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Case Summary

Harvey vs. Facey (1893) AC 552

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This Case Summary is written by Ishanvi Jain, a student of Galgotias University, Noida

Introduction

Harvey vs. Facey case is one of the important case law in contract law as it defines the difference between an invitation to offer and offer. In this case it is shown that the quotation of the price was held not to be an offer. Its importance is that it defined the difference between an offer and supply of information. In this case it is described that the indication of lowest acceptable price does not constitute an offer to sell, but it is considered as an invitation to enter into any negotiation. The defendants in this case were the owner the land, Bumper Hall Pen. And the plaintiffs were those who wanted to buy that land. The plaintiff sent a telegram to the defendant stating “Will you sell us the Bumper Hall Pen?” Telegraph the lowest price.” The defendants in return telegraphed them “the lowest price for Bumper Hall Pen is £900.” The plaintiffs then sent them the telegraph saying that “we agree to buy the Bumper Hall Pen for £900, send the details of the deeds”.

But then the defendants changed their mind and refused to sell their land to them. So the plaintiff sued them on the basis that the second telegraph sent by the defendant quoting the lowest price was the offer and same had been accepted by the plaintiff, and the contract was completed. But on the other hand defendants said that quoting the lowest price is not an offer which can be accepted. The Judicial Committee if the Privy Council held that the exchange of the above stated telegrams had not resulted in a contract. In the first telegram two questions were asked, first was regarding the willingness to sell the land and the second was about the price for which they can sell their land. And in the reply of this telegraph only the lowest price was sent which cannot be considered as offer to sell. In the third telegraph the plaintiffs agreed to buy the land and asked them to send the details of the deeds, which can be considered that they agreed to buy the land, which means that it is an offer and not the acceptance to offer. As the offer was not accepted so it cannot be considered as binding contract between two parties.

Facts

  1. Harvey who was running the partnership company in Jamaica wanted to buy the property owned by Facey who was also negotiating with the Mayor and Council of the Kingdom of Kingston City for the same property.
  2. On October 6th, 1893 appellant sent a telegram regarding the purchase of property to Mr. Facey who was travelling on the train on that day as he did not want that the property was sold to Kingston City.
  3. Telegram said “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid.” Mr. Facey replied “Lowest price for Bumper Hall Pen£900.” In return, Mr. Harvey Replied “We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession.”
  4. Then Mr. Facey changed his mind and refused to sell the land to Mr. Harvey, on this basis Mr. Harvey sued him stating that there existed a contract between them and said that the telegram was an offer and he accepted it.

Issues Raised

  1. Was there an explicit offer from Mr. Facey to Mr. Harvey for the sale of the said property for the consideration of £900 and is it capable of acceptance?
  2. Was there a valid contract or not?
  3. Was the telegram advising the lowest price an offer capable of acceptance?

Judgement

The honourable Judges Bench reviewed the total matter of this case and upholding the Justice Curran’s verdict the Lordships held that the Telegraph 1 asks the respondent this willingness to sell the land and what is the lowest price of that land. But the respondent answered only the second part, and his willingness to sell the property was absent in the telegraph and therefore it cannot be expected to be binding upon him. Here the Court asserted that through the telegraph 3 the reply from the appellants cannot be considered an acceptance to the offer to sell them the land. So the respondent acceptance cannot be granted as a valid contract and actually no acceptance through any form was conveyed by respondent. The Privy Council held that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer.

Conclusion

A valid contract requires a proposal and an acceptance to it and to make contract binding acceptance of the proposal must be notified to the proposer because a legally enforceable agreement required sureness to hold. This case clearly explains the differentiation between invitation to offer and offer and it also throws a light explaining the nature of the offer as it plays a very important role. A valid and concluded contract requires a proposal and an acceptance of the proposal. To make a contract binding it is necessary that the proposal must be accepted and also the acceptance of the proposal must be notified to the proposer. A mere statement contains no implied acceptance to hold. This is because a legally enforceable agreement requires certainty to hold. Here, in this case invitation to offer is an abstract concept which was realized clearly and expressly and this concept is improvising over the period of time. Now, I must say that the principle of invitation to offer is clearly distinguishable from an offer and it has played a crucial role to understand the nature of an offer.

