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Firm Gopal Company Ltd. and anr. Vs. Firm Hazarilal Company - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMadhya Pradesh High Court
Decided On
Case NumberFirst Appeal No. 79 of 1959
Judge
Reported inAIR1963MP37
ActsCode of Civil Procedure (CPC) , 1908 - Sections 34 - Order 6, Rule 4 - Order 30, Rule 1; Contract Act, 1872 - Sections 2 and 25; Interest Act, 1839 - Sections 1
AppellantFirm Gopal Company Ltd. and anr.
RespondentFirm Hazarilal Company
Appellant AdvocateR.S. Dabir and ;R.P. Sinha, Advs.
Respondent AdvocateA.P. Sen and ;A.H. Saifi, Advs.
Cases ReferredB.N. Rly. Co. Ltd. v. Ruttanji Ramji
Excerpt:
.....by all the parties signing the contract' applied fully to the defendants who had signed the contract. such a promise cannot therefore be a good consideration. what is here maintained is that a promise made for valuable consideration, and otherwise good as between theparties, is not the less valid because the performance will operate in discharge of an independent liability of the promisor to a third person under an independent contract already existing. yet, on the whole, it seems reasonable to say that the performance of, or the promise to perform, an outstanding contract with a third party may be good consideration for a promise, for, as martin, b. ' 28. the well known leading cases on this point are shadwell v. ; it seems to us better to hold, asa general rule, that if a has..........accepted by the plaintiff exercising their choice for taking rs. 25000/- and not for delivering 63 bales. the contract was held to be for consideration and valid. the claim was accordingly decreed for the amount with interest.6. before we take up the case on merits, we may dispose of an objection raised by the learned counsel for the appellants, viz., that the suit as not tenable as the plaintiff firm is a dissolved firm and only one partner thereof has been named in the cause title. under order 30, rule 1 of the civil procedure code, the right to sue in the firm name is given to persons who 'were partners at the time of the accruing of the cause of action'. the material date is thus the date of the cause of action and not the date of suit. it is clear from the language of the rule.....
Judgment:

Shrivastava, J.

1. This appeal is by the defendants against the judgment in Civil Suit No. 14 of 1952 of the Court of the Additional District Judge, Bhopal, decided on 31-12-1958, decreeing the claim of the respondent for Rs. 29,300/- and costs.

2. The suit was brought by the firm 'Messrs. Hazariial', a dissolved partnership firm, through. Hazariial, one of its five partners. The appellant No. 1 'Gopal and company, acts as selling agent of the Bhopal Textiles Limited, Bhopal. Appellant No. 2 Shiv Narain was one of the Directors OT Gopal and Co. On 9-5-1948 the plaintiff had contracted to purchase from the Bhopal Textiles 2101 bales of cloth of which 1050 hales were to be lifted in May 1948 and the rest in June 1948. The contract is incorporated in the document Ex. D-1, which gives the details of cloth sold. The plaintiff first took delivery of 623 bales during the period ending May 1948.

3. The plaintiff alleged that the price of cloth fell down and he would have been put to a heavy loss if he had lifted the rest of the bales. Further, he alleged that the contract was entered into as a consequence of some misrepresentation made by the defendants. However, the details of the misrepresentation were not disclosed in the plaint. The plaintiff went on to say that he refused to take delivery of the rest of the goods. After the refusal, the defendants proposed to him to take delivery of 427 bales remaining from the quota of May, whereupon they (defendants) would get the contract cancelled by the Mills for June quota and further offered to purchase 67 bales out of May quota at the contracted price or pay Rs. 25000/-Instead at the option of the plaintiff. The plaintiff agreed to take Rs. 25000/-; but the defendants did not pay the sum. The suit is for recovery of this amount with interest. In the alternative, the plaintiff also claimed the loss on 63 bales estimated at Rs. 15,333/4/- only with interest.

4. The defendants admitted that the plaintiff took delivery of 623 bales under the contract and refused to take the remaining 1478 bales. They also admitted that they had made an offer to the plaintiff as alleged; but added that this was just with a desire to help the plaintiff. Accordingly, the plaintiff lifted the remaining bales of the May quota and the Mills absolved them of the liability to lift the June quota. As regards the offer made by the defendants to take 63 bales themselves or pay Rs. 25000/-, the defendants stated that the plaintiff exercised his option to give 63 bales and not the other alternative of taking Rs. 25000/-. The question of taking the bales did not arise, as the plaintiff did not later offer these. The claim was -resisted on the ground that the promise was without any consideration and thus unenforceable.

