Contract Case Laws India: A Comprehensive Overview
In India, contract law is governed by the Indian Contract Act, 1872. This act sets out the legal framework for the formation and enforcement of contracts. Over the years, numerous case laws have been developed by the Indian courts that provide essential guidance on contract law. In this article, we will discuss some of the significant contract case laws in India.
Elements of a Contract
Every contract must have the following essential elements:
● Offer: It is a proposal made by one party to the other, expressing its willingness to enter into a contract.
● Acceptance: It is the expression of consent to the terms of the offer.
● Consideration: It refers to something of value offered by one party to the other in exchange for the promise.
● Intention to Create Legal Relations: Both parties must have an intention to create legal relations to make the contract enforceable.
Some of the significant cases involving the elements of a contract are:
1. Balfour v Balfour (1919): In this case, the husband promised to pay his wife an allowance of £30 per month when he was away in Ceylon. The couple eventually separated, and the wife sued for the allowance. The court held that the promise was not legally enforceable as it lacked the intention to create legal relations.
2. Carlill v Carbolic Smoke Ball Co. (1893): In this case, the company advertised a product that could prevent influenza and offered a reward of £100 to anyone who still contracted influenza after using the product according to the instructions. The plaintiff used the product and later contracted influenza. The court held that the advertisement constituted an offer, and the use of the product amounted to acceptance of the offer. Thus, the plaintiff was entitled to the reward.
Capacity to Contract
To enter into a contract, parties must have the necessary capacity to do so. Persons who are minors, of unsound mind, or under the influence of alcohol or drugs lack the capacity to enter into a contract.
1. Mohori Bibee v Dharmodas Ghose (1903): In this case, a minor mortgaged his property to a moneylender. The court held that the mortgage was void as the minor lacked the capacity to enter into a contract.
2. Jagdish Chandra v Ramesh Chandra (1992): In this case, a person under the influence of alcohol signed a contract to sell his property. The court held that the contract was void as the person lacked the capacity to enter into a contract.
Performance and Breach of Contract
Once a contract is formed, parties must fulfill their obligations under the contract. Failure to do so constitutes a breach of contract.
1. Hadley v Baxendale (1854): In this case, the plaintiffs operated a mill, and the defendant was hired to transport a broken mill shaft to a manufacturer to create a replacement shaft. The defendant delayed in delivering the shaft, causing the plaintiffs to suffer losses. The court held that the defendant could only be held liable for losses that could have been foreseen at the time the contract was formed.
2. M/s Alopi Parshad & Sons v Union of India (1960): In this case, the plaintiff was awarded a contract to supply certain goods to the government. The government later canceled the contract, leading to losses for the plaintiff. The court held that the cancellation was illegal, and the plaintiff was entitled to compensation.
Contract law is an essential aspect of commercial transactions in India. The case laws developed over the years provide valuable guidance on the formation and enforcement of contracts. Parties must adhere to the essential elements of a contract, have the necessary capacity to enter into a contract, and fulfill their obligations under the contract to avoid breach of contract. Understanding these case laws can help prevent disputes and ensure the smooth functioning of commercial transactions.