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The Dalmia Cement Company, Limited Vs. A.S.G. Lourdusami Pillai - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai
Decided On
Reported in(1943)1MLJ303
AppellantThe Dalmia Cement Company, Limited
RespondentA.S.G. Lourdusami Pillai
Cases Referred(Gallagher v. Hirish
Excerpt:
- - the plaintiff alleges that in response to a written invitation to offer for rates and terms at or on which persons who were willing to undertake the construction of a factory as well as subsidiary buildings to be raised in connection with the defendant company's new cement works at kalakudi, lalgudi taluk (contained in a notice published by the latter and now embodied in the contract. 6. tenders were invited by the defendant company for the construction of factory as well as subsidiary buildings in connection with their new cement works at kallakudi and the works according to the notice of tender were to be carried out strictly in accordance with the schedule, specification and conditions in what were described as contract documents attached therewith. 7. it was suggested by.....abdur rahman, j. 1. these are two connected appeals. they arise out of a suit for damages for breach of a building contract stated to have been committed by the defendant company in refusing to get a cement factory, or in any case, certain material portions thereof (and described as raw meal silos, workshops and stores and lepol kiln) constructed by the plaintiff. the plaintiff alleges that in response to a written invitation to offer for rates and terms at or on which persons who were willing to undertake the construction of a factory as well as subsidiary buildings to be raised in connection with the defendant company's new cement works at kalakudi, lalgudi taluk (contained in a notice published by the latter and now embodied in the contract. ex. a) he submitted a tender on the 26th.....
Judgment:

Abdur Rahman, J.

1. These are two connected appeals. They arise out of a suit for damages for breach of a building contract stated to have been committed by the defendant company in refusing to get a cement factory, or in any case, certain material portions thereof (and described as Raw Meal silos, workshops and stores and Lepol Kiln) constructed by the plaintiff. The plaintiff alleges that in response to a written invitation to offer for rates and terms at or on which persons who were willing to undertake the construction of a factory as well as subsidiary buildings to be raised in connection with the defendant company's new cement works at Kalakudi, Lalgudi Taluk (contained in a notice published by the latter and now embodied in the contract. Ex. A) he submitted a tender on the 26th May, 1938, under his covering letter Ex. B along with a deposit of Rs. 1,000 that was required to be made with the tender. This was accepted by the defendant company on the 2nd June, 1938, and the rates given by the plaintiff in his tender form part of the contract (Schedule B). The plaintiff alleged in his plaint that he was to supply ' all the labour and materials needed for the works specified in the drawings supplied as per Clause 3 of the said agreement' and was required to make a deposit of Rs. 5,000, as

the approximate cost of the work thus entrusted to the plaintiff amounted to Rs. 1,50,000

in accordance with the terms of the agreement. He states that he made the deposit,

entered on his duties and made all arrangements necessary for the carrying out of the work.

2. These consisted of, according to the plaintiff, constructing temporary sheds and other conveniences for a large number of workmen, getting the necessary materials, tools and plants, appointing technical staff necessary for the purpose and making advances to the workmen. The plaintiff states that after all this had been done and excavation work had proceeded for a few weeks, the defendant company's manager decided to substitute metal broken from limestone for granite stone and as no rates had been asked for or tendered in respect of such work, he suggested an unreasonable reduction in the rates which the plaintiff could not accept. The plain-tiff asserts that from the discussion that took place between him and the servants of the defendant company and from their attitude he had reason to apprehend that they were trying to terminate the plaintiff's agreement on account of the offers made by other contractors to do the work at lower rates. It is then stated in the plaint that while the plaintiff was continuing to do the work, he found that the foundations excavated by the plaintiff and the other works given to him were being filled with concrete and carried out by other petty constactors although 'the entire work' had, according to the contract between the parties to be done by the plaintiff for the due performance of which he had secured and maintained a large number of workmen at considerable cost in addition to the collection of all necessary tools and plant and large quantities of granite, construction of sheds and appointment of technical staff. He thus claimed a sum of Rs. 14,000 as damages for the breach of the contract and Rs. 2,666-14-3 for the work actually done by him. As the defendant company had paid Rs. 2,000 to the plaintiff for what he had done, a suit for Rs. 14,666-14- was instituted by him against the defendant company.

