Carlill vs. Carbolic Smoke Ball Co. (1893) 1 Q.B.

256
Principle: An offer need not be made to an ascertained person, but no contract can
arise until it has been accepted by an ascertained person. Although as a rule notice of the
acceptance of an offer must be given to the person making the offer that does not apply
where he should by his offer indicate or express that he does not except to receive notice
of acceptance apart from notice of performance.

Facts: In 1891, there was an epidemic of influenza and the defendant company offered
by an advertisement to pay 100 to any one who contracted influenza after using the
smoke ball three times a day for two weeks, in accordance with the printed
directions supplied with each ball. Further the defendant company announced that they
had deposited 1000 with the Alliance Bank showing their sincerity in the matter.
The plaintiff on the faith of this advertisement bought a smoke ball and used it as
directed from 20th November, 1891 down to 17th January 1892, but she was attacked by
influenza. She then sued the defendants to recover the sum of 100 in accordance with
the advertisement.
The defendant company contended firstly that the offer contained in the advertisement
was not binding because it was not made to any one person in particular and secondly the
defendant contended that they were not liable to the plaintiff because she had not
intimated to them that she intended to accept the offer.

Held: It was held that Carlill could recover 100, because the advertisement was not a
mere invitation to offer but it is an offer at large that is addressed to the whole
world and capable of being accepted by one or more who perform the conditions. In the
Court of appeal, dealing with the first point, Bowen L.J. said:
It was also said that the contract was made with the entire world, that is with everybody,
and that you cannot contract with every body. It is not a contract made with the entire
world. There is the fallacy of the argument. It is an offer made to the entire world which
is to ripen into a contract with anybody who comes forward and performs the condition.
It is an offer to become liable to anyone who before it is retracted, performs the
conditions and although the offer is made to the world, the contract is made with that
limited portion of the public who come forward and perform the condition on the
faith of the advertisement
In dealing with the second point Lindley L.J. said:
But than it is said, supposing that the performance of the condition is an acceptance of
the offer, that acceptance ought to have been notified. Unquestionably, as a general
proposition where an offer is made, it is necessary, in order to make a binding contract,
not only that it should be accepted but that acceptance should be notified. But is that so
in cases of this kind? I apprehend that they are exceptions to that rule, or, if not an
exception, they are open to the observation that the notification of the acceptance need
not precede the performance. This offer is a continuing offer. It was never revoked;
and if notice of acceptance is required, the person who makes the offer gets the notice of
acceptance contemporaneously with notice of performance of the condition. I think,
however, the true view in a case of this kind is that the person who makes the offer

shows by his language and from the Nature of the transaction that he does not
expect and does not require notice of the acceptance apart from notice of the
performance. [Indian Contract Act, 1872, Section8: Acceptance by performing
conditions or receiving consideration]

Bhagwandas Goverdhandas Kedia vs. Girdharilal

Parshothamdas & Co. (A.I.R. 1966) S.C. 543
Principle: An agreement does not result from a mere State of mind or intent to
accept an offer. Even a mental resolve to accept an offer does not give rise to a
contract. There must be intent to accept and some external manifestation of that intent
by speech, writing or other act. And, acceptance must be communicated to the
offeror unless he had waived such intimation or the course of negotiations implies on
agreement to the contrary. The contract is only complete when the acceptance is
received by the offeror, and the contract is made at the place where the acceptance is
received.

Facts: M/s. Girdharilal Parshothamdas and Company commenced an action in the city
Civil Court, at Ahmedabad against Bhagwandas Kedia Ginning factory and oil mill of
Khangaon, for the recovery of Rs.31,150/- on the ground that Defendants had failed to
supply Cotton Seeds Cake which they had agreed to supply under an oral contract on
22nd July, 1959 after negotiations between the parties by conversation on long
distance telephone.

