BWB 1013 / BAWB 1013

BUSINESS LAW

COMPILATION OF CASE LAWS

On the evening of Sunday 26 August 1928, Mrs May Donoghue, boarded a tram in Glasgow for the thirty
minute journey to Paisley. At around ten minutes to nine, she and a friend took their seats in the
Wellmeadow Café in the town's Wellmeadow Place. They were approached by the café owner, Francis
Minghella, and May's friend ordered and paid for a pear and ice and an iced drink. The owner brought the
order and poured part of a bottle of ginger beer into a tumbler containing ice cream. May drank some of
the contents and her friend lifted the bottle to pour the remainder of the ginger beer into the tumbler. On
doing so, it was claimed that the remains of a snail in a state of decomposition plopped out of the bottle
into the tumbler. May later complained of stomach pain, and her doctor diagnosed her as having
gastroenteritis. She also claimed to have suffered emotional distress as a result of the incident.

On 9th April 1929, Donoghue brought an action against David Stevenson, aerated water manufacturer
Paisley, in which she claimed £500 as damages for injuries sustained by her through drinking ginger beer
which had been manufactured by the defender. May had not ordered or paid for the drink herself, so there
was no contractual relationship between May and the café owner. Tort law at this time did not allow for
May to sue the café owner. There was a contractual relationship between him and the friend, but the friend
had not drunk the ginger beer. Ginger beer was not a dangerous product, and the manufacturer had not
fraudulently misrepresented it. At that time, those were the only two grounds for claiming negligence
against a manufacturer. On the face of it, the law did not provide a remedy for May. On appeal to the
House of Lord, Lord Atkin deliver his speech to the House of Lords and reveal his "neighbour" principle to
the rest of the world:

“There must be, and is, some general conception of relations giving rise to a duty of care, of which the
particular cases found in the books are but instances. ... The rule that you are to love your neighbour
becomes in law you must not injure your neighbour; and the lawyer's question: Who is my neighbour?
receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can
reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The
answer seems to be — persons who are so closely and directly affected by my act that I ought
reasonably to have them in contemplation as being so affected when I am directing my mind to the
acts or omissions that are called in question.” So David Stevenson should have been thinking about
his customers when he was bottling his ginger beer. Atkin went on: ‘…a manufacturer of products,
which he sells in such a form as to show that he intends them to reach the ultimate consumer in the
form in which they left him with no reasonable possibility of intermediate examination, and with
knowledge that the absence of reasonable care in the preparation or putting up of products will result
in an injury to the consumer's life or property, owes a duty to the consumer to take that reasonable
care.’

2. PALSGRAF V. LONG ISLAND RAILROAD (1928) 284 NY 339 (farish and his wife) (same) sep2014

Palsgraf is a landmark in tort law that helped establish the limitations of negligence. A passenger carrying
a package, while hurrying to catch and board a moving Long Island Rail Road train, appeared to the
railroad's (Defendant's) employee to be falling. The employee attempted to help the passenger and caused
a package the passenger was holding to fall on the rails. Unbeknownst to the employee, the package
contained fireworks, and the employee's effort to help caused the package to explode. The shock
reportedly knocked down scales at the other end of the platform, which injured Mrs. Helen Palsgraf
(Plaintiff). Palsgraf sued the railroad, claiming her injury resulted from negligent acts of the employee. The
Court of Appeals reversed and dismissed Palsgraf's complaint, deciding that the relationship of the
guard's action to Palsgraf's injury was too indirect to make him liable. Cardozo, writing for three other
judges, wrote that there was no way that the guard could have known that the package wrapped in
newspaper was dangerous, and that pushing the passenger would thereby cause an explosion. The court
wrote that "there was nothing in the situation to suggest to the most cautious mind that the parcel
wrapped in newspaper would spread wreckage through the station. If the guard had thrown it down
knowingly and willfully, he would not have threatened the plaintiff's safety, so far as appearances could
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 warn him." Without any perception that one's actions could harm someone, there could be no duty
towards that person, and therefore no negligence for which to impose liability.

This concept of foresee ability in tort law tends to limit liability to the consequences of an act that could
reasonably be foreseen rather than every single consequence that follows. Otherwise, liability could be
unlimited in scope, as causes never truly cease having effects far removed in time and space

3. BOLTON V. STONE (1951) AC 850 (feb 2015 sec b q1)

The respondent was struck by a cricket ball from a cricket ground while standing on a quiet road.
Evidence showed that this happened some five or six times in some 30 years. The ball had traveled almost
100 yards over a seven foot fence and the judge accepted evidence that the hit was an exceptional one.
There was no doubt that the risk of the ball ever traveling over the fence was foreseeable but the issue
was whether the risk was sufficient to render the committee and members of the club liable. Taking into
account such factors as the distance from the pitch to the edge of the ground, the presence of the fence
and the upward slope of the grounds in which direction the ball was struck, the House of Lords
considered that the likelihood of injury to a person in the plaintiff’s position was so slight that the cricket
club was not negligent in allowing cricket to be played without having additional precaution such as
increasing the height of the fence

4. PARIS V. STEPNEY BOROUGH COUNCIL (1951) AC 367

The plaintiff who was practically blind in his left eye was employed by the defendant to work as a garage
hand in a cleansing department. He later lost sight of his right eye when it was hit by a piece of metal
when dismantling the chassis of a gulley cleaner. The main issue before the House of Lords was whether
the employer was negligent in not supplying the appellant with suitable goggles whist at work. It was held
that while the likelihood of injury is so slight that it was not necessary to provide goggles to a normal man
with two good eyes, the risk that the plaintiff faced was more serious because the lost his right eye would
result in total blindness. The employer has thus breach their duty to take care by not providing the
goggles to the plaintiff.

5. WATT V. HERTFORDSHIRE COUNTY COUNCIL (1954) 1 WLR 835

The plaintiff, a fireman, was instructed to attend to an emergency where a woman was trapped under a
heavy vehicle a few hundred yards away. The situation required a heavy jack to be taken to the scene of
the accident but the vehicle specially fitted to carry this jack was out on other service. The jack was put on
the back of a lorry instead. During the journey, the driver of the lorry had to break suddenly and the
fireman was thrown off balance and the jack caught his leg, causing serious injury. The Court of Appeal
held that his employers had not been negligent. The risk involved to the plaintiff needed to be balanced
against the saving of life or limb. The purpose to be served, if sufficiently important, justifies the
assumptions of abnormal risk.

6. GOVERNMENT OF MALAYSIA 7 ORS V. JUMAT BIN MAHMUD & ANOR (1977)2 MLJ 103

The plaintiff injured his right eye when another pupil pricked his thigh with a pin causing him to turn
around and his eye came into contact with the sharp end of a pencil which the mischievous pupil was
holding. Subsequently the eye had to be removed. The plaintiff brought an action alleging that there was
lack of supervision by the teacher resulting in the accident. The court in holding that the school
authorities is not liable stated that even if the teacher had provided sufficient supervision, he could not
have prevented the injury from being inflicted because of the action of a pupil whose exuberant behavior
was unknown to the teacher.

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7. MOHAMED RAIHAN BIN IBRAHIM V. GOVERNMENT OF MALAYSIA (1981) 2 MLJ 27

The plaintiff suffered a laceration and a depressed fracture to the skull after he was accidentally struck on
the head with a cangkul by a fellow pupil during a practical gardening lesson. In finding the defendant to
be liable for negligence, the Federal Court held that the giving of warnings to pupils not to fool around
when using gardening tools without close supervision was not enough. This case is distinguished from
the case of Jumat Mahmud (see above). The teacher was liable for not checking the condition of the tools
nor provides a safe system of holding the gardening class. The court stated that this is a case where a
teacher appreciating that the boys were handling dangerous instruments had not given sufficient warning
as to their use nor had she taken steps to see the pupils were positioned within such a distance between
them to avoid injuries form being inflicted. There is a world of difference between the use of a cangkul and
that of a pencil.

8. LATIMER V AEC (1953) 2 ALL ER 449

A factory floor becomes slippery when water became mixed with oil after a heavy downpour. The
occupiers of the factory did everything possible to get rid of the effects of the flood sawdust was spread
on the floor but not on the entire floor. A workman slipped on the part which was not covered by sawdust.
The House of Lords held that the defendant was not liable since, in the circumstances of the case, the risk
was not sufficient grave. The court continued “ has it been proved that the floor was so slippery that,
remedial steps not being possible, a reasonably prudent employer would have closed down the factory
rather than allow his employees to run the risks involved in continuing work? The evidence all points to
the conclusion that the danger was, in fact, not such as to impose on a reasonable employer the
obligation to close down the factory.

9. BARNETT V. CHELSEA & KENSINGTON HOSPITAL (1968) 1 All ER 1068

At about 5 am on 1 January 1966, three night watchmen drank some tea. Soon afterwards all three men
started vomiting. At about 8 am the men walked to the casualty department of defendants' hospital, which
was open. One of them, deceased, when he was in the room in the hospital, lay on some armless chairs.
He appeared ill. Another of the men told the nurse that they had been vomiting after drinking tea. The
nurse telephoned the casualty officer, a doctor, to tell him of the men's complaint. The casualty officer,
who was himself unwell, did not see them, but said that they should go home and call in their own
doctors. The men went away, and deceased died some hours later from what was found to be arsenical
poisoning. Cases of arsenical poisoning were rare, and, even if deceased had been examined and
admitted to the hospital and treated, there was little or no chance that the only effective antidote would
have been administered to him before the time at which he died. In an action against defendant hospital
management committee for damages for negligence in that deceased's condition was not diagnosed nor
treated at the hospital: Held in failing to see and examine deceased, and in failing to admit him to hospital
and treat him, the hospital's casualty officer was negligent and did not discharge the duty of care which in
the circumstances was owed to deceased by defendants as hospital authority; but plaintiff had not
discharged the onus of proving that deceased's death was caused by the negligence, or, if there were a
burden on defendants of showing that his death was not due to the negligence, they had discharged that
burden, with the consequence that plaintiff's claim failed.

10. MCGHEE V. NATIONAL COAL BOARD (1972) 3 All ER 1008

The plaintiff, an employee of the National Coal Board was consistently exposed to brick dust while
working in hot and dusty conditions. There were no washing facilities at work and he would cycle home
after work everyday still caked in brick dust. He contracted dermatitis and it was accepted that the
condition was caused by the dust. The problem in this case as regards to the causation element: medical

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 evidence suggested that adequate washing facilities at the work place would have materially reduced the
risk of dermatitis but could not decide whether it would have probably prevented it. The point in this case
is the failure to provide the washing facilities, on the evidence would at most increase the risk and no
more. i.e. it would not have prevented the disease. The defendants however were held to be liable on the
account that it was sufficient to establish that the breach of duty by the board rendered the risk to the
plaintiff more probable. To quote one of the judges, Lord Simon:
‘the law does not require a plaintiff to prove the impossible, but holds that he is entitled to damages for
the injury if he proves on the balance of probabilities that the breach of duty contributed substantially to
causing the injury.

11. VACWELL ENGINEERING CASE v. BHD CHEMICALS (1971) 1 QB 88

The defendant in this case failed to warn the plaintiff of the risk that the content of an ampoule would
explode if it came in contact with water. A scientist working for the plaintiff put a number of these
ampoules in the same sink. A violent explosion ensues causing extensive damage. The defendant was
held liable for the damage on the ground that the type of damage i.e. explosion, was reasonably
foreseeable.

