This article has been written by Arpita Tripathy and has been further updated by Gauri Gupta. It provides for a detailed analysis of the landmark judgement of Lalman Shukla vs. Gauri Dutt (1913). The author aims to provide a brief background of the case, facts of the case, the important issues raised in this case, the contentions of the disputing parties, and the crucial points highlighted by the High Court of Allahabad. Furthermore, the author makes an attempt to explore the significance of the judgement in the contemporary era and discusses in detail the necessary provisions and judgements which are referred to and discussed by the court while delivering the judgement.  

Introduction

A contract is one of the basic elements of everyday transactions. Wherever we go, we encounter a contract in our daily life. From buying a bar of simple chocolate or riding on a bus to the agreement of employment, everywhere a contract is entered into. The contract is the basis of all financial transactions. Knowingly or unknowingly we all enter into contracts. Contracts can be either written or oral.  In India, the contracts are governed under the Indian Contract Act, 1872. In this article, we will be dealing with the case analysis of Lalman  Shukla vs. Gauri Dut (1913) and along with it we will examine the aspects of the contract which are, offer and acceptance.  

The case examines the existence of a contract in case there is no acceptance of the offer made by the offeror. In the words of Anson, “Acceptance is to offer what a lighted matchstick is to a train of gunpowder.” It is pertinent to understand that an offer alone does not lead to the creation of legal rights. These legal rights emerge only after the offer has been accepted by the offeree. It is the acceptance of the offer which converts the offer into a contract and entrusts the offeror and the offeree with certain legal rights and duties under the contract. Here, the case talks about the examination of the validity of a contract in cases where no acceptance of the offer exists. 

Download Now

Details of the case

  1. Title of the Case: Lalman Shukla vs. Gauri Dutt
  2. Date of Judgement: April 17th, 1913
  3. Plaintiff: Lalman Shukla 
  4. Defendant: Gauri Dutt
  5. Equivalent citation: Civil Revision Petition No. 10 of 1913, MANU/ UP/ 0388/ 1913
  6. Type of case: Civil Revision Petition
  7. Court: High Court of Allahabad
  8. Bench: Justice Banerji

Background of the case

The case of Lalman Shukla vs. Gauri Dutt (1913) is one of the most cited cases in the law of contracts. It is one of the oldest cases dealing with the different aspects of general offers, consent, and acceptance. 

Before discussing the particulars of the case, it is pertinent to note that clarity and precision are of extreme significance in the case of any law including the contract law. With the increasing complexity of commercial transactions, the courts were required to interpret the law in order to address the evolving situations. This is where this case plays an important role. 

The significance of Lalman Shukla vs Gauri Dutt lies in the explanation of the principle that an offer has to be communicated to the offeree and the same has to be accepted for the formation of a valid contract. This landmark judgement has laid down a strong foundation for decision making in cases revolving around the questions of offer and acceptance in contract law and is often discussed by courts even in contemporary times while discussing the concept of communication of offer and acceptance.

Facts of the case

The facts of the case are summarised below:

  • The defendant, Gauri Dutt, was the owner of a firm and the plaintiff was the Munib of the firm.
  • In the month of January 1913, the nephew of the defendant absconded from his home secretly and no one was able to find him. 
  • The defendant sent his servants to different places to search for his nephew. The plaintiff, Lalman Shukla was one of those servants who were sent to Haridwar to find the nephew of the defendant. The defendant gave some money to the plaintiff for his railway fares and other expenses. 
  • While the defendant’s servants were looking for his nephew, the defendant issued handbills claiming that if anyone found his nephew and brought him back then he would be rewarded with Rs. 501. 
  • The plaintiff found the nephew of the defendant in Haridwar. He communicated the same to the defendant and brought him back to his home in Cawnpore. The plaintiff on his return was rewarded with two sovereigns and twenty rupees. The plaintiff satisfied with the reward started with his usual daily work. 
  • After 6 months, the defendant removed the plaintiff from work due to some dispute. Thereafter, the plaintiff claimed Rs. 501 as the reward for tracing down the defendant’s nephew. 
  • The plaintiff alleged that while leaving for Haridwar, along with the expenses and other gifts, he was also promised to be paid Rs. 501. The main claim of the plaintiff against the defendant was that he did not provide him with a reward even after performing the given task of finding his nephew. 
  • The plaintiff filed a case before the Court of Small Causes at Cawnpore. Later he filed an application for the revision of the judgement of the Small Causes Court at the High Court of Allahabad. 

