FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2018

TEAM CODE: 04

BEFORE THE HON’BLE

SUPREME COURT OF ASNARD

IN THE MATTER OF:

HPC Ltd., & Amy Santiago……………………………………….APPELLANT

Versus

Steve Rovers…………………………………………………..…RESPONDENT

MEMORANDUM ON BEHALF OF APPELLANT

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TABLE OF CONTENTS

PAGE NO

LIST OF ABBREVIATIONS 4
INDEX OF AUTHORITIES
 INDIAN CASES 5
 INTERNATIONAL CASES 5
 STATUES 6

 BOOKS 6

STATEMENT OF JURISDICTION 7
STATEMENT OF FACTS 8
ISSUES RAISED 9
SUMMARY OF ARGUMENT 10
ARGUMENTS ADVANCED
1. Whether Fraud was committed by Mr Steve Rovers under 11
Section 17 of the Indian Contract Act?
1.1 Steve Rovers had duty to speak
1.2 Fraud is not justified by the defence of due diligence
1.3 Mr Tony relied on the skill and judgement of Mr
Steve
2. Whether the contract dated 14th August 2017 voidable at

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the option of Mr Tony snark?

3. Whether Steve Rovers is liable to compensate Amy
Santiago for the death of her husband and her consequent
loss of livelihood?
3.1 The Damage suffered by the claimant would not
have occurred but for the conduct of Respondent.
3.2 In the present case Respondent owed a duty of care
to the appellant
3.3 Breach of duty to take care by the Respondent
3.4 Mr Steve Rovers is liable to compensate Ms Amy
Santiago for her consequent loss of Livelihood
4. Whether Mr Steve Rovers being the supplier and service
provider of LPT machines is liable to compensate Mr Tony
Snark for breach of contract?
4.1Breach of Duty by Mr Steve Rovers under
negligence
4.1.1 Under professional and Industrial standards
4.2 Implied condition as to the quality and fitness and
merchantability
4.3 Special damages under section 73 of ICA

PRAYER

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LIST OF ABBREVIATIONS

& And
AIR All India Reporter
Anr. Another
UOI Union of India
v. Versus
ICA Indian Contract Act
SOGA Sale Of Goods Act
u/s Under Section
MP Moot Proposition
Art. Article
Mr. Mister
Mrs. Mis’ess
HPC Healing Hand Pharmaceutical
LPT Labzo-pharma Tech
Co. Ltd. Corporate limited

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INDEX OF AUTHORITIES

INDIAN CASE LAWS

S. No. CASE TITLES CITATION

Tata consultancy Service v. State of
1. Andhra Pradesh
2. Masanbhoy Jetha v. New India
Corporation United
3. Commissoner of custom Kandla v.
M/s Essar oil limited &Ors
4. Ningamura v. Byrappa
5. Venkataram v. Sivarmudy
6. The New India Assurance Co. Ltd.v.
Mrs. Pandyal Kuniyil Pushpavally
7. United India Insurance Co. Ltd v.
Muniandi Santha

INTERNATIONAL CASE LAWS

S. No. CASE TITLES CITATION

1. Nursey Spg & Wvg Co Ltd, Re ILR
2. Redgrave v. Hurd
3. Dobell v Stevens
4. Donoghue v Stevenson

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5. Junior Books Ltd. v. Veitchi Co Ltd.

6. Stennett v Hancock & Peters
7. Simpson v. London & North Western
Railway Co.
8. Victoria Laundry (Windsor) Ltd. V.
Newman Industries Ltd

LIST OF STATUES REFERRED

1. Indian Contract Act,1872

2. Sale Of Goods Act,1930
3. Constitution Of India,1950
4. Law Of Torts

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STATEMENT OF JURISDICTION

THE HON’BLE SUPREME COURT OF ASNARD IS VESTED WITH JURISDICTION TO

HEAR THE PRESENT APPEAL UNDER ARTICLE 133 OF THE CONSTITUTION OF
INDIA. 1

1
Under Art.133(1), an appeal lies to the supreme court from any judgment , decree or final order
in a civil proceedings of a High Court if it certifies –

(a) That the case involves a substantial question of law of general importance; and
(b) That in the opinion of the High Court, the said question needs to be decided by the Supreme
Court1

For the purpose of Art.133 (1), the proper test to determine whether a question of law is
substantial or not is whether it is of general public importance, or whether it directly and
substantially affects the rights of the parties, and if so, whether it is either an open question
in the sense that it is not finally settled by the highest court, or is not free from difficulty , or
calls for discussion of alternative views.

