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Rajabu Fathima Buhari and anr. Vs. S.V. Ramakrishna Mudaliar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtChennai High Court
Decided On
Case NumberO.S. Appeal Nos. 8 and 9 of 1966
Judge
Reported inAIR1973Mad70
ActsTransfer of Property Act - Sections 69; Indian Contract Act; Specific Relief Act
AppellantRajabu Fathima Buhari and anr.
RespondentS.V. Ramakrishna Mudaliar and ors.
Cases ReferredEdwards v. Skyways Ltd.
Excerpt:
contract - ambiguous - section 69 of transfer of property act, 1882, indian contract act, 1872 and specific relief act, 1963 - whether there can be contract of honour which is not enforceable in court - agreement intended to create only moral obligations and not legal rights or obligations does not create contract - court cannot implement intention of parties which had not been specifically agreed to. - - p-9, p-10, p-64 and p-65. we are satisfied that kamal referred to in ex. but i can see no reason why, even in business matters, the parties should not intend to rely on each other's good faith and honour, and to exclude all idea of settling disputes by any outside intervention with the accompanying necessity of expressing themselves so precisely that outsiders may have no difficulty.....raghavan, j.1. the above two appeals are preferred by the first and second defendants against the decree in c. s. no. 43 of 1962. the question that arises for consideration in these appeals is whether there can be a contract of honour or what is familiarly known as a gentleman's agreement which is not enforceable in a court of law based on the judgment of the court of appeal in rose and frank co. v. j. r. crompton and bros. ltd., 1924 all er 245.2. the facts of the case lie in a narrow compass. the plaintiffs are father and son and the defendants are wife and husband. the first plaintiff, the father, is the owner of 3 items of properties described in schedules a and b to the plaint which among others were bequeathed to him by his adoptive father late s. v. ramaswami mudaliar subject to.....
Judgment:

Raghavan, J.

1. The above two appeals are preferred by the first and second defendants against the decree in C. S. No. 43 of 1962. The question that arises for consideration in these appeals is whether there can be a contract of honour or what is familiarly known as a gentleman's agreement which is not enforceable in a court of law based on the judgment of the Court of Appeal in Rose and Frank Co. v. J. R. Crompton and Bros. Ltd., 1924 All ER 245.

2. The facts of the case lie in a narrow compass. The plaintiffs are father and son and the defendants are wife and husband. The first plaintiff, the father, is the owner of 3 items of properties described in Schedules A and B to the plaint which among others were bequeathed to him by his adoptive father late S. V. Ramaswami Mudaliar subject to other dispositions under his last will and testament dated 10-9-1937 which was duly probated. The A Schedule property consists of (1) House and ground bearing door No. 46 in Rattan Bazar Road and (2) House and ground bearing door Nos. 197 and 198 Mount Road, Madras and the B Schedule property is a bungalow and ground with the leasehold right therein measuring 51 grounds and 1132 sq. ft. the ground belonging to Sri Adikesavaperumal Devastanam, called 'Serles gardens', Greenways Road, Adyar, Madras. The absolute interest in the said lands was acquired by the first plaintiff as a result of certain proceedings taken by him. By a deed of transfer dated 4-3-1941, the first plaintiff's adoptive mother transferred all her interest in the said properties with the result that in or about 1941 he has been the absolute owner of the B Schedule properties and has been in possession of the same ever since 1941. Certain mortgages were created over the suit properties by the first plaintiff and the total of the principal amounts borrowed was about Rs. 1,23,000, and the mortgagees were conferred the power of private sale under Section 69 of the Transfer of Property Act. Interest was largely in arrears in respect of all these mortgages in the beginning of 1959 and the mortgagees took steps under Section 69 of the Transfer of Property Act to auction the hypotheca. Rs. 1,90,000 was required to discharge all the aforesaid four mortgages and other pressing debts. It is in that context and with a view to avert the auction sales of the properties in public auction which the mortgagee brought, that the first plaintiff, on the advice of his advocate Sri V. S. Rangachari, approached the second defendant for financial help and as a result of negotiations the sales of the aforesaid properties was agreed to and it was further agreed that the plaintiffs should execute two sale deeds in the name of the first defendant of the A and B Schedule properties for Rupees 1,90,000 and on 26-3-1959 in respect of the property described in the B Schedule for Rs. 85,000 and the other on 31-3-1959 in respect of the properties described in the A Schedule for Rs. 1,06,000. With the sums thus advanced the mortgages standing on the aforesaid properties were fully discharged and the sales of the properties in public auction by the mortgages were averted and the purchasers were put in possession of the properties. The case of the plaintiffs is that during the negotiation and discussion at the time of the sale, an arrangement was arrived at between V. S. Rangachari and Narayana Iyer (agent of the first plaintiff) on the one hand and M. Kamal acting for the second defendant on the other, the terms of which were as follows-

