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A. Cecil Cole Vs. Nanalal Moraji Dave - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 4879 of 1923
Judge
Reported inAIR1925Bom18; (1924)26BOMLR880
AppellantA. Cecil Cole
RespondentNanalal Moraji Dave
Excerpt:
.....purchase agreement--distinction between two kinds of agreements.;the plaintiff agreed to sell 'on hire purchase system' his motor lorries and other chattels to defendant no. 1 for rs. 25,000 and stipulated for payment of the amount in instalments. the agreement provided: 'in case of failure to pay any of the instalments on due date previous payments will be considered null and void and the lorries are not considered as sold until the final payment has been received. the purchaser has no right to mortgage or dispose of any lorries until the final amount has been paid and ...[the vendor] has the right to seize the lorries wherever they may be.' the plaintiff received rs. 5,000 and delivered the lorries to defendant no. 1 and also wrote to the commissioner of police to transfer the lorries..........that really arises is what is the nature of the agreement which the parties entered into. was it a hire-purchase agreement in the sense in which it is so understood in england, viz., no absolute sale, but only a hiring of the chattel by a person who has the option of returning it at any time before the various instalments are paid. or on the other hand, despite the language which the parties have used, was it really a sale having regard to what the parties in fact agreed to do '. before i turn to the actual document in this case, i wish to keep these two points of principle clearly before me, so that when i come to the document, i can show what in particular are the relevant passages to be borne in mind.2. now there are two lines of authority illustrating what i have just said. the first.....
Judgment:

Marten, J.

1. [His Lordship after getting out facts of the case proceeded.--] The first point that really arises is what is the nature of the agreement which the parties entered into. Was it a hire-purchase agreement in the sense in which it is so understood in England, viz., no absolute sale, but only a hiring of the chattel by a person who has the option of returning it at any time before the various instalments are paid. Or on the other hand, despite the language which the parties have used, was it really a sale having regard to what the parties in fact agreed to do '. Before I turn to the actual document in this case, I wish to keep these two points of principle clearly before me, so that when I come to the document, I can show what in particular are the relevant passages to be borne in mind.

2. Now there are two lines of authority illustrating what I have just said. The first line of cases illustrates a hire-purchase agreement proper, viz., where the hirer of a chattel has only an option to purchase the goods and is under no obligation to purchase. That is shown in Helby v. Matthews. [1895] A.C. 471. A leading case on the other side of the line is Lea v. Butler [1893] 2 Q.B. 318, where notwithstanding the fact that the parties spoke of themselves as being hirers and so on, and notwithstanding that it was expressly agreed that no property other than as tenant should vest in the hirer until the whole of the payments of rent thereby reserved should have been actually paid, the Court there held that the hirer of the goods had agreed to buy them notwithstanding the language used in the agreement.

3. Then if I turn to Belsize Motor Supply Company v. Gox [1914] 1 K.B. 244, the judgment of Mr. Justice Channell states the dividing line between these two classes of cases. In that particular case the owners of a motor vehicle let it to certain hirers for twenty-four calendar months at the rate of 15-12-2 per calendar month. On the signing of the agreement the hirers were to pay, and did pay, 50 on account of hire in advance, and each subsequent payment was to be made in advance on specified dates. The hirers were not to re-let, sell or part with the vehicle without the consent in writing of the owners. But if the hirers should, on or before the expiration of the twenty-four calendar months, be desirous of purchasing the vehicle they could do so by making the amount of hire paid equal to the amount of 422-11-6. Then if the hirers did certain things, of which parting with the possession of the vehicle without the owners' consent in writing was one, it was made lawful for the owners and they were authorised to take possession of the vehicle and terminate the agreement. Then it appears that while the agreement was subsisting, there being a sum due and unpaid on account of hire, the hirers without the consent of the owners pledged the vehicle to a pledgee who took it in good faith and without notice of the owners' rights. Subsequently the owners on hearing of the pledge demanded the vehicle from the pledgee, who refused to restore it. At the date of this demand and refusal there was a sum of 58-9 due and unpaid on account of hire.