12. SMITH V. LEECH-BRAIN & CO

In this case, the defendant negligently caused burns around the plaintiff’s mouth. The tissues on the lips
were already in precancerous condition and the plaintiff later developed mouth cancer which eventually
led to the plaintiff’s death. Normally, a simple burn around the mouth does not result in death, but it did so
in the plaintiff’s case as he was already suffering from a pre-malignant cancer. His estate succeeded in
recovering damages for death. The egg-shell skull rule applies so that the defendant is liable for
foreseeable damages even though the damage suffered by the plaintiff was more severe than normal due
to the plaintiff’s inherent physical or other condition.

13. ROUSE V. SQUIRES

Defendant A through his negligent driving collided with another car. Defendant B who was also driving
negligently skidded to avoid colliding with the vehicles involved in the first accident and killed the
claimant, a bystander. It was held that the first defendant's negligence was an operative cause in creating
danger to other road users, including other negligent drivers. The second accident would not have
happened but for the continuing obstruction created by A. It was a natural consequence of the fist
accident and did not break the chain of causation.

14. KNIGHTLEY V. JOHNS

The defendant, A, drove negligently in a tunnel and his car overturned. The police inspector who arrives at
the scene of the accident forgot to close the tunnel and ordered the plaintiff, a policeman on a motorcycle
to do so. The latter rode the wrong way against incoming traffic along the tunnel in attempt to close it. In
doing so he collided with B’s car. The Court of Appeal in reversing the trial judge decision holding A liable
for the injuries to the policeman held that the Inspector was negligent in both failing to close the tunnel
and in ordering the plaintiff to carry out dangerous maneouver of riding back along the tunnel. The actual
cause of the plaintiff’s injury was the negligent course of action taken by the Inspector. It was a novus
interveniens which has disturbed and interrupted the sequence of events between the defendant’s
accidents and the plaintiff’s accident.

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15. JONES V LIVOX QUARRIES

The plaintiff had ridden on the back of a vehicle (a “traxcavator”), thereby exposing himself to the risk that
he might be thrown off and injured. Another vehicle ran into the back of the first vehicle, injuring the
plaintiff. He contended that his damages should not be reduced because although it was foreseeable that
he might be thrown off the first vehicle, it was- not foreseeable that he would be injured by another vehicle
running into him. The Court of Appeal rejected this contention therefore found that he was contributorily
negligent. Singleton LJ said,
“The plaintiff, in riding on the traxcavator, was disobeying the orders of his employers. In so doing he was
exposing himself to danger. It may well be that the chief danger was that he might fall off, or be thrown off,
or that he might become entangled in some part of the machine on which he was riding; but those were
not the only risks to which he subjected himself. He had put himself in a dangerous position which, in
fact, exposed him to the particular danger which came upon him. He ought not to have been there. The
fact that he was in that particular position meant that he exposed himself, or some part of his body, to
another risk, the risk that some driver following might not be able to pull up in time - it may be because
that driver was certainly at fault. That is the view which the trial judge took of this case, and I do not see
that that is a wrong view. It is not so much a question of ‘Was the plaintiffs conduct the cause of the
accident?’ as ‘Did it contribute to the accident?’ on the assumption that it was something of a kind which
a reasonably careful man so placed would not have done. If he unreasonably, or improperly, exposed
himself to this particular risk, I do not think that he ought to be allowed to say that it was not a cause
operating to produce the damage, even though one may think that the prohibition against riding on the
vehicle was not made with that particular risk in mind

16. RAMACHANDRAN A/L MAYANDY V. ABDUL RAHMAN BIN AMBOK & ANOR (1997) 4 MLJ 380

The plaintiff suffered injuries in an accident which allegedly took place when he was in the employment of
the second defendant. The injury was sustained after he was requested by another employee of the
second defendant to open the door of the trailer when it flung open and a few pieces of iron rod rolled
down and hit him. On the application of the law to the facts, it was found that on evidence the plaintiff did
not take sufficient care for his own safety. The judge in that case identified three particular acts and
omission of the plaintiff: failure to stand at a safe distance when removing the pin of the trailer door;
failure to consider that there was nothing to bar the iron rods from rolling down once the door was
opened; and failure to assess the risk although he knew the danger that would be created by his act. As
such the plaintiff was found to be liable for contributory negligence.

17. BYRNE V. BOADLE

Byrne was struck by a barrel of flour falling from a second-story window. The court's presumption was
that a barrel of flour falling out of a second-story window is itself sufficient evidence of negligence: (Chief
Baron Pollock)

We are all of opinion that the rule must be absolute to enter the verdict for the plaintiff. The learned
counsel was quite right in saying that there are many accidents from which no presumption of negligence
can arise, but I think it would be wrong to lay down as a rule that in no case can a presumption of
negligence arise from the fact of an accident. Suppose in this case the barrel had rolled out of the
warehouse and fallen on the plaintiff, how could he possibly ascertain from what cause it occurred? It is
the duty of persons who keep barrels in a warehouse to take care that they do not roll out, and I think that
such a case would, beyond all doubt, afford prima facie evidence of negligence. A barrel could not roll out
of a warehouse without some negligence, and to say that a plaintiff who is injured by it must call
witnesses from the warehouse to prove negligence seems to me preposterous. The present case upon the
evidence comes to this, a man is passing in front of the premises of a dealer in flour, and there falls down
upon him a barrel of flour. I think it apparent that the barrel was in the custody of the defendant who
occupied the premises, and who is responsible for the acts of his servants who had the control of it; and
in my opinion the fact of its falling is prima facie evidence of negligence, and the plaintiff who was injured
by it is not bound to show that it could not fall without negligence, but if there are any facts inconsistent
with negligence it is for the defendant to prove them.

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18. GEE V. METROPOLITAN RAILWAY

Plaintiff, in company with his brother, was traveling by an underground railway. In an action against
defendants for negligence it was proved that plaintiff, being a passenger on defendants' railway, got up
from his seat and put his hand on the bar which passed across the window of the carriage, with the
intention of looking out to see the lights of the next station, and that the pressure caused the door to fly
open, and plaintiff fell out and was injured. There was no further evidence as to the condition of the door
and its fastenings.

19. ZAINAB ISMAIL V. MARIMUTHU (1955) 21 MLJ 22

The plaintiff’s daughter was washing clothes at a stand pipe and was killed by a lorry which was driven
negligently and recklessly. On the facts the judge found that the plaintiff was on the roadside and actually
saw her daughter being killed by the accident. The court held that the defendant cannot be exempted from
liability for shock to the plaintiff on ground of remoteness. The plaintiff is therefore entitled to recover
damages under nervous shock.

20. MCLOUGHLIN V. O’BRIAN [1983] 1 AC 410.

The plaintiff’s husband and three children were involved in a road accident. One of the plaintiff’s children
was killed and her husband and other children seriously injured. When the accident occurred the plaintiff
was two miles away, at home. She was told of the accident by a motorist who had seen it and brought to
hospital where she saw her seriously injured husband and two children, and heard her daughter had been
killed. As a result of seeing and hearing the results of the accident, the plaintiff suffered nervous shock: a
psychiatric illness. The House of Lords allowed her appeal holding that the nervous shock had been the
reasonably foreseeable result of the injuries to her family caused by the defendant’s negligence.

21. ALCOCK & ORS V. CHIEF CONSTABLE OF SOUTH YORKSHIRE POLICE

Shortly before the commencement of a major football match at a football stadium the police responsible
for crowd control at the match allowed an excessively large number of intending spectators into a section
of the ground which was already full, with the result that 95 spectators were crushed to death and over 400
injured. Scenes from the ground were broadcast live on television from time to time during the course of
the disaster and were broadcast later on television as news items. News of the disaster was also
broadcast over the radio. However, in accordance with television broadcasting guidelines none of the
television broadcasts depicted suffering or dying of recognizable individuals. Sixteen persons, some of
whom were at the match but not in the area where the disaster occurred, and all of whom were relatives, or
in one case the fiancé, of persons who were in that area, brought actions against the chief constable of the
force responsible for crowd control the match claiming damages for nervous shock resulting in
psychiatric illness alleged to have been caused by seeing or hearing news of the disaster. In the case of
thirteen of the plaintiffs their relatives and friends were killed, in the case of two of the plaintiffs their
relatives and friends were injured and in the case of one plaintiff the relative escaped unhurt. The chief
constable admitted liability in negligence in respect of those who were killed and injured in the disaster
but denied that he owed any duty of care to the plaintiffs. The question whether, assuming
that each plaintiff had suffered nervous shock causing psychiatric illness as a result of the experiences
inflicted on them by the disaster, they were entitled in law to recover damages for nervous shock against
the defendant was tried as a preliminary issue.

The judge found in favour of ten out of the plaintiffs and against six of them. The defendant appealed in
respect of nine of the successful plaintiffs and the six unsuccessful plaintiffs cross-appealed. The Court of
Appeal allowed the appeals and dismissed the cross-appeals, holding that none of the plaintiffs was
entitled to recover damages for nervous shock. Ten of the plaintiffs appealed to the House of Lords,
contending that the only test for establishing liability for shock-induced psychiatric illness was whether
such illness was reasonably foreseeable.

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 Held – A person who sustained nervous shock which caused psychiatric illness as a result of
apprehending the infliction of physical injury or the risk thereof to another person could only recover
damages from the person whose negligent act caused the physical injury or the risk to the primary victim
if he satisfied both the test of reasonable foresee ability that he would be affected by psychiatric illness as
a result of the consequences of the accident because of his close relationship of love and affection with
the primary victim and the test of proximity in relationship to the tortfeasor in terms of physical and
temporal connection between the plaintiff and the accident. Accordingly, the plaintiff could only recover if:
(i) his relationship to the primary victim was sufficiently close that it was reasonably foreseeable that
he might sustain nervous shock if he apprehended that the primary victim had been or might be
injured,
(ii) his proximity to the accident in which the primary victim was involved or its immediate after match
was sufficiently close both in time and space and
(iii) he suffered nervous shock through seeing or hearing the accident or its immediate aftermath.

Conversely, persons who suffered psychiatric illness not caused by sudden nervous shock through
seeing or hearing the accident or its immediate aftermath or who suffered nervous shock caused by being
informed of the accident by a third party did not satisfy the tests of reasonable foresee ability and
proximity to enable them to recover and, given the television broadcasting guidelines, persons such as
the plaintiffs who saw the events of a disaster on television could not be considered to have suffered
nervous shock induced by sight or hearing of the event since they were not in proximity to the events and
would not have suffered shock in the sense of a sudden assault on the nervous system. It followed that
none of the appellants was entitled to succeed because either they were not at the match but had seen
the disaster on television or heard radio broadcasts or their relationship to the victim had not been shown
to be sufficiently close to enable them to recover. The appeals would therefore be dismissed

22. PAGE V. SMITH

The plaintiff was involved in a minor car accident, and was physically unhurt in the collision. But the crash
did result in a recurrence of Chronic Fatigue Syndrome from which he had suffered for 20 years but was
then in remission (he is a primary victim). The defendant admitted that he had been negligent, but not for
the psychiatric damage as it was unforeseeable and therefore irrecoverable as a head of damage. The
lordships devised a test, if the defendant could reasonably foresee that his conduct would expose the
plaintiff to the risk of personal injury, psychological or physical. If the answer was yes, it is irrelevant that
the damage was not physical or that psychiatric injury was unforeseeable because of an eggshell
personality (take the defendant as you find them). As a result the law lords disagreed with the defendant
as the plaintiff had been in the range of foreseeable injury as a primary victim. (The rule concerning
customary phlegm/reasonable fortitude is not required for primary victims

23. BOURHILL V. YOUNG

In this case a motorcyclist was killed in a road accident for which he was responsible. A pregnant woman,
who had got off a tram at scene of the accident (having heard the noise of an accident), claimed that when
she reached the scene of the accident she saw blood on the road and as a result suffered shock which put
her into premature labour - resulting in the loss of the baby. She subsequently brought a claim in relation
to nervous shock and the resulting loss/damage. House of Lords held that there was insufficient proximity
between the motorcyclist and the claimant. There was not a duty of care, she was not present at the scene
of the accident (she had arrived after the accident had occurred).