5. The trial Court found that the offer made by the defendants was accepted by the plaintiff exercising their choice for taking Rs. 25000/- and not for delivering 63 bales. The contract was held to be for consideration and valid. The claim was accordingly decreed for the amount with interest.

6. Before we take up the case on merits, we may dispose of an objection raised by the learned counsel for the appellants, viz., that the suit as not tenable as the plaintiff firm is a dissolved firm and only one partner thereof has been named in the cause title. Under order 30, Rule 1 of the Civil Procedure Code, the right to sue In the firm name is given to persons who 'were partners at the time of the accruing of the cause of action'. The material date is thus the date of the cause of action and not the date of suit. It is clear from the language of the rule itself that dissolution of the firm at the time of filing of the suit does not matter, provided the firm existed when the cause of action accrued. This is the view tanen in Seth Agarchand v. Kasam, ILR (1937) Nag 28: (AIR 193/ Nag 314). Shri R.S. Dabir for the appellants further contended that the suit must have been brought in the name of two partners at least, as under Order 30, Rule 1 the light is given to 'any two or more persons'. This objection is equally untenable. These words are merely descriptive of a partnership as introductory to the enacting part of the rule that they are entitled to sue in firm name. According to the rule, the cause title need mention only the firm name and need not give the name of any partner at all. Thus, in Kishanlal v. Firm Nandkishore Kanhaiyaial, ILR (1955) Madh B 345 it was observed :

'The firm was no doubt described as through Kishaniat and Babulal. But this description in the suit and in the appeal was a mere surplusage, if the plaintiff had described the defendant as the firm of Bhagwandas Babulal without mentioning the names of the owners or partners of the firm, the description would have been sufficient having regard to the provisions of Order 30 of the Civil Procedure Code.'

On a plain reading of the first rule of Order 30, it is clear that a suit instituted in the firm name is good and it is not necessary for two partners of the firm to be mentioned in the cause title. Under Sub-rule (2) of that rule, one of the partners must sign and verify, the plaint and this is enough even none of the partners is named in the cause title. All these requirements have been complied with in the instant case. Accordingly, we hold that the suit wasmaintainable in the firm name and it was not necessary to name two partners in the cause title.

7. On merits, two points arise for determination in this appeal: (1) whether there was an agreement between the parties that the defendants would pay Rs. 25000/- to the plaintiff; and (ii) whether the agreement is without consideration and not therefore enforceable at law.

8. It would be convenient to understand the position of the defendants in relation to the Bhopal Textile Mills and the plaintiff for appreciating the arguments advanced on these two points on behalf of the parties. In paragraph 2 of the plaint the defendants have been stated to be the 'sole selling agents' of the Mills and this position was admitted in paragraph 2 of the written statement. The contract about purchase of cloth is contained in Ex. D-1. The schedule giving details of the cloth sold is a part of the agreement The preamble of the deed is as follows: 'We, the undersigned (hereinafter called the Buyers) hereby agree to purchase from Bhopal Textiles Limited (hereinafter called the company) the undermentioned goods upon the following terms and conditions, that is to say:--' It is thus evident that the parties to the contract are the Bhopal Textiles on the one hand and 'the undersigned (hereinafter called the 'Buyers') on the other. The deed is Signed by the Mills, the plaintiff and the defendants. Below the signature of the defendant Company we find the words 'Guarantee Broker'. As the signature of the defendant Company below the deed brings them within the description 'undersigned' and as they are not the 'Mills', it is obvious that they are included in the second party to the deed. At any rate, they are 'guarantee brokers', who are giving guarantee for performance of the contract which means guarantee for the performance by the purchaser to the Mills.

