(The following guest post is contributed by Shivprasad
Swaminathan, who is Associate Professor at the Jindal
Global Law School)
Swaminathan, who is Associate Professor at the Jindal
Global Law School)
“As has often happened, in the law the case
[becomes] more important not for what the judges said but for what the legal
profession came to believe the case stood for.”
[becomes] more important not for what the judges said but for what the legal
profession came to believe the case stood for.”
P. Atiyah, Rise and
Fall of the Freedom of Contract p. 414
Fall of the Freedom of Contract p. 414
The Stuff of Legends
There
are several canonical cases which have over the years hardened into axioms. So
sure are we about the propositions we have been taught they advance, that few
of us ever feel the need to check if that is indeed what they stand for. A good
example is Tweddle v Atkinson,
which we associate with the axiom that a stranger to the contract cannot sue
upon it. It should then come to the unquestioning among us as a surprise that
the subject of Atiyah’s grouse in the epigraph is indeed Tweddle v Atkinson. Atiyah alerts us to how the legend of Tweddle v Atkinson is completely at
dissonance with its reality. Tweddle v
Atkinson advanced the proposition that consideration must move from the
plaintiff to enable him to sue upon the contract. As Vernon Palmer reminds us, in
1861 when Tweddle v Atkinson was
decided, the privity of contract rule was still some time away from blipping
the radar (V. Palmer, Paths to Privity 160-165). Something
similar seems to have happened with Couturier
v Hastie (illustration (a) to
Sec. 20 of the Indian Contract Act) widely perceived as the fons et origo of the doctrine of mistake
but in reality had nothing to do with it (D. Ibbetson, Historical Introduction to the Law
of Obligations at p 228). As Ibbetson
argues, the law treatise seems to have played a crucial role in creating a legend
of these cases which did not match the reality. Sometimes, the law treatise
writers wanted the case to stand for a theory they were vigorously advancing
and as a result the case was twisted to make a procrustean fit with the theory.
In other cases, the result could be attributed to nothing more than an error on
the part of text book writers: such as is the case with Lalman v Gauri Datt.
are several canonical cases which have over the years hardened into axioms. So
sure are we about the propositions we have been taught they advance, that few
of us ever feel the need to check if that is indeed what they stand for. A good
example is Tweddle v Atkinson,
which we associate with the axiom that a stranger to the contract cannot sue
upon it. It should then come to the unquestioning among us as a surprise that
the subject of Atiyah’s grouse in the epigraph is indeed Tweddle v Atkinson. Atiyah alerts us to how the legend of Tweddle v Atkinson is completely at
dissonance with its reality. Tweddle v
Atkinson advanced the proposition that consideration must move from the
plaintiff to enable him to sue upon the contract. As Vernon Palmer reminds us, in
1861 when Tweddle v Atkinson was
decided, the privity of contract rule was still some time away from blipping
the radar (V. Palmer, Paths to Privity 160-165). Something
similar seems to have happened with Couturier
v Hastie (illustration (a) to
Sec. 20 of the Indian Contract Act) widely perceived as the fons et origo of the doctrine of mistake
but in reality had nothing to do with it (D. Ibbetson, Historical Introduction to the Law
of Obligations at p 228). As Ibbetson
argues, the law treatise seems to have played a crucial role in creating a legend
of these cases which did not match the reality. Sometimes, the law treatise
writers wanted the case to stand for a theory they were vigorously advancing
and as a result the case was twisted to make a procrustean fit with the theory.
In other cases, the result could be attributed to nothing more than an error on
the part of text book writers: such as is the case with Lalman v Gauri Datt.
Lalman
v Gauri Datt
v Gauri Datt
Figuring
prominently in the canon of cases every student who has gone through a course
on Indian contract law must know is Lalman
v Gauri Datt (1913) 40 ALJ 489. An internet search for Lalman v Gauri Datt throws up a great number of results all
confirming one proposition—that a person without the knowledge of the offer
cannot accept it. Standard textbooks on contract law confirm this understanding
of the case.
prominently in the canon of cases every student who has gone through a course
on Indian contract law must know is Lalman
v Gauri Datt (1913) 40 ALJ 489. An internet search for Lalman v Gauri Datt throws up a great number of results all
confirming one proposition—that a person without the knowledge of the offer
cannot accept it. Standard textbooks on contract law confirm this understanding
of the case.
