2(a)
2(b)
10

General Offer
Acceptance by Conduct

The company advertised that anyone who used its smoke ball and still got influenza would receive £100. The court held that this advertisement was a general offer (offer made to the public). Mrs. Carlill used the product exactly as instructed and still became ill. The court said she accepted the offer by performing the act required in the advertisement. Acceptance can happen through conduct (action), not only through spoken or written words. The company had also deposited money in a bank to show the promise was serious. This showed intention to create legal relations. Therefore a valid contract existed between the company and Mrs. Carlill. The case is one of the most famous examples explaining offer and acceptance in contract law.

2(a)

Offer vs Supply of Information

One person sent a telegram asking another person the lowest price for a property. The reply only stated the lowest price but did not say that the property would be sold. The buyer then tried to accept the price as if it were an offer. The court held that giving information about price is not an offer. It is only a supply of information. Since no offer existed, there could be no acceptance. Therefore no contract was formed between the parties. This case clearly explains the difference between an offer and a simple statement of information.

2(b)

Knowledge of Offer

A reward was announced for information about a criminal. A person provided the information but he did not know about the reward when he gave the information. Later he tried to claim the reward. The court held that a person cannot accept an offer without knowing that the offer exists. Knowledge of the offer is necessary for valid acceptance. Since the person acted without knowing about the reward, his act could not be treated as acceptance. Therefore he could not claim the reward.

2(b)

Knowledge of Offer

A servant was sent to search for his employer’s missing nephew. After the servant had already started searching, the employer announced a reward. The servant later found the boy and asked for the reward. The court refused the claim. It held that the servant did not know about the reward when he performed the act. Therefore there was no acceptance of the offer. This case again confirms that knowledge of an offer is necessary before acceptance.

2(d)

Meaning of Consideration

The court explained the meaning of consideration in contract law. It stated that consideration means some right, interest, profit or benefit given to one party, or some loss or responsibility taken by the other party. In simple terms, both parties must exchange something of value. Without such exchange, a promise is usually not enforceable in law. This case provides the classic explanation of consideration used in many legal discussions.

2(d)

Consideration from Third Party

A woman transferred property to her daughter and directed her to pay money to the woman’s brother every year. Later the daughter refused to pay the brother. The brother filed a case to enforce the promise. The court held that consideration (something of value given for a promise) can move from a third person. Even though the brother did not give the property himself, he could still enforce the promise. This case explains an important rule under Indian law.

2(d)

Privity of Contract

A manufacturer tried to enforce a resale price agreement against a retailer who had not made the contract directly with the manufacturer. The court held that only a person who is a party to a contract can sue on it. A stranger to the contract cannot enforce its terms. This rule is known as privity of contract (only people who made the contract can enforce it). Therefore the manufacturer could not enforce the agreement against the retailer.

4
5

Postal Rule of Acceptance

The defendants sent an offer by post but addressed the letter incorrectly, which caused delay. The buyer received the offer later and sent acceptance by post. Before receiving the acceptance, the defendants sold the goods to another person. The court held that acceptance becomes complete when the letter of acceptance is posted. It does not depend on when the letter is received. This rule is known as the postal rule of acceptance. Therefore a valid contract existed once the acceptance letter was posted.

4

Revocation of Offer

The defendants sent an offer by letter and later sent another letter withdrawing the offer. The withdrawal letter reached the buyer after the buyer had already sent acceptance. The court held that revocation (cancellation of an offer) is effective only when it is communicated to the other party. Since the buyer accepted before receiving the withdrawal, the contract was already complete. Therefore the revocation had no effect.

4

Instant Communication Rule

This case explained how acceptance works in instant communication such as telephone or telex. The court held that acceptance is complete only when it is received by the offeror. If the message does not reach the other party, the acceptance is not complete. Therefore no contract is formed until the acceptance is successfully communicated. This rule is different from the postal rule.

7

Silence is not Acceptance

An uncle wrote to his nephew saying that if he did not hear back, he would assume the horse was sold to him. The nephew intended to sell the horse but did not reply. Later the horse was mistakenly sold at auction. The uncle claimed that a contract already existed. The court held that silence cannot be treated as acceptance. Acceptance must be clearly communicated. Therefore no contract existed between the uncle and nephew.

7

Counter Offer

A seller offered to sell property for £1000. The buyer replied that he would pay £950. The seller refused this proposal. Later the buyer tried to accept the original offer of £1000. The court held that the earlier reply was a counter offer (new offer with changed terms). Once a counter offer is made, the original offer ends. Therefore the buyer could not later accept the original offer.