24. RYLANDS V. FLETCHER

John Rylands constructed a reservoir on land he was renting to supply water to his steam powered textile
mill. Thomas Fletcher operated mines in the area and had tunnelled up to old disused mines which were
under the new reservoir. Both were renting land from Lord Wilton and both were lawful users of their land.
Rylands employed independent contractors and engineers to do the work of building the reservoir which
was completed in December 1860. The lands were in Lancashire, in an area know for its mines. While
excavating the construction site, the contractors came across some disused mine shafts which had been

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 loosely filled with marl and soil. No attempt was made to seal them. In fact, the shafts led via a series of
interconnected shafts and tunnels into Fletcher's mines and land. Water from the mill's reservoir flooded
into Fletcher's mines on 11 December 1860 just days after completion of the reservoir and after it had been
partial filled. Fletcher sued Rylands. There had been no excessive rains or local floods.

In the Court of appeal, Justice Colin Blackburn spoke on behalf of all the judges and said, " We think that
the true rule of law is, that the person who for his own purposes brings on his lands and collects and
keeps there anything likely to do mischief if it escapes, must keep it at his peril, and, if he does not do so,
is prima facie answerable for all the damage which is the natural consequence of its escape. He can
excuse himself by shewing that the escape was owing to the Plaintiff’s default; or perhaps, that the
escape was the consequence of vis major, or the act of God; but as nothing of this sort exits here, it is
unnecessary to inquire what excuse would be sufficient."

The Court found in favour of Fletcher and ordered Rylands to pay for all the property damage to the mine.
The Court agreed that Rylands had a duty in maintaining the reservoir and of being liable for all harm
caused by it with broad scope of liability (strict but not absolute) with the extent of defenses described
above by Blackburn J and Lord Cairns.

25. PONTING V. NOAKES

A land owner’s horse ate some Yew leaves from a neighbouring tree. The tree was growing in a
neighbour’s field which was separated from his own by a fence and ditch. Both the ditch and fence
belonged to the neighbour with the ditch forming the boundary, (the fence is located on the neighbour’s
side of the ditch). The Yew tree had branches which extended over the fence and ditch, but not extending
so far as to overhang the horse owners field. The horse had reached over the ditch and eaten the foliage. It
was contended that the principle laid down in Fletcher v Rylands was applicable here where an owner of a
property is responsible for the escape of something on his land. But this was not the case in this situation
as the Yew branches were completely contained within the boundaries of the defendants land. Charles, J
said, "I do not see that they can be made responsible for the eating of these Yew leaves by an animal
which, in order to reach them, had come upon his land. The hurt which the animal received was due to his
wrongful intrusion. He had no right to be there and the owner therefore has no right to complain." The
appeal was granted and the original judgment against the yew tree owner overturned with costs awarded.

26. CROWHURST V. AMERSHAM BURIAL BOARD

The defendants planted a yew tree on their own land and about four feet from the boundary fence. In the
course of time as the tree grew, some of the branches projected through and over the boundary fence.
Parts of the tree consequently became accessible to the plaintiff’s horse, which was grazing in the
adjoining field. As a result of this, the horse died from yew poisoning and the plaintiff brought an action
for damages. It was held that the defendants had allowed the tree to grow over the boundary and that they
were consequently responsible. This follows the ruling given in Rylands and Fletcher (1863), 3 H.L.330,
namely that if a person brings on to his or her land something which is dangerous or harmful and he
allows it to escape, he will be held liable for any injury which may result.

27. NICHOLS V. MARSHLAND

The defendant has formed artificial ornamental lakes by damming up a natural stream. A most violent
thunderstorm, greater and more violent than any within the memory of witnesses, broke down the artificial
barriers and the rush of escaping waters destroyed four of the plaintiff’s bridges. The jury found that no
reasonable person could have anticipated the storm and thus the defendant could not be liable for an
extra-ordinary act of nature which she could not reasonably anticipated.

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28. CAMBRIDGE WATER CO LTD V. EASTERN COUNTIES LEATHER PLC

Cambridge Water Co. purchased a borehole in 1976 to extract water to supply to the public. In 1983 it
tested the water to ensure that it met minimum standards for human consumption and discovered that it
was contaminated with an organochlorine solvent. On investigation, it emerged that the solvent came from
the Eastern Counties Leather plc tannery, about 1.3 miles from the borehole. Since the tannery opened in
1879 until 1976, the solvent it used had been delivered in 40 gallon drums which were transported by fork
lift truck and then tipped into a sump. Since 1976, solvents had been delivered in bulk and stored in tanks.
It was then piped to the tanning machinery. There was no evidence of any spills from the tanks or pipes,
and it was concluded that the water had been contaminated by frequent spills under the earlier system.
Cambridge Water Co. claimed damages against Eastern Counties Leather plc alternatively for negligence,
nuisance and under the rule in Rylands v. Fletcher.

At first instance it was found that Eastern Counties Leather plc could not have foreseen this type of
damage and, therefore, disallowed the claims in nuisance and negligence. Further, it was found that the
actions of Eastern Counties Leather plc constituted a natural use of the land and consequently dismissed
the claim based on the rule in Rylands v. Fletcher. Cambridge Water Co. Ltd. successfully appealed.
Eastern Counties Leather plc then appealed to the House of Lords.

The House of Lords unanimously found that Eastern Counties Leather plc was not liable for the water
contamination. The main issue was whether the foresee ability of the damage suffered by Cambridge
Water Co. was relevant to a claim under the rule in Rylands v. Fletcher. The Lords accepted the original
finding that a reasonable supervisor employed by Eastern Counties Leather plc would not have foreseen
that the solvent would leak from the tannery floors down into the water source. It was thought at the time
that any spilt solvent would evaporate and that the only foreseeable risk was that if large quantities were
spilt, someone might be overcome by the vapour.

29. CENTURY INSURANCE CO. LTD V. NORTHERN IRELAND ROAD TRANSPORT BOARD (1942) AC 509

The driver of a petrol lorry, employed by the defendant, while transferring petrol from the lorry to an
underground tank in the plaintiff’s garage, struck a match to light a cigarette and threw it on the floor and
thereby caused a conflagration and an explosion which damaged the plaintiff’s property. The defendants
were held liable for the careless act of the drivers as it was done in the course of employment. Lord Wright
pointed out that the act of the driver in lighting his cigarette was done for his own comfort and
convenience, it was in itself both innocent and harmless. But the act could not be treated in abstraction
from the circumstances as a separate act, the negligence was to be found by considering the time and
circumstances in which the match was struck and thrown, and this made it a negligent method of his
work.

30. ROSE V. PLENTY (1976) 1 All ER 97

A milkman whose job included delivering dairy products was prohibited by his employer from employing
children or giving unauthorized lifts in his vehicle. Contrary to this he employed a 13 year old boy to assist
him. The boy later was injured in an accident caused by the negligence of the milkman. The court held that
although the act of employing children is prohibited, it was a conduct within the course of employment
and thus the employer of the milkman vicariously liable for his negligent act.

10
 LAW OF CONTRACT

1. R V. CLARKE

Facts: Clark, while under arrest for murder, gave information to the police about the whereabouts of a
known criminal. There was a reward of £1000 (i.e., a unilateral contract) for information leading to the
criminal’s arrest, and Clark knew about the reward at one point, but subsequently forgot about it. Though
unaware of the reward when he gave the information to the police, Clark took action against the crown,
arguing that the £1000 was owed to him, since he had performed the act requested.
Ruling: For Crown (NO contract) -- In giving information Clark was “not acting on or in pursuance of or in
reliance upon or in return for the consideration contained in the proclamation, but exclusively in order to
clear himself from a false charge of murder....Clark never accepted or intended to accept the offer in the
proclamation , and, unless the mere giving of the information without such intention amounted in law to
an acceptance of the condition, there was neither ‘acceptance’ nor ‘performance,’ and therefore there was
no contract.”
Ratio: No unilateral contract exists where the offeree performs the requested act without knowledge of or
in reliance on the advertisement

2. CARLILL V. CARBOLIC SMOKE BALL [1893] 1 QB 256

The Carbolic Smoke Ball Company made a product that it claimed could protect the user from contracting
influenza. The Company published advertisements claiming that it would pay £100 to anyone who got sick
with influenza after using its product according to the instructions set out in the advertisement.
Specifically, they stated:

£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing
epidemic influenza, colds or any disease caused by taking cold, after having used the ball three times
daily for two weeks according to the printed directions supplied each ball. £1000 is deposited with the
Alliance Bank, Regent Street, showing our sincerity in the matter.

Mrs Carlill, relying on the promises made in the advertisement, bought one of the balls and used it in the
manner specified, yet still managed to contract influenza. The Carbolic Company claimed that there was
no enforceable contract between it and the user of the smoke ball on the grounds that there was no
acceptance of its offer, because Mrs Carlill had never notified the Company that she accepted its offer, or
consideration, since the Company did not receive any benefit from a purchaser's use of the product once
the sale had been completed. The court rejected both arguments, ruling that the advertisement was an
offer of a unilateral contract between the Carbolic Smoke Ball Company and anyone who satisfies the
conditions set out in the advertisement. Once Mrs Carlill had satisfied the conditions she was entitled to
enforcement of the contract; the notification of performance of the conditions formed part of the
acceptance. Furthermore, weight was placed on the £1000 bank deposit that claimed to 'show their
sincerity in the matter' in showing that the advertisement was not just a puff.

3. PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V. BOOTS CASH CHEMISTS (SOUTHERN) LTD. [1953] 1
Q.B. 401; [1953] 1 All E.R. 482

The case revolved around the Boots Cash Chemists store that sold drugs which the customer chose and
put in a basket rather than asking a qualified pharmacist. Boots was one of the first stores opting for this
now common self-service system, which was becoming popular around the time. When a customer
entered the store he or she was given a basket and could pick items off the shelves as they wished and
place them in the basket. The customer would then take it to the cash desk next to which a registered
pharmacist would sit.
11
 The Pharmaceutical Society of Great Britain, a society representing the pharmacist profession, took issue
with this new practice and brought an action against Boots Cash Chemist as a test case to enforce the
Pharmacy and Poisons Act 1933 which made it illegal to sell a listed "poison" without supervision of a
registered pharmacist. The Pharmaceutical Society argued that the display of goods was an offer to sell
which was accepted by the customer upon placing the drugs in the basket, at which moment the contract
of sale was formed. As a result, the Society argued, the provisions of the Act prohibiting the sale of
"poison" without supervision were breached. Both the Queen's Bench Division of the High Court and the
Court of Appeal sided with Boots. They held that the display of goods was not an offer. Rather, by placing
the goods into the basket, it was the customer that made the offer to buy the goods. This offer could be
either accepted or rejected by the pharmacist at the cash desk.

In the case of an ordinary shop, although goods are displayed and it is intended that customers should go
ahead and choose what they want, the contract is not completed until, the customer having indicated the
articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract
is completed. The moment of the completion of contract was at the cash desk, in the presence of the
supervising pharmacist. Therefore, there was no violation of the Act.