Suggestions

This landmark case laid down the foundation of the concept “invitation to offer”, where a person barely think about the notion accepting the offer or not. Simply, we can say that when a person has not intimated his final desire to accept an offer, it is an invitation to offer. This clearly express that it is only mere formal proclamation of information on the terms on which the person may be willing to negotiate soon. Lack of consensus ad idem between the two parties is the primary reason for which this is not a complete offer. There was no valid contract between both the parties because in reply of the first telegraph the defendant answered only one of the two questions that is what is the lowest price of land and the answer was 900 pounds and it was only the reply of general information and only the invitation to offer but not an offer.

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Case Summary

Ragunath Prasad vs Sarju Prasad (1923) 51 I.A. 101.

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This Case Summary is written by Shrasti Singh, a student of Shri Ramswaroop Memorial University, Lucknow

Introduction

This case is a landmark judgement in Indian Contract Act, 1872 for free consent and undue influence.  For valid contract, one of the main essential element is free consent. The Consent of the parties means that they understand the same thing in the same sense or meeting of the minds. In English law, this is called ‘consensus-ad-idem. Under section 13 of Indian Contract act has define the word consent means as two or more person agrees upon the same thing in the same sense. For contract to be valid it is not enough that parties have given their consent. The consent should also be free .it means it has been given by free will of the parties involving no pressure and use of force. 

Section 14 of Indian Contract Act 1872, provide the concept of free consent. The contract is said to be free when it is not caused by- coercion, undue influence fraud, misrepresentation and mistake. When the contract is not free, it is treated as voidable contract at the option of the party whose consent is not free.

This case deals with the undue influence which is defined under section 16 of Indian Contract Act 1872, it means as when one party is in position to dominate the will of others and actually misuses the power, and then it is case of undue influence. To prove undue influence, the party has to establish a relation between the parties in which the other person in the power to dominate a will of other by reason of:

  • A real or apparent authority for eg a factory owner exercise undue influence to employees to make a certain agreement with him, because he has power to remove the employee from job.
  • Fiduciary relationship for eg Doctor and Patient Relationship.
  • Mental capacity which is influenced due to reason of age, illness, mental or bodily distress. It can be either permanently or temporarily. 

This case is judged by four judge bench of: Shaw, Carson, J Edge, A Ali, L Jenkin.

Fact of the Case

This case is second appeal from a decree of first appeal lie in the High Court of Judicature at Patna on November9, 1920, which change the decree passed by the Subordinate Judge of Arrah on September 25, 1917. In this case, the suit is filed for recovery of the amount of mortgage principle and interest due by Sarju Prasad Sahu to Ragunath (here petitioner). The subordinate judge passed decree in the mortgage suit but allow only simple interest but in appeal high court allowed compound interest.

 The petitioner Ragunath Prasad was a member of joint undivided family along with a respondent Sarju Prasad (his son). But some difference arose and they fought over the properties. The petitioner had sued a criminal proceeding against his own son in the court of law.

 In order to defend himself defendant borrowed money from the plaintiff by mortgaging his properties on May 27, 1910 and acquire ten thousand rupees at a compound interest of 24%. In the mortgage deed, it was written that the respondent will pay the interest by the 30th of the month and in case of non-payment, the interest would add on to principal and the interest would be then charged on the new principal.  Due to this in Eleven year, the amount payable is magnified more the elven fold that is RS. 1,12,885. 

The respondent’s contention was that the lender has taken unconscionable benefit of his mental distress by demanding him high rates of interest and therefore exercised the undue influence which make a contract voidable at option of the party whose consent is not free.