Laws and concepts discussed in this case

Agreement and contract 

All contracts are agreements but not all agreements are contracts. This can be understood with the help of the definitions under Section 2 of the Indian Contract Act, 1872. An agreement is an understanding between parties regarding the agreed terms as to which have to be complied with by the parties.

Section 2(h) has defined a contract as any agreement which is legally enforceable. When a person promises to do something in exchange for consideration then it is called an agreement. When a person offers to do or abstain from doing something and the offer is accepted by the other party then such an offer becomes a promise. An offer is a willingness shown by the offeror, to do any act or omission, to the offeree with an intention to receive assent to the offer. Therefore, a contract can be said as an accepted offer in exchange for consideration with an intention to legally bind the parties with the agreement. 

Legal enforceability 

An agreement will only become a contract when there is legal enforceability attached to it. When two parties enter into an agreement without any intention to take the matter to court if one breaches the performance then such an agreement cannot be termed as a contract. To see the legal enforceability both intention and essential elements of the contract have to be taken into account. 

The case of Balfour vs. Balfour (1919) is one of the landmark cases which explains legal intention as the basis of a contract. Here, both husband and wife visit England for vacation. But because of his wife’s health, she was recommended to stay back in England. The husband had worked in Ceylon and had to return back. Before going back to Ceylon, he promised his wife to send her a certain sum of money every month. For a few months, the husband sent his wife money, however, the relationship became strained and he stopped sending her money. The wife sued her husband and claimed breach of contract. However, the court held that this is just a domestic agreement between husband and wife and this cannot be legally enforced because of lack of intention. 

Competency to contract 

Section 11 of the Indian Contract Act specifies who is not competent to enter into a contract. If a person is minor, or is of unsound mind or is disqualified from entering into a contract then such people are not considered to be competent to contract. A person is a minor if he/she has not attained 18 years of age. If the guardian has been appointed by the court then the age of majority is 21 years. 

Section 12 lays down the law regarding people with unsound minds. When a person does not understand the implications or his rights or liabilities under the contract due to mental illness while entering into the contract then he is not competent to enter into a contract.

The landmark case of Mohori Bibee and Ors. vs. Dharmodas Ghose (1903) is a landmark case that explains the competency to contract of a minor. Dharmodas Ghose was a minor who mortgaged his property in favour of Brahmo Das for a sum of Rs. 20000. On the same day morning before Dharmodas Ghose entered into the contract, his mother had informed Brahmo Dutt about the age of the respondent. However, he entered into the contract. Later, Dharmodas Ghose and his mother sued Brahmo Dutt and sought to revoke the contract on the basis that while entering into the contract, Dharmodas Ghose was a minor. It was held by the Privy Council that the contract is void from the very beginning (void ab-initio).

Offer 

A contract is said to be formed when a party offers to another party and such an offer is accepted by the other party. Without offer, acceptance and consideration no contract can be formed and the whole process of entering into a contract begins with an offer. A person making an offer is called an offeror and the person accepting the offer is an offer. An offer can only turn into an agreement when there is a reciprocal acceptance. After acceptance has been communicated no revocation of the offer can be made. If the offer is revoked before the acceptance of the other party then an acceptance after revocation would not make a valid agreement. 

For example, if A offers to sell his car at Rs. 700000 to B, but before acceptance of B, A revokes the offer then an agreement cannot be formed. If B accepts the offer before the revocation then the offer cannot be revoked by A. The offer must be clearly communicated to the person with the intention to have a legal contract. There must be a willingness to comply with the offer and the offer should not be mere statements without any intention. There are different essential elements of a valid contract which will be discussed below. Offers are of different types, express offer, implied offer, general offer and specific offer. 

In simple words, an offer is described as a proposal which is made by one person to another. This proposal shows the willingness of the person to enter into a legal relationship with the person to whom the offer is made. Section 2(a) of the Indian Contract Act, 1872 defines the term offer. 