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STATEMENT OF FACTS

1.Healing hand Pharmaceutical Co.Ltd (HPC) is a company in Democratic State of Asnard that
enjoys absolute monopoly in the production of Lobanza capsule, which reduces addiction for
narcotic substances but is strongly advised not to be taken while a person is still consuming
drugs or tobacco. HPC Ltd. is owned by business tycoon Mr. tony snark. Mr. Steve Rovers and
Mr. Tony Snark are childhood friends.

2. Mr Steve Rovers designed his own machine named Labzo-pharma Tech, which can produce
Lobanza capsules at a comparatively cheaper rate and can increase its productivity. Owing to its
uniqueness, Mr. Tony agreed to purchase the machine on 4th June 2017.Owing to its efficiency,
Mr tony planned to buy 3 more machines and entered into an agreement with Mr Steve on 14th
August 2017 for delivery of machines in 5 days but were actually delivered after 9 days.

3. A week prior to the sale on 14th august, Mr Rovers recieved a detailed report about the patent
defects in the machine however he ignored and failed to disclose because of the extreme pressure
to meet its rising demand.

4. Mr Pablo Escocar, saw the advertisement of Lobanza capsule and subscribed to it as he

wanted to get rid of his drug addiction and smoking habit. Even after consuming it for days he
couldn't refrain from smoking. Unfortunately, his health deteriorated and he died after 8 days of
consumption of the capsule. His pregnant wife Ms Amy was traumatized by the death of her
husband and dwindling financial condition of the household as he was the sole bread winner. She
wasn't aware of the causes that lead to his husband's death, due to sheer lack of awareness.

5. Meanwhile, Mr Tony enraged by the loss in his production, accused Mr Rover of fraud and
initiated civil proceedings against him for breach of contract. Through local reports, he came to
know about Mr.Escocar's death. He approached his widow and requested her to join the suit
against Mr Rover, which she willingly agreed. HPC Ltd. has appealed before the Hon'ble Court
of Asnard after case was dismissed by HC as it lacked sufficient merit.

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STATEMENT OF ISSUES

 Whether fraud was committed by Mr. Steve Rovers under section 17 of the Indian
Contract Act?

 Whether the contract dated 14th Aug. 2017 voidable at the option of Mr. Tony Snark?

 Whether Steve Rovers is liable to compensate Amy Santiago for the death of her husband
and her consequent loss of livelihood?

 Whether Mr. Steve Rovers being the supplier and service provider of LPT Machines, is
liable to compensate Mr. Tony Snark for breach of Contract?

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SUMMARY OF ARGUMENTS

I. It is humbly submitted before the Hon’ble Supreme Court that Mr Steve Rovers has
committed fraud under section 17 of ICA , 1872. Firstly, he had a duty to speak as the
contract between him and Mr. Tony Snark was based on trust. Secondly, fraud is not
justified by the defence of due diligence. Thirdly, Mr. Tony relied on the skill of the
seller that he will provide the good fit for the purpose mentioned.

II. It is humbly submitted that Mr. Steve Rovers has committed Fraud under section 17 of
ICA as failed to provide Mr. Tony Snark with goods fit for the production of Lobanza
capsule and had a duty to speak. In the instant case, prima facie the appellant’s consent
for the contract was caused by fraud and that the respondent having prior knowledge of
the defects, could have rescind it. Therefore, the contract between the parties concluded
on 14th Aug. 2017 is voidable at the option of the appellant

III. It is humbly submitted before the court that the damages would not have occurred but for
the conduct of respondent. There was a contractual relation between manufacturer and
consumer as he was aware that the machine he had manufactured was meant to produce
Lobanza capsule which would be consumed by people. He owed a duty of care towards
consumers under Law of Torts which is breached resulting in the death of appellant’s
husband. Therefore, Steve Rovers is liable to compensate Amy Santiago for the death of
her Husband and her consequent loss of livelihood caused by death of sole bread winner
of the family.