'(a) The plaintiffs shall execute a deed of conveyance of the property described in the Schedule A in the name of the first defendant for the sum of Rs. 1,05,000 the second defendant, providing the said sum with which the mortgages subsisting on the said properties and certain other sundry debts of the plaintiff discharged.

(b) The plaintiffs shall also execute another deed of conveyance of the property described in the Schedule B hereto in the name of the first defendant for the sum of Rs. 85,000 the second defendant providing the said sum with which the two subsisting mortgages in favour of his son and certain other pressing sundry creditors were to be discharged.

(c) That the A and B Schedule properties will be put in possession of the first defendant as and from the date of sale.

(d) That the first defendant will reconvey the said properties to the plaintiffs on payment by the plaintiffs of the purchase amount within three years with ten per cent of the purchase price as solatium to the first defendant along with the actual amount spent on improvements if any effected by the defendants on the properties and deliver back possession of the A and B Schedule properties to the plaintiffs.'

The plaintiffs' case is that clause (d) of the abovesaid agreement relating to reconveyance was agreed to be treated as a gentleman's understanding and not to be incorporated in the formal sale deed of the properties and that the gentleman's understanding was reduced to writing as 'A record of Fact' which was in the handwriting of K. Narayana Iyer, the agent of the first plaintiff. The said Record of Fact was signed by M. Kamal. who it was stated was acting on behalf of the defendants in all the negotiations. The said understanding was signed both by M. Kamal and K. Narayana Iyer. The plaintiffs' case is that on 28-5-1960 the first defendant in pursuance of the aforesaid agreement and at the request of the plaintiffs reconveyed the B Schedule property to the plaintiffs for a sum of Rs. 95,000. That amount was fixed as the defendants wanted ten per cent solatium on the sale price and a further sum of Rs. 1,25,000 being the cost of repairs stated to have been effected to the property and the second defendant agreed to give vouchers in due course and the plaintiffs were put in possession of the B Schedule property and the second defendant continued to occupy the same as the plaintiffs' tenant. The period fixed in the gentleman's agreement was 3 years from the date of the execution of the sale deeds (P. 2 and P. 3) and the plaintiffs wrote to the second defendant requesting for the reconveyance of the A Schedule property offering a similar solatium of ten per cent on the purchase price. The plaintiffs' case is that the second defendant did not send a reply to the notice. The plaintiffs therefore arranged to tender the said sum in cash. But as the defendants were not available to receive the sum the present suit is filed seeking to enforce the agreement to reconvey the A schedule properties and directing the defendants or the first defendant with the concurrence of the second defendant to reconvey the properties on receiving Rs. 1,15,000 and on such terms which the court deems fit and proper and for other reliefs.

