Law students and legal professionals often come across instances where they struggle to recall some of the landmark cases in contract law.
Whether one is appearing for a job interview, arguing before a court, or preparing for judicial services, knowing some of the famous contract law cases may prove very useful especially for law students.
Keeping all this in mind, we have compiled on this page some of the landmark cases in contract law. Read them to learn more.
Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd. 1952 (Offer)
Goods were displayed in a self-service shop, with the prices attached. These items were displayed on open shelves from which they could be selected by the customer, placed in a shopping basket, and taken to the billing desk where they would be paid for.
Some shelves in the shop contained non-prescription drugs and medicines, many of which were listed in the Poisons List under the Pharmacy and Poisons Act 1933, which required the supervision of a registered pharmacist for the sale of any item in the Poisons List.
This was held to be an invitation to treat/offer, and not an offer in itself. It was not capable of conversion into a contract by acceptance. This analysis was supported by the fact that the customer would have been free to return any of the items to the shelves before payment had been made.
Carlill v Carbolic Smoke Ball Co. 1893 (Offer)
This is one of the classic and landmark cases in contract law.
In this case, a company stated in an advertisement that it would pay £100 to anyone who caught influenza after using its smoke balls thrice daily for two weeks. The company deposited the money in a bank account to show its sincerity.
A lady, relying on the advertisement, used the smoke balls for the prescribed period. She still caught influenza and sued the company for the reward after the latter’s refusal to pay her.
The company was held liable to pay because there was an intention to create a legally binding obligation, and this was made clear to all persons in general (general offer).
Pushpabala Ray v LIC of India, 1978 (S.29 Uncertain Agreements)
The managing director of a company entered into an agreement with one of the company’s employees, to pay a certain amount of remuneration when the company was in a position to do so. The agreement was held to be void due to uncertainty.
S.29 of the Contract Act states that “agreements, the meaning of which is not certain, or capable of being made certain, are void“. Hence, an offer (and acceptance) must be definite and certain. If the offer or acceptance are not clear enough to permit the conclusion of the contract, they are not considered valid.
Dunlop v Higgins, 1848 (Communication)
A offered, by post, to sell B some iron at a particular price. The letter reached B two days later, and B posted a letter of acceptance on the same day.
Due to some delay, the letter reached A after over a fortnight, by which time the price of iron had risen. A refused to sell the iron to B at the original price. It was held that there was a binding contract.
In case of communication by a non-instantaneous mode of communication, such as post or email, (a) an offer is complete as against the acceptor when the offeror puts it in a mode of transmission outside the control of the offeror, and (b) an acceptance is complete as against the offeror when the acceptor puts it in a mode of transmission.
Hyde v Wrench, 1840 (Offer)
A offered to sell her estate for 20 £1,000. B offered to pay £950. A refused. B replied immediately, accepting the original offer of £1,000. A now refuses.
It was held that A was no longer bound by the terms of her original offer because it had lapsed when B made the counter-offer to the original offer.
Therefore, an offer lapses if a counter offer is made. A counter offer is considered a fresh offer, which must be accepted in order to give rise to a contract.
Tarsem Singh v Sukhminder Singh, 1998 (Mistake S.13 Consensus Ad Idem)
A agrees to buy B’s land. Both of them are mistaken as to the actual size of the plot of land: they think the plot is 10 acres in size, whereas it is actually 15 acres in size.
The contract was held to be void. If both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, there is no meeting of minds, and the contract is void.
Section 13 of the Contract Act lays down the doctrine of ‘consensus ad idem’, that is, both parties must accept each other’s promises on the terms that they are made; that there must be a meeting of minds.
If not, there is, in fact, no agreement between them at all. Lack of consensus ad idem renders the contract void ab initio.
Chikkam Amiraju v Chikkam Seshamma, 1918 (Coercion – Suicide Threat)
A threatens to commit suicide if his wife and son do not agree to sell their property to him.