4. GIBSON V. MANCHESTER CITY COUNCIL

Gibson, a tenant of a Council house, filled out a form in order to inquire what would be the price of buying
his council house. The form was a brochure circulated by the council to tenants who had previously
expressed an interest in buying their houses. The scheme provided for a sale at market price minus a
discount for length of time the purchaser had been a council tenant. Gibson completed this form and
relied on it as an unconditional acceptance of the council’s offer to sell the house; but cannot be so
unless there was a contractual offer by the council available for acceptance. Gibson claimed that he relied
on the offer (he went ahead an renovated the house, thinking he’d soon own it), and that the council
clearly intended there to be a binding contract (the complex discussion of price and the numerous
memos). The council asserted that the language of the form clearly and unequivocally expressed the fact
that it was not an offer (the statement ‘this letter should not be regarded as firm offer of a mortgage’, and
more importantly, the numerous appearances of the words ‘application form’, which clearly implies
anything but offer)
Ruling: For D (NO contract) -- “The parties had not concluded a binding contract because the council had
never made an offer capable of acceptance, since the statements in the city treasurer’s letter of the 10th
February that the Council ‘may be prepared to sell’ and inviting the respondent ‘to make formal application
to buy’ were not an offer to sell but merely an invitation to treat. The respondent was, therefore, not
entitled to specific performance...”
Ratio: A mere quotation of price does not constitute an offer -- it’s simply an invitation to make an offer to
buy.

5. PARTRIDGE V. CRITTENDEN [1968] 2 All ER 421, [1968] 1 WLR 1204, 132 JP 367

On the 13th April 1967 an advertisement by the appellant (Arthur Robert Partridge) appeared in the
periodical "Cage and Aviary Birds", under the general heading "Classified Advertisements" which
contained, amongst others, the words Quality British A.B.C.R... Bramblefinch cocks, Bramblefinch hens
25s. each. In no place was there any direct use of the words "offer for sale". A Thomas Shaw Thompson
wrote to Partridge asking him to send him an ABCR Bramblefinch hen (a brambling) and enclosed a
cheque for 30s. On the 1st May 1967 Partridge dispatched a brambling, which was wearing a closed-ring
around its leg, to Thompson in a box. Thompson received the box on 2nd May 1967 and was able to
remove the ring from the bird's leg without injuring it.

Partridge was charged by Anthony Ian Crittenden, on behalf of the RSPCA, with illegally offering for sale a
wild life bird which was not a close-ringed specimen, bred in captivity, against s. 6(1)* and Sch. 4* of the
Protection of Birds Act 1954. The magistrates decided that the advertisement was an offer for sale and that
the ABCR Bramblefinch hen was not a close-ringed specimen bred in captivity, because it was possible to
remove the ring from the bird's leg. Partridge was convicted, was fined £5 and ordered to pay £5 5s.
advocate's fee and £4 9s. 6d. witnesses' expenses. Partridge appealed against conviction. The legal

12
 question facing the High Court was whether the appellant's advertisement constituted a legitimate offer for
sale, and whether the bird was not a close-ringed specimen bred in captivity under the Protection of Birds
Act 1954 if it were possible to remove the ring from its leg. It was held that the advertisement in question
constituted in law an invitation to treat and not an offer to sell; therefore the offence with which the
appellant was charged was not established. The judges also said that if the only issue were whether the
bird was a close-ringed specimen under the Protection of Birds Act 1954, the magistrates' judgment would
have been upheld.

6. HYDE V.WRENCH (1840) 49 E.R. 132

Wrench offered to sell his farm for £1,000. The buyer, Hyde, made a counter- offered of £950, which
Wrench rejected. Hyde then informed Wrench that he accepted the original offer of £1,000. It was held that
there was no contract. Hyde's counter-offer had effectively ended the original offer and it was no longer
open to him to accept it. A counter-offer must not be confused with a request of information. Such a
request does not end the offer, which can still be accepted after the new information has elicited.

7. STEVENSON V. MCLEAN (1880) 28 W.R. 916

The defendant held documents of title to certain quantities of iron and offered to sell them to the plaintiff
for 40/- cash, indicating that the offer would be held open until the following Monday. The plaintiff was a
broker and would only buy once they had lined up a buyer to take from them. On Monday at 9:42am P
sent a telegram to D sounding out what flexibility there might be to negotiate before the days trading got
under way. The market was unstable and P wanted to know the negotiating range. "Please wire whether
you would accept 40 for delivery over 2 months, if not, longest time limit." There was no response from D
and P later purported to accept the original offer. D claimed that the acceptance was not effective as their
telegram had rejected the offer by way of counter-offer. Here, the telegram was not a counter-proposal,
but a mere inquiry "which should have been answered" [morally or legally?]. It was not as a rejection of
the offer. As no notice of withdrawal was given by the offeror, the P could regard it as a continuing offer,
and their acceptance of it made the contract complete.

8. FELTHOUSE V. BINDLEY (1862), 11 Cb (NS) 869

Is the leading English case in contract law where the long-standing maxim that "silence does not amount
to acceptance" was first expressed. Mr. Felthouse wanted to buy one of his nephew's horses. Felthouse
wrote to his nephew who wanted to sell the horse to him, stating that "If I hear no more about him, I
consider the horse mine..." Subsequently, there was no notice from his nephew and Felthouse considered
the horse his own. The horse was not delivered to uncle Felthouse and later there was an auction at the
nephew's property for the other livestock. The nephew told the auctioneer, Mr. Bindley, not to sell the
horse at the auction. By accident Bindley sold it anyway. Felthouse sued the auctioneer in the tort of
conversion however the action could only succeed if it could be shown that Felthouse actually owned the
horse. The court ruled that Felthouse did not have ownership of the horse as there was no acceptance of
the contract. Acceptance must be communicated clearly and cannot be imposed due to silence of one of
the parties. The uncle had no right to impose a sale through silence whereby the contract would only fail
by repudiation. Though the nephew expressed interest in completing the sale there was no
communication of that intention.

9. ADAMS V. LINDSELL (1818) 1 B & Ald 681; 106 ER 250 (KB)

Was an English contract case involving two parties in the sale of wool. On 2 September, the defendents
wrote to the plaintiffs offering to sell them certain fleeces of wool and requiring an answer in the course of
post. The defendants, misdirected the letter so that the plaintiffs did not receive it until 5 September. The
plaintiffs posted their acceptance on the same day but it was not received until 9 September. Meanwhile,
on 8 September, the defendants, not having received an answer by 7 September as they have expected,
sold the wool to someone else. Held: There was a contract on 5 September when the plaintiffs posted their
acceptance.

13
 Basically the case lays the precedent for contracts being entered into upon acceptance by the offeree, not
notification by the offeree to the offeror. This case also illustrates the 'postal rule' in English Contract Law,
that acceptance is complete upon posting. The postal rule is an exception to the rule that acceptance is
only complete when it is communicated to the proposer or the offeror. The reason for the postal rule may
be explained on the ground that the offeror who chooses to start negotiations by post takes the risk of
delay and accidents in the post. The offeror could have protected himself by expressly stipulating that he
is not bound until actual receipt of the acceptance.

10. ENTORES LTD V. MILES FAR EAST CORP [1955] 2 QB 327, CA.

Is a landmark English decision in contract law on the moment of acceptance of a contract over telex. Lord
Denning found that the regular postal rule did not apply for instantaneous means of communications such
as a telex. Instead, acceptance occurs where the message of acceptance is read. Entores was a London-
based trading company that sent an offer for the purchase of copper cathodes by telex from a company
based in Amsterdam. The Dutch company sent an acceptance by telex. The contract was not fulfilled and
so Entores attempted to sue the owner of the Dutch company for damages. The controlling company,
Miles Far East Corp., was based in the U.S. and so Entores could only bring the action in the U.S. if it
could be found that the contract was formed in London rather than Amsterdam. Lord Denning found that
the contract was formed in London. He noted that the instantaneous nature of telex meant that regular
rules of acceptance by post did not apply. Similar to a contract formed over the telephone, if the line goes
dead before acceptance is communicated the offeror will never know but the offeree would be able to tell.
As such, the offeror should not be bound.

11. BRINKIBON V. STAHLUND STAHL MBH

Facts: This is a conflict of laws case, in which Brinkibon wants to sue, in English jurisdiction, an Austrian
company for breach of an alleged contract for the supply of steel. Brinkibon received a telex from the
Austrian company which constituted a counter offer. Brinkibon then sent a telex to the Austrian company
which constituted acceptance. Brinkibon alleged a breach of contract, and wanted to sue. The issue was
whether the contract was made in England (in which case Brinkibon could sue) or in Austria (Brinkibon
could not sue). It was held that no contract existed. The contract was made in Austria. Brinkibon failed to
show that that the contract was made in the English jurisdiction, because the court applied the reception
rule, and held that acceptance was made when the telex reached Austria, and from this, that the contract
was created in Austria -- hence Austrian jurisdiction applies. The general rule “is that a contract is formed
when acceptance of an offer is communicated by the offeree to the offeror. And if it is necessary to
determine where a contract is formed it appears logical that this should be at the place where acceptance
is communicated to the offeror.” Brinkibon’s conduct (opening a bank account for payment) is seen as
acceptance as well.
Ratio: A contract which is brought into existence by an acceptance communicated by telex is deemed to
be mad e at the place at which the telex was received. This is an exception to the "postal rule." So the
"postal rule" does not apply to fax transmissions.

12. BYRNE V. VAN TIENHOVEN 1880 Court of Common Pleas UK

The parties exchanged the following correspondence:

1 October: D posted a letter to P offering to sell tinplate. 8 October: D posted letter revoking the offer. 11
October: P telegraphed acceptance of the offer. 15 October: P confirmed acceptance by letter. 20 October:
P received D's letter of revocation. At what time would the revocation have taken effect? This case raises
2 questions: 1) Is revocation effective prior to its actual communication to the other party? 2) Does
posting a letter of revocation constitute communication of it? A state of mind not notified cannot be
regarded in dealings. Whilst it is well accepted that an acceptance takes effect from posting, yet there is
no authority to say that a revocation is also effective from posting. The principle is that the writer of an
offer impliedly accepts that a posted answer will be sufficient - and that the post office will act as agent for
the purpose. Therefore, delivery to the post office is delivery to the other party. But this principle is not

14
 applicable to the withdrawal of an offer. There is no authority or principle that withdrawal is effective
before it is received. So the withdrawal was ineffective and the contract completed on 11 October. Any
other view would lead to great inconvenience. Nobody could act on an acceptance until a further stage
had been gone through of confirming that a revocation had not been sent to them in the meantime

13. RAMSGATE VICTORIA HOTEL V. MONTEFIORE

Montefiore made application to buy shares in Ramsgate Victoria Hotel Co Ltd. Five months later the
company informed him he had been allotted the shares applied for. Montefiore refused to accept the
allotment on the grounds the offer had lapsed due to the passage of five months. The issue in this case
was whether Montefiore bound to accept the allotment and pay for the shares? It was held by the court
that the company in taking five months to respond to the application had not responded 'reasonably'.
Although no time was stipulated in which the acceptance was to take place, on the facts of the case this
passage of time was too long to be held as reasonable. Thus the offer to buy the shares had lapsed
through the effluxion of time.

14. BALFOUR V. BALFOUR

Facts: P (wife) and D (husband) came from Scotland (I think) to England for a holiday during the
husband’s leave of absence from work. When he had to return, the wife, on the advice of her doctor,
remained in England. Just before the husband left, he promised her an allowance of £30 per week. This
was maintained for a few months, when the husband wrote the wife, ending their relationship. She
remained in England, and after nearly two years, she claimed alimony. She also claimed that she should
be able to recover for the two years of unpaid allowance as agreed to between her and her husband. The
husband (defendant) argued that the agreement for the allowance was not a binding contract. It was held
that no contract existed between the parties. When the alleged agreement was made, the couple was
clearly in a state of amity. Agreements between spouses in amity typically do not constitute binding
contracts, because “the parties, in the inception of the arrangement, never intended that they should be
sued upon. Agreements such as these are outside the realm of contracts altogether” since unlike a
binding contract, there is no seal, no consideration, no obligation, and the terms are not inflexible.
Agreements between spouses in amity are rarely intended to be binding, so they do not form enforceable
contracts.