Held: The Trial Court found that the plaintiffs had made an offer from Ahmedabad
by long distance telephone to the defendants to purchase the said goods and that the
defendants had accepted the offer at Khangaon. The court held that when a contract is
made by conversation on telephone, the place where acceptance of offer is intimated to
the offeror is the place where the contract is made and therefore, the Civil Court at
Ahmedabad had jurisdiction to try suit.
A revision application filed by defendants was rejected in limini by the High Court of
Gujarat. Against the order of the High Court of Gujarat, this appeal had been preferred
with special leave in Supreme Court. The defendants contended that in the case of a
contract by conversation on telephone, the place where the offer is accepted is the
place where the contract is made, and that court alone has jurisdiction within the
territorial jurisdiction of which the offer is accepted and in the present case, the
acceptance was spoken into the telephone instrument. Contention raised by the
defendants raises a prevailment of some complexity which must be approached in the
light of the relevant principles of the common law and statutory provisions contained in
the Contract Act. A contract unlike a tort is not a unilateral transaction; if there be no

meeting of minds, no contract can result. There should therefore, be an offer by one
party, express or implied and acceptance of that offer by the other in the same sense in
which it was made by the offeror. The Contract Act does not expressly deal with place
where a contract is made. Sections 3 and 4 of the Contract Act deal with the
communication of a proposal and acceptance of proposal. The defendants contend that
the same rule applies in the cases of contracts made by conversation on telephone. On the
other hand plaintiff contended that the rule which applies to those contracts is the
ordinary rule which regards a contract as complex only when acceptance is intimated to
the proposer. In case of a telephone conversation, in a sense the parties are in the
presence of each other; each party is able to hear the voice of the other. There is
instantaneous communication of speech intimating offer and acceptance, rejection or
counter-offer.
The court after taking into consideration many English authorities on the point,
concluded that the contract is complete when the acceptance is received by the
offeror and the contract is made at place where the acceptance is received and the
Supreme Court held that the trial court was therefore, right in the view which it has
taken that the cause of action arose within the jurisdiction of the City Civil Court,
Ahmedabad where acceptance was communicated by telephone to the plaintiff and
therefore, the appeal dismissed.

Cundy vs. Lindsay (1878) 3 AC 459

Principle: Mistake as to the identity of the other party to a contract nullifies the
consent and its effect is to make the contract void.

Facts: One Alfred Blenkran hired a room on the corner of little Love Lane on Wood
street, Cheapside. Though the entrance was in little Love lane, he described it as 37
Wood street. He wrote letters from this address to Lindsay and Co. (Defendant), Linen
manufacturers, in Belfurst, ordering from them a quantity of goods, chiefly
handkerchiefs. In signing these letters, he used no initial as representing any name and
name signed was written as to appear to be Blenkran & Co.. There was a highly
respectable firm by name W. Blenkiron & Sons carrying on business at 123, Wood
Street. Lindsay & Co. knew the name of Blenkiron & Sons but not their address and they
sent the goods so ordered to M/S Blenkran & Co. 37, Wood Street, Cheapside, and the
invoices were made out in the same way. Blenkran received the goods and sold some of
them to the plaintiffs who were bona-fide purchasers. Blenkran did not pay and Lindsay
& Co. brought an action against him for the money due to them. Later, Blenkrans fraud
was discovered and he was prosecuted and convicted. Lindsay & Co. then sued Cundy
for unlawful conversion of the handkerchiefs received by them; and then, the question
before the court for decision was whether the property in goods had ever passed
from Lindsay & Co. to Blenkran.

Held: The Court, taking into consideration that the purchaser was a bona-fide purchaser,
gave judgment in favour of Cundy. But the court of Appeal reversed this decision and
Cundy now appealed. Upon this appeal the House of Lord held that no contract had been
made with Blenkran and the property in goods did not pass to him so that he never had a
valid title which he could transfer to Cundy who were therefore, liable to Lindsay & Co.
for the value of the goods. Further the court pointed out that Lindsay & Co. intended to
enter into contract with Blenkiron & Sons and not Blenkran; consequently no contract
could have arisen between them and Blenkiron as there is mistake as to the identity of
other party to a contract. On this point Lord Cairons L.C. observations are worth noting.
Of him (Blankran) they knew nothing and of him they never thought. With him they
never intended to deal. Their minds never even for an instant of time rested upon him,
and as between him and them there was no consensus of mind which could lead to any
agreement or any contract whatever.
Therefore, mistake as to the identity of the other party to a contract nullify consent and
consequently no contract could come into existence between the parties.