The wife and son sign the agreement. The contract is voidable at the instance of the wife and son for coercion. S.14 of the Contract Act provides that consent is said to be free when it is not caused by Coercion, Undue Influence, Misrepresentation, Fraud, or Mistake.
Coercion is the committing of or threatening to commit, any act forbidden by the Indian Penal Code, 1860, or the unlawful detaining of, or threat to detain, any property with the intention of compelling any person to enter into a contract. (S.15, Contract Act) Mere economic duress, however, would not amount to coercion.
John Minas Apcar v Louis Caird Malchus, 1939 (Fraud)
This is one if the landmark cases in contract law pertaining to Fraud.
A wanted to sell her property to B, and in order to get a high price, shows B fictitious letters from fake buyers, offering a very high price for the property. B, believing the letters to be genuine, enters into an agreement to buy A’s property for a high 40 price. The contract is voidable at B’s instance, for fraud.
Fraud u/s 17 of the ICA 1872 means and includes any of the following acts committed by a party to a contract, or with her connivance, or by her agent, with intent to deceive the other party or her agent, or to induce him to enter into a contract.
However, mere silence does not amount to fraud. Where, however, silence as to the facts is likely to influence the other party’s decision to enter into the contract, or if the silence is equivalent to speech, silence would amount to fraud.
Mithoolal Nayak v Life Insurance Corporation of India, 1962 (Good Faith Insurance)
The application form for an insurance policy contains a section, asking the applicant to tick the box if the applicant had consulted a doctor in the previous five years.
A, an applicant, had consulted a doctor in the previous five years, but does not tick the box. This would amount to fraud.
In some cases, such as insurance contracts, there must be full disclosure of all material facts.
This is because such contracts are considered uberrimae fidei, meaning, of utmost good faith.
Allah Baksh Khan v RE Barrow, 1917 (Misrepresentation)
This is one if the landmark cases in contract law pertaining to misrepresentation.
A, a landlord, represented to B, a lessee, that a house has four bedrooms, whereas one of the rooms was not fit for use as a bedroom.
A, however, did not know that one of the rooms is not fit for use as a bedroom. This would amount to misrepresentation, and the contract is voidable at B’s instance.
Note, that A contract is voidable only if the misrepresentation was such as to cause the other party to enter into the contract.
Although misrepresentation and fraud are similar in that both are based on a false representation, the difference between the two is that in the case of misrepresentation, the person making the statement believes it to be true, whereas in the case of fraud, the person making the representation does not believe it to be true.
Firm Bhola Ram Harbans Lal v Bhagat Ram, 1927 (Minors)
Minors can enforce contracts made in their favour for valuable consideration, because although they cannot incur liability, they are not debarred from acquiring title to anything valuable.
Hence, Legal guardians of minors can enter into contracts on their behalf and for their benefit. Also see, s.68 of the ICA that talks about the exception of necessity.
Doyle v. White City Stadium Ltd., 1935 (Minor’s Contract)
A, an infant and a professional boxer, applied for and was granted a license from the Board of Control.
The license provided that A would have to adhere strictly to the rules of the Board, and to any further rules or alterations to the rules.
The Board withheld a purse of £3,000 from A, in accordance with its rules, on the ground that A had been disqualified in a contest for hitting below the belt.
It was held that the contract was binding against A, even though A was a minor because the license was practically essential in order to enable A to become proficient in A’s profession.
S.68 of the Contract Act provides that “If a person incapable of entering into a contract, or any one whom he is legally bound to support, is supplied by any person with the necessities suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.”
Esso Petroleum Co. Ltd. v Customs and Excise Commissioners, 1976
One coin depicting a World Cup footballer was offered to every customer who purchased four gallons of petrol.
This was held to be an offer of consideration to the customer to enter into a contract of sale of petrol, and not a gift.
Consideration need not be adequate, or equal in value to the promise; all that is required is that it have some value in the eyes of the law, and cause some incremental change in the position of the receiver.
