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Alapati Ramamurthi, Vs. J. Ramanujam and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal Nos. 10 and 11 of 1955
Judge
Reported inAIR1961AP408
ActsSale of Goods Act, 1930 - Sections 5; Indian Contract Act, 1872 - Sections 182
AppellantAlapati Ramamurthi, ;gelli Krishnamurthi and Co.
RespondentJ. Ramanujam and ors.
Appellant AdvocateP.P. Suryarao, Adv.
Respondent AdvocateB.V. Subrahmanyam, ;K. Venkataramana Rao, ;C. Mallikharjuna Rao, ;K.V. Subrahmanya Narasu, ;K.B. Krishnamurthy and ;M.S.R. Subrahmanyam, Advs.
DispositionAppeals dismissed
Excerpt:
.....the formation of contract. the suits must fail as against the defendants. on that ground also, thesuit against him would..........the 1st defendant in o. s. no. 10/51 who on that day is said to have asked the 2nd defendant to purchase goods for both.the broker cannot vouch for the blood relationship between the 1st defendants which he seems to allege nor can he say whether the two had any joint business. he cannot even say whether one is the agent of the other. he admits d, w. 2 never before contracted on behalf of d. w. 3. so then, if the 1st defendant in o. s. 10/51 had instructed him (d. w. 1) to purchase for d. w. 3 (the 1st defendant in o. s. 13/51), such an instruction cannot be deemed to be an offer on behalf of d. w. 3 that may bind him or result in a binding contract so far as he is concerned, by its acceptance by plaintiff.it may be remembered that as brought out by the evidence, d. w. 3 was not in the.....
Judgment:

Kumarayya, J.

1. These two appeals raise questions of law and fact and may he conveniently disposed of by a common judgment. In fact, the two suits O. S. Nos. 10 and 13 of 1951 out of which they arise were, at the request of the parties tried together and a common judgment was rendered by the Additonal Subordinate Judge, Vijayavada. The plaintiff-seller in both the suits is a firm registered under the Partnership Act doing business at Vijayavada in jute products. The 2nd defendant who is a broker and is said to have brought about the contract between the purchaser and the seller is common to both the suits. The buyer is the 1st defendant in each of the suits, They are separate individuals. The suits are tor recovery of damages for breach of contract on account of non-acceptance of the goods sold.

2. Brictly stated, the facts, according to the plaintiti's case are: that on 20-12-1947 the 2nd defendant arranged contracts Nos. 367 and 368 at Vijayavada between the plainliif on the one hand and the 1st defendant in O, S. No. 10 and also O. S, No. 13 of 1951 on the Other hand, under which the 1st defendant in each case agreed to purchase from the plaintiff 100 bales of jute twine, each consisting of 5 Bengal maunds at the late of Rs 59/- pet maund and it was agreed that the bales shall be delivered in two instalments of 50 bales to each one of the said 1st defendants in the months of February and March 1948.

As the stipulated period drew near, the plaintiff sent the 1st instalment along with a hundi to each of the said first defendant in the month or February but the goods were refused and the hundi was dishonoured. Similar was the fate of the next consignment accompanied by a hundi. The plaintiff therefore after due notice sold the goods in open market on 25-4-1948 which fetched him a price at the rate of Rs. 44/- per Bengal maund. Thus, as a result of non-acceptance of goods the plaintiff sustained a loss of Rs. 15/- per maund. He therefore brought an action for the recovery of a sum of Rs. 7,500/- together with interest.

3. The 1st defendant in each of the suits dented the transactions and contended that they are not guilty of any breach of contract, that they were neither bound to accept the goods nor honour the hundies, that they cannot consequently be held liable for any damages and that the plaintiff had no cause of action against them.

4. The 2nd defendant as a broker while denying all liability supported the case of the plaintiff.

5. The main points in dispute were: whether the suit contract was true, valid and binding on the 1st defendant, and, whether the plaintiff is entitled to damages; if so, what is its quantum. The trial court after due enquiry entered its judgment in favour of the 1st defendant on all the above points in each suit. The plaintiff has therefore preferred these separate appeals.