Phillips vs. Brooks (1919) 2.K.B. 243

Facts: A person by name North entered a firm of Jewellers (plaintiff) and representing
himself to be Sir George Bullough of ST. James Square, purchased some pearls of the
value of 2550 and a diamond ring worth 450. The plaintiff, who had heard of Sir
George Bullough but had never seen him, believed in good faith that the person who
purchased the ring was Sir George Bullough and accepted a cheque in payment and
permitted North to take away one ring which he said he wanted at once for his wifes
birth-day gift.
Subsequently when cheque was dishonoured, plaintiff discovered on enquiry that the ring
had been pledged with the defendants a pawn broker for 350. North was subsequently
convicted for obtaining the ring by false pretences.
The plaintiff instituted a suit against the defendant for the return of the ring on the
ground of mistake. The defendant contended that there was no mistake or error in
consensus, but there was only an error in the inducing cause, or error in cause, namely a
fraud practiced by North. Therefore, plaintiff could not recover. The question before
the court was, did the plaintiff enter into a contract with the person who entered the
shop identified by sight and by hearing? If so, however, much they were in mistake in
thinking him to be Sir George Bullough, even though the inducing cause of the contract
was their belief that he was Sir George Bullough, the contract would only be voidable.
But if the plaintiff intended to and did enter into a contract only with Sir George
Bullough and not with the person who entered the shop, then the contract would be
void and cannot transfer property.

Held: The court held that the plaintiffs intention was to deal with the man, who was
physically in flesh and blood before them. Therefore, it was held that the property in
the ring had passed to North; that the plaintiff intended to sell the ring to the person when
he saw in his shop with whom he made the contract and though he was induced so to sell

by the fraud of North, that made the contract voidable but not void, and as in the mean
time the defendants had taken the ring from North in good faith for value and
without notice. They were protected. In this connection the expressions used by Morton
C.J. in Edmunds vs. Merchants Dispatch Transportation Co. seem to fit in this case.
The minds 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 fact that the
seller was induced to sell by fraud of the buyer made the sale voidable but not void. He
could not have supposed that he was selling to any other person; his intention was to sell
to the person present, and identified by sight and hearing.

Dunlop Pneumatic Tyre Co. vs. Selfridge & Co. Ltd. 1915
AC 847

Principle: A contract cannot be enforced by a person who is not a party to it even

though it is made for his benefit. In this case it was established and settled that one of the
fundamental principles of Law of Contract is that a stranger to a contract cannot sue.

Facts: The plaintiff company supplied motor tyres and covers to D.J. Dew & Co. who
were motor accessory dealers. By an agreement in writing between the Plaintiff Co. and
Dew & Co. in consideration of certain trade discounts. Dew & Co. agreed to purchase a
quantity of Dunlop motor tyres, covers, tubes and sundries and the understanding was
that the Dew & Co would not to sell the same below the listed prices, except to persons
engaged in the motor trade. They agreed further that when they sold any of the goods to a
motor trader below the list prices, they would, as agents for the Dunlop Company in that
behalf, obtain a contract in that behalf, i.e. obtain a written undertaking from the trader
that he would similarly observe the Dunlop listed prices, and would forward such
undertaking from the trader that he would similarly observe the Dunlop list prices, and
would forward such undertaking from the trader to the plaintiff company.
The defendant Co. obtained Dunlop covers from Dew & Co. at a discount and signed an
agreement not to sell or offer them below the listed price. The same agreement also
contained a clause according to which the Defendant undertook to pay 5 to the Dunlop
Company by way liquidated damages for each such sale or offer below the list prices.
Subsequently Defendant Company accepted two orders from their customers for Dunlop
covers below the current list. prices and also actually supplied materials to their
customers. The Dunlop Co. claimed an injunction against the Defendant to prevent them
from supplying their products below the listed prices and claimed damages for sale, in
breach of agreement, alleging that Dew & Co. had acted as their agent making the
agreement with Selfridge & Co.

Held: It was held that the contract was unenforceable by the Plaintiff and on appeal the
House of Lords held that there was no contract between the Plaintiff & Defendant and the
appeal was dismissed. In this connection Viscount Haldane L.C. had observed:
5

In the Law of England certain principles are fundamental; One is that only a person who
is a party to a contract can sue upon it. The second principle is that if a person with
whom a contract, not under seal, has been made is able to enforce it; consideration must
have been given by him to the promisor or to some person at the promisors request. A
third proposition is that a principal not named in the contract may sue upon it, if the
promisee really contracted as his agent. But again, in order to entitle him so to sue, he
must have given consideration either personally or through the promisee acting as his
agent in giving it.

