Carlill V. Carbolic Smoke Ball Co

Carlill v. Carbolic Smoke Ball Co.

Facts

Facts

CarlillThe Carbolic Smoke Ball Co produced the 'Carbolic Smoke Ball' designed to prevent users contracting influenza or similar illnesses. The company's advertised (in part) that:

“100 pounds reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1,000 pounds is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter”.

After seeing this advertisement MrsCarlill bought one of the balls and used it as directed. She subsequently caught the flu and claimed the reward. The company refused to pay. MrsCarlill sued for the reward.

Legal Issue

1. Can one make a contract with the whole world?

2. How does one interpret vague terms?

3. Was the ad a "mere puff"?

4. Does performance of the conditions advertised in the paper constitute acceptance of an offer?

5. Was there any consideration?

Judgment

At the trial stage the defendants denied that there was any contract between them and the plaintiff; and alternatively, that, if there were any, it was void as a wagering agreement. The trial court gave judgment in favour of the plaintiff and the defendants appealed.

The appellate court observed as following on the issues raised and gave the judgment in favour of Mrs. Carlill:

1. Can one make a contract with the whole world?

It is quite possible to make an offer to the world.

2. How does one interpret vague terms?

Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls.

3. Was the ad a "mere puff"?

The determination of a serious offer will be determined from the words and actions. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff.

4. Does performance of the conditions advertised in the paper constitute acceptance of an offer?

There was a unilateral contract comprising the offer (by advertisement) of the Carbolic Smoke Ball company) and the acceptance (by performance of conditions stated in the offer) by MrsCarlill. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance. Although as a general rule communication of acceptance is required, the offeror may dispense with the need for notification and had done so in this case. Here, it was implicit that the offeree (MrsCarlill) did not need to communicate an intention to accept; rather acceptance occurred through performance of the requested acts (using the smoke ball)

5. Was there any consideration?

There was consideration; the inconvenience suffered by MrsCarlill in using the smokeball as directed was sufficient consideration. In addition, the Carbolic Smoke Ball received a benefit in having people use the smoke ball.

MohoribibivsDharmodasGhose (1903)

Brief facts of the case :

DharmodasGhose (a minor) executed a mortgage of his house in favour of BrahmoDutt to secure the repayment of Rs.20000 at 12% interest. He signed a declaration that he was a major at that time. The agent who was acting on behalf of BrahmoDutt in this transaction knew that DharmodasGhose was only a minor at that time but he did not disclose this fact to his master. Plaintiff sued on the ground that minor agreement is void and mortgage must be cancelled.

Questions of law :

1. Can a minor validly execute a mortgage deed?

2. What is the effect of the minor's misrepresentation of his age?

3. If the deed of mortgage was cancelled can the Court order the minor to refund the amount to the lender?

JUDGEMENT:

The Privy Council rejected the defence of estoppel of the defendant stating that the defendant's agent knew the real age of the minor at the time of execution of the document and held that there was no estoppel. It was held that the question whether a contract is void or voidable presupposes the existence of contract within the meaning of the Act, and cannot arise in the case of an infant (Section 10 & Section 11 of Contract Act). In this case court held that the mortgage was entered into with a minor and hence void. Request for repayment of the amount advanced to the minor as part of consideration also turned down.

The court although took note of the s. 41 of the Specific Relief Act which says “On adjudging the cancellation of the instrument the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require” and s. 38 which provides in similar terms for a case of rescission of a contract; but observed under the circumstances of this case justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy.

Khan Gul v. Lakha Singh (1928) - A minor fraudulently concealed his age and contracted to sell a plot of land to another. The minor received the consideration of Rs. 17, 500/- and then refused to fulfil his part of the bargain. The other party prayed for possession or refund of consideration. The question rose whether a minor who entered a contract through false representation retain the benefits from the contract while refusing to perform his part. Since a minor’s contract is void, specific performance was not granted. However, the court ordered refund of the consideration.

The questions raised in this case were: (1) Whether a minor, who, by falsely representing himself to be a major, has induced person to enter into a contract, is estopped from pleading his minority to avoid the contract. (2) Whether a party who, when a minor, has entered into a contract by means of a false representation of his age, whether he be defendant or plaintiff, in a subsequent litigation, refuse to perform the contract and at the same time retain the benefit he may have derived therefrom.

