15 | Page

Damodaram Sanjivayya National Law University A Case Study OnBell v Lever Brothers

Mugdha TomarIInd SemesterSec - B201263 Contents

Introduction - What is a Contract ?.................... 3 Essentials For a Valid Contract.. 3 Agreement.. 3 What Agreements are Contracts ?...................... 4 Consent Definition of Consent [S.13] 4 - 5 Free Consent Defintion of Free Consent[S.14].. 5 Free Consentdefined............. 5- 6 Mistake Definition of Mistake 6- 7 Section 21 of Indian Contract Act,1872 7 Effect of Mistake as to Law.. 7 Section 22 of Indian Contract Act, 1872.. 7 Kinds of Mistake [S.20] 8-10 Bell v Lever Bros Ltd Facts of the Case.. 11 Issues Involved in the Case. 11 Proceedings & Judgement 11-12 Other Cases Where Bell v Lever Brothers Have Been Referred to... 12-13 Conclusion. 14 Bibliography.. 15

IntroductionWhat is a Contract ?The term contract is defined in Section 2(h) of the Indian Contract Act,1872,as follows:An agreement enforceable by law is a contract;Thus for the formation of a contract there must be (1) An agreement,and(2) The agreement should be enforceable by law [footnoteRef:1] [1: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 3]

Essentials For a Valid Contract An agreement between the two parties. An agreement is the result of a proposal or an offer by one party followed by its acceptance by the other. Agreement should be between the parties who are competent to contract. There should be a lawful consideration and lawful object in respect of that agreement. There should be free consent of the parties, when they enter into the agreement. The agreement must not be one, which has been expressly declared to be void.

AgreementAgreement is defined as every promise and every set of promises forming the consideration for each other.And a promise is defined as an accepted proposal.Section 2(b) says: A proposal,when accepted,becomes a promise.This is another way of saying that an agreement is an accepted proposal.The process of definition thus comes down in the following manner: A contract is an agreement; an agreement is a promise and a promise is an accepted proposal.Thus every agreement, in its ultimate analysis, is the result of a proposal from one side and its acceptance by the other.[footnoteRef:2] [2: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 3]

What agreements are contracts ?All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.Consideration can be defined as when at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing,something such act or abstinence or promise is called a consideration for the promise.

Nothing herein shall contained shall effect any law in force in [India] and not hereby expressly repealed, by ehich any contract is required to be made in writing or in the presence of witnesses,or any law relating to the registration of documents.Thus every contract is an agreement, but every agreement is not a contract.An agreement becomes a contract when the following conditions are satisfied:

1. There is some consideration for it.[S.2(d) and S.25]2. The parties are competent to contract.[Ss 11 and 12]3. Their consent is free [Ss.13-22]4. Their object is lawful.[Ss. 23-30][footnoteRef:3] [3: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 4]

ConsentDefinition of Consent[S.13]Section 13 of the Indian Contract Act,1872 defines Consent as follows;Two or more persons are said to consent when they agree upon the same thing in the same sense.An agreement upon the same thing in the same sense is known as true consent or consensus ad idem,and is at the root of every contract.This seems to have been picked up fro apassage in the judgement of Lord HANNEN in the famous case of Smith v Hughes.[footnoteRef:4] [4: (1871) LR 6 QB 597,609: 40 LJ QB 221: 25 LT 329]

It is essential to the creation of a contract that both parties should agree to the same thing in the same sense.Thus if two persons enter into an apparent contract conserning a particular person or ship,and it turns out that each of them,misled by a similarity of name,had a different person or ship in mind,no contract would exist between them.[footnoteRef:5] [5: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 227]

Free ConsentDefinition of Free Consent [S.14]According to Section 10 of the Indian Contract Act,1872 free consent is an essential requirement of a contract.Section 14 of the Indian Contract Act,1872 defines free consent.

Free Consent defined Consent is said to be free when it is not caused by :(1) Coercion,as defined in Section 15, Coercion is the commiting,or threatening to commit,any act forbidden by the Indian Penal Code(45 of 1860), or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intension of causing any person to enter into an agreement[footnoteRef:6] [6: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 177]

(2) Undue influence, as defined in Section 16,A contract is said to be induced byundue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair unfair advantage over the other.[footnoteRef:7] [7: 7 Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 180]

(3) Fraud, as defined in Section 17,Fraud means and includes any of the following acts committed by a party to a contract,or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract :- The suggestion, as a fact, of that which is not true by one who does not believe it to be true; The active concealment of a fact by one having knowledge or belief of the fact; A promise made without any intention of performing it; Any other act fitted to deceive; Any such act or omission as the law specially declares to be fraudulent.[footnoteRef:8] [8: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 212]

(4) Misrepresentation, as defined in Section 18, or Misrepresentation, means and includes (1) The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true,though he belives it to be true;(2) Any breach of duty which,without an intent to decive,gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice of anyone claming under him;(3) Causing,however innocently, a partly to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.[footnoteRef:9] [9: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 200]