Offer and invitation to offer 

Offer and invitation to offer are not the same terms. When a shopkeeper displays his items in his showroom then that is not an offer but an invitation to offer. When a person displays goods in his shop he does not intend to make an offer to any specific person but it is an invitation to offer to the general public to offer the best deal for his goods which he would accept. 

For example, if a shop displays, “Flat 35% off on all goods” then it is an invitation to offer and not an offer itself. Therefore, advertisements are not offers but an invitation to offer and no agreement can be formed without acceptance of the shopkeeper. 

Essential elements of a valid offer 

Communication of the offer 

Communication of an offer is important to make it a legally valid one. If an offer has not been communicated then it can be revoked. It is the duty of the offeror to clearly communicate the terms of the agreement to the offeree. If some of the terms of the agreement have been communicated but others have not been communicated then it will depend on the facts and circumstances of the case if the offer is to be considered as a valid offer or not. 

If some terms of the agreement have not been communicated by the person making the offer and those terms are in dispute between the parties then the offeree is not bound by those terms which were not communicated. It has to be established that the offeror made sufficient efforts to communicate the terms of the contract. Sometimes the communication of the terms of the contract is sometimes not clear-cut and there is some ambiguity in it. 

In the case of Thomson vs. London, Midland and Scottish Railway Company (1903), a ticket was bought by Thomson. There were certain conditions mentioned at the back of the ticket, one of the conditions mentioned at the back of the ticket was that the railway company would not be liable for any personal injuries of the passengers. On the front page of the ticket, it was clearly written, “for conditions see back”. However, the plaintiff claimed that he could not read and therefore, was not liable under the contract and claimed damages for his injury caused because of a railway accident. The Court of Appeal held that Thomson was bound under the contract because the railway company had made enough attempts to communicate the terms of the contract. 

Willingness

For an offer to be a valid offer, there has to be a willingness of the party who is offering to enter into an agreement to do or abstain from doing any act. The willingness should be to bind the parties in a legal relationship with each other.  If there is no legal intention to enter into an agreement then it cannot be termed as a contract because of lack of legal enforceability. The case, Balfour vs. Balfour which has been discussed above, is a perfect example of an offer to enter into an agreement without any intention of legal implications, in case of breach of contract. 

Must be certain or definite 

The person offering another person to enter into an agreement should clarify the terms of the contract clearly. If the terms of the agreement have not been defined then the offer is not valid. For example, if A offers to sell his bicycle without mentioning anything about price, specifications, etc., in return for consideration to B, even then the offer is not a valid one because of lack of specifications. 

Types of offers 

General offer

General offers are the offers that are not made to any certain person. It is a type of offer that is to the public at large. However, the offer will not be converted into an agreement when any person accepts the offer. Once an offer has been accepted by someone then no other person can accept the same offer. If A advertises in the newspaper for the reward to any person who finds his lost diamond brooch then he would reward the person finding it with Rs. 3000. If B finds it and returns the brooch then he would be eligible for the money under the general offer made by A. 

In the case Carlill vs. Carbolic Smoke Ball Company (1893) an advertisement was displayed in the newspaper claiming that if anyone contracted influenza even after having the medicine by Carbolic Smoke Ball Co. would be paid 100 Pounds. For showing their sincerity towards the offer they also claimed that they have deposited 1000 Pounds in Alliance Bank. Mrs. Carlil took the medicine but suffered from influenza and hence, sued the company. 

The company claimed that the money was just a part of an advertisement and no reasonable man would have taken it seriously. However, the Court of Appeal of UK held that the defendant attempted to show sincerity by depositing 1000 Pounds in the Bank. The company also claimed that a notification of acceptance should have been made to them but the court said that the offer was a general offer and anyone can accept it. A general offer needs no notification of acceptance. 

Communication of a general offer

A general offer is an offer which is made to the public at large and can be accepted only when someone complies with the terms of the offer. The landmark judgement in this regard is the case of Carlill vs. Carbolic Smoke Ball Company (1813). In this case, the Court of Appeal in the UK observed that the advertisement which promised to pay a reward to anyone who would use the smoke ball as per the printed directions and contact influenza, was a general offer made to the public at large. When the plaintiff complied with the terms of the offer, she accepted the contract and was thus entitled to the reward as the smoke ball medicine did not cure influenza. 

