1. This is a defendant's second appeal against a decree of the lower appellate Court confirming a decision of the Court of first instance decreeing the plaintiff's claim in part. The plaintiff's claim was for damages for the Wrongful rejection of goods agreed to be sold and delivered by the plaintiff to the defendant. It appears that on 2nd May 1930 the defendant ordered from the plaintiff, 1000 sleepers of a quality known as Samodha. The purchase price was Rs. 3,187 and delivery was to be given at Agra within ten days of the date of the contract. On the day upon which the order was given the defendant paid to the plaintiff a sum of Rs. 200 by way of earnest money to bind the bargain. The goods were despatched from Jhelum in the Punjab to Agra and arrived in Agra within time. The defendant however inspected the goods and rejected them on the ground that they were not of the quality contracted for. The plaintiff on hearing of the rejection came to Agra, paid the freight upon the goods and had them unloaded and stored. The plaintiff had to pay also the octroi dues due to the Municipality for these goods which had been brought into Agra.
2. The plaintiff then instituted a suit in Jhelum claiming from the defendant a sum of Rs. 2,100 as damages for breach of contract. Objection was taken that the Jhelum Court had no jurisdiction to deal with the case and eventually that Court returned the plaint for presentation in the Court having jurisdiction. Later, a suit was instituted by the plaintiff in the Court of the learned Munsif of Agra claiming a sum of Rs. 2,100 as damages. Both the Courts below have held that the goods delivered by the plaintiff at Agra were of the quality contracted for, viz. Samodha, and that the rejection by the defendant of these goods was wholly Unjustifiable and wrongful. Consequently both Courts were of opinion that the plaintiff was entitled to damages for such wrongful rejection. No point has been made on behalf of the appellant upon this finding as to liability. Whether these goods were of the quality contracted for or not was purely a question of fact and it cannot be argued here that there was no evidence to support the finding that the goods delivered were of the contract quality and description and therefore that the rejection was wrongful. The only question that has been argued before me is one upon damages. The claim, as I stated, was for a sum of Rs. 2,100, but the learned Munsif decreed the suit for a sum of Rs. 931-7-6. The learned Subordinate Judge confirmed the decree of the learned Munsif holding that the sum awarded by way of damages was a proper and reasonable sum.
3. In my view the method adopted by both Courts in arriving at the amount of loss was the proper one as there was no available market or a market price for these goods. By reason of the defendant's wrongful rejection of these goods the plaintiff was put to considerable loss and expense. He had to pay the freight on these goods from Jhelum to Agra and the costs of removing them from Agra and storing them. The actual expenses in connexion with these goods incurred by the plaintiff for freight, &c;, amounted to a sum of Rs. 1,552-3-6. His loss by reason of the defendant's action therefore amounted to the contract price of the goods, plus the expenses incurred less such sum as he obtained or could have obtained upon re-selling the goods within a reasonable time at Agra. Both the lower Courts came to the conclusion that the plaintiff could have sold these goods within a short time of the date of rejection for a sum of Rs. 4,100. He did not do so, but it is clear that a plaintiff must take all reasonable steps to mitigate his damages. There was clear evidence that had the plaintiff so desired he could have within a comparatively short space of time disposed of these sleepers for Rs. 4,100. He eventually disposed of them at a lower figure, but in my view he should have sold them earlier when he could have obtained the higher figure of Rs. 4,100. This sum of Rs. 4,100 must therefore be deducted from the total figure made up on the contract price which the plaintiff should have received, plus the expenses which he incurred by reason of the defendant's breach. The contract price, plus the expenses incurred by the plaintiff, amount to Rs. 5,031-7-6. If the sum of Rs. 4,100 is subtracted from this latter sum it leaves a balance of Rs. 931-7-6 which both the Courts awarded to the plaintiff.
4. In my view however a sum of Rs. 200 must be deducted from the sum of Rupees 931-7-6 because the plaintiff actually received that sum from the defendant as earnest money and in part payment of the purchase price on the date upon which the contract was made. Having broken the contract the defendant could never recover the earnest money from the plaintiff, but he can however claim to have the earnest money taken into consideration in assessing the quantum of damages sustained by the plaintiff. In Ockendon v. Henly (1858) 113 RR 740 it was held that a plaintiff who sues for damages for breach of contract must give the defendant credit for any earnest money paid by him in assessing the amount of damage suffered by reason of the defendant's breach. In that case the plaintiff put up for sale by auction real property, upon conditions of sale which stipulated that the purchaser of each lot should forthwith pay into the hands of the auctioneer a deposit of 20 per cent. on the purchase money and sign an agreement to pay the remainder, and that, if the purchaser of either lot should fail to comply with those conditions, the deposit money should be actually forfeited to the vendor, who should be at full liberty to re-sell such lot either by public auction or private contract; and any deficiency that might arise upon such re-sale together with all expenses attending the same, should immediately after such second sale be made good by such defaulter; and, on non-payment thereof, such amount should be recoverable by the vendor as and for liquidated damages. The defendant became a purchaser at the auction, but did not pay the deposit or complete the purchase. The plaintiff resold at a price below that for which defendant had purchased; and the deficiency with the expenses of sale exceeded the amount to be deposited: it was held that the plaintiff was entitled to recover from the defendant the amount of the deficiency and expenses only, and not, in addition to this, the amount of the deposit. Had the deposit been paid and the bargain completed, the deposit would have gone in part payment of the purchase money: and, in the case of non-completion of the bargain, if the deficiency and expenses had together been less than the deposit, the purchaser would have been entitled to the whole deposit, but nothing more. The judgment of the Court was delivered by Lord Campbell, C.J. and he made it abundantly clear that in assessing damages regard must be had to the earnest money already paid by the defaulting defendant to the plaintiff. This English case has been expressly approved of by a Full Bench of the Madras Court in the Vellore Taluk Board v. Gopalasami Naidu 1916 38 Mad 801. That case decided that:
Where a person deposits a certain amount as earnest money for the due performance by him of his part of the contract under which he agrees to pay the other party a certain sum breaks the contract thereafter, the other party who becomes entitled to retain the deposit as forfeited under the terms of the contract must, in a suit by him for damages for the breach of contract, give credit for the amount retained as forfeited and can only recover the difference between the actual loss sustained and the amount of the forfeited deposit.
5. The view expressed by the learned Judges in this Madras Full Bench decision is also the view taken by the learned authors of Pollock and Mulla's Sale of Goods Act, see p. 45, Edn. 1. In my judgment these cases apply to the present case and the sum of Rs. 200 already received by the plaintiff by way of earnest money must be taken into consideration in assessing the loss sustained by him. In principle I can see no difference between the present case and the cases which I have cited and that being so the amount of earnest money already received by the plaintiff, viz. Rs. 200, must be deducted from the amount of Rs. 931-7-6 which was awarded by way of damages to the plaintiff. The amount of damages, therefore, will stand at Rs. 731-7-6 and the plaintiff's claim will be decreed for Rs. 731-7-6 together with interest thereon at 6 per cent, per annum from 1st June 1930 to the date of realization. To this extent and this extent only the appeal is allowed. The parties will receive and pay costs in this Court in proportion to their success and failure. The cross-objection has not been pressed and there is no substance in it. Consequently it is dismissed with costs.