15. PHANG SWEE KIM V. BEH HOCK (1964) MLJ 383

In 1944, in consideration of $20,000 in Japanese currency, the respondent executed a transfer of his half-
share of the land in question to the appellant’s husband, now deceased. The transfer was not registered
but the deceased obtained possession of the land. In 1946 he died. The appellant, widow of the deceased
continue to be in possession of the land. In 1963, the land was subdivided into two lots and the
respondent became the sole proprietor of the lot occupied by the appellant. The respondent’s solicitor
then notified the appellant that she had trespassed on the said land and asked for vacant possession and
also all account of all income received from the land. The respondent then instituted an action claiming
the relief stated. The appellant counter-claimed that she was entitled to the said land. It was held that there
was adequate consideration given in this case (there being no evidence of fraud or duress) because the
respondent agreed to transfer the land to the appellant on the payment of $500 when the land was
subdivided. The appellant was therefore entitled for the land.

15
16. VENKATA CHINNAYA V. VERIKATARAMAYA

A sister agreed to pay an annuity of Rs 653 to her brothers who provided no consideration for the said
promise. But on the same day, their mother had given the sister some land, stipulating that she must pay
the annuity to her brothers. The sister however failed to pay the promised annuity and was sued by her
brothers. The court held that she was liable to pay the annuity. There was good consideration for the
promise (in terms of the land given by their mother) even though the consideration did not come (move)
from her brothers.

17. KEPONG PROSPECTING LTD. V. SCHMIDT (1968) 1 MLJ 170

In 1953, Tan applied to the government of Johor for a prospecting permit for iron ore. He was assisted in
the negotiations by Schmidt, a consulting engineer. A permit was the granted to Tan and Tan wrote to
Schmidt that Schmidt was to be paid 1% of the selling price of all ore that might be sold from any portion
of the said land and this was in payment for the work that Schmidt had done in assisting to get the permit
and in any work that might be done in starting up the mining operation. In September 1955, an agreement
was made between the company and Schmidt under which among others Clause 1 of the agreement
agreed to paid Schmidt 1% of all the ore that might be won from the land in consideration of the services
by the consulting engineer for and on behalf of the company prior to its formation, after incorporation and
for future services. Disputes arose subsequently between the parties and Schmidt commenced the
proceeding in 1959 claiming all the money payable to him under the 1955 agreement. The court held that
Clause 1 of the 1955 agreement established a legally sufficient consideration moving from Schmidt.

18. KARUPPAN CHETTY V. SUAH THIAN

In this case the requirement of certainty was not met when the parties agreed upon the granting of a lease
at $35.00 per month as long as he likes. The statement "as long as he likes" carries uncertain meaning to
it. This thus makes it a void contract.

19. NASH V. INMAN (1908) 2 KB 1

A tailor sued a minor to whom he had supplied clothes, including 11 fancy waistcoats. It was decided that,
as the minor was an undergraduate at Cambridge University at the time, the clothes were suitable
according to the minor’s station in life. Unfortunately for the tailor, however, it was further decided that
they were not necessary, as he already had sufficient clothing. Point of law: If a minor orders something
that they already have sufficient quantity of then those items can’t be necessaries.

20. GOVT. OF MALAYSIA V. GURCHARAN SINGH (1971) 1 MLJ 211

The government sued the first defendant as the promiser and the second and third defendant as sureties
for breach of contract. The claim was for RM11,500, the sum actually spend by the government in
educating the first defendant. At the time of the contract, the first defendant was a minor and the defence
was essentially that the contract was void due to lack of capacity. It was held that the contract was void
but the court ruled that since education was 'necessaries', the first defendant was liable for the repayment
of a reasonable sum spent on him.

21. PRICE V. EASTON

Easton made a contract with X that in return for X doing work for him, Easton would pay Price £19. X did
the work but Easton did not pay, so Price sued. It was held that Price's claim must fail, as he had not
provided consideration.

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22. DUNLOP PNEUMATIC TYRE V. SELFRIDGE [1915] A.C. 847

A leading House of Lords case on privity of contract. It established that only a party to a contract can be
sued on it.Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres
at a discounted price on condition that they would not resell the tyres at less than the listed price and that
any reseller who wanted to buy them from Dew had to agree not to sell at the lower price either. Dew sold
the tyres to Selfridge at the listed price and made Selfridge agree not to sell at a lower price either.
However, Selfridge sold the tyres below the price he promised to sell them for. Dunlop then sued Selfridge
for an injunction from selling tires and damages. At trial the judge found in favour of Dunlop. In appeal the
damages and injunction were reversed, saying that Selfridge was not a principal or an agent and thus was
not bound. The issue put to the court was whether Dunlop could get damages from Selfridge without a
contractual relationship.
Viscount Haldane based his argument on three fundamental principles in law. First, the doctrine of privity
requires that only a party to a contract can sue. Second, the doctrine of consideration requires a person
with whom a contract not under seal is made is only able to enforce it if there is consideration from the
promisee to the promisor. Third, the doctrine of agency requires that the principal not named in the
contract can only be sued if the promisee was contracted as an agent. In application to the facts, Haldane
could not find any consideration between Dunlop and Selfridge, nor could he find any indication of an
agency relationship between Dew and Selfridge. Consequently, Dunlop's action must fail.

23. PRESTON CORPORATION SDN BHD V. EDWARD LEONG & ORS (1982) 2 MLJ 22

In this case the Federal Court considered whether on a basis of a trade usage, the respondents who were
a firm of printers could legitimately claim ownership of the film positives used for the purposes of printing
books. The court, relied on Halsbury’s Law of England definition of trade usage i.e. the characteristic of
usage are notoriety, certainty and reasonableness in coming to its decision. The court subsequently
rejected the respondent’s claim because none of the three characteristics were fulfilled in this case

24. YONG UNG KAI V. ENTING (1965) 2 MLJ 98 High Court Sarawak

The defendant entered into a written agreement with the plaintiff for the sale of timber on a land in which a
tribe had communal customary rights. In order to cut the timber a license from the forest department was
required. The written agreement did not refer to the necessity of obtaining a license. The defendant did his
best to get a license but this was refused. On a claim for breach of contract, the court held that there was
an implied term that the sale of the timber was to be subject to the obtaining of the necessary license. As
the license was refused, the contract becomes impossible to perform because of frustration and the
plaintiff was therefore entitled to the return of moneys advances by him to the defendant under the terms
of the agreement.

25. POUSSARD V. SPIERS AND POND (1876) 1 QBD 410

In this case, the plaintiff was an opera singer who was contracted to perform in an opera starting on
November 28. The plaintiff fell ill from November 23 to December 4, and in the meantime the defendants
found that the only way in which they could hire a substitute singer was to give them the whole contract.
When the plaintiff returned on December 4, she was turned away and attempted to sue for breach of
contract. It was held that the plaintiff’s failure to appear on November 23 and onwards was a breach of
condition, which allowed the defendant to repudiate the contract, and thus her claim failed.

17
26. BETTINI V. GYE (1876) 1 QBD 183

Bettini was an opera singer. He agreed to sing in London in a number of theatres beginning on 30 March.
He also agrees that he would arrive in London 6 days before the first performance in order to practice.
Bettini became ill and did not arrive in London until 3 days before the first performance. The opera
company refused to allow him to sing. They said he had breached the contract. However, the court said
that the part of the agreement about practicing was a warranty not a condition. That meant it was not a
basic part of the contract. The defendants were entitled to damages, but could not treat the contract as
discharged.

27. KESARMAL V. VALIAPPA CHETTIAR [1954] MLJ 119.

In this case, it was held that a transfer executed under the Sultan, issued in the ominous presence of two
Japanese officers during the Japanese Occupation in Malaya, was invalid. It was held that a transfer
executed under the Sultan, issued in the ominous presence of two Japanese officers during the Japanese
Occupation in Malaya, was invalid.

28. CHIN NAM BEE DEVELOPMENT SDN BHD V. TAI KIM CHOO (1988) 2 MLJ 117

The respondents purchased homes off the plan to be constructed by the appellants. Each of the
respondents had signed a sale and purchase agreement to purchase a house at RM 29,500. Subsequently
the respondents was made to pay an additional RM4,000 under threat by the appellant to cancel the
booking of the houses if they did not pay up. The court find that the payment was not made voluntarily but
made under coercion.

29. MORLEY V. LOUGHNAN [1893] 1 Ch. 736

An action was brought by executors to recover ₤140,000 paid by the deceased to member of the Exclusive
Brethren in whose house he had lived for some years, and under whose religious influence he had been.
The court in giving judgment for the plaintiff, said that it was unnecessary to decide whether or not some
special relationship existed between the deceased and the defendant, for he ‘took possession, so to
speak, of the whole life of the deceased, and the gifts were not the result of the deceased’s own free will,
but the effect of that influence and domination.

30. ALLCARD V. SKINNER (1887) 36 Ch D 145

In 1867 an unmarried woman aged 27 sought a clergyman as a confessor. The following year she became
an associate of the sisterhood of which he was spiritual director and in 1871 she was admitted a full
member, taking vows of poverty, chastity and obedience. Without independent advice, she made gifts of
money and stock to the mother superior on behalf of the sisterhood. She left the sisterhood in 1879 and in
1884 claimed the return of the stock. Proceedings to recover the stock were commenced in 1885. It was
held by the Court of Appeal that although the plaintiff's gifts were voidable because of undue influence
brought to bear upon the plaintiff through the training she had received, she was disentitled to recover
because of her conduct and the delay.

31. TATE V. WILLIAMSON (1866) L.R 2 Ch. App 55

An oxford undergraduate, T, aged twenty three, was being pressed to pay his college debts, which
amounted to ₤1,000. Being estranged form his father, he asked his great uncle to advise him how he
should find the means to pay. The great uncle was unable to advice in person owing to ill health but he
asked the defendant, his nephew to do so. Conversations took place between T and the defendant in
which T expressed his desire to sell part of his estate, upon which the defendant offered to buy for ₤7,000.
Before the sale was completed, the defendant obtained a report from a surveyor on the property and this

18
 is valued at ₤20,000. The defendant did not disclose this fact to T but proceeded with the purchase.
Excessive drinking led to T’s death a year later. It was held that the purchase must be set aside. The
defendant having been asked to give advise, stood in confidential relationship to T and this prevented him
from being a purchaser of the property without the fullest communication of all material facts to T.

32. INCHE NORIAH V. SHAIKH ALLIE [1929] AC 127

Undue influence was alleged against a nephew over his elderly aunt. One solicitor had drafted the deed of
gift, and another had witnessed it. The solicitor had established that she understood it and entered into it
freely, but had not asked enough to establish that it was almost her entire estate, and had not advised her
that a better way to achieve the result would be by will. It was held that the gift is not valid for undue
influence. Usually a presumption of undue influence may be rebutted by showing that the transaction was
entered into "after the nature and effect of the transaction had been fully explained to the donor by some
independent qualified person." However (Lord Hailsham LC): "their Lordships are not prepared to accept
the view that independent legal advice is the only way in which the presumption can be rebutted . . ." and
"It is necessary for the donee to prove that the gift was a result of the free exercise of independent will.
The most obvious way to prove this is by establishing that the gift was made after the nature and effect of
the transaction had been fully explained to the donor by some independent and qualified person so
completely to satisfy the court that the donor was acting independently of any influence from the donee
and with the full appreciation of what he was doing; and in cases where there can there are no other
circumstances this may be the only means by which the donee can rebut the presumption."