4. Mr. Justice Channell, in delivering the judgment, said (p. 250):--

The first question is whether this case comes within the principle of Helby v. Malthews [1895] A.C. 471 or that of Lee v. Butler [1893] 2 Q.B. 318 and later cases of the same class. To decide that question I. have to see whether in this agreement of December 10, 1910, the Burgess Company, the original hirers, bound themselves to buy the motor cab The case of Lee v. Butler, which was not dissented from in Helby v. Matthews, decided that where the hirer has agreed to pay all the instalments of purchase-money that amounts to an agreement to buy, and the case comes within Section 9 of the Factors Act, 1889, or Section 25 of the Sale of Goods Act, 1893. in Helby v. Matthews, it was decided that, as the hirer had an option to return the goods, the case did not come within the sections. When those cases had been decided the case of Hull Hopes Co v. Adams (1895) 65 L.J.Q.B. 114 came before a Divisional Court. No report of Helby v. Matthews [1895] A.C. 471 had as yet been published in the Law Reports, and the Court reserved judgment until a report should appear. Having seen the report they decided that the facts in Hull Ropes Co. v. Adams did not bring the case within the decision of Helby v Matthews. There is no conflict between these cases. Where the agreement contains an obligation to pay the purchase-money it is an agreement to buy. In the present case there is a positive obligation to pay twenty-four instalments of 15 Section 2d. That amounts to 374 12 Section There was also an obligation to pay on the signing of the agreement the sum of 50 'on account of hire in advance'. If 374 12 section had been the entire sum which would have been necessary to enable the hirer to say that the cab was his property, the agreement would have been an agreement to purchase within the principle of Lee v. Butler [1893] 2 Q.B. 318; but 374 12 section was short of the entire purchase-money by the exact sum of 50 Both parties ignored as being immaterial the difference between 424 12 section (i.e. 50 + 374 12 section) and the figure 424 11 Section 6d. specified as the purchase price in Clause 5 of the agreement of Deoem.-her 10, 1910. If the hirers had both paid the 50 and all the twenty-four instalments they would have paid up the full amount required to purchase the cab; but the 50 would have been paid as deposit on account of purchase money in advance. The document on the face of it gives the hirers an option to purchase at any time by paying up the difference between 424 11 Section 6 d. and the sum already paid That is an option which no doubt the hirers would probably exercise unless it proved valueless, but it is none the less an option when they had paid the twenty-fourth instalment to decline to proceed with the purchase, and to claim a return of the 50 deposit. In my view they were never bound to pay more than 374 12 section. They never bound themselves to pay the whole sum of 424 11 Section 6 d. The case therefore comes within the principle of Helby v. Matthews and not within Lee v. Butler.

5. Then I may mention one more case of Lewis v Thomas [1919] 1 K.B. 319 where the head-note runs:--

A hirer of personal chattels under a hiring agreement which gives him an option to purchase them upon payment of all the agreed instalments of rent, but imposes upon him no obligation to do so, is not the 'true owner' of the chattels within the meaning of Section 5 of the Bills of Sale Act (1878) Amendment Act, 1882.

6. There in effect the Court thought that the case came within Helhy v. Matthews

7. Then in India there is a case of In re Linotype and, Machinery, Ld. and, the Windsor Frew of Calcutta (19160 1. L.R. 44 Cal. 72, under the Stamp Act, where the Court held that the document in that case was an agreement and not a conveyance. I do not think I need go into the details of that case.

8. There is one more authority in Brij Coomarce v. Salamander Fire, Insurance Company I.L.R. (1905) Cal. 816, where it is pointed out that the rights of parties are governed by the provisions of the Indian Contract Act, and that if they agree to do certain things, then in law certain consequences are bound to ensue. Sir Francis Maclean there says (p. 823):--

But, if you find in a contract certain terms from which, when they exist the Legislature says that certain consequences shall ensue, these consequences must ensue; otherwise, it is difficult to see what object there can be in codifying the law upon the question. For these reasons I think that the property in the goods was in the plaintiff and that they were covered by the policy of insurance.

9. Now the very expression 'hire purchase agreement' is not one that originated in this country. It is clearly a form of agreement which has originated in England and has been created by those engaged in the trade of particular articles. Substantially in this country there is little or no authority on hire-purchase agreements. At any rate none has been cited to me, although there has been some reference to some unauthorised reports which I am told are not even in the Bar Library. Under these circumstances I propose to follow the distinctions adopted in the House of Lords between these two classes of authorities, and to consider whether in the suit agreement there was an obligation by the purchaser to buy. Ae was said by Lord Herschell in Helby v. Matthews [1895] A.C. 471:--

Reliance was placed on the decision in Lee v. Butler [1893] 2 Q.B. 318, and it was said that the present case was not, in principle, distinguishable from it. There seems to mo to be the broadest distinction between the two cases. There was there an agreement to buy. The purchase-money was to be paid in two instalments, but as soon as the agreement was entered into there was an absolute obligation to pay both of them, which might have been enforced by action. The person who obtained the goods could not insist upon returning them and so absolve himself from any obligation to make further payment. Unless there were a breach of contract by the party who engaged to make the payments the transaction necessarily resulted in a sale. That there was in that ease an agreement to buy appears to me, as it did to the Court of Appeal, to be beyond question.