Issued raised

Whether the petitioner, in the circumstances proved in the case, has used undue influence or not within the provision of section 16 of Indian contract ACT 1872?

  Judgement

 The lordship laid down clear views upon Sub-section 3 of Section 16 of the Indian Contract Act as amended. In order to determine that the person falls within the under sub-section 3 of Section 16, the lordship laid down three step process.

  • 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 confirmed, the second stage has been reached, viz., 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 appear as unconscionable then 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.

The lordship view that this order followed in sequence otherwise error will arise. For eg: The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the will of the other? 

After taking Evidence in the case, the lordship held that the borrower failed to prove that lender was in a position to dominate his will under Section 16 of Indian Contract Act, 1872 which is first requirement to be proved. And the only relation between the parties was of lender and borrower. Hence the borrower got no relief.

The lordship have used these precedents given below:

1. Lord Davey in Dhanipal Das v. Raja Maneshar Bakhsh Singh.

2.  Maneshar Bakhsh Singh v. Shadi Lal.

 (While using this precedent, the court view that in present case the borrower have the full power of bargaining and he lay under no disability. The only relation between parties in this case was proved that they were lender and borrower. No prove was found to have the relation to dominate the will of other.)

3. Sundar Koer v. Sham Krishen

4. Abdul Majeed v. Khirode Chandra Pal (The Lordships dissented from the principles laid down by the Appellate Civil Court in this case while declaring the judgement).  

The court upheld the decree of the High Court but varied the amount of mortgage money. The court allowed the compound interest on the principal at the rate of two per cent, from the date of the execution of the bond until September 25, 1917, and thereafter simple interest at the rate of six per cent, per annum up to the date of realization. And held that the appellant will pay the costs of the appeal.

Conclusion

The court in Ragunath Prasad vs Sarju Prasad case laid down three step process which will further help to determine the case fall under section16(3) of Indian Contract Act. Through this case the confusion regarding the relation between the parties to dominate the will other, undue influence and burden of proof was cleared.

 Critical Analysis

The court in this case give a clear view regarding the section 16(3) of Indian Contract Act, 1872. The court laid down three-step process which should be followed in the order not otherwise which may result in error.

Even the case has unconsicousable advantage, if the petitioner does not prove the relation between him and the respondent in which one will dominate the will. The question of undue influence and unconsicousable advantage cannot be raised under section 16(3). 

Case Summary

Felthouse V. Bindley (1862) 11 CB 869

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This Case Summary is written by Shivanshi Aggarwal, a student at Maharaja Agrasen Institute of Management Studies, GGSIPU

Introduction

To make a contract valid and legally bound, offer, acceptance of that offer and consideration are considered to be essential elements. The Indian Contract Act, 1872 defines offer and acceptance as “When one person signifies to another his willingness to do a particular act is said to be maid offer” and “when the other person to whom the offer is made signifies his assent is said to accept that offer”. A contract is made to be complete when an offer is made and that offer is accepted. But to make a certain offer and to accept that offer certain conditions are required. These conditions generally lead to misunderstandings and later disputes. In this case as well there was misunderstanding between the appellant and the party whose property was being subjected regarding whether the offer made was accepted or not. This case provided a slight clear vision towards the correct form of acceptance and how a mere communication does not amount to contract of sale. 

Facts

Paul Felthouse, a builder residing in London was the complainant. He had communication with his nephew John Felthouse, showing the interest to buy his horse. They both had two letters exchanged as there was some misunderstanding regarding the prices of the horse. Paul sent the final letter to his nephew saying, “If I hear no more about him, I consider the horse to be mine at 30 pounds and 15 cents”. He was ready to pay more to cover up for the misunderstanding. John being busy with his farm’s auction replied nothing but instructed auctioneer Mr. Bindley that the horse should not be auctioned and should be reserved. But the auctioneer forgot this communication and sold the horse to some other party gaining more profit. When John got to know about this he sent a letter to his uncle apologizing for the same. Finally Paul sued Bindley in the tort of conversion which is using someone else’s property inconsistently with their rights.