Specific offer

Specific offers are the ones that are made to a certain person, personally. The acceptance of the offer can only be made by that certain person only and not anyone else. For example: A offers to sell his bike to B, the acceptance can only be made by B and not anyone else. 

In the case of Boulton vs. Jones (1857) 157 ER 232, Jones offered to buy 50 feet of leather from Z. Z had accepted the offer. However, later the business of Z was taken over by Boulton. Boulton thereafter supplied the leather as was offered by Boulton. Jones refused to take the delivery of the leather and claimed that the offer was made to Z personally and not Boulton. It was held by the court that the offer could only be accepted by Z and not B as it was directed towards Z. 

Express offer or implied offer 

Section 3 of the Indian Contract Act has specified two types of communication of an offer which is communicated through words and the other which is communicated by actions. Express offer means an offer that is made through words. Express offers can be made through email, letter, fax, advertisements etc. Implied offers are communicated through acts of the parties. One of the examples of implied offers can be that buses in Odisha run at different routes at fixed rates, this is an implied offer.

Acceptance

Section 2(b) of the Contract Act, 1872 provides for the acceptance of an offer. It provides that when the person to whom the offer is made signifies his assent to that offer made by the offeror, it is said to be accepted. In simpler words, acceptance is the act of giving consent to the proposal.

It is pertinent to note that the acceptance of the offer can be either express or implied. Express acceptance occurs when the offeree accepts the offer either in writing or by word of mouth. On the other hand, implied acceptance means acceptance of the offer by the conduct of the parties or by the surrounding circumstances. 

Essentials of a valid acceptance

The essentials of a valid acceptance are as follows:

  1. The acceptance must be absolute and unqualified. It should be as per the exact terms of the offer.
  2. The acceptance must be communicated only to the offeror and not to anyone else.
  3. The acceptance has to be made in the manner if there is any, prescribed by the offeror.
  4. The acceptance must be communicated within a reasonable time, or if the offer mentions a time frame within that time period.
  5. The acceptance has to be communicated before the offer lapses or is withdrawn.

In case of a general offer, the acceptance can be given by any member of the public and there is implied acceptance when the terms of the offer are complied with.

Issues raised in the case

  • Whether the decision given by the Lower Court is valid? 
  • Can the act of the plaintiff be termed as a valid acceptance of the offer made by the defendant?
  • Is this a valid contract? 
  • Whether the reward of Rs. 499 claimed by the plaintiff should be provided?

Arguments of the parties

Plaintiff 

The plaintiff argued that when he performed his part which was the essential element to claim reward then it was an implied acceptance of the general offer made by the defendant. The terms of the offer need not be communicated to the plaintiff for the contract to be completed. It was also contended that the handbill containing the offer was sent to the plaintiff. The plaintiff relied on two landmark judgments that supported their claims and declared that the performance of the act was associated with the reward. 

The plaintiff cited the case of Gibbons vs. Proctor (1891) 64 LT 594, where the Superintendent of Police offered a reward to anyone who provided information regarding a criminal. A police officer did not know about the reward but provided some useful information to the Superintendent through a third party. He came to know about the reward before the information reached the Superintendent. He claimed his reward and the court held that reward should be provided. This case set a precedent for the contention that an offer can be accepted without having its knowledge.

The case of Williams vs. Carwardine (1833), has also set the same precedent that the knowledge of a general offer is not necessary for its acceptance. The plaintiff cited Section 8 of the Indian Contract Act, 1872 which mentions that if the party to the contract performs the conditions mentioned in the offer then it is valid acceptance of the offer. 

Defendant

The formation of an agreement is based on the acceptance of the offer. If the petitioner did not have any knowledge about the offer then even no acceptance can be there. The petitioner had no idea of the reward offered by the defendant because the handbill was released after the plaintiff went tracing the nephew. The defendant relied on the case of Fitch vs. Snedekar (1868), where the whole case revolved around finding the suspect or culprit of a murder. Fitch came forward and helped to reveal the identity of the culprit. There was a reward offered by the Governor to anyone who provided information about the same. Fitch did not know about the reward but subsequent to providing information to the police he got to know about the reward. He filed suit to claim a reward. However, the Court of Appeals of the State of New York said that there can be no acceptance of the offer without its knowledge. 