3. The first and second defendants filed separate written statements. The case of the first defendant is that she purchased A and B schedule properties under the sale deeds dated 31-3-1959 and 26-3-1959 for valuable consideration, that at no time either before or at the time of the purchaser of the said properties was there any agreement much less a gentleman's understanding to reconvey to the plaintiffs these properties, that the alleged 'Record of Fact' purported to have been drawn up on 24-3-1959 is false, that she was not a party to the so-called record of fact dated 24-3-1959, that she never authorised her husband, the second defendant, to enter into any such agreement, that one M. Kamal referred to in the plaint had no authority to enter into any such arrangement agreeing to reconvey the properties, that there was no necessity or occasion for her to embark upon and agree to such an agreement and that in view of the phenominal rise in price of immovable properties the so-called 'Record of Fact', which is not binding on her appears to have been brought about that in fact there were no discussions as far as she was aware between the second defendant or his so-called agent M. Kamal regarding the alleged arrangement and that the arrangement will not bind her at all. The further contention put forward by her is that she is not a benamidar for the second defendant and that the properties were purchased with her moneys and for her benefit, that the second defendant paid the market value of the properties at the time of the sale and that the plaintiffs' case that the A schedule properties at the time of the sale and that the plaintiffs' case that the A schedule properties were worth Rs. 3,00,000 or Rs. 4,00,000 and of B schedule properties Rs. 3,00,000 at the time of sale is false. Without prejudice to her contentions the further plea put forward by her was that the 'Record of Fact' dated 24-3-1959 is illusory, vague, indefinite and devoid of particulars, that there was no recital therein that any firm commitment was made by her agreeing to reconvey the properties in three years, that the said 'Record of Fact' was not referred to in the two later sale deeds which were executed a few days later (Exts. P-2 and P-3 relating to B and A schedule properties), that the B schedule properties which were purchased by her under Ex. P-2 were resold to the plaintiff not in pursuance of any arrangement or agreement, but because the property purchased consisted of an old dilapidated house in respect of which she was unable to secure any tenants and that several lakhs of rupees had to be spend to repair the said dilapidated building and that she did not consider the investment on the same as profitable. Lastly the first defendant contended that the said 'Record of Fact' dated 24-3-1959 is vague and inadmissible in evidence, that it does not constitute a contract under the provisions of the Indian Contract Act, that the same is not enforceable under the provisions of the Specific Relief Act, and the present suit for enforcing the said 'Record of Fact' is not maintainable, as the specific performance claimed is not in respect of a contract to which she was a party.

4. The second defendant filed a separate written statement wherein he denied the existence of any agreement to reconvey the properties. His contention was that the alleged 'Record of Fact' dated 24-3-1959 is wholly false, that he was not a party to the said alleged agreement, that Kamal mentioned therein was never his agent and that the plaint allegations that the second defendant assured the first plaintiff that he would stand by the terms of the said 'Record of Fact' notwithstanding their not signing the same, is false. The further contention of the second defendant is that the allegation that the properties were purchased in the name of the first defendant not with her monies but with monies advanced by him is not correct and that the plaintiffs are not entitled to any of the reliefs claimed.

5. We may in this connection refer to the amendment of the plaint by the addition or paragraph 12 (b). The original plaint was laid on the basis that the first defendant was only a benamidar for the second defendant and that since the second defendant had agreed to reconvey the properties the first defendant was bound to reconvey the same. The alternative case as to what would happen when it is established that the first defendant was not a benamidar, was not, however, pleaded in the original plaint. The amendment sought is in respect of this alternative case. The amendment is to the effect that even on the alternative basis, namely, that even if the first defendant is not a benamidar but a real owner, the second defendant being the husband of the first defendant acted as such agent of the first defendant at the time when the properties were negotiated for purchase and that the agreement for reconveyance entered into by the second defendant would bind the first defendant also and that the first defendant would be estopped from denying the agreement dated 24-3-1959. The trial Judge allowed the amendment and permitted the defendants to file an additional written statement.

6. The following principal issues were framed-

1. Did the first defendant agree to reconvey A and B schedule properties to the plaintiffs as alleged in paragraph 9(d) of the plaint and is such an agreement evidenced by the 'Record of Fact' dated 24-3-1959?

2. Whether the 'Record of Face' set out in the plaint is admissible in evidence and if so whether it is true, valid and supported by consideration?

3. Is Kamal the agent of the defendants or either of them in the matter of putting through the said conveyance and the said agreement to reconvey?

4. Were the conveyance of A and B schedule properties in the name of the first defendant executed in the circumstances set out in paragraph 9 and 10 of the plaint?

5. Are the plaintiffs not entitled to specific performance of the agreement to reconvey the A schedule properties against the defendants?

7. Consequent upon the amendment of the plaint, the learned trial Judge framed additional issues which ran as follows:

(a) Whether, even on the footing that the first defendant was not a benamidar for the second defendant, the first defendant will be bound to reconvey the suit properties on the basis of the agreement entered into with the plaintiff and the representations made to him by the second defendant?

