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Muthaya Manigaran Vs. Lakku Reddiar and ors. - Court Judgment

LegalCrystal Citation
Subjectcontract
CourtChennai
Decided On
Judge
Reported in14Ind.Cas.255
AppellantMuthaya Manigaran
RespondentLakku Reddiar and ors.
Cases ReferredBoth Roth & Co. v. Tayson
Excerpt:
.....measure of--whether promisee entitled to the difference between the contract price and the market price on the day on which he chose to rescind the contract. - - the defendant failed to deliver within the 60 days, which expired on or about the 12th of july. on the 4th of september, the plaintiffs wrote a letter to the defendant in which they referred to the agreement and intimated that if the defendant failed to deliver the cotton within one week after the date of this letter, he would be liable for the loss that might befall the plaintiffs according to the market-rate at the date of the letter. on the 3rd october, the plaintiffs wrote to the defendant another letter in which they referred to their previous communication and gave notice to the defendant that as he had failed to..........brought an action and it was held that they were entitled to damages with reference to the market-price in november, when the defendants notified their inability to make a declaration in accordance with the contract. in this case the defendants, by making the shipment in september and by declaring that shipment against the contract, intimated that they treated the contract as a subsisting contract and having done that, they could not be heard to say they were not liable for damages on the basis of the market-price when they finally notified their inability to make a declaration in accordance with the contract.6. in the case of nickoll and knight v. ashton, edridge & co. (1900) 2 q.b. 298 where the defendants had failed to perform their contract within the time agreed upon, the.....
Judgment:

Arnold White, C.J.

1. The question raised on this petition is as to the date with reference to which damages should be assessed in an action for breach of contract. The facts are these: on the 12th of May 1909, the plaintiffs and (he defendant entered into a contract for the delivery by the defendant of 6 candies of cotton at an agreed rate within 60 days of the date of the contract. The defendant failed to deliver within the 60 days, which expired on or about the 12th of July. On the 4th of September, the plaintiffs wrote a letter to the defendant in which they referred to the agreement and intimated that if the defendant failed to deliver the cotton within one week after the date of this letter, he would be liable for the loss that might befall the plaintiffs according to the market-rate at the date of the letter. The defendant took no notice of this letter. On the 3rd October, the plaintiffs wrote to the defendant another letter in which they referred to their previous communication and gave notice to the defendant that as he had failed to deliver the cotton after the notice given, he was liable, on the footing of the market-rate at the date of this second letter and they demanded payment on that footing. They then sued the defendant. The Subordinate Judge, by way of damages, gave the plaintiffs the difference between the market-rate prevailing in October, that is, at the time the second notice was given and the contract rate.

2. I am unable to agree with the Subordinate Judge that the plaintiffs are entitled to damages on this footing. The Judge refers to Section 63 of the Contract Act which empowers a promisee to extend the time for the performance of the promise. Of coarse, it would have been open to the parties to extend the time by agreement but there is no evidence of any consent by the defendant to any extension of the time and this is not a case in which it can be said that silence has given consent. In my opinion, it is clear that Section 63 does not entitle a promisee, for his own purposes and without the consent of the promisor, to extend the time for performance which had been agreed to by the parties to the contract. The view of the learned Subordinate Judge was that at the time the suit was instituted, the contract of May 12th was a subsisting contract. In support of this view, Mr. Seshagiri Iyer relied strongly on the terms of Section 55 of the Contract Act, He contended that under that section the contract was voidable at the option of the promisee, that is, the plaintiffs, and as they had not avoided the contract, they were entitled to treat it as a subsisting contract at the date of the institution of the suit.

3. Now, in my opinion, Section 55 entitles a party to a contract, where time (as in this case) is of the essence of the contract, to say, if he is sued upon the contract, 'Time is of the essence of this contract, you have failed to comply with the stipulation as to time, I repudiate the contract'. It does not enable the promissee to say, 'I elect to keep alive this broken contract in the hope that I may hereafter recover heavier damages for the breach of the contract than I should be entitled to recover at the time of the breach of the contract.' Mr. Seshagiri Iyer contended that the only way by which a promisor, who had broken hiss tipulation as to time, could protect himself, if the promisee did not avoid the contract, would be to given notice that the contract was at an end. It seems altogether unreasonable to place any such obligation on a promisee when ex concesso the contract has been broken with reference to a matter which goes to the root of the contract. The object of Section 55 is to protect the promisee and is analogous to Section 39 as shown by the illustration to Section 39. This illustration is the statement of a case in which the promisee would be at liberty to put an end to the contract; so, under Section 55 where a stipulation entered into by the promisor, as to time which is of the essence of the cotract, is broken, the promisee is entitled to repudiate or put an end to or avoid the contract. No doubt, Section 55 deals with the effect of a breach of a stipulation which is of the essence of the contract and does not deal with the question of damages, but the plaintiffs would only be entitled to damages on the footing of the market-rate in October on the assumption that the contract was a subsisting contract in October. The contract in this case was broken in July and, in my opinion, came to an end in July and there is no evidence of any agreement to extend by the parties.

4. The cases to which Mr. Seshagiri Iyer refers are clearly distinguishable. The case of Ogle v. Earle Vane 2 Q.B. 275 turned on the question where there was a new contract to which the Statute of Frauds applied. The Court held there was no new contract but an extension of time by agreement. Lush, J, said (p. 284): 'I see no reason why after a breach of contract by non-delivery at the proper time, the buyer should not wait at the express or implied request of the seller with an understanding between the parties that if the buyer should wait, he would still be entitled if the seller turned out ultimately unable to deliver to do that which he was entitled to do in the first in instance, namely, go into the market and buy at the then price.' Here the right of the buyer to go into the market and buy at the 'then pries' is based on the express or implied consent of the seller.

