedbyContract [S.70]
TheGovernmentcarriedoutrepairsto the tank foritspreservation.The
Zamindarsalsoenjoyedthebenefitsof the repairs.
Theywereaccordinglyheldliabletomakeproportionalcontribution
towardstheexpensesofrepair.Thecaseshowsthatevenwheretheparty
makingpaymentorrenderingservicesispersonallyinterestedinthematter,
hecanrecoverproportionalcontributionfromthosewhohaveenjoyedthe
benefitsofhisservices.Similarly,wheretheownersofa hatwererequiredat
thepainofterminationoftheirlicencetomakecertainimprovementsinthe
hat, oneofthemwhocarriedouttheimprovementsrecoveredcompensation
fromhisco-owners.
Lenderofmoney
Apartyadmittedreceiptofmoneyasaloan.Thetransactionwasoral,
whollydependentuponthefaithreposedbythelender.Thecircumstances
showed it to be acontractof loan. Thecourtsaidthatit coulddirectthe
borrowertopaybackthemoneyatappropriateinterest.Itwasnotmaterial
that there was no stamped paperacknowledgingreceiptofmoney."
"Enjoysthebenefit."—Lastly,thedefendantmusthavederiveda direct
benefitfromthepaymentorservices.Wheretheworksdoneby arailway
companydevelopedtheadjoininglandsandconsequentlythemunicipality
receivedmore taxes, this was heldto be not asufficientbenefitto enablethe
railwaycompanytorecovercompensationfromthemunicipality.^^
Servicesrenderedto a personincompetentto contract at the time cannot
bemadethebasisofanactionunderthissection.^''
Similarly,wherenoserviceshavebeenrenderedat all,forexample,where
theGovernmentcancelleda leasegranted to the plaintiff by anofficerwho
was not so authorised, no relief can be allowed under thesection.^^Where
51.]araoKumarivBasantaKumar Roy,ILR(1905)32Cal374.
52. NarayanVenkateshPandit v SyedNuroddinKhadri,(1999)2 Kant LJ 449. Nannapaneni
VenkataRao CoopSugarsLtd vSBI,(2003)6 An LT 199:(2003)6ALD307,moneyleft
with bank under a share depositscheme,interest became payable notwithstanding the RBI
directive that no interest would be paid on SavingsBank Accounts. The account in question
did not come into thecategoryof SBaccount.
53.GovernorGeneral in Council vMaduraMunicipality,(1947-48) 75lA213: AIR 1949 PC
39. See also the decision of the Supreme Court in Srinivas & Co\IndenBiselers, (1971) 3
see725: AIR 1971 SC2224.Advancepaymentfor purchasingpaddy in ignorance of control
order allowedto berecoveredbecausethe payee had the benefitof the payment. Fakir Chand
Seth VDambarudharBania,AIR1987Ori50.
54.AmbikaTextilesLtd,re, AIR 1950 Cal 491.
55. Kirorilalv StateofM.P.,AIR 1977 Raj 101.Paymentsmadeandacceptedunder an express
contract did not attract S. 70 although the parties were mistaken about the distance. Kochu
Devasseyv State of Kerala, AIR 1982 Ker LR 180.Personclaimingrestitution under the
section has to offer proof of the work done by him: Mulamchand v State of M.P., AIR 1968
SC 1218:(1968)3 SCR214. The section was not applied to the case of a person who was not
party to thetransactionthough he was thebeneficiary,PaidiLakshmayyav Indian Bank
Ltd, AIR 1982 Kant 338.Aeries-AdvertisingBureau v C.T. Devaraj,(1995)3 SCC 250: AIR
1995 SC2251, no liabilityof the financieronly becausehe approvedthe advertisementfor the
circus. He derivednobenefit.SangameshPrinting Press v Taluk Development Board,(1999)https://t.me/LawCollegeNotes_Stuffs

714. [S. 71] Conditionsofliabilityunderthesection573
aroadbuildingcontractorclaimedanextraamountfor thereasonthathe
had to spend more on the haulage ofmaterialthanexpectedbut he had been
told at the time ofcontractingtotakecare of allpossibilities,thecourtsaid
thatanydisadvantagesuffered by thecontractorduringtheexecutionof the
workcould not be made agroundofmakinganadditionalclaim overand
abovethecontractrates
Provisionforrefundofprice
A clause in acontractstipulated for reimbursement of the price of goods
which hadalreadybeen paid in case of delayed delivery or delayed arrival or
non-delivery. The clause was held to be valid. Even in the absence of such a
clause, the price would have beenrefundablefor failure todeliver.^^"Where
apartpayment was made by way of purchase price and not as an earnest
money, it could not be forfeited. In such a case, the remedy by way of dam
agesfor breach of contract isavailable.^^Where the contracting process had
been completed by acceptance of the bid at an auction but the bidder did not
sign the agreement papers saying that it had becomeimpossiblefor him to
perform, the court said that this could not beregarded as a frustration of the
contractand therefore forfeiture of thesecuritydeposit inaccordancewith
the applicable rules wasproper.-''
Appropriatepleadings
It has been heldthatabsence of pleadings to the effectthatthetransaction
betweenthe parties didnotinvolveanycontract orinvolveda contract which
wasnotvalid,the plaintiffwouldnot beentitledto take aid ofSection70.^°
4.Finderofgoods[S. 71]
Section71laysdown theresponsibilityof afinderof goods.
S. 71.Responsibilityof finder ofgoods.—Aperson who finds goods
belonging to another and takesthenninto his custody, is subject to the same
responsibilityas a bailee.
Thusinrespectofdutiesandliabilitiesafinderistreatedat a par with
bailee.Thefinder'sposition,therefore,hasbeenconsideredalongwith
bailment..
6see44, the caseunderthesectionwasnotcanvassedbeforetheHighCourt atappealstage,
but therewerefindingsof fact by the trial court and thosecouldbe usedforconsideringthe
claim at theHighCourtlevel.
56. StateofKarnatakav Stellar Construction Co, AIR 2002 Kant 6:(2002)5 Kant LJ474.
57PhulchandExports(P)Ltd.v O.O.O.Patriot,(2011)10SCC300.SatishBatra vSudhir
Rawal,(2013)1 SCC 345:(2013)1 SCC(Civ)483, purchaser of property of Rs 70,00,000
depositedRs7,00,000asearnestmoney.Thewholeofthisamountwasallowedto befor
feited on his failure to complete thepurchase.
58. Satish Batra vSudhirRawal,(2013) 1 SCC 345:(2013)1 SCC (Civ) 483.
59. Mary v State of Kerala, (2014) 14 SCC 272:(2013)4 KLT 466.
60.KishanlalPanch v StateofOrissa,AIR 2010NOC535 (Ori).https://t.me/LawCollegeNotes_Stuffs

715. 574Chapter10CertainRelationsResemblingThoseCreatedbyContract [S. 72]
The SupremeCourthasruledin UnionofIndiavAmarSingh^^thatthe
statutoryfiction bywhichacontractofbailmentisinferredbetweena finder
of goodsandthe realownershouldnotbeenlargedbyanalogyorother
wise and, therefore, a railwayauthoritywhichtookinto itscustodywagons
containingtheplaintiff'sgoodsandwhichwere left across theborderin
Pakistanbecame thecontractualbailees of goods,andit was notnecessary
to regard them as finderswithinthemeaningof Section 70.
5.Mistakeorcoercion[S. 72]
Section 72 dealswithpaymentsmade orthingsdeliveredundermistake
orcoercion.
S.72.Liabilityofpersontowhommoneyispaid,orthingdelivered,
bymistakeorundercoercion.—Apersontowhommoneyhasbeenpaid, or
anythingdelivered, by mistake orundercoercion, must repay or return it.
Illustrations
(a)/AandBjointlyowe100rupees toC.Aalone pays theamountto C,andB,not knowing
this fact, pays100rupees over again to C.Cis bound to repay theamounttofi.
(fa)Arailwaycompany refuses to deliver up certaingoods,to the consignee,exceptupon
thepaymentof an lilegal charge for carriage. The consignee-pays the sumchargedin
order to obtain the goods. Heisentitled to recoverso much of the charge as was ille
gallyexcessive.
Mistakeoffact oroflaw
Moneypaidundermistakeis recoverablewhetherthemistakebe of fact
orpflaw.®^The.controversybetween High Courtdecisionsasto whether
moneypaidundermistake oflawcouldberecoveredwas set at rest by
thePrivyCouncilin Sri Sri ShibaPrasadSingh\MaharajaSrishChandra
Nandi.^^
"Payment 'by mistake' in Section 72 must refer to a payment which
was not legallydue and which could not havebeen enforced; the'mistake'
is onthinkingthatthe money paid was due when, in fact,itwas not due.
Thereisnothinginconsistentinenactingon the otherhandthat if parties
enterintoacontractundermistakeinlawthatcontractinuststandand
61.AIRI960SC233:(1960)2 SGR 75.
62.ExpresslysoheldbythePrivyCouncilinSriSriShibaPrasadSinghvMaharajaSrishChandra
Nandi, (1948-49) 76lA244: AIR 1949PC297 SeealsoJ&K BankLtd vAttar-ul-Nisa,AIR
1967 SC 540: (1967) 1 SGR 792, money credited by a bank under Government Orders to the
accountof acustomerbymistake,notallowedto berecoveredunderthesection.Similarly,
sales tax paid by a Governmeiit in pursuance of a contract was not allowed to be recovered.
UnionofIndiaVLaiChand&cSons,AIR1967Cal310.
63. (1948-49)76lA244: AIR1949PC297.In Wolf& SonsvDadybhaKhimji& Co,ILR(1919)
44Bom631,theBombayHigh Court and in A.M.AppavooChettiar v South IndianRlyCo,
AIR 1929 Mad 177,the Madras High Court had heldasinfluencedbyS.21 andEnglishLaw
that S.72 couldnotapplytopaymentsmadeundermistakeoflaw,whereasthe CalcuttaHigh
Court in Jagadish Prosad Pannalal v Produce Exchange Corpn Ltd, ILR (1945)2 Gal 41: AIR
1946 Gal 245 hadtakenthecontraryview.https://t.me/LawCollegeNotes_Stuffs

716. [S. 72] Conditionsofliabilityunderthesection575
is enforceable,but, on the other hand,thatif onepartyacting under mis
take of law pays toanotherpartymoney which is not due bycontractor
otherwise,thatmoney must be repaid. Moreover, if the argument based
on inconsistency with Section 21 were valid, asimilarargumentbased on
inconsistencywithSection 22wouldbe valid andwouldlead to the con
clusionthatSection 72 does not even apply tomistakeoffact....It may
be well to addthattheirLordships'judgment does not implythatevery
sumpaidundermistakeisrecoverable,nomatterwhatthecircumstances
may be.Theremay in aparticularcase becircumstanceswhichdisentitle
aplaintiffbyestoppelorotherwise."
Refundoftaxmoneypaidwithoutbeing due
The SupremeCourtin its decision inSTOvKanhaiyaLaiMukundLai
Saraf*hasacceptedthisinterpretationof Section 72.
Acertainamountof salestaxwas paid by a firmunderthe U.P. Sales
Tax law on itsforwardtransactionsandsubsequentlyto thepayment,the
AllahabadHighCourtruledthe levy of salestaxon suchtransactionsto
beultravires.Thefirmsoughtto recover back thetaxmoney.
Rejecting thecontentionbased on English,AmericanandAustralianlaws
which do not allow payments made undermistakeof law to be recovered,
the SupremeCourtallowed the recovery."Thesection in terms doesnot
make anydistinctionbetween a mistake of law or a mistake of fact. The
term'mistake'has been usedwithoutanyqualificationorlimitationwhat
ever ... Thecourtfound nogroundfor any estoppelagainstthe firmand
disapproved the following statement of theNagpurHighCourt.^^"If the
reason for the rule isthata person paying money undermistakeis entitled to
recover it, because it isagainstthe conscience of the receiver toretainit, then
when the receiver has no longer the moneywithhim orcannotbeconsidered
as still having it, as in a case where he hasspentit on hisownpurposes,
differentconsiderationmustnecessarilyarise."
In reference to this, the SupremeCourtsaidthat"no such equitable
consideration can beimportedwhen the terms of Section 72 are clear and
unambiguous".
If amistakeeitheroflawor of fact isestablished,the assessee isentitled
to recover the moneyandthepartyreceiving it isboundtoreturnitirrespec
tive of any other consideration. Money paid under a mistake of law comes
64. AIR 1959 SC 135: 1959 SCR1350.MasandTransportvAddlTransportCommr,(1996) 4
AIHC3556, reassessment, original demand lapsed being impliedly struck down by reassess
ment,taxpayerentitledtorefund.
65. Vide Budh Prakash JaiPrakashvSTO,1952 All LJ 322;confirmedby the SupremeCourt,
(1955) 1 SCR 143.SomaiyaOrganics(India)LtdvStateofU.P., (2001) 5 SCC 519: AIR
2001 SC 1723, the principle of unjust enrichment cannot be extended to give a right to the
Statetorecoverorrealisevendfeeafterthestatutehasbeenstruckdown.
66.BhagwatiJ,1959SCR1359,1364.
67. In Nagorao GovindraoAyachitvGovernor-Generalin Council, AIR 1951 Nag 372, 374.https://t.me/LawCollegeNotes_Stuffs

717. 576Chapter10CertainRelationsResemblingThoseCreatedbyContract [S. 72]
within"mistake"inSection72 of theContractActandthereis noquestion
of estoppel when themistakeof law iscommontoboththe assesseeandthe
taxingauthority/^
• Scopeoftheword"mistake"incontextofoverpaidtaxes
The scope of theword"mistake"has beenfurtherexemplified by the
SupremeCourtinTilokchandMotichandvH.B.Munshi.^^
A firmpaidsalestaxofmorethantwenty-sixthousandrupeesin
respectof sales toconsumersoutside the State of Bombayandwhichwere,
therefore,notliable to any salestax.Thefirmhaditselfcollectedthetax
moneyfromitscustomers.Theamountwasorderedto berefunded.A
cheque was given to thefirmsubject to theconditionthatwithinone
monthit shouldproducereceipts from thecustomersoutsideBombay
showingthattherefundinquestionhadbeen passed over to them.The
firm failed to do so and was,therefore,informedtoreturnthetaxmoney
to the State failingwhichitwouldbe recovered asarrearsoflandrevenue.
Thefirmpetitionedto the BombayHighCourtbut lost it. Itpaidback the
amountonlywhenitreceivedanorderofattachment.Whenallthiswas
going onbutunknownto the firm, the Actunderwhichtherecoverywas
made from the firm had beendeclaredby the SupremeCourtto beultra
vires7°The firm sought to recover back the money as having beenpaid
undereithermistakeoflaworcoercion.
Thecourtadoptedthe view of"mistake"whichhadbeentakenin the
earlierPrivyCounciland SupremeCourtdecisions to the effectthatthe
word meansmistakeinthinkingthatthe money was due when in fact it
was not due and heldthatthe firm in this case did not suffer from any such
mistake. The firm fully appreciated the legal position and knewthatthe
68.CSTVAuriayaChamberofCommerce,(1986) 3 SCC 50: AIR1986SC 1556. Such relief
can be had by means of a writ under Art. 226 of theConstitutionand regular suit would
not be needed. There should not have been any laches. SeeShiuShankarDalMills v State of
Haryana,(1980) 2 SCC 437: AIR 1980 SC 1037; Shri Vallabh Glass WorksLtdv Unionof
India,(1984) 3 SCC 362: AIR 1984 SC 971;SalonahTea Co Ltd v SuptofTaxes, (1988) 1
SCC 401: AIR1990SC772;TilokchandMotichandvH.B.Munshi,(1969) 1 SCC 110: AIR
1970 SC 898; MahabirKishorev StateofM.P.,(1989)4 SCC 1: AIR 1990 SC 313; Union of
IndiavStrawProducts,(1989) 2 Ori LR 356. Payment of taxesunderanunconstitutionalAct
allowed to be recovered.Kamalpur(Assam) TeaEstate(P) Ltd v Supt of Taxes, (1988) 1 Gau
LR 290. Refund of octroi illegally recovered.DharangadhraMunicipality vDharangadhra
ChemicalWorksLtd,(1988) 1GLH324.Suchrefundsareallowableeven if therelevant
statuteprovidesthatthere shall be norefundofmistakenpayments.SeeMamtaDrinksand
Industriesv UnionofIndia,(1990)70 Cut LT 423. Remedy by way of writ would not, how
ever, beavailablewheretaxesarenotinvolved,orthereis nootherunconstitutionalconduct
and the dispute is aboutordinarytrade terms even if one of the parties is a Government.
ChandrikavD.R.M.,SouthernRly,(1985) 1 MLJ 369. Water charges paid under a rule
which was struck down. Claim for refund was filed after the expiry of a reasonable period,
notallowed.MunicipalCorpnofGreaterBombayvBombayTyresInternationalLtd,(1998)
4SCC100:AIR1998SC1629:(1998)1AnLD 1.
69.(1969)1SCC110:AIR1970SC898.
70. VideKantiLaiBabulalvH.C.Patel,AIR 1968 SC 445: (1968) 1 SCR 735.https://t.me/LawCollegeNotes_Stuffs

718. [S. 72] Conditionsofliabilityunderthesection577
money was in fact due until thestatuteuiiderwhich recovery was made was
declared to beultravires. Thecourt,however, heldthatthepaymentwas
made under coercion and would have been recoverable under Section 72,
had it not been for theexpiryof theperiodoflimitation.MitterJ who
spoke for the majority, heldthatthe three years' period which was available
in this case for filing a suit for refund began to run from the date on which
the Act came into force and thepetitionwas filed after morethanthreeyears
fromthatdate.HegdeJ rightly dissented from thisaspectof themajority
view.According to him time should begin to run from the date on which
the Act was ultimately declared to be void and the petition was filed very
soonthereafter.^^But it seemstha?justice lay in the majority view, for, as
betweenthe firm and the State,thelatterwasbetterentitled to the money
which belonged not to the firmbuftoitscustomers.^^
Wheresubsequentlyto the paymentofexciseduty the ExciseCommissioner
declaredthat no duty was payableon those goods, it was held that the plain
tiff's claim to refund could not-bedefeated on thegroundthattherefund
wouldunjustlyenrichhim.^^This,shouldbecontrastedwith adecisionof
the Andhra Pradesh HighCourt.^'*Fee collected from consumers on the
71. Where thestatuteisunconstitutionaland,therefore,refundis allowableunderArt.226,not
theperiodoflimitation,butthedoctrineof-lacheswouldapply.FinolexCablesLtd vUnionof
India, (1988) 35 ELT 343(Bom).Where, on the other hand, the Act is valid but the payment
ismistakenandrecoveryisallowableunder S. 72, thegenerallaw of limitationwouldapply.
MamtaDrinks and Industries vUnionof India, (1990) 70 CutLT423, 427-28. It was held
that theperiodoflimitationwouldrun notfromthe dateofjudgmentbutfromthe dateofthe
petitioner'sknowledge.MaruthyEriterprisesv Corpn of City ofBangalore,AIR 1999 Kant
41,whereoverpaidpropertytax washeldto berefundableto the extent of the amountpaid
within the preceding three years, the rest becametime-barred.
72. InNeuiabganjSugarMills CoLtd-vUnionof India,(1976)1 SCC 120: AIR 1976 SC 1152,
refund allowed with a scheme for assuring refund to those who had paid the tax money to
the assessee firm; ShivShankarDMMills v StateofHaryana,(1980) 2 SCC 437: AIR 1980
SC1037,refundmoneyorderedto be paid overtopayers;U.P.SEBv CityBoard,Mussoorie,
(1985)2SCC16:AIR1985SC883'.
73. R. Parthasarthyv DipsiChemicals,1987MahLJ900;AgraBeveragesCorpnLtd vUnionof
India,(1988)18ECR261:(1988)?34ELT"'465(All).TheSupremeCourt has againreiterated
in Commr, Andaman v Consumer CoopStores Ltd,(1999)1 SCC 507: AIR 1999 SC 696
that the State should not resist the demand for refund of tax money (excisein this case) on the
groundof unjustenrichment,w^aethemoneyhasbeenillegallycollectedfromthetaxpayer.
MafatlalIndustriesLtd vUnFon-ofIndia,(1997)5SCC536, a personclaimingrestitution
must show that he has suffered loss or injury. If theassesseehas passed on the tax burden to
thirdpersons,a suit forrefundoh"the ground ofpaymentundermistakeof lawwouldnot
bemaintainable.Thedissentingjudge (SenJ) was of theviewthatevenin such casesrefund
should beallowed.Pfizer Ltd v Union of India,(1996)4 Bom CR 119, claim for refund of
excisedutypaid undermistake-onanitemwhichwasexempt,exemptionwassubjectto cer
tainconditions,held,without proofofcompliancewith thoseconditions,refund couldnot be
claimed. "
74.N.V.Ramaiahv State ofA.P.,AIR-1986AP361.Alsoto the sameeffect,Dharangadhra
MunicipalityvDharangadhraChemicalWorksLtd,(1988)1GujLH324,illegaloctori.
Followedin Unionof India vWoodPapersLtd,(1989)2 Guj LR 1323with thisobservation
that norecoverycan beallowedto a person who hassufferednoloss.Accordingly,taxes
illegallycollectedandpaidoverto theStatenotallowedto berecoveredbyadealerwhowas
notinapositiontorefundto hiscustomers.AlsofollowingStateofM.P.vVyankatlal,(1985)
2 SCC544:AIR 1985 SC 901. Refund is allowed prospectively from the date of judgmenthttps://t.me/LawCollegeNotes_Stuffs

719. 578Chapter10CertainRelations Resembling Those Created byContract [S.72]
sale of denatured spirit and paid into the Government account, though the
fee was illegal, theamountpaid under it was not allowed to be recovered
back because it would have gone to enrich the seller at the cost of the vari
ousbuyerswhom he would not have been able to pay back. As against this
recovery was allowed to a person who was compelledwithoutauthorityto
pay Rs5 per quintal on the food exported by him under hisexportlicence,
the source of payment being his own pocket and not the money collected
fromcustomers7^
Excessstampduty
Excessstamp duty happened to be paid voluntarily under some mistake.
The court said that it had to berefundedeventhough the payment was
whollyvoluntary.Anapplicationfor refundwasalsomadeasrequiredby
the Bombay Stamp Act,1958.^^
Limitationandlatches
Recoveryproceedingsgenerallyare instituted by way of writ petition.
Thereisnoperiodoflimitationapplicabletowrits.Theonlyrequirementis
that thereshouldnot beunreasonabledelayamountingtolaches.It has been
heldthat theperiodoflimitationwouldnotbeginto rununtiltheapplicant
hasdiscoveredthemistakeorcouldhavediscovereditwithreasonabledili
gence.Theclaimwaslaidwithinonemonthofthemistakeoflawbecoming
known.Itwasheldthat theclaimcouldnotbedefeatedon thegroundof
limitation.^''
declaringthelevyto beunconstitutional.KesoramIndustriesLtd v CoalIndiaLtd,AIR1993
Cal78. No refund was allowed where proof was not offered of the fact that theincidenceof
theexcisedutywasnotpassedofftothebuyersofthegoods.UnionofIndiavITCLtd,1993
Supp(4)see326: AIR 1993Se2135,distinguishingTata Engg andLocomotiveCo Ltd v
Municipal Corpn, Thane, 1993 Supp(1)See361: because in this case there was material on
recordthatTelcohadnotrecoveredtheamountpaidbythembywayofoctroidutyfromany
thirdperson.Alsoto thesameeffect,BirlaCementWorksvStateofPunjab,AIR1993P8cH
274, octroi ordered to be refunded because the goods were taken out of the State. Sharma
Transportv State of Karnataka,(2005)AIR Kant 94: 2005AIHe583,levyandcollection
ofcessonmotorvehicleswasfoundtobeillegal,theamountwaspassedtothetravelling
publicbyvehicleoperators,orderofrefundnot to bepassed.MunicipalCorpn,KotavJ.K.
SyntheticsLtd,AIR2008NOe1123(Raj),octroidutypaid,notrefundedbecausethepayer
had collectedthe amount from the purchaser.
75. State v Bansilal Chatarlal, 1985 Raj LR 325. The Bombay decision to the same effect is in
GarwarePlastics&PolyesterLtd vMunicipalCorpnofAurangabad,AIR1999Bom431,
octroidutywaspaidandtherewasaclaimforrefund-Theclaimantdid notpleadthat the
amountpaidwasnotaddedto thecostof theproductand,therefore,wasnotpassedon to
buyers.Hewasnotallowedtoclaimrefund.ShreeDigvijayCementCoLtdvUnionofIndia,
(2003) 2see614: AIR 2003Se767, no refund allowed where the burden of the tax had
alreadybeenpassedon tocustomers.AlcoChemLtd vHyderabadChemicalPharmaceutical
WorksLtd,(2003)3Be508(AP),norefundoftaxamountwhichwaspaidaftercollecting
fromothers.ForfurtherstudyseeMeenaH.Rao,RefundofTaxPaidunderMistakeofLaw,
1993 Tax LR 505(JournalSection).
76.HiteshD.DesaivSuptofStampsandInspectorGeneralofRegistration,AIR2016Guj62.
77. ChrisineHoden (P) India Ltd v N. D. Gadag,(1993)2 BomeR169.https://t.me/LawCollegeNotes_Stuffs

720. [S.72] Excess stamp duty 579
Apetitionwasfiledfor refundofextrapropertytax paid undermistake.
Thepetitionerfailedtoexplainthedelayandlatchesinapproachingthe
court.Thefactthathereceivedbelatedadvicewasnotconsideredtobesuf
ficient.The factthatthe money was utilised by the municipalcorporation
for thewelfareofthepeoplewasheldto be nodefence;The courtrestricted
recoveryofoverpaymentto theprecedingthreeyearsand not for thewhole
period.^^
Someotherexamplesofmistake
Anotherobviouscase is amistakencreditentryin acustomer'saccount
in a bank and the customerwithdrawing the amount. He would be bound
topaybacktheamountalongwithinterestundertheInterestAct.^'Where
rice-millerswerepaid anamountinexcessof theagreedratebecauseof a
mistake inclassificationaccordingto quality, they were required to disgorge
the unjustenrichment.®"
Wherea sum ofmoneywas paid to a bank as a price of the goodsand
the bankissueddeliveryorders which were notacceptedby the warehouse-
keeper,theCalcuttaHighCourtheldthat thiswasnot apaymentunder
mistake and Section72 was notapplicable.®^Where the railwayauthorities
chargedextrafareunderthemistakenbeliefthat thegoodswouldhaveto
becarriedby alongerroute,theywereorderedtorefundthe extrafare.®^
Where the vendor of mortgaged property allowed the purchaser toretain
78.MaruthyEnterprisesvCorpnofCityofBangalore,AIR1999Kant41.Confederationof
Real EstateDevelopersAssnof India v State of M.P., 2015SCCOnLineMP 2839; AIR
2015MP25,illegallevyofmunicipaltax,directedrefundwithinterestat9percent.Vaidehi
AkashHousing(P)Ltd vNewD.N. NagarCoopHousingSocietyUnionLtd, AIR2015
NOC772(Bom),adevelopmentagreementcouldnotbespecificallyenforcedbythedeveloper
becauseofbreachescommittedby him.
79.S.KotrabarsappavIndianBank,AIR1987Kant236.GrindlaysBankP.L.C.vCentrefor
DevofInstructionalTechnology,AIR1997Del164,foreignremittancecreditedbybank
intodefendant'saccountbymistake,defendantrequiredtorefundwith 12 percentinterest.
AmeenTradingCo vBankofBaroda,(1993)2KLT442,mistakencreditbybank,with
drawalbycustomer,liabletorefund.IndianBankvMocroElectronics,AIR2005 AP328:
(2005)6ALD234(NOC)negligentBankstaffcreditmoneyinto thedefendant'saccount.
The defendant did not inform the bank of the fact ofexcessentry and kept withdrawing the
money.Therewasnothingtoshowabonafideerroron the part of thecustomer.He had
alreadypaidbackthemoneyinfull,interestat the rateof 6 percentwasawardedfromthe
date ofsuitto that ofrepayment.Saseendrakumariv State BankofTravancore,AIR2011Ker
58,singlepaymentinto bankaccount,creditedtwicebymistake,refundable.
80. PoodCorporationofIndia v K.Venkateswara,(1988)1 An LT930.
81. Lohia TradingCo v CentralBank of India, AIR 1978Cal468.
82.AssociatedCementCo Ltd v Unionof India, AIR 1998MP 241. Unionof India v SAIL,AIR
1997Ori77,wherealsothegoodswerecarriedbyshorterroutethoughfarechargedwasthat
of thelongerroute.T.RanganathanvEssauAlfred,(1997)1 KantLJ721,a tenantagainst
whomadecreeforrecoveryof rentwaspassedwasnotpermittedto saythat he hadalready
paidtherentscoveredbythedecreeand,therefore,thelandlordwouldbeadoublebenefi
ciary.Thedoctrineofresjudicatapreventedhimfromsayingso.Hecouldhavetakenthat
defence in thesuititself.SomnathMahaswaravOrissaSRTC,AIR1995Ori186,payment
madeunderarrangementwhichwasnotpermissibleundertheapplicableActnotallowedto
berecoveredback.https://t.me/LawCollegeNotes_Stuffs

721. 580 Chapter 10 Certain Relations ResemblingThose Created byContract [S.72]
a part of the price for enabling him to pay off themortgageeand no such
payment became necessary because the relief was provided to him under a
statutoryprovision with the result that the mortgage was redeemedwithout
payment, it was held that the purchaser was bound to return the money
retained by him for redemption. A mistaken overpaymentof rent has been
heldto berecoverable.The court saidthatwhenapersonseeksrecoveryof
money paid under a mistake of law, it is not necessary to establishthathe
hadmistakenlybelievedthat he wasliableto make thepayment.He has
only to show that he would not havemade the payment but for the mistake
andpossiblythat themistakewasdirectlyconnectedwith theoverpayment
orconnectedto therelationshipbetweenthepayerand thepayee.®''
KisanVikasPatra purchased by a Cooperative Bank unconscious of
thefactthatsuchbankswerenotallowedto do soundertheGovernment
SavingsCertificates Act, 1959, the post office also remained oblivious to
therestriction.It was heldthatthe Post Officecouldnotrefuseinterest
accrued up to the date of maturity. Theprincipleof unjust enrichment does
notpermiteventheGovernmentand itsagenciesof takingadvantageof
sucherrors.^^Forfeitureofearnestmoneyfor notcomplyingwith the condi
tions of the tender consequent upon issue of letters of intent was held to be
notanunjustenrichment.^®
Aconsignmentofgoodswas damagedduringtransportation. The District
Forum under Section13 of the ConsumerProtectionAct, 1986, orderedthe
commoncarrier to pay thepriceof thegoodsto thepurchasercompany.
Suchcompanyhadpaidthepriceto theconsignee.Theconsigneehadalso
receivedthedamagedgoods.Thus theconsignee,beingthedoublebenefi
ciary, was directed to return the damaged goods to the carrier. In case he
haddisposedthemof,hewasdirectedtopaythevalueofthedamaged
goodsto thecarrier.®^
Discoveryofmistakeafterlongperiod
Anaccountingerror wascommittedby thecorporationinrecoveryof
loanandinterest.Themistakerealisedaftermorethanadecade.Anattempt
wasthenmadetorecovertheamountthatremainedunrecoveredandinter
eston it.Thecourtsaidthatinterestwasnotto beallowed.Itwouldbe
83.SaraswathiAmmal-vShanmughavadivammal,AlK1994Mad234.
84.Nurdin&PeacockPicvD.B.Ramsden& CoLtd,(1999)1WLR1249;GujaratSteelTubes
LtdVPortofKandla,AIR2002Guj173,pleaofrefundatthestageofargumentsnotallowed.
K.T.VenkatagirivStateofKarnataka,(2003)9SCC1:AIR2003SC1819soledistributor,
disputesarose,duringpendencyoflitigationmarketingdonethroughothers,thisdeprived
the sole distributor of his sales commission, he was allowed to claim reimbursement to that
extent.DivyeshvAatamGems,(2006)4BomCR471,summarysuitforpriceofdiamonds
handedoverforshowingtoprospectivecustomersbutneitherreturnednorsaleproceeds
accountedfor,the courtallowedtheresponsiblepersonleavetodefendondepositin court the
probablevalueof thediamonds.
85.MahilaSewaSahakariBankLtd v ChiefPostMaster,AIR2007Guj72.
86. Infotech2000India LtdVState of Punjab,AlK2007P&cH58.
87. Nagpur Golden Transport Co (Regd)v Nath Traders, (2012) 1 SCC 555: AIR 2012 SC 357.https://t.me/LawCollegeNotes_Stuffs

722. [S.72] Excessstamp duty 581
unjustenrichmentat the cost of the other and alsopenahyfor the fault of
thecreditor.®^
Change of position by payee in reliance onpayment
Everypaymentmade undermistakeis,however,notrecoverable."There
mayin aparticularcasebecircumstancesvirhichdisentitleaplaintiffby
estoppelorotherw^ise."®^TheCalcuttaHigh Courtfollowedthisprinciple
inacaseinwhichthefactswereasfollows:'"
Theplaintiffbankmadepaymentof certaincrossedchequesto the
defendantbank.Thelatterinformed their customer-payee of the cheques
and that thepaymenthadbeenreceivedfor thecheques.It then turned
outthat thechequeswereforged.Theplaintiffsuedthedefendantbank
and hiscustomerto recover back theamountcontendingthatthepayment
hadbeenmadeunderthemistakenbeliefthatthechequesweregenuine.
Thecourtcame to theconclusionthatif thedefendantbankhadnotpaid
awaytheproceedsto itscustomeror if thecustomerhad not yetdelivered
thegoods,themoneycouldhavebeenrecoveredbackunderSection72.The
defendantbank and its customerwere as much ignorant of the forgery as the
plaintiffbankandthey,havingalteredtheirpositionbecauseofthecheques
beingcleared,itwastoolatetorecoverback.Neitherweretheyguiltyofany
fraud nor had they been enriched by themistake.'^
Thisdefencewould be availableto the payee only if he can show that he
haschangedhispositionto hisdisadvantageinconsequenceofthepayment.
Thus where certainfilmsweredeliveredin pursuance to a contract for pro
cessing,developingandexhibitionandcertaininstalmentswerepaidbythe
recipientwhohadalsospentsomemoneyonprocessing,etc,hewasallowed
torecoverbackthe moneypaid whenit wasdiscoveredthat the contract was
void.Thepayeewasnotprejudicedbythefactthathedeliveredthefilms
becausetheywouldberestoredtohim.Itwasthepayerwhowasprejudiced
havingexpendedmoneyonprocessing,etc.'^
DillonandNichollsL JJwereof theviewthat the right to refund is
ofabsolutenatureexceptfor twolimitedcases,namely,wherethere is an
88.RadhaFlourMills PLtdv BiharStateFinancialCorpn,AIR2009Pat 12.
89.SoobservedbythePrivyCouncilinKaliPrasadSinghavSrishChandraNandi,(1948-49)
76lA244: AIR 1949 PC 297. Kerala SEB vHindustanConstructionCo Ltd,(2006)12 SCC
500:AIR2007SC425,theBoardin itsmeetingresolvedto paya particularsumto theclaim-
ant-contractorsubjecttoadjustmentofamountsasindicatedbytheCommitteeReport.The
SupremeCourtheldthattheresolutionmustbeimplementedirrespectiveofthefactwhether
it wasconfirmedat asubsequentmeetingornot.
90. UnionBank of India vA.T.AltHussain & Co, AIR 1978Cal169.
91.AnotherexampleofthesamekindisCitibankN.A.vBrownShipley&CoLtd,(1991)2All
ER 690. A draft wasissuedby a bank ontelephonicinstructionsconfirmedby a letter pur
portingtobefromthecustomerandhandedoverbythe-personreceivingittoanotherbank
whichbankaftergettingconfirmationofgenuinenessfromtheissuingbankpaidtheamount.
Theissuingbankwasnotallowedtorecoverbacktheamountfromthereceivingbankthough
the letter of authority turned out to be forged.
92. RoverInternationalLtdvCannonFilms SalesLtd,(1989) 1WLR912.https://t.me/LawCollegeNotes_Stuffs

723. 582 Chapter 10 Certain RelationsResemblingThose Created by Contract[S.72]
estoppelby reason of the payer's conduct or where the payment had been
made to an agentwho paid it overto the principal.There was a total failure
ofconsiderationbecausethepayeeof theinstalmentshad no right to hand
overthefilms.'^
TheSupremeCourt did not allow a party torecoverback the amount of
surchargepaid byhimto acorporationforgrantinghim an exportlicence,
thoughthelevywassubsequentlyfoundto be notauthorised.Illegaltaxes
wereconsideredbythe court to besomethingdifferentfrom paymentsmade
tocomplywith the termsandconditionsof apermit.^'*Butwhereextra pay
ment happened to be made on procurement of paddybecauseof a mistake
aboutits quality, it was allowed to be recoveredback.'^
Thepaymentof a sum ofmoneybywayof partpaymentof thepricein
advance for purchase of goods was allowed to be recovered back evenwhere
thebuyerhimselfmade a defaultinbuyingthegoods.The court said that
theresultwouldhavebeendifferentifthecontracthadcontainedaforfei
tureclause.The courtallowedinterestat 9 per centp.a.^^
Acceptanceof lesssumundercourtorders
In a contractforsupplyofgas,theseller'sattempttoincreaseprices(price
escalation)waschallenged.The courtdirectedby an interimorder that the
supplyshouldbecontinuedatoriginalprices.Theproposedenhancement
was finallyfoundto be valid. It was heldthattheconsumerswere liable to
pay the difference in prices since the first notice of escalation and also inter
estondelayedpayments.Thecourtappliedtheprinciplesofdeemedrenewal
andrestitution.'^Thetermsof theoriginalcontracthadexpired.Nonew
contractcouldbemadebecauseoftheconsumersrefusaltoacceptthenew
93.ApplyingWarmanv Southern Counties Car FinanceCorpn Ltd,(1949)2KB516.
94.DhanyalakshmiRiceMillsvCommrofCivilSupplies,(1976)4SCC723: AIR 1976 SC
2243.Atransactionenteredintoat apolicestationwaspresumablyheldto beundercoercion.
MathewvKuruvilla,1983KLT104.Quiteobviouslythesectiondoesnotapplywhereno
mistakeismadeoutas-touchingthetransactioninquestion.VnionofIndiavJalRustomji
Modi,(1970) 3 SCC 368: AIR1970SC 1490.
95.FoodCorporationofIndiavK.Venkateswara,(1988)1 AnLT930.Liabilityunderthe
NegotiableInstrumentsAct,1881fornegligenthandlingofcollectionofchequescannotbe
evadedbysayingthatactionshouldbebroughtunderS.72forpaymentmadeundermistake,
United Bank of India v. BankofBaroda,AIR 1997 Mad 23.
96.BaldevSteelLtd vEmpireDyeing&MfgCoLtd,AIR2001Del391.Wherepayments
weremadeto theownerofthepropertyto beboughtandalsoto thepersonactingforhim
inmakingtheagreementandthesalehavingfallenthrough,recoverywasallowedagainst
boththoughtheownerwassayingthattherewasnodealingwithhim,K.S.Satyanarayna
VV.R.NarayanaRao,(1999)6SCC104:AIR1999SC2544.SBlvNationalOpenSchool
Society,AIR2004Del306,savingbankaccountcreditedby bank bymistake.Onrealis
ingthemistakeoninformationbycustomertheentrywasreversedandinterestsoughtto
berecoveredfromthecustomerforusingthemoney,heldnotallowable.Whileattempt
ingtorecovertheprincipalmoney,thebankappropriatedanequalamountofmoney
fromthecustomer'sanotheraccount.Thiswasheldto bemisappropriationandbreachof
trust.
97.ONGCvAssnof Natural Gas ConsumingIndustries,(2001)6 SCC627:AIR 2001 SC2796.https://t.me/LawCollegeNotes_Stuffs

724. [S.72] Quasi-contracts in English Law 583
price.Thecontinuanceofthesupplyand itsacceptancebyconsumersunder
thecourtorderbecamethefoundationofadeemedrenewal.'^
Coercion
The word "coercion" is used in this section in its general sense and not as
defined in Section15.^'Thus money paid under pressure of circumstances,
suchaspreventionoftheexecutionof adecreeon apropertyinwhichthe
partypayingisinterested,mayberecoveredeventhough"coercion"as
definedinSection15isnotestablished.^"''
TheWESCOextractedarrearsof theelectricitybill of thepreviouscon
sumerfromthesubsequentpurchaserof the propertybyrefusingtosupply
themwithelectricityunlesstheypaid,contraryto thestatute.It washeldto
beanunjustenrichmentbydeprivinga manofhismoneywithoutauthority
oflaw."^
QUASI-CONTRACTS IN ENGLISH LAW
Thevarietyofquasi-contr&ctualobligationsrecognisedbyEnglishLaw
may now be noted.
Paymentsto the defendant's use
Twoprinciplesseemtogovernthiskindofquasi-contxactudlliability.
Oneofthemisthat thepaymentshouldhavebeenmadeunderpressureand
notvoluntarilyandtheotheristhat thedefendantshouldhavebeenbound
topayandhasbeenrelievedofhisliabilitybythepaymentmadebythe
plaintiff.
Anexpenditureorpaymentmadepurelyvoluntarilywillnotdo.If,for
example,apersonpayspremiumsdueuponthepolicyofanotherwithout
hisrequestandwithoutanycompulsion,hecannotrecover.^"^Similarly,
98.Ibid.
99.SethKanhayaLaivNationalBankofIndiaLtd,(1912-13)40lA56.Commr.ofCustoms
(Import)VFinacordChemicals(P)Ltd,(2015)15SCC697:(2015)319ELT616,imported
liquorwasconfiscatedbycustomsforundervalue,thepurchaserdepositedcertainamounts
forreleaseofthegoods,held,paymentwasnotpart ofcustomsduty,itwasonlyforrelease
of the goods, hence refundable.
100. Ibid.Whereanallegedsuretywascompelledto payaguaranteedloanofwhichhewasnot
aware,nor hispropertywaschargedunderit,heldcoercionwithinthemeaningofS.72,
1988Reports25,440Kar.DemandofguaranteedminimumpaymentbyaStateElectricity
Board does notbecomeunconscionableonlybecausetheGovernmenthas ordered cut in
supplyofenergytocertainconsumersondailybasis.Thereisnounjustenrichmentofthe
ElectricityBoardbythatreasonaloneand,therefore,noremedyunderS.72,W.B.SEEv
SidhartaFerroAlloysLtd,AIR1997Cal221.HasiMazumdarvW.B.SEB,AIR2006Cal
59;PunjabSEBLtdvZoraSingh,(2005)6SCC776,unauthoriseduseofelectricity,supply
disconnected,paymentmadebyconsumerofthechargesdemandedforrestorationofhis
supply,held,paymentundercoercion,refundable.PunjabSEBLtdvZoraSingh,(2005)6
SCC776,agriculturistapplicantpaidsecurityamountbutprovidednoconnection.Board
directedtoprovideconnectionandpayinterestattherateof9percentonthedeposited
amountand compensations ofRs5000.
101. AjayKumar Agarwalv OSPC,AIR 2007 Ori 37(DB).
102.FalckevScottishImperialInsuranceCo,(1886)LR34 Ch D 234(CA).https://t.me/LawCollegeNotes_Stuffs

725. 584 Chapter 10 Certain RelationsResemblingThose Created by Contract[S.72]
where a municipal corporation, having no legalliability to do so, carried out
repairs of a canalbridge,whichit was theobligationof the canal authority
to maintain, the corporation could notrecover,although the bridge was,
for want ofrepair,endangeringthe road andalthoughthecorporationhad
withoutsuccessrequestedthedefendantto carry out therepairs.Theywere
stillvolunteers.'"^There was nolegalcompulsionon them to carry out the
repairs. The onlycompulsionwas the damage being done to the road and
theexpendituremadebytheminprotectingtheroadmaygiveremedyunder
some other principle butdefinitelynot underquasi-conlTact.
Thekind ofcompulsionorpressurethat the lawrecognisesforthe pur
posesof thisremedyisevidencedbyExallvPartridge.Herethe plaintiff
hadlefthiscarriageuponthepremisesinwhichthedefendantwaslivingasa
tenant.Thelandlordlawfullyseizedallthegoodson thepremisesincluding
the carriage for non-payment of rent and would have sold them in execution
ofhisclaim.Theplaintiffpaidtheoutstandingrenttogetbackhiscarriage
andthensuedthedefendantfor,theamount.Hewasheldentitledto it.
Anotherillustrationis Brook's Wharf & Bull Wharf Ltd v Goodman
Bros^°^Thiswasacaseinwhichtheplaintiffs,whowerewarehousemen,
had takeninto theirbondedwarehousefurswhichwereimportedandwere
liable to duty. A man keeps a bonded warehouse on the terms that he will
beresponsibletotheCommissionerofCustomsandExciseifthosegoods
go out ofhisbondedwarehousebeforethedutieshavebeenpaid.The
defendantshadimportedskinsand putthemin theplaintiff'swarehouse.
Thegoodswerestolenfrom thewarehouseandtheCommissionerrecovered
thedutyfromthewarehousemen."Theyhad noanswer,theyhadheldthe
bonded goods, the bonded goods had left their warehouse and could be
madeavailableby thethieveson the home market, and the bonded ware
housemenhadtopay.Theywereheldentitledtorecoverfromtheimporters
theamountwhichtheyhadpaidbecauseitwasprimarilytheimporter's
dutytohavepaidtheimportdutiesassoonasthegoodswereimportedinto
thiscountry."
TheconditionsofthisactionwererestatedbyLynskeyJ inMonmouth
shireCountyCouncilvSmith
"Theessenceoftheruleis thattheremustbeacommonliabilityto
paymoneyto a particularperson;that theplaintiffhasbeencompelled
to payit bylaw;that thedefendantisliableto paythatmoney;and that
thedefendant'sdebtorliabilityhasbeendischargedbytheplaintiff's
payment."
103.MacclesfieldCorpn v Great CentralRlyCo,(1911)2KB528(CA).This is sobecausecom
monlawdoesnotfavourvolunteers.FordetailsseeAgencyof Necessity,post.
104.(1799)8 TermRep308:(1775-1802)AllER Rep 341(KB).
105. (1937) 1 KB534: (1936) 3 All ER 696(CA).
106.(1956)1WLR1132;affirmedin,MonmouthshineCountyCouncilvSmith,(1957)2QB
154:(1957) 2WLR33 (CA).https://t.me/LawCollegeNotes_Stuffs

726. [S.72] Quasi-contractsinEnglishLaw585
This statement was affirmed by the Court of Appeal. The appeal was
heardalongwithMetropolitanPoliceDisttReceivervCroydonCorpn}^'^
The twoappealsraisedexactlythesamepoint. Apoliceconstablewas
injuredthroughthenegligenceofthedefendantsand hadtoremainoffduty
duringthe period ofillness.Thepoliceauthoritieshad under statutory reg
ulationspaidthemoff-dutywages.Thepoliceauthoritiesbroughtan action
torecoverthe amount so paid away as off-dutywages.The contention was
that ifthepoliceauthoritieshad not paidthem,theconstablescouldhave
recoveredfrom the defendants, the loss of wages and that the liability of
thedefendantswastherebyreduced.Butthe Court ofAppealdid not allow
anyremedyunderquasi-contTact.Ineachcasethedefendantwasliableto
paycompensationto theinjuredconstableandtheirliabilitydidnotinclude
lossofwages.Thusthepaymentbythepoliceauthoritiesdidnotrelievethe
defendantof any liability.
Voluntarypayments
Paymentsmade under mistake offact
Paymentsmadeunderamistakeoffactcanberecoveredprovidedthat
thepartypayingwouldhavebeenliabletopayif themistakenfactwere
true. Thuswheremoneywas paid under alifeinsurancepolicywhichto
theknowledgeofthecompanyhadlapsed,butthefactoflapsehavingbeen
forgottenatthemoment,thecompanywasheldentitledtorecoverback
themoney.i"^ParkeBpointingoutthat itwouldbeagainstconsciencefor
apersonreceivingsuchpaymenttoretainit.Theprincipleofthiscasewas
appliedsubsequentlyto acasewherepaymentwasmadeunderapolicyof
marine insurance under the mistakenknowledgethat the cargo of lemons
hadperishedwhereasinfactitwasonlysoldenroute,thePrivyCouncil
held that the money wasrecoverable."'
One of the essential conditions of this action isthat"the mistake must be
as to afactwhich,if true,wouldmakethepersonpayingliableto pay the
money".ThissuggestionwasmadeinAikenvShort^'^"andwasapprovedby
theCourtofAppealinMorganvAshcroft}^^Thefactsassummarisedby
thecourtwereasfollows:
Therespondentisabook-maker.Theplaintiffisapublicanwhowasa
regularcustomeroftherespondentforbettingtransactions.Thenature
of the mistakeswhich led to theallegedoverpaymentof about £24 upon
whichthe action wasbrought,wasprovedinevidencetohavebeena
clericalerrorbytherespondent'sclerkwhichledhertogivetheappellant
107. (1957) 2 QB 154: (1957) 2WLR33 (CA).
108.Kellyv Solari,(1841)9M&W54: 11 LJEx 10.
109. Norwich Union Fire Insurance Society Ltd v Price Ltd, 1934 AC 455.
110. (1856) 1 H & N 210, 215: 25 LJ Ex 321.
111. (1938)1KB49 (CA).https://t.me/LawCollegeNotes_Stuffs

727. 586 Chapter 10 CertainRelationsResemblingThose Createdby Contract[S.72]
creditforthesumofabout£24twiceover;thuscausingtherespondent
to pay to theappellant£24too much.
The action was to recover back the overpayment, and it was lost on two
grounds.Firstly,the court wasforbiddenby theGamingAct, 1845, from
lookinginto bettingtransactionsand,secondly,evenif the mistakenover-
creditweretakentobetrue,therewouldhavebeennoliabilitytopay.
In thesubsequentcaseof Larner vLCC"^the Court ofAppealrelaxed
theprincipletothisextentthat abeliefthatthereisamoralliabilitytopay
issufficienttopreventthepaymentfrombeingregardedaspurelyvoluntary.
In thatcaseanemployerwhoseservantswerecalledupformilitaryservice
proposedto paythemthedifferencebetweentheirpayandthepaygivento
them bythe military authorities.The plaintiff to whom suchdifferencehad
tobepaiddidnotinformtheemployerofthedifferenceandconsequently
hewasoverpaid.Whenhecamebacktheemployerbegantodeductfromhis
paytheextrapaymentwhichhetriedtostop.Buttheemployerwasallowed
torecovertheextrapayment.Theschemewasnodoubtvoluntary,butonce
announced,thepaymentsmadeunderitcouldnotberegardedasvoluntary.
It is also necessary for this kind ofactionto succeedthatthemistakemust
beoneoffactandnot oflaw.Thedistinctionmayoftenbedifficultto draw
andtherulemayforthisreasonhaveoftenbeencriticized,itisstillapartof
thelaw.Thus,paymentofextrarentmadeunderanagreementtoincrease
rentmade inviolationof a RentControlAct couldnotberecovered."^
Similarly,the duty paid on an item which the House of Lords had held in
another case to be not dutiable, could not berecovered.""So was true of an
extra gratuitypaid on amistakenviewoftherelevantregulations."^
Whereaprivatedocumenthasbeenconstruedbyacourtoflaw,that
interpretationbecomesa part ofthelaw.Thus,whereanundertakingin a
separationdeedtopaythewifeanannualsumofmoney"freeofanydeduc
tionswhatever"hadalreadybeenconstruedasexcludingdeductionfor
incometax,apaymentinignoranceofthisinterpretationwithoutdeducting
incometaxcouldnotberecovered."^
Payments madeunderan ineffectivecontract
Threekindsofsituationaregenerallyconsideredunderthishead,namely,
totalfailureofconsideration,moneypaidunderavoidcontractandmoney
paidunderanillegalcontract.Theeffectsofvoidandillegalcontractshave
already beenconsidered,only the effectof total failure ofconsiderationwill
betakenuphere.Whereoneofthepartiesto acontracthaspaidmoney
intheperformanceofhispartbuttheotherpartyfailstodohispart,the
112.(1949) 2 KB 683 (CA).
113. SharpBros&Knightv Chant,(1917)1KB771(CA).
114.NationalPari-MutualAssn Ltd v R., (1930) 47 TLR 110.
115.HoltVMarkham,(1923) 1 KB 504.
116.OrdvOrd,(1923)2KB432.https://t.me/LawCollegeNotes_Stuffs

728. [S.72] Quasi-contractsin English Law 587
former has an option, namely, either to sue the other for the breach of con
tract or to treat thecontractas at an end and recover back his money under
quasi^contTact.Qw^jsi-contractualremedy arises whentherehasbeena
total failure of consideration as opposed topartial.For example, where a
shareholder of a company transferred his shares to the plaintiff for which
the price was paid, but the company on account of certain conduct on the
partof thetransferorhimself refused to register thetransferof his shares,
this was held to be a total failure of consideration enabling the plaintiff to
recover back hisprice."^
Otherinstances can be seen intransactionsrelating to sale of goods. If
the buyer has toreturnthe goods onaccountof there being no title on the
partof the seller to sell, the buyer can recover the whole of his price with
out anydeductionfor use value, forthereis, in such cases, atotalandnot
apartialfailure ofconsideration."®The same principle shall apply where
the goods have been taken under hire-purchase and the buyer had toreturn
themtothetrueowner.'^^
Partialfailure ofconsiderationwillnothave the sameeffect'.Thus,where
a boy was registered as an apprentice with awatchmakerfor a period of
six years on payment of a premium and the master died when the boy had
learned only for one year, he could not recover anypartof hispremium,
there being only apartialfailure ofconsideration.^^"The sameresultfol
lowed where apartyoccupied a premises on paying the agreed rent but left
soonthereafteronaccountof thelandlord'sfailure tocarryout hispartof
thepromise,he couldnotrecover back therent.^^^
Paymentsmadeundercompulsion
Wheretheownerof amarketrealisedtolls from ashopkeeperby seizing
his goodsandit beingsubsequentlyheldthathehadno suchauthority,the
shopkeeper was allowed to reclaim the tollmoney.^^^But where any such fee
or toll is paidwithoutimproperpressure or compulsion, there would be no
rightofrecovery;^^^so alsowherethepaymentis inresponsetosummons
issued by acourtoflaw.-^"*Paymentsextortedundercolourofauthority
whichisunfoundedarerecoverable.^^^
117.WilkinsonvLloyd,(1845) 7 QB 27: 4 LT (OS) 432.
118.RawlandvDivall,(1923) 2 KB500.
119.WarmanvSouthernCountiesCarFinanceCorpnLtd,(1949) 2 KB 516.
120.WhincupVHughes,(1871) LR 6 CP 78.
121.HuntVSilk, (1804) 5East449. Norefundwasallowedto anauction-purchaserwhoafter
paying the initial 10 per cent deposit backed out. Forfeiture of his deposit, thecourtsaid, was
not akin to a penalty or liquidated damages.Zemhunt(Holdings) vControlSecurities, 1991
ScottishLT653:1991CLY5101.
122.MaskellvHomer,(1915) 3 KB 106 (CA).
123.TwyfordvManchesterCorpn,(1946) 1Ch236.
124.Moorev VestryofFulham,(1895) 1 QB 399 (CA).
125.Newdigatev Davy, (1694) 1 Lord Ragm742.https://t.me/LawCollegeNotes_Stuffs

729. 588Chapter10CertainRelations Resembling Those Created byContract [S.72]
Quantummeruit
Where a party has in the performance of his contract done some work or
rendered some service and thefurtherperformancehas been made useless
by the other party, he may recover reasonable compensation for thewrorkor
service.FlinchevColburn}^^is anauthorityfor thisprinciple.
The plaintiff was the author of several dramaticentertainments.He
was engaged by the defendants, who were the publishers of aworkcalled
"TheJuvenileLibrary"towriteforthatworkanarticletoillustratethe
historyofarmourand costumes from the earliest times, for which he
was to bepaid,100 guineas. Theplaintiffmade various drawings and
prepared a considerableportionofmanuscriptwhen the defendants dis
continuedthe Juvenile Library. Theplaintiffclaimeda sum of 50guineas
for thepartwhich he hadprepared,and the trouble he hadtakenin the
business.Hewasheldentitledtoit.
Similarly, where aprinter,havingprintedmost of the work, refused to
complete it because the dedication was libellous, he was held entitled to
recover onquantummeruit}^''A similar recovery is allowed where aperson
has rendered services under a supposedcontractwhichturnsout to be a
nullity.Craven-EllisvCanons is anauthorityfor this.
Theplaintiffwasappointedmanagingdirectorof a company. The
appointmentwas made by theotherdirectorswho weredisqualifiedby
reasonof having nottakentheirqualificationshares. Theplaintiffalso
didnottakehisqualificationshares. But hecontinuedto act asmanaging
directorand sued thecompanyfor his agreedremunerationor for a rea
sonableremunerationon the basis ofquantummeruit.
TheCourtof Appeal rejected the claim for the agreedremuneration,the
contractofappointmentbeing void, but allowed him to recover on the basis
ofquantummeruit.GreekLJemphasisedthata claim of thiskinddoesnot
depend upon impliedcontractarising byvirtueof the services having been
accepted oruponinference of law, butupona rule of law.
"Theobligationto payreasonableremunerationfor theworkdone
when there is nobindingcontractbetweenthepartiesisimposedby a
rule of law, and not by an inference of factarisingfrom theacceptanceof
servicesorgoods.It is one ofthecaseswhicharereferredto inbookson
contractasobligationsarisingquasiexcontractuofwhichawell-known
instanceis aclaimbasedonmoneywhichhadbeenreceived."^^^
126..{1831) 5C&P58:172ER876.
127. Clay v Yates, (1856) 1H&N73:156 ER1123.
128.(1936)2KB403(CA).
129. At p. 412. A was a licensedbuilderwho did work and suppliedmaterialspursuantto an
oral buildingcontract.He sued for the value of the work done and materials supplied. The
defendantrelied upon the Building Licensing Act, 1971, which providedthatacontractwas
not enforceable by abuilderunless it was made inwritingand signed by theparties,held,
action on the basis of aquantummeruitsuch asthatbroughtby thebuilderrested not onhttps://t.me/LawCollegeNotes_Stuffs

730. [S. 72] Quasi-contractsinEnglishLaw 589
Though the remedy is independent of contract, but the contract, if any,
shall not be wholly irrelevant. Thus where a ship wasdeliveredfor repairs
and the contractor used moreexpensivematerial than that authorised by the
contract,he could not recover under thecontractbecause he had not carried
it outprecisely,nor underquasi-conti&cx,becausetheshipownerhad no
chanceto reject theexpensivematerial. He could not haverejectedthe ship
after it was already repaired and the mere taking of his ownpropertywas
not the same thing as anacquiescencein or acceptance of the workdone.""
Where adequatereliefisavailableunder the contract itself,the court may
not provide any relief underquasi-contract.
In the course of theperformanceof acontracttoconstructa power
dam, the owner was in severalimportantrespects in breach of the con
tract. The breach was sofundamentalas to justifyterminationof the
contract. However, thecontractorcontinued to work and completed the
project.He claimedcompensationfor the owner's breach on quantum
meruitbasis.
It was heldthatthecontractor,havingcontinuedto work thecontractin
the face of theowner'sbreach,wasentitledto recoverunderthecontract.
Sincethe contractor hadcompletedthe contract, and had adequateremedy
under thecontract,there was no need for law to fashion arestitutionary
remedy.Norwouldit berightfor thecontractorto obtainapossiblyhigher
rate of compensation than that under the contract."^
impliedcontractbut on aclaimforrestitutionand theliabilityto payareasonableremuner
ation arose from the operation of the law upon the circumstances.A quantum meruit is an
obligationor debtimposedbyoperationof lawwhicharisesin thedefendanthavingtaken
thebenefitof the work done, goods supplied orservicesrendered.Paveyand Matthews Pty
vPa«/,.(1987)162 CLR 221:(1990)6 Const LJ59, High Court of Australia, 1990CLY662.
130. Forman & Co Ltd v Liddesdale, 1900 AC190(PC).Suchclaims havebeen dealt with under
S.65oftheContractAct.
131. Morrison Knudsen & Co v B.C. Hydro and Power Authority,(1978)85DLR(3rd)186
(BrColCA).TheSupremeCourtdidnotallowescalatedrateswheretheratesalreadyfixed
under the contractseemedto be quitereasonable.GautamConstructions&FisheriesLtd
VNational Bank forAgricultureand RuralDevelopment,(2000)6SCC519:AIR 2000
SC3018.
Visitebcexplorer.comto access cases referred
tointhebool<tliroughEBCExplorer™on g?'|H||H
SCCOnline®;alongwithupdates,articles,videos, ExplOfef^
blogsand a host of different resources. companion resources for legal research
The following case from thischapteris available
throughEBCExplorer™;
•StateofW.B.YB.K.Mondal&Sons,A\R1962SC779: casepilot
1962Supp (1) SCR 876https://t.me/LawCollegeNotes_Stuffs

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SpecificContracts
(Ss.124-238)https://t.me/LawCollegeNotes_Stuffs

733. 11
ContractofIndemnity
Definitionandnature
Definitionin EnglishLaw
Anillustrationin English law of themeaningandeffect of acontractof
indemnityis to be found in the facts ofAdamsonvJarvis-}
Theplaintiff,anauctioneer,soldcertaincattleon theinstructionof the
defendant. It subsequentlyturnedoutthatthe livestock did not belong to
thedefendant,but toanotherperson,who made theauctioneerliableand
theauctioneerin histurnsued thedefendantforindemnityfor the loss he
hadthus suffered byactingon thedefendant'sdirections.
Thecourtlaiddownthattheplaintiffhaving acted on therequestof the
defendantwasentitledtoassumethat,if,whathedid,turnedoutto be
wrongful,hewouldbeindemnifiedby thedefendant.
Thus"indemnity"in English law means apromiseto save apersonharm
lessfromtheconsequencesof an act.Thepromisemay beexpressor it
may be implied from thecircumstancesof the case. Thus, for example, in
DugdalevLovering-}
Theplaintiffswere inpossessionofcertaintruckswhichwereclaimed
bothby thedefendantsand one K.P. Co. Thedefendantsdemandeddeliv
eryandtheplaintiffsasked for anindemnitybond,but received no reply.
Even so they delivered thetrucksto thedefendants.
K.P. Co, having successfully sued theplaintiffsforconversionoftheir
property,theplaintiffswere heldentitledtorecoverindemnityfrom the
defendantson animpliedpromiseasevidencedby the factthatbydemand
ing anindemnity,they made it quite clearthattheyhadnointentionto
deliver except on indemnity. Similarly, in SheffieldCorpnvBarclay,^a cor
poration,having registered atransferof stock on the request of abanker,
was held entitled to recoverindemnityfrom thebankerwhenthetransfers
were discovered to be forged.
1.(1827)4Bing66: 29RR503.
2. (1875) LR 10 CP196:44LJ CP 157: 32LT155.
3.1905AC392.InsimilarcircumstancesinStarkeyvBankofEngland,(1903) AC 114 (HL), a
bankwas allowed to recoverindemnityfrom an agent whopresentedatransferdocumenton
which one out ofthreesignatureswere forged,thoughhe didnotknowthis fact.
[591]
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

734. 592Chapter11ContractofIndemnity [S. 124]
The Enghsh definition ofindemnityis wide enough to include a prom
ise of indemnity against loss arising from any cause whatsoever, e.g., loss
caused by fire or by some other accident. Indeed, everycontractof insur
ance,otherthanlifeassurance,is acontractofindemnity.''
DefinitioninSection124narrower
But thedefinitionof"indemnity"in Section 124 of theIndianContract
Actissomewhatnarrower.Itislikethis:
S.124."ContractofIndemnity"defined.—Acontractby whichone
party promises to savetheotherfrom losscausedto him bytheconductofthe
promisorhimself, or bytheconductof anyotherperson,is called a"contractof
indemnity".
Illustration
AcontractstoindemnifyBagainsttheconsequencesof anyproceedingswliichC may
takeagainstSinrespectof acertainsum of 200rupees.This is acontractofindemnity.
The onlyillustrationappendedto thesectionsaysthatif apersonprom
ises to saveanotherfrom theconsequencesof aproceedingwhichmay be
commencedagainsthimit is acontractofindemnity.^
The person who gives theindemnityis called the"indemnifier"and the
personforwhoseprotectionit is given iscalledthe"indemnity-holder"or
"indemnified".
4. SeeOrientalFireandGeneralInsuranceCo v SavoySolventOilExtractionsLtd,(1997)
6 ALD 1, thefollowingpropositionsarenoticeablefrom thejudgment:in aclaimunderan
insurancepolicy, if theinsureris refusingpayment,theburdenlies upon him to showthat
theassuredviolatedtheconditionsof the policy; if theassuredpresentsabogusclaim(in
thiscasethatthewholestockwasburnt,whichwasnotfoundto betrue)hewouldforfeitall
benefits under the policy, he has to observe good faiththroughout;a provision in the policy
thattheinsurermayenterupontheaffectedpremisesandmayremaintherefor thepurposes
ofassessment,does notmakeit hisdutyto do so.StateofOrissavUnitedIndiaInsurance
CoLtd,(1997) 5 SCC 512: AIR1997SC2671,insurancefromporttoport,cancellation
by theinsurerat asubsequentstage,valid.UnitedIndiaInsuranceCoLtdv T.Venkata
Narsaiah,AIR2002NOC119 (AP), theinsurerheld liable forstockofbidisdestroyedin fire,
figures of the stock wereknownto the insurer.Shiftingof theinsuredstock from one specified
groundtoanothertoprotectit fromraincouldnotberegardedascontraryto theinsurance
policy.VishanNarainvOrientalInsuranceCoLtd,AIR2002Del336vehicleinsuredfor
Rs1,00,000,it wasstolenandbecameatotalloss, theinsurernotpermittedto saythathis
liabilitywas only up tomarketvalue of the vehicle.EasternCountiesLeatherpic vEastern
CountiesLeati)erCroupLtd,2002EWHC494:2002Env LR 34, right toindemnitywhich
became exercisable onaccountof therepairworks forprotectionof waterpollutioncaused by
atannery.NationalInsuranceCoLtdvArumugham,(2006) 2 CTC368,acontractof vehicle
insurance,indemnity,insurercould not depend upon exclusion clauses.
5. ForanotherillustrationseeMangladhaRamvGandaMai,AIR1929Lab388,wherea
vendor'spromiseto the vendee to be liable if title to the land wasdisturbedwas held to be
one of indemnity.Otherillustrationsare service bonds executed by the employees to serve the
master for aparticularperiodor personsclaimingpaymentof moneyofdelivery of goods on
indemnitybondshavinglost theoriginaldocumentsof title. M.ShamSingh vStateofMysore,
(1973) 2see303: AIR 1972 SC2440,an employee, sentabroadfortrainingonscholarship,
undertakingto serve the State oncomingback.https://t.me/LawCollegeNotes_Stuffs

735. [S.124] Definitionandnature593
Thus the scope of"indemnity"is bythe veryprocess of definitionrestricted
to cases where there is a promise to indemnifyagainstloss, caused:[a)by
the promisor himself, or{b)by any other person. The definition excludes
from its purview cases of loss arising from accidents like fire or perils of the
sea. Loss must be caused by somehumanagency.^Contractsofinsurance
against loss are covered by thechapteronContingentContracts.^
Secondly,situationslike those inAdamsonvJarvis^wherecattlewere
sold under theinstructionof a wrongful owner, are also outside the scope
of this definition. Such cases and the case of a loss arising from an act done
at therequestof thepromisorare covered by Section 223 of the Actwhich
provides forindemnitybetweenprincipalandagent.^
The promise of indemnity, as envisaged by the section, may be express
or implied. Anillustrationof impliedindemnityis the decision of the Privy
Council in SecyofState forIndiainCouncilv BankofIndiaLtd.^°
A notewithforgedindorsementwas given to abankwhichreceived it
for value and in good faith. Thebanksent it to the PublicDebtOffice for
renewal in their name. The true owner of the note recovered compensa
tionfromtheStateandtheStatewasallowedtorecoverfromthebankon
animpliedpromiseofindemnity.
Anindemnitybond which permits an employee to leave the employment
earlierthantheminimumagreedperiodonly at the cost of theforfeitureof
his bond money is valid provided both the period ofrestrictionand the bond
money are reasonable. Onlythatpartof the bond money can beretained
which is necessary to indemnify theemployer-forhisloss.^^
The question before the SupremeCourtwaswhetherthedocumentcon
tained acontractof indemnity or of bank guarantee. The document pur
portedto indemnify thepartyagainstlosses, claims, damages etc. which
may be suffered by it. It did not employ the usual words which are found in
abankguaranteelikeunequivocalconditions,unconditionalandabsolute.
It was held to be acontractof indemnity. The claim made by the assured
onterminationof thecontractneed not behonouredby thebankwithout
proofofloss.^^
6. SeeGajananMoreshwarParelkarvMoreshwarMadanMantri,AIR1942Bom302:(1942)
203IC261.
7. SeeTropicalInsuranceCo vZenithLifeAssurance,(1941) 196 IC 198 (Lah);LJCv S.Sindhu,
(2006)5see258: AIR2006SC2366,lapsedinsurancepolicy,paidupamountpayable.No
interestisliableto bepaidon suchamount.
8.(1827)4Bing66: 29RR503.
9. TheIllustrationsto S. 223 refer tosituationslikethatinAdamsonvJarvis,(1827) 4 Bing 66:
29RR503.
10.(1937-38)65lA286:AIR1938PC191:(1938)175 IC327.
11. P.N.V.S.V.PrasadvUnionofIndia,(1995) 1 AnWR126,minimumperiodofcompulsory
servicethreeyears,threemonths'remunerationto berecoveredif the employee leftearlier.
Neitherpenal under S. 74, norunenforceableunderS. 23.
12.SBIVMulaSahakariSakkarKarkhanaLtd,(2006)6 SCC293:AIR2007SC2361.https://t.me/LawCollegeNotes_Stuffs

736. 594Chapter11ContractofIndemnity [S. 125]
Insuranceindemnity
Almost allinsurancesotherthanlife andpersonalaccidentinsuranceare
contracts of indemnity. The insurer's promise to indemnify is an absolute
one. A suit can be filedimmediatelyuponfailure ofperformance,irrespec
tive ofactualloss.If theindemnityholderincurredliability andthatliability
wasabsolute,hewouldbeentitledcallupontheindemnifierto save him
fromthatliabilityby paying itoff."
Extentofliability
Section 125 lays down theextentof liability.
S. 125.Rightsofindemnity-holderwhensued.—Thepromiseein a con
tractof indemnity, acting withinthescopeof his authority, isentitledto recover
fromthepromisor—
(1)alldamageswhich he may becompelledto pay in any suit inrespectof
anymatterto whichthepromisetoindemnifyapplies;
(2)all costs which he may becompelledto pay in any such suitif,inbringing
ordefendingit, he did notcontravenetheordersofthepromisor, and
actedas itwouldhavebeenprudentfor him toactintheabsenceof
anycontractof indemnity, or ifthepromisorauthorisedhim to bring or
defendthesuit;
(3)all sums which he may have paidunderthetermsof anycompromiseof
any such suit, ifthecompromisewas not contrary totheorders ofthe
promisor; and wasonewhich it would havebeenprudentforthepromi
seeto make intheabsenceof anycontractofindemnity,or ifthepromi
sorauthorizedhimtocompromisethesuit.
Theindemnity-holder,actingwithinthe scope of hisauthority,is entitled
torecoverthefollowingamounts—
(1)All damages which he may be compelled to pay in any suit in respect
of anymatterto which the promise ofindemnityapplies;"
(2) all costswhichhe may becompelledto pay in such suits if, inbringing
ordefendingit, he did notcontravenetheorderof thepromisor,and
acted as itwouldhave beenprudentforhimto act in the absence of
anycontractofindemnity,or, if thepromisorauthorisedhimtobring
ordefendthesuit;"
13.NewIndiaAssuranceCoLtdvStateTradingCorpnofIndia,AIR2007NOC517 (Guj).
SubhashvNationalInsuranceCo, (2010) 4MahLJ582,theinsurerwas heldnotliableto
indemnifytheinsuredwhenthechequeissued by theinsuredunderthecontractofinsured
wasdishonoured.
14.ParkerVLewis,(1873)LR8 Ch App 1035, 1056;NallappaReddivVirdhachalaReddi,ILR
(1914) 37Mad270, right arises as soon as the decree is passedagainstthepromisee;Chiranji
LaiVNaraini,ILR(1919) 41 All395;NationalOverseasvExportCreditGuarantorCorpn
ofIndiaLtd, AIR 2008 All 18, liability toindemnifydid not arise where theexportercon
signed his shipment at his own riskwithoutresorting to the terms of the policy.
15. Pepin vChunderSeekur Mookerjee, ILR (1880) 5Cal811;GopalSingh v BhawaniPrasad,
ILR(1888-90)10 All 531.https://t.me/LawCollegeNotes_Stuffs

737. [S.125] * Commencementofliability595
(3)allsumswhich he may havepaid under the terms of anycompromise
of any such suit, if the compromisewas not contrary to the orders of
the promisor, and was one which it would have been prudent for the
promisee to make in the absence of anycontractof indemnity, or if the
promisorauthorisedhim tocompromisethesuit.^^
Apersonwho encashes anindemnitybondwhichisin thenatureof a
bank guarantee can retain onlythatpartof the amount of the bond which
represents thedamageor loss suffered by thebond-holderas aresultof the
contractingparty'sbreach.Anythingmorewouldbeundeservedwindfall
for onepartyandpenaltyof theother.^^
Where a motorvehicle(truck) was under indemnity insurance for
Rs2,00,000and it was stolenwithno chances of recovery, it was heldthat
the properamountof indemnity was as fixed by the surveyor at Rs 1,87,492
andthatit was payable with 18 per cent interest for the delay period. The
settlement of claim at a lesseramount byinsurance authorities wasarbitrary
andunfairunderArticle14oftheConstitution.^^
Commencementofliability
Animportantquestioninthisconnectioniswhendoestheindemnifier
become liable to pay, or, when is theindemnity-holderentitled to recover his
indemnity? The original English rule wasthatindemnitywas payable only
aftertheindemnity-holderhadsufferedactuallossbypayingofftheclaim.
Themaximof law was: "you must be damnified before you can claim to be
indemnified."But the law is now different. The process oftransformation
iswell-explainedbyChaglaJ[afterwardsCJ] of the BombayHighCourt
inGajananMoreshwarParelkar\MoreshwarMadanMantri-P"Itistrue
thatundertheEnglishcommonlawnoactioncouldbemaintaineduntilthe
actuallosshadbeenincurred.It was very soonrealizedthatanindemnity
16. See Pepin vChunderSeekurMookerjee,ILR(1880) 5Cal811;VenkatarangayyaAppaRao v
VaraprasadaRaoNaidu,ILRC1920)43Mad898: (1921) 60 IC 164, andalsothe decision of
the SupremeCourtinRamaswamivMuthuKrishna,AIR1967SC 359. Seefurther.Unionof
IndiavAmarendraHathSarkara,AIR1967Cal 119;BishalChandJainvChatturSen, AIR
1967All 506. Where a sellerpromisedto thepurchasertoindemnifyhimagainstdues, if any,
it was heldthatsuchindemnityclause would include only thenexistingdues and not those
subsequentlyimposedrestrospectively.ElizabethvAlgesendranChettiar,1986KLT 521. See
alsoE.E.CaledoniavOrbitValve Co, (1994) 2 Lloyd's Rep 230(CA),where thequestionwas
as to the scope of theindemnityclause on an employee'sdeathandwhetherthe clause cov
ered acts ofnegligenceandbreachesofstatutoryduty.SujirGaneshNayak& Co vNational
InsuranceCo Ltd, AIR 1996 Ker 49, the fire policycarried"riotandstrikeendorsement",this
was held to be applicable topartialcessationorinterruptionof workresultingin loss.Raigad
ConcreteIndustriesvICICIBankLtd,(2009) 4MahLJ923,indemnifieragreedto pay the
amounttoindemnityholder subject to theconditionthathe must pursue his remedyagainst
thepartyliableandrefundrecoverytoindemnifier,held valid.
17.CargillInternationalSAvBangladeshSugar&FoodIndustriesCorpn,(1996) 4 All ER 563
(CA).
18.MohitKumarSahaVNewIndiaAssuranceCoLfd,AIR1997Cal179.
19. AIR1942Bom302,304:(1942) 203 IC 261.FollowedinKhetrapalAmarnathvMadhukar
Pictures,AIR1956Bom106. CASE PILOT
CASEPILOT
«)https://t.me/LawCollegeNotes_Stuffs

738. 596Chapter11ContractofIndemnity * [S.125]
might be worth very little indeed if theindemnifiedcould not enforce his
indemnity till he had actually paid the loss. If a suit wasfiledagainst him he
had actually to wait till a judgment waspronouncedand it was only after
he had satisfied the judgmentthathe could sue on his indemnity. It is clear
thatthis might under certain circumstancesthrowan intolerable burden
upon theindemnity-holder.He might not be in a position to satisfy the
judgment and yet he could not avail himself of his indemnity till he had done
so. Therefore, thecourtof equity stepped in and mitigated therigourof the
common law. Thecourtof equity heldthatif his liability had become abso
lute then he was entitled either to get the indemnifier to pay off the claim or
to pay into courtsufficientmoneywhich would constitute a fund for paying
offtheclaimwheneveritwasmade."^°
This principle wasexpoundedinRichardson, whereBuckleyLJ
observed:"Indemnityis not necessarily given by repaymentafterpay
ment.Indemnityrequiresthatthepartyto be indemnified shall never be
called upon topay...."^^The High Court ofCalcutta'inits well-known
decision inOsmanJamal& SonsLtdvGopalPurshttam^^followed this
principle.
A company was acting as the commission agents of the defendant firm
and inthatcapacity boughtcertaingoods for the defendants which they
failed to take. Thesupplierbecameentitledto recover from thecompany
certainsum of money as damages for breach. Thecompanywent into
liquidationbefore paying the claim.
It was heldthattheOfficialLiquidatorcouldrecovertheamounteven
thoughthe company had not actually paid the vendor. Thecourt,however,
directedthattheamount,shouldbe setapartsothatit is used in full pay
ment of thevendorinrespectof whosecontractthecompanyhadincurred
liability.^"
20.Thecourtdistinguishedthe case from itsearlierdecisioninShankerNimbajivLaxman
Sapdu,AIR1940Bom 161.
21.(1911)2 KB705(CA).
22. Supra at p. 715; cited by LordWilliamsJ of theCalcuttaHighCourtinOsmanJamal&
Sons VGopalPurshottam,ILR (1929) 56 Cal262,266,wherethelearnedjudgereviewed
all theEnglishauthorities.Earlierto thisKennedyLJobservedinLiverpoolMortgage
InsuranceGo's, re, (1914) 2 Ch 617, 638 (CA)thatindemnitydoesnotmerelymeanto reim
burse inrespectof moneyspaid,but to save from loss inrespectof the liabilityagainstwhich
theindemnityhasbeengivenbecauseotherwiseindemnitymay beworthverylittleif the
indemnity-holderisnotable to pay in the firstinstance.
23.ILR(1929) 56 Cal262.Seealsoto thesameeffect,KumarNathBhattacharjeevNobo
Kumar,ILR26Cal241.
24.FollowedinPrafullaKumarvGopiBallabh,AIR1964Cal 159.https://t.me/LawCollegeNotes_Stuffs

739. [S.125] Commencementofliability597
The High Courts ofAllahabad^^,Madras^^andPatna^^have all expressed
their concurrence in the principle that as soon as the liability of the indem-
nity-holder to paybecomesclear and certain he should have the right to
require theindemnifierto put him in apositionto meet the claim. But con
traryviews have also beenexpressed.^®
Where an authorised agent of the insurance company collected the pre
miumamountfrom the assuredagainstproperreceipt, the liability of the
insurer began fromthatmomentthoughthe agent deposited the collection
withthecompanyaftertheoccurrence.^^
Specified time fornotice
An insured motorvehiclewas lost by theft. The insurance policy required
the assured to send notice to theinsurerimmediately after theft or anyother
criminalact. The assured made policereportof the theft immediately after
the incident, butinformedthe insurer after one month. The question was
whetherthis could beregardedas a notice given immediately. Thecourtsaid
thatthe expression immediately implies notice to be givenwithpromptitude
avoidingunnecessarydelay.lihmediatepolicereportshowedthebonafides
of theassuredin thematter.Reportto theinsurerafteronemonthcouldnot
beregardedasunreasonable.Indemnificationcouldnotbedenied.^"
25. SeeShiamLaivAbdulSalam,AIR 1931All754:ILR53Ail246;AbdulMajeedvAbdul
Rashid,klK1936All598.
26.RamalingathudayarvUnnamalaiAchi,(1915)38Mad791: (1914) 24IC423.
27.ChunibhaiPatelvNathaBhai Patel, AIR1944Pat 185;AbdulHussainJambawalavBombay
MetalSyndicate,AIR1972Bom252,orderofdirectpaymentof salestaxtoauthoritiesfrom
thepersonduewithouttheinterventionof the seller. Anactioncan bebroughtby theindemni-
ty-holderwithinthree years from the date ofpaymentby him.ShantiSwarupvMunshiSingh,
AIR1967SC 1315: (1967) 2 SCR 315. Theindemnifierhas the rightundertheprincipleof
subrogationto sue thepersonwho caused the loss.MaharanaShriJarvatSinghji v Secyof
StateforIndia,ILR 1889 14 Bom 299.
28. See forexample,ShankerNimbajivLaxmanSapdu,AIR1940Bom 161.
29.OrientalInsuranceCoLtdv AshaPaul,1996AIHC2043(J&K);SandhyaSah vNewIndia
AssuranceCo, AIR2004Pat 42,bankprovidingbenefit ofinsuranceto itscustomers,no
directcontractbetweencustomersandinsurer.For any delay inpaymentofinsurancethe
customercouldproceedonlyagainstbank.
30. Praful KumarMohantyvOrientalInsuranceCo Ltd, 1997 AIHC 2822 (Ori). Thecourtcited
RolfeB inThompsonvGibson,10 LJ Ex 243 to the effectthat"immediatelyimpliesthatthe
act to bedoneshouldbedonewithallconvenientspeed. Inotherwords,thethingto bedone
should be done as quickly as isreasonablypossible".https://t.me/LawCollegeNotes_Stuffs

740. 598Chapter11ContractofIndemnity
Visitebcexplorer.comtoaccesscasesreferred
to inthebookthroughEBCExplorer™on
seeOnline®;alongwithupdates,articles,videos,
blogsandahostofdifferentresources.
EBC
Explorer'
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•AdamsonvJarvis,(1827) 4 Bing 66: 29 RR 503
•GajananMoreshwarParelkarvMoreshwarMadanMantri,AIR
1942Bom302:(1942)203IC261
•MohitKumarSahavNewIndiaAssuranceCoLtd,AIR1997Cal179
fm
G
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

741. 12
Guarantee
DEFINITION
S. 126."Contractofguarantee","surety","principaldebtor"and"cred
itor".—A"contractofguarantee"is acontracttoperformthepromise,or dis
chargetheliability,of a thirdpersonin case of hisdefault.Thepersonwhogives
theguaranteeiscalledthe"surety";thepersoninrespectofwhosedefaultthe
guaranteeisgiveniscalledthe"principaldebtor",andthepersontowhomthe
guaranteeis given is calledthe"creditor". Aguaranteemay beeitheroral or
written.
Economicfunctionsofguarantee
Thefunctionof acontractofguaranteeis to enable apersonto get aloan,
or goods oncredit,or anemployment.Somepersoncomesforwardandtells
the lender, or thesupplieror the employerthathe (thepersonin need) may
betrustedandin case of anydefault,"Iundertaketo beresponsible".For
example,in the old case ofBirkmyrvDarnell^thecourtsaid:
"Iftwo come to a shop and one buys, and theotherto give him credit,
promisesthe seller,'Ifhe doesnotpay you, I will'."
This type of collateralundertakingto be liable for the default ofanother
is called a"contractofguarantee".In English law aguaranteeis defined as
"a promise to answer for the debt, default or miscarriage of another".^ It
is a collateral engagement to be liable for the debt ofanotherin case of his
default."Guaranteesare usuallytakento provide a secondpocketto pay if
thefirstshouldbeempty."^
Parties
The person who gives the guarantee is called the"surety",the person in
respect ofwhose default the guarantee isgiveniscalled the "principal debtor"
and the person to whom the guarantee is givenis called the "creditor".
1.91ER27:1Salk27.
2. S. 4,StatuteofFrauds1677,29Car,II, C 3.
3.Wood,LawandPracticeofInternationalFinance(1980) 295.
[599]https://t.me/LawCollegeNotes_Stuffs

742. 600Chapter12Guarantee [S. 126]
Independentliabilitydifferentfromguarantee
There must be aconditionalpromise to be liable on the default of the
principal debtor. A liability which is incurred independentlyof a "default" is
notwithinthe definition ofguarantee.''To refer again toBirkmyrvDarnell,^
where referring to the buyer's companion, the courtfurthersaidthatif the
companionhad said: "Let him have the goods, 'I will be your paymaster'or
'I will see you paid'." "This would have been anundertakingas for himself
and is not a guarantee."^ This principle was applied in Taylor vLee''decided
intheUS:
Alandlordand histenantwent to theplaintiff'sstore. Thelandlord
said to the plaintiff:MrParker will be on our land this year, and you will
sell himanythinghewants,and I will see it paid.
This was held to be anoriginalpromise,andnotacollateralpromiseto
be liable for thedefaultofanotherand,therefore,notaguarantee.^
Theundertakingby abankin the shape of abankguaranteeis also in the
natureof anindependent obligationpayable on demand. It hasnothingto
dowiththestateofrelationsbetweenthepartiesto thecontract.It is asuit
ablemethodof securing payment in commercial dealings. The beneficiary is
entitledtorealisethewholeof theamountundertheguaranteeirrespective
ofpendingdisputesbetweentheparties.^
Whereonly anassuranceforrepaymentofamountdue from theloanee
was given-by means of aletter,thecourtsaidthatit couldnotbeconstrued
as a deed ofguarantee.Thewriterof theletterwasaccordinglyheldnotlia
ble.^"Wherealetterofcomfortwas issued by aholdingcompanyinfavour
4. SeePunjabNationalBankv Sri VikramCottonMills, (1970) 1 SCC 60: AIR1970SC1973.
Thehabilityofboth(theprincipaldebtorandsurety)is just the same.
5.91ER27:1Salk27.
6.Observationsto the same effectappearinPunjabNationalBank v Sri VikramCottonMills,
(1970) 1 SCC 60:AIR1970SC1973;NanakRamvMehinLai,ILR(1877) 1 All 487;
Varghese vAbraham,AIR 1952 TC202,undertakingto seethatthecreditorwouldbe paid.
7. SupremeCourtofNorthCarolina,(1924) 121 SE659;187 NC 393.CollectedfromShepherd
&cWellington:ContractsandContractRemedies,(1957,4thEdn) 373; see alsoJuggutt
IndarNarainRayChowderyvNistiarineeDassee,(1931) 151IC981 (PC).
8. SeealsoMountstephenvLakeman,(1871) LR 7 QB196;affd1874 LR 7HL17wherethe
chairmanof aBoard,speakingpersonally,assuredpaymentto acontractorforcertainworks.
This was held to be apersonalundertakingand not aguarantee.Anundertakingtodischarge
theliabilityofanotherwithoutanyrequestfrom him creates anindependentliabilityand not
collateralasthatof aguarantor.N.S. Varghese vDhanalakshmiBank Ltd,1997AIHC1820
(Ker),repaymentofbankloan enrouteco-operativesociety, did not make thelatteraguaran
torfor theloan.ChananaSteel Tubes (P)LtdvJaituSteel Tubes (P)Ltd,AIR2000HP 48,
apartyintroducedto abusinessmanacertainpersonas acustomer.It did notmeanthatthe
introducerbecame aguarantorfor theperson.KinkarSantanandaSanyasivSBI,AIR2002
Ori114,jointholdersof FDR in abank,payabletoeitherorsurvivor,on thedeathof one of
them, theothercan nodoubtcollectpaymentbut he isaccountableto the legal heirs of the
deceasedjoint-depositor.United BankofIndiavRafiullaTeaandIndustries(P) Ltd, AIR
2002Gau 101,bankcashcertificate,paymentnotallowedto berefusedon thegroundthat
therewas alitigationwiththecertificateholder.
9.PollenDealcom(P)LtdvChambalFertilizers&Chemicals,(2010) 92AIC695(Cal).
10.IndianOverseasBankvSNGCastorete(P)Ltd,AIR2002Del309.https://t.me/LawCollegeNotes_Stuffs

743. [S. 126] Essentialfeaturesofguarantee601
of its associatecompanythatit hadcapabilitiesofmeetingitsfinancialand
contractualobligations,thecourtsaidthattheletterwas in thenatureof a
recommendatorydocument.Itcouldnotbeconstruedas aguaranteethere
beingnothingin itshowingthattheholdingcompanywasunderstanding
todischargeanyliabilityof itsassociatein the event of thelatter'sdefault."
ESSENTIALFEATURESOFGUARANTEE
The following are the requisites of a validguarantee:
1.Principaldebt
Recoverabledebtnecessary
Thepurposeof aguaranteebeing to secure thepaymentof a debt, the
existenceof arecoverabledebtisnecessary.^^It is of the essence of aguaran
teethatthereshouldbesomeoneliable as aprincipaldebtorandthesurety
undertakesto be liable on hisdefault.^^If there is noprincipaldebt,there
can be no valid guarantee.^'' "Acontractofguaranteeis atripartiteagree
ment whichcontemplatestheprincipaldebtor,thecreditorand thesurety.""
This was so held by theHouseof Lords in theScottishcase of Swan vBank
ofScotland,decidedas early as 1836.
The payment of the overdraft of a banker's customer wasguaranteed
by the defendant. Theoverdraftswerecontraryto astatute,which not
only imposed penalty upon the parties to such drafts but also made them
void. The customer having defaulted, the surety was sued for the loss.
But he was heldnotliable.Thecourtsaidthat"ifthereisnothingdue, no
balance, the obligation to makethatnothinggoodamountsitself tonothing.
If no debt is due, if thebankerisforbiddenfrom having any claimagainsthis
customer,there is noliabilityincurredby theco-obligers"."
11. United Breweries (Holding) Ltd vKarnatakaStateIndustrialInvestmentandDevelopment
&Corpn,AIR2012Kar65 (DB).
12.MountstephenvLakeman,(1871)LR7 QB196,202.
13.HarburgIndiaRubberComb Co vMartin,(1902) 1 KB 778 (CA).
14. A guarantee for a debt already barred by time,held,void. Manju Mahadev v Shivappa Manju
Shetti,ILR(1918)42Bom444.
15.MahabirShum Sher v Lloyds Bank, AIR 1968Cal371, 377 per Ray J, reiterated by the
SupremeCourt in the case cited in Note 5 above. The surety agrees to run the risk on express
or implied request.K.V.PeriyamiannaMarakkayarand Sons v Banians & Co, ILR (1925)
49Mad156: AIR1926Mad544;RamacbandraB.LoyalkavShapurjiN.Bhownagree,AIR
1940 Bom3\5-,JagannathBaksh Singhv Chandra Bhushan Singh,AIR 1937 Oudh 19: (1936)
12 Luck 484. The signing of a solvencycertificate does not make one aguarantorfor the debt
of the person whosesolvencyis certified.Joseph Abraham v Tahsildar Meenachil, AIR 1971
Ker334.
16. (1836) 10BlighNS 627. See also Lima Leitao & Co Ltd v Union of India, AIR 1968Goa'
29; Mahabir Shum Sher v Lloyds Bank, AIR 1968 Cal 371;A.Y.Varadarajulu Naidu vK.V.
ThavasiNadar,AIR1963Mad413.
17. See also Lima Leitao & Co Ltd v Union of India, AIR 1968 Goa 29;AgendaAgenda
NationalLtdv A.Socie-dadeChowgule& Cia Ltd, AIR1967Goa 88.https://t.me/LawCollegeNotes_Stuffs

744. 602Chapter12Guarantee [S.126]
Guaranteefor void debt, whenenforceable
Butsometimesaguaranteeeven for a void debt may be heldenforceable.
Where, for example, the directors of a companyguaranteedtheircompany's
loanwhichwas void as beingultravires,thedirectorswereneverthelessheld
liable.^^Thereason"may bethatthe voidness of acontracttoguaranteethe
debt of acompanyactingultravires isdifferentin itsconsequencefrom the
voidnessbroughtaboutby the express andemphaticlanguageof astatute".^'
Guaranteeofminor'sdebt
Asimilarproblem arises when the debt of aminorhas beenguaranteed.
The debt being void, is thesuretyliable? TheCourtof King's Bench con
sidered thequestioninCoutts& Co vBrowneLecky^"andheldthatno
liability should beincurredby the surety. The head note to thereportsays:
"A loan, by way ofoverdraftmade by abankto aninfantbeing void
under Section 1, of theInfants'Relief Act, 1874, theguarantorsof the
loan, where the fact of infancy isknownto allparties,cannotbe made
liable in anactionon theguarantee."
OliverJ said:"Apartfromauthorityit wouldcertainlyseemstrange
if acontractto make the debt default ormiscarriageofanother,could be
binding where, by statute, the loanguaranteedis, in terms, made absolutely
void. Looking at thematterbroadly, how, in thesecircumstances,can the
omissionby aninfantto paywhatis made void bystatutebedescribedas
either a debt, a default or a miscarriage? There is no debt here because the
Act of 1874 saysso;^^there is nodefault,for theinfantisentitledtoomitto
pay, andthereis nomiscarriagefor the samereason."^^
In India it has been held, following earlier English authorities,thatwhere
a minor's debt has been knowinglyguaranteed,the surety should be held
liable as a principal debtorhimself.InKashiba BinNarsapaNikadev
NarshivShripat^'*the Bombay HighCourtobserved: "A surety to a bond
passed by a minor for moneys borrowed for purposes of litigation not found
to benecessary,is liable to be sued on itwhetherthecontractof theminor
is considered to be void orvoidable.We see no reason why a person can
notcontracttoguaranteetheperformanceby athirdpersonof a duty of
18.YorkshireRailway Wagon Co v Maclure, 1881 19 Ch D 478(CA);GarrardvJames, (1925) 1
Ch616.
19.OliverJ inCoutts& Co vBrowneLecky, 1947 KB 10.
20.1947KB 10:(1946)2 AllER207.
21. TheInfants'ReliefAct, 1874, S. 1.
22. For a criticism of this decisionsee E.J. Cohn,Validityof Guarantees for Debts of Minors,
(1947)10ModLR40.
23.NarsapaNikade v Narshiv Shripat, ILR(1895)19 Bom 697,followingWathier v Wilson,
(1911)27 TLR 582. For other decisions see SohanLaiv Puran Singh, (1916) 54 Punj Rec 165;
TikkiLaiJaithuTeliv Komalchand, AIR 1940 Nag 327.
24. ILR (1895) 19 Bom 697. See alsoInderSingh vThakarSingh, (1921) 2 Lah 207: AIR 1921 Lah
20;JagannathGaneshramvShivnarayanBhagirath,AIR1940Bom247;ILR 1940 Bom 387.https://t.me/LawCollegeNotes_Stuffs

745. [S,127] Essential features ofguarantee603
imperfect obligation. If the debt is void, the contract of the so-called surety
is not collateral, but aprincipalcontract."^^
2.Consideration
Likeeveryother contract, a contract of guarantee should also be sup
portedbysomeconsideration.Aguaranteewithoutconsiderationisvoid.^^
But thereneedbe no directconsiderationbetween thesuretyand the credi
tor. Section127clearlysays:
S.127Considerationforguarantee.—Anythingdone,oranypromise
made,forthebenefitoftheprincipaldebtor,may be a sufficientconsideration
tothesuretyfor givingtheguarantee.
Illustrations
{a)Brequestsy(tosellanddelivertohimgoodsoncredit.Aagreestodoso,provicledCwili
guaranteethepaymentoftheprice ofthegoods.Cpromisestoguaranteethepayment
inconsiderationof/I'spromisetodeliverthegoods.This|sa sufficientconsiderationfor
C'spromise.
(b)A sells and deliversgoodstofi.CafterwardsrequestsA toforbeartosueS forthedebt
for a year, andpromisesthat,if hedoesso, Cwill pay forthemindefaultofpaymentby
fi.y4:agreestoforbearasrequested.This is a sufficientconslderatlpnfor C'spromise.^®
(c)^sells and deliversgoodstoB.Cafterwards,withoutconsideration,, agrees to pay for
themindefaultof6.TheagreementIs void.
Thus where a loan is given or goods sold on credit onthe;basis of aguar
antee that: is sufficientconsideration.^^Similarly, where acredithasalready
beengiven,and thepaymenthavingbeconiediie,thecreditorrefrains from
25}In England also it has been held that in such cases theguarantorshould beheld-liableas an
indemnifier,YeomanCreditLtdvLatter,(1961). 1WLR828:(-1961)2AllER294(CA).
AllahabadJalSansthanvStateofU.P.,AIR2004All 366,ratesofpremiumnotallowedto
be unilaterally increased. SiddhivinayakBlealitiiss(P)Ltd v Tulip Hospitality ServicesLtd,
(2007)4SGC612: AIR2007SC 1457,agreementforpurchaserofhotelproperty,default,
matter to bedecidedbyescrowagentsjointly,therewas apossibilityofa detailedcross-exain-
inationof ah escrow agent on the aspects of default, hence, he couldnotbe a judge in hisown
cause;
26.JahakiPaulvDhokar MallKidarbux,(1935)156IC200; RamNarainv Hart Singh, AIR
1964Raj: 76:ILR(1963)13 Raj973;
27.BestCJ observed inMare/yv Boothby, (1825) 3 Bing107that "no court of common law has
ever saidthatthereshouldbe aconsiderationdirectlybetween thepersonsgiving and receiv
ing theguarantee.It is enough if thepersonfor whom theguarantorbecomessuretyreceives a
benefit, or the person to whom theguaranteeis given suffers inconvenience, as an inducement
to thesuretytobecomeguarantorfor theprincipaldebtor".
28. The Patna HighCourtsimilarly held that aguaranteeon the implied request of the princi
pal debtor is binding. Aguaranteegiven after the execution of the loandocumentis valid.
PrasanjitMahthavUnitedCommercialBankLtd,AIR1979Pat 151.
29.SBIVKusumVallabhdasThakkar,(1994) 1GLH62: (1994).1Guj LR 655,forbearanceon
thepartof the creditor in filing a suit against one of the debtors was held to be a good consid
eration for theguarantee.Union Bank ofIndiav MoninEnterprises,AIR 2002 Kant 270, the
borrower was enjoying cash-credit facility from the bankwithoutanyguarantee,the facility
was alsoenhancedfrom time to time,guaranteetakenafterthe facility was finallyenhanced
andwithdrawalallowedwithoutguarantee,theguaranteedid notmentionanythingabout
past debts. Hence there was nothing done on the basis of theguaranteeeither in the present or
in thepast.Theguaranteewaswithoutconsideration.https://t.me/LawCollegeNotes_Stuffs

746. 604Chapter12Guarantee [S. 127]
suingthe principal debtor, that would be asufficientconsideration for giving
aguarantee.^"
Wheretheconsiderationfailed,thecourtsaidthattherewas noquestion
ofrecoveringanything from the principal debtor or of enforcing his bank
guarantee. In this case, thecontractwas for cutting and removing timber
from a forest. Payment for the same wasguaranteedby abankguaran
tee. The forestauthoritiesdid notpermitthe cutting.Considerationfailed.
Neitherthe bankguaranteecould be invoked nor thecontractor'searnest
money could beforfeited.^^
Guaranteeforpastdebt
But aguaranteefor apastdebt should be invalid. The section says
that"anythingdone...forthe benefit of the principaldebtor"is good
consideration.^^
But will the words"anythingdone" includethingsdone before theguar
antee was given? TheOudhHighCourtin M.GulamHusainKhan v M.
FaiyazAHKhan^^answered this question in the affirmative.
A lessee agreed to pay the sum due under a lease bycertaininstalments
and after a few days a person executed asuretybondJbinding himself to
pay a certain amount in default of the payment of instalments.
Thecourtheldthatthebondwasnotwithoutconsideration.^''Thedeci
sionhasbeencriticisedinPollockandMulla.Thelearnededitorsobserve:
"Thisseems toattributeanunnaturalmeaningto theword,which,it is
submittedandastherestofthesectionshows,referstoanexecutedas dis
tinguishedfromanexecutoryconsideration."^^
The decision also seems to becontraryto thethirdillustrationto the
section.^^
30.MadanLaiSobe vRajasthanStateIndustrialDevelopment&InvestmentCorpnLtd,(2006)
135 DLT 554,guaranteeforsecuringforbearance.
31.UjjalTransportAgency vCoalIndiaLtd,AIR 2011Jha34.
32. It is not necessarythattheguarantorshould draw somepersofialbenefit.SornalingaMudali
VPachaiNaickan,ILR(1915) 38Mad680;PestonjiManekjiModyv BaiMeherbai,AIR
1928 Bom 539. Theconsiderationmustalso belawful.CoopervJoel,(1859) 45 ER350,
aconsiderationwhichfailed;HetRamvDeviPrasad,(1881) 1 AllWN2,withdrawalofa
non-compoundablecase.
33. AIR1940Oudh346.SBIvPremcoSaw Mills, AIR1984Guj 93,forbearanceto sue on the
partof thecreditoris agoodconsiderationfor aguarantee.
34.Reliancewas placeduponthefollowingdecisions:MathraDasvShambooNath,AIR1929
Lah203;KalicharanvAbdulRehman,(1919) 10LW34:AIR1918 PC226.
35.IndianContractandSpecificReliefActs(8th Edn bySetalvadandGooderson,1957)
517.
36. TheAndhraPradesh HighCourthassupportedthe viewthatpastconsiderationis not good.
MirNiyamathAliKhan vCommercial&IndustrialBank,AIR 1969 AP 294. But the judi
cialopinionis still inconflict.SeeKalicharanvAbdulRehman,(1919) 10 LW 34: AIR 1918
PC226,aguaranteefor leasingtransactionswas held not to cover leasingagreementswhich
wereconcludedbefore thedateof theguarantee.PerryleaseLtdvImecarA.G.,(1988) 1
WLR463 (QB). TheBombayHighCourthasobservedinUnionBankofIndiavAvinashP.
CASEPILOT Bhonsle,1991MahLJ1004that;It is wellsettledthatjust asillustrationsshouldnotbereadhttps://t.me/LawCollegeNotes_Stuffs

747. [S.127] Essentialfeaturesofguarantee605
In a case before the. Bombay HighCourt^^,aguaranteewas executed
subsequentto release' of financialassistanceto theborrower.Thecourtheld
thatit could not be saidthatthere was noconsiderationfor theguarantee.In
the view of thecourt,"pastconsiderationis validconsideration".
fastas well asfuturedebt
Aguaranteefor a past as well as a future debt is enforceable provided
somefurtherdebt isincurredaftertheguarantee.But thereshouldbe a clear
undertakingto be liable for a pastdebt^®and as soon as some fresh obliga
tion isincurred,theliabilityfor all theobligationsiscoupledup.^^
Benefitofprincipaldebtor,enoughconsideration
If theprincipaldebtorgets a benefit,thatsuffices tosustaintheguaran
tee. Itwillbe of noconsequenceto saythattheprincipaldebtorhadnever
requestedfor aguaranteeorthatit was givenwithouthisknowledgeor
consent. Acontentionof thiskindwasrefutedby thePatnaHighCourtin
acase''"where thedirectorsof a company whoguaranteedthe company's
loansarguedthat thecompanyhadneveraskedfor theguarantee.Thecourt
relied upon the following statement of LordLoreburn;''^"Thereare three
possiblevariationsin thepartiestocontractofsuretyship.The firstandthe
simplest case isthatinwhichall thethreepartiesconcernedarepartiesto
thecontractin the sensethatboththeprincipaldebtorandcreditoragree
thatthesurety'sliabilityis asecondaryliabilityonly, andthattheprincipal
debtorisprimarilyliable for theobligationsguaranteed.But it is also pos
siblethatthecontractofsuretyshipmay berecognisedonly asbetweenthe
principaldebtor and the surety, or as between the creditor and the surety,
asextendingthemeaningof asection,they should also not be read asrestrictingitsoperation,
especially so, when the effect would be tocurtaila right which the plain words of the section
would confer. It is,therefore,clearthatwhen thelanguageof thetextof S. 127 of theContract
Act is clear andunambiguous,the sweep of thetextcannotbecurtailedby usingIllustration
(c) to impose alimitationon theexpression"anythingdone or any promise made for the
benefit of theprincipaldebtor"thatit should be done at the time of giving theguarantee.The
languageis wideenoughto include any thingthatwas done or a promise made before giving
theguaranteeand would notrestricttheapplicationof the section only towhatwas contem
poraneouslydone. SeefurtherAllahabadBankv S.M.EnggIndustries,(1992) 1CalLJ 448
wherethebankwasnotallowedto sue thesuretywithoutfurtheror anyadvancemadeafter
the date of theguarantee.
37. SICOMLtdVPadtnashriMahipatraiShah,(2005)3 Mah LJ125. The court further heldthat
where aguaranteewas given inconsiderationof anamountlent andadvanced,it was not
required in law that there should be an independent consideration for each of the clauses.
38.MorrellvCowan,(1877) 7 Ch D 151.
39. See, e.g.,CarlesberyBreweryMalaysiavSoonHengA.W.&Sons,(1989) 1 MLJ 104
(Malaysia) Kota Bahri, where thecourton goingthroughtheguaranteefoundthatit was
withinthecontemplationof thepartiesthattheguarantorswere to besaddledwithliabilities
not onlyafterbut also before the signing of theguarantee.Following, EssoStandardMalaya
VSouthernCross Airways,(1972) 1MaiLJ 168.
40.PrasanjitMahthavUnitedCommercialBankLtd,AIR1979Pat 151.
41.DuncanFox&CovNorth&SouthWalesBank,(1880)LR6 AC 1(HL).
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748. 606Chapter12Guarantee [Ss.142-143]
in which event the rights and duties arising out of thecontractof suretyship
onlyaffectthoseparties."
Counter-guarantee
A counter guarantee is forprotectionof the originalguarantor.When the
originalguarantoris called upon to pay and he has fulfilled his obligation
under his guarantees, he can call upon the counterguarantorto payhim.''^
Thedocumentsfiled by theplaintiffshowedthatthedefendanthadgiven a
counter-guaranteein favour of theplaintiffto cover the contingency of the
plaintiff having to pay any amount as a result of the invocation of the bank
guarantee. The defendant failed to pay. The plaintiff was held to be entitled
to a decreeagainstthedefendant."*^
3.Misrepresentationandconcealment
Acontractof guarantee is not acontractuberrimaefides or one of abso
lute goodfaith.''"'Thus where abankerreceived aguaranteewith knowledge
ofcircumstancesseriouslyaffectingthecreditof thecustomer,it was held
thatthere was no duty to disclose this fact to thesurety."*^Yet"itis the
duty of apartytakingaguaranteeto put thesuretyin possession of all
the facts likely to affect the degree of hisresponsibility;and if he neglects
to do so, it is at his peril. A surety ought to beacquaintedwith the whole
contractenteredintowithhisprincipal."Whereapersonpurchasedland
withoutdisclosingthathe was doing so onbehalfof a society forwhichthe
suretywouldnot have given theguaranteebecause the society wasalready
embroiled in litigation, thecourtheldthatit could be saidthatthe consent
of thesuretywastakenby suppressing the vital fact from him and therefore
he wasnotboundby theguarantee."*^Sections 142and143implementthese
principles. Sections 142 and 143 provides:
S. 142.Guaranteeobtainedbymisrepresentation,invalid.—Anyguar
anteeobtainedbymeansofmisrepresentationmadebytiiecreditoror with his
knowledgeandassent,concerningamaterialpartofthetransaction,is invalid.
S. 143.Guaranteeobtainedbyconcealment,invalid.—Anyguarantee
whichthecreditorhasobtainedbymeansofkeepingsilenceas tomaterialcir
cumstancesisinvalid.
42.KarnatakaStateIndustrialInvestmentCorpnvStateBankofIndia,(2005)1 CLT 437
(Kant,DB): (2004) 3CCC568,limitationforclaimagainstcounterguarantorstartsrunning
from the date ofpaymentby theguarantor.
43.PunjabNationalBankvMayaEnterprises,AIR2003NOC299(Del):(2002)62 DRJ729.
44.SeeDaviesvLondon&ProvincialMarineInsuranceCo, (1878) LR 8 Ch D 469.
45. NationalProvincialBank of England Ltd vGlanusk,(1913)3KB335.Seealso Bank of
ScotlandvMorrison,1911 SC 593;CoopervNationalProvincialBankLtd,1946KB 1.
Acreditor'sfailure to disclose to aguarantoramaterialfactknownto him willvitiatethe
guaranteeif thenon-disclosureamountsto amisrepresentation.Thesuppressionof a fact will
amounttomisrepresentationif the fact isinconsistentwiththepresumedbasis of thecontract
ofguarantee,WestpacSecuritiesvDickie,(1991) 1NZLR 657 (CA).
46.ShriniwasShankarPotnisvRaghukulSahakariGriharachanaSansthaMaryadit,(2010) 1
MahLJ368.https://t.me/LawCollegeNotes_Stuffs

749. [S.143] Essential features of guarantee 607
Illustrations
{a)Aengages Bas clerkto collect money for him.Bfallsto account for some ofhisreceipts,
and Ainconsequencecallsupon himto furnishsecurityforhisduly accounting. Cgives
hisguaranteeforfi'sduly accounting. Adoes notacquaintCwithS'spreviousconduct.
Bafterwardsmakesdefault.Theguaranteeis invalid.
(6)Aguaranteesto Cpaymentfor iron to be supplied by him to Bto theamountof 2000
tons. Band C have privatelyagreedthat Bshould pay five rupees per ton beyond the
market price, such excess to beappliedin liquidation of an olddebt.Thisagreementis
concealedfrom A.A Is not liable as a surety.
Guarantees for the good conduct of a servant have invited more frequent
appUcations of this principle. A very illustrative case isLondonGeneral
OmnibusCo vHolloway.^^
The defisndant was invited to give aguaranteefor the fidelity of
aservant.The employer hadearlierdismissed him fordishonesty,but
didnotdisclose this fact to the surety. Theservantcommittedanother
embezzlement.
Thesuretyw^asheld not liable."Thesuretybelievedthathew^asmaking
himself answerable for apresumablyhonestman,not for aknownthief."
Everysuretyundertakesthe risk ofdefault,whichismorein some cases
and less inothersdependinguponcircumstances.If thecreditorisaware
ofcircumstancesaffecting the risk, he should make the surety equally
aware. Similarly, in a case before the Lahore HighCourt,freshguaran
tees wereobtainedfor the fidelity of amanagerof abankwithoutdisclos
ing his previousdefalcations,the sureties were held not liable forfurther
defalcation."*®
LordChelmsfordobserved,withregardto aguaranteeotherthana
guaranteeof fidelitythatacreditorisundernoobligationtoinforman
intendedsuretyofmattersaffectingthecreditof thedebtor,or of any cir
cumstancesconnectedwiththetransactioninwhichhe isaboutto engage
whichwillrenderthepositionhazardous."*' To the same effect is anobser
vationin aScottishcase.Thereisnothingin"authoritiesforholdingthat
the factthatsuspiciouscircumstancesarise to theknowledgeof acreditor,
andare notcommunicatedat once to thecautioneris agroundforholding
acautionerfreed from hisobligation".^®Referringto thepositionof abank,
itwasobservedinthesamecase:"Thereis noauthorityfortheviewthat
it is thedutyof abank,wheneveritbecomesawareof anycircumstances
seriouslyaffectingthecreditof acustomer,tocommunicateat oncewith
47.(1912)2 KB72(CA).
48. CoopCommissionShopLtdv Udham Singh, AIR1944Lah 424.
49. Wythes vLabouchere,(1859) 3 DeG&J593.
50. BankofScotlandvMorrison,1911 SC 593,Scotland.Where thenatureof thetransaction
showedthatthe whole tenor ofguaranteepapers wasconcealedfrom thesuretyand he was
made to sign the last page only, thecourtheldthattheguaranteeletterdid not seem to be
genuine. Factsfurthershowedthattheborrowerwasprosecutingacriminalcaseagainstthe
surety. Union BankofIndiav M.P.SreedharanKartha,AIR 1993 Ker 285.
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750. 608 Chapter 12 Guarantee [S.128]
any of thatcustomer'sfriendswho mayhavecashcreditson his behalf or
guaranteesfor hispecuniaryobligation."^^
4.Writingnotnecessary
Section 126 expressly declaresthata guarantee may be either oral or
written/^But in England under the provisions of the Statute of Frauds a
guarantee is notenforceableunless it is "in writing and signed by theparty
to becharged".
EXTENTOFSURETY'SLIABILITY
Thefundamentalprincipleaboutthesurety'sliability, as laid down in
Section128,isthattheliabilityof thesuretyisco-extensivewiththatof the
principaldebtor. The surety may, however, by an agreement place a limit
uponhis liability. Thesectionis as follows:
S. 128.Surety'sliability.—Theliability ofthesuretyisco-extensivewith
thatoftheprincipaldebtor,unless it isotherwiseprovidedbythecontract.
51. Thecreditor(abankin this case) isundera duty to disclose to thesuretycontractualarrange
ments between the principal debtor and the creditor which made the terms of the princi
palcontractsomethingmateriallydifferentin aparticularlydisadvantgeousrespect to those
whichthesuretymightactuallyexpect,LevettvBarclaysBankpic,{1995) 1WLR1260.In
asuiton a deed ofguarantee,the pleathattheblanksin the deed were filled insubsequently
wasnotsustainablebecauseallentrieswereinitialled.
52. Since an oralguaranteeis also valid, apersonwhootherwiseappearedto be aguarantor
was heldliablethoughhissignaturedidnotappearonguaranteepapers.P.J.Rajappanv
AssociateIndustries(P)Ltd,(1990) 1 KLJ 77. Awrittenguaranteemay bespelledoutfrom
morethanonedocuments.S.ChattanathaKarayalarvCentralBankofIndiaLtd,AIR1965
SC 1856: (1965) 3 SCR 318. Awrittenguaranteewould have to satisfy therequirementsof
the Stamp Act.KarnatakaStateIndustrialInvestment&DevelopmentCorpnLtdvState
BankofIndia,(2005) 1 CLT 437: (2004) 3 CCC 568 (Kant), aguaranteeinwritingremains
enforceable even ifstampduty is notpaid,becausestampduty can be paid at any subse
quentstage.ShriBishwakarmaFurnitureWorkshopvSantanuSarkar,(2006)5 AIRKant
(NOC)762 (Jha); AIR2006Jhar89:2006AIHC2511,defendantguaranteedrepaymentof
loan, failure ofborrowerto pay backamountdeductedfrom theguarantor'sfixed deposit.
Guarantorsuedtheborrowerandthelatterwas heldliabletoreimbursetheguarantor.But
registrationisnotcompulsory.SeeKarnatakaStateIndustrialInvestmentandDevpCorpn
LtdVSBI,(2004) 4KantLJ266(DB),wherethecourtalso heldthatthoughthetransaction
is atripartitearrangement,all thepartieshave not toexecuteitsimultaneously.
53. S.4.ActionstrengthLtd v international GlassEnggIN.GL.ENSpA,(2002)1 WLR 566(2)
(CA),aperspnmay incur liability under an oral guarantee if he is estopped by reason of his
representationsorconductfromcontendingthattheguaranteewasoral.However,no such
estoppel could beshownin this case. There was norepresentationby the employercompany
to thesub-contractorthatitwouldhonourtheagreementdespitetheabsenceofwritingor
thatitwouldconfirmthe oralagreementbywriting.Anotheroffshootof thesamelitigation
was inActionstrengthLtdvInternationalGlassEnggIN.GL.ENSpA, (2002) 1WLR566
(2): (2002) 4 All ER 468 (CA), apromiseisnotcapableofbecomingaguaranteeif theprom-
iserundertakesliabilityinrespectof assets orsourceswithinhiscontrol,vide S. 4,Statuteof
Frauds,1877. C.S. Co vPunjab&SindBank,(2003) 3 KLT808,no suit can safely bedecreed
on thephotostatcopy of thebankguarantee,termsandconditionscan be giveneffectto only
when theguarantorsareproduced.https://t.me/LawCollegeNotes_Stuffs

751. [S. 128] Extentofsurety'sliability609
Illustration
Aguaranteesto Sthepaymentof abillofexchangeby C,theacceptor.Thebillisdishon
ouredbyC.Ais liablenotonly fortheamountofthebillbutalso for anyinterestandcharges
which may havebecomedueon it.
1.Co-extensive
The firstprinciplegoverningsurety'sliabilityisthatit isco-extensivewith
thatof theprincipaldebtor. Theexpression"co-extensivewiththatof the
principaldebtor"shows themaximumextentof thesurety'sliability. He is
liable for the whole of theamountforwhichtheprincipaldebtoris liable
andhe is liable for nomore.^'*The onlyillusttationappendedto thesection
saysthatif thepaymentof aloanbondisguaranteed,thesuretyis liablenot
only for theamountof theloan,but also for anyinterestandchargeswhich
may have become due onit."Where theprincipaldebtor acknowledges lia
bility and this has the effect ofextendingthe period oflimitationagainst
him thesuretyalso becomesaffectedbyit.^^
Where theoverdraftsof a company wereguaranteedby the company's
directorsand thebankerhad recovered apartof the loan by disposing of
54. Thus a guarantor of rent was held not liable for interest on rent because the principal debtor
himself was not so liable.MaharajaofBenaresvHarNarainSingh,ILR(1906-07)28 All
25. Under the agreement in this case, and even otherwise, the surety is liable not only for the
principal amount but for interest on the principal amount and charges incurred in enforcing
theliability.The court held that the trial court erred indecreeingthe suit against the surety for
onlythe principal amountexcludinginterest and costs. Indian Over SeasBank v G.Ramulu,
(1999)2ALD104.
55. For a parallel case see Nandlal Chogalal vSurajmalGangaram, AIR 1932 Nag 62. The
expression"co-extensive"also shows the nature of liability.Thus where in a suit against the
principal debtor and surety, the principal debtor was ordered to pay in instalments and the
suit against the surety was dismissed, this dismissal was held to be not proper.SBIv Sajita
Engg Works, AIR 1992 Ori 237. The court followed thedecisipnof theSupremeCourt in
Bank of Bihar Ltd vDamodarPrasad, AIR 1969 SC 297:(1969)1 SCR 620 and Nanda
DulalSen v Rao & Sons, (1972) 38 Cutt LT 959 where it was heldthatthe decree against
the surety would not be executed till the principal debtor paid off the dues by instalments
allowed by the court andthus,the liability of the guarantor was not wiped out. In all pro
ceedings against the principal debtor, his sureties are a proper party.IndustrialFinance
Corpn of India vP.V.K.Papers Ltd, AIR 1992 All 239. This is so becausethe liability is joint
andseveral.SureshNarainSinhavAkhauriBalbhadraPrasad,AIR1957Pat256;Madho
Sah VSitaramSah, AIR 1962 Pat 405. The period of limitation against the principal debtor
and the surety is the same, Union Bank of India v Suresh Bhailal Mehta, AIR 1997 Guj
48; D. Pandi vDhanalakshmiBank Ltd, AIR 2001 Mad 243, signature of the surety on
bank loan and guaranteedocumentsproved,suretyliable.E.P.Georgev Bank of India,
AIR 2001 Ker 107, a guarantor is also a debtor and if the creditor is demanding a security
. from the surety also, he should be able to provide security by an equitable mortgage of his
property.
56. Bank of India v Surendra Kumar Mishra, (2003) 1 BC 45 (Jhar):(2003)1 Bankmann 551;
VyasydBank Ltd vDGFT,(2003)6ALD241,liabilitywhollydependsupon the terms of
the contract. Writ petition notallowedfor knowingwhether interest waspayable.Civilsuit
advised.Kailash Nath Agarwal vPradeshiyaIndustrial & Investment Corpn ofU.P.Ltd,
(2003)4see305: AIR 2003 SC 1886, joint and severalliability created under a guarantee
bond.https://t.me/LawCollegeNotes_Stuffs

752. 610Chapter12Guarantee [S. 144]
certain goods belonging to the company, theMadrasHighCourtheldthat
theliabilityof thesuretyhadgonedownaccordingly."
Under theguaranteeclause, theguarantoragreed to beboundby any
judgment or awardobtainedby the lender bankagainsttheprincipaldebtor.
It was accordingly heldthatasettlementor compromisebetweenthebank
and theprincipaldebtor was binding upon theguarantor.The mere absence
of knowledge on thepartof theguarantorof thejointsettlementmemo was
of noconsequence.^®
One of therequirementsof anauctionnoticeunderthe SARFAESI
Act,2002,isthatthedetailsof theborrowermustbe given.Theauction
noticeinthiscasestatedthedetailsonly of theguarantor.Thiswas held
asnotaffectingvalidityof thenoticebecauseaguarantoris also a buyer
becausehe isequally(co-extensive) liablewiththeborrower.^'
Theliabilityof theguarantorcannotgo beyond the terms of theguar
antee. Abankwas notallowedto recover from theguarantorliabilitydue
underpre-existingdebtswhentherewas nomentionofsuchliabilityin the
guaranteewhichhad beenframedby thebankitself. The SupremeCourt
howeverpointedoutthatthis does not meanthatno liability can be fastened
uponaguarantorforpre-existingdebts.
Aguaranteewas given to abankfor theborrower'sloan. Theguarantor
gave a notice to thebankwithdrawinghisguarantee.Theguaranteecarried
a provision to the effectthatit would cease to exist after the expiry ofthree
months from the date of notice. Thecourtsaidthatthe guairantor could not
be held liable after suchexpiryoftime.^^
Conditionprecedent
Where there is a condition precedent to the surety's liability, he will not
be liable unlessthatcondition isfirstfulfilled. Apartialrecognition of this
principle is to be found in Section 144 whichsays:^^
Where apersongives aguaranteeuponacontractthatcreditorshallnotact
upon it untilanotherpersonhasjoinedin it as co-surety,theguaranteeis not
valid ifthatotherpersondoesnotjoin.
57.HargopalAgarwalvSBI, AIR 1956 Mad 211; Syndicate Bank vK.Manohara,AIR 2003 Ker
284, the surety and theborrowerwereheldliable jointly and severally. Central Bank ofIndia
VAntony Hardware Mart, (2006) 3 CTC 285 (Mad), no notice has to be given to the surety
beforefilinga case on him. A decreecan be executedagainst the surety without first proceed
ingagainsttheprincipaldebtor.
58.CentralBankofIndiav C.L.Vimla,(2015) 7 SCC 337: (2015) 3 SCC (Civ) 601.
59.JagdishSardav SBI,AIR2016Cal2.
60. Central Bank ofIndiavVirudhunagarSteel Rolling Mills Ltd, (2016) 3 SCC (Civ) 664:
(2016)2CHN98.
61.AmalKrishnaKay v Bank ofBaroda,AIR 2014 (NOC) 179(Ori).
62. This showsthatrights and liabilities of asuretyandborroweraredifferentanddistinct
andeverythingdepends upon the terms of theguarantee.See,GlobalTradeFinanceLtdv
SudarshanOverseasLtd, (2010) 4MahLJ 367.https://t.me/LawCollegeNotes_Stuffs

753. [S. 144] Extentofsurety'sliability611
AnillustrationinpointisNationalProvincialBankofEnglandv
Brackenbury.^^
Thedefendantsigned aguaranteewhichon the face of it wasintended
to be a joint and severalguaranteeof threeotherpersons with him. One
ofthemdidnotsign.Therebeing noagreementbetweenthebankand
theco-guarantorsto dispensewithhissignature,thedefendantwas held
notliable.
Thesameresultfollowedwherethesignatureof theco-guarantorwas
forged so as to make itappearthathehadjoined.®'*The facts were:
Theplaintiffsupplied timber to a company of which thedefendant
was adirector.Thecompanybeingunableto pay, theplaintiffagreed to
suspend the claim for a year providedthatthe debt was jointly and sever
allyguaranteedby thecompany'sthreedirectors.Aguaranteeapparently
signed by thedefendantandotherdirectorswas dulyprovided.The com
pany went intoliquidation.Theplaintiffsought to enforce theguarantee.
Before thetrialof theactionit wasdiscoveredthatthesignatureof one of
thedirectorshadbeen forged.
Thecourtsaid: "Ajointguarantorunder aguaranteewhich showed on its
fact that the other jointguarantorswere intended to be parties is not liable
at law if thesignatureof one of the otherguarantorsis forged, since there is
nocontractof guarantee unless all the anticipated parties to thecontractin
factbecamebound."
Proceedingagainst suretywithoutexhausting remediesagainst debtor
Where the liability is otherwise unconditional, thecourtcannotof its
ownintroduceaconditioninto it. This waspointedout by the Supreme
CourtinBankofBiharLtdvDamodarPrasad.^^
63.(1906)22TLR797.
64. James Graham & Co (Timber) Ltd v Southgate Sands, 1986 QB 80.
65. AIR 1969 SC 297: (1969) 1 SCR 620. See alsoLakhiRam Ram Dass vHarPrasadSyal,
(1972)3see337: AIR 1971Se1956. InSatwantSingh Kochhar & Co v PunjabNational
Bank, (1985) 27 DLT 441, where it was held that there was nothing wrong in directing the
sale of guarantor's share in the property first. In Chalamani Narasa Reddyv Collector,(1987)
2 An LT 969, where it was held that it was not legal for the mortgagee to proceed against
guarantor straightaway.TirputiPlywood Product (P) Ltd v Pradeshik Industrial Investment
Corpn ofU.P.Ltd, AIR 1997All364, guarantor can be sued directly without seekingreme
dies against principal debtor. Naba Kishore Sahoo v United Bank of India, 1995AIHe2176
(Ori),the guarantor cannot say that the decreeshould first be executedagainst the borrower
and against him only for the balance. P.C. Ravi v Union Bank of India, 1995AIHC2168
(Ker),failure to impleadlegalrepresentativesof the principal debtor is not a ground for setting
aside the suit against the surety. Pawan Kumar Jain v PradeshiyaIndustrialand Investment
Corpn of U.P. Ltd, 1998 AIHC 1360(All),initiation of recovery proceedings only against
the guarantor held to be illegal. Vasundhara Oil Industries (P) Ltd v Collector,(1998)33
ALR 29, recoveryofficersfirst proceeding against the pledged and mortgaged property of the
guarantors, held, nothingillegal.Govt of A.P. v State Bank of Hyderabad,(1993)2 AnWR
65(DB),Governmentguarantor, could not say that otheravenuesof liability should be tried
first.KantilalR. Shah vCentralBankofIndia,(1995) 2GLH952, proceedings against surety
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

754. 612Chapter12Guarantee [S. 144]
The defendantguaranteedabank'sloan. A default havingtakenplace,
thedefendantwassued.Thetrialcourtdecreedthatthebankshallenforce
theguaranteein question only after havingexhaustedits remediesagainst
the principal debtor. The Patna HighCourtconfirmed the decree. But the
SupremeCourtoverruledit.
Explainingthataconditionof this kind would defeat theparties'inten
tion, thecourtsaid:"Thevery object of theguaranteeisdefeatedif the
creditoris asked topostponehis remediesagainstthe surety. Is thecreditor
to ask forimprisonmentof theprincipal?Is heboundto discover at hisperil
all thepropertiesof theprincipaland sell them; if hecannot,does he lose his
remedyagainstthe surety?Hashe to file an insolvencypetitionagainstthe
principal?Thetrialcourtgave noreasonfor thisextraordinarydirection.It
saidthattheprincipalwas solvent. But the solvency of theprincipalis not a
sufficientgroundforrestrainingexecutionof the decreeagainstthe surety.
It is the duty of thesuretyto pay thedecretalamount.On suchpaymenthe
will besubrogatedto the rights of thecreditors."^^
And as sosubrogatedmayexhausthis remediesagainstthecreditor.
"Beforepaymentthesuretyhas norighttodictateterms to thecreditorand
ask him to pursue his remediesagainsttheprincipalin the first instance. The
suretyis aguarantor;and it is his business to seethattheprincipalpays, and
notthatofthecreditor."
TheAllahabadHighCourt^^has alsotakenthe similar viewalthough
without reference to the SupremeCourtruling. The loans of a company
were guaranteed. The guarantee stipulatedthatthe liability of the surety
would arise on demand. There was no conditionthatthe financialcorpora
tion should first proceed to recoverthe amount from the hypothecated prop
erty. Thecorporationcouldstraightawayproceedagainstthesuretywithout
first proceeding against the company.The order directing thecorporationto
first proceed against the company was held to be not proper.
alone,maintainable.D.F.C.FinancialServices v Coffey, (1991) BCC 218 PC,guarantorof a
debenture allowed to be proceeded against without making any demand on the company for
payment.P.N.RavivKottayamCoopUrbanBank,(1993) 1 KLJ538,noticeofdefaultto the
suretyandproofofdefaultare necessary.HiranyapravaSamantrayvOrissaStateFinancial
Corpn,AIR 1995 Ori 1,guarantoris entitled to prior notice on principles ofnaturaljustice.
Withoutsuch notice anactionagainsttheguarantorforshortfallcannotbeinstituted.Such
notice should have been given before the auction sale of security. Varghese vDhanalakshmi
Bank Ltd, (1997) 1 KLT 843, the secretary of a societyguaranteeda loan in his individual
capacity,it wasnotnecessaryto join thesocietyas a proformadefendant.RamBahadur
SinghVTehsildar,AIR 2002 All 344, the creditor may proceed straightway against the guar
antorwithoutfirst proceeding against the principal debtor.
66. Bank of Bihar Ltd vDamodarPrasad, AIR 1969 SC 297: (1969) 1 SCR 620. Sunder Singh v
PunjabNationalBank, AIR 1992 All 132, execution of decree against surety before proceed
ing against principal debtor andhypothecatedproperty. Kerala StateFinancialCorpnLtdv
C.J. Thampi, AIR 2000 Ker 36, it was not proper for the court to direct that an order against
the surety should not be passed because the defaulting chitty subscriber's husband was finan
cially well off.
67.U.P.FinancialCorpnvGarlonPolyfebIndustries,AIR2001All286.https://t.me/LawCollegeNotes_Stuffs

755. [S.144] Extent of surety's liability613
In asubsequentcase,theSupremeCourt heldthat the creditormust pro
ceedagainstthemortgagedproperty first and then only against the surety
for thebalance/®evenif the decree is a composite one against the principal
debtor,mortgagedproperty and the guarantor. In that case only a portion
of thedecreewascoveredby the mortgage and the court did notconsider
it relevant whether the two portions of the decree wereseverableor not.
Thisdecisionhas been overruled by theSupremeCourt inSBIvIndexport
Registered.^^In thiscaseacompositedecreewaspassedagainstthesurety,
the borrowerand the mortgagedproperty of the borrower.The High Court
ofDelhi^°directedthatthe decree-holder should first proceed against the
mortgagedpropertyandlevyexecutionagainstthesuretyonlyforthe bal
ance.YogeshwarDayalJsaid:^^"In the present case the decree does not
68.UnionofIndiavMankuNarayana,(1987)2SCC335:AIR1987SC1078.Incontrastto this
seeKwongYikFinancevMutualEndeavour,(1989)1MaiLJ135(HCKualaLumpur)where
itwasheldthatguarantors'liabilitiesarepersonalliabilitiesand are in nowayaffectedby
thechargecreatedinfavourofthecreditorand,therefore,theguarantorscannotsaythatthe
creditorscouldonlyproceedagainstthemiftherewasashortfallin theproceedsof thesale
realisedbytheforeclosureofthechargedproperty;PunjabNationalBankvSurendraPrasad
Sinha,1993Supp(1)SCC499:AIR1992SC1815wheretheSupremeCourtpermittedthe
securitiesdepositedbytheguarantorto berealisedthoughthedebthadbecometime-barred.
69. (1992) 3 SCC 159: AIR 1992 SC 1740.
70. In its decision of23-4-1990,Civil Appeal No. 7434 of 1990.
71.SBIVIndexportRegistered,(1992)3SCC159:AIR1992SC1740.FollowedbytheKerala
HighCourtinSBIvG.].Herman,AIR1998Ker161wherethecourtheldthatinthecaseof
acompositedecree,thecourtortheco-suretycannotinsistthatthecreditorshouldproceed
againstothersuretiesbeforeproceedingagainsthim.Itisthecreditor'soptiontodecidefor
himselfagainstwhomheshouldproceedfirst.Thesuretysoselectedforrecoverywouldhave
therighttorecovercontributionfromtheco-suretiesandindemnityfromtheprincipaldebtor.
Theabsenceofdecreeagainsttheprincipalborrowerisnogroundforsettingasidethedecree
againstthesurety,BalakrishnanvH.ChunnilalBagmar,AIR1998Mad175;SBIvM.P.Iron
andSteelWorks(P)Ltd, AIR 1998 MP 93, actionagainstdirectorsguaranteeingthe com
pany'sloanwasheldtobemaintainableevenwhenproceedingsagainsttheprincipaldebtor
companywerepending.Thebankwasnotboundto waitfortheresultoftheactionagainst
thecompany.Theapplicationofthebanktoattachtheproceedsofthedirector'spersonal
account in the bank was allowed.PermataMerchantBank v Glove Seal,(1994)1 Curr LJ 389
(Malaysia),thebankwasnotboundtoexhaustotherremediesbeforeembarkingontheaction
basedon theguaranteeagreement.Thelendingbankwasundernodutyto theguarantorsas
to how it dealt with the other securities. SBI vGoutmiDeviGupta,AIR 2002 MP 61: (2003)
1BC165,thedecreeholdercannotbedirectedtoproceedagainstthehypothecatedproperty
first. Industrial Investment Bank of India v BiswanathJhunjhunwala,(2009)9 SCC 478,
the SC reiterated that the decree holder can execute the decree against theguarantorwithout
proceedingagainsttheprincipaldebtor.BansilalvPunjabNationalBank,(2010)1MahLJ
101,moneydecreeobtainedbythebankagainsttheprincipaldebtorandguarantor,if the
bankcouldexecutethedecreeagainstoneor the other as per itschoice.Ba?ikofBarodav
J.K.Chemicals,(2010)5MahLJ448,guarantorswerenotallowedthedefencethattheir
signatureswereunderduress,theyalongwithotherdefendantswereheldjointlyandseverally
liable to pay the decree with interest at 12 per cent.
ThispositionwasreaffirmedbytheSupremeCourtinCentralBankofIndiavC.L.
Yimla,(2015)7SCC337:(2015)3SCC(Civ)601,whereitwasobservedthat it is aprerog
ative of the creditor alone whether he would move against the principal debtor first or surety
forrealisingtheloanamount.Rulingsonthepoint,however,continueto becontradictory.
It istoomuchthat ahelpershouldbeputunderthewholeburdenandtheborrowershould
beallowedtoenjoyhisenriching-assets.KamKishunvStateofU.P.,(2012)11SCC511:
(2012)173CompCas105:(2012)4AllLJ653,inthiscaseafarmerhadtakenaloan,hediedhttps://t.me/LawCollegeNotes_Stuffs

756. 614Chapter12Guarantee [S.144]
postpone the execution. Thedecreeis simultaneous and it is jointly and
severally(passed)against all thedefendantsincludingthe guarantor. It is the
right of thedecree-holderto proceed with it in a way he likes."
The courtconcededthat thewayinwhichadecreeis drawn up is an
importantfact to beconsidered."If the compositedecreeis a decreewhich is
both apersonaldecreeaswellas amortgagedecree,without any limitation
on its execution, the decree-holder, in principle,cannotbe forced tofirst
exhaust theremedyby way ofexecutionof themortgagedecreealone and
toldthatonlyiftheamountrecoveredisinsufficient,hecan bepermittedto
take recourse to the execution of the personaldecree.
Where,on the other hand, the saleproceedsof thehypothecatedtruck
were already realised andadjustedagainst thedecreedamount, it was held
that theguarantorhad no right to say that thedecree-holdershould have
firsttried torecoverthebalanceof thedecreedamountbyenforcingthe
decreeagainst the guarantor. Thedecree-holdermay at hischoiceenforce
thedecreeeitheragainsttheprincipaldebtororsurety.^^Adecisionof the
Punjaband Haryana High Court has theeffectofintroducinga human
aspect.The court said that if theprincipaldebtorisfinanciallywelloff and
can discharge his liability under the decree, the creditor should in the first
instancerequirehim to pay and only then hemaybeallowedtoproceed
againstthe surety.
TheSupremeCourt^'*hasalsoheldthatwherethemanagementof a com
panyhasbeentakenoverunderanAct",thatdoesnotdischargetheguar
antors of thecompany'sloans.VenkatramiahJsaid:^^"UnderSection
128of theIndianContractAct,1872,saveasprovidedin thecontract,
theliabilityofthesuretyiscoextensivewiththat oftheprincipaldebtor.
Thesuretythusbecamehabletopaytheentireamount.Theirliabilitywas
immediateandit wasnotdeferreduntilthecreditorexhaustedhisremedies
againstthe principaldebtor.The Actdoesnot saythat when a notificationis
issuedunderSection7(l){b)theremediesagainsttheguarantorsalsostood
suspended."
Actionagainstprincipaldebtoralone
The creditorcanproceedagainsttheprincipaldebtoralone.His suitcan
not berejectedon thegroundthat he has notjoinedtheguarantoras a
defendantto thesuit.^^Dismissalof the suitagainsttheprincipaldebtor
withoutpayingback,withinayearhisfatherwhowasaguarantoralsodied,hislegalheirs
werehauledup,theirlandssold,whereastheprincipaldebtorhadmorelandresources,he
remaineduntouched.Thelegalheirshad losteverything,mightbe with nomeanstorecover
theirindemnity.Thisisoneoftheconsequenceofcreatingmultiplicityofproceedings.
72.NikunjaKishorePradhanvSBI,(1990) 70 Cut LT 416.
73.PanporivCentral Bank of India, (2002) 1ICC838 1(P&H).
74. SBIVSaksariaSugar Mills Ltd, (1986) 2 SCC 145: AIR 1986 SC 868.
75. Sugar Undertaking (Takingover ofManagement)Act, 1978.
76. SBIVSaksaria Sugar Mills Ltd,(1986)2 SCC 145(146):AIR 1986 SC 868.
77. Union Bank of India v Noor Dairy Farms, (1997) 3 Bom CR 126.https://t.me/LawCollegeNotes_Stuffs

757. [S.144] Extentofsurety'sliability615
does not of itselfabsolvethe surety of his liability under the contract of
guarantee/^
Asuretywasallowedto beimpleadedwherehisliabilityhadalreadybeen
reducedand hispositionwouldhavebeenprejudicedif in theproceedings
againsttheprincipaldebtorthisfactwasnotbroughtto thenoticeof the
decidingauthority/^
Suitagainstsuretyalone
Asuitagainstthesuretywithoutevenimpleadingtheprincipaldebtor
has been held to bemaintainable.In this case, the creditor, in his affidavit,
had shownsufficientreasons for notproceedingagainst the principal debt
or.®"Acontractofguaranteewasmadeenforceablebyitstermsagainstthe
guarantorsseverallyandjointlywiththat oftheprincipaldebtorcompany.
It washeldthat the creditorhad the option to sue thecompanyalongwith
guarantorsasco-defendantsorguarantorsalone."
Thismakesthepositionofsuretiesspeciallyvulnerable.The court may
rescuethesuretywherehe wasprevailedupon and,therefore,hisconsent
wasnotfree.Asuretymaybedescribedasvulnerablewherethereis arela
tionshipoftrustandconfidencebetweenhimandthedebtor.Inthiscase,
thewifestoodsuretyforherhusband'sdebts.Shereceivednoindependent
78.KarnatakaStateIndustrialInvestment and Devp Corpn Ltd vSBI,(2004) 4 Kant LJ 266
(DB);KurnoolChiefFunds(P)LtdvP.Narasimha,AIR2008AP38,suitagainsttheprinci
paldebtorwasdismissedfordefauhandthatdecisionhadbecomefinal,noliabilityservived
againsttheprincipaldebtor,liabilityofthesuretyended.
79.B.R.Thadani vOrientalBank of Commerce, (2002) 2 Bom CR 263.
80. N. Narasimahaiah v Karnataka State Financial Corpn, AIR 2004 Kant 46, a surety can be
proceededagainstwithoutsuingtheprincipaldebtor.InfrastructureLeasing&Financial
ServicesLtd vVijayaV.Prabhu,AIR2010Bom72, to thesameeffect.
81.VijaySinghPadodevSicomLtd,(2000)4MahLJ772;KailashChandjainvU.P.Financial
Corpn,AIR2002All302,S.29oftheStateFinancialCorpnAct,1951permitscertainreme
diestothecorporation,oneofwhichistoproceedagainsttheguarantorswhoweredirectors
of theborrowercompany.Theywerenotpermittedtosaythat thecorporationshouldhave
first tried to realise the value of the unit of the borrower company which it had taken over.
StateofGujaratvStateBankofSaurashtra,AIR2003NOC437(Guj);guarantorallowed
to besueddespitetakeoveroftheunitoftheborrower.SyndicateBankvWilfredD'Souza,
AIR2003Kant337,exercisinglienoverthebankbalanceoftheguarantorafterdefaultbythe
borrowerheld to be valid and not violative of Article 14, the step being necessary toprotect
thebank'sfinancialinterestH.P.]alajakshivKarnatakaBank,AIR2003Kant280,attach
mentofthesalaryofthesuretynotallowedwheretheprincipaldebtorwasregularlypaying
theinstalments.V.Ramanujamv Karnataka StateFinancialCorpn, 2002SCCOnLineKar
616:2003AIRKantR 473,the rightof theprincipaltoproceedagainstsuretyaloneis not
affectedbyotherlawsunlessthereisaprovisiontothateffect.SICOMLtdvHarjindersingh,
AIR2004Bom337,guarantorscannotarguethatwherenosuitwasinstitutedagainstthe
principaldebtor,asuitagainstguarantorsalonewouldnotbepermissible.SheilaB.DasvP.
R.Sugasree,(2006)3MahLJ567,thetrialcourtnotcorrectindirectingtheplaintifftofirst
proceedagainstprincipaldebtor.DonAyengiavStateofAssam,(2016)3SCC1, aperson
guaranteesthepaymentofacheque,maybecomeliableasaguarantorandiftheobligation
remainsunfulfilled,hemayalsobecomeliableto beprosecutedunderSection138of the
NegotiableInstrumentsAct,1881,iftheotherrequirementsofthesectionarefulfilled,e.g.,
that thechequewasissuedfordischargeofa debtorotherliability.
82.BarclaysBankPicvO'Brien,(1994)1AC180:(1993)3WLR786(HL).https://t.me/LawCollegeNotes_Stuffs

758. 616 Chapter 12 Guarantee [S.144]
advice.The court freed her fromUabilityeither because of undue influence
or mis-representation. Such vulnerability is not limited to spouses. It would
includeco-habitants and others, e.g. elderlyparents.
Insuchcasesrelationshipoftrust andconfidenceoftenexistsand isprov
able. It is necessarythatthe bank should have notice of the factthatthe
surety was in a position of manifest disadvantage and this should putthe
bank on enquiry as to whether to acceptsuch a surety ornot.^^
Proceedingagainstguarantor'smortgagedproperty
Afinancialcorporationcannottakepossessionof themortgagedprop
erty of the guarantor withoutnoticeto him. The corporation also cannot
issuea public notice for auction sale of the property without notice to the
guarantor.Thereasonisthat theliabilityoftheguarantorissecondaryand
arisesonly when theborrowerfailsinrepayment.A guarantor is bound
byhisownseparateagreementtowhichtheprincipaldebtoris not a par-
ty.®"*Thepetitionerwas a surety for aloanadvancedbythe StateIndustrial
Corpnto theborrower.Itwasheldthat thecorporationhad nopowerto
takepossessionof the property of the surety underSection29 of the State
FinancialCorporationsAct,1951andbringthepropertyforsalewithout
aidofthecourt.TheLICpolicywhichhadbeendepositedbytheguaran
tor insupportof hisguaranteewas held to be available to thecreditorfor the
amount due underit.^®The property of the surety which has been offered
asasecuritycanbeproceededagainstwithoutexhaustingremediesagainst
theprincipaldebtor.Inthisparticularcasethewhereaboutsoftheprincipal
debtorwerenotknowneventothesurety.Hecouldnotseekprotection
undertheguisethathewasignorantoftheconsequencesofofferinghis
property as a security for the loan of the principal debtor.
Agreementtobeboundbyanyacknowledgement,etc byprincipal
debtoraboutindebtedness
Thesuretieshadagreedinthedeedofguaranteetobeboundbyany
admission,acknowledgementor partpaymentbytheborrower.Thesureties
wereheldto beboundbysuchagreement.Theywerenotallowedtodisown
83.KoyalBankofScotlandvEtridge(No.2),(1998)4AllER705(CA).
84.AmulyaLaiChowdhuryvTripuraIndustrialDevelopmentCorpnLtd, AIR2007 Gau 113.
85.PrakashwatijainvPunjabStateIndustrialDevelopmentCorpn,AIR2012P8cH13,theFull
BenchrulingofP&HHighCourtinParamjitSinghAhujavPSIDC,2006RDPScH8393in
whichsuchactionofthecorporationwasheldtobejustifiedwasregardedasnotgoodlawin
viewofimpliedoverrulingbytheSupremeCourtinKarnatakaStateFinancialCorpnvN.
Narasimahaiah,(2008) 5 SCC 176: AIR 2008 SC 1797. The sale was set aside.
86.VimalKishoreTiwariv DistrictDevelopmentAuthority,Lucknow,AIR2010NOC 401(All
DB).
87.A.MohamedAlivT.N.IndustrialInvestmentCorpnLtd,AIR2009Mad44(DB);Central
BankofIndiavSionBakersandConfectioners(P)Ltd,(2008)5MahLJ772,apersonwho
signsadocumentwhichcontainsacontractualassumptionisnormallyboundbyiteven
thoughbemightnothavereadit orignoredthepreciselegaleffect.https://t.me/LawCollegeNotes_Stuffs

759. [S.144] Extentofsurety'sliability617
theacknowledgementmadebytheborrower.Therewasnothingin itwhich
could be taken to be contrary to law or opposedto publicpolicy.^^
Prosecutionofguarantor-suretyfor bouncingof hischeque
Wherethe guarantor hadissuedachequeas asecurityforrepayment
of loan, but thechequebounced,the court said that hewasliableto be
prosecutedunderSection138of theNegotiableInstrumentsAct.It was no
defencethat he had notissuedthechequefordischargeof personal liability
ordebt.
Deathofprincipaldebtor
A suit wasfiledagainst theprincipaldebtor andsurety.The suit against
theprincipaldebtorwasfoundtobevoidahinitiobecauseofhisdeatheven
beforeinstitution of the suit. The surety was held to be notdischarged.The
suitcouldproceedagainsthim.Itwasintheinterestofthesuretytoimplead
underOrder1,Rule10,CPC,thelegalrepresentativesofthedeceasedprin
cipaldebtor,becauseifthesuitwasdecreedagainsthim,thesuretycould
enforceagainstthelegalrepresentativeshisrightsunderSection145.^'
Windingup of principal debtor company
Thelendingcorporationhadfailedtorecoverthedebtfromtheborrower
company.Theliabilityofthecompanywasheldtobeconfinedonlytothe
debtwhenwindinguporderwaspassed.Debtandinterestfreezedonsuch
order.Thecorporationwasapartytothewindingupproceedings.Itdidnot
opt outofthesame,norsoughtpermissionofthecourtunderSection446of
theCompaniesActtostartitsowncase.Hence,itcouldnotclaimanything
beyondtheamountdeterminedbytheofficialliquidator.^"
2.Surety'srighttolimithisliabilityormakeitconditional
Itisopentothesuretytoplacealimituponhisliability.Hemayexpressly
declarehisguaranteetobelimitedto afixedamount,forexample,that
"myliabilityunderthisguaranteeshallnotatanytimeexceedthesumof
£250".^^Insuchacase,whatevermaybeowingfromtheprincipaldebtor,
88. P.JagdeshwarReddyvBankofMaharashtra,AIR2011NOC397(AP).
89.SyndicateBankvA.P.Manjunath,(1999)2KantLJ362.Thecourtfollowedthedecisionin
OrissaAgroIndustriesCorpnLtdvSarbeswarGuru,AIR1985Ori270,wherealsothesuit
wasallowedtoproceedagainstthesurety.Sincethecreditorhastheoptionofsuingeither
theprincipaldebtororthesuretyoranyoneofthesuretieswithoutimpleadingtheprincipal
debtor,itcannotbesaidthatthedismissalofthesuitunderOrder1,CPCagainsttheprincipal
debtorwouldautomaticallydischargethe surety.
90. AnilKumar v Haryana Financial Corpn, AIR2011 P&H 140.
91.SeeHohsonvBass,(1871)LR6 ChApp792.Thesuretymayinsertanyotherconditionto
hisliability,e.g.that hewouldbeliableiftheperformancewasdefectiveincertainrespects.
SeeNanyangInsuranceCovAChinKimHin,(1992)1CurrLJ454(Malaysia),following,
EdwardOwenEnggLtdvBarclaysBankInternationalLtd,1978QB159;MalayanUnited
BankVStraits CentralAgencies(Sarwak),(1990)2 MLJ 254.https://t.me/LawCollegeNotes_Stuffs

760. 618Chapter12Guarantee [S.144]
theHabilityof thesuretycannot gobeyondthe sum sospecified.Thus in
a case before the Andhra Pradesh HighCourt/^a clause in a contract of
suretyship making the suretyHableup to Rs15,000 further declaredthat
he wouldbeliablefor any amount that mightbefinallydecreed.It washeld
that theclauseshouldbeconstruedasmeaningnotexceedingRs15,000.
A surety can attach any other condition to hisliability.Thus where the
letterofguaranteemadeit aconditionprecedentto theguarantor'sliability
that ondefaulton the part of theborrowerademandforpaymentshould
bemadeupon theguarantor,it washeldthat anindependentdemandwas
necessaryand themereserviceon the guarantorof the carboncopiesof the
demandmeantfortheborrowerwasnotsufficient.'^
Guarantor'sinsistence upon collateral security
Whetherthe obtainingofacollateralsecuritybyalenderisa termor con
ditionprecedenttoliabilitybeingimposedon aguarantorunderhisguar
anteedependsonaproperanalysisofthecontractualrelationshipbetween
thelenderandtheguarantor.Whereaguarantorseekstomakehisguaran
teedependenton athirdpartygivingsomeothervalidcollateralsecurity,
theguarantorhas toestablishthat thegivingof thesecurityby thethird
partyformedpart ofthecontractunderwhichtheguaranteewasgivenand,
accordingly,in theabsenceofthatbeingestablished,theguarantorwasnot
permittedto relyon anyfailurebythelendertoprovidehimselfwith a valid
collateralsecurityeventhoughhemighthaveindicatedthathewasgoing
todoso.Inthiscasetheguarantor,whowasalsothedirectorandprinci
palshareholderof thecompany,of hiscompany'sdebtswasnotallowedto
escapesayingthat thecollateralsecurityin theshapeofacompany'sdeben
tureobtainedbythecompanywas.notavalidsecurity,thecourtfindingthat
no proof wasavailableto showthat therewas any suchconditionthat there
shouldbeavaliddebenture.^''Thecourtsurveyedauthoritiesonthepoint.
The authorities appear to be clearthatin the final event whether the
obtaining of acollateralsecurity by thelenderis a term of or acondition
precedenttoliabilityon a guarantor underhisguaranteeisto bedetermined
92.YarlagaddaBapannavDevataChinaYerkayya,AlK1966AP151;AdityaNarayanChouresia
VBankofIndia,AIR2000Pat222,theguarantorsboundthemselvesto aparticularmaxi
mumlimit.Theirliabilitywaslimitedto thatamountand notbeyondthat.
93.OrangKayaMenteriPadukaWanAhmadIsaShakurvKwongYikBankBerhadBhd,(1989)
3MLJ155(SCKualaLumpur).Following,MokffinWithvU.M.B.C.,(1987)2MaiLJ610
(Malaysia),see alsoTCBLtd vGray,1987 Ch458(CA),wheretheconditionwas that the
lendershouldobtainfromtheborrowercompanyacollateralsecurityandheobtaineda
debenture,it washeldthat theconditionwassatisfiedevenif thedebentureturned out to be
invalid.GangaLahari v Har Narain, 1986Raj LR 538, wherethe court said that if thedecree
wasnotfullysatisfiedbyexecutionagainsttheprincipaldebtors(alsojudgment-debtors),
thenexecutionpetitionshouldbefiledagainstthesurety.Thecourtreferredto TanKinShan
vV.CheSi,AIR1925Rang 135whereon thebasisof S. 145,CPCit washeldthat anotice
requiredtobegiventoasuretyunderthissectionisaconditionprecedenttothevalidityof
the order for execution against him.
94. TCB LtdVGray, 1987 Ch 458(CA).https://t.me/LawCollegeNotes_Stuffs

761. [S. 144] Extentofsurety'sliability619
by a properanalysisof thecontractualrelationship between the lender and
the guarantor. The starting point is Traill vGibbons.Thedirection to
the jury ofErleCJ was in these terms:"Thenas to the equitable plea, it
states an agreement with the defendantthatNixey should sign the deed as
co-surety with him;thatthe society should procure him to execute it, and
that if they should not do so the defendant should not be liable. Has such
an agreementbeenproved?The lender is usually the party who requires an
additional surety, and so it seems to have been here. Still it may be some
times for theinterestof asuretyto say,'unlessyou getco-suretiesto join
with me, I will not become surety'. Andthatis the defence set up here. Has
it beenproved?Theevidenceisveryslightof any suchagreementwith the
defendant. The defendant himself does not saythathe requiredthatNixey
shouldjoin, butmerelythat heknew that the societyhad requiredit. Didthe
defendant require it for hisOwnbenefitor security, or was there any agree
ment or understanding on his part, as a condition of his own execution,
thatNixeyshouldjoin?Doesit appearthat thedefendant,beforehesigned,
lookedto Nixeyatall?On the contrary, hesayshe did not know until some
time afterwards that Nixey had not signed."(ErleCJ'semphasis.)
ThesameapproachwastakenintheopinionofthePrivyCouncilexpressed
bySirRobertCollierinWardv NationalBankof New ZealandLtd.^^
"Butwhereit isno part of the contractofthe suretythat otherpersonsshall
joinin it, in otherwords,wherehecontractsonlyseverally,thecreditordoes
not break that contract byreleasinganother several surety, the surety can
not, therefore, claim to be released on the ground of breach of contract. It
is true that he is entitled to contribution against other severalsureties to the
same extent as if they had been joint, but the right of contribution among
suchsuretiesdependsnot upon contract but onprinciplesestablishedby
Courtsof Equity."
In Greer vKettle/''the agreement under which the guarantee was given
relatedto a debt"effectivelysecuredby (interalia) 275,000 fullypaid shares
in theInsurancecompany"and thisfactwasspecificallyreferredto in the
recitalto theguaranteeagreement."Theagreementofguaranteemustbe
referredto in greater detail. Init.MercantileMarine iscalled'the corpo
ration', while the words 'the guarantors' mean Parent Trust". It contains
one recitalonly,which runs thus:"Whereasthe corporationhaveat the
requestoftheguarantorsadvancedto theAustinFriarsTrust,Ltdthesum
of £2,50,000 on thesecurityof achargedated March 20,1929,on the
sharesparticularsofwhichare set out in theschedulehereto."... "Inthese
circumstances,it would seem that the legal rights andliabilitiesof these
partiesdependuponthetrueconstructionandeffectof theagreementof
guarantee.Indeed,thisviewwas notdisputedbyeitherside....Once it is
95. (1861) 2F&F358: 175 ER1095.
96.(1883)LR 8 AC 755, 765 (PC).
97.1938AC156(HL).https://t.me/LawCollegeNotes_Stuffs

762. 620Chapter12Guarantee [S. 144]
realisedthatthe debt which ParentTrustareundertakingtoguaranteeis a
debt described as a debt the repayment of which by the principal debtor is
securedby a charge on (amongstothershares) the2,75,000sharesinIron
IndustriesLtd, the case (apart from the question of estoppel) becomes, in my.
opinion,a simple one. It is not a case, asBennettJ seems to havetreated
it, of seeking to imply a condition the implication of which is alleged to
be inconsistent with other provisions in the document. In other words, as
RomerLJsaid, it is not a case of ParentTrustbeing released from acontrac
tualengagement.It is a case of an attempt to impose upon them a liability
which they have never undertaken. The only debt the repayment of which
by the principal debtor they undertook to guarantee was a debt secured by
a charge on the2,75,000shares inIronIndustries,anda debt sosecured
neverinfactexisted."
These authorities were considered again in BybiosBank S.A.L. v
Al-Khudhairy:^^
Bank'sfailure toobtainothersecurities
"Counsel for the defendant submitted that where anunderlyingtrans
actionenvisagesadditional security for the principal indebtedness, a guar
antoris released if theadditionalsecurity is not taken, at least where it is
shownthatit was the intention of theguarantorthat such additional secu
rity should be taken. In this case the additional securityenvisagedbut not
takenwasA1Bunnia'spersonalguarantee,thedepositbyRonHoldingsand
(validlyexecuted)charges on Rushingdale's property. In the course of the
hearingbeforethis court wewerereferredto manyauthoritiesin support of
rivalsubmissionson theformulationoftheapplicablelegalprinciples,coun
sel'sinitialsubmissionfor thedefendantas set outabovebeingplainlytoo
wide.It istoowidebecauseit wouldincludeacasewherealenderstipulated
for additional securityfor its own protection and nothing was said or done
tocausethe lender acting reasonablyto know or suspect that the intention
of the guarantor was that thegivingof such security was a fundamental
prerequisiteto the validity of his guarantee. [Thereis]noprinciple,at law
or inequity,why in such a casethegivingof the additional security should
be treated as anessentialprerequisiteto thevalidityof the guarantee, and
noneoftheauthoritiestowhichwewerereferredestablishesorsupportsthe
existenceofsuchaprinciple.[U]ltimatelycounselforthedefendantaccepted
that to succeed on this appeal on this point he had to show that he had an
arguable case on the facts under one or other of the threeheads:(a)that
on thetruescope andambitof thecontractmadebetweenthebankand
Al-Khudhairyit was animpliedterm(counselacceptedthat it was not an
expressterm)of the contract thatAl-Khudhairy's.liabilityon his guarantee
wasconditionalon one ormoreof the threeitemsofadditionalsecurity
98. 1987BCLC232,239 perNichollsLJ.https://t.me/LawCollegeNotes_Stuffs

763. [S.144] Extent of surety's liability 621
being taken by the bank,{b)thatit was the continuing common intention
of both the bank and Al-Khudhairy that Al-Khudhairy'sliabiUtyshould be
conditional in this way; or(c)estoppel. It is clearlyimpossibleto spell out
of the documentaryevidencethatit was a precondition of Al-Khudhairy's
liabilityunderhisguaranteethat thebankshouldobtain a guaranteefrom
A1Bunnia."
Where the guarantor wassupposedto have depositedtitledeedsby way
ofequitablemortgage,butno suchproofwastherebecausethe bank didnot
producethe original titledeedsoreventheircopy,the guarantor was held
notliable.®'
Impossibilityofmaincontract
A loan fordevelopmentand maintenance of bee culture was guaranteed.
The surety undertook to beliablejointlyandseverallyto pay offinstalments
in caseoffailureon the part ofthe debtor.Thebeesdiedinconsequenceof a
viralinfection.Therewasatotalfailureofbusiness.Thedebtorbecamedis
abledfrompayinginstalments.Thesuretycouldnotescapeliabilityunder
thedoctrineof impossibility ofperformance.^""
Theliabilityof the surety doesnotdependuponpossibilityof the surety
beingabletorealisetheamountfromtheprincipaldebtor.^"^Thelawon
this pointwassettledbythedecisionof theSupremeCourt in acasewhere
it was observed that the right of the creditor to recover from theguarantor
arises out of the terms of the deed ofguaranteewhich are not in any way
supersededor broughtto nullitymerelybecausethe creditor (orguarantor)
maynot be abletorecoveranything from the principaldebtor.^"^
The guarantors of acompany'sloanscouldnotescapeliabilitybyreason
onlyofthefactthat thecompany'smanagementhadtotallychanged.^"^
Novationofmaincontract
Where a father guaranteed his son'sbusinessdebts and thebusiness
wassubsequentlyconvertedinto acompanyand with theconsentof the
bank the loan was to be treated asthatof the company and the son and his
companionswereacceptedasguarantors,it washeldthat under the new
arrangement,thefatherhadbeendroppedfromtheguaranteeandhencehe
was notliable.His property could not be attached forenforcementof the
guarantee.^"''
99.LakshmiVilasBankLtdvShreechakraEnterprises,AIR 2003Mad1.
100. Florence MabelR.J.v State of Kerala, AIR 2001 Ker 19.
101. Syndicate Bank v Narayana Iyer, (2003) 3KLT726.
102. Industrial FinanceCorpn of India Ltd v CannanoreSpg&WvgMillsLtd,(2002)5SCC54.
To the same effect is PunjabNationalBank v StateofU.F.,(2002) 5 SCC 80.
103.PunjabNationalBankvLakshmiIndustrial&TradingCo(P)Ltd,AIR2001All28.
104. Satish ChandraJain v National SmallIndustries Corpn Ltd,(2003)1 AllLJ238(SC).https://t.me/LawCollegeNotes_Stuffs