(b) Whether the second defendant was the agent of the first defendant in the transactions?

(c) Whether he had authority to agree to reconvey the suit properties on the terms alleged by the plaintiff?

(d) Whether, even if he had no such authority, the first defendant will be bound by the agreement actually entered into by the second defendant with the plaintiff or on the representations made by the second defendant to the plaintiff?

(e) Whether the first defendant induced the plaintiff to believe that the agreement entered into by the second defendant and the representations of the second defendant were within the scope of the second defendant's authority, and whether, assuming that they were misrepresentations, they will still bind the first defendant?

(f) Whether the first defendant is estopped from denying the agreement for reconveyance and refusing to act upon it?

The trial Judge went elaborately into the question, whether the first defendant was only a benamidar for the second defendant. The finding recorded by the learned trial Judge was that the first defendant was the benamidar for the second defendant. On the next question, whether the second defendant agreed to reconvey the properties on the terms alleged in the plaint, the trial Judge came to the conclusion that Ex. P-1 which is stated to be the 'Record of Fact' is true, that it was signed by Kamal as agent of the second defendant, that the properties must have been worth more than Rupees 1,90,000, in March, 1959, that the reconveyance of the B schedule properties in May, 1960 by the first defendant in favour of the first plaintiff was only in pursuance of agreement of reconveyance. The learned Judge after referring to the circumstances and the truth of the agreement came to the conclusion that the agreement was true and that Kamal signed the agreement on behalf of the second defendant. The learned Judge drew an adverse inference against the defendants from the fact that Kamal was not examined by the defendants and that adequate facilities were not given even to summon Kamal as a court witness. The learned Judge further found that the agreement for reconveyance was an integral part of the sale deed Exs. P-2 and P-3, and when the second defendant brought about the transaction of sale, he acted as the agent of the first defendant, that the first defendant had knowledge of the agreement of reconveyance and that consequently the agreement of reconveyance was binding on the first defendant. In the result, the trial Judge granted a decree for specific performance directing the two defendants to reconvey the properties described in Schedule A to the plaint and permitted the defendants to withdraw the sum of Rs. 1,15,500 deposited into court. Against the said judgment and decree of the learned trial Judge O. S. A. 8 of 1966 is preferred by the first defendant and O. S. A. 9 of 1966 is preferred by the second defendant. Both the appeals were heard together.

8. Before dealing with the several contentions raised in the appeal, we will briefly refer to the general features of the case. In 1959 the first plaintiff owned the A and B schedule properties among various other properties. He created a mortgage over the second item in the A schedule in favour of Inderchand Bhandari for a sum of Rs. 38,000 and over item 1 in favour of Bapalal and Co. for Rs. 23,000. Both the mortgagees were conferred the power of private sale under Section 69 of the Transfer of Property Act. The first plaintiff created two mortgages over the B schedule properties in the name of the defendant's son Mohamed Farook Buhari, the first mortgage was on 25-1-1957, the amount borrowed was Rs. 32,000 and the second mortgage was on 28-2-1957 the amount borrowed was Rs. 30,000. Both the aforesaid mortgages had also conferred on the respective mortgagees a power of private sale. In respect of the aforesaid 4 mortgages interest was in arrear in the beginning of 1959. The mortgagees Inderchand Bhandari and Messrs. Bapalal and Co. gave notices demanding payment of the amounts threatening to bring the properties to sale in exercise of power of sale contained in the respective mortgages. Sri V. S. Rangachari, an Advocate of this Court, who is the first plaintiff's lawyer, offered to raise the requisite money from Mr. Buhari (the second defendant) so that all the debts could be discharged. Meanwhile the mortgagees Bapalal and Bhandari were pressing for immediate payment. Buhari was unwilling to lend money on mortgage but offered to purchase A and B schedule properties and clear all the liabilities charged on the said property. It is later suggested by the second defendant that the sale deeds should be taken in the name of first defendant. It is under these circumstances that the sale deeds Ex. P-2 dated 26-3-1959 relating to the properties described in the present B schedule and Ex. P-3 dated 31-3-1959 relating to the two items covered by the A schedule came to be executed by the first plaintiff in favour of the first defendant for a total consideration of Rs. 1,90,000, and the purchasers were to be put in possession of the properties purchased. The plaintiffs' case is that on 24-3-1959, in the process of negotiation culminating in the sales referred to above, an arrangement was arrived at, which was recorded as follows:

'Telephone address:

Telephone No. 61678AA

S. V. Ramakrishnan

Ramamandirum,

170 Poonamallee High

Road, Kilpauk, Madras 10.

