1. Balfour v Balfour

Facts: Mr. Balfour, a senior government officer stationed in Ceylon, travelled to England on leave with his wife. During their stay, Mrs. Balfour’s health deteriorated, and her doctor advised her to remain in England rather than return to the hot, humid climate. Before departing, Mr. Balfour promised to send her £30 per month for maintenance until she was fit to rejoin him. Their relationship subsequently broke down, and he ceased payments. Mrs. Balfour sued, claiming that the promise was a legally binding contract.

Issues:

  • Whether an agreement between spouses living amicably can give rise to contractual obligations.
  • Whether there was an intention to create legal relations.

Judgment and Reasoning: The Court of Appeal, led by Atkin LJ, ruled that there was no enforceable contract. Agreements between spouses for household or maintenance matters are presumed not to create legal relations unless there is clear evidence to the contrary. The court emphasised that the law should not intrude into ordinary domestic arrangements.

This case remains a leading authority on the requirement of intention to create legal relations. It draws a line between social promises and commercial contracts.

2. Hadley v Baxendale

Facts: Hadley & Co., millers in Gloucester, experienced a breakdown of their steam engine when its crankshaft snapped. To resume operations, they needed the broken shaft delivered to engineers to manufacture a replacement. They engaged Baxendale, a carrier, promising next-day delivery. Due to Baxendale’s delay, the mill remained idle for several days, causing Hadley to lose profits. They sued to recover those losses as damages.

Issues:

  • What damages are recoverable for breach of contract?
  • How should courts limit liability for losses caused by breach?

Judgment and Reasoning: The court formulated the famous “two-limb” rule: damages include (a) losses arising naturally from the breach, and (b) losses that the parties contemplated at the time of contract because of special circumstances. The lost profits were too remote, as the carrier did not know the mill would stop without the part.

Hadley v Baxendale established the doctrine of remoteness of damages, ensuring parties are only liable for foreseeable losses.

3. Mohori Bibee v Dharmodas Ghose

Facts: Dharmodas Ghose, a minor, mortgaged his property in favour of a moneylender for a loan of Rs. 20,000. The mortgage deed was executed by the lender’s agent, who knew that Ghose was under 18 years of age. The borrower later sought to have the mortgage set aside on the ground of minority.

Issues:

  • Is a contract entered into by a minor enforceable under the Indian Contract Act?
  • Does knowledge of minority affect validity?

Judgment and Reasoning: The Privy Council ruled that agreements with minors are void ab initio. Knowledge of the borrower’s minority meant the lender could not claim equitable relief either. Contracts with persons lacking capacity cannot bind them except for contracts for necessaries.

The case safeguards minors and clarifies that capacity is a prerequisite for contract formation.

4. Carter v Boehm

Facts: Carter, the governor of Fort Marlborough in Sumatra, obtained insurance from Boehm to protect the fort against loss from enemy attack. At the time of arranging the policy, Carter did not disclose that the fort was poorly defended and vulnerable to capture. When the fort fell to French forces, Boehm refused to pay, alleging that Carter had concealed material information.

Issues:
The dispute raised the question of whether contracts of insurance impose a duty on the insured to reveal all facts material to the risk, even if not specifically requested by the insurer.

Judgment & Reasoning: Lord Mansfield, delivering the judgment, stated that insurance contracts are based on uberrima fides or utmost good faith. Because the insurer relies on the applicant’s knowledge, the applicant must disclose all material circumstances that could influence the insurer’s decision. Non-disclosure, even if innocent, may entitle the insurer to avoid the policy. Although Boehm ultimately remained liable because he was already aware of some facts, the case established the general duty of full disclosure in insurance law.

5. Felthouse v Bindley

Facts: Felthouse wrote to his nephew offering to buy a horse and adding that if he did not hear back, he would assume the animal was his. The nephew intended to accept but failed to communicate in time. Meanwhile, Bindley, an auctioneer, accidentally sold the horse at a sale. Felthouse sued Bindley, claiming ownership.