10

Acceptance by Conduct

A railway company and a coal supplier prepared a written contract but never formally signed it. However they continued their business according to the terms written in the document. The court held that acceptance can be shown through conduct (actions). Even though the document was not formally signed, the behaviour of both parties showed agreement. Therefore a valid contract existed between them.

10

Intention to Create Legal Relations

A husband promised to send money to his wife while he worked abroad. Later he stopped sending the money and the wife filed a legal case. The court held that agreements made in normal family situations usually do not create legal obligations. Such arrangements are based on personal trust and relationships. Therefore they are generally not treated as contracts in law.

10

No Intention to Create Legal Relations

Two companies made an agreement stating clearly that their arrangement was not a legal contract but only an honourable understanding. Later a dispute arose and one company tried to enforce the agreement. The court held that since the parties clearly stated they did not intend legal relations, the agreement could not be enforced. Intention to create legal relations is an essential element of a contract.

11

Minor’s Agreement is Void

A minor borrowed money and mortgaged property. Later the minor argued that the contract was not valid because he was under 18 years old. The Privy Council agreed with the minor. The court held that an agreement with a minor is void (not legally valid from the beginning). A minor cannot be forced to perform such a contract. This is a very important rule in Indian contract law.

11

Minor Liable for Necessaries

A tailor supplied expensive clothes to a minor who was already well supplied with clothing. The tailor later sued the minor for payment. The court held that a minor is liable only for necessaries (essential goods suitable to his life condition). Since the clothes were not necessary, the minor was not required to pay.

13

Mistake of Fact

Both parties agreed to ship cotton on a ship called “Peerless”. Unknown to them, there were two ships with that name sailing at different times. Each party referred to a different ship. The court held that there was no real agreement because the parties did not mean the same thing. Therefore the contract was void due to mistake.

14

Unilateral Mistake

A buyer purchased oats believing they were old oats suitable for feeding horses. The seller had not made any false statement about the oats. The court held that if one party is mistaken but the other party did not cause the mistake, the contract is still valid. Contracts depend on outward communication, not secret intentions.

16

Undue Influence

The court explained the principle of undue influence. This happens when one person has power over another and uses that power unfairly to obtain an advantage. The court must examine whether the weaker party truly acted freely. If undue influence is proven, the contract may be cancelled.

17

Fraud

The directors of a company made a statement believing it to be true. Later the statement turned out to be incorrect. The court held that fraud requires proof that the person knowingly made a false statement or did not believe it was true. Honest belief, even if wrong, does not amount to fraud.

18

Misrepresentation

A person entered a contract based on incorrect statements about a business. The court held that even if the other party could have discovered the truth by checking documents, the contract can still be set aside. A false statement that influences a person’s decision to enter a contract can make the contract voidable.

23

Agreement Against Public Policy

The Supreme Court examined the idea of agreements harmful to society (public policy). The court stated that this rule must be applied carefully. Only clear cases should be treated as against public policy. The case discussed wagering transactions and clarified that not all such agreements are illegal.

23

Unfair Contract Terms

Employees were required to sign a contract allowing the employer to terminate employment at any time without reason. The Supreme Court held that such a clause was extremely unfair. Courts can strike down very unfair terms that exploit weaker parties. The clause was declared void as it was against public policy.

26

Restraint of Marriage

A man promised not to marry anyone except a particular woman and agreed to pay money if he broke the promise. The court held that agreements that restrict marriage are against public policy. Such agreements interfere with personal freedom. Therefore they are void.

27

Restraint of Trade

The seller of a business agreed not to compete with the buyer for a certain time and area. The court held that reasonable restrictions can be valid if they protect legitimate business interests. However extremely wide restrictions that completely stop a person from working are not valid.

70

Quasi Contract

A contractor built structures for the government without a formal contract. The government used the structures and received benefit from the work. The court held that when one person lawfully does work for another and the other person benefits from it, the law may require payment. This is called quasi contract (obligation created by law).

72

Money Paid by Mistake

A person paid tax because of a mistake of law. Later the mistake was discovered and the person asked for refund. The Supreme Court held that money paid by mistake must be returned. The law requires restitution, which means restoring the benefit received wrongly.

73

Damages for Breach of Contract

This case explains the rule for damages (money compensation) when a contract is broken. The court held that damages can be claimed only for losses that naturally arise from the breach. Losses that both parties knew about at the time of the contract can also be claimed. However unexpected or remote losses cannot be recovered.