White v Bluett 1853 (Consideration)
A owed a sum of money as a promissory note to his father. He kept complaining of unequal treatment in the division of property, till his father told him that if he stopped complaining, he would waive A’s debt.
A stopped complaining and then refused to repay the debt when the father asked him to do so. It was held that A’s stopping complaining did not amount to valid consideration.
Jamna Das v Ram Autar Pande, 1911 (Privity of Contract)
This is one if the landmark cases in contract law pertaining to the Doctrine of Privity.
A borrowed Rs.40,000/- by executing a mortgage in favour of B. Later, A sold the property to C for Rs.44,000/- and allowed C to retain Rs.40,000/- of the price in order to redeem the mortgage. B, the mortgagee, sued C for the recovery of the mortgage. It was held that B could not succeed because B was not a party to the contract between A and C.
As per the doctrine of privity, a contract cannot confer rights or impose obligations under it on any person except the parties to it. A third person cannot be entitled to demand performance of the contract.
The doctrine of privity of contract must not be confused with the concept of privity of consideration.
While parties to a contract cannot confer rights or impose obligations under it on any third person, S.2(d) implies that as long as there is a consideration for a promise, it is immaterial if a third party has provided it.
Dutton v Poole 1678
In order to provide a marriage portion for his daughter, A intended to sell a piece of wood. A’s son, B, promised A that if A forbore from selling the wood, he, B, would pay the daughter £1,000.
A accordingly forbore from selling the wood, but B did not pay. The daughter and her husband sued B for the amount.
It was held that, though the daughter had not provided any consideration herself, she could still recover because there was a consideration, provided by the father.
Kedarnath Bhattacharji v Gorie Mahomed, 1887 (Promissory Estoppel- Townhall Construction)
This is one if the landmark cases in contract law pertaining to the Doctrine of Promissory Estoppel.
The Commissioners of Howrah Municipality invited subscriptions from the general public for the construction of a town hall. A subscribed to the fund for Rs.100/-.
Once sufficient subscriptions were made, and relying upon the faith of the promised subscriptions, the Municipality entered into a contract for the construction of the town hall.
A then refused to pay the amount of Rs.100/-. It was held that A was bound to pay. The promise was: ‘In consideration of your agreeing to enter into a contract to erect the town hall, I undertake to supply the specified 50 money for it.
Taylor v Bowers, 1875
A, a debtor, made a fictitious assignment of her goods to B, to defraud creditors. Two meetings of the creditors were called, but no composition was reached.
In the meantime, B had parted with the goods to C, one of the creditors who knew about the original transaction, without A’s consent.
A sued for the recovery of the goods. It was held 15 that A was entitled to recover the goods as the illegal purpose had been only partially effected, since the creditors, realizing that the greater part of A’s visible wealth had disappeared without the removal of A’s goods, and would probably abandon any attempt to exact payment by process of law.
The judges opined that nothing had been done to carry out the illegal purpose beyond the removal of the stock and this was insufficient to defeat the creditors.
Giles v Thompson, 1993 (Champerty)
A person who, without any just cause, supports litigation in which she has no legitimate interest, is guilty of maintenance.
This is not, per se, opposed to public policy, unless the object of the agreement is an improper one, such as abetting unrighteous suits or gambling in litigation.
Champerty is an aggravated form of maintenance, and is per se opposed to public policy; here, the maintainer stipulates for a share of the proceeds of the action or suit or other proceedings where property is in dispute.
CIWTC Ltd. v Brojo Nath Ganguly, 1986 (Public Policy Doctrine)
This is one if the landmark cases in contract law pertaining to the doctrine of public policy.
Company A entered into a scheme of arrangement with Corporation B, a government company; the scheme provided that the officers of Company A could either accept employment in Corporation B, or leave and receive a meagre sum by way of compensation.
The rules of Corporation B provided for termination of the services of officers by giving three months’ notice.