Mohri Beebe vs. Dhurmodas Ghose P.C. (1903) 30 I.A. 113

Principle: Section 10 of Indian Contract Act of 1872 declares the all agreements are
contracts if they are made by free consent of the parties competent to contract and
Section 11 of the Act further declares every person is competent to contract who is of age
majority according to the law to which he is subjectand the effect is that a contract
with infant is void.

Facts: On the 20th July, 1895, the defendant executed a mortgage in favour of Brahmo
Dutt, a money-lender carrying on business at Calcutta, to secure the repayment of Rs.20,
000 at 12% interest on some house belonging to the Defendant. At that time, the
defendant was infant and he did not attain 21 years until the month September of that
year. Throughout the transaction, Brahmo Dutt was absent from Calcutta and the whole
business was carried by his attorney Kedar Nath. While considering the proposed
advance, Kedar Nath received information that Defendant was still a minor. On the day
on which the mortgage was executed, Kedar Nath got the infant to sign a long declaration
which he had prepared for him - containing a statement that he came of age on 17th of
June 1895, and Brahmo Dutt, relying on this declaration, had agreed to advance to him
Rs.20, 000 and out which the money lender paid him only about Rs.8, 000. Kedar was
fully aware of the fact that at the time the mortgage was executed, the Defendant was at
the age of minority.
On the 10th September 1895, the defendant with his mother and guardian commenced an
action against the Brahmo Dutt, stating that he was under age - when he executed the
mortgage and paid for a declaration; that the same was void and in-operative as contract
with the minor is void. Brahmo Dutt put in a defence that the plaintiff was of full age
when he executed mortgage; that neither he nor Kedar Nath had any notice that the
Plaintiff was then infant; and even if he was a minor, the declaration as to his age was
fraudulently made to deceive appellant and thereby he contended that the defendant was
not entitled to any relief.

Held: The court of first instance found the facts as above and granted the relief asked.
And the appellant court dismissed the appeal. Subsequently to the institution of the
present appeal Brahmo Dutt died and his appeal has been prosecuted by the executors.
The Plaintiffs reason in the present appeal is that the courts below were wrong in
holding that the knowledge of Kedar Nath must be imputed to the Defendant.

The Appellants Counsel contended that the Plaintiff is estopped from setting up that he
was an infant when he executed the mortgage. The Court pointed out that the Estoppel
does not apply to a case (like the present) where the statement relied upon is made to a
person who knows the real facts and is not misled by the untrue statement. There can be
no Estoppel where the truth of the matter known to both parties. It was further contended
that as an infants contract was only voidable, the sum actually borrowed must be
refunded under Sec.64 of Indian Contract Act of 1872. Looking at Sec.10, 11 and other
contentions raised by Plaintiff and Defendant, their Lordships are satisfied that the Act
makes it essential, that all contracting parties should be competent to contract and
expressly provides that a person, who by reason of infancy is incompetent to contract,
cannot make a contract within the meaning of the Act. The question whether a
contract is void or voidable presupposes the existence of a contract within the
meaning of the Act and cannot arise in case of an infant. Their Lordships were of the
opinion that the infant contract is not voidable but only void and void only.
Consequently no question of refunding any monies could arise in such circumstances.
With this declaration of the Juridical Committee of Privy Council as regards the
interpretation of Section -11 of Indian Act, it is settled that infants contract under
Indian Law is absolutely void and therefore no possibility of ratification by the infant
on coming of age and present appeal was dismissed.

Chikkam Ammiraju vs. Chikkan Seshamma

A.I.R. (1918) Mad.414

Principle: An agreement to which the consent is caused by coercion is voidable at the

option of the party whose consent was so caused. The consent is said to be caused by
coercion, when it is obtained by pressure exerted by either (1) committing or threatening
to commit any act forbidden by the Indian Penal Code (2) or unlawfully detaining or
threatening to detain any property.
A threat to commit suicide, in consequence of which a document is executed by a
person, is the threatening to commit an act forbidden by the Indian Penal Code and it
amounts to coercion within the meaning of Section 15 of the Indian Contract Act.