Obviously
therefore an offer cannot be accepted unless and until it has been brought to
the knowledge of the person to whom it is made. This principle enabled the
Allahabad High Court in Lalman v Gauri
Datt to deal with a matter involving a very crucial question on this point.
therefore an offer cannot be accepted unless and until it has been brought to
the knowledge of the person to whom it is made. This principle enabled the
Allahabad High Court in Lalman v Gauri
Datt to deal with a matter involving a very crucial question on this point.
Defendant’s
nephew absconded from home. He sent his servant in search of the boy. When the
servant had left, the defendant by handbills offered to pay Rs.501 to anybody
discovering the boy. The servant came to know of this offer only when he had
already traced the missing child. He, however, brought an action to recover the
reward. But his action failed. (Avtar Singh, Contract and Specific Relief 10th ed. p.10)
nephew absconded from home. He sent his servant in search of the boy. When the
servant had left, the defendant by handbills offered to pay Rs.501 to anybody
discovering the boy. The servant came to know of this offer only when he had
already traced the missing child. He, however, brought an action to recover the
reward. But his action failed. (Avtar Singh, Contract and Specific Relief 10th ed. p.10)
This
is confirmed by other standard text books as well.
is confirmed by other standard text books as well.
The
plaintiff did not know the handbills when he found the boy. It was held that
the plaintiff was not entitled to the reward. It has been held that contractual
obligations do not arise if services are offered which in fact fulfill the
terms of the offer, but are performed in ignorance of the fact that the offer
exists. (Pollock and Mulla, The Indian Contract Act, 1872 14th
ed p.51)
plaintiff did not know the handbills when he found the boy. It was held that
the plaintiff was not entitled to the reward. It has been held that contractual
obligations do not arise if services are offered which in fact fulfill the
terms of the offer, but are performed in ignorance of the fact that the offer
exists. (Pollock and Mulla, The Indian Contract Act, 1872 14th
ed p.51)
The Reality
Lalman
Shukla was Gauri Datt’s munib or
clerk at Kanpur (then Cawnpore). When Datt’s nephew went missing, Lalman was
dispatched to Haridwar to look for the nephew. After Lalman left for Haridwar,
Datt announced a reward of Rs.501 for anyone who found his nephew. Lalman traced the nephew to Rishikesh and
brought him back to Kanpur. Later he filed a suit for his reward. Datt, the
defendant, resisted the suit by arguing that the plaintiff could not accept an
offer he was not aware of. Lalman countered this with the claim that even
though the reward was announced after he left, the handbills of the advertisement
had been sent to him in Haridwar. He also claimed that a subsequent promise to
pay the reward was made to him by the defendant. The trial court dismissed the
suit on the basis that: (i) that the
offer of reward was announced after the plaintiff had left; and (ii) there was no subsequent promise to
pay the reward. In revision, the Allahabad High Court, affirmed (ii) but rejected (i). That should have been
enough to reverse the trial court’s decision and hold for the plaintiff but the
High Court held for the defendant on an entirely different point, namely, that
of consideration.
Shukla was Gauri Datt’s munib or
clerk at Kanpur (then Cawnpore). When Datt’s nephew went missing, Lalman was
dispatched to Haridwar to look for the nephew. After Lalman left for Haridwar,
Datt announced a reward of Rs.501 for anyone who found his nephew. Lalman traced the nephew to Rishikesh and
brought him back to Kanpur. Later he filed a suit for his reward. Datt, the
defendant, resisted the suit by arguing that the plaintiff could not accept an
offer he was not aware of. Lalman countered this with the claim that even
though the reward was announced after he left, the handbills of the advertisement
had been sent to him in Haridwar. He also claimed that a subsequent promise to
pay the reward was made to him by the defendant. The trial court dismissed the
suit on the basis that: (i) that the
offer of reward was announced after the plaintiff had left; and (ii) there was no subsequent promise to
pay the reward. In revision, the Allahabad High Court, affirmed (ii) but rejected (i). That should have been
enough to reverse the trial court’s decision and hold for the plaintiff but the
High Court held for the defendant on an entirely different point, namely, that
of consideration.