3. In their written statement, the defendant company did not deny that the plaintiff's tender to do certain work had been accepted by them but alleged that under the agreement between the parties, there was no obligation on their part to have any or all the works done through the plaintiff's agency and that they had the option to have such portion or portions of the works carried out as they or their authorised representative chose to do. They alleged that in pursuance of the plaintiff's agreement, the site for excavation of foundations of Raw Meal Silos, Lepon kiln workshop, etc., was marked out by their assistant engineer and the plaintiff was doing excavation work till about the first week of August, 1938; that while this work was in progress, the use of limestone jelly in place of granite stone was suggested by the head office for mass concrete in foundations and as aggregate in reinforced concrete work and that inasmuch as they were at liberty to make any alteration, addition or deviation in the contract, they informed the plaintiff of the change of the rates which they were prepared to pay for the limestone concrete in respect of which there was no mention in the agreement. It was denied on behalf of the defendant company that there was any 'agreement as regards the rates for the substituted material, for mass concrete in foundations, etc.' (which in fact the plaintiff did nowhere allege) or that they had committed any breach of the contract and were liable in damages. It was contended on their behalf that the plaintiff himself had in his letter dated the 6th August, 1938, recognised that the original contract had ceased to be operative and as in any case he did not continue further execution of work and violated the agreement, if one subsisted, the defendant company were justified in terminating the same and in employing other contractors for filling the excavated foundations. They alleged that the amount actually payable to the plaintiff for the work done by him was Rs. 1,822-9-0 but to obviate an unnecessary dispute they had paid a sum of Rs. 2,000 instead.

4. The learned Subordinate Judge held that the contract Ex. A could not be considered to be merely an offer on the part of the plaintiff with liberty to the defendant company to get any work done by the plaintiff but it was definitely a contract with right to the defendant to drop any portion of the work and since the work to be done by the plaintiff was of the approximate value of a lakh of rupees consisting of three major items, that is, of Raw Meal Silos, Workshop stores, Lepon kiln and not for only such work for excavation of foundations as was suggested by the defendant company to the plaintiff, he found the defendant to have been guilty of a breach of contract but as there was another contractor Kriparam who had been given a portion of the contract, he, was of opinion that the probable amount of the value of the work of the plaintiff would have been about Rs. 50,000 and since the work of the value of Rs. 2,000 had been done, he assessed the damages, after adding Rs. 120 on account of two months' pay of a supervisor, at Rs. 4,920, and granted a decree for the same with interest at six per cent. Both the parties have appealed against this decision. The defendant company claims that no decree should have been passed against them in the circumstances' while the plaintiff asks for the balance of the amount which was not decreed in his favour.

5. As the liability of the defendant company or the rights of the plaintiff can only be adjudicated on the basis of the contract Ex. A, of which, the invitation to Lender made by the plaintiff, the acceptance by the defendant company, the terms and the conditions of the 'contract mentioned therein form a part, it is necessary to examine it carefully before the other documents and evidence are considered.

6. Tenders were invited by the defendant company for the construction of factory as well as subsidiary buildings in connection with their new cement works at Kallakudi and the works according to the notice of tender were to be carried out strictly in accordance with the schedule, specification and conditions in what were described as contract documents attached therewith. Works had to be carried out according to its terms under the supervision of the works manager and had to be completed within the time mutually agreed upon between the contractor and the works manager 'when acceptance of a particular tender had been intimated to the tenderer'. The tenderer had to submit a sum of Rs. 1,000 as earnest money along with the tender, which amount had to be appropriated towards his security deposit if the tender were accepted by the defendant company.

7. It was suggested by learned Counsel for the defendant company that the term 'Work' used in this tender did not refer to 'the construction of factory as well as subsidiary buildings' but only to such of the parts of the works in regard to which the acceptance of the tender was communicated to the tenderer from time to time. According to him the tender, even when approved, was to be something in the nature of a standing offer and had to be accepted by the defendant company with regard to every bit of work that was subsequently given to the contractor.

8. This notice of tender was sent by the plaintiff with his covering letter Ex. B on the 26th May, 1938. This letter contained nothing of any importance except that it clearly shows it was a tender 'for the construction of cement factory and subsidiary buildings of the company' and conveyed the plaintiff's willingness to 'remit the amount of tender deposit for this work.'