24-3-1959.

Record of Fact.

This is to record the gentleman's understanding between Mr. S. V. R. and Sri A. M. Buhari that Mr. Buhari will see to it that in case the purchase amounts as per the sale deeds in favour of Messrs. A. M. Buhari is repaid within 3 years from this date, the properties will be reconveyed to Messrs. S. V. R. who will also have to pay in addition to sale price ten per cent thereof as solatium of the actual amount spent on improvement if any.

24-3-69 Sd.

Narayana Iyer

Sd. V.S. Rangachari

Sd. Kamat 24-3-59

The aforesaid memorandum is stated to be a 'Gentleman's understanding'. In Oxford Concise Dictionary 'Gentleman's agreement' is defined as an agreement resting on gentleman's honour and not a formal contract. To the same effect is the definition in Chamber's Twentieth Century Dictionary. In 1924 All ER (reprint) 245, such a clause and is described as follows:

'This arrangement is not entered into nor is this memorandum written as a formal or legal agreement and shall not be subject to legal jurisdiction in the courts either of the United States or England. But it is only a defined expression and regard for the purpose and intention of the parties concerned to which they each honourably pledge themselves.'

Thus the caption of the memorandum itself shows that it is a record of the purpose and intention of the parties concerned which they pledge themselves to fulfill, but that such an arrangement is not an enforceable legal document.

9. The plaintiffs' case is, that the aforesaid memorandum though not signed by the parties themselves have been signed by their representatives and as such is binding upon the parties and is specifically enforceable. It may be seen that neither in the sale deed (Ex. P-2) nor in the sale deed (Ex. P-3) which was executed later is there any reference to this earlier 'Record of Fact'. The defendants have totally denied the existence of the aforesaid memorandum and their further contention is, that in any event, Kamal is not their representative, that neither the first nor the second defendant agreed to enter into any such arrangement themselves, that they never authorised any one to enter into any such arrangement or to sign any such arrangement on their behalf and that the 'Record of Fact' is a fabrication.

10. The evidence relating to the circumstances under which the 'Record of Fact' came to be prepared, is spoken to by P.W. 2 (first plaintiff).

(After discussing the evidence His Lordship proceeded.)

11. The case before the trial Judge covered a very wide filed particularly as to who advanced the moneys for the purchase of the suit properties and whether the first defendant in whose name the documents (Exs. P-2 and P-3) stand is the real owner or whether the first defendant is a benamidar for the second defendant. Since the present suit is one for specific performance of an agreement to reconvey, in our view, the question which really falls to be decided is whether there is an agreement of reconveyance signed by the parties, binding upon them and enforceable in a court of law. We do not propose to deal with the question as to who the real owner of the property is, whether it is the first or the second defendant. We propose to rest our decision on a narrow question relating to the existence of the agreement of reconveyance and its binding nature which, in our opinion, is sufficient for the disposal of the appeal.

(After discussing the evidence his Lordship proceeded.)