9. After the contract was made on 9-5-1948, there vat correspondence between the Mills and the plaintiff. Some of those letters have been filed by the defendants. Da 29-5-1948 the Mills complained by Ex. D-4 that only 623 bales out of 1050 bales of May quota had been lifted and Invited attention of the buyers to Clause 6 of the agreement which gave the a right to resell goods of which delivery was not taken. In Ex. D-5, dated 4-6-1948, the same complaint was repeated. On 8-6-1948 the plaintiff wrote Ex. D-6 complaining that the goods supplied were short in weight. On 9-6-1948 the Mills replied (Ex. D-7) that the shortage in weight was not relevant, as the sale was on piece basis, i.e. by number of pieces. On 11-6-1948 the Mills wrote Ex. D-9 styled as a notice to enforce the rights under Clause 9 of the agreement, it appears that an the same date the plaintiff wrote a letter to the Mills complaining of certain matters. This letter is not on record tut It is referred to in Ex. D-10, dated 17-6-1948, which is the reply to it by the Mills. The complaints are refered to in this letter. These are 'shortage in weight', 'shortage in length' & 'supply of doth to local merchants', 4t further appears that the plaintiff had asked for a rebate, as they were suffering loss on account of fail in price. The Mills replied refuting the complaints and adding that the question of rebate would be considered sympathetically later. Under the telegram, dated 19-6-1948 (Ex.D-11) and tne letter, dated 1-7-1948 (Ex.D-12) the Mills again repeated their threat to enforce Clause 6 of the agreement.

10. This was the position in which the parties found themselves on 7-7-1948 when the contract leading to the present suit took place. We may recall that according to both the parties, the defendant firm made an offer to the plaintiff giving him the alternative of either cancelling tneSouda of 63 bales and delivering them to the defendants at the contracted rate or to take Rs. 25000/- from them. There is difference between the parties regarding the alternative which was accepted; but according to either version the contract was made by acceptance of one of the alternatives. It is nobody's case that the agreement remained at the proposal stage without any acceptance of any alternative by the plaintiff. That being the position, the evidence on record has to be appreciated to find out whether the alternative accepted was of delivering 63 bales as stated by the defendants or of taking Rs. 25000/- as stated by the plaintiff. Much has been said about the burden of proof by both the parties in arguments; but on the pleadings of the parties setting up a positive case, it appears to us that the burden lay on each party to show that the alternative stated by it was accepted, though it was for the plaintiff to prove his case generally. (After discussing Oral as well as documentary evidence, the judgment proceeded:)

11-20. In our opinion, the trial Court has appreciated the oral evidence and the probabilities of the case correctly and has rightly concluded that the alternative accepted by the plaintiff was about taking a sum of Rs. 25000/- in cash. Accordingly, we confirm that finding.

21. We now pass on to the second contention of the appellants that the agreement, even if it was made, is without any consideration, and unenforceable at law. The plaintiff alleged in paragraph 4 of the plaint that the defendants had made certain misrepresentations. Details ot the misrepresentations were not given in spite of an objection being raised in the written statement. It was necessary for the plaintiff to do so under Order 6, Rule 4 ot the Civil Procedure Code. In the absence of the details, the plea cannot be considered. Moreover, there is no evidence about any misrepresentation having been made by the defendants at all. The plaintiffs witnesses say nothing about it and the correspondence on record contains complaints against the Mills only. We shall, therefore, assume that there was no misrepresentation on the part of the defendants.

22. 'Consideration' has been defined in Section 2(a) of the Indian Contract Act as follows:

'When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence of promise is called a consideration for the promise.'

It will be seen that the promisor must express a desire that the promisee should do something and the promisee should then do that thing or promise to do that thing. On the wordings of this definition, all that is necessary is that the desire of one party and the action of another must have a causal connection, i.e. the action of the promisee must have been induced by the desire of the promisor. It is not necessary that the promisor should derive any direct benefit from the act. The benefit may go to a third party or not at all to anyone. It is the action of the promisee which is the essential element of the consideration. In the instant case, the defendants promised to give Rs. 25000/- to the plaintiff and the plaintiff agreed to take delivery of the bales from the Mills. The act of taking delivery of the bales was thus at the desire of the defendants and it was performed as a consequence of the promise to pay Rs. 25000/-. Looked thus, the act formed consideration for the contract.

23. Shri R.S. Dabir for the appellants, however, contends that the promise to pay Rs. 25000/- was nothing.more than a gratuitous offer for something which the plaintiff was already bound under a contract with the Mills to do. It gave no benefit to the defendants; nor did it cause any detriment to the plaintiff. It could not therefore support a contract.