9. The notice of tender issued by the company was, as stated before, accompanied by a contract form. Since the tender made by the plaintiff was accepted and forms the actual contract between the parties, we must now turn our attention towards the same. In the beginning of this document, there is what was described by Mr. Rajah Aiyar, learned Counsel for the defendant company, a preamble, Kmphasis was laid by him on the words 'or a portion thereof' used in this preamble and it was contended that even if the offer made by the plaintiff is found not to be in the nature of a standing offer, the defendant company were, in any case, free under the words of this contract to give either the whole of the work or 'a. portion thereof and could not be held guilty of any breach even if they did not finally choose to give the whole of the contract but only a portion thereof. Learned Counsel for the plaintiff contends, on the other hand, that it was not an one-sided contract and the plaintiff's tender of acceptance could not be regarded in the nature of a standing offer. Moreover, according to him, in consequence of what happened either at the time of the acceptance of the offer or shortly after, that is, the demand of a security deposit of Rs. 5,000 under the conditions of the contract--the choice by the defendant company had been made and the work agreed to be constructed by the plaintiff specified.

10. We must, in view of these contentions, first of all determine whether after the acceptance of tender, the plaintiff's offer to construct certain buildings mentioned in Ex. A continued to remain in the nature of a standing offer--open and onesided--which could be converted into a definite contract to build only after a specific order by the company to build any definite portion or portions was given and if we come to the conclusion that a bilateral and a completed contract had come into existence, the extent of that contract.

11. Our attention was drawn in this connection by learned Counsel for the defendant company to Halsbury's Laws of England. (Hailsham), Vol. VII, paragraph 117, page 84 (tenders), to the decisions in Burton v. The Great Northern Railway Co. (1854) 96 Rev. Rep. 811 The Great Northern Railway Company v. Witham (1873) 9 Com. Pleas 16 The Queen v. Darners (1900) A.C. 103 Percival Lim. v. London County Council Asylums and Mental Deficiency Committee (1918) 87 L.J.K.B. Rep. 677 and the Secretary of State v. Madho Ram I.L.R.(1928) Lah. 493. Mr. Sitarama Rao, learned Counsel for the plaintiff, distinguished these cases on the ground that no contract, express or implied to get it performed could be, in these cases, said to have come into being. He relied, on the other hand, on the provisions of Ex. A and on the correspondence between the parties which, according to him, clearly pointed to a definite bilateral and 'entire' contract between the parties. At all events, he contended that even if the contract on the face of it appeared to be binding and obligatory upon his client alone, yet there were cases and occasions on which a corresponding and correlative obligation on the part of the other party--in this case the defendant company--must be found to have been implied. He relied on Addison's Law of Contract (11th Edition, pp. 446, 447), the decisions in Thorn v. The Commissioners of Public Works (1863) 32 Beav. 490 : 55 E.R. 192 Churchward v. The Queen (1865) 1 Q.B. 173 Tancred, Arrol & Co. v. The Steel Company of Scotland, Limited (1890) 15 A.C. 125 and Ford and Ors. v. Newth (1901) 1 Q..B. 683.

12. Having gone through these authorities, we find that the cases relied on by the learned Counsel for the defendant company cannot be held to apply to the facts of the present case. In the case of Burton v. The Great Northern Railway Co. (1854) 96 Rev. Rep. 811 the plaintiff had undertaken to provide all waggons, horses, etc., necessary for the cartage of grain, merchandise, etc., between Hatfield and Ware and to convey what were presented to him for that purpose, between the above points at a stipulated rate. The agreement was to continue for a period of twelve months. The Railway Company, however, served the plaintiff with a notice that the arrangement entered into between them and the plaintiff would cease from a certain date. This was because they had leased a portion of this land to another Railway Company and had bound themselves not to carry between Hatfield and Ware. On a suit for damages brought by Burton, it was held that there was a unilateral agreement and that:

the agreement did not raise an implied covenant that the defendant company would employ the plaintiff during two or three years although the defendant was bound by express words to pay the plaintiff the stipulated wages during those periods respectively if the plaintiff performed or was ready to perform the condition precedent on his part.