5. In the case of Ashmore & Co. v. Cox & Co. (1899) 1 Q.B. 439 there was an agreement by the defendant to sell hemp to the plaintiff, the shipment to be made between certain date3. The agreement contained a provision that if the goods did not arrive from loss of the vessel or other unavoidable cause, the contract was to be avoided. It became impossible (in a business sense) for the defendants to ship the hemp between the specified date. They shipped hemp on a later date (in September) and on October 27ch declared against the contract. The plaintiffs refused to accept this declaration and returned it to the defendants who in November wrote that it was the only declaration they were in a position to make. The plaintiffs brought an action and it was held that they were entitled to damages with reference to the market-price in November, when the defendants notified their inability to make a declaration in accordance with the contract. In this case the defendants, by making the shipment in September and by declaring that shipment against the contract, intimated that they treated the contract as a subsisting contract and having done that, they could not be heard to say they were not liable for damages on the basis of the market-price when they finally notified their inability to make a declaration in accordance with the contract.

6. In the case of Nickoll and Knight v. Ashton, Edridge & Co. (1900) 2 Q.B. 298 where the defendants had failed to perform their contract within the time agreed upon, the Court held that they were protected by the terms of the contract and were not liable. Mr. Justice Mathew, however, dealt with the question of the measure of damages as if the plaintiff had been entitled to recover. In that case the event which rendered the contract impossible of performance occurred in December 1899, and in that month notice of the fact was given to the plaintiff. The contract was for the delivery of goods during January 1900; with reference to the question of damages, Mathew, J., observed: 'It appeared that towards the end of December, the plaintiffs might have obtained another cargo at the then market-price which was much lower than the price at the end of January. But it was insisted for the plaintiffs that they were entitled to wait and watch the rising market until the end of January and then claim their damages on the footing of the then market-price. In my opinion, that contention was wholly untenable. Having regard to the decision in Both Roth & Co. v. Tayson 1 Com. Cas. 8 Asp. M.C. 120 I think the plaintiffs were bound to endeavour to mitigate the loss by acting as ordinary men of business would have acted, that is to say, by determining the liability at the earliest date at which they were able to obtain another cargo.' In the case before ns, I think damages should be assessed with reference to the market-rate at the expiry of the 60 days agreed upon as the time for delivery in the contract. We must set aside the decree of the Subordinate Court. The case must go back to the Subordinate Judge to be dealt with on this footing. The plaintiff must pay the costs in this Court, the other costs to be dealt with by the Judge.

Ayling, J.

7. The facts of the case out of which this revision-petition arises are simple. Defendants contracted on 12th May 1909 to deliver to plaintiff 6 candies of cotton at Rs. 147 a candy within 60 days. He failed to deliver. Neither party took any action on the expiry of the term allowed (12th July 1909). On 4th September 1909, plaintiffs wrote a letter Exhibit B demanding delivery of the cotton within a week. To this defendant made no reply. On 3rd October 1909, plaintiff wrote Exhibit C. rescinding the contract and claiming Rs. 228 as damages being the difference between the contract-price [and the market-price on that date.

8. He subsequently brought this suit for the recovery of this amount and the Sub-Judge has given him a decree as sued for.

9. Defendant (petitioner) contends that plaintiffs are only entitled to damages on the basis of the difference between the contract-price and the pries on 12th July 1909 when the contract was broken by his failure to deliver. This is the only point argued.

10. The view of the learned Sub-Judge that the power to extend the time of delivery which plaintiff claims is conferred by Section 63 of the Contract Act, seems to be untenable and is not seriously put forward before us. Section 63 deals only with concessions on the part of the promisee advantageous to the promisor. As stated in Cunningham and Shephard on the Contract Act: 'It is clear, however, that as the act of the promisee must bs in the nature of a concession advantageous to the promisor rather than to the promisee, so the consequence of the act must be the relieving of the promisor wholly or in part from his liability on the contract. The Section cannot be invoked to support an extension of time by the promisee for his own benefit.'

11. The only possible basis for plaintiff's claim is in fact Section 55 which makes the contract on failure of performance within the fixed time, 'voidable at the option of the promisee.' It is contended by Mr. Seshagiri Iyer that this Section confers on the promisor the discretionary right, although the promisee may have broken the contract by non-fulfilment within the time allowed, of tacitly treating the contract as subsisting for as long as he likes until it suits him to formally rescind it; that damages should be assessed with reference to price at date of rescission, and that the promisee may defer rescission to such a date as will enable him to secure the largest amount in the shape of damages.

12. As some sort of safeguard against this being pushed to obviously unreasonable lengths, he admits that the promisor may put an end to the contract on the expiry of the fixed term or afterwards by specifically stating his unwillingness to perform.

13. Section 55 contains no suggestion of such a proviso and one is prima facie inclined to hold that a reading of that section which requires such an unauthorised modification to make it reasonable and workable is not the correct one. It appears to me that Section 55 read with Section 2(i). means nothing more than this. On the promisor's failure to perform within the contract time, he (the promisor) loses the powers to enforce the contract, that is, to claim any advantage due to himself thereunder. The promisee, on the other hand, has the option of enforcing it or not as may suit him. He drops it altogether, and in some cases it would be to his interest to do so. If he elects to 'enforce' it, he can only do so, by suing under Section 73 for damages for breach; for the contract itself, being for performance within a date, which is past, is impossible of execution in terms. The damages for which he can obtain compensation under Section 73 are those which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it, which cannot include any aggravation of damages caused by the promisee's action or inaction subsequent to the breach.

14. This appears to be the natural and equitable meaning of the Act, and, applying it to the present case, I think the damages should be reduced to the difference between the contract price and the price on 12th July 1909. I concur in the order proposed by the learned Chief Justice.


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