6. The points that emerge for consideration must necessarily be the same, as have been referred to above, for the cause of action for the plaintiff would arise only if there was a contract and it was broken. So, then it is to be seen how far the plaintiff has made out his case. According to S. 5 of the Sale of Goods Act a contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. It may be oral or in writing or may even be inferred from the conduct of the parties, but it must of necessity originate in offer and acceptance.

Each of the 1st defendant in both the cases categorically denies to have made any offer for purchase or having accepted any offer made on behalf of the plaintiff in relation to the sale ot goods, it does not appear to be the case of the plaintiff that the contract was dircctiy entered into between the plaintiff and the 1st defendant. According to him, it was the broker who had brought about the contract. The broker is the 2nd defendant who in his written statement in support of the case of the plaintiff stales as to how he brought about the contract thus:

'On 20-12-1047, this defendant at the instance of plaintiffs who instructed this defendent to sell 200 bales of twine at Rs. 59/- per maund, had arranged the suit contract by telephone with the-1st defendant for sale to him of 100 bales of '5x72' reel jute twine of Nellimcrla and Chittiyalasa Jute Mills, each bale consisting of 5 Bengal maunds at Rs. 59/- per maund and on 22-124947 he had sent, the confirmation slip to the 1st defendant'.

7. This shows it was at the instance of the plaintiffs that the 2nd defendant moved the 1st defendant to purchase the said goods. But this story is not consistent with what the defendant has deposed on oath as D. W. 1 in the case. Therein he says:

'Defendant No. 1 in O. S. 10/51 phoned to me from Rajahmundry and said that he wanted to purchase 200 bales of Jute twine for the delivery in February and March 1948. He said that 100 bales-for him and 100 bales to defendant in O. S. No. 137, 51. He did not tell me rates. He wanted 50 bales to each of them in February and March 1948. I phoned to Galli Krishnamurthi at Calcutta and communicated the offer. He appeared to sell at Rs. 59/-per maund. On 21-12-1947 I intimated on phone to 1st defendant in O. S. 10/51 that the order has-been made pucca at Rs. 59/- per maund. I entered the entry in my business book'.

Thus while according to the written statement it was at the instance of the plaintiffs who instructed him to sell 200 bales of twine at the rate of Rs. 59/-per maund, the broker had arranged the suit contract on phone to the 1st defendant, the sworn testimony shows that it was at the instance of the 1st defendant that the broker took the initiative, phoned to one of the partners of the plaintiff firm at Calcutta for the purchase of 200 bales of Jute twine made the order pucca and informed the 1st defendant the rest day.

The disparity between the two statements is strikingly great. Indeed one is off at a tangent with the Other. Strange though it may seem, we are requested to spell out a contract from these conflicting statements. Unfortunately, there is no other oral testimony as to the genesis of the transaction tor the person with whom the broker had entered into telephonic communication according to P. W. 1 is since dead. P. W. 1 who is also a partner, of course,, says that on 20-12-1947 the contracts were entered into with the 1st defendants in both the suits through the 2nd defendant and each one of them agreed to purchase 100 bales of jute twine but admits that he was not personally present when the contract was entered into and that the 1st defendant in both the suits were not present when the contracts were confirmed.

Thus, his evidence as to the formation of contract is mere hearsay and it does not accord with any of the statements of the 2nd defendant who does not admit that each one of the defendants has agreed to purchase 100 bales. It is plain that apart from the testimony of the 2nd defendant (D. W. 1) there is no oral evidence that tends to establish the privity of contract between the plaintiffs and the 1st defendant.

But that testimony obviously enough, does not inspire credence by reason of its inconsistency with the averments in his pleading. That apart, even if his statement as to the formation of the contract is accepted at its face value, essential pre-requisites of offer and acceptance cannot be held to have been made out. The 1st defendant in O. S. No. 13 of 1951 admittedly did not make any offer through him.