Judgement of the case

The High Court of Allahabad observed that the acceptance of the offer as claimed to be fulfilled by the plaintiff was not a complete one because the plaintiff had no information about the hand-bills. For the acceptance of an offer, knowledge of the offer is essential. The handbills were advertised after the plaintiff went tracing the defendant’s nephew in Haridwar. The act of the plaintiff to search for the defendant’s nephew was not because of the reward offered in the hand-bill but because it was his duty to search for him. He already had a subsisting employee obligation to be fulfilled.  

The act that the plaintiff performed was a part of employment and not a part of the agreement for reward. There was no consideration on behalf of the plaintiff for which he can claim the defendant’s reward. There was no fresh benefit for the defendant. No doubt the case cited by the plaintiff supported their contention but their judgments have been criticised.

Ratio decidendi

This case sheds light on the two essential elements which are required for the formation of a valid contract. These two elements are:

  1. The complete knowledge of the offer: The person to whom the proposal is made must be aware of all the terms and conditions of the offer.
  2. Acceptance of the offer: The offeree has to agree to the terms of the offer and is required to communicate the acceptance to the offeror, following which there will be a valid contract.

In this case, both of these essential elements were not there. The plaintiff had no knowledge of the reward offered when he was looking for the nephew of the defendant. Furthermore, he did not provide his approval or accept the offer that was made by the defendant. The plaintiff was merely performing his duties as the servant of the defendant when he went out to find the nephew of the defendant. The plaintiff and the defendant did not have a valid contract, and thus, the plaintiff was not entitled to the reward of Rs. 501 as promised by the defendant to anyone who would find his nephew. 

Analysis of the judgement

As explained above, the case on Lalman Shukla vs. Gauri Dutt is a landmark judgement in contract law which addresses the doctrine of “communication of acceptance” in the formation of a valid contract. The judgement underscores the relevance of communication of an offer and the acceptance of that offer for the formation of a legally valid contract. The case highlights the significance of knowledge and intention which plays a crucial role in the law of contract. However, the experts believe that the decision has a very strict interpretation and neglects the principles of fairness and equity. However, the landmark judgement provides for a pivotal reference in the jurisprudence of contract law. 

Conclusion

General offers are the ones that are made to the public in general and not to any particular person. The judgement was indeed a celebrated one because it clarified what is an acceptance under general offers which are expressed ones. It has clarified the stance that general offers can only be accepted when there is knowledge about the offer. The case, Lalman Shukla vs. Gauri Dutt (1913) touched upon the basic concepts of contract, the vital elements that form an agreement, offer and acceptance. 

Frequently Asked Questions (FAQs)

Why was the plaintiff not entitled to the reward in this case?

The plaintiff, Lalman Shukla was not entitled to the reward in this case since he had no knowledge of the offer made by the defendant. Furthermore, he had no knowledge of the offer and thus, had no intention to enter into a legal relationship with the defendant. This further provides that there was no meeting of minds or consensus ad idem which forms an essential element of a valid contract, due to which there were no binding contracts between the disputing parties. 

What is the significance of the judgement in the case of Lalman Shukla vs. Gauri Dutt?

The case of Lalman Shukla vs. Gauri Dutt is of extreme significance in the law of contracts. This is because it provides for the principles of communication of offer from the offeror to the offeree and also for the acceptance of that offer by the offeree. Furthermore, it underscores the relevance of knowledge of the offer for the contract to be legally valid and binding in nature. 

What are the key takeaways from the judgement in this case?

The judgement highlights that certain points are to be kept in mind when discussing contracts. It includes knowledge of the offer, a meeting of minds, the intention to enter into a contract, and the acceptance of the contract. These elements are laid down under Section 10 of the Contract Act, 1872. Without these essential pre-requisites, there are no legal and binding contracts between the parties 

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

https://t.me/lawyerscommunity

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

RELATED ARTICLESMORE FROM AUTHOR

LEAVE A REPLY

Please enter your comment!
Please enter your name here