Facts: By threat of suicide, Chikkam Ammiraju induced his wife and his son to execute
a release in favour of his brother in respect of certain properties which they were
claiming as their own. Consequently, Chikkam Seshamma along with her son executed
a release document as desired by her husband. Later on, wife wanted to set aside the
document on the ground that she had executed the release document under coercion and
as such she prayed in the Lower Counts - let the document be declared as void. But the
Defendant Ammiraju contended that the suicide was not an act forbidden by the Indian
Penal Code within the meaning of Sec. 15 of the Contract Act; he further pleaded that the
Plaintiffs consent was obtained freely and therefore the release document could not be
declared void.

Held: The lower courts were of the opinion that the deed in question was obtained by
coercion; the coercion consisting in a threat by husband to his wife and son that he
would commit suicide if they did not execute the document. But there was different
opinion as to whether the facts as found amount to coercion within the meaning of
sec.15 of Indian Contract Act of 1872, then the present appeal come before High Court.
The main point argued before High Court was that suicide was not an act forbidden
by the Indian Penal Code and whether threatening to commit suicide was considered to
be coercion within the meaning of the Sec.15 or not since - threatening to commit
suicide is not an offence under I.P.C; only attempt to commit suicide is punishable
offence under I.P.C.
By the majority of judges led by Chief Justice, it was held that threatening to commit
suicide amounts to coercion within the meaning of Sec.15 of Contract Act. It was
further held that the document should be set aside and the appeal be dismissed with
costs.
In this connection, Willis Chief Justice and Seshagiri Iyer, J - observed:
It was impossible to hold that an act which is made punishable to abet or attempt is not
forbidden by the Indian Penal Code, especially in the absence of any Section punishing
the act itself is due to the fact that the suicide is in the nature of things beyond the
Jurisdiction of the Court.
Oldfield, J. dissenting held that the section should be strictly construed and that an act
not punishable under I.P.C. shall not to be said to be forbidden by the Code.

Nordenfelt vs. Maxim Nordenfelt Guns and

Ammunitions Co. (1894) A.C. 535
This is a leading case on the issue of restraint of trade relevant under Section 27 of the
Indian Contract Act. The House of Lords had declared the judgment and laid down the
policy of law consisting of four (4) major principles in respect of restraint of trade.

Facts: In this case, the appellant, Nordenfelt was an inventor and a maker of guns
and ammunition. He sold his business to the respondent Co. for 287,500 and entered
into a covenant which reads as follows:
- that he would not for 25 years hence-forth engageeither directly or indirectly in the
trade or business of a manufacturer of guns, gun mountings or carriages, gun-powder
explosives or ammunition, or in any business competing or liable to compete in any way
with that for the time being carried on by the company.

Held: It is clear that the restraint entered into by Nordenfelt was of a general and not
merely of partial nature, since there was no limit placed on the area to which it was
be extend. Nevertheless, the House of Lords held that the agreement was not totally
void. The latter part of covenant underlined above was unreasonable, and as it was
distinct and severable from the rest of the agreement, was void.
The House of Lords, went on to express the view that the division of agreements into
two classes general and partial could no longer be sustained as a rule of common
law. All contracts, said Lord Macnaughtan, which had for their object the restraint of
trade, were prima facie void; but all might be justified if they were reasonable in the
interests of the parties and the public.

Rules laid down in Nordenfelt case:

i.

All restraint trade, in the absence of special justifying circumstances, are

contrary to public policy and therefore, void;

ii.

It is a question of law for the decision of the court whether the special
circumstances adduced do or do not justify the restraint.

iii.

A restraint can only be justified if it is reasonable

a) in the interest of the contracting parties and
b) in the interest of the public

iv.

The onus of showing that the restraint is reasonable between the parties
rests upon the person alleging that is so i.e. covenantee.