10. [After setting out the portions of the agreement in suit the judgment proceeded.] Now was there any option to the purchaser to return these lorries after, say, he had paid four instalments? In my opinion there was not. The agreement begins with an agreement to sell. I agree the words 'on the hire-purchase system' follow, but nevertheless it is an agreement to sell for Rs. 25,000, and it is to be 'in consideration of payment as under.' Then lower down the agreement provides: 'The consideration is to be paid as under' and a list of instalments is given which makes up the full purchase-price of Rs. 25,000. I read that document as meaning that the purchaser was bound in any event to pay the whole of this consideration of Rs. 25,000, and that it would be a breach of contract on which he could be sued if he failed to pay up any of the instalments. I do not overlook the fact that the agreement provides that 'in case of failure to pay any of the instalments on due date previous payments will be considered null and void.' But that may be referable to the kind of measure of damages that the parties had in mind. I cannot consider those words as implying that the purchaser had an option to return the vehicles provided he forfeited the past instalments actually paid.

11. Then there is a provision that 'the lorries are not considered as sold until the final payment has been received.' But there again one must consider what is the principle on which the dividing line in the above cases has been laid down. If then there was a sale, on the true construction of this document, I cannot read this clause as meaning that the property was not to pass notwithstanding that the purchaser definitely agreed to buy the lorries and took delivery of the lorries there and then and agreed to pay the purchase money by instalments. If one turns to Section 78 of the Indian Contract Act, it is clear that in such a case the property in the goods would ordinarily pass.

12. There is one further point that the agreement speaks of delivery of all the lorries having been given that day. That is an expression which is applicable as between a vendor and a purchaser. For a mere hirer who has taken the goods on hire, delivery perhaps is not quite the apt word to use.

13. Then similarly the fact that the motor lorries are to be transferred to the name of the purchaser in the motor register kept by the Commissioner of Police, is at least in keeping with the view that the defendant was to be the purchaser although the purchase money was to be paid by instalments. At the moment I have only before me the Act itself, viz., The Indian Motor Vehicles Act, 1914, Section 10 of which provides: 'The owner of every motor vehicle shall cause it to be registered in the prescribed manner.' The rules under that Act which are before me are 'The Bombay Motor Vehicles Rules, 1915' which are set out in 'The Motorists' Guide (India), 2nd Edn.,' of Mr. Giles, Head Police Office, Bombay. But I am informed by counsel for the plaintiff that since then other rules have been issued by Government, particularly in connection with motor lorries, and that under those rules a person who plies a vehicle for hire and some other persons who are not necessarily the true owners have to be registered. If that is so, then the point that these lorries were to be transferred to the name of the defendant is not so significant as it otherwise would have been.

14. What has really happened here is that this is a home-drawn document, in which the parties have talked glibly about a hire-purchase agreement without really understanding what it means: and I have to make the best sense 1 can of it. In my opinion on its true construction it was really a sale where payment was to be made by instalments, and it comes within the principle of Lee v. Butler and not within Helby v. Matthews. Under these circumstances, in my opinion, the property in these lorries passed to the purchaser on the execution of the document.

15. That being so, the relief which the vendor is entitled to is to claim the balance of the purchase-money for goods sold and delivered. It will be seen on looking at the plaint, prayer (d), that the plaintiff's claim is put in the alternative there, viz., first for unpaid instalments and also for damages, and alternatively 'in the event of this Court holding that there was an agreement of sale of the said nine lorries to the first defendant by a writing dated May 21, 1923, the first defendant may be ordered to pay to the plaintiff the balance of the price, viz., Rs. 12,000, with interest thereon at nine per cent, per annum from November 1, 1923.' That, in my opinion, is the relief which the plaintiff is entitled to as against defendant No. 1. [ The judgment then dealt with other aspects of the case not material to this report and concluded.] Accordingly there will only be a decree for the plaintiff against defendant No. 1 for Rs. 12,000 and interest at nine per cent. per annum from November 1, 1923, to judgment. There will be costs and interest on judgment at six per cent.


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