In India, contracts are governed by the Indian Contract Act, 1872 and as per the said act, it can be both written and oral. The case of Lalman Shukla v Gauri Dutt, discusses the validity of a contract in a situation where no acceptance has been made. It explains the provisions of the Indian Contract Act related to the communication of offer and acceptance.
- The nephew of the defendant (Gauri Dutt) absconded and no one was able to find him.
- Plaintiff (Lalman Shukla) along with other defendants were sent to Haridwar from Cawnpore to look for the boy. The defendant gave them money for travel and other expenses.
- As soon as Lalman Shukla left the house, the defendant announced a price of Rs. 501 to anyone who will find her nephew. Shukla had no knowledge of this offer.
- He went to Haridwar and was able to find the boy and bring him back. On his return, he was rewarded with two sovereigns and Rs. 20, which he happily accepted.
- Six months after the incident, Dutt fired Shukla from his work because of some dispute. Thereafter, he asked her for the reward money for bringing her nephew back which Dutt refused.
- Shukla filed a case against his former master, Gauri Dutt.
- Whether Lalman Shukla is entitled to the reward?
- Whether there was an acceptance of the offer on part of the plaintiff?
- Whether there exists a valid contract between the parties?
CONTENTIONS BY PLAINTIFF
The plaintiff argued that the offer made by Defendant was a general offer and performing the conditions of the said offer is sufficient for acceptance. Thus, by bringing back the nephew he accepted the offer, and a valid contract was formed. Hence, he is entitled to the reward. To support his contentions, he cited the case of Gibbons v Proctor.
In this case, the Superintendent of Police promised a prize to anyone who could help catch a criminal. A police officer was unaware of the prize, but through a third party, offered some important information to the superintendent. Before the information reached the Superintendent, he learned about the award. He demanded his award, and the court agreed that it should be given. This decision established precedence for the argument that an offer can be accepted even if the recipient is unaware of it.
In the case of Williams v Carwardine, it was again held that knowledge of general offer is not necessary for acceptance.
It was stated by him that having prior knowledge of the offer was not necessary. He emphasized Section 8 of the Indian Contract Act, which reads:
“Acceptance by performing conditions, or receiving consideration. —Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.”
In the present case, the condition was to return the nephew for a reward of Rs. 501, which the plaintiff performed.
He stated that the time of knowledge of offer was immaterial, and he is entitled to the award.
CONTENTIONS BY DEFENDANT
The defendant argued that Lalman Shukla had no idea about the offer and therefore he is incapable of giving a valid acceptance.
Defendant referred to section 2 (a) of the Indian Contract Act, which reads:
“When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”.
And section 2(b) reads,
“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise”
By reading both the sections the defendant contended that knowledge of offer is necessary for assent/approval. In this case, the plaintiff was unaware of the existence of the offer and searched the boy because of his sense of duty and not some reward.
The defendant cited the case of Fitch v Snedaker, the case revolved around finding a murder suspect/culprit. Fitch came forward and assisted in the identification of the perpetrator. The Governor offered a reward to anyone who could provide information regarding the situation. Fitch was unaware of the reward until he provided information to the police, at which point he learned about it. He filed a lawsuit in order to receive monetary compensation. The court, on the other hand, stated that the offer cannot be accepted unless the offeree is aware of it.
The Hon’ble Bench dismissed the petitioner’s appeal against the defendant. Banerji J., Observed that the cases cited by the plaintiff, Gibbons v Proctor and Williams v Carwardine do support their case but they have been criticized by Sir Frederick Pollock and Ashley, an American author. He stated,
“In my opinion, a suit like the present can only be founded on a contract. In order to constitute a contract, there must be an acceptance of the offer and there can be no acceptance unless there is knowledge of the offer. Motive is not essential but knowledge and intention are. In the case of a public advertisement offering a reward, the performance of the act raises an inference of acceptance. This is manifest from section 8 of the Contract Act”
It was further held, that for creating a valid contract, it is necessary to have knowledge about the offer.
In this case, the plaintiff came to know about the offer later when there was no means of accepting it. The plaintiff was only doing his duty as a servant and not as a party to a contract.
Hence, there was no contract and Lalman Shukla was not entitled to any reward.
ANALYSIS OF JUDGEMENT
From the present case of Lalman Shukla v Gauri Dutt, it can be understood that to enter into a valid contract, two essentials must be considered
- Complete knowledge of facts of offer/proposal
- Valid acceptance of the offer
Any person to whom the offer is made must accept it. Communication of offer is important and also mentioned in Section 4 of the Indian Contract Act, which states that communication of a proposal is complete when it comes into the knowledge of the person to whom it is made.
To convert a proposal into agreement both knowledge and assent must be present, in the present case both were missing.
The task of finding the boy was given to the plaintiff before the offer was announced. Thus, he did not do any new act to give his assent to the offer. The act done by him was performed as a duty. Thus, there exists no contract.
The present case is about the acceptance of the offer and if someone can give acceptance before the knowledge of the offer, especially in the case of a general offer. General offers are offers made to the public at large. The judgment clarified the stance and held that knowledge of offer is a sine quo non for acceptance.
  40 ALJ 489
  64 LT 594
  EWHC KB J44
  38 N.Y. 248
 SUPRA Note 1