764. 622Chapter12Guarantee [S. 129]
Changes insuretycompany
The defendant company and its promoters borrowed a sum of money
from the IndustrialDevelopmentCorporation. Promoters could make any
changes in their company only with the approval of the corporation. But
withouttaking any such approval, they transferred their interest in the com
pany to new company and changed the management of the company. The
promoters were not allowed to claim discharge from their personal liability
undertheguarantee.^"^
Limitation.—^Wherea statutory provision or contract clauserequiresthat
first recoveryshould be effectedfrom,the assets of the principal debtor, the
SupremeCourt held that recovery should be effected against the guaran
toronlyafteritbecomesascertainedas tohowmuchcouldberecovered
from the principal debtor. The period of limitation for suing the guarantor
will start then and not from the date ofissueofnoticeforrecallingthe
amount.^"®
Liabilityundercontinuingguarantee
S. 129."Continuingguarantee".—Aguaranteewhichextendsto a series
oftransactions,is called a "continuingguarantee".
Illustrations
(a)A,inconsiderationthat6willemployCincollectingthe rent ofB'szamindari,promises
Bto beresponsible,to the amount of 5000 rupees, for the duecollectionand payment
by Cof those rents. This isa continuingguarantee.
(b)Aguaranteespaymenttofi,atea-dealer,to the amount of£1GO,foranytea he mayfrom
time to time supplytoCBsuppliesCwithtea to the above valueof £100,and CpaysB
for it.AfterwardsSsuppliesCwithtea to thevalueof£200.Cfailsto pay.Theguarantee
givenby/Awas a continuing guarantee, and he isaccordinglyliableto Bto theextentof
£100.
(c)Aguarantees paymentto Bofthepriceoffivesacksofflourto bedeliveredbyfito C
and to be paid for in a month. 6 delivers fivesacks toC.Cpays for them. AfterwardsB
deliversfour sackstoC,which Cdoes not payfor.The guarantee given byAwas not a
continuingguarantee,andaccordinglyhe is not liable forthefour sacks.
Aguaranteeof thiskindisintendedto cover anumberoftransactions
over a period of time. The suretyundertakesto be answerable to the cred
itor for hisdealingswith the debtor for a certain time. A guarantee for a
singlespecifictransactioncomesto an endassoon as theliabilityunderthat
transaction ends. Take, for instance, the old case of Kay vGroves,on
whichthe thirdillustrationgivenin thesectionisbased.The guaranteewas
intheseterms:
105.HPSIDCvMansonIndia (P) Ltd, AIR 2009 NOC 490 (HP).
106. Deepak Bhandari vH.P.State IndustrialDevelopmentCorpn Ltd,(2015)5 SCC 518:
(2015)3 SCC(Civ)123. It seemsthat all guarantors should be wise enough to put in such a
clause.
107. (1829) 6 Bing 276; 130 ER 1287.https://t.me/LawCollegeNotes_Stuffs

765. [S. 129] Extentofsurety'sliability623
"I hereby agree to beanswerableto K for theamountof five sacks of
flour to be delivered to T, payable in onemonth."Fivesacks wereactually
supplied and T paid for them.Furthersupplies were madeduringthe
samemonth,forwhichT failed to pay.
Thesuretywasthensued.Thecourtheldthatit wasnotacontinuing
guaranteeand, therefore, there was no liability for parcels delivered for var
ioussubsequentperiods.
Following is anillustrationof acontinuingguarantee:^"®
I do herebyguaranteethepaymentof goods to be delivered inumbrel
las and parasols to / in the sum of£200.
Anotherinstanceof acontinuingguaranteeis:
MessrsSea 6c Co, Sirs, thebearer,MrThomasHoran,wishestodeal
with you for produce, and he asked me to speak for him. I can highly
recommendhim, and in fact, I willstandgood for him to theamountof
£50}°'
The essence of acontinuingguaranteeisthatit applies not to a specific
numberoftransactions,but to anynumberof them and makes thesurety
liable for the unpaid balance at the end of theguarantee.""In Chorley&c
Tucker thedistinctionis thus explained:"^ "A specificguaranteeprovides for
securing of a specificadvance or for advances up to a fixed sum, and ceases
to be effective on the repayment thereof, while acontinuingguaranteecov
ers a fluctuating account such as anordinarycurrentaccount at a bank, and
secures the balance owing at any timewithinthe limits of theguarantee—"
A guarantee for a cash-credit account has been held to be a continuing
guarantee. The sureties could not claim to be discharged from their lia
bility by reason of the fact that the goods in the hypothecated store were
changed."^
108.HargreavevSmee,(1829)6 Bing 244: 8 LJCP 46: 31 RR 407.
109. See vFarey,(1889) 13 LRNSW72.
110. The liability of the guarantor to pay remains alive as long as the principal debtor does not
clear the account. Union Bank ofIndiav T.J. Stephen, AIR 1990 Ker 180. Following the
SupremeCourt decision in Margaret Lalita Samuel vIndoCommercial Bank Ltd,(1979)
2see396: AIR 1979 SO 102, thecourtheld that the period ofHmitationcommences from
the time when the payment is demanded and refused or otherwise denied by the surety. In
Bradford Old Bank Ltd v Sutecliffe,(1918)2 KB 833(CA)it was pointed out that the con
tract of the surety is collateral and, therefore, a demand on him is necessary to complete the
cause of action and set the statuterunning.The decision of the SupremeCourtin R.Lilavati
VBankofBaroda,AIR 1987 Kant 2:ILR1987 Kant 964 at p. 969 is authority for the prop
ositionthatin the case of acontinuingguarantee,thequestionoflimitationdoes not crop
up at all. Punjab National Bank v SurinderSinghMandyal, AIR 1996 HP 1, guarantee for
loan for purchase of bus, debtor becameirregular with his repayments,guarantor proposed
to pay back if the bank would transfer the bus to him, no responsefrom bank, guarantor not
dischargedbythatreasonalone.
111.LeadingCasesonMercantileLaw{4thEdn by Lord Chorley&Giles, 1962) 332.
112.SBIVGeminiIndustries,(2001) 3 CCD 1885;SICOMLtdvHarjindersingh,AIR2004
Bom 337, in the case of continuingguarantee,the bar of limitation does not arise as long as
guaranteeisrunning.https://t.me/LawCollegeNotes_Stuffs

766. 624Chapter12Guarantee [S. 129]
Aguaranteefor theconductof aservantappointedto collect rents has
been held by theCalcuttaHighCourtto be acontinuingguarantee.^"But a
guaranteefor theconductof atenantin paying rent dueunderthetenancy,
whetherit be arepeatedpayment or a single lump sum, has been held to be
aguaranteefor onetransactionand not ofcontinuingnature.^"It isnotper
missible toconstruea bankguaranteein the light ofcontemporaneousdoc
uments. Abankguaranteehas to beconstruedon its own terms. Itdelinks
itself with other documents of thetransactionand operates independently
of them. Ascomparedwithit, acontracthas to beconstrued,whenit is
containedin morethanonedocuments,by considering all thedocuments
together."^The employment of a person is onetransactionand theguaran
tee for his goodconductis not acontinuingguarantee."®
Liabilityunderbankguarantee
A bank guarantee is a sort of an absoluteundertakingto pay theamount
whenever demanded by the guarantee-holder. It has nothing to do with the
state of relations between the guarantee-holder and the person on whose
behalf the guarantee was given. Whileordinaryguarantees are linked
to and dependent on the underlyingtransaction,a bankguaranteeis an
arrangement where the guarantee is independent of the underlyingtransac
tion. There are professionalguarantorsfor whom the issue of guarantees or
bonds is a financial service, namely, banks, insurance companies or bond
companieswho issueguaranteesat acertainfee."^
113.DurgaPriyaChowdhuryvDurgaPadaRoy, AIR 1928Cal204;ILR(1928)55Cal154.
Liability under a continuing guarantee can be enforced only after ascertaining the final
amountdue. SeePunjabNationalBank v Sri VikramCottonMills, (1970) 1 SCC 60: AIR
1970 SC 1973 and United Commercial Bank Ltd v Okara Grain BuyersSyndicate Ltd, AIR
1968 SC1115:(1968)3 SCR 396, bank held liable in respect of its branches inPakistanfor
amountsnotforfeitedbythatGovernment.
114.HasanAlivWaliullah,AIR1930All 730.
115.SBIVMulaSahakariSakkarKarkhanaLtd, (2006) 6 SCC 293: AIR2007SC 2361.
116. SenVBank of Bengal, (1919-20) 47lA164. A guarantee for a sum certain though payable
in instalments is not continuing guarantee. Bhagvandas Rangildas Vaniv Secyof State, AIR
1926Bom465.
117. State Trading Corpn of India Ltd v Golodetz Ltd,(1989)2 Lloyd's Rep 277(CA).K.L.
Steels Ltd vMaharashtraSEB, (1998) 2 Bom CR 31, independent nature of thetransaction
emphasisedand no stay granted because there was no plea of irretrievable loss or fraud by
thebeneficiary.Alsoto the sameeffect,DwarikeshSugarIndustriesLtd v PremHeavyEngg
Works(P) Ltd,(1997)6 SCC 450: AIR 1997 SC 2477; Orissa Construction Corpn Ltd v
B. Engineers & Builders (P) Ltd, (1996) 81 Cal LT 126, the sub-contractor executed 42 per
cent of the total work, the total bankguaranteeof Rs 50 lakhs could not be encashed. The
court permitted encashment only up to Rs35.40 lakhs. The court followed U.P. State Sugar
Corpn v SumacInternationalLtd, (1997) 1 SCC 568: AIR 1997 SC 1644;NTPCLtdv
Flowmore(P) Ltd,(1995)4 SCC 515. The bank is not a party to the underlyingcontract.
State ofMaharashtravNationalConstructionCo, (1996) 1 SCC 735: AIR 1996 SC2367
KrishnaElectricalIndustries (P) Ltd vSBI,AIR 1996 MP 188, amountrecoverablequanti
fied,requisitenotice,opportunity to showcausenot required,encashmentnot stayed.Food
Corporationof India v Arosan Enterprises Ltd, AIR 1996 Del126,bank guarantee encash
ment by buyernot stayed on the allegation that the seller haddeliveredthe goods. Syndicate
Bank V Wilfred D'Souza, AIR 2003 Kant 337, no term in the guarantee that encashmenthttps://t.me/LawCollegeNotes_Stuffs

767. [S.129] Extentofsurety'sliability625
Aguaranteefor theappointmentof an agent has been held to be not a
continuingguarantee.The use of theword"continued"in theguarantee
bond did not make it acontinuingguarantee.It onlymeantthatthebond
was toremainin forceduringthesubsistenceof theagency."^In a case on
the subject before the SupremeCourt:"^
Abankundertookto pay to the SEB a sum not exceeding Rs50,000
within48hoursofdemand.Theguaranteewassubmittedonbehalfof
a supplier who haddepositedwiththebanksufficientsecurities.There
was noconditionto thebank'sliabilityexceptdemandby the Board. The
Boarddemandedpayment.The supplier was acompanywhichwent into
liquidation.Theliquidatorsoughtto prevent theBoardfromrealisingthe
guaranteeand thebankfrom paying it.
No such relief was allowed. TheBoardhadtherightto enforcepayment
of theguaranteeand thebankhad the right to reimburse itself out of the
securities. If theliquidatorthoughtthatthe Board'sconductin realising the
guaranteewas not proper, he should proceedagainsttheBoard.^^"Stating
the reasons for the same the DelhiHighCourtsaidthatifscrutinyis com
menced inrespectof theunderlyingcontract,obviously theautonomyand
independence of an absoluteguaranteewould be lost. Its enforcement would
onlyafterliabilitywasdeterminedby theDebtRecoveryTribunal,encashmentnotstayed.
MakImpexChemicals(P)Ltdv UnionofIndia,(2003) 3 Bom CR440,failure to fulfil
exportobligation,encashmentnot stayed.RaniSatiInvestment&FinanceLtdv Union
ofIndia,AIR2004Bom 424: (2004) 4 Bom CR 81, theexportercould not keep hisexport
commitment,noextensionof time wasgrantedto him,encashmentof hisbankguarantee
wasnotstayed.
118.MohdNazeerAhmedvEconomicTransportOrganisation,(2005)3 ALD527(AP).
119.MaharashtraSEB vOfficialLiquidator,(1982) 3 SCC 358: AIR 1982 SC 1497. The money
is payable on demand and not on breach. Dena Bank v FertilizerCorpnofIndia,AIR 1990
Pat 221. Suspension of thecontractbetween theDepartmentand the "contractor onaccount
of thelatter'sdefaults did not have the effect ofsuspendingtheenforcementof thebank
guaranteegiven byanotherperson for thecontractor'sdue performance.SCIL(India) Ltd
VIndianBank,AIR1992Bom 131. SriPalmarDevpandConstructionvTransmetric,
(1994) 1CurrLJ 224 (Malaysia), aperformancebond between acontractorcompanyand its
sub-contractor,stay notgranted,thecourttakingthe bond as it found it.RampurEnggCo
LtdVUnitedConstructionCo, AIR2002Del 170,revocationofbankguarantee,negligence
of bank in taking necessary steps against debtor and hisguarantorforrealisationofdebt
withinvalidityperiodofguarantee,bankliable toreimbursebeneficiary, thecourtwouldnot
interveneonlybecause of a disputebetweenthe beneficiary and the debtor.
120. To the same effect,BanwariLaiRadheMohanvPunjabStateCoop SupplyandMktg
FederationLtd,AIR1982Del357wherethecourtsaidthatabankguaranteebeingabso
lute, the pendency ofarbitrationproceedingscannotstand in the way of payment. Shreeram
Cloth Stores vTradingCorpnofBangladesh,(1980) 1CHN132. Thecourtsdo notinterfere
with theoperationof letters of credit due to theirimportanceininternationaltrade and also
because the beneficiary isassuredby thebankthathe would be paid as soon as he complies
with the terms of theletterofcredit.This isirrespectiveof hisnon-compliancewith the terms
of hiscontractwith the other-party. Letters of credit become autonomous documents.SBIv
Economic Trading Co, AIR 1975Cal145;Kunjannammav Kerala FisheriesCorpn,1986
KLT 37;RaniSatiInvestment&FinanceLtdvUnionofIndia,AIR2004Bom424:(2004)
4 Bom CR 81, bankguaranteeforperformanceofexportcontract,noexportofcotton
withinspecified time,encashmentjustified.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

768. 626Chapter12Guarantee [S. 129]
depend upon theresuhof an inquiry. This would defeat the very purpose of
abankguarantee.^^^
InHindustanSteelworksConstructionLtdv Tarapore & the
SupremeCourtlaid down the law in terms of the following propositions:
"(A)A bank guarantee is an independent and distinctcontractbetween
the bank and thebeneficiaryand is not qualified by the underlying trans
action and theprimarycontractbetween the person at whoseinstancethe
bankguaranteeis given and the beneficiary.
' (B)In the case of anunconditionalbank guarantee thenatureof the
obligation of the bank is absolute and not dependent upon any dispute or
proceeding between thepartyat whose instance the bank guarantee is
given and the beneficiary.
(C)
(D) Thecommitmentbybanksmustbehonouredfree frominterfer
ence by the court and it is only in exceptional cases, that is tosay,in case
of fraud, or in a case where irretrievable injustice would be done if bank
guaranteeisallowedto beencashed,thatthecourtwouldinterfere."
Some litigation in connection with bank or demand guarantees is gen
erated by the fact that there can beabusiveor unfair callings, which is to
a large extent due to the independent nature of both documentary credits
and unconditional on demand guarantees. Thebeneficiary'sright to pay
ment is absolute or almost absolute. Apart from thecourtstay order, one
method which has been suggested and which has been put to actual use
is the requirement that thebeneficiaryhas to state in his letter invoking
bank guarantee that there has been some kind of breach of theunderlying
transaction and what is the type of breach which isinvolved.^^^The person
121.BanwariLaiRadhe Mohan v Punjab State Coop Supply and Mktg Federation Ltd, AIR
1983 Del 86, 89. Daewoo Motors India Ltd v Union of India, (2003) 4 SCC 670: AIR 2003
SC 1786, bank guarantee for fulfilment of export obligations, encashment on failure to do
so not stayed. VirdichandjiGarg v Fiat India (P) Ltd, AIR 2004 Bom462, it is necessaryto
statespecificallyin the letterinvokingthe guarantee details of theinvoicesand outstanding
amount,invocationhas to be in terms of theguaranteeitself and not in terms of thecontract
between theparties.
122. (1996)5 SCC34; AIR 1996 SC216%.HimadriChemicals Industries Ltd v Coal Tar Refining
Co, (2007) 8 SCC 110; AIR 2007 SC 2798, an injunction can be granted only in cases of
egregiousfraud andirretrievableloss,adisputebetweenthe parties isnot asufficientground
initself.Org Informatic Ltd vTulipTelecomLtd, AIR 2011 NOC 258(Del),bank guaran
tee not stayed becausethere was neither any fraud in claimingencashmentnor any chance of
the money going beyond recovery.
123. SeeLars Gordon, Draft VNCITRAL. Convention on Independent Guarantees,(1997)JBL
240 at 244. Writ cannot be issued in the matter of enforcement of bank guarantee unless
some public law element is involved, A.C.Roy& Co v Union of India, AIR 1995Cal246.
See,forexample.NationalTelecomof India Ltd v Union of India, AIR 2001 Del 236, the
Governmentwas required to show at least one of two conditionsfor invokingguarantee, i.e.,
either that the amount hadbecomedue becauseof loss caused by breach or that the amount
was being forfeited by reason of the contractor's failure to perform his commitment. The
letterinvokingtheguaranteestatedthatpurchaseordershad notbeencompliedwithdespite
extensionof time.Anotherletteralleged breach. Thecourtsaidthatall this showedthatthe
circumstancesforinvokingtheguaranteewere made out. Thecourtfurthersaidthatevenhttps://t.me/LawCollegeNotes_Stuffs

769. [S.129] Extentofsurety'sliability627
claiming under the guarantee must establishthatconditions for invoking the
guaranteedo exist. In this casetheGovernmentmadeacounter-offerto the
highest bidder and entered intonegotiationswhich did notmaterialiseinto a
contract.Hence,theguaranteecouldnotbeinvoked.^^"*Acontractwas held
to have been formed where theparties,thoughnot accepting all theprinted
terms,agreedto some ofthem.Acontractthuscameintoexistenceoutside
the form. Stay of encashment of bankguaranteecould not be ordered on the
groundthatnocontractwasformed.^^^Wherethebankguaranteeis condi
tional,thebeneficiarycannothaveunfetteredrightto invoke theguarantee
andthecourtcan issue aninjunctionagainstinvocationon the facts of the
case.^^®Wheretherewas no reference in theinvocationletterto anybreach
ofcontracthaving beencommittednor to any loss ordamagethoughthe
terms of theguaranteerequiredsuchconditionsto be fulfilled theplaintiff
was allowed the relief ofinjunction.^^^
The SupremeCourtagain emphasised inU.P.CoopFederationLtdv
SinghConsultantsandEngineers(P)Ltd,^^^thattheoperationof abank
if thebeneficiarywas made the sole judge of thecircumstances,thebankwasobligedto pay
becausethebankcouldnotsit injudgment.
124. Basic TeleServicesLtdvUnionofIndia,AIR2000Del 1.
125.International(India)vIndianSugar&GeneralIndustriesExportImportCorpn,AIR2001
Guj227.
126.HindustanConstructionCoLtdvStateofBihar, (1999) 8 SCC 436: AIR1999SC3710.But
here there was a concludedcontractand theguaranteewas also absolute. Since abankguar
antee represents an independentcontractbetween the bank and beneficiary, both of them
areboundby its terms and they are extremelymaterial.CrestCommunicationsLtdvSBI,
(2000) 3MahLJ163, thecontractwasperformedandacceptedto theextentof 100 per cent
satisfactionand fullpaymentmade, anattemptto encash thebankguaranteewas stayed.
127.V.V.GuptavMCD,AIR2006NOC1035 (Del).
128. (1988) 1 SCC 174.Refusaltotakethematerialbecauseofallegationsas toqualityis not a
fraud in itself so as to prevent invocation of bankguarantee,EMCOPressmaster(P)Ltd
VUnion ofIndia,AIR 2000 Del 37. Conditions stated in thecontractbut not in the bank
guarantee could not be used for staying encashment. Assn of Corpn and Apex Societies of
Handloomsv State of Bihar, AIR 2000 Del 106. Breach ofcontractis not by itself enough
to bring about stay of encashment, the bankcannotsit in judgment for deciding the question
ofbreach.FederalBankLtdv V.M.JogEnggLtd,(2001) 1 SCC 663: AIR2000SC 3166;
Larsen&TubroLtdvMaharashtraSEE, (1995) 6 SCC 68: AIR1996SC334,wherefraud
or irretrievable injustice was not pleaded and the only plea was that there was no concluded
contract.G.DayanandvChiefConservatorofForestsStateTrading Circle, (1997) 2 BC
195 (AP),contractcancelled,forfeiturescarriedout, ifencashmentofbankguaranteewas
not stayed and cancellation was afterwards found to be wrongful, there would be irreparable
loss.ManIndustriesIndiaLtdvNVKharoteEngineers&Contractors,AIR2005Bom
311, absolute guarantee in favour of supplier, no link with actual supplies, encashment not
restrained, supplier could not have run away with the money, hence no chance of irreparable
loss. AdaniExportsLtd v Mktg ServiceIncorporated,AIR 2005 Guj 257, non-supply of
goods of approved quality within specified time, also short supply, purchaser's letters of
credit, encashment restrained.JindalStainless Ltd vICICIBanking Corpn Ltd, AIR 2005
Del 53, fraud was discovered only after thenegotiatingbankhadalreadyreleased payment.
Bhumiputra Commerce Bank v PYP Products Ltd, (2006) 4 Bom CR431,bank guarantee
in the winding up of the company under orders of theRajasthanHigh Court and confirmed
by theSupremeCourt up to a certain amount plus interest as accepted by the bank. The
bank was not allowed to say at the time of renewal that the guarantee was to be confined
onlyto the principal amount originallyordered.BSESLtd v Fenner India Ltd, (2006) 2 SCC
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770. 628Chapter12Guarantee [S. 129]
guarantee should be stayed only in cases of serious dispute, fraud or special
equities.
Two bank guarantees were furnished by acontractorfor theproper
constructionand successful commissioning of avanaspatiplant.The
bank was not to revoke theguaranteesup to a fixed date and was to make
unconditional payment on demand. The Board was to be the sole judge
ofthefactwhetherthecontractorhadfulfilledthetermsofthecontract.
DisputesarosebetweenthecontractorandtheBoardas to theerection
andperformanceof the plant.
The contractor sought an injunctionto restrain the Boardfromenforcing
the guarantee. The court found no seriousground for doingso.The court felt
that respectability and reliability of the assured mode of payment through
confirmed letters of credit in international trade and bank guarantees in
national trade is necessary for thegrowthandpromotionof trade.Shetty
cited LordDiplock:"""The whole commercial purpose for which the
systemofconfirmedirrevocabledocumentary creditshas beendevelopedin
international trade is togiveto the seller an assured right to be paid before
he parts with control of thegoodsand that does not permit of anydispute
with the buyeras to the performanceof the contract of sale beingused as a
ground for non-payment or reduction or deferment of payment."
HisLordshipcitedAmericanauthorities"^to the effectthatthefraud
ulent use of guarantee papers by the seller is the only case in which court
shouldstaymisuseof a creditsystem."Theexceptionfor fraud on the part
of thebeneficiaryseekingtoavailhimselfof the creditis a clearapplication
of the maxim ex turpi causa non orituractio,or, if plainEnglishis to be
preferred,'fraudunravelsall'.""^
728,guaranteesgiven for advancepayments,virholeamountof advances was recovered from
running bills,evenso guarantees wereinvoked.The court did not stayinvocation.There
waspendingarbitrationinwhichalso the stay wassought.Therewas nodangerofmoney
beinglostforever.Evenotherwise the other party had the right of encashmentforallkinds of
breach.A.P.ElectronicsDevelopmentCorpn Ltd vM.K. Mohan,(2010)1LW518(Mad),a
bank guarantee was not allowedto be invokedfor non-performanceof a contract which was
foundto beillegal.PetroleumIndia International v BankofBaroda,(2008)6 Mah LJ487,
no fraud or special equity proved.
129.U.P.Coop Federation Ltd v Singh Consultants and Engineers (P) Ltd,(1988)1 SCC 174.
130.UnitedCityMerchants(Investments)Ltd vRoyalBankof Canada,(1983)1 AC168:(1982)
2WLR1039(HL).
131. SzteinvJ. Henry SchorderBkg Corpn,(1941)3HYS2d 631, referredto withapprovalby
theEnglishCourt ofAppealin EdwardOwenEnggLtd vBarclaysBankInternationalLtd,
1978 QB 159(CA);Bolivinter Oil S.A. v ChaseManhattanBank N.A., (1984) 1 WLR 392
(CA).
132. The SupremeCourt surveyed the whole range of authorities: HamzehMalas& Sons v British
ImexIndustries Ltd,(1958)2 QB127:(1958)2 WLR 100(CA),paymentunder letters of
creditnotstayedon theallegationthat the firstinstalmentcontaineddefectivegoods;Elian
and Rabbathv Matsasand Matsas,(1966)2LILR495,wherepaymentwasstayedbecause
the shipowners resorted to a new lien without any justification.
The court noted that in India also trend of law is on the samelines:Tarapore & Co v
V.O. TractorsExport,(1969) 1 SCC 233: AIR 1970 SC 891, irrevocable letter of credit hadhttps://t.me/LawCollegeNotes_Stuffs

771. [S.129] Extentofsurety'sliability629
Fraud must be ofegregiousnature so as to vitiate the entire underly
ing transaction. The allegation of fraud must bespecificallyandexplicitly
pleaded.In this case there was no explanation as to how and in what man
ner the alleged fraud was committed. Encashment of bank guarantee was
notstayed."^
The court alleviated thefeelingsof contractors and buyers who provide
guarantees whichgo beyondtheir reach bysayingthat no irretrievableinjus
tice is likely to be done because the party withdrawing the amount would
remain accountable and, if hecannotjustify himself, he would have to offer
restitutionorcompensation.^^'*
"The wholly exceptional case where an injunction may be granted is
where it is proved that the bank knows that any demand for payment
already made or which may hereafter be made willclearlybe fraudulent.
Buttheevidencemustbeclearbothastothefactoffraudandastothe
bank'sknowledge.It would certainly not normally besufficientthat this
restsontheuncorroboratedstatementofthecustomer.Abankactingon
such a statement may cause irreparable damage to itscredit.""^
In reference to the meaning of irretrievable injury, the SupremeCourt
saidthatit must be of the kind which was thesubject-matterof the deci
sion inItekCorpn v First National Bank ofBoston-P^"To avail of the
exception,therefore,exceptionalcircumstanceswhichmakeitimpossible
for the guarantor toreimbursehimselfif heultimatelysucceedswillhave
to bedecisivelyestablished.Clearly,amereapprehensionthat the other
party will not be ableto pay is not enough."
adefiniteimplication;Centax(India)Ltd vVinmarImpexInc,(1986)4 SCC136:AIR 1986
SC 1924. Thecourtoverruledthe decision of theAllahabadHighCourtin Union ofIndiav
'MeenaSteelsLtd,AIR 1985All282.
133.H.P.SEBLtdvAhluwaliaConstracts(India)Ltd,AIR2015HP108.
134. A bank cannotjustifiablypay under aguarantee,whereit hasexpiredor thebusinessin
respectofwhichitwasgivenhasbeensuspended,and,therefore,paymentcanbestayed.See
J.R.EnterprisesvS.T.C.,AIR1987Del188.Similarly,thepaymentundera bankguarantee
submittedalongwitha bidcanbestayedifthebidiswithdrawnbeforeacceptance.Kirloskar
PneumaticCoLtdvNTPCLtd,AIR1987Bom308.
135.Sir JohnDonaldsonMr inBolivinterOilS.A.vChaseManhattanBankN.A.,(1984)1
WLR392(CA)citedbytheSupremeCourtinU.P.CoopFederationLtd vSinghConsultants
andEngineers (P) Ltd, (1988) 1 SCC 174.
136.566FederalSupp 1210.
137. Observations to the same effect are to be seen, among others, in Hindustan Steel Workers
ConstructionLtd v G.S. Atwal & Co (Engineers) (P) Ltd, (1995) 6 SCC 76: AIR 1996
SC 131; Larsen & Tubro Ltd v Maharashtra SEB,(1995)6 SCC 68: AIR 1996 SC 334.
Observationsof this kind are also to be seen inTTITeam TelecomLtdvHutchinson3G UK
Ltd,2003EWHC762(TCC)citedbytheSupremeCourtinBSESLtdvFennerIndiaLtd,
(2006)2SCC728:AIR2006SC1148"afailurebythebeneficiarytoprovideanessential
elementoftheunderlyingcontractonwhichthebonddepends:amisuseIjythebeneficiaryof
theguaranteebyfailingtoactinaccordancewiththepurposeforwhichitwasgiven:atotal
failureofconsiderationin theunderlyingcontract:a threatenedcall bythebeneficiaryfor an
unconscionable ulterior motive or a lack of an honest or bona fide belief by the beneficiary
thatcircumstances,suchas poorperformanceagainstwhichaperformancebondhadbeen
providedactuallyexist."VeerProbhuMktgLtdvNationalSupplyCorpn,AIR2006Calhttps://t.me/LawCollegeNotes_Stuffs

772. 630Chapter12Guarantee [S.129]
In General ElectricTechnicalServicesCoIncvPunjSons(P)Ltd,^^^
whiledeahngwithacaseof bankguaranteegivenforsecuringmobilisation
advance,it was heldthat the right of a contractor to recovercertain amounts
underrunningbillswouldhavenorelevanceto theliabilityof the bank
under the guarantee given byit."'
Abankguaranteewasunequivocalandunconditional.Thebankagreed
topaywithoutanydemurand ondemandthe court did notacceptthe
agreementthat thebeneficiarymustshowthat hehadsufferedlossbyreason
ofnon-fulfilmentofthecontract.Ifsuchcontentionsweretobeacceptedthe
verypurposeof suchguaranteeswould be defeated. Thecourtwould have
to record a finding and give a verdict in eachcase."°
TheHighCourtof Delhi followed this decision so as to holdthatthe
enforcementofthe bankguaranteewouldnot bestayedbutthat the author
itywouldbetoldthattheyshouldenforcetheguaranteeonlyforthebalance
amountminustheamountalreadyrecoveredfromthecontractor'srunning
accountpayments."^
In EscortsLtd vModern InsulatorsLtd^'^^theHigh Court ofDelhirefused
to staythepaymentbecausetheallegedgroundonlyshowedaninconsist
encyin the twolettersabouttheinstallationandworkingofmachinesand
notafraudorthepossibilityofanirretrievableinjustice.TheSupremeCourt
dealtwiththismatteratgreatlengthinU.P.CoopFederationLtdvSingh
301,supplyofgoodsforwhichguaranteewasgivenwascompleted,theplaintiffsassuppliers
dischargedtheirobligations.Therewasnocomplaintalso.Requestsweremadeforcancella
tionofguaranteesbutinsteadinvocationwasmade.Thiswasstayedadinterim,attemptto
get itvacatedfailed.
138.(1991) 4see230.
139.AnotherrulingtothesameeffectisCoronationConstruction(P)LtdvIndianOilCorpn
Ltd,AIR1999Del268,nopleadingthattherewasfraudinthemaincontract,theonlyalle
gationwas that the other party wastryingtoencashtheguaranteefor an amountwhichit
hadalreadyrecovered;thatwassufficientforestablishingtheexceptionoffraudorirretriev
ableinjustice.].T.MobilesLtdvDeutscheBankLtd,AIR1999Del358,aninjunctionwas
vacatedontheAttorneyGeneralgivingundertakingthatintheeventoftheparty'ssuitbeing
decreed,theUnionofIndiawillpaytheamount.A.L.N.NarayananChettiyarvOfficial
Assignee,(1941)54 LW 606: AIR1941PC 93, observations to the effect that "fraud like
anyotherchargeofcriminalproceedingsmustbeestablishedbeyondreasonabledoubt".A
findingastofraudcannotbebasedonsuspicionandconjecture.CitedinDLFCementLtdv
InspectorofPolice,AIR1999AP359:(1999)2 AnLD45,stayofencashmentwasheldto be
notproperwhereneitherofthegroundswasmadeout.Thecourt,ondirectingthepartiesfor
referencetoarbitrationintermsoftheiragreement,stayedtheencashmentoftheguarantee,
this washeldto beillegal.It is not thefunctionof the courts toexaminethemeritsof the
dispute at that stage.
140.AmrokLogisticsTrading(P)LtdvDigvijayCementCoLtd,AIR2001Giij299,therewas
no proof of fraud or irretrievableinjustice.
141.MadanGopaljajoovUnionofIndia,AIR1992Del253.StateBankofMysorevPukhrajmal
SugarmalLunkad,AIR2007 NOC589(Mad)(DB),bankguaranteeissuedwithoutthere
beinganyapplicantbytheofficerandalsowithoutanyauthority,decreepassedagainstthe
bankonthebasisofsuchguaranteewassetaside.HarcharanDasGuptavDDA,AIR2007
Del75(DB),encashmentof bankguaranteenotstayed.Therewasnofraudon thetenderer
becausehewasawareoftheexistenceofnullahon theprojectsite.
142.AIR1988Del345.https://t.me/LawCollegeNotes_Stuffs

773. [S.129] Extent of surety's liability 631
Consultants and Engineers(P)Ltd}''^The court reiterated that the bank
mustpayexceptincaseoffraudorirretrievableinjustice.Thereshouldbe
minimuminterferenceintrade.Commitmentsofbanksmustbehonoured
freefrominterferencebythe courts. Otherwise, trust incommerce,internal
andinternational,wouldbeirreparablydamaged.
TheSupremeCourtapprovedtheobservationsof LordDiplockin
UnitedCityMerchants(Investments)Ltd v Royal Bank of Canada,
where it was observed that "to this general statement of principle as to the
commercialobligation of theconfirmingbank to theseller,there is one
establishedexception,that is, where theseller,for the purpose of drawing
on the credit,fraudulentlypresentsto theconfirmingbankdocumentsthat
contain,expresslyor byimplication,materialrepresentationoffactsthat
to his knowledge areuntrue....Thecourts will not allow their process to
beusedbyadishonestpersonto carry out afraud".Anexampleof a fraud
of this kind was before the Bombay HighCourtinDai-IchiKarkaria(P)
LtdVOilandNaturalGasCommissionThecourtemphatically asserted
thatthe lawcannotallow the benefit of a bank guarantee to be claimed by
unscrupulousmethods.Here the party inquestionwascompelledat the
pain ofstoppingbusinesswithhimto dropfromhisbankguaranteethe
originalrequirementthat itwouldbeencashableonlywhentheparallel
amount of import duty paid byhim wasrefundedto him. Assoon as ONGC
143.(1988)1see174.Seealso Fenner (India) Ltd v Punjab and Sind Bank,(1997)7 SCC 89:
AIR 1997 SC 3450, encashment of bank guarantee on failure of payment up to a certain
limit, notstayed.KamalVirdichandjiGarg v Fiat India(P)Ltd, AIR 2004Bom462, the
contentionfor gettingencashmentstayed was that the matter had been settled byissuing
cheques,butthechequesbeingpost-datedandcouldnotbeencashedimmediately,therewas
no fraud ininvokingthe bank guarantee. Maharashtra StateHandloomCorpn Ltd v Assn
ofCorpn&ApexSocietiesofHandlooms,AIR2006NOC1185(Del),invocationstayedtill
theendofarbitrationproceedingsbecausethe contracthadbeenfullyperformed,attempted
invocationwasmotivatedby otherreasons.HindustanConstructionCo Ltd v SathijJal
VidyutNigamLtd,AIR2006Del169,bankguaranteefurnishedbythecontractorforcivil
work.Adisputewasreferredto theDisputeReviewBoard.Bankguaranteewasinvokedat
thisstagewithoutnotice.Itseemedto beanattempttodefeatthedecisionofDRB.Thecor
porationwasrestrainedfromencasingguarantee.AdaniAgriFreshLtdvMahaboobSharif,
2015 SCCOnLineSC1302:(2016)2LW56, a fruitsupplierwasgivena guaranteeby a fruit
wholesalerto makesupplyto anotherwholesaler.Supplywasaccordinglymade.Thebuyer
wholesalerdid not pay the bill and the bank guarantee wasinvoked.An injunction against
invocationissuedby the courtbelowwasheldto be notproper.Therewas noallegationof
any fraud or irretrievable loss.
144.(1983)1AC168:(1982)2WLR1039(HL).RigossExportsInternational(P)Ltd v Tartan
InfomarkLtd,AIR2002Del285,bankguaranteeobtainedbyanexportagentfraudulently,
encashmentstayed./agsonInternationalLtdv Oil&NaturalGasCorpnLtd,(2003)4 Mah
LJ733:(2004)2BomCR272,breachofriggingcontract,failuretoprovideoilrigsintime,
.arbitrator'sfindingthat thecontractorcommittedbreach,the court did notinterferewith
it,invocationofperformanceguaranteeallowed.NationalHighwaysAuthorityof Indiav
GangaEnterprises,(2003)7SCC410,invocationinaccordancewiththetermsoftheguar
antee,encashmentnotstayed.Thecourt furtheraddedthat inmattersofcontracta petition
under Article 226 is not theappropriateremedy.
145.AIR1992Bom309.BinfoElectronics(P)Ltd vBSNL,AIR2004NOC214(Kant),where
nopurchaseorderwasissued,thequestionofnon-compliancedidnotariseandtherebeing
nofailureonthepart ofthebidder,hisbankguaranteewasnotallowedto beencashed.https://t.me/LawCollegeNotes_Stuffs

774. 632Chapter12Guarantee [S. 129]
attempted to enforce the altered guarantee, he applied for and was granted
a stayagainstsuchencashment.He was thevictimofundueinfluencebor
dering on fraud and the special equities thus generated created the necessity
of rescuing thepartyfrom being victimised.
Where the terms of abankguaranteerequiredthattheletterof invoca
tion mustmentiontheamountof loss caused, it was heldthataletterof
invocation which only stated that the contractor had failed to perform his
contractwas not a sufficient compliance with therequirementsof invoca
tion. Hence,encashmentwasstayed."^"Whereno purchaseorder was placed
upon the bidder sothatthere was no concludedcontractat all,invocationof
bankguaranteewas held to be notjustified."^
In a case before theCalcuttaHighCourt:"^
Thecontractwas for dredging and deepening a reservoir. Advance
payment was made to thecontractorfor purchase of essential machinery
on bank guarantee. SAILsought encashment on account of the contrac
tor's default. The contractor tried to prevent it on the groundthatthe
workassignedto him wasimpossibleand that important facts weresup
pressedfromhim.Thesegroundswereheldto benotsufficienttoprevent
encashment.
Where the provision in the contract was that the guarantee would be
enforceableon the failure of the purchaser to takedeliveryand that the
supplier's decision as to thiswouldbe final, thecourtdidnotinterferein the
decisionof the supplier to enforce theguarantee."®Even where the matter
underdisputewasreferredto arbitration,the court didnot staytheenforce
ment of the bank guarantee."" A bank guarantee was invoked where the
contractorfailedtomakecontributiontowardscertainwelfarefunds.The
terms of the guarantee made the owner as the sole judgeof the fact whether
the contractorcommittedbreach.The court did notobligethe contractor
with an injunction restraining invocation of theguarantee."^
146.AnsalProperties and Industries (P) Ltd v Engg Projects (India) Ltd, AIR 1998 Del 176.
A suit for invoking encashment was dismissed as withdrawn, a second suit for the same
purpose was not allowed becausethere could not be fresh cause of action though the second
suit was moulded into a different shape of seekingremittanceof theamountmentioned in
the guarantee, Modi KoreaTelecommunicationsLtd vIndusindBank, AIR 2001 Del 254:
(2003) 1Banker'sJournal383.
147. Binfo Electronics (P) Ltd vBSNL,AIR 2004 NOC 214(Kant).
148.D.T.H.Construction(P)LtdvSAIL,AIR1986Cal 31.
149.AlliedResinsofIndia Ltd vMineralsand MetalsTradingCorpnofIndia Ltd, AIR1986Cal
346.
150.JuteCorpn ofIndiaLtdv Konark Jute Ltd, AIR 1986 Ori 238. The enforcement of bank
guaranteecannotbestayedbymeansofa writpetition.ModiVanijyavMetalScrapTrading
CorpnLtd,(1991) 1 Cal LT156.
151. GeoTechConstruction Co (P) Ltd v Hindustan Steel Works Construction Ltd, AIR 1999
Ker 72. Asif Enterprises vONGCLtd, AIR 2002 Guj 264, fake bank guarantee, black
listingof the contractorwithout hearing not wrong. His replyto the showcausenotice was
not tenable.Acceptanceof fresh bank guarantee and resuming contracts with him before
initiating action did not have the effect of condoningconsequencesof fake document.https://t.me/LawCollegeNotes_Stuffs

775. [S.129] Extentofsurety'sliability633
Where a mobilisation advance was provided by the owner to the contrac
tor againsta bank guarantee and the contracthavingbeenterminated and
the mobihsation advance thereby becomingrecoverable,encashment of the
bank guaranteewas heldto bejustified.It couldnot be said that the encash
mentwasnotinaccordancewiththetermsofthecontract.Evenifthefirst
invocationwasnotinaccordancewiththetermsofthecontract,itcould
befollowedbyasecondinvocation.The court further said thatreasonsfor
requiringa bankguaranteemaycontinuetopersistevenafterterminationof
thecontractto enable invocation up to the date of itsexpiry."^
Eventhe winding up of the company on whose behalf the guarantee was
submittedwould not enable thebankto refuse payment."^ The factthatthe
companywhichwasinvokingbankguaranteewaslikelyto bedeclareda
sick industrial undertaking was held to be not a situation of a special equity
orirretrievableinjusticeso as tojustifyaninjunctionagainstencashment."'*
Variationintermsofcontract
The High Court of Delhihasexpressedtheviewthat aclausein a bank
guaranteeto theaffectthat thepartiesmayvary thetermsof the contract
without affecting the liability of the bank would be valid. All that is nec
essaryis that theguarantor'sultimateremedyagainsttheprincipaldebtor
shouldremainunimpaired."^
Bankguaranteeseparatetransaction
Thecourtcannottake recourse tosurroundingcircumstancesunless an
ambiguityexistsin thetermsandconditionsofthecontract.A bank guar
anteeis aseparatetransaction.It has to beconstruedon its ownterms."^
Where there were twoseparatecontracts, the bank guaranteeexecuted
inrespectofoneofthemwasnotallowedto beinvokedinrespectof the
other."^
Lettersofcreditandbankguarantees
Sen J of theSupremeCourtobservedinCentax(India)Ltd v Vinmar
Impex "Commitmentsofbanksmustbeallowedtobehonoured
free from interference from the courts.Otherwise,trustininternational
commerce would be irreparablydamaged.""'The court did not grant an
152. CrownMaritimeCo (India) Ltd v Econ Engg (P) Ltd, AIR 2003 Bom 163.
153. Gas Authority of India Ltd v OfficialLiquidator, Mumbai,AIR 2004 Bom220.
154.KamalVirdichandji Garg v Fiat India (P) Ltd, AIR 2004 Bom 462.
155.LloydsSteelIndustriesLtd v Indian OilCorpnLtd,AIR1999Del248.
156. SBIVMulaSahakariSakkarKarkhanaLtd, (2006) 6 SCC 293: AIR2007SC 2361.
157.NationalHighwaysAuthorityofIndia vJivanlalJoitramPatel,AIR2010NOC 402(Guj).
158. (1986) 4 SCC 136: AIR1986SC1924.
159.At p.1986citingDenning MR inElanvMatpas,1966LILR595;AkaiImpexLtd v
GeneralSteelExport,(1998)2BomCR199,lettersofcreditarelikebankguarantees.They
areadealingindocuments.Thebanksarenotconcernedwiththequalityorquantitiesof
thegoods.Thosethingshaveto besortedoutbetweentheparties.Theirencashmentcan
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776. 634Chapter12Guarantee [S.129]
injunctionto stay theenforcementof letters of guarantee on the grounds
thatthegoodswereofinferiorqualityandthesellershadnotsenttheorigi
nalshippingdocuments.ThecourtcitedthefollowingstatementofJenkins
LJinHamzehMalas&SonsvBritishImexIndustriesLtd-}^°
"...theopeningof aconfirmedletterofcreditconstitutesabargain
betweenthebankerand thevendorof thegoodswhichimposeson the
banker anabsoluteobligationtopay...andthat this was not a case in
whichthecourtoughttoexerciseitsdiscretionandgranttheinjunction."
The courtemphasisedthat a bank guarantee attracts the same consider
ationas aletterofcreditand added: "Aletterofcreditsometimesresembles
andisanalogoustoacontractofguarantee.Abankguaranteeisverymuch
like a letter of credit. Thecourtswill do theirutmostto enforce it accord
ingto itsterms.Theywillnot, in theordinarycourseofthings,interfere
bywayofinjunctiontopreventitsimplementation."The court alsocited
anobservationofKerrJ in Harbottle R.D.(Mercantile)Ltd v National
WestminsterBankLtd:^^^
"It is only in exceptional casesthatthecourtwill interfere with the
machineryofirrevocableobligationsassumedbybanks.Theyarethelife-
bloodofinternationalcommerce."
The type of rarecaseinwhicha courtmayintervenewasbeforethe
CalcuttaHighCourt inBanerjee&BanerjeevHindustanSteelWorks
ConstructionLtd}^'^Herethe partyclaimingundertheguaranteefailed
to point out thepreciseamount of his claimalthoughhe had themeansto
quantifyit,hisintentionbeingtosuppressvitalinformation,thecourtheld
thathisconductbeingfraudulent,enforcementoftheguaranteeoughttobe
stayed.
Anotherexamplewouldbewheretheencashmentoftheguaranteewould
becontrarytolaw.Forexample,whereacontractorgaveabankguarantee
bestoppedonlyincasesoffraudorirretrievableloss.KaniConstructions(P)LtdvPatibel
JV,(2006)129DLT38,guaranteerevealedthatbankwasliabletopayonfirstdemand
withnorightofobjection.Thisalsoamountedtowaiverof therightunderS.133.Mark
Williams,DocumentaryCredit&Fraud:EnglishandChineseLawCompared,2004JBL
155;HimadriChemicalsIndustriesLtd v Coal TarRefiningCo,(2007)8SCC110:AIR
2007SC2798,noinjunctionagainstencashmentofletterofcredit,thebuyerofgoodswas
giventheoptiontonegotiatebutinsteadhe onlyagreedtoamendthe letterwith theconsent
ofthebank.
160.(1958)2QB127,129:(1958)2WLR100(CA).TheHouseofLordsinUnitedCityMerchants
(Investments)LtdvRoyalBankofCanada,(1983)1AC168:(1982)2WLR1039(HL)
heldthat theprinciplesenunciatedin thecasesdealingwithconfirmedirrevocablelettersof
creditwereequallyapplicabletocasesofbankguaranteesininternaltradewithincountry;
UnitedCoconutOilMillsvIndianOverseasBank,(1991)3CurrLJ2345(Singapore);Swiss
BankCorpnyjaiHindOilMillsCo,(1994)1BomCR371,thereisnoprivityofrelation
shipbetweenthevendorandtheconfirmingbank.Forfurtherstudysee,AgashaMugasha,
Enjoiningthebeneficiary'sclaimona LetterofCreditorBankGuarantee,2004JBL515
161. 1978 QB 146: (1977) 3 WLR 752.
162.AIR1986Cal374.https://t.me/LawCollegeNotes_Stuffs

777. [S.129] Extentofsurety'sliability635
along with his bid as was required,bythetender notice, the bidder, having
the right to do so, withdrew his bid before its acceptance, theDepartment
wasrestrainedfromencashingtheguarantee.Therewas nocontractyet
aboutwhichitcouldbesaidthattherewasabreach.^®^
Where the sub-letting of a Governmentcontractwas allowed only in
respect of three items and the principal contractor in fraud of his sub-lettee
handedover theentireworktohimandobtainedfromhimabankguar
antee for due performance, the enforcement of the guarantee was stayed
by reason of the fraud, for otherwise the sub-lettee would have suffered an
irreparableloss.^®''-
Where thebankwhich presented the letter of credit forencashmentwas a
holder in due course, it was heldthatthebankwhich issued the letter would
have tohonourthe same even if thedocumentwastaintedby fraud. The
facts of the present case showed that a fraud was practised by the buyer and
the supplier colluding with one and another to deprive the bank of repay
ment. An injunction order against the bank to restrain it from honouring the
documentary credit was vacated so that the payment couldfollow.^®^
A conditional or contingent bank guaranteecannotbe invoked by the
creditorwithoutthe specifiedcondition beingfulfilled.^®®
Bankguaranteeandarbitrationclause
The enforcement of a bank guaranteecannotbe made the subject-mat
ter of arbitrationproceeding.^^^But where a bank found that there was a
pendingarbitration under which theliabilityof all the parties had to be
ascertained, theKarnatakaHigh Court upheld the decision of the bank to
withholdpayment.^^®In anotherKarnatakacase"^it washeldthat the right
of thebeneficiaryof the guarantee torecoverthe guaranteed amount could
not bestayedpendingarbitrationand the bank couldnot berestrainedfrom
honouring itsobligation.But the amountencashedis subjectto adjustment
under the final award to be passed by thearbitrator.
163. KirloskarPneumaticCo Ltd vNTPCLtd, AIR 1987 Bom 308. Another case of stay because
ofspecialequitiesisArulMaruganTradersvRashtriyaChemicalsandFertilisersLtd, AIR
1986 Mad 161. Still another is Sztein v J. Henry SchorderBkgCorpn,(1941)3 HYS 2d 631
where theenforcementwas stayed becausethe shipmentwas not that of real but of worthless
wastematerial.
164. NagiaConstructions(India)(P)LtdvNationalBuildingConstructionCorpnLtd,AIR1990
NOC 177(Del).Writ jurisdiction is not a proper remedyfor demanding stay, Rayalaseema
PaperMillsLtd vA.P.StateTradingCorpn, AIR 1990 NOC 124(AP);National Project
ConstructionCorpnLtdvSadhu& Co, AIR 1990P&H300.
165. State Bank of Mysorev Machado ComputerServices,(2009) 5 Mah LJ349.
166.KarnatakaState Khadi andVillageIndustries Board v PunjabNationalBank, (2014)1 SCC
625:(2013)101ALR245.
167.National Project Construction Corpn Ltd v G. Ranjan,AIR 1985Cal23. Thecourt referred
to Unionof India v Raman Iron Foundry,(1974)2 SCC231: AIR 1974 SC 1265; Centax
(India) Ltd v VinmarImpexInc,(1986) 4 SCC 136: AIR 1986 SC 1924.
168.KudremukhIronOreCoLtdvKorulaRubberCo (P)Ltd,AIR1987Kant139.
169. HVSTechnologiesInc,USAv Aeronautical DevelopmentAgency,(2001)4 Kant LJ211.https://t.me/LawCollegeNotes_Stuffs

778. 636Chapter12Guarantee [S.129]
Period oflimitation(expiry ofguaranteeperiod)
The period of limitation for enforcing a guarantee is three years from the
date on which the letter of guarantee wasexecuted.^^"Where as against the
advancementof a loan to a company,the guarantee deed was executed by its
directors and subsequentlya letter acknowledgingthe loan was issued by the
same directors on behalf of the company, it was heldthatthe letter did not
have the effectof extending the period of limitation.Recoveryproceedings
instituted after three yearsfrom the date of the deed of guarantee were liable
to bequashed.'^^Where anacknowledgementof liability bypartpayment
or otherwise has the effect of extending the period oflimitation,it was held
that the debt remained the same as it wasbefore.So long as the principal
debtor remains liable, thesuretyalso continues to be liable. There is no need
for any separate acknowledgement from thesurety.'^^
Where the terms of the deed of guarantee showedthat the guarantee was
ofcontinuingnature, it washeldthat the suit would begovernedbyArticle
55 of the Limitation Act, 1963. Hence, so long as the account was alive, i.e.
neithersettlednor there wasrefusalby guarantors to.carry out theobliga
tion, the period of limitation would not start running. On breach taking
place, the bank gave notice invoking the guarantee. A suit filedwithinthree
yearsfromthatdatewas held to bewithintime.^^^
A guarantee has to be invoked within its validity period, i.e. before its
expiry date. Once it isinvokedwithin time actualproceedingscan be com
mencedwithin the period of threeyearsfrom that date. Anyclausein the
contract cutting short this period would be hit by Section
170. New Bank of India vSajithaTextiles,AIR 1997 Ker201, the guarantee deedwas not allowed
to beenforcedagainstthe guarantor undera suitfiledafter expiryof the period.Article55 of
the Limitation Act, 1963 is applicable.
171.AnnamaJose v KeralaFinancialCorpn,AIR2002Ker 396.
172.SyndicateBankv K.Prakash,AIR2007Mad307.
173.IndianBankvStateofT.N.,AIR2002Mad423;IbrahimAbdulLatifShaikhvCorpnBank,
AIR 2003 Kant 98, revivalletter andacknowledgementexecuted by the principal debtor on
authorisationofguarantor.Theguarantor'spleathat this did nothavetheeffectofcreating
afreshperiodoflimitationwasheldto benottenable.PunjLioydLtd v IndiaCementsLtd,
AIR 2005 Del 389, courts cannot direct, a bank to extend a bank guarantee. Punj Lloyd
Insulations Ltd vSBI,AIR 2006 Del 256, extendedcontract, bank guaranteeencashedin
accordancewithterrasandconditions.MulaSahakariSakharKarkhanaLtd vSBI,(2005)6
BomCR55, contract for erectionof paperplant,clausefor 10per centretentionon the bills,
replacedby bankguarantee,contractterminatedinvocationof bankguaranteenotstayed,
invocationwas after breachand thereforenot premature, the questionwhether the document
wasanindemnityorguaranteecouldbeconsideredat the trial, the contractorwasnotlikely
tosufferanyirretrievableinjustice.SyndicateBank vChannaveerappaBeleri,(2006)11
see506: AIR2006 SC1874,commencementof liabilitydependsupon termsof the guaran
tee.In the caseofdemandguarantee,limitationbeginswhenthereisrefusalto payafter due
invocation. The case against the principal debtor should be a live claim.
174. Explore Computers (P) Ltd vCalsLtd, (2006) 131 DLT 477; Maharashtra State Financial
CorpnVMagna Elastomeric Rollers (P) Ltd, 2005 SCC OnLine Bom 227: (2005) 4 Bom
CR 661,limitationasagainstthe guarantor starts onlyfrominvocationof theguarantee.
FollowedinSICOMLtd v PadmashriMahipatraiShah,(2005)3 Mah LJ125.https://t.me/LawCollegeNotes_Stuffs

779. [S.132] Extent of surety's liability 637
Where the guarantee was valid for 90 days, the court saidthatit could be
invoked on the 91st day, if the 90th day happened to be a public holiday or
Sunday and the banks did notfunctionthatday.^^^
Where thecontractbetween the parties had expired by efflux of time
without invocation of bank guarantee, as such the defendants had no
right under the contract toinvokethe bankguarantee.Theyinducedthe
plaintiff to renew the guarantee thus changing position to their detriment.
Defendants invoked the guarantee immediatelyafter renewal. The order of
injunction passed restraining thedefendantsfrominvokingthe guarantee
was held to beproper.^^®
Joint-debtorsandsuretyship[S.132]
S. 132. Liability of twopersons,primarilyliable,notaffected
byarrangementbetweenthemthatone shall besuretyinother's
default.—Wheretwo personscontractwith a third person toundertal<ea cer
tainliability,and also contract with each other that one of themshallbeliable
onlyon the defaultofthe other,the third person not being a partyto suchcon
tract,theliabilityofeach ofsuchtwo persons to the third person under the first
contract isnot affected bythe existenceofthe second contract,although such
thirdpersonmay havebeenawareof itsexistence.
Illustration
Aand 6 makea joint and severalpromissorynote toC.Amakesit,infact, as surety forB,
andC,knowsthis at the time when the note is made. The factthat/\,to the knowledge ofC,
madethe note as suretyforB,hno answerto a suit byCagainst/iupon the note.
The sectionis basedupon theprinciplethat theliabilityofpersonswho
areprimarilyliableasjoint-debtorsis notaffectedby anyarrangement
between them as to the order of their liability. A creditor is not affected by
anyprivatearrangemententeredinto asbetweenhistwodebtorsthatone
will be the surety of the otherevenif the creditorknowsof this arrange
ment. The creditor may not be aconsentingparty to thearrangement.^^''
Theprincipleofthesectionisthatwhateverbethearrangementbetween
joint-debtorsas totheirliabilitytothecreditortheyremainjointdebtors.
The creditor is not concerned with their mutual agreementthatone would
beaprincipaland theotherasurety.Where,however,thecreditorknows
ofanysucharrangement,hemustrefrainfromdoinganythingwhichwould
havetheeffectofdischargingthe suretyunderSections133, 134 or135.^^®
175. ICICI Bank Ltd v TataInternationalLtd, (2008) 6 Mah LJ446, S. 10 of the General Clauses
Act,1897.
176.VideoconIndustriesLtdvCoalIndiaLtd,AIR 2014Cal113.
177.DuncanFox&CovNorth&SouthWalesBank,(1880) LR 6ACl(HL).
178.OakeleyvFasheller,(1836)4C1&Fin207:7ER80andOverend,Gurney&CovOriental
FinancialCorpn,(1874)LR 7 HL 348;KousevBradfordBankingCo Ltd, 1894AC586
(HL).In twoIndiancasesthesameviewhasbeentaken.PunchanunGhosevDally,(1875)
15BLR331;Harjiban Das vBhagwanDas,(1871)7BLR535;followedinMooljiMurarji
SunderjivM.C.Finto,AIR1926Sind156;BihariLaivAllahabadBankLtd,AIR1929All
664 and M. Pogosev Bank of Bengal,ILR(1877)3 Cal 174.https://t.me/LawCollegeNotes_Stuffs

780. 638Chapter12Guarantee [S.130]
Unlessthereis aspecificagreementbetweenthe suretyand the creditorto
theeffectthattheprincipaldebtoralonewouldbeliableinthefirstinstance,
the creditor can proceed against the surety to the same extent as if he were
himselftheprincipaldebtor.Itwouldnot benecessaryfirsttorealisethe
amount from the principaldebtor.^^^
Apersonalguaranteeexecutedbythe guarantorprovidingthat the guar
antee was to remain in force till the borrower paid the full loanamounton
demandwasheldto be acontinuing guarantee.Theperiodoflimitation
startedrunningon refusal by theborrowerto fulfil thedemand.^^"After
noticeofrevocation,anyamountduefromthesuretyinrespectofpre-ex
istingtransactions,thepaymentfor the samemustbeclaimedwithinthree
years failingwhichitwouldbecometime-barred.^®^
DISCHARGEOFSURETYFROMLIABILITY
Asuretyissaidto bedischargedfromliabilitywhenhisliabilitycomesto
anend.The Actrecognisesthefollowingmodesofdischarge:
1. Byrevocation[S. 130]
Ordinarilyaguaranteeis notrevocablewhenonceitisactedupon.But
Section130providesforrevocationofcontinuingguarantees.
S.130.Revocationof continuingguarantee.—Acontinuingguarantee
mayat anytimeberevokedbythesurety,asto futuretransactions,bynoticeto
thecreditor.
Illustrations
(a)A,inconsiderationofB'sdiscounting,atA'srequest,billsofexchangeforC,guarantee
toB,fortwelvemonths,the duepaymentofallsuchbillstothe extentof5000rupees.
Bdiscountsbillsfor Cto the extent of 2000 rupees.Afterwards,at the end of three
months,Arevokestheguarantee.ThisrevocationdischargesAfromailliabilityto Bfor
anysubsequentdiscount.ButAisliableto6forthe 2000rupees,on defaultofC
(fa)AguaranteestoB,to theextentof10,000rupees,that Cshallpayallthebillsthat B
shalldrawuponhim.BdrawsuponC.Cacceptsthebill.Agivesnoticeofrevocation.C
dishonoursthebillatmaturity.Aisliableupon hisguarantee.
Revocationbecomeseffectiveforthefuturetransactionswhilethesurety
remainsHablefortransactionsalreadyenteredinto.^®^OffordvDavies^^^is
asuitableillustration:
Thedefendantsguaranteedtherepaymentofbillstobediscountedby
theplaintiffsforDavies&Cofortwelvemonthsnotexceeding£600.
179.MedisettiRaviBabuvPramidaChitFund(P)Ltd,(2003)2BC527(AP).
180. C.P. Sreelalv DistrictCollector,Thiruvanantapuram,AIR 2007 Ker 131.
181.TamilNadu IndustrialInvestmentCorpnvSudarsanamIndustries,AIR2009 Mad 15
(DB).
182.IndianOverseasBankvGohTengHoon,(1989)1CLJ554(HCSingapore).
183.(1862)6 LT579:142ER1336.Aguaranteeformoneyto beadvancedfromtimeto timeis a
continuingguarantee.LaurievScholefield,(1869) LR 4 CP 622.https://t.me/LawCollegeNotes_Stuffs

781. [S. 130] Dischargeofsuretyfromliability639
The defendants revoked theguaranteebefore any bill wasdiscounted.But
the plaintiffs discounted the bills which remainedunpaid.
The questionwas whether the surety had a right to revoke.The court said:
"We are of opinionthatthey had and consequently they were not liable. In
the case of a simple guarantee for a proposed loan, the right of revocation
beforethe proposal has been acted on did not appear to be disputed." In the
case ofacontinuingguarantee,every credit given is aseparatetransaction
which makes the surety irrevocably liable, but he may free himself from
furtherliability.^'''
Theemploymentof a servant is one transaction. A guarantee for his good
behaviour is not a continuing one and is not revocable as long as he contin
ues in thejob.^®^At any rate theemployeris entitled to such notice as will
enable him to determine the employmentwithoutliability. Nor is such a
guarantee determined by the surety's death unless there is an agreement to
thecontrary.^®®
Whether a guarantee for the payment of rent can berevokeddepends
upon the facts of each case and thelanguageemployedby the parties to
expresstheirintention.^^^In aguaranteeof this kind wherethe surety died,
thecourtheldthatneithercould he have revoked theguaranteeduringhis
lifetime nor was his estate released fromliability.^^^JoyceJ said:"Theright
to determine or withdraw a guarantee by notice forthwith cannotpossibly
exist when theconsiderationfor it is indivisible, so to speak, and moves from
persontowhomtheguaranteeisgivenonceforall,asin thecaseofthecon
siderationbeingthegivingor conferringanofficeoremploymentupon any
person whose integrity is guaranteed."
Asagainstit whena personguaranteedthepaymentofrent byhisservant
andrevokedtheguaranteeas soon as the servantlefthisemployment,he
washeldnotliableforrentswhichbecamedueaftertherevocation.^^'
Where the directors of acompanyguaranteed the payment of the com
pany'soverdraftsandsubsequentlyresignedtheirofficeand the bankwas
informed,it washeldthat theliabilityof thedirectorswouldbeconfinedto
theamountdueuptothedateoftheirresignation.""Theguaranteeingdirec
tionsof thecompanycan beproceededagainstevenwhenthecompanyhas
184. AnilKumarv CentralBank of India, AIR 1997HP 5, aco-suretygavenoticeto the bank
andcancelledhisguarantee,held,noliabilityforanythingaftersuchnotice;theliabilityof
theotherco-suretiesnotaffected.
185. Lloyds v Harper, (1880) LR 16 Ch D 290.
186.Balfourv Grace, (1902) 1 Ch 733..
187.ColesVPack,(1869) LR 5 CP 65, 70.
188. BalfourVCrace, (1902) 1 Ch 733.
189.WindfieldvDeSt Croin, (1919) 35 TLR 432.
190.HargopalAgarwalvSBI,AIR1956Mad211.Ayearlyrenewableguaranteefortheconduct
of a treasurer,held,continuing,LalaBansidharv Govt ofBengal,(1872)9BengLR364:14
MIA86.https://t.me/LawCollegeNotes_Stuffs

782. 640Chapter12Guarantee [S.131]
entered into protection from liability under theSickIndustrial Companies
(Special Provision) Act,1985."^
"Noticeto thecreditor"means a clear and specific notice intended to ter
minate liability under the guarantee. A denial of liability in a previous suit
vv^asheld to be not serving as anotice."^
2. Bydeathofsurety[S. 131]
A continuing guarantee is also determined by the death of the surety
unless there is a contract to the contrary. Once again, the termination
becomeseffectiveonly for the futuretransactions.Thesurety's heirs can
be sued for liabilityalreadyincurred. The sectionclearlypoints this out.
S.131.Revocationofcontinuingguaranteebysurety'sdeath.—The
death ofthe surety operates, inthe absence of anycontract to thecontrary,as a
revocation of a continuingguarantee,so far as regards future transactions.
Liabilityoflegal heirs
Theliabilityof thedeceasedsuretycan beimposedagainsthislegalheirs
but only to the extent of the property inherited bythem."''
3. Byvariance[S. 133]
Courts oflawandequityhavealwaystakenzealouscare of asurety's
interest."Asuretyisconsideredafavoureddebtor and his liabilityisin stric-
tissimijuris."'^^^Initially a contract of guarantee may not be one of utmost
goodfaith,butonceformedthedutyofutmostgoodfaithisimposedupon
thecreditor.Theresultofthisconcernofthecourtsforthesurety'sinterest
is that a surety is helddischargedvi^hen,without his consent, the creditor
makesanychangein thenatureortermsofhiscontractwiththeprinci
paldebtor."^"Thesuretyisdischargedas soon as theoriginalcontractis
191. R.K.Dewanv StateofU.P.,2005 All LJ 2067.
192. Bhikabhaiv BatBhuri,ILR27Bora418. A requestforreleasealso does not havethe effect
ofanoticeofrevocation,PerwatraHabibBankvSehatianDevelopment,(1994)1 CurrLJ
394(Malaysia).
193.Terminationbecomeseffectiveonthecreditorreceivingthenotice.CoultharivClementson,
(1879) LR 5 QBD 42. Butunderthe section there isautomaticterminationondeath.A term
oftheguaranteethatthelegalheirsmayterminatebynoticeafterdeathwouldbeaprovision
to the contrary.DurgaPriyaChowdhuryvDurgaPada Roy,AIR 1928Cal204: ILR(1928)
55Cal154.
194. R.K. Dewan v State ofU.P.,(2005)All LJ 2067.SBIv Jayanthi,(2011)2 CTC 465: AIR
2011Mad179 (DB),creditorcanrecoverdues out of theestateof thedecreased.
195.SeejudgmentofKayLJinRousevBradfordBankingCoLtd,1894AC586(HL),followed
bytheSupremeCourtinStateofMaharashtravM.N.Kaul,AIR1967SC1634,wherea
guaranteewasnotallowedto beenforcedaftertheexpiryofitsterm.Thecourtcitedpas
sagesfromthespeechofLordWestburyLCinBlestvBrown,(1862)4 DeGF&J367,376:
45ER1225:"Youbindhimto theletterofhisengagement.Beyondtheproperinterpretation
of thatengagement,youhavenoholduponhim."SBIvJayanthi,(2011)2CTC465: AIR
2011 Mad 179(DB),recovery from the estate of the deceased.
196. A variance with consent either given in advance or at the time of variance wouldmaintainthe
liabilityofthesuretyintact.ThushecanagreethathewouldnotclaimthebenefitofSs.133,https://t.me/LawCollegeNotes_Stuffs

783. [S.133] Dischargeofsuretyfromliability641
alteredwithout hisconsent."^^^A guaranteeis not a contract inrespectof a
primarytransaction.Itisanindependenttransactioncontainingindepend
entandreciprocalobligations.It iscreatedonaprincipaltoprincipalbasis.
Therefore,somereliefisprovidedboth to the creditorand theguarantor."^
Section 133 of theIndianContractAct incorporates this principle.
S. 133. Discharge ofsuretybyvarianceintermsofcontract.—Anyvari
ance, made without the surety's consent, inthe terms of the contract between
theprincipal^''[debtor]and thecreditor,discharges the surety as to transac
tionssubsequenttothevariance.
Illustrations
(a)Abecomessuretyto Cforfi'sconduct as amanagerinC'sbank.Afterwards,Band C
contract,without/I'sconsent, thatfi'ssalaryshallbe raised,and that heshallbecome
liable forone-fourthof the losses on overdrafts, fiallows acustomerto overdraw, and
the bank loses a sum ofmoney.A is discharged from his suretyship by the variance
madewithouthisconsent,and isnotliable to makegoodthis loss.
(fa)AguaranteesCagainstthemisconductoffiinanofficetowhichfiisappointedbyC,
and of which the duties are defined by an Actof theLegislature.ByasubsequentAct,
the nature of theofficeismateriallyaltered.Afterwards,fimisconductshimself.A is
dischargedbythechangefromfutureliabilityunderhisguarantee,thoughthemiscon
duct of fiis in respect of a duty not affected by the latterAct.
(c)Cagreestoappointfiashisclerktosellgoodsat ayearlysalary,uponA'sbecoming
suretyto Cforfi'sdulyaccountingformoneysreceivedbyhimassuchclerk.After
wards,without>A'sknowledgeorconsent,Candfiagree thatfishouldbe paid by a
commissiononthe goodssoldbyhimandnotbyafixedsalary.yAisnotliableforsubse
quentmisconductoffi.
(d)AgivestoCacontinuingguaranteetotheextentof3000rupeesforanyoilsuppliedby
Cto fion credit. Afterwards fibecomesembarrassed,and,withouttheknowledgeof A,
fiand Ccontract that Cshallcontinueto supplyfiwith oilfor readymoney,and that the
paymentshallbeappliedtothethenexistingdebtsbetweenfiandC.Aisnotliableon
hisguarantee for anygoods supplied after this new arrangement.
(e)Ccontractstolendfi5000rupeesonthe1stMarch./Aguaranteesrepayment,Cpaysthe
5000rupeestofionthe1stJanuary.isdischargedfromhisliability,asthecontracthas
beenvaried,inasmuchas Cmightsue Bforthe moneybeforethefirstofMarch.
BonarvMacdonalcP""is one of the earlyillustrations.
134,135,139and141andsuchagreementwouldbevalid.T.RajuSettyvBankofBaroda,
AIR1992Kant 108:(1991)4 Kant LJ475.The court did notagreewith the contraryview
asexpressedinUnionofIndiavPearlHosieryMills,AIR1961Punj281totheeffectthat
S.133cannotbeexcludedbyanagreementto thecontrary.Thecourtagreedwiththeview
expressedinCitibankN.A.vJ.K.JuteMillsCoLtd,AIR1982Del487andR.Lilavativ
BankofBaroda,AIR 1987 Kant 2:ILR1987 Kant 964.
197.PratapsingMoholalbhaivKeshavlalHarilalSetalwad,(1934-34)62lA23:AIR1935PC
21.
198.IndustrialFinanceCorpnofIndiaLtdvCannanoreSpg&WvgMillsLtd,(2002)5SCC54:
AIR2002SC 1841:(2002)110CompCas 685.
199.ThiswordwasinsertedbyS.2 andSch.1 oftheRepealingandAmendingAct,1917(XXIV
of1917).
200.(1850)3 HLCas226:10ER87;Brahmayya&CovK.SrinivasanThangirayar,AIR1959
Mad122.https://t.me/LawCollegeNotes_Stuffs

784. 642 Chapter 12 Guarantee [S,133]
The defendant guaranteed the conduct of a manager of a bank. The
bank afterwards raised his salary on the condition that he would beHable
for one-fourth of thelossesondiscountsallowedby him. No commu
nicationof this newarrangementwasmadeto thesurety.Themanager
allowedacustomertooverdrawhisaccountandthebanklostasumof
money.
Itwasheldthat the suretycouldnot becalledon tomakegood theloss
as thefreshagreementwasa substitutionof a newagreementfor the former
which discharged the surety.
Similarly,where the payment of rent was guaranteed, and the rent was
increased without the consent of thesurety;^°iwhere the creditor on default
ofpaymenttook apromissorynotefromtheprincipaldebtorwithout ref
erenceto thesurety;^°^wherethepositionof a partner in afirmwasguar
anteedandthebusinessofthefirmwasextendedwithoutknowledgeofthe
surety,the suretieswere held to bedischarged.^"^
One of thequestionsthatconcerns thecourtsisthatwhere avariation
is notsubstantialormaterial,or isbeneficialto thesurety,will he be dis
charged?Aproblemof this kindwasbeforetheSupremeCourt inM.S.
AnirudhanvThomco'sBankLtd.^°'^
Thedefendantguaranteedtherepaymentofa loanofRs20,000given
bytheplaintiffbanktotheprincipaldebtor.Theguaranteepapershowed
theloantobeRs25,000.Thebankrefusedtoaccept.Theprincipalthen
reducedtheamounttoRs20,000andwithoutintimationtothesurety
gaveit to the bankwhichwasthenaccepted.Theprincipaldebtorfailed
to payand the bank suedthesurety.Thequestionwaswhetherthe alter
ation had discharged him.
Itwasheldbyamajoritythatthesuretywasnotdischarged.Kapur J and
HidayatullahJ(afterwardsCJ)wereofthisview,butSarkarJdissented.
Hidayatullahj(afterwardsCJ) considered theauthorities.^"^
LordWestburyLCinBlestvBrown^°^statedtheliabilityin thefol
lowingterms:"Itmustalwaysberecollectedinwhatmannerthesuretyis
bound.Youbindhimtotheletterofhisengagement.Beyondtheproper
interpretationof thatengagementyouhaveno hold upon him. Hereceives
nobenefitandnoconsideration.Heisbound,therefore,merelyaccording
CASEPILOT
201.KhatunBibiv Abdullah,ILR(1880) 3 All 9.
202.GreetvSeth&Seth,1887AllWN136;C.N.SundaramvChennaiFinanceCoLtd,(2005)
5 An LT 60: AIR 2006 NOC 505(AP),loan for a period offivemonths. The creditor uni
laterallyextendedtimeandalsoacceptednewscheduleforrepayment.Thiswasdoneon the
askingof one of theguarantorswithoutinformingeventheprincipalborrower.The other
guarantors and the principal borrower becamedischarged.
203.JowandSingh vTirathRam,AIR 1939 Lah 193.
204. AIR 1963 SC 746:(1963)1 SCR 63:(1963)33 Comp Cas 185.
205.M.S.AnirudhanvThomco'sBankLtd,AIR1963SC746:(1963)1SCR63:(1963)33Comp
Cas185.
206.(1862) 4 De GF & J 367: 45 ER1225.https://t.me/LawCollegeNotes_Stuffs

785. [S.133] Dischargeof suretyfromliability643
to thepropermeaningsandeffectof thewrittenengagementthat he has
entered into. If that writtenengagementis altered in a singleline, no matter
whether the alteration be innocently made, he has a right to say: 'The con
tract is nolongerfor that for whichIengagedto besurety;youhaveput an
end to the contract that I guaranteed, and myobligation,therefore, is at an
end.'"
Thestatementof thelawinBlestvBrown^°'^wasconsideredbytheCourt
ofAppealinHolmevBrunskill^°^CottonLJstatedthelawinthesewords:
"The true rule in myopinionis that if there is anyagreementbetween
theprincipalswithreferenceto the contractguaranteed,the surety
oughtto beconsulted,and that if hehas notconsentedto thealteration,
althoughincaseswhereit iswithoutinquiryevidentthat thealterationis
unsubstantial, or that it cannot be otherwisethanbeneficialto the surety,
the suretymaynot bedischarged;yet that if it is notself-evidentthat
thealterationisunsubstantialor one whichcannotbe prejudicial to the
surety,the court will not in an action againstthesurety,go into inquiry
astotheeffectofthealteration."
"Thereis anoticeabledifferencebetweenthestrictrulestatedby
LordWestburyandthatstated byCottonLJ and the law now accepts
thatunsubstantialalterationswhichare to the benefit of thesuretydo
notdischargethesuretyfromtheliability.Ofcourse,if theakeration
is to thedisadvantageof the surety, or its unsubstantial character is not
self-evidentthesuretycanclaimto bedischarged.Thecourtwillnotthen
inquirewhetherit infactharmedthesurety.ThatdictumofCottonLJ
wasquotedwithapprovalbytheJudicialCommitteeinWardvNational
Bank of NewZealandLtd.^°^"
Anattemptedvariationwhichdoesnotbecomeeffectiveleavesthesurety
boundby hisguarantee.^^"
Anothereffectisthat an akeration not onlydischargesthe surety from his
personalliabilkybutalsoreleasestheproperty,ifany,whichthesuretyhad
included in thecontract.^"This was theskuationinBoltonvSalmon.The
defendantwasa suretyfor a loan and alsobroughtinsomeofher ownprop
ertyassecurky.Theprincipaldebtor,wkhoutherknowledge,borrowed
from thecreditorfurtherstillandexecuteda new deedconsolidatingall the
207.Ibid.
208.(1877) LR 3 QBD 495 (CA).
209. (1883) LR 8 AC 755 (PC).
210.EgbertvNationalCrownBank,1918AC903(PC).Theacceptanceofclaimsbyaliquidator
inthewindingupofacompanydoesnothavetheeffectofdischargingthesurety.Punjab
National Bank v Mehra Bros (P) Ltd, AIR 1983Cal335. The amount of arrears due was
mentionedin aguarantee.Subsequentlytheamountwasfoundto belessthan thatmen
tioned.Held, did not amounttovariation.N.Sulochanav Stateof A.P.,AIR1984AP173.
211.BoltonVSalmon,(1891)2 Ch48. KahnSinghvTekChand,AIR1968J&K93,compromise
of decreed debt,suretydischarged.
212.(1891) 2 Ch 48.https://t.me/LawCollegeNotes_Stuffs

786. 644 Chapter 12 Guarantee [S.133]
loans.Thedefendantwasheldtohavebeendischargedand her property
releasedfromthebond.
Wherea guaranteewasgivenfor the loanaccountof the principaldebtor
witha bank andthe bankopenedasecondaccountin thenameoftheprin
cipaldebtorintowhichconsiderablepaymentswerereceived,thesuretywas
heldtohavebeendischarged.^"The termsofguaranteeprovidedinterestat
9 per centand that the surety'sconsentwould not benecessaryfor any grant
bythecreditorto theprincipaldebtor"oftimeor any otherindulgenceor
consideration".The creditorextendedthe time ofpaymentbyone year and
increasedthe interestto 16 per cent. Thisdischargedthesurety.The court
said that thesubstantialincreaseofinterestcouldnot becoveredby the
words"anyindulgenceorconsideration".^"Theliabilityunderaguarantee
ceasedto existwheretheguaranteewassubstitutedby anotherguarantee
bondcoveringthewholeamountandsignedbyotherguarantors.^"
Extension of cash-credit limit of the borrower beyond the amount which
wasguaranteeddidnothavetheeffectofdischargingthe suretybecausehis
limitofhabilitywastoremainthesameas undertheguarantee.^"
Theliabilityof the guarantor would notautomaticallyceaseorcometo
an end merely because he had not signed revival letters. The factthatthe
guarantor was no longerwilling to continuewith the guarantee did not end
the guarantee or his liability underit.^^^
Advanceauthorisationof alteration
TheMadhyaPradeshHighCourthasbeenoftheviewthat anauthority
givenbythesuretyinadvanceenablingthecreditorandtheprincipaldebtor
tomakeanyalterationinthetermsandconditionsofthetransactionguar
anteedwouldbecontraryto theprovisionofSection133and,therefore,of
no effect. The consent of the surety of which the section talks must be con
senttakenatthetimeofvariancesoastobesimultaneouswiththeproposed
variance.The courtalsosaidthat theprovisionsofSections134,135,139
and141cannotbenullifiedinadvance.^^^
213.NationalBankofNigeriaLtdvM.S.Awolesi,(1964)1WLR1311;SatishChandraJainv
NationalSmallIndustriesCorpnLtd,AIR2003SC623:(2003)1ICC788,guaranteefor
son's proprietarybusinessdebts, businessconverted into company with the son and another
becomingguarantors.Theoriginalguarantorwasnotallowedto beproceededagainst.
214.Burnesv Trade CreditsLtd,(1981)1 WLR 805(PC),on appealfromWales.
215.PunjabNationalBankvYarlapaddaVenkataKrishnaiah,1998AIHC3052(AP);Industrial
finance Corpn ofIndia Ltd v CannanoreSpg&WvgMillsLtd,(2002)5 SCC54: AIR2002
SC1841:(2002)110CompCas685,nationalisationof theborrowermill(textile)did not
resultindischargeofcontractofguaranteeonaccountoffrustration.Theguaranteehadno
co-relationshipwiththeNationalisationAct,1974.Itwasanindependentcontractand had
to behonouredtofulfilthecontractualobligationbetweenthesuretyandcreditor.
216.M.V.ShantanarasimhaiahvDenaBank,(2002)2KantLJ255:(2002)2ICC260(Kant).
217 MaleVenkateswarluvStateBankofIndia,AIR2006NOC508(AP):(2005)5 AndhLD62.
218. Central Bank of India v Alt Mohd,(1993)2 Mah LJ 1092.https://t.me/LawCollegeNotes_Stuffs

787. [S,133] Dischargeofsuretyfromliability645
Consentmaybeeitherpriororsubsequenttothealteration.^"Allthatthe
abovedecisionmeanstosayisthatthereshouldbeeitheraproposedalter
ationforpriorconsentor analterationalreadyeffectedforsubsequentcon
sent. There should not be consent tovariationin vacuum. TheHighCourt
ofDelhihasexpressedthevievv^that atermin abankguaranteeproviding
thatvariationsintheunderlyingcontractmaybemadewithoutaffectingthe
liabilityof the bank would bevalid.^^°
Effect of decreeagainstsurety
In acasebeforetheHighCourtofDelhi/^^thecreditorobtainedadecree
bothagainsttheprincipaldebtorandthesuretymakingthemcollectively
andseverallyliabletopaytheamounttothedecree-holder.Hethenentered
into asettlementwith theprincipaldebtoragreeingtoacceptfromhim
a less amount and not to enforce the decree against him for the balance.
Thesuretyclaimedadischargeonthisbasis.Thecourtdidnotagreewith
him.Oncetheliabilityisconvertedinto adecreed-debt,theearliercon
straintsof theunderlyingcontractceasetobeapplicable.Thesubsequent
dealingwiththeprincipaldebtordoesnotoperatetodischargethesurety
fromaliabilityunderwhichheisnolongerliableasasurety,butunderthe
decree.^^^
EarUertheMadrasHighCourt^^^hadobservedin acaseofthiskind:
"Wearenot,afterajointdecreehasbeenpassedagainstprincipaland
surety,anylongerdealingwithaprincipalandsuretybutwithajoint
debtor."
219.LloydsSteelIndustriesLtdvIndianOilCorpnLtd,AIR1999Del248.
220.Ibid;IndianBankvS.Krishnaswamy,AIR1990Mad115,comparingtheeffectofvariation
under S. 62 with that under S. 133 the courtcitedBritishMotor Trust Co Ltd vHyams,
(1934)50TLR230,normallyspeakinganyalterationinthecontractbetweenthecreditor
andthedebtorissufficienttoreleasethesuretybutthateffectcanbeexcluded.SBlvVivek
Garg,AIR2011Sikk7,theguaranteestipulatedthatnotwithstandinganyvariationmadein
thetermsofthearrangementoranycompositionbetweenthebankandborrower,theguar
antor would not berelievedand he shall bedeemedto haveconsentedto the same. Hence,
hecouldnotpleaddischarge.KunbiSahakariBankLtdvShaktiPaperCo,(2009)1MahLJ
696,guarantorswhowaivedtheirrightsunderSs.133,134,139and141,couldnotclaim
discharge from liability under these sections.
221.CharanSinghvSecurityFinance(P)Ltd,AIR1988Del130.
222.JenkinsvRoberton,(1854)2Drewry351:61ER755;UnionBankofIndiavManku
Narayana,(1987)2SCC335.ThedecisioninthiscasewasoverruledbytheSupremeCourt
inSBlVIndexportRegistered,(1992)3SCC159:AIR1992SC1740byholdingthatthe
decree-holderobtainingacompositedecreecanproceedathischoicetoexecutethedecree
eitheragainstsecurityorperson.ThiswasfollowedinSharadR.KhannavIndustrialCredit
andInvestmentCorpn of India,(1993)1BomCR 546,decreeagainstmortgageproperty
andagainstsurety.Enforcementofdecreeagainstsuretypersonallynottobeprevented.The
decree-holdernotcompellabletoproceedagainstmortgagepropertyfirst,SBlvBalakRaj
Abrol,AIR1989HP 41.
223.MeenakshisundaramChettiarvVelambalAmmal,AIR1944Mad423.Comparewith
KahnSinghvTekChand,AIR1968J&K93,compromiseofadecreeddebtoperatedasa
discharge of the surety.https://t.me/LawCollegeNotes_Stuffs

788. 646Chapter12Guarantee [S.134]
InstillanotherMadrascase/^"*aloandueto aco-operativesocietywas
guaranteedbyasuretyand anawardwasobtainedbythesocietyagainst
theprincipaldebtoraswellas thesurety.Theprincipaldebtorobtaineda
dischargefromthedebt.Thedecree-holdersoughttoenforcethedecree
againstthe surety, whocontendedthathe was no more liableunderthe
awardas theliabilityof theprincipaldebtorstoodextinguished.Butthe
courtfound no merit in thiscontentionand said: "After a decree has been
passedthecharactersoftheprincipaldebtorandthatofthesuretychange
into those ofco-judgment-debtors.TheprovisionsofSections133-139 of
theContractActapplyonlywherenodecreehasbeenpassed.Thesepro
visionswhichgoverntherightsandliabilitiesofthecreditor,theprincipal
debtorandsurety,ceasetooperateaftertherightsandliabilitiesaredeter
minedanddeclaredbyadecree.Theliabilityasdeterminedbythedecree
cannotthereafterbemodifiedbyanythingwhichthedecree-holdermaydo
oromittodo."^^^
Analterationwhichdoesnotdisturbthebasicstructureofliabilitycre
ated by aguaranteewouldnotrendertheguaranteeunenforceable.Two
directorsofacompanyguaranteedthecompany'sobligationunderaleasing
transactionforphotocopyingequipment.Latersomeonedroppedtheword
"company" from the borrowingcompany'sname and initialled theahera-
tioninthenamesofthedirectors.Itwasheldthatthoughthealterationwas
a forgery, theguaranteeremained enforceable.
4.Releaseordischargeofprincipaldebtor[S.134]
S.134.Dischargeof surety byreleaseordischargeofprincipal
debtor.—Thesuretyisdischargedbyanycontractbetweenthecreditorand
theprincipaldebtor,bywhichtheprincipaldebtorisreleased,orbyanyactor
omissionofthecreditor,thelegalconsequenceofwhichisthedischargeofthe
principaldebtor.
Illustrations
{a)AgivesaguaranteetoCforgoodsto besuppliedbyCtoB.CsuppliesgoodstoB,and
afterwardsBbecomesembarrassedandcontractswithhiscreditors(includingC'sto
assigntothemhispropertyinconsiderationoftheirreleasinghimfromtheirdemands).
HereBisreleasedfromhisdebtbythecontractwithC,andAisdischargedfromhis
suretyship.
224.NelloreCoopUrbanBankLtdvAkiliMallikarjmayya,AIR1948Mad252.
225.DebtorA(No14of1913),re,(1913)3KB11.FollowedbyKeralaHighCourtinVelappa
KumarvKosammattomChitFund,1978KLT10anddissentingfromSardarKahnSingh
VTekChandNanda,AIR1968J&K93.Enforcementagainstthesuretyofthecomposite
decreedoesnothavetheeffectofdischargingthesurety.Thedecreecanbeexecutedagainst
himfortheamount,ifany,remainingunpaid.ChitturServiceCoopBankLtdvPankunny
(1988)1KLT358.
226.LombardFinanceLtdvBrookplainTradingLtd,(1991)1WLR271(CA);MohanJatiav
IndianBank,AIR2004Cal326,receiverappointedbybank,tookoversecurities,thesurety
couldnotclaimdischarge,securitieshavetobevaluedandrealisedandonlythenconse
quencescouldbeworkedout.https://t.me/LawCollegeNotes_Stuffs

789. [S.134] Discharge of surety from liability 647
(fa)Acontracts with Bto grow a crop of indigo on/\'sland and to deliver it to S at afixed
rate, and CguaranteesA'sperformanceof this contract. Bdiverts a stream of water
which is necessaryforirrigationofyA'sland and thereby prevents himfromraisingthe
indigo. C is nolongerliable on hisguarantee.
(c)Acontractswith Bfor a fixed price to build a house for Swithin astipulatedtime, Bsup
plyingthe necessarytimber. CguaranteesA'sperformance of the contract. Bomits to
supply the timber. Cisdischarged from hissuretyship.
(i)Releaseofprincipaldebtor
Thesectionprovidesfortwokindsofdischargefromliability.In thefirst
place,ifthecreditormakesanycontractwiththeprincipaldebtorbywhich
the latter is released,the surety is discharged.Where, for example, the credi
toracceptsacompromiseandreleasestheprincipaldebtor,thesuretyislike
wisereleased.Anyreleaseof the principal debtor is areleaseof the surety
also.227
Effectof DebtReliefActs.—Wheretheliabilityof theprincipaldebtor
isreducedunder theprovisionsof a statute, an important question arises
whethertheliabilityof the surety isalsodiminishedthereby.Facingthis
problemprobablyforthefirsttimein1938andagainin1944theNagpur
HighCourtheldthat theintentionofthestatuteis torelievetheprincipal
debtor and not thesurety.^^^But a FullBenchof the Madras High Court,
applyingtheprovisionsoftheMadrasAgriculturists'DebtReliefAct,1938
heldthat "thesuretyisliableonlyfor thereducedamount".^^'Thisviewof
theMadrasHigh Court has nowbeensupportedbytheKeralaHigh Court
inAypunniManivDevassyKochouseph^^°Explainingthepurposeofthe
debt-relievingstatutes,GopalanNambiyare Jobservedasfollows:"It
appearstous,thattoholdotherwise,wouldbetoahogetherdenytheben
efitof theameliorativeprovisionsof the Actto theagriculturistdebtor.On
anyotherviewitwouldbeopento thecreditortorecoverthedebtasscaled
downfromtheagriculturistdebtor,andthebalancefromthesurety,andthe
227.KahnSinghvTekChand,AIR1968J&K93;andseeIllustration{a)toS.134;Manohar
LaiBeltRam vHarKishanLai,AIR 1968 Del 108; Also see Radha Thiagarajanv South
Indian BankLtd, 1985KLT29(SN)whereit ispointedout that thedischargeof the prin
cipaldebtorisnotdischargeofthesuretywhereit isnotbroughtaboutbythevoluntaryact
of the creditor,but by operationof law;Bank of India Ltd v RustomFakirjiCowasjee,AIR
1955Bom419.Similarly,the creditor, whiledischargingthe principal debtor, mayreserve
hisrightsagainstthesuretyandin thateventthesuretywouldnotbedischarged.Cutlerv
McFhail,(1962)2QB292:(1962)2WLR1135.Acceptingnewpromissorynoteinplace
oftheoldloansystemwhichwasguaranteeddischargedtheoldloanandwiththatalsothe
surety,P.C.RavivUnionBankofIndia,1995AIHC2168(Ker);BalbirSoundvIndian
Bank,1996MPLJ853.
228.BalkrishnavAtmaram,AIR1944Nag111.
229.SubramaniaChettiar vM.P.NarayanaswamiGounder,AIR1951Mad 48,overrul
ingSubramaniavBatchaRowther,AIR1942Mad145;NarayanSinghvChhatarsingh,
AIR1973Raj347;AypunniManivDevassyKochouseph,AIR1966Ker203;BabuRao
Ramchandra Rao v BabuManaklalNehmal, AIR 1938 Nag 413;GopilalJ.Nachani v Trac
Industries and Components Ltd, AIR 1978 Mad 134.
230.AIR1966Ker203.https://t.me/LawCollegeNotes_Stuffs

790. 648Chapter12Guarantee [S.134]
latterinhisturncouldseekreimbursementfromtheprincipaldebtor{vide
S.144oftheContractAct).^^^Suchaconstructionwouldcompletelynullify
thebenefitsoftheameliorativelegislationtoindebtedagriculturists."
This isindeedthe mostdesirableinterpretation ofSection128 which
makestheliabilityofthesuretycoextensivewiththatoftheprincipaldebtor.
Inviewofthisdecisiontheeffectofthesectionis"thatastatutoryreduction
orextinguishmentof theprincipaldebtor'sliabilitywilloperateas a pro
tantoreductionorextinguishmentofsurety'sdebt".Themeresuspension
of adebtforashortperiodandthattoowithaclausethattheperiodof
limitationwillnot runduringtheperiodofsuspension,willnotaffectthe
liability of theguarantor.-^^
Applicationofinsolvency laws
TheSupremeCourt haslaiddownthatthoughunderSection134 the
suretyisdischargedbyreleaseordischargeof theprincipaldebtor,adis
chargewhichtheprincipaldebtormaysecurebyreasonofwindingupor
insolvencydoesnotabsolvethesuretyofhisliability.Abankguaranteefor
asumofRs50,000wassubmittedbyasupplieroftheElectricityBoard.The
bankwasliableundertheguaranteeto pay the amountwithin48 hours of
demandbytheBoard.TheBoarddemandedpayment.The bankmadeit.
Thebankwasnowtryingtorealisetheamountoutofthesecuritiesdepos
itedbythesupplierforsecuringtheguarantee.Thesuppliercompanywent
intoliquidation.Theliquidatorsoughttorestrainthebankfromrealising
thesecurities.Butthecourtallowedthe banktogoahead.Thebankwasa
secured creditor and was entitled to the benefit of securities. Thebankhad
nothingtodowiththestateoftherelationsbetweenthecompanyandthe
ElectricityBoard.^^^
(ii)Actoromission
Thesecondground ofdischargeprovidedinSection134 is that when
thecreditordoes"anyactoromissionthelegalconsequenceofwhichisthe
dischargeoftheprincipaldebtor",thesuretywouldalsobedischargedfrom
hisliability.Where, forexample,there is a contract for the construction of
abuildingtheperformanceofwhichisguaranteedbyasurety.Underthe
contract,thecreditorhas tosupplythebuildingmaterial.Anomissionon
231.Thissectionenablesthesuretytorecoverfromprincipaldebtortheamountwhichhe has
lawfullypaidto thecreditorunderthecontractofguarantee.
232.GopilalJ.NachanivTracIndustriesandComponentsLtd,AIR1978Mad 134.
233.MaharashtraSEBvOfficialLiquidator,(1982)3SCC358:AIR1982SC1497.Similarly,
thetakeoverofundertakingsunderstatutorypower,suchasSickTextilesUndertakings
NotificationAct,1974,doesnotdischargethesuretiesoftheborrowingsfromsuchunder
takings.BankofMaduraLtdvBankofBaroda,1986SCCOnLineMad95;(1986)99LW
721;StateofA.P.vCentralBankofIndia,(1982)1AnWR(SN)10.Suspensionofthecon
tractbetweenthe creditorand principalon accountof the latter'sdefaultsdoes not havethe
effectofabsolvingthesuretyfromhisliability.SCIL(India)Ltd v IndianBankAIR1992
Bom131.https://t.me/LawCollegeNotes_Stuffs

791. [S. 135] Dischargeofsuretyfromliability649
his part to do so would discharge the contractor and so would the surety
be discharged.Similarly,where the payment of rent due under a lease is
guaranteed and the creditor terminates the lease, or where the payment of
instalments due under a hire-purchase isguaranteedand the creditor pre
maturely determines the agreement, the effect would be the release of the
suretyalso.^^'*The act of the creditor interminatingthe agreement, e.g.,
in determining the agreement of hire-purchase by taking possession of the
goods,dischargedthe surety.
Theeffectofomissiontosueisconsideredlater.^^®
5.Composition,extensionof time andpromisenot to sue[S.135]
S.135.Dischargeofsuretywhencreditorcompoundswith,givestime
to,oragreesnottosueprincipaldebtor.—Acontractbetweenthecredi
tor andtheprincipal debtor, by whichthecreditormal<esa composition with,
or promises to give time to, or not to sue theprincipaldebtor, discharges the
surety, unlessthesuretyassentsto suchcontract.
The section provides for three modes of discharge from liability:
(1)Composition;
(2) Promise to give time, and
(3)Promise not to sue theprincipaldebtor.
Composition
Ifthe creditor makes a compositionwith the principal debtor,without con
sultingthesurety,the latter isdischarged.Compositioninevitablyinvolves
variation of the originalcontract, and,therefore,the surety isdischarged.^^^
A settlement was entered into between the principal borrower andbankfor
one-time settlementwithoutreference to the guarantor. Thecourtsaidthat
thisamountedtonovationofthecontractbetweenthecreditorandprinci
paldebtorto theexclusionofguarantor.Theliabilityof guarantorceased
toexist.Noproceedingscould be initiated against the guarantor under
Section13 oftheSecuritisationandReconstructionofFinancialAssetsand
Enforcement of Security Interest Act, 2002. Theguarantorwas allowed to
234. See Unity Finance Ltd v Woodcock, (1963) 1WLR455 (CA).
235.HewisonvRicketts,(1894) 63 LJQB 711. See alsoHastingsCorpn vLetton,(1908) 1 KB
378, a leaseunder which paymentof rent was guaranteed the lessorterminated the lease, the
suretywas helddischarged.
236. Seeunder S. 137.TheSupremeCourt laid down that a creditor is entitled to recoverthe debt
from the surety, even though a suit on the guarantee against the principal debtor is time
barred. Bombay Dyeing &MfgCo Ltd v State of Bombay, AIR 1958 SO 328: 1958 SCR
1122.
237. SeeBolton v Salmon,(1891)2 Ch 48;KahnSingh v Tek Chand, AIR 1968J&K93, where CASEPILOT
afterdecreeshad been passed against the principal debtor and sureties, the principal
debtorcompromisedwithoutconsultingthesureties.Thisdischargedthem.Mahomedalli
IbrahimjivLakshmibaiAnantPalande,AIR1930Bom122,compromiseof the suit bythe
principaldebtorundertakingto paytheduesbyinstalments,dischargeofsurety.
(i)https://t.me/LawCollegeNotes_Stuffs

792. 650Chapter12Guarantee [S. 135]
challenge the actioninitiatedagainsthim by invoking writjurisdiction.^^®A
compromise in terms of acourtdecree is different from privatecomposition.
Thatdoes not discharge thesurety,unlessthe decree iscollusive..
Promisetogivetime
When the time for the payment of theguaranteeddebt comes, the surety
has the right to require the principal debtor to pay off the debt.Accordingly,
it is one of the duties of the creditortowardsthe surety not to allow the
principal debtor more time for payment. "The creditor has no right, it is
against the faith of hiscontract,to give time to the principal, eventhough
manifestly for the benefit of the surety,withoutthe consent of thesurety."^''"
"It is very undesirable that there should be any dispute or controversy about
whether it is for his benefit or not; there shall be the broad principle that
if the creditor does intentionally violate any rights the surety had when he
entered into the suretyship, even though the damage be nominal only, he
shall forfeit the wholeremedy."^"'^
Thus, where the principal debtor was to make payment for gas supplied
within fourteen days and on one occasion he having failed to pay, the sup
pliertookapromissorynote from him, thisamountedtoextensionof time
and thereupon the surety wasdischarged.^''^Similarly,where the price of a
motor car was to be paid in instalments and payment of which was guar
anteed, the buyer fell into arrears and the dealer settled with the buyer that
he should pay a certain sum immediately and the balance by the end of the
month. This discharged thesurety.TheSupremeCourtof India has held
that wherea bankgavetime to the principal debtor to make up the quantity
of the goodspledged,it did not have the effect ofgivingtime for payment
withinthemeaningof Section135.^''''
238. N. B.GurudevavStateBankofMysore, AIR 2011 Kant 188.
239. City Bank N.A. vJuggilalKamlapatJuteMills Co Ltd, AIR 1982 Del 487.
240. See LordEldoninSamuelvHowarth,3 Mer 272, 279.
241.BlackburnJ inPolakv Everett,(1876)LR 1 QBD669. Seealso Rouse v Bradford Banking
Co Ltd, 1894 AC 586 (HL). A unilateral extension of time without any contract with the
principaldebtordoes notdischargethe surety. At best it is aforbearanceto sue.Ushadevi
MalhotravBhagwandasTiwari,AIR1967MP 250.
242.CroydonCommercialGas Co vDickinson,(1876)2 CPD 46 (CA).M.Venkataramanaiahv
Margadarsi Chit Funds, AIR 2009 NOC 940(AP),creditor made arrangement with debtor
in form ofpromisetogivetime or agreednot to sue him, this is a situationcomparableto
novation ofcontractor composition. Surety discharged.
243. Midland Motor Showrooms Ltd v Newman, (1929) 2 KB 256;PermataMerchant Bank v
GloveSeal,(1994)1 CurrLJ389(Malaysia),here theoriginalguaranteeexecutedby the
partiesclearlyshowedthat thesuretieswerenot to bedischargedorreleasedby the restruc
turing of the mode of repayment of the loan by instalments.
244. Amritlal GoverdhanLalanv State Bank of Travancore,AIR 1968 SC 1432:(1968)3 SCR
724.Wheretheprincipaldebtoracknowledgedthe debtwhichhadtheeffectofextendingthe
period of limitation, it was held that the surety would continue to be liable for the extended
period. WandoorJupiter Chits (P) Ltd v K.P. Mathew, AIR 1980 Ker 190. Where by an
arrangementbetween the principaljudgment-debtorand the decree-holder, the time for dis
chargeof the debt wasextendedby theformer,it was held that itseffectupondischargeof
suretydependedupon thediscretionof the court. Ram Chand Diwan Chand v SantSingh,https://t.me/LawCollegeNotes_Stuffs

793. [Ss.136-137] Dischargeof surety from liability651
S.136.Suretynotdischargedwhenagreementmadewiththirdper
son to give time to principal debtor.—Where a contracttogivetimeto the
principaldebtorismade bythecreditorwitha thirdperson,and notwiththe
principal debtor,thesurety is not discharged.
Illustration
C,the holder of an overduebillof exchange drawn by Aas surety forB,and accepted by
B,contractswith Mto give time toB.Ais not discharged.
Promisenottosue
If the creditor under an agreementwith the principal debtor promises not
to sue him, the surety is discharged. "The main reason is that a surety is
entitledat anytime torequirethe creditorto call upon theprincipaldebtor
topayoffthedebt"whenit isdueand thisrightispositivelyviolatedwhen
the creditor promises not to sue the principal debtor.
Forbearancetosue
This is,however,subjectto two importantqualifications.In the first
place,apromisenot tosueshouldbedistinguishedfromamere"forbear
ancetosue"."Apromisenot tosueis anengagementwhichtiesthehands
of the creditor. It is notnegativelyrefraining; not exacting the money at
thetime,but it is the act of thecreditordeprivinghimselfof thepowerof
suing....Section137incorporatesthisprinciple.
S. 137.Creditor'sforbearancetosuedoesnotdischargesurety.—iVlere
forbearanceon the part ofthe creditorto sue theprincipaldebtor orto enforce
anyotherremedyagainsthimdoes not,intheabsenceofanyprovisioninthe
guaranteetothecontrary, dischargethesurety.
Illustration
Bowesto Ca debt guaranteed byA.Thedebtbecomespayable.Cdoes not sue Bfora
yearafterthedebthasbecomepayable.Aisnotdischargedfromhissuretyship.
Thus"mereforbearanceto sue" does notdischargethesurety.Butsup
posethattheforbearancecontinuesuptotheexpiryoftheperiodoflim
itationandconsequentlytheactionagainsttheprincipaldebtorbecomes
timebarred,willthe suretybedischarged?AccordingtoSection134 if the
creditorisguiltyofanyact oromissionthelegalconsequenceofwhich
isthedischargeof theprincipaldebtor,thesuretyisalsodischarged.The
AIR1930Lah896;BankofBarodavAvdootBhagwantNaik,AIR2005Bom224,delay
inaskingforpaymentandinfilingsuit,didnotmeanpromisetoextendtime,thetrawler
purchasedwasdisposedofbuttheloanamountnotpaid.Theprincipaldebtorandguarantor
became jointly and severallyliable.
245. See LordHanworthMR inMidlandMotorShowroomsLtdvNewman,(1929) 2 KB 256
(CA).
246.Dissolutionofacompanywhichwastheprincipaldebtor,deathofoneofthesuretiesandthe
creditornotproceedingagainstthecompanydidnotdischargetheremainingsureties.Union
ofIndia v ModernStoresIndia Ltd, AIR1988Cal18.https://t.me/LawCollegeNotes_Stuffs

794. 652 Chapter 12 Guarantee [S.137]
omission to sue the principal debtor within the period oflimitationdefi
nitelydischargeshim. Thus if Section 134 stood alone the surety would be
discharged.ButSection137declaresthat"mereforbearanceto sue" does
not dischargethe surety.These two provisionsnaturally created a conflict of
decisionswhichwasultimatelyresolvedbythedecisionof the PrivyCouncil
inMahantSingh v UBa LordPorterobserved as follows:"...a fail
ure to sue the principal debtor until recovery is barred by the statutes of
limitation does not operate as adischargeof the surety inEngland.The
same view prevails in most of the High Courts inIndia.Withthese
decisionsof the other High Courts in India may be contrasted the case of
RanjitSinghvNaubat,^^'^whichdecidesthat in spite of theprovisionsof
Section 137,the creditor's right against the surety is not preserved unless he
sues the principal debtor within the period of limitation. Such a decision is
inconsistentwith theviewsheld by the courts in England and majority of
the courts in India. In thisconflict,theirLordshipspreferthereasoningof
themajority."^^^
Reserving rightsagainstsurety
Thedecisionfurther points out that anagreementnot to sue theprinci
paldebtoror togivetimewith areservationof the rightagainstthesurety,
would notdischargethesurety.The MahanthSinghcase^"wasdecidedon
this principle.
The plaintiff was engaged as a contractor by certain trustees of a
pagodaforconstructionwork.Thepaymentbythetrusteeswasguaran
teedbythedefendants.Thetrusteesdefeultedand,therefore,theplaintiff
suedthetrusteesand thesurety.Thebeneficiariesof the trustreplaced
theirtrusteesand the plaintiffdroppedhiscaseagainstthem and wasnot
allowedsubsequentlytosuethemin theirpersonalcapacity.Butthe suit
againstthesuretywasmaintained.
Itwasheldthat thesuretywas notdischarged."Theappellant'sact in
continuing to sue the surety though he withdrew his action against the
247.(1938-39)66lA198:AIR1939PC410;(1939)181IC 1;affirmedbytheSupremeCourt in
BombayDyeing & Mfg Co Ltd v State of Bombay,AIR 1958 SC328: 1958 SCR 1122.
248. SeeCarterv White, (1883) LR 25 Ch D 666 (CA).
249.SeeSankaraKalanavVirupakshapaGaneshapa,ILR(1883)7 Bom 146; Nur Din v Allah
Ditta, AIR 1932 Lah 419; AzizAhmed v SherAli,AIR 1956 All 8(FB);Dass Bank Ltd
VKaliKumariDevi,AIR1958Cal530DB;BombayDyeing&MfgCoLtd vStateof
Bombay,AIR 1958 SC 328:1958SCR1122.
250.ILR(1901-03)24Ail504.
251. 66lAat pp. 206-07. SeefurtherUshadeviMalhotra v BhagwandasTiwari, AIR 1967 MP
250; PunjabNational Bankv SurendraPrasad Sinha,1993Supp(1)SCC499;AIR 1992 SC
1815to theeffectthatwherethedebtbecomestimebarred,thesecuritiesdepositedbythe
guarantorcan beusedtowardsrealisation.MakhanLaiHarnarainvKaramchandThaper
&Bros(P)Ltd, AIR2004Jhar 143,takeoverofcoalminebyGovernment,formerowner's
liabilitiesto be paid by Government,paid lessto a claimant, balance allowedto berecovered
by theguarantor.
252. MahanthSinghv UBaYi,(1938-39)66lA198:AIR1939PC410:(1939)181IC 1.https://t.me/LawCollegeNotes_Stuffs

795. [S.139] / Discharge of surety from liability 653
principaldebtorswas a clearreservationof his rights. Theremedyof the
surety against the principal debtor is not impaired and his liabilityis, there
fore,notdischarged."^^^
Promise to give time todebtormade with third person
Secondly,Section136 providesthat "where a contract togivetime to the
principal debtor is made by the creditor with a third person, and not with
the principal debtor, the surety is not discharged".
6. Byimpairingsurety'sremedy[S.139]
S. 139.Dischargeofsuretybycreditor'sactoromissionimpairing
surety'seventualremedy.—Ifthe creditor does any act which isinconsistent
withtheright of the surety, or omits to do any act which his duty tothesurety
requires him to do, and the eventual remedy of the surety himselfagainst the
principaldebtoristherebyimpaired, the surety isdischarged.
Illustrations
(a)Bcontractsto build a ship forCfora given sum, to be paid byinstalmentsas the work
reaches certain stages. Abecomessurety to Cfor B'sdueperformanceofthecontract.
C,withoutthe knowledge ofA,prepays toBthe last two instalments. Aisdischargedby
thisprepayment.
{b)Clends money to Bon the security of a joint and several promissory note, made inC's
favour byS,and/\as surety forB,togetherwith abillof sale ofB'sfurniture, which gives
powerto Ctosellthefurniture,and applyto proceeds indischargeof the note. Subse
quently,Csellsthefurniture,but, owingto hismisconductandwilfulnegligence,onlya
small price is realized.yAis discharged from liabilityon the note.
(c)Aputs Mas apprentice to S,and givesa guarantee to BforM'sfidelity.Bpromiseson his
part that hewill,at leastonce a month,seeMmakeup the cash.Bomitsto see this done
as promised, and Membezzles. Ais not liable tofion hisguarantee.
If the creditor does any act which isinconsistentwith the rights of the
surety,or omits to do any act which his duty to the suretyrequireshim
to do, and the eventualremedyof the surety himself against the principal
debtorisimpaired,thesuretyisdischarged.It is the plainduty of thecred
itor not to do anything inconsistent with the rights of the surety. A surety
isentitled,afterpayingoffthecreditor,to hisindemnityfromtheprincipal
debtor. If the creditor's act or omissiondeprivesthe surety of the benefit
of thisremedy,the surety isdischarged.^^''Thus, where the integrity of a
cashierisguaranteedand theemployerundertakestocheckhis work once
in a month but neglects to do so, the cashierembezzles,the surety is not
liable.Thesamedutyrequiresthe creditortopreservethesecurities,ifany,
whichhe has againstthe principaldebtor.If helosesor parts with the secu
rities,the suretyisdischargedto thatextent.^"Similarly,whereagainst the
253.Seefurther, OrissaAgroIndustriesCorpnLtd vSarbeswarGuru, AIR1985Ori 270,where
the suitagainsttheprincipaldebtorwasdismissed,but it wasallowedagainstthesurety.
254. See,for example, Unity Finance Ltd v'Woodcock,(1963)1WLR455(CA).
255.SBIVPraveen Tanneries,(1992)2 An LT 5 (notes on recentcases)where the surety washttps://t.me/LawCollegeNotes_Stuffs

796. 654Chapter12Guarantee [S. 139]
terms of theguaranteetheGovernmentallowedthecontractorto remove
felled trees from a forest without payment of price, the surety was held to
bedischarged.^^®
AnothersuitableillustrationisDarwen&Fearce,
The principal debtor was a shareholder in a company. His shares were
partly paid and the payment of the unpaid balance wasguaranteedby the
surety. The shareholder defaulted in the payment of calls and the com
panyforfeited his shares.
By reason of the forfeiture the shares became thepropertyof the com
pany. If they had not been forfeited they would have belongedto the surety
on payment of theoutstandingcalls. Thus, the forfeiture deprived the surety
of his right to the shares and he was accordingly discharged.
Failure on thepartof the supplier of a lorry to seize it after an accident,
particularly when it was under repairs and under lien for repair charges, is
not the same thing as impairing the surety's remedy who had guaranteed
payment of theremaininginstalmentsof theprice.^^®To the same effect is a
decisionof the Rajasthan HighCourt.^^'The payment of the price of a liq
uor shop was spread into ten instalments and these payments wereguaran
teed by the defendant. Theprincipaldebtor defaulted with theinstalments.
The State could havecancelledthelicenceand re-auctioned the shop, but
did not do so. The guarantorcontendedthat this inaction should put an
end to hisliability.But he was heldliable.The State inaction had in no way
impaired his ultimateremedyagainst the principal debtor.Similarly,where
the suretyrepeatedlyasked the bank to do something against the principal
debtor who was rapidly disposing of his assets and even so thebankdid
nothing, the surety was not allowed to claim anydischarge.^'""
dischargedbecausethe bank was not ableto giveto the surety the securitiesin the samecon
dition as theyformerlystood in his hands;State Bank of Saurashtrav Chitranjan Rangnath
Raja, (1980) 4 SCC 516: AIR 1980 SC 1528 where the security of the pledged goods was
lostbecausethe bank was found to behighlynegligentin thekeepingand handling of those
goods.
256.StateofM.P. vKaluram,AIR967SC 1105. See alsoAmritlalGoverdhanLalanvState
Bank ofTravancore,AIR 1968 SC 1432, where the creditor'snegligencein allowing the
goods(securities)to fall short was heldsufficienttodischargethesurety.M.R. Chakrapani
lyengarv Canara Bank, AIR 1997 Kant 216, the principal debtor disposed of the hypothe
cated property, the surety submitted all the particulars to the creditor but the latter took no
steps to seizethe property or to issuecriminal process against the debtor, the surety became
discharged.UnionBankof India vSureshBhailalMehta,AIR1997Guj48,securityin the
form of hypothecatedgoods, lost on account of bank'snegligenceand not in existenceat the
time of the suitagainstthe surety, the suit liable to be dismissed.
257.(1927)1Ch176.
258. VasireddiSeetharamaiah vSriramaMotor Finance Corpn, AIR 1977 AP 164.
259.DalichandvStateofRajasthan,AIR1976Raj 112.Wherethecreditorgetsthesecuritysold
inexecutionof a courtdecree,it doesnot amount to parting with securityso as todischarge
the surety. City Bank N.A. vJuggilalKamlapat Jute Mills Co Ltd, AIR 1982 Del 487.
260.BhabaniShankarPatravS.B.I.,AIR1986Ori 247.https://t.me/LawCollegeNotes_Stuffs

797. [S.139] Discharge of surety from liability 655
The creditor also owesto the surety the duty of realisingthe proper value
of the securities in case he exercises his power ofsale.^^^"Anyimproper
dealing with the collateraldepositedto secure anindebtednessguaranteed
by another isavailableto the guarantor as adefence."^®^In a New York
case^^^the guarantor pleadedindefencethat the collateralsecurity(skinsin
thiscase)was sold beforematurityof the debtwithoutnotice for 200 dol
lars although worth 12,500 dollars at the time of sale. Theguarantorwas
allowedcorrespondingreduction in hisliability.Where, on the other hand,
the assets of acompany,whose debt was secured by mortgaging the assets
and also guaranteed bya director,weretaken overbythereceiverappointed
by themortgagee,thereceiverwasheldto be under no duty towards the
surety torealisepropervalueof theassets.The guarantor sued thereceiver
for the loss caused to him by notobtainingproper value of the assets. But
the action was notallowed.^^"*The decision proceeded on the groundthat
thereceiveris an agent of the creditor or, at the most, of thecompany,but
not that of the surety. But thedecisionhas beencriticised.
In a casebeforetheSupremeCourt:
Abankgranteda loanonthesecurityofthe stockingodown.The loan
wasalsoguaranteedbyasurety.Thegoodswerelostfromthegodownon
account of thenegligenceof bankofficials.The surety wasdischargedto
theextentofthevalueofthestocksolost.^^^
261.BhumiputraMerchantBankerBerhadvMelewarCorpn,(1990)2 CurrentLJ30 (HCKuala
Lumpur),amortgageehastherighttochoosethetimetosellandwhenhehasdecidedtosell,
he owesacommonlaw duty to the mortgagortorealisethe truevalueof the property sold.
ThecourtcitedStandardCharteredBankLtdv Walker, (1982) 1WLR1410 (CA), where
LordDenningdescribed this duty as only a particular application of the general duty of
careto yourneighbourwhichwasstatedbyLordAtkininDonoghuevStevenson,1932AC
562(HL).The mortgagorand guarantor areclearlyin veryclose"proximity" to those who
conductsale. ShriMahadevRamaBhonsle vCentralBankofIndia,(1998) 2 Bom CR244,
the bankrealisingthevalueofhypothecatedvehiclesafteralapseoffiveyears,the bankwas
liable to reducetherecoveryfrom the surety to the extent ofrecoverableloss. ChistovanVaz
VIndianOverseas Bank, (1998) 2 Bom CR 522,saleof vehicles after four years' exposure
to sun and rains,considerablediminutioninvalue,liability of surety to be reduced to that
extent.
262.Vase vFloridaRailroadCo, 50NY369,(1872).
263. New Netherlands BankofN.Y.v Dernburg, 200 NYS (2d) 577 (1967).
264.Latchfordv Beirne, (1981) 3 All ER 705.
265.SeeP.J.Davies,No Duty ofcareto aCompanyGuarantor,(1982)98 LQR351,whereit has
been maintained that thedecisionis contrary to the present trend of expanding the profes
sionalmen's,duty of care towards those who haveinevitablyto rely on them.SeeYianniv
EdwinEwans& Co,1982QB438:(1981)3 WLR843.SeealsoBarclaysBankLtd vThienel
&Thienel,(1978)122 SolJo 472, wherealso it was held that no duty was owedto a mort
gageguarantorwhenthemortgageeexercisedthepowerofsale.
266. State Bank ofSaurashtravChitranjanRangnath Raja,(1980)4SCC516;AIR 1980 SC
1528,followingStateofM.P.vKaluram,AIR1967SC1105andAmritlalGoverdhanLalan
VStateBankofTravancore,AIR1968SC1432,wherethecreditor'snegligenceinallowing
thegoods(securities)tofallshortwasheldsufficienttodischargethesurety.Asagainstthis
wherethehypothecatedgoodswerein thepossessionof theborrowerhimselfandthe bank
was neitherexercisingcontrol over the goods nor the borrower was under a duty togivea
periodicaccountand thebankwasalsonotawareofanydisposalof thegoodsotherwisehttps://t.me/LawCollegeNotes_Stuffs

798. 656Chapter12Guarantee [S. 139]
This has been further supplemented by the SupremeCourtby the decla
ration in a subsequent case that the creditor must proceed in the first place
against the security and then only against the surety for thebalance.^'"^
Where the salary of both the principal debtor and the surety was got
attached, it was held that nothing could berecoveredfrom the surety as
long as the principal debtor was paying his instalments. Only an instalment
in default could berecovered.The creditor caused delay of some years in
executing thedecree.The court said that the interest for the period of delay
could not be recovered from the surety. His liability was to be confined to
theoriginaldecretalamount.^^^
In a case before the PrivyCouncil/®^their Lordships observedthatthe
creditor owed no duty to the surety toexercisehis power of sale of the
mortgagedsecuritiesandcoulddecide in itsowninterestwhetherto selland
whento do so.The securitywasneithersurrendered,nor lost, nor imperfect,
nor altered in condition by reason of what was done by the creditor. The
creditor bank had three sources of repayment. The creditor could sue the
debtor, sell the mortgaged securities or sue the surety. All those remedies
could beexercisedat any time or timessimultaneouslyor contemporane
ouslyorsuccessivelyor not at all. If the creditor choseto sue the surety and
not pursue any other remedy,the creditor on being paid in full was bound to
assign the mortgaged securities to the surety. If the creditor chose to exercise
his power of sale over the mortgaged security, he must sell for the correct
marketvalue,butthecreditormustdecidein hisowninterestifandwhen
he shouldsell.The creditordoesnotbecomea trustee of themortgaged
than in the course ofbusiness,the surety was held to be notdischargedbecausethere was
no connection between the bank'snegligenceand the loss of security. Union Batik of India
VM.P.SreedharanKartha, AIR 1993Ker285,distinguishingSBIv Quality BreadFactory,
AIR 1983 P&H 244. Indian Bank v M. Ambika,(2001)1 Kant LJ 478, following State of
M.P.V.Kaluram,AIR 1967 SC1105.H.N.TilhariJemphasisedthe duty of the bank in
thisconnection.The bankfailedtopreventtransferof thehypothecatedstockbythe princi
pal to a thirdpartydespite having the power under the terms of the loan to do so. The bank
was under duty to inspectperiodically,take account,evaluateandgivedirections'regarding
disposalofthehypothecatedstock.Failureofthe bankin thisrespectfaciliatedillegalaliena
tion. The surety was dischargedto the extent of such lossof the stock. PunjabNationalBank
VLakshmi Industrial & Trading Co (P) Ltd, AIR 2001All28, areceiverwas appointed
on theapplicationof the bank forpledgedgoods. The bankclaimedthat the goods were
damaged or destroyed due to natural decay while in the custody of the bank. Noevidence
wasofferedto showthe quantity or quality of the goodsat the initial stage.The bank's suit
against the sureties was decreedafter adjusting the value of the goods lost.
267. Union Bank of India vMankuNarayana,(1987)2 SCC 335: AIR 1987 SC 1078.
268.H.P.JalajakshivKarnatakaBank,AIR2003Kant280.
269. China and South Sea Bank Ltd v Tan Soon Gin,(1990)1 AC536:(1990)2 WLR 56(PC)
onappealfromthe Court ofAppealof HongKong.J&KBankLtd vChoudharyPrakash
Chand,AIR2006 J&K 11,vehicleloan guaranteedbyasurety.Defaultbyborrow,bank did
nothing to cause sale of thehypothecatedvehicle,surety notdischarged.Appanna Pullam
Raju v Central Bank of India, AIR 2006 NOC1413(AP):(2006)1 CCC 262,allegation
by the bank that the debtor tamperedwith the goodslyingin thegodownswhichwas mort
gaged with thebank.Guarantorpleaded that the loss was caused by the conduct of the bank
officials.Guarantor's liability not affectedbecauseof suchnegligence.https://t.me/LawCollegeNotes_Stuffs

799. [S. 140] Rightsofsurety657
securities and the power of sale for the surety unless and until thecreditoris
paid in full and the surety, having paid the whole of the debt, is entitled to a
transfer of the mortgaged securities to procure recovery of the whole orpart
of the sums he haspaidto thecreditor.
Waiverofrights
There arecontradictoryrulings on the point whether a surety can
give up the benefit of provisions designed torelievehim from liability.
TheKarnatakaHighCourt^^"has been of the viewthatthe rights under
Sections133, 134,135, 139and141 are ofvariablenatureand,therefore,a
suretycan waive the benefit of these provisions by a clause in theguarantee.
There is, however, a ruling to the effectthattheoperationof Section 133
relatingtodischargebyvariancecannotbeousted.^^^
RIGHTSOFSURETY
Asuretyhascertainrightsagainstthedebtor,creditorandco-sureties.
Rightsagainstprincipaldebtor
Following are therightsof thesuretyagainst theprincipaldebtor:
1.RightofSubrogation[S. 140]
2.RighttoIndemnity[S. 145]
1.Rightofsubrogation[S. 140]
Section 140 provides for therightofsubrogation:
S.140.Rightsofsuretyonpaymentorperformance.—Whereaguaran
teeddebthasbecomedue, ordefaultoftheprincipaldebtortoperformaguar
anteeddutyhastakenplace,thesurety,uponpaymentorperformanceof all
thathe is liable for, isinvestedwith alltherightswhichthecreditorhadagainst
theprincipaldebtor.
Whenthesuretyhas paid allthathe is liable for he is investedwithall the
rightswhichthecreditorhadagainsttheprincipaldebtor. Thesuretysteps
into the shoes of thecreditor.Thecreditorhadtherightto sue theprincipal
debtor."Iftheliabilityof thesuretyis coextensivewiththatof theprincipal
debtor,hisrightisnotlesscoextensivewiththatofthecreditorafterhe
satisfies thecreditor'sdebt.^^^Thesuretymay,therefore,sue theprincipal
debtorintherightsofthecreditor.ForexampleinLamplughIronOreCo,
r^,273
270. T.RajuSettyvBankofBaroda,AIR1992Kant108.ThisrulingwasfollowedinCentral
BankofIndiavMultiBlock (P)Ltd,AIR1997Bom 109andCorporationBankv B.
MohandasBaliga,(1993) 1KantLJ308(DB).
271.UnionofIndiavPearlHosieryMills, AIR 1961Punj281.
272.BabuRaoRamchandraRaovBabuManaklalNehmal,AIR 1938Nag413.
273. (1927) 1 Ch308.https://t.me/LawCollegeNotes_Stuffs

800. 658Chapter12Guarantee [S. 140]
A director of a company in liquidationguaranteedand paid the rents
due from the companybeforethe date of the hquidation. It was held
thathe was entitled to stand in the place of the creditor, and to use all
remedies^if need be, in the name of thecreditorin anyactiontoobtain
indemnification from the principal debtor for the loss sustained.
TheSupremeCourt has laid down that "the surety will be entitled to
everyremedywhich the creditor had against the principal debtor; to enforce
everysecurity and all means ofpayment;to stand in the place of the creditor;
to have the securitiestransferredto him,thoughthere was nostipulationfor
that;and to avail himself of all those securitiesagainstthe debtor. This right
of a surety stands not merely uponcontract,but also uponnaturaljustice.
The language of Section 140 whichemploysthe words "is invested with
all the rights which the creditor had against the principal debtor" makes it
plain that even"without the necessityof a transfer, the law veststhose rights
inthesurety".^^''
This may not always be to the advantage of the surety. Where the princi
pal debtorbecomesinsolvent,the surety cannot ask the creditor first to pur
sue his remedyagainstthe principal debtor. The SupremeCourthaspointed
outthateven then thesuretyshould pay. He will besubrogatedto the rights
of thecreditoragainsttheprincipaldebtor,thoughsuch rightsagainstan
insolvent debtor may not be of much use."Thevery object ofguarantee
is defeated if thecreditoris asked topostponehis remediesagainstthe
surety."^^^
Rightsbeforepayment
Under the right ofsubrogationthesuretymay getcertainrights even
before payment. TheCalcuttaHighCourtexamined this possibility in a
case where thesuretyfound,thattheamounthaving become due, theprin
cipal debtor was disposing of hispersonalpropertiesone after theotherlest
the surety, after paying, may seize them and sought atemporaryinjunction
to prevent theprincipaldebtor from doing so. Thecourtgrantedthe injunc
tion. Relying upon anauthoritativework,SukumarChakravartyJsaid^^^
thatif in any suit it isprovedby affidavit orotherwisethatthedefendant
threatens,or isaboutto remove ordisposeof hispropertywithintentto
defraudhiscreditors,thecourtmaygrantatemporaryinjunctiontorestrain
such act or to give suchotherorder for thepurposeofstayingorpreventing
theremovalordispositionof theproperty.
274.AmritlalGoverdhanLalanvStateBankofTravancore,AIR 1968 SC 1432.
275. BankofBiharLtdvDamodarPrasad,AIK1969SC297:(1969) 1 SCR620,623;Jugalkishore
RampratapjiRathivBrijmohan,(1994)2 Bom CR 537, thesurety'sapplicationismaintain
able, thecourtmustconsiderit onmerits,itshouldnotberejectedmechanically.See also
Aboobackerv Ayishu, (1999) 3 KLT 530: AIR2000NOG29 (Ker), theprincipalhad paid
to a very largeextent,only thebalanceallowed to be recovered from the surety, for which he
wasentitledtoindemnityfrom theprincipaldebtor.
276.MamataGhosevUnitedIndustrialBankLtd,AIR1987Gal280,283.https://t.me/LawCollegeNotes_Stuffs

801. [S. 145] Rightsofsurety659
Listing theotherrights of thesuretywhich arise in his favour before
payment, thecourtcited the following passage fromStoryonEquity:^^^
"Sureties,also, areentitledto come into acourtof equity,aftera debt has
become due, to compel thedebtortoexoneratethemfromtheirliabilityby
paying the debt; or sue in thecreditor'sname,and collect the debt from
the principal, if he will indemnify the creditor against the risk, delay and
expenseof thesuit."
Thecourtbroughtout fromSnell'sPrinciplesofEquity^^®a passage
whichdiscusses the remedies of thesuretyundertwo heads, viz., before
paymentandafterpayment:"Ithas beenstatedtherethatthesuretyhas
anequitablerightto compel theprincipaldebtorto pay the debtandso
relieve thesuretyfrom the necessity of paying it out of hispocket.It is in
thenatureofquiatimet,andis based on theprinciplethatit isunreasonable
thatamanshould always have a cloudhangover him, sothatheoughtto be
entitledto remove it. It is,therefore,immaterialthatthecreditorhasrefused
to sue orthathe has made nodemand.Afortiori,theactionlies where the
principaldebtorthreatenstocommita breach of theobligationswhichthe
suretyhasguaranteedandan order may be made eventhoughtheprincipal
debtoriswithoutfunds.Butanactionwillnotliewherethedebtisnotan
actual,accruedordefinitedebtor, if on itstrueconstruction,theguarantee
precludesactionbefore thecreditordemandspayment."^^®
In a suitagainsttheprincipaldebtor and sureties for recovery of the
mortgagemoney the suretiespaidtheamountonpassingofpreliminary
decree. Thecourtsaidthatthisamountedtopaymentduringthependency
of the suit. Thecourtfurthersaidthat,byoperationof law, the suitbecame
assigned in their favour and they could continue itagainsttheprincipal
debtorbyvirtueof thesubrogation.^^"
2.Righttoindemnity[S. 145]
S. 145.Impliedpromisetoindemnifysurety.— Ineverycontractofguar
anteethereis an impliedpromisebytheprincipaldebtortoindemnifythe
surety; andthesuretyisentitledto recover fromtheprincipaldebtorwhatever
sum he has rightfully paidundertheguarantee,butno sums which he has paid
wrongfully.
Illustrations
(a)Bindebtedto C, and A issuretyforthedebt.CdemandspaymentfromA,and on his
refusalsueshim fortheamount.Adefendsthesuit,havingreasonablegroundsfor
in.(3rd Edn) 138,para327. See, AIR1987Cal280 at283.
278.(28thEdn by P.V. BaiterandP. St. J.Langan)467.
279. Thecourtalso cited a passage fromChittyonContracts(24th Edn) Vol 11,para4855 to
the effect that there are certainpotentialand inchoate rights of surety before payment. See
at p. 283, AIR 1987 Cal. SeeJagdishChandra Sahani v PrakashKaur,(1997) 2MPLJ320,
the rights under S. 140 are available only against the principal debtor and not co-sureties.
Against co-sureties there is only the right to contribution under Ss. 146 and 147.
280. Kadamba Sugar Industries (P) Ltd v Devru Ganapathi Hedge Bhairi, AIR 1993 Kant 288.https://t.me/LawCollegeNotes_Stuffs

802. 660Chapter12Guarantee [S. 141]
doingso, but iscompelledto paytheamountofthedebtwith costs. He canrecover
from Btheamountpaid by him for costs, as well astheprincipaldebt.
{b)C lendsfia sum of money, and A, attherequestof B,acceptsa bill ofexchangedrawn
byeuponAtosecuretheamount.C,theholderofthebill,demandspaymentof it from
A, and, on A's refusal to pay, sues himuponthebill./A,not havingreasonablegrounds
for sodoing,defendsthesuit, and has to paytheamountofthebill andcosts.He can
recoverfromBtheamountofthebill,butnotthesumpaidforcosts,astherewasno
realgroundfordefendingtheaction.
(c)Aguaranteesto C,totheextentof 2000rupees,paymentfor rice to besuppliedby Cto
B.Csuppliesto B rice to a lessamountthan2000rupees,butobtainsfrom Apayment
ofthesumof2000rupeesinrespectofthericesupplied.>4cannotrecoverfromBmore
thantheprice ofthericeactuallysupplied.
Thus in everycontractofguaranteethereis an impliedpromiseby the
principal debtor toindemnifythe surety. The right enables thesuretyto
recover from theprincipaldebtorwhateversum he hasrightfullypaidunder
theguarantee,butnotsumsvi^hichhepaidvi^rongfully.Anexampleof
wrongfulpayment is a case where a surety hadguaranteedthepaymentof
fourmotorvehicles delivered onhire-purchase.Thesuretycontendedthat
hehadpaidRs4000indischargeof his liability, but he failed to give an
accountof the pricewhichthemotorvehiclesmighthaverealisedon resale.
He was notallowedto recover hisindemnity.^^^
Rightsagainstcreditor
Thesuretyenjoys thefollowingrightsagainstthecreditor:
1.Righttosecurities[S.141]
2.Righttosharereduction
3.Rightof set off
1.Righttosecurities[S. 141]
S.141.Surety'srighttobenefitofcreditor'ssecurities.— Asuretyis enti
tled tothebenefitofeverysecuritywhichthecreditorhasagainsttheprincipal
debtoratthetimewhenthecontractofsuretyshipisenteredinto,whetherthe
suretyknows oftheexistenceof suchsecurityor not;and,ifthecreditorloses,
or,withouttheconsentofthesurety,parts,withsuchsecurity,thesuretyis dis
chargedtotheextentofthevalueofthesecurity.
Illustrations
[a] Cadvancesto B, histenant,2000rupeesontheguaranteeof A. C has also afurther
securityforthe2000rupeesby amortgageofB'sfurniture.Ccancelsthemortgage.B
281. Supreme Leasing v LowChuanHeny, 1989CurrentLJ809 (Kuala Lumpur). Shri
BisiowakarmaFurnitureWorkshop vSantanuSarkar,(2006) 5 AIR Kant (NOC) 762(Jha);
AIR2006Jhar89,suretypaid off thecreditor,allowed to recover hisindemnityfrom the
principal.Theprincipal'spleathathe had agreed to paywithoutany such claim was not
proved by him.KarnailSinghRandhawavJagirKaur, (2008) 66AIC539(P8cH),entitled
torecoverthesameamountfrom theprincipal,can alsorecoverintereston it.
282. ChekkeraPonnammav A.S.Thammayya,AIR 1983 Kant 124.https://t.me/LawCollegeNotes_Stuffs

803. [S. 141] Rightsofsurety661
becomesinsolvent, and Csues A on hisguarantee.A isdischargedfrom liabilitytothe
amountofthevalueofthefurniture.
(b) C,a creditor,whoseadvanceto B issecuredby adecree,receives also aguaranteefor
thatadvancefrom A. CafterwardstakesB'sgoodsinexecutionunderthedecree,and
then,withouttheknowledgeof>A,withdrawstheexecution./Aisdischarged.
(c)A, assuretyforfi,makes abondjointly with Bto C, tosecurea loan from C toB.After
wards,Cobtainsfrom B afurthersecurityforthesamedebt.SubsequentlyCgivesup
thefurthersecurity.A isnotdischarged.
The section recognises andincorporatesthe general rule of equity as
expoundedinCraythornevSwinburne^^^thatthesuretyisentitledto
every remedywhichthecreditorhasagainsttheprincipaldebtor,including
enforcementof everysecurity.^®'*
On paying off thecreditorthesuretysteps into his shoes and gets the
right to have thesecurities,if any,whichthecreditorhasagainsttheprin
cipaldebtor.^^^Therightexistsirrespectiveof the factwhetherthesurety
knows of the existence of suchsecurityor not."Itis the duty of thecreditor
to keepthesecuritiesintact;notto givethemup or toburdenwithfurther
advances."^8^
Theplaintiffslent to BandP,whoweretraders,£300forthepayment
ofwhichthedefendantbecamesurety. At the time of theloanBandP
assignedby deed assecurityfor thedebt,the lease oftheirbusinessprem
isesandplant,fixturesandthingsthereon.Theplaintiffhadtherightto
sell ondefaultby giving amonth'snotice.Thedefaulttookplace,butthe
defendantdidnotenter intopossession.He received notice of thedebtors'
insolvencybutallowedthemtocontinueinpossession.Consequentlythe
assets were seizedandsold bythereceiver. It washeldthattheplaintiffs,
bytheiromissionto seize thepropertyassignedondefault,haddeprived
themselves of thepowerto assign thesecurityto the surety. He was,
therefore,dischargedto theamountthatthe goods wereworth.^®^
283.(1807)14 VesJun160:33ER482.
284.IndustrialFinanceCorpnofIndiaLtdvCannanoreSpg &WvgMillsLtd,(2002)5SCC
54:AIR2002SC1841:(2002)110CompCas685.
285. The term"security"isnotused in anytechnicalsense but asincludingallrightswhichthe CASEPILOT
creditorhasagainstthepropertyof theprincipal.StateofM.P. vKaluram,AIR1967SC
1105:(1967)1SCR266.
286.ForbesvJackson,(1882) LR 19ChD615,621. SeealsoAmritlalGoverdhanLalanvState
BankofTravancore,AIR1968 SC 1432.Whereacarwas delivered onhire-purchase,the
paymentofinstalmentsof hireguaranteedby thesuretyandthecarwas seizedbecauseof
thehirer'sdefaultbutreturnedto him on hispayingasmallamountandundernoinforma
tion to the surety, thesuretywas held to be absolved from liability.Kunjuvarecthv Union
ofIndia,(1991) 1KLT49 (SN);IbrahimAbdulLatifShaikh vCorpnBank,AIR 2003Kant
98: (2003) 1ICC726,in theabsenceof anagreementtothateffect, thesuretycannotask
thecreditortoproceedagainstsecurityat aparticulartime. It is adiscretionof thecreditor.
Forfearanceon hispartinthatrespectdoes not absolve thesuretyof his liability. Mukesh
GuptaVSIMCOMLtd,AIR2004Bom 104: (2004) 2 BC 470:(2004)2 Bom CR290:
(2004) 1MahLJ 159 thesuretyhadwaivedthe benefitsunderSs. 140, 141,notpermissible
for him tocontendthathestooddischargedbecauseof thefailureof theprincipaldebtorto
take timely steps to preserve thesecurityor to call foradditionalsecurity.
287.Wuff&Billingv Jay, (1872) LR 7 QB 756.https://t.me/LawCollegeNotes_Stuffs

804. 662Chapter12Guarantee [S. 141]
Wherecertainbills of exchange were given by way of collateralsecurity
and they beingdishonoured,thecreditormade them useless bynotdoing
anythingwithinthe period oflimitation,thesuretywasdischargedto the
extentoftheirvalue;^^®
Ifthesecuritiesareburdenedwithfurtheradvancesitwillnotaffectthe
rights of the surety. Forexample,inForbesvJackson-}^^
Theprincipaldebtorborrowed£200onmortgaginghis leasehold
premises and a policy of lifeinsurance,thedefendantjoining as a surety.
The principal debtorborrowedfurthersums from thecreditoron the
samesecurities,thesuretyknowingnothingaboutit. Theprincipaldebtor
failed to pay. Thesuretypaidoff£200and interest and claimedboththe
securities. Thecreditordemandedpaymentof thefurtheradvances also.
But it washeld-thatthesurety'srightto thesecuritieswasnotaffected
by thefurtheradvancesand,therefore,he wasentitledtoboththe
securities.
According to English law, thesuretyhas a right to securities which the
creditorin fact hasagainsttheprincipaldebtor,whetherthesuretyknewof
themornotandwhethertheywere receivedbeforeoraftertheguarantee.
"Theexpression'security'in Section 141 is not used in anytechnical
sense; it includes all rightswhichthecreditorhadagainstthepropertyat the
^ dateofcontract."ThisstatementoccursinthejudgmentofShah J(after-
wardsCJ) of the SupremeCourtinStateofM.P.vKaluram.^^"
The State sold a lot of felledtimberto apersonfor a fixed price payable
in four equalinstalments,thepaymentofwhichwasguaranteedby the
defendant.Thecontractfurtherprovidedthatif a default wasmadein the
paymentof aninstalment,the Statewouldget therighttopreventfurther
removalof thetimberandto sell theremainingtimberfor therealisation
of the price. The buyerdefaultedbut even so the Stateallowedhimto
removethetimber.
Thesuretywasthensuedfortheloss. But hewasheldnotliable."The
Statehadachargeover thegoodssold as well as toremaininpossessiontill
paymentoftheinstalments.Whenthegoodswereremovedby thebuyerthat
CASEPILOT
288.M.Ramnarain(P)LtdvStateTradingCorpnofIndia,AIR 1988 Bom 45.
289. (1882) LR 19 Ch D 615.PadamakarK.BhagwatharvStateBankofIndia,(2006)2AIR
Kant(NOC)228 (Bom)contractprovisionthatthesuretywouldnotbedischargedbyreason
of the failure of thebanktotakeanyfurthersecurity,validand effective.
290.AIR1967SC 1105:(1967)1SCR266;reaffirmed,AmritlalGoverdhanLalanvStateBank
ofTravancore,AIR 1968 SC 1432; (1968) 3 SCR724.Inignoranceof thisdecisionthe
KarnatakaHighCourtheld inKarnatakaBankLtdvGajananShankararaoKulkarni,AIR
1977Kant14 and again inR.Lilavaiiv BankofBaroda,AIR 1987 Kant 2thata mere pas
siveactivityor passivenegligenceon thepartof thecreditorbyfailingtorealisethedebtfrom
thecollateralsecurityisnotsufficientinitselftodischargethesurety.Ifthisvievsriscorrect,
theeffectwouldbethatthecreditorcanpassivelypermitthesecuritiesto belost,butshould
notdosomethingactive todestroythem.Thecourtproceededon the logicthatthesurety
canhimselftakesteps to seize thesecuritybypayingoutthecreditor.https://t.me/LawCollegeNotes_Stuffs

805. [S. 141] Rightsofsurety663
securitywas lostand to the extent of thevalueof the securitylost, the surety
stood discharged." The court also pointed out that it was immaterialthat
the lossofsecuritieswas due to a mereinaction and not to apositiveaction.
Thedifferencebetween theEnglishlaw and theprinciplelaid down in
Section 141 was explained by the SupremeCourtinAmritlalGoverdhan
LalanvStateBankofTravancore-}^^"It is truethatSection 141 has limited
the surety's right to securities held by the creditor at the date of his becom
ing surety and has modified the English rulethatthe surety is entitled to the
securitiesgivento the creditor both beforeand after the contract of guaran
tee. Butsubjectto this variation, Section141incorporates the rule of English
law relating todischargefrom liability of a surety when the creditor parts
with or loses the security held by him."
Whenrighttosecuritiesaccrues.—Whenis thesuretyentitledto the
securities?Obviously,only on paying the debt. Difficulty, however, arises
when the surety has guaranteed only apartof the debt and consequently
evenwhen he has paid allthathe was liable for, the creditor's claim against
the principal debtor is not yet fully satisfied. The Bombay HighCourtcon
sideredthe questionin Goverdhandas Goculdas TejpalvBankofBengal.^^^
Certainmortgages were givento a bank as security for debtsamounting
to Rs3,15,000. The plaintiff, who was a surety inpart,paid Rs1,25,000
and claimedthat he was entitled to that extent to stand in the place of the
Bank and toreceivea share of the proceeds of the said securitiespropor
tionedto the sumwhichhehadpaid.
FarranJconsideredthe Englishauthoritiesand followingthem,said:
"Asuretywho has paid the debt, which he hasguaranteed,has a right to
the securities held by the creditors, because as between theprincipaldebtor
and surety the principal is under an obligation to indemnify the surety.
The equity between the creditor and the surety isthatthe creditor shall not
do anything to deprive the surety ofthatright. But the creditor's right to
hold his securities isparamountto the surety's claim upon such securities,
whichonly ariseswhenthecreditor'sclaimagainstsuchsecuritieshas been
satisfied."
TheMadrasHighCourthas differed not only from thisopinionbut also
fromthe factwhetherthisistheeffect of theEnglishdecisions.Thecase
before it wasParvateneniBhushayyavPotluriSuryanarayana?'^'^
TheImperialBankadvancedthreedifferentloans to apersonwith
threedifferentsuretiesfor each loan. Theprincipaldebtordidnotrepay
the loans in timeand,therefore,thebankobtainedmortgageof hisprop
erty.Ultimatelythebankhadto file suitsandthreedifferentdecrees were
291.AIR1968SC1432:(1968)3SCR724,733.
292.ILR(1891-92)15Bom48.
293. For acontrarydecision,seeGoodwinv Gray, (1874) 22WR312.
294.AIR1944Mad195:ILR1944Mad340.
CASEPILOT
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

806. 664Chapter12Guarantee [S. 141]
obtainedagainst the principal debtor and the surety on each loan. The
firsttwo sureties paid off the decrees for which they were sureties but the
thirddidnot.
The question on these facts was whether the first two sureties who had
paid off their obligations were entitled to aproportionateshare in themort
gage, while apartof thebank'sclaimagainstthe principal was stillunsat
isfied.KrishnaswamiAyyangerJ heldthatthey were soentitled.He said:
"Section140...expressly saysthatthe surety upon payment of allthathe is
liable for is invested,thatis,immediatelyinvested,withall therightswhich
thecreditorhad against theprincipaldebtor. Theconditionlaid down by
thesectionfor thisrightto arise is thepaymentby thesuretyof allthat
he is liable for, and not the payment of allthatmay be due to thecreditor
who holds thesecurities.Wheretheguaranteeddebt isfractiononly of the
debt, thesurety'srightcomes into existenceimmediatelyonpaymentofthat
fraction,forthatfractionis, so far as he isconcerned,thewhole."^^^The
learnedJudgethenconsideredIndianandEnglishauthoritiesandcame to
theconclusionthat"theresultofthediscussiononacarefulconsideration
of the decided cases isthatasuretyfor apartonly of a debt is onpayment
ofthatpartentitledprotantoto thesecurityheld by thecreditoras a cover
forthedebtasawhole".^^^
Wherethe evidence didnotdisclosethatthecreditorhadanythingto
dowiththe loss of thehypothecatedproperties,thesuretywasnotpermit
ted to claim anyreductionofliabilityinthatrespect. The act of losing or
partingwithasecurityhas to be avoluntaryact on thepartof thecreditor.
Thelosshastobeduetoanactwhichisattributabletothecreditor.The
decision of theKarnatakaHighCourt^^^was on the basis of asuretybond
whichprovidedthatthesuretywouldnotclaim the benefit of Section 141.
Thesectiondoes notcarrythewords"notwithstandinganythingcon
tainedto thecontrary,etc.", but even so thecourtheldthatbyreasonof the
provision in Section 128, which permits liability to beregulatedby agree
ment,asuretycanwaive the benefit of any of theprovisionstouchinghis
liability.^5^
295. See Sass,re.NationalProvincialBankofEnglandLtd,ex p, (1896) 2 QB 12.Ibidat p.204.
296.ParvateneniBhushayyavPotluriSuryanarayana,AIR1944Mad195:ILR1944Mad340
at p.206.ThelearnedJudgeconsideredthe decision of the PrivyCouncilonappealfrom the
CalcuttaHighCourtinCarrLazarusPhillipsvAlfredErnestMitchell,AIR1930Cal17:
ILR (1930) 57 Cal 764. Onappeal,A.E.MitchellvC.L.Phillips,(1930-31)58lA306:AIR
1931PC224.
297.IndustrialFinanceCorpnofIndiaLtdvCannanoreSpg & Wvg Mills Ltd, (2002) 5 SCC 54:
AIR2002SC 1841: (2002) 110CompCas 685.
298.R.Lilavativ BankofBaroda,AIR1987Kant2.
299. SeealsoPerwatraHabibBank v SehatianDevelopment,(1994) 1 Curr LJ 394 (Malaysia)
where a clause in thecontractofguaranteeenabled thecreditorto vary the terms of the
agreementwithoutany need for reference to theguarantors.https://t.me/LawCollegeNotes_Stuffs

807. [S. 141] Rightsofsurety665
Hypothecationis onlyequitablecharge
The section is notapphcabletohypothecation,it being only anequitable
charge. The goodsremainwiththeborrowerandnormallythequestionof
theirbeinglostby thecreditordoesnotarise.^""
2.Rightto sharereduction
Thisrightmay beillustratedby the case ofHobsonvBass:^"^
J gave aguaranteeto B in the following words: "I herebyguaranteeto
you thepaymentof all goods you may supply toE.H.,but so as my liabil
ity to youunderthis or anyotherguaranteeshallnotat any time exceed
the sum of£250."E gave asimilarguarantee.Bsuppliedgoods toE.H.,
to theamountof£657.E.H.becamebankrupt.B proved the whole sum
in the insolvencyofE.H.andthencalled on theguarantorswhopaidhim
£250each.SubsequentlyB received from the receiver a sum of 2s,and.
Id...in thepoundon£657.It was heldthateach of theguarantorswas
entitled to apartof the dividendbearingto the whole the samepropor
tionas£250to657,^"^
3.Rightofset-off
If thecreditorsues thesurety,thesuretymay have thebenefitoftheset-
off, if any,thattheprincipaldebtorhadagainstthecreditor.He isentitled
to use the defences of thedebtoragainstthecreditor.If, forexample,the
creditorowes himsomething,or thecreditorhas in hishandsomething
belonging to the debtor for which the creditor could havecounter-claimed,
thesuretycan alsoputupthatcounter-claim.^"^
He can claim such a right not onlyagainstthe creditor, but alsoagainst
thirdpartieswho have derived their title from the creditor. Thus where a
mercantile agentsoldthe goods of his principal and, being a surety for pay
ment of the price to theprincipal,had to pay it, he was held to have become
entitled to the unpaid seller's lien against the buyer and those deriving title
fromhim.^""*
Rightsagainstco-sureties
Where a debthasbeenguaranteedby morethanoneperson,they are
calledco-sureties.Some oftheirrightsagainsteachotherare:
1. Effect of releasing a surety;
2.Righttocontribution.
300.BankofIndiavYogeshwarKantWadhera,AIR1987P&H176.
301.(1871)LR 6 Ch App792.
302.See alsoBardwellvLydall,(1831) 7 Bing 489: 131 ER 189.
303.BechervaisevLewis,(1872)LR7 CP372.
304.WolmershausenvGullick,(1893)2 Ch 514.https://t.me/LawCollegeNotes_Stuffs

808. 666Chapter12Guarantee [Ss.138,146-147]
1.Effectofreleasingasurety[S.138]
S. 138.Releaseofoneco-suretydoesnotdischargeothers.—Where
thereareco-sureties,areleasebythecreditorofoneofthemdoesnotdischarge
theothers;neitherdoesit freethesuretysoreleasedfrom hisresponsibilityto
theothersureties.
Thecreditormay at his willreleaseany of theco-suretiesfromhisliabil
ity. Butthatwillnotoperateas adischargeof hisco-sureties.However,the
releasedco-suretywillremainliable to theothersforcontributioninthe
eventofdefault.^"^
2.Righttocontribution[Ss.146-147]
S.146.Co-suretiesliabletocontributeequally.—Wheretwoormore
personsareco-suretiesforthesamedebtor duty,eitherjointlyor severally,and
whetherunderthesameordifferentcontracts,andwhetherwithorwithoutthe
knowledgeofeachother,theco-sureties,intheabsenceof anycontracttothe
contrary,are liable, asbetweenthemselves,to payeachanequalshareofthe
wholedebt,or ofthatpartof itwhichremainsunpaidbytheprincipaldebtor.
Illustrations
(a)A,Band C assuretiesto D,forthesum of 3000rupeeslent toE.E makesdefaultin pay
ment.A,Band Care liable, asbetweenthemselves,to pay1000rupeeseach.
(b)/I,BandCaresuretiesto D forthesum of1000rupeeslentto£,andthereis acontract
betweenA, BandCthatA is to beresponsibletotheextentofone-quarter,B tothe
extentofone-quarter,and Ctotheextentofone-half.Emakesdefaultinpayment.As
betweenthesureties,A is liable to pay 250rupees,B250rupeesand C500rupees.
S. 147.Liabilityofco-suretiesboundindifferentsums.—Co-sureties
whoareboundindifferentsums are liable to payequallyas far asthelimits of
theirrespectiveobligationspermit.
Illustrations
[a] A,B and C assuretiesfor D,enterintothreeseveralbondseach In adifferentpenalty,
namely,inthepenaltyof10,000rupees,Binthatof20,000rupees,C inthatof40,000
rupees,conditionedfor D's dulyaccountingtoE.Dmakesdefaulttotheextentof
30,000rupees.A,BandC are liable to pay10,000rupees.
{b)A,Band C,assuretiesfor D,enterintothreeseveralbonds,each in adifferentpenalty,
namely,/Ainthepenaltyof 10,000rupees,Binthatof20,000rupees,C inthatof40,000
rupeesconditionedfor D's dulyaccountingto E.Dmakesdefaulttotheextentof40,000
rupees.Ais liable to pay 10,000rupees,andSandC 15,000rupeeseach.
(c)A, B and C, assuretiesfor D,enterintothreeseveralbonds,each in adifferentpen
alty, namely, A inthepenaltyof10,000rupees,Binthatof 20,000rupees,C inthatof
40,000rupees,conditionedfor D's dulyaccountingtoE.Dmakesdefaulttotheextent
of 70,000rupees.A,BandChave to pay eachthefullpenaltyof hisbond.
Where there are several sureties for the same debt and theprincipaldebtor
hascommitteda default, eachsuretyis liable tocontributeequally to the
305. SriChandvJagdishParshadKishanChand,AIR1966SC 1427: (1966) 3 SCR 451,456-57;
Rajammav C.Puttachari,(2005) AIRKant1542.https://t.me/LawCollegeNotes_Stuffs

809. [S.147] Rights of surety 667
extentofthedefault.If oneof themhas beencompelledto pay morethan
hisshare,he canrecovercontributionfromhisco-suretiesso as toequalise
the loss as between all ofthem.^®''Thus,if there are three sureties and a
defaultof three thousand rupees has taken place, each surety must contrib
ute one thousand rupees. The principle will apply whether their liability is
joint or several, under the same or differentcontracts,andwhetherwith or
withoutthe knowledge of eachother.
The principlewas applied by the English Court of Appeal even to a case
inwhichpaymentwas made by one of theco-suretieseven before there was
any formal demand by the creditor as required by the guarantee. Thecourt
said that it was necessary for this purposethatthe co-surety must not have
actedofficiouslyorvoluntarily.A demand is not a precondition for liability
under a guarantee. It is rather a procedural and evidentiary requirement.
It is there for the benefit of thesuretyalone. He could waive it. Where the
creditor is entitled to proceed against either co-suretywithoutnotifying the
other, such waiver by one co-surety would not deprivehim of his entitlement
to contribution from the other who has not been speciallydisadvantaged.^"^
PeterGibsonLJ summarised the lawthus:^"'"Let rnestartby setting out
certainuncontroversialprinciplesapplicablein thisareaof the law:
(1)Where more than one person guarantee to the creditor the payment of
the same debt, an equity arises suchthatif one of them pays morethanhis
dueproportionof the debt, he is entitled to a contribution from hisco-guar
antororco-guarantors.
(2)It isimmaterialwhether theco-guarantorsare bound jointly or sever
ally or jointly andseverally,or by the sameinstrumentor by separate instru
ments,or in the samesum,ordifferentsums,or at the same time ordifferent
times, orwhethertheco-guarantormakingpayment knows of the existence
of the otherco-guarantororco-guarantors,as the right ofcontributionis
not dependent upon agreement, express or implied.
(3)Normallyanactionforcontributioncannotbebroughtuntilpayment
has been made by aco-guarantorof morethanhisshareof thecommon
liability.
(4)Inparticularcircumstancesanactionforcontributionwill lie even
beforepaymentis made; thus whenjudgmenthas beenenteredby the credi
toragainstoneguarantor,whohaspaidnothinginrespectof thejudgment,
hecanmaintainanactioninequityagainsthisco-guarantorandobtain
anorderrequiringpaymentof theco-guarantor'sdueshareto thecreditor
(if apartyto theaction)or (if thecreditorisnotaparty)anorderthatthe
co-guarantorindemnifythejudgment-debtor,onpaymentof hisownshare,
againstfurtherliability."
306.SBIVPremDass,AIR1998Del 49, abankloanwasguaranteedbymorethanoneguaran
tors,they were heldjointlyandseverallyliable to pay theprincipaldebt.
307.ShirleyvBurdett,(1911) 2 Ch 418;WolmershausenvGullick,(1893) 2 Ch 514.
308.Stimpsonv Smith,1999Ch 340: (1999) 2WLR1292(CA).
309.Ibidat p. 837.https://t.me/LawCollegeNotes_Stuffs

810. 668 Chapter 12 Guarantee [S.147]
Theseprinciplesare allsubjectto anycontractualtermswhichmayUmit
orextendtheentitlementof aninterestedperson.
Is the service of a demand inwritingin accordancewiththeguarantee,
apreconditionofliabilityundertheguarantee?Itwouldbesurprisingif an
evidentiaryor proceduralrequirementofserviceof a written demandin the
guaranteewas aprecondition.
The only textbook whichdealswith thespecificpoint isAndrewsand
Millett,LawofGuarantees.Theeditorssay:^"
"It is submitted that strictly speaking there is no restriction upon the
time at which a surety can applyfor reliefagainst his co-sureties, provided
thatthe account between the principal(debtor)and the creditor is closed
and there is an immediate liability due and payableundertheguarantee
suchthattheamountof thecontributioncan be properlyascertained.It is
immaterialthatthe creditor has not yet demanded payment, or eventhat
the creditor is obligedunder the terms of the guarantee to make a demand
before the surety is liable. It is enough that the creditor could enforce the
guarantee,eitherforthwith or after making ademandfor morethan the
surety's rateable share. This is certainly the case withqutatimes relief
against the principal debtor for an indemnity, and there is no reason why
the same should not apply against theco-suretyforcontribution."
Theprincipleof equal contribution is subject to the maximum limit, if
any, fixed by a surety to hisliability.This is so because Section 147 lays
downthat"co-suretieswho areboundindifferentsums are liable to pay
equally as far as the limits of their respective obligations permit". Suppose
thatA,Band C are three sureties for a debt. Aundertakesto be liable up
toRs200,B up toRs400and C forRs600.The principal debtor makes a
default ofRs600.Each surety mustcontributeRs200.But if the default is
ofRs900,then according to the principle of equalcontribution,each would
be liable forRs300;this being morethanthe limit of A'sobligation,he can
be required to contribute onlyRs200.The remaining sevenhundred will be
apportionedbetweenB and C equally.
Indemnityandguaranteedistinguished
Indemnityandguaranteehave thiscommonfeaturethatbothare devices
forprovidingprotectionagainstaprobableloss. In either case the loss may
arise due tohumanconduct.However,thetechniqueofprovidingprotec
tion, the need andoccasionforprotectionand thenumberofpartiesinvolved
marksomedifferencesbetweenthem."Guaranteesandindemnities,which
are alsodescribedassecurities,aredistinctarrangementsunderwhicha
thirdparty,the surety, agrees to assume liability if the debtor defaults or
310. (2nd Edn, 1994). '
311. At p.360.https://t.me/LawCollegeNotes_Stuffs