33. HORSFALL V. THOMAS (1862) 1 HC 90

The defendant bought cannon which had been manufactured for him by the plaintiff. The cannon had a
defect which made it worthless and the plaintiff had tried to conceal the defect by inserting a metal plug
into a weak spot in the gun. The defendant never inspected the gun; he accepted it and upon using it for
the first time, the gun burst. He refused to pay for the gun and the plaintiff sued him for payment. Since
the defendant had not inspected the gun, the never knew of the plaintiff’s attempted concealment, which
subsequently did not affect his mind or conduct in entering into the contract. Thus it was held that a
person cannot be said to have been induced to enter into a contract by a representation or action that did
not influence him or affected his mind at the time of contract.

34. WEBER V. BROWN (1908) 1 FMSLR 12

In this case, the respondent sued the appellant for false and fraudulent misrepresentation relating to the
number of rubber trees on an estate which the respondent purchased from the appellant. The appellant
relied on the Exception to Section 19 of the Contracts Enactment 1899. The Court of Appeal held that the
defense that the respondent had the means of discovering the number of trees with ordinary diligence
could not be set up because the Exception to Section 19 of the Enactment 1899 does not apply to cases
where misrepresentation was made by a false and fraudulent statement.

35. KEATES V. LORD CADOGAN (1851) 10 CB 591

The defendant let the plaintiff a house a house which the defendant knew was in an unfit and dangerous
condition. The defendant kept silent and did not disclose the condition to the plaintiff although he knew
that the plaintiff required the house on immediate occupation. It was held that silence does not constitute
misrepresentation. The principle of caveat emptor applies in this case and thus there is no remedy for the
plaintiff.

19
36. BISSET V. WILKINSON.

The plaintiff purchased from the defendant two blocks of land for the purpose of sheep farming. During
negotiations the defendant said that if the place was worked properly, it would carry 2,000 sheep. The
plaintiff bought the place believing that it would carry 2,000 sheep. Both parties were aware that the
defendant had not carried on sheep-farming on the land. In an action for misrepresentation, the trial judge
said: "In ordinary circumstances, any statement made by an owner who has been occupying his own farm
as to its carrying capacity would be regarded as a statement of fact. … This, however, is not such a case.
… In these circumstances … the defendants were not justified in regarding anything said by the plaintiff
as to the carrying capacity as being anything more than an expression of his opinion on the subject." The
Privy Council concurred in this view of the matter, and therefore held that, in the absence of fraud, the
purchaser had no right to rescind the contract.

37. PEEK V. GURNEY. (1873) All E.R. Rep 116

The promoters of a company were sued by the appellant who had purchased shares on the faith of false
statement contained in a prospectus issued by the promoters. The appellant however was not the person
to whom shares had been allotted on the first formation of the company; he had merely purchased the
shares from the original shareholders. The House of Lord held that the prospectus was only addresses to
the first applicants for shares, it could not be supposed to extend to others than these; and that on the
allotment, the prospectus has done its work and it was exhausted.

38. ATTWOOD V. SMALL

The purchasers of a mine were told exaggerated statements as to its earning capacity by the vendors. The
purchasers had these statements checked by their own expert agents, who in error reported them as
correct. Six months after the sale was complete the plaintiffs found the defendant's statement had been
inaccurate and they sought to rescind on the ground of misrepresentation. It was held in the House of
Lords that there was no misrepresentation, and that the purchaser did not rely on the representations.

39. STRICKLAND V. TURNER. (1852) 7 Exch 208

The plaintiff purchased an annuity and paid the purchase price. Unknown to both parties the annuitant
was already dead at the time of the contract. The plaintiff was therefore entitled to recover on the basis
that the contract was void as it lacked subject matter. The consideration had totally failed

40. FALCK V. WILLIAMS (1900) AC 176

The defendants and the plaintiffs were negotiating about two charter parties; one to carry shale from
Sydney to Barcelona and another one to carry copra form Fiji to Barcelona. The plaintiff’s agent send a
coded telegram intending to confirm the copra charter but the telegram was ambiguous and was
understood by the defendants to refer to the shale charter. It was held that there was no contract due to
the mistake.

41. KENNEDY V. PANAMA ROYAL MAIL. (1867) LR 2 QB 850

The Panama etc Company had contracts for the carriage of intercontinental mail with the government of
New Zealand. It issued a prospectus for shares “in order to enable the company to perform the contract
recently entered into with the government of New Zealand, for a monthly mail service between Sydney,
New Zealand, and Panama, in correspondence with the West Indian Mail Company’s steamers between
Southampton and Panama”. Kennedy, induced by this statement, applied for and was allotted shares in

20
 the company. The contract referred to in the prospectus had been made by the company with the agent for
the New Zealand government. Both the company and the agent honestly believed that the agent had the
authority to make the contract, but the government later denied that he had authority, and refused to ratify
the contract. Kennedy brought action to recover the money paid for the shares, and for an account. The
company sued for money due under a call on the shares. The court held that the shares which he receives
were not, because of the difference in value, different in substance from those that the company had
contracted to deliver. It was stated that where the difference is only in quality, even though the
misapprehension may have been the actuating motive to the purchaser, yet the contract remains binding.

42. SHEIKH BROTHERS V. OCHSNER. (1957) AC 136

The appellant contracted with the respondent to grant him a license to cut process and manufacture all
sisal grown on a particular estate in Kenya of which they were leasees. In return the respondent deposited
a certain sum of money and undertook to deliver to the appellant 50 tones of sisal fiber, manufactured by
him each month. The estate was in fact not capable of producing such quantity of sisal to meet this
requirement thus the respondent was not able to do so as the leaf potential of the sisal was not sufficient.
The court held that having regards to the nature of the contract, it was the very basis of the contract that
the sisal area should be capable of producing the 50 tons a months. As the mistake is as to a matter of
fact essential to the agreement, the agreement was thus void for this mistake.

43. HEE CHENG V. KRISHNAN (1955) MLJ 103

The plaintiff and the defendant entered into an agreement for the sale and purchase of the plaintiff’s house
built upon a land in respect of which the defendant was the holder of a temporary occupation license. The
plaintiff claimed specific performance of the agreement or alternatively damages for the defendant’s
breach of contract. The court held that the contract entered into was an attempt to sell and to purchase the
defendant’s rights under the TOL license which is contrary to Rule 41 of the Land Rules 1930 which stated
that “No license for the temporary occupation of State land shall be transferable”. As such the contract
was unlawful as it being of such nature to defeat the provision of any law (Section 24 of Contract Act) and
therefore is void.

44. TAN BING HOCK v. ABU SAMAH (1968) MLY 221.

The defendant held a logging license in Pahang under the Forest Rules 1935 which prohibited transfer
without prior approval in writing of the District Forest Officer. The defendant agreed to assign his rights
under the license to extract timber to the plaintiff. The High Court found that the contract on which the
action was instituted was illegal as what the parties attempted to do amount to defeating the provision of
the Forest Rules 1935.

45. PALANIAPPA CHETTIAR V. ARUNASALAM CHETTIAR (1962) AC 294; MLJ 143

The plaintiff bought about 40 acres of rubber land and in order to avoid certain regulations that prohibits a
person from owning more than 100 acres of rubber land transferred the land to his son as the absolute
owner although the funds for the purchase comes from the plaintiff.. The sole purpose of doing so was to
defraud the relevant authority. Subsequently, the father sought to recover the property from the son, who
resisted the claim. The claim failed. The Privy Council held that upon the transfer of the property by the
father to the son, a presumption of advancement arose in favour of the son. In seeking to recover the
property from the son, the father had to rebut that presumption and in so doing, he had to show that his
true intent was not to benefit his son but to defraud the relevant authority. Since he had to rely on an
illegality, the court would not assist him in enforcing the resulting trust.

21
46. SYED AHAMED ALHABSHEE V. PUTEH (1922) 5 FMSLR 243

The defendant agreed to sell a property of the plaintiff in which an infant had an interest. The dealing was
detrimental to the infant’s interest and was consequently struck down by the court.

47. PEARCE V. BROOKS (1861] All ER Rep. 102

This case involves a contract of hire of vehicle for purposes of prostitution and in general way, in the
words of Lord Wright, those involving an immoral promise, such as a promise between a man and a
woman to live together without being married, or to pay a sum of money or give some other consideration
in return for personal association.

48. WRIGGLESWORTH V. ANTHONY WILSON (1964) MLJ 269

There was an agreement by which an advocate and solicitor is restrained from practicing his profession
within five miles from Kota Bharu for a period of two years after the termination of his present
employment. It was held that the agreement was void under Section 28 of the Contract Act and the
distance and place of the restraint are irrelevant.

49. CORPORATION ROYAL EXCHANGE V. TECK GUAN (1912) 2 FMSLR 92

A clause in a fire insurance policy stated that “If the claim be made and rejected, an such action or suit not
commenced within three months after such rejection, all benefits under this policy shall be forfeited’. The
court concluded that this clause reduced the period within which an assured might bring a suit for
compensation to a period less than that sanctioned by the limitation statute. As such the clause infringed
Section 28 of the Contracts Enactment (now Contract Act) and was therefore to that extent, void.

50. AHMAD B. UDOH v. NG AIK CHONG (1970) 1 MLJ 82

The respondent had entered into an agreement with the appellants for a lease of paddy land for a period of
six years and $1500 was paid in pursuant to the agreement. The agreement was in fact illegal,
contravening section 3(1) of the Padi Cultivators Ordinance. The appellants subsequently refused to allow
the respondent to till the land and in an action by the respondent for the recovery of the sum paid, the
former pleaded illegality of the agreement. The Federal Court held that since the parties were ignorant of
the fact that they were executing an illegal agreement, section 66 would apply and accordingly, the
respondent was entitled to recover the deposit paid.

51. YEEP MOOI V. CHU CHIN CHUA (1981) 1 MLJ 14

The Federal Court held that the appellant who had innocently deposited money with another carrying on
business in contravention of the Borrowing Companies Act 1969 could recover such deposit under
Section 66 of the Contract Act. Thus where only one party is unaware of the illegality of the contract, that
party will be able to recover.

52. LETCHUMI AMMAL v. NAM FONG HOUSING SDN BHD (1982) 2 MLJ 19

The Federal Court applied Section 41 of Contract Act and ruled that a contract that the appellant would get
RM6,000 if she herself would demolish or deliver possession of the house by a certain date to the owner of
the land was to be performed personally.

22
53. HAJI NIK ISHAK V. NIK ZAINAB [1975] 2 MLJ 82.

In this case, the parties agreed to transfer land each other, the consideration for the appellant's parcel
being $25,000 and that of the respondent's, $14,000. It was also agreed that the difference of $11,000
would be settled by two sons of the respondent; one would be paid and the appellant thereupon claimed
payment from the respondent. The claim was dismissed by the court of first instance and on appeal, the
Federal Court, dismissing the appeal, held that as the appellant had agreed to accept performance of the
promise from the third party, he could not under section 42 of the Contracts Act 1950 enforce it against
the respondent.

54. TAYLOR V. CALDWELL 3 B. & S. 826, 122 Eng. Rep. 309 (1863)

Defendants Caldwell & Bishop owned Surrey Gardens & Music Hall, and agreed to rent it out to the
plaintiffs, Taylor & Lewis, at the rate of £100/day. The plaintiffs had planned to use the music hall for four
concerts for four different dates during the summer of 1861, and had intended to provide a variety of
extravagant entertainments, including a singing performance by Sims Reeves. According to the contract
the parties had signed, the defendants were to provide most of the performers. The plaintiffs were to
receive the gate receipts and advertise for these events. Then, on June 11, 1861, a week before the concert
was to be given, the music hall burned to the ground. The plaintiffs sued the music hall owners for breach
of contract for failing to rent the music hall. There was no clause within the contract itself which allocated
the risk to the underlying facilities, except for the phrase “God’s will permitting” at the end of the contract.