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IV. Mr. Steve Rovers having committed Fraud u/s 17 of ICA Mr. Tony Snark for the breach
of contract. The goods provided were not reasonably fit for the purpose even after the
special purpose was made known to the seller u/s 16(1) and also the goods provided were
not of merchantable as provide u/s 16(2) resulting ina breach of contract. Negligence has
been committed on the part of Mr. Steve in the capacity of his professional and industrial
standards. Hence, Mr. steve is liable to compensate the appellant for the losses incurred
u/s 73 of ICA and also u/s 59 of SOGA,1930

ARGUMENTS ADVANCED

I. FRAUD WAS COMMITTED BY MR. STEVE ROVERS UNDER SECTION 17 OF

INDIAN CONTRACT ACT.

It is humbly submitted that on 4th of June 2017, HPC Ltd purchased a LPT Machine from Mr.
Steve Rovers, his childhood friend,which proved to be a boon for his company. Owing to the
productivity of the machine, Mr. Tony Snark on 14th August ,2017 entered into an agreement for
three more LPT Machines with Mr. Steve. He was ensured the delivery of goods in five days but
eventually received it after nine days and without showing any apprehensions as to the delay in
delivery completed the payment of $30 Million Dollars.2 A week prior to the sale of 3 LPTs on
14th August, Mr. Steve received a detailed report mentioning some patent defects of the machine

2
Moot Proposition, ¶6.

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which he ignored and didn’t disclose to the HPC Ltd. On 22nd October 2017 all the machines
malfunctioned. Mr Steve is therefore liable for Fraud.3

Section 17 of Indian Contract Act defines Fraud as any act committed by a party to the contract
to induce the other to enter into the contract. It can be a suggestion which is not true by one
who does not believe it to be true; or, the active concealment of a fact by one having a
knowledge of the fact; or, a promise made without any intention of performing it; or, any other
act fitted to deceive; or, any act or omission as the law specially declares to be fraudulent.4

Further ,Fraud is explained by the Hon’ble Supreme Court in the case of Commisioner of
Custom ,Kandla v M/S Essar Oil limited &Ors.5

“A "fraud" is an act of deliberate deception with the design of securing something by taking
unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating
intended to get an advantage."Fraud" as is well known vitiates every solemn act. Fraud and
justice never dwell together. Fraud is a conduct either by letter or words, which includes the
other person or authority to take a definite determinative stand as a response to the conduct of
the former either by words or letter. A fraudulent misrepresentation is called deceit and consists
in leading a man into damage by willfully or recklessly causing him to believe and act on
falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and
injury enures therefrom although the motive from which the representations proceeded may
nothave been bad. An act of fraud on court is always viewed seriously. Fraud and deception are
synonymous”.

3
Moot Proposition,¶12.
4
Indian Contract Act, 1872.
5
2004, SC.

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Here in the case at hand, Mr. Steve Rovers received the detailed report from his auditor
highlighting the patent defects of the machine. He however in order to maximise his profit
ignored the report and failed to disclose it to the plaintiff, leading him into damage by recklessly
causing him to believe and act on falsehood.

(i) Steve Rovers had Duty to Speak

It is humbly submitted that Mr. Tony Snark and Mr. Steve Rovers were childhood friends
and completed their Senior Secondary School Examination together in 2007 and took
admission for their Bachelor’s degree in the same university.6It is evident from the facts that
their relationship was based on trust. Duty to speak arises where in contracting party reposes
trust and confidence in the other.7

Mr Tony on 4th June 2017, purchased the machine fulfilling necessary compliances and due
diligence which proved to be a boon for his company.8 The efficiency and productivity of the
machine increased his trust and confidence in his friend. Consequently he bought another
three machines solely relying on his friend’s honesty. Moreover he appointed Mr. Steve and
his tech team to repair the machines9 which shows that he had full faith and confidence in
Mr. Steve. That being the case, it becomes the duty of Mr. Steve to speak and disclose to the
Appellant the defects of the machines.

(ii) Fraud is not justified by the defence of due diligence

6
Moot Proposition,¶3.
7
Nursey Spg&Wvg Co. Ltd, Re, ILR(1880)5 Bom 92
8
Moot Proposition,¶5.
9
Moot Proposition,¶12.

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If the Representor is untrue it is no defence that the person to whom the representation is
made had the means of discovering, and might with reasonable diligence have discovered
that it was true, or that he made a cursory inquiry into the facts. To escape liability the
respondent must show that either the appellant had knowledge of the facts which showed it to
be untrue, or that he stated in terms or, showed clearly by his conduct that he did not rely on
the representations.10 In the present case, it is explicit that the appellant had no knowledge of
the defects and he never showed by his conduct thathe did not rely on the representations.
Moreover his refusal to check the machines shows that he solely relied on the representations
made by the respondent. Mr. Steve Rovers cannot justify his act of fraud by the defence of
due diligence.