Banerji
J held that the plaintiff being an employee of the defendant was already under
a pre-existing legal obligation to look for the nephew when required by the
plaintiff. Although, it was not in the ordinary scope of duties as a munib, “when he agreed to go to Haridwar in search of the boy he undertook that
particular duty and there was an obligation on him to search for and trace out
the boy”[p.493]. Accordingly, the Court held:
J held that the plaintiff being an employee of the defendant was already under
a pre-existing legal obligation to look for the nephew when required by the
plaintiff. Although, it was not in the ordinary scope of duties as a munib, “when he agreed to go to Haridwar in search of the boy he undertook that
particular duty and there was an obligation on him to search for and trace out
the boy”[p.493]. Accordingly, the Court held:
Being
under that obligation which he had incurred before the reward in question was
offered, he cannot, in my opinion, claim the reward. There was already a
subsisting obligation and therefore the performance of the act cannot be
regarded as consideration for the defendant’s promise. [p 493]
under that obligation which he had incurred before the reward in question was
offered, he cannot, in my opinion, claim the reward. There was already a
subsisting obligation and therefore the performance of the act cannot be
regarded as consideration for the defendant’s promise. [p 493]
The
court applied the pre-existing duty rule found instantiated in cases such as Stilk v Myrick
(1809) 2 Camp 317 (this case was not,
however, referred to by the court) to hold that the promise to pay was without
consideration and hence would not amount to an enforceable contract. The
doctrinal basis for this rule is that the promisee who is under a pre-existing
duty suffers no fresh detriment, nor does the promisor derive any fresh
benefit—benefit and detriment being the hall marks of consideration at English
law. This point—that the pre-existing duty rule was dispositive of the case—has
not got the attention it deserves, and as we shall note in the following
section, raises far reaching questions about the definition of consideration
under s. 2 (d) of the Indian Contract Act, 1872.
court applied the pre-existing duty rule found instantiated in cases such as Stilk v Myrick
(1809) 2 Camp 317 (this case was not,
however, referred to by the court) to hold that the promise to pay was without
consideration and hence would not amount to an enforceable contract. The
doctrinal basis for this rule is that the promisee who is under a pre-existing
duty suffers no fresh detriment, nor does the promisor derive any fresh
benefit—benefit and detriment being the hall marks of consideration at English
law. This point—that the pre-existing duty rule was dispositive of the case—has
not got the attention it deserves, and as we shall note in the following
section, raises far reaching questions about the definition of consideration
under s. 2 (d) of the Indian Contract Act, 1872.
On
the point of acceptance—the issue on which Lalman
v Gauri Datt has come to be the locus
classicus—the court, in fact, held in favour of the plaintiff. The court
reversed the finding of the trial court that the alleged acceptance was in
ignorance of the offer as it found that the handbills had been sent to the
plaintiff in Haridwar. The court also added that plaintiff, in the case of a
public offer such as this is entitled to an “inference” that the acceptance was
valid [p.493], which is to say, with knowledge of the offer. In other words,
the court had no difficulty in finding that there was a valid offer and
acceptance, and hence agreement, in the case. Banerji J did observe obiter that an acceptance without the
knowledge of an offer is not valid [p. 492], but that was not a vice that the
acceptance in this case suffered from. Thus, while no one can cavil with the
proposition that there can be no acceptance without knowledge of the
offer—albeit found obiter in this
case—it would be plainly wrong to suppose that this was the reason the
plaintiff’s action failed in the case.
the point of acceptance—the issue on which Lalman
v Gauri Datt has come to be the locus
classicus—the court, in fact, held in favour of the plaintiff. The court
reversed the finding of the trial court that the alleged acceptance was in
ignorance of the offer as it found that the handbills had been sent to the
plaintiff in Haridwar. The court also added that plaintiff, in the case of a
public offer such as this is entitled to an “inference” that the acceptance was
valid [p.493], which is to say, with knowledge of the offer. In other words,
the court had no difficulty in finding that there was a valid offer and
acceptance, and hence agreement, in the case. Banerji J did observe obiter that an acceptance without the
knowledge of an offer is not valid [p. 492], but that was not a vice that the
acceptance in this case suffered from. Thus, while no one can cavil with the
proposition that there can be no acceptance without knowledge of the
offer—albeit found obiter in this
case—it would be plainly wrong to suppose that this was the reason the
plaintiff’s action failed in the case.
