1. The appellants-plaintiffs and respondents-defendants are Madura cotton brokers who on 21st August, 1918, Ex. VIII, engaged with others in what is known there as a chain contract.
2. The Mills of Messrs. Harvey were to produce 60 bales of certain counts, and, as they passed down the chain, these were to be received by Messrs. Ramudu Ayyar, the defendants, and sold by them to Messrs. Ramier & Bros., the plaintiffs, who will be described henceforth as the sellers and the buyers, because in a previous litigation their position was reversed and the terms plaintiffs and defendants will only lead to confusion.
3. 28 bales were tendered by the sellers, and taken delivery of by the buyers.
4. 9 bales were tendered (as will be shown below) by the sellers and rejected by the buyers. 23 bales have never been tendered at all.
5. The buyers now sue for a return of the advance made by them to the sellers on the date of the contract with interest thereon in respect of the 32 bales of which they did not take delivery. The suit has been dismissed by both Lower Courts, and the buyers appeal.
6. We agree with the lower appellate Court that the terms of Ex. IX clearly constitute a tender of the 9 bales on 15th November, 1918.
7. On 19th December, 1918, Ex. X, the buyers complained that contrary to the custom of the trade deliveries were not being made as and when the bales were ready at the Mills, and therefore they refused both to admit liability for the 28 bales already delivered, and to take delivery of the 9 bales tendered on 15th November, 1918.
8. It came out in the course of another suit between the parties that 3 out of these 9 bales had been bought from the Mills at a price less than that contracted for in the chain contract, Ex. VIII, and therefore the buyers would have been justified, on these grounds, in refusing not only the 3 defective bales but the whole instalment. The point is not one covered by the Indian Contract Act, but is clearly laid down in the English Sale of Goods Act, 1893, which embodies the existing law on the subject.
Section 30 (3) : 'Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may...reject the whole.'
9. This section has been repeated since this suit began in Section 37(3) of the Indian Sale of Goods Act (III of 1930) and the parties are agreed that, whatever be its interpretation, this is the law on the subject.
10. Therefore if on 19th December, 1918, the buyers had said we reject the 9 bales because 6 good are mixed with 3 bad bales, they would have been within their rights. The sellers might then immediately have tendered the six good bales as a fresh instalment, and if so advised, they had plenty of time in which to replace the three bad bales.
11. But since the buyers did not so state, but preferred to repudiate the whole contract, the question arises whether when the time has expired and there is no further question of replacement, the buyers can for the first time complain that three bales were defective. This proposition is precisely what Mathew, L. J., stigmatizes as unbusiness like and unreasonable in the leading case on the subject, Braithwaite v. Foreign Hardwood Company (1905) 2 K.B. 543. This case has been canvassed in the English rulings, but as regards our Court its principle is clearly affirmed in Rayulu Aiyar v. Kuppu Aiyar & Sons (1924) 49 M.L.J. 1 and Nannier v. Rayalu Iyer I.L.R. (1925) 49 Mad. 781 and the following passage at p. 551 shows how closely it runs on all fours with our present case:
After there had been a general repudiation of the contract by the defendants, the plaintiff's agent informed them that he had received the bill of lading for the first instalment; but the defendants again wrote refusing to take the bill of lading on the ground that they had previously repudiated the whole contract, and refused to be bound by it.
12. In the opinion of Collins, M.R., 'that act of the defendants amounted in fact to a waiver by them of the performance by the plaintiff of the conditions precedent which would otherwise have been necessary to the enforcement by him of the contract which presumably he had elected to keep alive against the defendants notwithstanding their prior repudiation, and it is not competent for the defendants now to hark back and say that the plaintiff was not willing and ready to perform the conditions precedent devolving upon him'.
13. Commenting upon this decision in British and Beningtons, Ltd. v. N. W. Cachar Tea Company (1923) A.C. 48 Lord Sumner says:
Furthermore it does not anywhere appear that, even if the first cargo might rightly have been rejected, the seller could not have found another exactly conforming with the contract, which he might have duly tendered and so have put himself right.
14. Therefore, since the sellers have proved that they duly tendered these 9 bales, we do not find that it is open to the buyers to raise the belated plea that three of the bales were not according to the contract which they had preferred entirely to repudiate.
15. But as regards the 23 bales there was no tender at all. It is clear that the sellers did not accept the repudiation of the contract, and on 2nd April, 1919, Ex. XIV, they are warning the buyers that 'you should also take delivery of the remaining bales (i. e., 23) without delay on payment of the amount when and as they are received,' but as a matter of fact they never did tender, and there was never any rejection after tender as with the 9 bales.
16. It was argued for the sellers that this contract though by instalments was indivisible and that a repudiation of one instalment was a repudiation of the whole so as to absolve the sellers from the obligation to tender the twenty-three bales.
17. The answer to this is that as stated in Section 31(2) of the English Sale of Goods Act the question of indivisibility is a matter of fact in each case and as will later appear the sellers themselves clearly treated the contract as divisible.
18. In these circumstances the law seems clear as laid down in Frost v. Knigh (1872) L.R. 7 Ex. 111:
The promisee may treat the notice of intention (to renounce) as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance: but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it.
19. Cf. Leake on Contracts, Ed. 8, p. 675. The sellers were still under the obligation of tendering, as they themselves admitted in their letter of 2nd April, 1919, Ex. XIV, and in the 'Note' to their plaint in O.S. No. 70 of 1919, Madura Sub-Court, which is an exhibit in this case.
20. The sellers at that time instead of bringing their suit regarding the twenty-three bales at once as they might have done elected to keep the contract alive so far as the twenty-three were concerned thereby preserving the mutual obligations of the parties intact.
21. One of these obligations was that they the sellers should tender the goods; and since they never did tender, they cannot now be heard to say that they can retain the buyers' earnest money on account of the 23 bales.
22. For the above reasons we agree with the Lower Courts in respect of the 9 bales, but allow the appeal in regard to the 23 bales; the advances for which must be returned with interest at 9 per cent, from date of demand. Proportionate costs throughout.