We are, therefore, of opinion that the agreement Ex. P-1 cannot be true. But we are not resting our judgment on this finding and we are prepared to consider the case even on the basis that the recitals in Ex. P-1 are true. By the date of Ex.P-1 it is clear that the sale deed will be taken only in the name of the first defendant. The agreement Ex. P-1 however was not entered into between the first plaintiff and the first defendant, but was entered into between the first plaintiff and the alleged agent of the second defendant. The second defendant is not shown therein as the agent of the first defendant. There is thus no binding obligation entered into by the second defendant of behalf of the first defendant agreeing to reconvey the properties within a period of 3 years. When the second defendant is not the purchaser and when he acts only as the agent of the first defendant, it is not clear why Ex. P-1 was not signed by the second defendant not as a party but as an agent of the first defendant. Kamal, who has signed the agreement (Ex. P-1) has not been established to be the agent of the first defendant. Equally it has not been established that Kamal was the agent of the second defendant. An attempt appears to have been made to connect Kamal, who signed Ex. P-1 with his having taken part in some of the documents particularly Exs. P-9, P-10, P-64 and P-65. We are satisfied that Kamal referred to in Ex. P-1 is not that Kamal who took part in Exs. P-9, P-10, P-64 and P-65. The learned Judge has referred to Ex. P-28 D/- 1-2-1961, a letter addressed by the first plaintiff to the second defendant. It may be seen that the resale of 'Serles gardens' was in June, 1960 and for the first time after the sale of (Serles gardens) we find that the first plaintiff addressed the letter Ex. P-28, the receipt of which is denied by the defendants. Ex. P-28 mentions of repeated requests for reconveyance of the present suit properties for over one year of his sending the letter Ex.P-28 the first plaintiff does not appear to have followed it up. In our opinion, that will be a circumstances to be taken into account whether the letter Ex. P-28 was sent to the second defendant at all or whether the letter Ex. P-28 has been brought into existence to bridge the gap between May, 1960 when the resale of 'Sarles gardens' was completed and the first plaintiff's letter Ex. P-30 dated 28-2-1962 addressed to 1. A. A. M. Buhari, 2. Fatima Buhari and 3. Kamal were sent. It is significant to note that Ex. P-30 does not refer to Ex. P-28. This is one more circumstance which, in our opinion, would show that Ex. P-28 was not issued or received by the defendants.

12. Assuming for arguments sake that Ex. P-1 is true we have next to see whether it is enforceable at law. It is not enforceable at law, for the following reasons: (1) that it has not been conclusively established that Kamal was an agent of the first or second defendant or both and that he was authorised to agree to the terms contained in Ex. P-1 and (2) that there is no intention to create a binding obligation entered into by the second defendant on behalf of the first defendant to reconvey the suit property to the first plaintiff; (3) the document merely says that 'Buhari will see to it, that in case the purchase amount as per the sale deeds is repaid within 3 years from this date etc.' which is vague.

13. In this connection Mr. M. K. Nambiar, the learned counsel for the appellants placed considerable reliance upon the judgment of the House of Lords in 1924 All ER (Reprint) 245. There the defendants an English Manufacturing Company entered into an agreement with the plaintiffs, an American Company, by which the plaintiffs were to be the sole agents for the sale of the defendant's goods in the United States and Canada. The agreement was in writing. One of terms therein was that 'This arrangement is not entered into nor is this memorandum written as a formal or legal agreement and shall not be subject to legal jurisdiction in the Law Court either in the United States or England. But this is only a definite expression and regard for the purpose and intention of 3 parties concerned to which each of them honourably pledged themselves to the fullest confidence--based on past business with each other--that it will be carried through by each of the 3 parties with mutual loyalty and friendly co-operation'. The defendants determined this agreement without notice and the plaintiffs brought an action for damages for breach of the contract, which they alleged was contained in the document of 1913, one of the clauses of which has been extracted above and for non-delivery of goods ordered by them in 1919 in accordance with the course of business prescribed in the document. Lord Phillimore held that the agreement was not a legally binding contract but that orders already accepted by it under it were binding, approving the view of Scrutton L. J. in the Court of Appeal. In the Court of Appeal Scrutton L. J. observed as follows:--

'It is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations. This reason of this is that the parties do not intend that their agreement shall give rise to legal relations. This intention may be implied from the subject-matter of the agreement, but it may also be expressed by the parties. In social and family relations such an intentions is rapidly implied, while in business matters the opposite result would ordinarily follow. But I can see no reason why, even in business matters, the parties should not intend to rely on each other's good faith and honour, and to exclude all idea of settling disputes by any outside intervention with the accompanying necessity of expressing themselves so precisely that outsiders may have no difficulty in understanding what they mean. If they clearly express such intention I can see no reason in public policy why effect should not be given to their intention.'