Gherulal Pareekh vs. Mahadevdas, A.I.R. 1959 S.C. 78

This is a leading case dealing with the wagering contract and various issues arising
under Section 23 of the Indian Contract Act. It raised the question of the legality of a
partnership to carry on business in wagering contract. Justice K. Subba Rao delivered
the majority judgment in this case.
In this case the appellant, Gherulal Pareekh and the respondent Mahadevdas entered
into a partnership agreement to carry on wagering contracts with two firms of
Hapur. It was agreed that the said contracts would be made in the name of the
respondent on behalf of the firm and the partners should share the profit and loss
resulting from the transaction. In pursuance of this agreement the respondent entered
into contract in his own name and suffered loss. As the Appellant denied his liability to
bear the loss, the respondent instituted a suit to recover Rs.5, 300/-

Held: The appellant has taken the defence that the agreement between the parties is
wagering contract and hence, unlawful under Section 23 of the contract Act.

The trial court accepted the plea of the defendant and dismissed the suit. The High Court
of Calcutta held that this partnership between the managers of Joint Hindu Family
amounts to wagering contract and is void under Section 30 of the contract Act. But its
object was not unlawful under Section23 of the Contract Act. Hence, the High Court
allowed the claim of the Plaintiff / Respondent.
The issue before the Supreme Court was whether this partnership agreement falls under
section 23 of the Contract Act. For this we have to deal with the Supreme Court
observations on the following three issues.
1. Whether the agreement is Forbidden by Law: In India where the criminal law is
codified, acts forbidden by law seem practically consists of acts punishable under Indian
Penal Code and of acts prohibited by special legislation or by regulations or orders.
This has been accepted by the courts. Hence, the wager is only void it is not forbidden
by law and the object of collateral agreement is not unlawful under section 23 of the
Act. Supreme Court held that the present partnership is not unlawful within the
meaning of section 23 of the Contract Act.
2. Whether the agreement is opposed to Public Policy: In this regard the Supreme
Court observed that it is no longer legitimate for the courts to invent new heads of public
policy. The judge must apply the principles laid in previous decision. The doctrine should
be involved only in clear cases in which the harm to the public is substantial. The
common laws of England and India have never struck down contracts of wager on the
ground of public policy.
3. Immorality: The case law both in England and India confines the operation of the
doctrine to sexual immorality. Immoral is very comprehensive word and takes in every
aspect to personal conduct deviating from the standard norms of life. There is no
universal standard and the doctrine is limited by interpretation at the courts and thereby
meaning allotted to it. Hence, the wager does not fall under the category of immorality.
For the foregoing reasons the Supreme Court held that the partnership was not unlawful
within the meaning of section23 of the contract Act. In the result the appeal fails and is
dismissed with costs.

10

Satyabrata Ghose vs. Mugnee Ram Bangur and Co. 1954

S.C.R.310
This case deals with the point of discharge by impossibility of performance. The
Supreme Court has considered the relevancy of English Law regarding frustration and
explained the scope of section 56 of the Contract Act. Justice Mukherji delivered the
majority judgment.

Facts: The defendant company was the owner of a large trust of land situated at
Calcutta. The company started a scheme for development of this land for residential
purposes. The plaintiff was granted a plot on payment of earnest money. The
company undertook to construct the roads and drains necessary for making the lands
suitable for building and residential purposes and as such as they were completed, the
purchaser would be called upon to complete the conveyance by payment of the balance of
the consideration money. But before anything could be done, a considerable portion
of the land was requisitioned by the State during the Second World War for
military purposes. The company attempted to cancel the contract on the ground that by
reason of the supervening events, its performance had become impossible. The
plaintiff filed a suit for specific performance and pleaded that the contract was still
subsisting.
Three issues were raised before the Supreme Court:
1. Whether the English law relating to frustration can be applied in view of specific
provision in India i.e. Section - 56 of the Contract Act.
2. Whether impossibility of performance can be a defence in case of contract of sale
of land.
3. Whether the doctrine is available in the light of events and circumstances of this
case.

Held:
(1) As regards the first issue, the Supreme Court observed that the whole law relating
discharge by impossibility of performance is laid down in section 56 of the Contract Act.
It would be incorrect to say that Section 56 applies only to cases of physical
impossibility. The provision is exhaustive one. Hence it is not permissible to import the
principle of English law, through these statutory provisions.
(2) The second contention related to the English principle that the doctrine of frustration
does not operate in the case of contracts for sale of land. The rule of frustration can only
be put on to purely contractual obligations, but it cannot destroy an estate in land which
has already accrued in favour of a contracting party. According to the Indian Law Section 54 of the T.P. Act - a contract for the sale of land does not itself create any
interest in the property. Hence, the doctrine of frustration is equally applicable to
contracts for sale of land in India.
(3) As regards the third issue the Supreme Court pointed out that the nature of the
contract in this case was different. The most material thing which deserved notice was
that there was absolutely no time limit within which the roads and drains are to be made;

11

another important thing which requires notice was that the war was already on, when the
parties entered into contract. Hence, the contract in this case is not frustrated.

