Introduction
Indian Contract Law has evolved through Supreme Court decisions that clarify principles like breach, damages, estoppel, frustration, and consideration. Below are five landmark cases that every student and practitioner should know.
Kailash Nath Associates v. Delhi Development Authority (2015)
The Supreme Court clarified the law under Section 74 of the Indian Contract Act, focusing on liquidated damages and penalty clauses. It rejected the English distinction between penalty and liquidated damages. Instead, the Court held that parties can stipulate a sum and claim reasonable compensation not exceeding that amount, provided actual loss is proven. This judgment refined how contractual penalties and pre-estimates are treated in Indian commercial law.
ONGC v. Saw Pipes Ltd. (2003)
This case reinforced and extended Section 74’s principles. The Court confirmed that in public contracts, pre-agreed damages clauses can bind even without proof of actual loss, especially if they represent a genuine pre-estimate of harm. It also ruled that arbitral awards ignoring such clauses could be set aside as against public policy.
Marwar Tent Factory v. Union of India (1989)
The Supreme Court held that interest on unpaid contract price may be awarded even if the notice served under Section 80 CPC did not expressly claim interest. The seller in a defense supply contract was entitled to receive unpaid dues with interest from the date of delivery. The judgment emphasized that contractual breach naturally entitles injured parties to interest unless expressly excluded.
Bhagwandas Goverdhandas Kedia v. Girdharilal & Co. (1959)
The Court considered where a contract is formed in a telephonic acceptance scenario. It ruled that the contract is formed at the place where acceptance is received, Ahmedabad in this case, not where the call originated. This decision interpreted Section 4 of the Act and clarified formation via instantaneous communication.
Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)
This judgment defined the doctrine of frustration under Section 56 of the Act. It held that unforeseen government requisition of land did not frustrate a sale agreement. The contract remained enforceable, and requisition alone was insufficient to discharge obligation. It helped sharply narrow frustration’s scope in Indian jurisprudence.
Conclusion
These cases collectively define crucial facets of Indian contract law, damages, contractual penalties, formation, breach interest, and impossibility. They guide how courts interpret and enforce contracts today. These landmark judgments are pillars of legal understanding for both academic study and real-world application.