14. Relying on this decision the learned counsel for the appellant contends Ex. P-1, which is styled as gentleman's agreement, is not enforceable at law as Buhari, one of the parties, only stated that he would see to the reconveyance of the properties, but never undertook any binding obligation on behalf of his wife to have the reconveyance of the properties executed.

15. The learned counsel next referred to a series of cases where promoters of foot-ball pools insert on the back of the coupon to be filled in by an entrant a term which states that the entry shall give rise to no legal relationship or liability. The first of the cases cited by the learned counsel is the decision in Jones v. Verson's Pools Ltd., (1938) 2 All ER 626. Atkinson, J., followed the decision of the House of Lords in 1924 All ER (Reprint) 245 referred to above and held that the conditions of the pool prevented the plaintiff from bringing any action to enforce payment. To the same effect is the judgment of the Court of Appeal in Appleson v. H. Litlewood Ltd., 1939 1 All ER 464 where the learned Judges following the decision in Rose and Frank Company case held that such arrangements were not contrary to public policy and that no action could be brought to enforce such arrangements.

16. The contention of the learned counsel for the appellants is that the learned Judge failed to consider the basic question whether Ex. P-1 was enforceable at law. His contention is that there is no intention to create a legal obligation and therefore there is no enforceable contract. In this connection, the learned counsel referred to Cheshire and Fifoot on the Law of Contract (Seventh Edition) pages 94 to 99. When parties enter into an agreement, which is supported by consideration, the question whether in addition to the above requirements a third contractual element viz., the intention of the parties to create a legal relationship is necessary. There is considerable support for the view that it is essential for the plaintiff, who wishes to establish the existence of a contract to prove that the creation of a legal relationship was intended. If no such intention can be established, there can be no contract. If, on the other hand, such an intention can be established, the Court may proceed to consider whether there is a valid offer and acceptance and whether there is consideration. Such cases may fall either under a category 'social family or other domestic agreements' on the one hand or 'commercial agreements' on the other. In the case of 'social family or other domestic agreements' the intention can be inferred from the language used by the parties and the circumstances in which they use it. On the other hand the intention is presumed in the case of commercial agreements rebuttable by the parties seeking to deny it. We may give some examples falling under the first category (domestic agreements). They are:--Balfour v. Balfour, (1919) 2 K.B. 571, Simpkins v. Pays, (1955) 3 All ER 10 and Buckpitt v. Oates, (1968) 1 All ER 1145. In the case of commercial agreements where intention to create legal relationship is presumed, such presumption could be rebutted in the case of (1) advertisements as illustrated by Carlill v. Carbolic Smoke Ball Co., (1893) 1 QB 256; (2) Where they expressly declare that it is not to be binding in law. The most remarkable instance of a clause expressly outlawing an agreement is to be found in Rose and Frank Co. case. The other cases which are illustrative of this aspect are the Football Pool cases.

17. The words inserted in such an agreement to exclude legal relations may be ambiguous. In such cases the onus of proving intention to create a legal obligation lies upon the party who asserts it. As an illustration to the above principle Edwards v. Skyways Ltd., (1964) 1 All ER 494 may be usefully referred.

18. The transaction in the present case is a commercial agreement and therefore the question will be whether the presumption which exists to create legal relations in making a contract has been rebutted. We are of opinion that the materials on record are sufficient to rebut the presumption and they are as follows:--(1) No binding agreement is entered into between the first plaintiff and the second defendant or by the first plaintiff with the first defendant, who is the principal contracting party under Exs. P-2 and P-3; (2) It has not been established that Kamal who executed Ex. P-1 represented either the first defendant or the second defendant, and (3) The language used in the document is not positive to create a legal liability. What the second defendant has offered is only to see to the first defendant executing the reconveyance deed which is not the language where a legal relationship is intended to be created and mutual obligations flow therefrom. In this connection we may refer to Chitty on Contracts, Volume I, paragraphs 42 and 48.