Regarding the first question court has held that where an infant has induced a person to contract with him by means of false representation that he was of full age, he is not estopped (i.e. prevented) from pleading his infancy in avoidance of the contract.

Regarding the second question the court observed that an infant though not liable under the contract, may in equity, be required to return the benefit he has received by making a false representation as to his age. It makes no difference whether in such litigation he is plaintiff or the defendant.

In this case the court order the minor to refund Rs. 17,500 which he had taken as advance payment, thus the scope of the doctrine of equitable restitution was extended to cover cash also.

The Law Commission of India in its Ninth Report expressed its agreement with case of Khan Gul. Further, the new Specific Relief Act, 1963 incorporated the principle of restitution under Section 33.

Section 33 of the Specific Relief Act, 1963 greatly reduces the potential for ambiguities and uncertainty in the matter. Section 33(1) seeks to restore the parties to their original position to the extent possible. If a void or voidable contract is cancelled at the instance of a party to the contract, the court may require such party to restore the benefits received under the contract and to such compensation as justice may require.

This discretion can also be exercised where the plaintiff is a minor. Thus, under Section 33(1), a minor who is a plaintiff can be compelled to return all the advantages and benefits received under the void contract as under the older law.

However, the court will not compel any restitution by a minor (even if he is a plaintiff) if:

a) the other party was aware of the fact of infancy and thus, was not deceived;

b) the other party was unscrupulous in his dealings with the minor;

c) the other party was overzealous to enter into the agreement that the minor’s misrepresentation did not influence him;

d) the other party provided no material for the court to conclude that justice required return of the money paid to the minor in the instant case.

Section 33(2) attempts to put the parties in the pre-contract position. Even if the defendant is a minor and successfully resists a suit on grounds of his incompetence and resultant void agreement, he can be compelled to account for the advantage, the money or anything else received by him which benefits him personally, such as education or training, or results in a benefit of a permanent nature to his estate. It is implied in Section 33(2) (b) that the English law as laid down in Leslie v Sheill is not applicable in India as it if for it extends the doctrine of restitution to money matters.

BhagwandasGoverdhandasKedia v. M/s. GirdharilalParshottamdas& Co. (1966) – The plaintiffs filed a suit at Ahmedamad against the defendants for compensation on the plea that the defendants had failed to supply cotton seed cake which they had agreed to supply under an oral contract negotiated between the parties by conversation on long distance telephone. Dispute arose as to where was contract formed- at Khamgaon where acceptance was given by defendants or at Ahmedabad where acceptance was received by plaintiffs.

On the issue of jurisdiction raised by the appellants, the trial court found that the Ahmedabad Court had jurisdiction to try the suit. The High Court rejected the appellant’s revision petition whereupon by special leave, he came to the Apex Court.

CONTENTION(S):

Defendants contended that according to the section 2, 3 and 4 of ICA, the place where the offer is accepted is the place where the contract is made and therefore Ahmedabad trial court did not have the jurisdiction to try the suit.

The apex court observed as under:

The language of section 4 of the Indian Contract Act covers acceptance by telephone, wireless etc. The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made but a different rule is made about acceptance. Communication of an acceptance is complete in two ways -(1) against the proposer when it is put in the course of transmission to him so as to be out of the power of the acceptor; and (2) as against the acceptor when it comes to the knowledge of the proposer.

In this case the word of acceptance was spoken at Khamgaon and the moment the acceptor spoke his acceptance he put it in course of transmission to the proposer beyond his recall. He could not revoke his acceptance thereafter. It may be that the gap of time was so short that one can say that the speech was heard instantaneously, but if we are to put new inventions into the frame of our statutory law we are bound to say that the acceptor by speaking into the telephone put his acceptance in the course of transmission to the proposer, however quick the transmission.

The court denied the applicability of the English Common law here (which is capable of being moulded by judicial dicta) and restricted itself to the language of the statute. It is contended that the communication of an acceptance is complete as against the acceptor when it comes to the knowledge of the proposer but that clause governs cases of acceptance lost through the fault of the acceptor. In this case both sides admit that the acceptance was clearly heard at Ahmedabad.