(iii) Mr. Tony Snark relied on the skill and judgement of Mr. Steve.

It is humbly submitted that Mr. Tony Snark made it known to the seller the purpose of the
machines and that he totally relied on the skill of the seller i.e. Mr. Steve. Section 16(1) of
The Sales of Goods act, 1930 says that where the buyer, expressly or by implication, makes
known to the seller the particular purpose for which the goods are required, so as to show that
the buyer relies on the seller’s skill and judgement, and the goods are of a description which
it is in the course of the seller’s business to supply, shall be reasonably fit for the purpose.11

In the present case, Mr. Tony Snark expressly made it known to Mr. Steve Rovers on 14th
August 2017 that he needed LPTs for the production of Lobanza Capsule which shows that
he relied on the skills and judgements of Mr. Steves. However, the machines supplied by Mr.

Redgrave v Hurd.(1881) 20 h D1”;Dobell v Stevens (1825) 3B &C623.

10
11
The Sales of Goods Act, 1930.

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Steve malfunctioned because of the existing defects and was not reasonably fit for the
purpose. Mr. Steve Rovers has thus committed Fraud.

II. THE CONTRACT DATED 14th AUGUST 2017 IS VOIDABLE AT THE OPTION
OF MR. TONY SNARK
Mr. Tony Snark on 14th August, 2017entered into a contract with Mr. Steve Rovers for
the purchase of 3 LPT machines for the production of Lobanza Capsules. However it was
found that the machines had some defects because of which the machines malfunctioned,
incurring a heavy loss upon the appellant.

When consent to an agreement is caused by coercion, fraud or misrepresentation, the

agreement is a contract voidable at the option of the party whose content was so caused.12
In the present case, Mr. Steve Rovers had the prior knowledge of the defects of the
machine but he failed to disclose the same to Mr. Tony Snark. The relationship which he
shared with Mr Tony was based on trust therefore Mr Tony relied on him for the quality
products. The onus was on Mr. Steve to disclose the defects to the appellant.

B, having discovered a vein of ore on the estate of A, adopts means to conceal and does
conceal the existence of the ore from A. through A’s ignorance B is enabled to buy the
estate at an under-value. The contract is voidable at the option of A.13In the present case,
Mr. Tony received the detailed report from his auditor about the defects of the machines.
He in order to meet the rising demand and maximise his profit however ignored the
report and failed to disclose it to Mr. Tony causing him to act on falsehood and buy
machines which were not reasonably fit for his purpose. The contract is thus voidable at
the option of Mr. Tony.
12
Section 19, Indian Contract Act 1870.
13
Illustration (d) to section 19, Indian Contract Act, 1872.

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In Ningawwa v. Byrappa,14it was held :

“……It is well established that a contract or other transaction induced or tainted by
fraud is not void, but only voidable at the option of the party defrauded. Until it is
avoided, the transaction is valid, so that third parties without notice of the fraud may in
the meantime acquire rights and interests in the matter which they may enforce against
the party defrauded…….”

Mr. Tony’s consent for the contract dated on 14th August,2017 was caused by Fraud leading
him into damage by recklessly causing him to believe and act on falsehood, rendering the
contract voidable at the option of Mr. Tony.

In Venkataratnamv.Sivaramudy,15 a vendor not only failed to disclose that he has leased away
the land which was being sold, but stated that immediate possession would be given. The madras
HC did not allow the vendor to take the defence of that vendee has failed to exercise the defence
of due diligence and vendee was allowed to treat the contract as voidable. In the case at hand, the
respondent also failed to disclose the defects to the appellant with whom he shared a relationship
based on trust and therefore cannot take the defence that the appellant failed to exercise the
defence of due diligence. The contract thus becomes voidable at the option of the appellant.

14
AIR 1968 SC 956.
15
AIR 1940 Mad 560

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STEVE ROVERS IS LIABLE TO COMPENSATE AMY SANTIAGO FOR THE

DEATH OF HER HUSBAND AND HER CONSEQUENT LOSS OF
LIVELIHOOD

It is humbly submitted before the court that the object underlying a provision for grant of
compensation is to enable the family of the deceased to tide over the sudden crisis resulting due
to death of the sole bread earner which has left the family in penury and without any means of
livelihood.