Issues:
Did the nephew’s silence amount to acceptance, creating a contract between uncle and nephew?

Judgment & Reasoning: The court held there was no contract. Silence cannot constitute acceptance unless the offeree has expressly agreed to that mode. Acceptance must be communicated or evidenced by conduct indicating assent. Because the nephew never actually accepted before the auction, ownership had not passed.

6. Harvey v Facey

Facts: Harvey sent a telegram to Facey asking whether he would sell a property called Bumper Hall Pen and, if so, to state the lowest cash price. Facey replied: “Lowest price for Bumper Hall Pen £900.” Harvey immediately telegraphed that he agreed to buy for £900. Facey later refused to sell.

Issues:
Was Facey’s reply quoting a price an offer capable of acceptance, or merely information?

Judgment & Reasoning: The Privy Council ruled that Facey’s statement was not an offer but a response to a request for information. There was no intention to be bound; hence, Harvey’s telegram could not amount to an acceptance. The case distinguishes preliminary negotiations from offers.

7. Lalman Shukla v Gauri Datt

Facts: Gauri Datt’s nephew went missing. He sent his servant, Lalman Shukla, to search. After the servant had left, Datt announced a public reward for finding the boy. Shukla located the child, returned him, and later claimed the reward. Datt refused, arguing Shukla had no knowledge of the offer.

Issues:
Can someone claim a reward if they perform the required act without knowledge of the offer?

Judgment & Reasoning: The court dismissed the servant’s claim. For a unilateral contract to arise, the offeree must know of the offer and perform in response to it. Since Shukla was unaware when he acted, no contract existed. The case highlights that knowledge of an offer is essential for acceptance.

8. Taylor v Caldwell

Facts: Taylor hired a music hall from Caldwell for concerts. Before the events, the hall was accidentally destroyed by fire without either party’s fault. Taylor sought damages for non-performance.

Issues:
Was the contract discharged by impossibility, or did Caldwell remain liable for failure to provide the hall?

Judgment & Reasoning: The court recognised an implied condition that the hall’s continued existence was fundamental. Because the hall perished without fault, the contract was frustrated and both parties were excused. Taylor v Caldwell laid the groundwork for the doctrine of frustration, protecting contracting parties from unforeseen destruction of the contract’s subject matter.

9. Dunlop Pneumatic Tyre Co v Selfridge & Co

Facts: Dunlop, a tyre manufacturer, sold tyres to a wholesaler under a resale price maintenance agreement. The wholesaler, in turn, sold tyres to Selfridge, a retailer, on terms requiring the retailer not to sell below a fixed price. Selfridge disregarded this undertaking and sold the tyres at a discount. Dunlop sued Selfridge for damages, despite there being no direct contract between them.

Issues:
The House of Lords was asked whether Dunlop, who was not a party to the agreement between the wholesaler and Selfridge, could enforce the resale price clause. The case raised the scope of privity of contract and whether a third party could sue on a contract to which it was not a signatory.

Judgment & Reasoning: The court held that Dunlop could not succeed because there was no privity between Dunlop and Selfridge. Only parties to a contract can enforce its terms or sue for breach, unless a recognised exception applies. Although the clause was intended for Dunlop’s benefit, the absence of contractual privity barred the action. The decision entrenched the doctrine of privity in English contract law.

10. Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas

Facts: A buyer in Ahmedabad telephoned a seller in Khamgaon to place an order for goods. The offer and acceptance were communicated entirely by telephone. Later, a dispute arose about performance, and the parties disagreed on the place where the contract was made, which would determine jurisdiction.

Issues:
The Supreme Court of India needed to decide where a contract is concluded when acceptance is communicated orally over the telephone: is it where the acceptor speaks, or where the proposer hears the acceptance?

Judgment & Reasoning: The court held that a contract made by instantaneous communication is complete at the place where acceptance is received by the proposer. In telephone contracts, that is the location where the acceptance is heard. Since the proposer was in Ahmedabad, that court had jurisdiction. The ruling clarified how the rules of offer and acceptance operate in modern modes of communication