TEAM NO.

:9D

GITARRATTAN INTERNATIONAL BUSINESS SCHOOL

MOOT COURT PROBLEM-9

BBALLB (III Sem) 2018-19

BEFORE THE HON’BLE COURT OF CIVIL JUDGE

AT
ROHINI COURT, NEW COURT

DEREK & CO. (PLAINTIFF)

V.
SHAMLAL & CO. (DEFENDANT)

ON SUBMISSION TO THE REGISTRY

OF THE HON’OBLE COURT

MEMORIAL FOR THE DEFENDANT – SHAMLAL & CO.

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 TABLE OF CONTENTS

LIST OF SOURCES 03

STATEMENT OF JURISDICTION 04

LIST OF ABBREVIATIONS 05

STATEMENT OF FACTS 06

STATEMENT OF ISSUES 07

SUMMARY OF ARGUMENTS 08

ARGUMENTS ADVANCED 09

PRAYER 16

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 LIST OF SOURCES

S. No. Statutes
1. Indian Contract Act, 1872

S. No. Cases
1. Price v. Easton
2. Jamna Das v. Ram Avtar
3. Advertising Bureau v. CT Devraj
4. Dunlop Pneumatic Tyre co. v. Selfridge and co.
5. Tweddle v. Atkinson
6. Iswaran Pillai v. Sonnivetralu
7. Krishna Lal v. Promila Bala
8. Utair Aviation v. Jackson Airlines Ltd. And another
9. Chinnaya v. Ramaya
10. Dutton v. Poole
11. Loon Karan v. John and Co.
12. Sakhti Sugars Ltd. v. Union of India
13. Mohan Lal Jain v. Ruler of Jaipur

S. No. Books
1. Law of Contract, RK Bangia
2. Indian Contract Act, Dr. S. K. Kapoor
3. Contract-1, Dr. S. R. Myneni
4. Law of Contracts & Specific Relief, Avtar Singh 2013
5. Law of Contracts, Ritu Gupta

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 STATEMENT OF JURISDICTION

The Hon’ble Court of Civil Judge of Delhi has Jurisdiction to hear and adjudicate over the matter.
The Jurisdiction of the court is of pecuniary nature under Civil Procedure Code,1980.

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 LIST OF ABBREVIATIONS

ICA Indian Contract Act,1872

AIR All India Reporter
Co. Company
& And
HON’ABLE Honorable
DEL Delhi
ER All England Reports
HC High Court
MAD. Madras
i.e. That is
Sec. Section
SC Supreme Court
v. Versus
SCR Supreme Court Reports
Rs. Rupees
CAL. Calcutta

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 STATEMENT OF FACTS

1. Derek & co. (a company) made tyres. It did not want it’s tyres sold cheaply but to maintain
a standard resale price. It agreed with its dealers (Khanna & Co.) not to sell them below its
recommended retail price.

2. It also bargained for dealers to get the same undertaking from their retailers (in this case,
Shamlal & co.). If retailers did sell below the list price, they would have to pay Rs. 1000
per tyre in liquidated damages to Derek & Co. Derek & Co. thus, was a third party to a
contract between Shamlal and Khanna.

3. When Shamlal sold the tyres at below the agreed price, Derek sued to enforce the contract
by injunction and claimed damages. Shamlal argued that Derek could not enforce the
burden of a contract between Derek and Khanna, which Shamlal had not agreed to.

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 STATEMENT OF ISSUES

ISSUE I: Whether there was any contractual relationship Plaintiff and Defendant?

ISSUE II: Whether any consideration moved from the side of plaintiff to the defendant?

ISSUE III: Whether Khanna & Co. contracted with defendant in the capacity of an agent of
Plaintiff?

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 SUMMARY OF THE ARGUMENTS

I: CONTRACTUAL RELATIONSHIP
A person, who is not a party to a contract, is neither entitled to the contractual benefits nor is he
bound by contractual obligations. Thus, the doctrine of privity of contract means that a non-party
cannot bring an action to the contract. The doctrine enunciates a fundamental principle of law of
contract that a stranger to a contract cannot sue upon it.

II: NO CONSIDERATION WAS THERE

A legally binding contract needs consideration as it is a vital element. So, a valid contract does not
exist without consideration. There was no contract between Derek & Co. and Shamlal this implies
that no consideration moved from Derek & Co. to Shamlal.

III: PRINCIPAL AGENT RELATIONSHIP

An agent never acts on his own behalf but always on behalf of another. He either represents his
principal in any transactions or dealings with a third person, or performs an act for the principal.
In either case, the act of the agent will be deemed in law to be not his own but of the principal.