The petitioners challenged this rule as arbitrary and alleged that a term in a contract of employment entered into by a private employer, which was unfair, unreasonable, and unconscionable, was bad in law. The contract was held to be opposed to public policy, and thus, void.
Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co. Ltd., 1894 (S.27 Restraint of Trade)
A, an inventor and manufacturer of guns and ammunition made a sale of goodwill and agreed with the buyer
- (a) not to practice the same trade for twenty-five years, and
- (b) not to engage in any business competing or liable to compete in any way with the business for the time being carried on by the buyer.
The first part of the agreement was held to be valid, but the second part was considered to be unreasonable and void.
Hakam Singh v Gammon 1971(S.28 Restraint of Legal Proceedings)
A clause in an agreement provided that the Bombay court alone would have the jurisdiction to adjudicate.
The plaintiff filed a suit in Varanasi, but it was dismissed in view of the agreement. In this case, both, the Varanasi and Bombay courts had jurisdiction, and since the restraint was not absolute, it was held to be valid.
Thomas Brown & Sons Ltd. v. Fazal Deen, 1962 (Doctrine of Severability)
This is one if the landmark cases in contract law pertaining to the doctrine of severability.
A contract of bailment was with regard to gold and gems; the former being illegal and the latter legal, since the two were severable, the latter was enforced.
So where you cannot sever the illegal from the legal part of convenience, the contract is altogether void; but where you can sever them, whether the illegality be caused by statute or the common law, you may reject the bad part and retain the good.
John Usher Jones v Edward Scott Grogan, 1919 (Anticipatory Breach S.39)
A entered into an agreement with B to chop timber from B’s property and deliver it to the nearest railway station on A’s carts.
A sold the carts before performance is complete. This would amount to anticipatory breach, and B can either acquiesce to the continuation of the contract or rescind it.
Under s.39, of the Contract Act, when a party refuses to perform or has disabled himself from performing her promise in its entirety, the other party may put an end to the contract unless she has, by words or conduct, signified acquiescence to the continuation of the contract.
Durga Devi Bhagat v JB Advani & Co. Ltd., 1970 (Frustration S.56)
A enters into a contract with B, who is in another country, to deliver some linseed oil to B in B’s country.
Subsequently, the export of linseed oil is banned. A is not bound to perform the promise under the contract, as the contract has been rendered void under the doctrine of frustration.
As per s.56, of the Indian Contract Act, if the performance of a promise becomes impossible for any reason which the promisor could not prevent, or unlawful, after the contract is made, the contract becomes void when the act becomes impossible or unlawful. This is the doctrine of frustration.
Alopi Parshad v. UOI, 1960 (Doctrine of Frustration)
This is one if the landmark cases in contract law pertaining to the doctrine of frustration of contract.
The performance of a contract must become impossible or unlawful for the doctrine of frustration.
A contract cannot be regarded as impossible merely because it is more difficult to perform than anticipated, or less remunerative.
Robert D’Silva v Rohini Enterprises, 1987 (Contract of Service)
A appoints B to cut and remove timber from a plot of land. A can specifically enforce this contract, since this contract is not dependant on the volition of the parties.
Contracts which depend on the will of the parties are usually contracts of service (‘Employment Contracts’), where a particular quality or ability, possessed by a person for which the contract is entered into, depends upon that person’s willingness or state of mind. If such contracts are specifically enforced, they may not obtain the results originally intended.
But if A, being an author, contracts with B, a publisher, to complete a literary work. B cannot enforce specific performance. (Based on illustration to clause (b) of S.21 of the (repealed) Specific Relief Act, 1877).
A court is not bound to grant specific performance merely because it is lawful to do so as this jurisdiction is discretionary.
Murlidhar Chiranjilal v Harishchandra Dwarkadas, 1962
The Supreme Court held that there are two principles on which damages are calculated in the case of breach of contract of sale of goods.
The first is that he who has proved a breach of a bargain to supply what he has contracted to get, is to be placed so far as money can do it in as good a situation as if the contract had been performed.