It is to be contended that the respondent was negligent in disclosing the defects in the machine
which ultimately resulted in the death of the deceased concerned.

A. CAUSE IN FACT: THE DAMAGES SUFFERED BY THE CLAIMANT WOULD NOT

HAVE OCCURRED BUT FOR THE CONDUCT OF THE RESPONDENT

It is contended before the court that Mr. Steve had a detailed report of the defects in those
machines which were used to manufacture capsules and he has knowingly concealed this from
the appellant that there were few instances of illness were reported due to defect in the
machine16. After consuming the capsule there was no change in the habit of the deceased and he
couldn’t refrain from smoking and consequently his health deteriorated and he died after 8 days
of consumption of the capsule.

Negligence is a breach of duty caused by the omission to do something which a reasonable

man,guided by those consideration which ordinarily regulate the conduct of the human affairs
would do , or doing something which a reasonable man would not do 17. The definition thus
involves three ingredients of Negligence (1) Legal duty to exercise due care on the part of the
party complained of towards complaining of towards the party complaining the former conduct
within the scope of the duty; (2) breach of such Duty (3) consequential Damage.
16
MOOT PROPOSITION, pg cited 5
17
Indian Contract Act,1872 (India)

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It is therefore, submitted before the court that the negligence of the respondent has been
established in the above paragraph which gives rise to compensation as a remedy. In the case of
The New India Assurance co. Ltd. V. Mrs Pandyat Kuniyil pushpavally 18 it was alleged that the
deceased was the sole bread winner of the family and they were dependent on him for their
livelihood and the death occurred due to negligence of the respondent. Respondent was made
liable and Court awarded Compensation for the same.

B. IN THE PRESENT CASE RESPONDENT OWED A DUTY OF CARE TO THE

APPELLANT

The general priniciple of ‘forseeability’ and ‘proximity’ applicable in solving case presenting the
existence or otherwise of a new situation laid down by LORD ATKIN in the celebrated case of
Donoghue v Stevenson. According to Lord Atkin’s ratio decendi,“a manufacturer of products,
which he sells…to reach the ultimate consumer …owes a duty of care to the consumer to take
reasonable care and you must take reasonable care to avoid acts and omissions which you can
reasonably foresee would be likely to injure neighbor. Who then in law is my neighbor? The
answer seems to be ,person who are so closely and directly affected by my act that I ought
reasonably to have them in contemplations as being so affected when I am directing my mind to
the acts or omission which are called in question. ” The court established that manufacturers
have a duty to the end consumers or users of the product.

1. He had the knowledge of the defect in the machine by the audit report and also he was the
manufacturer as well as seller of the same. The machines were meant to produce the
capsules so he had reasonable forseeability of the harm to the claimant.
2. Proximity or neighborhood according to Lord Atkin’s definition, defendant comes under
the ambit of neighborhood.

18
(1996) ACC 366 (India).

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In Junior books ltd. v. veitchi co. Ltd. “The defendants were specialist in flooring and were sub-
contractors to lay a floor in a factory which was to be used by plaintiffs. The plaintiffs claimed
that due to the negligence of the defendants, the floor was faulty and as they were specialist on
the matter, they were liable for the damage caused by cracking of floor to that they were
awarded 2,07,000 pounds being the cost of replacing the floors and other consequential loss.

C. BREACH OF DUTY TO TAKE CARE BY DEFENDANT

The Defendant’s ignorance to the report and failure of disclosure the reports to the
plaintiff breached the duty of care which was owed to the plaintiff.

D. MR STEVE ROVERS IS LIABLE TO COMPENSATE AMY SANTIAGO FOR HER

LOSS OF LIVLIHOOD

In the present case, claimant believes that conduct of the defendant caused the damage and loss
of livelihood to her. For making defendant liable it must be shown that the particular act of the
defendant constituted the cause of damage suffered by the claimant. To establish the requirement
for satisfying the existence of causation that we have already discussed under the above
contentions of this issue. The Supreme Court in Olga Tellis v. Bombay Municipal corporation
implied that “‘Right to livelihood’ is borne out of ‘Right to Life’ as no person can live without
the means of living, that is, the means of livelihood. The easiest way of depriving a person of his
right to life would be deprive him of his means of livelihood to the point of abrogation”. In the
present scenario claimant being deprived of her means of living, i.e. there is no source of income
by which she can enjoy bare neccesaties of life such as adequate nutrition, clothing and shelter
for one’s head. Therefore, with the reference of United India insurance co. ltd. V. muniandi
santha claimant has claimed compensation of $20mn. Its break-up figures are as under:

No. Description Amount

1. Loss of Dependency

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2. Cremation Expenses
3. Loss of love and affection
4. Loss of consortium to widow
5. Childbirth expenses
6. Upbringing of daughter
Basic intention is that on the death of the deceased concerned his family is not
deprived of the means of livelihood. The object is to enable the family to get over sudden
financial crisis.