(5) Mistake, subject to the provisions of Sections 20,21,22

MistakeDefinition of Mistake There the mistake does not defeat consent, but only misleads the parties,Section 20 shall apply.This section provides:Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement,the agreement is void.Example A, agrees to buy from b a certain horse.It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact.The agreement is void

Section 20 will come into play:(1) When both the parties to an agreement are mistaken,(2) Their mistake is as to a matter of fact,and(3) The fact about which they are mistaken is essential to the agreement.[footnoteRef:10] [10: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 227 -228]

Section 21 of Indian Contract Act,1872 Effect of mistake as to law A contract is not voidable because it was caused by a mistake as to any law in force in India;but a mistake as to a law not in force in India has the same effect as a mistake of fact.Example A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian law of limitation;the contract is not voidable.[footnoteRef:11] [11: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 228]

Section 22 of Indian Contract Act,1872 A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.[footnoteRef:12] [12: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 228]

Kinds of Mistake [S.20]Mistake as to PersonImportant CaseJaggan Nath v. Secy of State of India(1886)[footnoteRef:13] [13: (1886) 21 Punj Rec No.21 ]

A person, called S, a brother of the plaintiff, represented himself as plaintiff, and thereby induced a Government agent to contract with him.The court, finding that the Governments agent was deceived by the conduct of the plaintiff and his brother as to the person with whom he was dealing, held that there was no valid contract.The defendants agent intended to contract only with Ss brother and not with S and S knew this.[footnoteRef:14] [14: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 229]

Mistake as to Title or Rights:Important CaseCooper v.Phibbs(1867)In that case an uncle had told his nephew, not intending to misrepresent anything but being in fact in error, that he (the uncle) was entitled to a fishery, and the nephew, after the uncles death, acting in the belief of the truth of what the uncle had told him, entered into an agreement to rent the fishery from the uncles daughter, whereas it actually belonged to the nephew himself.The House of Lords hed that the mistake was such as not only to make the agreement voidable, but also liable to be set aside on such terms as the court thought to be fit to impose.

Different Subject Matter in Mind:Important CaseRaffles v. Wichelhaus[footnoteRef:15] [15: 15 (1864) 2 H & C 906: 159 ER 375: 133 RR 853]

The defendant bought of the plaintiff a quantity of Surat Cotton to arrive ex Peerless from Bombay.Two ships with the name Peerless sailed from Bombay, one in October, which the defendant had in mind and the other in December which the plaintiff had in mind.The court said: the defendant meant one Peerless and the Plaintiff another.That being so,there was no consensus ad idem and therefore no binding contract.[footnoteRef:16] [16: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 238]

Non existence of Subject Matter Important CaseCouturier v. Hastie(1852)[footnoteRef:17] [17: (1856) 5 HL Cas 673 : 25 LJ Ex 253: 10 ER 1065]

The defendant was employed to sell the plaintiffs cargo which was on voyage.After the defendant had sold the cargo to a third person, it was discovered that the cargo, having been damaged by bad weather, had been sold at an intermediate port. The buyer repudiated the contract and the defendant,being a del credere agent[footnoteRef:18] was sued for the price.[footnoteRef:19] [18: The expression means an agent who undertakes to be liable if the third person with whom he contracts on behalf of his principal fails to perform the contract.] [19: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg - 236]

Mistake as to nature of Promise Important CaseRaja Singh v. Chaichoo Singh(1940)[footnoteRef:20] [20: AIR 1940 Pat 201]

The plaintiff appointed the defendant to look after his cultivation and his affairs, as he had become too old to manage them himself.The defendant asked him to grant him a lease of his land.The plaintiff agreed to it and placed his thumb impression upon a deed which was in fact a gift of the land.The court held the deed to be void ab intio.[footnoteRef:21] [21: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 245]

Mistake as to Price Important CaseBankuBehariSahu v.KrishtoGobindo(1930)[footnoteRef:22] [22: (1930) 30 Cal 433]

Mistake as to Substance Important CaseSheikh Bros Ltd v. Ochener(1957)[footnoteRef:23] [23: 1957 AC 136 (PC)]

The appellant company, the lessor of a forest in Kenya,granted a licence to the respondent to cut, process and manufacture all sisal growing in the forest.The respondent to cut, process and manufacture and deliver to the appellant 50 tons of sisal fibre per month.But it turned iut that the leaf potential of the sisal area was not sufficient to permit the manufacture of the stipulated quantity and the respondent was sued for the breach. The agreement was helf to be void.Their Lordships, relying upon the statements from the landmark case of Bell v Lever Bros,came to the conclusion that having regard to the nature of the contract, which was a kind of joint adventure, it was the very basis of the contract that the sisal area should be capable of producing an average of 50 tons a month throughout the term of licence, and the mistake was as to a matter of fact essential to the agreement.[footnoteRef:24] [24: Singh Avatar, Contract and Specific Relief, Lucknow: Eastern Book Company.10th ed,(2008),Pg 239 ]

Mistake as to Quality Definition of Quality:Blacks Law Dictionary defines quality as1. The particular character or properties of a person,thing or act,after essential for a particular result