Some of the issues raised in front of the court were-

  1. Whether silence or no reply amount to acceptance
  2. Whether failure to reject amount to acceptance
  3. Does principle of acceptance put burden on the offeree to communicate the acceptance or the refusal

Arguments Raised

Defendant Side

Paul argued that since no letter was received from his nephew’s side the horse will considered being his and then Bindley had no right to sell or to take any advantage from the sale of the horse. He walked beyond his rights by selling the property which did not belonged to him. 

Accused Side

Bindley put up his point saying that since John never communicated his acceptance, there was no actual contract of sale or any bounding contract between them. He never officially communicated the horse to be his and thus Paul had no right over the horse. 

Judgement

This judgement was given by three judge bench consisting of Willes J, Byles J and Keating J unanimously. Willes J gave the leading judgement stating that there was no formal bargain for that horse and hence there was no space for contract of sale. Being silent or giving no response will not amount to acceptance. Though John showed his interest in selling the horse to Paul and also instructed Bindley not to sell the horse in auction but still showing interest will not legally bound him or Bindley to sell the horse to Paul. The date of sale of horse was 25th of February and by that date no letter of acceptance was being sent. The apology letter was sent on 27th of February which will be considered as the first official letter by the nephew to his uncle but that was after the sale of the horse. Thus at the time of the sale there was no legal contract between any party and Paul did not have the ownership of the horse. Since he had no legal right over the horse he cannot claim anything from Bindley and actions for conversion cannot be taken. The other two judges were of the same opinion and did not consider silence or failure to reject as an acceptance. They further signified that one cannot impose an obligation on another to reject one’s offer. 

Conclusion

Offer and acceptance being the major component of binding contract cannot be left as any loophole. There must be clear communication regarding making the offer and simultaneously accepting the offer made. In this case offer has been clearly made by Paul but John did not communicate any clear acceptance. Thus principles of acceptance of offer have been cleared here which clearly shows that silence cannot be considered as an acceptance. The court also considered the case of Dobell v. Hutchinson which tells that acceptance need not to be in written it can be oral as well. But regardless in this case acceptance was not made in any form and only the intention of selling the horse was shown which does not give ownership rights to any person concerned. This case was considered landmark as an important judgement was delivered regarding principles of acceptance. 

Suggestions

There is a concept of acceptance by conduct which means that doing ac act in accordance with what was required which shows the approval or acceptance. Since Paul put the letter stating, “If I do not hear”, and got no response there was a chance of acceptance by conduct. John might do not replied because he agreed to the conditions and prices. This case was also later reconsidered delivering that fact that there were chances of acceptance by conduct. Though the judges were right in saying that clear communication should be made for a contract of sale to become valid and legally bound but in my opinion this case should have been come under acceptance by conduct. The conduct of John, not replying or not giving any response will create a picture in someone’s mind that he accepted the offer and now horse belongs to him. Also the auctioneer was also instructed not to sell the horse and he also failed to work in accordance to what was required by his client. His negligence harmed Paul and Paul should be given the ownership of the horse. As can be seen in the case of Rust v. Abbey Life Asurance Co. Ltd., failure to reject was considered as acceptance. 

Case Summary

Lalman Shukla v. Gauri Dutt (1913) XL ALJR 489 (AII.)

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This Case Summary is written by Shivanshi Aggarwal, a student at Maharaja Agrasen Institute of Management Studies, GGSIPU

Introduction

For a valid and binding contract, there must be an offer and acceptance of that offer. If any one of the element is missing then it will not be considered as the valid contract. Further offer can be classified in various other ways one such is general offer. General offer can be defined as an offer which is made to general public or an offer which is made at large. Then whoever sees that offer and act in accordance with its policies is said to be accepted that offer, in this case there is no need to present acceptance to particular party concerned. In the case mentioned there was misunderstanding regarding whether the offer made by defendant was a general offer or a specific offer and whether plaintiff accepted that offer or his conduct was acceptance to that offer. 