811. [S.147] Rights of surety 669
causeslossto the creditor. The former arrangement is aguairantee,the latter
involves anindemnity."^^^
1. The liability under a contract of indemnity is contingent in the sense
thatit may or may notarise.^"Under a guarantee, on the other hand, the
liabilityissubsistingin thesensethat oncea guaranteehas beenactedupon,
the liability of the surety automatically arises, though it remains in sus
pendedanimationtill theprincipaldebtorcommitsdefault.
2. Theundertakingin a guarantee is collateral, in an indemnity it is orig
inal. The purpose of a guarantee is tosupporttheprimaryliability of a
thirdperson. In an indemnity, there being nothirdperson,theindemnifier's
liability is in itself"primary".^"
3. In acontractofindemnitythere are only twoparties,namely, the
indemnifierand the indemnity-holder. But there are three parties to a guar
antee, the creditor, theprincipaldebtor and the surety. It is atripartite
arrangement.
4. In anindemnitythereis only onecontract,thatis, thecontractofindem
nityagainstlossbetweentheindemnity-holderand theindemnifier.But in
aguaranteethere arethreecontracts,namely, acontractofloanbetween
theprincipaldebtorandthecreditor;acontractofguaranteebetweenthe
creditorand thesuretyand finally an impliedcontractofindemnitybetween
theprincipaldebtorandthe surety.
312. Ellinger,ModernBankingLaw, 259 (1987). SeeJayakrishnaTradingCo vKandasamy
WvgFactory& Co, 1994 SCCOnLineMad502: (1995) 1 LW 230. In this caseguarantee
was given not at therequestof theprincipaldebtor,noliabilityfor the default of theprincipal
debtorinsuchacase.
313.U/iityFinanceLtdvWoodcock,(1963) 1WLR455 (CA).
314. SeeCheshireandFifoot,LawofContract(9th Edn byFurraston,1976)181.https://t.me/LawCollegeNotes_Stuffs

812. 670Chapter12Guarantee
Visitebcexplorer.comto access cases referred
to inthebooi<throughEBCExplorer™on
seeOnline®;along withupdates,articles, videos,
blogsandahostofdifferentresources.
EBC
Explorer'
companionresourcesfor legalresearch
Thefollowingcasesfromthischapterareavailable
throughEBCExplorer™:
•AllahabadBank v S.M.EnggIndustries,(1992) 1CalLJ 448
•AmritlalGoverdhanLalanvStateBankofTravancore,AIR1968 SC
1432:(1968)3SCR724
• BankofBiharLtdvDamodarPrasad,AIR 1969 SC 297: (1969) 1 SCR 620
• Bombay Dyeing & Mfg CoLtdv StateofBombay, AIR 1958 SC 328:
1958SCR1122
•Centax(India)LtdvVinmarImpexInc,(1986) 4 SCC 136
•GoverdhandasGoculdasTejpal vBankofBengal, ILR(1891-92)15 Bom 48
•IndustrialFinanceCorpnofIndiaLtdvCannanoreSpg &WvgMills
Ltd,(2002)5SCC54
•LondonGeneralOmnibusCo vHolloway,(1912) 2 KB 72 (CA)
•M.5.AnirudhanvThomco'sBankLtd,AIR1963SC 746: (1963) 1SCR63:
(1963) 33CompCas 185
•MaharashtraSEB vOfficialLiquidator,(1982) 3 SCC 358
•StateofM.P.vKaluram,AIR1967SC 1105: (1967) 1 SCR 266
• U.P. CoopFederationLtdv SinghConsultantsandEngineers (P) Ltd,
(1988)1SCC174
• UnionBankofIndiavAvinashP.Bhonsle,1991MahLJ1004
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

813. 13
Bailment
Bailment implies a sort ofrelationshipin which thepersonalproperty
of onepersontemporarilygoes into thepossessionofanother.Theowner
ship of the articles or goods is in onepersonand thepossessioninanother.
Thecircumstancesinwhichthishappensarenumerous.Deliveringa cycle,
watch or anyotherarticleforrepair,or leaving a cycle or car, etc., at a
stand,depositingluggage or books in acloakroom,delivering gold to a gold
smithformakingornaments,deliveringgarmentsto adry-cleaner,deliver
ing goods forcarriage,warehousingorstorageandsoforth,are allfamiliar
situationswhichcreate therelationshipofbailment.Thusbailmentis a sub
ject ofconsiderablepublicimportance.^
DEFINITION
"Bailment"isdefinedinSection148oftheIndianContractActinthe
followingwords:
S.148."Bailment","bailor"and"bailee"defined.—A"bailment" isthe
deliveryofgoodsbyonepersontoanotherforsomepurpose,uponacontract
thatthey shall, whenthepurposeis accomplished, bereturnedorotherwise
disposedofaccordingtothedirectionsofthepersondeliveringthem.Theper
sondeliveringthegoodsiscalledthe"bailor". Thepersontowhomtheyare
deliverediscalledthe"bailee".
Explanation.—Ifapersonalreadyinpossessionofthegoodsofanothercon
tractsto holdthemas abailee,hetherebybecomesthebailee,andtheowner
becomesthebailorofsuchgoods,althoughtheymaynothavebeendelivered
by way ofbailment.
ESSENTIALFEATURES
The following essential features of"bailment"are emphasised by this
definition.
1.Deliveryofpossession
The firstimportantcharacteristicofbailmentis"thedelivery of posses
sion" by onepersontoanother.^"Delivery of possession" for thispurpose
1. See, forexample,C.V. Davidge,Bailment,(1925) 41 LQR 433.
2.NewIndiaAssuranceCoLtdvDDA,(1991)2 PLR (Del) 82, the essence ofbailmentis
possession. Delivery of truck to the parking centre, receipt issued for charges, safe keeping
[671]https://t.me/LawCollegeNotes_Stuffs

814. 672Chapter13Bailment [S.148]
CASEPILOT
should be distinguished from a mere"custody"."Onewho has custody
withoutpossession,Hkea servant, or a guest using his host's goods is not
abailee."^The goods must behandedover to the bailee forwhateveris the
purposeof bailment. Once this is done, abailmentarises, irrespective of the
mannerinwhichthishappens.
An oldcustomerwentintoarestaurantfor thepurposeofdiningthere.
Whenhe entered theroomawaitertookhiscoat,withoutbeing asked,
andhungit on ahookbehindhim.Whenthecustomerrose to leave the
coatwasgone.'*
Whatthewaiterdidmightbe no morethanan act ofvoluntarycourtesy
towardsthecustomer,yet therestaurant-keeperwas held liable as a bailee.
Thewaiterbytakingthe coat into hispossessionhadrelieved theplaintiff
of itscareandhadthusassumedtheresponsibilityof a bailee. It was hewho
selected the place where the coatshouldbe put.
Ifthecustomerhadinstructedtheservantwhereandhowthecoatshould
beput,the result,perhaps,wouldhave beenotherwise.Totake,forinstance,
adecisionof theMadrasHighCourt.^
A ladyhandedover to agoldsmithcertainjewels for thepurposeof
being melted andutilizedformakingnew jewels. Every evening assoon
as thegoldsmith'sworkfor the day was over, the lady used to receive
half-madejewelsfromthegoldsmithandputthemintoaboxinthegold
smith'sroomand keep the key in herpossession.Thejewels werelostone
night.
But thelady'sactionagainstthegoldsmithfailed,thecourtsaying: "Any
bailmentthatcouldbegatheredfromthe factsmustbetakento have come
to an end as soon as theplaintiffwasputinpossessionof the melted gold.
Delivery isnecessarytoconstitutebailment.The mere leaving of box in a
roomin thedefendant'shouse, when theplaintiffherselftookaway the key,
cannotcertainlyamountto deliverywithinthemeaningof theprovisionin
Section149."
Banklocker
On the sameprinciple,thehiringof abank'slocker andstoringthingsin
itwouldnotconstituteabailment.Thingskeptthereare in a wayputin a
hiredportionof the premises and notentrustedto thebank.Thecourtalso
foundthattherewas noproofof the factthatat thetimewhenbanklocker
wasrobbedthecustomerhadsome items ofjewelleryin the locker.The
for 24hours.The owner of the centre could notreturnthe vehicle nor he gave any plausible
explanationfor itsabsence,_heldliablefor the loss.
3.PollockandMulla,IndianContractandSpecificReliefActs(1957)560.Seealso
ReevesvCapper,{1838)5 BingNC136; 132EK1057,v^fherethecustodyof aservantis dis
tinguishedfromdeliveryofpossessionto abailee.
4. Ultzen vNicols,(1894) 1QB92.
5.KaliaperumalPillaivVisalakshtni,AIR 1938Mad32.https://t.me/LawCollegeNotes_Stuffs

815. [S. 149] Essentialfeatures673
courtfurthersaidthatit could not be inferredwithoutproofthatthe strong
room and lockers were not built according to specifications. Thecustomer
wasnotallowedto claim anydamages/Thecourtsaid^thatinorderto con
stitutebailmentwithinthemeaningof Section 148 it is necessary to show
thatactualand exclusive possession of thepropertywas given by thehirer
of the locker to thebank.It is only thenthatthe question ofreasonablecare
and damages would arise. As it was, it was impossible to know the quantity,
qualityor the value of the jewellerythatwastherein the locker. It is alsonot
arelationshipoflandlordandtenant.Thelocker-holderhas nodirectaccess
to his locker, nor he canoperateit of his own. He can do so onlywiththe
assistanceofthebank.
Actualorconstructivedelivery
Section 149explainsthemeaningof delivery of possession.
S.149.Deliverytobaileehowmade.—Thedeliverytothebaileemaybe
madebydoinganythingwhich hastheeffectofputtingthegoodsinthepos
sessionoftheintendedbaileeor of anypersonauthorisedto holdthemon his
behalf.
Anexplanationto Section 148 providesthat"ifapersonalreadyin pos
session of the goods ofanothercontractsto holdthemas a bailee, hethereby
becomes the baileeandtheownerbecomesthebailoralthoughtheymaynot
have been delivered by way ofbailment".
Delivery ofpossessionis thus of twokinds,namely:
(1)actualdelivery,and
(2)constructivedelivery.
When the bailorhandsover to the bailee physical possession of the goods,
thatis called"actualdelivery"."Constructivedelivery" takes place when
there is no change of physicalpossession,goodsremainingwhere they are,
butsomethingis done which has the effect ofputtingthem in the possession
of the bailee. For example, delivery of a railway receipt amounts to delivery
of thegoods.^Similarly,where a person pledged the projector machinery of
his cinema under an agreement which allowed him to retain the machinery
for the use of thecinema,theAndhraPradeshHighCourt^observed:
"Itmustbe heldthattherewas aconstructivedelivery, ordeliveryby
attornmentto thebank.Sincethentherewas a change in the legalchar
acter of the possession of goods, though not in the actual and physical
6. Atul Mehra v BankofMaharashtra,AIR 2003P&H11: (2003) 2 BC 570: (2002) 3 ICC 138.
7. Ibid at p. 17. Citing at p. 16 Port Swettenham Authority vT.W.Wu& Co (M) Sdn Bhd,
1979 AC 580: (1978) 3WLR530statementto the effectthatabankerisundernoobligation
to accept a parcel for safe custody and where he is asked to do so, he could ask to know the
contentsand value in order to gauge thenatureandextentof any possible liability.
8. SeeMorviMercantileBankLtdvUnionofIndia,AIR1965SC 1954:(1965)3 SCR254.
9.BankofChittoorVNarasimbulu,AIR1966AP 163.https://t.me/LawCollegeNotes_Stuffs

816. 674Chapter13Bailment [S. 149]
custody. Eventhoughthe bailorcontinuedtoremainin possession, it was
-thepossessionof thebailee.""^
Anotherillustrationofconstructivedelivery isFazalvSalamatRai}^
The defendant was holding the plaintiff's mare under the execution of
adecree.The plaintiff satisfiedthe decree and the court orderedredeliv-
ery of the mare to the plaintiff. The defendant, however, refused to do so
unless hismaintenancecharges were also paid. The mare was stolen from
hiscustody.
Holdinghim liable, thecourtsaidthatafter the delivery order had been
passed, therelationof bailor and bailee was established byvirtueof the
ExplanationtoSection148.
In a case before the SupremeCourtthe owner of a car involved inah
,accidentdeliveredit under thepolicyon behalfof the insurerto the nearest
garage for repairs. This delivery was regarded as sufficient toconstitutethe
insurancecompany as a bailee and the garage as a sub-bailee. They became
responsible for the loss of the car in a fire on thepremises.^^
2.Deliveryshouldbeuponcontract
Delivery of goodsshouldbe made for somepurposeanduponacontract
thatwhenthepurposeisaccomplishedthe goods shall bereturnedto the
bailor.Whenaperson'sgoods go into thepossessionofanotherwithout
anycontract,thereis nobailmentwithinthemeaningof itsdefinitionin
Section 148. Awell-knownillustrationis the decision of theAllahabadHigh
CourtinRamGulatnvGovtofU.P."
Theplaintiff'sornaments,havingbeen stolen, wererecoveredby the
police and, while in police custody, were stolen again. Theplaintiff's
actionagainstthe State fortheloss wasdismissed.
SethJ said:"...theobligationof a bailee is acontractualobligationand
springs only from thecontractof bailment. Itcannotariseindependently
ofacontract.Inthiscasetheornamentswerenotmadeovertothe
GovernmentunderanycontractwhatsoeverTheGovernment,therefore,
neveroccupiedthepositionof baileeandis not liable as such toindemnify
theplaintiffs.""
CASEPILOT
10.PerVenkataswamiJ at p.166,
11.(1928)120 IC 421. Goods whichcannotbe delivered,Ukea film not yetproduced,cannotbe
pledged.ChiefControllingRevenueAuthorityvSudarsanamPicture,AIR 1968Mad319.
12.N.R.SrinivasaIyervNewIndiaAssuranceCoLtd,(1983) 3 SCC 458:AIR1983SC 899.
13.AIR 1950All206.See alsoOmaPrasadv SecyofState,AIR1937Lah 572: (1937) 172 IC
567;SurendraNathKoleyvKaliKumarSen, AIR 1956 Ass 55,hiringofelephantsis not
bailment unless so agreed.AnamalaiTimber Trust Ltd vTrippunitchuraDevaswom,AIR
1954TC305.
14. To the same effect isMohdMuradIbrahimKhan vGovtofU.P., AIR 1956 All 75,property
depositedincourtunderorders,nobailmentbecausetherewas nocontract.InPollockand
Mulla,IndianContractandSpecificReliefActs(8th Edn, 1957) 562, thisassumption
has beendescribedasunjustifiable.https://t.me/LawCollegeNotes_Stuffs

817. [S.149] Essentialfeatures675
Non-contractualbailments
Englishlawrecognisesbailmentwithoutcontract.In thewordsof
CheshireandFifoot:"Atthe presentday,no doubt, in mostinstanceswhere
goodsare lent orhiredordepositedforsafecustody,or assecurityfor a
debt,thedeliverywillbetheresultofacontract.Butthisingredient,though
usual,isnotessential.""
TheBombayHigh Court in itsdecisioninLasalgaonMerchantsCoop
Bank Ltd vPrabhudasHathibhaf^hastakenthe lead in imposing the obliga
tion of a baileewithout a contract. In the opinion of the court, as expressed
throughNaikJ,wherecertaingoodsbelongingto anindividualareseized
bytheGovernmentthe latterbecomesthebaileethereofevenif thereis no
suggestionof acontractbetweentheGovernmentand theindividual.The
facts stated briefly were as follows:
Certainpackagesoftobaccolyinginthegodownofapartnershipfirm
werepledgedto theplaintiffbank.Someofthepartners,havingfailedto
clear their incometax dues, the IncomeTax Officerordered seizureof the
goods.Theofficialsof theCollectorateaccordinglylockedthegodown
and handedoverthe keyto thepolice..Then cameheavyrains. The roof
of the godown leaked and the tobaccowasdamaged.
The courtsaid:"Heavy rains do not(necessarily)amount to an act of
God. It was the duty ofGovernmentofficersto take such care as everypru
dentmanagerwouldtake ofhisowngoods.TheGovernmentstoodin the
positionofbaileesanditwasforthemtoprovethattheyhadtakenasmuch
care as was(reasonably)possiblefor them and that thedamagewas due to
reasons beyond theircontrol."^^
Thisviewwasacceptedby theSupremeCourt in State of Gujarat v
MemonMahomedHajiHasan}^
Certain motorvehiclesand other goods belongingto the plaintiffs were
seizedbytheStateinexerciseofitspowersunderaSeaCustomsAct.The
goodswhileinthecustodyoftheStateremainedtotallyuncaredfor.
It wascontendedonbehalfof the Statethatas the State werenotbailees,
therewasnoobligationto takecare.Referringto thisShelatJobservedas
follows:^^"Thatcontentionisnotsustainable.Bailmentis dealtwithby the
ContractActonlyincaseswhereitarisesfroma contract,butit isnot correct
tosaythattherecannot be abailmentwithoutanenforceablecontract....
15. LawofContract(6thEdn,1964) 73. Seealso the speechof LordColeridgeCJ inR.v
Macdonald,(1885)LR15QBD323,326andCaveJ at p.327.Foranillustrationofnon-con-
tractual bailment see Gilchrist Watt & Sanderson Pty Ltd vYorkProducts Pty Ltd,(1970)1
WLR1262(PC),wherea partywhounloadedgoodsbecamebaileefortheirsafecustody.
16.AIR1966Bom134.
17.Ibid.NaikJ at p.140.
18.AIR1967SC1885,1888:(1967) 3 SCR 938.
19.Ibidat p.im.https://t.me/LawCollegeNotes_Stuffs

818. 676 Chapter 13Bailment [S.149]
Nor is consentindispensiblefor such a relationship to arise. A finder of
goodsofanotherhasbeenheldto be abaileeincertaincircumstances."
The court alsocitedthefollowingpassagefromPollockandWright:^"
"Bailmentis arelationshipsui generis and unlessit is sought to increase or
diminishtheburdensimposedupon thebaileeby the veryact ofbailment^
it is notnecessaryto incorporate it into the law of contract and to prove a
consideration."^^
The trend set by thesecaseshasbeenaffirmedby theSupremeCourt
though withoutreferencetothem.^^Thefactsinvolveda repetition of the
RamGulam}^story,namely,theft,recoveryof theornamentsbythepolice
and their final disappearance from police custody.The State was held liable
to pay the value of theornamentstothevictimof thetheft.
WhenthePortTrustisrequiredtostoreimportedgoods,therelationship
ofbailorandbaileecomesintoexistence.UnderSection42(6)of the Major
Port Trusts Act, 1963, the Port Trust of a Major Port would be regarded
as thebaileeof thegoodscominginto itspossession.Theprovisionsof
Sections151, 152 and161of the Contract Actbecomeapplicable(duty of
careanddutytoreturn).^''
Contract,expressorimplied
The contract may be express or implied. Thus, where with the consent
of thestation-mastergoodswerestoredon arailwaycompany'splatform,
wagonsbeingnotavailable,thecompanywasheldliablewhen theywere
damagedbyfirecausedbya spark emittedbyapassingengine.^^
3. Deliveryshould be upon some purpose
Bailmentofgoodsisalwaysmadeforsomepurposeand issubjectto the
conditionthatwhenthepurposeisaccomplishedthegoodswillbereturned
to thebailorordisposedofaccordingtohismandate.^^If thepersonto
whomthegoodsaredeliveredis notboundtorestorethemtotheperson
20.PossessionintheCommonLaw, 143.
21. State of Gujarat vMemonMahomedHaji Hasan, AIR 1967SC1885,1888:(1967)3 SCR
938,943.
22.BasavvaKomDyamangoudaPatilvStateofMysore,(1977)4SCC3.58:1977SCC(Cri)598:
AIR1977SC1749.B.B.Pandeywelcomesthisdecisionin hisarticle.GovernmentLiability
fortheGoodsLostinCustody;AStepintheDirectionofReasonableAccountability,(1977)
4 SCC 13(Journalsection).
23. RamGulamvGovtofU:P., AIR 1950 All 206.
24. Port of Bombay v Sriyanesh Knitters, (1999) 7 SCC 359: AIR 1999 SC 2947.
25.GovernorGeneralof IndiainCouncilvJubileeMillsLtd,AIR1953Bom46.Where,how
ever,thegoodswereleftaftertheyweremarkedbytheloadingclerkandneitheranyrailway
receiptwasobtained,nor therailwaycompanymadeinchargeof thegoods,nobailment
arose.LachtniNarainvBombay,Baroda&CentralIndiaRlyCo,ILR(1923)45 All235;
DhanrajAgarwallav Union ofIndia,AIR 1958 Ass 5.
26.GangaramvCrown,AIR1943Nag436,nobailmentwherethethingisnotto bespecifically
accountedfor.https://t.me/LawCollegeNotes_Stuffs

819. [S. 149]
EssentialfeaturesGil
deliveringthemortodealwiththemaccordingtohisdirections,theirrela
tionshipwillnotbethat ofbailorandbailee.
TheplaintiffdeliveredtotheTreasuryOfficeratMeerutnine
Governmentpromissorynotesforcancellationandconsolidationintoa
singlenoteofRs48,000.Thedefendant'sservantsmisappropriatedthe
notes.TheplaintiffsuedtheStatetoholdthemresponsibleasbailees.^^
Buthis actionfailed.Therecan be nobailmentunlessthere is adelivery
ofgoodsandapromisetoreturn.TheGovernmentwasnotboundtoreturn
thesamenotes,norwasitboundtodisposeofthesurrenderednotesin
accordance with the plaintiff's directions.
Bailmentcomparedwith othersimilarrelations
It isthisfeatureofbailmentwhichdistinguishesit frommanyothertrans
actionsofthesamekind.Adepositofmoneywithabankerisnotabailment
asheisnot boundto return thesamenotesandcoins.^®Accordingly,a bank
wasnotallowedtoexercisetherightoflienasabaileeonmoneyheldunder
afixeddeposit.^^Anagentwhohascollectedmoneyonhisprincipal'sbehalf
isnot abaileeofthemoneyforthesamereason.^"In thewordsofShetty
JoftheSupremeCourt:^^"Oneimportantdistinguishingfeaturebetween
agencyandbailmentisthatthebaileedoesnotrepresentthebailor.He
merelyexercises,withtheleaveofthebailor(undercontractorotherwise),
certainpowerofthebailorinrespectofhisproperty.Secondly,thebailee
hasnopowertomakecontractsonbailor'sbehalf,norcanhemakethe
bailorliable,simplyasbailee,foranyactshedoes."^^Applyingthisprinci
pletothepositionofabankerwhowasholdingthegoodsonbehalfofits
account-holderforthepurposeofdeliveringthemtohiscustomersagainst
payment,thecourtheldthatthebankwasnottherebyconstitutedintoan
agentandremainedabaileeonly.
Abailmentisalsodistinguishablefromsale,exchangeorbarter.Inthese
transactionswhat istransferredis notmerepossession,butalsoownership
and,therefore,thepersonbuyingisundernoobligationtoreturn.Inasale
ofbeerbottles,oneofthetermswasthatthepriceofthebottleswouldbe
refundedonthebuyerreturningthebottles.Thetransactionwasheldtobe
a sale of the bottles and not abailment.^^But hire-purchase contract is a
27.SecyofStatevSheoSinghRai,(1875-80)2 All756.
28.IchhaDhanjivNatha,ILR(1888)13Bom338;DevendrakumarvGulabsingh,AIR1946
Nag 114: ILR 1946 Nag 210.
29.UnionBankofIndia vK.V.Venugopalan,AIR1990Ker223.
30.ShankerLaivBhuraLai,AIR1951Ajm24;Bridgesv Garrett,(1870)LR5 CP451.
31.UCOBankv Hem ChandraSarkar,(1990)3SCC389,395:AIR1990SC1329.
32.CitingFriedman'sLawof Agency,23(5thEdn).
33.KalyaniBreweriesLtdvStateofW.B.,(1997)7SCC738:AIR1998SC70,undertheW.B.
SalesTaxAct,1954;distinguishingitfromUnitedBreweriesLtdvStateofA.P.,(1997)3
SCC530:AIR1997SC1316,whererecoveryofbottleswasunderawell-laidoutsystem.Raj
SheelVStateofA.P.,(1989)3SCC262:AIR1989SC1696;StateofMaharashtravBritannia
BiscuitsCoLtd,1995Supp(2)SCC72:(1995)96STC642,deposittakenfortins,refundable
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

820. 678Chapter13Bailment
[S.150]
CASEPILOT
CASEPILOT
bailment,thoughofcourse,notmerelyabailment.Ithastwoaspects,bail
mentplusanelementofsale.^''
Postoffice, bailee
Post Office is a bailee of thearticlesof the sender.
DUTYOFBAILOR
AccordingtoSection150whichdealswiththedutyofbailor,bailorsare
of two kinds,namely;
(1)gratuitousbailor,and
(2)bailorforreward.
Apersonwholendshisarticlesorgoodswithoutanycharge,iscalleda
"gratuitousbailor".His duty is naturallymuchlessthan that of a bailorfor
hireorconsideration.
Dutyofgratuitousbailor
Speakingofthedutyofagratuitousbailor.Section150says:
S.150.Bailor'sdutyto disclose faults ingoodsbailed.—Thebailoris
bound todiscloseto thebaileefaultsinthe goodsbailed,ofwhichthebailoris
aware,andwhichmateriallyinterferewiththe useofthem,orexposethebailee
toextraordinaryrisks;andifhedoesnotmakesuchdisclosure,heisresponsible
fordamagearisingto thebaileedirectlyfromsuchfaults.
Ifthegoodsarebailedforhire,thebailorisresponsibleforsuchdamage,
whetherhewasorwasnotawareoftheexistenceofsuchfaultsinthegoods
bailed.
Illustrations
(a)lendsahorse,whichheknowsto bevicious,toB.Hedoes notdisclosethe fact that
thehorseIsvicious.Thehorserunsaway.Bisthrownandinjured.AisresponsibletoB
fordamagesustained.
ib)AhiresacarriageofB.Thecarriageisunsafe,thoughBisnotawareofIt,andAisinjured.
BIsresponsible to Afor the injury.
Aperson,forexample,wholendshiscycleorhorseto afriend,andif
heknowsthatthecycleiswithoutbrakesorthatthehorseisunsound,he
shoulddisclosethisfactandhisdutyendsthere."Wouldit not bemonstrous
onreturnoftins.Thecourtheldthatthetinswouldbedeemedtobesoldontheexpiryofthe
timeforreturn.
34.SoheldbytheSupremeCourtinanumberofcases:InstalmentSupply(P)LtdvUnionof
India,AIR1962SC53:(1962)2SCR644;K.L.Johar &CovCTO,AIR1965SC1082:
(1965)2SCR112;DamodarValleyCorpnvStateofBihar,AIR1961SC440:(1961)2SCR
522;SundaramFinanceLtdvStateofKerala,AIR1966SC1178:(1966)2SCR828;South
AustralianInsuranceCovRandell,(1869)LR3PC101,deliveryofgoodswitharightto
claimequivalentvalueinsomeothergoods.
35.CirVP.M.Rathod&Co,AIR1959SC1394:(1960)1SCR401.Thepositionofpostoffice
mreferencetoVPParticles.https://t.me/LawCollegeNotes_Stuffs

821. [S150] bailor679
toholdthatiftheownerofahorse,knowingittobeviciousandunmanage
able,shouldlendittoonewhoisignorantofitsbadqualitiesandconceal
themfromhim,andtherider,usingordinarycareandskill,isthrownfrom
itandinjured,heshouldnotberesponsible?Bythenecessarilyimpliedpur
poseoftheloanadutyiscontractedtowardstheborrowernottoconceal
fromhimthosedefectsknowntothelenderwhichmaymaketheloanperil
ousorunprofitabletohim."^^Theconditionsofhisliabilityare:
(1)Heshouldhaveknowledgeofthedefectandthebaileeshouldnotbe
aware.^''
(2)Thedefectinthegoodsmustbesuchasexposesthebaileetoextraordi
naryrisksormateriallyinterferesintheuseofthegoods.
Dutyofbailorforreward
Thedutyofabailorforconsiderationismuchgreater.Heismaking
profitfromhisprofessionand,therefore,itishisdutytoseethatthegoods
whichhedeliversarereasonablysafeforthepurposeofthebailment.Itis
nodefenceforhimtosaythathewasnotawareofthedefect.Section150
clearlysaysthat"ifthegoodsarebailedforhire,thebailorisresponsiblefor
suchdamage,whetherhewasorwasnotawareofsuchfaultsinthegoods
bailed".Hehastoexaminethegoodsandremovesuchdefectsasreasonable
examinationwouldhavedisclosed.InHyman&WifevNye&Sons:^
Theplaintiffhiredfromthedefendantforaspecificjourneyacarriage,
apairofhorsesandadriver.Duringthejourneyaboltintheunderpart
ofthecarriagebroke,thesplinterbarbecamedisplaced,thecarriagewas
upsetandtheplaintiffinjured.
HoldingthedefendantliableLindleyJsaid:"Apersonwholetsout
carriagesisnotresponsibleforalldefectsdiscoverableornot;heisnotan
insureragainstalldefects.Butheisaninsureragainstallthedefectswhich
careandskillcanguardagainst.Hisdutyistosupplyacarriageasfitfor
thepurposeforwhichitishiredascareandskillcanrenderit.Similarly
inReedvDean-?^
Theplaintiffshiredamotorlaunchfromthedefendantforaholiday
ontheriverThames.Thelaunchcaughtfire,andtheplaintiffswereuna
bletoextinguishit,thefire-fightingequipmentbeingoutoforder.They
wereinjuredandsufferedloss.
Thecourtheldthattherewasanimpliedundertakingthatthelaunch
wasasfitforthepurposeforwhichitwashiredasreasonablecareandskill
couldmakeit.Thedefendantwasaccordinglyheldliable.
36.BlakemorevBristolandExeterRlyCo,(1858)8El&Bl1035,1051:120ER385.
37.Gratuitousbailornotliablefordefectsnotknowntohim.
38".(1881)LR6QBD685.
39.(1949)1 KB 188.https://t.me/LawCollegeNotes_Stuffs

822. 680Chapter13Bailment
Whereabailordeliversgoodstoanotherforcarriageorforsomeother
purpose,andifthegoodsareofdangerousnature,thefactshouldbedis
closedtothebailee.'*"
DUTIESOFBAILEE
Thefollowingarethedutiesofeverybailee:
1.Dutyofreasonablecare[Ss.151-152]
Section151laysdow^nthisdutyinthefollowingterms:
S.151.Careto betakenbybailee.—Inallcasesofbailmentthebaileeis
boundtotakeasmuchcareofthegoodsbailedtohimasamanofordinarypru
dencewould,undersimilarcircumstancestake,ofhisowngoodsofthesame
bulk,qualityandvalueasthegoodsbailed.
Uniformstandard of care
Thesectionlaysdownauniformstandardofcarefor"allcasesofbail-
ment".«OriginallyinEnghshlaw"liabilityinbailmentwasabsoluteIt
wasnoexcuseforthebaileetosaythatthedamageorfailuretoreturnwas
duetonofaultofhisown;hewasliableinanycase".«Thus,wheregoods
weredeliveredtoabaileeforsafecustodyandhewasrobbedofthem,the
courtheldhimliable,saying,"itisadeliverywhichchargethhimtokeep
athisperil''.^Thefirstconcessionwasgiventoagratuitousbailee.Itwas
laiddowninR.vViscountHertford^^that"ifmoneybegiventooneto
keepgenerallywithoutconsiderationandifthepersonberobbedheisdis-
charpd"LordHoltinCog^svBernard''furtherreducedthescopeof
absoluteliabilitybyconfiningitonlytobailees"whoexercisedapublic
calling",namely,publiccarriersandinnkeepers.''^Subsequentlystillbya
judgmentofLordMansfieldabsoluteliabilitywasconfinedtocarriers
only.^Therestofthebaileesoweonlythedutyofreasonablecare."*^
40.LyellvGangaDai,\l.K(1875-80)1All60,goodsconsignedwithoutdisclosingthatthey
Kr749Trrn' CoVL.E.P.Transport&DepositoryLtd,(1922)I
1917PC17^ ChoudhurivRiverSteamNavigationCoLtd,AIR
41.Thusevenagratuitousorinvoluntarybaileeisboundtobringintohisdutythesameamount
otcareasisprescribedbythesection.WilsonvBrett,(1843)11M&W113
42.C.V.Davidge,Bailment,(1925)41LQR433, 436. '
43.SouthcotVBennet,1601CroEliz815:78 ER1041
44. (1681) Shower 172: 39 ER 870.
45.(1704)2 Ld Raym 909.
46.Aboutinnkeepers(hotelslodgesandguest-houses)thegeneraltrendofdecisionsisthatthey
arebaileesliableonlyiftherequisitestandardofcareisnotobserved.SeeRampalSinghv
Murray&Co,ILR(1897-1.900)22All164;beforetheContractActthereweresomedeci
sionstothecontraryeffect.SeeWhateleyvPalanji,(1866)3BHC(OC)137Butnowthe
opinionISdifferent.JanandSonvA.Cameron,ILR(1922)44All735
47 Forwardv Pittard,(1785)1 TR 27: 1 RR 142.
48.AcarrierispermittedbytheCarriersAct,1865toreducehisliabilityfromaninsurertothat
otabaileebyaspecialcontractwitheachconsignee,buthecannotexcludehisliabilityfor
negligence.IrrawaddyFlotilla&CoLtdvBugwandass,(1890-91)18lA121;ILR(1891-92)https://t.me/LawCollegeNotes_Stuffs

823. [S.151] Dutiesofbailee681
ForthepurposeofdutyofcaremodernEnglishlawdividesbaileesinto
twokindsonly,namely,gratuitousbaileeandbaileeforreward.Agratu
itousbaileeisliableforlossof, ordamageto,goodsonlyif he isguiltyof
grossnegligence."Thereisacertaindegreeofnegligencetowhicheveryone
attachesgreatblame",andthatmaybecalled"grossnegligence".''®Butthe
moderntrendistowardsasimpleprincipleofliabilityfornegligencein all
cases.^°BlountvWarOffice^^showsthistrend.
AhousebelongingtotheplaintiffwasrequisitionedbytheWarOffice.
Theplaintiffwasallowedtostorecertainarticlesinastrong-roominthe
house,whichhelocked.Ofthetroopsstationedthere,whowerenotkept
underpropercontrol,somebrokeintotheroomandstoleaquantityof
silver plates.
The War Office was held liable. Thecourtsaid:"Therewas avoluntary
bailmentofthegoodstothedefendantsinthewayofdepositandthestand
ardofcarerequiredofthemwasreasonablecarewhichamanwouldtake
ofhisownproperty.Itishardtobelievethatanyreasonableman,whohad
valuablepropertyofhisownstoredinthosecircumstances,wouldleave
it to thetendermerciesofseventyoreightydisplacedpersonsof that type
withouttakinganyprecaution.TheMinistrywasnegligent."
This trend has been furtherconfirmedby the Court of Appeal in
HoughlandvR.R.Low(LuxuryCoaches)LtdJ^
Theplaintiffwasapassengerinoneofthedefendant'scoaches.She
hadhersuitcaseputinthebootofthecoachfromwhereitwaslost.The
trialJudgefoundthatthiswastechnicallyagratuitousbailment.
Evenso it was held that the standard of care was that ofreasonable
care andwasthesamewhetherthebailmentwasgratuitousor forreward.
OrmerodLJsaid:"Thequestionthatwehavetoconsiderinacaseofthis
kind,ifitisnecessarytoconsidernegligence,iswhetherinthecircumstances
ofthisparticularcaseasufficientstandardofcarehasbeenobservedbythe
defendantsortheirservants."
Thestandardofcareexpectedof apaidbaileehasbeenexpressedin
almostsimilarterms.ThisappearsfromMartinvLondonCountyCouncil.
53
18Cal620(PC);S.93oftheRailwaysAct,1989chargestheRailwayswiththeresponsibility
ofaninsurersubjectonlytosomedefencesandvariationspermittedbytheAct.Carriersby
SeaandAirareundersimilarresponsibility.See,forfurtherdetails,AvtarSingh,Lawof
Carriage(3rdEdn,1993);ParasramvAir-IndiaLtd,1952SCCOnLineBom144;National
TobaccoCoofIndiaLtdvIndianAirlinesCorpn,AIR1961Cal383;RukmanandAjitsaria
VAirwaysIndiaLtd,AIR1960Ass71;IndianAirlinesCorpnvMadhuriChowdhuri,AIR
1965Cal252;BombaySteamNavigationCoLtdvVasudevBaburaoKamat,AIR1928Bom
5:ILR(1928)52Bom37,Carriageof Goods bySeaAct,1925.
49.ThomasGiblinvJohnFranklinMcMullen,(1869)LR2 PC317.
50.TheSupremeCourtofIndiahasalsopointedoutthatliabilityunderSs.151-152isonefor
negligenceonly.UnionofIndiavAmarSingh,AIR1960SC233:(1960)2SCR75.
51. (1953)IWLR736.
52. (1962) 1 QB 694 (CA).
53.1947KB628.https://t.me/LawCollegeNotes_Stuffs

824. 682Chapter13Bailment [S.152]
Theplaintiffwasbroughttoapaidhospitalasapatient.Onherentry,
thehospitalofficialstookchargeoftwopiecesofjewelleryandagold
cigarette-case.Theyweresubsequentlystolenby a thief whobrokeinto
the roominwhichtheywerekept.
It was heldthatthe defendants were bailees for reward and were liable
forthelossastheyhadfailedtoexercisecarewhichthenatureandquality
of the articles required.
In India,however,Section151prescribesa uniform standard of care in
allcasesofbailment,thatis,adegreeofcarewhichamanofordinary
prudencewouldtakeofhisowngoodsofthesametypeandundersimilar
circumstances.Ifthecaredevotedbythebaileefallsbelowthisstandard,he
willbeliableforlossofordamageto thegoods:
S.152.Baileewhen not liablefor loss,etc,ofthingbailed.—Thebailee,
intheabsenceofanyspecialcontract,isnotresponsiblefortheloss,destruc
tion or deterioration ofthe thing bailed, ifhe has taken theamountof care of it
describedinSection151.
No cast-ironstandardcan be laid down for the measure of care due
fromabaileeandthenatureandamountofcaremustvarywiththeposture
ofeachcase."^''Nature,qualityandbulkofthegoodsbailed,thepurpose
ofbailment,facilitiesreasonablyavailableforsafecustodyandthelike,will
betakenintoaccountfordeterminingwhetherpropercarehasbeentaken.
Thus,whereapartofthefoodgrainsstoredatabailee'sgodownweredam
agedbyfloodsunprecedentedinthehistoryoftheplace;^^whereaman
hiredawoodenshopanditwasburntbymobsduringcommunalriotsin
thecity,^®thebaileeineachcasewasheldnotliableas thelosswas dueto
eventsbeyondhiscontrol.Whereonaccountofpartitionofthecountrya
bankhadtofleealongwithmassexodusfromPakistantoIndia,thebank
washeldto be notliableforgoodsbailedto it inPakistanandwhichwere
thuslostthere.
Loss bytheft
Wherethebailor'sgoodsarestolenfromthecustodyofthebailee,hewill
beliableiftherehasbeennegligenceonhispart.Wheretheplaintiffstayed
atahotelandhisarticleswerestolenwhilehewasaway,thehotelierwas
heldliableastheroomwas,tohisknowledge,in aninsecurecondition.^^
Similarly,inanothercase,abaileekeptthebailor'sornamentslockedin a
54.ShantiLaivTaraChandMadahGopal,AIR1933All158.Astotheeffectofcircumstances
seeShwNathRaiRamDharivUnionofIndia,AIR1965SC1666.
55.UnionofIndiavUdhaRam&Sons,AIR1963SC422:(1963)2SCR702.
56. SunderLaiv RamSwarup,AIR 1952 All 205.
57.GopalSinghHiraSinghvPunjabNationalBank,AIR1976Del115;PyramidFinanceLtdv
RamknshnaIyer,2007SCCOnLineBom1227:2007CriLJ1767,baileeheldnotliablefor
destruction of goods in an accidental fine.
58. Jan and Sony A. Cameron,ILR(1922)44 All 735.https://t.me/LawCollegeNotes_Stuffs

825. [S.152] Dutiesofbailee683
safeand keptthekeyin acash-boxin thesameroom.The roomwas situ
atedon thegroundfloorand,beinglockedfromoutside,waseasilyacces
sibletoburglarsbyremovingthelatch.Theornamentshavingbeenstolen,
the bailee was heldliable.^^Where abankerwasrenderingthe service of
receivinggoodsonbehalfofitsaccount-holderandtoholdthemforthepur
poseofdeliveringthemto thecustomersoftheaccount-holderagainstpay
ment,itwasheldbytheSupremeCourtthat thepositionofthebankerwas
thatof the bailee and he was liable for theaccount-holder'slossinasmuch
as the banker did notdelivergoods to thecustomersfrom whom payment
had been received. Thecourtsaid:^""Thebanker-bailee,gratuitousor for
reward,is boundto take thesamecare of thepropertyentrustedto him as
areasonablyprudentpersonandcarefulmanmayfairlybeexpectedtotake
ofhisownpropertyofthelikedescription.Infact,apaidbaileemustusethe
greatestpossiblecareand isexpectedtoemployallprecautionsinrespect
ofthegoodsdepositedwithhim.Ifthepropertyisnotdeliveredto thetrue
owner, the banker cannot avoid his liability inconversion."
Applyingtheseprinciplesthecourtheldthat"thebankcouldnotavoid
theliabilitytoreturnthegoodsasagreeduponor topayanequivalent
amounttotheplaintiff.Evenifweassumethatthegoodsweredeliveredto
awrongperson,thebankhadtoownuptheliabilitytotheplaintiff.The
liabilityofbankerto acustomerinsuchacaseisabsoluteevenifnoneg
ligenceisproved".InHalsbury'sLawsof England itisstated:"Where
the bankdeliversthegoodsto thewrongperson,wherebytheyare lostto
theowner,theliabilityof the bank isabsolute,thoughthereis noelement
ofnegligence,aswheredeliveryisobtainedbymeansofanartfullyforged
order. In law the banker couldcontractout of this liability, but he would be
unlikelyto do so in practice.""
Burdenofproof
Theburdenof proofis on thebaileetoshowthat hewasexercisingrea
sonablecareandifhecanprovethishewillnotbeliable.Ifthebaileeplaces
beforethe courtevidenceto showthat he had takenreasonablecare to avoid
damagewhichwasreasonablyforeseeableorhadtakenallreasonablepre
cautionstoobviaterisks whichwerereasonablyapprehended,he would be
absolvedof hisliability.Thus,where the railway administration was not
59.RampalRamchandAgarwalvGourishankarHanumanPrasad,AIR1952Nag8.See
LakhajivMahadeo,AIR1938Bom101.Failuretoinsurewouldnothavemadethebailee
liablebecauseordinarilyanowneralsodoesnotinsure.Bosech& Co\Maudlestan,1906
PunjRecNo70.
60. UCO Bank v Hem Chandra Sarkar, (1990) 3 SCC 389, 396: AIR 1990 SC 1329.
61.Para94,Vol3, 4thEdn:LakshmiNarainBaijinathvSecyofStateforIndia,(1922-23)27
CWN1017,carryinggoodsin a boat withholes,obviousnegligence.
62.KuttappavStateofKerala,(1988)2KLT54.APortAuthoritywasheldliableintheabsence
ofproofthattheytookasmuchcareofthegoodslandedattheirportassatisfiedtherequire
mentofS.151.Theyneitherinformedtheconsigneeofthearrivalofthegoodsnormade
anyseriousefforttofindoutwhathadhappenedtothegoods.ChittagongPortAuthorityhttps://t.me/LawCollegeNotes_Stuffs

826. 684 Chapter13Bailment [S.152]
ableto explain how thebargecarrying theplaintiff'sgoodssank and was
lost,negligencewaspresumedmakingtherailwayliable."Whereajewel
leryboxwithdeclaredcontentswashandedover to abankundertheclause
whichprovided,"Thearticlesinsafecustodywillbekeptin thestrong
roomunderjointcustodyof themanageror anofficerdulyauthorisedby
the Head Office and the cashier", it was heldthatthebankwas liable to
account for the missing articles ofjewelleryand became liable because it
failedtogiveanysufficientexplanationfortheloss.Thedepositorhaving
diedtherecoverywassoughtbylegalheirsthroughopendeliveryincourt.
Wherethe bank tookoverpossessionof thehypothecatedtruckbecauseof
theborrower'sdefaultinrepaymentandneitherdisposedit ofinaccordance
with thetermsof theagreementnor tookpropercareof itleavingit in an
openplace, theextenttowhichthetrucksufferedloss of valuebecauseof
the passage of time, theloanamounthad to be reduced tothatextent."
Wheretheplaintiff'scarwaslostinafireoccurringin agaragewhereitwas
deliveredforrepairsand thebaileesdid not lead anyevidencetoshowas
to how the incidenttook place, theSupremeCourt held thebaileesliable."
Wherethegoodswereremovedbythecarrier'sdriverandattendant,it was
heldthat theonuswason thecarriers,asbailee,toprovethat thelosswas
not caused by any fault of his or his agents. In the case before the court the
carrierhadfailedtodischargetheonusofproofand assuchthe court found
VMohd.Ishaque,(1983)35DLR(AD)364(BangladeshSC).MilapCarriersv National
InsuranceCoLtd,AIR1994AP24,lossduetocircumstancesbeyondcontrolofcarrier,there
wasalsospecialcontractexemptingcertainrisks,theinsurerwhohadtopaytheclaimwas
notallowedtorecoverindemnityfromthecarrier.Hunt&Winterbotham(WestofEngland)
LtdVB.R.S.(Parcels)Ltd,(1962)1QB617:(1962)2WLR172,thereisthefollowingstate
mentin thiscase;If anownerofgoodsleavesthemwithanotherperson,whoundertakesto
mendthemforreward,andthenfailstoproducethemwhentheyarewanted,it isareasonable
inference,in theabsenceofanyexplanation,that hewasnegligent.
63.UnionofIndiavSugauliSugarWorks(P)Ltd,(1976)3SCC32.SeealsoOrientPaperMills
Ltd VUnionofIndia,AIR1984Ori156forresponsibilityofrailwaysasbaileesand the
questionofburdenofproof.Loadingwasdonein theprivatesidingof theplaintiffand so
burdenuponhimtoprovethefactofloading;CochinPortTrustvAssociatedCottonTraders,
AIR1983Ker154,PortTrustnotabletoexplainhowfirecommencedanddestroyedbailor's
goods,held,presumptionofnegligence.SBIvQualityBreadFactory,AIR1983P&H244,
goodslostfromhypothecatedgodownonaccountofthenegligenceofbankofficials,held,
borrower'sliabilityreducedto thatextent.Raman& CovUnionofIndia,AIR1985Bora
37,sincetheliabilityof theRailwaysisthat ofbaileeunderSs.151—152,burdenwason them
toshowhowlossoccurredandthatitoccurredafterthefirst7daysafterthecompletionof
thetransit;M.VeerabhadraRaovUnionofIndia,(1985)1ATC207(AP),goodslostafter
sevendays,theplaintiffcametoreceivethegoodsfourmonthsaftertheirarrival,noliability.
Wilkinsonv.Shields,ILR(1887)9All398,horsedyinginthebailee'scustody,burdenonhim
toaccountforcircumstances.TrusteesofHarbour,MadrasvBest& Co,ILR(1899)22 Mad
524, goods lost fromsafe-custody,accountability.
64. ]agdish Chandra Trikha v Punjab National Bank, AIR 1998 Del 266. The suitfiledwithin
threeyearsafterobtaininglettersofadministrationwasheldtobewithintime.Recoveryof
thevalueof themissingarticleswasallowedat themarketpriceon the dateof the suit with
12 percentsimpleinterest.
65. CentralBankofIndia vAbdulMujeebKhan,1997AIHC299(MP).
66. N.R. Srinivasa Iyer v New India Assurance Co Ltd, (1983) 3 SCC 458: AIR 1983 SC 899.https://t.me/LawCollegeNotes_Stuffs

827. [S. 152] Dutiesofbailee685
as a fact that the carrier wasnegHgentinappointinga particulardriverin
thecircumstances.^^Asagainstit,wherecertainengravingplatesweregra
tuitously left with a bailee and they were lost and though he was not able
to account for the manner of loss, he proved that the plates were kept in a
proper placeunder the care of proper persons and in a proper arrangement.
He wasaccordinglyheldnotliable.
Loss due toactofbailee'sservant
Where the loss has been due to the act of the bailee's servant, he would be
liable if the servant's act is within the scope of hisemployment.Explaining
the principle in Cheshire vBailey^^CollinsMRsaid: "The bailee isbound
to bring reasonable care to the execution of everypartof the duty accepted.
He may performthatduty by servant or personally, and if heemploysserv
ants he is as much responsible for all acts done by them within the scope of
theiremployment."
Thusin,SandersonvCollins-7°
The defendant sent his carriage to theplaintifffor repairs and thelatter
lent his own carriage to the defendant while the repairs were going on.
The defendant'scoachman,withouthis knowledge,tookaway the car
riage for hisownpurposeanddamagedit.
Thedefendantwasheldnotliableasthecoachmanatthetimewhen
theinjurywas done to thecarriagewasnotactingwithinthecourseof his
ernployment."Ifaburglarbroke into the coach house andtookaway the
carriageand causeddamageto it andbroughtit back, noliabilitywould
attachtothebailee.Theactoftheservantwasnotdifferent."^^
Where,ontheotherhand,thebailee'sdriverleftthevehicleinwhichhe
wascarryingtheplaintiff'sgoodsunattendedandhalfthe goods were sto
len, the bailee was held liable. Thecourtalso rejected theargumentthatthe
bailee hadcontractedwithaforwardingagentandnotwiththeplaintiffs,
as the baileeknewthatthe goods belonged to theplaintiff.^^The sameresult
followed where the goods were stolen by the driver andattendantof the
carrier'smotorlorry.^^
Whenthe goods have been stolen from the bailee's custody, heshould
takereasonablestepstorecoverthem.
67.RothmansofPallMallv Neo Kim, (1989) 1CurrLJ 59 (Kuala Lumpur).
68.BullenvSwanElectricGravingCo, (1907) 23TLR258 (CA).
69.(1905)1 KB237(CA).
70. (1904) 1 KB 628 (CA).BilaspurCentralCoop BankLtdvStateofM.P.,AIR 1959 MP 77.
71. Cheshire v Bailey,(1905)1 KB 237(CA)';ThomasGiblin vJohnFranklinMcMullen,(1869)
LR 2 PC 317;SearlevLaverick,(1874) LR 9 QB122,damagecausedbycollapseof aroof
owing to high winds, bailee not liable. SouthEasternCarriers (P) Ltd vMohdSarvar, 1996
AIHC2988 (AP), the driver of thelorryalong with his employer held liable forshortdelivery
forwhichthedriverwasresponsible.
72. LeeCooperLtdvC.H.Jeakins& Sons Ltd, (1967) 2 QB 1: (1965) 3WLR753.
73.RothmansofPallMallv Neo Kim, (1989) 1CurrLJ 59 (Kuala Lumpur)..https://t.me/LawCollegeNotes_Stuffs

828. 686Chapter13 Bailment [S.152]
A farmer accepted certain cattle for adjustment. Some of them were
stolenwithouthisdefault,but he made no effortswhetherbyinforming
the owner or the police to recoverthem/''
He was held liable.Heshouldhave usedreasonablediligencetorecover
them and he could discharge himself only by showingthatsuch diligence
wouldhave beenunavailing.
Bailee's owngoodslost with thoseofbailor
Where the bailee's own goods are lost alongwiththose of the bailor, the
bailee wouldnaturallycontendthathe wastakingas much care of the bail
or's goods as he did of hisown.^^But this would not be the deciding factor.
The factthatthe bailee is generally negligent with his own goods is no jus
tification for his negligencetowardsthe bailor'sgoods,^^unless the bailor is
aware of his habitsand,therefore,knewwhattoexpect.Even in such cases
theproperinquiryiswhetherreasonable care has been taken.Thus,where a
generalmerchantgoing to consign his parcel forexport,took, out of volun
tarycourtesy, his friend's parcel for similarconsignmentand enteredboth
the parcelsunderawrongheading,and,consequently,bothwere seizedand
lost. He was heldnotliable as he had in good faithtakenequalcare ofboth
theparcels.^^
MisdeliverybyRailway
Goodswere delivered to anunauthorisedpersononproductionof an
indemnitybondwhichturnedout to be bogus.Railwayadministrationwas
notable to showwhatwas the date ofarrivalof goods and oftermination
oftransitfor thepurposeofshowingthatneithertheconsignornor the con
signeehadclaimedthe goodswithina week oftheirarrival.Thustherewas
nothingtoexoneratetherailwayadministrationof itsliability.^^
Goodscarriedatowner'srisk
Thegoodscarriedbyaroadcarrierwereinsuredandwerealsobeing
carriedat"owner'srisk". They were damaged by rash and negligent driving
causing accident. It was heldthat"owner'srisk"cannotprotectacarrier
from the consequences of his own negligence or negligence of his agents.
74.Goldmanv Hill, (1919) 1 KB 443 (CA).
75.CalcuttaCreditCorpnvPrincePeter, AIR1964Cal374.
76.Lakshmidasv Megh Raj, 1900 Punj Rec No 90, p. 371.
77. SheillsVBlackburne,(1789) 1HBL158.
78.P.M.STraders v Jaitex Lungi Co, AIR 2007 NOC 1564 (Mad), S. 77(2) of the Railways
Act, 1890. UnionofIndiavHalasidharnthSahakariSakharKarkhanaLtd, AIR 2011 Gau
78, original railway receipt was lying with the bank, railways requested not to deliver the
consignmentexcept onproductionof theoriginalR/Rorindemnitybond,liabilityincurred
to the consignor for loss of the consignment because delivery happened to be madewithout
complyingwiththerequest.https://t.me/LawCollegeNotes_Stuffs

829. [S. 152] Dutiesofbailee687
"Owner's risk" cannot be regarded as alicenceor liberty clause from the
duty ofreasonablecare/'
Involuntarybailee
"A person who has come into possession of a chattel through no act of
his own and without his consent" is called an involuntarybailee.An early
illustrationistobefoundinthefactsofHowardvHarris:^"
The author of aplay,without being asked, sent his manuscript to a
theatreoperator,who lost it.
The court held"thatno duty of any kind was cast on the defendant by
receipt of something he had not asked for". Subsequentdecisions,how
ever,do not support this view of the situation. And this is amply shown by
NewmanvBourne&Hollingsworth.^^
The plaintiff went to the defendant's shop to buy a coat. Shewas wear
ingacoatfastenedwithadiamondbrooch,and shetookthecoatoff,and
put it on a glass case with the brooch by the side of it.Whenleaving she
forgot the brooch and it was handed by an assistant to the shopwalker
who put it in his desk, from where it was lost.
Thedefendantwas held liable."Hehad not exercisedthatdegree of care
which was due from one who had found an article and had assumedposses
sion of it. The degree ofnegligencemust be measured by the apparent value
ofthearticle."
But if aninvoluntarybailee,withoutnegligence, doessomethingwhich
results in the loss of theproperty,he willnotbe liable forconversion.This
hasbeenlaiddowninElvin&PowellLtdvPlummerRaddisLtd.^^
Amancame to theplaintiff'swarehouse,andorderedto buy£350
worthof coats. He said hewantedthem to be sent to the Brighton Branch
ofP&ELtd, which was done. Subsequently he sent a telegram toP8cE
saying:"Goodssent to yourbranchby error. Sending van to collect." The
defendants,believing in good faith in theerrortheory, allowed him to
havethegoods.
Theplaintiff'sactionagainstthemforconversionfailed.
Contracttothecontrary
It is stilldebatablewhetherabaileecancontracthimselfoutoftheduty
prescribedby Section 151, orwhetheracontractofbailmentcanexempt
the bailee from hisliabilityfor negligence? Theargumentis built chiefly on
79.SirmourTruckOperatorsUnionvNationalInsuranceCoLtd,AIR 2011NOC389 (HP).
80. (1884) 1C&E253, any suchreportbeing not available, the facts have been collected from
ChittyonContracts(22ndEdn,1961),Vol2,161.
81.(1951)31TLR209.
82. (1933) 50TLR158. See H.W.Burnett,ConversionbyInvoluntaryBailee, (1960) 75LQR
364.https://t.me/LawCollegeNotes_Stuffs

830. 688Chapter13 Bailment [S.152]
the ground thatSection152 opens with the remark; "in theabsenceof any
special contract". This may show that thelegislativeintent was to permit
him to reduce the scope of his liability. Judicialthinkingon this line is in
evidencein a Punjab andHaryanadecision." The court saidthatthe words
"in the absenceof specialcontract" as used in Section152 show that a bailee
can contract himselfout of the obligation under Section151.The court cited
thefollowingobservation from a Bombaydecision:"This court in Bombay
Steam Navigation Co Ltd v VasudevBaburaoKamaf^heldthatit was open
to a bailee tocontracthimselfout of theobligationimposedbySection151.
TheActdoes not expressly prohibit contracting out of Section 151 and it
could be a startling thing to say that persons sui juris are not at liberty to
enter into such acontractofbailmentas they maythinkfit.Contractsof
bailment are very common although they are not always called by their
technicalname. There is no reason why a man should not be atUbertyto
agreeto keep property belongingto a friend on the terms that suchproperty
is to be entirely at the risk of the consumer and that the man who keeps it
is to be under no liability for the negligence of his servants in failing to look
afterit."
It issubmittedwithrespectthatthis seems to be anunnaturalreading
of the two sections. Section 151 prescribes theminimumstandardof care
expected of a bailee and Section 152 has the effect of saying that unless the
standardof care isenhancedby specialcontract,the bailee will be liable
only when he fails to observe therequirementof Section 151. The words
in Section 152 "in the absence of any specialcontract"wouldpermitthe
standardof duty to be revised upwards and not to be diluted. Apart from
this, it has always been heldthatit isunfairandunreasonablefor anyperson
to say that he would not be liable fornegligence.No one can get a licence
to be negligent. Thus in a Gujarat case bales of cloth were lost from bank
custody undercircumstancesshowing negligence. Thebankerwas held lia
ble irrespective of a clause which absolved him of allliability.®^The clause
in question wasthatthebankwill be absolved from all liability forshortage
of goods by way of pilferage,stealthor removal from thegodownin any
manner.Even this couldnotprotectthebankbecause it wasagainstthe
meaning and intent of theminimumstandardprescribedby Section 151.
The Kerala HighCourtalsoadoptedthis line ofreasoning.^®Thecourtheld;
"Wherethe goods areentrustedwith the Port Trust, their duty iscertainly
83.SBlVQualityBreadFactory,AIR 1983P&H244.
84.AIR1928Bora5:ILR(1928)52Bom37.
85.MahendraKumarChandulalvC.B.L,AIR1984Guj(NOC)53: (1984) 1GujLR237. See
furtherChittagongPortAuthorityvMohdIshaque,(1983) 35DLR(AD)364,wherethe
ChittagongPortAct wasunderconsiderationandthatAct haddroppedthewords"inthe
specialcontract"andretainedonly the rest of thecontentsof S.152.It was heldthatthe
goods delivered by a ship to theportconstitutestheportinto a bailee of the consignee; Sheikh
MahamedvBritishIndianSteamNavigationCo, (1908) 32Mad95;RaipurTransportCo v
Ghanshyam,AIR 1956Nag145.
86.UnitedIndiaInsuranceCoLtdvPooppallyCoirMills,(1994) 2KerLT 473.https://t.me/LawCollegeNotes_Stuffs

831. [S. 152] Dutiesofbailee689
in the nature of abailee'sduty and they areexpectedto takereasonable
care.[They]cannot claim a total exemption from thestandardof care to be
taken by abaileeby taking recourse to theprovisioncontained in Section
121 of the Major Ports Trust Act, 1963 (protection from liability for acts
done in good faith). A Division Bench of thiscourthadoccasiontoconsider
inCochinPortTrustvAssociatedCottonTradersLtd^'^thenatureofthe
duty of the Cochin Port Trust towards the owner of the goods. In this case
also thegoodsweredestroyedin afirewhich broke out in the godown of
the Port Trust. The court heldthat the Port Trust which is in the position of
abaileehas a duty to take all propermeasuresfor protectionof thegoods.
Whengoodsentrusted to abaileeare lost ordamaged,there is initial pre
sumption ofnegligence(failureto take care) on thepartof the bailee. Onus
of proof is on thebaileeto show that he had takennecessaryprecautions
and carerequiredunderlaw.Thebaileealonewillbein apositionto explain
the cause of fire. It is a fact specially within his knowledge and, therefore,
underSection106 of theEvidenceAct, 1872, the burden ofprovingthat fact
will beuponhim."^^
DeliveryofgoodstoRailwaysfor purpose ofcarriageis under aspecial
contractbecause, in addition to it being anordinarycontractof bailment,
theprovisionsof theRailwaysAct^^alsoapply.TheBombayHigh Court
faceda problem on this point in acase'"involvingconsignmentof certain
balesofclothto becarriedin brakevanandonarrivalatthedestinationone
of thebalesbeingtampered with resultingin shortdeliveryto the extent of
33 kg. The Railwaysescapedliability becausethe valueof the goods was not
declared as required by the relevant section of the RailwaysAct.^^
As ordinarybaileesRailwaystoo are bound by the duty imposed by
Section151. TheRailwayswere held liable where, instead ofkeepingthe
goods in their own godown, they left them at the jetty of a port and they
weredestroyedbyfire.'^Liabilitycame torailwayswhen the goods they
werecarryingin awagonweredamageddue topercolationofrainwater
into thewagon.^^
Acontractofbailmentprovidedthatthe bailee would not be liable for
loss or damage due to causes beyond his control. It was heldthatthis would
87.1983KerLT562.
88. See also R.S. Deboo vM.V.Hindlekar, AIR 1995 Bom 68, laundry receipt carried printed
term of liability up to 20 per cent of charges or half the value of the garment, whichever was
less, held, unreasonable. Thecourtsaid that liability under S. 151 could not be diluted.
89. No 1 of 1890, S. 77-B(l) in this case. Now S. 93 of the new Railways Act of 1989.
90.JugalkishorePannalalDarakv Union of India, AIR 1988 Bom 377.
91. S. 77-B(l) of the old Railways Act. The new Act of 1989 does not carry any list of articles of
special value.
92. Union of India vHafizBashir,1987 Supp SCC 174. The liability of a carrier is regulated by
the Carriers Act, 1865 and that of the Railways by the Railways Act, 1989. There are similar
provisions in these Acts and, therefore,barringa few exceptions stated therein, the liability is
absolute, see ShahJugaldasAmritlal v Shah Hiralal Talakchand, AIR 1986 Guj 88.
93. Union of India v Hari Shanker Gauri Shanker, 2005 All LJ 2200(All),S. 77 of the Railways
Act,1890.https://t.me/LawCollegeNotes_Stuffs

832. 690 Chapter 13Bailment [Ss.1548c153]
notincludeshortagein theweightof thegoods.''*The court said that the
words"anyothercausewhatsoever"wouldalsonotcovershortageofwhich
no cause is shown. The bank officers were negligent intakingcount and
weightof thehandlesand cottonstrips.Suchirresponsibilitycould not be
described as a cause. The word "cause" had to beinterpretedasothercauses
akintothosementionedintheclause.
2. Duty not to make unauthorised use[S.154]
S.154.Liabilityofbaileemakingunauthoriseduse ofgoodsbailed.—If
the bailee makesany use of the goods bailedwhich isnot according to the con
ditionsofthebailment,he is liable to makecompensationtothebailor for any
damagearising tothegoods from or during such use of them.
Illustrations
(a)/Alends a horse to Sfor hisown ridingonly.SallowsC,a member of hisfamily,to ridethe
horse, Crides with care, but the horse accidentally fallsand is injured. Bis liable to make
compensationto Afortheinjurydonetothehorse.
(fa)A hires a horse in Calcutta from Bexpressly to march to Benares.A rides with due care,
but marches to Cuttackinstead.The horseaccidentallyfalls and is injured. A Is liable to
makecompensationtofifortheinjury tothehorse.
Goods must be used by the bailee strictly for the purpose for which they
havebeen bailed to him. Any unauthorised use of the goods would make the
baileeabsolutelyliable for any loss of or damage to the goods. Even an act
ofGodorinevitableaccidentwouldbe no defence. Ahorselent forriding
should not be used for any other purpose and if it is used outside the scope
of the bailment, the bailee would be liable for any damage to the horse how
soeverhappening.Apart from this, the bailor may terminate the contract at
once and insist on the goods being returned to him. This is so provided in
Section153.
Where a vehicle was delivered to aworkshopforrepairand the owner of
the workshopallowedanunlicensedemployeeto drive thevehicleand he
caused an accident resulting in the death of aperson,it was heldthatthe
bailee was liable to compensate the deceased as also the owner of thevehicle
becauseit was anunauthoriseduse of the vehicleandtheliabilitywas abso
lute. The insurer was also liable to pay compensation to the deceased and
recoverindemnityfrom the vehicleowner.'^
S. 153.Terminationofbailmentbybailee'sactinconsistentwithcon
ditions.—Acontractofbailmentisavoidableattheoptionofthebailor, ifthe
bailee does any act with regard tothegoods bailed, inconsistent withthecon
ditionsofthebailment.
Illustration
A lets to B,for hire, ahorsefor his own riding. Bdrivesthehorsein hiscarriage.This is, at
theoptionof A,aterminationofthebailment.
94.BalwantlalChhabildasMeljtavStateBankofSaurashtra,(1998) 4 GCD3112.
95.AliasvEM.Patil,AIR2004Ker214.https://t.me/LawCollegeNotes_Stuffs

833. [Ss.155-157,160] Dutiesofbailee691
3.Dutynottomix[Ss.155-157]
The bailee shouldmaintaintheseparateidentityof the bailor's goods.
Heshouldnotmixhisowngoodswiththose of thebailorandwithouthis
consent.If thegoodsaremixedwiththeconsentofthebailor,bothwill
have aproportionateinterest in themixturethus produced.[S.155] If the
mixtureis madewithoutbailor's consent, and if the goods can beseparated,
or divided, the bailee isboundto bear the expenses ofseparationas well as
anydamagearisingfrom themixture.[S. 156] But if themixtureis beyond
separation,the bailee mustcompensatethebailorfor his loss. Sections 155
to157runasfollows:
S.155.Effectofmixture,withbailor'sconsent,ofhisgoodswithbail
ee's.—Ifthebailee,withtheconsentofthebailor, mixesthegoodsofthebailor
with hisowngoods,thebailorandthebaileeshallhaveaninterest,inpropor
tiontotheirrespectiveshares,inthemixturethusproduced.
S.156.Effectofmixture,withoutbailor'sconsentwhenthegoods
canbeseparated.—Ifthebailee,withouttheconsentofthebailor, mixesthe
goodsofthebailor with hisowngoods,andthegoodscanbeseparatedor
divided,thepropertyinthegoodsremainsinthepartiesrespectively;butthe
baileeisboundtobeartheexpenseofseparationor division,andanydamage
arisingfromthemixture.
Illustration
A bailsTOObalesofcottonmarkedwith aparticularmarktoB.BwithoutA'sconsent,
mixesthe100bales withotherbalesof his own,bearingadifferentmark; A isentitledto
have his 100balesreturned,andB isboundtobearalltheexpensesincurredinthesepara
tion ofthebales, and anyotherincidentaldamage.
S. 157.Effectofmixture,withoutbailor'sconsent,whenthegoodscan
notbeseparated.—Ifthebailee,withouttheconsentofthebailor, mixesthe
goodsofthebailor with his owngoods,in such amannerthatit is impossible
toseparatethegoodsbailed fromtheothergoods,and deliverthemback,the
bailor isentitledto becompensatedbythebailee fortheloss ofthegoods.
Illustration
A bails a barrel of Cape flour worth Rs45 toB.B,without/4'sconsent,mixestheflour with
countryflour of his own, worth onlyRs25a barrel.6mustcompensateAfortheloss of his
flour.
4.Dutytoreturn[Ss.160-161]
Section 160 provides for the duty toreturn.
S.160.Returnofgoodsbailed,onexpirationoftimeoraccomplish
mentofpurpose.— it isthedutyofthebailee to return, or deliveraccordingto
thebailor'sdirections,thegoodsbailed,withoutdemand,assoonasthetime
for whichtheywere bailed has expired, orthepurposefor which they were
bailedhasbeenaccomplished.https://t.me/LawCollegeNotes_Stuffs

834. 692Chapter13Bailment [S. 161]
S. 161.Bailee'sresponsibilitywhengoodsarenotdulyreturned.—If,
bythedefaultofthebailee,thegoodsare notreturned,delivered ortendered
atthepropertime, he isresponsibletothebailor for any loss,destructionor
deteriorationofthegoodsfromthattime.
When thepurposeof bailment is accomplished or the time for which the
goods were bailed hasexpired,the bailee shouldreturnthe goods to the
bailorwithoutdemand.^^If he fails to do so, he will keepthegoodsat his
risk and will beresponsiblefor any loss of ordamageto the goodsarising
howsoever.Forexample,inShaw&CovSymmons&Sons:^^
Theplaintiffentrustedbooks to thedefendant,abookbinder,to be
bound,thelatterpromisingtoreturnthemwithinareasonabletime.The
plaintiffhavingrequiredthedefendantto deliver the whole of thebooks
thenbound,thedefendantfailedtodeliverthemwithinareasonabletime
andthey weresubsequentlyburntin anaccidentalfire on hispremises.
Thedefendantwas held liable indamagesfor the loss of thebooks.When
the losstakesplace while the bailee'swrongfulact is inoperation,thereis
noquestionof any defence like"actofGod"or"inevitableaccident"being
set up. He is liable in anycase.'®
Similarly, where apawneerefused toreturnthe goods evenafterthe ten
der of the debt by thepawner,and the goods, having beensubsequently
stolen,he washeldliable.'®
Terminationofgratuitousbailment
Wherethelendingof the goods isgratuitous,thebailormay at any time
requirereturnof the goods eventhoughhe lentthemfor a specified time
orpurpose.But if the bailee hasactedon thefaithof theloanmadefor a
specified time orpurposein suchmannerthatif the goods aredemanded
back before the agreed time, the bailee's losswouldbegreaterthanthe ben
efits derived, thebailormust,if he compels thereturn,indemnifythe bailee
CASEPILOT
96. He can be sued for detinue.DhianSinghSobhaSinghv UnionofIndia,AIR 1958 SC 274:
1958 SCR 781;BhatindaChemicalsLtdv M V "X PressNuptse",AIR2006Bom 311, no
privity ofcontractbetween theclaimantand the person who was alleged to have defaulted in
returningthegoods.
97.(1917)1 KB799.
98. But seePrakashRoadLines(P)LtdvOrientalFireandGeneralInsuranceCo, (1988) 1 TAG
263: (1988) 1KantLJ 118,failuretoperformtheobligationof a baileemakesthe baileeliable
except when the loss is due to act of God or forcemajeure.Where the goods are not fit for the
purposesofbailment,the bailee has only toinformthe bailor and notactuallytoreturnthem.
IsuffalliVIbrahim,1920SGGOnlineBom 93: AIR 1921 Bom 191 (1).
99.RampalRamchandAgarwalvGourishankarHanumanPrasad,AIR 1952 Nag 8. See also
DhianSinghSobhaSingh vUnionofIndia,AIR 1958 SG274:1958 SGR 781.Failureto
accountfor thegoodsamountstofailureto deliverand,therefore,attractstheabsolutelia
bility of the section.ChittagongPortAuthorityvMohd.Ishaque,(1983) 35 DLR (AD) 364
(BangladeshSG).DineshV. Pai vNavalAcademy,Kochi, AIR2003Ker280,excavatortaken
on hire for site work. There could be nojustificationfor notreturningthe machine to the
owner.https://t.me/LawCollegeNotes_Stuffs

835. [Ss.159,162, 165-166] Duties of bailee 693
fortheamountinwhichthelossoccasionedexceedsthebenefitsderived.
Section159isasfollows:
S.159.Restoration ofgoodslentgratuitously.—Thelenderofathingfor
use mayat anytimerequireits return,iftheloanwasgratuitous,even though
he lent itfor aspecifiedtime or purpose.But,if,on the faith of such loan made
for a specified time or purpose, the borrower has acted in such a mannerthat
the return of the thing lent before the time agreed upon would cause him loss
exceedingthe benefitactuallyderivedbyhimfromtheloan,the lendermust,if
he compelsthe return,indemnifythe borrowerforthe amount inwhichtheloss
sooccasionedexceedsthebenefitsoderived.
Agratuitousbailmentis alsoterminatedbythe death eitherof the bailor
or ofthebailee.Section162is asfollows:
S. 162.Terminationofgratuitousbailmentbydeath.—Agratuitous
bailment isterminated bythe death either of the bailoror of the bailee.
Bailmentby jointowners[S.165]
S. 165. Bailment by severaljointowners.—Ifseveraljoint owners of
goodsbailthem the baileemaydeliverthem backto, oraccordingto the direc
tions of,one joint ownerwithout the consent ofall,inthe absence of anyagree
menttothecontrary.
5.Dutynot to set up "justertii"
A bailee is not entitled to set up, as against the bailor's demand, the
defenceoijustertii,that istosay,that thegoodsbelongto a thirdperson.^™
Thebaileeisestoppedfromdenyingthe right of the bailorto bail thegoods
and toreceivethemback.^"^Where the goods werereturnedto the ware
housekeeperwhohadpledgedthemwithouttheauthorityoftheownerand
thepledgeedid not knowthisfact,thepledgeewasheldto be notliableto
the trueowner.^"^Evenif thereis a personwho has a better title to the goods
thanthatof the bailor or who claims ownership of the goods, the bailee may
safelyreturn thegoodsto the bailor and he will not beliableto the owner
forconversion.
S.166.Baileenotresponsibleonre-deliverytobailorwithouttitle.—If
thebailorhas notitleto the goods,and thebailee,ingoodfaith,deliversthem
backto, or accordingto the directionsofthebailor,the baileeisnot responsible
totheownerinrespectof such delivery.
100. This is calledtheestoppelofbailee.He can return the goodsto the person bailingthemeven
againstthedemandsof the trueownerunlessheisunderlegalpressure.RogersSons& Co
VLambert& Co, (1891) 1 QB 318, 325 (CA).
101. S. 117 of the IndianEvidenceAct (Act 1 of 1872).Where the goods have been seized by the
Government,liabilityunderthis sectiondoesnot arise.JuggilalKamlapat Oil Millsv Union
ofIndia,(1976) 1 SCC 893: AIR 1976 SC 227.
102. Bank ofBombayv NandlalThackerseydass,ILR(1912-13)40lA1:ILR(1913)37Bom
122.https://t.me/LawCollegeNotes_Stuffs

836. 694 Chapter 13 Bailment [S.167]
Butthe person whoclaimstheownershipmayapplyto the court to pre
vent the baileefrom returning the goods to the bailor and to havethe ques
tionoftitledecided.^"^
S.167.Right ofthirdpersonclaiminggoodsbailed.—Ifa person,other
than thebailor,claimsgoods bailed,he mayapplyto the Courtto stop the deliv
ery of the goods to thebailor,and to decide the title to the goods.
Further,if thebaileehasalreadydeliveredthegoodsto the personhaving
a bettertitle,andyetthebailorsueshim,hemayprovethat suchpersonhad
a better right toreceivethe goods as against thebailor.^"'*In a case before
the SupremeCourt:^"^
Oil wasconsignedwith theRailwaysfrom Kanpur to Calcutta. It
reachedCalcuttaintact. Thesender,however,instructedtheRailways
to bring it back to Kanpur. Before the formalities for the same could be
compliedwith, the oil was seized by a food inspector, who found it adul
terated and had itdestroyedunder the order of the High Court.
Holdingthe Railways not liable, thecourtsaidthata bailee is excused
fromreturningthesubject-matterof thebailmentto the bailor where it was
taken away from him by an authority of law.
Wheregoodshavebeenbailedbyseveraljointowners,thebaileemay
deliverthem back to one joint owner without theconsentof all, in the
absence of any agreement to the contrary.[S.165]
Transferofshippingdocuments
Wherethebilloflading,underwhichdeliveryof thecargowaseffected
to thecarrier,wastransferredbytheshipper,itwasheldthat therighttofile
a suit under thecontractof carriage became transferred to the bank when
itbecametheholderof thebillofladingunderatransferby theshipper.
Evenif thetransferwasbytheprincipalto itsagent,theprincipalcouldnot
claim the right to sue. Butevenso the original contract of bailment would
continueto exist subject only to the rightscreatedunderthetransferand
subjectalso to the terms andconditionsof the billoflading.To that extent
theoriginalshippercouldsuethecarriersfor theirfailuretodelivergoods
to thepartyentitledtothemat thedestination.^"^
6.Dutytoreturnincrease[S. 163]
In theabsenceof anyagreementto the contrary, the bailee is bound to
returnto thebailornaturalincreasesorprofitsaccruingto thegoodsduring
103. Rogers Sons & Co vLambert& Co,(1891)1 QB 318 (CA).
104. Explanation(2)to S. 117 of the Indian EvidenceAct, 1872.
105.JuggilalKamlapatOil Mills v Union ofIndia,(1976) 1 SCC 893: AIR 1976 SC 227.
106.EastWest Corpn vDKBSAP 1912 A/S, 2003 QB 1509 (CA).https://t.me/LawCollegeNotes_Stuffs

837. [Ss.163,168-169] Finder695
theperiodofbailment.Thisis soprovidedinSection163,whichis as
follows:
S. 163. Bailorentitledtoincreaseorprofitfromgoodsbailed.—Inthe
absenceofanycontractto thecontrary,thebaileeisbound todeliverto the
bailor,oraccordingtohisdirections,anyincreaseorprofitwhichmayhave
accruedfromthegoodsbailed.
Illustration
Aleavesacowinthecustodyof6 to betakencareof.Thecowhasacalf.Bisboundto
deliverthecajfas well asthecow to A.
Wheresharesandsecuritieswerepledgedwith a bank and the bank
received bonus shares and dividends andinterestin respect thereof, it was
heldthat thebankcouldnotbecompelledtohandoversuchincrementunless
thepledgedsecuritieswereredeemed.^"®
FINDER[SS.168-169]
S. 168.Rightof finder of goods:Maysue forspecificreward
offered.—The finderofgoods has no rightto sue the ownerforcompensation
fortroubleandexpensevoluntarilyincurredbyhimtopreservethe goodsand
tofindout theowner;but hemayretainthe goods againstthe owneruntilhe
receivessuchcompensation;andwheretheownerhasofferedaspecificreward
forthereturnofgoodslost,thefindermaysueforsuchreward,andmayretain
thegoodsuntil he receives it.
S. 169. When finder ofthingcommonly on sale may sellit.—Whena
thingwhichiscommonlythesubjectofsaleislost,iftheownercannotwith
reasonablediligencebefound,orifherefuses,upondemand,topaythelawful
chargesofthefinder,the findermaysellit—
(1)whenthethingisindangerofperishingoroflosingthegreaterpartof
itsvalue,or
(2)whenthelawfulchargesofthefinder,inrespectofthethingfound,
amounttotwo-thirdsofitsvalue.
Findersarebailees
Afinderofgoodsisabaileethereofandassuchboundbythedutyof
reasonablecare."^He does not have the right to sue the owner for compen
sationfortroubleandexpensevoluntarilyincurredbyhimtopreservethe
goodsandtofindouttheowner.[S.168]EarlyEnglishcasesdisallowednot
onlyanycompensation,butalsorighttolienforexpenses.Thuswhere:
Afinderfedadogfor20weeksandclaimed20s.forthesame.""
107.Where,forexample,bonussharesareallottedinrespectofthesharesduringtheperiodof
theirpledge,theincrementhastobereturnedonredemptionofthepledge.MotilalHirabhai
VBatMani,(1924-25)52lA137.
108. Standard Chartered Bank v Custodian, (2000) 6 SCC427:AIR 2000 SC 1488.
109.Heisundernohigherdutythanthat,haackvClark,(1615)2Bulstr306.
110.Binsteadv Buck, (1776) 2 WmB1117:96 ER 660.https://t.me/LawCollegeNotes_Stuffs

838. 696Chapter13Bailment [S.1648c158]
The court saidhe would beguiltyof troverif herefusedtodeliverunless
paid for hiskeeping.Similarly,in anothercase:"^
Aquantityoftimber,placedinadockonthebankofanavigableriver,
beingaccidentallyloosened,wascarriedbythetideto aconsiderabledis
tance.Thedefendant,findingit inthatsituation,voluntarilyconveyedit
to a place of safety.
Hewasheldnotentitledtolienonthetimberforthetroubleorexpense,
but wasliablein troverforrefusingtodeliver.
Finder'srights
Sections168 and169,however,protect the interest of a finder in two
ways.Section168allowsthefindertoretainthegoodsagainsttheowner
untilhereceivescompensationfortroubleandexpense.Further,wherethe
ownerhasofferedaspecificrewardforthereturnofthegoodslost,the
findermaysueforsuchreward,andmayretainthegoodsuntilhereceivesit.
Section169allowsthefindertosellthegoodsin certaincircumstances.
Wherethethingfoundiscommonlythesubjectofsaleand if theowner
cannotbefoundwithreasonablediligence,orifherefusestopaythelawful
chargesofthefinder,thefindermaysellthegoodsinthefollowingcases:
(1)whenthethingisindangerofperishingoroflosinggreaterpartofits
value,or
(2)whenthelawfulcharges-ofthefinder,inrespectofthethingfound,
amounttotwo-thirdsofitsvalue.
RIGHTSOFBAILEE
1. Right to compensation[S.164]
S.164.Bailor'sresponsibilitytobailee.—Thebailorisresponsibletothe
baileeforanylosswhichthebaileemaysustainbyreasonthatthebailorwas
notentitledtomakethebailment,ortoreceivebackthegoods,ortogivedirec
tionsrespectingthem.
Ifthebailorhasnorighttobailthegoods,or toreceivethembackor to
givedirectionsrespectingthemandconsequentlythebaileeisexposedto
someloss,the bailor isresponsiblefor thesame.
2.Righttoexpensesorremuneration[S.158]
S.158.Repaymentbybailorofnecessaryexpenses.—Where,bythe
conditionsofthebailment,thegoodsaretobekeptortobecarried,ortohave
workdoneuponthembythebaileeforthebailor,andthebaileeistoreceive
noremuneration,thebailorshallrepayto thebaileethenecessaryexpenses
incurred by himfor the purpose of the bailment.
111.NicholsonvChapman,(1793)2 HyB1254.https://t.me/LawCollegeNotes_Stuffs

839. [S.158] Rights of bailee 697
A bailee is entitled to recover his agreed charges. But where there is no
suchagreementat all,Section158comesintoplay.The sectionsaysthat
where the bailee is required by the terms of bailment to keep orcarrythe
goodsor to dosomework upon them for thebenefitof thebailor,and the
contractprovidesfor no reward, thebaileehas a right to ask the bailor for
paymentofnecessaryexpensesincurred byhim for the purpose of the bail
ment.TheAmericanlawisalsothesame.
Wherethe bailmentis gratuitous and the baileeis in no waybenefited,
the bailor has to bear the expenses, if any, of the bailee for keeping the
chattel. It is akin to the lien of awarehousemanfor claiming charges for
the preservation of the goods
The Calcutta High Court has laid down that this right is not linked
with the right of lien. Lien can beexercisedonly as long aspossessionis
retainedwhereasthe right tochargesremainsaliveevenwhenpossession
hasbeenparted with. In thiscasetheStateTradingCorporationhad hired
theplaintiff'sstoragetank forstoringitsoil.Onaccountof adispute,the
STCappointedaspecialofficerwho tookchargeof the tank anddelivered
its contents to others as directed. The plaintiff thus lostpossessionof the
oil and with it his lien, but his right tochargesfor protection and storageof
the oil survived. Thecourtsaidthatthe bailor had enjoyedthe benefit of the
bailee'sservices."^
Wherethebailmentis forthebenefit of the bailee,there,inreferenceto
expenses,thefollowingtwopropositionsapply:
If inusingthething,theborroweris put toanyexpense,thismustbe
bornebyhimself.Thus,forexample,if ahorseis lentto afriendfor a jour
ney,hemustbearexpensesofhisfoodduringthatjourney,and togetting
him shod, if he shouldchancetorequireit, for it is a burdenwhichis natu
rally attendant upon the use of the horse.
"Theborroweriscompellableto beartheordinaryexpenses;fortheloan
beingforhisbenefithemustbepresumedtoengagetobeartheburdenas
anincidenttotheuse."^"
3.Rightof lien[Ss.170-171]
If thebailee'slawfulchargesare not paid he may retain thegoods.The
righttoretainanypropertyuntilthechargesdueinrespectoftheproperty
arepaid,iscalledtherightoflien.TheSupremeCourt"^citedthefollowing
112.WiLLiNGTONONCONTRACTSas cited inRamachandran,TheLawofContractinIndia
(VolIII)2266.
113.SuryaInvestmentCovStateTradingCorpnofIndia(P)Ltd,AIR1987Cal46;Forbes
ForbesCampbell&CoLtdvPortofBombay,AIR2006Bom162,consigneeofgoodsdid
notturnup,thesteameragentdidnotarrangefortakingdelivery.PortTrustwasallowedto
recover demurrage charges and other charges from the steamer agent.
114.StoryonBailments,Ss.256and273.
115.SyndicateBankvVijayKumar,(1992)2SCC330:AIR1992SC1066,1068.SeealsoV.S.
PrabhuvR.D.Mujumdar,(1993)2 KantLJ1,thebaileecannotbedeprivedofhispossessionhttps://t.me/LawCollegeNotes_Stuffs

840. 698Chapter13 Bailment [S.170]
passage fromHalsbury'sLawsqfEngland"^as to thenatureof this
right:
"Lienis in itsprimarysense arightin onemantoretainthatwhich
is in his possession belonging toanotheruntilcertaindemandsof the
person in possessionaresatisfied.In this primary sense it is given by law
andnotbycontract."
Liensare of twokinds-,namely:(1)particularlien, and(2)general lien.
Particularlien[S. 170]
As a general rule a bailee is entitled only toparticularlien, which means
the right to retain only that particular property inrespectof which the
charge is due. This right is provided for in Section 170 of the Act.
S.170.Bailee'sparticularlien.—Wherethebaileehas, inaccordancewith
the purpose of the bailment, rendered any serviceinvolvingthe exercise of
labourorskillinrespectofthegoodsbailed, he has, intheabsenceof acontract
tothecontrary, a right to retain suchgoodsuntil he receivesdueremuneration
fortheservices he hasrenderedinrespectof them.
Illustrations
{a)AdeliversaroughdiamondtoB,ajeweller,to be cutandpolished,whichisaccordingly
done. Bis entitled to retain thestonetill he is paid for the services he hasrendered,
(b)Agives cloth toB,a tailor,to make into a coat. BpromisesAto deliver the coat as soon
as it isfinished, and to give athreemonths'credit fortheprice.Bis notentitledto retain
thecoatuntil he is paid.
Exerciseoflabouror skill
Thus the right isavailablesubjectto certain importantconditions.The
foremost among them isthatthe bailee must have rendered some service
involvingtheexerciseof labour orskillinrespectof thegoodsbailed."^
Further, it has been frequentlypointed out that the labour or skill exercised
bythebaileemustbesuchasimprovesthegoods."Thereisnoauthority
forthepropositionthat if what thecontractordoesis not toimprovethe
article,butmerelyto maintain it in itsformercondition,hegetsalienfor
the amount spent upon it for thatmaintenance.A job master has no lien at
allfortheamountofhisbillinrespectoffeedingandkeepingahorseathis
stable,whereasatrainerdoesgetalienuponahorsefor theimprovements
whichheeffectstothehorse.""^
foranysuperiorclaim.Hehasto bepaidfirst.Wheregoodsweretakenawayfrombailee
undercourtorder,hisliensurvivedandappliedto thesaleproceedsof thegoodsfor his
payment.
116.Vol20 (2nd Edn) 552,para695.
117. It was observed byBestCJ in Bevan v Waters,(1828)3 C & P 520 that if a man has an
articledeliveredtohim,ontheimprovementofwhichhehastobestowtroubleandexpense,
he has a right to detain it until his demand is paid.
118.HuttonVCarMaintenanceCo, (1915) 1 Ch 21.https://t.me/LawCollegeNotes_Stuffs

841. [S. 170] Rightsof bailee 699
Similarly,it hasbeenobservedinanothercasethat"whereabaileehas
expendedhislabourandskillintheimprovementofachatteldeliveredto
him,hehaslienforhischargein thatrespect.Thus,theartificertowhom
thegoodsaredeliveredforthepurposeofbeingworkedupintoform,orthe
farrierbywhoseskilltheanimaliscuredofadisease,orthehorse-breaker
bywhoseskillheisrenderedmanageable,havelienson thechattelsin
respectof their charges"."' InHuttonv Car Maintenance
Theownerofa motorcargaveit to acompanyto maintainit forthree
yearson afixedannualpayment.Anamounthavingbecomeduefor
maintenancecharges,thecompanyclaimedlienon the car.
It was heldthatinasmuch aswhatthecompanydid was not to improve
thecar,butonlytomaintainitinitsformercondition,thecompanyhadno
lienon thecar.Similarly,whereabaileeclaimedlienforstorageofsugar,
itwasheldthatsuchcustody,notbeingaserviceinvolvingtheexerciseof
labour or skill within the meaning ofSection170, the baileewas not enti
tledtohen.^^^On thesamereasoning,apersontowhomcattlearegivenfor
grazingdoesnothavetherightoflienonthemforhischarges.^^^
Inaccordancewithcontract
Secondly,thelabourorskillmusthavebeenexercisedinaccordancewith,
thepurposeofthebailmentandthetermsofthecontract.^^^
Goodsonwhichlabourorskillbestowed
Thirdly,onlysuchgoodscanberetainedonwhichthebaileehas
bestowedtroubleandexpense.Hecannotretainanyothergoodsbelonging
to thebailorwhichareinhiscustody.^^'*It isthiselementof "particularlien"
whichdistinguishesit from "generallien".
PossessoryRight.—Lastly,therightdependsonpossessionand is lost
assoonaspossessionofthegoodsislost.InacasebeforetheNagpurHigh
Court;!"
Theplaintiffpurchasedanoldrefrigerator,thevendoragreeingto
repairitforafixedcharge.Whentherepairwasoverandtheconditionof
themachinewasfoundsatisfactory,it wasdeliveredto theplaintiffbut a
partoftherepairmoneywasstillunpaid.Themachinebrokedownagain
andthevendorcarrieditsengineandanotherpartforfurtherrepairsand
119.ParkeBinScarfevMorgan,(1838)4M8cW270,283:150ER1430:51RR568, 578.
120.(1915) 1 Ch 21.
121.ChandMaivGandaSingh,1885RecNo60,p.126;KalloomalTapeshwariPrasad&Coy
RC&PLtd,AIR1990All214,liennotallowedformerestorageoffertilizers.
122. Vithoba LaxmanKalarv MarotiUkandsaKalar,AIR 1940 Nag 273.
123. v/ager,ILR(1883)6All139.
124.ChasevWestmore,(1816)15M&S180:105ER1016,piecemealdeliveryofgoodsunder
onecontract,lienonthewholelotarises;MillervNasmythsPatentPressCo,ILR(1882)8
Cal312, jutedeliveredfrom time to time forpressing.
125. Eduljee v CafeJohn Bros, ILR 1944 Nag 37.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

842. 700 Chapter13Bailment [S.171]
claimedlienontheseparts until theoutstandingchargesof repairwere
paid.
Thecourtheldthatdeliveryofpossessionafterrepairsareeffectedputs
anendto thelienwhichtherepairerhasforthechargesofrepairsand
cannotberevivedbecausetherepairerundertakesfurtherrepairsmerely
outofgraceandnotas amatterof freshcontract.ThecourtcitedLord
Ellenboroughassaying:'-^"...thedefendant,after the repairswerecom
pleted, relinquished his possession, and could notafterwardsdetain for the
amountof therepairs."
Thus,"lienisapossessoryrightwhichcontinuesonlysolongasthepos
sessor holds thegoods".^^^
Therightoflienmayalsobedefeatedorexcludedbyanagreementto the
contrary. Byan agreement to that effect, aparticularlien may be converted
into agenerallien.For,Section171saysin theendthat no otherpersons
havethe right togenerallienunlessthereis anexpresscontractto that
effect. The right of lien also became affected when the carrier was directed
todeliverthegoodstotheconsignorWarehousingCorporationbecausethey
wereinthedangerofperishing.Theorderrequiredthefurnishingofa bank
guarantee.^^®
Generallien [S. 171]
The right of"generallien",asprovidedfor inSection171,meansthe
right toholdthegoodsbailedassecurityfor ageneralbalanceofaccount.
Therightofparticularlienentitlesabaileetodetainonlythatparticular
property inrespectof whichchargesaredue.Butgenerallienentitledthe
baileetodetainanygoodsbailedtohimforanyamountdueto himwhether
inrespectofthosegoodsor anyothergoods.If,forexample,twosecurities
aregivento abankerbutaloanhasbeentakenonlyagainstoneofthem,the
bankermaydetainbothsecuritiesuntilhisduesarepaid.Whereaquantity
ofimportedmeatwasstoredwithawarehousekeeperwhobyageneralterm
of the trade had a general lien, it was heldthathe could retain the meat for
hischargesdueinrespectof othergoods.'^^
S.171.Generallienofbankers,factors,wharfingers,attorneys and pol
icybrokers.—Bankers,factors,wharfingers,attorneysofaHighCourtandpol
icybrokersmay,intiieabsenceofacontracttothecontrary,retainasasecurity
126. InHartleyvHitchcock,(1816) 171 ER 512.
127.SeeLeggvEvatts,(1840)151ER311;JacobsvLatour,(1828)5Bing130:130ER1010,
citedintheabove-notedNagpurdecision.SeealsoSuryaInvestmentCovStateTrading
CorpnofIndia(P)Ltd,AIR1987Cal46,wherethebaileelosthislienbecausethegoods
inhiscoldstorewereclaimedbyaspecialofficer,thebaileewasallowedbypersonalaction
torecoverunderS.158hisexpensesofstorage;PenningtonvRelianceMotorWorksLtd,
(1923) 1 KB 127, non-transferable right.
128. CentralWarehousingCorpn vPrabhtiNarainSingh,AIR 2003 All223-''003AIHC
3392(All).
129.Jowitt& Sons v Union Cold Storage Co, (1913) 3 KB 1.https://t.me/LawCollegeNotes_Stuffs

843. [S. 171] Rightsofbailee701
for ageneralbalanceofaccount,anygoodsbailed tothem;butnootherper
sons have a right to retain, as asecurityfor suchbalance,goodsbailed tothem,
unlessthereis anexpresscontracttothateffect.
Partiesentitledtogenerallien
The right of general lien is a privilege and is specially conferred by
Section 171 oncertainkinds of bailees only.Theyare:(1)Bankers,(2)Factors,
(3)Wharfingers,(4)Attorneys of aHighCourt,and(5)Policy-brokers.
1.Bankers
"The general lien of bankers, as judicially recognised and dealt with in
Section 171, attaches to all goods and securities deposited with them as
bankersby acustomeror by athirdpersonon acustomer'saccount,pro
vided there is nocontract,express or implied, inconsistentwithsuchlien.""°
The SupremeCourt"^cited the followingpassage fromChalmersonBills
OFExchange"^as to the concept of banker's lien: "Abanker'slien on nego
tiable securities has been judicially defined as an 'implied pledge'. A banker
has, in the absence of agreement to the contrary, a lien on all billsreceived
from a customer in theordinarycourse of banking businessin respect of any
balancethatmay be due from suchcustomer."
Thecourtalsocited the following passage fromChittyonContracts:"^
"Bymercantilecustom the banker has a generallien overall forms of com
mercialpaper depositedby or on behalf of a customer in the ordinary course
ofbankingbusiness.The customdoesnot extend tovaluableslodgedfor the
purpose of safe custody and may in any event bedisplacedby anexpress
agreement or circumstances which show an implied agreement inconsistent
withthelien.
...The lienisapplicabletonegotiableinstrumentswhichareremittedto
a banker from the customer for the purpose of collection. When collection
has beenmade theproceedsmay beusedby the banker inreductionof the
customer'sdebtbalanceunlessotherwiseearmarked.""''
Actingon theseauthoritiesthe court came to theconclusionthatfixed
depositreceiptsdepositedby way ofsecurityforcash-creditfacilitywere
usable as security against the customer's other debtsalso."^
130. Mercantile Bank of India Ltd v RochaldasGidumal& Co, AIR 1926 Sind 225.SBIv
DeepakMalviya,AIR1996All165,bankerentitledto retaingoodsbailedforsatisfactionof
anyotherdebt or promise.
131. Syndicate Bank vVijayKumar,(1992)2 SCC 330: AIR 1992 SC 1066, 1069.
132. (13thEdn)91.
133.{26thEdn) 389,para3032
134. The court also cited similar passagesfrom Paget's LawofBanking(8th Edn) 408.
135.SeealsoJ&KBank Ltd v AbdulSamadChaloo,AIR 2008J&K1, thelendingbank can
recoverfrom any partner of the firm and can also look to general lien as a protection against
losson the loan.Depositsorsecuritieshavebeenheldto bespeciesof goodsoverwhichlien
canbeexercised.https://t.me/LawCollegeNotes_Stuffs

844. 702Chapter13Bailment [S. 171]
Certaingoldornamentswere pledged with abankfor raising aloan.The
borrowerpaid back the loan. Thebankretainedthe security because of
anotherloan subsequentlytakenby theborrower.The bank was held to be
entitledtodosotillthesatisfactionoftheotherloanalso."^
It isnecessarythatthe goodsshouldhave been given to thebankeras a
bailee, because the lienextendsonly to goodswhichhave been bailed to
thebanker."^"Andthereis adistinctionbetweenbailmentanddeposit.It
has beenheld,"^thatmoneypaidinto abankto becreditedinto thecur
rentaccountof thepersonmakingthepaymentdoes notconstituteabail-
ment."^^'Followingtheseauthorities,it has been heldthatSection 171 does
not apply to cases ofdepositof money in abank.Thebankcannotclaim lien
on suchmoney.Thecourtsaid:"Section171 of theContractAct interms
does not apply to cases of deposit of money. In such cases, therelationship
ofbailorand bailee is notestablishedwithinthemeaningofSection148.
Moneydepositedwithabankdoesnotmaintainitsidentityunless setapart
orearmarkedfor some specialpurpose.Since therelationshipofcreditorand
debtorisestablished,the money incustomers'accountslegitimately belongs
to thebank.Thebankhas therightofownershipover the money. Thebank
cannotclaim lien on money which belongs to it. Therefore, theapplication
of Section 171 should be properlyconfinedto cases where the papers, secu
ritiesandothergoodsof thedebtorare lyingwiththebankunderbailment.
Similarly,where goods are deposited for safe custody or some other special
purpose,they will not be under the spell of general lien as theacceptance
of the goods for a special purpose impliedly excludes generalhen.""^Thus
where securities were given to abankto get them exchanged for fresh bills,
136. K. Sita vCorporationBank,(1999) 3 AnWR393(AP).
137. Title deeds casually left at abanker'stableafterrefusal by him to advance a loan were not
withinthe spell ofbanker'sgeneral lien.LucasvDorrein,(1817) 7Taunt278: 129 ER 112.
Things deposited with him in hischaracteras a banker are within the spell.AllahabadBank
VMECON,Doranda,AIR 2005 Jhar 54, bank promised to issue bank guarantee on deposit
of 10 per cent of the guarantee amount which was paid and guarantee issued. Subsequently,
the bank exercised lien on theparty'sfixed deposit for payment ofguaranteecommission.
Thecourtdid not allow it. The only requirement was that of deposit. There was no talk of
guaranteecommission.
138.Foleyv Hill, (1840) 9 ER 1002; Official Assignee v Smith, ILR (1908) Mad 68.
139.PuRANiKJ inDevendrakumarv Gulabsingh, AIR 1946 Nag 114: ILR 1946 Nag 210, 212.
140.SBIVM.P.IronandSteelWorks(P)Ltd,AIR1998MP93.
141.Cuthbertv Robarts, Lubboek & Co, (1909) 2 Ch 226 (CA). Where the goods were seized
by a banker under aparticularhypothecation, the terms of which did not permit such sei
zure, the loanee paid theamount,the banker was notpermittedto detain the goods for its
other claims. C.R.NarasimhaSetty vCanaraBank, (1990) 1 Kant LJ 81. Citing, George
HenryChambers v PatrickDavidson,(1866) LR 1 PC 296. Acceptance on specialpurpose
impliedly excludes the right of general lien. Lloyds Bank Ltd vAdministrator-Generalof
Burma,(1934) 12Rang25: AIR1934Rang66, therightdoesnotextendto atrustaccount
unless it is the property of the customer. Agra Bank's Claim, re,(1872)LR 8 HL 41; Official
Assignee vSRMMRM RamaswamyChetty, ILR (1920) 43Mad747, the specialpurpose
must be clearlyinconsistentwith general lien.SBIv]avedAkhtarHussain,AIR 1993 Bom
87,moneydepositedin fixeddepositby thedebtorinjointaccountwithhis wife inanother
branchthanthe lendingbranch,not allowed to be heldunderlien.https://t.me/LawCollegeNotes_Stuffs

845. [S-171] Rights of bailee 703
the banker could notexerciselien on the newsecuritieswhich,as Lord
Campbellsaid, "weredeliveredto them for aspecialpurposeinconsistent
with theexistenceof thelienclaimed"."^Thesecuritieswerebroughtto
the bank by a customer but theybelongedto another person. The customer
instructedthebanktohavethemrenewedandtotransfertheinterestto
hispersonalaccount.On theinterestsocreditedthebankwasallowedto
exerciselien.
Another illustration of a deposit for a special purpose is the case of
MercantileBankofIndiaLtdvRochaldasGidumal&Co."^
A customergavehis banker a sum of money for transmission by tel
egraphictransfer to his own firmat anotherplace.The bank purported to
hold the money for their balance of account against the firm.
The first question raised was whether "money" would becoveredby the
words "goods bailed" as used in Section171".The word "goods " is not
definedintheIndianContractAct.TheIndianSaleofGoodsActdefines
"goods" asexcludingmoney.Thus the matter was open andfollowing
Englishauthoritiesit was heldthat "moneyis aspeciesof goods which may
be the subject-matter of bailment and over which lien may beexercised"."''
But the court held that money given for telegraphic transfer is given for a
special purpose inconsistent with the exercise of the right of lien. "It would
be most unbusiness like and unreasonable for a banker to expectthata
remitter who is in urgent need of money at the place of payment would agree
totransmitmoneythroughthebankerif he is told or hasreasonto believe
that the moneyis likelyto be withheld in theexerciseof this allegedlien.""^
Where acustomerhas two accounts, a depositaccountand a loan
account, the banker may in the exercise of its lien, transfer the money in
the deposit account to theloanaccountwithoutany specificinstructions
of the depositor tothateffect."^TheKarnatakaHighCourthas heldthat
142.BrandaovBarnett,(1846) 12C1& Fin 787:136ER 207.
143. AIR1926Sind225,citingthe abovestatement.
144.MisavCurrie,(1876) LR 1 AC 554(HL);NagalingaChettiarvKayarohanaChettiar,AIR
1915Mad80(2).'
145.PerRupchandBilaramAJC,MercantileBankofIndiaLtdvRochaldasGidumal& Co,
AIR1926Sind225,227. SeeKrishnaKishoreKarvUnitedCommercialBank,AIR1982
Cal62, where there was specialarrangementforreimbursementbetweenthepartiesand
thatexcludedparticularlien. Inreferenceto thecontentsof anaccountthecourtheldthat
they could be withheld for debit balance inanotheraccount of the same customer.Portof
BombayvSriyaneshKnitters,AIR 1983 Bom 88, specialstatutoryrights excluding general
lien;Portof Bombay v Premier Automobiles,(1974)4 SCC 710. The SupremeCourtdid not
allow abanktodetaingoods belonging to the firmagainstpartners'individualaccounts.
GurbaxRaivPunjabNationalBank,(1984) 3 SCC 96: AIR1984SC1012.
146.DevendrakumarvGulabsingh,AIR1946Nag 114:ILR1946Nag 210.Moneyheldunder
a fixeddepositscheme has been held to be not asubject-matterof general lien. Union Bank
ofIndiav Venugopalan, (1990) 1 KLT 262. Such money does not create the relationship of
bailor and bailee. It creates therelationshipofcreditorand debtor. SBQ SteelsLtdvIndian
Bank,AIR2014NOC452(Mad),thebankfreezedthecustomer'saccountbecauseof his
failureto pay back theloan.Valid.https://t.me/LawCollegeNotes_Stuffs

846. 704Chapter13Bailment [S-171]
therightwouldextendto thefixeddepositsofthecustomerincludingthose
ofhis/herspouse.Thebankwasentitledtoadjusttheamountstowardsthe
loanaccount."^The court relied upon the decisionof theSupremeCourtin
SyndicateBankvYijayKumar,whichwasto theeffectthat thebanker's
lien could beexercisedinrespectof a joint accountalso"^and alsofixed
deposits."Thebanker'slienisnotprejudicedbyanydefectinthetitleofthe
customerorequitiesof thirdparties,providedthe bankeractshonestlyand
withoutnoticeofanydefectoftitle."^^°Thuswherea bankerknowsthat the
securitiesdepositedby acustomerbelongtosomeother person he cannot
hold them in the exercise of his lien against thecustomer."^But where two
firmshaveseparateaccountsin a bank andagreetogivethe bank ageneral
lien over all monies of the two firms, thebankmay hold the money in one
accountagainsta loan on the otheraccount.This hasbeensoheldby the
PunjabHighCourt inFirmJaiKishanDasJinda Ram vCentralBankof
IndiaLtd}^^
One of the above two firms gave a sum of money to the bank to remit
the same to a sugar mill. The mill refused to accept the amount when
offered.Theamountthuscamebacktothebankanditclaimedlienonit
for a balance dueagainsttheotherfirm.
Thecourtheldthatthe specific object for which the money was given
havingfailed,themoneywas nolongerbound byanyincidentof trust and,
therefore, the bank had a good lien in the terms of the firms' agreement.
147.K.S.NagalambikavCorporationBank, AIR 2000 Kant 201.
148. (1992)2see330: AIR 1992 SC 1066; City Union Bank Ltd v C. Thangarajan, (2003) 3Be
528 (Mad), right ofHenallowed to be exercisedagainst dues under fixed deposit receipts.SBI
VGoutmi Devi Gupta, AIR 2002 MP 61:(2003)1 BC 165, the surety is equally liable as a
debtor and, therefore, the lender bank would havelienon the surety's fixed deposits and other
amountslyingwith the bank. The GauhatiHigh Court has heldto the contrary. In Tilendra
NathMahantav United Bank of India, AIR 2002 Gau 1, it was held that a fixed deposit
is basicallya loan in the hands of the bank. It has no connection with a loan in a different
account. Anamountinanotheraccountcould not be adjustedagainstthe claim in any suit.
Mahajan Chit Fund and Finance (P) Ltd v Punjab and Sind Bank, (2003) 5 ALD 75, FDs
depositedas securityagainstcash creditfacility,allowedto beadjustedagainst dues.Alekha
SahooVPuri Urban Coop Bank Ltd, AIR 2004 Ori 142: (2004) 97 CLT 769 (Ori), gold
pledgedwith bank was notallowedto be retained after paymentof the gold loan just only
becausethe borrower was aguarantorin some other transaction. The pledgor was entitled to
take back his security. Narendra Singhv State of Bihar, (2002) 1IGe468.(Pat), a banker can
retain security for a general balance account any goods bailed to him and has a general lien
over all forms of security deposited with him in the ordinary course of banking business, but
has no legal justification to withhold payments from the customer's saving bank account.
149. To this extent the decision of the Lahore HighCourtin Simla Banking &IndustrialCoLtd
VBhagwanKaur,AIR 1928 Lah 316becomesaffectedbecausein that the opinionexpressed
was that a joint account would not come within the coverageof the right oflien.
150. FirmJai KishanDas Jinda Ram v CentralBank of India Ltd, AIR 1955Punj 250; Bank of
NewSouthWales v ValleyButter,1902AC 543.
151.CuthbertvRobarts,Lubboek& Co, (1909) 2 Ch 226 (CA); PunjabNationalBank Ltd v
Satyapal Virmani, AIR 1956 Punj 118; VijayaBank v Naveen MechanisedConstruction(P)
Ltd, AIR 2004 Kant 199, securities furnished under a bank guarantee became free because
theobligationwasdischarged.
152.AIR1955Punj250.https://t.me/LawCollegeNotes_Stuffs

847. [S. 171] Rightsofbailee705
Whereanequitablemortgageiscreatedbydepositof title deeds for a
particularloan,whetherthe same can bewithheldfor a subsequent debt is a
question to be answered on facts. TheKarnatakaHighCourtheldthatthey
wouldnotbe thesubject-matterof a general lien unlesstherewasintention
on thepartof thedepositortothateffect."^
Thepropertymortgagedby thecustomerfor theloaninquestionwas
attachedandsold inexecutionof a decree. Thepurchaserpaid back the
loanandasked forreturnof the title deeds.Thebanksoughttoretainthe
deeds asagainstanotherloanforwhichthecustomerwas a surety. The
purchaserpaid the surety money also underprotest,got the title deeds
released,andthensued thebankforrefundof thesuretymoney as having
been paidundercoercion.
He was allowedrefund.Thebankwasnotentitledto general lien. Its
withholding was wrongful and wrongful withholding ofpropertyis coer
cion.^-'''The deedswere deposited to secure oneparticularloan and no more.
Thecourtcited LordKindersleyremarkthatconveyance oflandwasnot
subject to generallien."^Thecourtalso cited aremarkfromFacet'sLaw
OFBanking"^totheeffectthat"itmustbeassumedthatthegenerallien
extendsonly tothecustomer'sownsecurities".
Similarly,where a person obtained a loan on a pledge of gold ornaments
to the lending bank and subsequently became aguarantorforanotherper
son's loan, he was allowed to claim hisornamentson paying off hispersonal
loan though the loan of another person guaranteed by him stillsubsisted."^
The principleof generallien does not extend to a loan taken by the customer
from another branch of thebank.^^®Aguarantorwas allowed to take back
his securities from the bank when thebankguaranteein respect of which
153. Mangalore Catholic Coop Bank Ltd v M.SundaraShetty,(1987)3 Kant LJ 21.SBIv
Jayanthi,(2011)2 CTC 465: AIR 2011 Mad 179(DB),equitable mortgage by deposit of title
deeds created for a special purpose to secure a particular loan. It couldhotbe held under
general lien for any other loan or dues, etc. Mohd Nayabuddin v Union of India, AIR 2016
Cal172, title deeds offlatpledged with bank by borrower and co-borrower for home loan.
Co-borrowerhad obtained cash-credit facility from the same bank under which amounts
were due. Loan did not exclude general lien. Bank allowed lien over title deeds also for the
amountdueunderco-borrower'scash-creditaccount.
154. The court referred to Watts v Christie,(1849)11 Beav546: 50 ER 928, where a customer's
lease-deed was not allowed to be retained for dues against the firm of which he was apartner.
LordEsherMR remarked that a generallien-holderhas no right to take a security givenfor
onepurposeandapplyit toanother.WolstenholtnvSheffieldUnionBankingCoLtd,(1886)
54 LT 746 (CA),lease-deed deposited to secure aparticularadvance not allowed to be used
forotherdues.
155.WyldevRadford,(1863) 33 LJ Ch 51, 53.
156.(8thEdn)500.
157.K.Jagdishwar Reddyv Andhra Bank,(1988)1 An LT 605. Nakulan v Canara Bank, AIR
2014 Ker 64, gold loan repaid by borrower, bank allowed to retain gold ornaments because
the borrower had not discharged liability under another personal loan availed by him.
158. SyndicateBankv DevendraKarkera,AIR 1994Kant 1.The court referredto SreeYellamma
CottonMills Co Ltd,re-,YellammaCottonWollenandSilk Mills Co Ltd, re, AIR 1969 Mys
280, where the court said hypothecation is only an extended idea of pledge.https://t.me/LawCollegeNotes_Stuffs

848. 706Chapter13Bailment [S. 171]
they were deposited came to an end. Thebankwas not allowed toretain
themfor theloanofanothercompanyinwhichalso theguarantorwas a
director.'^^
Abankprovidedfinancialassistance to a sugar factoryagainstpledge of
its entirestockofsugarstoredin its sevengodownsas security. Subsequently,
the stock was seizedunderstatutoryprovisionsforpaymentofotherclaims.
It was heldthatthe right of theCommissionerof sugar could not prevail
over the rights of the bank. The bank was entitled toretainthe sale proceeds
of the stock ofsugarin twogodownsorderedby thecourtto be sold by
publicauction.'^"
Pre-depositforentertainingappealundertheSARFAESIAct
UnderSection18 of the SARFAESI Act,2002apre-depositofmoneyis
requiredforentertainingan appeal. Suchdeposithas been held to benota
depositwiththe lenderbank.Thebankhadno lien on such deposit.After
disposalofappealthepre-deposithas to berefundedto theborrowerunless
alreadyappropriatedby thebankwiththeconsentof thedepositoror any
attachmentin anyproceedingsunderSection13 orRules.^"
2.Factors
The word"factor"inIndia,as inEngland,means an agententrustedwith
possession of goods for thepurposeof selling them for hisprincipal.^®^He
isgiven thepossessionof thegoodsin theordinarycourseof hisbusiness
for thepurposeof sale. He has a general lien on the goods of hisprincipal
for hisbalanceofaccountagainsttheprincipal.Thuswhere amotorcar
was delivered to anagentfor sale, he was heldentitledtoretainthecaruntil
his charges werepaid.^^^It isnecessaryfor the lien to arisethatthe goods
shouldhavebeendeliveredtothefactorinthecourseofbusinessandinhis
capacityas a"factor".
A factor who used to have various dealings with hisprincipalwas
instructedby theprincipalto effect a policy ofinsuranceon a ship. The
principalsent thepremiumand the policyremainedin thepossessionof
the agent, who claimed lien for the moneywhichwas owing to him in his
capacityas afactor.
Hisclaimwasnotallowed,as thepolicyofinsurancehadnotcome to his
possessionin hiscapacityas afactor.^^"*
159. VijayaBankvNaveenMechanisedConstruction(?)Ltd,AIR2004Kant199.
160.CentralCoop BankLtdvStateofMaharashtra,(2011) 3MahLJ 634; DeviIspatLtdv
Cental Bank ofIndia,(2010) 3ICC123(Cal),as long as the banker shows something due
from theconstituentby way of general balance of account, the banker may retain the goods
bailedto it as asecurity.
161. Axis Bank vSBSOrganics (P) Ltd, 2016 SCC OnLine SC 353: (2016) 196 Comp Cas 236.
162.StuartCJ inE.H.Parakhv KingEmperor,AIR1926Oudh202.
163.E.H.Parakhv KingEmperor,AIR1926Oudh202.
164.DixonVStansfield,(1850) 10 CB 398; 16 LT 150.https://t.me/LawCollegeNotes_Stuffs

849. [S.171] Rights of bailee 707
A factor, like a banker,willnot have the right ofHenon such goods as
have come to his possessionfor aspecificpurposevi^hichimpliedlyexcludes
therighttolien.^®-'
3.Wharfingers
"Wharfmeans a place contiguous tov\rater,used for the purpose of load
ing and unloading goods, and overw^hichthe goods pass in loading and
unloading. It is essential to aw^harfthatgoods should be in transit over it.
Theprimaryidea isthat,it is a place used, not for storing goods, but in the
process of theirtransitto or fromw^ater."^^^Wharfinger"is hethatowns or
keeps awharf,orhaththe oversight or themanagementofit".^^^Awharf
inger has general lien on the goods bailed to him until his wharfage, which
means, charges due for the use of hiswharf,are paid.
"The factthatamanufacturerhas awharfupon which hereceivesgoods
broughtto him bycustomers,does not entitle him to claim lien as awharfin
ger upon suchgoods."^®®He isnotawharfingerin the real sense of theword.
4.AttorneyofHighCourt
Anattorneyor a solicitor who is engaged by a client isentitledtogeneral
lien until the fee for his professional service andothercostsincurredby
him arepaid.^®The rightextendsto theproceedsof theactionthatcome
to thehandsof theattorney.^^°He has arightof lien over fundswhichare
depositedwiththecourt.^^^The BombayHighCourtheld in a casethata
solicitor who isdischargedby his client, has the right to hold thepapers
entrustedtohimsubjectto his lien forcosts.^^^Thecourtcited thefollowing
passage from ajudgmentof LordJames "Amanhas arighttochange
his solicitor if he likes; butthenthe law imposescertainterms in favour of
the solicitor,thatis to say,thatthepapersin the suitcannotbetakenoutof
hishandswithouthaving his costspaid."
But if theattorneyhimselfdecidesnotto act for the client, he forfeits his
lienand,therefore,musthandover thepapersto the client,whetherhis costs
165. SeeSpaldingvRuding,(1843) 6 Beav 376: 49 ER 871: 63RR120;FrithvVorbes,(1862) 135
RR217.
166. PerCollinsLJ inHaddockvHumphrey,(1900) 1 QB 609 (CA).
167.ChatockvBellamy,(189S) 64 LJ QB250;Tredgarlron&CoalCoLtdvSteamshipColliope,
1891AC 11(HL).
168.MillervNasmythsPatentPress Co,ILR(1882) 8Cal312.
169.GeneralShareTrustCo vChapman,(1876) 1 CPD771,lienonclient'scheques.It is nec
essarythatdocumentsshould come into hisprossessionas anattorney.Sheffield vEden,
(1878) LR 10ChD291(CA).
170.DevkabaivJefferson,BhaishankarandDinsha,ILR(1886)10 Bom248;MangalChand
MalooVPurnaChandraBasu,AIR1949Cal505:ILR(1945)1 Cal430.
171. TyabjiDayabhai& Co vJethaDevji& Co,AIR1927Bom 542; VedandSopherv R.P.
Wagle& Co, AIR1925Bom 351.
172.BalkesserbaivNaranjiWalji,ILR (1880) 4 Bom 352.
173. Yalden, ex p,(1876)LR 4 Ch D129,131;ibid,355 (ILR Bom).https://t.me/LawCollegeNotes_Stuffs

850. 708 Chapter13Bailment [S.171]
are paid or not. Thuswherean attorneyrefusedto actunlesshisprevious
costswerepaid^'''*,andwhereafirmofattorneyswasdissolvedand, there
fore,theyceasedto act for theirclient^^^,it washeldineithercasethat the
lienwaslost.
The law on this point hasbeensummarisedbythe AndhraPradeshHigh
Courtin terms of the followingpropositions;^^^
(1)The common law right ofpassiveand retaining lien available to a
solicitorin England isacceptedby courts in India as part of the law of this
country.
(2)The said common law right is notabrogatedby Section 171,Contract
Act.
(3)Section 171, Contract Act, enacts a special rule of lien applicable
exclusivelyto attorneys who are also known as solicitors.
(4)The other practitioners, who discharge the functions of solicitors, are
entitled to invoke the common law rights applicable to solicitors though
Section 171 isinapplicableto them.
(5)The practitioner forfeits the right of retaining lien the moment he dis
charges himself or by his client for misconduct.
Advocates.—TheSupremeCourt has laid down in R.D. Saxena v Balram
PrasadSharma^'^'^thatadvocates have no right of lien over clients' papers for
their unpaid fee. TheCourtsaidthatfilescontainingcopies of the records
(perhapssome original documentsalso)could not be equated with the word
"goods" referred in Section 171. It could not be saidthatfilesand papers
of a client lying with the advocate were in the category of "goods bailed".
In the case of litigation papers in the hands of the advocate there is neither
delivery of goods nor anycontractthatthey shall bereturnedor otherwise
disposed of.Thatapart,the word "goods" mentioned in Section 171 is to be
understoodinthesenseinwhichthatwordisdefinedintheSaleofGoods
174.BasantaKumarMittervKusumKumarMitter,(1899-1900)4CWN767. It isnotaprofes
sionalmisconductfor a lawyer toretainthe papers untilpaymentof his fee.Damordardass
Agarwalv R. Badrilal, AIR 1987 AP 254; A. K. Bijili Sahib v Dadhamia Bhalambai, AIR
1936Mad48; AnAdvocate,re,Tuticorin,AIR 1943Mad493. S. 171 is notexhaustiveof
the relationship of a lawyer with his client. These decisionsshould now be taken in the light
of the SupremeCourtdecision in R.D. Saxena v BalramPrasadSharma,(2000) 7 SCC 264:
AIR2000SC 2912 because the SupremeCourthasheldthatrefusal of anadvocatetoreturn
filesto his client amounts to professional misconduct irrespective of the fact whether his fee
has been paid ornot.
175.McCorkindale,re,ILR(1880) 6Cal1. See alsoAtoolChandraMukerjeev ShosheeBhusan
Mookerjee, (1901-02) 6 CWN 215, a vakil may be changed if he is not proceeding with due
diligence in prosecuting the case; RajahV.MuthuKrishna Yachendra v W.H. Nurse, AIR
1921Mad320, a vakilcannotrefuse toworkin the case accepted by him because his fee has
not been paid;BasantaKumarMitterv KusumKumarMitter,(1899-1900)4CWN767.
Thereis no lienwhentheremovalis formisconduct.'M'anAdvocate,re,AIR1957SC 149:
1956 SCR 811, thecourtscanexamineprofessionalconduct,AnAdvocate,re,Tuticorin,
AIR1943Mad493.
176.DamordardassAgarwalv R.Badrilal,AIR1987AP254.
177.(2000)7 SCC264:AIR2000SC2912at p.2914.https://t.me/LawCollegeNotes_Stuffs

851. [S.171] Rightsofbailee709
Act.Thus theyhaveto besaleablegoods.There is noscopeforconverting
thecase-filesintomoney,nor theycan besoldto anybuyer.Hence,anadvo
catecannotplace reliance upon Section 171.
5. Policybrokers
Aninsuranceagentwho isemployedto effecta policyofmarine insurance
is called a policybroker.His lien extends to any balance on any insurance
accountdueto him fromthe personwhoemployedhim toeffectthepolicy.
Lien against time-barred debt
Oneofthegreatadvantagesoftherightoflienisthat it canbeexercised
for therealisationof a debt even when anactionfor recovery of the debt
wouldbetimebarred."'
Maritimelien
TheSupremeCourtexplainedtheconceptinM.V.AlQuamarvTsavliris
Salvage(International)Ltd-}''^"Beitnotedthattherearetwoattributes
tomaritimelien:[a)a right to a part of thepropertyin theres;and(fc)a
privilegedclaimuponaship,aircraftor othermaritimepropertyinrespect
ofservicesrenderedto orinjurycausedby thatproperty.Maritimelien
thusattachesto thepropertyintheeventofthecauseofactionarisingand
remainsattached.It is,however,inchoateandverylittlepositiveinvalue
unlessit isenforcedbyanaction.It isa rightwhichstemsfromgeneralmar
itimelaw and is basedon theconceptas if the ship itselfcausedthe harm,
lossordamagetoothersor totheirpropertyandtheshipitselfmustmake
goodthatloss."^'"
Carrier'slien
A carrier has the right to retaingoodsuntil hisduesare paid. A carrier
cannotbeforcedtodelivergoodswithoutpaymentofdemurrageevenifthe
detentionorderwasissuedbytheCustomsAuthorities.Thedetentionorder
turnedout tobeillegal.Therefore,theCustomsAuthoritiesbecameliable
to pay thedemurrage.^"
178.BombayDyeing&MfgCoLtd vStateofBombay,AIR1958SC328:1958SCR1122,
1135.S.VasupalaiahvVysyaBank,(2002)1ICC327(Kant),thecourtsaidthatevenifthe
remedyofrecoveringdebtfromtheprincipaldebtorwasbarredbylimitation,theliability
subsistedand the bankwasentitledtoappropriatethe debtduefromtheamountswhich
wereinitspossessioneitherbelongingtotheprincipaldebtorortothesurety.Intheabsence
ofaspecialcontract,thereisgenerallieninfavourofthebankoversecuritiesandamounts
in itspossession.
179. (2000) 8see278: AIR 2000 SC2826 at p. 2848.
180.CitingMaritimeLaw byehrisopher Hill(2ndEdn).
181.ShippingCorpnofIndiaLtdvC.L.JainWoollenMills,(2001)5SCe345:AIR2001
SC1806.https://t.me/LawCollegeNotes_Stuffs

852. 710 Chapter 13 Bailment [S.171]
LienofPortTrust
ThegeneralliencontainedinSection171 of theContractAct isnotcov
ered by the provisions of Chapter VI of the Major Ports Trust (MPT) Act.
ThisActno doubtdealswith lieninrespectof,interalia,thegoodsimported
but it doesnot deal with the generallien in respectof amount due on earlier
consignmentsforwhichpaymenthasnotbeen made. Thecontractto the
contrary asenvisagedin Section171 of the Contract Act has to bespecific.
The MPT Act nowhere provides that the general lien under Section 171 of
the Contract Act would not be availableto wharfingers in a case where the
MPTAct isapplicable.^^^
"Generalbalanceofaccount"
Serviceswhich are undertaken under Section42 of the Major Ports Trust
Act, 1963haveto be paid for and any amount so duewouldberegarded
as a part of the"generalbalanceofaccount".Thereis noreasontogivea
restrictedmeaningto theexpressiontoincludeonlythewharfagecharges
andexcludedemurrage.A comparison of theprovisionsof Section 171 of
theContractActandSections59and61 oftheMPTActshowsthatwhile
Section 171 enables the retention of the goods only as a trustee, Section 59
of theMPT.Actgivesthe right oflien,whileSection61givesthepowerto
sell thegoodsandreahseitsdues.^®^
Lienofchitfundcompany
Thenatureofthetransactionin achithasbeenheldto benotthatof
acreditoranddebtor,butcontractual.The chit fundcompanycanexer
ciselien over the chit amounts. The companywas entitled to seek the relief
ofattachmentbeforejudgmentagainsttheprizeamountof thesuretyin
anotherchit.^?"*
Setoff
Set off is different from lien in this respect that it can be carried out even
withouttherebeinganybailment.A bank hadloanedasumofmoneyto
itslandlord,whichwasstilloutstanding.Arrearsofrenthadpiledupinto
an amount more than the sum due under the loan.Adjustmentof the rent
amount againstthe loan amountwasheldto be quitealright.^^^
182. Port ofBombayvSriyaneshKnitters,(1999)7SCC359:AIR1999SC2947;Om Shankar
Biyaniv Port of Calcutta, (2002) 3 SCC168: AIR 2002 SC 1217;American President Lines
LtdVPortofBombay,AIR2004Bora162:(2004)4BoraCR809,goodsdeliveredbyship
pingcompanyto port, came within lien of the Port Trust. Port of Madras vK.P.V.Sheik
MohammedRowther& CoLtd, 1963Supp(2)SCR915 at p. 940,goodsweredeliveredto
the port by the shipownerand,therefore,theshipownerwasthebailor.
183.Portof Bombay v Sriyanesh Knitters, (1999) 7 SCC 359: AIR 1999 SC 2947.
184. Margadarsi Chit Fund Co Ltd v Sd Fayazuddin, (2001) 1 An LT 541.
185.CentralBankof India vKeshoraoNarayanraoPatil,(2005)1 CCC504(Bom).https://t.me/LawCollegeNotes_Stuffs

853. [Ss.180-181] Rights of bailee 711
Types of lien covered by the Act
The Act provides for the following types of lien:
1. Lien offinderofgoods[S. 168];
2.Bailee'slien:
[a]Particular[S.170];
{b)General[S. 171];
3. Lien of pledgee orpawnee[Ss.173-174];
4. Lien of agents [S. 221].
4.Rightto sue
5.180.Suitbybailororbaileeagainstwrongdoer.—Ifa third person
wrongfullydeprives the bailee of the use or possession of the goods bailed, or
does them anyinjury,thebailee is entitled to use such remedies as the owner
might have used inthelikecase ifno bailment had been made;and either the
bailor orthebailee may bring a suit against a third person for such deprivation
or injury.
S. 181.Apportionmentofrelieforcompensationobtainedby such
suits.—Whateverisobtainedby way of relief orcompensationin any such
suit shall, asbetweenthebailorandthebailee, bedealtwithaccordingtotheir
respectiveinterests.
Section 180 enables a bailee to sue anypersonwho haswrongfully
deprivedhim of the useorpossessionof thegoodsbailedor has donethem
anyinjury.^'^Thebailee'srightsandremediesagainstthewrongdoerare just
the same as those of the owner. An action may, therefore, bebroughtby the
bailee or the bailor."Whateverisobtainedby way of relief orcompensation
in any such suit shall, asbetweenthe bailor and thebailee,be dealt with
accordingto theirrespectiveinterests."^®^Forexample,wheretherailway
companywasinducedonproductionofforgedrailwayreceiptstodeliver
certaingoods,thecompanywasheldentitledasabaileetosuetorecoverthe
goodsfromapersonwithwhomtheyweresubsequentlypledged.^^^
"Althoughsub-bailmentisasub-bailment,the lawhasbeenslowtodefine
thecriticalaspectsoftheparties'relationship."^^'MorrisvC.W.Martinand
SonsLtd^^°has beenconsideredto be animportantstarting-point ofthe legal
186. Karnataka Electricity Board vHalappa,(1987)1TAG451, suit by bailee against carrier.
187. S. 181 and seeMorviMercantileBankLtdv UnionofIndia,AIR 1965 SC 1954, where a
pledgeeofthegoodswasheldentitledtorecoverthesameamountforthelossofthegoods
as the pledger could have recovered.
188. Purshottam Das Banarsi Das v Union of India, AIR 1967 All 549. See also Pledge by
Unauthorised Persons, below Chapter 14, under the heading "Who canPledge".A partner
shipfirmwhichwasbaileeofgoodswasallowedtosuethe thirdpersonwhodamagedthe
goods.UmaraniSenvSudhirKumarDutta,AIR1984Cal230;KavitaTrehanyBalsara
HygieneProductsLtd, AIR 1992 Del 92.
189..PeterDevonshire,Sub-bailmenton Termsand theEfficacyof ContractualDefencesagainst
aNon-contractualBailor,(1966)JBL329.
190. (1966) 1 QB 716: (1965) 3 WLR 276 (CA).https://t.me/LawCollegeNotes_Stuffs

854. 712Chapter13Bailment [Ss.180-181]
development.Theplaintiffdelivered aminkstole to afurrierto becleaned.
With his consent the stolew^asgiven to thedefendant,a reputed cleaner. The
furrierwas aware of the terms andconditionsof the trade which applied to
sub-bailment.One of thoseconditionspurportedto excludeliabilityfor loss
of ordamageto goods. The fur was stolen by an employee of the cleaner.
Theownersuedhim.
LordDenningMRspokethus:"i"Hereit was not the owner, the plain
tiff,whoentrustedthe fur to thecleaner.Shehandedit to Beder,who,in
turn,withherauthority,handedit to thecleanerswhoweresub-baileesfor
reward.MrBeder could clearly himself sue the cleaners. But can theplaintiff
sue the cleanersdirectfor themisappropriationbytheirservant."
Theplaintiff'sactionwas accordingly allowed. The sub-bailee owed a
duty to her to take care. TheCourtof Appeal noted with emphasisthatthe
legal relationship of bailor and bailee of a chattel can exist independently
of anycontract.An exemption clause in asub-bailmentcontractcould be
enforced against the owner only if he had expressly or impliedly consented
to the baileemakingasub-bailmentcontainingthoseconditions,but not
otherwise.
The decision inJohnsonMatheyandCoLtdvConstantineTerminals
Ltd^^^laid emphasis upon thisthatif theoriginalbailor decides to sue the
sub-baileedirectly, hewouldbeboundby the terms of thecontractbetween
the bailee andsub-bailee,whethertherewasconsentor not.Hecouldnot
claim to be put in abetterpositionthanthatof the bailee if thelatterhad
suedhissub-bailee.
In this case silver bullion was taken by one carrier for apartof the way
and then handed over to another for completing the last leg of the journey.
Thislattercarrier'scontractwith theoriginalcarrierhad this clausethat
he would not be liable forainyloss unless it was due to his wilful neglect or
default. The bullion was stolen from the end carrier's possession. The clause
was held to be effectiveagainstthe owner.
The Privy Council examined the doctrinalbasisof the concept of
sub-bailmentinPioneerContainer,re-}'^^
The plaintiffs contracted with freight carriers for carriage of their
goods by container. TheBillsof Lading provided that the carriers would
be entitled to sub-contract on any terms, the whole or anypartof the
handling, storage or carriage of the goods. The carrierssub-contracted
the carriage from Taiwan to Hong Kongwith the defendant shipowners.
The defendants issuedfeeder bills of lading containing the clausethat the
191. At p. 728, ibid. The consent theory was approved inCompaniaPortoraftiCommerciale
SA VUltramarPanamaIttc,(1990) 2 Lloyd's Rep 395 see at p. 405 and the need for it was
notnegativedin asubsequentcontrarydecisionin DresserU.K.Ltd vFalcongateFreight
ManagementLtd, 1992QB502: (1992) 2 WLR319(CA).
192. (1976) 2 Lloyd's Rep 215.
193. (1994) 2 AC 324: (1994) 3 WLR 1. See alsoMahkutai,The, 1996 AC 650: (1996) 3 WLR 1
(PC) on the same point.https://t.me/LawCollegeNotes_Stuffs

855. [Ss.180-181] Rightsofbailee713
BillsofLadingwouldbegovernedbyChineselawand thatanydispute
would bedeterminedin Taiwan. The vesselsankwith the cargo as the
resultofacollision.
TheplaintiffscommencedproceedingsinHongKongbyissuinga writ
inremforarrestingasistership.TheproceedingsinHongKongsuited
thembecauseiftheyhadsuedinTaiwantheywouldhavebeenobliged
topayadvancecostsandacounter-securityfortheclaimifthevesselwas
arrested. The defendants moved for stay of proceedings inHongKong. By
the time the matter was heard the limitation period in Taiwan had expired.
In reference to thecontentionofsub-bailmentand lack ofprivityofcontract
theirLordshipsofthePrivyCouncilspecificallyacknowledgedthatrights
andobligationsunderbailmentwereindependentofcontractualdoctrines.
The law ofbailmentdoes notdependfor itsefficacyupon the doctrine of
considerationandprivityofcontract.TheirLordshipsemphasisedthat the
relationshipofbailmentarisesautomaticallywhenapartyvoluntarilytakes
possessionofanother'sgoods.Anintegralelementoftherelationshipisthe
assumptionofadutytotheowneranddirectaccountabilityforanybreach.
An action would be maintained by the owner withoutreferenceto the con
tract of sub-bailment. It would be sufficientthatthe claim is founded on
bailmentalone.Thus,theprincipalbailorwasnotboundbytheexclusive
jurisdictionclause.
Visitebcexplorer.com to accesscases referred
tointhebookthroughEBCExplorer™on H EBC
seeOnline®;alongwithupdates,articles,videos, ExplOfer"^
blogsand a host of different resources. companionresourcesforlegalresearch
Thefollowingcases from thischapterare available
throughEBCExplorer™:
•DamodarValleyCorpn v State ofBihar,AIR 1961SC440; case pilot
(1961) 2SCR522
•HuttonvCarMaintenanceCo, (1915) 1 Ch 21
• Instalment Supply(P)Ltd v Unionof India, AIR 1962 SC53:
(1962) 2SCR644
• RamGulamv Govt of U.P.,AIR 1950 All 206
• Shaw &CoySymmons & Sons,(1917)1 KB 799
•UCOBankvHemChandraSarkar,(1990) 3 SCC 389
•UltzenVNicols,(1894) 1 QB 92https://t.me/LawCollegeNotes_Stuffs

856. 14
Pledge
DEFINITION
Section 172 defines pledge:
S.172."Pledge","pawnor"and"pawnee"defined.—Thebailmentof
goods as securityfor payment of a debt or performance of a promise iscalled
"pledge".The bailor is in this case called the"pawnor".The bailee is called the
"pawnee".
Thus apledgeis only aspecialkind of bailment, and the chief basis of
distinctionis theobjectofthecontract.Wheretheobjectofthedeliveryof
goodsistoprovideasecurityforaloanorforthefulfilmentof anobliga
tion, that kind ofbailmentiscalledpledge."Pawnorpledgeis abailment
ofpersonalpropertyasasecurityforsomedebtorengagement.Apawner
is onewhobeingliableto anengagementgivesto the personto whomhe is
liablea thing to be held as securityfor payment of his debt or thefulfilment
of his hability."^
Followingaretheessentialcharacteristicsoringredientsofapledge:
1.Delivery of possession
"Deliveryof thechattelpawnedis anecessaryelementin themaking
of apawn."^Thepropertypledgedshouldbedeliveredto thepawnee.^
Thus,wheretheproducerof afilmborrowedasumofmoneyfroma
financier-distributor,andagreedtodeliverthefinalprints of thefilmwhen
1.?erSHELATjoftheSupremeCouninLallanPrasadvRahmatAli,AIR1967SC1322:(1967)
2 SCR 233. Any kind of personal property which is movable and saleable can be the sub
ject-matterofpledge.OfficialAssigneevMadholalSindhu,AIR1947Bom217;ArjunPrasad
VCentralBankofIndia,AIR1956Pat32.UmaKanoriavPradipKumarDaga,(2002)2ICC
588(Cal),pawneeisincludedin thedefinitionofmoneylenderunderBengalMoneyLenders
Act.
2. SeeShelatJ at p. 1325,ibid. SuneelKumar Gupta v Punjab & SindBank, AIR2006 Utt 26:
(2006)4AIRKant(NOC)488(Utt)(NOC),goodspledgedwithcreditorremainingincus
todyofdebtor,couldnotbesaidto bepledged,deliveryofpossession,actualorconstructive,
isnecessary.Thecreditorbankwaspayingfromtheborrower'saccountinsurancepremium.
That did not establish constructivepossessionof the bank.
3.Thingsdeliveredwouldincludetheincrements,ifany,on thegoods.Wheresharesand secu
ritieswerepledged,itwasheldthatbonusshares,dividendsandinterestincomeinrespectof
thesecuritiesreceivedbythepledgeebecameapledgedproperty.Standard CharteredBankv
Custodian,(2000)6 SCC 427:AIR2000SC1488.
[714]https://t.me/LawCollegeNotes_Stuffs

857. [S.172] Definition 715
ready,theagreementwas held not to amount to apledge,there being no
actual transfer ofpossession.''Deliveryofpossessionmay be actual or con
structive/Deliveryof the key of the godownw^herethe goods are stored,
is an illustration of constructivedelivery.Where the goods are in the pos
session of a third person, who, on the direction of the pledger, consents to
hold them onpledgee'sbehalf,that is enoughdelivery.It issometimescalled
deliverybyattornment.®Deliveryofdocumentsof title which wouldenable
thepledgeeto obtainpossessionisequallyeffectiveto createapledge.This
wasclearlyrecognisedbytheSupremeCourt in MorviMercantileBankLtd
VUnionofIndia7
Certain goods wereconsignedwith theRailwaysto "self" from
Bombayfor transit toOkhla.Theconsignerendorsedthe railwayreceipts
to theappellantbank againstanadvanceofRs20,000. Thegoodshaving
been lost in transit, the bank as an endorsee of the railway receipts and
pledgeeof thegoodssuedtheRailwaysfor thelossof thegoodswhich
were worth Rs35,500. The trial court rejected the action. The Bombay
High Courtallowedrecoveryup to Rs20,000only.Therewerecross-ap
peals against this decision.
TheSupremeCourtwascalledupontodecidewhetherarailwayreceipt
couldbeequatedwith thegoodscoveredbythe word"goods"for the pur
poseofconstitutingdeliveryofgoods.SubbaRao J(afterwardsCJ),who
deliveredthe majority opinion, held, thatdeliveryof railwayreceiptswas
thesamethingasdeliveryofgoods,thepledgewas,therefore,validand the
pledgeewasentitledtosuefortheloss."In thisvastcountrywheregoods
arecarriedbyRailwaysoverlongdistancesandremainin transit forlong
periodsoftime,therailwayreceiptisregardedasthesymbolofthegoods
forallpurposesforwhichabillofladingissoregardedinEngland."^The
Courtalsoheldthat thepledgeewasentitledtorecoverthe fullvalueof the
goodslostandnotmerelytheamountofhisadvance."Apledgebeingabail
mentofgoodsassecurityforpaymentof adebt,thepledgeewillhavethe
sameremediesas the owner of the goods would have against third person
fordeprivationof the saidgoodsor injurytothem."
RamaswamiandMudholkarJJ dissented. They were of the view that
in allcasesofpledgeaneffectivechangeofpossessionisabsolutelyneces
sary.Theonlyexceptioncouldbeinfavourofabilloflading.Ifthepledger
hasgoodsinhisphysicalpossessionhecouldeffectthepledgebyactual
delivery.If,however,thegoodsare in thephysicalpossessionof a third
4. RevenueAuthority vSudarsanamPicture, AIR 1968 Mad 319.
5. See S. 149, which provides about the mode ofdelivery.
6.MadrasOfficialAssigneevMercantileBankofIndia Ltd, 1935AC53,58-59.Himmatnagar
NagrikSahakariBankLtdvSureshkumarJayantilalThakkar,AIR2016Guj68,thefinanc
ingbankofamotorvehiclewithwhomthevehiclewaspledgedbecameliableinrespectof
accidentof thevehiclethough it was registeredin the name of the owner.
7.AIR1965SC1954:(1965) 3SCR254.
8. Morvi Mercantile Bank Ltd v Union of India, AIR 1965 SC 1954 at pp.1960-61.https://t.me/LawCollegeNotes_Stuffs

858. 716Chapter14 Pledge [S. 172]
person,pledge should be effected by anotificationto thecustodianwho
should acknowledge to hold the goods for the bailee. There would thus be a
change of possession andconstructivedelivery.
It has been held by the Mysore High Court that way bills issued by a
public carrier have not yet acquired thecharacterof being documents of title
and, therefore, their deliverycannotbe regarded as pledge of thegoods.®
Pledge byhypothecation
Sometimes the goods are allowed to remain in the custody of the pledger
for a special purpose. Butthatdoes not militate against theeffectivenessof
the pledge. Reeves vCapper^"is an early illustration.
Thecaptainof a ship pledged his chronometer with the shipowner
who allowed him to use theinstrumentfor the purpose of avoyage.The
captainpledged it over again withanotherperson.
The question was whether the first pledge was valid. Thecourtheld
that it was. In the same way a constructive pledge comes into existence as
soon as the pawner, without actuallydeliveringthe goods, agrees tohold
them for the pawnee and promises to deliver them on demand. Anillustra
tion is the decision of Andhra Pradesh High Court in Bank ofChittoorv
Narasimbulu}'^
A cinema projector and accessories were pledged with a bank. The
bankallowedthe property to remainwith thepledgers,sincethey formed
theequipmentof a runningcinema.Subsequentlythepledgerssold the
machinery.
The court held that the salewas subjectto thepledge."There was a con
structive delivery or delivery byattornmentto thebank."
Similarly,wherea firm ofmerchants,havingpledgedcertainrailway
receiptswith a bank, took them back under the pretence of clearing the
goods andrepledgedthem with another bank, the Privy Council held that
the first pledge was not therebydefeated."Likewise, where certain motor
vehiclespledgedbya motordealerwereallowedto remainin hispossession
fordemonstrationpurposes, the pledge washeldto bevalid."
9.C.I.&B.Syndicate Ltd vRamchandraGanapathyProbhu,AIR 1968Mys133. Share cer
tificates are not documents of title to goods, they are goods inthemselves,LalitMohan v
Haridas,(1916) 24 Cal LJ 335; LIC vEscortsLtd, (1986)1SCC 264: AIR 1986 SC 1370.
10.(1838)5 BingNC 136: 132 ER 1057. United Bank of India v NewGlencoeTea Co Ltd, AIR
1987 Cal 143,validmortgageofmovablesvi^ithoutdeliveryofpossession.Thoughpledgeby
wayofhypothecationis not dealtwithundertheAct,hypothecationis avalidsecuritycre
ating similar rights and duties as those created by a pledge. Haripada Sadhukhan v Anatha
Nath Dey, AIR 1918 Cal 165: (1918) 22CWN758.
11.AIR1966AP163.
12. Mercantile Bank of India v Central Bank of India, 1938 AC287(PC).
13. Appa Rao vSalemMotors andSaleemRadios, AIR 1955Mad 505. In this respect apledge
becomescloser to ahypothecationbecausein a transaction ofhypothecation,the material
remains with the borrower, the lender getting only the right to seize on default and to realise
the value. He is not liable for any accident caused by the motorvehiclewhich is under hishttps://t.me/LawCollegeNotes_Stuffs

859. [S.172] Definition 717
In such cases the other creditorscannotclaim anything from such goods
unless the claim of the pledgee is first satisfied."
2. Inpursuanceofcontract
"Pledgeis aconveyancepursuant to acontract,and it isessentialto a
validpledgethatdeliveryof thechattelshall bemadebythepledgerto the
pledgeeinpursuanceofthecontractofpledge.""Butitisnotnecessarythat
deliveryofpossessionand the loan should becontemporaneous."Delivery
and advance need not be simultaneous and a pledge may be perfected by
deliveryafter theadvanceismade."^®Deliverymay be madebeforeor in
contemplationof anadvance,w^hichripensinto apledgeas soon as the
advance is made. For instance, in Blundell Leigh vAttenborough:"
OnNovember1, 1919,the plaintiffhanded herjewelleryto one Miller
to value itandlet herknowwhatoffer hecouldmakeas tolendingher
money;he wastokeepthejewelleryassecurityif hemadetheadvance.
On thesameday Millerpledgedthejewellerywith thedefendants,a
pawnbroker,whoingoodfaithadvanced£1000 on it. OnNovember5,
Milleradvanced£500 to the plaintiff on the security of the ring. Miller
died.Theplaintiffcameto knowthefacts.Shepaid the amountshehad
borrowedand sued thedefendantforreturnof her jewellery.
Thecontentionon herpart wasthat whenshegavethejewelleryto Miller
forexamination,he onlybecameagratuitousbaileehavingno right to deal
with it. Therewasnovalidpledgethen.Subsequently,whenheadvancedthe
money,novalidpledgecouldariseashehadalreadypartedwiththeposses
sionofthegoods.Butthecourtheldthatthepledgewasvalid.Deliverymade
onNovember1 was a gooddeliveryfor thepurposeofcreatingapledge,
wheneverthatpledgewascreated."It isclearthat theplaintiffintended,
when she handed over thejewelleryto Miller, to create a validpledgeas
betweenhimandher from themomentwhenhehandedherthemoneyby
way of loan which she was prepared toaccept."^®
hypothecation;BankofBarodavRabariBachubhaiHirabhai,AIR1987Guj1.Asuretycan
not claim the benefitof S. 141 when the security is in the shape of hypothecated goods. Bank
of India vYogeshwarKantWadhera,AIR 1987P&H176.
14.BankofIndiavBinodSteelLtd,AIR1977MP188.BombayMercantileCoopBankLtdv
PaisaFund GlassWork,(2002)5 BomCR461, goodswerestoredin godownforshipmentby
themanufactureron the basis of which thebankissuedirrevocableletters of credit. The valid
ityofdeliveryofpossessionandofpledgewasnotaffectedbythefactthat themanufacturer
developed a dispute with hisexportagent.
15.SeeBankersLJinBlundellLeighvAttenborough,(1921)3KB235(CA).BankofRajasthan
LtdvHajarimalMilapC.Surana,(2005)10SCC238,deliveryofpreciousstonesto thelend
ingbankforsaleandrealizationoftheamounthadtheeffectofcreatingpledgeforsecuring
repaymentof loan.
16.ShelatJ inLallanPrasadvRahmatAli,AIR1967SC1322,1325.Possessionmaybedeliv
eredwithinreasonabletime after theadvance.Jyoti Prakash Nandi v Mukti Prakash Nandi,
33IC891:(1917)22CWN297, pledge of Government promissory notes.
17(1921) 3 KB235(CA).
18. SeeBankersLJin BlundellLeighv Attenborough,(1921)3KB235, 240(CA).https://t.me/LawCollegeNotes_Stuffs

860. 718Chapter14 Pledge [Ss. 173-174]
RIGHTSOFPAWNEE
1.Rightofretainer[Ss.173-174]
S. 173.Pawnee'srightofretainer.—Thepawneemay retainthegoods
pledged,not onlyfor apaymentofthedebtortheperformanceofthepromise,
but for the interest of the debt, andallnecessary expenses incurred by him in
respectof the possession or forthepreservation ofthegoodspledged.
S. 174.Pawneenottoretainfordebtorpromiseotherthanthatfor
whichgoodspledged:Presumptionincaseofsubsequentadvances.—The
pawnee shall not, in the absence of a contract to that effect, retain the goods
pledged for any debt or promiseother than the debt or promiseforwhichthey
are pledged; but such contract, inthe absence of anythingto thecontrary,shall
be presumed in regard tosubsequentadvances made bythe pawnee.
The firstimportantright of a pawnee is the right to retain the goods
pledgeduntil his dues are paid. He has a right to retain the goods not only
for payment of the debt or perforrnance of the promise, but for the interest
dueon the debt, and allnecessaryexpensesincurred byhim in respectof the
possession or for the preservation of the goodspledged."
Thepledgeecan retain the goods only for the payment of that particu
lar debt for which the goods were pledged and not for any other debt or
promise, unless there is a contract to the contrary. Where,however,after a
pledgeis created,asubsequentadvanceismadewithout any othersecurity,a
contract to burden the same goods shall bepresumed.^"The right of retainer
endson proper tender ofpayment.If thepledgeerefusesa propertender,
heopenshimself up for pledger'sremediesof seekingreturnand absolute
liabilityof baileeunderSections160and161 forfailuretoreturnintime.^^
Specialandparamountinterestofpledgee
The right of retainer is thus in the nature of aparticularlien. Yet lien
isdifferentfrompledge."A pawn orpledgeis an intermediate between a
19. Thisright of thepledgeehas to bedistinguishedfrombailee'slien.Apledgecreatesaspecial
interest in the property pledgedin favour of thepledgeegivinghim the right tosell,but a lien
is only a right to retain. Alliance Bank of Simla v GhamandiLaiJainLai,AIR 1927 Lah '
408;(1927)8 Lah 373. A mortgage is different from pledge in this sense that the legal inter
est in the propertybecomesvestedin themortgageesubjectonlyto themortgagor'sright of
redemption,whereasapledgegivesto thepledgeeonly aspecialinterest. Metonic India (P)
LtdVKrishnaBehl,AIR1997P&cH297,thepledgeebank tookoverpossessionof the goods
in theple.dgor'sgodovifnandlockedit, that did not amounttosub-lettingof thepremisesfor
the purposesofevictingthelesseeunder the East PunjabUrban RentRestrictionAct, 1949.
20.CowasjiMuncherji Banaji v Official Assigneeof Bombay, AIR 1928 Bom 507.
21.Bankof NewSouthWalesvO'Connor,(1889)LR 14AC273.SeealsoStateBankof
HyderabadvGadirajuKamaBhaskaraViswanadhaRaju,AIR1993A?337,thepledgorbya
willtransferredhisinterestin goldarticleslyingwith the bank to hislegalrepresentative,who
paid off the wholeclaimof the bank. The bankbecamebound to return the securitywithout
demandingsuccessioncertificate.Thepledgeeshouldexercisehis power in a fair manner and
not maliciously. Bank ofIndiavLekhimoniDas,(2000)3 SCC 640: AIR2000SC 1172.https://t.me/LawCollegeNotes_Stuffs

861. [S. 174] Rightsofpawnee719
simple lien and amortgage."^^"Thepawneegets a specialpropertyin the
goods pledged. The generalpropertyremainsin thepawnerand wholly
reverts to him ondischargeof the debt. Therighttopropertyvests in the
pledgee only so far as isnecessarytosecurethedebt."^^
Explainingthenatureof the specialpropertyin the goodswhichis
acquiredby the pledgee inBankofBiharvStateofBihar^'^the Supreme
Courtobserved:"Thisspecialpropertyorinterestis to bedistinguished
from the mererightofdetentionwhichtheholderof a lien possesses, in
thatit istransferableinthe-^ensethatapawneemay assign or pledge his
specialpropertyorinterestin the goods.Wherejudgmenthas beenobtained
againstthepawnerof goods and execution has issuedthereon,the sheriff
cannotseize the goodspawnedunless he satisfies the claim of thepawnee.
On thebankruptcyof thepawnerthe pawnee is a securedcreditorwith
respecttothingspledged."
Thus, so long as the pawnee's claim is not satisfied noothercreditorof
the pawner has any right to take away the goods or their price. Inthatcase,
the goods which were under the pledge of abankwere seized by the State of
Bihar. It was heldthatthe seizure could not deprive the pledgee of hisright
to realise theamountfor which the goods were pledged and, therefore, the
State wasboundto indemnify him up to theamountwhich would have been
realised from the goods. ThecourtalsopointedoutthattheIndianlaw in
this respect was not different from the Englishlaw.^-'
22.ShelatJ inLallanPrasadvRahmatAlt, AIR1967SC1322:(1967)2 SCR233.
23.SarvopariInvestments(P) Ltd v Soma Textiles &IndustriesLtd, (2003) 4ICC604(Cal),
pledge of shares with authority to pledgee to exercise voting rights. This right could not be
takenaway from thepledgee.
24.(1972)3SCC196:AIR1971SC1210.
25. Bank of Bihar v State of Bihar, (1972) 3 SCC196,200:AIR 1971 SC 1210. To the sameeffect.
StateofA.P.v Andhra Bank Ltd, AIR 1988 AP 18, the court pointing out that English law is
no different in this respect; Central Bank ofIndiav GrainsandGunny Agencies, AIR 1989
MP 28, the bank not being able to deliver goods, nor account for their loss, washeldentitled
to no relief;SBIv N.Sathiah,AIR 1989Mad279, the pledgee is entitled to a clean decree and
not one linked with the genuineness or spuriousness of the pledged articles; workers' claims
not givenprecedenceover that of the pledgee'sright.Central Bank of India v Authority under
thePaymentof WagesAct, 1986 SCC OnLine Mad 213: (1987) 100LW343.
S.Y.C.W.&S.Mills, re, AIR 1969 Mys 280. A.NarayanaPaiJ observed as follows: —"In
the case ofhypothecationor pledge of movable goods, there is no doubt about the cred
itor's right to take possession, to retain possession and to sell the goods directlywithout
the intervention of court for the purpose of recovering his dues. The position in the case of
regular pledge completed bypossessionis undoubted and set out in the relevant sections of
theContractAct.Hypothecationis only extended idea of pledge, the creditorpermittingthe
debtor to retain possession either on behalf of or in trust for himself (the creditor)."Sfate
SBIVState of Rajasthan, 1995AIHC4314 (Raj), here the bank had lien over the goods
in question. The attachment of such goods for payment of State Taxes was held to be ille
gal. BankofBarodav Collector, 1993 Cri LJ 3503 (MP), attachment of goods under bank's
pledgenot lawful evenif the trader who pledgedthem was violatingthe limits of the Essential
CommoditiesAct, 1955. O.KonavalovvCommander,CoastGuardRegion,(2006)4 SCC
620, property pledged was seized by the State understatutorypower, lien on the property for
the purpose of payment of pawnee remainedeffective.
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862. 720Chapter14 Pledge [S. 174]
A sugarmanufacturingcompany had pledged its stock of sugar with the
lending bank. It was heldthatthe rights of thebankover thepawnedsugar
had precedence over claims of the CaneCommissionerforpaymentto cane
growers and claims of workmen. In the absence ofwindingup of the com
pany, their claimsrankedas those ofunsecuredcreditors.Asugar mill
tookbankloan by pledging sugar stock. The stock was sold inauctionpur
suantto a recoverycertificateissuedagainstthe mill forpaymentofsugar
cane growers. Provident fund dues of mill employees were alsooutstanding.
It was heldthatdisbursementof saleproceedsfirsttowardsPF duesand
cane growers was improper. The pawneebankhad to be given precedence
overotherdues.^^
Records provedthatsugarfactorieshadenteredinto ataggingagree
ment as per Section 17(5) of the UP Sugarcane (Regulation of Supply and
Purchase) Act, 1953whichprovidedthatanadvanceobtainedon the secu
rity ofstockofsugarwhichisproducedor to beproducedhas to be uti
lised forpaymentof dues of cane growersirrespectiveof anyotherfinancial
agreementinrespectof the same stock of sugar. It was heldthatfinancial
institutionswouldbeentitledtoasserttheirrights onlyafterdues of cane
growers as pertaggingagreementwere dulyfulfilled.^^
Hypothecateehas nodirectrightofseizure
Wherethe pledge is by way ofhypothecation,thecreditorcannotdirectly
seize the goods byenteringpremises orotherwise.He has to do so either
withtheconsentof theborrowerorthroughacourtorder.Thecreditordoes
nothave therighttoenterthepremises,lockandseal the same. InUnion
ofIndiavShenthilnathan^^themostconspicuousfeatureof theagreement
wasthatin case theborrowercommitteddefaultinpaymentof the debt as
stipulated,the lender was atlibertyto seize the goods. Thecourtheldthat
thispowerwasnotdirectlyexercisable. Nopossessionwas delivered on the
date when thehypothecationdeed wasenteredinto.Whatwascontemplated
was afutureovertacton thepartof thecreditortosequesterthegoods,if
sodesiredandthattoo by aprocessknownto law. At best therightwhich
theplaintiffhadundertheagreementwas to file asuiton thedebtandafter
obtaininga decree toproceedagainstthepropertyspecified inrealisation
ofthedecree.^"
26.CentralBankofIndiavSiriguppaSugars&ChemicalsLtd,(2007) 8 SCC 353: AIR2007SC
2804.
27.SahyadriCoopCreditSocietyLtdvStateofMaharashtra,AIR2016SC1580. '
28.RashtriyaKisanMazdoorSangathanvStateofU.P.,AIR 2015NOC423 (All).
29.(1977)2MLJ499.
30.FollowedinSukraShoeFabricvUCOBank,1990SCCOnLineMad567;(1991) 1LW452
(Mad). Thecourtalsopointedoutthatsuchclaimscannotberaisedthroughwritjurisdiction
even when theclaimisagainstGovernmentagencies, such asnationalisedbanks,because
thesubject-matterof thelitigationis purelycontractual.Where the financier who ishypoth
ecatee of thematerialfinancedby himtakespossessionondefaultinlawfulmannerandin
accordancewiththetermsof theagreement,hecannotbechargedwiththeftunderS. 379 of
theIndianPenalCode,1860,ShriramTransportFinanceCoLtdv R.KhaimllaKhan,(1993)https://t.me/LawCollegeNotes_Stuffs

863. [S-174] Rightsofpawnee721
Wherethecontractprovidedthatthehypothecateewouldhavethepower
to takepossessionof and sell hypothecated goods without intervention of
thecourt,itwasheldthatadisputeresultingfromtheexerciseofthispower
was outsidethe scopeof determinationin a writjurisdiction.^^
Where the purchase of avehiclewas financed, and the financier neither
gaveinformationas to the latestpositionofinstalmentsnorgaveanynotice
beforeseizureofthevehiclesbyforce,the factbeingthat allinstalmentshad
alreadybeenpaid, theseizurewas held to beillegal.The order of the trial
courtawardingdamages to theextentof Rs50,000for breach ofcontract
by the financier wasupheld.^^
Aclausein theagreementpermittingthefinanciertoforfeitpayments
alreadymadeintheeventofadefaultwasheldto bevoid.Theamountspaid
by theborrowerwould have to beaccountedforandcreditedto hisaccount.
The right of the financier is only to recover the balanceamount.^^
Dutyofcare
Wherethe bank admitted that thegoodsinquestionwereactually
hypothecatedto it andsincethegoodswerenottraceable,the High Court
said that the courts belowwere correct in holding that the goods were lost.
1 Kant LJ 62(DB).Such right has also been upheld inSBIv S.B. Shah Alt, AIR 1995 AP
134, including the right of sale without intervention of court.HaripadaSadhukhan v Anatha
Nath Dey, AIR 1918Cal165:(1918)22CWN758, hypothecation is not a creation of stat
ute, security is created by the intention of the parties.Nanhujiv Chimna, (1911) 10IC869,
hypothecation withoutdeliveryofpossession,validsecurity.Chinni Venkatachalam Chetti
VAthivarapuVenkatramiReddi,AIR 1940 Mad 929, under S. 3 of the Transferof Property
Act, 1882, there can be valid mortgage ofmovableproperty, mortgage of crop in this case,
SimlaBankingCo v Pritams, AIR 1960Punj42,validityand points ofdifferencewithpledge
emphasised.Nadar Bank Ltd v Canara Bank Ltd, AIR 1961 Mad 326, pledging of godown
withcertainpowersofcontrolinfavourof the bank,pledge,nothypothecation.GopalSingh
Hira Singh v Punjab National Bank, AIR 1976 Del 115, hypothecatee is deemed to be in
possessionof the goods. Union of India v C.T. Shentilanathan,(1978)48 Comp Cas 640,
hypothecation accepted in law merchant by long usage and practice. Ahmad Alimohomed
Khoja,re, AIR 1932Bom613,rightsofhypothecateenotinferiorto those ofmortgagee.
Hypothecation is aspeciesof pledge which creates a charge in favour of the hypothecatee,
HindustanMachine Tools Ltd vNedungadiBank Ltd, AIR 1995 Kant 185.S.Y.C.W.& S.
Mills,re, AIR 1969 Mys 280,hypothecationprovidesa securitywhich the bank can use by
making private sale in accordancewith the terms of the hypothecation deed. Tarun Bhargava
VStateofHaryana,AIR 2003P8cH98: ILR (2003) 1P8cH26, hypothecatee should take
possession either with consent or with order of court. Shibi Francis v StateofKerala, AIR
2007 Ker296, bank financedvehicle,a term that the banker'srepresentativewould haveright
of accessto the place where thevehiclewas lying and seizeit, the court said that such power
could not be used through hired hoodlums or goondas, it could be exercised only through
police action, the police was obliged to take report against any such direct action.
31.StateBankofMysore v K.Amarnath,(2003) 2 Kant LJ 31 (DB). BusinessBankersv K.
Anandan, (2005) 1 KLJ97, vehiclerepossessedwithout terminating hire-purchase agreement
andwithoutinformingthepurchaserabouttheintentionto sell and sale also affected abso
lutely in a haphazard manner. The procedural formalities should have been complied with.
32.MuthootLeasing & Finance Ltd v Vasudeva Publicity Service, AIR 2003 Del 372.
33. Tarun Bhargava v StateofHaryana,AIR 2003P&H98: ILR (2003) 1P&H26, the financier
can be held criminally liable if he forcibly seizes the vehicle on default in the payment of an
instalment.https://t.me/LawCollegeNotes_Stuffs

864. 722Chapter14Pledge [Ss.175-176]
It was for the bank to showthatsufficientcare was taken. But noproofwas
offered. Thebankwas held liable for loss of the goods while they were in its
possession.^'*
2. Right toextraordinaryexpenses[S.175]
Thepawneeisentitledtoreceivefromthepawnerextraordinaryexpenses
incurredbyhimforthepreservationofthegoodspledged.Forsuchexpenses,
however,hedoesnothavetherighttoretainthegoods.Hecanonlysueto
recoverthem.Thisrightisprovidedfor inSection175whichis asfollows:
In anagreementoftermloanandhypothecationwithabank,therewas
noprovisionempoweringthebanktodebitanyamountbywayofxerox
chargesorlegalfees.Thecourtdidnotpermitthebanktodebitsuch
amounts.
S.175.Pawnee's right as toextraordinaryexpensesincurred.— The
pawneeisentitledtoreceivefromthepawnorextraordinaryexpensesincurred
byhimforthepreservationofthe goods pledged.
3. Right to sell[S.176]
Section176whichprovidesfor this important right is asfollows;
S. 176.Pawnee'srightwherepawnormakesdefault.—Ifthe pawnor
mal<esdefault in payment of the debt, or performance, at the stipulated time,
of thepromise,in respect of which the goods were pledged, the pawnee may
bringa suitagainstthepawnoruponthe debt orpromise,andretainthe goods
pledgedasacollateralsecurity;or hemaysellthethingpledged,ongivingthe
pawnor reasonable notice of the sale.
Iftheproceedsofsuchsalearelessthan the amount due in respect of the
debt orpromise,thepawnorisstillliableto paythebalance.Ifthe proceeds
of the sale are greater than the amount so due, the pawneeshallpayoverthe
surplustothepawnor.
Uponadefaultbeingmadeby thepawnerin thepaymentof the debt
orperformanceof thepromise,thepledgeegetstwodistinctrightsunder
Section176 of the Act.Firstly,thepledgeemay sue upon the debt and retain
thegoodsas acollateralsecurity.^®Secondly,hemaysellthegoodsafter
reasonablenoticeof theintendedsale tothepawner.^^
34.CanaraBankvBhavaniOilCo, AIR2004Ker 273: (2004) 2 BC 192(KerDB).
35. Syndicate Bank v Mahalaxmi Ginning Factory, 2004 AIR Kant HCR 3155.
36. S.K. EnggWorksvNeu^Bank of India, AIR 1987P&H.90:(1986-92)90 PLR 546;
ChandradharGoswamivGauhatiBank Ltd, AIR 1967 SC 1058. A pledgeecannotbe non
suitedonlybecauseinsteadofrealisingthesecurity,he isproceedingagainstthepledger
personally.KamlaPrasad Jadawal v Punjab National Bank, AIR 1992 MP 45.
37.The right ofpersonalactiondoesnot takeawaythe rightofrealisingthesecurity.Mahalinga
Nadar v GanapathiSubbien,ILR(1903-05)27 Mad 528.Wherethe amount wasfully
recoveredpersonallyfrom theborrower,a claimof penal interest after fullrecoverywas not
allowed, S.N. Choubey v Central Coalfields Ltd, AIR 2001Jhar13.https://t.me/LawCollegeNotes_Stuffs

865. [S. 176] Rightsofpawnee723
The right to sue is apersonalaction and rests upon thecontractof loan
quiteapartfrom the pledge.Butuntil the money due isrecovered,the pledged
goods may beretained,thoughthey would have to besurrenderedwhen the
loan is realised. If by reason of his own act, the pledgee is unable toreturn
the goods, hecannothave judgment for the debt. This was laid down by the
SupremeCourtinLallanPrasadvRahmatAliP
The defendant borrowedRs20,000from the plaintiff on a promissory
noteandgave himaeroscrapesworthaboutRs35,000assecurityfor
the loan. Theplaintiffsued for repayment of the loan, but was unable to
producethe security, having sold it,and,therefore,hisactionfor theloan
wasrejected.
ShelatJafterexaminingthe rights of thepartiesto a pledge, cited the
following passage from the decision of theHouseof Lords inTrusteesofthe
PropertyofEllis&Co vDixonJohnson:^^
"Ifacreditorholdingsecuritysues for the debt, he isunderan obliga
tiononpaymentof the debt tohandover the security, andthatif,having
improperlymade awaywiththesecurityhe is unable toreturnit to the
debtorhecannothavejudgmentfor the debt."
"Ifit wereotherwise,"ShelatJadded,"theresultwouldbethathe
wouldrecover the debt and alsoretainthe goods pledgedandthepawnerin
such a casewouldbe placed in apositionwhere heincursagreaterliability
thanhebargainedforunderthecontractofpledge.""*"
TheOrissaHighCourtfollowed this decision so as to holdthatabank
holdinggold by way ofcollateralsecurityandsuing theborroweron the
38. AIR1967SC 1322: (1967) 2 SCR233.Thegoodsareretainedin such a case as acollateral
security. See S.K. Engg Works v New BankofIndia,AIR1987P&H90:(1986-92)90 PLR
546, the right of thebankto sue, whileretainingthe goods as acollateralsecuritysubject, of
course, to thepreconditionof being able toreturnthe things pledged allowed. BankofBaroda
VRabariBachubhaiHirabhai,AIR1987Guj 1, thebankdoes notbecometheownerof the
hypothecatedgoods, it has only the right to sell. T.S. Kotagi vTahsildarGadag,AIR 1985
Kant 265, the right to sue can be exercisedwithoutnotice, but not right of sale:TapangaLight
Foundry vSBI,AIR 1987 Ori 174. No right to repayment unless securities produced where
the pledgee was in possession; Union Bank of India vDebendraNath RoyChoudhury,AIR
1992Gau88.
39.1925AC 489. At p.1325,ibid.
40.FakhruddinvStateofM.P., AIR 1967 SC 1326. The right of sale arises only by reason of
the pledge. It has been held by the SupremeCourtthatgiving a loan and keeping goods in
stock does notamountto pledge for thepurposesof S. 176.P.S.N.S.AmbalavanaChettiarv
ExpressNewspapersLtd, AIR 1968 SC741:(1968) 2 SCR 239. Where the goods were deliv
ered by agodown-keeperunderthe order of theControllerofFoodgrains,he notpointingout
that he was only a pledgee, he was notafterwardspermittedto raise the plea of pledge. Ram
PrasadvStateofM.P.,(1969) 3 SCC 24: AIR1970SC 1818.Thecourtdoesnotrestraina
pledgee from exercising his right of sale.StateBankofBikanerv FirmBallabhDas,AIR 1984
Raj 107. The KeralaHighCourtin its decision inDenaBank vGlorphisJames, (1993)2-KLT
105: (1994) 1 BC240distinguishedthis case from the decision in LallanPrasadvRahmatAli,
AIR1967SC 1322 and heldthateven where thesecurityis lost onaccountof the negligence
of thebank,it would not lose its right to recover back the loanamountif there is clause in the
agreement exempting the bank from liability for loss caused by negligence.
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866. 724 Chapter 14 Pledge [S.176]
promissorynote would get adecreeconditionalupon return of the goldto
theborrower''^andadecreeforsaleofthearticlesiftheborrowerdoesnot
satisfythedecree.''^Wherecertainfixeddepositreceiptswerepledgedwith
a bank as a collateral security, they being in the nature of goods, it was held
that the bank couldexercisethe option of retaining them andfilea suit for
recoveryof the loan. It was also heldthat the bank was notobligedto adjust
the monthly instalments of FDR refunds towards the loanamount.''^Thus
the creditor has two rights which areconcurrentand the right to proceed
against the property is not merely accessoryto the right to proceed against
the debtorpersonally.The same principles have been held to be applicable
to cases ofhypothecationor mortgage of movable property."''' Section 176
has been held to bemandatory.''^Where the bank took over possession of
thehypothecatedtruck but thereafter neithersold it accordingto the agreed
terms nor took care of it, leaving it in open place, the bank was liable for the
extraordinarydepreciation in the value of thevehicle.''^
Where the bank provided money for purchase of a lorry and also paid
insurance premium and subsequently the owner reported loss by theft, it
was heldthattheinsurancecompany was liable to pay theinsurancemoney
to the bank irrespectiveof the fact that the insurance was not in the name of
the bank. Thebankwas thehypothecateeandboththeinsurancecompany
and theborrowerwere joint debtors, theinsurancecompanyto theextentof
insuredvalueandtheborrowerforthebalance.''^
Wherecertainshares were pledgedwiththebank,it was heldthatthe
bankhad the right to sell themwithoutinterventionof thecourt.Thecourt
alsodirectedthecompanytoregisterthetransferbecausewithoutsuch reg
istrationthe title of thepurchasercould not beperfected.''^
The tworightsaredisjunctive
The pawnee's two rights, namely the right to sue thepawnorforpersonal
recovery orresortto sell thesecurityafterreasonablenotice, aredisjunctive,
beingindependentof eachother.The factthataperiodisprescribedfor fil
ing suitwouldnotmeanthattheprescribedperiodwouldalso apply to the
alternativeremedy of selling thegoods.''^
41.DodlaBhaskarRaovSBI,AIR1992Ori161.
42.HaridasMundravNationalandGrindlaysBankLtd,AIR1963Cal132.
43.SBIVNeelaAshokNaik,AIR2000Bom 151:(2000)1MahLJ801.
44.GulamhussainLaljiSajanvClaraD'Souza,AIR1929Bom 471.
45.OfficialAssigneevMadholalSindhu,AIR1947Bom 217.
46.CentralBankofIndiayAbdulMujeebKhan,1997AIHC299{MP).See alsoPunjabandSind
BankVNagrathIndustries(P)Ltd,AIR1996MP32,goodshandedover to thebankby the
judgment-debtor,thebankshouldhave soldthemimmediatelyandnotretainedthem.Interest
notallowedfrom the date onwhichthegoodsweremadeavailableforrealisingsaleproceeds.
47.SBIvSureshKumar,1995AIHC3889.
48.HindustanDevpCorpnvModiluftLtd,(2005) 4CHN14 (Cal).
49.KM.HidayathullavBankofIndia,AIR2000Mad251:(2003)2 BC 484.https://t.me/LawCollegeNotes_Stuffs

867. [S.176] Rightsofpawnee725
Thesecurityholderis not bound toproceedagainstthesecurityfirstor
surrender it before maintaining a summary suit against thebuyer/"
Priorityofemployees'PPdues
Theemployerhaddefaultedindepositingemployees'PFdues.The prop
ertyofemployerwaspledgedwitha bankbywayofsecurityforrepayment
of a loan. It washeldthat such property could be attached and sold for
recovery of PFdues.^^
Requirement of notice
Alternatively,thepledgeemaysellthegoods.Beforemakingthesaleheis
requiredtogivetothepawner,areasonablenoticeofhisintentiontosell.^-
Therequirementof"reasonablenotice"isastatutoryobligationand,there
fore,cannotbeexcludedbyacontactto thecontrary.Thus,forexample,
in a casebeforetheAllahabadFiighCourt:
Oneofthetermsofanagreementofloanenabledthelendingbankerto
sellthesecuritieswithoutanynoticeto thepawner.Thepawnerdefaulted
inpayment.Thebanksentareminder,butthepawneraskedformore
time. The bank thereupon disposed of the securities.
The sale was held to be bad in law."WhatiscontemplatedbySection 176,"
the court said, "is notmerelyanoticebut a'reasonable'notice,meaning
therebyanoticeofintendedsaleofthesecuritybythecreditorwithinacer
tain date so as to affordan opportunity to the debtorto payup the amount
withinthe time mentioned in thenotice."^"*Thecourtrefused to agreewith
thebank'scontentionthatthe sale noticeshouldbeinferredfrom thepawner's
50.SurajSanghiFinanceLtd vCredentialFinanceLtd,AIR2002Bom481.
51.MaharashtraStateCoopBankLtd v Astt.ProvidentFundCommr,(2009)10SCC123.
52. Kersarimalv GundabathulaSuryanarayanmurthy,AIR 1928 Mad 1022, onceproper notice
isgiven,nofurtherauthorisationorpermissionofthepawnertoeffecttheactualsaleis
needed,norheisboundtodisposeofwithinreasonabletimethereafter;MotilalBabulalv
Lakhmichand,AIR1943Nag234.SunderlalSarafvSubhashChandJain,(2005)3MPLJ
73; AIR 2006 MP 35: 2006AIHC1323(MP),the word "sale" means intended sale and not
asaleactuallyarrangedforaparticulardate.Anoticeunderthesectiondoesnotrequirea
specificationofthedate,timeandplaceofsale.BharatBankLtdvSheojiPrasad,AIR1955
Pat288,anoticewasvalidthoughitstatedonlythatsalewouldbearranged.Theplaceofthe
bank wasin asmalltown.It wasnecessarythat thesaleof thecostlymetalwasto beheldin
asuitablemarket.
53.Pledger'srighttoredeemcannotbetakenaway,norhecanbeforeclosedfromredeeming
thepledge.CartervWake,(1877)LR4ChD605.Wherethepledgeeacquiescesinthesale,
itamountstoratificationof sale withoutnotice.MadholalSindhuvOfficialAssigneeof
Bombay,AlK1950veil.
54. Prabhat Bank v Babu Ram, AIR 1966 All 134; Sri Raja.KakralPuniVenkatasudarasana
Sundara etc. v Andhra Bank Ltd,(1960)1 An WR 234. It is enoughif the noticecarries an
intimationoftheproposedsale,whetheritissignedornot,orwhetheritspecifiestheamount CASEPILOT
due or not have been held to be immaterial. A. Srinivasulu Naidu vGajrajMehta, (1990) 1
MLJ188;SankaranarayanaIyerSaraswathyAmmalvKottayamBankLtd,AIR1950TC66,
noadvancearrangementforsalenecessary;HulasKunwarvAllahabadBankLtd,AIR1958
Cal644.Salewithoutnoticeisvoidasbetweentheparties.OfficialAssigneevMadholal
Sindhu,AIR1947Bom217;SankaranarayanaIyerSaraswathyAmmalvKottayamBankhttps://t.me/LawCollegeNotes_Stuffs

868. 726 Chapter 14Pledge [S.176]
request for time. "A notice of the character contemplated by Section 176
cannot beimplied.Suchnoticehas to beclear andspecificin language
If theproceedsofsalearelessthan the amount duein respectof the debt
orpromise,the pawner is stillliableto pay thebalance.If the proceeds of
saleare greaterthan the amount so due, thepawneeshallpay overthe sur
plus to thepawner.
In a case before the Patna HighCourt,^^a banker, with whom some
jute bales werepledged,sold them in theexerciseof his right of resale, but
refundedthe price to thebuyerwhen the latterrejectedthegoodson the
ground that they contained "gudri" and notmerelyjute.The banker resold
thegoodstoanotherbuyerat alowerfigureand thensuedthepawnerfor
thebalancestilldueafteradjustingthesaleproceeds.Thecourtrejectedhis
action.Heshouldhavereferredto thepawnerbeforerefundingtheprice.
UntwallaJ said: "I find no principle or authority to support the contention
that all that wasdonebythe bank in regardto thedisputewasincidentalto
thepowerof sale of thebankunderSection176. Itwouldbedisastrousfor
thecommercialworldtoacceptandupholdit to begood."
The right of salecan beexercisedevenagainst a time-barred debt. In lieu
ofsale,the court can order the pawner to pay off thetime-barreddebt'but
suchanordermustinevitablybeaccompaniedwithanorderto thepawnee
toreturnthe pledgedarticles.^'
The fact that the date, time and place of sale were not mentioned in the
notice did not have the effect of rendering the notice to beineffective.No
paymentwasmadeevenafterreceivingnotice.Requestingthe bankto post
ponesalecouldnotdeprivethe bank of its right toproceedwith thesale.^^
Supposingthat aduenoticeofsalehasbeengivenso that thepledgee
getstherighttosell,mayhebuythegoodshimself?ThePunjabHighCourt
held,^°followingaPrivyCouncildecision"thatasaletothepledgeehimself
is notvoid.Itdoesnotterminatethe contract ofpledgeso as toentitlethe
pledgertohavebackthegoodswithoutpaymentofloan.Butthepledger
mayholdthepledgeeliableforanylosshemayhavesufferedbyreasonof
that fact, forexample,that thegoodshavebeengivenavaluelessthan their
marketprice.
Ltd, AIR1950TC 66,noticeto the suretyfor thepledgernotneeded,but itwouldbe better
toinformhimtoosoastogivehimtheopportunitytopayandsavethesecurity.
55.Saleofitemsbyacoldstoreaftergivingpropernoticeandadvertisement,depositornotturn
ingup,saleproperandbindingonhim,HimanchalFruitGrowersCoopMktg&Processing
SocietyLtd vUpperIndiaFoodPreservers&Processors(P)Ltd,AIR1984HP18;SriRama
FinanceCorpnvChajlaYellaiahReddi,(1976)1 AnWR107,thepledgeeis not boundtosell
immediatelyafter the date on whichnoticeperiodexpires.
56. S. 176 (2ndpara).
57.LuxmiNarayanArjundasvSBI,AIR 1969 Pat 385.
58. T.S.Kotagiv Tahsildar Gadag, AIR 1985 Kant 265.
59. SunderlalSarafvSubhashChandJain,(2005)3MPLJ73: AIR 2006 MP 35: 2006 AIHC
.1323(MP).
60. DhaniRam &Sonsv FrontierBankLtd, AIR1962Punj321,322-23.
61.NeckramDobey v Bank ofBengal,ILR(1891)19Cal322, 323.https://t.me/LawCollegeNotes_Stuffs

869. [S. 177] Rightsofpawnee727
Lossofsecuritydue to pledgee's negligence
Wheregoods are lost due to the negligence of the pledgee, theliability
of the pledger isreducedto theextentof the value of such goods. In a case
before the SupremeCourt;
Certaingoods in thegodownof afirmwereunderthe pledge of a
bank.Thegodownwasinsuredagainstfire. Apartof them wasdamaged
by fire. Thebankreceivedinsurancemoney to theextentof the fire.
Thebankwas obliged by thecourtto givecreditto the firm in its cash-
creditaccountfor theamountso received.Thecourtalsopointedout
thatbankwasnotentitledto hold itunderlienagainstpartners'personal
accounts.The goods were of the firm. They were not the goods of thepart
ners. They were not offered assecurityfor theindividualdebts of thepart
ners. The goods were pledgedagainstthecash-creditfacilityallowedto the
firm.^^
Fawner'srighttoredeem[S. 177]
Section 177 provides for the most valuable right of the pawner.
S.177.Defaultingpawnor'srighttoredeem.—Ifatimeisstipulatedfor
thepaymentofthedebt,orperformanceofthepromise,for whichthepledge
ismade,andthepawnormakesdefaultinpaymentofthedebtorperformance
ofthepromiseatthestipulatedtime, he mayredeemthegoodspledgedat any
subsequenttimebeforetheactualsale ofthem;buthemust,inthatcase, pay,
inaddition,anyexpenseswhich have arisen from hisdefault.
"Satisfactionof the debt or engagement extinguishes thepawnand the
pawneeonsuchsatisfactionis boundtoredelivertheproperty.Thepawner
has an absolute right to redeem thepropertypledged upon tender of the
amountadvanced."®^It has beenpointedout by the SupremeCourt®"*that
"the special interest of the pledgee comes to an end as soon as the debt for
which the goods were pledged is discharged. It is open to the pledger to
redeem the pledge by full payment of the amount for which the pledge had
been made at any time if there is no period fixed forredemption,or at any
time after the fixed date and the right continues until the thing pledged is
lawfully sold". The right to redeem clearly continues up to the time on the
expiry of which the pawnee has notifiedthatthe goods would be sold. But
the right continues even longer, for Section 177 clearly providesthatthe
62.GurbaxRat vPunjabNationalBank,(1984)3 SCC 96: AIR 1984 SC 1012, 1013.Haryana
Pesticides v BankofRajasthanLtd, AIR2004P&H83, thepledgerwas under duty to insure
the goods, the bank could also do so on his default, but neither did so, the pledgor not allowed
to say that he was discharged from his liability to the extent of loss caused by want of insur
ance,distinguishingDurgaDass vSansarSingh, 2003AIHC2800.
63.PerSiiV.LAT] inLallanPrasadyRahmatAlt,AlK1967SC 1322; (1967) 2 SCR233.Vasant
Deorao Deshpande vSBI,(1996) 1 Mah LJ 914, the pledgor giving notice to the bank that
he was willing to pay off the loan provided the bank would return his gold securities, bank
making no reply, interest did not cease to run from the date of such notice.
64.JasivantraiManilalAkhaney v StateofBombay, AIR 1956 SC 575: 1956 SCR 483, 498.https://t.me/LawCollegeNotes_Stuffs

870. 728Chapter14 Pledge [S. 177]
pawner mayredeemthe goods at anysubsequenttime before the actual
sale of them. "So long as the sale does not take place the pawner is entitled
to redeem the goods on payment of the debt." In other words, the right to
redeem is extinguished not by the expiry of tirhe specified in the notice of
sale, but by theactualsale of the goods.
Where thepawnerredeems after the expiry of the specified time, he is
bound to pay to the pawnee such expenses as have arisen on account of his
default.[S.177] Where thepawnerredeems before the expiry of the speci
fied period, he would remain bound by the terms of the loan, if any,thata
premiumwould be leviable onprematurerepayment.^^
The pawner has the right to take back with the goods the increase, if any,
thatthe goods have undergone during the period of pledge. In a case before
Delhi HighCourt,®®the pledge was that of certain shares of a company and
duringthe period of pledge the company issued bonus and rights shares. It
was heldthatthese increases belonged to thepawner.
Redemption means the enforcement of the right to have the title to corpus
of the pledgedpropertyrestored to the pledgor free and clear of the pledge.
A suit forredemptionhas to be filed for exercising this specific remedy and
not just for adeclarationof therightofredemption.®^
The suit was forredemptionof pledged goldornaments.The premises
of the pawnee were raided and theornamentswere seized by officersofthe
Income TaxDepartment.Thetransactionof pledgebetweenthepartieswas
proved. Section 293 of the Income Tax Act could not defeat the right of the
pawnortoinstitutethe suit for recovery of hisornaments.®^
Legalheir'srighttoredeem
Certaingoldornamentswere pledgedwiththebankassecurityfor gold
loan. Thepawnerdied. He left behind a will enabling his widow to redeem.
Thebankdemandedprobate.It was heldthatthebankhadnorightto do
so.Neitherprobatenor successioncertificatewas necessary. The sonand
daughterof thedeceasedhadraisednoobjection.®^
WHOCANPLEDGE
Ordinarilygoodsmay bepledgedby theowneror by anypersonwith
theowner'sauthority.A pledge made by anyotherpersonmaynotbe valid.
Thus,forexample,wheregoodswere left in thepossessionof aservant,
while theownerwastemporarilyabsent,a pledgemadeby theservantwas
65.HotelVrindaPrakashvKarnatakaStateFinancialCorpn,AIR2007Kant187.
66.M.R.DhawanvMadanMohan,AIR1969Del313.
67.NabhaInvestment(P)LtdvHarmishanDassLukhmiDass, (1995) 58 DLT 285. The pledgor
cannotseek anyreliefwithouttenderingtheamountdueagainsthim.
68.UnionofIndiavDeepChand,AIR2007NOC1756(Utt).
69.KamiliSarjinivIndianBank,AIR2008AP 71.https://t.me/LawCollegeNotes_Stuffs

871. [S.178] Whocanpledge729
held to beinvalid/"Similarly,where certain goods are left in the care of a
personforsomespecialpurpose,hecannotpledgethem7^In acasebefore
theAllahabadHighCourt,^^therailwaycompanydeliveredgoodson a
forgedrailwayreceipt.Thegoodswerethenpledgedwiththedefendants.In
a suit by theRailwaystorecoverthe goods,thedefendantscontendedthat
theRailwayswere toonegligentindeliveringthe goods to a wrong person.
But thecourtheldthatthis would notconstitutean estoppelagainstthe
companyand thatpledgewas notvalid.Theprincipleisnecessaryto protect
the individual interest in the ownership of property. But interest acquired
in the course of lawful commercial transactions equally deserves to be pro
tected.Accordingly,Sections178 and 179 provide for certain circumstances
in which a person,beingleft inpossessionwith theconsentof theowner,
maymakeavalidpledgethoughwithouttheowner'sauthority.
1. Pledgeby mercantile agent[S.178]
S. 178. Pledge by mercantile agent.—Where amercantileagentis,with
the consent of theowner,inpossessionof goods or the documents of title to
goods,anypledgemadebyhim,whenactingintheordinarycourseofbusiness
of amercantileagent,shallbe asvalidas if he wereexpresslyauthorised by
the owner of the goods to make the same;Providedthat the pawnee acts in
goodfaithandhasnotat the timeofthe pledgenoticethat thepawnorhasno
authoritytopledge.
Explanation.—Inthissection,theexpressions"mercantileagent"and"doc
uments of title"shallhavethe meanings assigned to them intheIndianSaleof
GoodsAct, 1930(IIIof1930).
Thefirstexceptionisinfavourofapledgecreatedbyamercantileagent.
Section178providesthatwhereamercantileagentis,withtheconsentof
theowner,inpossessionofgoodsordocumentsoftitletogoods,anypledge
madebyhimwhileactingintheordinarycourseofbusinessshallbevalid,
providedthatthepawneeactsingoodfaithandhasnonoticeofthefactthat
theagenthasnoauthoritytopledge.''^Thenecessaryconditionsofvalidity
underthesectionareasfollows:
70.BiddomoyDabeevSittaram,ILR4Cal497.SBlvManglabaiG.Deshmukh,(2005)3CCC
487(Bom),borrower'swidowofferedto pay backbank loan and toredeemgoldornaments.
Thebankrefusedandaskedhertoproducelettersofadministration.Thecourtsaidthatsuch
letterswerenotnecessary.Thecourtfurthersaidthattherefusalwaswrongfulandthatinter
estceasedtorunfromthedateofrefusal.
71.ShankarMurlidharvMohanlalJaduram,ILR(1887)11Bom704;].W.SeagervHukma
Kessa,ILR(1899-1900)24Bom458;NagandaDavayvBappuChettiar,ILR(1904)27Mad
424.
72.PurshottamDas Banarsi Das v Union of India, AIR 1967 All 549.
73.Ordinaryexamplesare:pledgeofcustomer'sjewellerybyajewellerybroker,Sesappierv
SubramaniaChettiar,ILR(1917)40 Mad678;pledgeofcustomer'ssharesbysharebroker.
FullerVGlyn,(1914)2KB168.MunjalGasesvSBI,(2004)2ICC518(P&H),thecourt
statedtheapplicablerequirements,thecasedealtwiththeliabilitytoreturngascylindersafter
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

872. 730Chapter14Pledge [S.178]
1.Mercantileagent
Thereshouldbeamercantileagent.Theexplanationto thesectionsays
that theexpression"mercantileagent"hasthesamemeaningasisassigned
toitbyIndianSaleofGoodsAct,1930.InthisAct,"mercantileagentmeans
anagenthavinginthecustomarycourseofbusinessassuchagentauthority
eithertosellgoods,or toconsigngoodsforthepurposeofsale,or tobuy
goodsortoraisemoneyonthesecurityofgoods".[S.2(9),SaleofGoodsAct]
2.Possessionwithowner'sconsent
Themercantileagentshouldbeinpossessionofthegoodsordocuments
oftitlewith theconsentof theowner.TheSupremeCourt has laiddown
thattheword"consent"forthispurposemeansagreeingonthesamething
in the same sense as defined in Section 13 of theContractAct. If the consent
isreal,it isimmaterialthat itwasobtainedbyfraudormisrepresentation
orwithdishonestintention.Allthesethingsmaymakethepersonreceiving
possessionhableforsomeoffence,buttheconsentoftheowneractually
givenisnotannulledthereby.Thus,whereagoldsmithobtainedpossession
ofcertainjewelleryunderthepretencethat hehad acustomer,andinstead
pledgedthejewellery,thepledgeewasheldtohaveobtainedagoodtitle.^''
Similarly,whereaFrenchCompanysenttotheirLondonagentscertainpic
tures,somebeingforexhibitiononly,buttheagentpledgedthem,thepledge
washeldtobevalid,thecourtsayingthattheprincipleappliestoallgoods
in thecustodyof themercantileagentwhetherfor saleornot.'^^
InSharadinvGokulchand,^^thecourtinterpreted"possession"appear
inginSection178asjuridicalpossessionasdistinguishedfrommerephys-.
icalpossessionor barecustody.It has been held that a servant or a relation
entrustedbytheownerwiththecustodyofgoodsduringhisabsencecannot
besaidtobeinpossessionthereofsoastobeentitletomakeavalidpledge
thereof.
3. In the courseofbusiness
Goodsshouldhavebeenentrustedto theagentinhiscapacityas amer
cantileagentandheshouldbeinpossessioninthatcapacity.Ifthegoodsare
entrustedtohiminadifferentcapacity,itisnotopento athirdpartywho
takesapledgefromhimtosaythattheywereinhispossessionasamercan
tileagentandtherefore,hehadthepowertocreateapledge.^^InChalmer's
SaleofGoods,''^theprincipleisexplainedbythisillustration:
74.U.SulaimanvMaYwet,AIR1934Rang198:(1934)151IC413;AhSanvMaungBaThi
(1937)169 IC221.
75.MoodyvPallMallDeposit&ForwardingCo,(1917)33TLR306.TheSupremeCourtheld
inCentralNationalBankLtd vUnitedIndustrialBankLtd, AIR1954SC181:1954SCR
391,thatwhenanagenttowhomgoodsweregivenforrepairssellsthem,theowner'sconsent
isnottherebyaffected.
76.AIR1931Lah526.
77.SeeMacKinnonJ inStaffsMotorGuaranteeLtdvBritishWagonCoLtd,(1934)2KB305.
78. (13th Edn by Steighart, 1957) 202.https://t.me/LawCollegeNotes_Stuffs

873. [S. 178] Whocanpledge731
Suppose a house were letfurnishedto a man whohappenedto be an
auctioneer.Couldhe sell thefurniturebyauctionand give a good title to
the buyer? Surely not?
It isfurthernecessarythatheshouldmake the pledge in theordinary
course of his business as such agent.
The plaintiff, a dealer indiamondsatAmsterdam,sent somediamonds
toadiamondbrokerinLondonforsale.Thebrokeraskedafriendofhis
to pledge thediamondsfor him. The friend pledged themwiththe defend
ants,whowerepawnbrokers.^'
In theowner'sactionagainstthedefendantsfor thediamonds,the pledge
was held to be invalid. "It wasnottheordinarycourseof business of a mer
cantile agent to ask a friend to pledge goodsentrustedto him, but to pledge
themhimself."
4.Goodfaith
The last essentialrequirementisthatthe pawnee should act in good faith .
andshouldnot have at the time of the pledgenoticethatthepawnerhas
noauthorityto pledge. The expressions "good faith" and"notice"are not
defined in the Act. The definition of "good faith" as given in the General
Clauses Act, 1895 is, therefore, applicable. According tothatAct athingis
said to be done in good faith when it is done honestly,whethernegligently or
not."Notice"willmeanactualaswellasconstructivenotice.®"
Pledge bydocumentsof title[S.178]
Where a mercantile agent is in possession of the documents of title relat
ing to his principal's goods, and if he pledges the same, the pledgee gets a
good title if he acts in good faith and without notice. Anexplanationto
Section 178 saysthatthe expression"documentsof title" shall have the same
meaning as is assigned to it in the Sale of Goods Act, 1930. Section 2(4) of
this Act provides that "documents of title to goods"includesa bill of lad
ing, dock warrant, warehousekeeper'scertificate,wharfinger'scertificate,
railway receipt,warrantor order for thedeliveryof goods and any other
79. De Gorter v Attenborough & Sons, (1904) 21 TLR 19. Similarly it is not in the ordinary
course ofbusinessto pledge outside the agent's business premises or out of business hours.
Oppenheimerv Attenborough & Sons,(1908)1 KB221; sale of a motor car without registra
tion book is also not in the ordinary course of business. Pearson v Rose & YoungLtd,(1951)
1 KB 275 (CA).PoonamchandShankarlal& Co vDeepchandSireymal, AIR 1972 MP 40,
the firm through which the plaintiff used to purchase and sell cotton and cotton seeds was
directed to deliverthe goods to a designatedcompany,but instead the firm pledgedthe goods
and the same was held to bebindingon theplaintiff.AhCheungv Ah Wain, AIR 1938Rang
243, the section is intended to protect persons who in good-faith deal with persons about
whom theyknewweremercantileagents.
80. Burdenliesupon the person who disputes the pledge to prove that thepledgeehad notice or
that he did not act in good faith. Stadium Finance Ltd v Robbins, (1962) 2 QB 664: (1962)
3 WLR 453(CA).A pledge after termination of authority would be equally valid unless the
pledgeehad notice of it, Moody v Pall Mall Deposit & Forwarding Co, (1917) 33 TLR 306.https://t.me/LawCollegeNotes_Stuffs

874. 732Chapter14 Pledge [S.178-A]
documentsused in theordinarycourse of business asproofof the posses
sion orcontrolof goods, orauthorisingorpurportingtoauthorise,either
by endorsement or by delivery, the possessor of thedocumenttotransferor
receive goods herebyrepresented.
BeforetheSale ofGoodsAct wasseparatedfromtheContractAct in
1930,"railw^ayreceipts" were not included in the meaning of the expression
"documentsof title". But the PrivyCouncilhadheldthat"railwayreceipts"
were alsodocumentsof title as they aretreatedas a symbol ofpossession
andcontrolof goods covered bythem.^^In 1930 when the Sale ofGoods
Act wasenacted"railwayreceipt"was expresslyincludedin thedefinition
of"documentsof title to goods"."Thisindicatesthe legislativeintentionto
accept themercantileusage found by theJudicialCommitteeinRamdas
VithaldasDurbarv S.Amerchand&Co.^^"
May theownerhimselfpledge the goods bytransferringdocumentsof
title? It has been heldbothby the PrivyCouncilandtheSupremeCourtthat
it is impossible to justify arestrictionon theowner'spowerto pledgewhich
was not imposed on the powers of the mercantileagent.^^
2. Person inpossessionundervoidablecontract[S. 178-A]
S.178-A.Pledgebypersoninpossessionundervoidablecon
tract.—Whenthepawnorhasobtainedpossessionofthegoodspledgedby
himunderacontractvoidableunderSection19orSection19-A,butthecon
tracthasnotbeenrescindedatthetimeofthepledge,thepawneeacquiresa
goodtitletothegoods,providedheactsingoodfaithandwithoutnoticeofthe
pawnor'sdefectoftitle.
Wheregoods are pledged by apersonwho hasobtainedpossessionunder
a voidablecontract,the pledge is valid,providedthatthecontracthasnot
beenrescindedat the time of the pledgeandthe pledgee hasactedingood
faith andwithoutnotice of the pledger's defect of title.PhillipsvBrooks
Ltd^'^is awell-knownauthority.
Afraudulentperson,pretendingto be amanofcredit,inducedthe
plaintiffto givehim a valuable ring inreturnfor his cheque which proved
worthless. Before the fraud could be discovered, the ring was pledged
withthedefendants.
(§)
CASEPILOT
81. Ramdas VithaldasDurbarv S.Amerchand& Co, (1915-16) 43lA164; Official Assignee v
MercantileBankofIndiaLtd,(1933-34)61lA416,consideredandfollowedbySubbaRao
J(afterwardsCJ) inMorviMercantileBankLtdv UnionofIndia,AIR1965SC 1954.
82.(1915-16)43lA164:AIR1961PC7.
83. Morvi Mercantile Bank Ltd v UnionofIndia,AIR 1965 SC 1954. SeealsoC.I.&B.Syndicate
LtdVRamchandraGanapathyProbhu,AIR 1968 Mys 133, where it was held that way bills
issued by a publiccarrierhave not yetacquiredthecharacterof being"documentsoftitle".
Sharecertificatesandcashreceiptshave been held to benotdocumentsoftitle,L/CvEscorts
Ltd,(1986) 1see264:AIR1986SC1370.
84.(1919)2 KB243.https://t.me/LawCollegeNotes_Stuffs

875. [S.178-A] Whocan pledge 733
The pledge was held to be valid, it being made by apersonin possession
underavoidablecontract.Theeffectoffraudistorenderthetransaction
voidable andnotvoid and if,therefore,aninnocentpersonhastakenthe
goods under a pledge before thetransactionis avoided, the true owner can
not claim them back.Explainingthe principle.DenningLJ observed in
Pearsonv Rose & YoungLtd:^^"For instance, if a mercantile agent should
induce the owner to pass thepropertyto him by some false pretence as by
giving him aworthlesscheque, or should induce the owner toentrustprop
erty to him for display purposes, by falselypretendingthathe was in a large
way of business when he was not, then the ownercannotclaim the goods
back from aninnocentpurchaser(orpledgee)...
But if thecontractunder which possession isobtainedis void, theperson
in possessioncannotcreate a valid pledge. The following passage in the
judgment ofB.K.MukherjeaJ inCentralNationalBankLtdv United
IndustrialBankLtd^^explains the principle: "The position, however, is
entirelydifferentif the fraud committed is of such a character as would
prevent there being consent at all on thepartof the owner to givepossession
of the goods to aparticularperson. Thus A might obtain possession of the
goods from the owner byfalselyrepresenting himself to beB.In such cases
the owner can never have consented to the possession of goods by A; the
so-called consent beingnot a real consent isa totally voidthing inlaw....The
position, therefore, is that when the transaction ofpossessionisvoidable
merelyby reason of its being induced by fraud, which can be rescinded at
the option of the owner, the consent which follows false representation is a
sufficientconsent.Butwherethefraudinducedanerrorregardingthe iden
tity of the person to whom or the property in respect of which possession
wasgiven,the wholething is void and there is no consentin thesenseof an
agreement between two persons on the same thing in the samesense."^^
Thecontractmustnot have beenrescindedat the time of the pledge.
The usual method of rescinding acontractis by giving notice to the other
party of the intention torescind.If hepledgesthe goodsafterreceivingsuch
notice, the pledge will not be valid. Where the person who has taken away
the goods keeps out of the way so that he cannot be contacted, the contract
can be rescinded by doing whatever the owner can do to regain possession.
Thus,informingthe police and requesting the Automobile Association to
trace the car which has beentakenaway by a swindler by giving a fake
chequehas beenheldto be asufficientdemonstrationof the intent to rescind
and any dealing with the goods after this will not bind theowner.^®
85. (1951) 1 KB275(CA).
86.AIR1954SC181,184:1954SCR391.
87. SeealsoJamesCundyv ThomasLindsay,(1878)LR 3 AC459:38 LT573: 47 LJQB481 and
IngramvLittle,(1961) 1 QB 31 (1960) 3 WLR 504 (CA).
88.Car& UniversalFinanceCoLtdvCaldwell,(1965) 1 QB 525: (1964) 2 WLR 600 (CA). The
method of avoidinga contract as prescribed by S. 66 is giving notice to the other party of the
intentiontoavoid.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

876. 734Chapter14Pledge [S.179]
CASEPILOT
3. Pledge by pledgee [S. 179]
S.179.Pledgewherepawnorhasonlyalimitedinterest.—Whereaper
sonpledgesgoodsinwhichhe has only a limitedinterest,thepledgeis valid to
theextentofthatinterest.
Section 179,whichis therelevantprovisionsaysthatwhereaperson
pledges goods inwhichhe has only alimited interest,the pledge is valid to
theextentofthatinterest.Thus,when a pledgeefurtherpledges the goods
the pledgewillbe valid only to theextentof hisinterestandhisinterestis
theamountforwhichthe goods have been given tohimas a security. If he
pledges for a largeramount,theoriginalpledger will still beentitledto his
goods on paying theamountfor which he himself pledged the goods.
Where, on theotherhand,an effective pledge in favour of the pledgee has
nottakenplace, any repledge made by him will be equally ineffective. The
SupremeCourtdecisionJaswantraiManilalAkhaneyvStateofBombay^°
is aninstructive,thougha bitcomplicated,illustration.
ACo-operativeBank had anoverdraftaccountwiththe Exchange
Bank, which was secured by the deposit ofcertainsecurities. After many
dealings andadjustmentsthe lastpositionof theaccountwasthatthe
overdraft limit was set at Rs 66,150 and the securities under the pledge
of thebankwereworthRs 75,000. TheCo-operativeBank did not, how
ever, make use of thisoverdraftfacility for a very long time and when it
attemptedto sue theExchangeBank it was itself in financialstraitsand
had pledged the securities first with theCanaraBank and then having
redeemed them, pledged them again with a private financier.
The SupremeCourtheldthatthe pledgewas not valid. If the Co-operative
Bankhadin factoperatedtheoverdraftaccountanddrawnsumswithinthe
limit, the Exchange Bank would have had protantoan interest in these
securities and might then have been entitled to pledge the securities with a
third party. But so long as there was no overdraft by the pledger, the pledgee
had no such interest as would have enabled it to sub-pledge to athirdparty.
Additionalexceptionsunderthe SaleofGoodsAct
In addition to these exceptions, a pledge by a seller remaining in posses
sion after sale and by a buyerobtainingpossession before sale isvalid.'^
Where one of severaljoint-owners is in possession with the permission of all,
a pledge by him would be valid, if the buyer had no notice of thesituation.'^
89.FirmThakurDasvMathuraPrasad,AIR1958All 66.
90.AIR1956SC575:1956SCR483.
91. See S. 30(1) and (2) of the Sale of Goods Act, 1930 and City Fur Mfg Co Ltd vFureenbond
(Brokers)London Ltd,(1937)1 All ER 799, goods left in the broker's warehouse after pur
chase; HajiRahimBux v Central Bank of India, AIR 1929Cal447, goods remaining in the
seller'sgodown; BelsizeMotor Supply Co v Cox,(1914)1 KB244, buyer obtaining possession
beforesale.
92.ShadiRam vMahtabChand,(1895) Punj Rec 1.https://t.me/LawCollegeNotes_Stuffs

877. Visitebcexplorer.comto access cases referred
to inthebookthroughEBCExplorer™on
seeOnline®;along withupdates,articles, videos,
blogsand a host of different resources.
EBC
Explorer'
companionresources for legal research
The followingcasesfrom thischapterareavailable
throughEBCExplorer™:
• BankofBihar v StateofBihar, (1972) 3 SCC 196
• Biddomoy Dabee v Sittaram,ILR4Cal497
•CentralNationalBankLtdvUnitedIndustrialBankLtd,AIR1954SC
1954SCR391
• JaswantraiManilalAkhaneyv StateofBombay,AIR1956SC575:
1956SCR483
•LallanPrasadvRahmatAli, AIR 1967 SC 1322: (1967) 2 SCR 233
• Phillips VBrooks Ltd,(1919)2 KB 243
•PrabhatBankvBabuRam,AIR1966All 134
CASEPLOT
735https://t.me/LawCollegeNotes_Stuffs

878. 15
Agency
DEFINITIONOF"AGENT"
Representative capacity,hallmarkof agency
"Agent"isdefinedinSection182of the Actin thefollowingwords:
S. 182. "Agent" and"principal"defined.—An "agent" is a person
employedto doanyact foranother,or torepresentanotherindealingswith
thirdpersons.Thepersonforwhomsuchactisdone,orwhoissorepresented,
is calledthe"principal".
Theemphasisisonthepoweroftheagenttorepresenthisprincipalin
dealingswiththirdpersons.Buttheabove"definitioniswideenoughto
embraceaservantpureandsimple,evenacasualemployee,a manwhois
engagedbymein the street to blackmy boots; but it cannot for a moment be
contendedthat theyare all to beplacedin thesamecategory".^Thus what
distinguishesanagentfromapersonappointedtodoanact,istheagent's
representativecapacitycoupledwith a power to affect thelegalrelations
of the principal with third persons. "Theessenceof the matter is that the
principalauthorisedtheagenttorepresentor actforhiminbringingthe
principalinto contractualrelationwith a thirdperson."^
Theconceptof"agency"wasthusexplainedbyRamaswamiJ of the
MadrasHighCourtinP.KrishnaBhattavMundilaGanapathiBhatta:^
"Inlegalphraseology,everypersonwhoactsforanotherisnotanagent.
Adomesticservantrenderstohismasterapersonalservice;apersonmay
tillanother'sfieldortendhisflocksorworkinhisshoporfactoryormine
ormaybeemployeduponhisroadsorways;onemayact for another in
aidingin theperformanceofhislegalorcontractualobligationsofthird
persons....Innoneofthesecapacitiesheis anagentand he isnotacting
foranotherindealingswiththirdpersons.It isonlywhenheactsas a
1. Vivian BoseJ inKalyanjiKuwarjivTirkaramSheolal,AIR1938Nag255.
2.MoheshChandraBosuvRadhaKishoreBhattacherrjee,(1907-08)12CWN28,32.Aper
sonperformingministerialactsis notanagent.MohanlalJain vSawaiManSinghji,AIR
1962SC73:(1962)1SCR702.Forthepositionofpostoffice,seeC./.T.vPatney&Co,AIR
CASEPILOT 1959SC1070;ShriJagdishMillsLtd vCIT,AIR1959SC1160:(1960)1SCR236;Malwa
UnitedMillsLtd vCIT,AIR1966SC1466:(1966)2SCR651;CITvOgaleGlassWorks
Ltd, AIR 1954 SC 429: (1955) 1 SCR 185.
3.AIR1955Mad648.
[736]
ihttps://t.me/LawCollegeNotes_Stuffs

879. [S. 182] Definitionof"agent"737
representativeof theotherin businessnegotiations,thatis to say, in the
creation,modificationorterminationofcontractualobligations,between
thatotherandthirdpersons,thathe is anagent....Representativechar
acter and derivativeauthoritymay briefly be said to be thedistinguishing
featureof anagent.'"*
The sameappearsfrom anobservationof the SupremeCourt^to the
effectthat"theexpressionagency is used toconnotetherelationwhich
exists where onepersonhas anauthorityorcapacityto create legalrelations
betweenapersonoccupyingthepositionofprincipalandthirdparties".
TheNationalTextileCorporationLtd was held to beneitheraGovernment
in itself nor adepartmentof theGovernment.It is only aGovernmentcom
pany. It could not equate itself with the Central Government. It could not be
regarded as an agent of theCentralGovernment. It is anindependentlegal
person. An agent is merely an extended hand of theprincipalandcannot
claimindependentrights.''
Testofdeterminingexistenceofagencyrelationship
The test ofdeterminingthe existence of agencyrelationshiphas been
explained byDhawanJ of theAllahabadHighCourtin the following
words:^
"Agency depends ontruenatureofrelationship.TheAmericanjuris
prudence refers to a case in which it was heldthatthe use of the words
'agency agreement' and 'agent' by the parties in acontractdoes not nec
essarily establish a relationship of agency in the legal sense. The law in
Indiaisthesame.Ithasbeenheldinseveraldecisionsthatthefactthat
the parties havecalled their relationship an agencyis notconclusive,if the
incidence of thisrelationship,as disclosed by evidence does not justify a
4. P. KrishnaBhattavMundilaGanapathiBhatta,AIR 1955 Mad 648, 651. Post Office is agent
of the sender,CITv P.M.Rathod& Co, AIR 1959 SC 1394: (1960)1SCR 401; buyers from
manufacturers for export purposes, only channel allowed by the State for export, not agents.
State of Mysore v Mysore Spg & Mfg Co Ltd, AIR 1958 SC 1002. State ofMaharashtrav
Deepak,(1996)2 BomCR 468, an agent cannot challengethe authority of the principal from
whom he derived his appointment. An agent appointed to collect toll tax on a bridge was not
allowedto saythat the Governmentshould not recoveranything from him becausethe cost of
the bridge hadalreadybeen recovered.
/ 5. Syed Abdul Khader vRamiReddy,(1979)2 SCC 601: AIR 1979 SC 553, 557. Babulal
Swarupchand Shah v South Satara{F.D.)Merchants' Assn Ltd, AIR 1960 Bom 548, formal
agreementnotnecessary;Laxmi Ginning & Oil Millsv Amrit Banaspati Co Ltd, AIR 1962
Punj56. Anagencycan arise withoutanyformal contract. Govind PrasadSharmav Board
ofRevenue,AIR 1965MP 66. A.P.State CoopRural Irrigation Corpn Ltd v Coop Tribunal,
(2006) 6ALE)814,representativecapacity is the test of agencyrelationship, merely because
therespondenthad undertaken tosupplymachineryfor certain period did not make him an
agentof thepetitioner.
6.NationalTextile Corpn Ltd vNareshkumar BadrikumarJagad,(2011)12 SCC 695: AIR
2012SC264.
7. Loon Karan SohanLaiv ]ohn & Co, AIR 1967 All 308, 310-11; Purshottamdas vGulab
Khan, AIR 1963 Pat 407, all the circumstances to be examined, and not merelylabels used by
theparties.https://t.me/LawCollegeNotes_Stuffs

880. 738Chapter15 Agency [S. 182]
finding of agency, andthatthecourtmustexaminethetruenatureof the
relationshipand thefunctionsandresponsibilitiesof the alleged agent."
Applying this test to the facts of the case beforehimthelearnedJudge
heldthatwhen the AssamGovernmentplaced itsquotaof acommodityat
thehandsof a dealer for resale toconsumers,he wasnotan agent of the
Governmenteven if hewasdescribedassuchintheagreement.®Similarly"a
persondoes not become an agent merely because he gives advice inmatters
ofbusiness".'A"procurementagent" has been held to benotan agent, as he
is only apersondirectedto do an act on acommissionandnottorepresent
another."
Apersonwho wasdescribedundertheMadrasFoodgrainsProcurement
Order,1947, as a"wholesaledealer"has been held to be anagent.Hewas to
purchaseand sell at price fixed by the Stateandhe was alsoresponsiblefor
safety.Thus,he was achannelthroughwhichthe State wasoperatingand
became an agent of theState."Similarly, where apersonwasauthorisedby
theGovernmentofIndiatoprocurerice inNepal,to have it milled at a spec
ified mill in Biharandtodispatchit todifferentStates asdirected,he was
held to be anagentof theState.^^Coaldispatchedby acollieryundercol
lierycontrolorder has been held toconstitutethe colliery into an agency for
the consigneemakingthelatterliable for freightanddemurrage.^^A cheque
8.LoonKaranSohanLaivJohn& Co, AIR1967All308;StateofMadrasvJayalakshmiRice
MillContractoCo,AIR1959 AP 352: ILR 1958 AP 671.Where,on theotherhand,themiller
was given theauthorityfor hulling paddy anddistributingthe sameaccordingtoGovernment
directionsandalsoforaccountability,he was held to be an agent.A.Z.MohammedFarooqv
StateGovt,1984KLT346(FB).
9. MoheshChandraBosuv Radha KishoreBhattacherrjee,(1907-08)12 CWN 28, see at p. 32.
10.StateofMadrasvJayalakshmiRice MillContractorCo, ILR 1958 AP 671. The Supreme
Courtheldthatanindependentbuyer isnotanagent,even if sodescribedin thecontract.
GordonWoodroffe& Co (Madras)LtdvSkM.A. Majid, AIR 1967SC181:1966Supp SCR 1.
11.GunupatiAlluraiah v State ofA.P.,AIR 1963 AP 394. Foranotherexample of arunning
State agency, seeHariChandMadanGopalvStateofPunjab,(1973) 1 SCC 204: AIR 1973
SC 381. See alsoLibertySales Services vJakkiMull& Sons,1997AIHC2368 (Del),handing
over of shop on exclusive possession basis for business, the sub-lettee to be responsible for all
expenseslikepaymentof staff, telephone, electricity, etc, agency, not tenancy.HappyHome
Builders (P) Ltd v Delite Enterprises, (1995) 2 AIHC 1320, a legal counsel is not agent. A
counsel appointed by the managing director of a company to negotiate the sale of the compa
ny'spropertywas held not to be in a position to act as an agent of the company and in that
capacity to rescind acontractand to forfeit the earnest money of thecontractorandappropri
ate ittowardshis claimsagainstthe company. Vijay Traders v Bajaj Auto Ltd, (1995) 6 SCC
566,appointmentof adistributorfor Bajaj vehicles, thedistributorhad to pay the price of the
vehicles ordered by him, delivery was to be given on payment of price and he had to bear dam
age to vehicles in transit. The relationship washeldto be that of principal to principal buyer
and sellerand not that of principal and agent. S. 206 which prescribes a notice for terminating
an agency was notapplicable.
12.GovtofIndiavJamunadharRungta,AIR 1960 Pat 19. Sellers who collect Sales Tax do not
become agents for tax collection: State Tax Commr v Sada Sukh VyaparMandal,(1959) 10
STC57(All);BabulalvStateofU.P.,AIR1966All204.
13.KuchwarLime & Stone Co vDehriRohtasLightRlyandCo Ltd, AIR 1969 SC 193: (1969)
1 SCR 350.DilawariExportersvAlitaliaCargo,(2010) 5 SCC 754: AIR 2010 SC2233,the
personinquestionactedas anagentof thecargoowneras well asthatof thecarrierairliner.
Thecargo-owner'scomplaintunder theConsumerProtectionAct, 1986 could not be rejectedhttps://t.me/LawCollegeNotes_Stuffs

881. [S.182] Definitionof "agent"739
wassentbytheUTIbyregisteredpost, butit wasnotreceivedbythepayee.
Therewasnounderstandingwith orrequestbythepayeethat itshouldbe
sentbypost.Thecourtsaidthat the postofficeactedas theagentofUTI.
Liabihtyfornon-dehverywasthat of theUTIand not the postoffice."
Agency inhire-purchasetransactions
To know whether a personoccupiesthepositionof an agent or not, the
lawhasto gobyhisfunctions.Thelawhastoseethesubstanceofthetrans
action and not the parties'terminology."Therelevanceof theexpressions
usedin anagreementhasoftenbeenconsideredinconnectionwithhire-pur-
chase transactions. Atransactionof this kind generallyinvolvesthree par
ties,thedealer,whoprovidesthegoods;thefinancier,whoprovidesmoney
to the dealer and the hirer, who takes the goods and pays hire-purchase
instalmentsto thefinancier.Whathappensinrealsubstanceisthat thedealer
handsovergoodsasdirectedbythefinancier.Lestthedealerberegardedas
anagentofthefinancierahire-purchaseagreementoftenexpresslydeclares
that thedealeris not anagent.The HirePurchaseAct,1972(repealed)
regardsthedealerasanagentofthefinancierforsomepurposes,oneof
themis that ifanyrepresentationsaremadeby thedealertopromotethe
saleoftheproduct,hewouldbedeemedtobeanagentof thefinancier.
But whether he is a general agent of the finance company remains an open
question.TheCourtofAppealhaswitnessedtwoviewsbeingexpressed.
forwantofprivityofcontractwiththecarrier.Officialreceiveris nottheinsolvent'sagent,
RamgopalNaickervMuthukrishnaAyyar,AIR1957Mad1.Acarrierwhoforwardsgoods
to anothercarrierdoesnot dosoasanagent,SukulBrosvH.K.Kavarana,AIR1958Cal730.
Apersonwhopurchasesgoodstosupplythemtohisconstituents,itdepends,whetherheis
anagent.SeegenerallytheopinionoftheSupremeCourtinthismatterinStateofMysorev
MysoreSpg&MfgCoLtd,AIR1958SC1002;GaneshExportandImportCovMahadeo,
AIR1950Cal188,theuseof theword"commission"forpricedoesnotconvertthevendor
andpurchaserintoprincipalandagent;StateofMadrasvJayalakshmiRiceMillContractor
Co,AIR1959AP352,paymentforworkbywayofcommission,notexhaustiveofthematter;
FruitsandVegetableMerchantsUnionvDelhiImprovementTrust,AIR1957SC344: 1957
SCR1,atrustconstitutedtoholdandmanageanestate,held,agency.GhasiramAgarwalla
vState,AIR1967Cal568,fair-priceshopis notagency,butownership,heldnotliablefor
movementofgoodstosomeotherplace;S.N.BarichvStateofW.B.,AIR1963Cal79;an
independentbuyerisnotanagent,VarshaEngg(P)LtdvVijayTraders,Baroda,AIR1983
Guj166.
14.UnitTrustofIndiavRavinderKumarShukla,(2005)7SCC428:AIR2005SC3528.Sagar
WarehousingCorpn vPawanHansHelicopterLtd,AIR2009Del8(DB),in acontract
forsaleofgoodstobedeliveredthroughcarrier,thetransporterwasto bearrangedbythe
buyer.Hewasregardedasthebuyer'sagent.Thebuyercompanywentintoliquidation.The
sellerwasallowedto take backthegoodsfromthe transporter for hispricetill the matter
wasdecidedinarbitration.MumbaiAgriculturalProduceMarketCommitteevMinisterfor
Mktg,AIR2015Bom234,agencyiscreatedwhenauthorityisgivento a persontorepresent
theprincipalindealingswiththirdpersonsor todosomethingfortheprincipal.Anagent
cannotperforman act in his ownright and forhimself.
15.SuptofStampsvBreul&Co,(1944)46BomLR686:AIR1944Bom325;ShriTirumala
Venkateshwara Timber & Bamboo Firm v CTO, AIR 1968 SC 784: (1968) 2 SCR 476; Firm
Murlidhar Banarilal v KishorilalJagannath Prasad, AIR 1960 Raj 296, description as pucca
adatianotexhaustive.https://t.me/LawCollegeNotes_Stuffs

882. 740Chapter15Agency [S.183]
Inoneofthemitwasstatedthat thedealeris a party to thehire-purchase
transactioninhisownrightand not as arepresentativeofanyotherparty,
though for manypurposeshe is anintermediarybetweenthe twoothers.^^
Theotherviewconsideredthedealerasanagentofthefinancecompany
formanypurposesoflaw.^^TheHouseofLordshasexpressed(obiter)the
opinionthat thequestionsofliabilityof thefinancecompanyfor acts or
defaultsofdealerscanberesolvedonlyinreferencetothegeneralmercan
tilestructurewithinwhichtheyariseor,ifonepreferstheexpression,to
mercantile reality. The reality of the situation is that customers often do
notknowaboutthefinancecompany.Theycomeonlyto thecounterof the
dealer,whodoeseverything."Ifthisisso,ageneralresponsibilityof the
financecompanyforthe acts,receiptsandomissionsofthedealerin relation
totheproposedtransactionofhire-purchaseoughttoflowfromthisgeneral
structureof relationship and expectation."
Co-agentsandco-principals
Wheretheauthoritygiventoco-agentsisjoint,itwouldbenecessaryfor
themto actjointlyandonlythentheirprincipalwouldbebound.Wherethe
authorityisjointandseveralanyoneofthemwouldbecompetenttoactfor
theprincipal.!^Anagentwhorepresentsmorethanoneprincipalsinone
andthesametransactions,shouldaccountfortoallofthemjointly,foran
accountgivento one maynotabsolvehim from hisliability.^"
Essentialsofagencyprincipalshouldbecompetentto contract
Anagencybeingacontractofemploymenttobringtheprincipalintolegal
relationswithathirdparty,thefirstrequisiteisthattheprincipalshouldbe
competenttocontract:^^
S.183.Whomayemployagent.—Anypersonwhoisofthe ageofmajor
ityaccordingtothelawtowhichheissubject,andwhoisofsoundmind,may
employanagent.
Itfollowsthataminorcannotappointanagent.Theappointmentofan
agentinvolvesacontract,andaminor'sagreementisvoid.Emphasisingthis
principle,DenningLJobservedinShephardvCartwright-}^"Aninfant
cannot appointan agentto act for himneitherbymeansofa powerof attor
ney,norbyanyothermeans.Ifhepurportstoappointanagent,notonlyis
16.MercantileCreditCoLtd vHatnblin,(1965)2QB242,269:(1964)1WLR423:(1964)2 All
ER592,600-01(CA).
17.FinancingsLtdvStimson,(1962) 1 WLR 1184.
18.BranwhitevWorcesterWorksFinanceLtd,(1969)1AC552:(1968)3WLR760.
19.LiverpoolHouseholdStoresAnns,re,(1890)59LJCh616.
20.RaghbarDayalv PiareLaiBhoraMai,AIR 1933 Lah 93.
21.Thebaseofanagencyisanagreement,GarnacGrainCoIncvHMFFameandFairclough
Ltd,1968AC1130:(1967)3WLR143(HL);noted,Fridman,84LQR224.
22. 1953 Ch 728, 755:(1953)1 WLR 460(CA).https://t.me/LawCollegeNotes_Stuffs

883. [S.183] Definitionof "agent"741
theappointmentitselfvoid,buteverythingdonebytheagentonbehalfof
the infant is also void and incapable of ratification."
Explainingthereasonfor theinfant'sincapacity,hisLordshipsaid:"An
infanthas not sufficient discretion to choose an agent to act for him. He
is all toolikelytochoosea wrongman; and so thelaw^declareshim to be
incapable of choosing an agent at all."
But in situations where a minor is capable of binding himself bycontract
hemayappointanagentto contract on hisbehalf."Whateveraperson
can dopersonallyhe can dothroughanagent."^^Thefollowingarticlein
BowsteadonAgency^''emphasisesthe sameprinciple:"An infant or a
lunaticisboundbya contractmadebyhisagentwith hisauthority,where
thecircumstancesare suchthathewouldhave beenboundif hehadhimself
madethecontract."^^
Further,"thereisnothingin theActwhichprohibitstheguardianof a
minor from appointing an agent forhim".^^
Whereaprincipalwhohadexecutedapowerofattorneybecameold,
weak,mentallyinfirmand not in apositionto thinkindependently,it was
heldthat thepowerofattorneyhadbecomeworthless;that theengagement
of alawyerunderitcameto anend,theprincipalbeingunabletogive
instructions because of mental infirmity and that the holder of the power
wasnolongercompetenttogiveevidenceonbehalfoftheprincipal.^^
Theprinciplethateverypersonhastherighttoappointanagentforany
purposedoesnotapplywheretheacttobeperformedispersonalinchar
acter or when it isannexedto apublicofficeor to anofficeinvolvingany
fiduciaryobligation.^^
23.Powell,The Lawof Agency(1952)242,citingheavenvWebb,(1901)2 Ch 59,77.
24.(11thEdn)14.SeealsoKusaParida vBaishnabMalik,AIR 1966Ori60.
25.SeeWebb,TheCapacityofanInfanttoAppointanAgent,(1955)18ModLR461,andanote
byR.E.M.onShephardvCartwright,1953Ch728,755:(1953)1WLR460(CA).
26. Madanlal Dhariwal vBherulal,AIR 1965Mys272. Only natural guardian can deal with
thepropertyofaminorforthebenefitofhisestate.Dealingsbya defactoguardianwithout
thepermissionofthecourtarevoid.SeeGurmelSinghvUjagarSingh,(1991)99PunjLR
571.Nospecificenforcementofsuchacontractwasallowed.Thecourtcited:AbdulHaqv
MohdYehiaKhan,AIR1924Pat84;BabuRameshwarPrasadSahivAnandiDevi,AIR1956
Pat53;RM.P.RamanathanChettiarvP.S.L.RamanathanChettiar,AIR1960Mad207;
GujobaTulsiramvNilkanth,AIR1958Bom202;BholanathvBalbhadraPrasad,AIR1964
All 527;NarpatRaj v Babulal, AIR 1964 Raj 92.
27.MahendraPratapSinghvPadamKumariDevi,AIR1993All143.KajuDevivH.S.
Rudrappa,(2005)4ICC515,generalpowerofattorneyholderheldto becompetenttoappear
as awitnessas tomatterscoveredby his power.
28.T.C.Mathaiv District &SessionsJudge,(1999)3SCC614:AIR1999SC1385.This state
ment was reiterated in K.RamachandraRao v State of A.P., (2005) 2 CTC 417 (AP FB), a
generalpowerofattorneycanfileacriminalcomplaint.ThisstatementwasrepeatedinK.
GopalakrishnanvKarunakaran,(2004)6CTC333(Mad),actsdonebyapowerofattorney
holderin theexerciseofhisauthoritygivenbytheprincipalareprotectedevenifdonebyhim
in his ownname.PratapBalkrishnaKedarivPremadeviLaxminarayanAgarwal,(2002)3
BomCR46,ownerofalicenceforliquorvendappointedagentinexchangeforroyalty,agent
notentitledto aninjunctionthat hisagencywasnot to beterminated.Suchassignmentwas
notallowedbythetermsoflicence.Thefactthatliquorauthoritieshadonanearlieroccasion
countersignedtheassignmentcouldnotcreateaprecedentoflegality.https://t.me/LawCollegeNotes_Stuffs

884. 742Chapter 15Agency [Ss.184-185]
Agent need not becompetent
S.184.Who may be anagent.—Asbetween theprincipaland third per
sons, any person may become an agent, but no person who is not of the age of
majorityand ofsound mind can become an agent, so as to be responsible to his
principalaccordingtotheprovisionsinthatbehalfhereincontained.
Theagentneednot becompetenttocontract.Section184laysdownvery
clearlythat "asbetweentheprincipaland thirdpersonsanypersonmay
becomeanagent".Ordinarily,anagentincursnopersonalliabilitywhile
contractingfor his principaland,therefore,it is notnecessarythat heshould
becompetenttocontract.^^Thus apersonmaycontract through a minor
agent,buttheminorwillnotberesponsibletohisprincipal.^""In thedays
when marriedwomenlackedcontractualcapacitythey couldnonetheless
act asagents."^^Acompanymay act as an agentbeyonditscapacity{ultra
vires).^^Apersonmayact as atrusteedespitehiscontractualcompetence.
Consideration for appointment not necessary
S. 185.Considerationnot necessary. —Noconsiderationisnecessaryto
createanagency.
Lastly,Section185providesthat noconsiderationisnecessarytocreate
anagency.Generallyan agent isremuneratedby way ofcommissionfor
servicesrendered,butnoconsiderationisimmediatelynecessaryat the time
ofappointment.
Agentandservant
Anagentoccupiesapositionwhichisinmanyrespectssimilarto that occu
piedbyaservant,baileeortrustee.Thedistinctionbetweenan"agent"and
a"servant"hasbeenunderlinedbytheSupremeCourtinLakshminarayan
RamGopal&SonsLtd v GovtofHyderabad.^'^BhagwatiJadoptedthe
distinctionas it isstatedin Powell'sLawofAgency^^andHalsbury's
LawsofEngland.^^The main points of distinction which have been
emphasisedare asfollows—
29.MohomedallyEbrahimPirkhanvSchiller,ILR(1889)13Bom470,noliabilityofaforeign
commissionagent.L.C. DeSouza,re, AIR 1932 All 374, minor son acting for hisfather,
noticetosoneffective.
30. Foreman vGreatWesternRlyCo, (1878) 38 LT 851.
31.Treitel,TheLawofContract{5thEdn,1979)534,citingStevensonvHardie,(1773)2
BlackW872:96ER513.
32.BellHousesLtd vCityWallPropertiesLtd,(1966)2QB656:(1966)2WLR1323(CA).
Commissionforfinancialadviseallegedlybeyondthecompany'spowers.
33.ShantiniketanCoopH.S.Ltd vDisttRegistrarofCoopSocieties,AIR2002Guj428,a
Frenchcitizenwasappointedas atrusteeof aprivatetrust,RBIgranteditspermission.In
thatcapacityhewasallowedtobecomeamemberof thecooperativesociety.ArunKumarv
BSNL,(2002) 3 KLT (SN) 92.
34.AIR1954SC364;(1955) 1 SCR393.
35.(1952)19-20.
36.Vol22 (Hailsham Edition) 113, para 192.https://t.me/LawCollegeNotes_Stuffs

885. [S. 185] Definitionof"agent"743
(1)An agent has the authority to act on behalf of his principal and to cre
atecontractualrelations between the principal and athirdparty. This
kind of power is not generally enjoyed by a servant.
(2)"A principal has the right to direct what the agent has to do; but a
master has not onlythatright, but also the right to say how it is to be
done."^^"Aservantactsunderthedirectcontrolandsupervisionof his
masterandisboundtoconformto allreasonableordersgiven tohim
in the course of hiswork.But an agent,thoughboundto exercise his
authority in accordance with all lawfulinstructions...is notsubjectin
its exercise to the directcontrolof supervision of theprincipal."^^
(3)The mode ofremunerationis generally different. Aservantis paid by
way of salary or wages, an agentreceivescommission on the basis of
workdone.^®
(4)A master is liable for a wrongful act of his servant if it is committed
in the course of the servant's employment. Aprincipalis liable for his
agent's wrong done within the "scope of authority".
(5)A servant usuallyservesonly one master, but an agent may work for
several principals at the sametime.'*"
The managing director of a company is anemployeeof the company, but
in the matter of the company's relation with third parties he occupies the
position of anagent.''^Similarly,the secretary of acompanyis its servant,
but in respect of the matters that come under his domain, hebecomesan
agent in hisdealingswith thirdpersons.'*^"Professionaladvisers,such as
stockbrokersand architects often act as agents for their clients.Otherpro
fessionalpersonsareengagedsimplyto produceaspecifiedresult:for exam
ple,to preparea report or to paint a picture.Suchpersonshaveno powerto
actonbehalfoftheirclients;...
The court is not bound by the terminology of the parties, but by the
substance of the relation. Where an agent was described and treated as a
servant, but the nature of the dealings showed that he was in essence an
agent,it was heldthat hehavinginvestedhis personalmoneyandresources
37. PerBramwellB inR.v Walker, 1858 LJMC 207,208:31 LT (OS) 137.
38.Powell,The LawofAgency.Seealso QamarShaffiTyabjivCommr,Excess Profits Tax,
AIR1960SC1269:(1960)3SCR546,551.
39. ButseePerformingRightSocietyLtdvMitchell& Booker(PalaisdeDonse)Ltd,(1924)1
KB762.
40.KhedutSahakari Ginning & PressingSocietyv State of Gujarat,(1971)3 SCC480,484:AIR
1972SC1786.
41.Hely-Hutchinsonv Brayhead Ltd,(1968)1 QB 549:(1967)3WLR1408(CA);K.R.
Kothandarmanv CJT, AIR1967Mad143: AIR1960SC 1269.
42. Panorama Development (Guildford) Ltd v Fidelis Furnishing Fabrics,(1971)2 QB 711:
(1971)3 WLR 440(CA);Chandi Prasad Singh v State of U.P., AIR 1956 SC 149:(1955)2
SCR1049.
43. SeeG.H. Treitel,The LawofContract(5th Edn, 1979) 532, citing Leicestershire Country
CouncilVMichaelFaraday & Partners Ltd,(1941)2KB205,valuersnot agents,nor bound
to surrender valuation documents prepared for the purpose of report; Fraser v B.N. Furman
(Productions) Ltd, (1967) 1 WLR 898, 910(2)(CA),stockbrokers not agents.https://t.me/LawCollegeNotes_Stuffs

886. 744Chapter15 Agency [S. 185]
in theworkingof the agency, the same could not besummarilyterminated.
Itrequiredsomereasonablenotice.''^'
Agentandbailee
An agent differs from a bailee incertainrespects. Firstly, therelationship
of bailor and bailee subsists only so long as the baileeaoldssome goods
belongingto the bailor, but this isnotnecessaryfor thesubsistenceof
agency relationship. Sometimes an agent may be in possession of his princi
pal'spropertyandtothatextenthe may also be a bailee. Andsometimesan
ordinarybailee may become an agent when he isauthorisedto dispose of the
bailor'spropertyaccordingto hisdirections.
Secondly, an agent is a representative with a power tocontractonbehalf
of his principal. A bailee does not have that power. The SupremeCourt
acceptedthesepointsofdistinctionin a case inwhichabankerhadassumed
the responsibility of receiving the goods on behalf of anaccount-holderand
to release them in favour of his customers against payment. The banker was
held thereby not to have become an agent. He remained only abailee.''^
Agentandbuyer
A sellingagencyhas to be distinguished from atransactionresulting in an
out and out sale. The legal position of an independent buyer is enormously
different fromthatof an agent. Anillustrationis to be found in the decision
of the SupremeCourtinGordonWoodroffe& Co (Madras)LtdvSkM.A.
Majid.'*^The court pointed out that even an agent can become a purchaser
when he pays the price to the principal and discloses to himthatfact. The
opening words of thecontractin question werethatthe defendants were
buyingthe goods for resale in the UK. If it were not an outright sale, but
only anagency,it would not have beennecessaryto provide for the price,
for the time ofdeliveryand for the fact that salestax was to be borne bythe
defendants.
'Kinds ofagent
Agents are of several kinds. The word"agent"is used to describe vari
ous types ofactivity.Forinstance.LordHerschellobservedin Kennedy
VDeTrafford:'^'^"No word is more commonly and constantly abusedthan
the word 'agent'. A person may be spoken of as an agent and no doubt in
popularsenseof the word he mayproperlybe saidto be anagent,although
when it is attempted to suggestthathe is an agent under such circumstances
44. Popular ShoeMartvK.Srinivasa Rao, (1989)2 An LT 541: AIR 1990 NOC 87(AP).
45.UCOBank v Hem Chandra Sarkar,(1990)3 SCC 389, 396. In the subsequentcase ofVijaya
Bank VUnited Corpn, AIR 1991 Ker 209, thepledgeebank beingbailee,and not an agent,
wasallowedtorecovercompensationfrom thegodown-keeperfordamageto the goods.
46. AIR1967SC 181:1966Supp SCR 1.
47.1897AC180,188(HL).https://t.me/LawCollegeNotes_Stuffs

887. [S.185] Definition of "agent" 745
as create thelegalobligationsattaching toagencythat use of the word is
only misleading."
"The description 'agent' is oftenemployedin businessin a complimentary
and not in a legalsense."**^Thus one hears of "dress agency; privateinquiry
agent; secretagent"'^',and the word is also used inreferenceto mechani
calagents,such as washing orcleansingagent. The types of agent that are
knownto the business world are, however, fewer. Only those may be briefly
describedhere.
Factor
"The word 'factor' in India as in England, means an agent entrusted with
thepossessionof goodsfor the purpose ofsellingthem."^''"He is a mercan
tileagentwhoseordinarycourseofbusinessistodisposeofgoods,ofwhich
he is entrusted with the possessionor control by hisprincipal."^^
Broker
A"broker"is also a kind of mercantileagent.^^He isappointedto negoti
ate and make contracts for the sale or purchase of property on behalf of his
principal, but is notgivenpossessionof the goods.
Delcredereagent
A"Je/credereagent"is another type ofmercantileagent. In ordinary
casesthe onlyfunctionof anagentistoeffecta contractbetweenhis princi
pal and a third party.Theagentthendropsout.^^He canneithersueon the
contract, nor he is held liable for thefailureof the third party to perform.
Butwhere an agent undertakes, on the paymentof someextracommission,
to beliableto theprincipalfor thefailureof the third party toperformthe
contract, he iscalleddelcredereagentand his extracommissionfor the
guaranteeisknowndelcrederecommission.Thepositionofsuchagentwas
explained inHastievCouturier:^'*
Thedefendantsacting as delcredereagentssold the plaintiff's goods
whichweresupposedto be on avoyagebut whichunknown to the par
ties hadalreadybeensold by the captainowingtodamageby heat. The
buyerrepudiatedthecontractand,therefore,theagentsweresuedforthe
buyer's failure toperform.
48.Halsbury'sLawsofEngland(2nd Edn) 1,para194(g).
49. Powell,TheLawofAgency(1952)27, f.n. 3.
50. SeeStuartCJ in E.H. Parakh v King Emperor, AIR 1926 Oudh 202.
51.BowsteadonAgency(11thEdn,1951) 2.
52. SeeCommercialEnterprisers v Madan MohanSingh,AIR1951Hyd 47 andWilliamSon
Magor &CovKeshoram Agaruialla,ILR1956 Ass 268.
53. SeePalJ in Sukumari Gupta v Dhirendra Nath, AIR 1941Cal643, 655.
54.(1856)5 HLCas673.Adubashis anagentof this kind,namely,aguarantorplusanagent.
K.Y.PeriyamiannaMarakkayarandSonsvBanians& Co,ILR(1925)49 Mad156:AIR
1926Mad544.https://t.me/LawCollegeNotes_Stuffs

888. 746Chapter15Agency [S.185]
Thequestionwas"whetherthedefendantsareresponsiblebyreasonof
theircharginga delcrederecommission,thoughtheyhavenotguaranteed
bywriting".Thecourtsaidthattheywere."Ahigherrewardispaidin con
sideration of their taking greater care in sales to their customers and also
forassumingagreatershareofresponsibilitythanordinaryagents,namely,
responsibilityforthesolvencyandperformanceof theircontractsbytheir
vendees.Thisisthemainobjectoftherewardbeinggiventothem."Keeping
this inview,the courtheldthat a delcredereagencyis not a contract of
guarantee,evenif itmayterminatein aliabilityto paythe debt ofanother,
becausetheagenthasapersonalinterestin thetransactionand,therefore,a
writingisnotnecessary.
Thenatureofliabilityincurredbya delcredereagenthasbeenexplained
bytheAllahabadHigh Court in thefollowingwords:^^
"Adelcredereagentincursonlyasecondaryliabilitytowardstheprin
cipal.Hislegalpositionis partlythat of aninsurerand partly that of a
suretyforthepartieswithwhomhedealsto theextentofanydefaultby
reasonofanyinsolvencyorsomethingequivalent.Hisliabilitydoesnot
go to theextentofmakinghimresponsibleto theprincipalwherethere
can be no profit by reason of anystringencyin the market."
A delcredereagentis,however,notliableto thebuyerforanydefauh
on thepart ofhisprincipal.^^Nor is heliableforanydisputesbetweenthe
principal and the buyerrelating to the contract or the sumdue.^^The extent
ofhisinvolvementasaguarantorwasthusexplainedbyBuckleyLJ:^®
"Theliabilityofthedelcredereagentiscontingentpecuniaryliability,
notaliabilitytoperformthecontract;it is apecuniaryliabilitytomake
goodintheeventofthedefaultofthebuyerinrespectof apecuniary
liability.Itdoesnot extend to otherobligationsof the contract. It does
not expose del credere agent to an action toascertainthe sum due. It is
limitedto acontingentpecuniaryliabilityinrespectof asumwhichas
betweenthesellerand thebuyeris an ascertained sum."
CREATIONOFAGENCY
InthewordsofDesaiJ oftheSupremeCourt:^'"Therelationofagency
ariseswheneveronepersoncalledtheagenthasauthorityto act onbehalf
ofanothercalledtheprincipalandconsentssotoact.Therelationshiphas
itsgenesisin acontract."
Therelationshipofprincipalandagentmaybecreatedinanyofthefol
lowingways:(1)byexpressappointment;(2)bytheconductorsituationof
55.ChampaRamvTulsiRam,(1927)26AllLJ81,perSenJ at p. 82.
56. ShawVWoodcock, (1872) 7B&C73: 31RR158.
57.Churchill& Simv Goddard,(1937)1KB92(CA).
58.ThomasGabriel& SonsvChurchillSim,(1914)3KB1272(CA).
59.SyedAbdulKhaderv RamiReddy,(1979)2SCC601:AIR1979SC553,557.https://t.me/LawCollegeNotes_Stuffs

889. [S.185] Creation ofagency747
the parties;(3)bynecessityof thecase;or(4)bysubsequentratificationof
anunauthorisedact.
Expressappointment
Anyperson who is competentto contract and who is of sound mind may
appoint anagent.The appointment may beexpressedin writing or it may
beoral.^°"InEngUshlaw no man canbecomethe agent of another except
by the will of that other person. His will may bemanifestedby writing or
orallyorsimplybyplacinganother in a situationinwhich,accordingto the
ordinary rule orlaw,orperhapsitwouldbemorecorrecttosay,according
to the ordinaryusageof mankind, that other is understood to representand
act for the personwhohas soplacedhim; but ineverycase,it is only bythe
will of theemployerthat anagencymay be created."
"Therelationshipofprincipalandagentcan only beestablishedby the
consentoftheprincipalandtheagent.Theywillbeheldtohaveconsentedif
theyhaveagreedto whatamountsin lawtosucharelationship,evenif they
do notrecognizeitthemselvesandevenif theyhaveprofessedtodisclaim
it... But the consent must have been given by each of them, either expressly
or by implication from their words and conduct".
"In Indian law thedefinitiongiveninSection182seemsto be somewhat
wider in thisrespect....Thedefinitiondoesnot limit theemploymentto
one bytheprincipalonly....Itwillincludeanemploymentbyanyauthority
authorised by law to make theemployment."Thus, where an agent was
appointedundertheprovisionsofa statutefortheprotectionoftheinterests
ofquarrellingco-ownersand of thirdpersons,theCalcuttaHigh Court
heldthat theagentsoappointedwouldcomewithin thedefinition,though
hewouldnothavethesame"well-knownandsettledincidents"attached
to him as arise in the case of contractualagency.®^Similarly,loan incurred
byanagentappointedunderthetermsofastatutewasheldbindingon the
proprietors.^^
InEnglandalso,"the lawmayattribute anagentto aperson:forexam
ple,whenacompanyisfirstformed,itsoriginaldirectorsareitsagentsby
operationoflaw....Astatute mayempowerthe court to appoint a person
toactonbehalfofanotherandsoenablethecourttocreatetherelationof
principalandagent.Thusapersonappointedbythe court tomanagethe
affairs of a mental patient has been held to be the patient'sagent.""
60.Delhasse,ex p, (1878) LR 7 Ch D 511.
61.TheappointmentwasundertheprovisionsofBengalTenancyAct,1885.Deptt ofAnimal
HusbandryvK.Rinzing,AIR1998Sik7,letterofappointmentundera statutestatedthat
theappointmenthasbeenmadewiththeapprovalof theGovernment.Itwasheldthat the
plaintiff need not giveany further proof of his appointment. .
62. Sukumari Gupta v Dhirendra Nath, AIR 1941Cal643.
63. G.H.Treitel,The LawofContract(5thEdn,1979)530,citingPlumptonvBurkinshaw,
(1908)2 KB572.https://t.me/LawCollegeNotes_Stuffs

890. 748Chapter 15Agency [S.185]
Where the appointment is made by a deed, it is called a "power of attor
ney"/''In a casebeforetheSupremeCourt"a power of attorney, by which
a person was appointed as a caretaker of certainagriculturallands, was
signedby the three owners of the lands and one of the arguments was that
theappointmentwasineffectivebecausehow could threepersonsbecome
theprincipalsofoneagentand that too by asinglepowerofattorney.
Overruling the objection,DesaiJ said: "Therelationshipofagencyhas its
genesis in acontract.If agency is theoutcomeof acontractbetweenthe
principaland theagent,in orderto showthat threeprincipalsjointlyconsti
tuting an agent by a deed called 'Power of Attorney' somethingwhich was
impermissible,provisions of the Contract Act or the generallawof contract
shouldhavebeenshownashavingbeenviolatedbysuchacontract.Nothing
of the kind was pointed out to us. On the contrary, inHalsbury'sLaws
OFEngland,^®thefollowingpropositionhas been stated:'Co-principals
mayjointlyappointanagentto actforthemandinsuchcasebecomejointly
liable to him and may jointly suehim.'"
Thethreeprincipalswhosignedthepowerofattorneyhadnojointprop
erty.Evenso the power was regarded to be valid andapplicableto their
respectiveagriculturallands.
An oral appointment is also valid even though the contract which the
agent is authorised to make has to be inwriting.®^
UndertheSalarySavingSchemeadoptedbytheLifeInsuranceCorpo
rationofIndiatheemployer,whenauthorisedbytheLICtocollectpremium
amountfromthe salary of anemployeeand forward it to the LIC,becomes
an agentof the LICfor that purpose.Wheresuchanemployerfailedin for
wardingthe amountto the LICandconsequentlythepolicywasin the state
of lapseat the time of theemployee'sdeath, the National Commission under
theConsumerProtectionAct,1986directedtheemployertopaytheamount
dueto theemployeeunderthepolicy.TheSupremeCourtdidnotapprove
thisdecisionanddirectedtheLICtomakepaymentunderthepolicy.The
employerwasdirectedto payRs25,000as thecostsof theproceedings.®^
64. AminaBegumv Mohd Ramzan, AIR 2005 Raj 41, the power of attorney carried the words
"generalpowerofattorney"andnot"specialpowerofattorney",itrelatednaturallyto vari
ouscasespendingin courts and not to anyparticular transaction.StateofRajasthanvBasant
Nahata,(2005)12SCC77:AIR2005SC3401,registrationofdeedforappointingpowerof
attorney is not necessary unless required under the Registration Act.
65.SyedAbdulKhaderv RamiReddy,(1979)2SCC601:AIR1979SC553,557.
66.Vol1, 4th Edn, para 726.
67.Apersonperformingtheministerialactofsigninglettersonbehalfofthemilitarysecretary
of anex-Ruler,held,not anagent.MohanlalJain vSawaiManSinghji,AIR1962SC73:
(1962)1SCR702.Postofficebecomesanagentwhentheagreementbetweenpartiesis that
chequesmaybesentbypost.C.I.T.vPatney&Co,AIR1959SC1070:1959Supp(2)SCR
868;IndoreMalwaUnitedMillsLtdvCIT,AIR1966SC1466:(1966)2SCR651.Important
membersof acommunityare not itsagents.Sk Peru Bux vKalandiPati Rao, AIR 1970SC
1885:(1969)2SCR563.Therecan be noagencyforillegalacts.A.ThangalKunjuMusaiar
VM. Venkatachalam Potti, AIR 1956 SC 246: (1955) 2 SCR 1196.
68.Heardv Pilley, (1869) LR 4 Ch548.
69. Delhi Electric Supply Undertaking v Basanti Devi, (1999) 8 SCC229:AIR 2000 SC 43.https://t.me/LawCollegeNotes_Stuffs

891. [S. 185] Creationofagency749
Thecourtreferredto itsownearlierdecision inHarshadJ. Shah vLICJ"
The SupremeCourtcited the following passage fromHalsbury'sLawsof
England:''^"Underthe lawgoverningcontractsofinsurancethepremium
may bepaidby theassuredto theinsurersor to aninsuranceagentacting
onbehalfof theinsurersandif theagenthas theauthorityto receive it the
paymentbinds theinsurers.Theauthorityneednotbe an expressauthority;
it may be implied from thecircumstances."
Impliedagencies
Implied agencies arise from theconduct,situationor relationship ofpar
ties. Whenever a person placesanotherin asituationin whichthatother
isunderstoodto represent or to act for him, he becomes an implied agent. .
Thus,where awomanallowedher son to drive a car for her, shepayingall
the expenses ofmaintenanceandoperation,it was heldthatthe son was
an implied agent of themotherand when he made a collision injuring his
wife, the wifecouldsue themotherfor thefaultof heragent.^^Apermis
siongrantedto a person to ferry a car from one place toanothermakes
him an agent forthatlimitedpurposeso as to create liability for conse
quences of negligentdriving.^^Theborrowerof a car would not occupythat
position.^''Unauthorisedpretensions do not havethateffect.^^An employer
allowed to collect premiums from hisemployeesand forward the collection
to the organisation, became the implied agent of thelatterthough described
explicitly in the scheme as the agent of the employees.
Estoppel
One of thewell-knownillustrationsof implied agency is agency by hold
ing out or estoppel. The principle of holding out has been thus stated in an
American case:"Whereaprincipalhas by hisvoluntaryact placed an agent
in such asituationthata person ofordinaryprudence,conversantwithbusi
ness usages and the nature of theparticularbusiness,is justified in presum
ingthatsuch agent has authority to perform aparticularact and therefore
deals with the agent, the principal is estopped as against suchthirdperson
from denying the agent'swork."^^
An earlyillustrationisPickeringvBusk^^:
70. (1997) 5see64: AIR 1997 SC 2459. Regulations and the conditions of his service did not
authorise the agent to collect premium on behalf ofLie.
71.Vol25,254,para460.
72.SmithVMosse,(1940) 1 KB424.
73.OrmrodvCrosvilleMotorServicesLtd,(1953) 1WLR1120{CA).
74.HewittvBonvin,(1940) 1 KB 188 (CA);MorgansvLaunchbury,1973 AC 127: (1972) 2
WLR1217(HL).
75.Kennedyv DeTraufford,1897AC180,188(HL).
76. DelhiElectricSupplyUndertakingvBasantiDevi, (1999) 8 SCC 229: AIR2000SC 43.
77.IrvineC in Johnson v Milwaukee,(1895)46 Neb 480: 64 NW Rep 1100; borrowed from
JohnS.Ewart,Estoppel—PrincipalandAgent, 16HarvLR 186,187-88.
78. (1812) 15East38.https://t.me/LawCollegeNotes_Stuffs

892. 750Chapter15 Agency [S. 185]
Apurchaserof hemp allowed it toremainin the custody of thebroker
throughwhom he hadboughtit. The broker'sordinarybusiness was to
buyandsell hemp. He sold the hemp and received the price.
TheCourtheldthatthe sale and receipt of money werebindingon the
principal.LordEllenboroughexplainedtheprinciplethus:"Ifaperson
authorisesanotherto assume theapparentright ofdisposingofpropertyin
theordinarycourse oftrade,it must bepresumedthattheapparentauthority
is the realauthority.He may bind theprincipalwithinthe limits ofauthority
withwhichhe has beenapparentlyclothedby theprincipal;andtherecould
be no safety incommercialtransactionsif he couldnot."
Anillustrationis a decision of theOrissaHighCourt,inwhich^®aland
lordappointedatahsildartomanagehisagriculturallands.He letoutthe
landstotenantsoncertainterms.
Anauthorityof thiskindwas not given to himand,therefore,thequestion
waswhetherthetenancyagreementswouldbindthelandlord.It was held
thatthelandlordhad,bymakingthetahsildarinchargeof thelands,cre
ated anappearanceofauthoritywhich,accordingto theprevailingusages,
includedtherightto let.
Husbandandwife
A wife livingwithherhusbandhas the impliedauthorityof thehusband
to buy articles ofhouseholdnecessity. In thestrikingwordsofHornby:"As
long as peoplecontinueto live in houses, the wife willnormallydo the
householdshopping,and thehusbandwill pay thebills....The law ofprin
cipal and agent will always cut deeply into the law ofhusbandandwife."^°
A wife's impliedauthorityto bind herhusbandby her credit purchases is,
however, subject to someimportantlimitations.In the first place, it is neces
sarythatthehusbandand wife should be living together. If the wife is living
apartfrom thehusbandwithouthis fault and if she has been leftunprovided
for, she may become an agent of necessity of herhusbandto pledge his credit
to theextenttowhichareasonablemaintenancemakes it necessary, but she
willnotbe animpliedagent.®^
Secondly, they must be livingtogetherin a domesticestablishmentof
their own."Themere fact ofmarriagedoes not make the wife an agent in
law of herhusband";nor the fact of livingtogetheris sufficient. There must
be a domesticestablishmentof which the wife is the incharge. If there is
a domestic establishment of which a person is acting as the manager, the
79. Kasinath Das vNisakarRout, AIR 1962 Ori 164. See alsoGayaSugar MillsLtdvNand
KishoreBijoria,AIR 1955 SC 441.
80.ThePrinciplesofAgency(1952)32.
81. A wife who went away to liveapartfrom thehusbandbecause of hisbringingsecond wife into
the home was held to be not justifiably livingapart.NathubhaivJauherRaiji, ILR(1876)1
Bom 121. Awomanpurchasingin her own right does notpurchaseas arepresentative,the
husbandnot liable.KanhayalalBisandayalBhiwapurkarvIndarchandjiHamirmaljiSisodia,
AIR1947Nag48.https://t.me/LawCollegeNotes_Stuffs

893. [S. 185] Creationofagency751
presumptionof agency will arise even ifthatpersonis not the wife. This
well-knownprinciple was established inDebenhamvMellon-}'^
Thedefendantwas themanagerof a hotel, where his wife acted as the
manageress.They livedtogetherin the same hotel, buthadno domestic
establishmentoftheirown.Thewifeincurredwithatradesmanadebt
for clothes,paymentforwhichwasdemandedfromthehusband.
But he was heldnotliable,thecourtsayingthatthe mere fact ofcohabi
tationdidnotgive rise topresumptionof agency, unless it was in adomestic
establishment.
Iftheseconditionsarefulfilleditisimmaterialwhetherthetradesmandid
or didnotknowthatthe buyer was amarriedwoman.
Thirdly, the wife canrunherhusbandinto debt only for necessaries.
"Thedomesticarrangementof the family being usually left to thecontrol
of the wife, herauthorityextendsto allthosematterswhichfallwithinher
department,as, forexample,the supply of provisions for the house,clothing
for herselfandthingsofthatsort."®''Theword"necessaries"is nodoubt
not free from ambiguity. But it has been held to include articlessuitedto the
style inwhichthehusbandchooses to live, because"thehusbandconducting
himselfin themannerof awealthymannodoubtexpects his wife to con
ductherselfin themannerof awealthyman'swife".®^Butthewifecannot
embarkupon the purchase of things beyond thestationin which theylive.^^
Thus where the goods supplied to a wife included a gold pen and pencil, a
sealskin cigar case, a sealskin tobacco pouch, a glove and ahandkerchief,
thehusbandwasheldnotliable.®''
Lastly, thehusbandwill not be liable if he makes areasonableallow
ance to his wife for her needs.Thus,forexample,inGirdhariLaivW.
Crawford^^theAllahabadHighCourtheldthatthehusbandwill not be
liableevenifthefactofallowanceisnotknowntotheseller.
Thehusbandcannegativeliabilitybyproving—
(1)thathe expresslywarned thetradesmannot to supplygoods oncredit;®'
(2)thatthe wife was already suppliedwithsufficiency of the articles in
question;
(3)thatthe wife was supplied with sufficient means for the purpose of
buying the articleswithoutpledging thehusband'scredit.
Further,the(English)MatrimonialProceedings andPropertyAct, 1970,
which restricts the implied agency of wife, provides in Section4(1)that:
82.(1880)LR6 AC24.
83.PaquinLtdvBeauclerk,1906AC 148 (HL).
84.PhillipsonvHayter,(1870) LR 6 CP 38.
85.RobertSimpson Co Ltd vRugglas,borrowed from 8 Can BR 722.
86.SeymorevKingscote,(1922) 38TLR586.
87.PhillipsonVHayter,(1870) LR 6 CP 38.
88.ILR(1887) 9 All 147.
89. Morel Bros & Co vEarlofWestmorland,1904 AC 11;(1900-03)All ER Rep 397 (HL).https://t.me/LawCollegeNotes_Stuffs

894. 752Chapter15 Agency [S. 185]
"Any rule of law and equity conferring on a wife authority, as agent of
necessity to herhusband,to pledge his credit or toborrowmoney on his
creditisherebyabolished."
Husbandnotimpliedagentofwife
Ahusbandhas nooriginal,inherentor impliedpowerto act as an agent
for his wife. Hisauthoritycanarisefromanappointmentasagent,expressly
or impliedly, or byratificationby his wife of acts done by him on her behalf.
Accordingly, a wife was held not liable on acontractmade by herhusband
in her name andwithoutherauthoritywhen shedisaffirmedthecontract
withinreasonabletimeaftergettingtoknowofit.'°Ahusbandhas no
impliedauthorityto sell his wife'sproperty.^^
Agencies of necessity
Thereasonfor the agency ofnecessityhas beenthusstatedbyStory:^^
"Althoughthepowersoftheagentsare,ordinarily,limitedtoparticular
acts;yet...extraordinaryemergenciesmayarise,inwhichaperson,who
is an agent, may, from the necessities of the case, be justified inassuming
extraordinarypowers;and...his acts fairlydone,undersuchcircumstances,
will bebindinguponhisprincipal."
Originatedwithmarineadventures
Theprincipalof agency of necessity was firstappliedto cases ofmarine
adventures.Unforeseenemergenciesmayarisein thecourseof amarine
adventurewhichmaythreatenthe goodsandthemasterof the ship isnot
able tocommunicatewiththeprincipal.In suchcircumstancesthe mas
ter gets thepowerand it is also hisdutyto sell the goods in order to save
their value. The sale will bind the cargo owner. Initially it was supposed
"thatthisdoctrineofauthoritybyreasonof necessity isconfinedtocertain
well-known exceptional cases, such as those of the master of a ship or the
acceptorof the bill ofexchangefor thehonourof thedrawer".But insubse
quentcases the sameprinciplewasappliedtocarriersby land.Thus,in Sims
&CoyMidlandRlyCo:'^
Aquantityofbutterwas consigned with thedefendantrailway com
pany. It was delayed intransitowing to a strike. The goods being perish
able thecompanysoldthem.
The sale was held binding on the owner. The company's action was jus
tified by the necessities of the case and it was also notpracticableto get
instructionsfromtheowner.
90. K.KasuluvCommission,EndowmentsDeptt,1986AndhLT 44.
91.JawaharlalDaima&Co\ChintaChittemma,(1989) 1 An LT335.
92.OnAgency(9th Edn) S. 141 ascjWbyMcCardieJ inPragervBlastpielStamp&Heacock
Ltd,(1924) 1 KB566,571.
93.(1913)4 KB103.https://t.me/LawCollegeNotes_Stuffs

895. [S.185] Creationof agency 753
Similarly,inGreatNorthernRlyCo vSwaffield:^'^
A horse, having beenconsignedwith thedefendant-company,was not
receivedby anyone at the destination. The company had no arrangement
of its own to keep animals and,therefore,placed the horse with a livery
stable-keeper.
The company's action was held to be reasonably necessaryin the circum
stances and, therefore, the company was allowed to recover the charges of
thestable-keeper.
And then became principleofgeneralapplication
"Thusthe basic principle is a broad and useful one. It lies at therootof
variousclassesof cases of which the carrierdecisionsare merelyan illustra
tion." The reason for this wide rule as to agency of necessity was thusstated
byMcCardieJ in Prager vBlastpielStamp & HeacockLtd:^^"The object
of common law is to solve difficulties and adjust relations in social and
commercial life. It must meet, so far as possible, sets of factsabnormalas
well as usual. It must grow with the development of the nation. It must face
anddealwithchangingor novelcircumstances.Unless it can dothatit fails
in its function anddeclinesin its dignity and value. An expanding society
demands anexpandingcommon law."
Pre-existingagencynotnecessary
It was also supposedatone timethatagency of necessity is confined to
cases in which there is subsisting relationship of principal and agent and
the agent, in someemergency,exercisesan authority which is not expressly
provided in thecontract.For example,ScruttonLJ observed inJebarav
Ottoaman^^that"the agency of necessity develops from anoriginaland
subsisting agency and only applies itself to unforeseeneventsnot provided
for in the original contract". Accordingto him the principlewould not apply
"when there is no pre-existingagency,as in the case of a finder of perish
able chattels or animals". Two cases have been usually cited insupportof
thisproposition,namely, where the finder of a dog spent money on feed
ingit,'^and a person spent money on rescuing logs from ariver^^and nei
ther of them could claim a lien on the goods for his trouble and expense.
BowenLJobservedin one of the cases on the subjectthat"liabilitiesare
notto be forceduponpeoplebehindtheirbacks, any morethanyou can
confer a benefit upon a managainsthiswill".'®The case where help is vol
unteered by a purestrangerare covered inRomanlaw by thedoctrineof
94. (1874) LR 9Exch132.
95.(1924)1 KB566.
96. (1927) 2 KB254,257(CA),reversedsub nom.OttomanBankvJebara,1928AC 269.
97BinsteadvBuck,(1776) 2 WmB1117:96 ER660.
98.NicholsonvChapman,(1793) 2 HyB1254.
99. Falcke vScottishImperialInsuranceCo,(1886)LR 34 Ch D 234 (CA).
CASEPLOThttps://t.me/LawCollegeNotes_Stuffs

896. 754 Chapter 15Agency [S.185]
NegotiorumGestio.'^°°Referringto this doctrine it isobservedinAnson's
LawofContract:"^"Ourlaw doesnotrecognisethenegotiorumgestor
of Romanlaw—theman who voluntarily spends his own money upon the
necessary protection of the property of another."
This may be thegeneralprincipleofEnglishlaw.Butexceptionshave
beenadmitted. A personwho carries onsalvageat sea is entitledto his com
pensationfromthepersonwhosepropertyhasbeensalvaged.^''^Similarly,
where a bill of exchange has been dishonoured either by non-acceptance or
bynon-payment,anypersonmayhonourit byacceptanceorpaymentfor
protectingthe honour of the drawer and maysubsequentlyrecoverfrom
suchperson.Butit has been pointed out by LordGoddardCJ in Sachav
Milkos^°^"thatthecourtshouldbeslowtoincreasetheclassesofthosewho
can be looked upon as agents ofnecessityin selling or disposing of other
people's goods without the authority of the owners".
"In the United States it is fairly clear law that a finder of lost goods is
entitled to recover from the owner his necessary and reasonable expenses
incurred in the successful recovery and preservation of thegoods.In
India a finder has no right of action, but he is entitled to lien unless his law
ful charges are paid. He has also a limited right of sale.[S.177]
Reliefofinjuredpersons
Another occasion for a person to act as an agent of necessity arises when
an injured person is in urgent need of medical attendance. Any person acting
on his behalf may call theservicesof a doctor; or any doctor may volunteer
hisservices.The personbenefitedis bound to pay the charges of theservice.
Willistonin his article on AgencyofNecessity^'^^cites the following cases as
anillustrationof the principle:
InMathesonVSmiley'^°^theManitobaCourtof Appeal heldthata
surgeon was entitled to recoverfrom the deceasedman's estate reasonable
remunerationfor his serviceswhenhehad,withoutrequest,given aid to
amanwhohadattemptedsuicide.
Conditionsforapplicationoftheprinciple
The conditions which enable a person to act as an agent of necessity of
anotherhave been stated byMcCardieJ in Prager vBlastpielStamp &
HeacockLtd.^"^
100.Meaningof thephrase,Walter B.Williston,AgencyofNecessity;(1944) 22 Can BR492.
101.(22ndEdnbyGuest,1964)535.
102. The Five SteelBarges,(1890) 15 PD 142.
103.(1948)2 KB23,36 (CA).
104. Williston, Agency of Necessity, (1944) 22 Can BR 492, 504 and the authorities cited there.
105.(1944)22CanBR492,506.
106.(1932)ZDLR781.
107. (1924) 1 KB566,571-72:1924All ER Rep 524.https://t.me/LawCollegeNotes_Stuffs

897. [S.185] Creationof agency 755
InabilitytoCommunicatewithPrincipal.— "In the first place, it
is of course clear that agency ofnecessitydoes not arise if the agent can
communicatewith his principal. The basis of thisrequirementisthatif the
principal's directions can be obtained the agent should ask it before acting."
Awell-knownillustrationisGwilliamvTwist}°^
While the defendants' omnibus was being driven by their servant, a
policeman,thinkingthatthe driver wasdrunk,orderedhim todiscon
tinue driving, the omnibus being then only aquarterof a mile from the
defendants' yard. The driver and the conductor then authorised aperson
who happened to be standing by to drive the omnibus home.Thatperson
throughhis negligence injured the plaintiff.
Theplaintiff'sactionagainstthe owners failed, because thedefendants
mighthave been easilycommunicatedwithand,therefore,there was no
necessity for their servants to employanotherperson.
Actshouldbereasonablynecessary.—"Inthenextplace, it is
essentialfor the agent to provethatthe sale was necessary.Whatdoes this
mean?"^"^LindleyLJ observed in a casethat"bynecessaryismeantrea
sonablynecessaryandinconsideringwhatisreasonablynecessaryevery
materialcircumstancesmust betakenintoaccount,e.g. danger,distance,
accommodation,expense, time and soforth".""SachavMilkos^^^is an illus
trationexplainingabsence of necessity:
Thedefendantallowed theplaintiffto storecertainfurniturein his
house free of charge.Thereafterthey losttouchwitheachother.Some
threeyears later thedefendantneeded the spacetakenup by thefurniture
andwrotetwolettersto theplaintiffat anaddresssupplied by hisbank,
but received no reply. Hisattemptto reach theplaintiffbytelephonealso
failed. Hethensold thefurniture.Six years later theplaintiffclaimedthe
furniture.
It washeldthatthosefacts gave rise to no agency ofnecessitysincethey
exhibitednothingin thenatureof an emergencycompellingthedefendantto
sell thefurniture.As to thequestionof damages thecourtpointedoutthat
if theplaintiffreceived theletters,hewouldbeentitledto recover only the
actualsaleproceedsof thefurniture.Butthatif he didnotreceive theletters,
hewouldbeentitledtocompensationfor theincreasedvalue offurniture
betweenthedateof saleandhisdiscoveryof it.
A year later the samecourtfacedanotherproblemof the samekind,in
Munrov
108.(1895)2 QB 84 (OA).
109.McCardieJ inPragervBlastpielStamp&HeacockLtd,(1924)1 KB566.
110. PhelpsJames& Co v Hill, (1891) 1 QB 605,610-11(CA).
111.(1948)2 KB 23(CA).
112.(1949)1 KB295.https://t.me/LawCollegeNotes_Stuffs

898. 756 Chapter 15Agency [S.185]
The plaintifflefther car in thedefendant'syardwithoutpayment.The
storagewasintendedto befor a short time,but the carremainedtherefor
several years. It became an obstacle owing to the conversion of the yard
into agarage.Afterunsuccessfulefforts tocommunicatewith the plain
tiffthecarwasrepairedandsold.
Thecourtheldthatthe facts showed no emergencywhichwouldhave
entitledthedefendantto sell as an agent of necessity.
Another interesting decision is Prager v Blastpiel Stamp & Heacock
Ltd.'''
During the First World War the defendant purchased for the plaintiffs,
as their agents, fur skins to be despatched to Romania. Owing to the
occupation of Romania by German forces it became impossible for the
defendants to send the skins or anycommunicationto the plaintiffs. In
the last year of the war, the defendants sold the skins.
When peacereturnedthe plaintiffs claimed their goods. The defendants
sought to justify theiractionunder the principle of agency of necessity. But
thecourtheldthattherewas no necessity to sell the goods.Theyhadbeen
purchased by the plaintiff in time of war in the hope of receivingthem when
peace arrived. The goods being dressed furs were not likely to deteriorate if
carewasused.
Bonafideintheinterestofpartyconcerned.—"Inthethird
place, an alleged agent of necessity must satisfy thecourtthathe was acting
bona fide in the interest of thepartiesconcerned. In Tronson vDent'''^the
Privy Council plainlyindicatedthatbona fides was essential inadditionto
actualnecessity.""^
Relationsofprincipalandagent
DUTIESOFAGENT
Mutualrights and duties ofprincipaland agent may be whollyprovided
for intheircontract.But the following dutiesofgeneralnatureareimposed
by law upon every agent, unless they are modified or excluded by special
contract.
1.Dutytoexecutemandate
Thefirstandtheforemostdutyof everyagentis tocarryoutthemandate
of his principal. He shouldperformthe work which he has beenappointed
to do. Any failure in thisrespectwouldmakethe agent absolutely liable for
theprincipal'sloss.Thusit has been held in anumberof casesthat:"The
rule ofequityis,thatif anorderis sent by aprincipalto afactortomakean
113. (1924) 1 KB 566:1924All ER Rep 524.
114.(1853)8MooPC419,452.
115. See alsoLindleyLJ in Phelps James&CovHill,(1891)1 QB 605,611-12(CA).https://t.me/LawCollegeNotes_Stuffs

899. [S-211] Dutiesofagent757
insurance, and he charges his principal, as if it was made, if he never in fact
madethatinsurance,he isconsideredas theinsurerhimself.""^
In suchcasesthe agentisheldliableto theprincipalforthe amountwhich
wouldhavebeenrecoveredif thegoodshad beeninsured."^Thus,for exam
ple, inPannalalJankidasvMohanlal-}^^
Acommissionagentpurchasedgoodsfor his principaland storedthem
in a godown pending theirdespatch.The agent was under instruction to
insure them. He actually charged the premium for insurance, but failed
toinsurethegoods.Thegoodswerelostin anexplosionin theBombay.
harbour.
The agent was heldliabletocompensatetheprincipalfor his loss
minustheamountreceivedundertheBombayExplosion(Compensation)
Ordinance,1944, underwhichtheGovernmentpaidcompensationup to
fiftypercentinrespectoftheuninsuredmerchandiselostintheexplosion."^
2. Duty to followinstructionsor customs[S,211]
S. 211.Agent'sdutyinconductingprincipal'sbusiness.—Anagentis
bound to conduct the businessofhisprincipalaccordingto the directionsgiven
bytheprincipal,or inthe absence of any suchdirections,accordingto the cus
tom whichprevailsin doing business of the same kind at the place where the
agent conducts suchbusiness.When the agent acts otherwise, ifanylossbe
sustained, he must make it good to hisprincipal,and ifany profit accrues, he
mustaccountforit.
Illustrations
{a)A,anagentengagedin carrying on for Ba business, inwhich)it isthecustomto invest
from time to time, at interest,themoneys which may be in hand, omits to make such
investment. A must make good to Bthe interest usuallyobtainedby such investments.
(fa)B,abroker,Inwhose business,it is not the custom to sellon credit,sellsgoodsof/Ioh
credit toC,whose credit at the time was very high.C,before payment, becomes insol
vent.Bmustmakegoodtheloss to A.
Section211providesthatan agent is bound to conduct the business of his
principalaccordingto thedirectionsgivenbytheprincipaland to keephim
selfwithin theconfinesof his authority.Forexample,an estate agentcannot
make a binding contract on behalf of his principal with a thirdparty.^^"In
theabsenceofdirections,the agenthas tofollowthe customwhichprevails
inbusinessesof the same kind and at the place where the agent conducts
suchbusinesses.When the agent acts otherwise, if any loss be sustained.
116. LordChancellorin TichelvShort,(1750)2YesSen239:28ER154.Adopted bytheSupreme
CourtinPannalalJankidasvMohanlal,AIR 1951 SC 144, 146: 1950 SCR 979: (1951) 21
CompCas1.
117. SeeSmith v Lascelles, (1788)2 TR 187: 1 RR 457 cited by the Supreme Court, ibid.
118. AIR 1951 SC 144: 1950 SCR 979: (1951) 21 Comp Cas 1.
119. See also Illustration{d)to S. 212 and Savoy Solvent OilExtractionLtd v Indian Bank,
(1996) 2 AnWR184, failure of the person under duty to ensure, liability.
120.JohnVPhilip, (1987) 2 KLT 50 (SN).https://t.me/LawCollegeNotes_Stuffs

900. 758Chapter15Agency [S-211]
he mustmakeit good to hisprincipal,and, if anyprofitaccrues,he must
accountforit.^^^[S.212]Thus, forexample,inLilleyvDoubleday}'^^
Anagentwasinstructedtowarehousehisprincipal'sgoodsat a par
ticularplace.Heplaceda part ofthemat adifferentwarehousewhich
wasequallysafe.Butthegoodsweredestroyedwithoutnegligence.
Theagentwasheldliablefortheloss.Anydisobedienceof,ordeparture
from, the instructions makes the agentabsolutelyliablefor theloss.^^^
Whereaprincipalhadgiveninstructionsofambiguousnaturewhich
werecapableoftwomeanings,hewasnotpermittedtoargueasagainstthe
agentthat heshouldhavereadtheinstructionin theothersensethanwhat
heactuallydid.^^''
In the absence ofinstructions,businesscustoms must be followed. Where,
forexample,thecustomsofa particulartraderequirethatgoodsshouldnot
be sold on credit or inreturnfor a negotiable instrument, the agent should
not do so. If he does so, he would be liable to the principal for any loss
resulting from thetransaction.^^^Inreferenceto a broker the importance
of actingaccordingtocustomswashighlightedin thefollowingwords:^^*^
"Brokersemployedtosellgoodsare bound to do so in theusualway,and
if it is usual to send the seller anestimateof value inorderthathe may be
enabled to fix a reserve price, they ought to do so; and whether it is so or
not theyare boundfor their ownguidanceto makea carefulestimateofthe
value;and if they sell,evenby public auction at a price much below their
fair value, then not having made such an estimate, will beevidenceof negli
gence,and if a loss is caused thereby,they will be liable."
Where a booking agent did not prepare the airway bill with proper skill
anddiligenceinasmuchas therelevantboxesrelatingto theitemsas to 'cash
ondelivery'andcollectionofchargesby the carrier were left blank byhim.
121. SeeKaniaCJ inPannalalJankidasvMohantal,AIR 1951 SC144,147.
122.(1881)LR 7 QBD 510. "Where the act which an agent isemployedto perform is one which
bylawis void(suchas the makingof awageringcontract),the principalcannotrecoverdam
agesfor the failure to perform it."ChittyonContracts(24th Edn, 1977) 51, para 2095.
Citing Cheshire & Co vVaughanBros & Co, (1920) 3 KB 240.
123. Seefurther Bostock v Jardine,(1865)3 H&C 700:(1865)159 ER 707,an agent authorised
to buycotton, boughtfor the principalanddiversothers in onelarge-scalecontract so that
the principal had no particular contract to enforce,held bound to refund principal's money;
National CoffeePalace Co, re,Panmure,ex p,(1883)LR 24 Ch D 367(CA),purchasing
shares of companies otherthanthose directed.
124. Ireland v Livingston,(1866)LR 2 QB99;(1872)27 LT79.Where the directors of a company
were instructed to purchase abusinessas it then stood, they were held not liable when the
businessturnedout to be insolvent. It was animprudentinstructionon thepartof the prin
cipal. Overend & Gurney Co v Gibb,(1872)LR 5 HL 480.
125.FerrervRobbins,(1835) 2CM&CR152.
126.Solotnanv Barker, (1862) 2F&F726: 121 RR 828, the broker sold goods at aninadequate
pricewhereashe was under a duty tosellat avalueinaccordancewith thecustomsof the
particular trade, held liable for theprincipal'sloss. Paul Beier v Chotalal Javerdas,ILR
(1904) 30 Bom 1, customs of the place of business;https://t.me/LawCollegeNotes_Stuffs

901. [S.212] Duties of agent 759
he being in breach of duty, he was not allowed to recover his expenses in
arrangingconsignmentof thegoods.^^^
Akin to this is the duty tomaintainthe businesssecrets of the principal. A
bank is under a similar duty of secrecy so far as the customer's dealings with
him are concerned and would be liable in damages if any loss is caused to
the customer by leakage of secretinformation.Certaincurrencynotes were
depositedwithabankfordemonetisation.ThebankinformedtheIncome
TaxAuthoritiesand thecustomertherebylost theutilisationofthatmoney.
Even so thecustomer'sactionagainstthebankfailed. Thebankwasundera
highernationalduty which superseded the duty to thecustomer.^^*
Anagentis alsounderadutytomaintainconfidence,secrecyandnon-dis-
closure of any sensitiveinformationaboutthe affairs of hisprincipal.A
bankermay be liable if the state of his customer's account is leaked, except
where the disclosure isundercompulsionof law, e.g., duty to obey anorder
underBankers'Books Evidence Act, orunderhigherdutyowed toStateor
publicinstitutionswhich supersedes lower duty or under anystatementin a
formalclaim orwithcustomer'spermission.'^'
B
3.Dutyofreasonablecareandskill [S. 212]
S.212.Skillanddiligencerequiredfromagent.—Anagentisboundto
conductthebusinessoftheagencywithasmuchskill as isgenerallypossessed
bypersonsengagedin similarbusiness,unlesstheprincipal hasnoticeof his
w/antof skill.Theagentis alwaysboundtoactwithreasonablediligence,and
tousesuchskill as hepossesses;andtomakecompensationtohisprincipal
inrespectofthedirectconsequencesofhisownneglect,wantof skill or mis-,
conduct,butnotinrespectof loss ordamagewhichareindirectlyorremotely
causedbysuchneglect,wantof skill,ormisconduct.
Illustrations
(a) A, amerchantinCalcutta,has anagent,B,inLondon,towhomasumofmoneyispaid
on/\'saccount,withordersto remit. Bretainsthemoneyfor aconsiderabletime.A, in
consequenceofnotreceivingthemoney,becomesinsolvent.B is liable forthemoney
andinterestfromtheday on which itoughtto havebeenpaid,accordingtotheusual
rate, and for anyfurtherdirect loss—ase.g., by variation of rate ofexchange—butnot
further.
(b)/A,anagentforthesale ofgoods,havingauthorityto sell on credit, sells to Boncredit,
withoutmakingtheproperand usualenquiriesas tothesolvencyofB.B,atthetimeof
such sale, isinsolvent.>4mustmakecompensationto hisprincipalinrespectofanyloss
therebysustained.
(c)A,aninsurance-brokeremployedby6toeffectaninsuranceon a ship,omitstoseethat
theusualclausesareinsertedinthepolicy. The ship isafterwardslost,inconsequence
oftheomissionoftheclausesnothingcan berecoveredfromtheunderwriters.A is
boundtomakegoodtheloss to B.
127. Sinclair.FreightandCharteringConsultants(P) Ltd vFielTraders, AIR 1987Cal201.
128.ShankarlalAgarwallavSBI,AIR1987Cal 29.
129.Ibid.https://t.me/LawCollegeNotes_Stuffs

902. 760 Chapter 15Agency [S.212]
(d)A, amerchantin England, directsB,hisagentat Bombay, whoacceptstheagency, to
sendhim 100 bales ofcottonby a certain ship.B,having it in hispowertosendthecot
ton, omits to do so. The ship arrives safely in England. Soon after her arrivaltheprice of
cottonrises. Bisboundto makegoodto Atheprofit which he might havemadebythe
ICQbales ofcottonatthetimetheship arrived, but not any profit he might havemade
bythesubsequentrise.
Thus everyagent is bound to carry on the business of agency with reason
able skill andcare.^^°For example,"^ a bank wasinstructedby theplaintiff
tocollectacertainamountonhisbehalfandtoremitittohim.Therewas
nospecificinstruction as to the manner of remittance. The bank sent the
amount bydraftplaced in a letter sent byordinarypost. The bank was held
negligent in sending theamountlike that.Certaincheques were paid into a
bankforcollection.Thebanksentthemtothedraweebankforcollection,
but they were lost in transit. The bank was held liable to the customer for
theprincipalvalue of thecheques."^
Thestandardof care and skillwhichan agent has to bestow dependsupon
thenatureof hisprofession."^An agent, havingauthorityto sell on credit,
musttakecare toascertainthe solvency of his buyer. Aninsurancebroker
must seethatusual clauses for theprotectionof the principal are inserted
in the policy. An estate agent should know the land laws and also must
takecare toascertainthe solvency of thetenant."''If an agent isretained
for assisting hisprincipalfor lending money on amortgage,he must make
reasonableinquiryaboutthe value of theproperty."^Astockbrokershould
knowtheregulationsof the stock exchange. An agentshouldcommand
enoughlegalknowledgeto sufficientlyandadequatelysafeguardtheinter
ests of theprincipalin thecourseof theagency."®He may becomeanswer
able for theincompetenceof thelabouremployed byhim."^
If theprincipalsuffers any loss owing to the agent'swantof care or skill,
the agent mustcompensatetheprincipalfor such loss. Section 212 limits the
agent'sliabilityto"directconsequences"."^It providesthatthe agent must
"makecompensationto hisprincipalinrespectof thedirectconsequences
of hisownneglect,wantof skill ormisconduct,butnotinrespectof loss
130.Dutiesandliabilitiesare thesamewhethertheagentisworkingforconsiderationorwithout
it.AgnewvIndianCarryingCo, (1865) 2MadHCCases 449.
131.BankofBiharLtdvTataScobDealers(ControlledStock)CalcuttaLtd,AIR1960Cal
475. If he satisfies therequiredstandard,he is not liable for theprincipal'sloss, if any, and
it would be no cause of actionthatthe loss could have been avoided if the agent had acted
differently.RajaRam vAbdulRashim,(1973) 9SLR77: (1915) 31IC450;LagunasNitrate
Co VLagunasSyndicate,(1899) 2 Ch 392 (CA).
132.StateBankofJndorevNationalTextileCorpn,(2004)4MPLJ214.
133. Everypersonwho acts as askilledagent isduty-boundto exercisereasonableskilland
knowledge in theperformanceof his duty;PandurangvJairamdasPandurang,AIR1925
Nag166;Lee vWalker,(1872)LR7 CP121.
134.HeysvTindal,(1861) 1B&S296.
135.Baxterv F. W.Gapp& CoLtd,(1939) 2 KB 271 (CA).
136.ParkvHammond,(1816) 6Taunt495: 128 ER 1127.
137.NagendraNathvNagendraBala,AIR1929Cal988.
138.KrishnaChandraGanpativK.HanumanthaRao,AIR1950Ori241.https://t.me/LawCollegeNotes_Stuffs

903. [S.214] Dutiesofagent761
or damagewhich are indirectlyorremotelycaused by suchneglect,want of
skill ormisconduct".If, forexample,an agent fails to send the principal's
money in time, he may be liable for the money and thelossof interest, but
not if the principalbecomesinsolvent by that reason. An example of direct
lossis to be seenin the facts of KeppelvWheeler^^^.An agent was appointed
to sell a house. He received an offer which he promptly communicated to
his principal. Thelatteraccepted it provisionally "subject tocontract".
Subsequentlythe agent received a higher offer which he failed to pass on to
the principal. This resulted in final acceptance of the first offer in ignorance
of the second. The agent was held liable to make good theprincipal'sloss in
terms of the difference in thetwoprices.
The meaning of the expression"directconsequences" has beenexplained
by the SupremeCourtinPannalalJankidasvMohanlal^'^°:
Anagent,havingbeeninstructedtoinsurecertaingoods,failed to do
so. The goods were lost in anexplosionat the docks. Even if the agent
hadtakenouta fireinsurancepolicy in the usual form itwouldnothave
covered a loss of thiskind,as fire due toexplosionwouldhave been an
excepted peril. But the BombayGovernmentpassedanordinanceunder
whichitundertookto payhalfloss in cases ofuninsuredgoods.Thusthe
principal got only half ofwhathe would have got if the goods had been
insured.
The agent contendedthatas the passing of theOrdinancecould not have
beenanticipated,the loss was too remote. But, it was held by a majority,
thatthe loss was thedirectresult of the agent's negligence.TheirLordships,
following English decisions,"^ feltthattheinterventionof theGovernment
Ordinancedidnotbreakthechainofcausation.KaniaCJ said:"Once
misconductisadmittedor proved the factthattheOrdinancedid not exist
and couldnothave been in thecontemplationof thepartiesisirrelevantfor
deciding thequestionof liability."
In cases ofdifficultythe agent's duty is to use allreasonablediligence in
communicatingwith hisprincipal,and in seeking toobtainhisinstructions,
if the principal can be communicated with by reasonable care, before taking
any steps in facing the difficulty oremergency.
S. 214.Agent'sdutytocommunicatewithprincipal.— It isthedutyof
anagent,in cases ofdifficulty,to use allreasonablediligence ofcommunicating
with his principal,andinseekingtoobtainhisinstructions.
Where the agent informed his principalthatpurchases have been effected
on his behalf and subsequently confirmed it byreportingthatthe goods
139.(1927)1 KB577.
140.AIR1951SC144:1950SCR979.
141. The followingEnglishdecisionsbearing on the questionwereconsidered:PolemisandFurness
Withy & Co, re,(1921)3 KB560(CA);Liesbosch DredgervSSEdison, 1933 AC 449.
142. For example, in selling shares otherwise than as directed.BuddulalGoerlalMahajanv
ShrikisanChandtnal,AIR 1961 MP 57, 61;FaniBai v SireKanwar,AIR 1981 Raj 184.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

904. 762Chapter15 Agency [Ss.215-216]
would be despatched as soon astransportstrike was over whereas he had
donenothingin thematter,it was held by the SupremeCourtthatsuch a
neglect andmisconductof the agentmisinformingtheprincipalwassquarely
withinthe widetermsofSection212."Hemustbearthebruntto paydam
ages," thecourtsaid.^"*^
4.Dutyto avoidconflictofinterest
S.215.Rightofprincipalwhenagentdeals,onhisownaccount,inbusi
nessofagencywithoutprincipal'sconsent.— If anagentdealson hisown
accountinthebusinessoftheagency,withoutfirstobtainingtheconsentof
hisprincipalandacquaintinghimwithallmaterialcircumstanceswhichhave
cometo hisownknowledgeonthesubject,theprincipal mayrepudiatethe
transaction,ifthecase shows,eitherthatany material fact hasbeendishonestly
concealedfrom him bytheagent,orthatthedealingsoftheagenthavebeen
disadvantageoustohim.
Illustrations
(a) AdirectsBto sellyA'sestate.B buystheestatefor himself inthenameof C.A, on discov
eringthatB hasboughttheestatefor himself, mayrepudiatethesale, if he canshow
thatB hasdishonestlyconcealedany material fact, orthatthesale hasbeendisadvan
tageousto him.
(b)A directs Bto sell A'sestate.B,on looking overtheestatebeforeselling it, finds a mine
ontheestatewhich is unknown to A.B informs Athathe wishes to buytheestatefor
himself, but concealsthediscovery ofthemine. A allows Bto buy inignoranceof the
existence ofthemine./A,on discoveringthatBknew of the mine at the time hebought
theestate,mayeitherrepudiateoradoptthesale at hisoption.
S. 216.Principal'srightto'benefitgainedbyagentdealingonhisown
accountinbusinessofagency.—ifanagent,withouttheknowledgeof his
principal, deals inthebusinessoftheagencyon his ownaccountinsteadof on
account of hisprincipal,theprincipalis entitled to claim from the agent any
benefitwhich may haveresultedto him fromthetransaction.
Illustration
Adirects 6, his agent, to buy a certain house for him. Btells A it cannot be bought, and
buys the house for himself.Amay,on discoveringthatBhasboughtthe house, compel him
to sell it to A attheprice hegavefor it.
An agent occupies fiduciary position and, therefore, it is his duty not to
do anything which would bring his personal interest and his duty to the
principal in conflict with each other. This conflict invariably arises when
theagentispersonallyinterestedin theprincipal'stransaction,forexample,
where he himself buys thepropertyhe is appointed to sell ordelivershis own
goods when he is instructed to buy on behalf of the principal. A stockbro
ker wasemployedto buy some shares for his principal. He submitted to his
143.JayabharathiCorptiv Sv.P.N.Sn.RajesekaraNadav, 1993 Supp(1)SCC 401: AIR 1992,SC
596.SushilaDevi vStateofBihar, 2005AIHC1514 (Pat), thematterofinformationin con
nectionwith anaccidentwas beinghandled bythepoHce.Informationof death to the police
wasattributedtotheinsurer.https://t.me/LawCollegeNotes_Stuffs

905. Dutiesofagent763
principalforsignaturecertainpaperswhichshowedthatthepurchasewas
beingeffectedinthemarket.But,infact,theagentwastransferringhisown
sharesto theprincipal.Theprincipalwasallowedtoclaimrescission.^''''A
well-knownillustrationis the case of De Busche v
Theplaintiffconsignedashipto acompanyinChinaforsale"at
£90,000payableincash".Withtheconsentoftheplaintiffthecompany
appointedthedefendant,aJapaneseagent,toselltheship.Thedefendant
attemptedtoselltheship,buthavingfailedtofindacustomer,boughtthe
shiphimselfandwithoutdisclosingthis,remittedtheabovesumthrough
thecompanytotheplaintiff.Soonthereafterawarbrokeoutandships
wereagainingreatdemand.AJapaneseprinceboughtitfromthedefend
antat£1,60,000.Theplaintiffsuedthedefendanttorecovertheprofit
madeonresale.
Hewasheldboundtoaccountfor theprofit.Therewouldhavebeen
nothingwrongiftheagenthadboughttheshipafterdisclosingthefactto
hisprincipal.Theagentmighthavebeenhonestinthisparticularcase.But
ifhiscontentionwasaccepted,manyanagentwouldmakesecretprofitsby
feigninginability tosell."^
TheprincipleisincorporatedinSection215,whichprovidesthat if an
agentdealsonhisownaccountinthebusinessofagency,withoutfirst
obtainingtheconsentofhisprincipalandacquaintinghimwithfullfacts,
the principal may repudiate the transaction if he can showthat—
{a)amaterialfacthasbeendishonestlyconcealedfromhim,or
[b)thedealingoftheagenthasbeendisadvantageoustohim."^
Thefirstillustrationtothesectionsaysthatiftheagenthassecretly
boughttheprincipal'spropertyforhimself,theprincipalmayrepudiatethe
transactionif he canshowthat theagenthasconcealedanymaterialfact
orthatthesalehasbeendisadvantageoustohim.Where,forexample,the
agentdiscoversamineontheprincipal'sestateandwithoutdisclosingthis
factbuystheestateforhimself,theprincipalmayrepudiatethetransaction.
Themerefactoftheagentbuyingtheprincipal'spropertybringshisinterest
inconflictwithhisdutytotheprincipaland,therefore,ithasbeenpointed
outthattheconflictisinitselfasufficientdisadvantagetotheprincipal."®
144.ArmstrongVJackson,(1917)2KB822.Willies JobservedinMollettvRobinson,(1870)
LR5CP646,655that "it is anaxiomof the law ofprincipalandagentthat abroker
employedtosellcannothimselfbecomethebuyerwithoutdistinctnoticetotheprincipalso
that the lattermayobjectto it if he thinksproper".
145. (1878) LR 8ChD286.
146.Theprincipleisapplicableevenwherethereisamerepossibilityofconflictandtheagentacts
ingoodfaith.BoardmanvPhipps,(1967)2AC46:(1966)3WLR1009(HL).
147.Detrimentof theprincipalis aquestionoffact.Firm ofRameshardasBenarashidasv
TansookhraiBashesharilalFirm,AIR1927Sind195.Repudiationbytheprincipalmustbe
withinreasonabletimeafterdiscoveringthefacts.ArmstrongvJackson,(1917)2KB822-
(1916-17)All ER Rep 1117.
148. See, for example,JanakidasvDhumanmal,AIR 1917 Sind 5. But it has been held in
MamchandvChajuram&Sons,(1937)169IC827,thatsomedisadvantageinadditiontohttps://t.me/LawCollegeNotes_Stuffs

906. 764Chapter15 Agency
5. Dutynot to makesecretprofit
Anotheraspectofthisprincipleisthedutyoftheagentnottomakeany
secretprofitinthebusinessofagency.Hisrelationshipwiththeprincipalis
offiduciarynatureandthisrequiresabsolutegoodfaithintheconductof
agency.Whatismeantbysecretprofit?Itmeansanyadvantageobtained
bytheagentoverandabovehisagreedremunerationandwhichhewould
nothavebeenabletomakebutforhispositionasagent.Acceptanceof
bribeisaprofitofthiskind,even"iftheemployersarenotactuallyinjured,
andthebribefailstohavetheintendedeffect"."'Amilitaryofficerwho'
tookbribeandallowedgoodstopassundertheauthorityofhisuniform,
washeldliabletoaccountforthesameto theCrown.^^"Similarly,where
anauctioneerreceivedfromthebuyercommissioninadditionto whathis
principalpaidhim,hewasheldboundtohandoverthecommissiontothe
principal.'^^
Whereanagentsellshisownstocktotheprincipalwithoutdisclosing
thefact,heisboundtoaccountforanyprofithemadeinthetransaction.
Itisimmaterialthattheagentchargedonlytheprevailingmarketprice.^^^
Aprincipalagreedtobuyhorsesfromadealerprovidedthathisveteri
narysurgeonwouldpassthemassound.Thesellerbribedthesurgeonand
obtainedhiscertificate.Thehorsesturnedoutto beunsound.Theprincipal
washeldjustifiedinrejectingthemandcountermandingthechequewhich
hehadissuedfortheprice.
Knowledgewhichisacquiredbyanagentinthecourseofthebusinessof
agencyandwhichheconvertsintoadvantagedoesnotrequireaccountabil
ityiftheagentneitherusestheprincipal'spropertyintheprocessnordiverts
his businessopportunities."''
Asapartoftheagent'sdutytobehonesttohisprincipal,itisnecessary
thattheagentshouldnotdiscloseanyconfidentialinformationreceivedby
thisbareconflictmustbeshown.GrantvGoldExplorationandDevelopmentSyndicate
Ltd,(1900)1QB233(CA),anagentforsaleandpurchasecannotactfortheotherparty
at thesametimeor take acommissionfromhimunknownto theprincipal.NabiKhanv
Roojdar,AIR2010Raj128,agentappointedtosellland,solditbelownaturalpriceandthat
tootohisownfather,thusself-dealing,recoveryofpropertybytheprincipalordered.
149.HarringtonvVictoriaGravingDockCo,(1878)LR3QBD549.
150. Reading v Attorney General, 1951 AC507(HL).
151.AndrewsvRamsay& Co, (1903) 2 KB 635.
152.BentleyvCraven,(1853)18Beav75:104RR373.SeeS.216anditsillustration.
153.ShipwayvBroadwood,(1899)1QB369(CA).Theprincipalisentitledtoclaimintereston
theillicitprofitsmadebytheagent.TotaRamvKunwarZalimSingh,AIR1940All69,
followingRegiervCampbellStuart,(1939)1Ch766,theagentforfeitshiscommission.
AndrewsvRamsay&Co,(1903)2KB635,bytakingbribe;thesectiongivesoptiontothe
principaltoavoidthetransactioninreferencetothethirdpartyortoaffirmitandholdthe
agentliableforhisbreaches.VinayakRaovRansordas,(1870)7BHC(OC)90;Joachinson
VMeghjeeVallabhdas,ILR(1910)34Bom292;HaslamandHier-Evans,re,(1902)1Ch
765(CA),recoveryofcommissionfrom solicitor.
154.NordiskInsulinlaboratoriumvGorgateProductsLtd,1953Ch 430:(1953)2WLR879
(CA);AasVBenham,(1891)2 Ch 244(CA).https://t.me/LawCollegeNotes_Stuffs

907. [Ss.218&213] Duties of agent765
him from hisprincipal.If hedoesso, theprincipalmay terminatethe con
tract and hold the agentliableindamagesfor his loss, ifany."^
6.Dutytoremitsums[S. 218]
S.218.Agent'sdutytopaysumsreceivedforprincipal.—Subjectto
suchdeductions,'^®theagentis bound to pay to hisprincipalallsums received
onhisaccount.
The agentis bound to pay to his principal all sums receivedon his account.
Theagentis,however,entitledtodeducthislawfulcharges,butsubjectonly
to this right, the principal's money must be remitted to him even if it has
beenreceivedin pursuance to a void or illegal contract. The agent has to
perform this duty even if his earnings for the principal flow out of void or
illegaltransactions. "If an agentreceivesmoney on his principal's behalf
under anillegaland void contract, the agent must account to the principal
for the money soreceivedand cannot set up the illegality of contract as a
justificationfor withholding payment, which illegalitythe other contracting
partyhas waived by paying theamount.""''
The agenthas the right to make a counter claim.The BombayHigh Court
did not consider it fair or in the interest of justice to compel the agent to
deposit the amount in the court as a measure of protecting his principal,
particularly when there was a claim against theclaim."®
7.Dutytomaintainaccounts[S. 213]
S.213.Agent'saccounts.—Anagentisboundtorenderproperaccounts
to his principal ondemand.
Accounts arenecessaryfor theproperperformanceof the agent'sother
duties, for example, the duty to remit sums to theprincipal."^
There is noprovisionin the Actenablingan agent toinstituteasuitfor
accountsagainsttheprincipal.The SupremeCourtinNarandasMorardas
GajiwalavS.P.A.M.Papammal^^°laiddownthattheprovisionsof the
ContractAct arenotexhaustivein thisregardandthattherightof an agent
to sue the principal for accounts is anequitableright arising under special
155.Harris(L.S.)TrusteesLtdvPowerPackingServicesLtd,(1970)2 Lloyd's Rep 65.Theagent
can also berestrainedby means of aninjunctionfrom disclosing confidence.AntonFiller
K.G.VMfgProcesses.Ltd,1976Ch 55: (1976) 2WLR162 (CA).
156.DeductionsindicatedinS.217.
157.BholaNathvMulChand,ILR(1901-03)25 All 639 (wageringtransactions);Palaniyappa
Chettiar v Chockalingam Chattiar, ILR(1921)44 Mad 334. Illegal agency is itself not as
suchenforceable.
158.NationalShippingCoofSaudiArabiavSentransIndustriesLtd,(2004) 2 Bom CR 1.
159. As apartof theobligationtorenderaccountsthe agent has toproducevouchers insupport
ofexpenditureincurred by him. See S. Paul & Co v StateofTripura, AIR 1984Cal378.
Theprincipalcanrecover fromagent'sestateanythingthathecanshowto be due from the
deceasedagent.R.BhawaniSingh vMisbah-ud-din,(1929) 30 LW 21: AIR1929PC 119;
PurshottamVasudeovRamkrishnaGovind,AIR1945Bom 21.
160.AIR1967SC333.https://t.me/LawCollegeNotes_Stuffs

908. 766Chapter15 Agency [S. 213]
circumstances.One ofthosespecialcircumstancesis where all theaccounts
are in thepossessionof theprincipal.In a case before theMadrasHigh
Court,anagent wasrunninga millwhichwastakenover by theown
ers. The agentclaimedthathe lost hisaccountsin the process oftake-over
and,therefore,claimedaccountsfrom theprincipal.Thecourtdidnotpro
vide him any relief because he wasnotable to give anyproofof the loss of
hisaccounts."Wherean agent wasappointedto secureordersfor supply
ofgoods,,hiscommissionto be payable when theprincipalreceived pay
mentfor supplies, it was heldthatquitenaturallyanaccountwouldhave
to bemaintainedby theprincipalandthe agenthadtherighttodemandan
account.^^^The same is thepositionwhere theaccountsare socomplicated
thata suit for a definite sum of money isnotpossible. In caseswhereset
tlementofaccountsalone can docompletejusticebetweentheparties,the
agentcansue theprincipalforaccountingeven if he ishavingsortie evidence
ofthetransactionwithhim.^®^
The Lahore HighCourtfaced a case of thiskindin RamLaiKapur&
SonsVAsianCommercialAssuranceCo TappJ observed:"Theright
to claim astatementof accounts is anunusualform of relief, onlygranted
incertainspecific cases and is only to be claimed when therelationship
betweenthepartiesis suchthatthis is the only reliefwhichwill enablethe
claimanttosatisfactorilyassert his legal rights."
Inthatcase, theplaintiffs,who wereinsuranceagents, were to be remu
nerated by a commission calculated on the premia paid on all policies
effected or introduced through them. The court held that as the plaintiffs
could not know which of thepolicieshad lapsed, matured or forfeited, they
wereentitledtodemandrenditionofaccounts.
The Sind HighCourt^^^explained the position in the following words:
"An agent has nostatutoryright to the account from his principal.
Nevertheless where it is equitable from theparticularcircumstances and
the relationship of thepartiesthatone shouldaccountto the other, a suit
for account will lie. If an agent can satisfythatall accounts are rightly in
possession of the principal andthathe (the agent) hasnotand couldnot
have in hispossessionaccountswhichwouldenable him todeterminehis
claim for commission against his principal, he will be entitled to sue for
anaccount.But if it is foundthatthe agent has noaccountsbecause of his
own failure or fault, he should not be granted the relief he claims, much
lessif it is found that he has accounts which he is withholding."
A suit by an agent against his principal for a specific sum of money is
not a suit for accounts. It is only in exceptional cases where the agent's
161. StateofT.N.v S.AlagirsubramanianChettiar,AIR 1988Mad248.
162.SarojKapurvNitinCastingsLtd,AIR1987Del349.
163. Thiruvenkidam vQuilonPencil Factory, (1990) 2 KLT 327.
164.AIR1933Lah483.
165.GulabraiDayaramvIndiaEquitableInsuranceCo Ltd, AIR 1937 Sind 51.
i
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909. [S.213] Dutiesofagent767
remuneration depends on the extent of deahngs which are not known to him
orwherehecannotbeawareoftheamountdue tohimunlesstheaccounts
ofhisprincipalaregoneinto,thatasuitbyanagentforaccountsagainsthis
principal might becompetent.^®^
TheDivisionBenchof theNagpurHighCourtallowedasalepusherof
books to know from his principal an account of thevolumeof sale induced
by hisefforts.
TheprinciplebehindtheserulingswasaffirmedbytheSupremeCourtin
Narandas MorardasGajiwalavS.P.A.M.Papammal.^^^The agentsuedfor
anaccountand theprincipalsoughtenforcementofpromissorynotegiven
bytheagentto theprincipal.Thecourtpassedadecreeon thepromissory
notesubjecttoset-offfor amounts duefrom theprincipalto theagent.The
principalthusbecameaccountableforthosedues.^^®
Inspectionofagent'saccounts.
Concedingtherightto theprincipalofinspectinghisunderwritingagent's
computerisedaccounts,the court said: "That obligationto providean accu
rate account in the fullest sensearises by reason of the fact that the agent has
beenentrusted with the authority to bind the principal to transactions with
third parties and the principalis entitledto know what his personal contrac
tual rights and duties are in relation to those third parties as well as what he
is entitled toreceiveby way of payment from the agent. He is entitled to be
providedwith thoserecordsbecausetheyhavebeencreatedforpreserving
informationas to theverytransactionswhich theagentwasauthorisedby
himtoenterinto.
Beingthe participant in the transactions, the principal is entitled to the
recordsofthem."™
Explaining the source of the agent's obligation tomaintainaccounts
and toprovideinspectionthe court heldthat theobligationtokeeprecords
andproviderecordsto theprincipalarisesout of theagencyrelationship.
and does not depend on thatrelationshiphaving been created by contract.
The duty would coexist with a contract ofagency.Theexpressarrange
mentsfor inspectiondo not oust this, though they qualify theimpliedduty,
for instance, byrelievingthe agent of duty todelivertheir original books,
accountsandrecords.
The duty to provide access to the records survives theterminationof the
contract. It would be extremely inconvenient and potentially very damag
ing to theprincipalif the obligation does not surviveterminationof the
166.RamachandraMadhavadossCo vMoovakatMoidunkuttiBirankutti& Bros, Firm, AIR
1938Mad707.
167.BasantKumar Mishra vRoshanlalShrivastava,AIR 1954 Nag 300.
168.AIR1967SC333:1966SCR38.
169. StateofT.N. v S.AlagirsubramanianChettiar,AIR 1988Mad248.
170.YasudaFire and Marine Insurance Co v Orion Marine Insurance Underwriting Agency
Ltd,1995 QB 174; (1995) 2WLR49.https://t.me/LawCollegeNotes_Stuffs

910. 768Chapter15Agency [S.190]
contract. It is clear that there can be obligations under the contract which
do surviveits termination. Theclassicexampleis of course an agreement for
arbitration.^^^
Theprincipalspecificallyadmittedthat he wasreadyto settleallclaims
andliabilities.Thecourtsaidthatsuchclaimrevealedthattherewasneces
sityforrenditionofaccounts.Accountswerestillnotcrystallised.The suit
forrenditionofaccountswasmaintainable.^^^
8.Dutynotto delegate[S.190]
Delegatusnon potestdelegareis awell-knownmaxim of the law of
agency.Theprincipalchoosesa particularagentbecausehe has trust and
confidencein his integrity andcompetence.Ordinarily, therefore, the agent
cannot furtherdelegatethe work which has been delegated to him by his
principal.
It was laid down inJohn McCain and Co vPow"^that unless so author
isedbytheprincipal,an estateagenthas no rightto appointasub-agentand
delegateto him his powerswhich require specialskill and care. Noimplied
authority could bepleaded.In this case the sub-agenteffecteda sale on his
own account. The agent (plaintiff) had sued for his commission. Thecourt
negativedthe claimas the contract ofagencydid not permitappointmentof
sub-agent.
This principle and its exceptions are stated in Section190:
S.190.Whenagentcannotdelegate.—Anagentcannotlawfullyemploy
anotherto perform acts which he has expressly or impliedlyundertakento per
form personally, unless bytheordinary custom oftradeasub-agentmay, or,
fromthenatureoftheagency,asub-agentmust, beemployed.
Butthere areexceptions.In the followingcasesthe agent maydelegatethe
worktoanother:
1.Natureofwork
Sometimes the verynatureof work makes it necessary for the agent to
appoint a sub-agent. For example, an agent appointed to sell an estate may
retaintheservicesofanauctioneerandtheoneauthorisedto file asuitmay
engagea lawyer. A banker instructed to make payment to aparticularper
son at theparticularplace may appoint a banker who has anofficeat that
place.^^"*A banker authorised to let out a house and collect rents mayentrust
theworkto anestateagent.^^^
171.HeymanvDarwinsLtd,(1942) AC 356.
172.P.T.MathewvKeralaSEB,AIR2014NOC588(Ker).
173.(1974) 1WLR1643(CA).
174.SummanSingh vNationalCity BankofNew York, AIR 1962 Punj 172: ILR 1952 Punj 189.
175.MohindervMohan,AIR 1939All188; UnionofIndiavAmarSingh, AIR 1960 SC 233:
(1960) 2 SCR 75, goods received fromanotherrailway, sub-agency notconstituted;Nagpur
Electric Light and Power Co vR.B.S.R.Pandit, AIR 1937 Nag 379, director of a companyhttps://t.me/LawCollegeNotes_Stuffs

911. [Ss.191&c193] Duties of agent 769
2.Tradecustom
'Secondly,a sub-agent may be appointed and the work delegated to him
if there is ordinary custom of trade to that effect. Thus architects generally
appointsurveyors.^^®
3.Ministerialaction
An agentcannot,ofcourse,delegate actswhichhe has expressly or
impliedlyundertakentoperformpersonally, e.g., actsrequiringpersonalor
professional skill. But the agent may delegate acts which are purely ministe
rial innature,e.g.,authoritytosign.^^^
4.Principal'sconsent
Theprincipalmay expressly allow his agent toappointa sub-agent. His
consent may also be implied from theconductof theparties.Theprincipal
mayratifyhisagent'sunauthoriseddelegation.
Apersonwho isappointedby the agent and towhomtheprincipal'swork
isdelegatedisknownas"sub-agent".Section191 defines"sub-agent"as"a
personappointedbyandactingunderthecontrolof theoriginalagentin the
business of theagency".
S.191."Sub-agent"defined.—A"sub-agent"is apersonemployedby,
andactingunderthecontrolof,theoriginalagentinthebusinessoftheagency.
In a case before the SupremeCourt:^^^
Apersonhadsentcertainparcels by VPP to adestinationinPakistan.
The articlesreachedPakistan.Theywere delivered to theaddresseeand
theirvalue was collected. TheGovernmentofPakistan,havingsnapped
thepostaltreatywiththeGovernmentofIndia,didnotforwardthe
amount.TheIndianPost Officecouldnotpay tothesender.Thesender
suedtheGovernment.
HoldingtheGovernmentnotliable,thecourtsaidthatwhentwosover
eignpowersenter into apostaltreaty,neitherofthemcan bedescribedas an
agent of the other.Neithercan be said to be employed or actingunderthe
controlof theotherasrequiredof asub-agentunderSection 191.
Whenasub-agentisappointed,whatrelationshipisconstitutedbetween
theprincipalandthesub-agentandthe agent?Theanswerdependsupon
whetherthesub-agenthas beenproperlyorimproperlyappointed.
1.Improperdelegation[S. 193]
S.193.Agent'sresponsibilityforsub-agentappointedwitliout
authority.—Whereanagent,withouthavingauthorityto do so, hasappointed
appointinganadvocate;RamdeoTilokchandAgarwalvLaluNatha,AIR 1937 Nag 65, a
general agentappointinganadvocatefor a suit.
176.MoonVWitneyUnion,(1837) 43RR802.
177.MasonvJoseph,(1804) 1 Smith KB406.
178. UnionofIndiavMohdNazim,(1980) 1 SCC 284; AIR1980SC 431.https://t.me/LawCollegeNotes_Stuffs

912. 770Chapter15 Agency [S. 192]
apersontoactas asub-agent,theagentstandstowardssuchpersoninthe
relation of a principal to anagent,andisresponsiblefor hisactsbothtothe
principal and to third persons;theprincipal is notrepresentedby orresponsible
fortheactsofthepersonsoemployed,nor isthatpersonresponsibletothe
principal.
Delegation isimproperwhen it is notauthorised,thatis, when it is not
withinany of the recognised exceptions. The effect isthattheprincipalis
notboundby theappointment.He is not represented bythatperson,nor
boundby his acts.Thatperson is also not responsible to theprincipal.But
the agent will be responsible to theprincipalfor any act ofthatperson.The
agentstandsin thepositionofprincipaltowardsthatpersonandis as such
responsiblefor his acts tothirdparties.
2.Properdelegation[S. 192]
S.192.Representationofprincipalbysub-agentproperlyappoin
ted.—Whereasub-agentisproperlyappointed,theprincipalis,so far asregards
thirdpersons,representedbythesub-agentandisboundbyandresponsible
for hisacts,as if hewereanagentoriginallyappointedbytheprincipal.
Agent'sresponsibilityforsub-agent.—Theagentisresponsibletothe
principalfortheactsofthesub-agent.
Sub-agent'sresponsibility.—Thesub-agentisresponsiblefor hisactsto
theagent,butnottotheprincipal,exceptincaseoffraudor wilfulwrong.
In CalicoPrinters'Assn v BarclaysBank^^°WrightJexplainedthe effect
ofproperdelegation:
"Even where thesub-agentisproperlyemployed, there is noprivity
betweenhim and theprincipal;thelatterisentitledto hold the agent
liable for breach of themandate,whichhe has accepted, andcannot,in •
general claimagainstthesub-agentfor negligence orbreachof duty."
The following effects of theappointmentarestatedin Section 192:
1.Principalrepresentedbysub-agent
In the first place, so far asregardsthirdpersons,theprincipalis repre
sented by thesub-agent.He isboundbyandresponsiblefor his acts as if he
were an agentoriginallyappointedby theprincipal.^®^
179. Apersonwho wasappointedas a sole agent was held to have noauthoritytodelegate.
McCannJohn&CovPow,(1974) 1WLR1643(CA).
180. (1931) 145 LT 51 (CA). AsimilarexplanationoccursinMercantileBankofIndiaLtdv
ChetumalBulchand,AIR 1930 Sind 247, 250;IndianAirlines vRenuGupta,AIR2007
(DOC) 116: (2006) 3 CPR201,IndianAirlinessellsticketsto itsconsumersthroughits
agents.Oneofthemfailed toinformthe buyer ofchangein time ofdeparturewiththeresult
thattheconsumerhad to wait for6-7hours. The Airlines was heldvicariouslyliable for
deficiencyofservicebyagent.
181. See alsoRaghunathPrasadv SevaRamTikamDas,AIR1980All 15.https://t.me/LawCollegeNotes_Stuffs

913. [S.192] Dutiesofagent771
2. Agent's responsibility forsub-agent
Secondly,the agentisresponsibleto the principal for the acts of the sub-
agent.If, forexample,thesub-agenthasmisappropriatedtheprincipal's
property or its sale-proceeds, the agent is responsible for the same. There is
no privity of contract between the principal and the sub-agent and, there
fore,he cannotsuethesub-agent,exceptforfraudorwilfulwrong.Even
wherefraudor wilful wrong isestablishedtheprincipalhas thechoiceto
sueeithertheagentor thesub-agent.^^^But the agent mayexempthimself
from suchliability.^^^
3. Sub-agent's liability toprincipal
Thesub-agentis not directlyliableto the principal, except for fraud and
wilfulwrong.Awell-knownillustrationisCalicoPrinters'AssnvBarclays
Bank''\
Asub-agentfailedto insurethe principal'sgoods,whichweredestroyed
byfire.Butthe principal could notrecoveragainst thesub-agent.
Similarly, inSummanSingh v N.C. BankofNewYork-}^^
Theplaintiffin a foreigncountryappointedthe N.C. Bank to deliver
a sum of money to onePritamSingh ofJullundur,whose address was
given.The bank instructed its Bombay branchaccordingly.The Bombay
branch appointed the Punjab National Bank whichdeliveredthe money
toawrongperson.
The plaintiff's action against either bank failed. The PunjabNational
Bank was held not liable on the principlethata sub-agent is not liable to
the principal except when he is guilty of fraud or wilful wrong. The wrong •
delivery was due only tonegligence.The N.C. Bank had exempted itself
from the consequences of wrongdelivery.
A sub-agent is, however, bound by all the duties of anordinaryagent.
His rightscannotgo beyond those of themainagent and they have to be
exercisedthroughthe agent except where direct action would be necessary
to give business efficacy to theappointmentof a sub-agent. Where a sub-
agent (fire-protection coatingspecialist)was appointed on agreed basis for
thepurposeof coating the 52-storey buildingundertakenby thecontractor,
it was held to be an impliedterm that his work would not be rejected except
on reasonablebasis.^^*"Asub-brokerwas allowed to recover his agreed com
mission from thebrokerirrespectiveof the factwhetherthebrokerhadbeen
182.NensukhdasvBirdichand,1917 SCCOnLineBom 47: AIR1917Bora 19.
183. Summan Singh vNationalCity Bank of New York, AIR 1962 Punj 172:ILR1952 Punj 189.
184. (1931) 145 LT 51 (CA);NewZealandandAustralianLandCo v Watson, (1881) LR 7 QBD
374 (CA), privity notconstitutedby raere knowledge or consent toappointment;Stephens v
Badcock,(1832)3B&Ad354: 110 ER 133, money paid to sub-agent, principal could sue the
agent,notsub-agent.
185.AIR1952Punj172.
186.Obbayashi-GumiLtdvIndustrialFireproofing(P) Ltd, (1991) 3 Curr LJ 2330 (Singapore).https://t.me/LawCollegeNotes_Stuffs

914. 772 Chapter15Agency [Ss.194-195]
paid by theprincipalornot.The courtsaidthat itwhollydependsupon
terms of theappointmentasinterpretedin thebackgroundof factual back
groundofmarketpractices.'^''
Substitutedagent[Ss.194-195]
S.194.Relationbetweenprincipalandpersondulyappointedbyagent
toactinbusinessofagency.—Wherean agent, holding an express or implied
authorityto name another person to act fortheprincipalinthe businessofthe
agency,has named another personaccordingly,such person isnot asub-agent
but anagentoftheprincipal for such part ofthebusiness oftheagencyas is
entrustedtohim.
Illustrations
(a)AdirectsB,his solicitor,to sellestateby auction, and to employ anauctioneerfor the
purpose. BnamesC,an auctioneer, toconductthe sale. Cis not a sub-agent, but isA's
agentfortheconductofthfesale.
(b)AauthorisesB,amerchantinCalcuttatorecoverthemoneysdueto A from C&Co B
instructsD,a solicitor, to take legalproceedingsagainstC&Co,fortherecovery ofthe
money. D is not asub-agent,but is solicitor for A.
S.195.Agent'sdutyinnamingsuchperson.— Inselectingsuchagentfor
his principal, anagentisboundto exercisethesameamountofdiscretionas a
man ofordinaryprudencewould exercise in his own case; and, if hedoesthis,
he is notresponsibletotheprincipal fortheactsornegligenceoftheagentso
selected.
Illustrations
{a)AinstructsB,amerchant,to buy a ship for him. 6employsa shipsurveyorofgoodrep
utationtochoosea ship for A.Thesurveyormakesthechoicenegligentlyandtheship
turnsoutto beunseaw/orthyand is lost. Bis not,butthesurveyoris,responsibleto A.
(b)Aconsignsgoodsto 6, amerchant,for sale. 6, induecourse,employsanauctioneerin
goodcredit to sellthegoodsof A,and allowstheauctioneerto receivetheproceedsof
thesale. Theauctioneerafterwardsbecomesinsolventwithouthavingaccountedfor
theproceeds.B isresponsibleto Afortheproceeds.
Asub-agenthas to bedistinguishedfrom asubstitutedagent. Sections194
and 195containspecial provisionsaboutsubstitutedagents. According to
Section194 when an agent has an express or impliedauthorityof hisprin
cipal to name a person to act for him and the agent has accordingly named
a person, such person is not a sub-agent, but he becomes an agent forthe
principal in respect of the business which is entrusted to him. The two illus
trationsto the sectionfurtherexplainthe position of asubstitutedagent.
A solicitor isappointedto sell an estate by auction and to employ an auc
tioneer for thepurpose.The auctioneer thusappointedis not asub-agent
but an agent of the employer himself for thepurposeof the sale. Similarly,
when an agent is authorised to recover debts and he appoints a solicitor for
187.Cremav CenkosSecuritiespic,2011 BusLR943 (CA).https://t.me/LawCollegeNotes_Stuffs

915. [S.195] Duties of agent 773
thepurpose,the latter is not asub-agent,but afull-fledgedagentfor the
purpose."^
One of theeffectsof.appointing'asubstitute is that a directprivityof.
contractis established between theprincipaland the "substitute". The agent
is notconcernedabouttheworkof thesubstitute.Hisonlyduty is to make
theselectionof thesubstitutewithreasonablecare.Section195 saysthat
"inselectingsuchagentfor hisprincipal,anagentis bound toexercisethe
sameamountof discretion as a man ofordinaryprudence would exercise
in his own case; and, if he does this he is not responsible to the principal
for the acts ornegligenceof the agent soselected".The two illustrations
appendedto thesectionexplainthe point. Amerchantisinstructedtobuy
ashipforhisprincipal.Themerchantemploysashipsurveyorofgoodrep
utation to choose a ship for the principal. The surveyor makes the choice
negligently,the shipturns out to beunseaworthy,and is lost;Thesurveyor,
but not theagent,isliableto theprincipal.In thesecondillustration, goods
areconsignedto a merchant for sale. The merchantemploysan auctioneer
in goodcredittosellthegoodsandallowshim toreceivetheproceeds.
The auctioneerbecomesbankruptwithout having accounted for the pro
ceedsto theprincipal.Themerchantisresponsibleto theprincipalfor the
proceeds.
Remedies ofprincipalfor breach of duty
"Aprincipalhasthreefoldrightsagainstanagentwhofailsin hisduty:
{a)to ask for anaccountand alsodemandpaymentof secret and
illicitprofitsearned by him as anagent;^®^
{b)to seekdamagesfor disregardof the terms ofagencyas also for
wantofskillandcare;
(c)to resist the claim of the agent forcommissionand indemnity
bythepleathat theagenthadactedforhimself,i.e.as aprincipal."^^"
188. Seealso thedecisionof theSupremeCourt in QamarShaffiTyabjivCommr,ExcessProfits
Tax, AIR 1960 SC 1269:(1960)3 SCR546, 551,wherea person named as an agentfor the
companywith theapprovalof theBoardofDirectorswasheldto be asubstitutedagent;
AggarwalChamberofCommerceLtd v GanpatRai HiraLai,AIR1958SC269:.1958SCR
938,privityof contractestablished.CentralBank of India Ltd v FirmRurChandKurra
Mai,AIR 1958Punj 59, the principalaskinghis bank to collecttheproceedsof theirinvoice
througha particular bank, the matterhandedoverto that bankwhich,therefore,becamea
substitutedagent.A.C.RangaswamivD.}.Renuka,1997AIHC975Kant,holderof power
ofattorneyisequalin therightoftransferto theowner,partpaymenttakenbytheattorney,
salefailedto go through, attorney liablefor refund as muchas the owner.
189. Beaumont vBoultbee,(1802)7Ves599, 608, account of profits made bylessee-agentby
entering intoarrangementwith adjacent owners.
190.V.G.Ramachandran, LawofAgency(1985)401, citing Maneklal Mansukhbhai v
JwaladuttPilani,AIR1947Bom135.Wherenolossiscausedbybreachofduty,the prin
cipalisentitledtorecoveronlynominaldamages.ManchubhaivJohnH.Tod,ILR(1896)
20 Bom 633. In the case of adelayedsale, thedifferencerecoverableis the price actually
realised and that which would have been realised when the goods ought to have been sold,
ChallapathivSuruyya,12 MLJ 375.https://t.me/LawCollegeNotes_Stuffs

916. 774Chapter15Agency [S.219]
RIGHTSOFAGENT
Thefollowingaresomeof the important rights of anagent:
1. Right toremuneration[S.219]
S. 219.Whenagent'sremunerationbecomesdue.—Intheabsence
of anyspecialcontract,paymentfor theperformanceof anyactisnot due to
the agentuntilthecompletionofsuchact;but an agentmaydetainmoneys
receivedbyhimonaccountof goodssold,althoughthewholeof the goods
consignedtohimforsalemaynothavebeensold,oralthoughthe salemaynot
beactuallycomplete.
Everyagent is clearlyentitled to his agreed remuneration, or if there is no
agreement,to areasonablerernuneration.^^^Wheretheamountofremuner
ation is left on principal's discretion, eventhen reasonableness would be the
criterion.^'^The difficult question is as to whenremunerationbecomes due.
Section219saysthat "in theabsenceof anyspecialcontract,paymentfor
theperformanceofanyact isnot dueuntilthecompletionofsuchact...".
Thisprovisionraisestwoquestions.Whenis the actcomplete?andsec
ondly,istheactaresultoftheagent'sservices?Bothquestionsdepend"first
and last on particular terms of the particularcontract""^Thus where an
agentwasappointedtosecureordersforadvertisementsin anewspaper,
thecommissioninrespectof anadvertisementbeingpayablewhenitwas
published,theagentwasheldentitledtocommissiononordersactually
obtained by him although the advertisements to which the orders related
werenotpublisheduntilaftertheterminationofemployment.'^''Asagainst
it,whereanagentwasengagedtonegotiateforthepurchaseofahouseat a
commissionof 2 per cent on the purchase price, hewasheld not entitled to
anycommissiontill thecompletionof the purchase of thehouse.'^^Much
dependsuponthenatureoftheservicethattheagentundertakestoprovide.
191. Forexample,the Lahore High Court held inKhursheedAlamv Asa Ram, AIR 1933 Lah
784that"whereapersonisprovedtohaveactedasbroker,heisentitledtohiscommission;
andevenifhefailstoprovetherateofcommissionagreedupon,areasonableamountought
tobeawardedtohimassuchcommission".Themode,mannerandtimeofpaymentmaybe
providedforbyaspecialcontract.YasanjiMooljivKarsondasTejpal,AIR1928Bom270,
whereremunerationispayableoncompletionof sale,no quantummeruit if the transaction
provedunsuccessful.HindustanAntibioticsLtd vKohliMedicalStores,1997AIHC2630
(MP),recoveryofagreedcommissionfortheextendedperiodofagency.
192.KofiSunkersetteObuvA.Strauss&CoLtd,1951AC243(PC).Wherethereisnoexpress
contract, customorusageof the particular tradebecomeapplicable.Read v Mann,(1830)
10B&C438.
193.Sellersv London CountrisNewspapers,(1951)1KB784(CA).
194.Ibid.AnothersimilarcaseisBilbeevHasse&Co,(1889)5TLR677,theagentwasentitled
tocommissionon ordersreceivedfrom the customerintroducedbyhimevenafter the termi
nationof his agency.
195.AyyanahChettyvSubramaniaIyer,(1923)45MLJ409.Thecourtrelieduponthefollowing
statementofLordEsher inPeacockvFreeman,(1888)4TLR541(CA):"Landcouldonly
be said tohavebeensoldwhentheconveyancewascompletenotwhentherewasamere
contracttosell."https://t.me/LawCollegeNotes_Stuffs

917. [S. 219] Rightsofagent775
Thus,in a case before theAllahabadHighCourt,anagent wasappointed
tointroduceapurchaserwilling topurchasethedefendant'sproperty. He
didintroduceoneandeventhesale wassettledandearnestmoneypaid,but
it could not be completedthroughthepurchaser'sinabilityto find money.
The agent was nevertheless held entitled to his agreedcommission."^
Secondly, thetransactionthatresults must be due to the agent's services.
The bargain must be direct result of hisservice."®In Green vBartletf^^an
agent was appointed to sell a house. He held an auction but failed to find a
purchaser. One of the persons attending the auction obtained from him the
address of the principal and purchased the house from himwithoutinter
vention of the agent. Even so thetransactionwas held to be a result of the
agent'seffortentitlinghim to hiscommission.
The principle of this case was followed by the Bombay HighCourt.^°°
The defendants appointed the plaintiff, a broker, toobtaina loan on the
mortgage of hispremises.He introduced the manager of a bank who would
have made anadvanceif the security offered had not proved to be insuffi
cient. Ultimately, the bank did make an advance, butthroughanotherbro
ker. Theplaintiffwas held entitled to his commission.
Where the agent's services are only remotely connected with thetransac
tion, hisremunerationis not earned. Tribe vTaylor^"'^is an aptillustration.
The defendant requested the plaintiffs to introduce a purchaser of his
premises or a source of capital. The plaintiff introduced one Wood who
advanced a sum of money by way of loan. The agreed commission was
paid to theplaintiffs.SubsequentlyWood entered into partnership with
the defendant and advanced afurthersum. Theplaintiff'saction to claim
commissiononthissecondadvancefailed.
Thejudgesaid: "The question which arosewas...whether the subse
quentadvancewas the result of any act of theplaintiffs.If...theplaintiffs
had introduced any new person, who had advanced themoney,I should
havethoughtthe defendant would have been bound to pay the commission
claimed. If they had induced Wood to become apartnerand to introduce
196. SheikhParidBaksh vHargulalSingh, AIR 1937All46.
197. See alsoSaraswatiDevi vMotilal;AlK1982 Raj 108: (1982) Raj LR 251. Wherecommission
waspayableto an estate agentas and when he introduceda readyand willingcustomerbut
the principalrefusedto signtheagreement,held,the agententitledtocommission.Following
AbdullaAhmadvAnimendraKissenMitter,AIR1950SC 15:1950SCR30.
198. See, for example, Bray v Chandler, (1856) 18 CB 718; Gibson v Crick,(1862)31 LJ Ex 304;
it need notnecessarilybe the immediate cause of the transaction, but it must be shown that
it was brought about as the direct result of his intervention. Burton v Hughes,(1885)1 TLR
205. It is notsufficientfor the agent to show that it would not have been entered into but for
hisservices,if it resulted therefrom only as a casual or remoteconsequence:Tribe v Taylor,
(1876)LR 1 CPD505 and Jordon v Ram Chandra Gupta, (1903-04) 8CalWN 831.
199.(1863)14CBNS681: 8 LT503:11WR 834: 32LJCP261. Approved by the Privy Councilin
BurchellvGowie,1910AC 614.
200. VasanjiMooljivKarsondasTejpal, AIR 1928 Bom 270.
201.(1876)LR1CPD505.https://t.me/LawCollegeNotes_Stuffs

918. 776Chapter15 Agency [S. 219]
furthercapital, I should havethoughtthey would have been entitled to
commissiononthat....Wasthesubsequentpartnershiptheresultof the
introductionor of anindependantnegotiation? Causaproximais not the
question;theplaintiffsmustshowthatthe act oftheirswas thecausacau-
sans. It is truethat(second)advance might not, andprobablywouldnot
have been made byWood, but for the originalintroductionby the plaintiffs.
Butthatisnotenough."
The principal is, of course, under a duty not to prevent the agent from
earning hiscommission.^"^But this does not prevent the principal from sell
ing thepropertyhimself or from refusing to sell at all. Awell-knowncase is
Luxor[Eastbourne)LtdvCooper^°^
An agent waspromisedhis commission if hebroughtaboutthe sale of
thedefendant'scinemas. The agentintroducedacustomerbut the com
pany refused to sell. The agentbroughtanactionfor his commission.
The House of Lords held against him: "There was no implied termthat
the principal would not dispose of the propertyhimself,or through other
channels or otherwise act so as to prevent the agent from earning his com
mission."ViscountSimonLCsaid:^"''"Theagentnecessarilyincurscertain
risks, e.g. the risk that his nominee cannotfindthe purchase price and will
notconsentto termsreasonablyproposedto beinsertedin thecontractof
sale— The agent also takes the risk of his principal not being willing to
concludethe bargain with the agent's nominee. The last risk is ordinarily a
slight one for the owner's reason for approaching the agent is that he wants
tosell."
Where an agent of a foreign company entered into acontractfor sale of
machineryto thedefendantand one of the terms of thecontractwasthat
payment of commissionto be payable by the defendant would be subject to
installationof the machinery, but thedefendantcould not make the site for
installation ready and,therefore,there could be no installation. The agent,
being notresponsiblefor the same, wasentitledto hiscommission.^"^The
terms of the arrangement showed sufficient privity ofcontractbetween the
defendant buyer and the agent of theforeignprincipal,e.g.provision for
paymentofcommissionto the agentdirectlybydeductingit fromprice.
Jurisdiction
WherethecontractwasenteredintoatCalcuttaandcommunicatedto
the plaintiff at Delhi and payment ofcommissionwas also made at Delhi,
202. Wherethe transaction fellthroughbecauseof thedefectivetitle of the principal, the broker
vifasallowed his commission. Ellas v Govind Chandar,ILR(1903) 30Cal202.
203.1941AC 108 (HL).
204. At p.117,ibid. For the purposes of hisremunerationthe agent has the right to demand
accountsfrom the principal though there is no statutory provisionon it, NarandasMorardas
GajiwalavS.P.A.M.Papammal,AlK1967SC 333, 335.
205.ContinentalandEasternAgencies v CoalIndiaLtd, AIR 2003 Del 387.
206.Ibid.https://t.me/LawCollegeNotes_Stuffs

919. [S.220] Rights of agent 777
it was heldthatthecourtsat Delhi hadjurisdictionto enforce thecontract
since apartof the cause of action had arisenthere.^"''
Effectofmisconduct[S. 220]
S.220.Agentnotentitledtoremunerationforbusinessmiscon
ducted.—Anagentwho is guilty of misconduct intliebusiness oftheagency
isnot entitled to any remuneration in respect ofthat part ofthe business which
hehasmisconducted.
Illustrations
(a)Aemploys 6 to recover1,00,000rupees fromC,and to lay it out on good security. B
recovers the1,00,000rupees and laysout 90,000 rupees on good security, but laysout
10,000rupees on security which he ought to have known to be bad, whereby A loses
2000 rupees. BIsentitled to remuneration forrecoveringthe1,00,000rupees and for
Investingthe 90,000 rupees. HeIsnot entitled to any remuneration forInvestingthe
10,000rupeesand hemustmakegoodthe2000rupeestoB.
{b)Aemploys Bto recover1000rupees fromC.ThroughB'smisconduct the money Isnot
recovered.B Isentitledto noremunerationfor hisservices,andmustmakegoodthe
loss.
Anagentis notentitledto anycommissioninrespectof that part of the
businesswhichhe hasmisconducted.^"®Section 220accordinglyprovides
that an agent who is guilty of misconduct in thebusinessofagency,is not
entitledto anyremunerationinrespectof that part of thebusinesswhichhe
hasmisconducted.
The effect of misconduct is twofold. Firstly, the agent forfeits his right to
commission.This isirrespectiveof anylosssufferedby the principal. "The
principleunderlyingtheruleisthat 'aprincipalisentitledtohaveanhonest
agentand it isonlythehonestagentwhoisentitledto anycommission'."^°^
The commission is forfeited only in respect of thatpartof the agency busi
ness which has beenmisconducted.^^"An agent was employed to sell lease
holdpremises.Greatmanytailorswereinterestedinacquiringthepremises.
Theagent,beingafraidthat theoriginallandlordwouldnot permitleaseto
tailors, obtainedhispermissioninadvance.Thisconsiderablyincreasedthe
price.Theagent,however,keptthisfactfromhisprincipalandinducedhim
207.Ibid.
208. There is no misconduct where commercial practices of a trade allow the broker commission
from both parties, or where the principalleavesthe agent to look forremunerationto a
third party orwhereheknowsthat theagentwillgetremunerationfromthird party.Bow's
EmporiumLtd v A. R. Brett & Co,(1927)44 TLR 194(HC);BaringvStanton,(1876)LR
3 Ch D 502(CA);Municipal Corpn of Bombay v CuverjiHirji,ILR(1895)20 Bom 124,
acustomorknowledgeof that kindwouldhaveto beprovedby theagent.Butotherwise
commissionfrom the other party is amisconduct.Andrewsv Ramsay & Co,(1903)2KB
635.Discountmoneyretained in the honestbeliefthat the agentis entitledto it is not a mis
conduct though the amount may have to be handed over.
209. Sirdhar Vasanta Rao Ananda Rao vGopalRao Sethu RaoPeshwai,AIR 1940 Mad 299,
301.
210. SeePurushottamHaridasvAmruthGheeCoLtd,AIR1961AP 143.https://t.me/LawCollegeNotes_Stuffs

920. 778Chapter15 Agency [Ss.217&221]
to acceptlowerprice.This was a misconductand breachof duty on thepart
of the agent. He wasnotallowed to recover hiscommission.^"
Secondly,the principal is entitled to recover compensation for any loss
causedby themisconduct.Theillustrationsto thesectionmakeitclearthat
payment of damages caused by themisconductis inadditionto the forfei
tureofcommissionorremuneration.
2.Rightofretainer[S. 217]
S. 217.Agent'srightofretaineroutofsumsreceivedonprincipal's
account.—Anagentmay retain,outof any sumsreceivedonaccountofthe
principalinthe businessof the agency,allmoneys due to himselfin respect of
advances made or expenses properlyincurred by him inconducting such busi
ness,and alsosuch remuneration as maybe payableto himfor acting as agent.
The agent has the right to retain his principal'smoneyuntil his claims, if
any,in respect of his remuneration oradvancesmade orexpensesincurred
in conducting thebusinessofagencyare paid. The right can beexercised
on "any sums received on account of the principal in the business of the
agency". He can retain only such money as is in his possession. He is not
entitled to an equitable lien, that is, the right to have his claimssatisfiedin
preferenceto othercreditorsout oftheprincipal'smoneynot in hisposses
sion.Butasolicitoror vakil isentitledto anequitablelien on theproceeds
of anactionconductedbyhimtillhiscostsarepaid.Hisfeeisfirstcharge
on theproceedsevenif they are not in hispossession.He is also entitled,for
this purpose, to havetheproceedspass through hishands.^^^
3.Rightoflien[S. 221]
S.221. Agent's lien on principal'sproperty.—Inthe absence of anycon
tracttothecontrary,anagentisentitledtoretaingoods,papersandother prop
erty,whethermovable,orimmovable,oftheprincipalreceivedbyhim,untilthe
amount due tohimselfforcommission,disbursementsandservicesin respect
ofthesamehasbeenpaid oraccountedfor to him.
Inadditionto theaboveright ofretainer,the"agenthas the right to
retain goods, papers and otherproperty,whethermovableorimmovable,
of the principal received by him, until theamountdue to himself for com
mission,disbursementsandservicesinrespectofthesamehasbeenpaidor
accountedfortohim".^"
211. Heath v Parkinson,(1926)42 TLR 693; E.I.D. Parry (India) Ltd v Far Eastern Marine
TransportCoLtd,1983SCCOnlineMad61:(1988)1LW320,shortdeliveryofgoodsby
carrier: E.I.D. Parry (India) Ltd v Far Eastern Marine Transport Co Ltd,(1988)2 TAC387.
212. Menon vCochineMercantilesLtd,(1962)32 CompCas 378.
213. LordEllenboroughin Houghton v Mathew,(1803)3Bos&;P 485, 494,describedlien
"to betherightinonemantoretainthatwhichis inhispossessionbelongingtoanother
untilcertaindemandsofthepersonwhoisinpossessionaresatisfied".CitedbyA.H.Khan
J inGopaldasvThakurdas,AIR1957MB20,22.BharatPetroleumCorpnLtd vChembur
ServiceStation,(2011)3SCC710:(2011)2SCC(Civ)49andBharatPetroleumCorpnLtd vhttps://t.me/LawCollegeNotes_Stuffs

921. [S.221] Rights of agent 779
The conditions of this right are:
(1)Theagentshouldbelawfullyentitledtoreceivefromtheprincipala
sum of money by way of commission earned or disbursements made
orservicesrenderedin the properexecutionof thebusinessofagency.
(2)Thepropertyoverwhichthe lienisto beexercisedshouldbelongto the
principaland itshouldhavebeenreceivedbythe agentin hiscapacity
and during thecourseof his ordinarydutiesasagent.^"The property
is consideredto besufficientlyin the possessionof the agent where he
has beendealingwith it. Thuswhereanauctioneerwasengagedto
sellfurniture at theowner'shouse,he was held to besufficientlyin
possessiontoexerciselien for hiscommission.The property held byan
agent for a special purposecaniiotbe subjected to lien. The existence
of aspecialpurposeimplicitlyexcludestheright.^^^Similarly,where
possession is obtained without the principal's authority or by fraud or
misrepresentation, there is no lien.Briefly,the agent's possession must
belawful.
(3)The agent has only aparticularlien. Aparticularlien attaches only to
thatspecificsubject-matter in respect of which thecharges^'®are due.
Nootherpropertycan beretained.
Forexample,inBombaySaw Mills Co, the secretariesandtreas-
urers^^^of a company claimed lien over the company's property for their
advances. ScoTT J rejected the claim "because the sums advanced and
expended were not, asrequired(by S. 221)'disbursementsand services
in respectofthepropertyon which the lien was claimed, but were loans
made on behalf of the company generally and for the purpose of the whole
concern".^!'
Effectoflien
The effect of lien as between theprincipaland the agent has been thus
stated by A.H.KhanJ inGopaldasvThakurdas^^°:"The agent's lien does
not giveunrestrictedauthorityto the agent to dealwiththepropertyin
anymannerthe agent may like. Therightislimitedinnature.It enables
ChemburServiceStation,(2011)3 SCC 710: (2011) 2 SCC (Civ)49,certainrailway premises
were inpossessionof abusinessmanfor hisbusinessfor over 40 years.Hislicence wastermi
natedandhe was told tohandovervacantpossession.Heclaimedcompensationforsudden
terminationandlien onpremisestillpayment.Thecourtsaidthathedeservedanoticeand
hearingsothatthecourtcouldconsiderwhatwere thetermsof the licence.
214. SeeMehtaAJC inPestonjiBhimjivRavjiJaverchand,(1934) 150IC483 (Sind), 447.
215. Williams vMillington,(1788)1 HyB181: 2 RR 724.
216. S. 171 confines general lien only to bankers, factors, wharfingers, attorneys and policy bro
kers. Ageneralagentisnotcoveredby any one ofthesecategories.
217.ILR(1888)13Bom314.
218.Whowere asortofmanagingagents,nowbanned.
219. At p. 321.RocklinesConstructionsvTruptiK.Patel,(2003) 1 CLT 414 (Kant), anordercan
be issued for delivery ofpropertywhere therightdoes not exist orpaymenthas been made.
220.AIR1957MB20, 22.https://t.me/LawCollegeNotes_Stuffs

922. 780 Chapter 15Agency [S.221]
the agent to retain the property till hisduesare paid. But thisconfersno
authority on the agent to sell or otherwisedisposeof the property without
theconsentoftheowner".
A partnership firm acting as theclearingandforwardingagentsof the
principaldetainedthe goodsof the principalbecauseof a disputeabout their
commissionamount and had the goods sold on an interim court order. The
firmwas held to be in the wrong. It had no right to sell becauselien does not
givethatiright.An agentcan no doubtdisposeofthegoodswith the consent
of theprincipalor with court order, but in this casethe order of the court
was not valid because the firm being not registered could not have filed a
suit. The sale was wrongful. The court directed the firm to keep intact the
moneyequivalentof the value of the goods so that theremedyof accounts
would be effectivelyavailable to theprincipal.^^^
Where, however, in terms of his agreement with theprincipal,the agent
has become a pledgee of the goods, hemaysell them after giving a reasona
ble notice to the principal of his intention tosell.^^^
As against third parties the lien iseffectiveonly to the extent of the prin
cipal's rights on the property. If the principal has limited rights, the lien
will be equally limited. If the property is already subject to some rights or
equitiesin favour of third persons, the lien will also be subject to them. But
where thepropertyon which lien is being exercised is a negotiableinstru
ment, the agent will become a holder for value to the extent of his lien and
will acquire a title free of prior equities if he acts in good faith andwithout
noticeofthem.^^^
If the principal creates any charge on thepropertysubsequently to thb
attachmentof the lien,thatwill besubjectto the lien.
Lossoflien
The agent's lien is lost in thefollowingcases:
(1)Lien, being a possessory right, is lost as soon as possession is lost.
Possessionislostwhentheagentdelivers thegoodsto theprincipal
himselfor to acarrierfor thepurposeoftransmissiontotheprinci
pal. In thelattercase, the agentcannotrevive his lien by stopping the
goods intransit.^^''But where thepropertyhas been delivered for a
specialpurpose,like safe custody,whichisinconsistentwithlien, the
lienisnotlost.
As long as the agentremainsinpossession,his lien is effective,
andisnotaffectedby the factthatthecompanytowhichthe
221.KavitaTrehanvBalsaraHygieneProductsLtd,AIR1992Del92.
222.GopaldasvThakurdas,AIR1957MB20,22.
223.LondonJointStockBankvSimmons,1892 AC 201 (HL).
224.KishunDasvGaneshRam,AIR1950Pat481;SweetvPym,(1860) 1East4:102ER 2: 5
RR497.https://t.me/LawCollegeNotes_Stuffs

923. [S.222] Rights of agent781
goodsbelongedhasbeenorderedto bewound or that the
principal hasbecomeinsolvent.The agent'spossessionis not ter
minatedwherepropertyhasbeenobtainedfromhim byunlawful
means or by fraud or misirepresentation.
(2)The lien is lost, when the agentwaiveshis right. Waivermay arise out
of anagreementexpressorimpliedormaybeinferredfromconduct
inconsistentwiththe right.
(3)Theagent'slienissubjectto acontractto thecontraryand,therefore,
doesnot existwher,etheagenthas byhisagreementwith theprincipal
excludedit.^^®
4. Right to indemnity[Ss.222-223]
S.222.Agentto be indemnifiedagainstconsequencesof lawful
acts.—Theemployerofan agent isbound toindemnifyhimagainstthe conse
quencesofalllawfulactsdone bysuchagentinexerciseoftheauthoritycon
ferreduponhim;
Illustrations
(a)B,atSingapore,underinstructionsfromAofCalcutta,contractswithCtodelivercer
taingoodstohim.AdoesnotsendthegoodstoB,andCsuesBforbreachofcontract.
6 informsAof the suit, and Aauthorises himto defend the suit. Bdefends the suit, and
iscompelledtopaydamagesandcosts,andincursexpenses.Aisliableto Bforsuch
damages,costs andexpenses.
{b)B,abrokeratCalcutta,by the orders ofA,amerchant,there, contracts with Cfor the
purchaseof10casksofoilfor>A.Afterwardsrefusestoreceivetheoil,andCsuesB.B
informs/A/whorepudiateis.theeontraet.altogether.edefends,butunsuccessfully,and
hasto paydamagesandcostsandincursexpenses./!isliableto6forsuchdamages,
costsandexpenses.
Therighttoindemnityextendstoalllossesandexpensesincurredbythe
agentintheconductofthebusiness.Where,forexample,astockbroker,on
the instructions of asolicitor,contracted to sell certain shares and had to
incurliabilitytothepurchaserbyreasonoftheowner'srefusaltocomplete
thesale,thestockbrokerwasheldentitledtorecoverindemnityfromthe
principal.^^^
Theagentmusthavebeendamnifiedinthelawfulconductofthebusi
nessofagency.Awageringagreementis notunlawful.It isonlyvoid.
Accordingly,theSupremeCourtinKishanlalvBhanwar allowedan
agenttorecoverindemnityforlossesincurredbyhiminwageringtransac
tions entered into oninstructionsof his principal.
Wherethe actdonebytheagentoninstructionsfromhisprincipalis
apparentlylawful,butitturnsouttobeunlawfulorinjuriousto athird
225.ChidambaranChettiarvTinnevellySarangapaniSugarMillsCo Ltd,ILR(1906-08) 31
Mad123.
226.RamPrasadvStateofM.F.,{1969)3SCC24,27:AIR1970SC1818,therightisexcluded
where the property is acceptedfor a specialpurpose.
227. Hichens Harrison,Woolston& CovJackson & Sons, 1943 AC266 (HL).
228.AIR1954SC500(1955).https://t.me/LawCollegeNotes_Stuffs

924. 782Chapter15Agency [S.223]
person, theagentisentitledtoindemnityagainst theconsequencesof the
act.
Liabilityof agentunderdishonouredcheque
Thecontractwasforsupplyofgoods.Thepetitionerwasworkingas
acommissionagent transactingbusinesson behalf of thecompany.The
courtsaidthatoncethechequewasissueddulysignedby thepetitioner,
hebecameliabletobeprosecutedagainst.Therewasfailureon thepart of
theagenttoreplytothenoticetoinformthecomplainantthattheprimary
liabilitywasthatoftheprincipalfortheamountdue,ifany.Thisestopped
himfromsubsequentlysayingthatonlytheprincipalwasliable.Hewasalso
notabletoprovethattherewasnorealtransactionunderwhichthecheque
wasissued.^^'
S. 223.Agentto beindemnifiedagainstconsequencesofactsdonein
goodfaitli.—Whereonepersonemploysanotherto do an act,andthe agent
doestheactingoodfaith,theemployerisliabletoindemnifytheagentagainst
theconsequencesofthat act,though itcausesaninjuryto therightsofthird
persons.
Illustrations
(o)A,adecree-holderandentitledtoexecutionofB'sgoods,requirestheofficerof the
Courtto seizecertain goods representing them to be the goods ofS.Theofficerseizes
thegoods,andissuedbyC,thetrueownerofthegoods.Aisliabletoindemnifythe
officerforthesumwhichheiscompelledtopaytoC,inconsequenceofobeyingi4's
directions.
[b)B,attherequestof/A,sellsgoodsinthepossessionofA,butwhichAhadnorighttodis
pose of.Bdoes notl<nowthis,and hands overthe proceeds ofthe saletoA.Afterwards
C,the trueownerofthegoods,suesBandrecoversthevalueofthegoodsandcosts.
AisliabletoindemnifyBforwhathehasbeencompelledto payto Cand forB'sown
expenses.
OneoftheillustrationsappendedtoSection223seemstobebasedupon
the facts ofAdamsonvJarvis-P°
Anauctioneersoldcertaincattleoninstructionsfrom thedefendant
and was held liable to the true owner for conversion. He recovered indem
nityfromtheprincipalbecausetheactinquestionwasapparentlylawful.
Where,however,theactinquestionisapparentlyunlawfulorcriminal,
suchasbeatingapersonorpublicationofalibel,theprincipalwillnotbe
liableuponanexpressorimpliedpromisetoindemnifytheagentagainstthe
consequencesofsuchact.Forexample,anagent,appointedtoimportadul
teratedmustard oil,sufferedlossandpunishment,but he couldnotrecover
229. J.RamarajvlUyazKhan,AIR2007 NOC 2031(Kant).
230.(1827)4Bing66;29RR503.TheSupremeCourtheldinA.ThangalKunjuMusaiarvM.
VenkatachalamPotti,AIR1956SC246:(1955)2SCR1196,1211,thattherecan be no
agencyforthecommissionofacrime.Thewrongdoerwouldbepersonallyliable.https://t.me/LawCollegeNotes_Stuffs

925. [Ss.224-225] Agent'sauthority783
indemnity.^^^Where,however,the plaintiff on instruction, from the defend
ant, paid a sum of money to the caste panchayat to have the defendant's
castedisquaUficationsremoved, he was allowed to recover the money from
thedefendant.^^^
S. 224.Non-liabilityofemployerofagenttodoacriminalact.—Where
one person employsanotherto do an act which iscriminal,theemployer is not
liableto the agent, either upon an express or an implied promise, to indemnify
himagainsttheconsequencesofthatact.
Illustrations
{a)A employs Bto beatC,and agrees to indemnifyiiimagainst all consequences of the
act. BthereuponbeatsC,and has to pay damages to Cfor so doing. A is not liable to
indemnify6forthosedamages.
(b)B,the proprietor of a newspaper, publishes, atA'srequest, a libel upon Cin the paper,
and Aagrees to indemnifyBagainst the consequences of the publication, and allcosts
and damages of any action in respectthereofBis sued by Cand has to pay damages,
and also incursexpenses.A is not liable to 6upontheindemnity.
Where the act in questionis apparentlytortious, the agent,who has been
heldliableon it, mayrecovercontributionfrom the principal (notindemnity)
under the Law Reform(MarriedWomen's and Tortfeasors) Act,1955.^^^
5.Righttocompensation[S.225]
S. 225.Compensationtoagentforinjurycausedbyprincipal's
neglect.—Theprincipalmustmakecompensation tohisagent in respect of
injurycausedto suchagent bytheprincipal'sneglect or want ofskill.
Thuseveryprincipalowesto hisagentthe dutyofcarenot toexposehim
to unreasonablerisks.Theillustration appended to the section makes the
pointclear:
AemploysBasabricklayerinbuildingahouse,andputsupthescaffold
inghimself.Thescaffoldingisunskilfullyput up, and B is inconsequence
hurt.Amustmakecompensationto B.
Relations ofprincipalwiththirdparties
AGENT'SAUTHORITY
The acts of the agent within the scope of his authority bind the princi-
pal.^^^Section226 oftheContractActgivesstatutoryeffectto theprinciple
bydeclaringthat:
231. Ram KumarAgarwalav LakshmiNarayanAgarwala,AIR 1947Cal157.
232.HazarimalKochnaji vKhemchandMaggaji, AIR 1962 Raj 86.
233.S.6(l){c),(2)."Contribution"isdifferentfrom"indemnity"becauseindemnitycoversthe
wholeof the losssufferedby theagent.
234. Federal Insurance Co v Nakano Singapore (P) Ltd, (1992) 1 Curr LJ 539 (CA Singapore),
liability forweakscaffolding.
235. SeePolestar Electronics (P)Ltd v CST,(1978)1 SCC636, whereit was held that sales made
byataxpayerthroughhisbranchesrun byhisagentswouldberegardedassalesmadebyhttps://t.me/LawCollegeNotes_Stuffs

926. 784Chapter15Agency [S.226]
S. 226.Enforcementandconsequencesofagent'scontracts.—
Contractsentered into through an agent, andobligationsarisingfrom acts
doneby an agent, may be enforced inthesame manner, andwillhavethesame
legalconsequences,as ifthecontractshadbeenenteredintoandtheactsdone
bytheprincipal inperson.
Illustrations
(o)AbuysgoodsfromB,knowingtliatheisanagentfortheirsale,butnoti<nowingwhois
theprincipal.B'sprincipalisthepersonentitledtoclaimfromAthepriceofthegoods,
and Acannot, in a suit by theprincipal,set-off against that claimadebtdue to himself
fromB.
{b)A,beingS'sagent,withauthoritytoreceivemoneyonhisbehalf,receivesfromCa sum
ofmoneyduetoB.CisdischargedofhisobligationtopaythesuminquestiontoB.
It isnecessaryfor this effecttofollowthat the agent must have done the
actwithinthescopeofhisauthority.Theauthorityof anagentandmore
particularlyitsscopearesubjectsofsomecontroversy.Theuncertaintyis
largelyduetothefactthattheauthorityofanagentdoesnotdependupon
onesource.Itemanatesfromtheprincipal,butitsdimensionsdependupon
legalinferences,which,inturn,dependuponthepurposeoftheagency,the
surroundingcircumstancesand adesiretoprotectbonafidecommercial
transactions. For,agencycame into being to promote and not to hinder
commerce.
Theauthorityofanagentmeanshiscapacitytobindtheprincipal.It
referstothesumtotaloftheactsithasbeenagreedbetweenprincipaland
agentthattheagentshoulddoonbehalfoftheprincipal.Whentheagent
doesanyofsuchacts,itissaidhehasactedwithinhisauthority.^^^
him.V.RameshvConvenor,EAMCET,AIR1997AP79,acandidatewho wasentitledto
areserveseat foradmissiontoengineeringcollegewasinvitedbytelegramforinterview.
TelegraphDepartmentdelayedmessage.TakingtheTelegraphDepartmenttobetheagentof
thesender,itslapsewasthelapseoftheprincipalwhichtheprincipalmustrectify.Direction
foradmission./I.ArulLathaGoldvGovtofT.N.,(1994)2LW686(Mad),principleof
agencyattractedwhenpostofficeisselectedasacarrierofmessage.
236.ThevaryingviewpointshavebeenpresentedbyJ.L.MontroseinTheBasisofthePowerof
anAgentinCasesofActualandApparentAuthority,(1938)16CanBR757Thefollowing
articlesarethereconsidered:Cook,AgsncybyEstoppel,(1905)5ColLR35;Ewart,Agency
ofEstoppel,(1905)5Col354;Cook,AgencyofEstoppel—AReply,(1906)6ColumLR
34; Cook, Estoppel as Applied toAgency,('1903)16 Harv LR 324. He who does an act
throughanotherisdeemedinlawtodoithimself.SeeMCDvJagdishLai,(1969)3SCC
389:AIR1970SC7:(1970)1SCR579.SardarGurcharanSinghvMahendraSingh,(2004)
1MPLJ252,plaintiffsfathercancelledthepurchaseoflandmadebyhissonbecausethere
wasencroachment.In that respecthe acted as an agent of his son. The latterbecamebound
bythatact.
237.See,forexample,Stoljor,The LawofAgency: ItsHistoryandPresentPrinciples
(1961).KamleshvjasbirSingh,AIR2004P&H216:(2004)4ICC39,theownerauthorised
hisbrother-in-lawtomanagehispropertyinhisabsence.Heinductedalicenceeontheprem
ises.Thiswasheldtobevalid.Itwasalsoratifiedbytheowner.Itdidnotrequirearegistered
powerof attorneybecausetherewas no transfer of interestin it. The ownercould terminate
the licenceand sue for possession.
238.NandLaiThanvivLegalRepresentativesofGoswainiBrijBhushan,(2004)2ICC103
(Raj),acknowledgementofUabilitybyagentbindingtheprincipalwithextensionoftimeof
limitation.https://t.me/LawCollegeNotes_Stuffs

927. [Ss.186-187] ' Agent'sauthority785
Actualauthority
Actual authority of an agent is the authority conferred on him by the
principal.It is of two kinds,namely,expressorimpUed.Sections186 and
187 provide this:
S.186.Agent'sauthoritymaybeexpressedorimplied.—Theauthority
of anagentmay beexpressedorimplied.
S. 187.Definitionsofexpressandimpliedauthority.—Anauthorityis
said to be express when it is given by wordsspokenor written. Anauthority
is said to be implied when it is to be inferred fromthecircumstancesofthe
case; andthingsspokenorwritten,ortheordinarycourse of dealing, may be
accountedcircumstancesofthecase.
Illustration
Aowns a shop inSerampure, livinghimself in Calcutta, and visitingthe shop occasionally.
Theshop ismanaged byfi,and he isinthe habit of ordering goods from Cinthe nameof/A
for the purposes of the shop, and of paying for them outof/A'sfunds with/A'sknowledge. B
has animpliedauthorityfromAto order goods from Cin the name ofAfor the purposes of
theshop.
Expressauthority
Where the authority is conferred by words, spoken or written, it is called
expressauthority.A power ofattorney,forexample,which is a kind of
deed and authorises the agent to do certain acts, is an illustration of express
authority.But,howeverpreciselythe authority of an agent may be drawn,
disputesas to itsscopearelikelytoarise.Thescopeofexpressauthority is
worked out by construction of the words used in the documents. For exam
ple,whereaprincipal,whilegoingabroad,authorisedhisagentand partner
to carry on thebusiness,and hiswifetoacceptbillson his behalfforhisper
sonalbusiness,he was held not bound when his wife accepted bills for the
business,which the agentwasconductingand which was differentfrom his
personalbusiness.Thedecisionhasbeencriticised,particularlybecause
theagentand the third party had acted in good faith to meet the princi
pal'sgenuinebusinessneeds.Accordingly,in asubsequentcaseofagencyby
powerofattorney,wheretheagentobtaineda loanoutsidehisauthorityby
signingachequeon behalf of his principal to pay the principal'sworkmen,
theprincipalwasheldbound.^''®.Wheretheappointmentwasfor"fixing"a
steamer,intention beingto let it out, the principal was held liablewhen the
agentinsteadhireda steamer.
239.AttwoodVMunnings,(1827)7B8cC278: 108ER727. Thedecisionhas beencriticisedin
Stoljor,TheLawofAgency(1961)94.
240.ReidVRigby, (1894) 2 QB 40.
241.WeigallS. & Co vRunciman& Co,(1916)85LJKB187(CA).ForystheTradingServices
Ltd VM.V.Niizuru,(2004) 5 Bom CR 806, contract made through agency process, the
principalacceptedliabilityto payforthesupplycouldnotsubsequentlyescapebysayingthat
there was no privity ofcontract.https://t.me/LawCollegeNotes_Stuffs

928. 786 Chapter15Agency [S.187]
Butwherethe third party hasknowledgeof thelimitationon theagent's
authorityor couldhavediscoveredit byreasonableexamination,he would
beboundbyit.^'*^Thus,whereanagentwasgivenverywidepowerofwith
drawingtheprincipal'smoney"withoutrestriction",theprincipalwasheld
notboundwhentheagentgaveachequeto a cardealertopurchasea car
forhimself,andpaidafewchequesintohisbankingaccounttowipeout
hisoverdraft.^''"Ineithercaseitwasthedutyof the third party tomakea
reasonableinquirywhethertheagenthadtheauthoritytousetheprincipal's
money for his personalpurposes.^"*^
An agent cannot borrow on behalf of his principal unless he has clear
authority to do so. The power to draw or endorse bills or notes does not
includethepowertoborrow.Wheretheagenthas thepowertoborrow,
thefactthatheborrowedbeyondtheauthorisedlimit,doesnotpreventthe
thirdpartyfromholdingtheprincipalliable,^''^becausethethirdpartyhas
nomeansofascertainingthatfact.Similarly,thefactthat anagenthasacted
fromimpropermotivedoesnottakethecasebeyondthescopeofauthority.
ThusinHambrovBurnard:^'^^
An agent was appointed to underwritepolicies.He underwrote a
policywhichinfactamountedto aguaranteeof acompany'sdebts.He
knewtheprecariousconditionofthecompany,butbeinginterestedin it,
wantedtohelpit.Theprincipalwasheldliablebecausethethirdparty
couldnothaveknownwithwhatmotivetheagentwasunderwritinga
particularpolicy.
Impliedauthority
"An authority is said to be implied when it is to be inferred from the cir
cumstancesofthecase;andthingsspokenorwrittenortheordinarycourse
ofdealing,maybeaccountedcircumstancesofthecase."[Seeillustrationto
S.187]
Impliedauthorityis aninstanceofrealoractualauthorityfor it is con
ferredupontheagentbytheconductoftheprincipalasinterpretedin the
circumstancesofthecase.
242.FergusonvUmChandBoid,ILR(1906)33Cal343,thepowerofattorneyexpresslyrestrict
ingborrowing.
243.ReckittVBarnet, Prembroke& Slater Ltd, 1929 AC 176(HL).
244.MidlandBankLtdvReckitt,1933 AC 1 HL.
245.UnitedProvinceGovtvChurchMissionaryTrustAssnLtd,ILR(1948)22Luck93:AIR
1948Oudh54,thethirdpartyknewthattheagentwasactingunderpowerofattorney,but
did not bother to acqaint himself with its terms.
246.JacobsvMorris,(1902)1Ch816(CA).RaymondWoollenMillsLtd vCoalIndiaLtd,
(1998)1CHN53,anagentcannotinitiatelegalproceedingsonbehalfofprincipalwith
outexpressauthorisation.To thesameeffectis thedecisionin State ofKarnatakav M
Muniraju,(2003) 1 Kant LJ 291.
247. Withington v Herring,(1829)5 Bing442.
248.(1904)2KB10(CA).AlbrightandWilsonUKLtd vBiochemLtd,2002UKHL37(HL),
achemicalsuppliercompanywhoseagentfailedtoprovidethe correctdocumentationwith
thedeliverywasheldto beinbreachofitscontractwiththebuyer.https://t.me/LawCollegeNotes_Stuffs

929. [S. 187] Agent'sauthority787
\
Thedistinctionbetween express andimpUedauthorityis notfunda
mental, but depends merely onwhethertheauthorityis delimited by
words or byconduct.If P tells Athathe is to act asmanager,this is really
a compendious way ofstatingthathe is to do all the acts asmanager
wouldordinarilydo. Those acts might well be termed as expressauthor
ity. However, it isoftensaidthatif an agent is placed in acertainposition
he has implied authority to do all the acts a person inthatposition ordi
narilydoes.^"*'
Anillustrationof impliedauthorityis to be found in Ryan vPilkington.^^°
An estate agent wasappointedto find apurchaserforcertainproperty. He
accepted a deposit from a prospective customer and misappropriated it. The
principal was held liable, becausean estate agent hasanimpliedauthority to
take a deposit. Hecannot,however, receive payment or give anywarranty
unlessactuallyauthorised.^^^
Thus the extent of an agent's authority, whether express or implied,
dependsupon—
(1)thenatureof the act or business he isappointedtodo;
(2)things which are incidental to the business or are usually done in car
ryingitout;^^^
(3) theusualcustomsandusages of thetrade.
Thisis the essence ofSection188whichdefines theextentof theagent's
authorityin the following words:
249. J.L. Montrose, Actual and Apparent Authority,(1938)16 Can 764. The American
Restatement refers to this kind ofauthorityas"incidental".Art. 35 says: "Unless otherwise
agreed,authority to conducta transactionincludesauthority to do acts whichareincidental
to it, usually accompany it, or are reasonably necessary to accomplishit."
250. (1959) 1WLR403:(1959) 1 All ER 689 (CA).
251. SeeBowsteadonAgency(13th Edn by Reynolds and Davenport, 1968) 73. See also
FoujdarKameshwarDuttSinghvGhanshyamdas,1987SuppSCC689,wheretheelder
brother sold property and was held to beimpliedlyauthorisedby longacquiescencewith
openknowledge;BanarseeDas vGholamHossein,(1869-70)13MIA358,drawingand
acceptingof bills,impliedauthorityifincidentaltobusiness.Bank ofBengalvRamanathan,
(1915-16) 43lA48: 43 Gal 527, authority to borrowimpliesauthority to create a charge,
pledgeormortgage.MalukchandvShamMohan,ILR(1890)14Bom590;BankofBengalv
Fagan,(1849)5 MIA27:18ER 804, authority to selldoes not includeauthority to mortgage;
PestonjiNesserwanjeeBottlewallahvGoolMohdSahib,(1874)7 Mad HCR 369, authority
of a firm of merchants to run their ordinary business does not imply authority to accept bills,
etc; SatyanarayananvVithal,AIR 1959 Bom452, authority to sellpresentgoods does not
includeauthorityto sell future goods.
252. Thingsnecessarymeansthingsnecessaryfor carryingout the purposesofagency.Murugesav
ProvinceofMadras,AIR 1947Mad 74, an agentappointedto takepossessionof land on
expiryofleasecannotacceptrent;PhonographicPerformanceLtd v Hotel GoldRegency,
AIR 2009 Del 11, acopyright-societycannot be authorised by the owner of copyright to
instituteproceedingson theowner'sbehalf.Suchauthorisationis notenforceableunderthe
CopyrightAct orContractAct.https://t.me/LawCollegeNotes_Stuffs

930. 788 Chapter 15Agency [S.188]
Scope ofauthority
S. 188.Extentofagent'sauthority.—Anagent, havingan authority to do
an act, has authority to do everylawfulthingwhichis necessary inorder to do
suchact.
Anagenthavingan authorityto carryon abusiness,hasauthorityto do every
lawfulthing necessary for the purpose, orusuallydone in the course, of con
ductingsuchbusiness.
Illustrations
(o)AisemployedbyB,residinginLondon,torecoveratBombaya debt due toB.Amay
adopt anylegalprocessnecessaryforpurposeofrecoveringthe debt, andmaygivea
validdischargeforthesame.
(b)AconstitutesB,hisagent tocarryonhisbusinessofashipbuilder.Bmaypurchasetim
berand othermaterials,and hireworkmen,forthe purposeofcarryingon thebusiness.
A well-known illustration is the case of Dingle vHare?^^
An agentwasauthorisedtosellartificialmanure.He had no authority
togiveany warranty about the goods.Yethe warranted to the buyerthat
the manurecontained30 per centphosphateoflime.
The warranty turned out to befalseand theprincipalwassuedfor its
breach. He was held liable, because it was usual in the artificialmanure
trade togivea warranty of this kind.BylesJ said:
"Whenthe jury foundthatit was usual to sell theseartificialmanures
withawarranty,thenicedistinctionasto theextentoftheagent'sauthor
itybecamequiteimmaterial.Anagenttosellhasgeneralauthorityto do
allthat isusualandnecessaryin thecourseofsuchemployment."
Thuseveryagenthas theimpliedauthorityto actaccordingto thecus
tomsandusagesof aparticularmarketortrade.^^"*Theprincipalisbound
bysuchusagesevenifheisunawareofthem^^^oreveniftheyconflictwith
hisinstructions.Thus, where a bill-broker inLondonwasentrustedwith
certainbillsfordiscounting,and hepledgedthem,theprincipalwasheld
boundasitwasusualforbill-brokersinLondontoraisemoneybydeposit
ingtheircustomers'bills enbloc}^^
But the custom or usage must not beunlawfulorunreasonable.Whethera
customorusageisunlawfulisaquestionoflaw.Anycustomwhichchanges
253. (1859) 7 CB (NS) 145: 29 LJ (CP) 143: 1 LT 38.
254.SuttonvTatham,(1839)10Ad8cE27:113ER11:8LJQB210;MarkervEdwards,(1887)
57LJQB147(CA).Mahmud-Un-NissavBarkatUllah,AIR1927All44,authoritytocarry
onbusiness,toreceiveandtospendmoneysincludesauthoritytoborrow.MuruganvG.
Ramamurthy,(2006)1AIRKant196,thedriverofamotorlorrywhowasappointedbythe
ownerappointedacleaner,theinsurancecompanywasnotpermittedtodenythevalidityof
theappointmentandtosaythathispresenceatthelorrywasthatofastranger.
255.Scott&Hartonv Godfrey, (1901) 2 KB 726.
256. Poster v Pearson,(1835)1 CM&R 489: 4 LJEx 120.https://t.me/LawCollegeNotes_Stuffs

931. [S. 188] Agent'sauthority789
the verynatureof theagency,as for example, which converts the agent into
a principal is unreasonable. Robinson vMolletf-^''is an illustration in point.
Rauthoriseda broker M to purchase for him 50 tons of tallow.Msup
plied his own tallow as there was a custom in his trade to buylarge quan
tities oftallowin his own nameandthentoallocateit to hisprincipals.
TheHouseofLordsheldthecustomtobeunreasonable.ItmadeM a
wholesaler ratherthanan agent. It also created a conflict between his duty
to the principal and hispersonalinterest.
Similarly,a custom whichgivesthe agent liberty to adjust his personal
account by way of set-off or otherwise for the claims of the principal is
unreasonable. Thus, where an agent was authorised to collect from the
underwriters a sum of money due under a policy of insurance, he was not
allowedto set-off his personal debts to the underwriters againstthatmoney
although a custom to that effectwasalleged.Theprincipal would, how
ever, have been bound by this custom if he were aware of it.
Theprincipleof DinglevHare^^^appliesto all caseswherethe agent acts
as aseller.For example, an agent appointed to sell a horse maywarrantit
as good if theprincipalis a horsedealer,orif the sale isbeingheld at a
marketplace,^^^but not if it is aprivatesale.^^^Similarly,an agentto sella
property has authority to state theconditionandvalueof the property to
a proposedpurchaser^^^and an agent to discount a bill may warrant it as a
good bill, but hecannotendorseit.^^"^
Authorityof special agents
Factor
A factor is amercantileagentwho is put inpossessionof the goods of his
principalforsale.He has theauthoritytoselltheminhisownname,^*^^to
warrantthem if it is usual to doso,^"to fix the selling price and to receive
payment.^^''
Broker
Abrokeris amercantileagentappointedto sellthegoodsofhisprincipal,
but he is notgivenpossessionthereof.He maysellthegoodsin his own
257.(1874) LR 7HL802.
258.BlackburnvMason,(1893) 68 LT 510: (1893) 9 TLR 286 (CA).
259.(1859) 7 CB (NS) 145.
260.HowardvSheward,(1866) LR 2 CP148.
261.BrooksvHassal,(1883) 49 LT 569.
262. Brady vTodd,(1861)9 CB (NS) 592: 127 RR 797._
263.MullensvMiller,(1882)LR22C^194.
264. Fennv Harrison,(1791)3 TR 757 AmaliEnglishMediumHighSchoolv GovtofA.P., AIR
1993AP338,concessionmadebytheAdvocateGeneralonbehalfof theState,binding.
265.BaringvCorrie,(1818)2 B&Aid137;Dixon,exp,(1876)LR4 ChD133.
266. Dinglev Hare,(1859)7 CB(NS)145:29 LJ(CP)143:1 LT38.
267.Drinkwater-vGoodwin,1775Cowp251.https://t.me/LawCollegeNotes_Stuffs

932. 790Chapter15 Agency
[S.188]
CASEPILOT
name,andmayreceivepayment.^^^Butifhedisclosesthenameoftheprinci
pal, hecannotreceivepayment.^^'He mayactaccordingto the usualcourse
ofbusinessexceptwhereausageisunreasonableorunlawful.Hemaysell
onreasonablecredit.^^"
EstateorHouseAgent
"Ahouseor estateagentis in adifferentposition from a broker at the
stockexchangeowingto thepeculiaritiesof thepropertywithwhichhe
has to deal andwhichdoes not pass by a short instrument asstocksand
sharesdo, but has to betransferredafterinvestigationof title as towhich
variousstipulations,whichmightbe of particularconcernto theowner,
mayhavetobeinsertedin aconcludedcontractrelatingtosuchproperty.
,Theparties,therefore,do notordinarilycontemplatethat theagentshould
havetheauthoritytocompletethetransactioninsuchcases.Thatiswhyit
hasbeenheldbothinEnglandandhere,thatauthoritygivento abrokerto
negotiateasaleandfindapurchaser,withoutfurnishinghim with all the
termsmeans'tofinda manwillingtobecomeapurchaserand not to bind
himandmakehimapurchaser'."Thispassageoccursinthejudgmentofthe
SupremeCourtinAbdullaAhmedvAnimendraKissen
Thefactsofthecasewerethat anestatebrokerwasappointedwith
anauthorityforonemonthtonegotiatethesaleof apropertyoncer
tainterms as to price andwithwhichhiscommissionwas alsolinked.
Beforetheexpiryofthemonthhefoundacustomerreadyandwilling
topurchaseandcommunicatedthefacttotheprincipal.Theprincipal
terminatedtheauthorityof theagentanddirectlyenteredintoaccount
withanomineeofthepersonfoundbytheagent.Theagentclaimedhis
commission.
Itwasheldthattheagenthavingnegotiatedthesaleandsecuredabuyer
whomadea firm offeracquiredthe right tocommissionon thebasisof the
preferredpricesubjecttotheconditionthatthebuyershouldcompletethe
transaction,and as thisconditionwasfulfilled,theagent'srighttocommis
sionbecameabsoluteandcouldnotbeaffectedbythecircumstancesthat
theprincipalforsomereasonofhisownsoldthepropertyatalowerprice.
Ageneralpowerofattorneywasconstitutedfordealingwithexisting
propertiesoftheprincipalaswellaspropertiesacquiredaftertheappoint
mentoftheattorney.Acontractmadebyhimintheexerciseofthepower
couldnotbecancelled.Thepurchaserhadhimselfcancelledtheagreement
tobuy.Heclaimedrefund oftheconsideration.The vendorwanted to set-off
hisclaimfordamagesforbreach.Thecourtsaidthatthiscouldbepossible
onlyonshowingthatheremainedreadyandwillingtoperformhispart.
268. Campbell v Hassell, (1816) 1 Stark 233.
269.Linck,Mocller&CovJameson&Co,(1885)2TLR206(CA).
270.BoormanvBrown,(1842) 3 QB 511: 61 RR 287.
271.AIR1950SC15:1950SCR30,36;seealsoJohnvPhilip,(1987)2KLT50(SN).https://t.me/LawCollegeNotes_Stuffs

933. [S.188] Agent'sauthority791
The purchaser hadjustificationincancellingbecausethevendor'stitle was
defective.Thecourtsaidthatthis right ofrefundis available also to aperson
who had prior knowledge of thedefect.^^^
Auctioneer
An auctioneer is an agentappointedto sell goods at a public auction.
He, therefore, does not have the authority to sell by privatecontract.^^^He
cannotsell oncredit,oraccept any paymentotherthancash, orwarrant
thegoods.Heacts both for seller and buyer and, therefore, can sign the
contractforboth."^
Powerofattorneyholder
Except where a matter is required to be donepersonally,acts and state
mentsofapowerof attorneyareattributableto theprincipal.Theprincipal
wasanon-residentlandlord.Hewantedtoevictthetenant.Thestatement
made by the attorney to the effectthat his principalwas in personal need of
thepremiseswas held to bereceivableinevidencefororderingeviction.
AgentofLifeInsuranceCorporation
Anagentof theLifeInsuranceCorporationdid not perform his duty to
depositthepremiumamountwithLIC.It washeldthatLICcouldnot shirk
itsresponsibilityto pay the amount assuredunder thepolicy.
Ostensible orapparentauthority
The apparent authority of an agent is thus explained byDenning
"Ostensible or apparent authority is the authority of an agent as it appears
to others. It often coincideswithactual authority. Thus, when theboard
(ofdirectors)appoint one of theirmembersto be amanagingdirector they
investhimnot onlywithimpliedauthority,butalsowithostensibleauthor
ityto do allsuchthingsasfallwithintheusualscopeofthatoffice.Other
peoplewhoseehimactingasmanagingdirectorareentitledtoassumethat
he hasthe usualauthorityof amanagingdirector.Butsometimesostensible
authorityexceedsactualauthority.Forinstance,whenthe boardappoint
themanagingdirector,theymayexpresslylimithisauthoritybysayinghe
isnot toordergoodsworthmorethan £500 withoutsanctionoftheboard.
In that case his actual authority is subject to the £500 limitation, but his
ostensibleauthorityincludesall the usual authority of a managing director.
272.R.L.Pintov P.P.Menzes,AIR2001Kant141.
273. VCarr,(1856) 1H&N484:108RR683.
274.Paymentbycheque,etc.maybeacceptedifthereisacustomtothateffect,BharatSurvodaya
MillsCoLtdVShreeRamMills,AIR1959Bom309.
275. Payne v Leconfield, (1882) 51 LJ QB 642.
276.EmersonvHeclis,(1809)11RR520.
Til.SatnamChannanvDarshanSingh, AIR2007DOC216(P8cH).
278. Kota Central Coop Bank Ltd v District LegalServiceAuthority, AIR 2016 Raj 1.
279.Hely-Hutchinsonv BrayheadLtd,(1968)1 QB549:(1967)3WLR1408(CA).https://t.me/LawCollegeNotes_Stuffs

934. 792ChapterISAgency [S. 188]
The company is bound by his ostensible authority in his dealings with those
who do not know of the hmitation. Thus, if he orders goodsworth£ 1000,
the company is bound to the otherpartywho does notknowof the£500
Hmitation."
"When it is said that an agent's act was within the scope of his apparent
authority allthatis meant isthatthe act appeared to beauthorised".^^"A
leadingauthorityisWatteauvFenwick?^^
Thedefendantshadforbiddenthe manager of their hotel from buying
cigars on credit. The plaintiffgavecigars to the manager on credit, which
were used in business. The manager's name appeared over the board, the
plaintifftrusted him and hadneverheard ofthedefendants.Beingunable
to recover the price from the manager, the plaintiff sued the defendants.
The court found that"cigarswere...suchas wouldnaturally besupplied
to and dealt in such an establishment".WillsJ, therefore, heldthat"once
it isestablishedthat the defendantwas the real principal, the ordinary doc
trine as to principal and agent applied, that the principal is liable for all the
actsofthe agentwhicharewithin the authorityusuallyconfidedto an agent
of thatcharacter,notwithstandinglimitations,asbetweenthe principaland
theagent,put uponthatauthority".^^^In anothersimilarcase,themanager
of apublichousewasauthorisedto buyspiritsonlyfromA,but hebought
themfromanotherpersontellinghimthat hewasamanager.Theprincipal
was held not liable, becausethe fact of agencywas disclosedand it was well
known that suchmanagershad authority to buyonlyfrom authorisedsourc-
es.^^^But if in the above case the fact of agencyhad not been disclosed, the
principalwouldhavebeenliablein the manner of a dormant partner.
Similarly,inacasebeforetheKeralaHighCourt,^^''itwasheldthat aper
sonhavingresponsibilityto carryon thebusinessofthestoreofacoopera
tive society must be deemed to have authority to purchase goods on credit
notwithstandingthat thesocietyhadadvancedhimenoughmoneyfor the
purpose.
A decision of theAllahabadHighCourtfurnishesanotherillustration.^^^
In pursuance of anagreementthe plaintiffdespatcheda wagonload of
potatoes to thedefendant.The latterrefusedto takedelivery.The plain
tiff then sent his agent to takedeliveryand to sell them at the available
280. J.L. Montrose, Actual and Apparent Authority, (1938) Can BR 757, 765.
281.(1893) 1 QB346.
282.SeealsoEdmundsvBushel!andJones,(1865)LR 1QB97whereat p. 99CockburnCJ
observed:"[A]well-establishedprincipleis that if apersonemploysanotheras anagentin a
characterwhichinvolvesa particular authority,he cannot bysecretreservationdivesthim of
thatauthority."
283.DaunVSimmins,(1879) 41 LT783.
284. Valapad Coop Stores Ltd v SrinivasaIyer,AIR 1964 Ker 176.
285.IshaqAbdul Karim vMadanLai,AIR 1965 All 34. See, where LordBlackburnobserved
thatonceanagentisclothedwithostensibleauthority,noprivateinstructionscanprevent
his acts within the scopeof that authorityfrom bindinghisprincipal.https://t.me/LawCollegeNotes_Stuffs

935. [S.188] Agent'sauthority793
price.Thedefendantofferedtotheagentalesssumofmoneyinfull
payment,whichtheagentaccepted.Theplaintiffreceivedthemoneybut
brought an action for the balance.
It was held that the defendant could presume that the agent who was sent
tosellat theavailablepricehad theostensibleauthoritytosettlewith the
defendantat a less price.
'In the above-cited Kerala case thecourtadopted from Smith and Watt's
MercantileLaw^^^thefollowingstatement on the distinction between
"implied"and"ostensibleauthority":"Impliedauthorityisrealauthority,
theexerciseof which isbindingnot only asbetweentheprincipaland the
thirdparty,butalsobetweenprincipalandagent.Itdiffersonlyfroman
expressauthorityin that itisconferredbynoexpresswords,butistobe
gatheredfromsurroundingcircumstances.Theterm"ostensibleauthority",
on the other hand,denotesnoauthorityat all. It is aphraseconveniently
usedtodescribethepositionwhichariseswhenonepersonhasclothed
another,orallowedhimtoassumeanappearanceofauthorityto act onhis
behalf,withoutactuallygivinghimanyauthorityeitherexpressorimplied,
bywhichappearanceofauthorityathirdpartyismisledintobelievingthat
arealauthorityexists.
Apparentauthority is realauthority
Thestatementportraysthe truth inLordEllenborough'sobservation
that"apparentauthorityistherealauthority".^^^Whetherthereisappear
anceofauthorityinaparticularcasedependsuponthefactsofthecase.An
appearanceofauthoritymay,forexample,arisefromthecourseofbusiness.
Awell-knownauthorityisHumbrovBurnardP^Hereanagentwasauthor
isedtounderwriteinsurancepolicies.Theprincipalwasheldliablewhenhe
underwroteaguranteepolicybecauseunderwritingofguaranteepolicies
waswithintheordinarycourseofbusinessofaLloyd'sunderwriter.
Appearanceofauthorityarisingfromcourseofdealing
Anappearanceofauthoritymayarisefromthecourseofdealingadopted
inaparticularcase.Thus,whereaprincipalonceauthorisedhisservantto
purchaseirononcreditandpaidforit,hewasliablewhenonasubsequent
occasionhesentthe servantwithreadycash,but the servantagain incurred
credit.^'®Butiftheoriginalacthadbeenunauthorised,theprincipalwould
nothavebeenliablefor thesecond,evenif he had paid for thefirst.Thus
inBarrettvIrvine,itwaslaiddownthat amotherwhohasoncepaidfor
286.(8thEdn,1924)177.ValapadCoopStoresLtdvSrinivasaIyer,AIR1964Ker176.
287.CitedbyMathewJ inValapadCoopStoresLtdvSrinivasaIyer,AIR1964Ker176,177.
288. Pickering v Busk, (1812) 15 East 38.
289.(1904)2 KB 10.
290.HazardvTredwell,(1722) 1Stra506.
291.(1907)2ILR462(CA).https://t.me/LawCollegeNotes_Stuffs

936. 794Chapter15Agency [S.188]
ahorseforherinfantsondoesnottherebyraiseaninferenceof ageneral
authorisationtohimtopledgehercreditforhisfutureequinepurchases.
Representationofauthoritybyconduct
A representation of apparent authority has to emanate from some con
ductoftheprincipal.Theremustbesomeconductonhispartwhichenables
theagenttooccupyapositionofapparentauthority.Therepresentation
whichcreates"apparent"authoritymaytakeavarietyofformsofwhich
thecommonestisrepresentationbyconduct,thatis,bypermittingtheagent•
to actinsomewayintheconductoftheprincipal'sbusinesswithotherper-
sons".^'^Forexample,aprincipalusedtoordergoodsfromtheplaintiff.He
hadaservantwhomheneverauthorisednoreversentoutforbuyinggoods.
Theservantwasdismissedandafterthatontwooccasionsheboughtgoods
fromtheplaintiffintheprincipal'sname.Eachtimetheprincipalpaidthe
accountinignorance.Hewasheldentitledtorecoverbackthemoney,forhe
haddonenothingtoenablehisservanttoacquireanappearanceofauthor-
ity.^''^WhereaCrownagentwithouteverhavingbeensoauthorised,sold
steelplatesbelongingtotheCrown,thelatterwasnotboundbythesale.
Theagent'sownrepresentationscouldnotcreateanapparentauthority.^'^
Ontheotherhand,intheAmericancaseofKannellesvLocke,theprinci
palwasheldliablefortheactofacompleteimposter.Theplaintiffarrivedat
nightat asmallhotel.Shewasgreetedbya manin thecorridor.Hebooked
aroomforherandtookchargeofhervaluablearticlesandissuedareceipt
intheprincipal'sname.Hedisappearedwiththearticles.Thehotel-keeper
washeldliablebecausetheimpostercouldnothaveoccupiedthatposition
ofapparentauthoritywithoutthehotel-keeper'snegligence.InPanorama
Development[Guildford)Ltd vFidelisFurnishingFabrics^^^thefactswere:
Theplaintiffranacars-on-hirebusiness.Thedefendantcompany's
secretaryhiredcarsfromtheplaintiffostensiblyforthecompany'sbusi
ness,tellinghimthatthecarswerewantedtocarryimportantcustomers
ofthecompany.Hewroteonthecompany'spaperorderingthecars,
signinghimself"CompanySecretary".In fact, he used the cars himself
and not for thecompany'spurposes.
Itwasheldthat thesecretaryhadostensibleauthoritytoenterintocon
tractsforhiringcarsforwhichthecompanymustpay.
292.BorrowedfromHanbury,ThePrinciplesofAgency(1952)28,Irishreportsbeingnot
availablehere.SeealsoGiUmanvRobinson,(1825)1C&P642,whereBestCJsaid(at
p.643):"Iagreethatonetransactionisnotenoughtoraisethepresumptionofageneral
authority,but severalinstancesaresufficient."
293.LateefaBegumvB.G.Kirloskar,(2005)11SCC515,thepersoninquestionwasopenly
actingasagentinpropertymatters.Theprincipalnotallowedtodenyit.Specificrecoveryof
propertygranted.
294. Bailey & Whites Ltd v House, (1915) 31TLR583.
295.Attorney-GeneralforCeylonevSilva,1953AC461:(1953)2WLR1185(PC)
296. (1919) 12 Ohio App 210.
297. fl971) 2 QB711;(1971)3 WLR 440(CA).https://t.me/LawCollegeNotes_Stuffs

937. [S.188] Agent'sauthority 795
Continuanceofapparentauthoritytilltermination
An apparent authorityoncecreatedcontinuesto existunlessit is termi
natedbyanoticeto thethird party.It cannot beterminatedorrestrictedpri
vately.Thusaprincipalwhohadterminatedtheauthorityof hisagentwho
hadoccasionallybought wool for him wasneverthelessheldliablefor the
agent'sfurtherpurchasesasthesupplierhad nonoticeofthetermination.^'^
Similarly,wherea manlivedwith hismistressashusbandandwifeand used
topayforthemistress'spurchases,hewasheldliableforthepurchasesmade
after he had left her, becausethe supplier did not know of thatfact.^^'
Agent'spossession
Thepossessionofservantoragentis that of hismasterorprincipalfor
allpurposes.A suitagainstservantoragentcannot bemaintainedon the
basisofsuchpossession.^"""It iswellsettledthat thepossessionofthe agent
is thepossessionof theprincipaland inviewof thefiduciaryrelationship
the defendantcannot be permitted to claimhis ownpossession.This aspect
waswellemphasisedin DavidLyellvJohnLaivsonKennedy,^"^wherethe
agentwhowascollectingtherentsfromthetenantsonbehalfoftheowner
anddepositingit in aseparateearmarkedaccountcoritinuedto do soeven
after the death of the owner. After more than 12 years of the owner's death
hisheir'sassigneebroughttheactionagainsttheagentforpossessionand
theagentdefendantpleadedadversepossessionandlimitation.Theplaintiff
succeeded in thefirstcourt. But the action was dismissed by theCourtof
Appeal.TheHouseofLordsreversedthedecisionof the Court ofAppeal
andremarked,"For whom, and onwhosebehalfwerethose rentsreceived
after Ann Duncan's death? Not by the respondent for himself,or on his own
behalf,anymorethanduringherlifetime".Emphasisingthefiduciarychar
acteroftheagenthispossessionwaslikenedto that oftrustee,asolicitoror
anagent,receivingthe rent under a powerofattorney.
Employer'sundertaking to payinsurancepremia
Whereanemployer,in agroupsavingslinkedinsurancescheme,under
tooktopaymonthlypremiumstotheinsurerfromwagesorsalariesof
employees,butwhenaworkerdied,itcametolightthat thepremiumswere
indefault,itwasheldthat the insurerwas bound to paythe insurancemoney
toemployee'sfamily.Theemployerhadbecometheagentoftheinsurerfor
theagreedpurpose.Lackofconsiderationbetweentheinsurerandemployer
298. Dodsley v Varley, (1840) 12A&E632.
299.RyanvSams,(1848)12QB460.InSummersvSoloman,(1857)7E&B879,theprincipal
becameresponsibleto asupplierwhosuppliedjewellerytotheshopmanagerasusualnot
knowing that he had beenremoved.
300.MahabirPrasadJain vGangaSingh,(1999)8SCC274:AIR1999SC3873.
301.(1989)LR14AC437.CitedinKamleshvJasbirSingh,AIR2004P&H216.Anothercaseon
mattersofrent,CorpnofCalicutvK.Sreenivasan,(2002)5SCC361:(2002)1RCR(Rent)
614.https://t.me/LawCollegeNotes_Stuffs

938. 796 Chapter 15Agency [S.188]
was immaterial because no consideration is necessary at the time creation
ofagency.Consideration in such cases is promotion ofbusiness.Thisline
ofdecisionshasfoundSupremeCourtapprovalinLifeInsuranceCorpn
VRajiv KumarBhaskar?^^Theemployerbecame the agent ofLICfor col
lectionandpaymentofpremiaon theaccountofemployeescoveredbythe
scheme.The insurerhad to bearresponsibility.After noting thecontentsof
thescheme,thecourtsaid:
"Theemployersin terms of this tripartitearrangementacceptedthe
responsibility of deducting the premium from the salaries of the same and
sendthesameto theCorporationby onecheque.Theconcernedemploy
eeswouldhavenoknowledgeabout thecontentsofcorrespondencepassed
betweenthe Corporation and theiremployers."
"Theemployer'sletter to the Corporation indicates that no form of indi
vidualpremiumduenoticeorreceiptwouldbeissuedby theCorporation
whichclearlyshowsthat theentireresponsibilitywasthrust upon the
employer by theCorporation."
Dealingwith the arguments as to creation ofagencythe court said:
Anagencycan becreatedexpresslyor bynecessaryimplication.It maybe
truethat theemployersinresponseto theproposalmadebytheCorporation
stated that they would act asagentsof theiremployeesand not that of the
Corporation,but, theexpression"agent" in suchcircumstancesmay not
meanto beonewithinthemeaningof theLifeInsuranceCorporationof
India(Agents)Regulation,1972,made in terms of Section 49 of the Act: but
wouldmeananagentinordinarysenseoftheterm.Anemployerwouldnot
be anagentintermsof the saidRegulationon thepremisethat it was not
appointed by the Corporation to solicit or procure life insurancebusiness.
Theemployershad no duty todischa;rgeto theCorporationeitherunder
theActor therulesandregulationsframedthereunderbutkeepinginview
thefactthat theCorporationdidnotmakeanyofferto theemployeesnor
woulddirectlymakeanycommunicationwiththemregardingpaymentor
non-payment of the premium or any other matter in relation thereto or con
nectedtherewithincludingthelapseof thepolicy,ifany,it cannot be said
that theemployerhadnoroletoplayonbehalfoftheCorporation.
TheSchemeclearlyandunequivocallydemonstratesthat notonlythe
contractofinsurancewasenteredintobyandbetweentheemployeeandthe
insurerthroughtheemployerbuteventhetermsandconditionsofthepolicy
weretobeperformedonlythroughtheemployer.In thatlimitedsense,the
employerswould be the agents of the insurer. InBowstead&Reynolds
302.UCVK.RamaIyer,2004AIRKant594:(2004)1KantLJ216(DB),thepremiumsin
respectof theemployeewereindefaultforfourmonthsup to thetimeofhisdeath,the
insurerwasheldliable.ItwasthedefaultoftheemployerwhowasLIC'sagent.
303.(2005)6see188:AIR2005SC3087:(2005)126CompCas809.H.B.GowrammavLIC,
2006seeOnLineKar 365:2007ACJ1087delaybyschoolinsendingpaymentunderthe
scheme,evensoLICaccepted,notallowedtosaythatthepolicyhadlapsed.https://t.me/LawCollegeNotes_Stuffs

939. [S.237] Agent'sauthority797
ONAgency,^"''it is stated; "Where a person, by words or conduct, repre
sents or permits it to be representedthatanotherperson hasauthorityto act
on his behalf, he is bound by the acts of that other person with respect to
anyonedeaUngwith him as an agent on the faith of any such representation,
to thesameextentas if suchother personhad the authoritythat he wasrep
resented to have even though he had no such actual authority."
In a scheme of group insurance of policemen, premium amounts were
sent by thePoliceDepartment after deducting fromrespectivesalaries. The
department failedto communicateto the insurer the fact of death of a police
manwithinthe timestipulatedin the policy and after which theinsurerwas
not to beliable.It was held that in all matters in respect of the group policy,
theDepartmentwas acting as an agent of the insurer. Theinformationof
theDepartmentamountedtoinformationof the insurer.Thustheinsurer
hadattributedknowledgewithintime.^"^
Statutoryprovisionaboutapparentauthority
The doctrine of ostensibleauthority isgivenstatutoryshape in Section237
oftheContractAct.
S. 237.Liabilityofprincipalinducingbeliefthatagent'sunauthorised
actswereauthorised.—Whenanagenthas,withoutauthority,doneactsor
incurredobligationsto thirdpersonsonbehalfof hisprincipal,theprincipalis
boundby suchactsorobligationsif he has by hiswordsorconductinduced
suchthirdpersonstobelievethatsuchactsandobligationswerewithinthe
scopeoftheagent'sauthority.
Illustrations
(a)consignsgoodstofiforsale, and gives himInstructionsnot to sellundera fixed price.
Cbeingignorantof B'sinstructions,entersinto acontractwith 6 to buythegoodsat a
pricelowerthanthereservedprice.A isboundbythecontract.
{b)AentrustsBwithnegotiableinstrumentsendorsedinblank.Bsellsthemto C in viola
tion ofprivateordersfrom A.The sale isgood.
Theprovisionhas been used in quite a few cases to fix theprincipalwith
liabilityforunauthorisedacts of his agent.Theprominentamongthem
304.(7thEdn)307.
305.SushilaDevivStateofBihar,2005AIHC1514 (Pat);LICvRajivKumarBhaskar,(2005)6
see188:AIR2005SC3087:(2005)126CompCas809.
306.See, forexample,MoosaBhoyv V.Kristiah,AIR1952Hyd 79,whereapettycontractor
was held liable for the moneymisappropriatedby his agent put by him in charge of the work.
See alsoDinabandhuSahavAbdulLatifMolla,ILR(1922) 50Cal258;VurdhmanBros
VRadhakishanJaiKishan, AIR 1924 Nag 79; K.S.Ramachandranv Coop Societies, AIR
1963Mad105,wherea clerk of thesocietywas held to beauthorisedto receivepayments.
Representationofauthorityshould have beentowardstheparticularplaintiffand not to the
world unless theplaintiffacted onthatwiderrepresentation.PhonographicPerformance
LtdVHotelGoldRegency, AIR2009Del 11, acopyrightsocietycannotbeauthorisedby
the owner ofcopyrighttoinstituteproceedingson theowner'sbehalf. Suchauthorisationis
notenforceableundertheCopyrightAct orContractAct.https://t.me/LawCollegeNotes_Stuffs

940. 798Chapter15 Agency [S. 237]
seems to be a decision of theNagpurHighCourt,whereabankingfirm
was held liable for themisappropriationof the funds of acustomerby a
person who, to the knowledge of the firm, was accepting deposits from cus
tomers.Thecourtsaid:
"TheirLordships of the JudicialCommitteeof the Privy Council ruled
inRamPertabvMarshal?"^thattherightof athirdpartyagainstthe
principal on thecontractof his agent though made in excess of agent's
actualauthoritywas nevertheless to be enforced when the evidence
showedthatthecontractingpartyhad been led into an honest belief in
the existence of theauthorityto theextentapparenttohim."
Actualorconstructivenoticeoflackofauthority
Where,however, apersoncontractingwiththe agent hasactualor con
structivenotice of anyrestrictionon the agent's ostensibleauthority,he
isboundby therestriction.Thuswherean agent,authorisedby apower
ofattorneytooperatea business, butnottoborrowmoney,producedthe
powerofattorneyto a lenderwhomhe asked for a loan, but the lender did
not read it and advanced a loan, he could not recover it from theprincipal
as hehadconstructivenoticethattheagenthadnopowertoborrow.^"^
Whereabrokerwaspermittedto receivepaymentfor hisprincipal'sgoods
bydrawinguponthe seller a bill ofexchangeandsecuringhisacceptanceto
it, apaymentmade inthatmannerbecamebindingupontheprincipal.But
where thebrokerwasauthorisedto receivepaymentonly inrespectof one
previouscontract,thatwas held to be not sufficient to create anapparent
authorityto receive suchpaymentsin thefuturealso.^^°Onceanostensible
authorityiscreated,theprincipalbecomesboundby agent's actswithinthe
scope of such authority. Hecannotrely upon any privaterestrictionsupon
theagent'sauthority.^"
Justandreasonablesolution
The ultimate question iswhetherthecircumstancesunder which a serv
anthasmadeafraudulentmisrepresentationwhichhascausedloss to an
307.BissessardasvKabulchand,AIR 1945 Nag 121:ILR1945 Nag 204. An agentauthorisedto
borrowon exceptional terms in an emergentsituation,borrowed on exceptional terms with
out any emergency, yet theprincipalwas held liable for the loan.MontaignacvShitta,(1890)
LR 15 AC 357.CliffordGeorgePintovM.R.Shenava,(2005) 3 CCC 498 (Kant): AIR2005
KantHCR316: (2005) 1 Kant LJ 458, power ofattorneyfor sale of only oneproperty,the
other included by the attorney by forgery, neither the buyer was aware of it nor the power
document created any such doubt, principal bound by the sale.
308.ILR(1898)26Cal701.
309.JacobsVMorris,(1902) 1 Ch 816 (CA).
310.KamalSinghDugarvCorporatedEngineers(India) (P) Ltd, AIR 1963 Cal 464.
311.SarsharAlivRobertsCottonAssn, (1963) 1 SC 244 (Pak); RamPertabvMarshall,ILR
(1898) 26 Cal 701, where their Lordships of the Privy Council ruledthatthe rights of a
thirdpartyagainst the principal on the contracts of his agent though made in excess of the
agent'sactualauthoritywereneverthelessto beenforcedwhentheevidenceshowedthatthe
contractingpartyhad been led into anhonestbelief in the existence of theauthorityto the
extentapparentto him.https://t.me/LawCollegeNotes_Stuffs

941. [S. 189] Agent'sauthority799
innocentpartycontractingwithhim are such as to make it just for the
employer to bear the loss. Such circumstances exist where the employer by
words or conduct has induced the injuredpartytobelievethatthe servant
was acting in the lawful course of the employer's business. They do not exist
where suchbelief,although it is present, has been brought about through
misguidedrelianceon theservanthimself, when theservantisnotauthor
ised to do what he ispurportingto do, when what he ispurportingto do
is not within the class of actsthatanemployeein his position is usually
authorised to do and when the employerhas done nothing to representthat
he isauthorisedto do it. Applying these principles to the facts of a case
before it, the House of Lords heldthatwhere an agent wasauthorisedto
dispose of a ship, acharter-partygranted by him did not bind the principal.
The sale of a ship backed by athree-yearcharter-partyis atransactionof
wholly differentcharacterfrom astraightforwardsale.^^^
Rule 8 of the LifeInsuranceCorporation(Agents)Rules, 1981 framed
under Section48(2){cc)of the Life InsuranceCorporationAct, 1956 pro
hibits agents from collecting premium on behalf ofLIC.Accordingly,an
implied or apparent authority could not be inferred for that purpose. The
factthatLIC accepted the premiumamountfrom him, which he hadtaken
from his client, would not create an apparent authority in favour of the
agent.^^^
Agent'sauthorityinemergency[S. 189]
S. 189.Agent'sauthorityinanemergency.—Anagenthas authority, in
anemergency,to do all suchactsforthepurposeofprotectinghis principal
from loss as would bedoneby apersonofordinaryprudence,in his own case,
undersimilarcircumstances.
Illustrations
(a)Anagentfor sale may havegoodsrepairedif it benecessary.
(fa)A consigns provisions to Bat Calcutta, withdirectionstosendthemimmediatelyto C,
at Cuttack. Bmay selltheprovisions at Calcutta, iftheywill notbearjourneyto Cuttack
withoutspoiling.
This section creates a specialauthorityinemergency.Itconstitutesthe
agentintoanagentofnecessitytocounteracttheemergentsituation.An
act done in the exercise of this extendedauthoritywould bind theprincipal
if the agent was not able tocommunicatewith hisprincipaland the course
hetookwas necessary in the sensethatit was the only reasonablyprudent
courseleft open tohimandthathe acted in good faith in theinterestof the
partiesconcerned.
312.ArmagasLtdvMundogasS.A.,1986AC 717: (1985) 3WLR640 (CA).
313.HarshadJ. Shah vLIC,(1997) 5 SCC 64: AIR1997SC 2459. The policy lapsed because of
delay inpaymentby the agent. The SupremeCourtorderedoncompassionategroundsthe
insurerto pay back thetotaldepositamountwithinterest.https://t.me/LawCollegeNotes_Stuffs

942. 800Chapter15 Agency [Ss.227-228]
Whereagent exceedsauthority
S.227.Principalhowfarbound,whenagentexceedsauthority.—When
anagentdoes more than he isauthorisedto do, and whenthepart of what
hedoes,which is within hisauthority,can beseparatedfromthepartwhich is
beyond his authority, so much only of what he does as is within hisauthorityis
bindingasbetweenhimandhisprincipal.
Illustration
A,beingownerof a ship and cargoauthorisesBtoprocureaninsurancefor 4000rupees
on theship,eprocures a policyfor 4000 rupees on the ship, andanotherfor the likesum on
thecargo. A Isboundto paythepremium forthepolicy ontheship, but not thepremium
forthepolicy onthecargo.
S.228.Principalnotboundwhenexcessofagent'sauthorityisnotsep
arable.—Whenanagentdoesmorethanhe isauthorisedto do, andwhathe
doesbeyondthescopeof hisauthoritycannotbeseparatedfromwhatiswithin
it,theprincipal isnotboundtorecognizethetransaction.
Illustration
AauthorisesBto buy 500sheepfor him. Bbuys 500sheepand 200 lambs for one sum of
6000rupees.A mayrepudiatethewholetransaction.
Where an agent exceeds his authority, actual or apparent, the principal is
notboundby theexcesswork, but where it is separable from theauthorised
work the principal is bound to that extent.[S.227] For example, an agent
isauthorisedto insure a ship. He insures the ship as well as the goods under
separatepolicies.The principal is bound only by the policy on the ship. If he
had taken out only onepoHcyin excess ofinstructions,the principal would
not have beenbound.^"Where the agent wasauthorisedto sell half a right
over a property and he contracted to sell all the rights, the principal was
held to beboundto theextentofhalfrights,they beingseparablefrom the
rest.^"
Wheretheauthorisedworkisnotseparablefrom the rest, theprincipal
may repudiate the whole of thetransaction.[S.228] For example, an agent
isauthorisedto buy 500 sheep. He buys 500 sheep and200lambs for one
sum of 6000 rupees. The principal mayrepudiatethe wholetransaction.
Wherean agent wasauthorisedtodrawbills up toRs200each, theprinci
pal was held not liable when the agent drew up to Rs 1000each.^^^Similarly,
where an agent wasinstructedtocontractfor the purchase ofcottonto be
delivered at the end ofJanuary,theprincipalwas heldnotliablewhenthe
agentcontractedfor delivery in the middle ofthatmonth.^^®
314.BrainsvEwing,(1866)LR1 Ex320.
315.AhammedvMammadKunhi,AIR1987Ker228.
316.IllustrationtoS.228.
317.PremabhaiHemabhaivBrown,(1873) 10BHCR319.
318.AvlapaNayakvNarsiKeshawji,(1871) 8 BomHCApp Cas 19.https://t.me/LawCollegeNotes_Stuffs

943. [S.229] Agent'sauthority801
Effectofnoticetoagent
S. 229.Consequencesofnoticegiventoagent.—Anynotice given to
orinformationobtained by the agent,providedit begivenor obtained in the
courseofthebusinesstransacted byhimfortheprincipal,shall,asbetvyveenthe
principalandthirdparties,havethesamelegalconsequencesasifithadbeen
given to or obtained bytheprincipal.
Illustrations
id]AisemployedbyBto buyfromCcertaingoods,ofwhichCistheapparentowner,and
buysthemaccordingly.Inthecourseofthe treatyforthesale,Alearnsthat the goods
reallybelongedtoD,but Bisignorantofthatfact.Bisnotentitledtoset-offa debt
owing to himfrom Cagainst the price of the goods.
(b)AisemployedbySto buyfromCgoodsofwhichCisthe apparentowner.Awas,before
he wassoemployed,a servant ofC,and then learnedthat the goodsreallybelonged
toD,but Bisignorantofthat fact.Inspite oftheknowledgeof hisagent, Bmayset-off
against the price of thegoodsadebtowing to him fromC.
The effect of theprovisionisthatnotice given to orinformationobtained
by an agent in the course of the businesstransactedby him onbehalfof his
principal, shall, as between the principal and third parties have the same
legalconsequencesas if it hadbeengivento orobtainedby theprincipal.
Actingon theprincipleof thesectionthe Calcutta High Courtheldthat
wherethesecretaryofasocietywasdefactoaswellas dejureinchargeof
theaffairsofthesociety,anoticegivento himof thefactthat a partnerof
afirmwithwhichthesocietyhaddealingshadretired,operatedas anotice
to thesociety.^"
Knowledgeofbroker
Whetherabrokerisactingas anagentof theassuredor theinsurer,
depends upon the facts of each case. It has been heldthatwhenabrokerhas
the power to bind the insurer, popularly known as "binder", he will be an
agentoftheinsurerandhisknowledgewillbedeemedto betheknowledge
of theinsurer.Thus,whereamemberof thebroker'sfirmknewofthecrimi
nalpastoftheassured,theinsurerwasnotpermittedtodenyliabilityonthe
groundthatthepasthad not beendisclosed.^^°
In suchcircumstancesan assurancegivenby the broker would bind the
insurer.In one such case the broker orallyassuredthat the new car pur
chasedby theassuredwouldbesubstitutedunder thesamepolicyfor the
old.Theinsurerwasheldliablethoughhewasnot in apositiontogivesuch
substitution.^^^
Liability for agent'swrongfulacts[S.238]
Section238of the Contract Actlaysdown theprinciplebywhich the lia
bilityoftheprincipalfor the wrongfulacts of the agentis to bedetermined.
319. JaniNautamlalVenishankervVivekanandCoop HousingSocietyLtd, AIR 1986 Guj 162.
320.WoolcottVExcess Insurance Co Ltd,(1978)1Lloyd'sRep 633(CA).
321. StocktonVMason,(1978)2 Lloyd's Rep 430.https://t.me/LawCollegeNotes_Stuffs

944. 802Chapter15Agency 238]
S.238.Effect,onagreement, ofmisrepresentationorfraud byagent.—
Misrepresentationsmade,orfraudscommitted,byagentsactinginthecourse
oftheirbusinessfortheirprincipals,havethesameeffectonagreementsmade
by such agents as ifsuch misrepresentations or frauds had been made or com
mittedbytheprincipals;butmisrepresentationsmade,orfraudscommitted,
byagents,inmatterswhichdonotfallwithintheirauthority,donotaffecttheir
principals.
Illustrations
(a)A,beingB'sagentforthesaleofgoods,InducesCtobuythembyamisrepresentation,
which he was not authorized byBtomake.The contract Isvoidable, asbetweenSand
C,attheoptionof C.
{b)A,the captain of B's ship signs bills of ladingwithouthaving received on boardthe
goodsmentionedtherein.The bills of lading are void asbetweenBandthepretended
consignor.
Tofixthe principal with vicariousHabilityfor the wrongs of his agent it
is necessary that the wrong must have been committed in the course of the
principal'sbusiness.Althoughthe particular actmaynot beauthorisedbut
if it is done in the course of carrying on the authorised business, the princi
pal is liable.
A master is liable for the wrongs of hisservantcommittedin the course
of the servant'semployment,whereas a principal is liable for wrongs done
by the agent in the course ofbusiness.The expression "course of business"
has been generallytaken to mean the same thing as "course of employment".
Accordingly,the principles governing the master and servant relationship
have been applied tothatof principal and agent and also topartners.To
quote Professor Street: "There has never been a time when cases on master
and servant were not cited asauthorityin the law of principal andagent."^^^
Secondly,although Section 238 speaks of "misrepresentations" and
"frauds" inreferenceto "agreements made by agents" the principle is appli
cable to all caseswhetheranagreementis involved or not.
322. For example, LordLindleyinCitizens'LifeAssuranceCo vBrown,1904AC 423, 427,
stated the principle of vicarious liability in the following words; "Although theparticular
act which gives the cause of action may not be authorised, still, if the act is done in the
course of employment which isauthorisedthen the master is liable for the act of his servant."
This doctrine has been approved and acted upon by this Board in Mackay vCommercial
Bank of NewBrunswick,(1874)LR 5 PC 94; Swire v Francis, (1877) LR 3 AC 106 (PC),
and the doctrine is as applicable to incorporated companies as to individuals. All doubt on
this question wasremovedby the decisionof the Court of Exchequer Chamber in Barwick
VEnglishJointStock Bank, (1867) LR 2 Ex 259, which is the leading case on this subject.
It was distinctlyapprovedby LordSelbornein the House of Lords, inHouldsworthv
City of Glasgow Bank, (1880) 5 AC 317, 326, and has been followed in numerous other
cases. There can be no agency for doingwrongfulacts. A.ThangalKunjuMusaiarv M.
VenkatachalamPotti,AIR 1956 SC 246: (1955) 2 SCR 1196. The agent would bepersonally
liable.
323.Street,FoundationsofLegalLiability,Vol2, 454.https://t.me/LawCollegeNotes_Stuffs

945. [S. 238] Agent'sauthority803
Misrepresentationsandfrauds
An agentappointedtosellhisprincipal'sgoods orpropertyhasoftento
makestatementsconcerningthenatureandqualityof thepropertyand,in
hisenthusiasmto find acustomer,may makeexaggeratedstatements.The
law doesnotlike to hold theprincipalliable for the agent'sextravagant
statementsunless it finds some faultwiththeprincipalhimself. If, forexam
ple, theprincipalhasauthoriseda falsestatementto be made, orknowsthat
it is being made by the agent or keeps the real facts from the agent,obviously
theprincipalis liable. Theliabilityof theprincipalisenforced,at theoption
of thethirdparty,by avoiding thecontractif it is stillexecutoryor by hold
ing theprincipalliable indamages.Suchliabilitycame to theprincipalin
the followingthreecases:
FullerVWilson:^^'*An estate agentstatedto thepurchaserthatthe house
undersale was free from rates and taxes. Theprincipalwas aware, but the
agent wasnot,thatthe house was subject to taxesandtaxeswere leviedsoon
aftertheplaintiffpurchasedthe house. Theprincipalwouldhave been held
liable if theplaintiffhad relied on therepresentation.DenmanCJ said"...if
thepurchaserwasactuallydeceived in hisbargain,thelawwill relievehim
from it. Wethinktheprincipaland his agent are for thispurposecompletely
identified, andthatthe question is, notwhatwas passing in the mind of either,
butwhetherthepurchaserwas in fact deceived by them or either of them."
LondonCountyFreehold&cLeaseholdPropertiesLtdvBerkerly
Property&InvestmentCoLtd:^^^Negotiationswereafootfor the sale of
a block of flats by thedefendantcompanyto theplaintiffcompany. The
solicitors of theplaintiffcompany, while goingthroughthedraftagreement,
putamarginalnoteinquiringwhetherall thetenantswerepayingtheirrents
regularly. The solicitors of thedefendantcompanyconsultedtheproperty
managerof the company and then informed theplaintiffs,also by way of
marginalnote to thedraft,thatthetenantswerepayingrentsregularlywith
immaterialexceptions.Thestatementturnedoutto be false. Thedefendant
company was held liable in fraud because one of its agents(propertyman
ager) whoknewthe real factshadmade a falsestatement,and thecompany
hasnecessarilyto actthroughits agents.
Briess vWooley:^^^Adirectorof acompanystartednegotiationsfor a
contractwithoutanyauthorityandmadefraudulentmisrepresentations.
Subsequently he wasauthorisedto complete thecontract,but didnothingto
correct the misrepresentations. The company was held liable.
In the following case theprincipalswere heldnotliable:
CornfootvFowke:^^^Theplaintiffhademployed an agent to let a house.
Thedefendantwas incontactwiththe agent for a house. Thedefendantasked
324.(1842)3 CB58.
325.(1936) 2AllER1039.
326.1954AC333:(1954)2WLR832(HL).
327.(1840)6M&cW358:55RR655.https://t.me/LawCollegeNotes_Stuffs

946. 804Chapter15 Agency [S. 238]
the agent: "if there was anyobjectionto thehouse",towhichheanswered
thatthere was not; the defendant entered into and signed the agreement,
butafterwardsdiscoveredthatthe adjoining house was a brothel, and on
thatgrounddecHnedtofulfilthe agreement. He claimed the right to avoid
theagreementas there wasfraudulentconcealmentof amaterialfact. But
he was held bound by theagreement.There was no guilt in the principal
becauseheneitherknewnorhadauthorisedthestatementtobemade.There
was no guilt in the agent because he didnotknowthattherewas abrothel.
This decisionhas beencriticised.^^®It should be the duty of the principal
to apprise the agent of the wholesituation,otherwisehe creates the risk of
innocentmisrepresentationbeing made by the agent.Moreover,rescission is
allowed even for innocent misrepresentation and there was no reason why
this should not have been attributed to the principal. If the principal had
himselfsaid"therewas noobjectionto thehouse"hewouldhave been
guilty of fraud, and when hegivesanostensibleposition to his agent to make
this statement, the elementary principle that "he who acts through another
isdeemedtoacthimself"shouldhavebeenfollowed.
Despite criticism, the decision was followed inArmstrongvStrain-?^^
OneMrStrain, aretiredpractitioner,"ownedabungalowin an area
notoriously prone to produce settlements because of the heavy clay sub
soil. The bungalow had sufferedseverelyfrom this scourge and had
already been underpinned three times". He was naturally anxious to dis
pose it of and entrusted it to his partners for this purpose. His partners
arranged it with anotherfirm,which found Armstrongs as buyers. The
bungalowwas described to be "in a very nicecondition"and one of the
partners of the latter firmvaluedit at£2000for mortgagepurposes. The
agents knew of the last underpinning but not of the two earlier ones.
Within two months of the transaction the bungalow collapsedfinally.But
Armstrong's action to hold the principal liable in damages for the fraud
failed.The courtfoundnoconsciousfalsehoodand,therefore,acquitted
the principal "and theunfortunateArmstrongs were left with the ruins
of abungalow".
Thedecisionhas beendescribedbyL.C.B.Gower as one that is socially
undesirable and logicallyunsatisfying.^^"Thelearnedwriterhasstatedthe
position of English law in the following words:
Thelawisthat aprincipalisnotliableforfraudinrespectofhisagent's
actsunless—
[a)he intends or knowingly permits the agent to make a false state
ment,or
328. For critical analysis of this andcontrarydecisions see Patrick Devlin,Fraudulent
Misrepresentation: Division of Responsibility between Principal and Agent, (1937)53 LQR
344.
329. (1952) 1 KB 232: (1952) 1 KB232(CA).
330. L.C.B. Gower, AgencyandFraud, (1952) 15 Mod LR 232 at p. 234.https://t.me/LawCollegeNotes_Stuffs

947. [S. 238] Agent'sauthority805
{b)his agent acting within the actual orapparentscope of hisauthor
ity makes a statement with knowledge of its falsity or recklesslynot
caringwhetherit betrueor false.
Agent'storts
"Onewhochoosesto dobusinessthroughanagentmayincertainsitua
tions be liable for atortcommittedby the agent. Thedoctrineofrespondeat
superior(letthe superior answer) will be applied to make the principal liable
where the agent commits atortwhile engaged in the business of the princi
pal, or, as it is commonlysaid, when the tort is committed by the agentwhile
acting in the course of andwithinthe scope of hisagency."^^^
"An agent kicked a boy from a moving streetcar. The principal was held
liable for assault andbattery.Anagent, employed to collect evidence for
his principal in a pending lawsuit, offeredto bribe a witness. It was heldthat
the act waswithinthe course of the employment of the agent andthatthe
principalwasboundbyit."^^^
It was at one time said, on theauthorityof Bartvick v EnglishJointStock
Bank^^'^that the principal would not be liable where the agent committed a
tort for his personalbenefitand not for thebenefitof the principal. But the
House of Lords in their decision in Lloyd v Grace Smith & clearly
ruledthatthe Bartvick case was not anauthorityfor any such principle and
thatthe only condition of the principal's liability isthatthe act in question
must bewithinthe course of the agency business. The facts of the case were
asfollows:
Grace Smith&Co were a firm of solicitors of somereputeandrespect
ability.MrsLloyd,awidow,beingdissatisfiedwith theincomeof her
two cottages,consultedthe firm's clerk, who was incharge of the con
veyancingbusiness,as to how toimprovetheincome.Headvisedher to
disposeof thecottages.Heaskedher to bring the titledeedswhich she
didandobtained her signature on two papers. He converted these papers
into a sale deed to himself and subsequently disposed of thepropertyand
misappropriatedtheproceeds.It was held "that the firm were responsi
ble for the fraud committed by their representative in the course of his
employment".^^^
Where the premiumwas to be deducted by theemployerfrom the salary
of theemployeeand for forwarding it to the insurer and this arrangement
331. Atlantic Die Casting Co v WhitingTubular ProductsInc,337 Mich 414,reported inStimson
and Lazar,RecentCasesandMaterialsonBusinessLaw(1955) 131.
332.SchultzVLa Groses CityRlyCo, (1907) 133Wis420.
333.ChicagoCity Rly Co vMcMohan,1882ILJ485. The statementis borrowedfromSpencer
and Gillam, ATextBookofLawandBusiness,280 (3rd Edn, 1952).
334.(1867)LR2 Ex259.
335.1912AC716(HL).
336. Therelationshipof alocker-holderwith the bank is that ofbaileeand bailor and not that
of landlord and tenant. The bank will be liable if an employee fraudulently tampers with a
locker.NationalBank of Lahore Ltd v SohanLai,AlK1962Punj534: ILR (1962) 1 Punj 566.https://t.me/LawCollegeNotes_Stuffs

948. 806 Chapter 15Agency [S.238]
was in terms of an agreement between the insurer andemployer,it was
heldthat theemployerhadbecomeanagentof theinsurerfor thispurpose.
Failureoftheemployertosendtwoinstalmentsbyreasonofwhichthe pol
icywas in a state of lapse at the time of theemployee'sdeath was not to go
againsttheemployee.It was the failure of the insurer's agentand not that of
the employee.
RIGHTSANDLIABILITIESOFUNDISCLOSED PRINCIPAL
Therightsandliabilitiesofaprincipalundercontractsmadebyhisagent
dependuponwhether—
(а)Theprincipal'sexistenceand nameweredisclosedbytheagent;
(б)The principal'sexistencewasdisclosedbut not his name;
(c)Neitherexistencenor name of the principalwasdisclosed.
Where theprincipalis disclosed
Wheretheexistenceof theprincipalisdisclosed,Section226applies,
accordingtowhichtheagent'sactsandcontracts"willhavethesamelegal
consequenceas if thecontractshadbeenenteredinto and the actsdoneby
theprincipalinperson".Theprincipalmaysuethethirdpartyuponthecon
tract and vice versa. Forexample,where the agent is authorised toreceive
payment,apaymentto himdischargesthe third party from hisliabilityto
the principal.
Theagentcanneithersuenor besueduponacontractmadebyhim on
behalfofhisprincipal."Thecontractisthecontractoftheprincipal,not
that oftheagent,andprimafacieatcommonlawtheonlypersonwhocan
sueistheprincipalandtheonlypersonwhocanbesuedistheprincipal."^^^
Unnamedprincipal
Evenwheretheagentdoesnotdisclosethenameofhisprincipal,butdis
closeshis ownrepresentativecharacter, the contract will be the contract of
theprincipal,unlessthereissomethingin itsformorsignaturetoshowthat
theagentintendedto bepersonallyliable.Whereanagentsignedthe con
tractasabroker,"tomyprincipals",butdidnotdisclosewhotheprincipals
were,hewasnotpersonallyliable.^^'"Thereisnothingwhateveron the con
tracttoshowthatthedefendantintendedto actotherwisethanas abroker."
Undisclosedprincipal
Thedoctrineofundisclosedprincipalcomesintoplaywhentheagentnei
therdisclosestheexistenceofhisprincipalnorhisrepresentativecharacter.
337.L/CVMukeshDevi,AIR2002Raj404.AnothersimilarrulingisL/C vK.KamaIyer,2004
AIRKant594:(2004)1 KantLJ216(DB),LICnotallowedtodenyliability.
338.MontgomerievUnitedKingdomMutualSSAssn,(1891)1QB370, 371,perWrightJ.
339.SouthwellvBowditch,(1875) LR 1 CPD 374.https://t.me/LawCollegeNotes_Stuffs

949. [S.231] Rights and liabilities of undisclosedprincipal807
In suchcircumstancesthe question arises what are the mutual rights and
liabilitiesof the principal, the agent and the third party.
Thereisnothingunusualin thisdoctrineinsofaras therelationsbetween
the agent and the third party are concerned.Sincethe agent has contracted
in his own name, he is bound by the contract. He may be sued on it and he
has the right to sue the third party, and the principal is not liable in such a
case.^'"'
But the principal too has the right to intervene and assert his position as
an undisclosedpartyto the contract. This right of the principal is protected
by theContractAct itself.Section231declares:
Ifanagentmakes acontractwith apersonwhoneitherknows, nor has rea
son tosuspectthathe isan agent, his principal may requiretheperformanceof
thecontract;....
This right of theprincipalhas been described as"anomalous"because it
does notfitin any of the established principles of the law ofcontract.^'*^"The
rule which permits an undisclosed principal to sue and be sued on acontract
to which he is not a party, thoughwell-established,is itself ananomaly."^''^
Similarly, inBowstead'sLawofAgency^''^thedoctrineisdescribed
as"surprisingbutwell-establishedby the cases." Yet thedoctrinehas busi
ness convenience to recommend itself. But for this doctrine, theproperty
or money of one person would have gone to enrich the estate ofanother
person.^'*'*If, for example, an agent sells his principal'spropertyin his own
name andreceivesthe price, the principal is obviously entitled to trace his
money and recover it, evenif the agent has gonebankrupt.An action of this
kind wasallowedas early as 1710 inGurrattvCullum.^'^^
But theprincipal'sright to sue thethirdpartywas establishedwithan
initial setback. In what has been considered to be the very first case, namely,
ScrimshirevAlderton-?'^^
A farmer's oats were sold by a del credere factor without disclosing
thename or existence of thefarmer.The factor becamebankrupt.The
farmer discoveredthe buyer and informed him not to pay the factor. Even
so the buyerpaidhim.
Lee CJ was of opinionthatthe buyer should be responsible to the undis
closed principal in such cases. "Here being notice before actual payment,
there could be noharmdone." But the juryobstinatelyheld for thedefendant.
340. J.Thomas(P)Ltd&CovBengalJuteBaling Co Ltd, AIR 1979Cal20.
341.CheshireandFifoot,TheLawofContract(6thEdn,1964)418.
342. LordDaveyin KeighleyMaxseted&CovDurant,1901 AC240,256 (HL).
343.{13thEdn byReynolds&cDavenport,1968)273.
344. Thehistoricalfoundationof thedoctrineis traced in Stoljar,TheLawofAgency(1961)
204-11.
345. 1710 Bull NP 42: Willes400,405-06.
346.(1743)2Stra1182:93ER1114.https://t.me/LawCollegeNotes_Stuffs

950. 808 Chapter 15Agency [Ss.231-232]
The right oftheundisclosedprincipaltointerveneand suethe third party
is,however,subject to the following qualifications. They are laid down in
Sections231and232.
S.231.Rights ofpartiesto acontractmadebyagentnotdisclosed.—If
an agent makes a contract with a person who neither knows,nor has reason to
suspect that he is an agent, hisprincipalmay require the performance of the
contract;buttheothercontractingpartyhas, asagainsttheprincipal,thesame
rightsashewouldhavehadasagainstthe agent ifthe agent had beenprincipal.
Iftheprincipaldiscloseshimselfbefore the contract iscompleted, the other
contracting party mayrefusetofulfilthe contract, ifhe can show that, ifhe had
known who wastheprincipal inthecontractor ifhe had knownthattheagent
was not a principal, he would not haveenteredintothecontract.
S.232.Performanceofcontractwithagentsupposedtobeprincipal.—
Whereonemanmakesacontractwithanother,neitherknowingnorhavingrea
sonablegroundtosuspectthattheotherisanagenttheprincipal,ifhe requires
the performance of the contract, can only obtain such performance subject to
the rights and obligations subsistingbetweenthe agent and the other party to
thecontract.
Illustration
A,who owes 500 rupees toB,sells1000rupees worth of rice toB.A is acting asagentfor
Cin thetransaction,but 6 has noknowledgenorreasonablegroundof suspicionthatsuch is
the case. CcannotcompelBto takethericewithoutallowing him to set-off>A'sdebt.
Subjecttoequities
Firstly,the othercontractingpartywould have against the principal "the
same rights which he would have had against the agent if the agent had
been principal". This declaration of Section 231 is further supplemented by
Section 232 which saysthat"the principal, if he requires the performance
of thecontract,can only obtain such performance subject to the rights and
obligationssubsisting between the agent and the otherpartyto thecontract".
Themainconcernofthesesectionsis toensurethatthethirdpartyisnot
put to any disadvantage by the intervention of the principal. If, for example,
the agent owes some money to the third party, which the latter could have
set-off against the price of the goods sold to him, he would have the same
right if the principal sues him for theprice.^'*''MontaguvForwoocP^^is an
illustrationinpoint.
The plaintiffs, who were acting for the owners of a cargo, employed
B & Co as their agents to collect fromunderwriterscontributionsin
respect of general average loss. B & Co not being brokers, employed the
347. See Greer vDownsSupply Co, (1927) 2 KB 28(CA),where timber waspurchasedunder the
impression that the buyer would have set-off against the seller and the undisclosed principal
ofthesellerwasnotallowedtointervene.
348.(1893) 2 QB350(CA).https://t.me/LawCollegeNotes_Stuffs

951. [S.232] Rightsandliabilitiesofundisclosedprincipal809
defendants,whowerebrokersatLloyd's,tocollectthemoney,and they
did so. At the timewhenthedefendantsreceived themoneytherewas a
debtdue tothemfromB & CoThedefendantsdidnotknowandthere
was nothing to lead them to suppose, that B & Co were not acting as
principalsin thematterand thedefendantsbelievedthat B &Cowere
acting as principals.
It was heldthatthedefendantswereentitledtostandinthepositionin
whichtheywouldhavestoodifBCohadreallybeenprincipals;andthat
consequently,thedefendantswereentitledtoset-offagainstthedemandof
theplaintiffsforthemoneywhichtheyhadcollectedthedebtduetothem
fromB &Co.
TheillustrationappendedtoSection232ismoreorlesstothesameeffect.
k,who owes 500 rupees toB,sells 1000 rupees worth of ricetoB.Aisacting as agent
for C in thetransaction,but B has no knowledge nor reasonablegroundsof suspicion
that such isthe case. Ccannot compel Bto take thericewithoutallowinghimto set-off
>A'sdebt.
A contract to underwrite the shares of a company, i.e., to take upthat
portionoftheshareswhichisnotappliedforbythepublic,wasnotallowed
to beenforcedby theundisclosedprincipalof theunderwriterbecausean
engagementofthiskindproceedsuponthepersonalreputationandintegrity
oftheunderwriter.^''^
Butwherethe third partydoesnotbelievetheagentto be aprincipalor
therearesuspiciouscircumstanceshemaynotbeabletoclaimaset-off.
Thus,forexample,in IsaacCookevHenryDouglasEshelby:^^"
L & Co sold cotton to C, in their own names, but really on behalf of
anundisclosedprincipal.Cknewthat L &Cowereinthehabitofdeal
ingbothforprincipalsandontheirownaccountandhadnobeliefon
thesubjectwhethertheymadethiscontractontheirownaccountorfor
a principal.
It was heldthat C could not, in an action brought bythe principal for the
priceofcotton,set-offa debtduefromL &Co.
Third party's right to repudiate executorycontract
Secondly,if theprincipaldiscloseshimselfbeforethe contract is com
pleted,thethirdpartymayrepudiatethecontractifhecanshowthatifhe
hadknownwhotheprincipalwasor that theagentwasnot theprincipal,
he would not havecontracted.^^^The right of the third party to repudiate
thecontractarisesonlywhentheidentityoftheundisclosedprincipalwould
349. Collins v Associated Greyhound Racecourses Ltd,(1930)1 Ch 1(CA).
350. (1887)LR12 AC 271 (HL).
351.S.231.GovtofGoavGoaUrbanCo-operativeBankLtd,(2011)2MahLJ37(Bom),the
actshouldbe within the scope of the agent's authority.https://t.me/LawCollegeNotes_Stuffs

952. 810Chapter15Agency [S.232]
havebeensomaterialto him that if he had knownthe truefacts,hewould
nothavecontracted.ThusinSaidv
A theatre ticket waspurchasedby a person through anundisclosed
agentknowingfull wellthata ticket would not have been issued to him
onpersonalgrounds.It washeldthat thetheatre-ownerhad the right to
repudiatethecontractandexcludehimfromadmission.
It means that an undisclosed principal cannot intervene when he knows
thattheotherpartywouldnothavedealtwithhim.Thisprinciplewillapply
onlywhen"somepersonalconsideration(forms)amaterialingredient".^^^
InDystervRandallandSons^^'^apieceoflandwaspurchasedbysomebody
for an undisclosed principal. The owner would not have sold the land to
him, yet he wasallowedtointerveneandenforce thecontract.^^^
Undisclosedprincipal cannotinterveneagainstexpressterms
Lastly,anundisclosedprincipalcannotinterveneifsomeexpressor
impliedterm of the contractexcludeshimfromdoingso.Where,for exam
ple,anagentdescribedhimselfinthecontractas"owner'V^^"proprie-
tor'V^^itshowsanintentiontomakeapersonalcontractandconsequently
precludestheundisclosedprincipalfromintervening.Butwhere,in a con
tract oflettingout, theagentdescribedhimselfas the"landlord",evidence
wasallowedtoshowthat hewasonlyanagent.Similarly,"thedescription
inacharter-partyofoneofthecontractingpartiesas'charterer'doesnot,of
itself,designatehimas theonlypersontofillthatposition",and theundis
closedprincipalwasallowedtosueforthebreachofthecharter-party.
Thirdparty's rightagainstundisclosedprincipal
Just as theundisclosedprincipalhas the righttosuethe thirdparty,the
latterhastherighttosuetheprincipal.Difficultquestionsinthisconnection
havearisenwheretheprincipalhasalreadypaidtheagent,trustingthathe
haspaidorwillpaythethirdparty,buttheagenthasdefaultedorhasgone
bankruptbeforepayment.Thishappenedin DavisonvDonaldson.^^^
Themanagingownerandtheship'shusbandpurchasedgoodsoncredit
fromtheplaintiffforthepurposesoftheship.Theundisclosedpartner
settledhisaccountwiththehusbandbelievingthatthelatterhadpaidthe
352.(1920)3 KB497.
353.DystervRandallandSons, 1926 Ch 932, 939.
354.1926Ch932.
355.Evenvifherenopersonalconsiderationsareinvolvedand the third partywastoldthat the
agent was not acting for any principal, the third party can avoid the contract for fraud.
ArchervStone,(1898)78LT34,cfBergvSadler&Moore,(1937)2KB158(CA).
356. Humble v Hunter,(1848)12 QB 310, 317.
357.FormbyBros v Formby, (1910) 102 LT 116.
358. Fred Drughorn Ltd v Rederiaktieb Olaget Transatlantic,1919AC203.
359. (1882)LR9 QBD 623.https://t.me/LawCollegeNotes_Stuffs

953. [S.230] Personalliability of agent811
plaintiff.Buthe had notdoneso and hadgonebankrupt.Theplaintiff
sued the principal.
Thecourtsaid:"Whereapersonissuppliedwithgoodsitishisdutytosee
that thesellerispaid....Partnersoughtnot to settlewith theirco-partners
withoutsatisfyingthemselvesthat thepaymentshavebeenactuallymade."
PERSONALLIABILITYOFAGENT[S.230]
S. 230.Agentcannotpersonallyenforce,norbeboundby,contractson
behalfof principal.—In the absence of any contract to thateffect,an agent
cannotpersonallyenforce contract entered into by himon behalf of hisprinci
pal, nor is he personally bound by them.
Presumptionofcontracttocontrary.—Such acontractshall bepresumed
toexistinthefollowingcases—
(1)where the contract ismade byan agent forthe sale or purchase of goods
for amerchantresidentabroad;
(2)wheretheagentdoes not disclosethename of his principal;
(3)wheretheprincipal,thoughdisclosed,cannotbesued.
Agentcannotsue or be sued unlesscontrarycontract
It has already been seen that the chief function of an agent is to establish
contractual relationship between his principal and third parties. The agent
then drops out. He can neither sue nor be sued on contracts made by him
on his principal's behalf. Section 230 accordinglyprovides:In the absence
of any contract to that effect, an agent cannot personally enforce contracts
enteredinto byhim on behalfof hisprincipal,nor is he personallybound by
them.^®"Whereaconsignmentwaslandedfroma shipbut theconsigneedid
not takedeliveryand the questionarose as to who was liableto pay demur
rage, it was held that the liability was solely that of theconsigneeand not
that of the shippingagent.^^^Similarly,in a casebeforethe Calcutta High
Court^^^it was apparent from the billof ladingthatthe document was signed
by the agent of aprincipalwho was named in the document. There was no
contractto the effectthatthe agent would be bound by the contract. Thus,
unless it is shown that there is a contract to the effectof binding the agent,
entered into on behalf of the namedprincipal,the agentcannotbebound
360. SeeMarineContainerServices South (P)Ltdv Go GoGarments,(1998) 3 SCC 247:
AIR 1999 SC 80, an agent of acontractoragainst whom there was acomplaintunder the
ConsumerProtectionAct,1986fordeficientserviceswasheld to beentitledtoraisethe
defence ofimmunityandthatdefence could not bebrushedasidewithoutdueconsideration.
Tropic Shipping Co Ltd v Kothari Global Ltd, (2002) 2 Bom CR 93, an agent not allowed to
enforceanarbitrationaward.
361. Port of Madras v Southern Shipping Corpn (P) Ltd, AIR 2001 Mad 413 at p. 417. Tashi
DelekGaming SolutionsLtdv State ofKarnataka,(2006) 1 SCC 442: AIR2006SC 661,
advertising and other agents had the right to challenge the validity by means of a writ the ban
on their workwithoutthe principal joining as a party.
362.JayteeExportsvNatvarParekhIndustriesLtd,AIR2001Cal150.https://t.me/LawCollegeNotes_Stuffs

954. 812 Chapter15Agency [S.230]
byit. Theattachmentofthe bankaccountoftheagentwasnotallowedto
be continued. Earning ofcommissionby the agent cannot make hisagency
as onecoupledwithinterest.Themerefact thatsomeof the persons were
directors in the principal company as well as in the agencycompany was not
a material fact when the principal was fully disclosed.
This is known as theprincipleof theagent'simmunity from personal
liability.This ruleappliesevenwheretheagenthascontractedbeyondhis
authority and the principalwould not beliable.Eventhen the agent cannot
be sued on the contract if he professedto act for theprincipal,thoughhe
will then beUableto compensate the thirdpartyfor hisloss.^"
But there arecertaincircumstancesin which the agent incurspersonal
liability.Section 230, which incorporates the principle of agent's immunity
forpersonalliability,saysthat there may be a contract to thecontrary.In
other words, the agent may contract to undertake personalliability.The
sectionfurthergoeson toprovidethat such contract ispresumedin the
followingcases:
Presumptionofcontrarycontract
In the followingcases there is presumption of a contract to the contrary:
1.Foreignprincipal
When an agent contracts for "a merchant resident abroad" there is the
presumptionthat theagentundertakespersonalliability.[S.230(1)]The
originalpresumptionofEnglishlawwasthat theagent alonewasliableand
he had no right to pledge the credit of a foreign principal. The presump
tionstillstands,but it has declined inimportance.Thepresumptionwas
needed at a time when it wasdifficultto sue foreign principals and for the
convenienceof merchants a usage came into existence that the agent of a
363.AnothercasetothesameeffectMidlandOverseasvC.M.B.T.Tana,AIR1999Bom401,
the contract of carriage was entered into by agent on behalf of foreign principal who was
named anddisclosed.The agent did not undertake any personalliability.The agent could
not be sued personally for the alleged breach of contract. K.M. Sankaran v DC, (2004) 2
CTC 101, a power of attorney holder agent working as adisclosedagent was not allowed to
be suedpersonallyfor dues against the principal. Thejudgmentin the case of Mackinnon
Mackenzie & Co v Lang, Moir & Co,ILR(1881)5 Bom 584 an admitted position that the
companywas aware of the fact that the other contractingparty was acting as an agentfor a
third party whosenamewasalreadyknown to the contractingparty.PremNath Motors Ltd
VAnuragMittal,(2009)16 SCC274:AIR2009 SC567,the principalcalledapplicationsfor
bookingcars. The agentreceivedapplicationswithchequesdrawn infavourof the principal.
The claim of the petitioner was that he filedan application alongwith the cheque, but neither
he received the car nor refund. The plea of the agent that the liability was of the principal
and not his washeldto be proper.NationalTextile Corpn Ltd vNareshkumarBadrikumar
Jagad,(2011)12 SCC 695; AIR 2012 SC 264, agent sued when principal known, the agent
challengedit beforetheSupremeCourt for the first time. It beinga question of fact, the chal
lenge was notentertained.
364. Lewis v Nicholson, (1852) 18 QB 503. Where thematterisdoubtfulas to who between the
two is sueable, both should be sued. (1989)MalaysianLJ 187, SC Kuala Lumpur.
365. This liability arisesunder S. 235 as that of a pretendedagent. He may be also sued for deceit.https://t.me/LawCollegeNotes_Stuffs

955. [S.230] Personal liability of agent 813
foreignprincipal incurs personalliability.But now on account of changed
conditions ofinternationaltrade,merchantstrusteachotherand agents do
not like to incur personalliability.The resulting position has been summed
up bySCRUTTONLJ in the following words: "While Ithinkthatonecannot
at the presentday attach the importance which usedto be attached forty or
fiftyyears ago to the fact that the supposedprincipal is aforeigner,it is still
amatterto be taken intoaccountin decidingwhetherthepersonsaid to be
an Englishagent has or has not made himselfpersonallyliable."^^^
The presumption being still a part of the law, an agent can only over
throwit bycontractingin amannershowing anintentionnot toincurper
sonalliability.Thus, where a contract was signed "by the authority of our
principals,...asagents",or"GreenwichMarihe Incorporated asagentsfor
Trader ExportS.A."^^^it was held that this wassufficientmanifestationof
the intention to excludepersonalliability.^^®Where acharter-partycontract
was signed by agents "for and on behalf of J.M.&Co (asagents),J.A.M."
theywereheldto be notpersonallyliableunder thecharter-party,although
they weredescribedascharterers.Wherea contract made through an
agentfor the import ofmetallicrecoveryexpresslyprovidedthat the obli
gationsof theprincipalorsellerwerenotenforceableagainst theagent,a
claimfor shortage in metallicrecoveryagainst the agentwas held to be not
maintainable.^^"
Where there was a short landing of goods and a suit for damages was
filedagainsttheforeignprincipal,thecarrier,it washeldthat the Indian
agentwasautomaticallydischargedofliability.Thecourt saidthat both the
principal and agentcould not be suedtogether.^^^
366.H.O.Brandt& Co vH.N.Morris & Co Ltd, (1917) 2 KB 784, 797, in some of the cases,
however,it has beenstated that thepresumptionhas ceasedto existaltogetherand the whole
questionturnsupontheintentionoftheparties.See,forexample,PritchardJ in Holt &
MosleyLtd vCunningham& Partners,(1949)83LILReports141;quotedinPowell,The
LawofAgency, 252(1961).A.H. Hudson in his threecontributions,namely.Agent of a
ForeignPrincipal,(1960)23 ModLR695,and(1957)35 CanBR336;AgentsforForeign
Principals,(1966)29ModLR353hasarguedthatthepresumptionstillexistsaspartofthe
law. See alsoTeheranEurope Co Ltd vS.T.Belton(Tractors)Ltd,(1968)2 QB 545. The
matterdependsuponas towhomthe third partygavecreditormaybepresumedtohave
givencredit.Hecannotbepresumedtohavegivencreditto aforeignprincipalaboutwhom
he knows nothing. JamesMackintosh& Co v SreeYamunaMills Co Ltd,(1990)2KLJ
141.
367. TudorMarineLtdv TradaxExportS.A., (1976) 2 Lloyd's Rep 135.
368.Miller,Gibb & Co v Smith &TyreLtd,(1917)2KB141. See alsoLilly,Wilson& Co v
Smales,Eeles& Co,(1892)1QB456,wherealsothemodeofsignatureexcludedliabilityof
the agent who mistakenlyquoted a wrong rate of freight.
369. UniversalSteam Navigation Co v James McElvie & Co, 1923 AC 492(HL).MV X-press
AnnapurnavGitanjaliWoolens(P)Ltd,AIR2011Bom105,agentsuedunderacontractfor
carriageofgoodsbyseafornon-deliveryofgoods.Itwasnotacontractforsaleorpurchase
ofgoodswithamerchantresidentabroad.Agentactedonbehalfofadisclosedprincipal.No
decree for damages could be passed against him.
370.NandanIronandMetalIndustriesv FenestyInc,AIR 1992 Del 364.
371.W.B.Essential Commodities Supply Corpn Ltd vKorenForeignTransportationCorpn,
AIR2002Cal211.https://t.me/LawCollegeNotes_Stuffs

956. 814Chapter15 Agency [S. 230]
Byvirtueof the provision in Section 230 thepresumptionhasstatutory
force in India. A company registered in England, and having a place of busi
ness in India, has been held to be a foreign principal for the purposes of this
presumptionand theIndianagent acting for it was heldpersonallyliable.^^^
2,Principalunnamed
Thepresumptionof agent'spersonalliability arisesw^henhe "does not
disclose the name of his principal". Where an agent contracts for an undis
closed principal, hedefinitelyis personally liable, being apartyto the con
tract.Butwhen he contracts for an unnamed principal, there is only
a presumption of his personal liability. The presumption may arise even
where the agent discloses his representativecharacter,but not the name of
his principal.Accordingly,the honorary secretary of a schoolwas heldper
sonallyliablefor the rent of a house hired by him in his own name though
for purposes of theschool.^^''But where an agent disclosed hischaracteras
the secretary of a club, personal liability could not be imposed onhim.^''^
The sameresultwouldfollowwheretherepresentativecharacter is already
known to the thirdparty.^^^But in every such case the form ofcontract
will be the decidingfactor. In an English case, a broker signed a contract in
his own name, but hadadded:"MessrsSouthwell,to my principal, etc." It
was held that he was not personallyliable."Thereis nothing whateverin
thecontracttoshowthatthedefendantintendedtoactotherwisethanas
broker."Where an order was placed overtelephonebya-brokerto another
brokerforthesupplyofbunkers,theorderingbrokerwasheldto benot per
sonallyliable.Thegeneralpracticeinplacingordersbytelephonewasnotto
disclosethe nameof theprincipaland,moreover,thesupplieralreadyknew
that the order was sent by abroker.^^^Where, on the other hand, the usual
mode of operation overtelex of a forwarding agent was to remark, without
disclosingthe name of the principal, "We can do this for you", he was held
372.TutikaBasavrajuv Parry & Co,ILR(1904) 27 Mad 315. Shaw Wallace & Co Ltd v Vnion
of India,(2004)5 CTC 308,wherethe agentwas the first partyliablefordamageto the
goods in transit and the seconddefendantwas the owner of thevesseland,therefore,both
being jointly liable invocation of S. 230 was notnecessary.Girish Chander v American
ConsolidationServicesLtd, 2004 All LJ 3098;Cochinfrozen Food Exports (P) Ltd v
VanchinadAgencies,(2004)13SCC434,disclosureornon-disclosureofprincipal,so far
as S. 230Exception(1)isconcerned,isimmaterial,the onlyrequirementbeing that the
principalshouldberesidentabroad.SeeIanBrown,ThesignificanceofGeneralandSpecial
Authorityin theDevelopmentof theAgent'sAuthorityExternalAuthorityinEnglishLaw,
2004JBL391.
373. CastrolLtd vAdmiralShippingLtd,(2005)3BoraCR507,ordersplacedbyagentwithout
disclosingthat hewasactingfor aprincipalandacceptingallbillsandinvoiceswithoutany
protest, nothingto showthat hewas actingfor aforeignprincipal,the agenthimselfliableas
aprincipal.
374. Bhojabhai v Hayen Samuel, ILR (1898) 22 Bom 754.
375.NWPClub vSadullah,ILR (1898) 20 All 497.
376. Mackinnon Mackenzie&CowLang, Moir & Co, ILR(1881)5 Bom 584.
377SouthwellvBowditch,(1875)LR 1 CPD 374.
378.{N&J)VlassopulosLtd v Ney Shipping Ltd, (1977) 1Lloyd'sRep 478(OA).https://t.me/LawCollegeNotes_Stuffs

957. [S.230] Personal liability of agent 815
personallyliable,though in that case heindicatedthe name of the liner to
whom he wasforwardingthe goods.
LiabilityofdealerundertheConsumerProtectionAct
A dealer of motorvehicleswas held personally liable under the Consumer
Protection Act, 1986 for passing adefectivevehicleto a consumerbuyer.
His defence wasthatthe real liability should bethatof themanufacturer.
TheNationalCommission saidthatthe dealer may have hisreimbursement
from his principal against any such liability but so far as the consumer is
concerned he was bound either to rectify the defect or take back the vehicle
andrefundtheprice.^^"
3.Non-existentor incompetentprincipal
Anagentispresumedto incur personalliabilitywherehe contracts on
behalf of aprincipalwho, "thoughdisclosedcannot besued".An agent
who contracts for a minor, the minor being not liable, the agent becomes
personallyliable.Thisresultmaynot,however,followwheretheotherparty
alreadyknowsthat theprincipalisminor.^^^Similarly,wherepromotersbuy
goodsonbehalfof aprojectedcompanytheybecomepersonallyliableto
payforthem.Thecompany,beingnot inexistenceat thetimeof the con
tract, cannot besued.^®^Now, by virtue of theprovisioninSection9(2)of
theEuropeanCommunitiesAct,1972,anagentof anunformedprincipal
will bedeemedto be contracting personallyso as to entitle him to sue and
be also sued on thecontract.TheCalcuttaHighCourtdid notpermitan
agentof theRussianGovernmentto besuedpersonallybecauseit wasnei
theraverrednorprovedthat theGovernmentofRussiacouldnot besuedin
India or elsewhere.The mere factthatsuch a suit required permission of the
Governmentof India could not betakento meanthatno suit was possible.
Directorsofcompany
Directors of a company are not agents of thecompanyin the conven
tionalsenseoftheprincipal-agentrelationshipordinarily,therefore,theyare
notliableindamagesforbreachof contractcommittedby theircompany.
Evenif they areagents.Section230confersimmunityon an agent against
personalliabilityprovidedonlythat thecontracthasbeenmadein therep
resentativecapacityfor and onbehalfoftheprincipal.Thereare no doubt
someexceptions.Butit is ageneralprincipaland not anexceptionthat an
379.SalsivJetspeedAirServicesLtd,(1977)2Lloyd'sRep57.ShriniwasShankarPotnisv
RaghukulSahakariGriharachanaSansthaMaryadit,(2010)1 MahLJ368,third party can
refusetoperformcontractmadebyagentwithoutdisclosingforwhomhewascontracting.
380.Marikar(Motors)LtdvLalanCarmu,(2004) 1 All LJ 522 (NC).
381. ShetManibhaiv BaiRupaliba,ILR(1899) 24 Bom 160.
382. Kelnerv Baxter,(1866)LR2 CP174.Byvirtue of S.9(2)of the EuropeanCommunitiesAct,
anagentof anunformedcompanybecomespersonallyliable.SeePhonogramLtd vLane,
1982 QB 938:(1981)3WLR736 (CA).
383. Unionof India v ChinoyChablani&cCo,AIR1976Cal467.https://t.me/LawCollegeNotes_Stuffs

958. 816 Chapter 15Agency [S.233]
agent committing tort or some other wrong, for example, inducing a person
to make a loan to the company by making a fraudulent representation, the
director would be personallyliable.^^''
Electionby thirdparty[S. 233]
S. 233. Right ofpersondealingwitliagentpersonallyliable.—Incases
where the agent ispersonallyliable,a person dealing with him may hold either
him or hisprincipal,orbothofthemliable.
In all theabovesituations"wheretheagentispersonallyliable,a person
dealing with him may hold either him or his principal, or both of them, lia
ble." The only illustration givenin the sectionsays:
AentersIntoacontractwith6tosellhim100balesofcottonandafterwardsdiscov
ers thatfiwas acting as agent forC.Amaysue eitherBorC,or both, for the priceof the
cotton.
Thisseemsto be a departure fromtheEnglishlaw,wherethe third party
has to elect between the liability of the principal or agent and the election
once made is final and binding onhim.^®^If, forexample,he has obtained
judgmentagainsttheagent,he cannotafterwardssuetheprincipalevenif
the judgment against the agent has remainedunsatisfied.^®^But this rule has
beencriticised.^®^Clearly it is contrary to justice that T should not be able
tosueP if hisjudgmentagainst A isunsatisfied.The rule works particu
larlyharshlywhere T doesnotevenknowof P's existenceuntilafterhe has
obtainedjudgmentagainst
It isperhapsfor thisreasonthat the IndianLegislaturemarkeda depar
turefromtheEnglishrule andallowedthe third party tosuetheagent
and theprincipaljointly.Coutts-TrotterCJ of the Madras High Court
doubtedwhetherthiswastheintentionof theLegislatureandopinedthat
theEnglishruleshouldbefollowed.^®®But asubsequentDivisionBenchof
the sameHigh Courtdisagreedwith him.LeachCJsaid: "There isno ambi
guityin thelanguageusedin thesectionand I amunabletoseeanything
unreasonablein the rule, which itembodies.What would be the position
if a suit is brought against the principal after judgmenthad been obtained
against the agent in an earlier suit isanothermatter, but we are not called
upon toconsiderthat questionhere.''^^"EarliertheBombayHigh Court had
alsoheldthat thesectionplainlyintendstocreatejointliability.
384.TristarConsultantsvCustomerServiceIndia(P) Ltd, AIR2007Del 157.
385. Kendall v Hamilton,(1879)LR 4 AC 504 (HL).
386. Mere commencement of proceedings constitutes evidence of election but that is rebuttable.
ClarksonBookerLtd vAndjel,(1964)2 QB775:(1964)3WLR466(CA).
387 Seethedissentingjudgmentof LordPenzancein Kendallv Hamilton,(1879)LR4 AC504
(HL), where he described it as "unbending and indiscriminate".
388. Powell,TheLawofAgency(2nd Edn, 1961) 270.
389.KuttikrishnanNair v Appa Nair,ILR(1926) 49 Mad 900, 902: AIR 1926 Mad 1213.
390.Shamsuddinv Shaw Wallace & Co, ILR 1939Mad282: AIR 1939Mad520.
391. Shivlal Motilal vBirdichandJivraj, 1917 SCC OnLine Bom 68: AIR 1917 Bom 268.https://t.me/LawCollegeNotes_Stuffs

959. [Ss.234-235] Personal liability of agent 817
But it seemsthatevenunderthissectionsomekindofelectionis likely to
beinvolved.The third party has to choose between the liability of the agent,
or the principal or both and the choice once made shall bind him.
Election may be express or implied from conduct. An implied election
takesplacewhen the third partydebitsthe account of theprincipalor the
agent,receivesanegotiableinstrument from one or the other in payment
of theprice,orsuesone or the other.Filingof a suit is a strongprimafacie
evidence ofelection,butisnotconclusive.^®^
Estoppelofthirdparty[S. 234]
S.234.Consequenceofinducingagentorprincipalto act onbeliefthat
principal oragentwillbe held exclusively liable.—When a person who has
made a contract with an agent induces theagentto act upon the beliefthat
theprincipalonlywillbe heldliable,or induces theprincipalto act upon the
belief that the agent onlywillbe heldliable,he cannot afterwards hold liable
theagentor principalrespectively.
One method of electing between the principal and the agent is indicated
bySection234. If the third partyleadstheagenttobelievethat only the
principalwill beheldliableor theprincipaltobelievethatonlytheagent
will be held liable, he cannot afterwards change his stance. He would have
to confine himselftothe liability of a person whom he has selected bythat
process.Thuswhereapurchaserofgoodsgavenoticeto theseller'sagent
that the agent alone would be heldresponsibleif the goods did not turn out
to be ofcontractquality,he couldnotproceedagainsttheprincipal.^^'*
4.Pretendedagent[S. 235]
S. 235. Liability ofpretendedagent.—Aperson untruly representing
himselfto betheauthorisedagentof another, andtherebyinducing a third per
son to deal with him as such agent, isliable,ifhisalleged employer does not rat
ifyhisacts,tomakecompensationto the other inrespect ofanylossordamage
whichhe hasincurredby sodealing.
Thuswhereapersonpretendsto act as theagentofanother,hemaybe
savedbytheprincipalbyratifyinghisact.Butif noratificationisforthcom
ingthepretendedagentbecomespersonallyliableto thethird party for any
lossthat he mayhavesufferedbyrelyingupon therepresentationof author
ity.Itwouldmakenodifferencetohisliabilitythat hehonestlybelievedthat
he had the authority in questionor that,evenif he did not haveit, his princi
palwouldratifyhisact.^'^Thefalserepresentationmustbethecauseofthe
392.AddisonvGandasequi,(1812) 4Taunt574.
393.ScarfyJardine,(1882)LR 7AC345;ClarksonBookerLtd vAndjel,(1964)2QB775:
(1964) 3WLR466(CA).
394.MadhadevGangaPrasadvGouriShankarSanganaria,lLK(1949)1Cut453:AIR1950Ori42.
395.CollinsvWright,CollinsvWright,(1857)8E&B647,approvedinStarkeyvBankof
England,1903 AC 114 (HL).https://t.me/LawCollegeNotes_Stuffs

960. 818Chapter15 Agency [S.236]
contract. A person who acknowledged theliabiUtyof a firm pretending to
be one of its partners was held to have incurred personal liability under the
acknowledgment.^®^Since the action in such cases is under thetortof deceit,
tort principles as to damages would apply rather than those applicable to
breach ofcontract.^'^If the truth is already known to the other party, no
habilityarises.
Where the pretension is as to a matter of law, the agent wouldnot.be
liable.For example, the borrowing power of a company is a matter of inter
pretation of its constitutional documents and governing statutes. A mis
representation as to this will not createliability.^''But whether borrowing
powers have been exhausted, is a question of fact. Liability would follow if
this fact ismisrepresented.''"®
Theagenthimselfcannotsueon a contractwhichhehasmadepretending
to be an agent. This disability is clinched upon him by Section 236.
S. 236.Personfalselycontractingasagent,notentitledtoperfor
mance.—Apersonwithwhomacontracthasbeenenteredintothecharacter
of agent is not entitled to requirethe performance of it,ifhe was inrealityact
ing,notasagent,buton hisownaccount.
"Whena person has, in fact, no principal, yet persuades the other to con
tract with him as an agent of another, he is estopped fromsayingthat he
had noprincipal,andsincethe contractwaswith hisprincipaland not with
him he has no locus standi to sue underthatright. This will be so whether
hefeignsa named or unnamedprincipal.''®^Where a shippingagentgavea
personal commitmentof issuinga bill of lading after mate's receipt but did
not do so, he was held personally liable to the principal for the tort of con
versionandforbreachofcontractunderSection73oftheContractAct.'*"^
5. Breach ofwarrantyofauthority
Closelyalliedto theliabilityof apretendedagent is theliabilityof an
agentforbreachofwarrantyofauthority.Whereapersonisinfactanagent,
butexceedshis authority, or represents to have a kind of authority which he
infactdoesnothave,hecommitsbreachofwarranty ofauthorityand isper
sonallyliableto the third party for any losscausedto him by reason of act
ingonthefalserepresentation.'"'^ThisistheprincipleofCollinsvWright.
396.BheekChandv Farbhuji, AIR 1963 Raj 84:ILR(1963)13 Raj 84.
397. VairavanChettiarv AvichaChettiar,ILR (1915) 38Mad275.
398. ShetManibhaiv BaiRupaliba,ILR(1899)24Bom160,a motherrepresentingherselfto be
theagentofherminorson,washeldnotliableastheotherpartyalreadyknewtheprincipal's
minority.
399. Saffron WaldenBenefitBuildingSocietyv Rayner,(1880)LR 14 Ch D 406(CA).
400. Oliver v Bank ofEngland,(1901) 1 Ch 652, 660 (CA).
401.GopalSridharv SashiBhushan,ILR (1933) 60Cal111: AIR 1933Cal109.
402. Nepal Food Corpn v U.P.T.ImportandExportLtd, AIR 1988 Cal 283.
403.GanpatPrasadvSarju,(1912) 9 All LJ 8.
404.(1857) 8E&B647: 27 LJ QB 215: 30 LT209.https://t.me/LawCollegeNotes_Stuffs

961. [S.196] Ratification819
W waslandagent for one G.Wagreed tograntto theplaintiffa lease
of G's farm forllViyears. Hehonestlybelievedthathehadtheauthority
to do so. But Grefusedto execute the leaseandheprovedthathehad
given no suchauthorityto the agent.W,havingdied in themeantime,the
plaintiffsued hisexecutorsfor the loss hehadsufferedinenteringupon
thefarm,andtheywere held liable.
WiLLESJsaid:'"'^"Thefactthatthe professed agenthonestlythinksthathe
hasauthoritythataffects themoralcharacterof his act; but hismoral inno
cence, so far as the person whom he has induced tocontractisconcerned,in
no way aids such person, or alleviates the inconvenience and damage which
he sustains. The obligation arising in such a case is well expressed by saying
thata person, professing tocontractas agent for another, impliedly, if not
expressly,undertakesto or promises the person who enters into such con
tract, upon the faith to the professed agent being duly authorised,thatthe
authoritywhichhe professes to have does inpointof factexist.'"*"®
Similarly, inYongevToynbee'*°''an agent was held liable forprosecuting
an action even after hisprincipal,thoughunknownto him, had become
insane,for theinsanityhaddeterminedthe agent'sauthorityat once. An
agent was held liable to a person to whom he chartered his principal's ship
withoutauthorityof theprincipalwhorepudiatedthetransaction.'"'®An
agentgiveswarrantyof his authority; he does not guarantee that, if the con
tractiswithinauthority,theprincipalwould not commit breach.
RATIFICATION
Thedoctrineofratificationcomes into play when apersonhas done an
act onbehalfofanotherwithouthisknowledgeorconsent.Thedoctrine
givesthe person on whose behalf the act is done an option either to,adopt
theactbyratificationortodisownit.Ratificationisthusakindofaffirma
tionofunauthorisedacts. It is thusexplainedin Section 196:
S. 196. Right ofpersonas toactsdonefor himwithouthisauthor
ity: Effect ofratification.—Whereacts are done by one person on behalf of
another,butwithouthis l<nowledge or authority, he mayelectto ratify or to
disown such acts. If he ratify them,thesame effectswillfollow as ifthey had
beenperformedby hisauthority.
405. Collins VWright, (1857) 8E&B647 (657): 27 LJ QB 215: 30 LT 209.
406. The principle of this case applies to all cases where a person induces another to do an act
on the faith of his representation. See, for example, Starkey v Bank of England, 1903 AC
114 (HL),transfer to consols by the bank on the faith of the defendant's representation that
he had the power of attorney to authorise the transfer; SheffieldCorpn v Barclay, 1905 AC
392, a banker innocently inducing a corporation to act on the basis of a forged deed;Bank
of England v Cutler,(1908)2KB208(CA),the agent innocently introducing certain person
as theownerofstock,when he was not so in fact.
407.(1910) 1 KB215(CA).
408.WeigallS. & CovRunciman& Co,(1916)85LJKB187(CA),the agentwas authorisedto
hire a ship but he mistook the instruction and let out a ship.https://t.me/LawCollegeNotes_Stuffs

962. 820Chapter15Agency [S.197]
Where,forexample,apersoninsuresthe goods ofanotherwithouthis
authority,theownermayratifythepohcyandthenthe policy will be as
valid as if the agenthadbeenauthorisedtoinsurethegoods."*"'
Ratificationmay beexpressedor implied. Section197provides:
S. 197.Ratificationmaybeexpressedorimplied.—Ratificationmay be
expressedormaybeimpliedintheconductofthepersononwhosebehalfthe
actsaredone.
Illustrations
(a) A,withoutauthority,buysgoodsfor B.AfterwardsBsellsthemto C on hisownaccount;
B'sconductimpliesaratificationofthepurchasemadefor himbyA.
{b)A,withoutB'sauthority,lends B'smoneyto C.AfterwardsBacceptsinterestonthe
moneyfromCB'sconductimpliesaratificationoftheloan.
Where themanagerof aninsurancecompany effected an assurance which
he had noajithorityto do, but the company accepted the money which was
receivedunderthe policy,thatwas held to be a sufficient ratification.'*"
"Ratificationwill be implied from any act showing an intention to adopt
thetransaction,even silenceor mereacquiescence"*"and if an act is adopted
at all, it will be held to have beenadoptedthroughout."Ratificationof a
contractrequiredto be inwritingneednotbe inwriting,butratificationof
acontractmade by deed must be bydeed."*^^
Requirementsofratification
Avalidratificationhastofulfilcertainconditions.Someofthemareas
follows:—
1.Onbehalfofanother
In the first place, it is necessarythatthe act in question must have been
done on behalf of the person who wants to ratify it. The agent must profess
to act as an agent and on behalf of an identifiable principal. "It is not neces
sary that he should be named, but there must be such a description of him
as shallamountto a reasonabledesignationof thepersonintendedto be
409. SecyofState inCouncilforIndiavKamacheeBoye, 7MIA476,unauthorisedact of an
agentratifiedby theGovernment.
410.HukumchandInsuranceCo Ltd v BankofBaroda,AIR 1977 Kant 204. A mereparticipation
in arbitration proceedings has been held to be no ratification. Union of India v A.L.Rallia
Ram,AIR 1963 SC1685:(1964) 3 SCR 164. T. R.BhavaniShankarJoshivGordhandas
Jamnadas,(1942-43)70lA50: AIR 1943 PC 66, 68.Ratificationbecomeseffectivewhenit
iscommunicated.RajaGopalacharyuluv SecyofState,ILR38Mad997.
411. Bank ofMelliIrenv Barclays Bank,(1951)2 TLR 1057, silence of landlord as to repairs by
tenant. Ashok Kumar J. Pandya y Suyog CoopHousingSociety Ltd, AIR 2003NOC118
(Guj):2002AIHC3401, ratification isaffirmationof acontractalready made and as on the
date on which it was made. It is not the making of a new contract to the effect that the parties
would beboundby the oldcontract,nor it is themakingof newcontractin terms of the old
one. Acontractwhich has no legalvaliditycannot,therefore,be ratified.
412.ChittyonContracts(24th Edn, 1977) 9, para 2019, citing Commercial Banking Co of
SydneyLtdvMann,1961 AC 1: (1960) 3WLR726.https://t.me/LawCollegeNotes_Stuffs

963. [S. 197] Ratification821
bound by thecontract.'"'^^^If the agent acts in his own name and "makes no
allusiontoagency'"*"his act cannot be ratified by any other person,evenif
the agentin his secretmind intendedto act for another. This is theprinciple
of the famous case of KeighleyMaxseted& Co vDurant.'^^^
K.M.&CCo, authorised their agent to buy Karachi wheat at specified
rates on their joint account. Wheat was not obtainable at those rates. He
bought wheat fromDurantat a higher rate. He did so in the hope and
confidencethathis act would be adopted by the principals, but he never
mentionedthe principals and contracted in his own name. The principals
approvedthe purchase, but, when the price of wheatfell,refusedto take
delivery.Durantsued the agent and the principals for breach of contract.
But theprincipalswere held notliable.The agent, having contracted in
his own name, his act was not open to anybody's ratification and, therefore,
the purported ratificationwasineffective.LordMacnaghtensaid: "...[B]y
a wholesome and convenient fiction, a person ratifying the act of another,
who, without authority, has made a contract openly andavowedlyon his
behalf, isdeemedto be a party to the contract. Does thefictioncoverthe
caseof a personwhomakesnoavowalat all, butassumesto act forhimself
and for no oneelse?On principleI should say certainlynot....[0]bligations
are not to be createdby,or founded upon, undisclosedintentions.'"*^®
SimilarlyLordJamessaid:[atp.251]"Toestablishthat a man'sthoughts
unexpressedandunrecordedcan form thebasisof a contract so as to bind
otherpersonsand makethemliableon a contracttheynevermadewith per
sons they never heard of, seemsa somewhat difficult task."
Thewords"onbehalfofanother"as used inSection196expresslyrec
ognisethisrule.'*"Thesection,however,doesnotinsistupon the name of
theprincipalbeingdisclosed.Marineinsurancepoliciesareofteneffected
on behalf of anybody interested and are,therefore,open toanybody'srati-
fication."*^^Where the act is purported to be done on behalfof another, that
other mayratifyevenif the agentusedhis name to commita fraud upon the
thirdparty."*!^
413.WiLLESJ: 'WatsonvSwann,(1862) 11 CB (NS) 756, 771: 142 ER 993.
414. Cheshire and Fifoot, The LawofContract,405 (6th Edn, 1964). .^
415.1901AC240,256(HL). .-''
416.Keighley,Maxeted &CowDurant,1901 AC 240 at p. 247.
417.Raja RatBhagwatDayalSinghv DebtDayalSahu,(1907-08).35lA48; R.Raghavachariv
M.A.PdkkiriMahomed, 1916 SCC OnLine Mad 403: AIR 1917 Mad 250, an agent buying
in his own name against thedirectionsof his principal a property at a court auction, the
principal'ssubsequentratification of no effect.
418.HagedornvOliverson,(1814)2M&S485;Arnold,MarineInsurance.In othercases,
there is ageneralinsistencethat theprincipalshould be named anddisclosed.Boston Fruit
Co VBritish & Foreign Marine Insurance Co, 1906 AC 336,338-39(HL).
419.Tiedemann&LedermannFreres,re,(1899)2QB66.Afterratificatiofi^theprincipalis
boundbythe actwhetherit isto hisadvantageordetrimentandwhetherliabilitythereforis
foundedincontractor in tort, to thesameextentandwithall thesameconseqi^encesas ifit
has been done by his previous authority. .^https://t.me/LawCollegeNotes_Stuffs

964. 822Chapter15 Agency [S.200]
2.Competenceofprincipal
Sinceratification relates back to the date when the contract was origi
nally made by the agent, it isnecessarythat the principal who purports to
ratifymustbe inexistenceat the time of thecontractandshouldalso be
competent. It is this principle which prevents a person from ratifying a con
tract made by him during hisminority.Similarly,a company cannot ratify
a contract made in its name before itsincorporation.''^''But this is subject
to theprovisionsof theSpecificReliefAct, 1963. Section15 of the Act pro
vides that where the promoters of a public company have made a contract
before its incorporation, for the purposes of the company, and if the con
tract is warranted by the terms of incorporation, the company may enforce
it. "Warranted by the terms of incorporation" means within the scope of the
company'sobjectsasstatedin thememorandum.Thecontractshouldbe for
thepurposesof thecompany.A contract to allotsharesafter thecompany
is incorporated is not for the purposes of the companyso that the company
cannotenforce it against the otherparty."'^^
Section 19 of the same Act providesthat the other party can also enforce
the contract if the companyhas adopted it after incorporation and the con-
tractis within the terms ofincorporation.
3. What acts can be ratified (Actshould be lawful) [S. 200]
S. 200.Ratificationofunauthorisedactcannotinjurethirdper
son.—Anactdonebyonepersononbehalfofanother,withoutsuchother
person's authority, which, ifdonewith authority, would havetheeffect of sub
jecting a third person to damages, or of terminating any right or interest of a
thirdperson,cannotby ratification, bemadeto have such effect.
Illustrations
(a)A,not being authorized thereto byS,demands, on behalfof S,thedeliveryofa chattel,
the propertyofB,fromC,who isinpossessionofit.Thisdemandcannotberatifiedby
B,so as to make Cliable fordamagesfor his refusal to deliver.
(b)Aholds a lease fromB,terminable on three months' notice.C,an unauthorized person,
givesnotice of termination toA.The notice cannot beratifiedbyB,so as to be binding
on/\.
Onlylawfulactscanberatified.—Onlylawful acts are open to
ratification.Anact whichisvoidfromthe verybeginningcannot beratified.
ThePrivyCouncilobservedin acase''^^thatratification"mustbe inrelation
420. Exceptas providedinSpecificReliefAct, 1963, an unincorporated companyis not ableto act
before incorporation. Kelner v Baxter, (1866)LR 2 CP 174; Ganesh Flour Mills Co vPuran
Mai,1905PunjRecNo 2. Anunauthorisedactonceratifieddoesnotcreatean authorityfor
such future acts. Irvine v Union Bank of Australia,ILR(1875-78) 3Cal280,285-86.
421. Imperial Ice Mfg Co v Munchershaw BarjorjiWadia,ILR(1889)13 Bom415.
422. La BanqueJacques-Cartier v La Banque d'Epargne,(1887)LR 13 AC111(PC),an appeal
fromtheProvinceofQuebec.Voidacts cannot beratified.Mulamchandv State ofM.P.,
AIR 1968 SC 1218: (1968) 3 SCR 214; State of U.P. v MurariLaiBros Ltd, (1971)2 SCC
449:AIR1971SC2210.NoratificationofaGovernmentcontractmadeincontraventionhttps://t.me/LawCollegeNotes_Stuffs

965. [S.200] Ratification823
to atransactionwhich may be valid in itself and not illegal". Where money
was entrusted to a person for investment and he put it to his own use, it
was held by the Privy Council that the doctrine of ratification could not be
used tovalidatethis breach of fiduciaryobligation.''^^Wherethemanag
ing director of acorporationremoved anemployeebelonging to a category
ofemployeeswhomhe was not authorised toremove,it was held that the
act was an illegal termination ofemploymentand could not be cured by
ratification/^''
Subjectto this, any act may be ratified "whether it is founded on a tort
or on a contract". A forgery of signatures, being a crime, cannot be rati-
fied.''^^A minor's agreement being voidcannotbe ratified by him onattain
ingmajority.
Actswhichwouldbecomeinjuriousbyratification.—Similarly,
acts which would become injurious to others by ratificationcannotbe rat
ified.Thisprincipleis incorporated inSection200 which says that an act
cannot be ratified which by ratification "would have the effect of subjecting
a third person todamages"."*^^Theillustrationsto thesectionare that an
unauthorisednoticeterminatinga leasecannotberatified.''^^
ActsdoneonbehalfofGovernment.—Suchactsareratifiable
in the same way in which private acts can be. In one of the cases it was
observed:'*^^"If there had been any doubt about the original intention of the
Government, it has clearly ratified and adopted the acts of its agents which
according to theprincipleinBuronvDenman'^^^isequivalenttoprevious
authority."Thus acts ofpublicservantsinexcessof their authority may be
ratifiedby theGovernment.
Wherepublicofficersexceedtheir authority the Statewill beliableonly
to the extent it hasexpresslyorimpliedlyratifiedorapprovedthe acts of
suchofficers.This was laid downspecificallyas earlyas1861in Collectorof
of Article299(1)of the Constitution. Their Lordshipsobserved;"There can in truth be no
notification without an intention to ratify and there can be no intention to ratify an illegal
actwithoutknowledge of illegality."
423. M.P.M. MurugappaChettiv OfficialAssigneeof Madras,(1936-37)64lA343: AIR 1937
PC296.
424.Sunilv Maharashtra State Mining Corpn, (2006) 1 Mah LJ495. Krishna Kumar v Electrical
Engineer,(1979)4SCC289:AIR1979SC1912,appointingauthorityisBoardofdirectors.
425. Brook v Hook,(1871)LR 6 Exch 89. There may,however,be estoppel againstforgery,i.e.,
theprincipalmaybypriororsubsequentconductbedeprivedof his right tosaythatthere
wasforgeryof signature. Greenwoodv Martins Bank Ltd, 1933AC51(HL).
426. Forexample,ratificationof a contract after itsbreachby the third party.Kidderminister
CorpnVHardwick,(1873) LR 9 Exch 13.
427. Facts of this kind were involved in CassimAhmedvEusufHajiAzam, (1916) 23CalLJ
453, wherenoticeto quit wasgivenby one of jointlessorsand the other joint lessorwas not
allowedto ratify it.SucharitaPradhan vU.P.TwigaFibreglassLtd, AIR 2002 Del 1, an
unauthorised notice served by only some of the owners for termination of tenancy was not
allowed to be made regular by ratification by others.
428.Secyof State in Councilfor India vKamacheeBoye,7 MIA 476, 539.
429. (1848) 2 Exch 167.https://t.me/LawCollegeNotes_Stuffs

966. 824Chapter15 Agency [S.198-199]
Masulipatamv CavalyVencataNarrianpah,'^^°where thecourtsaid:"The
acts of a Government officer bind theGovernmentonly when he is acting
in the discharge ofcertaindutywithinthe limits of theauthorityor if he
exceedsthatauthority, when theGovernmentin fact or in law directly or by
implicationratifies the excess."
4.Knowledgeoffacts[S.198]
S.198.Knowledgerequisiteforvalidratification.—Novalidratification
can be made by a person whose knowledge of the facts ofthecase is materially
defective.
"Toconstituteabindingadoptionof acts aprioriunauthorisedthese con
ditionsmustexist; (1)theactsmusthavebeendoneforandinthenameof
the supposed principal, and(2)there must be full knowledge of what those
acts were, or such an unqualified adoption that the inference may properly
be drawn that the principal intended to take upon himself the responsibility
for such acts,whatevertheywere.'"'^^
5. Wholetransaction[S.199]
S. 199. Effectofratifyingunauthorisedactformingpartofatransac
tion.—Apersonratifying anyunauthorisedactdoneon hisbehalf,ratifiesthe
whole ofthetransactionof which such actformeda part.
Apersoncannotratifyapartof thetransactionwhichis beneficial to him
and repudiatethe rest. So a ratificationof a part of a transaction operatesas
aratificationofthewholeofthetransaction.''^^
6.Withinreasonabletime
Aratificationtobeeffectivemustcomewithinreasonabletime."*^^Ifatime
is fixed forperformanceof thecontract,ratificationmust come beforethat
time otherwiseit will be toolate."'^''Forexample,a tender for supplyofeggs
was approved by aboard,butnotformally. The time forcommencement
430. (1861) 8 MIA 529, 554 PC.BuronvDenman,(1848) 2 Exch 167ratificationof the acts of a
British Naval Commander and thereby making them sovereignacts and therefore entitled to
sovereign immunity.ChatturbhujVithaldasJasanivMoreshwarParashram,AIR 1954 SC
236; 1954 SCR 817, ratification of contracts made without complyingvi'ithArt. 299 of the
Constitution.
431. SeePitzmauricevBayley,(1856)6E&B868 where the principal withoutknowledgeof
the factwhetherthe agent hadexceededauthority,stood by his actswhatevertheywere.
Followedin Gauri Shankar Rao vJwalaPrasad, AIR 1930 Oudh 312;TukaramRamji
Shendre v Madhorao ManajiBhange,AIR 1948 Nag 293, ratification of contract made on
behalf of a minor without the knowledge of facts.
432. Commercial Banking Co of Sydney Ltd v Matin, 1961 AC 1: (1960) 3 WLR 726; Bristow v
Whitmore,(1861)9 HL Cas391,principalboundtoperformthe contractin itsentirety.
433. Portuguese Consolidated Copper Mines Ltd, re, (1890)LR 45 Ch D 16(CA).
434.DibbinsvDibbins,(1896) 2 Ch348.It isobservedinPollockonContractsthatratifica
tion must in everycase be within a reasonable time and where a time isexpresslydelimited
within which an act must be done, ratification after the time has expired will not serve.https://t.me/LawCollegeNotes_Stuffs

967. [S.199] Ratification825
of performance wasSeptember.Beforethis date the tender was withdrawn.
The board ratified its approval of the tender on October 6. It was held this .
was too late as it was doneafterthe date fixed forperformance.''^^Similarly,
a policy of fire insurance was not allowed to be ratified after the occurrence
of the loss, because the owner himself could not haveinsuredatthattime.''^^
The only exceptionis marine insurance, where a policy can be ratified even
after the owner has come to know of theloss."*^^"Theprincipalhas no right
to pause and wait for the fluctuation of the market, in order to ascertain
whether the purchase islikelyto bebeneficial.He is bound if hedecidesto
notify his determination in a reasonable time provided he has anopportu
nityof doingit.'"*^^
Effectsofratification
Ratificationhas the following effects:
(1)Itestablishestherelationshipof principal and agent insofar as the
act ratified is concerned between the personratifyingand theperson
doingthe act.
(2)Ratificationestablishestherelationshipof contract between the prin
cipal and thethirdparty.
Doctrineofrelationback
Ratificationrelates back to the date on which the agent firstcontracted.
Section196declaresthatif anunauthorisedact isratifiedby thepersonon
whose behalf it was done, "the same effects will follow as if they had been
performedbyhisauthority".Thusthereis acontractbetweentheprincipal
andthethird party,notfromthedateofratification,butfromthe datewhen
theagentfirstcontracted.Oneoftheeffectsofrelationbackisdemonstrated
by BoltonPartnersvLambert^^^
The defendant made an offer to themanagingdirectorof acompany
who, having no authority to do so,acceptedit. Thatgavethe company
an optionto ratify thecontract.Butthecompanyratifiedonlyafter the
defendant had withdrawn his offer. The company sued the defendant for
specificperformance.
Thecompanywasheldentitledto it. Thecompany'sratificationrelated
back to the date on which the managing director first accepted the offer.
Thus there was acontractbetween the company and the defendant from
thatdate.Thedefendant'srevocationof hisofferwasineffective.Lindley
LJbelievedthatitwasnotaquestionofwithdrawalofoffer,butwithdrawal
435. MetropolitanAsylumsBoard of Manager vKingham& Sons,(1890)6TLR217.
436.GroverScGroverLtdvMathews,(1910) 2 KB401.
437. Williams vNorthChinaInsuranceCo, (1876) LR 1 CPD 757 (CA).
438. Prince v Clarke,(1823)1B&C186: 107 ER 70.Followed,MaduraMunicipalityv K.
Alagirisami Naidu, AIR 1939 Mad 957, 960.
439.(1889)LR 41 Ch D 295 at pp.308-09.https://t.me/LawCollegeNotes_Stuffs

968. 826Chapter15 Agency [S. 199]
from contract. The managing director having accepted the offer, though
withoutauthority, there wascontract,and it was not an offer, but acontract
thatwasratified.Hesaid:
"leanfind noauthorityin the books towarrantthecontentionthatan
offer made, and in fact accepted by a principalthroughan agent or oth
erwise, can be withdrawn. The true view on the contrary appears to be
that the doctrine as to retrospective action of ratification isappHcable."
The decision has been criticised on the groundthatit leaves thethird
partyin aworsepositionthanhewouldhavebeenin if hehadcontracted
with the principal, for then he could haverevokedhis offer until the prin
cipal had accepted it. But if he contracts through an unauthorised agent,
he neither has acontract(until ratified) nor can hewithdrawfrom it. The
AmericanRestatementsuggestsadifferentrule: "Toconstitutearatifica
tion, the affirmanceof a transaction must occurbeforethe other party has
manifestedhis withdrawal from it eitherto the purported principalor to the
agent, and before the offer or agreement has beenotherwiseterminatedor
been discharged."[S.88, Restatement]
The decision hasalsobeen justified. The defendant had contracted to sell
thepropertyfor certain price and was giventhe same terms. The ratification
had not caused him anyprejudice.'*'*''
Butthegeneraltrend of opinionis againstthedecision.That is why it is
nottobeextendedandwasnotfollowedinWatsonvDavies.'^'^^
The defendant offered to sell his property to a charitable institu
tion. The offer wasacceptedby afewmembersof the board"subject
to approval by full members of the board". The day on which the board
wastomeet,thedefendantwithdrewhis offer.Theboardratifieditand
brought an action for specificperformance.
Theratificationwas held to be too late, and therevocationeffective.
MaughamJ said: "Anacceptanceby an agent... subjectinexpressterms to
ratification by his principal is legally a nullity until ratified, and is no more
bindingon the otherparty than anunacceptedofferwhichcan, ofcourse,
bewithdrawnbefore acceptance."
Theabovedecisionmaybesaidtoconstituteanexceptiontotheprinciplein
BoltonPartners vLambertAnotherexceptioniswhereratificationwould
prejudicetheinterestsacquiredbyothers.Forexample,anunauthorised
stoppageofgoodsintransitcannotberatifiedafterthetransithasended.'*'*^
The doctrineofrelationbackdoesnotcomeinto playwherethe contract
madebytheagentsaysthat it is"subjecttoapprovalorratification".In such
440.SeeStoljar,The Law of Agency(1961)190-91;Powell,TheLawof Agency(2ndEdn,
1961)143.
441. (1931) 1 Ch 455, at pp.468-69.
442.(1889)LR41ChD295.
443. BirdvBrown,(1850)4Exch786;alsonotwherethirdpartieshavein themeantimeacquired
propertyrights.Whiteheadv Taylor, (1839) 10Ad&El210.https://t.me/LawCollegeNotes_Stuffs