III. Mr. STEVE ROVERS BEING THE SUPPLIER AND SERVICE PROVIDER OF
LPT MACHINES IS LIABLE TO COMPENSATE MR. TONY SNARK FOR
BREACH OF CONTRACT.

It is humbly submitted before the Hon’ble Supreme Court that in the present case Mr. Steve
Rovers was made known by Mr. Tony Snark on 14th August 2017 specifically the purpose for
which he needed three more LPT machines for the production of Lobanza capsules. The LPT
Machine which comes under the purview of goods under sale of goods act which includes every
kind of movable property other than actionable claim and money. A contract for the sale of
goods contain certain stipulation and contravention of these express or implied stipulations give
rise to the breach of contract and allow the innocent party to claim damages for such breach.

In the present case Mr. Tony purchased 4 LPT machines from Mr. Steve for an amount of 10
million each. The machines supplied by Mr. Steve were defected and not fit for the purpose, and
all the machines malfunctioned and stopped working on 22nd October 2017 incurring upon the
appellant a huge loss. Therefore breached the established contract between the parties becoming
liable to compensate the appellant for the losses suffered.

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Breach of contract by fraud (counsel 1 has already dealt with it)

BREACH OF DUTY BY MR STEVE ROVERS UNDER NEGLIGENCE

In the case at hand, Mr.Steve Rovers owed a legal duty to Mr. Tony Snark under the terms of
the contract to provide machines fit for the production of Lobanza Capsule. However he
failed to provide the same. According to Law of Torts, the respondent is liable for tort of
negligence if he breaches the legal duty owed to him by the appellant resulting into
consequential damages suffered by the appellant. 19

Lord Atkin in his judgement propounded ,

“You must take reasonable care to avoid acts or omissions which you can reasonably foresee
would be likely to injure your neighbour.”20

He then defined “neighbours” as “persons 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 omission which are called in question.”

Similarly in the present case Mr. Steve was liable to Mr.Tony as his omission of ignoring the
report led to the failure of the machinery on 22 October consequently causing him a heavy
loss which was reasonably foreseeable that a negligent act would result in same.

 UNDER PROFESSIONAL AND INDUSTRIAL STANDARDS

19
Tort, 18th edition winfield
20
Donoghue v. Stevenson, (1932) UKHL, A. C. at 580

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If anyone practices a profession or is engaged in a transaction in which he holds himself out as

having professional skill, the law expects him to show the amount of competence associated with
the proper discharge of the duties of that profession, or trade, and if he falls short of that and
injures someone in consequence he is not behaving reasonably. 21

In the case of Stennett v Hancock & Peters, It was held that service providers generally owe a
duty to take reasonable care not to cause foreseeable injury in providing a service.22

Similarly in the present case, Mr. Steve being reckless about his conduct in providing proper
machine and services to Mr. Tony made a breach of duty to take reasonable care and to avoid
any foreseeable injury. A week prior to the sale of LPT’s on 14th August he became aware of the
patent defects which his machine had and yet ignored to disclose the same to the appellant
knowing the fact that it would result in heavy losses.

IMPLIED CONDITION AS TO THE QUALITY AND FITNESS AND

MERCHANTABILITY:

According to the sale of goods act where goods are bought by description from the seller who
deals in the goods of that description there is an implied condition that goods should be of
merchantable quality.23

In Tata consultancy service vs. state of Andra Pradesh24 St. Albans city and district council
case25 was cited where it was held that if the disk is sold or hired by the manufacturer, but the

21
Tort ,285, 18th edition Winfield
22
(1939) 2 ALL E.R. 578
23
Section 16(2) of S.O.G ,1930.

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program is defective, there would be prime facie breach of the terms as to quality and fitness.
Similarly in Union Of India vs. Rallia Ram26 it was held that a part of cigarette supplied to
respondent was mildewed and unfit for consumption and therefore the respondent was entitled to
claim compensation on the ground that government of India has committed breach of warranty.

In Hasanbhoy Jetha vs. New India Corporation Limited 27 an appeal is brought by the
defendants a firm carrying on the business of hardware goods and second hand machinery in
Bombay. The suit was instituted in March 1946 by the respondents herein for the recovery of the
damages on the ground that applicant firm was guilty of breach of contract, breach of condition
and warranty. Even though the machine was repaired and inspected before-hand learned judge
held that respondents were clearly entitled for the refund of the entire purchase price.

SPECIAL DAMAGES UNDER SECTION 73 OF INDIAN CONTRACT ACT

Special damages are those which arise on account of the unusual circumstances effecting the
plaintiff. They are only recoverable when the special circumstances were bought to the
knowledge of the defendant so that the possibility of the special loss was in the contemplation of
the parties.

In the case of Simpson v London & North Western Railway Co 28 the above suggestion was
qualified to this extent that if the special circumstances are already within the knowledge of the
party breaking the contract, the formality of communicating them to him may not be necessary.

The plaintiff was in the habit of exhibiting samples of his implements at cattle shows. He
delivered his samples to the defendant company for consignment to the show grounds. The
consignment note stated: “must be at New Castle on Monday certainly”. But no mention was

24
AIR 2005 SC 371, (2004) 39 APSTJ 205.
25
(1996) 4 AER 481.
26
1963 AIR 1685, 1964 SCR (3) 164
27
AIR 1955 Mad 435.
28
(1876) 1 QBD 274

23 MEMORANDUM ON BEHALF OF APPELLANT

 FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2018

made of the intention to place the goods in the exhibition. On account of negligence the goods
reached only after the show was over. But as the company already had the knowledge of the
purpose, the plaintiff was allowed to recover not only the loss of freight but also the profits he
would have made by placing the goods at the show.

Cockburn CJ said:

The principle is now well-stated that, whenever either the object of the sender is specially
brought to the notice of the carrier, or the circumstances are known to the carrier, from which the
object ought in reason to be inferred, so that the object may be taken to have been in the
contemplation of both parties, damages may be recovered for the natural consequences of the
failure of that object.

It was restated in the case of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd 29

By Lord Asquith that: Only such loss is recoverable as was at the time of the contract reasonably
foreseeable as liable to result from the breach. Foreseeability depends upon the knowledge.

In the present case Mr. Tony conducted a market research to test the viability of his new project
regarding the Lobanza capsule and discovered that the LPT machine would slash the cost of
production by one third and the productivity would increase roughly by ten times. Seeing such a
positive result, on 14th August 2017, HPC Ltd entered into an agreement with Mr. Steve,
regarding the purchase of three more LPT Machines for Lobanza Capsule’s production. Hence
the specific purpose of purchasing the machine was made known to the seller.

However, a week prior to the sale of three LPTs on 14th August, Mr. Steve received a detailed
report from the auditor categorically highlighting certain patent defects in those machines yet he
ignored the reports and failed to disclose it, showing a reckless conduct from his side. On certain
occasions HPC Ltd. encountered frequent problems with machines and finally on 22nd October

29
(1949) 2KB 528: (1949) 1 All ER 997 (CA).

24 MEMORANDUM ON BEHALF OF APPELLANT

 FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2018

all the machines malfunctioned and stopped working resulting in a heavy loss incurred by Mr.
Tony Snark. Hence he is obligated to get special damages for his loss as he made his purpose
known to Mr. Steve, yet he failed to deliver the goods fit for the purpose and it did not served
his purpose. He also incurred heavy losses due to the failure of the machinery and the resulting
damages were also reasonably foreseeable.

25 MEMORANDUM ON BEHALF OF APPELLANT

 FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2018

PRAYER

For the reasons aforesaid, in the light of issues raised, arguments advanced and authorities cited,
it is humbly submitted before this Hon’ble Court:

Declare that the fraud has committed by Mr Steve and order for the restitution to Appellant,

Declare that the contract is voidable by the virtue of fraud and order for the damages to
Appellant,

Declare that there is loss of livelihood of the wife of deceased and order for the compensation to
Appellant,

Declare that there is a breach of contract and order for the restitution and damages

Respectfully submitted,

Councils of Appellant.

26 MEMORANDUM ON BEHALF OF APPELLANT