It was the 1st defendant in O. S. No. 10/51 who on that day is said to have asked the 2nd defendant to purchase goods for both.

The broker cannot vouch for the blood relationship between the 1st defendants which he seems to allege nor can he say whether the two had any joint business. He cannot even say whether one is the agent of the other. He admits D, W. 2 never before contracted on behalf of D. W. 3. So then, if the 1st defendant in O. S. 10/51 had instructed him (D. W. 1) to purchase for D. W. 3 (the 1st defendant in O. S. 13/51), such an instruction cannot be deemed to be an offer on behalf of D. W. 3 that may bind him or result in a binding contract so far as he is concerned, by its acceptance by plaintiff.

It may be remembered that as brought out by the evidence, D. W. 3 was not in the station at all but was at Madras, during the period from 20-12-1947 to 25-12-1947. D. W. 3 categorically denies to have made any offer through D. W. 2 or D. W. 1. Thus the testimony of D. W. 1 does not even prima facie establish contractual obligation between D. W. 6 and the plaintiff. As regards the 1st defendant (D. W. 2), 2nd defendant admits that while requesting him to make a purchase, 1st defendant did not specify any rate at which he should purchase.

He further admits that be (the 2nd defendant) himself did not communicate the rate to him for acceptance before the contract was confirmed. According to him and the plaintiff the contract was completed on 20-12:1947 itself on phone. But it is obvious at the same time that according to 2nd defendant himself, the rate was communicated only on 21-12-1947 and the confirmation slips were sent on 22-12-1947 and the defendant had not confirmed or accepted the rate at or before that lime or even subsequent thereto.

It is not easy to see how the contract can be said to be concluded without the acceptance of the rate which was an essential term of the contract. Section 5 of the Sale of Goods Act to which reference has already been made postulates an offer to buy or sell for a price and the acceptance thereof. The goods sought to be contracted were not for ready delivery. They were to be delivered in future in two instalments at sufficient interval between each. The price to be agreed upon may not necessarily be the then ruling price. That may vary from place to place or firm to firm. It is not shown that the price quoted was the ruling price at which the broker could strike the bargain by virtue of any implied authority attached to his office that may be pleaded. As a matter of fact, it was denied in Ex. A. 3 that was the then prevailing rate. When the seller had offered to transfer has goods on payment of some price at a future date in order to make it a binding contract that price must be accepted or agreed to by the intending purchaser.

The mere fact that the latter had made an offer for purchase ot goods does not render the contract complete by the acceptance of that offer even though it may be for a price which was not contained in the original offer. The price quoted will constitute a counter offer which must be accepted to develop into a contract. The requirements of a valid contract are varied. They are not satisfied if the offer to buy or sell unaccompanied by the quotation of price is accepted. Certainly it will be fatal if the quotation of price by the person agreeing to sell is left unaccepted.

There must be acceptance both of the purchase and of the price at which it is to be purchased. Judged thus, even if we ignore the serious infirmities in the statement of D. W. 1 and accept it as it is, no contract of sale in law can be said to be made out thereby which may be enforceable against fist defendant. That apart, the testimony of D. W. 1 docs not merit acceptance at all having regard to the serious inconsistency to which we have already referred and other infirmities which we may point out at a later stage.

8. The plaintiff has also relied on certain correspondence and the entries made in his books and also the books of the broker in order to establish the contract. (After discussion of documentary evidence His Lordship proceeded).

Thus the entire documentary evidence is in no way helpful in establishing the case of the plaintiff. That being the case, it is obvious that the plaintiff has failed to establish that there was a contract of sale with defendant in each of the suits. Much capital has been made of the fact that D. W. 2 in Ex. A. 3 having denied the contract took exception to the quality of goods etc. It may be stated at this stage that the plaintiff had despatched the goods of wrong description i.e., not of the description which was alleged to have been purchased and D. W. 2 in Ex. A. 3 had pointed this Out. It is argued therefore that if there was no contract, how could such a plea have been taken.