The Outstanding
Question
Question
What
is striking about the judgment in Lalman
v Gauri Datt is that not once does s 2(d) of the Indian Contract Act find
mention and the court proceeds to hold that the agreement in the case trips up
on the consideration hurdle, on the assumption that the definition of
consideration in s 2(d) is the same as the English definition replete with
elements of benefit and detriment. To be sure, even at the time the case was
decided, there was considerable support for the proposition that s 2(d) does
nothing more than restate the English definition of consideration, in the form
of the commentaries of Pollock and Mulla (Indian
Contract Act, 1872 2nd ed. 1909 p. 14, 25) and Whitley Stokes
(Anglo Indian Codes 1888 p. 497). And
there was also authority in the form of the Bombay High Court’s judgment in Ramchandra
Chintaman v Kalu Raju (1878) 2 ILR Bom 362
which held that a promise to do something the promisee is already under a
pre-existing duty to do does not amount to consideration. But the question that
did not then receive the attention it deserved—and arguably never did
thereafter either—was whether a pre-existing duty rule could ever be pressed
out of out of s 2(d) which contained no reference to benefit or detriment. If any act or abstinence or promise at the
desire of the promisor is consideration, it should hardly matter whether such
act also amounts to a benefit or detriment, let alone an additional or fresh
benefit or detriment. A hundred years on, we find that benefit and detriment
has been interpolated into the definition of consideration with the approval of
the Supreme Court of India in Chidambaraiyer v
Renga Iyer [1965] AIR SC
193
and standard text books take it as axiomatic. The English common law may after
a long struggle have liberated itself somewhat from the shackles of ‘benefit’
and ‘detriment’ in William v Roffey
Bros [1991] 1 QB
1,
but we in India continue to endorse the old definition of consideration,
replete with elements of benefit and detriment, which is manifestly without any
basis qua interpretation of s 2(d). Disputing this received wisdom here would
take us far afield and thus must await another occasion. It should suffice for
now to adumbrate the issue and alert us to the fact that the foundations of the
case law on consideration in India might be a lot less sure than we may have
been led to believe. Lalman v Gauri Datt
ought to serve as a reminder of those shaky foundations.
is striking about the judgment in Lalman
v Gauri Datt is that not once does s 2(d) of the Indian Contract Act find
mention and the court proceeds to hold that the agreement in the case trips up
on the consideration hurdle, on the assumption that the definition of
consideration in s 2(d) is the same as the English definition replete with
elements of benefit and detriment. To be sure, even at the time the case was
decided, there was considerable support for the proposition that s 2(d) does
nothing more than restate the English definition of consideration, in the form
of the commentaries of Pollock and Mulla (Indian
Contract Act, 1872 2nd ed. 1909 p. 14, 25) and Whitley Stokes
(Anglo Indian Codes 1888 p. 497). And
there was also authority in the form of the Bombay High Court’s judgment in Ramchandra
Chintaman v Kalu Raju (1878) 2 ILR Bom 362
which held that a promise to do something the promisee is already under a
pre-existing duty to do does not amount to consideration. But the question that
did not then receive the attention it deserved—and arguably never did
thereafter either—was whether a pre-existing duty rule could ever be pressed
out of out of s 2(d) which contained no reference to benefit or detriment. If any act or abstinence or promise at the
desire of the promisor is consideration, it should hardly matter whether such
act also amounts to a benefit or detriment, let alone an additional or fresh
benefit or detriment. A hundred years on, we find that benefit and detriment
has been interpolated into the definition of consideration with the approval of
the Supreme Court of India in Chidambaraiyer v
Renga Iyer [1965] AIR SC
193
and standard text books take it as axiomatic. The English common law may after
a long struggle have liberated itself somewhat from the shackles of ‘benefit’
and ‘detriment’ in William v Roffey
Bros [1991] 1 QB
1,
but we in India continue to endorse the old definition of consideration,
replete with elements of benefit and detriment, which is manifestly without any
basis qua interpretation of s 2(d). Disputing this received wisdom here would
take us far afield and thus must await another occasion. It should suffice for
now to adumbrate the issue and alert us to the fact that the foundations of the
case law on consideration in India might be a lot less sure than we may have
been led to believe. Lalman v Gauri Datt
ought to serve as a reminder of those shaky foundations.