969. [Ss. 201&203] Determinationofagency827
casesthe otherpartywould have the option towithdrawuntilratification.'*''''
Retrospective ratification also becomes ruled out where the agent andthird
partyhave already bymutualconsent cancelled the contract.''''^
DETERMINATION OFAGENCY
The relationship ofprincipaland agent may end in any of the ways men
tionedinSection201.''''®
S. 201.Terminationofagency.—Anagencyisternninated bytheprincipal
revoi<inghis authority; or bytheagentrenouncingthebusiness oftheagency;
or bythebusiness oftheagencybeingcompleted;or byeithertheprincipal or
agentdying orbecomingofunsoundmind; or bytheprincipal being adjudi
catedaninsolventundertheprovisions of any Act forthetimebeingin force for
thereliefofinsolventdebtors.
The section provides for the following modes of termination:
1.Revocation''''^;
2.Renunciationby agents;
3.Completionof business;
4. Principal or agent's death;
5. Principal or agent becoming person of unsound mind;
6. Insolvency ofprincipal;
7.Expiryof time.
Thesemodesareconsideredbelow:
Byrevocation[S. 203]
The principal mayrevokehis agent's authority and that puts an end to
the agency.
S. 203.Whenprincipalmayrevokeagent'sauthority.—Theprincipal
may,save as is otherwise provided by the last preceding section,revokethe
authority givento hisagentat anytime before the authority has been exercised
so astobindtheprincipal.
444. Warehousing and Forwarding Co of East Africa Ltd v Jafferali & Sons Ltd, 1964 AC 1:
(1963)3WLR489(PC).
445. Walter v James, (1871) LR 6 Exch 124.
446. See generallyKhilaDhish v Moot Chand, (1969) 3 SCC 411,413-14.
447.U.P.Purva Sainik Kalyan Nigam Ltd v State of Uttaranchal, AIR 2005 Utt 33: 2006 All
LJ 1622(Utt),provisionfor termination of securityserviceby one month notice, notice
effective.Ashish Gupta vl.B.P.Co Ltd, (2005) 125 DLT 298, termination of Government
dealershipwould requireshow-causenotice, opportunity of beingheard and reasoneddeci
sion, there can be interferenceunder writ jurisdiction if natural justice is not observed. It is
immaterial that the relationship is that of contractual nature.DirghayuMahavir Diagnostic
VState ofBihar,2015 SCCOnLinePat 299: AIR2015 Pat 110,anagencywascreatedto run
and operateregionaldiagnosticcentres.The Authorityhad the right to terminatetheagency
either onestablishingits owndiagnosticcentresor byfollowingthe procedureprescribed
bylaw.Therewas no clarityabout powerof termination.The Authorityhad notestablished
its own centres. Yet it terminated the agency that too by not giving any prior notice of show
cause,arbitrationwas also not accepted because work was of emergency nature.Termination
was held to benotproper.https://t.me/LawCollegeNotes_Stuffs

970. 828Chapter15 Agency [S. 203]
Section207furtherprovidesthatrevocationmay beexpressedorimplied
in theconductof theprincipal.Anillustrationappendedto thesectionsays:
AempowersB to let A'shouse.AfterwardsA lets ithimself.Thisis an
impliedrevocationofB'sauthority.
Thuswhere theownerof a collieryappointeda sole selling agent for his
coal for seven years, it was heldthattheownercould sell thecollieryeven
before theexpiryof thisperiodandthusterminatethe agency. He wasnot
boundto keep hiscolliery."'''^
LordPenzancesaid:'*'''"Uponsuch anagreementasthat...unlessthere
is some special term in thecontractthattheprincipalshallcontinuetocarry
on business, itcannotfor a moment be implied as amatterofobligationon
hispartthat,whetherthe business is aprofitableone or not,andwhetherfor
his own sake he wishes tocarryit or not, he shall beboundtocarryit on for
the benefit of the agent and the commissionthathe may receive."
Similarly,an agent had provided acharter-partyto the owner of a ship to
run for a period of 18 months, the agent receiving commission on hire paid
andearned.Theownersold the ship to thechartererswithinfourmonths.
Thecharter-partyended and so did the agency. The agent couldnotrecover
any damages, for the principal was not bound to keep the ship for the period
of thecharter-party.''^°An agent wasappointedby ashirtmanufactureras
a canvasser and traveller forfive-yearperiod to sell such goods as may be
forwarded to him. The principal's factory was burned down by a chance fire
while there were still three years for the agency to go. The principal never
resumed business and ended theagency.He was held liable in damages as
the agency seemed to have beencreatedfor a definiteterm.''^^
There was an agreement for allotment of distributorship of Gas. The
allotteefulfilledthetermsandconditionsoftheletterofallotment.The
company failed to send itsstandardagreement to the allottee. It was held
that the terms and conditions of thestandardagreement could notlegally
448. Rhodes v Forwood,(1876)LR 1 AC 256 (HL). The principle laid down inLlanellyRly
&DockCoVLondonandNorthWestern Rly Co, (1875) LR 7 HL 550thatthere would
be apresumptionofperpetualdurationincontractsspecifying no time-limit, does not
apply to agency. See Carnegie, 85 LQR 392 and Treitel,TheLawofContract(5th Edn,
1979)570.
449. At p.272,RhodesvForwood,(1876) LR 1 AC 256 (HL).
450. L. French & CoLtdvLeestonShippingCo Ltd, (1922) 1 AC 451.
451.TCBLtdVGray,1987Ch 458 (CA). See alsoM.S.Desai& Co vHindustanPetroleum
Corpn Ltd, AIR 1987 Guj 19 where it was held that the termination of the dealership
by aninstrumentalityof the State raises wider questions than mere breach ofcontract.
Madhabananda Nayak v State of Orissa, AIR 1998 Ori 1, anagencyunder the public dis
tribution system was held to have been wrongfully terminated when the alleged points of
misconduct on the part of the agent were not proved. A similar matter, Ashok Agarwal v
State of Orissa,(1996)82 Cut LT 239. Declaration of Government policy thatagenciesfor
NationalSavings Certificates should not be given to relatives of employees was held to be not
a good ground forterminationof existingagencies.Union of India vV.P.Parukutty,(1997)
2see252:AIR1997SC1903.https://t.me/LawCollegeNotes_Stuffs

971. [S.207] Determinationofagency829
bind theallottee.Theterminationof theagencyon theviolationof such
termswasnotproper.''^^
Anagencywasdeemedto have endedautomaticallyby operation of law
whena warbrokeoutbetweenthetwocountriestowhichtheprincipaland
agentrespectivelybelonged/^^This is sobecause"agencyas a contract is
determined by any event which terminates acontract".''^''
Withdrawalofvakalatnama
It hasbeenheldthat a contractofVakalatnamacan bewithdrawnbythe
client at any time. There is no such thing as an irrevocable Vakalatnama.
Aftercollectingthe case papers, theadvocatewas trying to blackmail the
client.Theclientlostfaithinhim.Heterminatedthevakalatnamaand
sought return of hisfile.It wasimmaterialthat he wasworkingwithout
his professionalfee.Corresponding to the right of the client, he was under
professional duty to handover papers to theclient.'*^^
Revocation may be express or implied. Section 207 given below so
provides:'*-'^
S. 207.Revocationandrenunciationmaybeexpressedorimplied.—
Revocation and renunciation may beexpressedor may be implied inthecon
ductoftheprincipal oragentrespectively.
Illustration
Aempowers Bto letyA'shouse. AfterwardsAlets ithimself.Thisisan implied revocation
ofB'sauthority.
An example of implied revocation was found in a case in which a father,
after executing a power of attorney in favour of his son, fell into strained
relations with him so that the son became an adversary and was, therefore,
no more capable of acting as anagent.''^^
Execution of power of attorney does not denude the principal of his
power to actindependentlyof the attorney. The principal is not required
to takeattorney'sconsent for so acting. He wasnotboundtoconsulthis
attorney before signing a compromise petition. Such act on thepartof the
principal was held to have operated as animpliedrevocationof the power
ofattorney.''^^
452.NilouferSiddiquivIndianOilCorpnLtd, AIR 2008 Pat 5.
453.Stevenson(Hugh) & SonsLtdv Ag FurCartonnagenIndustrie,(1917)1KB 842 (CA).
Another justifiedtermination,G.L. Kilikar v StateofKerala, (1971) 3 SCC 751: AIR 1971
SC1196.
454. English vDedhamValePropertiesLtd, (1978) 1WLR93.
455. C.V.SudhindravDivineLightSchool for Blind, AIR2009Kant 5.
456. U.P.PurvaSainik KalyanNigamLtdvStateofUttaranchal,AIR2005Utt 33, notice ter
minating security service, as per thecontractby giving one month notice.AminaBegum v
MohdR'amzan,AIR2005 Raj 41, a written powerof attorneycouldnot be orallycancelled.
457. Amrik Singh v Sohan Singh, (1988-91) 93 PLR 541.KamleshAggariualv Union of India,
AIR 2003 Del 88, agency ofNationalSavingsOrganisationschemes, the agent was absent
and remained unavailable due to detention in a criminal case. Termination of agency proper.
458. DebRatanBiswas vAnandMoyi Devi, AIR 2011 SC 1653.https://t.me/LawCollegeNotes_Stuffs

972. 830Chapter15Agency [S-204]
Anagreemententeredintobyvirtueof thepowerofattorneybeforeit
wasrevokedretainsitsbindingeffect.Ifanythingisdoneinrelationto such
atransaction,theagentcanrecovercompensationforloss,if anycausedto
him.'*^'
Revocation is subject to the following conditions:
Revocation operates prospectively[S.204]
S. 204.Revocationwhereauthorityhasbeenpartlyexercised.—The
principalcannotrevoketheauthoritygiventohisagent aftertheauthorityhas
beenpartlyexercised,so farasregardssuch acts andobligationsasarisefrom
actsalreadydoneintheagency.
Illustrations
[a)AauthorisesBto buy1000bales of cotton on account ofA,and to pay for it out of
yA'smoneyremaininginB'shands. Bbuys 1000 bales of cotton in hisown name, so as
to makehimselfpersonallyliablefor the price.AcannotrevokeB'sauthority so faras
regardspaymentforthecotton.
(b)AauthorisesBto buy1000balesof cotton on accountofA,and to payfor it out ofA's
moneyremaininginB'shands.Sbuys1000balesofcotton in/A'sname,and so as not to
renderhimselfpersonallyliablefortheprice.AcanrevokeB'sauthorityto payforthe
cotton.
Evenwherethe agenthas partlyexercisedhisauthority,theprincipalmay
revokeit for the future. But it is irrevocable "as regards such acts and obliga
tions as arisefrom acts alreadydonein theagency".Where, forexample,an
agenthasbeenappointedtobuysomethingfortheprincipalandhehaspur
chasedit byinvolvinghispersonalliability,hisauthoritycannotberevoked.
Where a sale deed was executed by an agent under his power of attorney
beforehispowerwasrevokedbyanewspapernotification,it washeldthat
it couldnot upsetthedeedalreadyexecutedand theregistrationof the deed
couldnothavebeenrefusedbecauseoftherevocation.''^"
Wheretheagentcarries onbusinessevenafter his authority has been
revokedby theprincipal,the latter cannotrecoverprofits,ifany,made by
the agent in that business.''" The agent cannot have any claim to remuner
ation for a period after therevocation.''"He can,however,recover com
pensationforwrongfuldismissal.Hemayevenrestrainhisprincipalfrom
appointing any other person in his place if there was a restrictive covenant
tothateffect.''^^
459.ShamliDasvSwadeshGhose,(2010) 2ICC40(Cal).
460. KishniDevi v State of Rajasthan, AIR 1992 Raj 24. Anauctioneer'sauthority isrevocable
before heknocksdownbutnotafterwards,HareandO'More,re, (1901) 1 Ch 93.
461.HariharPrasadSingh v KesboPrasadSingh, AIR 1925 Pat 68.
462.DenmarkProductionsLtdvBoscobelProductionsLtd,(1969) 1 QB 699:(1968)3WLR
841; Roberts vElwellsEngineers Ltd, (1972) 3 WLR 1(CA);remuneration earned up
tothedateofrevocationremainsrecoverable.MadhusudanSen vRakhalChandraDas
Basak, AIR 1916 Cal 698, if the agent continues to work for the legal heirs, a new agency is
created.
463.Decro-WallInternationalSA vPractitionersinMktgLtd,(1971) 1WLR361 (CA).https://t.me/LawCollegeNotes_Stuffs

973. [Ss.205-206] .
Determination of agency 831
Noticeprecedenttorevocation[S.206]
S.206.Noticeofrevocationorrenunciation-Reasonablenoticemust
begivenofsuchrevocationorrenunciation;otherwisethedamagethereby
resultingtotheprincipalortheagent,asthecasemaybe,mustbemadegood
to the one bythe other. ^
Whereanagencyhasbeencreatedforafixedperiod,areasonablenotice
wouldbenecessarytoterminateit.^«^Thelengthofnoticewilldepend
amongotherthmgsuponthelengthforwhichtheagencyhascontin
ued.ThusthePnvyCouncilheldthat"thenoticeofSVzmonthsgivenby
therespondentswasinadequatetodetermineanagencywhichhadlasted
fornearly50years,underwhichaverylargebusinesshadbeenbuiltup
andgreatexpenseincurredbytheagents".^"TheirLordshipswouldhave
acceptedwithoutquestionthattwoyearswasareasonablenotice.
Liabilitytocompensate[Ss.205-206]
ofrevocationbyprincipal,orrenunciationby
agent.-Wherethereisanexpressorimpliedcontractthattheagencyshould
becontinuedforanypenodoftime,theprincipalmustmakecompensationto
theagent,ortheagenttotheprincipal,asthecasemaybe,foranyprevious
revocationorrenunciationoftheagencywithoutsufficientcause.
S.206.Noticeofrevocationorrenunciation.—Reasonablenoticemust
begivenofsuchrevocationorrenunciation;otherwisethedamagethereby
resultingtothepnncipalortheagent,asthecasemaybe,mustbemadegood
to the one bytheother. ^
Iftheagencyisdeterminedwithoutreasonablenotice,"thedamages
therebyresultingtotheagentmustbemadegood"bytheprincipal.Where
anagencyhasbeencreatedforafixedperiod,compensationwouldhaveto
bepaidforitsprematuretermination,iftheterminationiswithoutsufficient
cause.Reasonablenoticeforprematuredeterminationofanagencywasnot
given.TheagentwasearningRs4000permonth.Thecourtwasoftheview
nnn noticeshouldhavebeengiven.AcompensationofRs12,000wasaccordinglyallowed.^«<^Theliabilitytopaycompensation
doesno^tarisewheretheagencyisnotforafixedperiod.TheMadrasHigh
Courtdidnotallowanycompensationtotheagentfortheunilateralter
mination^^ whichthoughcreatedwithoutanystipulationforits
2 ineffective.OmPrakasf,PariwaNUnionofIndia,AIR1988
al143,FCIterminatingtheagencyofastormgagentwithoutnotice.Therequirementof
NOC Rao,(1989)2AnLT541:AIR1990
465.S°hrab,iyOrientalGovtSecurityAssuranceCo,(1944-45)72lA315:AIR1946PC9
hMk'!l MachadoBros,1996AIHC3869,terminationofagency
ttriiKt ^organisationofthefirm,theagencywascontinued,subsequent
rot"^en°" necessarybeforetermination,whichwas
466.J.R.SayanivBrightBros(P)Ltd,AIR1980Mad162.https://t.me/LawCollegeNotes_Stuffs

974. [S. 202]
832Chapter15 Agency
duration,hadlastedfrom1952to1964.^^^Thusnoconipensationispayable
inthefollowingcases:(1)Wheretheagencyhasnotbeencreatedforany
definiteperiod;(2)Where,thoughcreatedforaspecifiedlengthoftime
reasonablenoticeforitsterminationhasbeengivenortheterminationi
otherwise based upon asufficientcause.
Powerofattorneyexecutedonconsideration
Apowerofattorneywasexecutedinfavouroftheagent(defendant)after
receivingconsiderationfromhim.Itsexecutionwasdulymadebyanumber
ofconscioussignaturesonseveralpapers.Itwassubsequentlyrevokedwith
outgivingtheagentanycompensationorrepaymentoftheloanamount.
Suchcancellationwasheldtobenon-estintheeyesoflaw.
Agencycoupledwithinterest[S.202]
Incertaincircumstances,however,anagencybecomesirrevocable.This
happenswhentheagentispersonallyinterestedmthesubject-mattero
agency.Section202provides;
S.202.Terminationofagency,whereagenthasaninterestm
subject-matter.—Wheretheagenthashimselfaninterestintheproperty
whichformsthesubject-matteroftheagency,theagencycannot,mthe
absenceofanexpresscontract,beterminatedtotheprejudiceofsuchinterest.
Illustrations
(a)AgivesauthoritytoBtosell/^'sland,andtopayhimself,outoftheproceeds,thedebts
duetohimfromA.Acannotrevokethisauthority,norcanitbeterminatedbyhisinsan
(b)JronSiooObalesofcottontoB,whohasmadeadvancestohimonsuchcotton
^^IddesiresBtosellthecotton,andtorepayhimself,outofthepricetheamounto
hisownadvances.Acannotrevokethisauthority,norisitterminatedbyhisinsanityor
death.
Inthewell-knowncaseofSmartvSanders'^'WildeCJstatedtherule
thus:
"Whereanagreementisenteredintoonasufficientconsideration,
wherebyanauthorityisgivenforthepurposeofsecuringsomebenefittothe
doneeoftheauthority,suchanauthorityisirrevocableThisiswhatisusu
allymeantbyanauthoritycoupledwithaninterest,andwhichiscommonly
saidtobeirrevocable."^^"Thesimplestcaseofsuchagencyoccurswhen
theprincipalowessomethingtotheagentandauthoriseshimtosellthe
467.BrightBros(P)LtdvJ.K.Sayani,AIR1976Mad55.
468.SubhadravM.HarasimhaMurthy,AIR2012Kant19.
IfoClvt^917 fromClerkvLaurie,PublicOfficer,(1857)2H&N199:157ER
83.Theagencyisirrevocableduringthesubsistenceofsuchsecurityorinterest.Reginald
CharlesVrithvJosiahAlexanderFrith,1906AC254.https://t.me/LawCollegeNotes_Stuffs

975. [S.202] Determination ofagency833
principal's goods and pay himself out of the saleproceeds.''^^But an author
ity to pay debts which the principal owes to some third person does not
make the agencyirrevocable.''^^In a case before the Madras High Court, a
personwas entitledto bemaintained out ofthe incomeof a property, known
astarwadproperty. He was subsequentlygiventhe authority to collectrents
of the property. Theauthoritywas held to be notrevocable.''^^Inanother
casebeforethe sameHigh Court, inconsiderationofadvancesmade bythe
plaintiff, all the properties of a devason were given over to him on lease for
18 years with authority toreceiverents. That was held to be an authority
coupledwithinterestand,therefore,irrevocable.''^''Thusthe essence of the
matter isthat"[t]he agent has, as it were, bought his authority in order to
ensure the payment of a debt due from theprincipal".''^^Where an agent was
authorised to do all acts in connection with the performance of acontract
and toreceiverunning payments, it was held to be an equitable assignment
of thecontractfor a consideration making the arrangementirreversible.''''^
The amounts payable to the agent were notpermittedto be attached for the
debts of the principal, but the rest of the amounts, such as security deposits
andretentionmoney, which were not assigned,remainedattachable.
An agency of this kind is not even terminated by the principal'sdeath.''^^
A principal owed a sum of money to his agent and gavehim an accepted bill
of exchange with an authority to fill in the drawer's name. The principal
died before the agent could complete the bill. Hisauthorityto fill in the
drawer'snamewasheldtobenotterminated.''^®Butthematterisnotfree
from controversy. For, in Watson v LordEllenboroughsaid:"How
can a valid act be done in the name of a dead man?"Commentingupon the
decision, Powell says:"Thedecision overlooks the factthatanauthority
coupled with an interest is really atransferofproperty.'"''"Anauthority
coupled with interest is also notdeterminedby theprincipal'sinsolvency.''®^
471.PestonjivMatchett,(1870)7 BHC App Cas 10;SubbaRao vVaradaiah,AIR 1943Mad
482,buyerauthorisedto pay offmortgageout of saleproceedsin hishands.Jogabhaiv
RustomjiNasarvanji,(1885) 9 Bom 311, anassignmentof a debt isnotrevocable.
472.ClerkvLaurie,PublicOfficer,(1857) 2H&N199:157ER 83.
473.ChathuKuttiNairvKundanAppa,AIR 1932Mad70.
474.Ibid.
475.Powell,TheLawofAgency(2ndEdn,1961)392.
476.JosephGeorgevCochinSanitaryWares, (1991) 2 KLT 447.
477.ShantadevivSavjibhaiH.Patel,(1999)4 GCD 3190, in the absence of expresscontractfor
termination,evendeathof theprincipalwould notresultinterminationof such an agency.
The agency in this case was for thedevelopmentandconstructionactivity onlandforweaker
sectionsof society.
478.CartervWhite,(1883) LR 25ChD666(CA).
479. (1815) 4Camp272.
480.TheLawofAgency(2ndEdn,1961)388,f.n. 5.
481. Alley vHotsan,(1815) 4 Camp 325. The SupremeCourthas held inLoonkaranSethiya v
IvonE.John,(1977) 1 SCC 379: AIR1977SC 336thatwherean agency iscreatedfor valu
able consideration and the agent is givenauthority to secure his interest, the authority cannot
berevoked.https://t.me/LawCollegeNotes_Stuffs

976. 834 Chapter15Agency [S.202]
Interestexisting at the timeofcreationofagency
Butthedoctrineofagencycoupledwithinterestis not withoutquaUfi-
cation.In thefirstplace,theinterestof theagentmust existat thetimeof
thecreationof-theagency.''^^"[T]his doctrineappliesonly tocaseswhere
the authority isgivenfor the purpose ofbeingasecurity,or...asa part of
thesecurity:not tocaseswherethe authority isgivenindependently,and
the interest of the donee of the authority arisesafterwards,and incidentally
only.'"^^^Thisstatementofthe lawoccursin Smart vSanders^^'^In this case
goodswereconsignedto afactorforsaleandhesubsequentlymadeadvances
to hisprincipalon the credit of thegoods.It was held that thesubsequent
advance could not convert the agency into one coupled with interest. "The
making of such an advance may be a good consideration for an agreement
that the authority to sellshall be no longer revocable, but such an effectwill
not ariseindependentlyofagreement."Anagencycreated by anirrevocable
powerof attorney forenablingthe agentto constructhouseson the land of
the principal for sale was held to be anagencycoupledwith interest. The
courtsaidthattheinterestof theagentneednotbe apre-existinginterest.
Such interest may be created simultaneouslywith the agreement. The agent
had to seek approval of the building plan. His agency was not allowed to
berevoked.''^^An agency createdthroughpower ofattorneyauthorising
the agent to apply for renewal of permits of thevehiclesand, ifnecessary,
toreplacethevehiclesby transferring them and spend money for this pur
pose,theagencywas heldto be onecoupledwith interestand, therefore,not
revocableto the prejudice of the interest. The acts done by the agent within
the scope of his authority were held to be binding on theprincipal.'*^®An
irrevocable power of attorney was created for working a mine. The inten
tionwas totransferthe leaseholdinterestin the mine in favour of thepower
482. Kondayya Chetti v Narasimhalu Chetti, ILR (1897)20 Mad 97(1893),advance givenfor the
purpose of getting agencyand to recoup from proceeds, irrevocable.
483.WildeCJ inSmartv Sanders, (1848) 5 CB 895. See M.JohnKotaiah v A.Divakar,AIR
1985 AP 30, itwfasa power ofattorneytomanageanestate,the agent was to receive com
mission at the rate of 5 per cent of themarketvalue of the property. Held, this was not an
agency coupled withinterest.
484.Ibid.
485.ShantideviPratapSingh RaoGaekwadvSavjibhaiS.Patel,(1998) 2 Guj LR1521,invest
ment by the agent on the basis of the promise creates aninterest.
486.GouthamSurana&Sonsv K.Kesavakrishnan,1995SCCOnLineMad5:(1998)3LW
809. Thecourtconsidered Board of Revenue vAnnamalai& Co(P)Ltd, AIR 1968Mad
50,debtorauthorisingthecreditor-bankerto sell hispropertiesto pay himself, held, agency
coupled with interest.BhagwanbhaiKaramanbhaiBharvadvArogyanagarCoopHousing
Society Ltd, AIR 2003 Guj 294: (2004) 1 Guj LR 506, land ownersexecutedanirrevoca
ble power ofattorneyfor sale of land, death of one of them did not make it necessarythat
he should take consent of his legal heirs,BhaskarAdityavMinatiMajumdar,AIR 2003
Cal178: (2003) 1ICC573(Cal),ownerenteredintoagreementfordevelopmentwitha
developer, the work was that of the owner,throughthedeveloper—anagent, the developer
acquired interest in the property which was the subject-matter of development.JeetKumari
VGirdhariLai,(2003) 4 ICC 501, rights given for sale of a housepropertyforconsideration
on power ofattorney,held, agency coupled withinterest.https://t.me/LawCollegeNotes_Stuffs

977. [S.202] Determinationof agency 835
ofattorneyholder. It was heldthataninterestwascreatedin favour of the
holder.Theagencycould not be terminated to theprejudiceof theholder.''®^
Protectionofexisting interest,primarypurposeofagency
Secondly,"the test to be applied forfindingout whether a power of attor
ney given to an agent is irrevocable or not is to see whether theprimary
object in givingthe power was for the purpose of protecting or securing any
interest of the agent. If theprimaryobject was to recover onbehalfof the
principal the fruits of his decree and, in doing so, the agent's rights were also
incidentally protected, then the power isrevocable".''^®Similarly, the pros
pect of earning a commission is not an interest for thispurpose.'*^'Again, a
"merearrangementthattheplaintiff'ssalaryshouldbe paid out of the rents
could not be regarded as giving to the agent an interest in the property, the
subject-matterof the agency,withinthe meaning of Section202"."'^''A mere
mentionthatthe agency is irrevocable does not make itso.'*'^The concept
of irrevocable power ofattorneyis notknowntojurisprudenceunless the
poweris coupledwithinterest.Accordingly, an agency to give effect to an
agreementfordevelopmentofpropertydoes not create aninterestin the
property."*^^Apowerofattorneywasexecutedto enable theattorneyto look
after theconstructionwork. He was notauthorizedto takepersonalloans
for thepurpose.Thepropertywas not offered as a security forpecuniary
liabilitiesincurredby the agent. He was not allowed to saythatthe agency
had becomeirrevocablebyreasonof hispecuniaryinvolvementwhichhe
could not evenprove.''^^
Renunciationby agent [S. 206]
Anagentmayrenouncethebusinessof agency in the samemannerin
which theprincipalhas therightofrevocation.In the first place, if the
agency is for a fixedperiod,the agentwouldhave tocompensatetheprincipal
487.BiratChandraDugaravTaurianExim (P) Ltd, AIR2005Ori 147.
488.MocketJinPalaniVannanvKrishnaswamiKonar,AIR.1946Mad9:(1946)ILRMad191.
InDalchandvHazarimal,AIR 1932 Nag 34,securitygiven asagainstapre-existingdebt,
S.202doesnotapply.
489.LakhmiChandvChotooram,ILR(1900) 24 Bom 403; even where thecommissionagency
was for aperiodof five years it didnotbecome onecoupledwithinterest.DowardDickson
& Co V 'Williams & Co, (1890) 6TLR316.Theearningofcommissionby abookingand
shippingagent was held to benotaninterestfor thepurposesof thesection,JayteeExports
vNatvarParekhIndustriesLtd,AIR2001Cal150 at p. 153.
490.VishnucharyavRamchandra,ILR(1881)5Bom 253. The same is true of anauctioneerwho
isauthorisedtodeducthiscommissionfrom saleproceeds,TaplinvFlorence,(1851) 10 CB
744 and of anagentforexecutionof adecree,hisremunerationto bepaidfromthe pro
ceeds of thedecree,PalaniVannanvKrishnaswamiKonar,AIR1946Mad9.Ishwarappa
VArunkumar,2004AIR KantHCR2273: AIR2004Kant 417, power ofattorneyexecuted
forlookingafterconstructionwork,noauthorisationforincurringloan liability,property
notofferedas asecurityforpayment,agencynotcoupledwithinterest.
491.BarsesJ.A.D'SouzavMunicipalCorpnofGreaterBombay,(2003) 6 Bom CR846.
492.VipinBhimanivSunandaDas,(2006) 2CHN396:AIR2006Cal 209 (DB).
493.IshwarappavArunkumar,2004AIRKantHCR2273:AIR2004Kant417.https://t.me/LawCollegeNotes_Stuffs

978. 836 Chapter 15Ageney [S.202]
for anyprematurerenunciationwithoutsufficientcause.[S.205]Secondly,
a reasonable notice of renunciation isnecessary.Length of notice is to be
determinedby the sameprincipleswhich apply to revocation by the prin
cipal.If theagentrenounceswithoutpropernotice,he shallhaveto make
good any damage thereby resulting to the principal.[S.206]
Completionof business [S. 201]
Anagencyisautomaticallyand by operation of law determinedwhen its
businessiscompleted.Thus, forexample,the authorityofan agentappointed
to sellgoods ceasesto beexercisablewhen the sale is completed. He cannot
afterwardsalterthetermsofthesale.'*^''ButtheAllahabadandCalcutta
High Courtshaveheld thatagencyis notterminatedon thecompletionof
the sale but continues until payment of the sale proceeds to theprincipal.''^^
Deathorinsanity[S.201]
Anagencyis determinedautomaticallyon thedeath''^®orinsanity''^^of
the principal or the agent.Winding up of a company or dissolutionof apart
nership has the sameeffect.''^®Acts done by the agentbeforedeath would
remain binding. Where an attorney appointed a counsel for his principal, it
was heldthatsuch anappointmentwould survive the death ofattorney.'"^
Thecourtcited the following passage from GirshanIndustrialCoLtdv
InterchemCorpnJ"""An attorney is merely an agent of the principal and
whathe does, he does for the principal. So long as theprincipalis alive, any
act done by theattorneyor his counsel is valid and continues to be valid
irrespectiveof the fact whether the attorney is aliveor dead. But the counsel
for theattorneycannotact if theprincipalis dead." A reading of Section 201
makes it clearthaton thedeathof an agent his agency comes to an end but
it does notobliterateacts done by the agent onbehalfoftheprincipalduring
thetenureof his agency.
Where aprincipalauthorisedhis power ofattorneyto present adocument
disposing of hispropertyfor registration, but the principal died before the
agent could do so, a subsequent registration was held to be invalid. In this
case theRegistraralsoknewthattheprincipalwasdead.^"^
494.VenkatachalamvNarayanan,ILR(1914)39Mad376. In thematterof an agency for collec
tion of bills andremittingtheamount,agencyterminatesas soon as thedraftsaredespatched
to the principal, Alliance Bank of Simla vAmritsarBank, AIR 1915 Lah 214.
495.BabuRam vRamDayal,ILR(1890)12 All 541;W.R.Fink vBuldeoDass,ILR (1899) 26
Cal715.
496.CampaitarivWoodburn,(1854)15 CB400;Pool v Pool, (1889) 58 LJP 67.
497. Yonge vToynbee,(1910)1 KB 215 (CA).
498.Saltonv New Beeston Cycle Co, (1900) 1 Ch 43;HaroldFieldingLtdvMansi,(1974) 1 All
ER1035.
499.NasibKaurvChananSingh, (1999) 1 PLR 216.
500.1970CurrLJ 387.
501.MujibunnissavAbdulRahim,(1900-01)28lA15:(1901-03)23 All233.A.B.Ramuluv
B.Yadigir, (1993) 2 An LT 425,proceedingscould not becontinuedby the power ofattorney
afterthe death of theprincipalwithouttakingpower from legalrepresentatives.https://t.me/LawCollegeNotes_Stuffs

979. [S.208] Determination ofagency837
Principal's insolvency[S.201]
Anagencyends on the principal beingadjudicatedinsolvent.^°^
Onexpiryof time [S.201]
"Whereanagenthasbeenappointedfor afixedterm, theexpirationof
the termputsan endto theagency,whetherthepurposeoftheagencyhas
beenaccomplishedornot."^°^Anagencycomesto anautomaticendon the
expiryofitsterm.Wheretheagencywasto run.apetrolpumpfor aspeci
fiedperiod,it washeldthat theagentwas boundtovacatethepremiseson
expiryoftheperiod.Therewasnorenewalclause,nor in facttherewasany
renewal.^""*
Effectsoftermination[S.208]
S.208.Whenterminationofagent'sauthoritytai(eseffectastoagent,
and as tothirdpersons.—Theterminationof the authorityof an agent does
not,sofarasregardsthe agent,takeeffectbeforeitbecomesknowntohim,or,
sofaras regardsthird persons,beforeit becomesknownto them.
Illustrations
(a)AdirectsBtosellgoodsforhim,and agreesto giveBfiveper centcommissionon the
pricefetchedbythegoods.Aafterwards,byletter,revokesB'sauthority.B,afterthe
letter issent, but beforehereceivesit,sellsthe goods for 100rupees.The sale isbinding
on A,andBisentitledto fiverupeesas hiscommission.
(b)A,atiVladras,byletter,directsBtosellforhimsomecottonlyingin awarehousein
Bombay,andafterwards,byletter,revokeshisauthoritytosell,anddirects6tosendthe
cottontoMadras.B,afterreceivingthe second letter,enters intoa contractwithC,who
knows ofthefirst letter,butnot ofthesecond,forthesale to him ofthecotton.C pays
Bthemoney,withwhichBabsconds.C'spayment isgood as against
(c)Adirects8,hisagent,to paycertainmoneytoC.Adies,andDtakesout probatetohis
will.B,afterA'sdeath, but before hearing of it, pays the money toC.The payment is
goodasagainstD,theexecutor.
Asbetweentheprincipalaridtheagent,theauthorityoftheagentends
when he comes to know of thetermination.Where, for example, theauthor
ityof anagentappointedtosellgoodsisrevoked,buthesellsthegoods
beforereceivingthe letter ofrevocation,the sale is good. Illustration{a)is
relevanttothispoint.
Butasregardsthirdpersons,theagencydoesnotterminateuntilthey
come toknowofthefact oftermination.Where,forexample,anagent
sellstheprincipal'sgoodsevenafterreceivingnoticerevokinghisauthority,
thesaleisbindingontheprincipalandthebuyergetsagoodtitleprovided
502.ErnestCharlesElliottvWilliamTurquand,(1881)LR7AC79;involvencyofanagentwould
alsohavethe sameeffectif itmakeshim unfit toperformhisduties,McCallvAustralian
MeatCoLtd,(1870) 19WR188.
503.PerMookerjeeJ,LalljeeMahommadvDadabhaiJivanjiGuzadar,AIR1916Cal964.
504. P. Sukhadevv Commr of Endowments,(1998)1 BC403(AP).https://t.me/LawCollegeNotes_Stuffs

980. 838Chapter15 Agency [S.210]
he did not know of the fact of termination. Illustration(b)is relevant to
thispoint/°^Where the power of attorney-holder executed the sale deed
infavourof the third party who hadalreadypaid the priceto the principal
under anagreementwith him, the principalbecamebound though he had
terminated the power of attorney but the thirdpartywas not aware of the
factofterminationatthecrucialmoment.^®®Thecourtcitedthefollow
ing passage from the decision of theMadrasHighCourtinKhatoonBivi
Ammalv ArulappaNadarJ°'^"Policy of law apparently in the interest of
trade andcommerceis that the agent'saction should bind the principaleven
though theprincipalmighthavecancelledtheagent'sauthority,unlessthe
thirdpartywith whom the agent enters into thecontractknows of the ter
mination of theagency."The court also placedrelianceupon thejudgment
in Trueman vLoderJ°^"Here A traded asB'sagent. With the authority of
B, all parties with whom A made contracts in that business, wereheldto
have a right to hold B liable to them until Bgivesnotice to the world that
A'sauthority isrevokedand it makesnodifferenceif in a particular casethe
agentintendedtokeepthe contract on his ownaccount.The courtrepelled
thecontentionthat itwasveryunreasonabletoexpectthat theprincipal
shouldinformthewholeworldthat hehascancelledthepowerofattorney
givento hisagentand that he cannot beexpectedtoapproacheverybody
with whom the agent was likely to enter into acontractand inform him of
thecancellation."
Evenwhen theagencyisterminatedby the death of theprincipal,the
terminationiseffectiveonlywhen itcomesto theknowledgeof theagent.
Illustration(c)isrelevantto this point. Awifewasauthorisedby her hus
bandtokeepbuyinggoodsfromadealer.Thehusbandbecameapersonof
unsound mind. The wifekept up her purchasesfrom theseller,the latter not
knowingofthehusband'sincapacity.Thehusbandwasheldliabletopayfor
thegoods.^"'
Terminationofsub-agency
When the authority of an agent terminates, it entails the termination of
the authority ofallsub-agentsappointed by him.Section210 is asfollows:
S.210.Terminationofsub-agent'sauthority.—Thetermination of the
authority of an agent causes the termination (subjectto the rules herein con
tainedregardingtheterminationofan agent'sauthority)oftheauthorityofall
sub-agentsappointedby him.
505.Wherein thecaseofapartnershipfirmtheauthorityofpartnerscouldbeterminatedbya
publicnoticewhichwasnotdoneandthebanknotknowingtookacknowledgmentfroma
partner, the samewaseffective.Assiammav State Bank ofMysore,(1990)1KLT18.
506.KashiRam v Raj Kumar, AIR 2000 Raj 405.
507.AIR1970Mad76.
508.(1840)11 Ad & El 589.
509.DrewvNunn,(1879)LR4QBD661.Registrationof atransferdeedeffectedbyaperson
whoseauthorityhadended,heldvoid.SekarMudaliarvShajathiBi,AIR1987Mad 239.https://t.me/LawCollegeNotes_Stuffs

981. [S.209] Determinationofagency839
Theallotmentofworksto acontractorisnotthecreationof anagencyor
sub-agencyfor the purposes of thissection/^"
Agent's duty ontermination[S.209]
Section 209 gives the duty of the agent ontermination.
S. 209. Agent'sdutyonterminationofagencyby principal'sdeathor
insanity.—Whenan agencyisterminatedbytheprincipaldyingorbecoming
of unsound mind, theagentis bound to take, on behalf of the representatives
ofhislateprincipal,ailreasonablestepsfortheprotectionandpreservationof
theinterestsentrustedtohim.
Section210providesthat theterminationofanagent'sauthorityamounts
toterminationof allsub-agentsappointedbyhim.Section209chargesthe
agentwithdutytoprotecthisprincipal'sinterestwheretheprincipalhas
died orbecomea person of unsound mind.
510.DalmiaCement(Bharat)Ltd vT.V.Ootnen,(1987) 1 KLT 534.
Visitebcexplorer.com to accesscases referred
tointhebookthroughEBCExplorer™on |iM||||||||£g(;;
seeOnline®;along,withupdates,articles,videos, ExplOfGr^
blogsand a host of different resources. companion resources for legal research
The following cases from thischapterare available
throughEBCExplorer™:
•AbdullaAhmedvAnimendraKissenMitter,AIR1950 SC 15: casepilot
1950SCR30
• MohanlalJain v SawaiManSinghji,AIR 1962 SC73:
(1962) 1SCR702
•PannalalJankidasvMohanlal,AIR1951SC144:1950SCR979:
(1951) 21CompCas1
•PragervBlastpielStamp&HeacockLtd,(1924)1KB566https://t.me/LawCollegeNotes_Stuffs

982.  
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Join Us Here for More Materials
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983. PARTIII
LawofSpecificRelief
(Ss.1-142)https://t.me/LawCollegeNotes_Stuffs

984. 16
SpecificReliefAct, 1963
TheSpecificReliefAct,1963^
[Act 47 of 1963]
[13December1963]
An Act to define and amend the law relating
tocertainkindsofSpecificRelief
PrefatoryNote.—ThefollowingextractfromtheStatementofObjectsand
Reasons isgivenbelow:
"ThisBillseekstoimplement the recommendations of theLaw
Commissioncontained in itsNinthReport on theSpecificReliefAct,1877,
exceptinregardtoSection42whichisbeingretainedasitnowstands.An
earlierBillonthesubjectintroducedintheLokSabhaonthe23rdDecember,
1960,lapsedduetodissolution.Thenotesonclauses,extractedfromthe
ReportoftheLawCommission,explainthechangesmadeintheexisting
Act."{VideGaz.ofIndia,Extra.,PartII,S.2,dated June15,1962.)
BeitenactedbyParliamentintheFourteenthYearoftheRepublicofIndia
asfollows:—
Part1
PRELliVllNARY
S.1.Shorttitle,extentandcommencement.—(1)ThisActmaybe called
theSpecific ReliefAct, 1963.
(2)ItextendstothewholeofIndiaexcepttheStateofJammuandKashmir.
(3)Itshallcomeintoforceonsuchdate^astheCentralGovernmentmay,by
notificationintheOfficialGazette,appoint.
Actnotexhaustive
ThoughSpecificReUefActwidensthesphere.ofthecivilcourt,itspre
ambleshowsthat the Act is notexhaustiveof all kinds ofspecificreliefs.
TheActisnotrestrictedtospecificperformanceofcontractsas thestatute
1. TheActreceivedtheassentofthePresidentonDecember13,1963andpublishedin theGaz.
of India, Extra., Part II, S. 1, datedDecember16,1963.
2.1stMarch,1964,videNotificationNoS.O.189,dated13thJanuary,1964,Gaz.ofIndia,
PartII, S. 3(h), p. 214.
[841]https://t.me/LawCollegeNotes_Stuffs

985. 842 Chapter16SpecificReliefAct,1963 [Ss.2-4]
governspowers of the court in grantingspecificreliefsin a variety offields.
Even so, the Act does not cover all specificrehefsconceivable.^
S.2. Definitions.—InthisAct,unlessthe context otherwise requires,—
(a)"obligation"includes every duty enforceable bylaw;
(fa)"settlement"meansaninstrument[otherthana will or codicil asdefined
bytheIndianSuccessionAct,1925(39of1925)]whereby the destination
ordevolutionofsuccessiveinterestsinmovableorimmovableproperty
isdisposed of or isagreedto be disposed of;
(c)"trust" hasthesame meaning as Section 3 of the Indian Trusts Act, 1882
(2of1882),and includes an obligation inthenature of atrustwithinthe
meaningofChapterIXofthatAct;
id)"trustee"includeseverypersonholdingproperty intrust;
(e)allother words and expressions used herein but not defined, and defined
in theIndianContractAct,1872(9of1872),havethemeaningsrespec
tivelyassignedtotheminthatAct.
S. 3. Savings.—Exceptas otherwise provided herein, nothing in this Act
shallbedeemed—
(o)todepriveanypersonofanyrighttorelief,other thanspecificperfor
mance, which he may have under any contract; or
ib)to affect the operation of theIndianRegistrationAct,1908(16of1908),
ondocuments.
S. 4. Specific relief to begrantedonlyfor enforcing individual civil
rightsand notforenforcingpenallaws.—Specificreliefcanbegrantedonly
forthepurposeofenforcingindividualcivilrightsandnotforthemerepurpose
ofenforcingapenallaw.
SPECIFICRELIEF
IntroductiontotheoutlineoftheAct
Alargenumberofremedialaspectsoflawhavebeentakencareofbythe
SpecificReliefActof1963(47of1963).ThisActisareplacementoftheear
lier Act of1877.Ameredeclarationof rights anddutiesis notsufficientto
giveprotectiontolifeandproperty.Enumerationofrightsanddutiesmust
besupplementedbylegaldeviceswhichcanhelptheindividualtoenforce
hisrights.Everypersonwhoisinjuredinthesocialprocessmusthavea
socialredress.Onlythenit willbepossibleto saythat humansocietieshave
beensoorganisedastoassurethatwhereverthereisawrongtheremust
bearemedy.ThisisthemissionoftheSpecificReliefAct.Generally,reme
diesarealsoprovidedbythebranchofsubstantivelawwhichdefinesrights
anddutiesforitsownpurposes.Thelawofcontractprovidestheremedy
ofdamagesforbreachofcontract.Thelawoftortssimilarlyprovidesfor
recoveryofdamagesinseveralcasesoftortiouswrongs.Substantivelaws,
3.AshokKumarSrivastavv NationalInsuranceCoLtd,(1998)4SCC361:AIR1998SC2046.https://t.me/LawCollegeNotes_Stuffs

986. [S. 4] Specificrelief843
however, can never afford to be exhaustive in terms of their remedies and
reliefs.Scoperemains for an Act whose onlypurpose is to provide a network
ofreliefsin certain specificterms. Such an Act does not confer any rights in
itself. It only provides aspecificrelief so as to remedy the violation of a legal
right. The network ofreliefsallowed by the Act falls under the following
outlines:
1. Recoveryofpossessionofproperty
Though theSpecificRelief Act is concerned only with the enforcement
of civil rights and not penal laws, evencivil law has to take care of certain
rights, theviolationof which iscapableof creatingseriousviolentclashes,
and these are rights to possession of property. The very first chapter pro
vides relief to those who have been dispossessed oftheirproperty.
1. Specificperformanceofcontracts
One ofthe most important aspectsofcivilrightsisthefulfilmentofexpec
tations created by acontractvoluntarily made by the parties. Contracts are
at the base of almost all economic relations. All employments and profes
sions are contract bound. All property, whetherbusinessassets or personal,
remain locked up under contracts. Forexample,money in banks and in
otherforms ofinvestmentiscontractuallybound.Thuscontractsconstitute
the modern wealth. They are sacred per se. Moreover, aparticularcontract
is not justanisolatedtransaction.It is oftenaHnkin a chain ofseveralcon
tracts. Afailureat oneplacecan causeaseriousdislocationofeconomicand
social life.Contractsmust be enforced. But the only way the law ofcontract
can enforce a contract is by awarding compensation to the injured person.
In manycases,however,compensationfailstoservetheeconomicpurpose
of the contract. Ahospitalis, forexample,interestedin thefulfilmentof
itsrequirementsand not inreceivingcompensationfrom afailedsupplier.
There was thus the need for a remedy which would compel a defaulting con
tractor toactuallyperformhis contract. This important function is under
taken by thesecondchapter of theSpecificReliefAct under theheading:
SpecificPerformanceofContracts.
3.Rectificationandcancellationof instrumentsandrescissionof
contracts
Manytransactionsare required by law to be in writing. Many more trans
actions are put into writing because ofexpediency.A written transaction is
an instrument. Aninstrumentis the result of negotiations. Occasionally it
happensthat theinstrumentthatemergesfailstoexpresstheintentionof
theparties.Itsrectificationmaybecomenecessary.Accordingly,ChapterIII
of theSpecificReliefActhelpspartieswhowant tohavetheirmistakenly
executeddocumentsrectified.https://t.me/LawCollegeNotes_Stuffs

987. 844Chapter16 SpecificReliefAct,1963 [S. 4]
Closely alliedwithdocumentsmistakenlyexecutedis thecategoryof doc
umentswhichareafterwardsdiscoveredtobevoidorwhichbecomevoid.
Theyoughtto be cancelled.ChapterV provides relief from suchkindsof
documents.
Thenthereis acategoryofcontractswhich,for onereasonoranother,
such as, for example, lack of free consent, are voidable at theoptionof
thepartywhoseconsentwas not free. He has arightto have thecontract
rescinded. Relief by way of rescission is provided byChapterIV of the Act.
4.Preventiverelief
Therearecasesinwhichthenatureofthecontractdoesnotadmitof
specificperformance, nor damages are likely to serve any purpose. In such
cases thecourtmay have torestrainthepartythreateningbreach, to the
extentto which it is possible to do so. For example, a personcontractsto
sing at aparticularplaceandalso undertakes not to sing elsewhere during
the same period. He threatens breach. The court cannot force him to sing.
The positive side of the bargain is notspecificallyenforceable. But the neg
ativeundertaking"not to sing elsewhere" can be enforced byrestraining
him from givinghis performanceselsewhere.When he is so prevented from
resorting to otheropenings^it may exert some pressure upon his mind and
he may be persuaded to go ahead with the performance of his contract.
This type of remedyis known aspreventiverelief.It is granted by issuing an
order, known as "injunction", upon thepartyconcerned directing him not
to do aparticularact or asking him to perform aparticularduty, known
as a mandatory injunction. Such relief is granted under the provisions of
Part III of the Actrunningfrom Chapter VII to theend.'*
5.Declaratoryrelief
There is one more matter of which theSpecificReliefAct takes care and
that is "declaratoryrelief".Occasionallyit mayhappen that a person is enti
tled to some status or character or has a right in some property, but there
are persons who are denying him the enjoyment of his right. He is allowed
by Chapter VI of theSpecificReliefAct to proceed against any person who
is denying or interested in denying him his right and the court may issue a
general declaration as to his entitlement to such right (declaratorydecrees).
RECOVERY OFPOSSESSIONOFIMMOVABLE PROPERTY
Section 5 of theSpecificReliefAct, 1963 provides that a person entitled
to the possession ofspecificimmovablepropertymay recover it in the man
nerprescribedby the Code of CivilProcedure,1908.^
4. Adhunik Steels Ltd vOrissaMangenese Minerals (?) Ltd, (2007) 7 SCC 125: AIR2007SC
2563, the SupremeCourtexplained the various types of relief under the Act and theirnature
andscope.
5. Sanjay Kumar Pandey v Gulbahar Sheikh, (2004) 4 SCC 664, the proceedings under the
section are of summary nature and limited in their scope to finding out the fact of possessionhttps://t.me/LawCollegeNotes_Stuffs

988. [Ss.5-6] Recoveryofpossessionofimmovableproperty845
S.5.Recoveryofspecificimmovableproperty.—Apersonentitledtothe
possessionofspecificimmovablepropertymayrecoveritinthemannerpro
vided bythe Code ofCivilProcedure, 1908(5of1908).
Thissectiondealsvi^ithactionforrecoveryofpossessionofspecific
immovablepropertybased on title. The essence of the section isthatwho
everprovesa "better title" is a person"entitledtopossession".The title
maybeon thebasisofownershiporpossession.Thus,supposeAenters
intopeacefulpossessionoflandclaimingit ashisownalthoughhemight
havenotitleto it,stillhecansueanotherwhohasforciblyoustedhimfrom.
possessionandwhohas no bettertitleto it,becauseA,althoughhe hasno
legaltitle,hasatleastapossessorytitle.ThepurposebehindSection6 isto
restrain a person fromusingforceand todispossessa person without his
consentotherwisethaninduecourseoflaw.^
A suitunderSection5 is an ordinarysuit underthegenerallaw and the
plaintiffhastoprovethathehasabettertitle.Further,specificperformance
canbedecreedonlyagainsttheexecutantofthecontracthavingtherightto
dispose of the property inquestion.^
It is aprincipleof law that a person who has been in longcontinuous
possessionof animmovableproperty,can protect thesamebyseekingan
injunctionagainst anypersonin the worldotherthanthe true owner. It is
alsowellsettledthateventheownerofthepropertycangetbackhisposses
sion only by resorting to the due process oflaw.®
Adecisionas to aspecifiedpart of the property inquestionmaynot con
stituteresjudicatainrespectofanysubsequentproceedingsaboutthe entire
property.^
S. 6. Suit bypersondispossessedof immovable property.—(1) Ifany
person isdispossessedwithout hisconsent ofimmovableproperty otherwise
withinperiodof sixmonthsprecedingto theinstitutionof thesuit.Thequestionof title
isignoredintheseproceedings.If thesummaryproceedingisunsuccessful,the person in
questionshouldfilea regular suit for title to bedecidedon merits.Theremedyofrevisionis
availablebut only by way of exception and not as a general rule. A case has to be made out
under S. 115 CPC.BajranglalShivchandraiRuia v Shashikant N. Ruia,(2004)5 SCCTil,
for successof his suit the plaintiff would have to establish his title.
6. PuthukkattilParangodanv PuthukkattilParameswaran,AIR2002Ker221,thesubject-mat
ter of the tenancy wascompletelydestroyed and the lease automaticallyterminated. But even
so the landlord couldclaimand recoverpossessiononly through the court process.ITCHotels
LtdVAdarsh Coop HousingSocietyLtd,(2013)10SCC169:(2012)94 AIR 682,remedy
under the sectionis only forrecoveryofpossessionof the personwho has beendispossessed.
A regular suit has to be filed for establishing title or ownership.
7.AnnapooraniAmmalv G.Thagapalam,(1989) 3 SCC 287.
8.PratapraiN.KotharivJohnBraganza,(1999) 4 SCC 403: AIR 1999 SC 1666. RamChander
Aggarwalv Hans Raj Banga, AIR 2003 NOC 109(Del):2002AIHC4102(Del),the plain
tiff has toprovehis right topossession.He could notprovein this case that he had pur
chased the premises. The sale certificate produced by him was found to be not reliable.Market
Committee,HodalvSukhdevi,(2016) 1 SCC 290: AIR 2016 SC2226,no suit lies for recov
ery ofpossessionof land which had already been acquired under statutoryprovisions,i.e.
LandAcquisitionAct,1894.
9. V.Rajeshwariv T.C.Saravanabava,(2004) 1 SCC 551.https://t.me/LawCollegeNotes_Stuffs

989. 846Chapter16SpecificReliefAct,1963 [S-6]
than indue courseoflaw,he or any personclaimingthrough himmay,by suit,
recoverpossessionthereof,notwithstandinganyothertitlethatmaybesetup
insuchsuit.
(2)Nosuit under this section shall bebrought—
(a)after the expiryofsixmonths from the date ofdispossession;or
(b)againsttheGovernment.
(3)Noappealshallliefromanyorderordecreepassedinanysuitinstituted
underthissection,.norshallanyreviewofanysuchorderordecree beallowed.
(4)Nothinginthissectionshallbaranypersonfromsuittoestablishhistitle
to such property and torecoverpossessionthereof.
Sections5 and 6givealternativeremediesand aremutuallyexclusive.
UnderSection5 apersondispossessedcangetpossessiononthebasisof
title,whereasunderSection6 apersondispossessedmayrecoverpossession
merelybyprovingpreviouspossessionandsubsequentwrongfuldisposses
sion. UnderSection6 he need not prove a better title against theoccupier.
Theoccupierwillnot beallowedtoshowhistitlebyownership,contract,
prescription or inheritance.
Clause(4)ofSection6,however,providesthat thepersonagainstwhom
adecreemaybepassedunderclause(1)ofSection6may,notwithstanding
suchadecree,suetoestablishhistitleand torecoverpossession.Theobjects
ofSection6are:
(i)Todiscouragepeoplefromtakingthelawintotheirownhands,
however good their title may be.
(it)Toprovideasummary,cheapandusefulremedyto apersondispos
sessedofimmovablepropertyotherwisethan in duecourseoflaw.
Section6 isapplicableonly if the plaintiffproves—
(1)that hewasinjuridicalpossessionof theimmovableproperty in
dispute;^"
(2)that he had beendispossessedwithout hisconsentandotherwise
thaninduecourseoflaw;"and
10.PremSharmavNishiSharina,AIR 2003 HP 45, entries in the Municipal Register of
Assessmentsand the reportlodgedwith thepoliceofdispossessionshowedthat the com
plainantwasinpossessionof thehouseimmediatelybeforehewasdispossessed.Relieffor
recoveryofpossessionwasgranted.SiyaRantv NagarPalikaFarishad,AIR2010NOC1111
(All),afootpathcannotbeallottedto anypersonforbusinessorotherwise.Apersonselling
hisgoodsbylayingthemon afootpathgetsno right tomakesuchuse.Hisdispossessionis
notillegal.ShantabaiSonba Madavi v NanibaiUdebhanUike,AIR 2015 NOC 47(Bom),
plaintiff'scasewasthatthesuitpropertywaspurchasedbyherfatherandthatsheinheritedit
afterherparents'death.EntriesinVillagePanchayatrecord,paymentoftaxesandelectricity
billssupportedherclaimofbeingtherightfulowner.Thedefendanttrespassedandwasin
wrongfulpossession.Shewasallowedtorecoverpossessionandmesneprofit.
11. Narbada Devi Gupta vBirendraKumarJaiswal,(2003)8SCC745:AIR2004 SC175,receipt
forpaymentofrentshownwiththumbimpressionofthelandladyatbacksideandalsosigned
byherson(plaintiff)at theback.Theplaintiffadmittedhissignature.Thustenancybecame
establishedruling out a case ofdispossession.The court said that the tenant had not to pro
duce furtherevidenceon the point. Raj Narayan Pandey vKameshwarThakur, AIR 2011https://t.me/LawCollegeNotes_Stuffs

990. [S.6] Recovery of possession of immovableproperty847
(3)that the dispossession took place within six months from the date of
thesuit.^^
Possession here means legal possession which may exist with orwithout
actualpossessionand with or without a rightful origin. The plaintiff need
not establish his title. It is enough to prove long standing peaceful posses
sion.^^Questions of title can be ignored. Relief can also be given on the basis
of title with apermanentinjunctionagainstthedefendantnot to interfere
in the plaintiff ownership and possessoryrights."Apropertywas donated
to All India Congress Party. There was split in the party. Thepartyled
byIndiraGandhiwas declared by the Election Commission as theIndian
NationalCongress. Its right of possession of thepropertywasprotected.
The defendants who were in possession were ordered to vacate the prop
erty."Thus where a trespasser is allowed to continue on thepropertyand
the owner sleeps upon his rights and makes no efforts to remove him, he
will gain possession under Section 6. The possession of atenantafter the
terminationof thetenancycontinuesto be ajuridicalpossession.Hisright
topossessionremainsunless theownergets a decree of evictionagainst
him. Tillthenif he isdispossessedhe isentitledto seekrestitutionof his
possession.^®InExpressNewspapers(P)Ltdv UnionofIndia"the Supreme
CourtremindedtheGovernmentthateven where aperpetuallease for con
structionof an office blockprovidedfor the lessor'srightofre-entryupon
forfeitureof leaseuponbreaches of theconditionsof the lease, the lessor
Jha 13, shoptenantthrownoutwithoutrecourse to the applicable Bihartenancylegislation,
restoredto hispossessionbycourtorder.
12.NairService SocietyLtdvK.C.Alexander,AIR 1968 SC 1165: 1968 SCD 500.Tirumala
TirupatiDevasthanamsv K.M.Krishnaiah,(1998) 3 SCC 331: AIR 1998 SC 1132, where the
suit for possession could not be filedwithinsixmonths,thecourtsaidthataregularcivil suit
could be filedthereafter.GeorgeThomasv Srividya, AIR 2003Mad290,propertyin wife's
name, assessment in her name forpaymentof taxes, thebuildingplan was alsosanctionedin
her name. Thecourtdid not accept thetheoryofbenamifor evasion of taxes. She was allowed
to recoverpossessionanddamages.Annakiliv A.Vedanayagam,(2007) 14 SCC 308: AIR
2008SC 346, theHighCourtfinding wasthatthe title of theplaintiffhadattainedfinality,
it was for thedefendantto provethatthey had hostilepossessionunderwhich theplaintiff's
title became extinguished. The defendant could not do so. Theplaintiffhad not to file a suit
fordeclarationof his title. R.RamaRao v R.AppalaSwamy,AIR 2011 Ori 1, sixmonths
have to betakenfromthe date ofdispossessionwhichmay befoundby thecourton itsown
evidenceandnoton the basis ofpolicereport.
13.SanwalRamvRamjan,AIR 2016Chh48.
14.ManojvChandraKishore,AIR2015NOC87 (Bom).
15.JanathaDalPartyvIndianNationalCongress, (2014) 16 SCC 731: AIR 2014 SC 1062.
16. See K.K. Verma v UnionofIndia,AIR 1954 Bom 358:ILR1954 Bom 950;LalluYeshwant
Singh v Rao Jagdish Singh, AIR 1968 SC 620: (1968) 2 SCR 203; S.R. Ejaz v T.N.Handloom
Weavers' Coop Society Ltd, (2002) 3 SCC 137: AIR 2002 SC 1152, thetenantproved that
he was dispossessed, remand of thematterafter a long period was held be wrongful because
it had defeated the verypurposeof thesummaryremedy.SubrataKumar Das v State ofWB,
AIR 2010Cal49 (DB), suit filedaftersixmonths,has nomeaning,policecannotbeblamed
for notputtingthe dispossessed person into possession. There is no violation of legal or fun
damentalrights.
17.(1986)1SCC133:AIR1986SC872.https://t.me/LawCollegeNotes_Stuffs

991. 848 Chapter 16SpecificReliefAct, 1963 [S.6]
would not have the right to declare such forfeiture all by itself and then
taketo itself tothrowout the lessee eitherdirectlyorthroughthesummary
procedureunder thePublicPremises(EvictionofUnauthorisedOccupants)
Act, 1971. The court said that where a breach is found, the lessor must
adoptthe dueprocessoflawbyfilingacivilsuittoenforcethe right ofre-en
try. Suchalesseeis not an "unauthorised occupant" of a "public premises".
He will beentitledto reliefagainstsucheviction.
A tenant was dispossessedforcibly.Thecourtsaidthathe couldinstitute
his suit for repossession at that stage immediately. But he himself gained
forciblerepossession.He became a trespasser and therefore could not be
regarded to be in lawfulpossession.He didfilea suit subsequently but did
not pursue it for numbering. It was numbered after three years. Relief of
possession was notgrantedtohim.^^
Regarding appeals, the section itselfsaysthat there is no right of "appeal"
against a decree in a suit under this section. Similarlya "review" of the deci
sion is alsobarred.But arevisionunderSection115 of the CPCmaylie to
the High Court, although courts have not favoured this remedy because the
aggrievedpartyhasanotherremedy open to him by way of a regular suit.
An interesting question may arise;Whetheran action under Section 6 can
bemaintainedinrelationtoincorporealor intangibleproperty,e.g. right of
ferry, right of fishery, right to collect rents, right to cut grass, etc. There is a
conflict of decisions on the point. TheHighCourtsof Bombay andMadras
have answered this question in theaffirmative.^'Thesecourtshave held
thatamanis said to be inpossessionof a right when he can exercise it,and
he recovers possession of anincorporealright when theobstructionwhich
interferedwithit is removed. But acontraryview has beenexpressedby
theCalcuttaHighCourt,^°whichhaspointedoutthatthissectiondoesnot
extend toincorporealrights because they are not rights of which possession
can betakenand delivered to theplaintiff.
Noinjunctionwas issuedagainsttheownerof an item of movableprop
erty(vehicle)whichhadbeen delivered onhirepurchasetopreventhimfrom
enteringthe premises of thehireron hisdefaultinpaymentsandtotake
away the vehicle.Therewas a clause tothateffect in thecontract.^^
Further,itshouldbenotedthattheonlyprayerin asuitunderSection6
canbe aprayerfor recovery of possession.Consequentlya claim fordam
agescannotbecombinedwiththatfor possession. Thesectiondoesnot
apply to suitsbasedon title toproperty.
18.K.KrishnavA.N.ParamkushaBai,AIR2011 AP 165.
19.MangaldasvJivanRam,ILR(1899) 23 Bom 673;KrishnavAkilanda,ILR(1889)13Mad
54.
20.FaduJhalavGourMohunJhala,19Cal544.
21.G.E.CapitalTransportationFinancialServicesLtdvAmritajitMitra,AIR2009NOC1969
(Cal). Even in such a case,therewouldhave to bepermissiveentryandnot forcible entry.
22.NagarPalikavJagatSingh, (1995) 3 SCC 426:AIR1995 SC 1377.https://t.me/LawCollegeNotes_Stuffs

992. [S.6] Recoveryofpossessionofimmovableproperty 849
Possession,under the section, may be actual (i.e.physical)or construc
tive.Hencethe possessionof a mortgagee or alesseeis that of the mortgagor
orthelessorandviceversa.^^
A personvi^hois in settled possessioncannot be summarilydispossessed.
Settledpossessioncreates such a right that even the rightfulow^nermay
recoveronly by takingrecourseto a court oflavi^.The settledpossession
even of a trespasser may beprotected.^''
Reliefcannot be refusedonlyon the ground that the property in question
is a joint family property. One of the co-owners was ousted from the prop
erty. He was allowed to exercise his right to seek possession of hisshare.^^
The right acquired by adverse possession, if not perfected by resort to
Section 6, would cease to exist if possession isinterruptedin themeantime.^^
Recovery of possession where possessiongratuitous[S.6]
Where thegrantof possession was purelygratuitous,the owner had the
right to reclaim possession evenwithoutthe knowledge of the person in pos
session.Thepartyin possession in this case was using the garage owned by
his sister. The owner dispossessed him. The trialcourtorderedrestoration
of possession. The HighCourtconfirmed this order. The SupremeCourt
describedthisasanerror.
It was evidentthattherespondentwas using the garage of theappellant
onpermissionhaving beengrantedby the sister to thebrother.According
to the judgment of theHighCourttherespondentwas claiming no legal
interest in the said garage as he was not claiming itsownershipbecause he
was not claiming to be atenantor even a licensee. His possession was purely
gratuitousand even ifwithoutthe knowledge of therespondentthe appel
lant has reclaimed the possession, it was not a fit case for theHighCourtto
haveinterferedunderArticle227oftheConstitution.^^
Thepersonwho was in permissivepossessionandwhose claim of adverse
possessionproved to be false, wasdirectedtohandoverpossessionto the
owner.^®Wherepossessionwas given forrepairsbut the premiseshappened
to comedown,it was heldthatthere was noquestionof seekingrestoration
of possession. Thepropercoursewouldhave been to claimdamages.^'
23.JageshwarSingh vJawahirSingh,ILR(1875-80)1All311.
24.RameGowdav M.VaradappaNaidu,(2004) 1 SCC 769.AjayKumarvChanchalaDevi,
AIR 2011 HP 37, a trespasser who is settled in possession can regain his possession from any
person,otherthanthe owner, whodispossessedhim.
25.GautamGazmervVttamGazmer,2014SCCOnLineCal18020:AIR2015Cal15;City
MunicipalCouncilBhalkivGurappa,(2016) 2 SCC200,legalrepresentativesof the deceased
ownerestablishedbefore thetrialcourtandHighCourt.Suit for title andpossessionallowed.
26.BinodeDasvSarumaiParangia,AIR 2014NOC73 (Gau).
27.AnimaMallickv AjoyKumarRoy,(2000)4 SCC 119.
28.LakshmivKaruppathal,AIR 2011 Bom 192;SardarMalkiatSingh vKanwaljitKaur,AIR
2010NOC733 (Del),daughter-in-lawliving infather-in-law'shouse, she had to give up pos
session, she had already taken residential house where she was living afterpartingcompany
withherhusband.
29.AshokKumarChowanvA.G.AnwarAli,AIR2010Kant70.https://t.me/LawCollegeNotes_Stuffs

993. 850 Chapter16SpecificReliefAct,1963 [S.6]
Prayer fordeclarationof title
Althoughnormallysucha suit is notmaintainablein theabsenceof a
prayerfordeclarationof title,it washeldonfactsthat as thenecessaryaver
mentsweremadeinthe plaint (thatregisteredleasedeedfor99yearsin favour
ofappellant-lesseewas void and not binding and that suit property was trust
property),andansweredin the writtenstatement,issuesframed,evidence
led and argumentsadvanced,noprejudicewas caused to the appellant-de
fendant by the fact that there was no formal prayer seeking a declaration.
The High Court rightlydismissedtheLPAfiledby theappellant-defendant
under Order 6, Rule 1 of the Civil Procedure Code, 1908. Thecourtsaid:
"Eventhough there was no formalprayer,noprejudicehas been caused to
the appellant inasmuchas he has not beenpreventedfrom leadingevidence
on this aspect and has not beenprecludedfrom raising contentions in this
behalf. All that was necessary to cure the defect was an amendment by
incorporating oneprayer.This could have been done at anystage."^"
TheSupremeCourt has onceagain heldthat a suit forpossessionsimplic-
iterwithoutdeclarationoftitleismaintainable.Onthefactshere,however,
titlecouldnotbesuccessfullyquestioned.^^
Noappealor review[Subs.(3)]
No appeal lies from a decision in a suit under Section 6, nor any review is
maintainable. But where a suit upon title is wrongly treated as a suit under
Section 6, an appealHes.The proper procedures for the appellate court in
such a case is toremandthe suit for fresh disposal. In a suit decidedunder
Section 6, revision can be preferred on various grounds. If the error is pal
pable and the remedy is clear, the High Court can interfere in its revisional
jurisdiction, but could not interfere on point of lawespeciallywhen it is
raised for the first time in revision. In the absence ofjurisdictionalerror,the
finding of the lowercourtcannotbedisturbedby theHighCourt.^^
"Wherean interim order was passed in a suit under Section 6 of theSpecific
Relief Act, it was heldthatthegrantof such an order was not appealable
underOrder43, Rule 1 of the CivilProcedureCode,1908.^^
ApplicationofLimitationAct
Section 14 of theLimitationAct, 1963 applies toproceedingsagainst
dispossession.One of the effects would bethattime taken in prosecuting
proceedingsunder writ jurisdiction would beexcluded.^''
30.SantokhSingh vMahantIqbalSingh, (2000) 7 SCC 215: AIR2000SC 3155.BinaRoy v
BasantiBhattacharya,AIR 2009 NOC 119(Cal),thematterof court fee is between the claim
ant and State, the claimant may pay court fee on his valuation, the defendantcannotsaythat
no relief should be allowed because ofinadequatecourtfee.
31.MaddasaniVenkataNarasaiahvMuddasaniSarojana,AIR2016SC2250.
32.GafoorKhanvAmiruddin,AIR2012Raj 35.
33.MadhukarbhaiTrambaklalShahthrovSterlingBhopalCityCoopHousingSociety,AIR
2009NOC262(Guj).
34. Pratapsing Ganpatrao Kadam v Maruti Raghunath Todkar, AIR 2003 Bom 11.https://t.me/LawCollegeNotes_Stuffs

994. [S.7] Recoveryofpossessionofmovableproperty851
Sixmonths limitation not applicable toproceedingsunder CrPC
The finding that the appellants should have come within six months from
thedateofdispossessionwasheldto be nottenableas theSpecificRelief
Act has no application to proceedings under Section145(6)of the Criminal
ProcedureCode.^^
Counterclaimandcourtfee
The defendant was unlawfully dispossessed and wanted enforcement of
hisstatutoryright under Section 6 of regaining possession. A counterclaim
wasfiledagainst it. The counterclaim being in the nature of a plaint in a
suit, thecourtsaid, it did not require to be valued under Section6{v)of the
BombayCourtFeesAct.^^
RECOVERY OFPOSSESSIONOFMOVABLE PROPERTY[SS.7-8]
Sections 7 and 8 of the Specific Relief Act, 1963 providemethodsfor
recovery of possession of some specific movable property.
S. 7.Recoveryofspecificmovableproperty.—Apersonentitledtothe
possessionof specificmovablepropertymayrecoverit inthemannerprovided
bytheCodeofCivilProcedure,1908(5 of1908).
ExplanationI.—Atrusteemaysueunderthissectionforthepossessionof
movablepropertytothebeneficialinterestinwhichthepersonforwhomhe is
trusteeisentitled.
ExplanationII.—Aspecial ortemporaryright tothepresentpossessionof
movablepropertyissufficienttosupportasuitunderthissection.
Mainingredients
By Section 7, it isprovidedthatapersonentitledto thepossessionof the
specific movablepropertymay recover the same in themannerprescribed
by the Code of CivilProcedure.Themainingredientsof thissectionare:
35.ShakuntalaDevivChamruMahto,AIR2009SC2075.
36.SushilaUttamchandJainvRajeshKumarPrakashchandJain,AIR2012Bom22.
37.PunjabUrbanPlanning&DevelopmentAuthorityv ShivSaraswatiIron& SteelRe-Rolling
Mills, (1998) 4see539, theplaintiffhas to prove his own case. Hecannotthinkof succeed
ing because of theweaknessof thedefendant'scase. This"section"correspondsto S. 10 of the
erstwhileSpecific Relief Act, 1877.Thatsectioncarriedthe followingillustrations:
(a) Abequeathsland toBfor his life, withremainderto C. A dies.Benters on theland,
but C,withoutB'sconsent,obtainspossessionof thetitle-deeds.B mayrecoverthem
fromC.
(b) A pledgescertainjewels to B to secure a loan. B disposes of them before he isentitled
to do so. A,withouthaving paid or tendered theamountof loan, sues B for possession
of the jewels. The suitshouldbedismissed,as A isnotentitledtotheirpossession,
whateverrighthemayhavetosecuretheirsaifecustody.[Basedon DonaldvSuckling,
(1866)LR 1 QB585.]
(c) A receives aletteraddressedto him by B. B gets back theletterwithoutv4'sconsent.
A has such apropertytherein as entitles him to recover it from B. [Based onOliverv
Oliver,(1861) 11 CB NS 139.]https://t.me/LawCollegeNotes_Stuffs

995. 852Chapter16SpecificReliefAct,1963 [S.7]
{i)Theplaintiffmustbeentitledto thepossession.Apersonmaybe enti
tledtopossessioneitherbyownershipor asprovidedbyExplanation2
to Section7 byvirtue of aspecialor temporary right. It is notnecessary,
.however,that the plaintiff shouldhavebeenpreviouslyinpossession,or
that thegoodsshouldhavebeenremovedfromhispossession.Aspecial
or temporary right may arise by either:
(a)the act of the owner of the goods, e.g., bailment, pawn, etc. In this
case the bailee or pawnee has special right, or;
{b)not bythe act ofthe owner of goods,e.g.,finderof lost goods. In this
case the finder of lost goods has a special right to possession except
againstthetrueowner.
ExplanationImakesit clearthat a trusteeisthepersonentitledto the
immediatepossessionof trust property. Henceif trust property is taken
away by someone, he can recover the same.
A person who does not havea right to presentpossessionofmovable
property cannot maintain a suit under thissection.An illustration in
point is: Apledgescertainjewelswith B to secure a loan. B disposes
thejewelsto C before he is entitled to do so. A without having paid the
amountoftheloan,suesCforpossessionofjewels.Thesuitshouldbe
dismissed, as A is not entitled toimmediatepossession of jewels,what
ever interest he may have to secure their safe custody.
{ii)Property in question must bespecificmovableproperty.Specificmeans
thatwhich isascertainedorascertainable.Specificpropertymeans the
verypropertyitself, not its equivalent. Thus coins or grains are not spe
cificmovableproperty, because theycannotbe distinguished from other
coinsorgrain.
The specificmovablepropertymust be capable of being seized anddeliv-.
ered.Wherethe goods have ceased to be recoverable or are not inpossession
orcontrolof thedefendant,theplaintiffis not entitled to a decree for recov
ery inspecie-,his only remedy then being damages orcompensation.
Suitfortitle
Thesubstantiveprayerin theplaintwas for adeclarationthattheplain
tiffs "were fullyentitled"to the suitbondsandcertainreliefswhichwere
founded upon thisdeclaration.A suit for such adeclarationwouldcertainly
beatitlesuitsofarasthesuitbondswereconcerned.Ondismissalofthe
suit, theappealagainstit wasbroughton thefootingthattheplaintiffhad
fully proved its title to the suit bonds andthatthe SpecialCourthad errone
ously heldagainsttheplaintiff.Thecourtsaidthatlookingat the suit from
(d) A deposits books and papers for safecustodywithB. B loses them and C findsthem,
but refuses to deliverthemto Bwhendemanded.B mayrecoverthemfrom C,subject
to C'sright,if any,underSection168 of theIndianContractAct,1872.
(e)A, awarehouse-keeper,ischargedwith the delivery ofcertaingoods to Z, whichB
takesoutofA'spossession,A may sue B for thegoods.https://t.me/LawCollegeNotes_Stuffs

996. [S.8] Recovery of possession of movableproperty853
any point of view it could not be held that the suitvirasa mere declaratory
suit, it had to be regarded as a titlesuit.^^
Limitation
Article91(b)of the Limitation Act, 1963 prescribes a period of three
years'limitationfor the suitcomputablefrom the date when the property
iswrongfullytaken orinjuredorwhenthedetainer'spossessionbecomes
unlawful.
Liability to deliverpossessionto person entitled
S. 8. Liabilityofpersoninpossession,not as owner, to deliver toper
sonentitledto.immediatepossession.—Anyperson having the possession
orcontrolof aparticulararticleofmovableproperty,ofwhichhe is not the
owner,maybecompelledspecificallytodeliveritto thepersonentitledto its
immediate possession, in any ofthefollowing cases:
(a)when the thing claimed is held bythedefendantas the agent ortrustee
oftheplaintiff.
(b)whencompensationinmoneywouldnotaffordtheplaintiffadequate
relief fortheloss ofthethingclaimed.^^
(c)when it would be extremelydifficultto ascertain the actual damage
causedby itsloss;""
id)when thepossessionof the thingclaimedhas beenwrongfullytrans
ferred fromtheplaintiff."*^
Explanation.—\Jn\essanduntilthecontraryisproved,the courtshall
inrespectofanyarticleofmovablepropertyclaimedunderclause(b)or
clause(c)ofthissection,presume—
(o)thatcompensationinmoneywouldnotaffordtheplaintiffade
quatereliefforthelossofthethingclaimed,or,asthe casemaybe;
(fa)that itwouldbeextremelydifficulttoascertainthe actualdamage
causedby itsloss."^
38.StandardChartered Bank v Andhra Bank Financial Services Ltd, (2006) 6 SCC 94.
J9.Proofofentrustmentof thepropertyinquestionwouldbenecessary.GangaBishanv Jai
Narain,(1986)1SCC75:AIR1986SC441.Theremaybeathingwhichmaynothavemuch
intrinsicvalue,but,byreasonofpeculiarassociationorsomespecialconsideration,have
obtainedintheeyesofitsholdersavaluethatcannotbeestimatedinmoney,e.g.familyidol.
Itwouldbegreatinjusticeifanindividualcannothavehispropertywithoutbeingliabletothe
estimateofpeoplewhohavenottheirfeelingsuponit.Athingmayhaveapretiumaflections
whichit isimpossibletovalueinsordidgoldorsilver.However,theprinciplemustnotbe
extendedtocasesfoundedinweaknessandfolly.Itwould,therefore,be aperversionof the
rule to applyit to thedeliveryof a lady'slap dog.
40. There exists no standard to ascertain their value, e.g. rare picture painted by a dead painter,
articles ofantiquityand the like.
41.E.g.byatort,orwheredefendanthasobtainedthegoodsbyfraudorwhereservanthas
pawnedthegoodsofmasterwithouttheauthorityofthemaster.
42.ThissectioncorrespondswithS.11of therepealedSpecificReliefAct,1877.Thatsection
carriedthefollowingillustrations:
Illustrationas toclause(a).—A,proceedingtoEurope,leaveshisfurnitureinchargeofB,
ashisagentduringhisabsence.B,withoutA'sauthority,pledgesthefurnituretoC,.andC,https://t.me/LawCollegeNotes_Stuffs

997. 854Chapter16 Specific Relief Act, 1963 [S. 8]
Ingredients
In order that Section8 may comeinto operation the followingingredients
mustcoexist—
(1)the defendant has possession or control of theparticulararticle
claimed;
(2) sucharticleis movableproperty;
(3)the defendant is not the owner of the article;
(4)the person claiming,thatis, the plaintiff, is entitled to immediate
possession;and
(5)the thingclaimedisheldbythedefendantas theplaintiff'sagent or
trustee;or whencompensationinmoneywouldnot affordadequate
relief for the loss of the thing claimed; or
whenit isextremelydifficultto ascertain the actualdamagecaused
by the loss of the thing claimed; or
whenthepossessionofthe thingclaimedhas beenwrongfullytrans
ferredfromtheclaimant.
An illustration of the types ofcasesfalling under this section would be
like this. A person, while going abroad,leaveshis furniture under the care
of hisfriend.Thefriendis atrusteeof thearticlesandisboundtoreturn
themwhendemanded.If thefriendpledgesthefurniture,thepledgeewill
also remainsubjectto thesametrust andsimilarlybound to return to the
owner whendemandedbyhim.'*^
Anillustrationunderclause(b)wouldbe, forexample,whentheidolof
afamilytempleis in thecustodyof a retired priest, he is bound to return it
to the family.
Casescomingunderclause(c)would be, forexample,whenarticlesof
rarevalue,hkeoriginalpaintingsofadeceasedpainter,areinthepossession
ofanother.Sincethey arearticlesofirreplaceablenature and their market
valueis ofunascertainablenature, theownerhas a righttorecoverthemin
specie.'*'*
Underclause(a)theonusis on theplaintifftoprovethefiduciaryrela
tionshipandunderclause(d)theonusisontheplaintifftoprovethewrong
fultransfer.TheExplanationdealswith theonusunderclauses{b)and
(c),whichisplacedonthedefendantandthedefendanthastoprovethat
knowingthatBhadnorighttopledgethefurniture,advertisesitforsale.Cmaybecompelled
todeliverthefurnituretoA,forheholdsit asA'strustee.[BasedonWoodvRowcliffe,(1844)
3Hare304:64RR303].
Illustrationastoclause{b).—ZhasgotpossessionofanidolbelongingtoA'sfamily,and
ofwhichA is the propercustodian.Zmaybecompelledtodeliverthe idolto A.
Illustrationas toclause(c).—Aisentitledto apicturebyadeadpainterandapairof
rareChinavases.Bhaspossessionofthem.Thearticlesareoftoospecialacharacterto bear
anascertainablemarketvalue.B may becompelledtodeliverthemto A.[BasedonFakkev
Gray, (1859) 4 Drew 651: 113 RR 493].
43. Based on Wood v Rowcliffe, (1844) 3 Hare 304: 64 RR 303.
44. Based on Falcke v Gray, (1859) 4 Drew 651: 113 RR 493.https://t.me/LawCollegeNotes_Stuffs

998. [S.9] Specificperformance of contracts 855
compensationin moneywouldbeadequatereliefandthatitwouldnotbe
extremely difficult to ascertain the actual damage caused by the loss of the
chattel.
DifferencebetweenSections7and8
(i)Under Section 8, no suitcanbebroughtagainsttheowner,whileunder
Section 7, a person having a special ortemporaryright to present possession
may bring the suit even against the owner of the property.
(n)UriderSection 7, a decree is for thereturnof movableproperty,or for
themoneyvaluethereofin thealternative,whileunderSection8 the decree
is only for thereturnof the specific article.
SPECIFICPERFORMANCE OFCONTRACTS
Specificperformanceisequitablerelief given by acourtin case of breach
ofcontractin the form of ajudgmentthatthedefendantis toactuallyper
form thecontractaccordingto its terms andstipulations.
Acontract,accordingto theIndianContractAct, is anagreementenforce
able by law. From everycontractthereimmediatelyanddirectlyresultsan
obligation on each of thecontractingpartiestowardstheothertoperform
such of the terms of thecontractas he hasundertakentoperform.'^'And if
the person on whom this obligation rests, fails to discharge it, there results
inmoralityto the otherpartya right at his election either to insist on the
actual performance of thecontractor to obtain satisfaction for the non-per
formanceofit.
An obligation includes every duty enforceable by law. Consequently,
whenever amancomesunderaliabilityto do orforbearfrom doing any
thing, he remains under an obligation. This liability may be a consequence
of either acontractor atort.Anobligationtoforbearis a positivedutygen
erally imposed by a contract. This form of specificreliefis described as "the
specificperformanceofcontract".
S. 9.Defencesrespectingsuitsforreliefbasedoncontract.— Except as
otherwiseprovided herein, where any relief is claimed under this Chapter in
respectof a contract,theperson against whomthereliefis claimed may plead
by way ofdefenceanygroundwhich is available to himunderany law relating
tocontracts.
Defencesunderlawofcontracts
Section9 of theSpecificReliefAct, 1963 providesthat except as provided
in this chapter{i.e.Chapter II, Sections 9 to 25) alldefencesopen under
the law of contract shall be open to a defendant, where any reliefis claimed
under this Chapter in respect of a contract.Defencesthat are available
45.KumariAnandanv T.BalamukundaRao, AIR 2002 Mad 472; Ameer Mohd vBarkatAlt,
AIR 2002 Raj 406, in both these cases the action was founded upon oral agreement, but the
details of the agreement were not proved and, therefore, no relief could be allowed.https://t.me/LawCollegeNotes_Stuffs

999. 856 Chapter 16SpecificReliefAct,1963 [S.9]
under the law of contract, such asincapacityof parties, the uncertainty of
contracts, coercion, undueinfluence,fraud, misrepresentation, mistake, etc.
haveallbeendealtwithintheIndianContractAct.Thissectionavoidstheir
repetition in theSpecificReliefAct. Thus it isnecessarythat the contract
in question shouldbevalid andenforceable.TheSupremeCourt refused
to grant the relief of specific performance where thecontractwas in an
alternativeformandoneformhadfailedtomaterialiseandtheotherwas
void, being not enforceable by virtue of uncertainty. It was acontractof sale
stipulating that if the co-sellerfailed to sign the sale deed then the principal
sellerwouldexecuteasaledeedofherown"oneoftwoshares",otherwise
pay back the advance and compensation in the same amount. The co-seller
did not sign. The alternative for thepromisorwas either to sell her share or
pay compensation. If she opted for compensation there was no breach and
no question ofspecificperformance,which was also not possible because
her share wasnotdefined nor wasthereanyindicationof thepartof the
lump sumconsiderationwhichwas applicable to hershare.''^
Acontingentcontractto the effectthatthemortgagedhouse would be
sold assoonas themortgagewasredeemedwas held by theSupremeCourt
to be specificallyenforceableon theredemptionof themortgage,thoughno
relief could beprovidedon facts because the claim was filed morethanthree
yearsafterthe date ofredemption."*^
Governmentcontracts
IthasbeenheldthataGovernmentcontractwhichisconcludedwithout
fulfilling therequirementsprescribedby Article 299 of theConstitutionof
Indiacannotbe specificallyenforced."*^
Validityoforiginalcontract
In a suit for specificperformance,thesubsequentpurchaserchallenged
thecontentionthattheoriginalcontractto sell was fictitious andnotgenu
ine, but the suit wasultimatelydecreed. It was heldthatthe firstappellate
courtoughtto haveconsideredthe evidenceandrecordeditsownfindingas
towhethertheoriginalagreementwastrueandvalid.'"
46.MayawantivKaushalyaDevi,(1990) 3 SCC 1. AcontractwiththeGovernmentwhichdid
not comply with therequirementsof Art. 299 of theConstitutionwas not allowed to be
enforced. SohanLaiv UnionofIndia,(1991) 1 SCC 438: AIR 1991 SC 955. C.BalaSubba
Reddy vLakshmiNarasamma,(2002) 10 SCC 247: AIR2002SC 390, a new plea not allowed
to beraisedat theappellatestage.
47.RamzanvHussaini,(1990) 1 SCC 104: AIR1990SC 529.ParmanandvBajrang,(2001) 7
SCC 705, the defence raised wasthatmoney was not taken as aconsiderationfor sale but by
way of loan and thepropertywas offered as a security for repayment of loan and he sought
adjournmentfor adducing evidence to prove the real nature of thetransaction,rejecting his
defence without giving him theopportunityto prove was held to be wrong. The suit was
remandedforretrial.
48.Bishandayal& Sons vStateofOrissa,(2001) 1 SCC 555: AIR2001SC544.
49.RamNiwasvBano,(2000)6 SCC 685:AIR2000SC2921.HansaV.GandhivDeepShankar
Roy, (2013) 12 SCC 776: (2013) 116 Cut LT 457, aletterofintentdoesnotbringabouta con
cludedcontract,withoutsuchcontractthere is no right to seek specificperformance.https://t.me/LawCollegeNotes_Stuffs

1000. [S.9] Specificperformance of contracts 857
Thedefencethat thepurchasewasmadebonafideforconsiderationwith
outnoticeof theearlieragreementfor salewouldhaveto beprovedby the
secondpurchaser.Thisdefencecanbedefeatedbyshowingthat anoticeof
the salewasgivento him. Wherethe onlyevidenceofprior noticewas a copy
of anapplicationappearingtobeendorsedbytheSub-Registrarbutthere
wasnocorrespondingrecordor entryintherecordsoftheSub-Registrar,it
washeldthat suchanapplicationwouldnotconstitutepriornotice.^®
Privityofcontractbetweenthepartiestothesuitisalsoathingofcardi
nalimportancefor adecreeofspecificperformance.^^
Delayas ground ofdefenceunder law of contract
Wherea suitwaswithintheperiodoflimitation,butdelayhadresulted
inthirdpartiesacquiringrightsinthesubject-matterofthesuitorhadgiven
risetoapleaofwaiveritwasheldthatitwouldprovidegroundsofdefencein
asuitforspecificperformanceofcontractforsaleofimmovableproperty."
Thepresentappealarisesout of anagreementforsaleofthesuitprop
erty,betweentheappellantwould-bepurchaserandrespondentvendor.
UndertheagreementtheconsiderationfixedwasRs25,000;ofthissumthe
appellantpaidRs17,000atthetimeoftheexecutionofthecontracton20
February1977.Thebalanceamountwastobepaidwithinfivemonths,i.e.
before19July1977,atthetimeoftheexecutionofthesaledeed.According
totheappellant,therespondentwouldnotacceptthebalanceamountdue
and did not executethe sale deed. Therefore the appellant sent three notices
dated15March1978,4April1978and the last on 26November1978,
throughhislawyertonoavail.On10August1979,aboutninemonths
afterthedateofthelastnotice,theappellantfileda suitforspecificperfor
manceand,inthealternative,fordamagestothesumofRs38,000.The
respondent-defendantdeniedtheexecutionoftheagreementforsale,his
signatureonitandthereceiptofRs17,000aspart-consideration.Thetrial
courtfoundthattheagreementhadbeenexecutedasaverredanddecreed
the suit for specificperformance.
OnappealtheBombayHighCourtaffirmedthefindingastotheexist
enceoftheagreementbutsetasidethereliefastospecificperformanceand
allowedcompensation.TheSupremeCourtallowedtheappealagainstthis
judgmentwithcosts.Thecourtsaid:
"Theaspectsofdelaywhicharerelevantinacaseofspecificperfor
manceofcontractfor sale ofimmovablepropertyare:
(2)delayrunningbeyondtheperiod,prescribedundertheLimitation
Act;
50.ZorawarSinghvSarwanSingh,(2002)4SCC460:AIR2002SC1711.
51ChurchofChristCharitableTrust&EducationalCharitableSocietyvPonniamman
Educational Trust,(2012)8 SCC706:(2012)4 SCC(Civ)612.
52.LimitationAct,1963,Art.34.https://t.me/LawCollegeNotes_Stuffs

1001. 858 Chapter 16SpecificReliefAct, 1963 [S.10]
{ii)delayin caseswhere, though the suit is within the period of limita
tion,yet:
{a)due to delay the third parties have acquired rights in the sub
ject-matterof the suit;
[b]in thefactsandcircumstancesof thecase,delaymaygiverise
to plea ofwaiverorotherwiseit will beinequitableto grant a
discretionaryrelief.
Here none of theabove-mentionedaspectsapplied.The last notice was
issuedon26-11-1978andfromthatdatethe suitwasfiledonlyafter
ninemonthsand not aftermorethan a yearasnotedbythe High Court.
Thereforeon thefactsof thiscasethe ground ofdelaycannot beinvoked
to deny relief to theplaintiff."^^
Section 10 of theSpecificRelief Act enumerates those cases in which the
specificperformanceofcontractscan beenforced.
S. 10.Casesinwhichspecificperformanceofcontractenforcea
ble.—Exceptasotherwiseprovidedinthischapter,thespecificperformanceof
anycontractmay, inthediscretionoftheCourt,beenforced—
[a)whenthereexistsnostandardforascertainingtheactualdamagecaused
bythe non-performance of the act agreed to be done; or
[b)whentheactagreedtobedoneissuchthatcompensationinmoney,for
its non-performance would not affordadequaterelief
Explanation.—Unlessanduntilthe contraryisproved,the Courtshall
presume—
(/)that thebreachofacontracttotransferimmovablepropertycan
not beadequatelyrelievedbycompensationinmoney;and
(ii)thatthebreachofacontracttotransfermovablepropertycanbe
so relievedexcept in thefollowingcases—
(a)wherethe property isnot an ordinaryarticleofcommerce,or is
ofspecialvalueorinterestto theplaintifforconsistsofgoods
which are not easilyobtainableinthemarket;
(b)wherethepropertyisheldbythedefendantas the agent or
trusteeoftheplaintiff.^"*
53.MotilaljainvRamdasiDevi, (2000) 6 SCC 420: AIR 2000 SC 2408.
54.Clauses{a)and{b)ofthissectioncorrespondwithclauses{b)and(c)ofS.12oftherepealed
SpecificReliefAct,1877.TherelevantillustrationsappendedtotheprovisioninthatActmay
bereproduced:
Illustrationastoclause(a).—Aagreestobuy,andBagreestosell,apicturebyadead
painterandtworareChinavases.AmaycompelBspecificallytoperformthiscontract,for
thereisnostandardforascertainingtheactualdamagewhichwouldbecausedbyitsnon-per
formance.[BasedonFalckevGray,(1859)4Drew651:113RR493.]
Illustrationsas toclause(b).—(1)AcontractswithB tosellhimahouseforRslOOO.B
isentitledtoadecreedirectingAtoconveythehousetohim,hepayingthepurchase-money.
(2)InconsiderationofbeingreleasedfromcertainobligationsimposedonitbyitsAct
o{Incorporation,arailwaycompanycontractswithZtomakeanarchwaythroughtheir
railwaytoconnectlandsof Zseveredby therailway,to constructa roadbetweencertain
specifiedpoints,topayacertainannualsumtowardsthemaintenanceofthisroad,andhttps://t.me/LawCollegeNotes_Stuffs

1002. [S.10] Specificperformance of contracts 859
Contractswhich are specifically enforceable[S.10]
Whereno other suitable remedy
In a case beforetheSupremeCourt a family woman (appellant'smother)
borrowed a sum of moneyfrom afamilymember(respondent'sfather)and
executed a deed of sale of herpropertyin favour of the lender'sminorson
with an agreement ofreconveyanceon repayment of the loan. The dues
under the loan were paid back and on denial ofreconveyance,theSupreme
Court upheldthe decreeofspecificperformance orderingreconveyance.The
mortgagee having disposed of the property, the decree was allowed to be
enforced against such buyeralso."
The shares of a private company have been held to be goods of such a
natureas they are not easilyobtainablein the market. Thecourt,therefore,
laid downthatspecificperformanceshould begrantedin suchcases.The
courtcited the following opinion of the PrivyCouncil:^^"It is also the opin
ion of the Boardthathaving regard to the nature of the company and limited
marketfor its shares, damages would not be an adequate remedy."
Validcontractinexistence
There should be a concludedcontract.In the present, there was an agree
ment fortransferofpropeirty.Thetransferordid not dispute the agreement
in his reply to the notice from the transferee. He did not even dispute in his
writtenstatementaverments made in theplaintas to theagreement.No such
also toconstructasidingandawharfas specified in thecontract.Z isentitledto have
thiscontractspecifically enforced, for hisinterestin itsperformancecannotbeadequately
compensatedfor by money; and thecourtmayappointaproperpersontosuperintendthe
constructionof the archway, road, siding andwharf.[Based onStorervGreatWesternRly
Co, (1842) 2 Y&;CChCas 48: 63 ER 21.]
(3)Acontractsto sell,andBcontractsto buy, acertainnumberofrailway-sharesof
aparticulardescription.A refuses to complete the sale. B may compel A specifically to
performthisagreement,for thesharesarelimitedinnumberandnotalwaysto be had in
themarket,and their possessioncarrieswith it thestatusof ashareholder,whichcannot
otherwisebeprocured.
(4) Acontractswith B topaintapicturefor B, who agrees to paythereforRs1000.The
pictureispainted.B isentitledto have it delivered to him onpaymentortenderof Rs1000.
55.NivartiGovindIngale vRevanaBhimanagoudaPatil,(1997) 1 SCC 475.KaulashwariDeviv
NawalKishore, 1955 Supp (1) SCC 141: AIR 1994 SC1200,subsequentbuyer of theproperty
affected by the decree. M.RamalingatnvSubramanyam,AIR 2003Mad305,registeredsale
deed, the seller could not provethatit was amortgagetransaction.Considerationnot low,
thus the agreement was for sale, the defendant compellable to perform hispartof thecontract.
Aniglase Yohannan vRamlatha,(2005) 7 SCC 534: AIR 2005 SC 3503, found from aver
ments in the plaint and from evidence that theplaintiffhad complied withstatutoryrequire
ments. He was entitled to specific relief. Vishwa Nath Sharma v ShyamShankerGoenka,
(2007) 10 SCC 595, sale of sub-lease of plottakenfrom DDA,permissionof theAuthority
being necessary, the decree had to be moulded accordingly. P.S.RanakrishnaReddy vM.K.
Bhagyalakshmi, (2007) 10 SCC 231: AIR2007SC 1256, agreement found to be one of sale
and not loan, a provision for damages in case of default was not a determinative factor.
56.M.S.MadhusoodhananvKeralaKaumudiPLtd,(2004)9SCC204:AIR2004SC909.
57. BankofIndiaLtdvJamsetjiA.H.Chinoy& ChinoyandCo,(1949^50)77lA76: AIR 1950
PC90. CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

1003. 860 Chapter16SpecificReliefAct,1963 [S.10]
pleawasraisedbeforetheHighCourtorthetrialcourt.Hence,existenceof
the agreement was notdisputed/®
Theothertworequirementsforseekingspecificreliefarethat thedefend
ant committed breach of the contract and that the plaintiff was alwaysready
andwillingtoperformhispart oftheobligationintermsof thecontract/^
Where anagreementfor sale prescribed aretrospectivedate for execu
tion, the court said that it was notpermissible.It would make the contract
vagueandtherefore,incapableofexecution.Suchanagreementcannot be
sought to be specificallyenforced.®"
Contractnotextinguishedby decree
Thepassingofdecreeforspecificperformance does not extinguish the
contract between the parties. The parties continue to be entitled to their
rights and bound by theirobligationunder the contract. Thedecreefor
specificperformancemerelyrecognisesentitlementto the claim forspecific
performance.®^
Agreementfor reconveyance orrepurchase
An agreement to repurchasepropertywhich had been sold, popularly
know as agreement for reconveyance,has been held to bespecificallyenforce
able. Referringto such an agreementinV.Pechimuthu vGowrammal,^^the
SupremeCourtsaid:
"Such an agreement, not being merely a privilege or concession, such
as an option to purchase, granted to the owner, remains an agreement for
sale of immovablepropertyand must be governed by the same provisions
of law as are applicable toordinaryagreements for sale. Decision as to
whetheranagreementis anoptiontopurchaseor anordinaryagreement
depends oninterpretationof its terms. It was held on the factsthatthe
reconveyanceagreementin favour of theappellant-plaintiff,theoriginal
vendor, was anordinaryagreementfor sale. TheHighCourtinsecond
. appeal erred in reversing the decree of specificperformancein his favour
grantedbytrialcourtandaffirmedby firstappellatecourt."
Delay
Unreasonabledelay by aplaintiffinperforminghispartof thecontract
operatesas abarto hisobtainingspecificperformance,providedthat—
58.KammanaSambamurthyvKalipatnapuAtchiitamma,(2011) 11 SCC 153: AIR 2011 SC 103.
59. ManKaurvHartarSingh Sangha, (2010) 10 SCC 512. The SupremeCourtemphasisedthatit
is not necessarythatthere should be a provision in thecontractentitlingthe aggrievedparty
to seek specific relief.
60.BachanKaurvSadhuSingh, AIR 2016NOC291(P&H).
61.AmolVDeorao,AIR2011NOC215 (Bom).
62. (2001) 7 SCC617;AIR2001SC2446.BismillahBegumvRahmatullahKhan,(1998) 2 SCC
226: AIR1998SC970,time is of the essence in acontractofreconveyance.V.R.Sudhakara
RaoV T.V.Kameswari,(2007)6 SCC 650, oralcontract,thereis necessity ofproofof fully
concludedcontractanditsessentialterms.https://t.me/LawCollegeNotes_Stuffs

1004. [S. 10] Specificperformanceofcontracts861
(/)time wasoriginallytheessentialelement of thecontract;or
{ii)it was made anessentialelement by asubsequentnotice; or
[iii)the delay has been sounreasonableandlongthatitamountstoaban
donmentofthecontract/^
As a generalpropositionof law, in the case of sale of immovableproperty
there is nopresumptionas to time being the essence of thecontract.Even
if it isnotoftheessence of thecontracttheCourtmayinferthatit is to be
performedwithina reasonable time if theconditionsare evident:
(/)from the expresstermsof thecontract;
{ii)from thenatureof theproperty;and
[Hi)from thesurroundingcircumstances,forexample,the object of
makingthecontract.
From the expression, "Rs98,000(rupeesninety-eightthousandonly)will
be paid by the secondpartyto the firstpartywithin a period of ten days
only" in thecontract,it is clearthattheamountof Rs98,000ought to have
been paid on or before the 10th day. Failure to do so constituted a breach
committedby the defendant. The word "only" has been used twice over
(1)to qualify the amount ofRs98,000,and(2)to qualify the period of 10
days. The evidencealso showedthatthe plaintiff was not willing to pay this
amountunless vacant delivery of possession of one room on theground
floor was given. The notices which were exchanged between thepartieshave
to be looked into indeterminingreadinessandwillingness.^''
It has been heldthata person seeking specific enforcement of acontract
mustapproach the court within reasonable time even if time is not of the
essenceofthecontract.Itwasfurtherheldthat"reasonabletime"meansas
soon as circumstances permit. Where the defendant was to remove a tele
graph pole from a property and then to execute the sale deed, but he only
removed the pole and did not execute the sale deed despite notice and the
plaintifffileda suit within one month of removalof the pole, it was held, on
the facts,thatthe suit was filedwithinreasonabletime. Time was not of the
essenceof the present contract. The court said: "The word 'reasonable' has
in law a prima facie meaning of reasonable in regard to those circumstances
of which the person concerned is called upon to act reasonably knows or
ought to know as to what was reasonable. It may be unreasonable to givean
exactdefinitionoftheword'reasonable'.Thereasonvariesinitsconclusion
according to idiosyncrasy of the individual and the time and circumstances
in which he thinks. The dictionary meaning of 'reasonable time' is to be so
much time as is necessary, under the circumstances, to do convenientlywhat
63.K.S.VidyanadamvVairavan,(1997)3 SCC 1: AIR1997SC 1751, delay of2Viyears after
paying a small amount by way of earnest moneyfor purchasingimmovableproperty, disenti
tled from claimingspecificrecoveryof property.DeokabaivUttam,(1993)4 SCC 181, delay
inexecutingtheconditionsof the saledeprivedthe right tospecificperformance,refund of
earnestmoneyordered.
64.CbandRanivKamalRani,(1993) 1 SCC 519:AIR1993SC1742. CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

1005. 862Chapter16 SpecificReliefAct,1963 [S. 10]
thecontractor duty requires should be done in aparticularcase. Inother
wordsitmeans,assoonascircumstancespermit."
"Thelegal actioninitiatedby theappellant-plaintiffwas rightly held by
the trialcourtand the first appellatecourtto have been commencedwith
outdelay and definitelywithinareasonabletime. TheHighCourtwasnot
justified indisturbingthe finding of factarrivedat onappreciationof the
evidence, whiledisposingof the second appeal.
A validcontractof salemustbeprovedbyproducingtheoriginaldocu
ment.Inthiscase a copy of thecontracttypedinduplicatewasproduced
before thecourt.Theson of thedeceasedvendoradmittedthesignatureof
hisfather.TheHighCourtfoundonevidencethattheoriginaldocument
wasretainedby thevendorandhe didnotproduceit.TheHighCourt
acceptedthedocumentasgenuineanditscontentsastrue.TheSupreme
Courtheldthatontheevidenceontherecord,sufficientfoundationfor
acceptingthedocumentby way ofsecondaryevidence intermsofSection65
oftheEvidenceActhadbeenlaid.^®
It has been held by theSupremeCourtthatspecificperformanceof a con
tractcannotbedecreedagainstadefendantwhois devoid oftitle—Nemo
datquodnonhabet.^^
Sale byjointowners
The SupremeCourtpropoundedthefollowingproposition:"Whereany
propertyis held jointly, and once anypartyto thecontracthasagreedto
sell suchjointpropertybyagreement,then,even if theotherco-sharerhas
notjoined,atleastto theextentof hisshare,he isboundtoexecutethe
saledeed.However,intheabsenceoftheotherco-sharertherecouldnot
be any decree of any specifiedpartof thepropertyto bepartitionedand
possessiongiven.Thedecreecouldonly be totheextentoftransferringthe
share of the appellants in suchpropertytoothersuchcontractingparty.In
thepresentcase, it is not in disputethattheappellantshave5/6thssharein
theproperty.So, theplaintiff'ssuit for specificperformanceto theextentof
65.VeerayeeAtnmalvSeeniAmmal,(2002)1 SCC134:AIR2001SC2920.Wherethereis no
concludedcontract,the relief of specificperformancecannotbe had,GaneshShet v C.S. G.K.
Setty,(1998) 5 SCC381.GunwantbhaiMulchandShahvAntonElisFarel,(2006)3 SCC
634: AIR2006SC 1556, saleagreement,caseremandedfor redecission on meritsincluding
the point oflimitation,because thematterwas 29 years old.VishwaNathSharmav Shyam
ShankerGoenka,(2007) 10 SCC 595, compensation for appreciation in value ofproperty
when specificperformancewasgrantedafterseveral years.
66. T. Mohan vKannamtnal,(2002) 10 SCC 82.]aiNarainParasrampuriavPushpaDevi Saraf,
(2006)7 SCC 756, a clear and validagreementof sale was notallowedto betakenoutof
the scope of specificperformanceby trying to put in the category of aloantransaction.
DyaneshwarRamachandraRao Patange v Bhagirathibai, (2006) 6 SCC 663, the person,
who was vendee of thepropertyunderanagreement,died leaving behind hiswidowandthree
daughters. Hisbrotherapplied for specific enforcement of the agreementcontendingthatthe
widow hadremarriedand twodaughtersrelinquishedthe share in his favour. Thecourtdid
not consider these points because the brother had no right, to the exclusion of the legal heirs,
tofilethesuit.
67.MayaDevivLataPrasad,(2015)5 SCC588.https://t.me/LawCollegeNotes_Stuffs

1006. [S. 11] Specificperformanceofcontracts863
this 5/6ths share was rightly decreed by the HighCourtwhich requires no
interference."^®
S.11.Casesinwhichspecificperformanceofcontractsconnectedwith
trustsenforceable.—(1)Except asotherwiseprovidedin this Act, specificper
formanceof acontractmay, inthediscretionofthecourt,beenforcedwhenthe
actagreedto bedoneis intheperformancewholly orpartlyof atrust.
(2) Acontractmadeby atrusteeinexcessof hispowersor inbreachoftrust
cannotbespecificallyenforced.
Performanceoftrusts
Section11(1)providesanothercircumstanceinwhichcontractscanbe
specificallyenforced.
Enforcementoftrustee'sduty
Thecreationof atrustimposes adutyon thetrustees,whichmay be
enforcedeven bystrangersto thetransactionwhomaynothave been in
existenceat itsdate,iftheyhave aninterestunderthecontract.Thuscon
tractsconnectedwithtrustscanbespecificallyenforcedeither at theinstance
ofthebeneficiariesorattheinstanceofthetrustees.
Section 11(2), however, providesthatacontractmade by atrustee:
[i)in excess of hispowers,or
[ii]inbreachoftrust,
cannotbe specificallyenforced.
In the first case it is beyond hiscompetenceand,in the second case, it is
unlawful."Inbreachoftrust"meansactinginviolationof the dutiesand
obligationsimposedby thetrust.®
68. A.AbdulRashidKhanvP.A.K.A.ShahulHamid,(2000)10 SCC 636.SurinderSingh v
KapoorSingh, (2002) 10 SCC 109, theotherjointownercontestedthe suit on thegroundthat
she was not apartyto thecontract.Thecourtdissentedfrom the decision inKartarSingh
VHarjinderSingh, (1999) 3 SCC 517 in which thecourtordereddelivery ofhalfshare of
the jointpropertyon payment of half of the consideration money. Awadesh YadavvSuresh
Thakur,(2002) 10 SCC 156, jointHindufamilyproperty,theKartawas found to be not com
petentto sell.
69. S. 11 brings together Ss. 12(a) and21(e)of the repealed SpecificRelief Act, 1877. The relevant
illustrationsappendedtherethatAct may bereproduced:
(1) A holdscertainstock intrustfor B. Awrongfullydisposes of the stock. The law cre
ates an obligation on A to restore the samequantityof stock to B, and B may enforce specific
performance of this obligation. [Thisillustrationwas repealed wherever theIndianTrusts
Act, 1882 is inforce—seeS. 2andScheduleofthatAct.]
(2) A is atrusteeoflandwith power to lease it for seven years. He enters into acontract
with B togranta lease of the land for seven years, with a covenant to renew the lease at the
expiry of the term. This contract cannot bespecificallyenforced. [Basedon Mortlock v Buller,
(1804) 10 Ves292:7RR417.]
(3) Thedirectorsof acompanyhave power to sell theconcernwith thesanctionof a
general meeting of the shareholders. Theycontractto sell itwithoutany suchsanction.This
contractcannotbe specifically enforced.
(4) Two trustees, A and B, empowered to selltrustpropertywortha lakh of rupees, con
tractto sell it to C for Rs30,000.Thecontractis sodisadvantageousas to be abreachoftrust.https://t.me/LawCollegeNotes_Stuffs

1007. 864Chapter16SpecificRelief Act, 1963 [S.12]
Limitation
A suit forspecificenforcementsliouldbe filed for specificperformance
within the period stipulated under Article 54 of the Limitation Act, 19637°
In acontractwhere no date forperformancewas final, thecourtsaidthat
the period of limitation wouldstartrunningfrom the date on which the
plaintiff comes to know that the otherpartywas refusingperformance/^
S. 12.Specificperformanceofpartofcontract.—(1)Except asotherwise
hereinafterprovidedin thissection,thecourtshall notdirectthespecific per
formanceof apartof acontract.
(2)Where apartyto acontractisunableto performthewhole of hispartof it,
butthepartwhichmustbe leftunperformedbearsonly a smallproportionto
thewholeinvalueandadmitsofcompensationinmoney,thecourtmay, atthe
suit ofeitherparty,directthespecificperformanceof so much ofthecontract
as can beperformed,and awardcompensationinmoneyforthedeficiency.''^
(3)Where apartyto acontractisunableto performthewhole of hispartof it,
andthepartwhichmustbeleftunperformedeither—
[a) forms aconsiderablepartofthewhole,thoughadmittingofcompensa
tioninmoney;or
(b)doesnotadmitofcompensationinmoney;
he isnotentitledtoobtainadecreeforspecificperformance;butthecourt
may, atthesuit oftheotherparty,directthepartyindefaulttoperformspecifi
cally so much of hispartofthecontractas he canperform,iftheotherparty—
(/')in acasefallingunderclause(a),pays or has paidtheagreedconsidera
tionforthewholeofthecontractreducedbytheconsiderationforthe
partwhichmustbeleftunperformedandin acasefallingunderclause
(b),^^[paysor has paid]theconsiderationforthewholeofthecontract
withoutanyabatement;and
(//)ineithercase,relinquishesallclaimstotheperformanceoftheremaining
partofthecontractandallrighttocompensation,eitherforthedefi
ciencyor fortheloss ordamagesustainedby himthroughthedefaultof
thedefendant.^"
Ccannotenforceits specificperformance.[Based onMortlockvBuller,(1804) 10 Ves292:
7RR417.]
(5) Thepromotersof acompanyforworkingminescontractchat thecompany,when
formed,shallpurchasecertainmineralproperty.Theytakenoproperprecautionstoascertain
the value of suchproperty—andin fact agree to pay anextravagantpricetherefor.Theyalso
stipulatethatthevendorsshall givethemabonusoutof thepurchasemoney.Thiscontract
cannotbespecificallyenforced.
70.ThakammaMathewv M.AzmnathullaKhan,1993 Supp (4) SCC492:AIR 1993 SC1120.
71.M.K.VsmanKoyav C.S.Santha,AIR2003Ker 191:(2003)3 CLT12.
72. For example, seeIllustrationto S. 14 of the old Act, cited above. Undercl.(2)performancecan
beenforcedeitherby thepromisoror by thepromisee.
73.Ins.by theRepealingandAmendingAct,1964(52 of1964),S. 3andSch. II.
74.Whilecl. (2)relaxesthe rulethatpartof acontractcannotbespecificallyenforcedinfavour
ofboththeparties,cl. (3) does so infavourof thepartynotindefault.Partyindefaultis the
partywho isunabletoperformthe whole of hispartof thecontract.Theprincipleunderlying
cl. (3) isthatthepartywho is not atdefaultisentitledto specificperformanceof so much of ahttps://t.me/LawCollegeNotes_Stuffs

1008. [S. 12] Specificperformanceofcontracts865
(4)When apartof acontractwhich,takenby itself, canandoughtto be
specificallyperformed,standson aseparateandindependentfootingfrom
anotherpart ofthesamecontractwhichcannotoroughtnot to be specifically
performed,thecourtmaydirectspecificperformanceoftheformerpart7=
Explanation.— Forthepurposesof thissection,apartyto acontractshall
bedeemedto beunabletoperformthewholeof hispartof it if aportionof
itssubject-matterexistingatthedateofthecontracthasceasedto exist atthe
timeof itsperformance/®
Specificperformanceofpartofcontract[S.12]
Section 12 deals withspecificperformanceof apartof acontract.It pro
vides in clause(1)thatas a general rule, thecourtshall notgrantspecific
performanceof apartof acontract.The section, however, recognisesin
contractas theothercanperform.RachakondaNarayanavPonthalaParvathamma,(2001)
8see173, thereHefofdirectingthedefendantpartytoperformspecificallyso much of his
partof thecontractas he canperformcan be pleaded at theappellatestage also when the fact
of thedefaultingparty'sinabilitytoperformapartof thecontractcomes to the knowledge of
thepartyseeking specificperformance.
75.Forexample,if, at anauction,apersonpurchasesseveralplotsofland,theinabilityof the
vendor to make out good title to one plot will not prevent him fromenforcingspecific per
formanceof the sale ofotherplots.BalkarSingh vMohabatSingh, AIR2004P8cH340,
agreementfor sale ofdefendant'sshare inpropertyas well as share of hisminorsonwith
outcourtpermission,enforceableto theextentofdefendant'ssharereducingconsideration
proportionally.
76.Sub-sections(1), (2), (3), (4) andExplanationof this sectioncorrespondwith Ss.17,14,15,16
and 13 of therepealedSpecific Relief Act, 1877.ThatActcarriedthe followingillustrations:
Illustrationsas tosub-section(2).—(a)Acontractsto sellBa piece of landconsistingof
100bighas.Itturnsoutthat98 bighas of thelandbelong to A,andthetworemainingbighas
to astranger,whorefusestopartwiththem.Thetwobighasare notnecessaryfor the use
orenjoyment(of the 98bighas,nor soimportantfor such use orenjoyment)thatthe loss of
themmay not bemadegoodin money. A may bedirectedat the suit of B to convey to B the
98bighas and to makecompensationto him for not conveying the tworemainingbighas; or B
may bedirected,at the suit of A, to pay to A onreceivingtheconveyanceandpossessionof the
land, thestipulatedpurchasemoney, less a sumawardedascompensationfor the deficiency.
[Based onRichardsonv Smith, (1870) LR 5 Ch App 648.]
{b)In acontractof the sale andpurchaseof a house and lands for two lakhs of rupees, it is
agreedthatpartof thefurnitureshould betakenat avaluation.TheCourtmaydirectspecific
performanceof thecontractnotwithstandingthatthepartiesare unable to agree as to the
valuationof thefurniture,and may either have thefurniturevalued in the suit and include it
in the decree for specificperformance,or mayconfineits decree to thehouse.
Illustrationsas tosub-section(3).—{a)Acontractsto sell to B a piece oflandconsisting
of 100 bighas. Itturnsoutthat50 bighas of the land belong to A, and theother50 bighas to
astranger,who refuses topartwith them. Acannotobtaina decreeagainstB for the specific
performanceof thecontract;but if B is willing to pay the price agreedupon,and to take the
50bighaswhichbelong to A,waivingallrightstocompensationeitherfor the deficiency or
for losssustainedbyhimthroughA'sneglectordefault,B isentitledto a decreedirectingA
to convey those 50 bighas to him onpaymentof thepurchasemoney.
(b) A contracts toselltoBan estate with a house and a garden for a lakh of rupees. The
gardenisimportantfor the enjoyment of the house. ItturnsoutthatA is unable to convey
thegarden.Acannotobtaina decreeagainstB for the specificperformanceof thecontract;
but if B is willing to pay the price agreedupon,and to take the estate and housewithoutthe
garden, waiving all rights to compensation either for the deficiency or for loss sustained by
himthroughA's neglect or default, B is entitled to a decree directing A to convey the house to
him onpaymentof thepurchase-money.https://t.me/LawCollegeNotes_Stuffs

1009. 866 Chapter 16SpecificRelief Act, 1963 [S.12]
clauses(2)to(4)certain exceptions to the above rule.Whetherspecific per
formanceof a part of the contract is to be ordered orn9thas been wholly
left by the section to one deciding factor,namely,theproportionthepart
which can be performed bears tothatwhichcannotbe performed. Where
the part which cannot be performed bears only a smallproportionto the
whole in value and the unperformedpartcan be compensated adequately in
terms of money, thecourtmay order specificperformance of onepartand
compensationfor the other.
Aslightlydifferent principlecomesinto playwhere thepartwhich cannot
be performed forms a considerablepartof the whole. In such cases thecourt
has first to seewhetherthe majorpartwhich has to be left out admits of
money compensation or does not do so. If the unperformedportioncan be
compensated in terms of money thecourtmay order specific performance
of the rest, providedthatthepartyseeking relief has paid his consideration
underthecontractasreducedby theamountofcompensationfor theunper
formed portion. Where the matter does not admit of compensation thecourt
may order specificperformance only when thepartyseeking relief has paid
his wholeconsiderationwithoutanyreductionwhatsoever.
Where thepartthat would remain unperformed does not admit of com
pensation in terms of money, thecourtwould orderspecificperformance
only if thepartyseekingperformanceundertakesto pay theconsideration
for thewholeof thecontractwithoutanyabatement.
In eithersituation,thepartyseekingperformanceof apartof acontract
has to relinquish all claims to the performance of the remainingpartand
also all rights tocompensationeither for the deficiency or for any loss or
damagesustainedthroughthedefendant'sdefault as toperformance.
An illustrative account of theworkingof the principle is to be found in
RutherfordvActonAdamsJ"^
If a vendor sues and is in apositionto conveysubstantiallywhatthe
purchaserhascontractedto get, thecourtwill decree specificperformance
withcompensationfor any small andimmaterialdeficiency,providedthat
thevendorhasnot,bymisrepresentationorotherwise,disentitledhimself
to this remedy.Anotherpossible case arises where avendorclaims specific
performanceand where thecourtrefuses it unless thepurchaseriswillingto
consentto a decree on the termsthatthevendorwill makecompensationto
thepurchaserwho agrees to such a decree onconditionthathe iscompen
sated. If it is thepurchaserwho is suing, thecourtholds him to have even a
larger right. Subject toconsiderationsofhardship,he may elect totakeall
he can get,andto have aproportionateabatementof thepurchasemoney.
But thisrightapplies only to a deficiency in thesubject-matterdescribedin
thecontract.
77. 1915 AC 866 (PC). Where thepropertycame to the share of twobrothersjointly and one of
themsold thewholeto aneighbour,the buyer wasallowedto recover only thesellingmem
ber'sshare.SardarSingh vKrishnaDevi,(1994) 4 SCO 18.https://t.me/LawCollegeNotes_Stuffs

1010. [S. 12] Specificperformanceofcontracts867
TheSpecificRelief Act, 1877 (now repealed)carriedthe following illus
trationin thecorrespondingSection 14:
Acontractsto sell toBapieceof landconsistingof 100bighas.Itturnsoutthat98bighas
ofthelandbelongto A,andthetworemainingbighasto astranger,who refuses topartwith
them.The twobighasare notnecessaryfortheuse orenjoymentofthe98bighas,nor so
importantfor such use orenjoymentthattheloss ofthemmay not bemadegoodin money.
Amay bedirectedatthesuit ofBto convey to B98 bighas and to makecompensationto him
for not conveyingthetwo remaining bighas; or Bmay bedirected,inthesuit of A,to pay to
A, on receivingtheconveyanceandpossessionoftheland,thestipulatedpurchasemoney
less asumawardedascompensationforthedeficiency.'®
In acontractfor the sale and purchase of a house and lands for Rs 2
lakhs, it is agreedthatpartof thefurnitureshould be taken at a valuation.
Thecourtmay direct specificperformanceof thecontractnotwithstanding
the parties are unable to agree as to the valuation of the furniture, and may
eitherhavethefurniturevaluedinthesuitandincludeitinthedecreefor
specificperformance, or may confine its decree to the house.
Where acontractwas incapable of beingperformedand apartycategori
cally refused to acceptpart-performancejit was heldthatthere was no read
iness and willingness at all stages to acceptpart-performance.Therefore
such a party could not be permitted later to change its position and elect to
acceptpart-performance.^'Thecourtsaid:
"In cases where acontractis not capable of beingperformedin whole
then the readiness and willingness, at all stages, is the readiness and will
ingness to acceptpart-performance.If acontractis not capable of being
performedin whole and a partyclearlyindicatesthat he is not willing to
accept part-performance, then there is no readiness and willingness,at all
stages, to accept part-performance. In that case there can be nospecific
performance of apartof thecontractat a later stage."
In a case under theJ&KSpecificRelief Act, 1977[S.15] it was heldthat
where a party was unable to perform the whole of hispart,the courtcould
direct the performance of so much of hispartas he was capable of perform
ing(l/3rdshareof theproperty)."
The requirements of the section were stated by theSupremeCourt as
follows:®^
"The ingredients which wouldattractspecificperformance of thepart
of thecontractunder thelatterpartofsub-section(3)of Section 12 are:
78. Based onRichardsonv Smith,(1870)LR 5 Ch App 648 andArnoldvArnold,(1880) LR14
'ChD270..
79.SurjitKaurvNaurataSingh,(2000)7 SCC 379: AIR2000SC 2927.
80.Ibid.
81.ManzoorAhmed Magray vGhulamHassanAram, (1999) 7 SCC 703: AIR2000SC 191.
82. Rachakonda Narayana v Ponthala Parvathamma, (2001) 8 SCC 173.ChenguniOthayoth
ThankomvKoolothBalakrishnanNair, AIR2002Ker 297, reducing the claim to apartof
the property at the appellate stage was not material to relief becausethe plaintiff know from
the very beginning that the document was defective.https://t.me/LawCollegeNotes_Stuffs

1011. 868Chapter16 SpecificReliefAct,1963 [S. 13]
(i)if apartyto anagreementisunabletoperformapartof thecontract,
he is to betreatedasdefauhingpartytothatextent,and{ii)theother
partyto anagreementmust,in a suit for such specificperformance,either
pay or havepaidthe whole of theagreedamount,forthatpartof the con
tractwhichis capable of beingperformedby thedefaultingpartyandalso
relinquishhis claim inrespectof theotherpartof thecontractwhichthe
defaultingpartyisnotcapableofperformingandrelinquishestheclaim
ofcompensationin respect of losssustainedby him. If suchingredients
are satisfied, thediscretionaryrelief of specificperformanceisordinarily
grantedunless there is delay or laches or anyotherdisabilityon thepart
of theotherparty."
Illustrationsas toExplanation.— (a) Acontractsto sell ahouseto
B for alakhofrupees.The dayafterthecontractismade,the house is
destroyed by a cyclone. B may be compelled toperformhispartof the
contractby paying thepurchase-money.
{b)Inconsiderationof a sum of money payable by B, Acontractsto
grantanannuityto B forB'slife. The dayafterthecontracthas been
made, B isthrownfrom his house and killed.B'srepresentative may be
compelled to pay thepurchase-money.
Rightsofpurchaseror lesseewhereseller's orlessor's
titleimperfect[S. 13]
S. 13.Rightsofpurchaserorlesseeagainstpersonwithnotitleor
imperfecttitle.—(1)Whereapersoncontractsto sell or letcertainimmovable
propertyhavingno title or only animperfecttitle,thepurchaserorlessee(sub
jectto theotherprovisions of this Chapter), hasthefollowing rights,namely—
{a)ifthevendoror lessor hassubsequentlytothecontractacquiredany
interestintheproperty,thepurchaserorlesseemaycompelhim to make
goodthecontractputofsuchinterest;
(b)wheretheconcurrenceofotherpersonsisnecessaryfor validatingthe
title,andtheyareboundtoconcurattherequestofthevendoror lessor,
thepurchaserorlesseemaycompelhim toprocuresuchconcurrence,
andwhenaconveyancebyotherpersonsisnecessarytovalidatethe
titleandtheyareboundto convey attherequestofthevendoror lessor,
thepurchaseror lessee may compel him toprocuresuchconveyance;
(c)wherethevendorprofesses to sellunencumberedproperty,butthe
propertyismortgagedfor anamountnotexceedingthepurchasemoney
andthevendorhas in fact only a right toredeemitthepurchasermay
compelhim toredeemthemortgageandtoobtaina validdischarge,
and,wherenecessary,also aconveyancefromthemortgagee;
(c/)wherethevendoror lessorsuesfor specificperformanceofthecontract
andthesuit isdismissedonthegroundof hiswantof title orimperfect
title,thedefendanthas a right to a return of hisdeposit,if any, withhttps://t.me/LawCollegeNotes_Stuffs

1012. [S.13] Specificperformanceof contracts 869
interestthereon,to hiscostsofthesuit,andto a lien for suchdeposit,
interest and costs on the interest, if any, of the vendor or lessor in the
propertywhich isthesubject-matterofthecontract.
(2)Theprovisionsof sub-section(1)shallalsoapply,as far as may be,to con
tractsforthesaleorhireofmovableproperty.
Section 13 deals with the rights of a purchaser or lessee against a per
son with no title orimperfecttitle. The ideaunderlyingthis sectionis that
whenapersonentersinto a contractwithoutthepowerforperformingthat
contract andsubsequentlyheacquiresthe power ofperformingthesame,
he is bound to do so. This section is, however, limited to contracts to sell
or letproperty.This resultmaynotnecessarilyfollowparticularlywhere
thepurchaserwasawareof the lack oftitle.In thiscase,thesellerwasthe
cultivatingtenant of the land inquestion.Thepurchaser(plaintiff)from
him wasverymuchawarethat he had notitle.The court said thatsuch
purchaserhadnorighttoseekspecificenforcementoftheagreementtosell.
Evensubsequentacquisitionoftitlebythesellerwouldnotenureto the ben
efitofsuchpurchaser,becausehecouldnotsaythat hehadcomewithclean
hands.
The different clauses of Section 13 affect the remedy of the buyer and
theobligationof theseller.Thesectioncomesintoplaywhenthesellerof
immovablepropertyhasnotitleoronlyanimperfecttitle.Ifheacquiresany
interestinthepropertysubsequently,thepurchasercancompelhimtomake
goodthecontractout ofsuchinterest.Whereconcurrenceoforconveyance
bysomeotherpersonisnecessarytoenablethevendortovalidatehistrans
fer,andifthatpersonisboundtoconcurat thedirectionofthevendor,the
purchasercancompelthevendortoprocuresuchconcurrenceandvalidate
thetransfer.Where thevendorpurported to sell the property asfreefrom
anyencumbrance,etc.,but thepropertyis infactsubjectto amortgage
and, if the amountof themortgageisequalto thesaleprice,thebuyermay
compelthevendortoredeemthemortgageandtransferthepropertyto
himfreefromthemortgage.Wherethe contractoftransferwassubjectto
theresponsibilityofthevendortoapplyforandtogettheagriculturalland
convertedintonon-agriculturaluseandthoughhe had notobtainedsuch
permission,thelandinquestionwasheldtobespecificallyrecoverablefrom
himwhen,byvirtueofaninterveningstatutoryenactment,thevendeewas
ableto getthelandconvertedtohisuse.®''Wherethevendorsuesthebuyer
forspecificperformanceandthesuitisdismissedonthegroundofwantof
titleorimperfecttitle,thevendeewouldbeentitledtorefundofhisdeposit
alongwithinterestandalsocostsand thisclaimwilloperateas acharge
upontheinterest,ifany,of thevendorin theproperty.
83. S. KanakaDurgaManikyhumbavRamapragdaSuryaPrakasaRao,AIR2010AP99.
84.RojasaraRamjibhaiDahyabhaiv]aniNarottamdasLallubhai,(1986)3SCC300:AIR1986
SC1912.https://t.me/LawCollegeNotes_Stuffs

1013. 870 Chapter 16SpecificReliefAct, 1963 [S.13]
Amendmentofplaintforrelinquishmentofperformance
ofremainingpart
The relinquishment of claim as contemplated under Sectionll{2)){a)as
regards performance of the remaining part and rights as to compensation
need not bespecificallypleaded.Thesub-sectiondoes not lay down any
limitation for filing such an application for amendment. It can be filed at
any stage of the proceedings and also before theSupremeCourt. Delay is
immaterialfor thispurpose.^^
Purchaserofshare inunpartitionedproperty
The caseinvolvedsale bytwo brothers onlyof their sharesin the unparti
tioned jointlyinheritedproperty. Theotherco-ownerswere two sisters who
had notjoinedthesale.TheSupremeCourtsaid:"Section12 of theSpecific
ReliefAct would be of noassistancein the situation obtaining here. In the
absence of sisters being parties to the agreement, the vendee can at best
obtain theundividedinterestof the two brothers in the property.Section12
cannotbe involved by the vendee in the sale ofundividedshareof thetwo
brotherswith a right toforcepartition on thesisterswhowerenot parties
to theagreementof sale. Such a reliefcannotbeobtainedunderSection 12
byavendeeonpurchaseof anundividedsharein the property ofsomeof
theco-ownersagainst otherco-ownerswho werenot parties to thesale."®^
Thedefendantwas theownerof 3/4thundividedsharein theproperty.
The court said thatevensuchshare could besold.His property was identi
fiedbyaspecificshare.Theplaintiffwasreadyto paythefullprice.Adecree
forspecificrecoveryof such share could be passed.
Specificperformanceofpartofcontract
The whole of the property belonging to the joint owners was contracted
to besold.Oneofthemwasaminorwhosesharewasto betransferredon
obtaining court permission. Such permission could not be obtained. The
vendeeclaimedspecificperformanceof that part of the property which
belongedto the adultjoint-owners.It washeldthatsincetheycouldtransfer
their shares in the property and they being owners of definiteshares and no
courtpermissionbeingnecessaryfor that purpose, thedecreewas granted.
The contract was not ofcontingentnature. It wasnowhereprovidedthat
85.SurinderSinghvKapoorSingh,(2005)5SCC142.Theclaimanthas to payonlya propor
tionalpart of theconsideration.Thepromisein thiscasewasfor saleof propertyof theseller
andhissister.Hecouldnotpersuadethesister.Specificrecoveryofhispartwasallowed.Jeet
SinghVDaulatRam, AIR2012P8cH3, thevendorwas not abletoperformthe contract to
thefullextentbecause3/4thofthepropertyhadalreadybeendecreedinfavourofco-sharers,
thevendeewas willingto pay full price evenfor getting 1/4. This was allowed.He could relin
quish a part of his claim at any stage of proceeding.
86.Shanmughasundaramv DiraviaNadar,(2005) 10 SCC 728: AIR 2005 SC 1836.
87. GopalRamvilasGattani vSheshraoPimdlikHivarkar,AIR 2009 NOC 1366(Bom).https://t.me/LawCollegeNotes_Stuffs

1014. [S.14] Specificperformance of contracts 871
thecontractwastobecomevoidorunenforceableonthefailureofthecourt
permission.
S. 14.Contractsnotspecificallyenforceable.—(1)The following con
tractscannotbe specificallyenforced,namely—
(a) acontractforthenon-performanceof whichcompensationinmoneyis
anadequaterelief;
(fc>)acontractwhich runs into such minute or numerous details or which is
sodependenton the personalqualificationsor volitionof the parties, or
otherwisefrom itsnatureissuch,thatthecourtcannotenforcespecific
performanceof its material terms;
(c)acontractwhich is in itsnaturedeterminable;
(d)a contract the performanceofwhichinvolvesthe performance of a con
tinuousdutywhichthecourtcannotsupervise.
(2)Saveas provided by theArbitrationAct,1940,no contract to refer pres
entorfuturedifferences toarbitrationshall be specifically enforced;butif any
person who has made such a contract (otherthan anarbitrationagreement to
whichtheprovisionsof the saidActapply)and hasrefusedto perform it sues
inrespectofanysubjectwhichhe hascontractedtorefer,theexistenceofsuch
contractshallbarthesuit.
(3)Notwithstandinganything contained inclause(o)or clause(c)or clause(d)
of sub-section(1),the court may enforce specificperformance in thefollowing
cases—
(a)wherethesuit is fortheenforcementof acontract,—
(/)to execute amortgageor furnish any other security for securing
the repayment of any loanwhichthe borrower is notwillingto
repayatonce:
Providedthat where onlya part ofthe loan has been advanced the
lender iswillingto advance the remaining part of the loan interms
ofthecontract;or
(;7)to take up and payfor anydebenturesof a company;
(b)wherethesuitisfor—
(/)the execution of a formal deed of partnership, the parties having
commenced to carryon the businessofthepartnership;or
(//)the purchase of a share of a partner in afirm;
(c)where the suit isfor enforcement of contract forthe construction of any
buildingor the executionof any other workon land:
Providedthatthefollowingconditions arefulfilled,namely:—
(/)thebuildingorotherworkisdescribedinthe contractintermssuf
ficientlypreciseto enable the court to determine the exact nature
ofthebuildingor work;
88.P.C.VarghesevDevakiAmmaBalambikaDevi,(2005)8SCC486.KammanaSambamurthy
VKalipatnapuAtchutamma,(2011)11SCC153:AIR2011SC103,thehusbandtransferred
thewholeof theproperty,itturnedoutthat halfof thepropertybelongedtohiswifeand
shedidnotconsentto thetransfer.Specificperformancewasorderedagainsttheshareof the
husbandonly.https://t.me/LawCollegeNotes_Stuffs

1015. 872Chapter16SpecificRelief Act, 1963 [S. 14]
(/;)theplaintiff has asubstantialinterestintheperformanceofthe
contractandtheinterestis of such anaturethatcompensationin
moneyfornon-performanceofthecontractis not anadequate
relief;and
{Hi)thedefendanthas, in pursuance ofthecontract,obtainedposses
sion of the whole or any part oftheland on whichthebuilding isto
beconstructedorotherworkistobeexecuted.^®
89.Illustrationsinpreceding1877 Act. The section is based on S.21{a),{b),{d)and{g)of the
repealedSpecificReliefAct, 1877. That Act carried the following illustrations:
Illustrations as to sub-section(l){a).—Acontracts to sell, andBcontracts tobuy,a lakh
of rupees in the four per cent loan of the Central Government;
A contracts to sell, and B contracts to buy, 40 chests of indigo at Rs 1000 per chest:
In consideration of certain property having been transferred by A to B, B contracts
to open acreditin A's favour to theextentof Rs10,000,and tohonourA'sdraftstothat
amount.
The above contractscannotbe specifically enforced, for in the first and the second both A
and B, and in the third A, would be reimbursed by compensationinmoney.
Illustrations as to sub-section{l){b).—Acontracts to render personalserviceto B:
Acontractsto employ B onpersonalservice;
A, an author, contracts with B, a publisher, to complete a literary work.
Bcannotenforce specificperformanceof thesecontracts.
A contracts to buyB's businessat the amount of a valuation to be made bytwo valuers, one
to be named byA and the other by B. A and B each name a valuer, but beforethe valuation is
made, Ainstructshis valuer not to proceed;
Bya charter-party entered into in CalcuttabetweenA, the owner of a ship, andB,the
charterer,it isagreedthat the shipshallproceedtoRangoon,and thereload a cargoof rice,
andthenceproceedtoLondon,freightto be paid,one-thirdon arrivalatRangoon,and two-
thirds on delivery of the cargo in London;
A letsland to B and Bcontractstocultivateit in a particularmannerfor threeyearsnext
afterthe date of the lease;
A and B contract that, inconsiderationof annualadvancesto bemadeby A, B will for
threeyearsnextafterthedateofthecontractgrowparticularcropson thelandin hisposses
sion anddeliverthem to A when cut and ready fordelivery;
A contractswith B that, inconsiderationofRslOOOto be paid to him by B, he will paint
apicturefor B;
A contractswith B toexecutecertain works whichthe Court cannotsuperintend;
A contracts tosupplyB with all the goodsof a certain classwhichB mayrequire;
AcontractswithBto takefromB aleaseof a certainhousefor aspecifiedterm, at a spec
ifiedrent, "if the drawing-room is handsomelydecorated", even if it is held to have so much
certainty that compensation can be recovered for its breach;
AcontractstomarryB.
The above contracts cannot bespecificallyenforced.
Illustrationas tosub-section(I)(c).—Aand B contract tobecomepartners in a certain
business,thecontractnotspecifyingthedurationoftheproposedpartnership.Thiscontract
cannotbespecificallyperformed,for,if itweresoperformed,eitherA or Bmightatonce
dissolvethepartnership.[BasedonScottvRayinent,(1868)LR7 Eq112].
Illustrationas tosub-section{l)(d).—Acontractsto letfortwenty-oneyearsto Btheright
to usesuch part of a certain railwaymade byA as was upon B's land, and that B should havea
rightofrunningcarriagesoverthewholelineoncertainterms,andmightrequireAtosupply
thenecessaryengine-power,andthatAshouldduringthetermkeepthewholerailwayingood
repair. Specificperformanceof thiscontractmust be refused to B.https://t.me/LawCollegeNotes_Stuffs

1016. [S.14] Specificperformance of contracts 873
Contractswhichcannotbe specificallyenforced
The effectof theprovisionsinSection14 can bestated in terms of certain
propositions,namely,that in thecaseofthefollowingcontractsthereliefof
specificperformancecannotbe allowed:
1. Wherecompensationisadequate[S.14(l)(a)]
Courts will not orderspecificperformance of a contract where the
aggrievedparty canbeadequatelycompensatedintermsofmoney.Anordi
nary contract to lend or borrowmoneywhether with or withoutsecurity
is anexampleof a contract which cannot bespecificallyenforced,though
where a loan has been already advanced on the understanding that a secu
rity wouldbeprovidedagainstit, this can bespecificallyenforced.^"
2. Contracts involvingpersonal skill [S.14(l)(b)]
It isnotpossiblefor the court tosupervisetheperformanceof a contract
which runs into minute and numerous details or is dependent upon the per
sonalqualificationsof thepromisoror isotherwiseofvolitionalnature.
Contractsofemployment,contractsofpersonalservice,contractsinvolving
performance of artistic skill, like contracts to sing, to paint, to act, con
tracts ofauthorship,are ordinaryexamplesofthingsrequiringpersonal
skill and,therefore,beyondthecapacityof thejudicialprocesstoenforce
theiractualperformance.Theonlychoiceinsuchcasesisto becontentwith
damages.'^Anemployermaynot becompellabletokeepanemployeein
accordancewith a contract ofemployment,but the position will be differ
entwhereanemployeehasbeenremoved,for,in thatcase,if theremoval
iswrongful,theemployeecan bereinstated.TheSupremeCourt,however,
didnotapproveofanarbitrator'sawardreinstatingaprofessorremovedby
the DelhiUniversity.Acontract to publishapieceofmusicand a contract
to build ahouse'^havebeenspecificallyenforcedbecauseboth are purely
mechanicalfunctions.It isobservedinChittyonContracts:^''
90. S.14(3).MeenakshisundaraMudaliarvRathnasamiPillai,ILR(1918)41 Mad959.
91.GunputNarainSingh,re,ILR(1875-78)1Cal74,contractofmarriage;BansiSahvKrishna
Chandra, AIR 1951Pat 508, a leasecarrying personalcovenantsfor repair.
92. S.Diitt(Dr)vUniversityofDelhi,AIR1958SC1050:1959SCR236.PearliteLiners(P)Ltd
VManorma Sirsi,(2004)3 SCC172:AIR 2004 SC 1373, privateemployment,oral appoint
ment,theemployeedid notcomplywithorderoftransferandsoughtdeclarationthat the
transferwasillegal,that herserviceandbenefitsmustbemaintained,andthat theemployer
shouldberestrainedfromholdinginquiry against her. The court said that such arelief,if
granted,wouldamounttoenforcingacontractofpersonalservice,whichis notpossible
under the law. Shiv Kumar Tiwari v Jagat Narain Rai, (2001) 10 SCC 11: AIR 2002 SC 211,
adeclarationgivenbyacivilcourtthatthepersoninquestionwasapermanentlectureristhe
college,no binding efficacyset aside.
93.BarrowvChappell&Co,(1951)62TheAuttor38(unrep)citedinJosephvNational
MagazineCo,1959Ch14:(1958)3WLR366,citedinChittyonContracts(Vol1,24th
Edn,1977)1645.
94.Ibidatp.1646.https://t.me/LawCollegeNotes_Stuffs

1017. 874Chapter16SpecificReliefAct,1963 [S. 14]
"But specificperformanceof acontractto build can be decreed if (i)
the work ispreciselydefined;(it)damageswill not adequatelycompensate
the plaintiff; and(iii)the defendant is in possession of the land on which
the work is to be done so that the plaintiff cannot get the work done by
anotherbuilder."
Clauses of uncertainnature.—Thesuit was forspecificperformance of
the agreement of renewal of lease. There was a concurrent finding of the
courtbelow that the option of renewal was exercised against the terms of
the renewal clause. The clause required fixation of the terms and condi
tionsofrenewaland alsoitsperiodundermutualagreementoralternatively
through the village Mukhiya or Panchas. Such persons were not named
in the agreement. The lessee served legal notice of renewalwithoutfulfill
ing therequirementofinitialmutualassent. The relief ofrenewalwasnot
allowedtothelessee.^^
Contracts involving personal,confidentialandfiduciaryservice.—The
specificperformanceof a contract for personal,confidentialandfiduciary
servicedependentonmutualtrust,faithandconfidence has been held to be
barredunderSection14(l)(i3),{b)&c[d].^^
3.Contractsofdeterminablenature[S.14(l)(c)]
Specificperformanceis notorderedof acontractwhichis in itsnature
determinable.Anillustrationappearingunder thecorrespondingprovision
in the repealedAct of 1877sufficientlyexplains this point:
A and Bcontractto becomepartnersin a certain business, thecontract
did notspecifythe duration of the proposedpartnership.The contract
cannot bespecificallyperformed, for, if it were so performed, either A or
B might at oncedissolvethepartnership.^^
Similarly,no orderofspecificperformanceislikelyto bepassedwhenthe
contract isrevocableat the option of the opposite party. A revocable lease
is in thiscategory.'®Buta tenancyfromyear to year,determinablebyeither
party by half a year's notice to quit, isspecificallyenforceable.'^
A contract ofemploymentis notspecificallyenforceable.A person who
was selectedwas not allowed to get the position to which he wasselected.
The courtobserved:"Courts do not ordinarilyenforceperformanceof
contracts of a personal character, such as a contract ofemployment.The
95. ShantiPrasadDevi vShankarMahto, (2005) 5 SCC 543: AIR 2005 SC 2905.
96. PerceptD'Mark(India) (P) Ltd vZaheerKhan, (2006) 4 SCC 227.
97.Basedon ScottvRayment,(1868)LR7 Eq 112,otherwisewheretheagreementis for adefi
niteterm,EnglandvCurling,(1844) 8 Beav 129: 68 RR 39.
98.Lewisv Bond,(1853)52 ER34: 18Beav85. ONGC Ltd vStreamlineShippingCo (P)Ltd,
AIR 2002 Bom420, a contract of hiringvesselsfor three yearswith the rightreservedin the
hirertoterminateit afteroneyear,the courtsaidthat the hirercouldnot bepreventedfrom
exercisingthisright.
99.LevervKoffler,(1901) 1 Ch 543.https://t.me/LawCollegeNotes_Stuffs

1018. [S.14] Specificperformanceofcontracts875
remedy is to sue for damages. The grant ofspecificperformance is purely
discretionary and must be refused when notwarrantedby the ends of jus
tice. Suchrehefcan be granted only on sound legal principles. In the absence
of any statutory requirement, courts do not ordinarily force anemployer
torecruitorretainin service an employee not required by the employer.
There are, of course, certain exceptions to this rule, such as in the case of a
public servantdismissedfrom servicein contravention of Article 311 of the
Constitution;reinstatementof a dismissed worker under theIndustrialLaw;
a statutory body acting in breach of statutory obligations, and the like. The
facts of this case do not fallwithinthe exceptions. Therefore, theplaintiff's
suit for mandatory injunction, on the facts of the case, was rightly dismissed
by the trial court and wronglydecreedby the firstappellatecourt and the
HighCourt."""
A distributorship was held to be determinable in nature. An order could
not be passed for itsrestoration."^Where the plaintiff claimed that an
agreementin hisfavourto run a restaurant wasillegallyterminated, the
courtsaidthatthecontractnot being, specifically enforceable aninterim
injunction to restrain the termination could not begranted."^Thelicenceto
run the petrol pump was terminated. Thelicencewas granted under a revo
cableagreement.The court said that the only remedyfor thelicenceewas to
sue fordamagesandnot forenforcementof theagreement.The suit asfiled
washableto berejected."^
4. Contract requiringconstantsupervision [S.14(l)(d)]
Clause{d)ofSection14(1)saysthat a contract cannot bespecifically
enforcedwhere itinvolvesthe performance of a continuous duty which the
courtcannotsupervise.
For this reason courts have refusedspecificallyto enforce anundertaking
bythelessorof aserviceflattohavea porter"constantlyinattendance";"''
a tenant's undertaking tocultivatea farm in a particularmanner;"^the
obligationof arailwaycompanyto operatesignalsand toprovideengine
100. Nandganj Sihori Sugar Co Ltd v Badri Nath Dixit,(1991)3 SCC54: AIR 1991 SC 1525.
M.K.UsmanKoyav C.S.Santha,AIR2003 Ker191:(2003)3CLT12, in a pendingeviction
proceeding,thelandlordenteredinto anagreementwith the tenantthatevenif adecreeof
evictionwaspassed,itwouldnot beenforcedandthepartieswouldenterintoafreshtenancy
agreement.Evenso,thetenantdidnot payrentfor 14yearsand alsodidnot paythepremium
amount.It wasalsonotclearwhatwouldbe thetermsofthenewrentdeed.Thusthetenant
wasnotperforminghis part of thecontract.He wasnotableto get an orderfromthe court
directing the landlord to execute the deed.
101.IndianOil Corpn Ltd vAmritsarGas Service, (1991) 1 SCC 533.
102.VidyaSecuritiesLtdvComfortLivingHotels(P)Ltd,AIR2003Del214.BharatPetroleum
CorpnLtd vRajeshSharma,AIR2015NOC881(All),adealershipagreementwasheldto
be ofdeterminablenature. No injunction could be granted against determination of such
agreement.
103. BharatPetroleum Corpn Ltd vKhaybarTransport (P)Ltd, AIR 2011 All 131.
104.Ryan-vMutualTontineWestministerChambersAssn,(1893)1 Ch 116(CA).
105.RaynervStone,(1762)2 Edn128:28 ER845;PhippsvJackson,(1887)56LJCh550.https://t.me/LawCollegeNotes_Stuffs

1019. 876Chapter16 SpecificReliefAct,1963 [S. 14]
power;^"^acontractto keep an airfield inoperation;^"^theobligationof
ashipownerunder acharterparty^"®and acontractto deliver goods by
instalments.^"'
Where atenantvacated a site forpurposesofreconstructionunderan
understandingthataportionof the building would bereallottedto him,
thecourtheldthatthelandlordwasboundto provide the premises as
promised.""
Sub-section(3)qualifies to acertainextenttheoperationof the clauses
dealingwithsituationswherecompensationis an adequate relief and where
thecontractis unilaterally revocable. It says that an agreement to provide a
securityor to execute amortgageagainstaloanwhichhasalreadybeen pro
vided is specifically enforceable, if theborroweris not willing to pay back
the loan at once. Where the lender has advanced only apartof the loan,
he can claim specific relief only when he is ready and willing to advance
the remainingpartof the loan also. An agreement to take up, and pay for,
the debentures of a company is also specifically enforceable. Agreements to
execute a formal deed ofpartnershipwhere thepartnershave already com
menced business and to purchase the share of apartnerin a firm are also
specificallyenforceable.
Constructioncontracts[S.14(3)(c)]
As for agreementsfor the construction of a building, the principles crys
tallised in English law have been adopted by sub-section(3)(c).The agree
ment will be enforceable if the nature of the building is of exactnature,the
plaintiffhas asubstantialinterestin theworkandtheworkis also ofsuch
nature that itcannotbe compensated for in terms of money and the defend
ant is in possession of the whole or apartof the site.
In a case before theSupremeCourt,"ithe Authority which had to super
vise theperformanceof thecontracthadceasedto exist.TheCourtsaid:
"There is also force in the contention that the agreement is notspecifically
enforceablein viewofclause{d)ofsub-section(1)ofSection14oftheSpecific
ReliefAct, 1963. This provision provides that a contract, the performance
of whichinvolvesthe performance of a continuous duty which the court
cannotsupervise, is notspecificallyenforceable. Having regard to thenature
of the Schemeand the facts and circumstances of the case, it is clearthatthe
performance of the contractinvolvescontinuous supervision which is not
possible for the court. After repeal, such continuous supervision cannot be
106. PowellDuffrynSteam Coal Co v TaffValeRlyCo,(1874)LR 9 Ch App 331.
107.DowtyBoultonPaul Ltd v WolverhamptonCorpn,(1971) 1WLR204.
108.DeMattosvGibson,(1858) 4D&J276:124RR250.
109.DominionCoal Co vDominionIron& Steel Co, 1919 AC 293.
110.K.M.]ainaBeevivM.K.Govindaswami,AIR1967Mad369.
111. Her Highness Maharani Shantidevi P. Gaikwad v SavjibhaiHaribhaiPatel,(2001) 5 SCC
101:AIR2001SC1462.https://t.me/LawCollegeNotes_Stuffs

1020. [S.14] Specificperformanceofcontracts877
directed to be undertaken by the competent authority as such an authority
isnownon-existent."
Where thecontractinvolved a project ofpubHcinterest and the plaintiff
was not able to prove anyprimafacie case in his favour and his loss was also
ascertainable inmonetaryterms, thecourtrefused to grant an injunction
restrainingtheexecutionof a publicproject."^
Arbitration
Section 14 provides insub-section(2)that,except as provided by the
ArbitrationAct,1940,(nowArbitrationandConciliationAct, 1996) a con
tractto refer a present or future dispute toarbitrationshall not be specifi
cally enforced. Anarbitrationagreement operates as a bar to the filing of a
suit.
Lackoffreeconsentandsituationofnocontract
Wherethe pleathatthe sale deed wasexecutedunderdistress wasnot
taken by the vendor in hiswrittenstatement and this being a question of
fact, it was not allowed to be raised for the first time in second appeal. The
courtfound the sale agreement to be genuine andalsosupportedby lawful
consideration.The plea raised at this stagethatthe decree, if passed, would
causehardshipto him, was notentertained."^
Anagreementwhichwasnotsigned by the vendee and was signed only
by thevendorwas held to be aconcludedcontract.Thecourtsaidthatwhat
wasnecessaryforenforceabilitywasconsensusadidem. Suit for specific
performancecan bemaintainedeven on thestrengthof anoralagreement.^"
Atrustwascreatedby a lady.Underthetrustdeed,twotrusteeswere
appointedwhowere toactjointly. Yet the ladyherselfactedas atrusteeand
enteredinto anagreementofsaleonbehalfof thetrust.Thus,theagreement
was made inbreachof thetrustand in excess of thepowersofindividual
trustee.The buyer could not seek specificenforcement."^
Familysettlement
Anagreementfortransferofpropertywhichwas found to be apartof
thesettlementwasheldtobenotbereftofconsideration.Thesettlementis
aconsiderationin itself.Thedeed ofsettlementwasproduced.Itcarriedthe
provisionfor thetransferinquestion.Thecourtheldthatit couldnotbe said
thatthesettlementhadnotbeen proved. The decree of specificperformance
waspassed."^
112.EnvisionEnggvSachinInfaEnviroLtd,AIR2003Guj 164.
113.AmmisettiChandramvChodasaniSuryanarayana,AIR2003AP 269. Terai Tea CoLtdv
NathmalKedia,AIR2012Cal43, asituationof nocontract.Even anoralagreementwas
notproved.
114.MohdAbdulHakeemvNaiyazAhmad,(2004) 3 CLT137(AP).
115.SachchidanandaBanerjeevMolyGupta,AIR2015NOC552(Cal).
116.KanigollaLakshamanaRao vGudimetlaRatnaManikyamba,AIR 2003 AP 241.https://t.me/LawCollegeNotes_Stuffs

1021. 878 Chapter 16SpecificReliefAct, 1963 [S.15]
S. 15. Who mayobtainspecificperformance.—Exceptasotherwisepro
vided bythisChapter,thespecificperformance of a contract may be obtained
by—
(a) anypartythereto;
(b)therepresentative-in-interestortheprincipal, of anyparty thereto:
Providedthatwherethelearning,skill,solvency or anypersonalqual
ity of such party is amaterialingredient in the contract, or where the
contractprovidesthathisinterestshall not beassigned,hisrepresent
ative-in-interestor his principal shall not beentitledto specific perfor
manceofthecontract,unless such party has alreadyperformedhispart
ofthecontract,ortheperformancethereofby hisrepresentative-in-in
terest,or his principal, hasbeenacceptedbytheotherparty;
(c)wherethecontractis asettlementonmarriage,or acompromiseof
doubtfulrightsbetweenthemembersofthesamefamily,anyperson
beneficiallyentitledthereunder;
(d)wherethecontracthasbeenenteredinto by atenantfor life indueexer
cise of apower,theremainderman;
(e)a reversioner inpossession,wheretheagreementis acovenantentered
into with hispredecessor-in-titleandthereversionerisentitledtothe
benefitofsuchcovenant;
(f)areversionerinremainder,wheretheagreementis such acovenant,and
thereversionerisentitledtothebenefitthereofandwillsustainmaterial
injury byreasonof itsbreach;
(g)when acompanyhasenteredinto acontractandsubsequentlybecomes
amalgamatedwithanothercompany,thenewcompanywhich arisesout
oftheamalgamation;
(h)whenthepromotersof acompanyhave,beforeitsincorporation,entered
into acontractforthepurposesofthecompany,andsuchcontractis
warrantedbythetermsoftheincorporation,thecompany:
Providedthatthecompanyhasacceptedthecontractandhascommuni
catedsuchacceptancetotheotherpartytothecontract.
Persons for oragainstwhomcontractsmay be specifically
enforced[S. 15]
Assignee from legal heir
Theexpression"representative-in-interest"includes the assignee of a
right to purchase thepropertyand, therefore, he would have the title to
claim specificperformance."^The deed of assignment of a decree for specific
117.T.M.BalakrishnaMudaliarv M.SatyanarayanaRao,(1993)2 SCC 740:AIR1993SC
2449;KhiriaDevi vRameshwarSao, 1992 Supp (2) SCC 1: AIR 1992 SC1482,suit for
reconveyance.AshokKumarJ.PandyavSuyogCoopHousingSocietyLtd,AIR2003NOC
118 (Guj):2002AIHC3401,a clause in theagreementto sellsubjectto theconditionthat
in case ofrejectionby theGovernmentunderCeilings.Act, theagreementwould betreated
as cancelled. Specificenforcementwas not allowed when theagreementbecamecancelled
byreasonof theGovernmentrefusal.RaghuvirSinghBhattyv RamChandraWamanhttps://t.me/LawCollegeNotes_Stuffs

1022. [S. 16] Specificperformanceofcontracts879
performancedoesnotcreate anyright,title orinterestinimmovableprop
erty in favour of the assignee. Hence, such deed does not require any com
pulsoryregistration.The decree in this case was assigned in favour of one
of theplaintiffs.Theassignee beingrepresentativeininterestas defined in
Section15(^)wasentitledto seekenforcementofthedecreeunderOrder21,
Rule 16, CPC. Theassignmentinquestionwasthatof a decree forspecific
performanceof anagreementto sell. Thecourtsaidthatnoconsideration
wasrequiredto beshownfor such assignment."®
Lease or sale infavourofcompanybeforeincorporation
Wherea lease wasgrantedin favour of acompanybefore itsincorpora
tionand thepromotersof the company,insteadformedonly apartnership,
it was heldthatsuchpartnershipfirmcouldnotclaim anyrightsorinterest
under clause[h)in the property. The lease deed was signed only by the les
sor.Thetransactionwasineffectiveevenotherwise."'
Thepromotersof anunincorporatedcompanypurchasedcertainprop
erty for the purposes of the company. Clause{h)providesthatsuch transac
tion can be enforced by the company afterincorporationprovidedthatit has
accepted thecontractandcommunicatedits acceptance to theotherparty.
In this case,afteritsincorporation,thecompanyfiled a suitagainstthe
seller for adeclarationthatthe company was the owner of the property. The
courtsaidthatthisamountedto an acceptance of thecontractand commu
nicationto theotherparty. On the facts, however, the company could not
get the relief of recovery of property because there was undesirable conduct
of frivolous litigation on thepartofbothparties.The company was allowed
compensationand refund of theearnestmoney with 12 per centinterest.^^""
All buyers orcontracteesmustjoin
In order toobtainthe relief of specificperformance,allco-contractees.
mustbebeforethecourtbutallofthemneednotbeonthesameside.Others
can be joined as co-defendants. Where there is a single indivisiblecontract
to convey land to several persons, some of them only cannot seekspecific
performanceif the others do notwantit.^^^
S. 16.Personalbarstorelief—Specificperformanceof acontractcannot
beenforcedinfavourofaperson—
(a)whowouldnotbeentitledtorecovercompensationfor itsbreach;
[b)whohasbecomeincapableofperforming,or violates anyessentialterm
of,thecontractthaton hispartremains to beperformed,or acts infraud
Subhedar, AIR 2002All13, refusal of permission by ceiling Authority, repeal of Ceilings
Act, legal hurdle removed, decree of specific performance could be passed. The purchaser
hadcauseddelay in applying for permission. Prices escalated in the meantime. Decree of
specificperformancenot allowed.
118.AmolVDeorao,AIR2011NOC215(Bom).
119.MurariGangulivKanailalGarai, AIR 2003Cal105.
120.JaiHarainParasrampuriav Pushpa Devi Saraf, (2006) 7 SCC 756.
121.MukeshKumarvColHarbansWaraich,(1999) 9 SCC380:AIR2000SC172.https://t.me/LawCollegeNotes_Stuffs