This argument cannot impress us and it did not impress the court below for the defendant had categorically denied the contract and took the pleas, which were obvious enough, in the alternative. That cannot come to the succour of the plaintiff. The truth remains that the plaintiff has failed to establish the formation of contract. So then, the questions of breach of contract and consequent damages would not then arise. The suits must fail as against the defendants.

9. The plaintiff has alternatively claimed his rebef against 2nd defendant in his plaint. But his status as acknowledged by him being that of a borker, it is not easy to see how he can claim relief on the non-fulfilment of the alleged contract. A broker (See Bowstead on Agency at page 3) is an agent whose ordinary course, of business is to negotiate and make contracts for the sale and purchase ot goods and other property, of which he is not entrusted with possession or control. The duties of abroker are set out at page 105 in the same book. They inter alia consist in executing contracts in such a way as to be legally binding on both parties and so as to give each party a right to sue thereon. The correct position Ot a broker in law and the nature and extent of his liability has been lucidly stated in the tallowing passage in Fowler v. Hollins, (1872) 7 QB 610 at 623:

'The true definition of a broker seems to be, that he is an agent employed to make bargains and contracts between other persons in matters of trade, commerce, or navigation. Properly speaking, a broker is a mere negotiator between the other parties. If the contract which the broker makes between the parties be a contract of purchase and sale, the property in the goods, even if they belong to the supposed seller, may or may not pass by the contract. The property may pass by the contract at once, or may not pass until a subsequent appropriation of goods has been made by the seller and has been assented to by the buyer. Whatever may be the effect of the contract as between the principals, in either case no effect goes out of the broker. It he signs the contract, his signature has no effect as his; but only because it is in contemplation of law the signature of one or both of the principals; no effect passes out of the broker to change the property in the goods. The property changes either by a contract which is not his, or by an appropriation and assent, neither of which is his.....It the goods be in existence, the broker frequently passes a delivery order to the vendor to be signed, and on its being signed, he passes it to the vendee. In so doing he still does no more than act as a mere intervener between the principals. He himself, considered as only a broker, has no possession of the goods, no power actual or legal or determining the destination of the goods, no power or authority to determine whether the goods belong to buyer or seller or either; no powers, legal or actual, to determine whether the goods shall be delivered to one or be kept by the other. He is throughout merely the negotiator between the parties. And, therefore, by the civil law, brokers 'were not treated as ordinarily incurring any personal liability by their intervention, unless there was some fraud on their part:'

.....And if all a broker has done be what I have hitherto described, I apprehend it to be clear that he would have incurred no personal liability to any one according to English law'.

That the position is not far different even under the Indian law can be gathered from the observations of the Chief Justice who delivered the opinion of the Full Bench in K. Radhakrishnarao v. Province of Madras, : AIR1952Mad718 which are to be the following effect:

'A broker is an agent employed to make a bargain for another and receives a commission on the transaction which is usually called brokerage. He has usually neither the custody nor the possession of the goods. It is the broker's duty to establish privity of contract between the principal and the third party. The broker cannot sell in his own name nor can he sue on the contract'.

It is manifest therefore that a broker is a mere intervener. He is a negotiator and is interested in establishing privity of contract between the parties. His position may be that of an agent for purposes of negotiation. He is not concerned with the actual fulfilment of the contract nor does he incur any personal liability in that behalf. That being the position in law the plaintiff cannot sue the defendant as a broker for the breach of contract. The trial Judge has on evidence also held no liability attaches to the 2nd defendant.

He has in para 23(2) of the judgment observedthat both P. W. 1 and P. W 2 admitted that thedefendant being a broker is not liable for breach ofcontract and that it is also so stated in Ex. B. 3 thespecimen contract form. It would appear from thisthe action against the 2nd defendant has not beenmade to rest on any fraud of 2nd defendant nor isit fought on that basis. On that ground also, thesuit against him would fail. It follows that there isno force in these appeals. They are accordingly dismissed with costs of the 1st respondent.


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