1. Balfour v.

Balfour (1919) 2 kb 571

a. Facts:- The plaintiff and defendant were married. Husband was posted in

Ceylon. They lived in Ceylon for fifteen years except for two short visits.

When they returned after fifteen years, the doctor told the plaintiff to stay

back. The plaintiff alleged that due to her poor heath, she should stay back

for some months. Her husband in consultation with her assessed her

needs, and said he would send 30l. per month for her maintenance. She

further said that she then understood that the defendant would be

returning to England in a few months, but that he afterwards wrote to her

suggesting that they had better remain apart. In March, 1918, she

commenced proceedings for restitution of conjugal rights, and on July 30

she obtained a decree nisi(an order by a court of law stating the date on

which a marriage will end unless a good reason not to grant a divorce is

produced.). On December 16, 1918, she obtained an order for

alimony(provision for a spouse after separation or divorce; maintenance).

Court held:-

i. These two people never intended to make a bargain which could be

enforced in law.

ii. Reasons:-

a. The husband expressed his intention to make this payment, and he

promised to make it, and was bound in honour to continue it so long as

he was in a position to do so.

b. The wife on the other hand, so far as I can see, made no bargain at all.

c. In order to establish a contract there ought to be something more than

mere mutual promises having regard to the domestic relations of the

 parties. It is required that the obligations arising out of that

relationship shall be displaced before either of the parties can

found a contract upon such promises.

d. ordinary circumstances

e. parties did not intend that they should be attended by legal

consequences.

f. The consideration that really obtains for them(husband and wife

setting) is that natural love and affection which counts for so little in

these cold Courts.

g. FAULT BY PARTIES: The suggestion is that the husband bound

himself to pay 30l. a month under all circumstances, and she bound

herself to be satisfied with that sum under all circumstances, and,

although she was in ill-health and alone in this country, that out of that

sum she undertook to defray the whole of the medical expenses that

might fall upon her, whatever might be the development of her illness,

and in whatever expenses it might involve her. To my mind neither

party contemplated such a result.

FACT:- The husband offered to give some maintenance per month to his

wife who had to stay in London due to medical conditions.

Justice Warrington:-

 Issue: is it a contract or a domestic arrangement?

 There is no intention to enter into legal relations

 Husband is bound in honour, but not in law to follow his

promise.
Justice Duke:-

 No requirement of the issue if there was intention to create legal relations or

not.

 Said that intention to create legal relations is included in the consideration.

 There is no consideration as benefit detriment test is not applicable. The wife,

regardless of the money given by husband had to stay in London.

Justice Attinkson

 Gave the definition of consideration that is followed in india

 Certain arrangements pass the test of contract, but cannot be enforced as it

lacks intention to create legal relations and consequences.

Issues:-

a. Consideration +intention

Requirement of intention is transposed in requirement of consideration.

Benefit detriment test has to give way to contribution to both parties to

contract(Principle of mutuality) –Justice Duke

The mining case-discussed.

b. In non written and social arrangement-legal intention is to be proved.

In written and commercial arrangement, intention to create legal relations is

assumed.

c. Reasonable man standard- in mining case, court held that it was a policy

decision and not a binding decision.

d. Puff vs offer

Carlil v carbolic smoke balls.

2. Coward v MIB [1963] 1 QB 359 Court of Appeal

Coward was killed whilst riding pillion on a motorcycle driven by a friend and

work colleague on the way to work. The collision was due to the negligence of

the friend. Coward's widow sought to claim damages from the Motor

Insurance Bureau since the rider's insurance did not cover pillion passengers.

The Motor Insurance Bureau would only be obliged to pay if insurance for the

pillion was compulsory. Insurance was only compulsory for pillions if they

were carried for hire or reward. Coward paid the friend a small weekly sum to

take him to and from work each day. The widow therefore argued that this

was a contract for hire or reward. However, the MIB argued that to amount to

a contract for hire or reward there had to be an intention to create legal

relations which was absent in agreements of this nature between friends.

Held:

There was no contract of hire or reward as it was a social and domestic

agreement and therefore no intention to create legal relations. The widow was

therefore not entitled to compensation.

3. Kleinwort Benson (KB) v Malaysia Mining Corporation BHD (MMC

BHD) [1989] 1 WLR 379Court of Appeal

Malaysia Mining Corporation Metals Ltd (MMC Metals) was a wholly owned

subsidiary of the defendant, MMC BHD. MMC Metals approached the

 claimant KB Bank for a loan. MMC Metals was a relatively newly formed

company lacking in the size and resources of MMC BHD. The bank

approached MMC BHD asking if they would act as guarantor for the loan.

MMC refused to act as guarantor but stated they it was their company policy

to ensure that their subsidiaries are always in a position to meet their debts. In

reliance of this letter of comfort the bank advanced money to MMC Metals.

MMC Metals subsequently went into administration having not paid the loan.

KB brought an action against MMC BHD to recover their loss based on the

assurance given in the comfort letter.

Held:

The comfort letter had no legal effect. The fact that MMC BHD had refused to

act as guarantor demonstrated they did not intend to be legally bound. The

comfort letter referred to company policy at that time. There was nothing to

stop the company changing its policy.

4. CWT Vs Abdul Hussain (1988) 3 scc 562

Facts-the respondent gave a sum to his partner, another Muslim. The sum was used

in the firm jointly owned by them. He stated the transaction to be governed by

Muslim personal law and sum to be received by the other 'without any obligation

and without any rate of interest and without any consideration.'However, the

appellant was unable to accept this claim.

Held- APPEAL WAS ALLOWED

(1) As no authoritative text nor any principle or

precedent recognised in Muslim Law was cited before the High

Court or this Court, establishing the nature, content and

incidents of the institution of 'Quaraza-e-Hasana', it was

not possible to say, one way or the other, whether Courts

could recognise and act upon such a rule of Muslim Law much

less afford relief to the proponent of that rule. [232G-H;

233A-B]

(2) If the concept of 'Qard Hasan' was the same as that

of 'Quaraza-e-Hasana', the obligation on the part of the

debtor of the loan to repay nor the right of the creditor to

repayment were excluded. The only incident appeared to be

that it was 'interest-free'. [234C]

(3) The reliance by the High Court on the concept of

mussalman gift 'Hiba-ba-shart-ul-Iwaz' did not help the

assessee because this kind of gift stipulated liability for

return. [232E-F]

(4) The debt, though a 'passive debt' would require to

be treated as due and payable to the assessee. It was not

the assessee's case that the debt was bad and irrecoverable.

The debtor's declaration itself established its existence.

[235B]

(5) Where, as in the instant case, the tax implications

of large financial obligations were sought to be put an end

to, the burden as heavy on the assessee to establish that

what would otherwise be the usual incidents of the

transaction were excluded from contemplation by

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the parties. Here, one partner had lent a large sum to the

other to be utilized as capital in the partnership venture.

The transaction was in the context of a commercial venture.

The presumption therefore, was that legal obligations were

intended. The onus was on the parties asserting the absence

of legal obligations. The test was not subjective to the

parties, but an objective one. [236E-F]

(6) The non-enforceability of debt was pleaded not as a

part of what was permissible in law of contracts, but

specifically as some inexorable incident of a particular

tenet peculiar to and characteristic of the personal law of

the Muslims. That not having been established, no appeal

could be made to the principle of permissibility of

exclusion of legal obligations in the law of contracts. In

the instant case, the admitted existence of a debt implied

an obligation to repay. No legal bar of the remedy was

pleaded. What was set up, and was unsubstantiated, was the

non-existence of the remedy itself. The loan would therefore

become includible in the wealth of the assessee. [238C-E]