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 ARGUMENTS ADVANCED

I. EXISTENCE OF PRIVITY OF CONTRACT

1. A contract, according to sec. 2 (h) of the ICA states that “an agreement enforceable by law
is a contract” but there is no existence of contract between the plaintiff and defendant as
the plaintiff is the third party to contract and there is a contractual relationship between
defendant and Khanna & Co.

2. No one may be entitled to or bound by the terms of a contract to which he is not an original
party. This general rule was established in Price v. Easton 1. In other words, a person, who
is not a party to a contract, is neither entitled to the contractual benefits nor is he bound by
contractual obligations. Rights and obligations emerging out of a contract are limited to its
parties only and do not extend to a stranger. This is known as the doctrine of privity of
contract. The rights and obligations are strictly, the private matters of contracting parties
and because of this stranger has no legal access to them. Thus, the doctrine of privity of
contract means that a non-party cannot bring an action to the contract. The doctrine
enunciates a fundamental principle of law of contract that a stranger to a contract cannot
sue upon it.

3. Sec. 73, 74, 75 of ICA 1872 deals with the consequences of breach of contract, only that
person is entitled to sue for breach of the contract who is a party to the contract and has
suffered loss due to such breach. Consequently, a person who is not a party to a contract
i.e. a stranger cannot, bring an action for breach of contract.

4. As a contract is based on a mutual agreement, it would not be fair to force commitments

on any party who might not have given his consent to be bound. Furthermore, empowering
third parties to enforce contracts would influence or limit the rights of contracting parties
to differ or end the contract. A third party might not have provided the consideration, and
consequently should not have the capacity to authorize the agreement.

1
1833 4 B. & Ad. 433

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 5. Therefore, the doctrine of privity of contract prevails as the plaintiff is third party to
contract.

6. In Jamna Das v. Ram Avtar2, it was held the mortgagee has no right to avail himself of
that. He was no party to the sale. The purchaser entered into no contract with him and the
purchaser is not personally bound to pay this mortgage debt.

7. In Advertising Bureau v. CT Devraj3, it was held the suit by the advertiser against the
financer was dismissed as there being no privity of contract between the advertiser and the
financer.

8. In Dunlop Pneumatic Tyre co. v. Selfridge and co. 4 it was held that assuming that the
plaintiffs were undisclosed principles, no consideration move from them to the defendants
and that the contract was unenforceable by them and only a person who is a party to a
contract can sue.

9. In Tweddle v. Atkinson 5it was held that no stranger that the plaintiff could not recover the
money, even though the agreement had expressly provided that the plaintiff should have
the right to sue on it. Wightman J said: “It is now established that no stranger to the
consideration can take advantage of a contract, although made for his benefit.”, whereas,
Crompton J said that “consideration must move from the promise”

10. In Iswaran Pillai v. Sonnivetralu6 it was held that C being no party to the contract between
A & B, he cannot enforce the promise of B.

2
ILR 1912 34 A11 63
3
AIR 1995 SC 2251
4
1915 AC 847
5
1861 1 B&S 393
6
1915 ILR 38 MAD. 753

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 11. In Krishna Lal v. Promila Bala 7it was held that a Hindu assures wives action to recover
the money due under her deceased husband’s policy was rejected because she, though a
nominee under the policy, was not a party to the contract between the deceased and he
insurance co. and no interest passed to her mainly because she was named in the policy.

12. In Utair Aviation v. Jackson Airlines Ltd. And another8, it was held that privity in this
context implies a mutuality of will and in an attraction of parties and their successors it
creates a legal bond or tie. The rue of privity of contract is that no one but the parties of
the contract can be bound by it. A third person cannot become entitled by the contract
itself to demand performance of any duty under the contract.

7
AIR 1928 CAL 518
8
AIR 2012 DEL 415

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 II. NO CONSIDERATION WAS THERE

1. Sec.10 of ICA, 1872 explains the essentials of a valid contract, which states as follows:
‘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 object, and are not hereby expressly
declared to be void’.
Offer + Acceptance = Promise
Promise + Consideration = Agreement
Agreement + Enforceability by law = Contract

2. A legally binding contract needs consideration as it is a vital element. So, a valid contract
does not exist without consideration.

3. As going by the facts of the case Derek & Co. was a third party to a contract between
Shamlal and Khanna hence, there was no contract between Derek & Co. and Shamlal this
implies that no consideration moved from Derek & Co. to Shamlal.