Judge Blackburn began his opinion by stating that the agreement between the parties was a contract,
despite their use of the term “lease”. Blackburn reasoned that the rule of absolute liability set forth in
Paradine v. Jane only applied to positive, definite contracts, not to those in which there was an express or
implied condition underlying the contract. Blackburn further reasoned that the continued existence of the
Music Hall in Surrey Gardens was an implied condition essential for the fulfillment of the contract. The
destruction of the music hall was the fault of neither party, and rendered the performance of the contract
by either party impossible. Blackburn cited to the Civil code of France and the Roman law for the
proposition that when the existence of a particular thing is essential to a contract, and the thing is
destroyed by no fault of the party selling it, the parties are freed from obligation to deliver the thing. He
further analogized to a situation in which a contract requiring personal performance is made, and the party
to perform dies, the party’s executors are not held liable under the common law of England. Blackburn
thus held that both parties were excused from their obligations under their contract.

55. KRELL. V. HENRY

The defendant, C.S. Henry, agreed by contract on June 20, 1902, to rent a flat located at 56A Pall Mall from
the plaintiff, Paul Krell, for the purpose of watching the coronation procession of Edward VII scheduled for
June 26 and 27. The housekeeper of the premises informed Henry that he would have an excellent view of
the procession from the room. The parties agreed on a price of £75, but nowhere in their written
correspondence did either of them explicitly mention the coronation ceremony. Henry paid a deposit of
£25 to Krell for the use of the flat, but when the procession did not take place on the days originally set (on
the grounds of the King’s illness), Henry refused to pay the remaining £50. Krell brought suit against
Henry for the remaining balance, and Henry countersued for his deposit of £25. The judge determined that
given the affidavits of the parties, Krell had only granted Henry a license to use the rooms for a particular
purpose (watching the coronation). He analogized the situation to one in which a man hired a taxicab to
take him to a race. If the race did not occur on the particular day the passenger had thought, he would not
be discharged from paying the driver; but unlike the situation in this case, the cab did not have any
special qualification, as the room here did (its view of the street). Furthermore, the cancellation of the
coronation could not reasonably have been anticipated by the parties at the time the contract was made.

23
56. LEE KIN V. CHAN SUAN ENG. (1933) MLJ 197

A lease for five year yearly renewals was held to be frustrated by the enactment of a new law prescribing
annual renewal of such leases.

57. CHOO YIN LOO V. VISUVALINGAM (1930) 7 FMSLR 135

The plaintiff contracted to perform certain work on the defendant’s land. It was agreed that the work
should be done expeditiously by having 30 workers on the land at all times. If on any day there should be
less than 30 workers, the plaintiff should be paid $1 per day for every worker short of the stipulated
numbers. The defendant agreed to pay fortnightly 70 percent of the value of work completed. Work
commenced and regular payments were made for a time but the defendant later ceased further payment
on the allegation that there was shortage of the stipulated number pf workers which entitled him to
damages amounted to $3,845. The plaintiff who to date have employed only a total of 3,355 workers when
he ought to have employed 7,200, stopped work on account of the non-payment. He then proceeded to sue
the defendant for damages, claiming that he had been prevented by the defendant’s default from
completing the contract. The defendant counter claimed for damages. It was held that since the plaintiff
had agreed to carry out the work expeditiously, his action in employing less than half the number of
workers constituted a breach which entitles the defendant to put an end to the contract.

58. BAN HONG JOO MINE LTD. V. CHEN & YAP LTD (1969) 2 MLJ 83

The Federal Court ruled that the deliberate refusal of the appellant to make fortnightly payments for work
already done and their order to the respondents to stop work left the latter with no option but to treat the
contract as having been repudiated, and to sue for payment of work that have been done.

59. KABATASAN TIMBER EXTRACTION CO [1969] 2 MLJ

In this case the appellants had contracted to supply timber to the respondents to be delivered at the site of
the sawmill to be erected by the respondents. The timber was delivered in three lots. The second lot of 198
logs and 4 of the 22 logs in the third lot were not delivered to the sawmill but were dumped at a distance of
more than 500 feet from the sawmill. The learned trial judge gave judgment for the appellant for RM
9,892.41 being the balance due under the contract and also awarded damages to the respondent on his
counter-claim for breach of contract for the sum of RM13, 192.40. It was held to dismiss the appeal in
respect of the claim and allowing the appeal in respect of counter-claim by reducing the amount: it was
the duty of the respondent in this case to take reasonable steps to mitigate the damage. There was no
need for the respondent to have gone to the expense of buying logs from elsewhere when the logs were
lying a few hundred feet away from the sawmill and all that was required was the additional expense for
hauling them up to the sawmill.

24
 SALE OF GOODS ACT

1. ROWLAND V. DIVALL [1923] 2 KB 500

Divall bought a motorcar and later resold it to Rowland. Rowland repaired and painted it, and sold it to
Colonel Railsdon. It later appeared that the person who sold it to Divall had stolen the car from the true
owner. Rowland refunded to Railsdon the price paid in that contract, and sought to recover the price paid
to Divall, being £334 only. The car was in Rowland’s possession for about two months, and in the
Colonel’s possession for about two months. The first instance judge held that, because the car had been
in the possession of Rowland and the Colonel, there had been no ‘total failure of consideration’, and the
price paid to Divall was therefore not recoverable in an action for money had and received. On appeal it
was decided that there has been a total failure of consideration, that is, the buyer has not got any part of
what he paid for – property. The fact that he had possession is irrelevant. It is also irrelevant that the
buyer has used the car. The buyer accepted the car under the representation of the seller that he had a
right to sell. The seller had no such right. He cannot say the buyer nevertheless ‘had a benefit'. The buyer
got nothing of what he was entitled to receive, namely, title and the right to possession. Therefore
notwithstanding that he had the use of the car, the consideration had totally failed, and he was entitled to
get the purchase money back.

2. ARCOS LTD V. E.A RONAASEN [1933] A.C. 470

Agents for the sale of Russian timber agreed to sell to English buyers a quantity of staves of Russian
redwood and whitewood, required by the buyers, as the sellers knew, for making cement barrels. The price
was to include cost, freight and insurance from Archangel to the River Thames. With respect to the length,
breadth, and thickness the agreement contained stipulations which allowed some variation in the length
and in the breadth of the staves, but none in the thickness, which in all cases was specified as half an
inch. When the goods arrived in London the buyers claimed to reject them on the ground that they did not
conform to the description in the contract in that they were not of the thickness of half an inch.

In an arbitration under the contract an umpire made an award in the form of a special case for the opinion
of the King’s Bench Division, in which he found that in thickness none of the staves were less than half an
inch; about 5 per cent were half an inch; a large proportion was over half an inch, but not more than 9/16
of an inch; some were over 9/16 of an inch; a very small proportion was over 5/8 of an inch. The umpire
found that the staves were fit for making cement barrels and that when shipped they were commercially
within and merchantable under the specification in the contract:–

Held (affirming the decision of the Court of Appeal and that of the learned judge of the King’s Bench
Division), that the buyers were entitled to demand goods answering the description in the contract, and
were not bound to accept the goods tendered merely because they were merchantable under that
description.

3. BEALE V. TAYLOR

The seller of the car advertised it as a ‘Herald Convertible. White 1961…’. The buyer viewed the car before
agreeing to buy it. Later is was discovered that while the rear end part of the car was a 1961 Herald
Convertible, the front part was from an earlier model. The court held that the seller is entitled to damages
for breach of the condition that in sale of goods by description, the goods must correspond with the
description.

25
4. ASSOCIATED METAL SMELTERS V. THAM CHEOW TOH

The defendants agreed to sell a metal melting furnace to the plaintiff and had given the undertaking that
the furnace will have a temperature of at least 2600 degrees Fahrenheit. The furnace supplied by the
defendants did not meet the required temperature. The court held that the failure of the defendants to
supply a furnace which would meet the required temperature constituted a breach of the condition of the
contract entitling the plaintiff to treat such breach as breach of warranty.

5. CAMMELL LAIRD V. MANGANESE BRONZE

The sellers manufactured a ship's propeller for a particular ship owned by the buyers. The finished
propeller had defects rendering it unfit for the buyer's particular ship, although it could have been used
perfectly well on other ships. Having classified the contract as one for sale for goods the House of Lords
held that the sellers were liable for breach of an implied condition since the buyer had informed the seller
of the purpose for which he required the goods and relied on the seller’s skill and judgement to provide
them.

6. GRIFFITHS V. PETER CONWAY

In that case a lady purchased a Harris tweed coat. After wearing it she developed dermatitis. She made a
claim under s 14(1) of the Sale of Goods Act 1895. The evidence revealed that the plaintiff’s skin was
abnormally sensitive and that there was nothing in the cloth which would have affected the skin of a
normal person. The abnormality of the plaintiff’s skin was not made known to the retailer. The plaintiff
failed on the ground of the abnormality of her skin which no seller would assume to exist.

7. BALDRY V. MARSHALL.

Facts: B asked S for a car that would be suitable for touring and S recommended a particular make of car.
B then ordered the car from S by its trade name and subsequently took delivery of it. However the car
turned out to be unsuitable for touring and B sued S for breach of the fitness for purpose condition.
Issue: Was B entitled to rely on the fitness for purpose condition even though he ordered the car under its
trade name?
Held: B could recover because it was clear from the dealings between the parties that B had relied upon
the seller's skill and judgement despite the fact that he ordered the car under its trade name. The proviso
in s17(b) only applies where the buyer orders the goods in such a way that shows that he or she does not
rely on the seller's skill and judgment.

8. THORNETT & FEHR V. BEERS & SONS

Facts: B bought some barrels of vegetable glue from S. By arrangement, and before he purchased the
glue, B visited the warehouse of S for an inspection. While every opportunity to inspect the glue was
offered to B, he merely looked at the outside of the barrels in which the glue was stored. Had he looked
inside, a defect in the glue would have been quite apparent. Issue: Was this an "examination" of the
goods?
Held: It was an examination such as to preclude B from relying upon the implied condition as to
merchantable quality. In the opinion of the court if there has been some examination then the buyer
cannot complain about defects which a full examination would have revealed.

26
9. WILSON V. RICKET, COCKERALL & CO

Facts: B ordered a ton of coalite from S. Upon delivery, B used part of the coalite to make a fire, a use for
which the goods were designed. The fuel contained a piece of a highly volatile substance which exploded
upon lighting causing damage to B's property. Neither party was aware of the existence of the explosive.
Issue: Did the merchantable quality condition apply where there was nothing wrong with the goods
ordered, namely the coalite.
Held: That the section covered all the goods supplied by S in purporting to carrying out the contract,
which in this case included the offending explosive. As delivered, the fuel was not reasonably fit for
burning and was therefore unmerchantable.

10. DRUMMOND V. VAN INGENUE

Facts: S (seller) submitted a sample of cloth to B (buyer). B ordered a quantity of the material which was
delivered and made into clothes as intended. It transpired that the material could not stand the wear and
tear of ordinary use.
Issue: Were the goods unmerchantable even though they corresponded with the sample?
Held: The goods were not merchantable for the purpose required and B could recover. S could not rely on
the fact that the goods corresponded with the sample because the defect in the material could not be
discovered on a reasonable inspection of the sample. The defect only became clear once clothes, which
were made from the material, were worn.