Facts

Gauri Dutt, the defendant sent her several servants to different places to find out her missing nephew who was absconded from the house. Lalman Shukla, the plaintiff was the munim in the firm. He was sent to Haridwar to trace the boy. He was given the expenses of the train fare and was paid for other expenses as well. He found the nephew in Rishikesh and brought him back to Kanpur. When he was gone for the search, the defendant issued handbills saying that whoever will bring back the nephew will be rewarded with 501 rupees. Plaintiff was unaware of this announcement. When he returned he was awarded 20 rupees and two sovereigns. He accepted that and continued to work. After six months when he was being fired from the job due to some dispute he got to know about the offer. Later he filed the case in Kanpur court to claim rest of the reward money. Kanpur courts dismissed his appeal, then he filed the reconsideration appeal in high court. 

Issues Raised

Some of the issues raised in front of the court were:

  1. Whether the offer was accepted
  2. Whether the lower court was correct in dismissing his appeal
  3. Whether he was entitled to receive the remaining reward money
  4. Whether the offer made was specific offer or general offer
  5. Whether the principles of offer made were fulfilled 

Arguments Raised

Plaintiff Side

The plaintiff argued that the conditions of the offer were to find the missing boy and to bring him back home. He fulfilled those and thus as per Section 8 of Indian Contract Act, 1872 which says “performance of the conditions of the proposal is an acceptance of the proposal”, he should be given the remaining amount. He further presented the case of Gibbons v. Proctor which shows that if persons performs the conditions of the offer even if completely unaware of the reward is entitled to receive the amount of the reward also in the case of Williams v. Carwadine it was shown that the valid contract exists if the acceptance is done by performing the essential conditions of the contract. 

Defendant Side

Defendant claimed that since plaintiff was unaware of the offer made and never accepted that offer, should not be entitled to receive any reward as per Section 2(b), and Section 2(h) of Indian Contract Act, 1872 which says that “when the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted” and “an agreement enforceable by law is a contract”, respectively. She further presented the case of Fitch v. Snedker which shows that failure to accept the offer made the contract void and hence no claim can be pleaded. 

Judgement

On filing the reconsideration appeal, in Allahabad High Court, Justice Banerji also dismissed the plaintiff’s appeal stating that since at the time of declaration of reward defendant was not present and did not had the knowledge of the handbills, it cannot be considered as the acceptance of any offer made. Also the acceptance of general offer can be done when any person after knowing the offer, then act in accordance with the offer made with the motive to receive the reward but since here he did not had any previous knowledge he cannot claim any compensation. He was just performing his duties in accordance with his obligations as the servant and not in accordance with any contract or offer made. Thus the contract is not enforceable by law and cannot be treated as any agreement and leading no option with plaintiff to receive any sum of money from defendant as the conduct of finding the missing boy. 

Conclusion

This case was considered very important as a landmark judgement regarding essentials of contract, how contract turns into agreement and elements of general offer were justified here. This case shows how general offer and specific offer is differentiated. Also this case shows the presence of knowledge at the time of conduct or acceptance is very necessary. This case also clarifies how the given facts are different from any other lost and found or missing advertisements of the market and thus why in this case the plaintiff will not receive any remuneration which people usually receive in general times. Also various provisions of Indian Contract Act, 1872 were being highlighted and discussed which extensively tells how to rely upon certain circumstances and how certain facts change the entire concept of general offer. As per this judgement the contract needed acceptance to turn into valid agreement but the absence of that made it void and unenforceable. Lalman Shukla, no doubt performed his duties what was mentioned by Gauri Dutt in the handbills issued but it was not in accordance or not with the motive to fulfill that offer. It was his mere sincerity towards his job. He simply did not have any motive to claim the reward when he left to find the boy from Kanpur to Haridwar. Thus the absence of both knowledge and motive made this case to be dismissed.