Hechester vs. De in Tour 1853 2 E & B 679

This is a leading case on the point of anticipatory branch of contract. It may sometimes
happen that even before the time for performance arrives, the promisor may definitely
renounce the contract and refuse to perform it. The affected party can bring an action
without waiting till the end of the last date of performance.
In this case, the defendant engaged the plaintiff on the 12th April to enter into his service
as courier and to accompany him upon a tour; the employment was to commence on the
1st June. On the 11th of May the defendant wrote to the plaintiff to inform him that his
services would not longer be required. The plaintiff at once brought an action, although
the time for performance had not yet arrived. Now the question in such cases is whether
the party would at once be entitled to treat the contract as broken or whether he
should wait till the time for performance arrives, and then bring an action for
damages.
The court held that the plaintiff was entitled to do so. The court observed that in case of
what is called anticipatory breach of contract, it is not necessary for the plaintiff to
wait till the time of performance passes. In this case, keeping the contract alive would
involve an obligation on the courier to keep himself equipped for the three months
foreign travel, thus preventing him from taking up any other employment. It was
considered reasonable that in such cases of anticipatory breach of a contract, it should be
open to the other party to accept renunciation as immediate breach of the contract and sue
for damages. He can claim prospectively such damages as would be caused by a breach at
the appointed time subject to any circumstances which may operate in mitigated of the
damage.
The rule had also been applied to situations where the performance is conditional, as in
Frost vs. Knight (1872).

Hadley vs. Baxendale (1854) 156 ER 145

Principle: This is a leading case dealing with the principle of damages for breadth of
contract. The foundation of modern law of damages is laid down through this case. The
statement of law is generally known as the rule in Hadley vs. Baxendale and it will be
seen that it lays down damages are recoverable in two cases:

12

Facts: The Plaintiffs carried on the business as Millers. Their Mill was stopped by the
breakage of a crankshaft, and it was necessary to send the crankshaft to the makers as a
pattern for a new one. The Defendants who were carriers undertook to deliver the shaft
to the makers, but the only information given to them was that the article to be carried
was the broken shaft of a mill, and that the plaintiffs were the millers of the mill. By
some neglect on their part the delivery of the shaft was delayed and in consequence
the mill could not be re-started. The Plaintiff lost profits which they would otherwise
have made.

Held: The question was whether this loss of profits ought to be taken into account
in estimating damages. It lays down the Principle that damages are recoverable in two
situations.
1. When they arise naturally i.e. according to the usual course of things
from the breach; and
2. When they are such as may reasonably be supposed to have been in
contemplation of both parties at the time they made the contract, as the
probable result of the breach of it.
Applying these principles quoted above, the court pointed out that the circumstances
communicated to the defendant, did not show that a delay in the delivery of the
shaft would entail loss of profits of the mill. The plaintiffs might have had another
shaft, or there might have been some other defect in the machinery to cause the
stoppage.
Alderson B. observed as follows:
It follows, therefore, that the loss of profits here cannot reasonably be considered such a
consequence of the breach of contract as could have been fairly and reasonably
contemplated by the parties when they made this contract. For such loss would neither
have flowed naturally from the breach of this contract in the great multitude of such
cases occurring under ordinary circumstances, which perhaps, would have made it a
reasonable and natural consequence of such breach of contract, communicated to or
known by the defendants.
The court, therefore, held that the loss of profits to the miller could not be taken into
consideration at all while estimating the damages.
Compiled by:
Prof. Dr. K.S.N. Sarma
B.Sc; M.A (S.W); LL.D

Advocate
High Court of Judicature [A.P]
Visiting Faculty ICFAI Business School
109-Star Shelters, Saidabad Colony
HYDERABAD 500059
Mobile: +91 88864 22446
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