4. Chinnaya v. Ramaya9, The Madras HC held that in this agreement between the defendant
and plaintiff the consideration has been furnished on behalf of the plaintiff (uncle) by his
own sister (defendant’s mother). Although the plaintiff was stranger to the consideration
but since he was a party to the contract he could enforce the promise of the promisor,
since under Indian law, consideration may be given by the promisee or anyone on his
behalf – vide Section 2 (d) of ICA.

Thus, consideration furnished by the old lady constitutes sufficient consideration for the
plaintiff to sue the defendant on her promise. Held, the brother / uncle was entitled to a
decree for payment of the annual sum of money.

9
(1882) I.L.R. 4 MAD. 137

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 5. In Twiddle v. Atkison10, the claim failed: The groom was not party to the agreement and
the consideration did not move from him. Therefore, he was not entitled to enforce the
contract.

6. In Dutton v. Poole11, The court found in favour for the sister on the basis that the
relationship between the father and the daughter had made the sister a party to the
agreement, even if she was not included at the time the contract was agreed. The
relationship between father and daughter was found to extend the consideration that the
father gave in the promise to the children.

7. In Jamna Das v. Ram Autar12, it was held that the mortgagee has no right to avail himself
of that. He was no party to the sale. He was no party to the sale. The purchases entered
into no contract with him, and the purchaser is not personally bound to pay this mortgage
debt.” The mortgagee has no right to avail himself of that. He was no party to the sale. He
was no party to the sale. The purchases entered into no contract with him, and the
purchaser is not personally bound to pay this mortgage debt.”

10
1861 1 B&S 393
11
(1678) 2 LEV 210
12
ILR 1912 34 A11 63

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 III: PRINCIPAL AGENT RELATIONSHIP

1. Section 182 of Indian contract Act 1872 defines agent and principal
Agent - A person employed to do an act for another or to represent another, in dealings in
with third person
Principal - the person for whom the act is done or who is so represented.

2. In an agency one person employs another person to represent him or to do an act on his
behalf, in dealings with a third person. The act of an agent binds the principal in the same
manner in which he would be bound if he does that act itself.

3. According to this definition, an agent never acts on his own behalf but always on behalf
of another. He either represents his principal in any transactions or dealings with a third
person, or performs an act for the principal. In either case, the act of the agent will be
deemed in law to be not his own but of the principal. The crucial test of the status of an
agent is that his acts bind the principal.

4. In case Loon Karan v. John and Co.13, held that conferring a licence on a person by the
government of Assam to have the exclusive right to purchase yarn and sell it to the
customers, did not make such a person as government’s agent even though he had been
described as such in agreement. In this case, it was found that in fact the person so
authorised was acting solely in his own name, and there was no indication to suggest that
he was an agent, even by implication.

5. In case Sakhti Sugars Ltd. v. Union of India14, held that the State Trading Corporation,
which is a legal entity, when permitted to export sugar, does not become the agent of
Union of India, while exercising that commercial function. Its position is just like that of

13
1977 AIR 336, SCR (1) 853
14
AIR 1981 DELHI 212, ILR 1980

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 an individual, who, when authorised to export some goods, has the position only of a
license rather than an agent of Union of India.

6. In case Mohan Lal Jain v. Ruler of Jaipur15, held that signing letters on behalf of military
secretary of an ex-ruler of a former Princely State could not make the person, who signed
the letters, an agent.

7. In our subject case there is no principal and agent relation between Derek &Co. and
Shamlal & Co. either expressly or impliedly which is essential for establishment of the
concept of Agency and there was contract between khanna & Co. and Shamlal & Co.
and Shamlal & Co. was acting solely in his own name and capacit and there was no
indication from Shamlal & Co. that they were acting as an agent on behalf of plaintiff and
hence no suit is maintainable against the defendant

15
1962 AIR 73, 1961 SCR (3) 702

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 PRAYER

In the light of the issues raised, arguments advanced and authorities cited, the counsel for the
Defendant humbly prays that the Hon’ble court be pleased to:

1. “Pass the order of compensation for the travelling expenses, reasonable attorney’s fees,

cost of litigation and the postal charges that were borne by the defendant.

2. And pass any order that this Hon’ble Court may deem fit in the interest of equity, justice
and good conscience. And for this act of kindness, the counsel for the Defendant shall
duty bound forever pray.

Respectfully submitted by: Date: - November 2, 2018

Team - 9D Place: - Delhi

(counsel for Defendant)

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