The court opined that the language of s. 4 of the Indian Contract Act covers the case of communication over the telephone. The Contract Act does not provide separately for post, telegraph, telephone or wireless. Some of these were unknown in 1872 and no attempt has been made to modify the law. It may be presumed that the language has been considered adequate to cover cases of these new inventions. The communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor. Thus, the court held that the contract was complete at Khamgaon.

Union of India v. MaddalaThathaiah (1966) – This was an appeal filed by the Railways against the order of the High Court. In this case the Railways invited tenders for the supply of jaggery to the railway grain shops and awarded the tender to MaddalaThathaiah. The Railways cancelled and closed the contract without completion of full supply taking the plea that the Railways reserved the right to cancel the contract at any stage during the tenure of the contract without calling up the outstandings on the unexpired portion of the contract as already mentioned in the contract. The High Court held that the clause reserving the right in the appellant to cancel the contract was void. In response appeal was filed in SC challenging the HC order.

The appeal was dismissed and the court observed that “any such terms in a contract which destroys the contract itself according to earlier terms is void as in that case there would be nothing in the alleged contract which would have been binding on the appellant”.

Abdul Aziz v. Masum Ali – In this case the appeal arise out of a suit brought by the plaintiffs against heirs of Muslim Abdul Karim who promised made a subscription for repairing and reconstructing a mosque. But the cheque was returned by Bank as it was out of date and in the meanwhile Muslim Abdul Karim died. The plaintiffs demanded the subscription from his heirs. In this case court has held that the subscription of Muslim Abdul Karim was a mere gratuitous promise on his part and thus dismissed the claim.

Raghunath Prasad v. Sarju Prasad – The case was for recovery of the amount of principal and interest due by the appellant to the respondents (the plaintiffs) under a mortgage. The question in this case was whether the contract was induced by undue influence (Section 16 of the Indian Contract Act).

The court observed that to make a case for undue influence three matter are to be dealt with. In the first place the relations between the parties to each other must be such that one is in a position to dominate the will of the other. Once that position is substantiated the second stage has been reached – namely the issue whether the contract has been induced by undue influence. Upon the determination of this issue a third point emerges, which is that of the onus probandi. If the transaction appears to be unconscionable, then the burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other. And the orders stated above must be followed to avoid any error.

In this case the court has held that only relation between the parties that was proved was simply that they were lender and borrower. In these circumstances, even though the bargain had been unconscionable (and it has the appearance of being so), a remedy under the Indian Contract Act does not come into view until the initial fact to dominate the will has been established.

SatyabrataGhose vs. MugneeramBangur& Co. (doctrine of frustration of contract).

The dispute in the present matter pertained to the question as to whether a contract for sale of land was discharged and came to an end by reason of certain supervening circumstances which affected the performance of a material part of it. The court while adjudicating the above issue was also sought to distinguish the law relating to frustration of contract as applicable in England and in India.

Material facts of the case

The defendant company scheme for development of on a large tract of land owned by itfor residential and in furtherance of the scheme the entire area was divided into a large number of plots for the sale of which offers were invited from intending purchasers. A major portion of the land-appertaining to the scheme was requisitioned by the Government due to war and the company decided to treat the agreement for sale as cancelled giving the option of taking back the earnest money, or deposit the balance of the consideration money and take possession after requisite construction by the company on termination of the war. The plaintiff refused to accept either of the two alternatives offered by the company and stated categorically that the latter was bound by the terms of the agreement from which it could not, in law, resile.

High Court gave decision in favour of the defendants and the appeal was filed by the plaintiff against it. The learned Attorney General, who appeared in support of the appeal, has put forward following three-fold contention on behalf of his client.

1. That the doctrine of English law relating to frustration of contract, upon which the learned Judges of the High Court based their Decision has no application to India in view of the statutory provision contained in section 56 of the Indian Contract Act.
2. That even if the English law Applies, it can have no application to contracts for sale of land and that is in fact the opinion expressed by the English ,judges themselves.
3. That on the admitted facts and circumstances of this case there was no frustrating event which could be said to have taken away the basis of the contract or tendered its performance impossible in any sense of the word.

The apex court observed as following on the above contentions: