Case Study: Ramsgate Victoria Hotel v Montefiore
Vidya (20232MBA)
Bindu (20232MBA0387)
Gagan (20232MBA0393)
Vishnu (20232MBA)
Akash kumbar (20232MBA0388)
Introduction
When it comes to contracts, time is of the importance. If not accepted until the end of a
certain period of time, a proposal or offer may be withdrawn. However, if no time frame is
established, it does not follow that the proposition or offer is valid indefinitely. The
acceptance must be communicated in this situation within a reasonable amount of time. The
court will ultimately decide what constitutes a reasonable amount of time.
Background
In the case of Ramsgate Victoria Hotel Company Ltd. v. Montefiore (1864), the Ramsgate
Victoria Hotel Company Ltd. was officially registered on June 6, 1864, requiring an initial
deposit of £1 per share upon application and an additional £4 deposit on allotment, with the
deposit refundable in case of non-allotment. On June 8, Montefiore applied for 50 shares,
paying a £50 deposit and receiving a banker’s receipt for his payment. The company listed
him as an applicant, but from June to November 23, he received no communication regarding
his application or any share allotment. Frustrated by the lack of response, Montefiore sent a
letter on November 8, 1864, withdrawing his application, requesting a refund of his deposit,
and explicitly declining to sign the company’s articles or accept any shares.
On November 23, the Company allotted him the 50 shares he had applied for and required a
£4 first call payment by December 5. However, Montefiore refused to accept the shares or
make the payment, prompting the Company to sue him for the outstanding call amount. This
case was combined with a similar lawsuit involving another applicant, Goldsmid, who had
also refused payment but had not formally withdrawn his application. The legal question
centered on whether Montefiore was liable for the payment after retracting his application.
The court ruled in favor of Montefiore, finding that the Company's five-month delay and his
prior withdrawal released him from any obligation to make the first call payment. The
judgment underscored the importance of timely communication in share allotment.
Arguments of the Parties:
Plaintiff's Arguments
The company can claim the initial call amount; a legal contract binds defendants to
accept shares and pay.
The Companies Act 1862 supports that pre-withdrawal lists by the Secretary are valid
registers, so the November 23 list is valid.
Allotment on November 23, 1864, created a binding contract; defendants cannot
disregard it.
Goldsmid must pay, as he did not withdraw his request; thus, the company need not
refund his deposit.
Defendants' Arguments
Withdrawal occurred before any allotment or notification, so there’s no obligation to
accept shares.
No enforceable agreement exists due to delayed allotment notification.
Withdrawals were made before the creation of any legal share register.
Defendants aren't company members and aren’t bound by the Articles of Association.
The prospectus promised deposit refunds if shares weren't allotted, so defendants are
entitled to refunds.
Issue Involved:
The current case is one of the earliest to deal with the idea of withdrawal of an offer due to
the passage of a reasonable amount of time. According to the case, an acceptance cannot be
considered valid unless it is communicated within a reasonable amount of time. This idea is
of the utmost importance and is currently covered by Section 6 Clause 2 of the Indian
Contract Act of 1872 as well as British contract law.
The case, however, did not make it clear exactly what constitutes a reasonable time frame.
Even after more than 50 years, there is still no definitive answer to this question because it
entirely depends on the specific facts and circumstances of each case.
Judgment
The court held that the Ramsgate Victoria Hotel’s action for specific performance was
unsuccessful. The offer that the defendant had made back in June was no longer valid to form
a contract. A reasonable period of time had passed and the offer had lapsed. The court stated
that what would be classed as reasonable time for an offer to lapse would depend on the
subject matter. In this case, it was decided that six months was the reasonable time before
automatic expiration of the offer for shares. Yet, for other property, this would be decided by
the court in the individual cases.