1023. 880Chapter16 SpecificReliefAct,1963 [S. 16]
ofthecontract,or wilfully acts atvariancewith, or insubversionof,the
relationintendedto beestablishedbythecontract;or
(c)whofails to averandprovethathe hasperformedor has alwaysbeen
ready and willing to performtheessential terms ofthecontractwhich
are to beperformedby him,otherthantermstheperformanceofwhich
hasbeenpreventedorwaivedbythedefendant.
Explanation.—Forthepurposesofclause(c),—
(/)whereacontractinvolvesthepaymentofmoney,it isnotessentialfor
theplaintiff toactuallytendertothedefendantor todepositincourtany
moneyexceptwhensodirectedbythecourt;
(;/)theplaintiffmustaverperformanceof, orreadinessandwillingnessto
perform,thecontractaccordingto itstrueconstruction.
Personsnotentitledtoreliefof specificperformance
ThereUefof specificperformancecannotbeawardedin favour of the
following persons;
1. Apersoncannotseek specificperformancewherethecircumstances
are suchthathewouldnothave beenentitledtocompensationfor
breachofcontract.
2. Apersonwho isguiltyof any of thefollowingcannotclaim specific
performance:
{a)he has becomeincapableofperforminghispartof thecontract;
{b)he has violated any essential term of thecontractthaton hispart
remainedto beperformed;
(c)hehasactedinfraudofthecontract;
(d)he haswilfullyactedatvariancewithor insubversionof the rela
tionintendedto beestabhshedby thecontract.
3. Apersonwho has failed to averandprovethathe hasperforrnedor
has always been ready and willing toperformtheessentialterms of
thecontractwhichwere to beperformedby him exceptthoseterms
which he has beenpreventedfromperformingby theotherpartyor
theperformanceofwhichtheotherpartyhas waived.
Wherethecontractinvolvespaymentof money, it is notessentialfor the
plaintifftoactuallytenderto theotherpartyor todepositincourtany
money except when sodirectedby thecourt.Performancemustbe offered
accordingto thetrueconstructionof thecontract.
BeforeactingunderOrder8, Rule 10 of the CivilProcedureCode,the
courtin asuitfor specificperformancehas toscrutinisethe facts setoutin
theplaintto find outwhetherall therequirements,inparticularthose indi
cated in Section 16 of the SpecificRelief Actregardingreadiness and willing
ness, have been complied with ornot.^^^There has also to be a findingthat
all the requirements of an enforceable agreement are there. The Supreme
122.SyedDastagirvT.R.GopalakrishnaSetty,(1999) 6 SCC 337: AIR1999SC3029.Thecourt
followedR.C.ChandiokvChuniLaiSabharwal,(1970) 3 SCC140.S.Kaladeviv V.R.https://t.me/LawCollegeNotes_Stuffs

1024. [S.16] Specificperformance of contracts 881
Court hasobservedthatdecreeinga suit forspecificperformanceonlyon
thebasisofafindingthat theagreementwasgenuine,isnotproper.Several
otheraspectslikereadinessandw^illingnesshavealso to beconsidered.^^^
Readyandwilling[CL(c)]
ExplanationIImakesitnecessaryfor a partyclaimingspecificperfor
mancetoaverandprovethat he hasbeenall the time readyandvi^illingto
performhispart ofthecontract.^^''Continuousreadinessandw^illingnessto
perform his part of the contract on the part of the plaintiff is acondition
precedent for the grant of therelief.Where the plaintiff was found to be
Somasundaram,(2010)5 SCC401: AIR 2010 SC 1654, an unregisteredsale deed is admis
sibleinevidenceof the contract of sale for order ofspecificperformance.
123.DheerajDevelopers(P) Ltd v OmPrakashGupta, 2016 SCC OnLine SC 192:(2016)116
ALR484.
124. GajananJaikishanJoshi v Prabhakar MohanlalKalwar,(1990)1 SCC 166; SukhbirSingh
VBrij Pal,(1997)2 SCC200: AIR 1996 SC2510, the fact that the party waspresent in the
Sub-Registrar'sofficewithnecessaryfunds was held to be a proof of the party'sreadiness
andwillingness.The plea that thevendeedid not showreadinessandwillingnesscan be
taken by vendor only and not by thesubsequentbuyer.JugrajSinghv LabhSingh,(1995)
2 SCC 31: AIR 1995 SC 945. Sri BrahadambalAgencyvRamasamy,AIR 2002 Mad 352,
time not specified to be of the essence, the buyer ready and willing, bank balance is irrel
evant factor, suit within limitation.Specificrelief allowed. Dularo Devi v Asturna Devi,
AIR 2012 Pat 16, purchaser ready and willing to pay the balance money after chakbandi
proved, allowed relief.M.K.Makbool Khan v Shamsunisa, AIR 2002 NOC 87 (Kant), the
tenant who purchasedthepremiseswasdeductingexpendituremade on repair and also for
paymentoftaxes,the court said that thisshowedthat he had nointentionto paythe full
agreed price.Specificrelief was not allowed to him. ValliamalvAngammal,AIR 2002 Mad
292, the vendee was supposed to pay the price by redeeming the mortgages to which the
propertywas subject, but he didnotdo so as a result of which the vendor had to sell some
other property to pay off the bank. Thisshowedthat thevendeewas not willing to do his
partCeeanInternational(P) Ltd v Ashok Surana, AIR 2003Cal263, the property under
sale was mortgaged to theLIC,the agreement stipulated that the plaintiff was to take the
property in "as it is" state, but he made it clear that he was not going to take the property
untilagoodandamarketabletitle wasmadeout. Thecourtsaidthathecouldnotseek
enforcement. He was not ready and willing to take the property as it was. Time was also of
the essence which theplaintiffdid not keep.DuttaSeethamalakshmammavYanamadala
Balaramaiah,AIR 2003 AP 430, thevendeemade part paymentand that too after expiry
of the stipulated period, vendorcancelledtheagreement,thevendeekept silent andfileda
suit after a long period. His suit was rejected.He showedno credentials of either bona fides
or willingness. Sardar Joginder Singh v Vasandran Kakani, AIR 2003 NOC 340 (Ori), the
purchaser doubting seller's title, he also admitted that he had no sufficientmoneywith him
on the appointed date to seekingexecutionof sale deed, not ready and willing.He had to pay
interest on daily basis on default. Interest not paid. Provision showed that time was consid
ered to be important.Failureto keep time-bound commitmentsdebarred the plaintiff-buyer
fromspecificrelief. N. Satyanarayana vVedprakashDusaj,(2003)3 ALD 884, only small
amountpaid, no evidence that the buyer was ready and willing to pay thesubstantialbal
anceainount,specific relief not allowed. Theagreementwas for sale of leaseholdinterestin
immovable property, price rise inpendentelite period, not relevant to relief. Thecontract
was cancelledby notice. Suit filedthree years after that. Art. 54, Limitation Act appliedsuit
barred. T. Mohan v Kannammal, (2002) 10 SCC 82, the vendor parted with possession in
favour of the purchaser evenbefore the expiry of the period, the requirement of being ready
and willing lost its significance.The finding of the High Court was held to be justified that
the purchaser had satisfied the legal requirement of being ready and willing.https://t.me/LawCollegeNotes_Stuffs

1025. 882Chapter16SpecificReliefAct,1963 [S.16]
dabblinginrealestatetransactionswithoutmeanstopurchasetheproperty
andfailedtopaytheconsiderationmoneywithinthetimegivento himby
the trial court, itwasheldthat hewasnotreadyandwillingtoperformhis
part.i^^Whereacontractforsaleofahousestipulatedmakingofpart-pay
mentofpurchasepricewithinaspecifiedperiodso as toenabletheowner
who wasresidingin thehousetopurchaseasuitableresidencebyutilising
the amount, it was held that thepart-paymentmust be made within a rea
sonable time and failure to do so would seriously affect the proposed ven
dor'srighttoacquireanaccommodationandshowthattheproposedvendee
was notreadyandwillingtoperformhis part of thecontract.The court
saidthat the grant of adecreeforspecificperformancein thecircumstances
would amount to an instrument of oppressiongivingan unfair advantage to
theproposedvendeewhichthecourtshouldtakecaretoavoid.^^®
In a suit,forspecificperformanceofa contractforsaleofland, the read
inessandwillingnessofplaintifftoperformhispart ofthe contractis to be
ascertained from his conduct and attending circumstances.Where the plain
tiff neitherhadsufficientfunds to pay theconsiderationamount nor was he
actingpromptlywithinthestipulatedtimewheretimewastheessenceof
the contract, it was heldthat he was neitherreadynor willingto perform his
part ofthecontract.Hencehewasnotentitledto adecreeforspecificper
formance of thecontract.^^^The making of a conditional offer for payment
ofthestipulatedamountdoesnotfulfiltherequirementoflawcontainedin
Forms 47 and 48 of Appendix A to the CivilProcedureCode.^^®Depositing
ofanyamountinthecourtat theappellatestagewouldnotmeettherequire
ment of Section16{c)}'^^Where the land under sale was mortgaged to the
bank and the buyerhad agreed to pay back the loan and redeemthe mort
gagebut he didnothingin thatdirectionnorshowedanyinclinationto
do so, rather he wasappropriatingthe usufruct of the land tohimself,the
SupremeCourtheldthathewasnotreadyandwillingtoperformhispart."°
Where thevendeesent a legal noticerescindingthe contract andfileda
suit for refund ofadvancepaid and that wasdecreedby the trial court, his
applicationforrevisionand forspecificperformancewasdismissed.The
courtsaidthatit would not lie in hismouthto saythathe was ready and
125.N.P.Thirugnanamv R. Jagan Mohan Rao, (1995) 5 SCC 115.
126. P.R. Deb and Associates v Sunanda Roy, (1996)4 SCC 423: AIR 1996 SC1504. Raj Kishore
VPremSingh,AIR 2011 SC382,avermentas toreadinessandwillingnessis mandatoryin a
suit for specificperformance.
127. AcharyaSwamiGanesh Dassji v Sita Ram Thappar,(1996)4 SCC526;AIR 1996 SC2095.
128. Umabai vNilkanthDhondibaChavan, (2005) 6 SCC 243: (2005) Mah LJ 306, the mere
statementin the plaint or in the written statementof beingreadyand willingis notsufficient.
The entire set of attending circumstanceshas to be examined to ascertain the real position.
The onus as to this lies on the plaintiff even though not required by the defendant to do so.
129.Ibid.Raisingof thepleaofspecificperformanceof the contract forreconveyanceand the
alternative plea of cancellation of the debt or a decree for accounting, inconsistent, not
permissible.
130. R.K. Parvatharaj Gupta v K.C.JayadevaReddy,(2006)2 SCC428:(2006)3 Mah LJ1.https://t.me/LawCollegeNotes_Stuffs

1026. [S.16]- Specificperformanceofcontracts883
willing to go ahead withperformancefrom hisside."^Where thepurchaser
clearly averred his readiness and willingness toperform,thecourtsaidthat
it was notnecessaryfor him to show hispossessionof money to thecourt.
Thecourtfoundthatthetransferorwastryingtoscuttlethe sale in favour of
thetransferee.Heexecutedasaleinfavourofhisrelativeforalesseramount
who knew of theearliersale.Grantof relief of specificperformanceto the
first-purchaser was held to beproper.^^^
Apersonwhomakeshimselfapartyto an illegalcontractcannotenforce
hisrightsunderthissection.^^^
Whereone of the terms of anagreementfor sale wasthattheappellants
wouldwithdrawtheirsuit for specificperformanceandthe suit wasnot
withdrawn,it was heldthattheappellants-plaintiffscouldnotbe said to be
readyandwillingtoperformtheirpartof theagreement.The finding in the
impugnedjudgmentthattheconditionregardingwithdrawalof the suit was
aconditionprecedent,was alsocorrect.As theappellantsdid notwithdraw
the suit they couldnotbe said to be ready andwillingtoperformtheirpart
of theagreement.Forthisreasonalso theclaimfor specificperformance
couldnothavebeenenforced.""*
Averment as toreadinessandwillingnessin aplainthas been held to be
sufficient if theplaint,read as a whole, clearlyindicatesthattheplaintiff
was always and is still readyandwillingto fulfil hispartof theobligations.
Suchavermentisnotamathematicalformulacapable of beingexpressed
only incertainspecific words orterms."^Thecourtsaid: "An averment of
readiness and willingness in theplaintis not amathematicalformula which
should only be in specific words. If the averments in theplaintas a whole
131.PukhrajD Jain v G.Gopalakrishna,(2004)7 SCC 251: AIR2004SC 3504.Pemmada
Prabhakarv Youngmen's Vysya Assn, (2015) 5 SCC355;(2015) 3 SCC(Civ)56, a vendee
who defaulted in payment of instalments of price for the land under sale was not allowed to
claim specific performance. The whole property purchased from some of the sharers only,
notenforceable.
132. UshaVSukhdevSingh, AIR 2015NOC338(P&H).
133.I.T.C.LtdVGeorgeJosephPernandes,(1989) 2 SCC 1: AIR 1989 SC 839.
134. Bishandayal & Sons v StateofOrissa,(2001)1SCC 555: AIR 2001 SC 544; SyedDastagir
VT.R.GopalakrishnaSetty, (1999) 6 SCC 337: AIR 1999 SC 3029, deposit of money in
courtwithoutcourtordercannotgo against the person seeking relief. VijayBhadurand
Champalal v Surendra Kumar, AIR 2003 MP 117, there was no pleading in the plaint that
the purchaser had sufficientfunds with him or was having the capacity to pay the sale price.
He sent his notice to the seller after one year and nine months from the date of the agreement.
There was also variance between pleading and proof. Thecourtsaidthatthepurchaserhad
not proved hiswillingness.
135. Motilal Jain v Ramdasi Devi, (2000) 6 SCC 420: AIR 2000 SC 2408; Ajaih Singh vTulsi
Devi, (2000) 6 SCC566: AIR 2000 SC2493, default in payment of instalment, readiness and
willingnessnot proved. A. Abdul Rashid Khan v P.A.K.A. Shahul Hamid, (2000) 10 SCC
636, actinginaccordancewith the terms of the contract, nodelayand,therefore,ready and
willing. Boramma v Krishna Gowda, (2000) 9 SCC214, concurrent finding of fact by three
lowercourtsas to readiness and willingness.RakhaSingh v Babu Singh, AIR2002P8cH
270, drafting of plaint, need not be strictly as per Forms 47, 48 of CPC, a substantial com
pliancewith therequirementsof theFormswould besufficient.M.S. Madhusoodhanan v
KeralaKaumudiP Ltd, (2004) 9 SCC 204: AIR 2004 SC 909, agreement between membershttps://t.me/LawCollegeNotes_Stuffs

1027. 884Chapter16 Specific Relief Act, 1963 [S. 16]
do clearlyindicate the readiness and willingness of the plaintiff to fulfil his
part of theobligationsunder the contract which is thesubject-matterof the
suit, the factthatthey are differentlywordedwill not militateagainstthe
readiness and willingness of theplaintiffin a suit for specificperformance
ofcontractforsale.
Intheinstantcase,aperusaloftheplaintdoesclearlyindicatethereadiness
and willingness of the plaintiff. The only obligation which he had to comply
with was payment of balance of consideration. The appellant-plaintiff had
partedwithtwo-thirdsof the consideration at the time of execution of the
agreement for sale. There is no reason why he would not pay the balance
ofone-thirdconsiderationto have thepropertyconveyed in hisfavour.""^
The judgment of the HighCourtwas set aside and thejudgmentand
decreeofthetrialcourtwererestored.
Thus, there can be nostraightjacket formulaaboutreadiness and will
ingness. It depends upon overallconductof thepartiesprior to and sub
sequent to filing of the suit. The provision in the agreement wasthatthe
balanceamountwas to bepaidto the ITAuthorities.Thecourtsaidthatthe
vendor could not insistthatit should be paid to him. He couldnotonthat
groundsaythatthe vendee wasnotreadyandwilling."^
Anagreementbetweenthepartiesstipulatedtermsofreconveyanceon
paymentofloanamount.Theplaintiffssent notices timeandagain for
executionof sale deed and alsodepositedmoney in thecourtbefore the
date fixed in thejudgmentwhichwaspassedfor specificperformance.This
showedtheirreadinessandwillingness.Plaintiffswere heldentitledto spe
cificperformance.^^^
of aprivatecompanyfortransferof shares on thedeathof a member, suit filedwithin10
monthsof thedeathof the widowedmother,could not be said to be delayed.Aniglase
Yohannan vRamlatha,(2005) 7 SCC 534: AIR2005SC 3503, where theessentialpoints
containedin theplaintled to aninterferenceof theplaintiff'sreadiness andwillingness,the
SupremeCourtheldthattheHighCourtrightly concludedthattherequirementof S. 16(c)
wassatisfied.SubhashMainivNathiRam,AIR2012All 67, thecourtsawavermentas to
readinessfrom thetotalstateof thepleadings.Thevendeerepeatedlyrequestedthevendorto
takebalancemoney and to get thetransferregistered,heappointeda place where he would
comewithbalancemoneybutvendordidnotturnup. Thecourtsaidthatthe vendee was
ready and willing and wasentitledto specificperformance.
136.DeendayalvHarjotKanwar,AIR 2003 Raj202,the vendorpostponedthepurchaser's
requestforexecutionof sale deed bysayingthatherhusbandwasnotwell, he filed the suit
just after one month from the date of refusal, thecourtsaidthatthepurchaserwas ready
and willing to complete thetransaction.The secondpurchaserwas not found to be in a state
of bona fides.EmaniKrishnaRao v VijayaChitraFilms, AIR 2003NOC142 (AP):2003
AIHC334, readiness and willingness can be considered in appeal also while appreciating
other facts and circumstances.Dharamveerv SureshChandraBhardwaj, AIR 2016 All 48,
vendee claimed that he was ready with money and willing to pay and had sent a notice to the
vendor fixing the date for registratipn, he waited in the officeof Registrar, but vendor did not
turnup,requirementsproved.R R.AravindhanvK.R.S.Janakiraman,AIR2016NOC240
(Mad), thepurchaserproved loanarrangement,ability for readiness and willingness proved.
137.SatyaJainvAnisAhmeddRusQie,(2013)8SCC131:(2013)3SCC(Civ)738.
138.BiswanathGhosh vGobindaGhosh, (2014) 11 SCC 605: (2014) 104ALR184;MohdAbdul
Azeem vSouthIndiaPrimeTannery(P)Ltd,AIR 2016 Hyd 170, vendee showed sufficient
arrangementof money, madepaymentto some of the vendors andobtainedregisteredsalehttps://t.me/LawCollegeNotes_Stuffs

1028. [S. 16] Specificperformanceofcontracts885
Where theplaintiffshowedthathe was ready and willing to pay thepur
chase price andcontinuedto be so, the failure to pleadthathe had money in
thebankandhadnotwithdrawnit, wasimmaterialbecausethiswas amat
ter of evidence and had not to bepleaded.^^^Possession of adequate means
isnotamaterialfactorwhere the vendee hasnottakenany steps to dis
charge hispartof the obligation as provided in the agreement.Prohibition
of Section16{c)getsattractedin such a case. Thecourtsaidthatifthere
was undue delay orindifferenceon hispart,hiswillingnessdeserves to be
doubted. The refusal tograntrelief wasproper.""
Whenthepurchaserhad not sent anycommunicationto thevendorregard
ing hisreadinessandwillingness,had paid only aninsignificantamountas
advance, hadnotobtainedpermissionfrom CeilingAuthorities,hadtaken
no stepstowardsthevaluationof thesuperstructureon thelandasrequired
underthe saleagreement,neitherled evidencenorenteredthewitnessbox
insupportof hiswillingness,the SupremeCourtheldthattheHighCourt
hadrightly upheld the, dismissal of his suit for specificperformance."^A
plea was set upthattwo applicablestatutesprohibitedthetransferin ques- ,
tion. This plea wasnotraisedbefore thetrialcourtorAppellateCourt.
No evidence wasproducedon thepoint.The Acts onlycarriedrestrictions
whichwere capable of being cleared.Therewereconcurrentfindingsof fact
in favour of theplaintiff.Thecourtsaidthatthey werenotliable to beinter
feredwith.The decreepassedfor specificperformancecouldnotbe faulted.
Thecourtaddedthanthefactthattherewasaconsiderableincreaseinthe
priceof thesuitland,even iftrue,couldnotbe agroundfordenyingspecific
performance."^
Wherethe buyerpleadedthathewasreadyandwillingbut didnotpay
because the seller didnotget the sitemeasured.Thecourtfoundthatthe
buyer hadalreadypaidapartof theconsiderationindifferentspells in four
yearswhichwouldnothave been done ifmeasuringwas anessentialcon
dition.Hehadtakenoverpossessionyet didnotpay thebalanceandinsist
uponregistration.Hence he wasnotready andwilling."^
deeds from them for their respectiveshares,,depositedmoney for the onlyotherowner, can
cellationof the saleagreementby the vendor was notknownto vendee. Vendeepurchasedas
amanagingdirectoronbehalfof the company, specificperformancecould not be refused.
139.RakhaSingh vBabuSingh, AIR2002P&H270.
140. MalireddyButhiramannaDonayDasariVeerabhadraRao, AIR2012AP52. Daya Ram Soni
VGyarsiBaiKhandelwal,AIR 2016 Chh 73,verideenot able to prove his ability to pay the
balance money after payingearnedmoney. Vendor even waited at the office of the Registrar
on theagreeddate but vendee didnotturnup. Vendee was heldnotentitledto specific relief.
141.PushparaniS.SundaramvPaulineManomaniJames,(2002) 9 SCC582.P.Purushottam
Reddy vPratapSteelsLtd,(2002)2 SCC 686: AIR2002SC 771, in a suit for specificperfor
mance,theHighCourtdecideditwithoutconsideringinaccordancewiththe law laiddown
by theConstitutionBench of theSupremeCourtisChandRanivKamalRani,(1993) 1 SCC
519: AIR 1993 SC 1742, this was held to benotproper.
142.LaxmanTatyabaKankatevTaramatiHarishchandraDhatrak,(2010) 7 SCC 717: AIR2010
SC3025.
143. Puvvada Chiranjeeva Rao v Busi Koteswara Rao, AIR 2012'AP 17;DharambirPrasad v
DevendarGope, AIR 2011 Jha 20;conductshowedthatthepurchaserhad no readymoney.https://t.me/LawCollegeNotes_Stuffs

1029. 886Chapter16 Specific Relief Act, 1963 [S. 16]
The plaintiff(buyer)undertookthe responsibility of getting the premises
vacated from theunauthorisedoccupier. He sought specificperformance
without fulfilling suchundertaking.Thecourtsaid that how theplaintiff
could saythathewas ready and willing to perform hispartof thecontract.^'*''
The purchaser was required under the agreement to get permission for
transferof the surpluswithina specified time which he could not manage.
Thesellerofferedtoreturnhimhisearnestmoneybutherefusedtotakeit.
Withoutdisclosing this fact, he sought recovery of theearnestmoney with
24 per cent interest. Looking at his conduct, thecourtdid not allow him the
relief ofspecificperformance.'''^
The meremakingof a plea in theplaintis not sufficient. There must be
proofwithsatisfactoryevidence of the fact at all thematerialtimes of the
case. Thecourtsaidthattheconductof theplaintiffin issuingnoticeafter
a period of three years was sufficient in itself to disentitle theplaintifffrom
claimingthediscretionaryrelief.
Where the acknowledgement receipt of payment ofearnestmoney showed
overwritingandbanker'scheque for final payment was cancelled, it showed
noproperconduct. Specific enforcement was not allowed eventhoughthe
manshowedenoughmoneyin hisbankaccount.'''^
Unregisteredsaleagreement
Anunregisteredsale agreement was tendered in evidence. This was held
to be not an evidence of a completed sale, but asproofof anagreementof
he could not claim specific relief orrefundofearnestmoney.
144.PalayDuttavMohdAliAfsar, AIR 2016Cal199. Thecourt,however,observedotherwise
thatreliefcouldnothave beendeniedsimply on the basis of the factthattherewasdefaultin
makingup deficitstampduty.
145.CitadelFinePharmaceuticalsvRamaniyamRealEstates(P) Ltd, (2011) 9 SCC 147: AIR
2011SC3351.
146. AyithiAppalanaiduvPetlaPapamma,AIR2011AP 172; KalashProperties(PjLtdv Lilly
Pushpam,AIR 2010NOC772 (Mad). Theplaintiffmust plead and provethathe was ready
and willing to perform thecontractfrom its very commencement till end. He filed his suit
30monthsafterthe date ofcontract,nocommunicationinbetween,presumptionthathe
was not ready and willing.ShanthiKawarbaivSushila,AIR 2010NOC454MadDB, the
requisite permission which thepurchaserhad to manage, he could not do so, he filed his
case just one day beforeexpiryof the period oflimitationof three years. No relief allowed.
VishalkumarNeinichandKakadvShankarMahadeoKubde,AIR2009NOC258 (Bom),
plaintiffwas already in possession of the land to be bought by him, yet he complainedthat
thevendorhadnotcarriedoutdemarcation,it wassomethingwhichhecouldconveniently
dohimself.Thecourtsaidthathe was notreadyandwillingtoperformhispart.
147.DiwakarMullickv GangaKhandelwal,AIR 2016 Chh 53. For apropertyworthRs 9lakhs
only Rs11,000earnestmoney was offered. A suspiciousconduct.
MatadinYadav vMidasLids(P)Ltd,AIR2014NOC295 (Del), theplaintiffcompany
purchasedpropertyon payment of some advance, but could not pass necessary resolution
because themajorityshareholderdid notconsentto it and he was not willing toprovide
funds for thepurpose.Thecompanytherefore,had no basis to saythatit was ready and will
ing. The purchaser had alsoobtainedat his expense no objection certificates. But there was
neither any application for the same, nor any effort in that direction. Specificperformance,
notallowed.https://t.me/LawCollegeNotes_Stuffs

1030. [S. 16] Specificperformanceofcontracts887
sale. It was admissible in evidence as an oral agreement of sale. The pur
chaser was entitled to relief of specificperformance."^
Amendmentofplaint
Theamendmentwassoughtby theplaintiffvendee toincorporatethe
legal plea ofreadinessandwillingnesstoperformhispartof thecontract.
The plea happened to beomittedin theplaint.Thecourtsaidthatthe plea
wasnotnew to thedefendantandtherewas nochangein thecauseofaction.
Theamendmentwasaccordinglyallowed."^
Defaultof firstbuyeravailable as defence tosubsequentbuyer
The factthatthe buyer defaulted with payment and was, therefore, not
ready andwillingtoperform,whichis a defence available to the seller,would
also be available to the second buyer. An appeal being acontinuationof the
proceedingsthesubsequentpurchaserwasallowedtotakethatdefence.""
Necessaryorproperparty
It has been heldthatpersonswhoare likely tosecureinterestinthesuit
propertyafterdecisioninthependingsuit,areneitherapropernorneces
saryparties."^
Jurisdiction
Thedeclaratoryrelief entailsdeterminationof rights to orinterestsin
immovable property. Such relief can begrantedonly bycourtwithinwhose
localjurisdictionthepropertyissituate.Theplaintiffin this casehad
soughtdeclaratoryrelief inrespectofpropertywhen hehadonly achance
or hope ofgettingtitle to theproperty.His case was rejected. Hehadan
equally efficacious remedy of applying to theProbateCourtunderPartVII,
ChapterXXIIIof theIndianSuccession Act,1925."^
Decree, ex p.— In a suit for specificperformanceby thepurchaser,the
seller(defendant)did notfilehiswrittenstatement. A decree was passed as
prayed for under Order 7, Rule 10, CPC. The decree,thoughexparte,was
held to be valid for allpurposes.Thepartiesallowed the decree to become
final. The seller could notturnaroundand challenge the decree asunexecut-
able.Thecourtpassing a decree in a specificenforcement suitretainscontrol
over the decree in the process of itsexecution.Thepurchaserhadappliedfor
executionaftersixandahalfyears.Duringthisperiodpricesoflandshot
up. Thepurchaserdid not pay the balanceconsiderationamountbecause
148.AkshayDoogadvStateofM.P.,AIR2016MP83.
149.JagathSwapna&CovChurchofSouthIndiaTrustAssn, AIR 2011 AP 81.
150. RamAwadhvAchhaibarDubey,(2000) 2 SCC 428: AIR2000SC 860. Followed in Ceean
International(P)LtdvAshokSurana,AIR2003Cal263.
151.MumbaiInternationalAirport(P)Ltdv RegencyConventionCentre&Hotels(P)Ltd,
(2010)7SCC417:AIR2010SC3109.
152.PriyankaVivekBatravNeeruMalik, AIR2009NOC260 (Del).https://t.me/LawCollegeNotes_Stuffs

1031. 888Chapter16SpecificRelief Act, 1963 [Ss.17-18]
the transferor had not fulfilled his obligations. Neitherpartyapproached the
court for appropriate directions. Both parties were at fault. The court has
to balance equities in such a situation. The purchaser had to pay increased
landvalue."^
Selling orlettingpropertywithouttitle[S.17]
A person who contracts to sellor let outimmovableproperty with knowl
edgethat he has no right to do so cannot ask forspecificenforcementin his
favour. This will be so even if hehonestlybelievedthathehadthe title but
is not able to give at the time of performance a title free from reasonable
doubt. The same principle is applicableto sale or letting of movableproperty
also.Section17isasfollows:
S. 17.Contracttosellorletpropertybyonewhohasnotitle,notspe
cificallyenforceable.—(1)Acontractto sell or let anyimmovableproperty
cannotbe specificallyenforcedinfavourof avendororlessor—
(a)who, knowing himselfnotto have any title totheproperty,has con
tractedtosell orlettheproperty;
(b)who,thoughheenteredintothecontractbelievingthathe had agood
title totheproperty,cannotatthetimefixed bythepartiesor bythe
courtforthecompletionofthesale orletting,givethepurchaseror les
seeatitlefreefromreasonabledoubt.
(2)The provisions ofsub-section(1)shallnotapply, as far as may be, to con
tractsforthesaleor hire ofmovableproperty.
Whereperformancenot possiblewithoutvariation[S. 18]
"Wherethecontractis inwritingand, asagainstthepartyseeking specific
performance, the otherpartysets up the defence of variation, then in the
following cases specificperformancecannotbeawarded:
(a)where byreasonoffraud,mistakeof fact ormisrepresentation,the
writtencontractisdifferentfromwhatthepartiesagreedto, or does
notcontainallthetermson the basis ofwhichtheyenteredintothe
contract;
(b)where the object of thepartieswas toproduceacertainlegalresult
whichthecontract,asframed,isnotcalculatedtoproduce;
(c)wherethepartieshavevariedthetermsof thecontractsubsequentto
itsexecution.
The provisions of Section18are as follows:
S. 18.Non-enforcementexceptwithvariation.—Whereaplaintiffseeks
specificperformanceof acontractinwriting,towhichthedefendantsetsup a
variation,theplaintiffcannotobtaintheperformancesought,withthevariation
sosetup, inthefollowingcases,namely—
153.RajinderKumarv Kuldeep Singh, (2014) 15 SCC 529: AIR 2014 SC 1155.https://t.me/LawCollegeNotes_Stuffs

1032. [S. 19] Specificperformanceofcontracts889
(a)whereby fraud, mistake of fact ormisrepresentation,thewrittencon
tractof whichperformanceissoughtis in itstermsor effectdifferent
fromwhatthepartiesagreedto, ordoesnotcontainallthetermsagreed
tobetweenthepartiesonthebasis of whichthedefendantenteredinto
thecontract;
(b)wheretheobjectoftheparties was toproducea certain legal result
whichthecontractasframedisnotcalculatedtoproduce;
(c)wherethepartieshave,subsequentlytotheexecutionofthecontract,
varieditsterms.
"Whereapartof the property was inahenable on account of beingexcess
land under a ceiling legislation andanotherpartwas inalienable because
ofacquisitionby the State, it was held that the buyer could not seek spe
cificperformanceof such a contract inrespectof theremainingportion of
the propertyonly.The court said that such a situationwas notcoveredby
Section18."'*
Theword"court"includesan"arbitrator".OnlybecauseSection20 con
fers discretion on courts to grantspecificperformance it does not meanthat
the parties cannotagreethat thediscretionmay beexercisedby a forum of
theirchoice."^
S.19.Reliefagainstpartiesandpersonsclaimingunderthemby
subsequenttitle. —Exceptas otherwise provided by thisChapter,specific
performanceof acontractmay beenforcedagainst—
(a)eitherpartythereto;
(b)any other personclaimingunder him by a titlearisingsubsequently to
thecontract,exceptatransfereefor value who has paid hismoneyin
goodfaith andwithoutnotice oftheoriginal contract;
(c)anypersonclaimingunder a titlewhich,though priorto the contract and
known to theplaintiff,might have been displaced bythe defendant;
(d)when a company hasenteredinto a contract and subsequently becomes
amalgamatedwithanothercompany,the new company whicharisesout
oftheamalgamation;
(e)when the promotersofa companyhave,beforeitsincorporation,entered
into acontractforthepurposeofthecompanyand suchcontractis war
rantedbythetermsoftheincorporation,thecompany:
Providedthatthe company has accepted the contract and communicated
suchacceptancetotheotherpartytothecontract.
Reliefagainstparties, legalrepresentativesorsubsequenttransferee
Section19providesthat thereliefofspecificperformancecan beobtained
againstthe followingparties:
1. against eitherpartyto the contract;
154. K. Narendra v Riviera Apartments (P) Ltd, (1999)5 SCC 77: AIR 1999 SC 2309
155. OlympusSuperstructures(P) Ltd v MeenaVijayKhetan,(1999)5 SCC 651: AIR 1999
SC2102.https://t.me/LawCollegeNotes_Stuffs

1033. 890Chapter16 SpecificReliefAct,1963 [S. 19]
2.againstanyotherpersonwho claims titlearisingsubsequentlyto
thecontract,but not against atransfereefor value whopaidfor the
propertyingoodfaithandwithoutnotice of theoriginalcontract;
3.againstanypersonclaimingunderapriortitlewhichwasknown
to theplaintiff,wherethe title wassuchthatitcouldhavebeendis
placedby thedefendant;
4.againsta new company which arises out of theamalgamationof the
transferorcompany;
5.againstacompanywhosepromotersenteredintoacontractforthe
purposesof the company before itsincorporation,providedthat
thecontractiswarrantedbytheterms of theincorporationof the
company.
Reliefagainstlegalrepresentative[S. 19]
Section19{b)providesthatrelief can be claimed against any person who
claims title arisingsubsequentlyto thecontract.Thiswouldnotbe sowhere
the legal representative is not competent under the applicable personal law.
A vendor died after entering into the agreement. After hisdeath,his widow
took further advance from thevendee.According to the Muslim law appli
cable to the vendor, the widow (mother) is not the legalguardianof her
minor children. The advance taken by her for alienation of the property of
herminorchildrendidnotbindthem.Thecourtsaidthatshecouldnotbe
compelledto execute the sale on the basis of the advance taken byher.^^^
Partiesclaimingtitleunderoriginalowner
Subsequentbonafidebuyer[S. 19(b)]
Under Section19{b)of theSpecificRelief Act, 1963, aspecificperfor
mance of a contract can be enforcednot only against eitherpartythereto but
against any other person claiming under him by a title arising subsequently
to the contract, except a transferee for value who has paid his money in
good faith andwithoutnotice of originalcontract.Further,Section 91 of
the Indian Trusts Act, 1882providesthat where a personacquiresproperty
with noticethatanother person has entered into an existingcontractaffect
ingthatproperty, of which a specific performance could be enforced, the
former must hold thepropertyfor the benefit of thelatterto theextentnec
essaryto give effect to thecontract.In a casedefendants4 to 7hadnoticeof
the contract between the plaintiff and Defendant 1 and they were not bona
fidepurchasers,therefore,the High Court was quitejustifiedinpassinga
decreeagainstthemaswell."^
156. AmarAhmadKhan v ShamimAhmadKhan, AIR 2012Jhar39.
157.VasanthaViswanathanvV.K.Elayalwar,(2001)8 SCC133.For another authorityseeJagan
NathvjagdishRai,(1998)5 SCC537:AIR 1998 SC2028.RajenderKumar Gupta vMadan
Lai,AIR 2010 NOC 644(P&H),suit forspecificperformance filed by prior purchaser. The
agreementto sell was not aregistereddocument.It was not his casethathe hadinformed
thesecondpurchaserabout the saleto him.The court regardedhim as a bona fidepurchaserhttps://t.me/LawCollegeNotes_Stuffs

1034. [S. 19] Specificperformanceofcontracts891
In the case of a bona fidepurchaserin good faith for valuewithoutnotice
of the originalcontractbetween persons inactualpossession and owner
of theproperty,it was held by the SupremeCourtthatinorderto estab
lish his bona fides suchpurchasermust showthathe had madeappropriate
enquiries."^Thecourtsaid:"Section19{b)of the Specific Relief Act, 1963
protectsthebonafidepurchaseringoodfaithfor valuewithoutnoticeof
theoriginalcontract.Thisprotectionis in thenatureof anexceptionto the
general rule.Hence,the onus ofproofof good faith is on thepurchaserwho
takes the pleathathe is aninnocentpurchaser.Goodfaith is aquestionof
facttobeconsideredanddecidedonthefactsofeachcase.Section52ofthe
Penal Code emphasises due care andattentioninrelationto good faith. In
theGeneralClauses Act emphasis is laid on honesty."
"Atransfereefor value, who has paid his money in good faith andwith
out notice of theoriginalcontract,is excluded from thepurviewof clause
[b]of Section19of the Specific Relief Actprovidingfor specificperformance
against"anyotherpersonclaimingunderhimby a titlearisingsubsequently
tothecontract".Inorderto fallwithintheexcludedclass,atransfereemust
showthat:
{a)he haspurchasedfor value theproperty(which is thesubject-matter
of the suit for specificperformanceof thecontract);
[b]he haspaidhis money to the vendor ingoodfaith; and
(c)hehadnonoticeof theearliercontractfor sale (specificperformance
ofwhichissoughtto beenforcedagainsthim).
The saidprovisionis based on the principle of English lawwhichfixes pri
ority between a legal right and an equitable right. This principle is embodied
in Section19[b)of the Specific ReliefAct."^
withoutnotice of theearliersale. Thegrantofalternativerelief of recovery ofearnestmoney
withinterestwasnotimproper.
158.R.K.MohammedUbaidullahv Hajee C. Abdul Wahab, (2000) 6 SCC 402: AIR 2001 SC
1658. Nathan v Nokhu Ram, AIR 2004 HP 20, no enquiriesmaideby the second buyer to
satisfy herself, she also refused to step into the witness box. Suit of the first buyer decreed, no
laxityon hispart.
159. Rajan v Yunuskutty, AIR 2002 Ker 339, oral agreement, theplaintifffiled a piece of paper
on which someamountand date werewritteninsupportof the alleged oralagreement.The
ownerexecuteda sale deed infavourofanotherperson,who wasnotawareof thepen
dency of the suit. He wasprotectedby S. 19.Plaintiffnot allowed any relief. AshanDeviv
PhulwasiDevi, (2003) 12 SCC 219: AIR2004SC 511,objectionallowed toexecutionof ex
partedecree by athirdpartypurchaserswho claimedthathe was inpossessionof thevacant
landunderaregisteredsale deed; their names were alsomutatedinMunicipalrecords,they
would be dispossessedby deliveryof possession to the decree holder. The fact that they were
physically there when the property was handed over to the decree holder was held to be
immaterial.RanganathaGounder v Sahadeva Gounder, AIR 2004 Mad 520, a subsequent
buyer to whom thepropertywas handed over under registered sale deed and who was not
aware of the earlier agreement acquired good title. The buyer under the earlier agreement
did not pay the balance money for long and did not object to the subsequent sale except after
2Viyears.Padmakumariv Dasayyan, (2015) 8 SCC 695:(2015)4 SCC(Civ)428, there was
failure on the part of the buyer under an agreement of sale to pay the agreed amount of the
balance price within the agreed time, hence he could not claimspecificenforcement.In thehttps://t.me/LawCollegeNotes_Stuffs

1035. 892Chapter16SpecificRelief Act, 1963 [S.19]
Where these requirementswere not satisfiedby the subsequent buyer,the
court saidthatspecificperformance could begraritedagainst the subsequent
transferee.He could bedirectedto reconvey thepropertyto theoriginal
buyer or the sale to the subsequent buyer may be set aside, theproperty
revested in the original seller who may thentransfer-itto the first buyer. The
second buyer may also be ordered to pay compensation to the firstbuyer.^®"
"Notice"may be(i)actual,(H)constructive,or{Hi)imputed. Under
Section 3, Transfer ofPropertyAct andExplanationIIthereof, astatutory
presumption of "notice" arises against any person who acquires any immov
ablepropertyor any share or interest therein of the title, if any, of the person
who is for the time being in.actualpossession thereof.
"The principle of constructive notice of any title which atenantin actual
possession may have, was laid down by LordEldonin Daniels vDavison."
"In the present case, thepurchasershaveacquireda legal right under the
saledeed.The right ofthe tenant underit, if it is true and valid,though ear
lier in time, is only anequitablerightandit doesnotaffectthepurchasers
if they are bona fidepurchasersfor valuableconsiderationwithoutnotice of
thatequitableright."^^^
"Wherethe first purchaser was atenantin possession, but did not comply
with the agreement for one year and ninemonths,hiscontentionthatthe
secondpurchaser,in order to establish hisbonafides, should haveenquired
fromhimas to thenatureof hispossession,thecourtsaidthatit wasnot
necessaryto make anyinquiryfrom thepersoninpossession.^^^
Wherethereareunnaturalcircumstanceswhichmayputthepurchaser
on hisguard,aninquiryfrom thepersonactuallyinpossessionmay become
necessary in order for the second buyer to establish his bona fides. In this
case the price of the land was lessthan2/3rdof the price for which the land
hadbeen agreed to be sold earlier. Thesecondpurchaserdidnotseem to
have anyintentionofmakingenquiryabouttheencumbrance.Thematter
of thelandmust have become atalkof the village because the firstpur
chaser wasputintopossessionandsubsequentlydispossessed. The second
purchasercouldnothave beenignorantaboutallthat.Theburdenofproof
meantime,thepropertywaspurchasedby abonafide buyerwithoutnoticeof theexisting
saleagreementwhichwas held to beeffectiveandbinding.S.PrasannavShanyJalal,AIR
2015Kar172,duringthesubsistenceofearlieragreementof sale toplaintiff,theproperty
was sold toanotherbuyer,burdenlay on such buyer to provethathe was abonafide buyer
for value ingoodfaithwithoutnoticeof theearlieragreement,burdenisnoton theplaintiff.
160.RajendraKantilalDalaivBombayBuildersCo (P)Ltd,AIR2002Bom408.LS.Sikandarv
K.Subramani,(2013) 15 SCC 27: (2014) 118 Cut LT 89, anagreementfortransferof immov
ablepropertywasterminatedbecause ofnon-performanceby thetransferee(plaintiff).The
samepropertywasthentransferredtoanotherpartyfor ahigherprice.Thesubsequent
buyer's case for specificperformancewas notallowedto beresistedby the first failed buyer.
MohdAslamvRais,AIR2015NOC31 (Utt), aseven-yearoldagreementwhichremained
unperformedand gone past alltime-limits,not allowed to be set upagainstsubsequentbuyer
onlybecausehe alsobelongedto thesamevillage.
161.RamNiwasvBano,(2000)6SCC685:AIR2000SC2921.
162.VijayBhadurandChampalalvSurendraKumar,AIR2003MP117.https://t.me/LawCollegeNotes_Stuffs

1036. [s.20] Specificperformanceofcontracts893
wason himto showthat hewasa bonafidepurchaserforvalueand without
notice.^^^
Apersonclaimingatitleadversetothe.titleofthevendordoesnotfall
inanyofthecategoriesofSection19.TheSupremeCourtalsoaddedthat
thesectionisexhaustiveofthepersonsagainstwhomand bywhomspecific
performancecan beallowed.^®''
Transfer executed by only someofowners
Thesuitpropertywasjointlyownedbyrespondents.Thesaledeedwas
executedbysomeofthemwithoutauthorisationfromothers.Thetransac
tionbeingimproperitcouldnotbesetrightbyratificationbyothers.The
executionofratificationbythosejointownerswhowerenotpartiesto the
saledeedhadnolegalvalue.Thesaledeedinfavourofthesubsequenttrans
fereewasnotsavedbySection
Acquiringtitle duringpendencyof suit
Whereapersonpurchasersapropertywhichhadalreadybeensoldear
lier and a suit about that sale ispending,hedoesnothavethe right to say
thatheisabonafidebuyerforvalue.Suchtransferishitbytheprincipleof
Uspendense}^^
Discretion and powers of court[S.20]
S.20. Discretionas to decreeing specificperformance.—(1)Thejurisdic
tiontodecreespecificperformanceisdiscretionary,andthecourtisnotbound
tograntsuchreliefmerelybecauseitislawfultodoso;butthediscretionofthe
courtisnotarbitrarybutsoundandreasonable,guidedbyjudicialprinciples
and capableofcorrectionbya courtofappeal.
(2)Thefollowingarecasesinwhichthecourtmayproperlyexercisediscre
tionnottodecreespecificperformance—
(a)wherethetermsofthecontractortheconductofthepartiesatthetime
ofenteringintothecontractortheothercircumstancesunderwhichthe
contract was entered into are such that the contract, though not voida
ble,givestheplaintiffanunfairadvantageoverthedefendant;or
(b)wheretheperformanceofthecontractwouldinvolvesomehardshipon
thedefendantwhich he did not foresee,whereasitsnon-performance
would involve no suchhardshipontheplaintiff;
(c)wherethedefendantenteredintothecontractundercircumstances
whichthoughnotrenderingthecontractvoidable,makesitinequitable
toenforcespecificperformance.
Explanation1.—Mereinadequacyofconsideration,orthemerefactthatthe
contractisonerousto the defendant orimprovidentin itsnature,shallnot be
163. DevinderSinghvManshaSingh,AIR 2003P&H166.
164.Kasturivlyymaperutnal,(2005)6SCC733:AIR2005SC2813.
165. A.Tramodav D.Komaraiah,AIR2010AP 81.
166. CeeanInternational(P)Ltd vAshokStirana,AIR2003Cal263.
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

1037. 894 Chapter16SpecificReliefAct,1963 [S.20]
deemed to constitute anunfairadvantage withinthe meaning of clause{a)or
hardshipwithinthemeaningof clause(b).
Explanation2.—Thequestionwhethertheperformanceof acontractwould
involvehardshiponthe defendantwithinthemeaningofclause(6)shall,except
in cases where the hardship has resultedfromany act of theplaintiff,subse
quenttothecontract,bedeterminedwithreferencetothecircumstancesexist
ing atthetimeofthecontract.
(3)Thecourt mayproperlyexercisediscretionto decreespecificperformance
in anycasewheretheplaintiffhasdonesubstantialactsorsufferedlossesin
consequencesof acontractcapableof specificperformance.
(4)The court shall not refuse to any party specificperformance of a contract
merelyonthegroundthatthecontractisnotenforceableattheinstanceofthe
otherparty.
Discretion
Section 20 of the Specific Relief Actfurtherlistscertaincircumstancesin
whichthe court mayat itsdiscretionrefusespecificenforcement.Thesection
openswiththeremarkthat thejurisdictiontodecreespecificperformanceis
discretionaryandthecourtisnotboundtogivesuchreliefmerelybecause
it islawfulto do so. Thesection,however,immediatelyaddsthat suchdis
cretion shall not bearbitrarilyexercised.It has to be exercised on sound and
reasonablebasis.Itsexerciseshallbeguidedbyjudicialprinciplesandshall
beopentocorrectionbyacourtofappeal.^^^Apersonseekingequitable
reliefshouldcomewithcleanhands.Wheretheplaintiff'scasewasbased
oncertainfalseandincorrectfacts,thereliefofspecificperformancewas
notgrantedtohim.^^^Specificrecoveryofpropertywasgrantedwherethe
buyerwasallthetimereadyandwillingtoperformhispartofthecontract
andhadfiledasuitforspecificperformanceandyetthepropertywassoldto
anotherpersonwhowasnotabonafidebuyer.^^'Wherethevendoralleged
thatthelandwasmortgagedtoabankandwas,therefore,nottransferable,
buttherewasaconcurrentfindingofthecourtsbelowthatthemortgage
stooddischargedonrepaymentoftheloan,thebar totransferended,the
courtheldthatthepurchaserwasentitledtoseekspecificperformanceofthe
agreementwithhim.'^"
Wheretheownerofthepropertyinquestionagreedtosellitsubjectto
approvalunderanapplicableceilinglegislationbutthesamewasrejectedand
theauthoritiespermittedtransferinfavourofaco-operativesociety,itwas
167.KallathilSreedharanvKaniathPandyalaPrasanna,{1996)6SCC218,impecuniosityof
the party topayfor the part of thejoint-familypropertywhichcametoherinexcessof
share,advancepaid,orderedtoberefundedandspecificrecoverynotgranted.Malapali
MunaswamyNaiduvP.Sumathi,(2004)13SCC364,decreeingspecificperformancewith
out testing the case through the provisions of S. 20 was liable to be set aside.
168.LourduMar:DavidvLoutsChinnayaArogiaswamy,(1996)5SCC589:AIR1996SC2814
169.PirthivJatiRam, (1996) 5 SCC 457.
170.Indrapalv Sham ShankarLai,AIR 2002 All 243.https://t.me/LawCollegeNotes_Stuffs

1038. 20] ' Specificperformanceofcontracts895
heldthatthesocietyhavinghadnonoticeoftheearliertransfer,itobtained
agoodtitleingoodfaithforavaluableconsideration.Thefirstbuyerwas
notentitledtoanyreliefexceptthatofrefundofadvanceamount.^^i
TheSupremeCourthasrestatedthefactorswhichhavetobekeptin
mind inexercisingthe powerofdiscretion:^^^
1.Whethertheplaintiffwasreadyandwillingtoperformhispartof
thecontractintermsofSection16;
2. Whether it was a case forexerciseof discretion by the court for
decreeingspecificperformanceunderSection16;
3.Whethertherewerelacheson thepart oftheplaintiffinapproaching
thecourt.^^^
Insomecasesit willbesubstantivequestionof lawas towhetherdiscre
tionisto beexercisedornot.^^''Thegrantofreliefisdiscretionaryand not
arbitrary.Thetrialcourthadexerciseditsdiscretion.Theappellatecourt
shouldnotexercisediscretionagainstgrant ofspecificperformanceon
extraneousconsiderationsorsympatheticconsideration."^
Nodiscretionwasexercisedinfavourof apersontowhomleaseof two
propertieswaspromisedandofwhichpossessionhavingbeengivenofone,
hemadeillegalreconstitutionand,therefore,possessionoftheotherwas
notgiven.Insuchcircumstancesalsotherewasnoquestionofawarding
himanycompensation."^Discretionwasnotexercisedinfavourofaperson
whoinsteadofperformingthecontractwassettingupthecounterclaim
thatthepropertyhadalreadybeengiftedtoherandthegiftdeedshouldbe
produced.Therewasnomentionofsuchgiftdeedinthecontractofsale."^
Apersonwhobecomesentitledtospecificperformanceofhisrightunder
anagreementalsobecomesentitledtoadecreeofpermanentinjunction
torestrainhisvendorsfrominanymannerdealingwithselling,pledgmg,
alienatingortransferringorcreatingthirdpartyinterestinthesuitproperty
exceptinfavourofthevendeeinperpetuity."^
171EmaniKrishnaRaovVijayaChitraFilms,AIR2003NOC142(AP):2003AIHC334.
172.RajeshwarivPuranIndoria,(2005)7SCC60;K.G.ArumughamvK.A.Chinnappan
(2005)2SCC793,thepurchasersbytheirdefaultandlonglapseoftimeallowedthird-
partyrightstosetinrenderingspecificperformanceintheirfavourtobeinequitableand
173.^RajKishorevPremSingh,AIR2011SC382,timeforreconveyancehasalwaysbeenregarded
asoftheessence,hencenoorderforenforcementofsuchaclauseafterexpiryoftime.
174.RameshChandvAsruddin,(2016)1SCC653,whereconditionsorcircumstancesofthe
contractgaveunfairadvantagetotheplaintiff,orderforspecificperformancewasnot
granted.HemantaMondalvGaneshChandraNaskar,(2016)1SCC567:AIR2015SC
3757,recitalsaboutproperty,e.g.areaoflandwerenotclear,theplaintiffbuyerwasnot
doinganysubstantialacts,norsufferinganymonetaryloss,specificreliefdenied.
175.K.PrakashvB.R.SampathKumar,(2015)1SCC597:AIR2015SC9.
176SubhadraRaniPalChoudharyvSheirlyWeigalNain,(2005)5SCC230:AIR2005SC
3011.SurinderSinghvKapoorSingh,(2005)5SCC142,thecourthastoseeinwhose
favour equity lies.
177.MadhuVerma v Urmila Devi, AIR 2011 Pat 46.
178.VijayKumarvNeeruRajput,AIR2014NOC217(Del).https://t.me/LawCollegeNotes_Stuffs

1039. 896Chapter16SpecificReliefAct,1963 [S.20]
Buyer with notice of previous sale
Asaleagreementwasmadewiththeplaintifffordischargingfamilydebts.
Possessionwashandedoveronthedateoftheagreement.Subsequenttothis
asaledeedwasexecutedinfavourof athirdpartyinrespectofthesame
property The latterwasmadeawareof thefirstagreement.The courtheld
thatitcouldnotbesaidthatthethirdpartyactedingoodfaith.Theplaintiff
alsoproducedthemortgagedeedandthefactofpaymentforredemptionof
themortgagewasendorsedonit.Thethirdpartydidnotproduceanysuch
dischargedmortgagebond.Thecourtaccordinglyallowedtheplaintiffto
enforcetheagreementagainstthethirdpartybuyeralso.'^'
"Grantingofspecificperformanceisanequitablerelief,thoughthesame
isnowgovernedbythestatutoryprovisionsoftheSpecificReliefAct,1963.
TheseequitableprinciplesareincorporatedinSection20 of theAct.While
grantingadecreeforspecificperformance,thesesalutaryguidelinesshall
beintheforefrontofthemindofthecourt.Thetrialcourt,whichhadthe
addedadvantageofrecordingtheevidenceandseeingthedemeanourof
thewitnesses,consideredtherelevantfacts andreachedaconclusion.The
appellatecourtshouldnothavereversedthatdecisiondisregardingthese
factsandtheappellatecourtseriouslyflawedinitsdecision.Therefore,itis
heldthattherespondentisnotentitledto adecreeofspecificperformance
ofthecontract."'^®
Discretionshouldbeexercisedinaccordancewithjustice,equity,good
conscienceandfairnesstoboththeparties.^^^Whereinsuitforspecificper
formancefiledbytherespondentin1970,alternativereliefofRs12,000as
damageswasalsoclaimed,andthedefendant-appellantwasthenprepared
topayRs10lakhsasalternativerelief,itwasheldthatthedecreeforspecific
performanceatthisdistanceoftimewouldbeunrealisticandunfair.Hence,
an alternative relief of payment of Rs10 lakhs wasordered.'^^
179.JammulaRamaRaovMeriaKrishtiaveni,AIR2003NOC134(AP):2003AIHC106(AP)
SargunamvChidambaram,(2005)1SCC162:AIR2005SC1420,thesecondbuyerhad
noticeof the first sale, notallowedspecificrelief.
180. A.C. Arulappan v Ahalya Naik,(2001)6 SCC 600: AIR 2001 SC2783.
181.AmeerMohdvBarkatAli,AIR2002Raj406,discretionto bebasedonsoundandreason
ablejudicialprinciplesandnottobeexercisedarbitrarily.Onfacts,howevertheoralagree
mentcouldnotbeproved.YelamatiVeeraVenkataJaganadhaGuptavVejjuVenkateswara
Rao,AIR2002AP369,oralagreement,thevendorwasthelandlord,thetenantallegedthat
hehadpaidamountstothelandlord,withouttakingreceipts,thefactsshowedthattheland
lordwasgivinghimreceiptsevenforrent,otherinconsistenciesinevidence,oralagreement.
notproved.ManjmiathAttandappavTammanasa,(2003)10SCC390:AIR2003 SC1391
suitfiledsixyearsafterdateofagreementtosellandthattoowhenthesuitorcametoknow
thatthelandhadbeensoldtosomeoneelse,thoughtimewasnotoftheessence,heshould
haveapproachedthesellerandthecourtwithinareasonabletime,havingregardtohiscon
duct,discretionaryreliefwasrefusedtohim.NallabothuPuniaiahvGarreMallikarjuna
Rao,AIR2003AP201,purchaserhadmeanstopay,saledeedproved,nodelayinseeking
relief by the buyer, relief allowed.
182.NaharSinghvHarnakSingh,(1996)6SCC699.ArjunParadeepakvG.Vani,AIR2003
NOC468(AP),thesellerwasalwaysreadyandwilling,buyerwasguiltyoflaches,heneverhttps://t.me/LawCollegeNotes_Stuffs

1040. [S.20] Specificperformanceofcontracts897
Wherethesubsequentpurchaserdidnotmakeenquiriesat theofficeof
thesub-registrarsoastofindoutwhetherthepropertyhadalreadybeen
transferredtoanotherperson,the court saidthat itcouldbeconcludedthat
thesubsequentpurchaserhadknowledgeofthefirstsale.Theycouldnotbe
termedasbonafidebuyers.Nodiscretioncouldbeexercisedintheirfavour.^®^
Sub-section(2)then enumerates situations in which the court can prop
erlyat itsdiscretionrefusetoorderspecificperformance.
1. Unfaircontracts
The court mayrefusespecificperformance where a contractgivesan
unfairadvantageto theplaintiffoverthedefendant.Theunfairnessofthe
contractmayappearfromthetermsofthecontract,fromtheconductofthe
partiesatthetimeofenteringintothecontract,orothersurroundingcircum
stances.Itisnotnecessarythat thecontractshouldbevoidable.It isenough
if it isexploitative.Anordinaryexamplewouldbeacasewhereasignature
is obtained under a state of utter surprise or drunkenness. Where a person
contractedtopurchasealeaseholdestate,thesellersuppressinginformation
thatthe landlord had served notice for repair of a dilapidatedportion,spe
cificperformancewasdeniedto theselleralthoughthesuppressionwasnot
sufficientin itselfto allowrescissionto thebuyer.^^''Inadequacyofconsider
ationmay.notbesufficientinitselfunlessit isshockinganditappearsthat
thedefendanthas takenadvantageof hissuperiorbargainingposition.^^^
The conductof the personclaimingspecificreliefalso has an important
bearinguponthediscretionofthecourt.Specificreliefhasbeenrefusedon
thisgroundtopersonswhoinducedotherstoenterintocontractswiththem
byholdingoutoralassuranceswhichtheydidnotfulfilthoughsuchassur
ancesmaynotbeexpressedinthecontract.^®^Apersonpurchasedanother
man'srighttocertainpropertybutthesalecouldnotbecompletedbecause
of the death of the seller before the execution of the sale deed.Subsequently
• treated time to be an essentialfactor, he also sufferedno loss becausethere was no price rise,
the seller allowed to enforce the saleagainstthe buyer.
183.KamSwaroopSingh vKaranSingh, AIR 2010Utt122.
184.BeyfusvLodge,1925Ch350.TciDistributionCentresLtdvOfficialLiquidator,(2009)6
CTC814,theofficialliquidatornotifiedthesaleofthecompany'spropertyasperdirections
ofthecourton "asis,whereis,whatis"basis.Theauctionpurchaserhadall thetimetosee
thepropertyandexaminedocumentsconnectedwithit.Buthedidnotdoso.Appliedfor
settingasideofthepurchasebecauseOLhadnotdisclosedthingslikeoverheadhightension
wiresinaportionofthepropertyandaTVroominacorner.Thecourtsaidthatanyone
could have noticed these things on a merevisit to the sight.
185.S.RamgarajuNaiduvS.Thiruvarakkarasu,1995Supp(2)SCC680:AIR1995SC1769;
S.V.R.MudaliarvRajabuF.Buhari,(1995)4SCC15:AIR1995SC1607,inequitablecon
ductinassigningrightsunderthecontract.JaiNarainParasrampuriavFushpaDeviSaraf,
(2006)7SCC756,inadequacyofconsiderationisnotinitselfagroundforrefusingspecific
relief.
186.HandleyPageLtdvCustomsandExciseCommrsandRocktvellMachineToolCoLtd,
(1970)2Lloyd'sRep459(CA),specificreliefwasresortedtoinordertoescapeaset-off;
SuryaNarainUpadhyayavRamRoopPandey,1995Supp(4)SCC542:AIR1994SC105,a
failuretomakeupthedeficiencyincourtfee,anindicationofinabilitytopayconsideration.https://t.me/LawCollegeNotes_Stuffs

1041. 898Chapter16SpecificReliefAct,1963 [S.20]
thepurchaseracquiescedin the widow of thesellerdisposingof the same
property to anotherperson.Subsequentlystill, theoriginalpurchaser dis
posed of his rights under the contract to another personwho instituted the
presentproceedingstospecificallyrecoverthe property.TheSupremeCourt
didnotfavourhimwithadecreeofspecificperformance.Theoriginalbuyer
had lost orwaivedhis rights by virtue of hisacquiescence.Thetransferee
ofhisrightshad nobetterrightsthan theletter'srights.Thushewasonly
entitled to recover theadvance-money.^®^
Aprovisionin asaleagreementfor refundof the entireadvancemoneyis
a normalfeatureineveryagreementofsale.Suchaclausecannotgiveunfair
advantagetopurchasers.^®®
Thetermsof thecontractinquestiongaveanunfairadvantageto the
plaintiffpurchaser.The amount ofearnestmoneyreceivedat the time of
agreementwasdifferentlystated in theagreementandreceipt.Thedefend
ants took thepleathattheyonlytooka loan ofRs85,000andmortgaged
theirlandassecurityandweretrickedintoputtingtheirthumbimpression
on the purportedagreementofsale.Itwasheldto be proper thatreliefof
specificperformancewasrefused.^®^
Contingentcontracts.—Inan agreement for sale of land, the condition
wasthatthesaledeedwouldbeexecutedafterthesellerobtainedpermis
sion for use of the land as villageland. It was held that the contract was not
contingent.It wasspecificallyenforceable.The suitfiledwithinthreeyears
afterobtainingpermission was nottime-barred."°
187.ParakunnanVeetillJoseph'sSonMathewvNedumbaraKuruvila'sSon,1987SuppSCC
340:AIR1987SC2328.TheoldActcontainedthefollowingillustrationson thispoint:
(1)A, a tenant for life of certain property, assigns his interest therein to B. C contracts
tobuy,andBcontractstosell,thatinterest'.Beforethecontractiscompleted,Areceives
a mortal injury from theeffectsof which he dies the day after the contract isexecuted.If
BandCwereequallyignorantorequallyawareof thefact,B isentitledtospecificper
formanceof thecontract.If Bknewthefact,and Cdidnot,specificperformanceofthe
contractshouldberefusedtoB.
(1)AcontractstoselltoBtheinterestofCincertainstock-in-trade.Itisstipulatedthat
thesaleshallstandgood,eventhoughitshouldturnoutthatC'sinterestisworthnothing.
Infact,thevalueofC'sinterestdependsontheresultofcertainpartnershipaccounts,on
whichheisheavilyin debtto hispartners.Thisindebtednessisknownto A, butnot to B.
Specificperformanceof thecontractshould be refused to A.
(3)Acontractstosell,andBcontractstobuy,certain land. To protect the land from
floods,it isnecessaryfor itsownertomaintainanexpensiveembankment.Bdoesnot
knowthiscircumstances,andAconcealsitfromhim.Specificperformanceofthecontract
shouldberefusedtoA.
(4)A's property is put up to auction.BrequestsC, A'sattorney,to bid for him. C does
thisinadvertentlyandingoodfaith.Thepersonspresent,seeingthevendor'sattorneybid
ding,think that he is amerepufferandceasetocompete.Thelot isknockeddownto B at
a low price.Specificperformance of the contract should be refused to B.
188. R.AravindhanvK.R.S.Janakiraman,AIR2016NOC 240(Mad).
189. Shamsher Singh v Rajinder Kumar, (2015) 5 SCC 531: AIR 2014 SC 2253.
190.RojasaraRamjibhaiDahyabhaiv Jani NarottamdasLallubhai,(1986)3SCC300: AIR
1986SC1912.https://t.me/LawCollegeNotes_Stuffs

1042. [S.20] Specificperformanceof contracts 899
The sellercannotsue for the price unless he obtains the necessary per
missionsfirst.^'^
Accordingto adecisionof theSupremeCourtsubsequenteventscan also
be taken into account inexercisingdiscretion under thesection."^The court
said:
"Jurisdictionof courts underSection20 isdiscretionary.Subsequent
eventscanbetakenintoconsiderationtodecidetoexerciseornottoexer
cisejurisdiction.Hence,wheretheagreementtoselllandstipulatedthat
itwassubjectto grantofpermissionbythecompetentauthorityunderthe
UrbanLand(CeilingandRegulation)Act,1976and the authorityrefused
to grantsuchpermission,it washeld,thatsuchorder of thecompetent
authorityshouldhavebeennecessarilytakenintoconsiderationtodecide
as to whether toexercisethe discretionary jurisdiction to directspecific
performanceof theagreementornot.Tilltheorderof thecompetent
authoritystood,decreeforspecificperformanceof thecontractcould
notbegranted.Wherethediscretionaryjurisdictionwasnotexercisedin
favourof theplaintiffbythe trial court and theappellatecourt(Single
Judge,HighCourtinthiscase),,theDivisionBenchoftheHighCourt
couldnot, inexerciseofitsLettersPatentjurisdiction,normallyinterfere
withsuchdecisionsofthecourtsbelow.
ContractsIncomplete.—Wherein anagreementforsaleofflats,there
was noconsensusbetweenthe parties as to the pricepayable,the court
saidspecificperformancecouldnotbeordered.Thebuilderwasdirected
to refund the amountreceivedfrom the purchaser and thereafter he was to
vacate the flats. Thecourtalso saidthatthe discretion in thegrantof spe
cificperformancehasto beexercisedonsoundjudicialprinciplesandnot
arbitrarily.Theplaintiffmustprovebeyonddoubttheexistenceofavalid
andenforceablecontract."^
191.NathulalvFhoolchand,(1969)3SCC120:AIR1970SC546:(1970)2 SCR854.Chandnee
WidyaVatiMaddenvC.L.Katial,AIR1964SC978:(1964)2SCR495;RameshChandra
Chandiok v ChuniLaiSabharwal,(1970)3 SCC 140: AIR 1971 SC 1238, the court has
jurisdictiontoorderthevendortoapplyforpermissionwithinacertaintimeandeffectthe
transferaftersuchpermission.
192.M.MeenakshivMetadinAgarwal,(2006) 7 SCC 470.
193.MirabulEnterprisesvVijayaSrivastava,AIR2003Del15.Manohar-LalvMaya,(2003)
9 SCC478: AIR 2003 SC2362, the contentionof the sellerlady that her thumbimpression
wastakenonsameblankpaper,thecourtsaidthatitcouldnotbebrushedaside,refundof
considerationallowed.M.JayaRaov M.KrishnaRao,AIR2012AP34,noclearagreement,
vendeeclaimedthatheperfectedhistitleofownershipbybeinginpossessionformorethan
12years.Thisfactandbeingreadyandwillingtoperformcontractareoppositethings,no
relief allowed. VimleshKumdriKulshrestha v Sambhajirao, (2008) 5 SCC 58: AIR 2009 SC
806,saleoftenantedpremises,agreementcontainedonlyboundariesofproperty,theplanof
thepropertyshowingdefinitesubject-matternotattached,themapofsketchattachedwith
theplaintdidnotcorrespondwithagreement,specificperformancenotgranted.Claridges
Infotech(P)LtdvSurendraKapur,AIR2009Bom1,acceptancemustbeintermsofthe
offer,conditionalacceptanceamountstocounteroffer.It is notconcludedagreementthat
could form the basis of a suit for specificperformance.https://t.me/LawCollegeNotes_Stuffs

1043. 900Chapter16SpecificReliefAct,1963 [S.20]
Themortgagorofpropertyexecutedanunregistereddocumenttosell
themortgagedpropertytothemortgageeasandwhenhemightdecideto
dosoattheprevailingmarketrate.Buthesoldthepropertytohisnephew.
Themortgageefiledthe suit forspecificperformance.Hewasnotableto
place on record any material to show that the cousin was aware of the earlier
agreement.The court accordingly held that the suit could not be decreed.
Theagreementwasaninchoateagreementandalsovague.Themortgagee
was trying to secure an undue advantage whereas the cousin was a bona
fidebuyerforconsideration.""*Inanauctionsaleoftheborrowercompany's
assets,thehighestbidderdepositedtheearnestamountbutnot25percent
ofthebidmoneywithinthestipulatedperiod.Thustherewasnoconcluded
contract.Thehighestbidderwasheldtobenotentitledtothedecreeofspe
cificenforcementof theagreementof salein hisfavour."^
Theareaoflandagreedtobesoldwasnotclearandfinal.Theplaintiff
could not be said tohavedone substantial acts orsufferedlossesdue to
expenditureinconstruction,etc. The court said that the contract was not
capableofsupportinganorderofspecificenforcement.Onfacts,itwould
beequitable,fairandpropertodirectthesellertopaybacktheamountof
earnestmoneywith interestat 18 per centp.a."®
Transferbyunauthorisedpartners.—kpartnershipfirmcomprisedof
14-15partners.Theprospectivepurchaserofapropertyofthefirmentered
intoanoralagreementwithonlytwopartners.Neithertheyweresoauthor
ised,noritwasapartoftheirimpliedauthority.Theagreementbeingnot
enforceableagainstthefirm,thecourtdidnotallowanyreliefunderthe
SpecificReHefAct."^
Transferbyunauthorisedperson.—Thetransferorwasonlyhalfowner
oftheproperty.Theotherhalfbelongedtohiswife.Yethepurportedto
transferthewhole.Thecourtheldthatthewife,beingnon-consenting,was
notboundbythepurportedsale.Therecouldbenodecreeofspecificper
formance againsther."^
Oralagreement.—ksuitwasfiledforspecificperformanceof anoral
agreementto purchase thepremisesinquestion.The court said that the
plaintiffwouldbeentitledtoaninterimreliefonlyuponshowinghisreadi
nessandwillingnesstoperformhispart ofthecontract.UnderSection49of
theRegistrationAct,asuitforspecificperformancecanbefiledonthebasis
ofanunregistereddocumentandalsouponanoralagreement."^
194.SahadevaGramanivPerumalGramani,(2005)11SCC454.
195.KeralaFinancialCorpnvVincentPaul,(2011)4SCC171:AIR2011SC1388.
196.HemantaMondalvGaneshChandraNaskar,(2016)1SCC567:AIR2015SC3757
197.SagarmalGulabchandJain vGujaratiBeediCo,AIR2011MP172.
198.KammanaSambamurthyvKalipatnapuAtchutatnma,(2011)11SCC153:AIR2011
SC103.SohanSinghvAvtarSingh,AIR2015Raj1,salebyoneofthelegalheirswitha
smallshareinthelandwithoutauthorityofanyotherlegalheirnotallowedtobespecifically
enforced.
199.NiravDeepakModivNajooBehramBhiwandiwala,AIR2012Bom50.https://t.me/LawCollegeNotes_Stuffs

1044. [S. 20] * Specificperformanceofcontracts901
A plea for possession inpartperformance of an oral agreement of sale
cannotbe raised by the vendee in a suit for specificperformance.^""
In the case of an oral agreement, heavy burden lies on theplaintiffto
provethat there was consensusad idem between the parties. An oral agree
ment cannot be presumed unless there isevidenceof the date on which the
parties had cometo the concluded oral agreement.There should be no find
ing of this kind on the basis of conjectures andassumptions.^"^
Memorandumofunderstandings
Amemorandumofunderstandingto purchase immovablepropertieson
its basis was held to be neither equivalent to registered agreement, nor spe
cificabout any properties and thereforecould not support the plea ofspecific
performanceor aninjunction.^"^
2.Hardship
Specificenforcementisrefusedwhereit wouldcauseconsiderablehard
ship to thedefendantwhich he did notforesee,whereasnon-performance
would cause no suchhardshipto the plaintiff. Specificenforcement was not
grantedwherethebuyerof land forfarmingpurposesfoundit to be land
locked from all sideswithout any right ofway;^"^where the cost of perfor
mance to the defendant was wholly out ofproportionto thebenefitsto the
plaintiff;^"''andwhereitinvolvedlitigationwithuncertainresultstoenable
thedefendanttoperform.^"^
Ordinarily,the fact that the performancewould causeseverehardship to
thedefendanthas to beconsideredon the basis of factsexistingat the time
ofthe contract. And where the plaintiff has causedthe hardship byhis subse
quentconduct,that wouldalsobetakenintoaccount.Theexplanationgives
effectto thisprinciple.Wherethegrantofspecificreliefwouldhaveresulted
in aspecialhardshipto thedefendantswho hadalreadybuiltcostlystruc
tures on the land inquestion,it was held bytheSupremeCourt that Section
20(2)(b)shouldbeinvokedeventhoughtheplaintiffswerereadyand willing
toperformthecontractanditwerethedefendantswhocommittedbreaches
of the contract.Accordingly,instead ofexecutingthe sale deed infavour
of theplaintiffs,thedefendantsweredirectedtopayto theplaintiffsthe
specifiedpresentvalueofthe landininstalments.^"^Thejurisdictionunder
200.KaramChandvLabhChand,AIR2009NOC868 (Raj).
201. SriSunamaniNathvSukumariDeb, AIR 2009 NOC 261 (Gau). K.Nanjappav R.A.
Hameed,(2016)1 SCC 762, theSupremeCourt did notexercisediscretioninfavourof
directingspecificperformanceon thebasisof an oralagreementbecauseof manyuncertain
features inproofof it.
202.ParleBiscuit(P) Ltd vKabiscoAgroFoods (India) (P)Ltd, AIR 2009 NOC 256(All).
203.Dennev Light, (1857) 8DM&G774: 44 ER 588.
204.MorrisvRedlandBricksLtd,1970AC 652: (1969) 2WLR1437 (HL).
205. Wroth v Tyler, 1974 Ch 30: (1973) 2 WLR 405.
206. DamacherlaAnjaneyuluv DamcherlaVenkataSeshaiah,1987 SuppSCC75: AIR 1987 SC
1641.https://t.me/LawCollegeNotes_Stuffs

1045. 902Chapter16 SpecificReliefAct,1963 [S. 20]
Section 20 of the SpecificRehef Act, 1963 to decree specificperformanceis
discretionaryandthecourtisnotboundtograntsuch relief merelybecause
it is lawful to do so; thediscretionof thecourtisnotarbitrarybutsound
andreasonable,guidedbyjudicialprinciplesandcapable ofcorrectionby
acourtof appeal.Performanceof thecontractinvolving somehardshipon
the defendant which he did not foresee, while non-performance involving
no suchhardship,on theplaintiff,is one of thecircumstancesinwhichthe
courtmayproperlyexercisediscretionnotto decree specificperformance.
The doctrine of comparative hardship has beenstatutorilyrecognized in
India. However, mereinadequacyofconsiderationor the mere factthatthe
contractis onerous to thedefendantorimprovidentin itsnatureshall not
constituteanunfairadvantage to theplaintiffover thedefendantor unfore
seeablehardshipon thedefendant.^°^The factthatthe houseundersale was
theavailableresidencewiththesellerandwithoutithewouldberendered
homeless was held to be not ahardshipbecause he was aware of this fact
whenhemadetheagreementofsale.^°^
Where the purchasers had purchased thepropertysome 25 years before
the case reached theSupremeCourt and had spent huge sums of money on
improvements, it was heldthatdecreeing the suit in favour of the opposite
partywould have meant hardship to the purchasers. Therefore, compen
sation was awarded in favour of the oppositeparty.Theplaintiff kept
postponingregistration. It was heldthatthis conduct caused hardship to
thedefendant-ownerinasmuch as he could not purchase another property
outof theconsiderationmoneywhichwouldhave come into hishandif the
agreementhadbeenperformed.Discretioncouldnotbe exercised in favour
of suchplaintiff.^'"
A man sold the whole of the property whereas half of it belonged to his
wifewho did notsign.Both of themdied.Thetransfereesoughtspecific
recoveryof half portion of the man's share. His 10 daughters who were liv
ingin thesingledwellinghouse,resistedthe suit on the groundofhardship.
The SupremeCourtallowed recovery of half share becausethatwasnot
likely to cause anyhardship.^"
Price Escalation.—"Where thecourtis considering whether or not to
grant adecreeforspecificperformancefor the first time, the rise in the price
ofthe landagreedto beconveyedmaybearelevantfactorindenyingthe relief
ofspecificperformance.Butin this case,thedecreeforspecificperformance
207. K.Narendrav RivieraApartments(P) Ltd, (1999) 5 SCC 77: AIR 1999 SC 2309. A.Maria
Angelinav A.G.BalkisBee,(2002)9 SCC597: AIR 2002 SC 2385: plea of hardship not
raisedin the written statement,raised for the first timebeforetheAppellateCourt, concur
rentfindingofLowerCourts of the plaintiff beingready and willing,nointerferencein the
decree of specific performance.
208.DarshanSingh vDalipKaur,2014SCCOnLineP&H19044:AIR2015P&H10.
209. V.MuthusamiVAngammal,(2002) 3 SCC 316: AIR2002SC 1279.
210. K.N.KrishnamurthyvG.K.Sridhar, AIR 2009NOC263: (2008) 6 AIR Kant R 369.
211.KammanaSambamurthyvKalipatnapuAtchutamma,(2011) 11 SCC 153: AIR 2011
SC103.https://t.me/LawCollegeNotes_Stuffs

1046. [S. 20] Specificperformanceofcontracts903
has already been passed by thetrialcourtandaffirmedby the first appellate
court.The only question before the SupremeCourtwaswhethertheHigh
Courtin second appeal wascorrectin reversing the decree. Consequently
the principleenunciatedin K.S.Vidyanadamwill notapply."^^^
Inanothercase, the SupremeCourtobserved:
Thegrantof a decree for specificperformanceofcontractis not auto
maticandisoneofthediscretionsofthecourtandthecourthastoconsider
whetherit will be fair, just and equitable. Thecourtis guided by principles
of justice,equityand good conscience.
Thecourtshould meticulously consider all facts andcircumstancesof the
case and motive behind the litigation should also be considered.
"In view of the clear finding of theHighCourtthattheappellanttried
to wriggle out of thecontractbetween the parties because of escalation
in prices of real estate properties, the respondent is held entitled to get a
decree as he has nottakenany undue orunfairadvantage over the appel
lant. It will be inequitable and unjust at this point of time to deny the decree
to the respondent after two courts below have decided in favour of the
respondent."^"
212. V.PechimuthuvGowrammal,(2001) 7 SCC 617: AIR 2001 SC2446.The decision in K.S.
Vidyanadam vVairavan,(1997)3 SCC 1: AIR 1997 SC 1751 was distinguished on facts.
GobindRam v GianChand,(2000) 7 SCC 548: AIR2000SC 3106,furthersumdirectedto
be paid for securing order ofperformance.
213.GobindRam v Gian Chand, (2000) 7 SCC 548: AIR 2000 SC 3106. Thecourtrelied on
ParakunnanVeetillJoseph'sSonMathewvNedumbaraKuruvila'sSon, 1987 Supp SCC
340: AIR 1987 SC 2328 and distinguished Damacherla Anjaneyulu v Damcherla Venkata
Seshaiah, 1987 Supp SCC 75: AIR 1987 SC 1641. Nirmala Anand v Advent Corpn (P) Ltd,
(2002) 5 SCC 481: AIR 2002 SC 2290, decree for delivery of the flat at escalated price.
Specificreliefnotrefusedbecausetherewas apossibilityofrenewalof leaseandrevalidation
of building plan. The court said that there was no general rule that the plaintiff must neces
sarily be denied the benefitof price increase. While balancing equities, the court must bear
in mind as to who was the defaulting party. R. Aravindhan v K.R.S.Janakiraman,AIR 2016
NOC 240 (Mad), sellertrying to get out of the contract only becauseof price rise, the court
in itsdiscretionallowed specificperformance.
The old Actcontainedthe followingillustrationson this point:
(1)A is entitled to some land under his father's will on condition that if he sells it within
twenty-fiveyears, half thepurchase-moneyshall go toB.A, forgetting the condition, con
tracts, beforethe expiration oftwenty-fiveyears, to sellthe land to C. Here the enforcement
of the contract would operate so harshly on A, that the Court will notcompelits perfor
manceinfavourofC.
(2)A and B, trustees, join theirbeneficiary,C, in a contract to sell thetrustestate to D,
andpersonallyagreetoexoneratethe estatefromheavyincumbrancestowhichit issubject.
Thepurchase-moneyis notmerelyenoughtodischargethoseincumbrances,though, at the
date of the contract, the vendors believed it to be sufficient.Specificperformance of the
contractshould be refused to D. [Based on Wedgwood vAdams,(1843) 6 Beav 600: 63 RR
195:49ER958.]
(3)A, the owner of an estate, contracts to sell it to B, and stipulates that he, A, shall not
beobligedtodefineitsboundary.The estatereallycomprisesavaluableproperty,not known
to either to be part of it.Specificperformanceof the contract should be refusedtoBunless
he waives his claim to the unknown property. [Based on Baxendale v Seal,(1855)19 Beav
601: 105RR261.]
(4)A contracts with B to sell him certain land, and to make a road to it from a certain
railwaystation.It isfoundafterwardsthat Acannotmaketheroadwithoutexposinghimselfhttps://t.me/LawCollegeNotes_Stuffs

1047. 904Chapter16 Specific Relief Act, 1963 [S. 20]
Subsequent rise in price is not to be treated as a hardship to entail refusal
of decree forspecificperformance.^"
The vendor was willing to complete the transaction as early as possible.
But there was delay of nearly two years on thepartof the purchaser in
obtaining the requisite permission of the Collector which was necessary for
completionofthetransaction.Therewasasubstantialrise inthemarket
prices of property including that of the property in question. Even if time
was not of theessence,parties are supposed to perform their obligations
within reasonable time when the market has become pricesensitive.The
court said that in such a case it would be inequitable to give the relief of
specificperformance to thepurchaser.But he was held entitled to a money
decreeforrepaymentofconsiderationpaid by him to the transferoralong-
with interest at 18 per centp.a.from the date ofpayment.^^^
A suit forspecificperformance of sale of an urban property wasfiled
after thelapseof a longperiod.The court said that it couldrefuseto grant
thereliefofspecificperformanceasthevalueofsuchpropertyescalatesvery
fast.^^®
Thus, the reliefofspecificperformance cannot bedeniedon the ground
ofeffluxof time and escalation of price of the property'in themeantime.In
suchcases,the court can grantreliefunderrevisionof the priceaccordingto
thethenmarketvalue.
3.Inequitable,unconscionable
Wherethecircumstancesof a contract are suchthat, though they do not
makethecontractvoidable,theydefinitelyrenderspecificenforcementineq
uitable,the contract isone-sided,animpositionby one upon the other, the
partiesarenoton equalfooting,are some of thecircumstanceswhichthe
tolitigation.Specificperformanceof the part of the contract relatingto the road should be
refusedto B,eventhough it maybe heldthat he is entitledtospecificperformanceof the rest
withcompensationfor loss of the road.[BasedonPeacockvBenson,(1848)11Beav355:
50ER854.]
(5)A, alesseeofmines,contractswithB,hislessor,that any timeduring the continuance
of thelease,Bmaygivenoticeof hisdesireto take themachineryand plant used in and
about the mines, and that he shall have the articlesspecifiedin his noticedeliveredto him at
avaluationon the expiryof thelease.Sucha contract mightbe mostinjuriousto thelessee's
business,andspecificperformanceof itshouldberefusedto B.[Basedon Talbot v Ford,
(1842) 13 Sim 173: 60 RR 314.]
(6) Acontractsto buycertainlandfrom B. Thecontractis silent as to access to theland.
No right of way to it can be shown to exist.Specificperformance of the contract should be
refusedto B.[Basedon Denne v Light,(1857)8DM&G774:44 ER 588.]
(7) A contracts with B to buy from B'smanufactoryand notelsewhereall the goods of
acertainclassusedbyA in histrade.The CourtcannotcompelB tosupplythegoodsbut
if hedoesnotsupplythem, Amaybe ruined,unlesshe isallowedto buy themelsewhere.
Specificperformanceof the contractshouldberefusedto B.[Basedon HillsvCroll,(1845)
2 Ph 60: 78RR23.]
214.K.BrakashvB.R.SampathKumar, (2015) 1 SCC 597: AIR 2015 SC 9.
215. Baramananda Base v Santosh Kumar Dutta, AIR 2011 NOC 140 (Ori).
216. Vimaleshwar Nagappa Shet v Noor AhmedShriff(2011)12 SCC 658: AIR 2011 SC 2057.
217.Satyajainv Anis Ahmedd Rushdie, (2013) 8 SCC 131: (2013) 3 SCC(Civ)738.https://t.me/LawCollegeNotes_Stuffs

1048. [S. 20] Specificperformanceofcontracts905
courtkeeps in mind in consideringwhetheran order ofspecificenforcement
would give rise to inequitable results. One of the illustrations appended to
Section 22 of the repealed Act of 1877 affords an example. Acontractswith
B to buy fromB'smanufactoryand not elsewhere all the goods of acertain
class used by him in his trade. Thecourtcannotcompel B to supply the
goods but if he does not supplythem,A may beruined,unless he isallowed
to buy them elsewhere. Bcannotspecifically enforce thecontractagainst
"Thejurisdictionto decree specific relief isdiscretionaryand thecourt
canconsidervariouscircumstancestodecidewhethersuchreliefistobe
granted.Merely because it islawfultograntspecific relief, thecourtneed
notgrantthe order for specific relief; but thisdiscretionshallnotbe exer
cised in anarbitraryorunreasonablemanner.Certaincircumstanceshave
beenmentionedin Section 20(2) of the Specific Relief Act, 1963 as tounder
whatcircumstancesthecourtshallexercisesuchdiscretion.Ifunderthe
terms of thecontracttheplaintiffgets anunfairadvantageover the defend
ant,thecourtmaynotexercise itsdiscretioninfavourof theplaintiff.So
also, specific relief may not begrantedif thedefendantwouldbeputto
unduehardshipwhichhe didnotforesee at the time ofagreement.If it is
inequitable tograntspecific relief, then also thecourtwould desist from
grantinga decree to theplaintiff."
From the terms andconditionsadumbratedin thesecondagreementit is
clearthattherespondenthad beentryingtotakeunfairadvantageof the
appellantandthatthecircumstancesinwhichthisagreementwasexecuted
waswithinashortperiodofterminationof the firstcontractby therespond
ent, make it highlyprobabletha.t theappellantmightnothavereadilyagreed
to thiscontract.Thereareothercircumstancesalso to holdthattheplain
tiff-respondenthad notapproachedthecourtwith clean hands. It is clear
thatshe had beentryingto get possession of the house even before execution
of the sale deed, forwhichshehadapparentlycolludedwiththetenant.
Moreover,theappellantin this case was clearly inimpecuniouscircum
stancesand somanyloans wereoutstandingagainsthim. Hehadexecuted
the firstagreementto pay off these debts and in order to raise some funds.
From the first agreement it is clearthatthepartieswere not very serious
aboutthesale ofthehouse.Thefactthataftera fewmonthstherespondent
resiled from theagreementandsoughtrepaymentof the money also proves
this fact. Theappellanthadvoluntarilyretired from service. Admittedly,
he had nootherhouse to stay inafterretirement.Therespondent-plaintiff
had tried to takeunfairadvantage of thedefendantandthroughoutthe
courseofthetransactionshehadnotbeenfair.Thetrialcourt,whichhad
the added advantage of recording the evidence and seeing thedemeanourof
thewitnesses,consideredtherelevantfactsandreachedaconclusion.The
218.BasedonHillsvCroll,(1845)2 Ph 60: 78RR23.https://t.me/LawCollegeNotes_Stuffs

1049. 906Chapter16SpecificRelief Act, 1963 [S.20]
appellatecourt should not havereversedthatdecisiondisregarding these
facts and the appellate court seriouslyflav^^edin itsdecision.Therefore, it is
held that the respondent is not entitled to a decree ofspecificperformance
ofthecontract."^"
"Wherethe true object of an agreement (construction of houses under
Section 21 of theUrbanLand Ceiling Act forvi^eakersections of society
in this case) could not befulfilled(as a result of changes in themasterplan
in this case), it would be inequitable to enforcespecificperformance of the
agreement.Harmto the reputation of the plaintiff was irrelevant.Specific
relief was not allowed where thetransferorwas not capable of dealingwith
the property because of the doctrine oflispendens, the same being already
thesubject-matterof dispute in acourtcase.^^°
"Grantof decree forspecificperformance is a matter of discretion under
Section 20 of the SpecificRelief Act, 1963. Thecourtis notboundtogrant
such relief merely because it is lawful to do so. Discretion is to be exercised
on sound and settled judicial principles. One of the grounds on which the
courtmay decline to decree specificperformanceis where it would be ineq
uitable to enforcespecificperformance. The present is clearly such a case.
It would be wholly inequitable to enforce specific performance for(i)resi
dentialhouses forweakersectionsof societycannotbeconstructedin view
of theexistingmasterplanand,thus,no benefit can be given to the said
sectionof society; (ii) in any case, it isextremelydifficult, ifnotimpossi
ble, tocontinuouslysupervise andmonitortheconstructionandthereafter
allotmentof such houses;(Hi)the decree is likely to result in anuncalled-for
bonanzato the plaintiff;(iv)patentillegality of the order of theCompetent
Authoritydated20-6-1998;(v)absence of law or anyauthoritytodetermine
excessvacantland afterconstructionof4356dwellingunits;and{vi)agree
ment does not contemplate thetransferof nearly600acres of land in favour
of theplaintiffforconstructionof 4356 units for which landrequiredis
about65 acres. The object of the Act was topreventconcentrationofurban
landin thehandsof a fewandalso topreventspeculationandprofiteering
therein.The object of Section 21 is to benefitweakersectionsof society
andnottheowners.Ifnoneoftheseobjectscanbeachieved,whichisthe
219. A.C.Arulappanv AhalyaNaik,(2001) 6 SCC 600: AIR 2001 SC 2783.AkbarAliv Vinod
Khanna,(2005) 9 SCC 367:AIR2004SC3940,in theabsenceof plea ofinadequateprice
raised,or an issueframed,or evidence led on thepoint,in thewrittenstatementnotto hold
thattheagreementto sell wasunconscionable.DevalsabvIbrahimsabF.Karajagi,(2005)
3 SCC 342: AIR2005SC1940,theownercontractedto sell thepropertyto theplaintiff,
theownerdid notexecutethe sale deedwiththeplaintiffandinsteadattemptedto sell the
propertyto thesecondbuyer.Thelatterfiledacollusivesuit on the seller. The suitresulted
in acompromisedecreeunderwhichsale deed wasexecutedinfavourofsecondbuyer.The
SupremeCourtset aside theorderof specificperformanceinfavourof thesecondbuyerand
awardedit to the first buyer.Thecourtsaidthattherewas no suchequityleft in theconduct
of thesecondbuyer as the suit filed by him waspreconceivedandprearrangedwiththe seller
inordertocheatthe firstbuyer.
220.Tara Singh vStateofPunjab,AIR 2011NOC452(P&H).https://t.me/LawCollegeNotes_Stuffs

1050. [S. 20] Specificperformanceofcontracts907
factual position, it would be inequitable to still maintain decree forspecific
performance."^^^
Plaintiffto comewithcleanhands.—Whereapartyinstituteddifferent
proceedings in different forumswithinashortspan of time, it was heldthat
such apartywho abuses the process of courts could not be said to be pos
sessed of clean hands and is, therefore, not entitled to equitable reliefunder
theAct.222
Where the value of thepropertywas much morethanwas mentioned in
the agreement to sell, the plaintiff was in possession as atenantand stopped
payingrent since the date of theagreement,thecourtsaidthatthe mere
fact of the agreement did not conferownershipon the plaintiff. He was not
entitled to the equitable relief of specificperformance.^^^Where theclaimant
was not able to provethatthe sale deed was validly executed by the vendor
and the vendor provedthathissignaturewastakenon ablankpaper, and
onthisbasis ascombinedwithotherdefects in thedocument,thecourtsaid
thatthe refusal of the relief of specificperformancewas justified.
The right to specificperformanceof a buyer ofpropertywas not defeated
by the factthathe added the names of twoindependentpersons asmarginal
witnessestothesaledeed.^^"*
The relief is discretionary. Thebonafides of the person claiming this relief
should be above-board. Lack of bona fides in any of the pleadings, be it as to
thecontentsof theagreement,factumofpayment,etc.,disentitlestheparty
fromclaimingrelief even if thetransactioniswithintheframeworkoflaw
inotherrespects. Thepurchaserin this casepaida smallamountandtook
possessionat the time of theagreement.He didnotpayanythingfurtherup
to 8 years andclaimedspecificperformanceonly by way ofcounter-claimto
the owner's suit for recovering his possession. He did not even pay thecourt
fee for hiscounter-claimsayingthathe didnothave themeansto pay.This
showedthathehadno means to pay thebalanceprice. Hisconductwasnot
fair. He was not entitled to the equitable relief.
221.HerHighnessMaharaniShantideviP.GaikwadvSavjibhaiHaribhaiPatel,(2001) 5 SCC
101:AIR2001SC1462.
222.MahabirPrasadJainv Ganga Singh, (1999) 8 SCC 274: AIR 1999 SC 3873.LalitKumar
JainVJaipurTradersCorpn(P) Ltd, (2002) 5 SCC 383, theplaintiffwhoapproachesthe
courtwithuncleanhandsisnotentitledto any relief in equity.
223.ShiddappaAdiveppaJadivRamanna,AIR2002Kant416. P.PurusholhamReddyvPratap
SteelsLtd,AIR2003AP 141, the vendee wasmakingfalse pleas,notcleanhands,notenti
tled toequitablerelief.
224.RamKhilonavSardar,(2002) 6 SCC 375: AIR2002SC2548;AbdulDadamiyaShaikhv
JagannathMurlidharRathi,AIR2002Bom 413, no relief to apurchaserwho had not paid
theconsiderationmoney.
225.B.R.Koteswarav C.Rameswari,AIR2002NOC42 (AP):2002AIHC2973(AP).Kota
SatyanarayanavQamarunnisaBegum, AIR 2003 AP 63, thepurchaserinstigatedsomeone
else to file a suitagainstthedefendantseeking share in the sameproperty.He also got the
defendant'spropertyattachedand made her todepositsomeamountandotherwisealso put
her into lot oftrouble.Discretionexercised in favour of theplaintiffonly to theextentof
orderingrefundof the advanceamountbut not fororderingspecificperformance,theorder
wasnotinterferedwith.SumerChandGaelvRakeshKumar,AIR2002All82,theentirehttps://t.me/LawCollegeNotes_Stuffs

1051. 908Chapter16 Specific Relief Act, 1963 [S. 20]
Agreementopposedto publicpolicy.—Thecourtmay not exercise dis
cretion in favour of theclaimantwhere the agreement isopposedtopubUc
- policy. On the facts of the case, however, thecourtfoundthatthere was
nothingagainstpublic policy.Therewasreadinessandwillingness.The
power ofattorneyacting for the company was doing sowithinits limits.
Thecompanyhad clearly resolved to sell itsproperty.
Objectforbidden.—Anallottedplotwasagreedto betransferredafter
receipt of aparticularsum. The plot in question was nottransferablefor a
period of 10 years. The agreement to sell was held to be not an enforceable
contract.The decree passed by theHighCourtwiththeknowledgeofthat
factwassetaside.^^^
4.Substantialperformanceby one side
Whereapartyto acontracthasalreadysubstantiallyperformedhispart
of it, itwouldbe highlyinequitableto him if theotherisnotcompellableto
performhis part.. Sub-section(3)accordingly providesthatthecourtmay
properly exercise the discretion to decree specificperformancein any case
where theplaintiffhas donesubstantialacts or suffered losses in conse
quence of acontractcapable of specificperformance.The old Actcontained
thefollowingillustrationon thispoint:
A sellslandto arailwaycompany, whocontractto executecertain
worksfor his convenience. Thecompanytakethelandand use it fortheir
railway. Specificperformanceof thecontractto execute theworksshould
bedecreedinfavourof
saleconsiderationwas given to the vendor at the time of theagreementitself,possessionof
propertywas also given, seller's pleathatheshouldbeallowedtoreturnthe moneybecause
of the price rise was not accepted.PuvvadaChiranjeevaRao v BustKoteswaraRao, AIR
2012AP 17, the vendeetookpossessionandraisedconstructioninbreachof thecontract
provisions.It being amalafide act,deprivedthe vendee of therightto seek specificperfor
mance.ChodiMahalakshmivKoppaddaSathiraju,AIR 2011 AP 125, the vendee falsely
set up the case of fullpayment,no cleanhands,disentitlementto specific relief.CitadelFine
PharmaceuticalsvRamaniyamRealEstates(P)Ltd,(2011) 9 SCC 147:AIR2011SC3351,
plaintiffsuppressedthematerialfactthatthedefendantvendor hadreturnedtheearnest
money of Rs10,00,000whichherefusedtoacceptbeforefihnghis suit.Thisdisentitledhim
todiscretionaryrelief.
226.IndianFinancialAssnofSeventhDayAdveiitistsvM.A.Unneerikutty,(2006) 6 SCC 351;
(2006)4KLT520.
227.SatishKumarvKaranSingh, (2016) 4 SCC 352: AIR 2016 SC 737.
228. Based onSforervGreafWesternRlyCo, (1842) 2 Y 8c CChCas48:63ER21.Gudurusyamala
DeviVAttolaAmmarvaraRao,AIR2002AP462,theagreementwasenteredinto to pay
offcertaindebts owed by the seller to the buyer. Theplaintiffbuyerclearedoff thedebts.
Evidenceshowedthattheagreementwasintendedto beactedupon.He wasallowedto spe
cificallyrecovertheproperty.But nodamageswereallowedto him for delay in theexecution
of the sale deed in his favour.RanjanaNagpalv Devi Ram, AIR2002HP 166, delay of 19
years wascauseddue toinactionon thepartof the seller. The seller wasnotto bepermitted
totakeadvantageof his owninaction.Relief of specific recovery wasgrantedthoughthere
had beenconsiderablerise in the prices of real estates. There was aconcurrentfinding of fact
by the lowercourtsthattheplaintiffwas all the time ready and willing toperformhispart.
Nointerferencein such finding.https://t.me/LawCollegeNotes_Stuffs

1052. 20] Specificperformanceofcontracts909
Wherethe fatherborrowedamount from the plaintiff to meet afamily
necessityandagreedtosellthelandtotheplaintiffonhisfailuretopayback
theamount,andallthiswasprovedbyclearevidence,specificenforcement
againstthefatherandonesonwhowaslivinginthefamilywasallowed.
Onesonhadalreadygoneoutofthefamilyand,therefore,noreliefcould
be allowed againsthim.^^'
5. Mutuality ofremedy(readyandwilling)
Sub-section(4)declaresthat the court shallnotrefuseto any party spe
cificperformanceofacontractmerelyonthegroundthatthecontractisnot
enforceableat theinstanceofthe otherparty.It hadbeenacommonbelief
in thisfield"that the courtwillnot orderspecificperformanceat the suitof
onepartyunlessitcoulddosoatthesuitoftheother".ThePrivyCouncil
hadlaiddownin MirSarwarjanvFakhruddinMahomedChowdhury,^^°
thatacontractofpurchaseoflandonbehalfofaminorwasnotspecif
icallyenforceableattheinstanceoftheminorbecauseitcouldnothave
beenenforcedagainsthim.TheirLordshipssaidthat astheminorwasnot
boundbythecontract,therewasnomutualityandthatconsequentlythe
minorcouldnotobtainspecificenforcementofthecontract.Butbeginning
withSrikakulamSubrahmanyamvKurraSubbaRao,^^^thePrivyCouncil
allowedspecificenforcementeven"incaseswheretherewasnomutualequal
ity.Thusthedoctrineofmutualityceasedtohaveanyforce.InEnglishlaw
alsotherequirementofmutualityhasbeensubjectedtosuchalargenumber
ofexceptionsthatithasbeenobservedinChitty;"thenumberandimpor
tanceoftheseexceptionshasgivenrisetoadoubtastotheexistenceofthe
requirementofmutuality."^^^TheprovisionsofSection12aresufficientin
themselvesto ridthelawoftherequirementofmutuality.Thatsectionhas
beenfurthersupportedbythissub-sectionwhichquiteclearlysaysthatthe
courtshouldnotdeclinespecificreliefonlybecauseoflackofmutuality.
It isalsonecessarythattheplaintiffshouldhaveeitherdonehispart or
shouldbereadyandwillingtodohispart.Inthecaseofatransferofprop
erty,theSupremeCourtobservedthatatransfereeofimmovableproperty
canclaimspecificperformanceofthecontractonlybyshowinghisperfor
manceorwillingnesstoperformhispartofthecontract."^Accordingly,
wherethe court ingrantingreUefunderSection16paidnoattentionto
229. NotiChinaSubbaReddyvPulavarthiRamaRao,AIR2003AP49.
230.(1911-12)39lA1:(1912)39Cal232 PC.
231.(1947-48)75lA115:ILR1949Mad141PC.
232.OnContracts(24th Edn, 1977) 1659.
233.lawaharLaiWadhwavHaripadaChakroborty,(1989)1SCC76:AIR1989SC606.Pramod
BuildingsandDevelopers(P)LtdvShantaChopra,(2011)4SCC741;AIR2011SC1424,
thebuyerwasnotpayingthewholebalanceamountandwasinsteadaskingthesellertopay
theMunicipaltaxes,etc.Thebuyerbeingnotwillingtoperformhisobligation,hissuitfor
specificperformancewasdismissed.ShankarlalBijrejavAshokBAhuja,AIR2011Chh66,
insteadofpayingthefullamountwithinsixmonthsascontemplatedintheagreement,the
buyerinsistedupondeliveryofpossessionproportionatetotheamountpaid,thecourtsaid
thatthisamountedtosettingupanewagreement,hewasnotwillingtoperformtheoriginalhttps://t.me/LawCollegeNotes_Stuffs

1053. 910Chapter16SpecificReliefAct,1963 [S.20]
thesideofthesellerandconfineditsfindingstothepurchaser'sside,this
was described by the SupremeCourtas a seriouserror.^^'^In this case the
plaintiffsaidthat he haddepositedtherequisiteamountin a bankaccount
and though he did notproducethepassbookof his ownaccordnoadverse
inferencecould be drawn against himbecauseneither the defendant nor the
court hadcalledupon him toproducethepassbook.Theconcurrentfind
ingofthetrialcourtandHighCourtwasdescribedbytheSupremeCourt
as contrary to theevidenceand palpablyunreasonable.The court did not
hesitatetosetasidethefindinganddecreedtheplaintiff'ssuitforspecific
performance.Thecourtsaidthattheonlyinferencethatcouldreasonablybe
drawnwasthatthedefendantwantedtodefeattheclaimoftheplaintiffand
wantedtowriggleoutoftheobligationundertakenbyhim.Inanothercase,
theHighCourthadrefusedtograntthereliefofspecificperformanceonthe
groundthatitwouldbeunjusttodosoinviewofpassageoftimeresulting
inescalationofpricesandtheSupremeCourtdidnotagreewiththisview
ofthematter.Thecourtwentbythefactsthatthewholeofthepricehad
beenpaidlongagoandthepremiseswereinthepossessionofthepurchaser
inpart-performanceoftheagreement.ThecasewasremandedtotheHigh
Courtfordecisiononmerits.^^^
Wherethebuyerprovedhisbeingreadyandwillingthroughoutandonly
thesellerwasshelteringhimselfbehindtheprovisionintheagreementthat
incasethesellerfailedtoperformhispart,hewouldpaydoubletheamount
ofearnestmoney,it washeldthat suchclausecouldnot leadto theinference
thatthebuyercouldnotseekspecificperformanceoftheagreementtosell.
Damagescouldnotbetreatedasadequatecompensation.Thecourtpassed
decreeofspecificperformance.^^^
Specificperformancewasnotdecreedwherethepartieswereundera
mutualmistakeastotheidentityofthelandagreedtobesold.Thepur
chaserdidnotcooperatewiththetransferorinsortingouttheareatobe
transferred.The transferor had donesomeconstructionwork on the land.
Heofferedtheotherareatothepurchaserwhichthelatterdidnotaccept.
Thepurchasercouldnotgetanyorderofdirectingthetransferortotransfer
thelandtohim.^^^Specificreliefwasalsonotgrantedwherethetransferee
claimedthathehadpaidhalftheamountbychequeandtheotherhalfby
cash,andtheamountbeinghugeincashalso,hewasnotabletoofferany
proof of the fact of presenceof so much cash with
agreement,hewasnotentitledspecificperformance,hewasentitledonlytorefundof the
amountpaid.
234. Indira Kaur vSheoLaiKapoor,(1988)2 SCC488: AIR 1988 SC 1074.
235.AjaibSinghv Gurbax Singh,(1988)1 SCC 143.
236.GopalDassvSonu,AIR2010P&H126;SumatPrakashJainvLaxmi,AIR2010Raj63
(DB),clearprovisionthatneitherpartywouldrefusespecificofthecontractrelatingtotrans
ferofthedisputedproperty,theprovisionforpenalclauseofdoubleadvancewasimmaterial.
237.GeneralSales Ltd vJagdish Rana, AIR 2003 HP 90.
238.M.V.Prema Chandra v Sarojamma, AIR 2015 Kar 1.https://t.me/LawCollegeNotes_Stuffs

1054. 20] Specificperformanceofcontracts911
Protectinginterest of vendor
Inrespectofanagreementtopurchaseimmovableproperty,itwasproved
thatthepurchaserhadbeeninpossessionforseveralyearsandhadalso
beenenjoyingtheusufructoftheproperty.Thecourtaccordinglyordered
maintenanceofstatusquo;butdirectedthepurchasertodepositinthetrial
court afixedamountannuallyinordertoprotecttheinterestof theven
dor.Thesuitmaythenbefinallydisposedofinfavourofthetransferee.
Aladybuyerwasnotabletoprovethatshehadbeenallalongreadyand
willingtoperformhersideofthebargain.Butherfamilymembershad
beenlivinginthepropertyformorethan30yearsintheirownright.They
couldnotthereforebeforcedtovacatetheproperty.In theinterestofjus
tice,thecourtdirectedhertopayRs60,000totheplaintiffinclusiveof
advance paid byher;^'"'
Limitation
Thecontractfortransferofpropertystipulatedatime-periodforpayment
offullconsiderationandregistrationofsaledeed.Thetransfereemadeonly
partpaymentandthattooafterexpiryofthestipulateddate,butthetrans
feroraccepteditwithoutstipulatinganyfurtherdate.Thecourtsaidthat
limitation would start from the date of refusal by the vendorin responseto
thenoticebythevendeeofspecificenforcementandnotfromthedatestip
ulatedilltheagreement.
Thoughtheprescribedperiodoflimitationisthreeyears,thecourtsaid
thatcourtshavepowertodismissasuitevenbeforethreeyearsifitisfound
thatintheinterregnumbetweenthedateofagreementandthedateofsuit,
certainevents,suchassteepincreaseinpricesofproperty,etc.havetaken
place.Thetimestatedintheagreementforcompletionalsoassumesits
importance.Averyshortperiodforcompletionwasstipulated.Insucha
casethepartycannotbepermittedtowaitforthreeyearsandfilethesuitat
leisure.Thecourtcouldignorethefactthatpropertywasagreedtobesold
becauseofaccutenecessity.
Thequestionastobaroflimitationisnotapurequestionoflaw.Itcan
not bedecidedas a preliminaryissue.^"^
239.SukkhaSinghv MahalSingh,AIR2003Raj21.
240.AzharSultanavBRajamani,(2009)17SCC27:AIR2009SC2157.
241.DuttaSeethamalakshmammavYanamadalaBalaramaiah,AIR2003AP430.
242.PuvvadaChiranjeevaRaovBustKoteswaraRao,AIR2012AP17;S.KanakaDurga
ManikyhumbavRamapragdaSuryaPrakasaRao,AIR2010AP99,thesuitwasfiled^fter
lapseof12yearsfromthedateofagreementtosell.Thesellerhadatthattimenotitleand
thepurchaserknewthathewasonlyatenant.Subsequentlyheacquiredtitle.Thepurchaser
couldnotmakeanyuseofitbecauseofthetime-bar.JagdevSinghvGursewakSingh,AIR
2016NOC231(P&H),initiallythesuitwasfiledforrecoveryofearnestmoney,subse
quentlyreliefbywayofpossessionbyspecificperformancewassoughttobeadded,thiswas
after three years, barred by limitation.
243.TajKeralaHotels&ResortsLtdvEasytecIndia(P)Ltd,AIR2014Ker9.https://t.me/LawCollegeNotes_Stuffs

1055. 912Chapter16SpecificReliefAct,1963 [S.20]
Limitationfor executionofdecree
In acompromisedecreeexecutionproceedingswerenotfiledin thesame
courtwhichpassedthedecree.Asperthetermsoftheagreementthedecree
wasexecutablewithinonemonth.Thedecreeholdersoughtexecutionafter
morethanfouryears.Thejudgmentdebtorobjectedbecauseoflimitation.
It washeldthat the proceedingswere liableto bedismissedbecause the exe
cutingcourthadnopowertoextendtimeforexecutionofthecompromise
decree.^'*'*
Pre-emptiveordersundertaxmeasures
Wherethereis apre-emptiveorderunderataxingmeasureaboutsome
property,it has theeffectofvestingthepropertyin theGovernment.Such
anorderdoesnotbecomesetasidebythefilingofacivilsuit.Reliefabout
thesaleofsuchpropertycannotbegrantedautomatically.Solongasthe
orderremainsinforce,notitlecanbeconveyed.TheActappliestotransfers
byactsofpartiesandnottovestingofrightsunderstatutoryoperations.^''^
Amendmentofplaint
In a suit fordeclarationof title andinjunction,therewasomissionto
claimreliefofspecificperformanceofagreementtosell.The courtsaid
thatitamountedtorelinquishmentofthatpartoftheclaim.Subsequent
inclusionofthepleaofspecificperformancebywayofamendmentafter
elevenyearsofthesuitwasnotallowed,beingbarredbylimitationunder
Article54oftheLimitationAct.^"*^
Natureofjurisdictionunderthe Act
ThenatureofjurisdictionundertheActhasbeenheldtobelegaland
equitable.Thisobservationof theSupremeCourtoccurredin acasein
whichapersonenteredintoacontractofsaleofland.Hissons,whowere
alreadymajor,opposedthesuitforspecificperformancesayingthatthey
werejoint-ownersand they were neither consulted noreveninformed of
thetransaction.Butthevendeestatedbeforethecourtorallythatoneof
thesonshadparticipatedinthenegotiations.TheSupremeCourtdidnot
believethesonstosaythattheyhadnoknowledgeofthingswhennegoti
ationsforsaleandexecutionofdocumentstookplace,theybeingnotchil
drenat thetime.Therewasnoequityin theirfavourbecauseevenafterthe
suittheydid notapproachtheAuthoritiesundertheU.RConsolidationof
HoldingsAct,1953forhavingtheirnamesrecordedasjointowners.Such
Authoritieshadexclusivejurisdictionforthatpurpose.
244.MdHanifKhanvNareshPrasad,AIR2010Jhar73.
245. DeepakPrakash vJayanta Kumar Base,AIR 2003Cal153.
246.VanVibhagKaramchariGrihaNinnanSahkariSansthaMaryaditvRameshChander
(2010)4see596:AIR2011SC 41.
247.NarenderSinghvJaiBhagwan,(2005)9See157:AIR2005Se582:2005AllLJ289.https://t.me/LawCollegeNotes_Stuffs

1056. [S. 21] Specificperformanceofcontracts913
No reliefwas sought for declaration of title to property or for possession
ofproperty.Thesuitwasforspecificperformancesimpliciterand not suit for
land. It was heldthatthe suit wastriableby theCalcuttaHighCourteven
it thepremisesagreed to be assigned by way of lease were situated outside
theterritoriallimitof thecourt.Thereturnof theplaintwasnotproper.
Thecourtdoes not lose jurisdiction after grant of decree of specificper
formancein view of Section 28(1) of the Act. The sellerappliedfor rescission
of the decree. The decree holder deposited the balanceamountin the bank
to show his bona fides as a purchaser. The seller applied for extension of
time about his application for rescission. Extension was granted to him.
Such enlargement of time was held to be proper.
Impleadment(additionofparty)
In a suit forspecificperformance, a third party-stranger asserted that she
was inpossessionof the disputed property. The court said that such rights
could not be adjudicated in a suit for specificperformance.Astrangeris nei
ther necessary nor a properpartyforeffectiveadjudication of suchsuit.^^°
Powerofcourttoawardcompensation[S. 21]
S. 21.Powertoawardcompensationincertaincases.—(1)Ina suit for
specificperformanceof a contract,tlieplaintiff may also claimcompensation
for itsbreach,eitherinadditionto, or insubstitutionof,suchperformance.
(2)If,inany such suit,the court decides thatspecificperformanceought not
to be granted, but that there isa contractbetweenthe parties which has been
broken bythe defendant, and that theplaintiffisentitled to compensation for
thatbreach,it shallawardhim suchcompensationaccordingly.
(3)If,in any such suit, the court decidesthatspecific performanceought
to be granted, butthatit is notsufficientto satisfythe justice of the case, and
thatsomecompensationfor breach of thecontractshouldalsobe made tothe
plaintiff,it shallaward himsuch compensationaccordingly.
(4)Indeterminingtheamountof anycompensationawarded under this sec
tion,thecourt shall beguidedbytheprinciples specified in Section 73 ofthe
IndianContractAct,1872(9of1872).
(5)Nocompensationshallbe awarded under this section unlesstheplaintiff
hasclaimedsuchcompensationin his plaint:
Providedthatwheretheplaintiff hasnotclaimedany suchcompensationin
theplaint,the courtshall,at anystage ofthe proceeding,allowhimto amend the
plainton such terms as maybe just,for includingaclaimforsuch compensation.
Explanation.—Thecircumstancethat the contract has become incapableof
specificperformancedoes not precludethe courtfromexercisingthejurisdic
tionconferredby thissection.
248. NiligiriEstates (P) Ltd vKhanivaHousing (India) (P) Ltd, AIR 2012Cal60.
249.DilipKumar Patro v M.GopikrishnaRao, AIR 2015 Ori 15.
250.Lakshmammav P.K.Jayachandra,AIR 2015NOC1037 (Kar).https://t.me/LawCollegeNotes_Stuffs

1057. 914Chapter16 SpecificReliefAct,1963
[S. 21]
CASEPILOT
Compensationinadditionto orsubstitutionof specificperformance
Everypartyseeking the relief of specific performance is allowed by this
Section to claimcompensationfor the breach of thecontract.Such relief
may be claimed either in addition tospecificperformance or in substitu
tion of it. If the court is of opinion thatspecificperformance ought not to
be ordered, thecourtmay award compensation if a validcontractand its
breach areestablished.^^^Should the court find thatspecificperformance
by itself would not besufficientrelief,itmay,in addition, award compen
sation also to meet the ends ofjustice.Compensation would beassessed
in accordance with the principlesstatedin Section 73 of theContractAct.
Even where thecontracthas become incapable ofspecificenforcement, the
courtcan exercise the power under this section to award compensation. In
a case wherereconveyancewas refused, the court on ordering the same,
observedasfollows:"When the plaintiff by his option has madespecific
performanceimpossible.Section21 does notentitlehim toseekdamages.
Wherethe contract, for no fault of theplaintiff,becomesimpossibleof per
formance Section 21 enables the award of compensation in lieu and substi
tution ofspecificperformance."The courtcontinued:"Sofar as theproviso
tosub-section(5)ofSection21 isconcerned,twopositionsmust be kept
clearlydistinguished.If theamendmentrelatesto thereliefofcompensa
tion in lieuof or in additiontospecificperformancewherethe plaintiffhas
not abandoned his relief of specific performance theCourtwill allow the
amendmentat anystageof theproceeding.That is a claimforcompensation
falhng under Section 21 of theSpecificReliefAct, 1963 and the amendment
is oneundertheprovisotosub-section(5). Butdifferentand lessHberal
standardsapply if what is sought by the amendment is the conversion of a
suit forspecificperformance into one fordamagesfor breach of contract
inwhichcaseSection73oftheContractActisinvoked.Thisamendment
is under the discipline of Rule 17,Order6, CPC. The factthatsub-sec
tion(4),in turn,invokesSection73 of the Contract Act for theprinciples
of quantification and assessment of compensation does not obliterate this
distinction.""^
The measure ofcompensationis by thestandardsof Section 73 of the
IndianContractAct.Dealingwith thefacts,the courtsaid:"In thepresent
case assuming that the respondent had not actually sought the amendment
251.JaiNarainParasrampuriav Pushpa Devi Saraf, (2006) 7 SCC 756, promoters contracted
to buy property fpr thecompanybeforeincorporation.Thecompanyafterincorporation
adoptedthe contractandinformedthevendor.Butafterwards,vendorschangedtheir mind
andrefusedtoseO.Thisprovokedfrivolouslitigationbetweenbothparties.Eitherparty
beingequallyguiltyofmisconduct,thecourtrefusedtograntspecificperformanceto the
company to which it was otherwise entitled. Instead compensation of Rs 50 lakhs and refund
ofearnestmoney with 12 per centinterestwas allowed.
252.HarjeetSinghvAmrikSingh,(2005)12SCC270,nocompensationwasallowedto aperson
whohadnot beenreadyandwillingto dohispart.RizviBuildersvLamarckR.C.Clemente,
AIR 2015 Bom 192, no compensation where the contract was not yet formed and no loss was
showntohavebeencaused.https://t.me/LawCollegeNotes_Stuffs

1058. [S.21] Specificperformanceof contracts 915
of plaint forcompensationin lieu ofspecificperformance,theamendment
washerebypermitted so thatcompletejusticecould bedone.The quan
tum ofcompensationisascertainablewithreferenceto the determination
of the market value in the land acquisition proceedings. The compensation
awardedmaysafelybe taken to be themeasureofdamages,subject,of
course,to thedeductiontherefromofmoneyvalueof theservices,time and
energyexpendedby theappellantinpursuingtheclaimsofcompensation
and theexpenditureincurredby him in thelitigationculminatingin the
award.Accordingly,therewillbeadecreeawardingto therespondentcom
pensationinlieuandsubstitutionofoneforspecificperformancewhich,but
fortheacquisition,therespondentwouldhavebeenentitledto the quantum
and the measure.ofthecompensationbeing the entire amount of compen
sationdeterminedfor theacquisitionofthe suitpropertiestogetherwith all
thesolatium,accruedinterestand all otherpaymentsunderthe law author
isingtheacquisition,lessasumofRs1,50,000whichwastogototheappel
lant towardshisservices,timeandamountsspentinpursuingtheclaimsfor
compensationaswellastheconsiderationstipulatedforreconveyance."^^^
It isnecessarythat theplaintiffshouldhaveaskedfor thereliefof com
pensation.Thecourtmay,however,allowtheplainttobeamendedatany
stagetoenabletheplaintifftoclaimcompensation.^^"*
"Where,forexample,abuyerof land isallowedtorecoveritspecifically
and it takeshim about a yearto gettherelief,the court mayawardcompen
sation for the loss of time. Thefollowingfour illustrations appeared under
theearlier1877Act:
(1)Acontractstosellahundredmaundsofriceto 8.Bbringsa suittocompelAtoperform
thecontractortopaycompensation.TheCourtisofopinionthatAhasmadeavalid
contract and has broken it, without excuse, to the injuryof 8, but that specific perfor
manceisnotthe properremedy.Itshallawardto 8suchcompensationasitdeemsjust.
(2)Acontractswith8tosellhima houseforRs1000,thepriceto be paidand thepossession
givenonthe1stJanuary,1877.Afailstoperformhispartofthecontract,andBbrings
hissuitforspecificperformanceandcompensation,whichisdecidedinhisfavouron
the 1stJanuary,1878.Thedecreemay,besidesorderingspecificperformance,awardto
8compensationforthelosswhichhe hassustainedby/\'srefusal.-
(3)A,apurchaser,sues8,hisvendor,forspecificperformanceofacontractforthesaleofa
patent.Beforethehearingofthesuitthepatent"expires.ThecourtmayawardAcom
pensationforthenon-performanceofthecontract,andmay,ifnecessary,amendthe
plaint forthatpurpose.
(4)AsuesforthespecificperformanceofaresolutionpassedbytheDirectorsofa pub
liccompany,underwhichhewasentitledtohavecertainsharesallottedtohim,and
forcompensationforthenon-performanceoftheresolution.Alltheshareshadbeen
253.JagdishSinghvNatthuSingh,(1992)1SCC647:AIR1992SC1'604.
254.JhandoovRameshChandra,AIR1971All189,CitedinRajendraKantilalDalaivBombay
BuildersCo(P)Ltd,AIR2002Bom408,compensationwasawardedtotheplaintiffagainst
thesecondbuyerbecausehehadpurchasedthepropertywithfullknowledgethattheprop
ertyhadalreadybeensoldtotheplaintiffandhedidsomalafidewithaviewtodefeatthe
plaintiff's title.https://t.me/LawCollegeNotes_Stuffs

1059. \ •'
916Chapter16SpecificRelief Act, 1963 [S.21]
allotted before the institution of the suit. The court may, under this section, award A
compensationforthenon-performance.[Based on Ferguson vM///son.^"]
Orderfor delivery of goods
The court canissueadirectionfordeliveryofgoodsdespitetherebeing
an alternative plea for damages. On the facts of thisparticularcase/^®the
courtsaid;
"In caseofnon-deliveryof goods,wheretherew^asanalternativeplea
fordamages,court may not directdeliveryof thegoods(UnitsofUTI)
after theirpurchasefromopenmarketalongwithbenefitofrightsissue.
Insteadthe court cancompensatetheplaintiffwith return of themoney
paid by him with interest and award ofreasonabledamages."
Anagreementwasenteredinto for sale of units of UTI by theappellant
to therespondent.Paymentsby way ofconsiderationforpurchaseof the
unitsweremadeby therespondentto theappellantandbanker'sreceipt
was issued by theappellantin respect of the saidtransaction.But units were
notdeliveredbytheappellant.Byaletterdated1July1992therespond
entclaimedcompensationforbreachof contract treating the same tohave
takenplaceon30May1992andon thatbasisitclaimeddifferenceinprice
betweentheratethat waspaidandtherateofUTIason 30May1992.Since
no amount was paid by theappellant,a suit wasfiledby therespondent
claimingdeliveryof the unitsinrespectofwhichpaymentshadbeenmade.
Analternativeprayer was also made for payment of a certain amount as
damagesplusfurther interestat17.5per centp.a. on the saidamounttillthe
dateofpayment.TheSpecialCourtconstitutedundertheSpecialCourt Act
of1992grantedreliefofspecificperformancerequiringtheappellanttobuy
the units forwhichpaymenthadbeenmadeandalsotopurchaseandsell
to therespondenttheunitsrepresentingtherightissuewhichtherespond
ent wasdeprivedofavailingbecauseof thenon-deliveryof the units.Costs
ofRs27,87,000werealsoawarded.Disposingof theappeal,theSupreme
Courtsaid:"Theappellantadmitsthat therespondent,towhomdeliveryof
theunitswasnotmade,wouldbeentitledto therefundofthemoneyplus
damagesthereoncalculatedinaccordancewith theprinciplescontainedin
Section73 ofthe Indian ContractAct, 1872.Consideringthe factthat there
wasanalternativepleafordamages,on thefactsofthe presentcaseadecree
forspecificperformanceinthemannerinwhichitwaspassedwasprobably
notappropriateespeciallywhen therespondentcouldbecompensatedwith
the return ofmoneyand awardofreasonabledamages."
255.(1866)LR 2ChApp 77. K.Narendrav RivieraApartments (P) Ltd,(1999)5 SCC77: AIR
1999SC2309,Agreement,onfactshavingbecomeincapableofperformance,compensation
equalto theamountofpricealreadyreceivedbythevendor,directedto bepaidtothevendee
bythevendorinadditiontotherefundoftheamountreceived.Interestdirectedtobepaidon
theamountofcompensationfromthedateofdecisionandontherefundableamount,from
thedatethevendorhadreceivedthesame.
256. State BankofSaurashtrav P.N.B., (2001) 5 SCC 751: AIR 2001 SC 2412.https://t.me/LawCollegeNotes_Stuffs

1060. [Ss.248c22] Specificperformanceofcontracts917
Loss of right to compensation
Therighttosueforcompensationislostwherethesuitforspecificperfor
manceisdismissedinwholeor inpart, butotherrights,ifany,willsurvive.
ThisistheeffectofSection24.
S. 24. Barofsuitforcompensationforbreachafterdismissalofsuiffor
specific performance.—Thedismissalof a suitforspecificperformanceof a
contract or part thereofshallbar theplaintiff'srightto sue forcompensation for
thebreachofsuchcontractorpart,asthecasemaybe,butshallnotbarhisright
to sueforanyotherrelieftowhichhe maybe entitled,byreasonofsuch breach.
Reliefofpossession,partition,etc.[S.22]
Wherethereliefsoughtisforthetransferofimmovableproperty,the
courtmayalsogrant,ifsoprayedbytheparty,reliefbywayofpossession,
partitionandseparatepossession.Thecourtmayalsograntanyotherrelief,
suchasrefundofearnestmoneyordepositpaidincasespecificperformance
isrefused.Wherethe party has notmadeanysuchprayerin theoriginal
plaint, the court maypermitamendmentof theplaint.^^^
S. 22.Powertograntreliefforpossession,partition,refundofearnest
money,etc.—(1)Notwithstanding anything to the contrary contained in the
CodeofCivilProcedure,1908(5of1908),anypersonsuingfor thespecific
performanceof acontractforthetransferofimmovablepropertymay,inan
appropriatecase,askfor—
(a)possession,orpartitionand separatepossession,of theproperty,in
additionto suchperformance;or
(&)anyotherrelieftowhichhemaybeentitled,includingtherefundofany
earnestmoney ordepositpaid or [madeby]him, in case his claim for
specificperformanceisrefused.
(2)Noreliefunderclause(a)orclause(b)ofsub-section(1)shallbegranted by
the court unless it has beenspecificallyclaimed:
Providedthat wheretheplaintiffhasnotclaimedanysuchreliefintheplaint,
the courtshall,at anystage oftheproceeding,allowhimto amendtheplainton
such terms as may bejustfor including a claim for suchrelief.
(3)The powerofthecourt tograntreliefunderclause(b)ofsub-section(1)shall
bewithoutprejudice to its powers to awardcompensationunder Section21.
Reliefforpossessionhas to bepleaded(alternativerelief)
Reliefofpossessioncan begranted onlyif it isspecificallyprayedfor.^^®
Sub-section(1)ofSection22oftheSpecificReliefAct,1963isanenabhng
provision.A plaintiff in a suit forspecificperformance may ask for further
257. The sectionisanenablingprovision,AdconElectronics(P)Ltd vDaulat,(2001)7 SCC698:
AIR2001SC3712.
258. Lavinder Kumar Sharma v Pramod Kumar, AIR 2011P&H30, the alternative relief of
possession,partition, refund of earnestmoney,etc. can be granted onlyvi^henspecifically
pleaded.https://t.me/LawCollegeNotes_Stuffs

1061. 918Chapter16SpecificReliefAct,1963 [S-22]
reliefsmentionedinclauses{a)and[b]thereof.Clause{a)containsreliefsof
possessionandpartitionandseparatepossessionoftheproperty,inaddition
tospecificperformance.Themandateofsub-section(2)ofSection22isthat
noreliefunderclauses{a)and[b)ofsub-section(1)shallbegrantedbythe
courtunlessit hasbeenspecificallyclaimed.Thusitfollowsthat no court
cangrantthereliefofpossessionoflandorotherimmovableproperty,sub
ject-matteroftheagreementforsaleinregardtowhichspecificperformance
isclaimed,unlessthepossessionoftheimmovablepropertyisspecifically
prayed for.
Where an execution of sale deed was made in favour of the plaintiff by
processofthecourtitself,itwasheldthattheonusuponthecourtbecame
further extended to ensuredeliveryof possession through execution pro
ceedingsforthepurposeofsatisfyingthedecree.Eveniftherewasnoprayer
fordeliveryofpossessionintermsofSection22,thedecreeholderwasenti
tled to be inpossessionof thedemisedproperty.
Intheinstantcasethesuitisforspecificperformanceoftheagreementfor
saleof the suitpropertywhereinreliefofdeliveryof the suit propertywas
notspecificallyclaimed,assuchitcouldnotbetreatedasa"suitforland".It
wasnotpossibletoacceptthecontentionthatinthepresentcasethesuitwas
foracquisitionoftitleto thelandandisa"suitforland".In itstruesense,
asuitsimpliciterforspecificperformanceofacontractforsaleoflandisa
suit for enforcement of the terms of a contract. The title to the land as such
is not the subject-matter of thesuit.^^"
Refusalofrelief
Wherethepropertyinquestionwastransferredbyaco-sharerwhose
sharewasverysmallanditwasnotpossibletodirectspecificperformance
oftheentirepropertyasitcouldnotbedividedintosmallshares,itwasheld
thatexerciseofdiscretionby the trial court in notdecreeingthe suiteven
to theextentof thesellingco-sharer'ssharewasproperandwasnot to be
interferedwith.^^^
Insuchcasesgenerallytheahernativereliefofrefundofmoneypaid to
thesellerisallowedwithinterest.^®^
Alternativerelief
In aclaimforspecificperformanceofanagreementtosell,thedefendant
provedthatheneverintendedtosellthepropertyinquestionbecausethe
259.SunitaDevi vDinbandhuShah, AIR 2010 Jhar 151; KrishnamurthyGounderv
Venkatakrishnan,AIR 2012 Mad 105, thedecreewassilentaboutdeliveryofpossession.
Butoncespecificperformanceisallowed,possessionshouldbegranted,whetherpleaded
ornot.
260.AdconElectronics(P)Ltd v Daulat,(2001)7SCC698:AIR2001SC3712;P.C.Varghese
VDevaki AmmaBalambikaDevi,(2005)8 SCC 486, the relieffor partition orexclusive
possessioncanbegrantedinadditionto themainreliefofspecificperformance.
261.KhanderaoSubbaraoNadagirvHulagavva,AIR 2003 Kant 354.
262. Sarita Dokania v Krishna Dey,(2014)13 SCC 522:(2013)3CalLJ 153.https://t.me/LawCollegeNotes_Stuffs

1062. [S.22] Specificperformanceof contracts 919
intention was to provide thepropertyas a security for a loan. Thecourtsaid
that it could grant the alternative relief of repayment of the loan amount to
theplaintifflender. Section 22 enables thecourttotakeinto its fold the relief
ofreturnoftheamountlent.^^^
Amendmentofplaint
An amendment of plaintw^assought for including prayer forreturnof
advancemoneywithinterest.Thecourtsaidthattheamendmentwas cov
ered by Section 22(2) and not Order 6, Rule 17, CPC. The plaintiff was
entitled to amend his pleadings at any stage of theproceedings.^^''
The plaintiff failed to pray for relief ofpossession,nor anydecreefor
possession was passed. Thecourtsaidthattheplaintiffcould be allowed
to amend his plaint for including prayer of possession at any stage includ
ing execution. This was necessary to avoid multiplicity of proceedings and
advance the cause ofjustice.^^^
Liquidationofdamagesnobar[S. 23]
Where the parties to the contract have fixed the amount of compensation
whichwouldbe payable in the event of default, this would notconstitute
any bar to the relief of specificperformance.Thecourtmay examine the cir
cumstancesof the case. If they showthatcompensationwas fixed in order to
secure performance and not to allow the defaultingpartyan option to pay
compensation,thecourtmay allow specificperformance.Where, on facts,
the plaintiff-respondent was found ready, willing and able to perform his
partof the agreement for the sale of orchard, it was held that such plaintiff
was entitled tospecificperformance despite the existence of a penalty clause
providing for payment of Rs 10,000 by thepartyviolating the terms and
conditions of agreement. The Division Bench of the HighCourtrightly dis
missed the appeal of theappellant-Defendant1vendor.Thecourtcannot,
however, in the same decree order the payment of the fixedamountalso.
The Act of1877carriedthispowerunderSection 20andhadthe follow
ingillustration:
AcontractstograntB anunder-leaseofpropertyheld by AunderC, andthathe will
applyto Cfor a licencenecessarytothevalidity oftheunder-lease,andthat,ifthelicence is
notgranted,/Awill pay B Rs10,000.A refuses toapplyforthelicence and offers to payBthe
Rs10,000. B isneverthelessentitledto havethecontractspecificallyenforcedif Cconsents
to givethelicence.
Earnestmoney
Anagreementfor sale ofpropertydidnotcontainanystipulationfor
forfeitureofearnestmoney or advance madetowardssaleconsideration.
263.LaxmanHaraklalvUkhajiZingaMahajan,AIR 2011 Bom 159.
264.RajeshKumarChoudharivDarshansinghSardar,AIR 2011Chh179.
265.M.PalanisamyvValmoorty,AIR2010NOC557 (Mad).
266.ManzoorAhmedMagrayvGhulamHassanAram,(1999) 7 SCC 703: AIR2000SC 191.https://t.me/LawCollegeNotes_Stuffs

1063. 920 Chapter16SpecificReliefAct,1963 [S.27]
Thevenderdid nothing further which could be regarded as steps towards
performance.Hewasorderedtorefundtheamountwith 6 percentsimple
interestfromdateofsuit.^^^
Alternativereliefprovidedincontract
Wheretheagreement(forsaleofagriculturalland)itselfprovidingfor
contingenciesof(/')sellerrefusingtoselland(»')purchaserrefusingto buy
bystipulatingthe return ofearnestmoneyplusanothersum ineithercir
cumstance, it was held, that on facts, there was no obligation on theseller
tocompletethesaletransactionand the contractcouldnot bespecifically
enforced.The High Court erred inupholdingthedecreeofspecificperfor
manceawardedby the firstappellatecourt.
Evenotherwise the plea of alternative relief of refund of earnest money
anddamagescannot by itself be a bar to claim thedecreeofspecific
performance.^®'
Enforcementofarbitralawardsanddirectiontoexecutesettlements
Section 25 of the Act providesthatthe provisions of this chapter (i.e.
ChapterII) shallapplytoawardstowhichthe Arbitration Act, 1940 does
notapplyand todirectionsin awillorcodiciltoexecuteparticular settle
ment. (Now theArbitrationandConciliationAct, 1996)
RESCISSIONOFCONTRACTS
The rescission ofcontractnecessarily constitutes a bar to its performance
by eitherof the party to it(Fry:ChapterXXIV).Thegroundsforbringing
a suit forrescissionhave been given in Sections 27 and 28 of theSpecific
ReliefAct,1963:
S. 27.Whenrescissionmaybeadjudgedorrefused.—(1)Anyperson
interestedin acontractmay sue to have itrescinded,and such rescission may
be adjudged bythe court in any of thefollowingcases, namely:—
(o)wherethecontractisvoidableorterminablebytheplaintiff.
(b)wherethecontractis unlawful forcausesnotapparenton its faceand
thedefendantismoretoblamethantheplaintiff.
(2)Notwithstandinganythingcontainedinsub-section(1),thecourtmay
refusetorescindthecontract—
(a)wheretheplaintiff has expressly or impliedly ratifiedthecontract;or
(b)where, owing tothechangeofcircumstanceswhich have taken place
sincethemaking ofthecontract(not being due to any act ofthedefend
anthimself),thepartiescannotbesubstantiallyrestoredtotheposition
in whichtheystoodwhenthecontractwasmade;or
267.VishalkumarNemichandKakadvShankarMahadeoKubde,AIR2009NOC258Bom.
268.DadaraovRamrao,(1999)8SCC416.
269. P.C. Varghese v Devaki AmmaBalambikaDevi, (2005) 8 SCC 486.https://t.me/LawCollegeNotes_Stuffs

1064. Rescissionofcontracts921
(c)wherethirdpartieshave,duringthesubsistenceofthecontract,acquired
rights in good faithwithoutnotice and for value; or
id)whereonlyapartofthecontractissoughttoberescindedandsuchpart
isnotseverablefromtherestofthecontract.
Explanation.—\n thissection"contract", in relation totheterritoriesto
which theTransferof PropertyAct,1882,does not extend, means a contract in
writing.
Whenrescissionavailable
Thereliefofrescissioncomeshandyto apersonwho hasbecomethe
victim of an imposition by means of a contract. This burden of acontract
hasbeenimposeduponhimbymeansofafraudorillegahtyorsomething
equivalentwhichmakesthecontracteithervoidorvoidable.Hemayask
thecourt that thecontractshouldbedeclaredas notbindinguponhim.
Thisisrescission,thatis,gettingrid of acontract.Section27accordingly
providesthatthecourtmayallowthereliefofrescissionin thefollowing
cases:
(1)Wherethecontractisvoidableorterminablebytheplaintiff;
(2)wherethe contract isunlawfulforcausesnotapparenton itsface
andthedefendantismoretoblame.
Lossofrightofrescission
ThereliefofrescissionisavailablesubjecttoveryimportantHmits.Thisis
sobecauseeveryvoidablecontractisvalidas longas it is notavoided.If the
reliefofrescissionis notquicklyobtained,circumstancesmaysoseriously
changethat it may then not bedesirableto put an end to the contract. Sub
section(2)accordingly provides that the right of rescission is not available
in the following cases:
1.Affirmation
The plaintifflosesthe right ofrescissionwhen onbecomingaware of
his right he chooses to ratify the contract. Once thecontractis affirmed it
cannotafterwardsbeavoided.Affirmationmaybeexpressorimplied.An
expressaffirmation takes place when the right to rescind is openlywaived.
Animpliedaffirmationtakesplacewhenthe partyhavingthe right to
rescind is instead enjoying the benefits of thecontract.
270. This section corresponds with S. 35 of the repealedSpecificReliefAct, 1877. That section
carriedthe followingillustrations:
Illustrationas tosub-section{l){a).—Asellsafieldto B.Thereis a right ofwayoverthe
fieldof which A has direct personal knowledge, but which he conceals from B. B is entitled
tohavethecontractrescinded.
Illustration as to sub-section{l){b).—A,an attorney, induces his client, B, a Hindu
widow, to transfer property to him for the purpose of defraudingB'screditors. Here the
partiesarenotequallyinfault,andB isentitledto have theinstrumentoftransferrescinded.https://t.me/LawCollegeNotes_Stuffs

1065. 922Chapter16SpecificReliefAct,1963 [S-28]
2. Whererestitutionnotpossible
Therightofrescissionisalsolostwherethepositionofthepartieshas
beenaheredtosuchan extentthattheycannotbeput backto theiroriginal
status.Whereonepartyhasalreadyresoldthegoodsorconsumedthem,
restorationof the status quo antebecomesimpossible.
Thetransfereeobtainedpossessionof thepropertyin partperformance
of the contract.The court said thatpossessionoverpropertywas to be pro
tectedevenif theperiodoflimitationforbringinga suitforspecificper
formancehadexpired.Thetransfereewasrequiredtofulfilthenecessary
conditionsin ordertodefendand protecthispossession.TheLimitationAct
doesnotextinguishdefences.Itonlybarstheremedy.
3.Interventionofthirdparties
Wheretherightsofthirdpartieshaveintervened,rescissioncannotbe
allowedtotheprejudiceofsuchrights.Where,forexample,apersonhas
obtainedgoodsbyfraudand,beforethesellerisabletocatchhim,hetrans
fersthegoodsto abonafidebuyer,thedeceivedsellerwouldnotnowbe
allowedto getrid ofthesaleonaccountofthefraud.
4.Severance
Rescissionis notallowedwherethe plaintiffisseekingrescissionof only
apartofthecontractandthatpartisnotseverablefromtherestofthe
contract.
S. 28.Rescissionincertaincircumstancesofcontractsforthesaleor
lease of immovableproperty,thespecificperformanceof which hasbeen
decreed.—(1)Whereinanysuita decree forspecificperformanceofa contract
for the sale or lease of immovablepropertyhas been made and purchaser or
lesseedoes not,withinthe periodallowedbythe decree or suchfurther period
asthe courtmayallow,paythepurchasemoneyor other sumwhichthe court
hasordered himtopay,the vendororlessormayapplyinthe samesuitinwhich
thedecreeis made, to havethecontractrescinded and on such applicationthe
courtmay,byorder,rescindthecontract,either so far asregardsthe party in
default oraltogether,asthejustice ofthecase may require.
(2)Where acontractis rescinded undersub-section(1),thecourt—
(o)shalldirectthe purchaserorlessee,ifhe has obtainedpossessionofthe
propertyunderthecontract,torestoresuchpossessionto thevendoror
lessor,and
(fc>)maydirectpaymentto thevendororlessorofalltherentsandprofits
whichhave accrued in respect of the property from the date on which
possessionwas so obtained bythe purchaseror lesseeuntilrestoration
271.ShrimantShamraoSuryavanshivPrathadBhairobaSiiryavanshi,(2002)3 SCC 676: AIR
2002SC960.https://t.me/LawCollegeNotes_Stuffs

1066. Rescissionofcontracts923
ofpossessionto thevendororlessor,and, iftliejusticeof the case so
requires,the refund of any sum paid by the vendee or lessee asearnest
nnoney ordepositinconnectionwiththecontract.
(3)ifthepurchaserorlesseepaysthepurchasemoneyorothersumwhichhe
isordered to pay under the decreewithinthe period referredto in sub-section
(1),thecourtmay,onapplicationmadeinthesamesuit,awardthepurchaseror
lesseesuchfurtherreliefashemaybeentitledto,includinginappropriatecases
allor anyofthefollowingreliefs,namely:—
(a)theexecutionofa properconveyanceor leasebythe vendororlessor;
(b)thedeliveryofpossession,orpartitionand separatepossession,of the
property on the execution of such conveyance or lease.
(4)Noseparatesuitin respectofanyreliefwhichmaybeclaimedunderthis'
sectionshalllie at the instance of a vendor,purchaser,lessor or lessee, as the
casemay be.
(5)The costs of anyproceedingsunder this section shall be inthediscretion
ofthecourt.
Inbuiltremedyofrescissionindecreeofspecificperformance
Section28enablesthe court to put an inbuiltremedyofrescissionin a
decreeofspecificperformance.Whereadecreeofspecificperformancehas
beenpassedinrespectofacontractforthesaleorleaseofimmovableprop
erty,butthe party towhomsuchreliefhasbeengranteddoesnotpaythe
pricewithin the timedelimited,thesellermay ask the court forrescission.
The courtwilldirectthepurchaserorlessee,if he hasalreadytakenover
possession,torestoreit to thesellerandalsoto payhimrent for the period
duringwhichheenjoyedthebenefitsofpossession.Wherejusticesorequires
thecourtmayorderrefundoftheearnestmoney,ifany,paidbythevendee
orlessee.Where,on theotherhand,thevendeeorlesseehasdepositedthe
moneyasdirectedbythecourt,hemaybeallowedanyreliefasmayseem
justto thecourtinthecircumstances.
272.Reliefwasallowedevenwherethedepositwaslatebutitwasmadeduringthependencyof
theappeal.Thecourtretainscontroloverthematterevenafterthepassingof thedecree,
RamankuttyGuptanvAvara,(1994)2SCC642:AIR1994SC1699.V.S.Palanichamy
ChettiarFirmv C.Alagappan,(1999)4SCC702;AIR1999SC918,applicationto the
executioncourt forextensionof time. M. MohammadAslamv C.N.A. Gowthaman, AIR
2003 Mad 248, norescissionallowedwherethepurchaserpaid thebalanceconsideration
moneyas orderedbythe court.P.J?.YelumalaivMM.Ravi,(2015)9 SCC52:(2015)4 SCC
(Civ)309, the decree holder did not deposit the balance sale consideration within the time
stipulated,norin themannerstipulatedbythecourtin theconditionaldecree.Hedelayed
paymentby one day evenafterextensionof time. Hecouldnot seekexecutionof the decree
whichhadceasedtoexistbecauseofthedeemeddismissalofthesuit.T.L.RajagopalvS.N.
Shivakumar,AIR 2015 NOC433(Kar),enormousdelayinpayment,rescissionallowed.
Vinayanv Radhakrishnan, AIR2016NOC 216(Ker),vendeefailedto depositsaleconsider
ationwithintheprescribedperiodandadmittedthat hedidnothavefundsforthepurpose.
Vendorentitledtorescission.Buthe had torefundthedepositamountwith 7.5 per cent
interestbecausehe was havingthe property and depositwith him.https://t.me/LawCollegeNotes_Stuffs

1067. 924Chapter16SpecificReliefAct,1963 [S.28]
Contract not automatically extinguishedondecreeof
specificperformance
Thecontractbetweenthepartiesisnotextinguishedonpassingofdecree
ofspecificperformance.Thecourtdoesnotloseitsjurisdiction,nordoesit
becomefunctusofficio.Thedecreeofspecificperformanceis in the nature
of apreliminarydecree.Thesuitisdeemedtobependingevenafterthe
grantofsuchdecree.Thecourtretainsitscontrolovertheentiremattereven
afterthe decree. Section 28 itself isindicativeof such aconsequence.The
courthaspowertoenlargetimeinfavourofthedecreeholdertoenablehim
topaytheamountor toperformtheconditionsmentionedin thedecree.
Therewas nodefaultclause in the decree in the sensethatiftheconditions
were not satisfied within a certain time, it could be avoided. The decree
holderhad, during thecourseof theproceedingsstretchingover24years,
-paidtheentirepremiumamountandlargesumsinrespectofaccruedrents.
It could not be said that he, beingthelessee,intendedto abandon the agree
ment.He wasdirectedto paythebalanceamount within30dayson which
thelessorwastoexecutetheleasedeed.^^^
Where there was no outer limit for payment of balance amount of the
priceandontheaskingofthecourtthepurchaserdepositedthebalance
amountinthecourtanditwasfoundthatthevendorswerenotcarrying
outtheirpart oftheagreement,theremedyofrescissionwasnotallowedto
suchvendor
The courtwhichpassesadecreeforspecificperformanceretainscontrol
overthedecree.Butthe parties cannotdeviatefromthe terms of thedecree.
Proceedingsforexecutionofdecreedo not fall within theexpression"pen
dencyofsuit".Thesuitattainedfinalityasnoappealwaspreferred.During
thependencyofexecutionproceedings,thejudgmentdebtorsoldawaythe
suit property.The court said that this did not amount toassignmentor crea
tion of anyinterestduringthependencyofasuit.Noleaveofthe court was
obtainedbeforepurchasingtheproperty.Thepurchaserwasnotallowedto
beimpleadedas a party to executionproceedings."^
273. KumarDhirendraMulHckv Tivoli Park Apartments (P) Ltd, (2005) 9 SCC 262.Susheela
DeviVMaharshiCommerce Ltd, AIR 2010 NOC 819(AP),rescissioncan be ordered for
non-depositofanyothersumorderedbythecourt,notnecessarilythebalanceamountof
consideration.The plaintiff(buyer)was directed to deposit costs of stamp papers, expenses
ofregistrationand otherincidentalchargeswithinonemonth.Refusalto grantreliefof
rescissionondepositofsuchamountswasheldto beimproper.KhoobiramvXJrmilla
Chauhan,AIR2010MP 211,therewasno directionto thedecreeholderin thedecreeto pay
the balance consideration within two months, it was for the otherpartyto receive the bal
ance and to execute sale deed. There was no default on thepartof the decree holder within
themeaningof S. 28.
274. S.K.Guptav Kuldeep Singh,AIR2011 Del 54.
275.MahfoozAhmedvNeelmani,AIR 2010 MP165.https://t.me/LawCollegeNotes_Stuffs

1068. [S.29] Rescissionofcontracts925
Extensionoftime forpaymentunderdecree
The decree was signed and sealed on aparticulardate under which the
decreeholder was givenabout three weeks' time to pay under the decree.His
application for extension of time was dismissed on the same day. Such order
ofdismissalwasheldtobeerroneous.
Limitation
Anapplicationfor rescissionoughtto be filedwithin3 years from the
date of the decree for specificperformance.The cause ofactioncommences
from the date of decree, and not from the date of dismissal of application
filed by the vendee for extension of time to pay the decretal amount. But,
evenafterdismissing thepetitionfor rescission ofcontractastime-barred,
adirectionto the vendee for deposit of thesaleconsiderationalongwith
interestwouldbelawful.
For execution ofproperconveyance by vendor and delivery of posses
sion, thepreconditionfor theplaintiffis to pay thebalancepurchasemoney
withinthe time mentioned in Section 28(1). There was failure on thepart
of theplaintiff-purchaserto deposit the balance saleconsiderationincourt.
He made a falseavermentin theaffidavitas to havepaidthebalancecon
sideration.He playedfraudon thecourt.Hebecamedisentitledto relief of
executionunderSection28(3).Thevendorbecameentitledto getthecon
tractrescinded.^^^
Appealableorder
AnorderunderSection28 forrescindinganagreementamountsto a
decree. Anappealliesagainstsuchorderandnotrevision.^^^
Alternativeprayerforrescission insuitfor specificperformance[S. 29]
Asprovidedby Section 29 of the Specific Relief Act,1963,theplaintiff
may in a suit for specificperformancemake aprayerthatif such reliefcan
not begranted,thecontractmay berescinded.He has to make delivery of
theinstrumentfor being cancelled.
But the converse is nottrue.So, theprayerfor the rescission of the
contractor, in thealternative,for a decree of specificperformanceisnot
permissible.^®"
S. 29.Alternativeprayerforrescissioninsuitforspecificperfor
mance.—Aplaintiffinstitutingasuitforthespecificperformanceof acontract
inwritingmay pray inthealternativethat,ifthecontractcannotbespecifically
276.MostParwatiDevivMahabirMahto,AIR2015Jhar87.
277.B.V.GururajvMRRathindran,AIR2010Mad129.
278.KaniyattilVmmakulsummav P.T.VijiyaKumar,AIR2015Ker 289.
279.NVSMAnandvalev K.T.Santhanakrishnan,AIR2010Mad204;Ss.96,2(2)andOrder41,
Rule1.
280. Fry,SpecificPerformance,S. 1058 (5th Edn).https://t.me/LawCollegeNotes_Stuffs

1069. 926 Chapter 16SpecificReliefAct, 1963 [S.30]
enforced it may be rescinded and delivered up to be cancelled;and the court, if
it refuses toenforcethecontractspecifically, maydirectit to berescindedand
deliveredupaccordingly.
Extensionoftime
Where thecourt,while ordering specificperformancein favour of the
plaintiff,directedhim to paythe balanceamount within aspecifieddate and
that,on his failure to do so, his case would be dismissed, it was held on his
failure to do so,thatthecourtcouldgranthimextensionoftime.^^^
Rescissionandequity
Section30lays downthatthecourtmay requirepartiesrescindingto do
equity. It provides:
S. 30.Courtmayrequirepartiesrescindingtodoequity.—Onadjudg
ingtherescission of acontract,thecourtmay requirethepartytowhomsuch
relief isgrantedto restore, so far as may be, anybenefitwhich he may have
received fromtheotherpartyand to make anycompensationto him which jus
ticemayrequire.
It is amaximof lawthat"he who seeks equity must do equity" in the
transactioninrespectofwhichrelief issought.So while decreeing rescission
thecourtmight direct not only payment ofcompensationto the defend
ant but alsorestorationof any benefit received by theplaintiffunderthe
contract.
Apartyseekingspecificreliefmay at the same time askthatif specificper
formancecannotbeallowed,thecontractmay beorderedto berescinded.If
thecourtrefuses one relief, it mayordertheother.
The SupremeCourthas been of theopinionthatwhile dealingwithan
applicationunder Section 28(1) for rescission ofcontractin a case in which
the relief of specificperformancehas been earlier allowed, thecourtdoes .
notcease to havejurisdictionover thematter.Thecourtretainscontrol
over the decree evenafterthedecree has beenpassed.It isopentothecourt
to exercise power under Section 28(1) either for extension of time or for
rescindingthecontract.^^^
Wherethepurchaserdepositedthe money in thecourtasdirectedby the
court,he wasnotallowedtowithdrawitwithoutfirst applying to thecourt
for adirectiontothevendortoexecutethesaledeed,becauseuntilthenit
281.VatsalaShankarBansolevSamhhajiNanasahebKhandare,AIR2003Bom 57.
282.RamankuttyGuptanvAvara,(1994) 2 SCC 642: AIR1994SC 1699.AkshayalingamFillai
VAyyambalaAmmal,AIR 1933Mad386,the DBheldthata decree for specificperformance
enuresnotonlyfor the benefit of theplaintiffbut alsothatof thedefendant;thepassingof
the decree doesnotterminatethe suitbecauseall reliefsopento theplaintiffafterjudgment
areequallyavailableto thedefendant.MohdAltSahibvAbdulKhadirSaheb,(1927) 59MLJ
351,afterdirectingthepurchaserto pay the pricewithinthreemonths,thecourthad the
power tograntextension of time on sufficient cause shown though theapplicationwas made
afterthe time fixed forperformancehadexpired.https://t.me/LawCollegeNotes_Stuffs

1070. [S.26] Rectificationofinstruments927
could not be saidthatthe vendor had failed to comply with the order of the
court.^^^
Thepartyat whose instance thecontractis cancelled may be asked by the
courtto restore the benefits, if any, receivedunderthecontractto theextent
towhichjusticerequires.
RECTIFICATIONOFINSTRUMENTS [S.26]
Section 26 of the Specific Relief Act, 1963 provides remedy forrectifica
tionofinstruments.Theterm"instrument"has been defined in Section 2,
clause(14)of theIndianStamp Act (II of 1899), Accordingly,"instrument"
includes everydocumentby which any right or liability is orpurportsto be
created,transferred,limited,extended,extinguishedorrecorded.A suit,
therefore,lies for therectificationof a will, a decreeandalso fortherectifi
cationof anaward-decreeon thegroundof fraud. Theword"instrument",
however,doesnotinclude"ArticlesofAssociation".^^"*
S. 26.Wheninstrumentmayberectified.—(1)When,throughfraud or
amutualmistakeoftheparties,acontractorotherinstrumentin writing [not
beingthearticles ofassociationofacompanyto whichtheCompaniesAct,1956
(1of1956),applies]doesnotexpresstheirrealintention,then—
(a)eitherpartyor hisrepresentative-in-interestmayinstituteasuitto have
theinstrumentrectified;or
(b)theplaintiffmay, in any suit inwhichanyrightarisingundertheinstru
mentis in issue, claim in hispleadingthattheinstrumentberectified;or
(c)adefendantin any such suit as isreferredto in clause(b),may, inaddition
toanyotherdefenceopentohim, ask forrectificationoftheinstrument.
(2)Ifin any suit in which acontractorotherinstrumentissoughtto be recti
fiedundersub-section(1),thecourtfindsthattheinstrument,throughfraud or
mistake,doesnotexpresstherealintentionoftheparties,thecourtmay, in its
discretion,directrectificationoftheinstrumentso as toexpressthatintention,
so far as this can bedonewithoutprejudicetorightsacquiredbythirdpersons
ingoodfaithandforvalue.
(3)Acontractinwritingmay first berectified,andthenifthepartyclaiming
rectificationhas soprayedin hispleadingandthecourtthinksfit, may bespe
cificallyenforced.
(4)No relief fortherectificationof aninstrumentshall begrantedtoanyparty
underthissectionunlessit hasbeenspecificallyclaimed:
Providedthatwhereapartyhasnotclaimedanysuchreliefin hispleading,
thecourtshall, at anystageoftheproceeding,allow him toamendthepleading
onsuchtermsas maybejustforincludingsuchclaim.^®^
283.M.MohammadAslamvC.N.A.Gowthaman,AIR2003Mad248.
284.CITVKamlaTownTrust,(1996) 7 SCC349:AIR1996SC620,powertoorderrectification
oftrustdeed;rectificationwasorderedtodeclarethatthetrustwasacharitableone.
285.Sub-section(1)andcl.(a) of this S.correspondswithS. 31andsub-section(3)of thissection
correspondswithS. 34 of therepealedSpecific Relief Act, 1877.ThatActcarriedthefollow
ingillustrations:https://t.me/LawCollegeNotes_Stuffs

1071. 928Chapter16SpecificRelief Act, 1963 [S.26]
In thematterofrectification,thetruequestion,iswhatwas theintention
of the parties at the time of its execution and not what the parties inten
tionallyomitted.^®®The plaintiff must establishthatthe alleged intention to
whichhedesiresthedocumentto bemadeconformable,continuedconcur
rently in the minds of all parties down to the time of its execution. [Ibid]
For, if the parties after an agreement changed their minds and it is their
changed intention that is embodied in the instrument, there is no ground for
rectification.Whatis done onpurpose,is obviously not done by mistake.
[Ibid]
Essentialsto beproved
(1)Thatthere was amutualmistakeorfraud,and
(2)thattheinstrumentonthataccount did nottrulyexpress theintention
of theparties.^^^
Mistake
The rnistake to form agroundfor the relief ofrectificationmust bemutual
andnotunilateral.Amistakeon one side may be agroundof defence or a
ground for rescinding a contract, but not for correcting or rectifying an
instrument.Themistakemay beeitherof fact or of lawalthoughthecourt
of equity will not generally grant relief against a mistake of law, except
where themistakeresults in aninequitableresult.^^®
The principle ofgrantingrelief by way of rectification isthatwhere a con
tractas finally made fails to express or embody the agreement between the
partiesas originally made, it can be had rectified so as to bring it in accord
Illustrationsas tosub-section(1)andclause(a).— (a) A,intendingto sell to B hishouse
and one of three godownsadjacentto it, executes a conveyancepreparedby B, in which,
throughB's fraud,allthree godowns are included. Of the two godowns which werefraudu
lentlyincluded,B gives one to Candlets theotherto D for arent,neitherCnorDhavingany
knowledge of the fraud. The conveyance may, asagainstB and C, be rectified so as to exclude
from it thegodowngiven to C, but itcannotbe rectified so as to affect D's lease.
{b)By amarriagesettlement.A, the father of B, theintendedwife, covenants with C, the
intendedhusband,to pay to C, hisexecutors,administratorsand assigns,duringA's life, an
annuityofRs5000.C diesinsolventand the official assignee claims theannuityfrom A. The
Court,onfindingitclearlyprovedthatthepartiesalwaysintendedthatthisannuityshould
be paid as a provision for B and herchildren,may rectify thesettlementand decreethatthe
assignee has norightto anypartof theannuity.
Illustrationsas tosub-section(3).—Acontractsinwritingto pay to hisattorney,B,a
fixedsumin lieu ofcosts.Thecontractcontainsmistakesas to thenameandrightsof the cli
ent,which,ifconstruedstrictly,wouldexcludeB from allrightsunderit. B isentitled,if the
Courtthinksfit, to have itrectified,and to anorderforpaymentof the sum, as if at the time
of itsexecutionit hadexpressedtheintentionof theparties.[Based onStedmanvCollett,
(1854) 17 Beav608:51ER1171.]
286.LaxmanvGanpat,2NagLR 4.
287.AdelMuhammedvAttorneyGeneralofPalestine,(1947) 60WN118:AIR1946PC 42;
StateofKarnatakavK.K.Mohandas,(2007) 6 SCC 484: AIR2007SC 2917, rectifica
tionofwrittencontract,in the absence of plea ofmutualmistake,afraud,such reliefnot
permissible.
288.NawabBegum vA.H.Greet,ILR(1905) 27 All 678.https://t.me/LawCollegeNotes_Stuffs