But this principal is qualified by a second which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.
United Breweries Ltd. v Andhra Pradesh, 1997 (Damages S.74)
‘A’ sold beer in bottles and crates. The deposit paid by dealers for the bottles and the crates was refunded to them upon return of the bottles and crates.
‘A’ required from its dealers that bottles were not sold to the customers, and bottles were to be returned in order to ensure that the bottling process could continue smoothly. It was held that the deposit represented the liquidated damages for the loss of the bottle if it was not returned.
As per s74 of the ICA 1872, if a contract stipulates a sum to be paid if there is a breach, or contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage is proved to have been caused by the breach, to receive reasonable compensation not exceeding the amount named or as the case may be, the stipulated penalty.
However, even in a case where the losses resulting from the breach are more than the liquidated damages, the plaintiff cannot recover an amount higher than the liquidated damages.
State of Orissa v United India Insurance 1997 (Indemnity S.124)
A contract of insurance is a contract of indemnity, which covers every kind of loss envisaged by the policy, and not just loss caused by the party to the contract.
As per s.S.124 of the ICA, a contract by which a party promises to save another from loss caused by the conduct of the promisor, or by the conduct of another person, is called a ‘contract of indemnity’.
Jan & Sons v A Cameron, 1922 (Bailment)
This is one if the landmark cases in contract law pertaining to bailment contracts.
A stays at Hotel B, and leaves some luggage with the Hotel for safekeeping. The Hotel is a bailee in respect of the luggage, and A is a bailor.
Bailment is the delivery of goods by one person (“the bailor”) to another person (“the bailee”) for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the bailor’s instructions. (S.148, Contract Act).
And where the contract of bailment does not provide for any remuneration to be paid to the bailee for the purpose for which the goods are to be kept or carried, the bailor must repay to the bailee the necessary expenses incurred by the bailee for the purposes of the bailment.
Gaya Sugar Mills v Nand Kishore Bijoria, 1955 (Agent-Servant Difference)
This is one if the landmark cases in contract law that defined the distinction between agents and servants.
The distinction between an agent and a servant or employee is that while in the case of an agent the principal merely directs what must be done, in the case of employees, the employer also directs how it is to be done.
An agent must conduct the principal’s business according to the principal’s instructions, or, if there are no such instructions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts business.
Bank of Bihar Ltd. v 50 Tata Scob Dealers, 1960
A bank was asked to collect money on behalf of a customer and remit it to the customer. The bank sent the money, about Rs. 34,000/- by draft, by ordinary post. The draft was lost. As an agent, the bank was held to be negligent in sending such a large amount through an ordinary post.
An agent must also conduct the business of the agency with such skill as is generally possessed by a person engaged in a similar business unless the principal had notice of the agent’s lack of skill.
An agent must act with reasonable diligence, use all the skills that the agent possesses, and must compensate the principal for direct consequences of the agent’s neglect, want of skill, or misconduct. (S.212, Contract Act)
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O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write [it] between you in justice. Let no scribe refuse to write as Allah has taught him. So let him write and let the one who has the obligation dictate. And let him fear Allah, his Lord, and not leave anything out of it. But if the one who has the obligation is of limited understanding or weak or unable to dictate himself, then let his guardian dictate in justice. And bring to witness two witnesses from among your men. And if there are not two men [available], then a man and two women from those whom you accept as witnesses – so that if one of the women errs, then the other can remind her. And let not the witnesses refuse when they are called upon. And do not be [too] weary to write it, whether it is small or large, for its [specified] term. That is more just in the sight of Allah and stronger as evidence and more likely to prevent doubt between you, except when it is an immediate transaction which you conduct among yourselves. For [then] there is no blame upon you if you do not write it. And take witnesses when you conclude a contract. Let no scribe be harmed or any witness. For if you do so, indeed, it is [grave] disobedience in you. And fear Allah. And Allah teaches you. And Allah is Knowing of all things.
Holy Quran 2:282