24. It has rightly been contended by the appellants that mere moral duty to perform a promise given to a party cannot be consideration to support a contract. AS Anson points out in his Principles of the English Law ot Contract (page 111, Twentieth Edition), the wide observations of Lord Mansfield in Lee v. Muggeridge, (1813) 5 Taunt 36, were not accepted in Eastwood v. Kenyan, (1840) 11 Ad and E1 438, which definitely laid down that a moral duty to fulfil a promise was insufficient. However, we do not agree that in the instant case the promise of the defendants created only a moral duty.

25. The learned counsel for the defendants read Ex. P-4 written by the plaintiff to the defendants. This letter describes how the talks on 7-7-1948 developed. The plaintiff at one place said in this letter that he did not wish to recover the loss in cash from the defendants, as they had been helpful; but as the defendants insisted upon one of the alternatives being accepted, he chose to take Rs. 25000/-. This statement of the plaintiff does not support the contention that the promise was gratuitous. The final upshot of the talk was promise by the defendants to pay the sum and promise by the plaintiff to lift the bales. There were thus mutual promises forming consideration ot each other.

26. As to the benefit arising out of the promise by the plaintiff to lift the bales, we have already said that under the terms of Ex. D-1 they were under an obligation to see that the contract was performed by the plaintiff. The foot-note in Ex. D-1 to the effect that

'Full responsibility of this contract is taken singly as well as jointly by all the parties signing the contract'

applied fully to the defendants who had signed the contract. They were thus interested in seeing it performed. This was sufficient benefit to them. The argument that in default by the plaintiff, the dispute would be a matter between the Mills and the defendants with which the plaintiff was not concerned is not of any significance. If the plaintiff took delivery of the bales, the cause for that dispute would become non-existent and save trouble to the defendants. This was sufficient benefit to the defendants apart from saving their reputation as selling agents and thus avoiding any occasion to the Mills to disturb that agency contract.

27. It is true that the plaintiff was under a contract with the Mills to lift the bales and in agreeing to do what he was already bound to do under that contract he did not impose upon himself any fresh obligation. The question of a promise to perform an existing duty under a contract arises in two contexts. It may be between the same parties, e.g. an express promise by A to B to do something which B can already call on him to do. In such a case, there is no fresh advantage to B, nor any detriment to A. Such a promise cannot therefore be a good consideration. The question may arise in another context, namely, a promise is made in consideration of the promisee doing or promising to do something which a subsisting contract with a third person has already bound him to do. The answer in the latter case is difficult. Pollock in his Principles of Contract, Tenth Edition, discusses this question critically on pages 183 to 186 and concludes:

'What is here maintained is that a promise made for valuable consideration, and otherwise good as between theparties, is not the less valid because the performance will operate in discharge of an independent liability of the promisor to a third person under an independent contract already existing. This was the opinion of W.M. Leake, a most accurate lawyer, and of'Prof. Langdell of Harvard.'

A similar conclusion is reached by Anson (pages 9/-100) when he sums up the discussion by saying:

'Yet, on the whole, it seems reasonable to say that the performance of, or the promise to perform, an outstanding contract with a third party may be good consideration for a promise, for, as Martin, B., pointed out in Scot-son v. Pegg., (1861) 158 ER 121, the defendant is a stranger to the prior contract, and 'we must deal with this case as if no prior contract had been entered into'. The. point, however, awaits an authoritative determination.'

28. The well known leading cases on this point are Shadwell v. Shadwell, (I860) 142 ER 62 and (1861) 158 ER 121. Smith and Thomas in their 'A Casebook on contract', Second Edition, have given a brief report of thesa cases on pages 175 and 178 respectively and have assett a third case Abbot v. Doane, (1895) 163 Mass 433, from the Supreme Judicial Court of Massachusetts. In the first case, A had written to his nephew B promising to pay an annuity if he married X. B was already engaged to X. B married X. The question was whether the promise of A fould support a binding contract. The majority of the Judges held that the promise was capable of supporting a binding contract. Commenting on this case, Anson doubts the existence of the contract on the ground that the facts da not show that the marriage was induced by the uncle's proposal. This is not relevant to our case. His subsequent remarks

'The case would have been different, if ........the nephew had had it in mind to break his engagement and the uncle to induce him to keep it had promised to pay him the annuity'

fully apply to the instant case. The plaintiff was breaking the contract and the defendants' promise induced hint to perform it. In the second case, the defendant's promise was to unload a cargo of coal at a certain rate in consideration of the plaintiff delivering the coal to him, which, the plaintiff was already bound to do under a prior contract with the shippers of the coal from whom the defendant had bought it. Wide B. observed as follows in deciding the case for the plaintiff:

'But if a person chooses to promise to pay a sum of money in order to induce another to perform that which he has already contracted with a third person to do, 1 confess I cannot see why such a promise should not be binding. Here the defendant, who was a stranger to the original contract, induced the plaintiffs to part with the cargo, which they might not otherwise have been willing to do, and the delivery of it to the defendant was a benefit to him. I accede to the proposition that if a person contracts with another to do a certain thing, he cannot make the performance of it a consideration for a new promise to the same individual. But there is no authority for th& proposition that where there has been a promise to one person to do a certain thing, it is not possible to make a valid promise to another to do the same thing.'

From the third case, we need only quote a passage from-the decision of Allan, J.;

' ........ .it seems to us better to hold, asa general rule, that if A has refused or hesitated to perform an agreement with B, and is requested to do so byC, who will derive a benefit from such performance, and who promises to pay him a certain sum therefor, and A thereupon undertakes to do it, the performance by A of his agreement in consequence of such request and promise by C is a good consideration to support C's promise.'

29. From these decisions, it appears that the second agreement brings into existence a new contract between different parties and therefore a promise to do a thing which the promisee is already bound to do under a contract with a third party can be good consideration to support a contract.

30. Shri A.P. Sen for the respondent supported the contract on one more ground. He pointed out that the plaintiff had raised disputes with the Mills and had refused to take delivery on certain grounds. The offer of the defendants induced the plaintiff to abandon his stand and take delivery. This was a good consideration. He relies upon the decision in Harihar Prasad v. Kesho Prasad, AIR 1925 Pat 68 (FB), where it was said:

'The case of Stapilton v. Stapilton, (1739) 1 Atk 2, is authority for the proposition that if an agreement is entered into upon a supposition of a right or of a doubtful right, it shall be binding.'

31. The abandonment of a disputed claim or doubtful claim is undoubtedly a valuable consideration and it is so even if the claim is ultimately found to be unsustainable. As Bowen, L J., said in Miles v. New Zealand Alford Estate, Co., (1886) 32 Ch D 266 at p. 291:

'The reality of the claim which is given up must be measured, not by the state of the law as it is ultimately discovered to be, but by the state of the Knowledge of the person who at the time has to judge and make the concession. Otherwise you will have to try the whole cause to know if the man had a right to compromise it.'

The test to be applied in such cases is not to find out whether the party had a good case but only to see if he thought in good faith that lie had a case which he was abandoning.

32. On behalf of the appellants, reliance was placed on Chuni Lal v. Maula Bakhsh, AIR 1936 Lah 6, where abandonment of a claim was not held to be good consideration; but that was because the party had put a case false to its knowledge which the learned Judge thought to be really a form of blackmail. These facts are distinguishable from the present case, as the plaintiff believed in the existence of a right and we have no reason to think that he was, to his knowledge, putting up a false case. We, therefore, hold that the abandonment of the claim formed a good consideration to support the contract.

33. For all these reasons, we are unable to uphold the appellants' contention that the contract was without consideration.

34. The last contention of the appellants is that interest should not have been allowed for the period before the date of suit. It has been laid down in B.N. Rly. Co. Ltd. v. Ruttanji Ramji, ILR (1938) 2 Cal 72 : (AIR 1938 PC 67), that such interest can be allowed only if there is an agreement to pay interest at a fixed rate or if it is payable under any usage of trade having the force of law or under the provisions of any substantive law. There was no agreement to pay interest in the present case. Nor has any usage been alleged. The only substantive law relied upon by the respondent is the Interest Act of 1839. Underthat Act, interest can be allowed only when debts or sums are payable by virtue of some written instrument or it payable otherwise a notice demanding the amount with interest has been given. In the instant case, there was no such writing and no such notice. The plaintiff is not, therefore, entitled to any interest for the period before suit.

35. In view of what we have said above, we disallow the amount of Rs. 4300/- allowed as interest by the trial Court. The amount due is thus reduced to Rs. 25000/-only. The rest of the decree, including the direction to pay future interest, is confirmed. The defendants shall pay proportionate costs to the plaintiff in this Court and in the trial Court. With these modifications, the appeal is dismissed.


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