1072. [S. 31] Cancellationofinstruments929
withtheintentionof theparties.Thus where the finaldraftmentioned the
price in weight when in fact it was agreed to be incountand riot risk was
mentionedin aninsurancecover bymistake,thecourtallowedrectification.
ThecourtsaidthatthemattercamewithinSection 26 of the Specific Relief
Act of 1963whichprovidesthataninstrumentcan be rectified ifthrough
fraud or amutualmistakeof theparties,thecontractdoesnotexpresstheir
realintention.^^®
Under anagreementfor sale ofproperty,buyer sent notice to the seller for
executionof the sale deed. The seller repliedthathehadagreedto sell only
5 cents of the land.Therewas aconcurrentfinding of thecourtsin favour
of thepurchaserthatthe agreement was to sell 5 cents plus somestructures
specified in the deed. ThecourtsaidthatSection 26 was not applicable as
there was noambiguityin the deed.Therecould be nointerferencein a
concurrentfinding of fact. The suit for specificperformancewas rightly
decreed.^^®
In the case of a gift deed, only the donor may seek its rectification. Inother
cases it is permissible only to the parties to thecontractand noneelse.^'^
CANCELLATION OFINSTRUMENTS [SS.31-33]
Sections 31 to 33 of theSpecificRelief Act, 1963 provide for the cancel
lationofinstruments.
S.31.Whencancellationmaybeordered.—(1)Anypersonagainstwhom
awritteninstrumentisvoidable,andwhohasreasonableapprehensionthat
suchinstrument,if leftoutstandingmaycausehimseriousinjury, maysue
to have itadjudgedvoid or voidable; andthecourtmay, in itsdiscretion,so
adjudgeit and order it to be delivered up and cancelled.
(2)IftheinstrumenthasbeenregisteredundertheIndianRegistration
Act, 1908thecourtshall alsosenda copy of itsdecreetotheofficer inwhose
officetheinstrumenthasbeensoregistered;andsuch officer shallnoteonthe
copy ofthe instrument contained in his books the fact of itscancellation.^®^
289. NewIndiaRubberWorks (P) Ltd vOrientalFireandGeneralInsuranceCo Ltd, (1969) 1
Comp LJ 153(Cal).
290.SubhadravThankam,(2010) 11 SCC 514:AIR2010SC3031.
291. JosephJohnPeter Sandy v Veronica ThomasRajkumar,(2013) 3 SCC 801: (2013) 2 SCC
(Civ)332.
292. This section corresponds with S. 39 of the repealedSpecificRelief Act, 1877. That section
carriedthefollowingillustrations:
(a)A, the owner of a ship, by fraudulently representing her to be seaworthy, inducesB,
anunderwriter,to insure her. B mayobtainthecancellationof the policy.
{b)A conveys land to B, who bequeaths it to C and dies.ThereuponD gets possession
of the land and produces a forgedinstrurhent stating that theconveyancewas made to B in
trustfor him. C mayobtainthecancellationof the forgedinstrument.
(c)A, representingthat the tenants on his land were all at will, sellsit to B, andconveys
it to him by an instrument, dated the 1st January, 1877.Soon after the day,A fraudulently
grants to C a leaseof part of the lands, dated the 1st October,1876,and procuresthe lease
to beregisteredunder the IndianRegistrationAct. B may obtain thecancellationof this
deed.https://t.me/LawCollegeNotes_Stuffs

1073. 930Chapter16 SpecificReliefAct,1963 [S. 31]
A sale deed which wasexecutedbypractisinga fraud on thetransferor
who was also not ofsoundmind,was held liable to bequashedandnotto
be specificallyenforced.^®^Cancellationof a salewithoutissuingnoticeto
the vendee has been held to be not permissible. Aunilateralcancellationand
itsregistrationare of no effect. TheHighCourtdirectedthewritpetitioner
whohadunilaterallycancelledthe sale deedexecutedbyhimtoapproacha
civilcourt.Thecourtsaidthatthecancellationof a sale deedandits regis
trationarevalidonlywhenthereisdeclarationtothateffect by acompetent
court.Inthiscasetherewasnosuchdeclaration.Further,nonoticewas
issued to theotherparty.The SupremeCourtset aside thecancellationand
itsregistration.^®''Asale,deed wasexecutedat the timewhenit wasproved
bydocumentaryevidencethattheexecutantwasalreadydead.It was held
tobenonestandthereforeliabletobecancelled.^®^
Whocanseekcancellation
A sale deed was executed in respect of an ancestral property. The trans
feror's sonschallengedit andsoughtadeclarationthatthe sale was null and
void.Therewasnothingto showtheirages andwhethertheyhadbirth-right
in theproperty.Theywerenotallowedto challenge it on thegroundof the
competenceof thetransferor.Thesuitwas alsotime-barredbecause it could
be filed onlywithinthreeyears of the cause ofactionwhereas 13 years had
alreadypassed.^'®
Thetransferof acoparcenarypropertyby one of the coparcenerswith
outtheconsentofotherswasallowedtobecancelledattheactionofa
coparcener. Thecourtsaidthatnootherpersoncan seekcancellationof
suchatransaction.^®''
There is a presumptionthata registered document has been validly exe
cuted.It is,therefore,aprimafacievaliddocumentin law.Theonusof
proof would be on the person who leads evidenceto rebut the presumption.
[d)A agrees to sell and deliver a ship to B, to be paid for by B's acceptances of four bills
of exchange, for sumsamountingto Rs30,000,to bedrawnby A or B. The bills aredrawn
and accepted, but the ship is not deliveredaccordingto theagreement.A sues B on one of
the bills.Bmayobtainthecancellationof all the bills. [Based onAnglo-DanubtanCo v
RogereoK,(1867)LR4Eq3.]
293.ChackovMahadevan,(2007) 7 SCC 363.KowtaSubrahmanyaSastry v Kowta
Chandramouli,AIR2014NOC309 (AP), eldestbrotherclandestinelyobtaineda sale deed
in favour of his son pressurising and playing fraud upon father, taking advantage of his old
ageandhelplessness.Sale was held as liable to becancelled.
294.ThotaGangaLaxmivGovtofA.P.,(2010)15 SCC 207:(2011)3 KLT 345.
295.MahanthRamasisDasvNoorMdMian,AIR2012Pat 67.
296.DayawativMadanLaiVerma,AIR2003All 276,Arts.58and59 of theLimitation
Act,1963.
297. Jagdish Tiwary vLalitaKuer,AIR 2011 Pat 40.RameshwarLaiv Jai Prakash, AIR 2014
Raj 72,propertysold by father when owners were minors and the fact ofminoritywas men
tioned in the sale deed. Purchaser could have known this fact. It is for apurchaserto take
care to seethatlegalrequirementshave been compliedwith.Cancellationof sale deed was
held to be proper.https://t.me/LawCollegeNotes_Stuffs

1074. [S.31] Cancellationofinstruments931
The respondent in this case could not doso.^^'The ground of seekingcan
cellation wasthatbecause of the fiduciary relationship, the beneficiary was
in apositionto exert undueinfluenceon theexecutant.The court said that
the burden ofprovinggoodfaithin the transaction was on thebeneficiary.
Hecouldnotdo.so.Thesale deed wasthereforeliableto becancelled.^^'
In a case for cancellation of a sale deed on the groundthatthe deed was
void,it was held that the suit could befiledin acivilcourt by the recorded
tenure holder,executant of the deed or hissuccessor.The suit filedbya third
partywas notmaintainable.^""
When a document is valid, no question arises of its cancellation. When
adocumentis voidabinitio, a decree for setting aside the same would not
benecessaryas the same is non est in theeyeof the law, as it is anullity.
Section31 of theSpecificReliefAct, 1963refersto both void andvoidable
documents.Itprovidesfor adiscretionaryrelief.^"^Thedeedin thiscasewas
voidbyreasonofthe factthat it purportedtoconveytheinterestofaminor.
Thecourtsaid:
"If a deed was executed by the plaintiff when he was a minor and it
was void, he had two options tofilea suit to get thepropertypurport
edlyconveyedthereunder.Hecouldeitherfilethe suitwithin 12yearsof
the deed or within 3 years of attainingmajority.Here, the plaintiff"did
not either sue within 12 years of the deed or within 3 years of attaining
majority.Therefore,the suit wasrightlyheldto be barred bylimitation
by thetrialcourt."
Apersonwhomademisrepresentationstoinduceapersontopurchasehis
land was not allowed to seek setting aside because of his own misconduct.
He could not be allowed to take advantage of his ownmisdeed.^"^
Cancellation of a sale deedcannotbe sought only on the basis of unpaid
saleprice.^"^
Nounilateralcancellation,only bycourtorder
A transfer by way ofsalewas madeabsoluteby transfer of the property
fromthetransferortopurchaser.Thecourtsaidthatsuchtransfercouldnot
298.FremSinghvBirbal,{2006)5SCC353:(2006)2KLT863:(2006)5 MahLJ441.
299. Naib Singh vGurdevKaur,AIR 2011 NOC 382(P&H).
300. Kishori Prasad vAddlDistt Judge, AIR 2003 All 58.LalitKumar Jain v Jaipur Traders
Corpn(P)Ltd,(2002)5SCC383,unexplaineddelayinfilingthe suit after theexchange
ofnotices,vendeeremainedinpossessionof the mill and usedit for the longperiod of 30
years.In thecircumstancesof thecase,theSupremeCourtdirectedtransferofthemillto
thevendeesubjectto hispayingRs 40lakhsinadditionto thebalanceamount.Hameedv
Kanhaiya,AIR2004 All405,the plaintiffwasabletoprovethat hewasthe sonat the owner
of the property on whomfraud wascommitted.He wasallowedto sue.
301.PremSinghv Birbal,(2006)5 SCC353:(2006)2 KLT863:(2006)5 Mah LJ441.
302. SunderlalBhandariBhagatv State of Gujarat, AIR2012 Guj71. RammachandraMonappa
Kallihalv Sunanda TukaramKoparde,AIR 2016 Kar 140, sale made throughfraudulently
obtainedgeneralpowerof attorney 12yearsagowhenthe personexecutingit was inICU.
Saleheldvoidabinitio.
303. KeyPeeBuildtech (P) Ltd v Shahjahan Begum,AIR 2015 NOC 1061(Raj).https://t.me/LawCollegeNotes_Stuffs

1075. 932Chapter16 Specific Relief Act, 1963 [Ss.32&33]
be annulled as cancelled unilaterally by vendor by executing a cancellation
deed. Such deed could not be accepted for registration. Cancellation of sale
deedcan be orderedonly bythe court under Section31 oftheSpecificRelief
Act.30^
It is not within the powers of the Registrar of Partnership firm to declare
that the partnership deed in question was null andvoid.The remedy is to
approach a civilcourtunder Section 31 of theSpecificReliefAct.^°^
On execution and registration of a sale deed, the owner completely loses
his right over thepropertyand the purchaser becomes absolute owner. The
sale deedcannotbe nullified by executing a deed of cancellation. Itcannot
beannulledevenbyconsentoragreementbetweentheparties.Thepowerto
cancelsuchdeedsvestswith the court. It cannot beexercisedby the trans
feror of a property. Hence, theBangalore DevelopmentAuthority could not
canceltheregisteredsaledeedunderwhichit hadtransferredproperty.^"^
Limitation
There was no pleading in the plaint seeking exemption from the law of
limitation in terms of Order 7, Rule 6, CPC. The plaintiff was not allowed
to raisethe pleaoflimitation for the firsttime in secondappeal.The suitwas
forxancellationofthesaledeedwhichwasexecutedin1997.Thelimitation
had to bereckonedfrom that date. Suitwasfiledin2004,sevenyearsafter
execution. The suit was held to be barred by limitation.
S. 32.Whatinstrumentsmaybepartiallycancelled.—Wherean instru
ment isevidence of differentrights or differentobligations,the courtmay,in a
propercase,cancelit inpartandallowittostandfortheresidue.
ThissectioncorrespondswithSection40 of therepealedSpecificRelief
Act, 1877.Thatsection carried the following illustration:
A draws a bill onBwhoendorsesit toC,by whom itappearsto beendorsedto D,who
endorses to EC'sendorsementis forged. C is entitled to have such instrument cancelled,
leaving the billsto stand inotherrespects.
S. 33.Powertorequirebenefittoberestoredorcompensationtobe
made wheninstrumentis cancelled or is successfullyresistedas being
voidorvoidable.—(1)Onadjudgingthecancellationof aninstrument,the
courtmay requirethepartyto whom such relief isgranted,to restore, so far as
maybe, any benefitwhichhe may havereceivedfrom the other party and to
make anycompensationto him which justice may require.
(2)Whereadefendantsuccessfullyresistsany suit on the grounds —
(o)thattheinstrumentsoughtto be enforcedagainsthim inthesuit isvoid
able, the courtmay,ifthedefendanthas received any benefit under the
304.LatifEstateLineIndiaLtdvHadeejaAmmal,AIR 2011Mad66.
305. SriLakhaGranites vEklavyaSingh, AIR 2011 Raj 49.
306. K.Rajuv Bangalore Development Authority, AIR 2011 NOC 341 (Kant).
307.SukhenSarkarvRakhalChandraSarkar,AIR 2011 Gau 56.https://t.me/LawCollegeNotes_Stuffs

1076. [S.33] Cancellationof instruments 933
instrumentfromthe other party,requirehimto restore,sofar as maybe,
such benefit tothatparty or to makecompensationfor it;
(b)that the agreement sought to be enforcedagainst himinthe suit isvoid
byreasonofhisnothavingbeen competent to contractunderSection11
oftheIndianContractAct, 1872,thecourtmay, ifthedefendanthas
received any benefit under theagreementfrom the other party, require
him to restore, so far as may be, such benefit tothatparty, totheextent
tow/hichhe or hisestatehasbenefitedthereby.
ThereliefprovidedinSection33oftheSpecificReliefActisbasedon the
principleofprotectiveorpreventivejustice.Thissectionappliesto instru
mentsexecutedby theplaintiffaswellas to otherinstrumentswhichhe
seekstohaveadjudgedvoidorvoidable.^"^It isnotnecessarythat the plain
tiffmustbesiparty to acontract;hecanmaintainthesuitunderthissection
if theinstrumentisagainsthisinterest.
The conditions precedent to the applicabilityof this sectionare—
(a)theinstrumentshouldbevoidorvoidableagainsttheplaintiff;
(b)there is areasonableapprehensionof aseriousinjury;^"'
(c)that the case is fit for theexerciseof the court's discretion to grant
the prayer. [Ibid]
Whenagreementvoid
Anagreementnotenforceablebylawissaidtobevoid[S.2(8)of the
IndianContractAct]. Acontractisvoid—
(i)wheretheconsiderationorobjector anagreementisforbiddenby
law, or
(it)isoifsuchanaturethat,ifpermitted,itwoulddefeattheprovisions
of any law, or
(Hi)isfraudulent,or
(w)involvesorimpliesinjuryto thepersonorpropertyofanother,or,
(v)thecourtregardsit isimmoraloropposedtopublic policy[S.23 of
theIndianContractAct].
It will also be noted that anagreementin restraint of marriage of any
personother than aminor,[S.26,ContractAct]or bywhichanyoneis
restrainedfromexercisingalawfulprofession,tradeorbusiness[S.28,ibid]
orlegalproceedings,oragreementsofunmeaningorofwageringnatureand
anagreementwithoutconsiderationasageneralrule[S.25,ibid]arevoid.
Acontractby aminorisvoid.^^"
308.SurajKetPrasadv ChandraMul,AIR 1934All1071.
309. TekaDulav Bai Jivi, 39 BLR1072.
310. Mohori Bibeev Dhurmodas Ghose, (1902-03) 30lA114:ILR(1903)30 Cal 539(PC).https://t.me/LawCollegeNotes_Stuffs

1077. 934 Chapter16SpecificReliefAct,1963 [S.33]
Whencontractvoidable
Anagreementwhichisenforceablebylaw,at the option of one or more
parties thereto, but not at the option of the other or others, is avoidable
contract.[S.2{i)of theIndianContractAct, 1872]
Whenconsentto anagreementiscausedbycoercion,fraudormisrep
resentation,theagreementis acontractvoidableat theoptionofthe party,
whose consent was so caused.[S.19, ibid]
A contractinducedbyundueinfluenceisvoidableat the option of the
party whose consentwas socaused.[S.19-A,ibid]
Reasonableapprehension
ThereliefprovidedunderSection31 of theSpecificReliefAct isbased
uponprotectivejusticeand upon the idea of''quiatime"(forfear)and,
therefore,wherethereis noapprehensionofinjuryto theplaintiff,no suit
can be instituted.^"Reasonableapprehensionis to be determined with ref
erencetothecircumstancesofeachcasewhichthecourthastodealwith.
Requirementsofgroundof relief
(1)The relief under Section 31 ofSpecificReliefAct cannot be claimed
as amatterofright;the courtwillact upontheprincipleoftheexerciseof
sounddiscretion,havingdueregardto theconductoftheparties.
(2)Wherethepartiesareinparidelictoandfraudisallegedastheground
forcancellation,the courtmayrefusethereliefto theplaintiff,as he is
equallytoblameas isdefendant.^'^
(3)Noreliefcan begrantedunderSection31of theSpecificReliefAct
wherethereis aquestionofmereinadequacyofconsideration.^"
(4)No suitfor thecancellationofawillcan beinstitutedduringa testa
tor'slifetime.
Partialcancellation
Section32 oftheSpecificReliefActwillbeapplicableonlywhenrights
andobligationsunderaninstrumentaredistinctandseparable.^"
Compensation
The plea of compensation must be taken in the first court.
311.ChaganlalvDharamdas,7 Bom 607.
312. Valley vDallubhoy,ILR25 Bom 10.
313. Bindeshari Prasad v Lekhraj Sahu, (1915-16) 20CWN760.
314.KelamvPolavampur,191Cal746.
315.KhubSingh vJahanLai,12 CPCR 13.
316.GokulVKaram,8 PC782.https://t.me/LawCollegeNotes_Stuffs

1078. [S.33] Cancellation of instruments 935
Limitation
Article 59 of Indian Limitation Act, 1963 prescribes a period of three
yearsfor a suit forcancellationof an instrumentcomputablefrom the date
when the fact entitling the plaintiff to have the instrument cancelled first
becomesknowntohim.
Theprovisionshave beenfrequentlyused by the courts in rescuingminors
from the burden of contracts made by them. One of theoutstandingcases is
the decision of the Privy Council in Mohori Bibee vDhurmodasGhose.^^^
A minor,declaringhimselfto be of full age, mortgaged his two houses as
againsta loan, a part ofwhichwas paid to him incash.He thenapplied
to thecourtfor cancellation of the mortgage. Thecourthad to cancel the
mortgagebecauseit wasinfactvoid.Themoneylenderpleadedforrefundof
hismoney.The provisions do authorise courts to require a minor to restore
thebenefitsobtained or make compensation, but only to the extent to which
justicesorequires.In thepresentcasetheirLordshipssaidthatjusticedid
notrequireanyreliefinfavourof thelenderbecausehewasrecklessin his
dealingswiththe minor.
Theprovisionsquiteclearlycontemplatedthat the courtcouldaskonly
thatpersontomakecompensationwhowasseekingthereliefofcancella
tion. In a case beforethe Lahore HighCourt^^®reliefwas sought by a person
againstaminorwhohadtakenthepriceinadvanceof the landwhichhe
purportedtosellbutrefusedtocompletethesale.Itwaspowerfullycon
tendedthat theprovisionswouldpermitreliefonlyagainstapersonwho
himself seeks cancellation and not against one who came to the court as a
defendant.Butthecourtorderedtheminortorefundthe money. Asagainst
it, theAllahabadHighCourtrefusedto asktheminor,whowasadefendant
in the court, to refundthemortgagemoney.^"WhentheSpecificReliefAct
was re-enacted in 1963, in terms of the proposals of the Law Commission,
Section33whichprovidedfor thereliefofrestitutionon thecancellationof
a contractcontainedprovisionstocoverbothsituations,namely,whether
thepersonseekingreliefistheplaintiffor thedefendant.Theprovisionscan
be presentedin terms of thefollowingpropositions:
(1)Whereavoidorvoidablecontracthasbeencancelledat theinstanceof
a partythereto,thecourtmayrequirehimtorestoresuchbenefitsashe
has received under thecontractand to make anycompensationto the
otherpartywhich justice may require.
(2)Whereadefendantsuccessfullyresistsanysuit on thegroundthat the
contract,byreasonof hisbeingincompetent,isvoidagainsthim, he
mayberequiredtorestorethebenefits,ifany,obtainedbyhimunder
the contract, but onlyto the extent to which he or his estate has bene
fitedthereby.
317. (1902-03) 30lA114:ILR(1903) 30Cal539 (PC).
318. KhanGulv Lakha Singh,ILR(1928)9 Lah 701: AIR 1928 Lah 609.
319.AjudhiaPrasad vChandanLai,AIR 1937All 610(FB).
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

1079. 936 Chapter 16SpecificReliefAct, 1963 [S.34]
DECLARATORY DECREES
Sections34 and 35 lay down the law relating to declaratorydecrees.A
declaratorydecreeis adecreedeclaratory of a right which is doubtful or
whichrequiresto becleared.Theobjectofdeclaratorydecreesis toprevent
futurelitigationbyremovingtheexistingcauseof thecontroversy.In other
words,if acloudis cast upon the title orlegalcharacter of the plaintiff, he
is entitled to seek the aid of the court to dispel it.
Section 34 of the Specific Relief Act lays down thecircumstancesunder
which a declaratory decreemay be passed.
S.34. Discretion ofcourtas todeclarationofstatusor right.—Any per
son entitled to any legalcharacter,or to any right as to any property, mayinsti
tutea suit against any person denying orinterestedto deny, his title to such
character or right,and the court may inits discretion maketherein a declaration
that heissoentitled,and theplaintiffneed not insuchsuitaskforanyfurther
relief:
Providedthat no courtshallmakeany suchdeclarationwhere theplaintiff,
being able to seek further reliefthan a mere declaration of title, omits to do so.
Explanation.—Atrustee of propertyisa"personinterestedtodeny"a title
adverse tothetitle ofsomeonewho isnot inexistence, and for whom, ifinexist
ence,hewouldbeatrustee.
Section34 of theSpecificReliefActdoesnot sanctioneverykind of dec
larationbutonlyadeclarationthattheplaintiffisentitledtoanylegalchar
acter or to anyproperty.^^oIt is not a matter of absolute right to obtain a
declaratorydecreeand it isdiscretionaryfor the court to grant orrefuseto
grantit.
It isessentialfor adecreeunderSection34 that the plaintiff must be
entitledto anylegalcharacterto any right toproperty."Legalcharacter"
is apositionrecognisedbylaw,^^iand aperson'slegalcharacterismadeup
oftheattributeswhichlawattachestohiminhisindividualandpersonal
capacity and the phrase is synonymous with the word"status".^^^It includes
the right offranchiseand the rightofelection.^^^It maybeobservedthat the
words"legalcharacter"and"toafiyrightastoanyproperty"areseparated
by thedisjunctive"or" and,therefore,the plaintiffcan maintain a suit for
ameredeclaration,if he canshowthat he isentitledto anylegalcharacter,
eventhoughhecannotlayanimmediateclaimto anyproperty.
320. FirmofFakirchandv ShriJagadguruShankaracharya,AIR1970Guj145.
321.HiraLaivGulab,10CPCR1; Ram Das vSalimAhmed,(1998)9SCC719,weaknessin
defendant'sclaimfor titleto the propertycannotestablishplaintiff'stitle.Plaintiffnot enti
tledtogetdeclarationoftitleifsuchtitlecouldnotbeestablishedbyhimbyleadingconvinc
ingevidence.HighCourtfailedtoconsiderthespecificfindingmadebythelowerappellate
courtthattheplaintiffhad failed toestablishtitle.
322. RamKrishnavNarayan,27 MLJ 639.
323. SatNarainGurivalavHanumanPrashad,AIR1946Lah 85: 224IC322.https://t.me/LawCollegeNotes_Stuffs

1080. [S.34] Declaratorydecrees937
(i)Essentials to be set up for relief under Section 34
(1)That theplaintiffisentitledto alegalcharacterat thetimeofthe suit,
or to any right as to anyproperty.^^''
(2)Defendanthasdeniedtheseor heisinterestedindenyingthatcharac
ter or right of the plaintiff, and
(3)Theplaintiffis not in apositionto ask forreliefconsequentialupon
thedeclaration.
Iftheseconditionsaresatisfied,the plaintiffneednot askfor any further
reliefthana meredeclaration.But thecourtshall not make any such decla
rationifhe,beingabletoseekfurtherreliefthan ameredeclarationoftitle,
omitstodoso.^^^'
(ii)Frameofplaint
The plaint mustdisclose—
(1)the title or right claimedbythe plaintiff,
(2)thecircumstancesinwhichthecloudwascastoverthesameor the
samewasdeniedorthreatened,
(3) the prayer.
324.PadminiChandrasekharanvR.RajagopalReddy,(1996)8 SCC 632, entitlement to prop
ertyonfamilypartition.SowrashtraVipraSabhavNamakalMunicipality,(1996)11SCC
584,titleperfectedbyformalities.PrabhakarAdsulevStateofM.P.,(2004)11SCC249:
AIR 2004 SC3557,suit forrestraininginterferenceinpossession,but title to the prop
ertynotmadeout.Noreliefallowed.NiranjanSinghvBantSingh,AIR2004P&H334,
personswhofailedtoprovetheywererelativesofthedeceasedowner,exclusiveowner
shipof theotherparty,declaratoryreliefallowed.N.V.SrinivasaMurthyvMariyamma,
(2005)5SCC548:AIR2005SC2897,thetitleoftheclaimantwasdependantonexecution
oftheagreementofreconveyance.Withoutsuchagreementthedeclarationcouldnotbe
granted.
325. MankuwarAsaramvBodhiMukundi,AIR1957MP211.A.Subramanianv Thirunarakutty
Desivinayagam,AIR2003(NOC)384(Mad),thetrusteeof atempledeclaredtobenot
theownerof thetempleproperty,hewasoustedfromtrusteeshipat thetimewhenhe
attemptedtosell,adecreeforrecoveryofpropertyfromhimwasnotpassed.DalipSingh
VSikh Gurdwara Prabhandak Committee,(2003)10 SCC 352: AIR 2004 SC 137, claim
thatthepropertywasthatofthevendorfromwhomitwaspurchasedbecausetherewasno
NotificationunderS.10(3)of theSikhGurdwaraAct,1925that itbelongedtoSGPC,but
it was included in the List under S.7(3).Failure to produce the Notification under S. 10(3),
noconclusionthatthepropertydidnotbelongtoSGPC.KanwarjitSinghDhillonvHardyal
SinghDhillon,(2007)11SCC357:AIR2008SC306,thefactthataprobateunderwillhad
beengrantedinrespectofthepropertyinquestion,didnotbaracivilsuitfordeclarationof
titleandpermanent.Theprobatecourtisnotcompetenttodecidewhetherthepropertywas
a joint ancestral property.
326.StatevGudge,Pat(HC)262.SomaDevivGuinDevi,AIR2003HP158,aprayerfor
declarationofgenuinenessofsignatureonadocumentrejectedbecauseofalongdelayin
seekingthedeclarationandalsobecauseoflackofbonafides.RamachandranvAngamuthu
Ammal,AIR2004NOC469(Mad),noproofthattherewascontinuousanduninterrupted
possessionfor12years.VenkataramanavAnnayyaHedge,AIR2004Kant433,claimant
failedtoprovethattherewaspermissivepossession,decreeonaccountofadversepossession
affirmed.P.B.Pathyv SPandurangam,AIR2012Kant24,documentsproducedbythe
plaintiffshowedhistitleandpossessionsincethedateofpurchase.Thedefendantdidnot
denythespecificallegationabouthistrespass,plaintiffentitledtodeclarationoftitleand
possession.https://t.me/LawCollegeNotes_Stuffs

1081. 938Chapter16SpecificReliefAct,1963 [S.34]
Therighttoanyproperty,mentionedin thissection,mustbearight
actuallyexistingat thedateofthesuit,thoughtheenjoymentitselfmaybe
deferred,e.g.,a right of thereversioher.^^^Butwhentheplaintiffhad no
vestedorcontingentrighttoanypropertybutonlyafainthopeofbeing
selectedas ashebaitafter thedeathof theexistingshebait,hecouldnot
maintaina suit fordeclaration.^^^In QaboolSinghv BoardofRevenue,^^^
itwasheldthat theplaintiffmustshowsubsistingrightnotonlyon thedate
ofthesuitbutalsoonthedateofdecree.
Thedefendantshouldbe a personwho actuallydeniesor isinterestedto
denytheplaintiff'stitle,status,righttoanyproperty;eventheleasedenied
byapersonor theagentof apersonwhoisinterestedtodenyinveststhe
plaintiffwithacauseofactionforadeclaratorysuitunderSection34,
SpecificReliefAct,^^°but amereapprehensionexistingin themindof the
plaintiffdoesnotgivehim anyrighttobringa suitfordeclaration.^^'
When suit fordeclarationdoes notlie.—Asuit fordeclarationwill not
lie in the following cases:
(1)foradeclarationthat theplaintiffdidnotinfringethedefendant'strade
mark.^^^Negativedeclarationwill not beallowed;
327.CityMunicipalCouncilBhalkivGurappa,(2016)2SCC200,onusontheplaintifftoprove
histitleindependently,withoutdependingupondefendant'sfailuretoprovehistitle.On
facts, plaintiffsucceededinestablishingtitle.
328.RamSundarvEmperor,AIR1929All904.T.SeshaReddyvManagingCommittee,Jama
Masjid,2001SCCOnLineAP1148;2002AIHC1811thepartyclaimingtitleoverproperty
underregisteredsaledeedprovedthatthepropertywasnotapartofthewakfproperty,
entitledtodeclarationoftitle,possessionandconsequentialreliefofpermanentinjunction.
PennaiahvThippamma,AIR2004Kant444,variancebetweenpleadingandproof,prop
ertydescribedin theplaintnotmatchingwiththepropertyat thesite,norelief.Ramchandra
SakharamMahajanvDamodarTrimbakTanksale,(2007)6SCC737:AIR2007SC2577,
thesuitwasforrecoveryofpossessiononthestrengthoftitle.Thedefendantalsosetuprival
title,butbecauseofweaknessofhisevidencehewasnotabletoestablishit.Theplaintiff
was not entitled to claim relief on the weakness of thedefenceevidence.He has to establish
hisowncasebyhisownevidence.Thequestionoftitlewasalsonottobedecidedbysurvey
recordsalone.ThecourtemphasisedtheneedforappointmentofCommissiontogetthe
propertyidentifiedanddemarcated.
329.AIR1973All158.KumariDevivNoorMohammadMian,AIR2002Pat132,deedofsale
whichthedefendantclaimedin hisfavourwasshownto beforgedbecauseitsdatewasafter
thedeathoftheexecutant.Thecourtsaidthattheburdenofprovinggenuinenesswasonthe
claimantwhichhecouldnotdischarge.BabuSheriffvMaqboolSheriff,AIR2003Mad355,
misconductoftenantintryingtocaptureownership,titleoftheplaintiffwasestablishedby
concurrentfindingsoflowercourts,nointerference.GovtofIndia,MinistryofDefencev
IndiraDevi,AIR2003AP329,plaintiff'ssuitfortitletoland,thedefendantscontended
thatitwasaGovernmentland,buttheycouldnotprovetheirstandbytheirrecords.The
suitwasdecreed.SurajbaiGaliyanaSolankiBhilvRoopaNevjiDabharBhil,AIR2011
MP160,defendantwasinpossessionofthelandandherownershipwasalsoestablishedby
document. Shecould not bedispossessed.
330.NaubaharSingh vQadirBux, AIR 1930 All 753.
331.JagtuMaivLaxmanDas,157IC523.GovtofA.P.vPratapKaran,(2016)2SCC82:AIR
2016SC1717,plaintiff'spossessionofthelandwasnotdeniedbythegovernment.Titleand
possessionwerealsoproved.Theplaintiffwasheldentitledto thedecreeclaimed,i.e.decla
ration of title and possession.
332.IllIC176.https://t.me/LawCollegeNotes_Stuffs

1082. [S.34] Declaratorydecrees939
(2)for a declarationthat a dispositionmade by the father of the plaintiff in
a will is invalidand that the property is ancestral and that the plaintiff
is entitled to a share in it.Thissuit would bebarredby the proviso of
Section42 of theSpecificReliefAct,becausethe plaintiff can claimfur
therrelief orpartition;^^^
(3)for a declaration,during thelifetimeof the testator, that the will is inva
lid.Thereasonisthatthe will isrevokableandnopropertyistrans
ferred during the lifetime of thetestator;^^'*
(4)for adeclarationthat the plaintiffis apurchaserunder anunregistered
deedofsale;^^^
(5)nodeclaratorysuitliesto setasideasuccessioncertificategrantedunder
ActXXVIIof1860;336
(6)no onecan askfor adeclarationofanon-existentright, asofsuccession,
i.e., the chanceorpossibilityof acquiringa right in the future;
(7)a suit by astudentagainstaUniversityfor adeclarationthat he has
passed anexamination;^^^
(8)adeclarationtendingtoaffectthefreeflowofcapitalandcommercial
operations would beunjust.^^®
(iii)Furtherrelief whereplaintiffentitledto it(proviso)
Allthat theprovisotoSection34 oftheSpecificReliefActforbidsisa suit
for mere declaration without further reliefif the plaintiff can sue for further
relief. The term"furtherrelief" means"therelief to which theplaintiffis
necessarilyentitledon thebasisofdeclarationof thetitle".Thisisdonein
ordertoavoidmultiplicityofsuits.Further,reliefmustbeinrelationto the
legalcharacterorrighttosuchcharacteror therightwhichthedefendant
deniesor isinterestedindenying.It mustalsobereliefappropriateto, and
consequent on the rightasserted.^^^
Forexample,whereAclaimsthat heisentitledto halfportionof the
house in the occupationof B, he must pray in his suit:—
{i)that adeclarationbemadethat A isentitledto halfportionofthe
houseand;
(ii)that thedefendantbeaskedtodeliverthe halfportionofthehouse
to A. This isconsequentialrelief.^'"'
333.SuryanarayanmurtivTammanna,ILR(1902)25 Mad 504.
334.KambhajanKunivarvGurcharanKunwar,ILR(1905)27All14.
335. SkRahmatullav Sk SariutullaKagchi,10 WR 51(FB).Seealso S.53-AofTransferof
PropertyAct,1882.
336. Goodwinv Gray,(1874)22 WR 312. The newActis the IndianSuccessionAct, 1925.
337.Ramugrahv BanarasHinduUniversity,(1919-20)47lA434.
338. AmericanExpressBank Ltd v Calcutta SteelCo,(1993)2 SCC199, 213.
339. Joy Narayan Senv SrikanthaRoy,(1921-22)26 CWN 206.
340.RajasthanBhavanTrustvPradlyaDevi,AIR2003NOC352(Jhar):2003AIHC2272
(Jhar),thedefendantinviolationof anagreementwiththeplaintiffsoldthepropertyto
anotherbyregistereddeed.Theplaintiffsoughtameredeclarationthat thesaledeedwas
voidand did not seekadecreeforspecificperformancein hisfavour,seekingadeclaratoryhttps://t.me/LawCollegeNotes_Stuffs

1083. 940 Chapter 16SpecificReliefAct, 1963 [S.34]
The courtwhiledeclaringtitle of the plaintiffcannotdeclinetoadjudi
cate consequentialquestions of possession,removal of encroachments, dem
olitionofencroachingstructure upon a portion of the land to which the title
of theplaintiffhas beendeclared.^''^
In Ram Saran v Ganga the defendant was in possession of some
ofthesuitpropertiesandtheplaintiffsintheirsuitdidnot askforthepos
sessionofthoseproperties.Theymerelyprayedforadeclarationthatthey
were the owners of the suit properties. It was heldthatthe suit was not
maintainableand was hit bySection42 of the Act of 1877 [nowS. 34 of the
Specific Relief Act,1963],
Adeclarationwassoughtinrespectofapropertywhichwasin the pos
sessionof acharitabletrust. Thepropertywaspurchasedbytheadoptive
mother of the plaintiff in his name and givenover to the trust under a valid
trustdeed.Theplaintiffwasminorat thetime.Hehimselfwasa party to
thetrustdeedandconvenorofthetrust.Therewasnoevidencetoshowthat
hehad let out thepropertyto the trust.Documentaryevidenceshowedthat
the trustwasinpossessionofthepropertyandwaspayinginrespectofit
property tax, electricity, water charges, etc. It was heldthatin the circum
stancestheplaintiffwasnotentitled to the relief ofdeclarationoftitle.^''^
reliefwithoutseekingthe mainreliefwasheldto beself-defeating.Munilakshmammav
VijendraRao,AIR2003 NOC 376(Kant):ILR(2003)1 Kant637,a blankdeclarationthat
allpreviousproceedingsby the plaintiff be regardedas void, notallowable.RameshChand
ArdawatiyavAnilPanjwani,(2003)2SCC350;AIR2003SC2508,suitunderagreement
tobuyagainsttrespasser,reliefofdeclarationoftitle,restorationofpossessionandinjunc
tion sought, the suit could not be dismissed for omission to seekfurtherrelief because no
furtherreliefcouldbesoughtagainstatrespasser,thesuitwasproceedingexparte,thebuyer
wasput inpossessionunderanagreementtosellto him, hispossessionhad to beprotected
against the trespasser, but he was not entitled to adeclarationthathe was the owner of
theproperty.GangaramRambhauZitevChindhuDagaduTikone,AIR2003Bom1,dis
pute overlanebetweentwohouses,the partyclaimingpossessionanddeclarationcould not
prove.Thecourtsaidthatthedescriptionofthehousepropertyincertifiedcopyofthehouse
mapswasconclusiveandclinchingevidenceand thatshowedthat theplaintiffdidnot own
andpossessthelane,asitwasincludedintheareaofthedefendant.Plaintiff'scaserejected.
341.PhanidharKalitavSaraswatiDevi,(2015)5SCC661:(2015)3SCC(Civ)230
342.(1973)2SCC60:AIR1972SC2685.ShivCharanvSukhRam,AIR2003NOC251(P&H):
(2003)2RecCriR149,acquisitionofownershipbytheplaintiffundergiftdeednotdis^
puted,thedefendantclaimedpermanentleaseandownership,theleasehadexpired,butthe
defendantcontinuedinpossessionevenafterexpirybothundertheoriginalownerandthe
plaintiff.Itwasheldthattheplaintiffwasentitledtodeclarationofownershipandposses
sion. Venkataraja vVidyaneDoureradjaperumal,(2014)14 SCC 502 declaration of owner
shipoverthesuitlandfiled,butwithoutclaimingsubsequentreliefofevictionof the tenant
whichwaspossiblebutwasnotmaintainable.UnionofIndiavIbrahimVddin,(2012)8
SCC148:(2012)4SCC(Civ)362,suitseekingdeclarationofownershipofpropertywithout
seekingpossessionwhenthe plaintiffwasnot inpossession,held,notmaintainable.
343. Pradeep Kumar vMahaveerPershad, AIR 2003 AP 107. N.S. Ramanathan v N.
KrishnamoorthyIyer,AIR2003Mad78,theplaintiffclaimedownershipovertheprop
erty byvirtueof apartitiondecreepassedin anearlierproceeding.Thedefendantsdid not
produceanythingtoprovetheirtitleovertheproperty.Theyratheradmittedtheplaintiff's
ownership and possession. The plaintiff was held entitled to the declaration. The defendant
couldnottakeadvantageofthefactthatthemeasurementofthepropertywasdifferentfrom
that shown under the earlier suit for partition.https://t.me/LawCollegeNotes_Stuffs

1084. [S. 34] Declaratorydecrees 941
Section 34 is areproductionof theoriginalSection 42 of the repealed Act.
Thatsectioncarriedcertainillustrationsreproducedhere in thefootnote.^''''
„Declarationof rights orstatusis one at thediscretionof thecourtunder
Section34 of theSpecificReliefAct, 1963.Equally,the grant orrefusal
of the relief ofdeclarationandinjunctionunder the provision ofthatAct
isdiscretionary.Theplaintiffcannotclaim the relief as of right. It has to
begrantedaccording to sound principles of law and ex debitojustitiae.
Thecourtcannotconvertitself into aninstrumentof injustice or vehicle of
oppression. While exercising itsdiscretionarypovv^er,thecourtmust keep in
its mind thevv^ell-settledprinciples of justice and fair playandthediscretion
wouldbe exercised keeping in view the ends of justice since justice is the
hallmarkanditcannotbeadministeredinvacuum.Grantofdeclaration
andinjunctionrelating to commercialtransactionstend to aid dishonesty
and perfidy. Conversely, refusal tograntrelief generallyencouragescandour
in business behaviour, facilitates free flow of capital,promptcompliance
withcovenants,sustainedgrowthofcommerceandabove allinculcates
respectfortheefficacy ofjudicialadjudication.Beforegrantingorrefusing
tograntrelief ofdeclarationorinjunctionorboththecourtmustweighpros
andcons in each case,considerthefactsandcircumstancesintheirproper
perspectiveand exercisediscretionwithcircumspectiontofurtherthe ends
of justice. In thisbackdropof factsituationit was held in a casethatthe
relief ofdeclarationgrantedwas unjustandillegal as ittendedtoimpede
the free flow ofcapital,thwartedthegrowthofmercantilebusiness and
deflectedthecourseofjustice.^''^
344.(a)A is lawfully in possession ofcertainland. Theinhabitantsof aneighbouringvillage
claim a right of way across the land. A may sue for a declarationthatthey are not entitled to
therightsoclaimed.
(b)A bequeaths hispropertyto B, C and D, "to be equally divided amongst all and each
of them, if living at the time of mydeath,thenamongsttheirsurvivingchildren".No such
childrenare in existence. In a suitagainstA'sexecutor,thecourtmay declarewhetherB, C
and D took thepropertyabsolutely, or only for their lives, and it may also declare the inter
ests of thechildrenbeforetheirrightsare vested.
(c)Acovenantsthat,if he should at any time be entitled topropertyexceeding onelakhof
rupees,he will settle it uponcertaintrusts.Before any suchpropertyaccrues, or any persons
entitledunderthetrustsareascertained,heinstitutesasuittoobtainadeclarationthatthe
covenantis void foruncertainty.Thecourtmaymakethedeclaration.
(d) A alienatesB'spropertyin which A has merely a life interest. Thealienationis invalid
as against C, who is entitled as reversioner. The court may in a suit by C against A and B
declarethatC issoentitled.
(e)The widow of a sonlessHindualienatespartof thepropertyof which she is in posses
sion as such. The person presumptivelyentitled to possess the property if he survive her may,
in a suit against the alienee, obtain a declaration that the alienation was made without legal
necessityand was therefore void beyond the widow's lifetime.(S.14 of the HinduSuccession
Act has now changed the position into this that a widow is entitled to full rights over her
property.)
(f) Out of dateillustration,hence omitted.
(g)A is in possession of certain property. B, alleging that he is the owner of the property,
requiresA todeliverit to him. A may obtain a declaration of his right to hold the property.
345.ThakammaMathewv M.AzamathullaKhan,1993 Supp {4) SCC 492: AIR 1993 SC1120;
J.DaulatSingh v Delhi Golf Club Ltd, AIR 2002 Del 501, declaration that the plaintiffhttps://t.me/LawCollegeNotes_Stuffs

1085. 942Chapter16 SpecificReliefAct,1963 [S. 34]
Adeclarationofownershipoflandcannotbesoughtby theplaintiffon
the basis of adverse possession. But a claim ofownershipby adverse posses
sion can be made by way of defence when he isarrayedas adefendantin
proceedingsagainsthim.^"*^
In a suit fordeclarationof title, the onus to prove his title is on theplain
tiff.Hecannotsucceedontheweaknessofthedefendant'scase.Revenue
recordisnotaproofof title. Theplaintiffrelied on the familysettlement.He
offered noexplanationof the fact as to why the suitlandwasnotmentioned
in the familysettlement.Thus,thecourtfeltthathis titlebecamedoubtful.
It was notproperto have decreed the suit on theweaknessof thedefendant's
case.^''^
In a suit fordeclarationof title, the dispute was as to theextentof the
landcovered by theagreement.The SupremeCourtsaid:"TheHighCourt
findingthatplaintiffmade out his title inrespectof 8guntasoflanddecreed
the suit tothatextent.Thoughtheplaintiffhadpurchased4guntasof culti
vablelandand4guntasofkharabland(land unfit forcultivating),when the
entireextentoflandwasconvertedtonon-agriculturaluse, thelandceased
to be "cultivable land" and"kharabland" also becamenon-agricultural
land. It was heldthattheHighCourt,therefore, rightly found on the facts
thatplaintiffsucceeded inestablishinghis title andpossessioninregardto 8
guntasandhe wasentitledtopermanentinjunction.^'*^
Powerto dojustice
Theplaintiffclaimed to have perfected title by adverse possession and
soughtdeclarationof title and possession. The suit was dismissed as the plain
tiff was found to be in an unauthorised occupation for years. The plaintiff
offered to purchase the suit land atmarketvalue. Thecourt,in order to do
justice, offered him the possible solution to purchase the land inquestion.^'*^
Transferbypartneroffirm
The suitpropertybelonged to apartnershipfirm. Records showedthat
after retirement of a partner, the property came to the share of otherpart
ners. The retiringpartner(plaintiff) had relinquished his right to the prop
erty by the deed of dissolution. He never questioned the ownership of the
was entitled to the membership of the club was not granted. The fact that some others were
admitted wrongly would not by itself entitle him to admission to membership. Art. 14 of the
Constitutionwas not applicable to the club.GangadharBeheravSurendraBarik,AIR 2003
NOC 322 (Ori): (2003) 1 Ori LR 51, proceeding under S. 145 of the CrPC, possession taken
overbyreceiverfrom thewrongdoer.On thebasisofsuchpossession,thewrongdoerwasnot
tofile asuitfordeclarationunderthesection.
346. Gurdwara Sahib v Gram PanchayatVillageSirthala, (2014) 1 SCC 669: (2014) 1 SCC Civ
630: (2014)4 Mah LJ 74: (2014)3 MPLJ 36. It would also be open to plead that the previous
finding regarding adverse possession operated as resjudicata.
347. UnionofIndiav Vasavi CoopHousingSociety, (2014) 2 SCC 269: AIR 2014 SC 937.
348.Venkatappav M.AbdulJabbar,(2006) 9 SCC235.
349. Birbal v StateofHaryana,(2014) 16 SCC 757:(2015)3 SCC (Civ) 781.https://t.me/LawCollegeNotes_Stuffs

1086. [S. 34] Declaratorydecrees 943
firm over the property. The partners of the firm transferred the property.
The retiredpartnerwas not allowed to question the alienation. The suit for
declaration of ownership,mandatoryinjunction and restoration of posses
sionwasallowed.^^"
The suit was forrestrainingthe defendants andotherpartnersof the firm
from alienatingpropertyof the firm as stated in the schedule to the plaint.
Thepartnershipwas at will. Thecourtsaidthataninjunctioncouldnotbe
grantedwithouttherebeing aprayerfordissolutionof the firmandsettle
mentofaccount.^-'^
Suitfordeclarationandinjunctionwithoutseeking
reliefofpossession
Thepropertyinquestionwasnon-agriculturalland.Entriesin therecord
of rights couldnothelp to prove possession. Physicalpossession,thecourt
said, wasrequiredto be verified from recordsproducedby theparties.
Accordingto the evidence theplaintiff'sfatherwas inenjoymentof pos
sessionwhethersymbolic or real. Theplaintiffsalsoproducedtaxreceipts.
Thedefendantsproducednocontraevidence. Theplaintiffs,havingalready
establishedtheirpossession,therewas no need forthemto claimpossession
as aconsequentialrelief.
Suit fordeclarationofpossessionandinjunction
Theplaintiffclaimedpossessionon the basis of an oral sale. Thecourt
saidthatanoralsale is notrecognisedby law. The law recognises only
twomodesoftransferandconveyance,namelybyregisteredinstrument
or by delivery of possession. Theplaintiffwasnotentitledto adeclaration
evenassumingtherewas some evidence to showthatshe wassettledin
possession.^^^
Simultaneousconsumercomplaintandcivilsuit
Asimultaneousconsumercomplaintandcivil suit have been held to be
maintainable.Thehirerhadtakenaway forciblepossessionof the vehicle.
Thepurchaserfiled acomplaintbefore theDistrictForum claiming compen
sationfor forcibledeprivationof possession. He also filed a civil suit for dec
larationthathewasthesoleownerofthevehicle.Thecourtsaidthatsuch
proceedings are not mutually destructive. They can runconcurrently.^^''
Declarationas tostatusofwife
Adeclarationwas sought under Section 5(1) of theHinduMarriage
Act, 1955, for being a legally wedded wife. The suit was by the second wife.
350.SudarshanKumarKhoslavRajinderPalKhosla,AIR 2011NOC52(P&H).
351.ScariaPaulvParackaIndustries,AIR2011Ker 97.
352. K.JagdishwarvSharada,AIR 2011 Kant 148.
353.PankajakshyvDevakiRamakrishnan,AIR 2011 Ker 30.
354.L&TFinanceLtdvAnupKumarBera,AIR 2014Cal78.https://t.me/LawCollegeNotes_Stuffs

1087. 944Chapter16 SpecificRelief Act, 1963 [S.34]
This fact could not be proved that the first wife remainedunheardof for
sevenyears. There was no proof also of a custom in the community for sec
ond marriage afterobtainingcustomary divorce. The resolution passed by
the Gram Panchayat dissolving firstmarriagewas not valid because the first
wife was not apartyto it. The certificate wasmanagedonly forsub-serving
the purpose of declaration. Thecourtrefused to grant the declaration, the
marriageinquestionbeing null andvoid.^"
A suit was filed fordeclarationof the legalstatusof a legally wedded
wifeandchildrenof the deceased.Identityofpersonswhoparticipatedin
themarriageceremony was not disclosed andnone-examined.Daughter
and son-in-law of the alleged wifesupportedher evidence but did not have
direct knowledgeaboutmarriage.Thecourtsaidthatthere is a presump
tionin favour ofvalidityofmarriageandlegitimacyofchildren,if from
the time of the allegedmarriage,thepartieshave beenacceptedashusband
and wife by the relatives and others or the fact of it has beenmentionedin
anydocumentpreparedafterthe fact ofmarriage.Evidence wasnotsuf
ficient to prove the ceremony ofmarriageor the fact ofcustomarymar
riage. Legalstatusof wife andchildrenwas therefore not proved. Sale deed
executedby theactualwife was held to bevalidandwasthereforenotto
be cancelled. Appellants failed to prove theirstatusas wife andchildren
ofthedeceased.Respondentson theotherhandproved titleandposses
sion of theproperty.Appellantswerenotentitledto aninjunctionunder
Section38.^^^
Declarationas to title asagainstwife
Whereapropertywaspurchasedin the name of wife, but thehusband
contendedthathepurchasedit for hisownandfamilybenefit,thecourt
saidthatfamily includes wife. Hence,therewas noproofthattheproperty
wasnotpurchasedfor thebenefitof wife.Thehusbandwasnotentitledto
declarationof title forhimselfonly.^^^
In a case ofpaternitydeclarationandagainstdenialofpaternity,the
putativefatherwasunwillingtosubjecthimselftoDNAtest.TheHigh
Courtheldthatit could usereasonableforce bytakingpoliceassistanceif
thebloodsamplewasnotwillinglygiven.TheSupremeCourtdismissed
putativefather'sspecialleavepetitionbutmodifiedthatHighCourtdirec
tiontothisextentthatconfidentialitywouldbeaffordedtothepetitioner
bytakingthe sample at his residenceandnotcompellinghim to come to the
courtfor thepurpose.Thepetitioner'sold age was alsotakenintoconsider
ation.Theputativesonandhismotherwerepermittedto bepresentatthe
homecollectionof the sample sothatgenuineness of the sampleremained
355.PillaAppalaNarsammavMadrasRegiment,AIR 2011 AP 183.
356.SumathyvKamalamma,AIR2014NOC45 (Ker).
357.RudraPratapDuttaavSatendraNathDuttaa,AIR2012Pat 78, hecouldnotmakeawill
for the wholepropertyofwhichhe was not exclusiveowner.https://t.me/LawCollegeNotes_Stuffs

1088. [S.34] Declaratorydecrees 945
free fromcontroversy.The DNA lab was directed to furnish the report in a
sealedcover.^^®
DeclarationastoWill
Asuitwas filedunderSection63 of theSuccessionAct,1925for decla
rationand possession. Theentitlementwasclaimedto be on the basis of
the earlier Will executed in favour of the plaintiff which was duly proved
and registered. The subsequent Will in favour of the defendants was not
registered. It was not dictated by the testator, but by some other person.
The court saidthatthe subsequent Will was shrouded by suspicious circum
stances. Theplaintiffwasallowedpossessionof thelandinquestionon the
basisoftheearlierWill.^^^
Who can seekrelief(locusstandi)
It was a joint suit bydaughterandcollateralofownerinpossession.It
was heldthatin the event ofdeathof theownerinpossession,theancestral
property(agriculturallandin this case) was to devolveuponhis fourdaugh
ters and notuponthecollateral.Thecollateralhad no locusstandito file
Questioningsale deed ongroundoffraud
Thedocumentcontainingthe sale deed wasquestionedon theground
offraudallegedto have beenpractisedby thepurchaser.Butfraudwasnot
proved.Thetransactionwas,therefore,notvoid.Thetransactioncouldhave
beenrepudiatedinaccordancewiththetime-limitprescribedbyArticle59
of theLimitationAct,1963.^^^Entries made in the revenue record by playing
fraud with the Record Officewere not allowed to be used for showing title
andestablishingownership.Adeclarationof title wasnotgrantedonly on
thebasisofrevenuerecords.^®^
Rightofway
Therewasdisputeas torightover thecommonpathway. Theplaintiffand
his wifehadajointrightover the pathway, but it wastransferredas a whole
by the wife alone. Thecourtsaidthatthe wife was notentitledtoalienatethe
entirecommonpathwayinwhichtheplaintiffhusbandalsohadtheright.
Itmadenodifferencetothematteroftitlethatthehusbandhadattestedthe
sale deed made by his wife. Thedefendant'srightnot being complete, he was
358.NarayanDuttTiwarivRohitShekhar,(2012) 12 SCC 554.
359.HansRaj v Ran Singh, AIR 2011NOC451 (HP). GianChandv Shiv Dei, 2014 SCCOnLine
HP897:AIR2014HP54,anotherWillshroudedbysuspicion,executedfivemonthsbefore
death,theweddedwifedeposedthathe wasnotin asoundstateofmind,personsfavoured
were not even closelyrelatedto thedeceased,Willrejected,normalsuccessionallowed.
360.GulkandivDhikkal,AIR2016P&H73.
361.MathuriBewavPrafullaRoutray,AIR2003Ori 136.
362.BabuSingh vGorakhSingh, AIR 2011 MP 79.https://t.me/LawCollegeNotes_Stuffs

1089. 946 Chapter 16SpecificRelief Act, 1963 [S.34]
not entitled to put any obstruction to the ingress andegressof the plaintiff
over the common pathway. The plaintiff was entitled to a declaration of his
common right and alsopermanentinjunction.^"
Courtfee
A suit fordeclarationthatthe sale deed executed by theplaintifffather was
null and void and for seeking joint possession was held to be not a suit for
cancellationof sale deed. Thecourtfee hasnotto bepaidon saleconsidera
tionmentionedin the sale deed. It is to becomputedunderSection7(IV)(c)
oftheCourtFeesAct,1870.^®''
Jurisdiction
A claim forhereditaryinterestorrightinrespectofWatanpropertybased
onadoption.Thecourtsaidthatjurisdictionof civilcourtshas not been
excluded in thematterunderthe BombayInferiorVillageWatanAbolition
Act, 1959. Such aclaimcouldnotbedecidedby theCollector.Questions
regardingadoptioninvolvedeclarationas tostatus,character,etc. of a par
ticularperson. Such questions can be decided only a civilcourt.^^^There was
acquisition of landwithoutnotice to land owner and forcible possession by
acquiring authority. Acquisition proceedingwithoutnotice was held to be
nullity. Civilcourtjurisdictionfordeclarationto be bad in law andinjunct
authoritiesfromtakingforciblepossessionhas not beenbarred.
Effectoflimitation
Thedefendantslosttheircase inproceedingsunderSection 145 of the
CriminalProcedureCode.Theydidnotfiletheirsuitfordeclarationoftittle
withinthreeyears fromthatdate. It was heldthatthe right, title andinterest
of thedefendantsin the suitlandbecameextinguishedafterexpiryofthree
years.
Declarationthatstatementisdefamatory
It has been heldthatthereliefofdeclarationfallsoutsidethescopeof
Section 34, even so thepowerofcourttograntthedeclarationof a civil
natureunderSection9CPC,isnotbarred.Therelief wassoughtinthis
casethatthestatementmadeby thedefendantsintheirdailynewspaper
weredefamatory.Thecourtsaidthattheplaintcouldnotberejectedasthe
plaintiffalso prayed for relief ofpermanentinjunctionnot to repeat such
publicationin the future and afurtherrelief of damagesforthe loss caused
to thereputationof theplaintiff.^®^
363.ThukkaramvShanthiVaradharajan,AIR 2011Mad57.
364.SuhridSingh vKanbirSingh, (2010) 12 SCC 112: AIR 2010 SC2807.
365.RamchandraDagduSonavanev VithuHiraMahar,(2009) 10 SCC 273.
366.M.P.HousingBoardvStateofM.P.,AIR 2014 MP 1.
367.LakhanSaovParwatiDevi,AIR2010NOG1112(Pat).
368. J.JayalalithaavNakheerangopal,AIR2009NOC853 (Mad).
rhttps://t.me/LawCollegeNotes_Stuffs

1090. [S. 35] Injunctions947
Parties who areboundbydeclaration
S.35.Effectofdeclaration.—AdeclarationmadeunderthisCliapteris
bindingonly on tinepartiestotliesuit,personsclaimingthroughthemrespec
tively,andwhereany ofthepartiesaretrustees,onthepersonsforwhom,if in
existenceatthedateofthedeclarationsuchpartieswouldbetrustees.
Section 35 laysdownthatadeclarationmadeunderthischapter{i.e.
ChapterVI of the Act) isbindingonly:
{i)on thepartiesto the suit,
{ii)onpersonsclaimingthroughthemrespectively, e.g.reversioners,
widowsandsonsetc.,and
{Hi)where any of thepartiesare trustees, on the persons for whom, if
in existence at the date of thedeclarationsuchparties wouldbe
trustees.
Forexample.A, aHindu,in a suit to whichB,his allegedwife,
andhermother,aredefendants,seeks adeclarationthathismar
riage was duly solemnised and an order for therestitutionof con
jugal rights. Thecourtmakes the declaration and order. C claiming
thatB is his wife,thensues A for the recovery of B. Thedeclaration
madein theformersuitisnotbindinguponC.
{iv)Limitation.—Thegoverning articles in theIndianLimitation
Act,1963areArticles56, 57and58.
Amendmentofplaintandlimitation
A suit fordeclarationwasfiledwithinlimitation.Theplaintiffsubse
quently became aware of the fact that he had failed to include his money
claim. An amendment of the plaints was allowed. It was heldthatthe entire
claimassuchmustbedeemedtohavebeenfiledwithintime.^^'
INJUNCTIONS
The term "injunction" has beenthe subjectof various attempts at a defini
tion. It has been defined byJoyceas "An order remedial, the general purpose
ofwhichis torestrainthecommissionorcontinuanceof somewrongfulact
of thepartyinformed."
In Burney"injunctionhas been defined to be a judicial process, by which
one who has invaded or isthreateningto invade the rights, legal or equita
ble, of another is restrained from continuing or commencingsuch wrongful
act."37«
Both of these definitions are expressive more ofwhatis called a pro
hibitory injunctionthatmandatoryinjunction. The definition which clearly
includesbothis the one given by LordHalsbury.According to him "An
369. S.Veerabandrav S.SambandaNdicker,AIR2003Mad19.
370.EncyclopaediaoftheLawsofEngland,Vol 6 (1stEdnby A.W.Renton)464.https://t.me/LawCollegeNotes_Stuffs

1091. 948Chapter16 SpecificReliefAct,1963 [Ss. 36&37]
injunctionis a judicial process whereby apartyis ordered torefrainfrom
doingor to do aparticularact orthing".
Injunctionacts inpersonam.It does notrunwiththeproperty.Forexam
ple A, the plaintiff, secures aninjunctionagainstB forbidding him to erect
a wall. A sells thepropertyto C. The sale doescarrytheinjunctionwiththe
property.
Aninjunctionmay be issued for andagainstindividuals,public bodies or
even the State.Disobedienceof aninjunctionispunishableascontemptof
court.
Therearethreecharacteristicsof aninjunction:
(i)it is a judicialprocess,
(it)the reliefobtainedtherebyis arestraintorprevention,and
(Hi)the actpreventedorrestrainediswrongful.
Nelson suggeststhat"thenatureof discretion and the rules for its guid
ance, in the case ofIndianCourtsare the same as inEngland".Under
EnglishLaw:
(1)if the injury to theplaintiff'slegal rights is small; and
(2) is one which is capable of beingestimatedin money; and
(3)is one which can be adequately compensated by a small money pay
ment;and
(4)the case is one, in which it would be oppressive to thedefendantto
grantaninjunction,
then damages insubstitutionfor aninjunctionmay be given.
In India some of these points have beenincorporatedinto rules of juris
diction by being enacted as sections of the SpecificRelief Act, 1963.
Theymay bestatedas below:
Aninjunctionwillnotbeissued—
(/)wheredamagesare theappropriateremedy,
(ii)whereinjunctionisnottheappropriaterelief,
(Hi)where theplaintiffis notentitledto aninjunctiononaccountof his
conduct,
(iv)where thecontractcannotbe specifically enforced,
(v)where theinjunctionwould operate inequitably.
Kinds ofinjunction
S.36.Preventivereliefhowgranted.—Preventiverelief isgrantedatthe
discretionofthecourtbyinjunction,temporaryorperpetual.
Injunctionsare eithertemporary(interlocutory) orperpetual.They are
defined in Section 37, Specific Relief Act,whichreads—
S. 37.Temporaryandperpetualinjunctions.—(1)Temporaryinjunctions
are such as are tocontinueuntil aspecifiedtime, or untilthefurtherorderofthehttps://t.me/LawCollegeNotes_Stuffs

1092. [S. 37] Injunctions949
court and they may begrantedat anystageof a suit, and areregulatedbythe
CodeofCivilProcedure,1908.
(2)Aperpetualinjunctioncan only begrantedbythedecreemadeatthe
hearing and uponthemerits ofthesuit,thedefendantistherebyperpetually
enjoinedfromtheassertionof a right, or fromthecommission of an act, which
wouldbecontrarytotherightsoftheplaintiff.
Temporaryinjunctions
The procedure for granting temporary injunction is governed by the rules
laiddowninOrderXXXIX,Rules 1 and 2, CivilProcedureCode^^^vi^hich
readsasunder:
Cases in whichtemporaryinjunctionmay begranted
A temporary injunction may be granted in the following cases:
1.Forprotectionofinterestinproperty
Thiscategorywill cover the following cases:
(a)that any property in dispute in a suit is in danger of being wasted,
damaged or alienated by any party to the suit, or wrongfully sold in
executionof adecree,or
(b)that the defendant threatens, or intends, toremoveor dispose of his
propertywith a view to defraud his creditors,
(c)thatthe defendant threatens to dispossess the plaintiff or otherwise
cause injury to the plaintiff in relation to any property in dispute in
thesuit.^^^
thecourtmay by order grant a temporary injunction torestrainsuch
act, or make such other order for the purpose of staying and preventing the
wasting, damaging, alienation, sale, removal or disposition of the property
as thecourtthinksfit until the disposal of the suit or untilfurtherorders.
2.Injunctionto restrain repetition or continuance of breach
(1)In any suit for restraining the defendant from committing a breach
ofcontractor other injury, of any kind, whether compensation is claimed
371. For the U.P.AmendmentofOrder39, Rules 1 and 2, see S. 13 of theUttarPradeshCivil
Laws(ReformsandAmendment)Act,1976.
372. VolitionInvestment(P)LtdvMadhuriJitendraMashroo,AIR 2003 Bom 360, sale of prem
isesvifhichwere in possession of tenants, full payment was to be made by the buyer without
waiting for consent letters from tenants to vacate, presumption that time was not ofessence.
Even in theabsenceof suchlettersthememorandumofunderstandingfortransferofprem
ises did not end.,The buyer wasentitledto injunction to prevent the seller from transferring
the property to any other person. Arvind Construction Co (P)Ltd v KalingaMining Corpn,
(2007)6see798: AIR 2007 SC 2144,primafacie case for injunction under Order 39, CPC,
applicablealso to exerciseof jurisdiction under S. 9 of the Arbitration and Conciliation Act,
1996, factual positipn in the case was not clear enough to assume for the purpose of these
interlocutory proceedings to entitle the plaintiff tospecificallyenforce the agreement, the
HighCourtdid not err in refusing injunction.https://t.me/LawCollegeNotes_Stuffs

1093. 950Chapter16 SpecificReliefAct,1963 [S. 37]
in the suit or not, theplaintiffmay, at any timeafterthecommencementof
the suit, and either before orafterjudgment,apply to thecourtfor a tem
poraryinjunctiontorestrainthedefendantfromcommittingthe breach of
contractorinjurycomplainedof, or anybreachofcontractorinjuryof a
like kind arising out of the samecontractor relating to the samepropertyor
right.
(2)Thecourtmay by ordergrantsuchinjunction,on such terms as to the
durationof theinjunction,keeping an account, giving security, or other
wise,asthecourtthinksfit.
The matter of temporary injunctions is not governed by theSpecificRelief
Act.373
Discretionaryrelief
It should be notedthatgrantofinjunctionisdiscretionarywith the
court. Section 36 of the Specific Relief Act, 1963 expressly lays downthat
"Preventivereliefis granted at the discretionofthecourtbyinjunction, tem
poraryorperpetual".^^''Thereforethecourtwillgranttemporaryinjunction
if the followingconditionsare satisfied:
(/)The plaintiff must establish aprimafacie case. He is not required to
makeoutacleartitlebuthemustestablishthatthereis asuljstantial
question to be investigated and that matters should be preserved in
statusquo until theinjunctionis finally disposed of.
(»)Anirreparableinjury would result if theinjunctionwere refused and
thatthere is nootherremedy open to theapplicantby which he could
protect himself from the consequences of the apprehended injury.
{Hi)The conduct of the plaintiff has not been blameworthy.
[iv]The balance of convenience requiresthattheinjunctionshould be
granted.^^-'
Interiminjunctionwhenperpetualinjunctionis prayed for
In a suit for specificperformanceof an agreement to buy land, there was
no prayer for a decree ofperpetualinjunctionrestrainingthedefendantfrom
transferring the suit land by way of sale to some other person etc., till the
disposal of the suit. But he prayed for an interiminjunctionwhich was not
allowed.^^^Thecourtfollowed its own earlier ruling in which it wassaid:^^^
"It is also a settled principle that in a suit where there is nopermanent
373. Best SellersRetail(India) (P)Ltdv Aditya Birla Nuvo Ltd, (2012) 6 SCC 792: (2012) 4
MPLJ16.
374. Ravi Singhalv Manali Singhal,(2001)8 SCC1, in an application for interim reliefin respect
of a settlement, the court said that it is at the discretion of the court to grant interim relief
and exercise ofdiscretionshould not be perverse orirrational.
375.ZaheerKhan vPerceptD'ntarkIndia(P) Ltd, AIR2004Bom 362,restrictivecovenantin
contractin thenatureofrestraintoftrade,ordertoenforcenotissued.
376.IshwarbhaivBbanushaliHiralalMohanlalNanda,AIR2002Guj 328.
377. Gujarat Electricity Board v Maheshkumar & Co, (1982) 2 Guj LR 479: AIR 1982 Guj 289.https://t.me/LawCollegeNotes_Stuffs

1094. [S-37] Injunctions951
injunctionsought for, in thefinalanalysis,ordinarily a temporary injunc
tion cannot begranted.Theprinciplesthatgovernthe grant of a perpetual
injunction would govern the grant of a temporary injunction also."
Disobedience or breach ofinjunction
Section94(c)andRule2-A ofOrder39 oftheCivilProcedureCode
(Act V of 1908) provide for the consequences of disobedience or breach of
injunction.Section94(c)provides:
In order to prevent the ends of justice from being defeated theCourt
may, if it is soprescribed...grant a temporary injunction and in case
ofdisobediencecommit the person guilty thereof to thecivilprison and
orderthathispropertybeattachedand sold.
And Rule 2-A of Order 39 provides:
"R. 2-A.Consequenceofdisobedienceorbreachofinjunction.—(1)In
thecase ofdisobedienceof any injunctiongrantedorotherordermadeunder
Rule1 orRule2 or breach of any of the terms on which the injunction was
grantedortheorder made, of the Court granting the injunction or makingthe
order,or any Courtto which the suit or proceeding istransferred, mayorder the
propertyofthepersonguilty of suchdisobedienceorbreachto beattached,
and may also order such person to bedetainedinthecivilprison for a term not
exceedingthreemonths,unlessinthemeantimetheCourtdirectshisrelease.
(2) Noattachmentmadeunderthisruleshallremaininforceformorethan
oneyear, attheendofwhichtime,ifthedisobedienceorbreachcontinues,the
propertyattachedmay be sold andoutoftheproceeds,theCourt may award
suchcompensationas itthinks fit totheinjured party and shall paythebalance,
ifany, tothepartyentitledthereto."
The above provisions provide for thepenahyof eitherarrestorattachment
ofpropertyof the personw^hohascommitteddisobedience or breach of the
injunction.But thedetentionin civilprisonshall not exceed three months
and theattachmentofpropertyshall notremainin force for morethanone
year. If the disobedience or breach continues, thepropertyattached may be
sold and out of the proceeds the Court may award such compensation as it
thinksfit to theinjuredparty.
Perpetualinjunctions
Section37(2) laysdownthatapermanentinjunctioncanbegrantedonly
by a decree atthehearinganduponthemeritsof the suit. Inotherwords
forobtainingapermanentinjunction,aregularsuit isrequiredto be filed
inwhichtherightclaimedby theplaintiffisexaminedon meritsandfinally
theinjunctionisgrantedby means of the decree. Apermanentinjunction
therefore finally decides the rights ofpartieswhereas atemporaryinjunction
does not do so. Apermanentinjunctionforbids thedefendantfromassertinghttps://t.me/LawCollegeNotes_Stuffs

1095. 952Chapter16SpecificRelief Act, 1963 [S.38]
a right or committing an act which would be contrary to the rights of the
plaintiff.
Restraintonpersonorpropertyoutsidejurisdiction
The court which passed a decree has power to restrain a person from
handingoverpropertyin his possession to the judgment debtor (suit prop
erty) alongwith the title documents and keeping them in safe custody. Such
an order is in thenatureof a freezing order, or marevainjunctionand order
akin to a Anton piller order even if thepropertyor the person concerned is
outside thejurisdictionof thecourt.^^^
Permanentinjunction
Section 38 of theSpecificRelief Act states thecircumstancesinwhicha
permanentinjunctioncan begranted.It provides:
S.38.Perpetualinjunctionwhengranted.—(1)Subjecttotheotherpro
visionscontainedin orreferredtobythischapter,aperpetualinjunctionmay
begrantedtotheplaintiff topreventthebreachof anobligationexisting in his
favour,whetherexpresslyor byimplication.
(2)When any suchobligationarises fromcontract,thecourtshall beguided
bytherulesandprovisionscontainedinChapterII.
(3)Whenthedefendantinvadesorthreatenstoinvadetheplaintiff'sright
to, orenjoymentof,property,thecourtmaygrantaperpetualinjunctioninthe
followingcases,namely—
(a)wherethedefendantistrusteeofthepropertyfortheplaintiff;
(b)wherethereexistsnostandardforascertainingtheactualdamage
caused,or likelyto becaused,bytheinvasion;
(c)wheretheinvasionissuchthatcompensationinmoneywouldnotafford
adequaterelief;
(d)wheretheinjunctionisnecessarytopreventamultiplicityof judicial
proceedings.
Requirementsforapplicability
Theconditionsprerequisiteto theapplicabilityof thissectionare—
(1)there must be a legal right express or implied in favour of theapplicant;^^'
(2) such arightmustbeviolatedorthereshouldbe athreatenedinvasion;^®"
378.MohitBhargavavBharatBhushanBhargava,(2007) 4 SCC 795: AIR2007SC 1717.
379.BasantiPaikarayvPrananathPaikaray,AIR 2016NOC555 (Ori), gift deed by themother-
in-law in favour ofson-in-law,thebrother-in-lawgot the gift deed cancelled, theson-in-law
(plaintiff) sought injunction on the ground that the cancellation deed did not carry his signa
ture and therefore it was not valid.Injunctionwasgrantedin favour of the plaintiff.
380.ParkashoDevi v TarsemLai,AIR 2003P&H245, suit by plaintiff for injunctionrestraining
thedefendantfrominterferingwithplaintiff'spossession. Entries in revenuerecordswere
in plaintiff's favour. Subsequent entries which came into beingwithoutnotice to the posses
sor (theplaintiff)andwithoutfollowingFinancialCommissioner'sinstructionscouldnot
sustain the defendant's claim to possession.Injunctiongranted.MuddannavPanthanagerehttps://t.me/LawCollegeNotes_Stuffs

1096. [S. 38] Injunctions953
(3) such arightshouldbe anexistingone;
(4)the caseshouldbe fit for the exercise ofcourt'sdiscretion.^^^Wherethe
inconvenience likely to result fromgrantinginjunctionis greaterthan
thatwhich is likely to arise fromwithholdingit, theinjunctionshould
not begranted;^^^
(5) it should not fallwithinthe sphere of therestrainingprovisionscon
tainedin, orreferredto, in Section 41 of the Specific ReliefAct.^^^
Illustrationsinpreceding1877Act
Section 54 of the original Act upon which the present section is based
carriedcertainillustrationswhicharereproducedbelow:^®''
GroupPanchayat,(2003) 10 SCC 349, the Panchayat could not remove the person in pos
session because the title to the land was in dispute. The Panchayat should have followed the
normal procedure under the PanchayatAct. Gouri vKamalakshi,AIR 2004 Mad 463, right
todrawwaterfrom a welltransferredundera will,othersweredrawingwaterbymanual
labour, defendantrestrainedfrom using mechanical device.LakshmikantMaharanav State
of Orissa, AIR 2012 Ori 4, the plaintiff could not get a restraint order where the proposed
area to be leased out to him was notcarvedout and he had no right inrespectof anyother
area. Mohd AbdulRahmanv MohdEgmalSheikh, AIR 2015 Gau 112, electricity is an
essential requirement for any occupied premises, disconnection of power would amount to
invasion of his right to fully enjoy the propertylegitimatelyoccupied by him. Perpetual
injunction againstdisconnectiongranted.
381.GurVBhag,96 PR 1911:11IC213.
382. RajaMaheshwarDayalSeth vYuvrajDuttSingh,1945 SCC OnLine Oudh 34: AIR 1946
Oudh42.
383. Attar SinghBalram Singh v VishanDas-Prabh Das,ILR(1937)18 Lah 345. An injunction
is not allowed where the suit is an abuse of the process of court, Surya Nath Singh v Khedu
Singh,1994Supp (3) SCC 561.
384.(a)A lets certain land to B, and B contracts not to dig sand or gravelthereout. A may sue for
an injunction to retrain B from digging in violation of his contract.
{b)A trustee threatens a breachof trust. His co-trustee,ifany,should,and thebeneficial
owner may, sue for an injunction to restrain the breach.
(c)The directors of a publiccompanyare about to pay adividendout of capital or bor
rowedmoney.Anyof theshareholdersmaysuefor an injunctionto restrain them.
(d)The directors of a fire and life insurance company are about to engagein marine insur
ance. Any of the shareholdersmay sue for an injunction to restrain them.
(e)A, anexecutorthroughmisconductorinsolvency,isbringingthe property of the
deceasedintodanger.The court maygrant an injunctionto restrain him from getting at the
assets.
if) A, a trustee for B, is about to makean important saleof a smallpart of the trust prop
erty. B may sue for an injunction to restrain the sale, even though compensation in money
would haveaffordedhimadequaterelief.
(g)Amakesasettlement(notfoundedonmarriageor othervaluableconsideration)ofan
estate on B and hischildren.A thencontractsto sell the estate to C. B or any of hischildren
may sue for an injunction to restrain the sale.
(h)In the courseof A'semploymentas a vakil, certain papersbelongingto his client, B,
comeinto hispossession.Athreatenstomakethesepaperspublic,or tocommunicatetheir
contentsto a stranger.B maysue for an injunctionto restrain A from so doing.
{i)A isB'smedicaladvisor.Hedemandsmoneyof BwhichBdeclinestopay.A then
threatenstomakeknownthe effect of B'scommunicationto him as apatient.Thisis con
trary toA'sduty,and Bmaysuefor aninjunctionto restrainhimfromsodoing.
(/)A,theowneroftwoadjoininghouses,letsoneto Bandafterwardsletstheotherto C.
Aand Cbegintomakesuchalterationsin thehouseletto Caswillpreventthecomfortable
enjoymentofthehouselettoB.Bmaysueforaninjunctiontorestrainthemfromdoingso.https://t.me/LawCollegeNotes_Stuffs

1097. 954Chapter16 SpecificReliefAct,1963 [S. 38]
Theword"oWigation"inSection38(1) has been used in a wide senseand
it mayarisefrom:
(/)Contract,
{ii)Trust,
IshwaraBhatvAnnappaNaika,AIR 1997 Ker 165, neighbourdisturbingthe peace of the
personinpossessionandenjoymentof the land inquestionandthreatenedtrespass,retained
permanently.Also to the same effect, WalterLouisFranklinv George Singh, (1997) 3 SCC
503.MadanJenavSaraswatiJena,AIR 2003 Ori 14, oneco-sharerlocked theentranceof
the passage room of the other co-sharer preventing her from having access to the public road
on that side. The affected sharer was granted an injunctionrestrainingthe guiltyco-sharer
from doing so, the latter having alreadyadmittedthe right of theco-sharerto the use of the
passage.
(fe)A lets certain arable lands to B for purposes of husbandry, but without any express
contractas to the mode of cultivation.Contraryto the mode of cultivationcustomaryin the
district, B threatens to sow the land with seed injurious thereto and requiring many years to
eradicate. A may sue for an injunction torestrainB from sowing the lands incontravention
of his impliedcontractto use them in a husbandry-like manner. [Based onParttv Brett,ILR
(1817) 2Mad.62: 17RR187.]
(I).A,B and C arepartners,thepartnershipbeing determinable at will. Athreatensto do
an act tending to the destruction of the partnership property. B and C may,without seeking
a dissolution of the partnership, sue for an injunction to restrain A from doing the act. [Based
on Miles vThomas,(1839) 9 Sim 606: 47 RR 320.]
(m)Y-*
(n)A, B and C are members of an undivided Hindu family. A cuts timber growing on the
familyproperty,and threatensto destroypart of thefamilyhouseand sellsomeof the family
utensils. B and C may sue for aninjunctiontorestrainhim.
(o)A, the owner of certain houses in Calcutta, becomesinsolvent.Bbuys them from the
officialassigneeand enters intopossession.Apersistsintrespassingon and damaging the
houses, and B is therebycompelled,atconsiderableexpense, to employmen to protect the
possession. B may sue for an injunction to restrain further acts of trespass.
ip)The inhabitants of a villageclaim a right of way overA's land. In a suit against several
of them, A obtains a declaratory decreethat his land is subject to no such right. Afterwards
each of the other villagers sues A for obstructing his alleged rights of way over the land. A
may sue for aninjunctiontorestrainthem.
iq)A, in an administration suit to which a creditor, B, is not a party, obtains a decree for
theadministrationof C'sassets.Bproceedsagainst C's estate for his debts. A may sue for
aninjunctiontorestrainB.
(r) A and B are in possession of contiguous lands and of the minesunderneaththem. A
workshisminesso as to extendunder B'smineand threatenstoremovecertain pillarswhich
helpto support B's mine.B maysuefor an injunctionto restrain him from so doing.
(s)A rings bells or makes some other unnecessary noise so near a house as to interfere
materially and unreasonably with the physicalcomfort of the occupier,B. B may sue for an
injunction restraining A from making the noise.Shamboo Nath Tikoo v S. Gian Singh,1995
Supp(3)SCC 266, injunction against causing disturbance by religious prayers.
{t)A pollutes the air with smokeso as to interfere materiallywith the physicalcomfort of
B and C, who carry onbusinessin aneighbouringhouse.B and C maysuefor an injunction
torestrainthepollution.
[u]A infringes B's patent. If the court is satisfied that the patent is valid and has been
infringed, B may obtain an injunction to restrain the infringement.
(f)A pirates B's copyright. B may obtain an injunction to restrain the piracy, unless the
work ofwhichcopyrightis claimed is libellous or obscene.
{w)A improperly uses the trade mark of B. B may obtain an injunction to restrain the
user,providedthatB's use of thetrademarkishonest.https://t.me/LawCollegeNotes_Stuffs

1098. [S. 38] Injunctions955
{in)Tort,385
[iv]Anyotherlegalobligation.
Section38expressly statesthatwhere suchobligationarises from a con
tract,thecourtshall be guided by the principles and rules given in connec
tionwiththe specificperformanceofcontracts.Thusapermanentinjunction
will begrantedtopreventbreach ofcontractonly inthosecases where the
contractiscapableof specificperformance.It is again made clear by the
languageof Section 41(e)whichsaysthataninjunctionwillnotbegranted
to prevent breach of acontractwhich is not capable of specificperformance.
Section 42, however, saysthatwhere acontractcomprisingofa positive
agreementto do acertainact is coupledwitha negativeagreementnotto do
acertainact,whetherexpressly or impliedly, the factthatpositivepartisnot
capable of specificperformancewill not preclude thecourtfrom enforcing
the negativepartof the agreement by means of an injunction, providedthat
theplaintiffperforms hispartof thecontract.For example, Acontractsto
sing at B'stheatrefor one year and not to sing elsewhere. "To sing at B's
(x) A, atradesman,holds outBas hispartneragainstthe wish andwithouttheauthority
otB.B may sue for an injunction to restrain A from so doing. [Based onRouthv Webster,
(1847)10 Beav 561: 50 ER 698.]
(y)A, a very eminent man, writes letters on family topics to B. After the death ofAand B,
C, who is B's residuary legatee, proposes to make money by publishing A's letters. D, who is
A's executor, has a property in the letters, and may sue for an injunction to restrain C from
publishingthem.
{z)A carries on amanufactoryandBis his assistant. In the course of his business, A
imparts to B a secret process of value. B afterwards demands money of A, threatening, in
case of refusal, to disclosethe process to C, a rival manufacturer. A may sue for an injunction
to restrain B from disclosingthe process. Daewoo Motors India Ltd v Brijendra Prasad, AIR
2003 Del 2, defendant was an employee of theplaintiffcompany and after severing relation
ship he startedvilificationcampaign against thecompany.He, with his brother, started issu
ing notices to the company imputing violation of 23 statutes. The court said that there were
statutoryauthorities to take care of the violations. Thecourtissued aninjunctionrestraining
the defendants fromharmingreputationand goodwill of theplaintiffcompany.
{zz)A person who had playeda role in the production of a serial film but his name was not
included in the title was allowed to have an order for such inclusion.SureshJindalv Rizsoli
Corriere Delia Sera, 1991 Supp (2)SCC 3: AIR 1991 SC2092. Award of damages would not
havebeenanadequateremedy.
385. In a case before theSupremeCourt an injunction was prayed for directing the Municipal
Corporation, not to issue alicencefor running or operating a "bhatti" (bakingoven)for a
bakery.The court said: "Insofar as theMunicipalCorporationisconcerned,thedismissalof
the suit against it by the trial court was not challenged by the plaintiffs by filing an appeal.
Grantof licence is astatutoryfunction to be discharged by the MunicipalCorporation.The
licencehaving already been issued by the Municipal Corporation to appellant-Defendant 1,
the trial court rightly observed that the plaintiffs were at liberty to approach the Municipal
Corporation and seekcancellationoflicenceor prayforwithholdingthe renewalthereofby
making out a case for the grant of such relief within the framework of the legal provisions
governingthe grant and renewalof suchlicence.In the eventof the plaintiffsbeingillegally
or unreasonably denied relief by the Municipal Corporation, they would be at liberty to
pursue theremedyof appeal or approach the superiorauthoritieswithin theframeworkof
the PunjabMunicipalCorporationAct or such otherremedyas may beavailableto them in
accordance with law.KuldipSingh v SubhashChanderJain,(2000) 4 SCC50;AIR2000
SC 1410.HartRam vJyotiPrasad,(2011) 2 SCC 682: (2011) 1 SCC (Civ)540: AIR 2011 SC
952, theSupremeCourt restrained the encroachmentof a public street.https://t.me/LawCollegeNotes_Stuffs

1099. 956Chapter16 SpecificReliefAct,1963 [S. 38]
theatrefor one year" is acontractwhichdependsuponthepersonalqualifi
cationsorvolitionof thepartiesandhencecannotbe specificallyenforced.
But the negativepartof thiscontractthatA will not sing elsewhere can be
specifically enforced. Hence A can becompelledbyinjunctionnotto sing
elsewhere. Section 42correspondswithSection 57 of theearlierSpecific
Relief Act andthatprovisioncarriedcertainillustrationswhicharerepro
ducedbelow.^^®
Theessenceofthesectionisthatwhereacontractcontainsbothaffirm
ativeandnegativeagreementsandalthoughit may bebeyondthepowers
of thecourttocompelspecificperformanceoftheaffirmativepart,aparty
may berestrainedfromcommittingabreachof the negativepart,provided
thattheplaintiffhasperformedhispartof thecontract.
Theconditionsessentialto theapplicabilityof thissectionare—
(1)thecontractmustcontaintwoagreements,thatis, (i) anaffirmative
agreementto do acertainact, and [it) a negativeagreement(express
or implied)notto do acertainact and the negativepartmustbe
capableof beingseparatedfrom therestof thecontract;and
(2) theapplicantmusthave fullycarriedout hispartof thecontract.
Thecourtisnotboundtograntaninjunctionin every case. Aninjunction
to enforce a negative covenant would be refused if it wouldindirectlycom
pel the employee either to idleness or to serve theemployer.^^^
386.RameshKumar v ChamanLai,AIR 2003 Del 202, thepropertyin question belonged to
thepurportedseller and his sister, the seller by misrepresenting his exclusive right received
advance, buyer could not get any right, he was allowed refund of his earnest money and
compensationfor his loss.
Illustrations
(a) Acontractsto sell toBforRslOOOthegoodwillof acertainbusinessunconnected
with business premises, and further agrees not to carry on that business in Calcutta.Bpays
A the Rs 1000 but A carries on the business inCalcutta.TheCourtcannotcompel A to send
his customers to B, but B mayobtainan injunctionrestrainingA from carrying on business
inCalcutta.
(b)A contracts to sell to B the goodwill of a business. A then sets up a similar business
close by B's shop and solicits his old customers to deal with him. This iscontraryto his
impliedcontract,and B mayobtainan injunction torestrainA from soliciting the customers,
and from doing any act whereby theirgoodwillmay bewithdrawnfrom B.
(c)Acontractswith B to sing for twelve months at B's theatre and not to sing in public
elsewhere. Bcannotobtainspecificperformanceof thecontractto sing, but he is entitled to
aninjunctionrestrainingA from signing at anyotherplace of publicentertainment.[Based
onLumleyv Wagner, (1852) 1 De GM & G 604.]
{d)Bcontractswith Athathe will serve himfaithfullyfor twelve months as a clerk. A
is notentitledto a decree for specificperformanceof thiscontract.But he isentitledto an
injunctionrestrainingB fromservinga rivalhouseas clerk.
[e)A contracts with B that, in consideration of Rs 1000 to be paid to him by B on a day
fixed,hewillnot set up a certainbusinesswithin aspecifieddistance. B fails to pay the
money. Acannotberestrainedfromcarryingon the business within the specified distance.
(But see S. 27 of theIndianContractAct,1872.)
387.GujaratBottlingCoLtdv Coca Cola Co, (1995) 5 SCC 545: AIR 1995 SC 2372: (1995)
84 Comp Cas 618.PanchuPradhanvRamachandraSethi, AIR 2003NOC88 (Ori), suit
for declaration of sale deed to be null and void, declaration made appealed against, order of
restorationof possession not passed because a temple hadalreadybeenconstructedon thehttps://t.me/LawCollegeNotes_Stuffs

1100. [538] Injunctions957
Again,wherethedefendantinvadesorthreatenstoinvadetheplaintiff's
righttoorenjoymentofproperty,thecourtmaygrantpermanentinjunction
in thefollowingcases:
(i)Wherethedefendantisatrusteeofthepropertyfortheplaintiff.For
example,in thecourseofA'semploymentas anadvocate,certain
papersbelongingtohisclientB,cameintohispossession.Athreat
ens to make these papers public orcommunicatetheir contents to a
stranger.B.maysueforaninjunctiontorestrainAfromsodoing.A
legalpractitionerisunderanobligationinthenatureoftrustnotto
disclosesecretsofhisclients.^^®
{ii)Wherethereexistsnostandardforascertainingtheactualdamage
caused, or likely to be caused by the invasion:
Forexample,Apollutestheairwithsmokesoastointerferemate
riallywiththephysicalcomfortofB and C,whocarryonbusiness
intheneighbourhood.Band Cmaysuefor aninjunctionto restrain
Afrompollutingtheair.Theinstallationofanelectrictransformer
infrontof theplaintiff'slandcausingnuisance,hindranceand
obstructionto free access to the highway wasrestraintby issuing
apermanentinjunction.Therewasnothingtoshowthatconsentof
the landowner was taken or sanction of anystatutoryauthority was
arranged.^®'
{iii)Wheretheinvasionissuchthatcompensationintermsofmoney
willnotaffordadequaterelief,forexample.A, aprofessoroflaw,
deliverslectures to his students, the lectures being his own literary
composition,hedoesnotcommunicatesuchlecturestothewhole
world.Theselecturesare thepropertyof theprofessorand not of
the students. A is entitled torestrainthe students frompublishingthe
noteswithouthisconsent.
[iv)Whereitisnecessarytopreventamuhiplicityofjudicialproceedings.
Thesuitwasforaninjunctionsimpliciter.Theownershipoftheplaintiff
wasnotdisputed.Butthedefendantsthreatenedtoinvadetheplaintiff's
righttoenjoyhisplot.Thecourtsaidthatasimplicitersuitforaninjunction
withoutprayingfordeclarationwasmaintainable.^^"
landandthedeityinstalled.Thecourtsaidthat thesuitaboutthelandwasmaintainable,
thedecreeforpermanentinjunctionwastobesetaside.MohdAbdullahButukvZainab
Begum,AIR2004AP474,judgmentbasedonmisinterpretationofdocumentaryevidence
andignoringmaterialevidence,setaside.YamunaNagarImprovementTrustvKhariatiLai,
(2005)10see30:AIR2005SO2245,theplaintiffinthefirstproceedingsfailedtoprovehis
case,hissuitwasliabletobedismissed,bythetimeofthesecondproceedings,thelandhad
becomevestedin the Statefreefrom allencumbrancesand the plaintiffhad no right, title or
interestin it, his secondsuit was also liableto bedismissed.
388.S.GanapathyvKunjammal,AIR2004NOC436(Mad);2004AIHC2611(Mad),property
belongedtoSamadhayamofthevillage,handedovertovillagecarpenter,afterhisdeathto
successorcarpenter,injunctionissuedinhisfavourforuninterruptedpossessionanduse.
389.HPSEBVHartChand,AIR2009HP 30.
390.PrembaivGhanshyam,AIR 2011 MP 1.https://t.me/LawCollegeNotes_Stuffs

1101. 958Chapter16SpecificReliefAct,1963 [S.38]
The grant ofdiscretionaryreUef,suchas aninjunction,isequitablein
nature.Itmustbegranted,interalia,onconsiderationsofequityandjus
tice.Theappellantwhowashimselfguiltyofinequitableconductcouldnot
claimsuchrelief.Heobtainedpossessionundertheorderof anAuthority
thathadnojurisdiction.Therespondentdeservedinequitytobeputback
into possessionso as to restore thestatusquo ante. The order of restoration
deservednointerference.^^^
Aninjunctioncannot beissuedinfavourof atrespasseragainstthe true
owner.^^^Wheretheplaintifffailstoestablishhislegalrighttotheproperty
orhislegalrighttocontinueinpossession,hecouldnotbegrantedperpet
ualinjunctionagainsttheownerorthemanageroftheproperty.Thefact
that atrespasserhasestabhshedhispossessionand,therefore,cannot be
thrownoutexceptbycourtordersdoesnotentitlehimto aninjunction.^'"
Wheretwopersonswereinjointpossessionandenjoymentofproperty,
one of themwas notallowedtoseeka mandatoryinjunctiontoexcludethe
otherfromthepropertyandleaveitforexclusiveenjoymentoftheplaintiff.
The titleto the propertywasindispute.The court wouldhavetodetermine
thetitletothepropertyfirstaftergivingopportunitytobothparties.The
plaintiffwasnotentitledtofinalreliefmerelyonthebasisofpossession.^'^
Injunctiontorestrainpossession
If anissuerelatingto aflawinthetitleofthepersoninpossessionis
notraised,the parties to the suit or thoseclaimingunder them would be
estoppedfromchallengingtheflawedtitlein anyfuture suitbasedontitle.
Thetitletothesuitpropertyinthiscasewasflawedfornotbeingwritten
orregistered.Thepersonwhoclaimedapermanenttitletorestrainhispos
sessionhadnotchallengedhistitleon thatbasis.Accordingly,whenhesold
thesuitpropertyto athirdperson,thelatterwasalsoestoppedfromchal
lengingtheflawedtitleonthegroundofnon-registrationinthesuitfiledfor
declarationoftitleandpossession.Thecourtsaidthattheunregisteredtitle
oftheallotteeofthesuitfromaCooperativeHousingSocietyisbetterthan
theclaimbasedonanunregisteredrelinquishmentofownershipofthesuit
property.^®®
391.KanchusthabamSatyanarayanavNamuduriAtchutaramayya,(2005)11SCC109-AIR
2005SC2010.
392.KishanLaivRadheyShyam,AIR2002All 271.
393..Municipal Board v Abdul Hammed, 1981 AllLJ376.
394. RamRattan v State ofU.P.,(1977)1SCC188:AIR 1977SC619;KrishnaRam Mahalev
Shobha Venkat Rao, (1989) 4 SCC 131: AIR 1989 SC2097
395. Venkataswamy v A. Narayana, AIR 2002 Kant 326.'
396.AnnatimuthuThevar v Alagammal, (2005) 6 SCC 202. Maria Colaco vAlbaFlora
HermindaD'Souza,(2008)5SCC268,plaintiffwasinpossessionofpropertyafterowner's
death, the defendant assumed control andstartedconstruction for some time. This showed
thatthedefendantwasnotsureofhistitleorrights,grantofaninjunctionrestrainingthe
defendantwasnotimproper.JayantiKarvDillipKumarPatnaik,AIR2016Ori44,aprop
ertywassoldtomorethanonebuyerwithacommonpassage.Oneofthemattemptedtoputhttps://t.me/LawCollegeNotes_Stuffs

1102. [S.41] Injunctions959
Suppressionofmaterialfacts
Wherethevendorseekingthereliefof permanentinjunctionagainstthe
vendeesuppressedthematerialfactthat hewasstillunderduestowardsthe
vendee,the court said that he was notentitledto thediscretionaryreliefof
permanentinjunction.^'^
Orderforrescuingarbitrationprocess
Where one of the parties was attemptingto sabotagethe arbitration pro
cess,the courtemphasisedits role inprovidingunderlyingsupport. The
powerto grant aninjunctionbywayof aspecificreliefiscoveredbythe
1963Act.Specificreliefis one of the types ofreliefavailableforpreventing
breachof anobligation.^'^
Refusalofinjunctiverelief
Section41laysdown thecircumstanceswhenperpetualinjunctionwill
berefusedbythe court. In otherwords,Section41laysdownthedefences
that can be raisedagainstthe prayerfor grant of aninjunction.Itprovides:
S.41. Injunction when refused.—Aninjunctioncannot be granted—
[a)torestrainanypersonfromprosecutingajudicialproceedingpending at
theinstitutionofthesuit in whichtheinjunction issought,unless such
restraintisnecessaryto prevent amultiplicityofproceedings;"®
[b)torestrainany personfrominstitutingorprosecutingany proceedingin
courtnotsubordinatetothatfrom whichtheinjunctionis sought;"""
[c)torestrainany person fromapplyingto anylegislativebody;
(c/)torestrainanypersonfrominstitutingorprosecutingany proceedingin
acriminalmatter;""^,
upanirongateandboundarywall.Thisamountedtoinfringementoftherightofpassageof
others. An injunction was granted against him.
397.M.HariNarayanav P.SwaroopaRani, AIR 2009 NOC 257(AP).
398.AdhunikSteels Ltd v Orissa Mangenese Minerals (P) Ltd, (2007) 7 SCC 125.
399.KukkalaBalakrishnavVijayaOilMills,AIR 2009 NOC 648(AP),immovableproperty
soughtto besoldinexecutionofdecree.Perpetualinjunctionsoughtto stayexecution.
Declarationof titlewassoughton thebasisofunregisteredwill,whichwasalsosuspicious
and notgenuine.But thedefendantbecomesuccessfulin putting the property inexecu
tion of the decree and the other defendant became successful bidder. Thecourtdeclined
interference.
400.SBIVMadhumitaConstruction (P) Ltd, AIR 2003Cal7, the expression "court" does not
includetheDebtsRecoveryTribunaleitherforpurposesofappealorrevision.The High
CourtcannotstayfurtherproceedingspendingbeforetheTribunalin theexerciseof the
powerunderS.9 oftheCPCorcl.12oftheLettersPatent.ExportCreditGuaranteeCorpn
ofIndiaLtdvAnnammaPhilips,AIR2011Bom18,SmallCauseCourtconstitutedunder
PresidencySmallCauseCourtsAct,1882[S.6],LettersPatent(Bombay),els.13, 36, is a
courtsubordinateto theBombayHigh Court inexerciseof ordinaryoriginalciviljurisdic
tion,torestrainapartyto a suitbeforeitfrominstitutinganyproceedingin asmallcause
court.
401.SangramSinghvStateofU.P.,AIR2010All65,noinjunctioncanbeissuedrestrainingany
personorauthorityfromlodginganFIR.Atemporaryinjunctioncannotbeissuedwhere
permanent is not possible.https://t.me/LawCollegeNotes_Stuffs

1103. 960 Chapter 16SpecificReliefAct, 1963 [S.41]
(e)topreventthebreach of acontracttheperformanceof which would not
bespecificallyenforced;
(f)to prevent, onthegroundof nuisance, an act of which it is notreasona
blyclearthatit willbeanuisance;
ig)to prevent a continuing breach in which the plaintiffhas acquiescenced;
[h]whenequallyefficaciousreliefcancertainlybe obtained by any other
usualmodeofproceedingexceptin case ofbreachoftrust;"*"^
(/)whentheconductoftheplaintiffor hisagentshas been such as to disen
titlehim totheassistanceofthecourt;""^
ij)whentheplaintiff has nopersonalinterestinthematter.
Illustrationsin preceding1877Act
ThissectioncorrespondswithSection56 of therepealedSpecificRelief
Act, 1877.Thatsection carried the following illustrations:
(a)Aseeksaninjunctionto restrainhispartner,B,fromreceivingthe partnershipdebts and
effects. ItappearsthatA had improperlypossessedhimself ofthebook of the firm and
refused Baccess to them. The Court willrefuse the injunction.
(b)Amanufacturesand sellscrucibles,designating them as "patentplumbago-crucibles",
though in fact they have never been patented. Bpiratesthedesignation.A cannot
obtain an injunction to restrain thepiracy.
(c)A sells an article called"MexicanBalm",stating that it iscompoundedof divers rares
essences,and hassovereignmedicinalqualities.Bcommencesto sell a similar article to
whichhegivesa nameanddescriptionsuchasto leadpeopleintoabeliefthat theyare
buying/I'sMexicanBalm./Asues Bfor an injunction to restrain the sale. S showsthat/l's
MexicanBalmconsists of nothing but scented hog'slard.>4'suse of hisdescription isnot
an honest one and he cannot obtain aninjunction.[BasedonPerryvTrue/iff.'""']
In a suit by acoparcenerfor apermanentinjunctionforrestrainingthe
Karta or managerof the jointHinduFamilyfrom transferringthe jointfam
ilypropertyinpursuanceofasaleagreementwith a third party, it washeld
402.Thuswhereawrongcan becompoundedinmoney,compensationwillbe anequallyeffi
caciousrelief.Butinsuchacasealsoif thedefendantis aninsolventorpauper,adecreefor
damageswouldbeameremockeryandthereforethe court maygrantinjunction.R.Ramani
VShanthiDamodaran,AIR2011Mad 60,acquisitionofownershipon thebasisofunpro-
batedWill,transferbysuchapersonnotvalid,noquestionoforderingspecificperformance
againsthim.
403. Thisclauseincorporatesthe maxim: "He whocomesto equitymustcomewith cleanhands."
Forexample,whereanarticlenameas"MexicanBalm"issaidto beconsistingofraremedic
inalqualities,butwhichreallyisnothingbutanordinaryointment,thevendor'sdescription
beingdishonestnoinjunctioncanbeissuedtorestrainanotherdealerfromsellingasimilar
articleunderthesamenameinordertomisguidethepeople.PremjiRatanseyShahvUnion
ofIndia,(1994)5SCC547atp.550,noinjunctioncanbeissuedinfavourofatrespasseror
a personwhogainedunlawfulpossessionas againstthe trueowner.S.Jaffarvalv B. Pedda
Siddaiah,AIR2003NOC219(AP)noinjunctionwasgrantedto apersonaboutwhomthe
officialreportwasthathewasnotinpossessionofthelandinquestion.Thisreportwasveri
fiedbythe court findingof fact. The findingwas not interferedwith. M.S. Madhusoodhanan
VKeralaKaumudiP Ltd,(2004)9SCC204:AIR2004SC909,applicationforpermanent
injunctionagainstobstructiontopeacefulenjoymentofofficepremises,suitfiledtwoyears
aftertheobstructionbegan.Refusalofinjunctionwasheldto beimproper.Therightto
enjoymentofpropertycouldnot betakento beextinguishedbyinactionfortwoyears.
404.(1842)6Beav66: 49ER749.https://t.me/LawCollegeNotes_Stuffs

1104. [^5.39] Injunctions961
thatsuchaninjunctioncouldnotbegranted.Thecourtsaidthatthoughin
thecaseofwasteor ousteraninjunctionmaybegrantedagainstthemanager
butablanketinjunctionrestrainingpermanentlyfromalienatingthefamily
property,eveninthecaseoflegalnecessity,cannotbegranted.Thecourt
furthersaidthatSection 38 of the Act has to be readwithSection 41. As
thecoparcenerhasanadequateremedytoimpeachthealienationunderthe
familylaw,hecannot,inviewofSection41(h)movethecourtforaninjunc
tionrestrainingtheKartafromalienatingthecoparcenaryproperty.'""^
A suitwasfiledbytheoccupantcorporationforrestrainingdemolition
anddispossession.Tiaecorporationhadalreadybeendispossessed.Theland
inquestionwasrequiredbytheownerrailwaysforitsownpublicpurposes.
Thecorporationhavingnotopposedthenoticeoftermination,acceptedits
correctnessbe itterminationofrightsaslesseeorlicencee.The courtsaid
thatevenifthedispossessionwaswrongful,therightandentitlementofthe
corporationtocontinueinpossessionhadcometo anend.Noinjunction
could be granted.'"'^
Mandatoryinjunctions
S.39.Mandatoryinjunctions.—When,topreventthebreachofanobliga
tion,itisnecessarytocompeltheperformanceofcertainactswhichthecourt
iscapableofenforcing,thecourtmayinitsdiscretiongrantaninjunctionto
preventthebreachcomplainedof,andalsotocompelperformanceofthereq
uisiteacts.
Theinjunctionwhichcommandsthedefendanttodosomethingistermed
as"MandatoryInjunction".Salmonddefinesmandatoryinjunctionas "an
orderrequiringthedefendanttodoapositiveactforthepurposeofputting
anendtoawrongfulstateofthingscreatedbyhim,orotherwise,infulfil
mentofthelegalobligations,forexample,anordertopulldownabuilding
whichhehasalreadyerectedtotheobstructionoftheplaintiff'slights".'*"^
Section39oftheSpecificReliefAct,1963,reads:"When,topreventthe
breachofanobligation,itisnecessarytocompeltheperformanceofcertain
actswhichthecourtiscapableofenforcing,thecourtmayin itsdiscretion
grantaninjunctiontopreventthebreachcomplainedof,andalsotocompel
performance of the requisite acts."
Illustrationsin old Actof1877
ThissectioncorrespondswithSection55oftherepealedSpecificRelief
Act,1877.Thatsectioncarriedthefollowingillustrations:
{a)A,bynewbuildings,obstructsliglitstotheaccessanduseofwhich6hasacquireda
rightundertheIndianLimitationAct,[nowLimitationAct,1963]PartIV.Bmayobtain
405.SunilKumarVRam Prakash, (1988) 2 SCC 77: AIR 1988 SC 576.
406.PradeepOilCorpnvUnionofIndia,AIR2012Del56.
407.Salmond,TheLawof Torts(13thEdn,1961,changedinlatereditions)186.https://t.me/LawCollegeNotes_Stuffs

1105. 962Chapter16SpecificReliefAct,1963 [S.39]
aninjunction,notonlytorestrainAfromgoingonwiththebuildings,butalsotopull
down so much of them as obstruct S's lights.
(b)AbuildsahousewitheavesprojectingoverB'sland.Bmaysueforaninjunctiontopull
down so much of the eavesas so project.
(c)Inthe caseputasIllustration(/)toSection54,theCourtmayalsoorderallwrittencom
municationsmadebyB,aspatient,toA,asmedicaladviser,to bedestroyed.
id)IntheCaseputasIllustration(y)toSection54,theCourtmayalsoorder/l'slettersto be
destroyed.
(e)AthreatenstopublishstatementsconcerningBwhichwouldbepunishableunder
ChapterXXIoftheIndianPenalCode.TheCourtmaygrantaninjunctiontorestrainthe
publication,eventhoughitmaybeshownnotto beinjurioustoB'sproperty,
(flA,beingB'smedicaladviser,threatenstopublishB'swrittencommunicationswithhim,
showingthatBhasledanimmorallife.Bmayobtainaninjunctiontorestrainthepubli
cation.
ig)InthecasesputasIllustrations(v)and(w)toSection54andasIllustrations(e)and{f)
tothissection,theCourtmayalsoorderthecopiesproducedbypiracy,andthetrade
marks,statementsandcommunications,thereinrespectivelymentioned,to begiven
up ordestroyed.
Whenamandatoryinjunctionisgrantedunderthissection,twoele
mentshavetobetakenintoconsideration:Inthefirstplace,thecourthas
todeterminewhatactsarenecessaryinordertopreventabreachof the
obligation;in thesecondplace,therequisiteactsmustbesuchasthe Court
iscapableofenforcing.'"'^Theseactsmayassumeavarietyofforms,e.g.
pullingdownofabuildingasinIllustration(a)above,thepullingdown
ofeavesas in Illustration(b),the destruction of written communications
andlettersasinIllustrations(c)and(d),destructionofcopiesproducedby
piracyofcopyrightandoftrademarksimproperlyusedbythedefendantas
inIllustrations(v)and(w)offormerSection54, set out underSection38
above,and Illustration(g)above.
Amandatoryinjunctionforevictionof agratuitouslicenseeoraper
soninpermissivepossessionuponrevocationofpermissionbytheowneris
possible.Itsgrantbythetrialcourtwasheldtobeproper-^^'Suchperson
inpossessionisentitledto anorderforretaininghispossessionorclaimfor
repossession.''^''
Whennotgranted
Mandatoryinjunction,however,willnotbegrantedinthefollowing
cases:
(/)Wherecompensationintermsofmoneywouldbeanadequaterelief
to theplaintiff.
(ii)Where the balance of convenience is in favour of the defendant.
408.MadhoSinghvAbdulQaiyumKhan,AIR1950All505.LakshmiNarainBanerjeevTara
ProsonnaBanerjee,ILR(1904)31Gal944,949;KhazanSinghvRallaRam,AIR1937Lah
839.
409.Gowriv Shanthi,(2014)11SCO664:(2014)4 SCOCiv 250.
410.MariaMargaridaSequeiraFernandesvErasmoJack deSequeira,(2012)5 SC370:(2012)3
LW111 (SC).https://t.me/LawCollegeNotes_Stuffs

1106. [S.40] Injunctions963
(Hi)Where the plaintiff is guilty of allowing the obstructions to be com
pletedbeforecoming to the court, i.e. where plaintiff has shown
acquiescencein the acts of the defendant.
{iv)Where it is desired to create a new state of things.Mandatoryinjunc
tion, as is clear, is granted to restore status quo. It cannot be granted
to create a new state of things. Thus, it was held by the Allahabad
High Court in Sheo Nath vA//,''"that where the defendant con
structedastructurewhich interferedwiththe privacy of theplain
tiff's house, he could not be ordered to erect a wall on the roof, so as
to prevent a view of the plaintiff's house from the roof.
In a dispute between a brother and hissister,the background was that
the sister constructed a house adjacent tothatof her brother and the brother
activelyparticipated in the construction activity and also allowed her to
take the support of hiswall.Heneverobjected.Twoyearslater,hechanged
hismoodandclaimedremovalordemolitionoftheconstruction.Thetrial
courtrefused to order demolition but granted an order againstfurthercon
struction. Such order was held to be proper. The order of the appellatecourt
for demolition by resorting to the Easements Act, 1882 was held to be not
propersinceaneasementaryright wasneverclaimed.''^^
Damages in lieu of or inadditiontoinjunction[S.40]
S. 40.Damagesin lieu of, or inadditionto,injunction.—(1)The plain
tiff in a suit forperpetualinjunction under Section 38, ormandatoryinjunction
under Section 39,mayclaimdamages either inaddition to, or insubstitutionfor,
such injunction and the courtmay,ifit thinks fit,award such damages.
(2)Norelieffor damages shall be granted under this section unlessthe plain
tiff hasclaimedsuchrelief in hisplaint:
Providedthatwhereno suchdamageshavebeenclaimed intheplaint,the
courtshall,at any stage of the proceedings,allowtheplaintiffto amend the
plaint on such terms as may be just for includingsuchclaim.
(3)The dismissal of a suit topreventthebreach of anobligationexisting in
favour ofthe plaintiffshall bar his right to sue for damages for such breach.
This sectionprovidesthat the plaintiff in a suit for perpetual injunction
under Section 38, ormandatoryinjunction under Section 39, may claim
damageseitherin additionto, or insubstitutionfor,suchinjunction,and the
courtmay,ifit thinks fit,awardsuchdamages.The plaintiffhasspecifically
toincludein his plaint a claim fordamagesalso. If he has not done so, he
may seek permission of the court for the amendment of hispleadings.But
where a suit, in which damages were not claimed, isdismissed,a subsequent
separatesuit fordamageswould notlie.The court can awarddamagesin
lieuofinjunctionwheretheinjuryisthreatenedthoughnot yetcaused.The
411.80All70.
412.DhaniyaBaivJiwan,AIR 2003 MP 71.https://t.me/LawCollegeNotes_Stuffs

1107. 964 Chapter16SpecificReliefAct,1963 [S.40]
House of Lords in LeedsIndustrialCoop SocietyLtd vSlack,"^^^laid down
thatdamagescould be allowedto a person whosetenementis sure to suffer
lossofhisrighttolightwhenaplannedbuildingstructurecomesup.Where,
forexample,apersonhappenedtoraisehisbuildingtoencroachuponthe
landofhisneighbourup tothreeinches,thecourtallowedtheneighbour
compensationinsteadofan orderfordemolitionofthebuilding/^"*Damages
have also been allowed under thisprinciplewhere informationdeliveredin
confidence was put touse.''"
413.1924AC851(HL).Non-complianceis anoffenceofa perpetualnature.]aiDayalvKrishan
LaiGarg, (1996) 11 SCC 588: AIR1997SC 3765.
414.TilokchandNathmal v Dhundiraj Madhavurao,AIR 1957 Nag 2, of the samekind.
415. Fraser v Thames Television Ltd, 1984 QB 44 (HL).
Visitebcexplorer.comtoaccesscasesreferred
tointhebookthroughEBCExplorer™on §|gH||||H5B(;;
SCCOnline®;alongwithupdates,articles,videos, PxnlorpK
blogsand a host of different resources. . t, ,
^ companion resources for legal research
The following cases from thischapterare available
^liroughEBCExplorer™:
® AjudhiaPrasad v ChandanLai,AIR 1937All610(FB)
®CeeanInternational(P)Ltdv Ashok Surana, AIR2003Cal263
• Chand Rani vKamalRani,(1993)1 SCC 519: AIR 1993 SC 1742
• Jai Narain Parasrampuria v Pushpa Devi Saraf, (2006) 7 SCC 756
® M.S. Madhusoodhanan v KeralaKaumudi P Ltd,(2004)9 SCC204
CASEPILOThttps://t.me/LawCollegeNotes_Stuffs

1108.  
Law College Notes & Stuffs
Exclusive group for Law Students
Join Us Here for More Materials
Law College Notes & Stuffs https://t.me/LawCollegeNotes_Stuffs

1109. SubjectIndex
Acceptance,24
absolute,to be,30
someinstances,39
acceptor himself, by, 28
burdenofrefusal,when,28
communicationof, 24
mode not prescribed, 31
mode prescribed, 30
notnecessary,when,28
offererhimself,to, 27
waiverof, 28
communicationof, of bid,51
completewhen, 33
Entorescase.Supreme
Courtapproval,36
parties in direct communication, 34
conditional,36
conditionprecedent, 67
conditionsubsequent,40
conduct,by,25
contract,when concluded, 32
counter proposals, of, 37
deathofofferer,67
definition,24
earnestmoney, refund of, 54
Englishand Indian laws,difference,34
externalmanifestation,by, 24
ignorance of offer, in, 10
inquiryintoterms,38
insanity of offerer, 67
jurisdiction,for, 69
lapse of offer, 57
letterofintent,52
modeof,30
non-compliancewithrequirements,54
offer open for, 61
overtact, by, 24
partial,38
postal,32
provisional, 42
tentativearrangements,43
revocationof, 68
bid of, 63
Acceptance (contd.)
communicationfrom
offererhimself,62
freshproposal,by, 63
general proposals, of, 62
specifiedperiod, open for, 61
standardformcontracts,69
telephone,by, 34
tenders,of,44
liability for failure to consider, 52
lowesttender,noobligation
toaccept,49
non-compliancewith .
requirements,54
prevented from tendering, 57
refundofearnestmoney,54
withdrawalof,44
tentativearrangements,43
time for, lapse of, 66
to bemadebeforeofferlapses,57
voluntaryretirement,acceptance
ofproposal,for, 60
Accordandsatisfaction,445
estoppelbyacceptingof final bill, 446
Acknowledgment,123
asevidenceofprivity,123
Actnotexhaustive,841
Affirmation,220
conduct, by, 220
lapse of time, by, 221
voidablecontract,of,220
Agency, 736
apparent,793
apparentauthority
courseofdealing,createdby, 793
real,as,793
co-agents and co-principals, 740
considerationnotnecessary,742
creationof,746
death,effect of, 836
delegationof,768
ministerialaction,769
[965]https://t.me/LawCollegeNotes_Stuffs

1110. 966LawofContract
Agency (contd.)
natureofwork,768
principal'sconsent,769
tradecustom,769
when deiegable, 770
when not deiegable, 769
disclosureof,806
essentialsof, 740
estoppelby, 749
existenceof,testfor, 737
expressappointment,747
hire-purchase,739
transactionsin,739
husbandand wife, 750
husband not agent of wife, 752
implied,749
insanity,effect of, 836
interest, agencycoupledwith, 832
existinginterest,834
protectionofexistinginterest,835
revocablewhen,827
natureof, 768
necessity,of, 752
application,conditionsfor, 754
generalapplication,753
marineventures,752
pre-existing,753
relief of injured persons, 754
ostensible,791
powerofattorney,748
ratification,by,819
actsratifiable,822
lawfulacts, 822
behalfofanother,820
competenceofprincipal,822
effects of, 825
Government,actsdone
onbehalfof, 823
injuriousacts,becomingby, 823
knowledgeof facts, 824
relationback,doctrineof, 825
timefor,824
wholetransaction,of, 824
sub-agency,terminationof, 838
terminationof, 832
authority,effect ofrevocation
on,827,837
compensationforrevocation,831
completion of business by, 836
death,by, 836
duty of agent,terminationon, 839
Agency{contd.)
effect of, 837
expiryof time, by, 837
insolvency ofprincipal,by, 837
irrevocablewhen,832
noticeprecedentto,revocation,831
prospectiveoperationof
revocation,830
renunciationby agent, by, 835
revocation,by, 827
power of attorney, executed
onconsideration,832
withdrawalofvakalatnama,829
sub-agency, 838
test ofdeterminingexistence
of agency, 737
unreasonablerevocation,833
unauthorisedacts, 788
undisclosed,806
expressterms,810
repudiation,rightof,809
rightsagainst,810
subject to equities, 808
wife, agency of, 750
Agent
actinginignoranceoftermination
of authority, 837
apparentauthority,of, 791
actualnotice,798 "
conduct, representation by, 794
constructivenotice,798
continuanceof, 795
course of dealing, 793
realas, 793
reasonablesolution,798
statutoryprovision,797
appointmentbyminor,741
authoritycoupled with interest,
revocationof, 832
authorityof special agents, 789
bailee,distinguishedfrom, 744
brokeras, 745
co-agents andco-principals,740
compensation,rightof, 831
conflictofinterest,762
customs,dutyto follow, 757
definition,736
delcredere,745
dutiesof, 756
careandskill,759
conflict ofinterest,to avoid, 762https://t.me/LawCollegeNotes_Stuffs

1111. Agent[contd.)
delegate,notto, 768
executemandate,756
followinstructionsorcustoms,757
maintainaccount,765
remitsums,765
secret profit, 764
emergency,authorityin, 799
employer as, payment of
insurancepremia, for, 795
expressappointmentof, 747
factor,asagent,745,789
fraudby, 803
indemnity,rightof, 781
insurance,paymentunder,
defaultby employer, 795
kindsof,744
liabilityof,811
dishonourof cheque, for, 782
lien,rightof, 778
effectof,779
loss of, 780
LifeInsuranceCorporation,of, 791
marriedwoman,whenagent,752
masterof ship, 752
misconduct,effect of,777
misrepresentationby,803
noticeto,801
effect,801
ostensibleauthority,of, 791
reasonablecare and skill, duty of, 759
remuneration,rightof, 774
retainer,rightof, 778
rightsof, 774
compensation,783
indemnity,781
jurisdiction,776 .
lien,780
misconduct,effectof,777
remuneration,774
secret profits, liability for, 764
servant,distinguishedfrom,742
sub-agent,769
agent'sresponsibility,771
liabilitytoprincipal,771
principal represented by, 770
substitutedagent,772
suits byandagainst,811
terminationofauthority,827
tortsby,805
unauthorisedacts,of,800
SubjectIndex967
Agent (contd.)
unnamed principal, effect on
agent's liability, 814
wifeas, 750
Agreement
arbitration,326
definitionof, 3
dischargeofcontract,by, 433
howmade,3
hypothecation,5
unlawful,255
validityof, 34
void,288
whatagreementsarecontracts,3
whenbecomescontract,3
Alienenemy
contractwith,279
Allotmentofland,63
cancellationof, 63
Anticipatorybreach,450
consequencesof, 450
contingentcontract,of, 452
damages,when fixed, 456
prematuretermination,contract
ofemployment,of, 453
entirety,breachin, 461
furtherperformanceexcused, 450
immediaterightofaction,451
injunction,negative,454
lease,prematuretermination,458
meaning,450
options of the injured party, 451
partial,462
repudiatingpartymay choose
toperform,453
repudiation,whatamountsto, 458
restitution,463
supervening impossibility, effect of, 455
waiting afterrepudiation,effect, 452
Apprenticeship
minor,contractof,with,167
Appropriationofpayments,426
creditor,by, 428
debtor,by,426
law, by, 428
Arbitrationclause,530
exclusionofSection73,530
Arbitrator'sawardofdamages,529
Article299,570
compliance,570https://t.me/LawCollegeNotes_Stuffs

1112. 968LawofContract
Assignmentofcontracts,428
effect andformality,432
consideration,432
equities,subjectto, 432
noticeof,432
liabilities,of,429
rights,of, 430
unilateralcancellation
of saledeed,431
Auctionsale,22,49
announcementtohold,22
revocationof bid,42,63
Bailee,696
duties,680
burdenofproof,683
contracttocontrary,687
increase,dutytoreturn,694
involuntarybailee,of, 687
justertii,notto set up, 693
misdelivery by railway, 686
mix,dutynotto, 691
reasonablecare,680
return,dutyto, 691
servant'snegligence,liabilityfor,685
theft,loss by, 682
thirdpersonsclaiming
goodsbailed,694
transferofshippingdocuments,694
unauthoriseduse, duty
nottomake,690
uniformstandardof,680
finderas, 695
bailee,as, 695
rightsof, 696
postofficeas,678
rights,696
bailee's servant, loss caused by, 685
postoffice, as, 678
sale,677
terminationofbailment,692
deathby, 693
gratuitous,692
jointowner,by, 693
Bailment,671
bailee,whennotHable,682
burdenofproof,683
comparedwithotherrelations,677
bank,depositof money, in, 677, 701
banklocker,672
barter,677
Bailment{contd.)
exchange,677
conditionaldelivery ofpossession,676
contractnecessaryfor, 674
expressorimplied,676
non-contractual,675
contracttocontrary,687
deathofbailor,693
definitionof, 671
delivery ofpossession,671
actual,673
constructive,673
depositof money,distinguished
from,677
essentialfeatures,671
goods,bailee'sownlost,686
gratuitousbailment,terminationof, 692
hire-purchase,as,677
involuntarybailee,687
jointowners,by, 693
locker,bankin,672
non-contractual,675
railways,misdelivery by, 686
sale,distinguishedfrom,677
shippingdocuments,transferof, 694
Bailor,678
duty, 678
Banker'slien,701
Banklocker,672
Bid,49
communicationofacceptance,51
Bid, seeAuctionsale, 22
Bill oflading,731
asdocumentoftitle,731
pledgeof, 731
Breach,450
alienationofproperty,injunction
torestrain,518
anticipatory,450
meaning,450
confidence, breach of,injunction
torestrain,516
damagesfor,465
dischargeofcontract,by, 450
entirety,to bein,461
fundamental,theoryof, 79
Government,terminationof
contractby,writ,518
injunctionforrestraining,517
meaningof, 450https://t.me/LawCollegeNotes_Stuffs

1113. Breach(contd.)
partialfailure, 462
repudiationas, 458
restitution,463
terminationofdealership,
writremedy, 518
Brokage, 284
marriagefor,284
Cancellationofallotmentofland,63
Cancellationofinstruments,929
amendmentofplaintandlimitation,947
compensation,934
courtorder,on,931
limitation,932,935
partialcancellation, 934
reasonableapprehension,934
requirements of relief, 937
transferbypartner,942
unilateralcancellation,notallowed,931
voidablecontracts,934
voidcontracts,of, 933
whocanseek,of,930,
Capacitytocontract,153
definition,153
minor,153
persons ofunsoundmind, 172
whohave,153
Carriageby air,387
Carrier'slien,709
Catalogue,21
banker's,22
display of goods, 21
ofprices,21
Certaintyofterms,56
Champerty,282
Charitablepromises
charitable nature, promises of, 106
Child
fiduciaryrelationship,183
ofparent,duty, 183
undueinfluence,186
maintenance,illegitimateof, 135
Chit fund company, lien of, 710
Coercion,177
Cohabitation
illegal,270
Collateralagreements,341, 348
validityof, 341, 348
SubjectIndex969
Commencement,1
ContractAct,1872,1
Specific Relief Act, 1963, 841
Commencement,Act,of, 841
Communication
acceptanceof, 24
complete when, 33
fax, by, 36
proposal,of, 6
revocationof, 58
Compensation,seeDamages,465
Compromise,133
asconsideration,133
composition,139
existingcontractof, 96
Concealment,212
misrepresentation,when, 200
Confidence,515
damages for, breach of, 515
Confidentialinformation,313
Consent
consensusadidem,176
definition,of,226
divorce bymutual,279
freewhen,176
vitiatingfactors, 176
Consideration,103
absenceof,146
abstinence,as,128
actsdoneatrequest,105
adequacyof, 130
inadequacyas evidence of
imposition,131
adequate value, need not be, 130
atpromisor'sdesire, 105
beneficiary,120
charitablenature,promises of, 106
composition,139
compromiseas, 133
merits,irrespectiveof, 133
definition,103
English Law,fundamental
propositions,113
estoppel,by, 109,123,139
promissory,109, 139
exceptions to consideration, 146
contractsunderseal,
English Law, 146
naturalloveandaffection,147
pastservice,149https://t.me/LawCollegeNotes_Stuffs

1114. 970LawofContract
Consideration(contd.)
time-barreddebt,150
exceptionstoprivity,120
executedandpast,127
executory,128
existingduties,performanceof, 133
composition,139
contractualobligations,135
contractwithpromisor,135
contractwiththirdparty,143
part-paymentbythirdparty,139
paymentbeforetime,139
Pinnel'srule,138
exceptionsto,138
pre-existingcontractwith
promisor,135
promiseto pay less, 138
promissoryestoppel,139
forbearanceto sue, 131
gifts,actuallymade, 152
Governmentagencies,
promissoryestoppel,109
has done orabstained,124
inadequacyofconsideration,152
as evidence of imposition, 131
licencee, estoppel of, 110
landofcouncil.111
marriagesettlements,122
motive,distinguishedfrom,145
naturallove andaffection,
exceptionto,147
obligations tothirdparties,
performanceof,139,143
partpaymentbythirdparty,139
past,124
pastandexecutedconsideration,127
pastconsiderationatrequest,124
voluntary,126,149
pastserviceatrequest,126
paymentbeforetime,139
paymentby athirdparty,139
pre-existingcontractwith
thirdparty,143
privityofcontract,114
acknowledgement,123
charge,120
covenantsrunningwithland,124
English Law, decision following, 117
estoppel,123
exceptionsto,120
familyengagements,122
Consideration{contd.)
fundamentalprinciples of
EnglishLaw, 113
marriagesettlements,122
positioninIndia,117
SupremeCourtupholdingprivity, 119
whennotapplicable,120
promiseas,128
promiseeor anyotherpersonby.111
positionofbeneficiarywho
isnotparty,112
promisesofcharitablenature,106
promiseto pay lessthan
amountdue,138
promisor'sdesire,105
promissoryestoppel,105, 109, 123
Governmentagencies,against,109
licencee,110
positioninIndia,143
request,actsdoneat, 105
seal,contractunder,146
such act, abstinence, promise, 128
SupremeCourt,upholdingprivity, 119
time-barred debt, promise to pay, 150
trustorcharge,120
unilateralpromises,revocation
of,108,109
valuable,128
voluntaryservice,126
Contingentcontract,351, 352
Contingentcontracts
conditionprecedent,354
contingencyto becollateral,352
definition,351
eventhappening,355
humanconduct,event linked with, 356
performanceof, 351
Will ofperson,353
contingency depending upon, 353
Contract
agreementdistinguishedfrom, 2
agreement,whenbecomes,3
bilateralrelation,4
breachof,487
loss of expected profit, 487
terminationof,556
capacityto,153
civilobligation,as, 5
conditionofblacklisting,57
contingent,351
definition,2https://t.me/LawCollegeNotes_Stuffs

1115. Contract(contd.)
discharge,351
divisible,349
purposiveinterpretation,91
ContractAct,1872
commencement,1
extent,1
interpretation,2
Preamble,1
shorttitle,1
Contribution,666
co-sureties,between,666
Damages,465
arbitrator'sawardof,529
auctionsale ofproperty,482
compensatory,492
consentdecrees,553
earnest,doubleamount
of,forfeiture,552
earnestmoney,refundof,wrong
specifications,549
English Law, 530
forfeiture,no,whereextracost
otherwiserecovered,551
forfeitureofdeposit,541
general,467
HadleyvBaxendale,rule in, 466
,re-examinationof,469
revitalisedbyHouseofLords,471
hire-purchasecontracts,532
incompleteexecution,485
inflation,impactof, 519
interest,forfeitureofdoubleamount,555
landrevenue,recoveryas,529
liquidated,distinguishedfrom
actualloss,necessary,544
measureof,492
band,failuretoattend,509
builder, delay suffered by,481
compensation,rightto,
exclusionof,547
compensatory,notpenal,492
confidence,breachof
injunctiontorestrain,516
demotionofemployee,513
dishonourofcheque,513
electricitylines, negligence in
maintenanceof,509
holidaycases, 510
SubjectIndex971
Damages{contd.)
housingservice, 508
inconvenience,493
interest,damages,by way of,486,555
mentalpainandsuffering,502
misrepresentation,losscausedby,494
no losssituation,499
nominal,496
non-pecuniaryloss,502
packagetour,511
pets, loss of, 513
photographer,failure toattend,509
plots, scheme forallotment,481
pre-contractexpenditure,500
solicitor'sfailure,512
tradesecrets,514
weddingreception,cancellation,510
membership,conditionsof, 534
mentalpainandsufferingfor, 502
minimumcharges,554
mitigate,dutyto, 520
advantagesof one's own
wrongnotallowed,524
auctionsales,521
employment,521
agreementby employee to
releaseallclaims,491
increasingloss byunreasonable
conduct,524
negligence,contributory,529
ownwrongadvantage
notallowed,524
property,transactions
concerning,526
reluctanceofcourtsto
expand,scope, 528
unfairdismissalof employee, 491
unusualburdens,528
mutualdelay, loss caused by, 548
nominal,496
noticeofclause,554
partialcancellationofcontract,
refundon,500-
paymentin cash orkind,applicable,534
penalty,530
penalty,heavyamount,evidence,533
physicalinjurybybreach,472
powerto reduce specifiedamount,531
pre-contractexpenditure,500
prematureterminationofcontract,485
principlesinIndia,damages,474https://t.me/LawCollegeNotes_Stuffs

1116. 972LawofContract
Damages(contcL.)
remotenessof,465
rescission for failure toperform
withintime,225
Section73,ContractAct,474
buildingcontracts,479
delay intransit,487
exclusionof,arbitration
clause,under,530
exclusionofrightto
compensation,547
finalbill,unilateral
deductionfrom,539
marketprice,488
meaningof, 488
ordinarycases,478
price,provisionforrefundof, 573
profits, loss of, special loss, 486
promiseofmarriagebreach of,504
specialloss,486
unilateraldeductionfrom
final bill, 539
Section74,535
securitymoneyjinderother
contracts,552
special, 467
scientificprocess,agreement
toprovide,502
specialcircumstances,
knowledgeof, 467
surveyreport,negligent, 473
statutorydamages,555
stigmacompensation,523
stipulationsextraneoustocontract,534
suit,jurisdictionfor, 556
taxation,effectof,495
tradesecrets,compensation
formisuse,514
withholdingofpaymentunderbills,544
work got donethrough
othersources,485
wrongfuldismissalof employee, 491
Death
agency, effect on, 839
bailment,effecton,693
promisor,of, 403
proposer,of, 67
Declarationoftitle
immovablepropertyto,prayerfor, 850
Declaratorydecree, 936
amendmentofplaint,947
Declaratorydecree (contd.)
consumercomplaint
civilsuit,and,943
essentials,937
frame ofplaint,937
fraud,questionvalidityon
groundof, 945
furtherrelief, 939
limitation,935
partieswho areboundby, 947
possessionandinjunction,943
suitfor,whendoesnothe, 938
transferbypartnerof firm, 942
whocanseek relief,945
wife,declarationas totitleagainst,943
statusof, 943
Will,declarationas to, 945
withoutseeking relief ofpossession,943
Defactoguardian,160
Definitionofcontract,2
Delcredereagent,see Agency, 745
Dischargeofcontract,351
accordandsatisfaction,by, 445
agreement,by, 433
breach,by, 450
impossibility ofperformance,by, 390
materialalteration,447
modesof, 351
novation,by, 433
performance,by, 358
remissionofperformance,by, 439
Displayofgoods,21
Earnestmoney
forfeitureof,66,544
non-fulfilmentofconditions
ofe-auction,544
noforfeiture,wherecontract
notformulated,551
refundof,wrongspecification
provided,549
show-causenoticebeforeforfeiture,553
Employee
agreementto release allclaims,491
PFdues,725
unfair,wrongfuldismissal,
compensationfor, 491
Enemies
contract,with,279https://t.me/LawCollegeNotes_Stuffs

1117. Escalationelaaises,
interpretationof,'9Q:
Estoppel
agency, by, 74'9
final bill, byacceptingof,446
promissory,109,139
government agencies, against, 109
Excessstampduty, 578
Exclusionof
arbitrationclause,under,530
ExclusionofSection73,530
Extentofapplication,1, 841
ContractAct,1872,1
SpecificRelief Act, 1963, 841
Factor
agent,as, 744
authorityof, 789
lien of,706
Fax
communicationby, 36
Fiduciaryrelations,183
undueinfluence,180,184
Finalbill,446
Finder,695
baileeas, 695
lien,rightof, 696
rights of, 696
sale,rightof, 696
Forbearancetosue,131
consideration,as, 131
Foreignlaw, 254
mistakeof,254
Fraud,210
activeconcealment,212
assertionoffacts
withoutbelief, 211
concealment,by,212
constructive,see"fraudby silence", 213
definition,210
fittedtodeceive,anyacts,217
fraudulentobject,217
halftruths,215
misdeclarationsin application form, 213
misrepresentation,
distinguishedfrom, 217
modeof, 221
non-disclosure,by, see"fraud
by silence", 213
SubjectIndex973
Fraud{contd.)
promise without intention
ofperforming,216
rescission,limitsof, 218
affirmation,by,220
intervention,221
rightsof, 221
thirdparties,221
time, lapse of, by, 221
restitution,222
silence by, 213
special declared acts as fraudulent, 217
Fraudby silence, 213
changeofcircumstances,215
deceptive, silence, when, 215
duty tospeak,213
half-truths,215
uberimafides,contracts,214
Fraud, questioning sale deed,
ongroundof, 945
courtfee,946
declarationas todefamatory
statement,946
jurisdiction,946
limitation,effectof,946
rightof way,945
Frustration,seeImpossibility
ofperformance,390
Gift
actuallymade, 152
unconscionable,187
Governmentagencies,109
promissory estoppel of, 109
Governmentcontracting,56
Governmentcontracts,568
Article299,compliance,570
constitutionalrequirement,568
GovernmentofIndiaAct,568
Gratuitouspossession,849
recovery of, 849
Guarantee,599
actionagainst,principal
debtoralone,614
bankguarantee,624, 633, 635
arbitrationclausesandbank,635
lettersofcredit,633
variationofterms,633
cheque,bouncing,prosecution
ofsurety,617https://t.me/LawCollegeNotes_Stuffs

1118. 974LawofContract
Guarantee[contd.)
collateral security, 618
composition,effectof, 649
concealment,obtainedby, 606
considerationfor, 603
contingentbank,635
continuing,622
deathby,termination,of,640
noticeby,terminationof, 638
revocationof, 638
contribution,rightof, 666
co-sureties,665
counterguarantee,606
death ofprincipaldebtor, 617
death of surety, 640
DebtRelief Act, effect of, 647
decreeagainstco-surety,645
definition,599
economicfunctionof, 599
independentliability, 600
parties,599
discharge of surety, 638
actoromission,648
advanceauthorisationof, 644
compromise,650
death,640
impairingremedy, 653
promiseto givetime,650
release of principal debtor, by, 647
sue,promisenotto, 651
variance,by, 640
economicfunctionof, 599
features,601
benefit of principal debtor
enough,605
concealment,dutynottomake,606
consideration,603
minor'sdebt,602
misrepresentation,duty
nottomake,606
oral,608
pastdebt,604
principaldebt,601
recoverabledebt,601
voiddebt,602
fraud,629
impairingsurety'sremedy, 653
impossibilityofmaincontract,621
indemnitydistinguishedfrom, 668
indemnity,impliedcontractof, 659
independentliabilitydifferent
fromguarantee,600
Guarantee[contd.)
jointdebtors,637
lettersofcredit,633
liabilityof
acknowledgement of,principal
debtor, by, 616
principaldebtor, company,
windingup, of, 617
suretycompany, changes in, 622
limitation,622
limitationof liability, 617
minor'sdebt,602
misrepresentation,effect of,606
novationofmaincontract,621
partiesto,599
pastdebt,604
periodoflimitation,636
principaldebt,necessary
forvalidityof, 601
principaldebtor,action
againstalone,614
proceedingagainstguarantor's
mortgageproperty,616
proceedingagainstsurety,without
suingprincipaldebtor,611
promisenotto sue, 651
prosecutionof surety, cheque,
bouncingof, for, 617
recoverable debt, necessary, 601
reduction,surety'sright to share, 665
releaseof,666
release ofprincipaldebtor, effect of, 646
revocationof, 638
rights of surety, 657
before payment,658
co-sureties,against,665
creditor,against,660
indemnity,to, 659
principaldebtoragainst,657
securities,surety'srightto,660
subrogation,surety's right of, 657
surety
bank'sfailuretoobtain
othersecurities,620
coextensive,609
conditionprecedent,610
continuingguarantee,622
insistenceuponcollateralsecurity,618
liabilityof, 608-
limitof, 617
proceeding againstwithoutexhausting
remedyagainstprincipaldebtor,611https://t.me/LawCollegeNotes_Stuffs

1119. Guarantee(contd.)
prosecution,bouncing of
cheque,for, 617
reservationofrightsagainst,652
rightsof, 657
suitagainst,alone,615
time,extensionof,underpromise
with3rdperson,653
variation,dischargeofsurety's
liabilityby,640
voiddebt,guaranteefor,
whenenforceable,602
waiver ofrights,657
writing,notnecessary,608
written,608
Husbandandwife,750
agency of wife, 750
Hypothecation,pledge by, 716
seizure byhypothecatee,720
Identity,mistakeas to, 228
Illegalandvoidagreements,342
exceptions,344
restraintupon,308
trainingexpenses, recovery of, 309
Immorality,effect anagreement,269
Impossibilityofperformance,390
adjustmentofrights,418
agreement to do impossible act, 390
automaticoperation,417
change ofcircumstances,399
commercialhardship,effect of, 394
contemplatedevent,
non-occurrenceof,402
death or incapacity of party, 403
industrialrelations,
appliMtionto, 403
destructioii-ofsubject-matter,397
effectsoffrustration,415
frustration,392
governmentintervention,404
groundsoffrustration,397
incapacityofparty,403
initial,390
judicial non-interference,
general principle, of, 391
lease,applicationto, 409
English cases, 409
SubjectIndex975
Impossibilityofperformance{contd.)
Indiancases,412
legislativeintervention,404
non-interference,judicial,391
paridelicto, 422
quantummeruit,423
rights,adjustmentof, 418
becomesvoid,424
discoveredto be void, 419
paridelicto, 422
quantummeruit,423
self-induced,415
subsequent,390
theoriesoffrustration,413
impliedterm,413
justsolution,414
notapplicableinIndia,415
void,agreementdiscovered to be, 419
contractbecomes,424
war,interventionof,408
Inadequacyofconsideration,152
Indemnity,591, 592
commencementofliability
ofindemnifier,595
definitionof,591
English Law, 591
extentofliability,594
guarantee,distinguished,668
narrowIndiandefinition,592
notice,time specified for, 597
specified time for notice, 597
surety'srightto,657
Individualcivilrights,842
forenforcing,842
notpenallaws, 842
Infant,seeMinor,153
Injunction
applicability, requirements for, 952
breachof, 951
breachofconfidence,torestrain,516
breach,toprevent,517
continuityofbreach,toprevent,,951
damagesin lieu of, 963
discretionaryrelief, 950
disobedienceof, 951
interest inproperty,protectionof, 949
interim, whenperpetualprayed for, 950
kindsof,948
mandatory,961, 962
;material facts, suppression of, 959https://t.me/LawCollegeNotes_Stuffs

1120. 976LawofContract
Injunction{contd.)
permanent,952
perpetual,952
refusalof, 959
rescuingarbitration,959
restrainpossession,to, 958
whennotgranted,962
Insanity,seeUnsoundnessofmind,172
Interestrates,102
discretiontolender,to set, 102
Interpretationclause,2
contraproferentem,87
escalationclauses,90
pricereviewclauses,90
Invitationto receiveproposals,19
Jointpromises,performanceof, 363
contribution,365
deficiency,sharing,365
devolution,liabilities,of,364
devolutionof jointrights,364",366
jointandseveral,364
jointpromises,of,366
liabilities,devolutionof,364
releaseofone,366
savingaccount,eitherorsurvivor,367
JurisdictionunderAct,912
natureof,912
Land
cancellationofallotment,63
Lettersofintent,16
Lien,697
agent's,778
attorney's,707
banker's,701
carrier's,709
chit fund company, of, 710
factor's,706
general,700
generalbalanceofaccount,710
kindsof, 698
maritime,709
particular,698
policybroker's,709
porttrust,of, 710
setoff,710
statutory,710
time-barreddebts,709
Lien(contd.)
types of, covered by the Act, 711
wharfinger's,707
LimitationAct,1963,850
applicationof,850
movablepropertycases, 851
Liquidateddamagesandpenalty,535
seeunderDamages,465
Locker,bankin,672
Lottery,342
wageringagreements,exceptionto, 341
Mandatoryinjunction,961, 962
Maritimelien,709
Marriage,122
brokeragecontracts,284
minor's,167
Muslimminorgirl, of, 167
restraintof, 291
Marriedwoman,seeHusband
andwife,750
Membership
terminationof,penaltyas, 535
Mercantileagent, 729
broker,745
factor,as, 745
pledge by, 729
Minor,153,160
age ofmajority,153
agreementof,156
alienationofproperty,160
apprenticeship,agreementsof,167
beneficialcontracts,163
apprenticeship,167
marriage,166
optiontoretire,168
tradecontracts,168
effects ofminor'sagreement,156
estoppel,cannot,be raisedagainst,156
liabilityincontract,157
natureof,172
marriage,contractof, 166
mortgageinfavourof, 162
necessaries,liabilityfor, 170
meaningof, 170
natureof, 172
statutoryprovision,170
ratification,168
reliefsoughtby, 159https://t.me/LawCollegeNotes_Stuffs

1121. Minor(contd.)
restitution,doctrineof, 158
Specific Relief Act,1963,162
amendedprovisions,162
reliefagainst,159
Misrepresentation,200
breachof duty, by,202
change ofcircumstances,207
damagesforinnocent
misrepresentation,224
definition,200
duty,breachof,202
fraud,distinguishedfrom,217
inducement,208
inducingmistakeas to
subject-matter,by, 203
materialfacts,of,205
meansofdiscoveringtruth,209
opinion,expressionof, as,206
stateofmind,representationof,207
suppressionof vital facts,204
unwarrantedstatement,by,200
Mistake,226
consensusadidem,226
consent,definitionof,226
definitionof,226,227
supplementaryprovisions,227
differentsubject-matters
inmind,237
erroneousopinion,253
essentialfacts,whatare,227
fact,of,254
identity,as to, 228
assumptionof false
identity,228
business,takeover of,228
fraud,causedby, 229,230
identityandattributes,230
speciallyimportant,233
importanceofidentity,233
law, effect ofmistakeas to,254
limitations,250
natureofpromise,as to
documentsmistakenly
signed,247
non-estfactum,247
parties'intention,245
non-existentsubject-matter,234
qualityofsubject-matter,as to, 239
respectiverightsofparties,
asto,241
SubjectIndex977
Mistake[contd.]
subject-matter,as to,234
substanceofthe
subject-matter,as to,237
title,as to,235
who may accept an offer, 231
Motive
acceptance of offer in, 11
consideration,and,145
Movableproperty
liability to deliver to person entitled, 853
limitationfor, 853
mainingredients,851
recovery of possession of, 851
suitfortitle,852
Necessaries,170
husband'sliabilityforwife's
purchaseof, 750
minor'sliabilityfor, 170
Nemodatquodnonhabet,862
Novation,433
no effect uponarbitrationclause,438
rescission,and,434
substitutionof newagreement,435
Offerorproposal,5
agreementto keep open for
specifiedperiod,61
communicationof, 6
definition,5
escalationclauses,90
express,7
general, 17
acceptable byconduct,18
continuingnature,19
impliedpromise,7
^impliedproposals,6
intentiontocreatelegalrelations
businessmatters,14
familymatters,12
objectivity,13
SupremeCourton,16
invitationto offer,distinguishedfrom, 19
auction,announcementtohold,22
catalogueofprices,21
definiteness,23
display, 21
freedistributionofarticles,23https://t.me/LawCollegeNotes_Stuffs

1122. 978LawofContract
Offerorproposal[contd.)
lettersofintent,16
pricereview,90
protectionagainsttermsin
~standardcontracts,70
revocation,57
socialmatters,12
when complete, 10
Pardanashinwomen,198
contracts,with,198
undue influence,presumption-of,186
Partnership,300
agreementinrestraintoftrade
betweenpartners,300
Partofcontract,864
specificperformance,of, 864
Penalty
liquidateddamages,
distinguishedfrom, 530
Performance
bywhom,362
contingency,conditionprecedent,as,354
Will of aperson,dependingupon,353
contingentcontracts,of, 351
contractswhichneednot
beperformed,433
essence,whentimeof,377
factorswhichmaketimeof essence,377
impossibilityof, 390
jointpromisees,366
joint promises of, 363
legalrepresentatives,bound
bypromises,359
place for, 361,367
applicationforreasonable
place, for, 370
reciprocalpromisesof, 371, 372
remissionof,439
renewalclause,359
tenderof,360
place of, 361
timeof,361
timeandplace,367
promisee'schoice,370
propertime and place, 370
reasonableplace, for, 370
timeandmanner,370
usualbusinesshours,369
withoutapplication,369
Performance{contd.)
timefor,377
representatives,bound
bypromises,359
unconditionaltenderof
performanceto be, 361
Perpetualinjunctions,948,951
requirementsof, 952
temporary,948
temporarycases inwhich
to be,granted,949
Pledge, 714
definition,714
deliveryinpursuanceofcontract,717
deliveryofpossession,essentialfor, 714
documentsof title by, 731.
hypothecation,by, 716
seizure,noright,720
mercantileagent, pledge by, 729
notice,beforesale,725
paramountinterestof pledgee,718
pawnee,718
disjunctiverights,724
extraordinaryexpenses,rightto,722
retainer,right,of, 718
sale,rightof,722
specialinterest,of, 718
pawner'srightofredemption,728
personinpossessionundervoidable
contract,pledge by, 732
pledgee,by,734
priorityof employees' PF dues, 725
securities,loss of, pledgee's
negligence,due to,727
whocan,728
exceptions,732
mercantileagentby,729
pledgeeby, 734
voidablecontract,possession
under,732
Porttrust,lienof,710
Postalcommunications,32
whencontractconcluded,32
Postoffice,678
baileeas,678
Preamble,1
Prefatorynote,841
Pricereview,clause,90
interpretationof, 90
Principleofbusinessefficacy, 333https://t.me/LawCollegeNotes_Stuffs

1123. Privityofcontract,114
SupremeCourtupholds privity, 119
Promissoryestoppel,105,109
Governmentagencies, 109
applicationon, 109
licencee, of, 110
Proposal,seeOffer,5
Publicinterest,49
Public policy, 272
alienation of land, depressed
class by, 278
arbitrationaward,fraud or
corruption,inducedby, 279
black money
paymentoutof, 275
chitty, 278
English Law, observations in, 272
grabbing privileges, 276
headsof, 279
administrationof justice
interferencewith,280
enemy,tradingwith,279
maintenanceand champerty, 282
marriagebrokeragecontracts,284
public offices, trafficking in, 280
statutoryprovisions,things
doneunder,279
stiflingprosecution,280
unfairterms,285
unreasonableterms,285
Indian cases, adopting English view, 273
interestclauses,276
matchingbargainingpowers, 287
minorgirl,marriageof, 275
paymentout of black money, 275
priceescalation,276
public policy of friendly
foreigncountries,277
surrenderofrights,274
surreptitioustransferofshares,286
unconscionabledealings,285
wherepartunlawful,288
Quantummeruit,423
Quasi-contracts,558
EnglishLaw, in, 583
paymentstodefendant'suse, 583
paymentsundercompulsion,587
paymentsunderineffective
contract,586
SubjectIndex979
Quiasi-contracts(contd.)
payments under mistake of fact, 585
quantummeruit,588
finder of goods, 573
liabilityto pay for non-
gratuitousacts,564
appropriatepleadings,573
constitutionalrequirements,
non-compliance,568
contractsvoidunderArticle 299, 570
gratuitously, notintending,564, 571
lawfully, 571
lender of money, enjoys
the benefit,572
non-provablecontracts,
recoveryunder,569
officiousinterference,566
oralcontracts,recovery under, 569
refund of price, provision for, 573
requestforservices,566
terminationofcontract,
workdoneafter,570
voidcontract,under Article 299, 570
workaftertermination
ofcontract,570
mistakeorcoercion,574
change ofposition,581
fact, of, 574
laches,578
law, of, 574
limitation,578
mistake,examples of, 579
scope,overpaidtaxes,contextof, 576
taxmoney,refund,575
necessaries,supplyof, 561
payment by an interested person, 561
interested,561
legalcompulsionto pay, 563
one, by, toanother,564
rationale,558
impliedin fact, 559
unjust enrichment,558
supply ofnecessaries,561
Ratification
competenceof theprincipal,
necessaryfor, 822
conditionsofratification,820
effectsof, 825
Government,actdoneonbehalfof, 824
injuriousacts,823https://t.me/LawCollegeNotes_Stuffs

1124. 980LawofContract
Ratification[contd.)
knowledge of facts, necessary, 824
lawfulacts,822
minorby, 823
onbehalfofanother,actto bedone,820
relationback,doctrineof, 825
whatactscanberatified,822
wholetransaction,has to be ratified, 824
withinreasonable,time to be made, 824
Reasonableness,94
statutorydefinition,94
Reciprocal promises, performance of, 371
defaultofone,374
legal and illegalparts,376
orderof,372
partypreventing,373
Rectificationofcontracts,927
mistake,928
Rectificationofinstruments,927
essentials,928
Remissionofperformance,439
acceptanceof less sum, 440
payment underprotest,441
additionalwork,paymentfor, 441
extensionoftime,443
waiver,441
Removalsimpliciter,95
employment from, 95
Rescission,limitsof, 218
Rescissionofcontracts,920
affirmation,921
alternative prayer for, 925
appealableorder, 925
equity, and, 926
equity,partiesrequired to do, 926
extensionoftime,926
extensionoftimeforpayment
underdecree,918,925
limitation,925
restitution,wherenotpossible, 922
severance,922
specificperformance, decree of
contractnotextinguished,924
specificperformance,inbuilt
remedyofrescission,in, 923
thirdparties,interventionof, 922
Restrainingbreachofcontract,
injunctionfor, 517
Restraintof legalproceedings,314
absolutely,314,319
Restraint of legal proceedings [contd.)
compromise outsidecourt,316
exceptions,325
legal proceedings, 315
limitationoftime,317
referencetoarbitration,325
surrenderofrights,318
Restraintofmarriage,290
Restraintoftrade,291
employees,upon,306
duringemployment,306
removal,effect of, 313
terminationofemployment,
upon,308
tradesecrets,protectionof, 309
training expenses, recovery of, 309
employers, agreement between, 312
exceptions,298
exclusivedealings,302
knockoutagreements,296
lease,restraintin, longperiod,297
long period, restrictions for, 297
partnership law, exceptionsunder, 300
premature,effect, 313
restrictions,longperiod,for,297
sale ofgoodwill,298
limitsofrestraint,299
meaningofgoodwill,298
scope,291
allrestraints,291
business,294
EnglishLaw,292
general principles, 293
profession,294
trade,294
soledealership,302
solusagreements,302
statutoryexceptions,298
termsofservice,306
tradecombinations,under,300
underjudicialinterpretation,
exceptions,300
Revocation,68
agreement to keep offer open
for specifiedperiod,61
bid of, 63
offerof,57
before expiry of fixedperiod,59
cancellationofallotmentofland,63
communicationfromofferor,62
freshproposal,63https://t.me/LawCollegeNotes_Stuffs

1125. Revocation(contd.)
generaloffers,of, 62
specifiedperiod,before, 61
voluntaryretirement,proposalof, 60
stranger,by, 62
supersedingby freshproposal,63
tenders,of,44
voluntary,retirement,of, 60
Shippingdocuments,694
transferof,694
Shorttitle,1, 841
Specificimmovableproperty
prayerfordeclarationof title, 850
recovery ofpossessionof, 844
review orappeal,notavailable,850
suit bypersondispossessed,845
Specificperformanceofcontract,855
acquiringtitleduring
pendencyofsuit,893
all buyers or contractees must join, 879
alternativerelief,provided
incontract,925
amendmentofplaint,870
arbitralawards,enforcementof,920
arbitration,877
assignee from legal heir, 878
buyerwithnotice of previous sale, 896
casesinwhichallowed,858
cleanhands,plaintiffto comewith,907
companybeforeincorporation,
lease infavourof, 879
compensationinadequate,
enforceability,873
compensation,powerof
courttoaward,913
loss ofright,to, 917
constantsupervision,contracts
requiring,875
constructioncontracts,876
contingentcontracts,898
contractinvolvingpersonal,confidential
andfiduciaryservice,874
contractsnotspecifically
enforceable,871
contractswhich are specifically
enforceable,863
decree of,contractnotautomatically
extinguished,924
defaultof 1st buyer, defence
availableto2ndbuyer,887
SubjectIndex981
Specificperformanceofcontract(contd.)
defence, law ofcontractunder, 857
delay, 860
delivery ofgoods,order for, 916
determinablecontracts,874
discretionofcourt,893
familysettlement,877
first buyer,defaultof, 887
freeconsent,lack of,877
goods, order for delivery of, 916
governmentcontracts,856
hardship,901
imperfect title, rights ofparties,868
impleadment,913
incompletecontracts,899
inequitable,904
jointowners,saleby, 862
lease in favour ofcompany
beforeincorporation,879
legal representatives, reliefagainst,889
limitation,911
liquidateddamages,no bar, 919
mutualityof remedy, 909
noticeofprevioussale, buyerwith,896
objectforbidden,908
originalcontract,validityof, 856
partofcontract,of, 864
pendencyofsuit,acquiring
titleduring,893
performanceoftrust,863
personalbars to relief, 879
personalskill,contractsinvolving,
enforceability,873
personsagainstwhomenforceable,878
personsforwhomenforceable,878
possession,relief of, 917
possession,relief of, to bepleaded,917
powersofcourt,893
pre-emptiveordersunder
taxmeasures,912
previoussale, buyerwithnotice of, 896
priceescalation,902
protectionofvendor'sinterest,911
publicpolicy,agreementopposedto,908
purchaseofsharesinunpartitioned
property,870
readyandwilling,881
reconveyance,agreementfor, 860
relief ofpartition,917
relief ofpossession,917
repurchase,agreementfor, 860https://t.me/LawCollegeNotes_Stuffs

1126. 982LawofContract
Specificperformance of contract (contd.)
sale byjointowner,862
settlements,directiontoexecute,920
subsequentbona fide buyer, 890
subsequent transferer, relief against, 889
substantialperformanceby one side, 908
taxmeasures,pre-emptiveorders,912
titleacquired,during
pendencyof suit, 893
title,suitfor, 852
title,withoutsellingor
lettingproperty,888
trust,performanceof, 863
trusts,performanceof,
limitationfor, 863
unconscionable,904
unfaircontracts,897
validityoforiginalcontract,856
variation,wherenecessary
forperformance,888
vendor'sinterest,protectionof, 911
Specific relief
cancellationofinstruments,843
contracts,specificperformanceof, 843
declaratoryrelief,844
immovableproperty,recovery
ofpossession,844
introductionto,842
possession ofproperty,recovery of, 843
preventive relief, 844
property,recovery ofpossession,843
recoveryofpossessionof
immovableproperty,844
recovery ofpossessionofproperty,843
rectificationofinstrumeints,843
rescissionofcontracts,843
specificperformanceofcontracts,843
Speculativetranslations,339
Standardformcontracts,69
breach,definitioninUnfair
ContractTermsAct,1977,85
contractualdocumentsandreceipts,
differencebetween,72
contraproferentem,87
coreofcontract,79
departurefrommainpurpose,80
fundamentalbreach
resortto, nolongernecessary,85
theoryof, 79
imputednotice,78
protectivedevices, 70
Standardformcontracts(contd.)
reasonableness,statutorydefinition,94
reasonablenotice,70
receipts,etc.,noticein, 72
resorttofundamentalbreach,
nolongernecessary,85
ruleofconstruction,81
signedcontracts,74
strictconstructionofterms,86
contraproferentem,87
revision,reviewclauses,90
thirdparties,96
tort,habilityin, 92
negligence for, 92
UnfairContractTermsAct,1977,98
breach,definitionin, 99
unreasonableterms,92
compromiseofexistingcontract,96
disclaimerandexclusionclauses,101
removalclausesincontracts
ofemployment,95
set off, clausesagainst,101
statutorydefinitionof
reasonableness,94
unusualterms,noticeof, 76
weakerparty,exploitationof, 69
Statutorydamages,555
Stigmacompensation,523
Strangertoconsideration,113
Strangertocontract,114
Streedhan,279
Temporaryinjunctions,950
Tenders,44
acceptanceof,44
revocation,44
withdrawalof,44
Time-barreddebt,49
Timeforpermanance,see
underPerformance,377
Tradesecrets
compensationformisuse,514
Uncertainagreements,327
agreements,notcapableof
beingenforced,334
agreementstoagreeornegotiate,328
capable of being madecertain,332
certaintyofterms,56https://t.me/LawCollegeNotes_Stuffs

1127. Uncertainagreements {contd.)
lock-out agreement, 335
partialuncertaintyj332
preliminary negotiations, 331
property,undefined,330
renewal of tenancy, 335
repeal of Act, contract linked with, 335
terms,certaintyof, 56
Unconscionablebargains,187
inequality of bargaining power, 187
Undueinfluence,180
abilitytodominate,181
apparentauthority,183
burden of proof,185
consentunderpressure,181
definition,180
economicduress,187
fiduciary relation, 183
fraud, subtle species of, 181
inequality of bargaining power, 187, 192
mentaldistress,184
statutorycompulsion,185
urgentneed of money, 185
pardanashinwomen,198
presumptionof, 186
realauthority,183
relationswhich involve, 182
rescission,200
unconscionable bargains, 187
bargaining power, inequality, 187
blood, marriage or adoption
relationship,191
dominance, necessary for,188
economicduress,187
employees, rescuing from undue
unreasonableterms,197
exploitationof needy, 195
gifts,unconscionable,189
instancesof,187
judicialintervention,
techniqueof, 196
moneylendingtransactions,in,188
naturaljustice, 198
needy,exploitationof, 195
persuasion,influence
distinguishedfrom,193
pressure,consentunder,181
re-negotiationofterms,194
statutorycompulsion,nodistress,185
unconscionable,187
urgentneed of money, nodistress,185
SubjectIndex983
UnfairContractTerms Act, 1977, 98
Unilateral cancellation, sale deed, of, 431
Unilateralpromises, 109
revocationof, 109
Unlawfulagreements,255
consideration,256
defeat any law, 262
friendly country, law of, 263
innocentviolations,264
"law",scope of term, 265
money andpropertyinvolved, 265
statutoryprivileges,
undercuttingof,266
taxes,evasionof,266
effect of, see under Illegal and
voidagreements,342
forbidden by law, 257
licences andpermits,257
violation ofenactments,257, 260
fraudulent,267
illegal agreements, effects, 342
immoral,269
cohabitation,illegal, 270
dancinggirls, 272
maritalrelations,interferencein, 269
prostitutes,dealingswith,270
sex outsidemarriage,to
belimitedto, 272
injurious,268
fruitsofcrime,269
object,256
public policy, 272
personorproperty,to,268
when recovery possible, 347
Unregisteredsaleagreement,886
Unsoundmind,personsof, 172
disability at time of agreement, 174
EnglishLaw,. 172
Indianpositionin, 174
Voidagreements,288
consideration,without,290
impossibleacts,390
legalproceedings,restraintof, 314
marriage,restraintof,290
part,unlawfulin, 288
trade,restraintof, 291
uncertainagreements,327
unlawfulinpart,288
wageringagreements,335https://t.me/LawCollegeNotes_Stuffs

1128. 984LawofContract
Voluntaryretirement,60
acceptanceof proposal for, 60
Wageringagreements,335
collateraltransactions,341
crosswordcompetition,342
effectsof,340
essentialsof,336
exceptionsto, 341
horserace,341
lottery,342
Wife, seeHusbandand wife, 750
Writremedy
contract,terminationbyGovt,518
dealership,termination of, against, 518
directionfor payment, 518
Government,terminationof
contract,against,518
letterofintent,withdrawal
of,against,519
non-performance of Govt contract, 519
waiver,and,519
withdrawalofletterof
intent,against,519https://t.me/LawCollegeNotes_Stuffs

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