19. Our attention is further drawn to the Law of Vendor and Purchaser by Roy Milner Stonham. We extract the following passage from 2:-

'3. Mere agreements, or promises, intended to create mere social, political, or family obligations or obligations of honour, or understood by both parties as a jest, do not create a contract. There must be an intention to create obligations enforceable between the parties by legal sanctions. In other words, it must be intended to create jural relations. This intention is sometimes referred to as an animus contrahendi. Mere statements of intention, hope, anticipation, or expectation do not create enforceable obligations. An agreement intended to create moral obligations only, and not legal rights or obligations, does not create a contract. Also, the agreement may be subject to a third person's consent, or any other condition precedent to it becoming operative as an enforceable agreement. An agreement, though purporting to be made by one party without prejudice to his rights, will operate according to its tenor and effect the rights of each party accordingly. A stipulation whose enforcement against the party concerned rests upon his mere will has no contractual effect.'

20. We may further observe that there is no consensus ad idem in regard to the agreement to reconvey the properties. The stipulation that the second defendant would see to the first defendant executing the reconveyance deed rests merely upon the will of the second defendant and there can be no consensus between the first plaintiff and the second defendant creating a binding obligation compelling of the second defendant to have the reconveyance deed executed. If the second defendant so chose, he could have persuaded the first defendant (real owner) to execute the reconveyance. But if the second defendant did not move in the matter, the first plaintiff cannot seek to compel the second defendant to persuade the first defendant to complete the reconveyance deed. It is open to the second defendant to refuse to do so and when he has so refused the first plaintiff cannot compel him. It is equally open to the first defendant to accede or refuse to accede to the request of the second defendant, even if the second defendant chose to call upon her (the first defendant) to recovery the properties.

21. It is, however, contended that the second defendant being the husband of the first defendant, he took an active part in bringing about the sales Exs. P-2 and P-3, he must be deemed to be the agent of his wife and as such bound to implement the offer made by him. We have already held that the language of the document relating to reconveyance of the property not being specific does not create a binding obligation. The terms viz., 'the second defendant would see to it etc.' are too uncertain to create a legal obligation. It is a well-established rule that the terms of a contract must be certain that the parties to the contract must agree to its terms and that if the terms are not certain the contract cannot be specifically enforced. As was held in Davies v. Davies, (1887) 36 Ch D 359 an undertaking to retire from business 'so far as the law allows' has been held to be too uncertain to create a contractual obligation. Similarly a promise that if satisfied with the plaintiff as a customer the defendants would favourably consider an application by him to renew a subsidiary contract has also been held to be too uncertain for enforcement. See Montreal Gas Co. v. Vasey, 1900 AC 595. Further a tenancy 'for the duration of the war' has been held in Lace v. Chantlor, 1944 KB 368 to be too uncertain.

22. The Court's duty is to implement the intention of the parties when the essential terms of the contract have been agreed upon. In our opinion, the essential terms of the contract relating to reconveyance not having been specifically agreed to between the parties, the suit for specific performance cannot be enforced.

23. In Fry on the specific performance of contracts (sixth edition) at page 129 in paragraph 277 it is stated that 'If what passed between them was but treaty or negotiation, or an expectation of contract, or an arrangement between them of an honorary nature, no specific performance can be had.'

24. Our attention was drawn in this connection to Simpkins v. Pays, (1955) 3 All ER 10, Edwards v. Skyways Ltd. (1964) 1 All ER 494 dealing with the intention of parties to create a legal relationship and also the need for the terms in a contract to be certain. The decision in the above cases depended upon the facts established and the earlier decisions viz., 1924 All ER and (1919) 2 KB 571 have been considered therein. We are, therefore, of opinion (1) that Ex. P-1 not having been signed by the parties to the agreement; (2) that Kamal referred to therein not having been established on evidence to be the agent of the second or the first defendant; (3) that there having been no intention to create a legal relationship between the parties; (4) that there being no ad idem between the first plaintiff and the first defendant on the question of reconveyance of the properties and (5) that the terms relating to reconveyance not being certain and therefore not being specifically enforceable in a Court of law we are of opinion that no decree for specific performance can be passed on the basis of Ex. P-1.

25. In the result, the appeals are allowed with costs. The decree passed by the trial Judge is set aside. Counsel's fee one set in O. S. A. 8 of 1966.

26. Appeals allowed


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