11. GRANT V. AUSTRALIAN KNITTING MILLS

The appellant, Richard Thorold Grant, a fully qualified medical man practising at Adelaide, South Australia,
brought an action against the respondents, Australian Knitting Mills, Ld., and John Martin & Co., Ld.,
claiming damages on the ground that he had contracted dermatitis by reason of the improper condition of
some "Golden Fleece" woolen underwear purchased by him from John Martin & Co., Ld., retailers, on
June 3, 1931, and manufactured by the Australian Knitting Mills, Ld. He alleged that he began to wear the
underwear on June 28, 1931, and that on the next day he became ill of a dermatitis which gradually
developed into an acute form. The dermatitis, he pleaded, was caused by a chemical irritant-free sulphite-
which the respondents, Australian Knitting Mills Ld., had negligently omitted to remove in the process of
manufacture, and he alleged that in breach of warranty the underwear was not fit for the purpose for which
it was required and was not of a merchantable quality, and that the respondents, Australian Knitting Mills,
Ld., had in breach of their duty to him not used due or proper care in the manufacture of the underwear.
He claimed damages from both respondents

27
 LAW OF AGENCY

1. CHAN YIN TEE V WILLIAM JACKS & CO (MALAYA) LTD [1964] MLJ 290.

The appellant and Yong (a minor), were registered as partners. At a meeting with a representative
of the respondent company, the appellant held himself out to be Yong’s partner. Goods were
supplied to Yong but were not paid for. The respondent company obtained judgment against the
appellant and Yong. The appellant appeal to FC which held that since the appellant had held Yong
out of his agent who had the authority to do things on his behalf, the appellant was liable for
Yong’s act

2. KGN JAYA SDN BHD V PAN RELIANCE SDN BHD [1996] 1 MLJ 233

The Court of Appeal held that the law does not require that an agency or sub agency agreement
must be in writing. Furthermore, Part X of the Contracts Act 1950, which contains the relevant
provisions on agency, does not contain any requirement that the appointment of an agent or sub
agent has to be in writing or be evidence in writing.

3. KEIGHLEY MAXTED & CO V DURANT

An agent, Roberts was authorized by the appellants to buy wheat at a certain price. The agent
exceeded his authority and bought at a higher price in his own name but intending it for Keighley.
Keighley agreed to take the wheat at that price but failed to take delivery. The court held that
Keighley was liable to the Durant since R at the time of the contract did not profess to act as an
agent.

4. SRM MEYAPPA CHETTIAR V LIM LIAN KOO [1954] 20 MLJ 246

PC, the attorney of SC, entered into an agreement with the respondent under which the PC handed
over to the respondent a piece of land belonging to his principal in consideration of RM 7,000/- and
agreed ‘ upon the return of normal conditions, the vendor shall obtain a special power of attorney
from the said SC now in India and execute the true and lawful transfer of the said land at the
purchaser’s own expenses’. He further agreed that if he was unable to obtain the necessary power
from his principal the RM7,000/- will be return to the respondent. At the trial, the learned judge held
that the agreement had been satisfied by SC and therefore dismissed a claim for recovery of
possession of the land. The Court of Appeal held that the terms of the agreement showed that PC
was acting in his personal capacity and therefore the principal of ratification could not apply to the
agreement.

5. KELNER V BAXTER [1866] LRE 2 CP 174

A contract to buy a hotel made by an agent on behalf of the company which is about to be formed,
could not be ratified by the company since it did not exist at the time. The agent therefore held for
the contract unless the third party agreed to release him.

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 NEGOTIABLE INSTRUMENTS - CHEQUES

1. UNITED ASIAN BANK BHD. v. TAI SOON HENG CONSTRUCTION SDN. BHD.

The appellant carried on banking business. The respondent was a customer of the bank, having an
account at the branch of the bank at Jalan Ipoh. Two of the respondent's directors were the authorised
signatories to operate the account. One Wong Chow Seng ('Wong'), the respondent's accounts clerk,
forged several cheques of the respondent drawn on the appellant. The cheques were honoured by the
appellant and the respondent's account with it was debited in consequence. The fraud was discovered
when a new accounts clerk was employed. Police reports were lodged. A total of 97 cheques had been
forged, all of which had been honoured by the appellant. Wong was charged under s. 420 of the Penal
Code in respect of 18 of the cheques and convicted and sentenced. The respondent issued a writ claiming
a sum of RM397,660 being the total of the 97 forged cheques that had been met by the appellant. In the
main, the claim was on the tort of conversion. The trial Judge found the cheques to have been forged, and
applying the decision of the Privy Council in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. & Ors.
gave judgment for the respondent in the sum of RM1,491,424.34 together with interest on the sum of
RM397,660 at the rate of 8% per annum from 25 August 1983 to the date of realisation. The appellant
appealed.

HELD:
The appellant, as a banker, was absolutely liable. On the other hand, the respondent was not under any
duty to ensure that its cheques were not forged by its employee, and therefore there could not be an
estoppel operating against it. (b) At common law, the liability of a banker is founded on the tort of
conversion, which is a tort of strict liability. A banker who pays out on a forged instrument drawn on his
customer's account is absolutely liable to make good the loss. The forged instrument is a nullity and a
banker has no authority, actual or implied, from his customer to act on it. (c) Section 24 of the Bills of
Exchange Act 1949, which codifies the common law, creates a limited exception in favour of a banker.
Section 24 protects a banker by recourse to the doctrine of estoppel. A customer cannot recover if he has
represented to his banker that the forged signature is effective and that the instrument is accordingly
good for payment. (d) At common law, a customer owes his banker only two duties. The first is to refrain
from drawing a cheque in such a manner as may facilitate fraud or forgery. The second is a duty to inform
the bank of any forgery of a cheque purportedly drawn on the account as soon as the customer becomes
aware of it. There does not exist, at common law, a further duty on the part of a customer to take
precautions in the general course of his business to prevent forgeries on the part of his servants. Neither
is there at common law, in the absence of a contract to the contrary, a duty imposed upon the customer to
inspect his periodical bank statements to ensure that his account is being properly maintained by the
bank. (e) The decision of the Privy Council in Tai Hing Cotton Mill v. Liu Chong Hing Bank Ltd. should be
followed. In that case it was held that there was no basis for the 'wider duty' or the 'narrower duty' as
either an implied term of the contract between banker and customer or as a duty of care in tort, and that in
the absence of any duty there could not be an estoppel. It is important generally, and more so in matters
of commercial law, that there should be uniformity in the common law of the Commonwealth. This is good
judicial policy and provides for consistency.

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2. TINA MOTORS PTY. LTD. V. AUSTRALIA & NEW ZEALAND BANKING GROUP LTD. [1977] V.R. 205

The plaintiff's employee had forged a number of cheques drawn on the plaintiff's account with the
defendant. The bank paid the cheques and then debited the plaintiff's account. On two occasions the bank
had doubted the signatures on cheques presented by the employee and before paying the cheques the
manager of the bank's branch had telephoned a director of the plaintiff who told the manager that if the
employee was presenting a cheque the signature was in order. The manager accordingly gave instructions
that the cheques presented by the employee should be honoured. The plaintiff later brought an action for
a declaration that the bank had improperly debited its account. The action failed on the ground that the
plaintiff was estopped from claiming that the cheques had been forged. The bank had relied upon the oral
representations made by the director that the signature on any cheques presented by the employee for
payment was in order and the bank had acted to its detriment by paying the cheques.

3. SYARIKAT ISLAMIYAH V. BANK BUMIPUTRA MALAYSIA BHD

The proposition of the law which emphasises that where the signature on a cheque is forged, there is
therefore no mandate to the bank. If a banker pays such a cheque, he pays without a mandate and cannot
debit his customer's account.

4. TAI HING COTTON MILL LTD V LIU CHONG HING BANK LTD

An accounts clerk of a textile company forged the signature of the company’s managing director on some
300 cheques totaling approximately HK$5.5m. The forgeries extended over a period of about 3½ years and
were not discovered because of inadequate internal controls. The company brought an action for a
declaration that the three banks involved were not entitled to debit its accounts for the payment of the
forged cheques. The banks contended that the company was precluded from setting up the forgeries by
the breach of a duty of care owing to the banks. The banks relied on what was referred to as the ‘wider
duty’, that is, a duty to take such precautions as a reasonable customer in his position would take to
prevent forged cheques being presented to his bank for payment. They also relied on what was referred to
as the ‘narrower duty’, that is, a duty to take such steps to check his monthly bank statements as a
reasonable customer in his position would take to enable him to notify the bank of any items debited there
from which were not or may not have been authorized by him. Reliance was also placed on the customer’s
agreement at the time the accounts were opened to comply with the bank’s rules and procedures
governing the conduct of the accounts. In each case, there was a rule to the general effect that upon
failure to notify the bank within a specified period of any error in the bank statements, which was sent to
the customer without return of the cancelled cheques, the statement would be deemed to be approved or
confirmed.
The Privy Council held that “no wider duty, requiring a customer to take reasonable precautions in the
management of his business to prevent forged cheques being presented to the bank for payment, or to
take such steps as a reasonable customer would to check the periodic bank statements in order to be able
to notify the bank of any items which were not, or might not have been, authorised, could be implied into
banking contracts as a necessary incident of the relationship of banker and customer; and that, therefore,
the banks were not relieved by any breach of duty by the company from having to bear the loss
occasioned by the forged cheques.”

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5. LONDON JOINT STOCK BANK LTD. V. MACMILLAN

The plaintiffs, Messrs. Macmillan and Arthur brought a suit for a declaration that the defendant, the
London Joint Stock Bank, was not entitled to debit the plaintiffs with a cheque for £ 120. The plaintiffs had
in their employ a confidential clerk who had been with them for some years. They left to him the copying
of their books and filling up cheques for signatures. The usual practice in the office of the plaintiffs seems
to have been for the clerk to present cheques for signatures to get petty cash usually for £ 3. On a certain
day, the clerk made out a cheque for £ 2 and asked one of the partners to sign it which the partner did. As
the clerk did not turn up the next day, the partners became suspicious and went to the bank. There they
learnt that the clerk had presented a cheque for £ 120 which had been paid. The clerk was a thief and had
absconded with the money. :The learned trial Judge found that at the time when the cheque was presented
to the partner for signature the figure '2' was written thereon with enough space on either side for
insertion of additional figures and the clerk had taken advantage thereof and altered the figure '2' to 120.
The question was, whether the plaintiffs had been so negligent with regard to the cheque that their action
against the bank should fail.

HELD (House of Lords):

"As the customer and the banker are under a contractual relation in this matter, it appears obvious that in
drawing a cheque the customer is bound to take usual and reasonable precautions to prevent forgery.
Crime, is indeed, a very serious matter, but everyone knows that crime is not uncommon. If the cheque is
drawn in such a way as to facilitate or almost invite an increase in the amount by forgery if the cheque
should 'get into the hands of a dishonest person, forgery is not a remote but a very natural consequence
of negligence of this description."

6. GREENWOOD V. MARTINS BANK LTD

A husband and wife, whose name was Greenwood, had a joint account with bankers, Martins Bank, Ltd.
who undertook to honour cheques signed by both customers. Afterwards that account was closed and an
account was opened in the sole name of the husband, the wife having no authority to draw cheques upon
it. During the currency of both accounts the wife repeatedly forged her husband’s signature to cheques,
and drew out money which she applied to her own uses. During the currency of the sole account the
husband became aware of the forgeries, but being persuaded by his wife to say nothing about them, he
kept silence for eight months. When he finally determined to disclose to the bank the forgeries, the wife
shot herself. In an action by the husband against the bankers to recover the sums paid out of the sole
account on cheques to which his signature had been forged as aforesaid it was held that as against the
plaintiff he was estopped from relying upon the forgery because, as a result of the then technical position
in English law, the cause of action against Mrs. Greenwood lapsed with her death, and the husband by his
failure to disclose his wife’s forgery deprived the bank of their opportunity of suing Mrs. Greenwood
before her death.

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