13. The form of the agreement would show that the railway had nowhere bound themselves to present the grain, merchandise, etc., for cartage and the notice could not but have been, in the circumstances, regarded as a matter of courtesy alone which they were in no way bound to give. Similarly in the case of The Queen v. Darners (1300) A.C. 103 Lord Macnaghten who delivered the judgment of their Lordships of the Privy Council on appeal from the judgment of the Superior Court at Quebec observed as follows:

There is nothing in the contract binding the Government to give to the respondent all or any of the printing work referred to in the contract, nor is there anything in it to prevent the Government from giving the whole of the work, or such part as they think fit, to any other printer.

14. Evidently the terms of the contract in that case did not permit an inference of implied obligation on the part of the Government to be drawn. As for the third English decision, Percival Lim. v. London County Council Asylums and Mental Deficiency Committee (1918) 87 L.J.K.B. Rep. 677 the facts were that a firm of contractors had signed a tender addressed to the Asylums Committee of the London County Council whereby they had undertaken on the acceptance of the tender to supply all or any of the goods mentioned in the schedule if, and to the extent, the same should be ordered by the Committee, and in any quantity. The probable requirements for the period of the contract were stated in the schedule but the Committee had the option to require the supply and delivery of goods in excess of the quantities in each schedule. The eleventh condition in the contract was as follows:

Nothing contained in this contract shall be held to restrain the committee from contracting with persons other than the contractor for the supply of any of the goods described or referred to in this contract, if they shall in their discretion think fit to do so, but the committee will not exercise this power so long as the contractor satisfactorily carries out all the conditions of his contract, except in case of emergency or of unforeseen circumstances.

15. The Committee did not require the quantity specified in the schedule annexed to the tender form and the contractors claimed that they were entitled to supply goods to the full amount specified. Atkin, J., who delivered the judgment of the Court, was of opinion that the contract was not a firm contract to take the whole of the goods that were required. He pointed out that the question whether there was a firm contract between the parties or whether the tender was of a nature that even if accepted the purchasing body was not bound to give the tenderer any order at all depends entirely on the form of the contract. In the latter case, the contractor would, according to the learned Judge, be taken to merely offer to supply goods at a price and would be under an obligation to supply the goods in accordance with the order if the purchasing body chose to give him an order for the same within a stipulated time; but apart from that nobody was bound. He pointed out that there was an intermediate contract that could be made in such a way as not to bind the parties to supply or purchase any specified quantity, but to bind the purchaser to pay for such goods as in fact were needed and ordered by them. As the tenders in that case had made it plain that the purchasers were under no obligation to order any of the goods and the tenderer was, on the other hand, under an obligation to deliver the goods specified in the tender as and when he got orders from the London County Council there was no firm contract under which the purchasing body had undertaken to buy all the specified goods from the contractor. In Secretary of State v. Madho Ram I.L.R.(1998) Lah. 493 the plaintiff had agreed on acceptance of his tender to supply and deliver so much oil as the Military authorities of Lahore might require. The learned Judges of the Lahore High Court, on a construction of this contract and after adverting to the decisions in Percival Lim. v. London County Council Asylums and Mental Deficiency Committee (1918)87 L.J.K.B. Rep. 677 and other decisions came to the conclusion that there was nothing in the contract which could have bound the Government to give to the plaintiff any order to, supply the oil and that the tender made by the plaintiff and accepted on behalf of the defendant merely created a series of continuing offers which they were at liberty to convert into contracts by giving orders in accordance with the terms of the tender. It might be mentioned that this decision was taken up in appeal to the Privy Council but. their Lordships abstained from going into this question and disposed of the case on a different point altogether.

16. Mr. Sitarama Rao, learned Counsel for the plaintiff, contended as observed already, that an 'entire contract' (in the sense which that term is used in building contracts for which see Halsbury, Vol. Ill, paragraphs 357, 366) had been given to his client and that the company was under an obligation to allow him to complete the whole of the work. We have already referred to the various authorities on which he relied in this connection. The first decision which he cited in support of his contention was in Thorn v. The Commissioners of Public Works (1863) 32 Beav. 490 : 55 E.R. 192. where it was held that a contract alleged to be wholly one-sided could not be, although possible, 'supported without express words'. That Courts would lean against such a construction as far as possible can be inferred from the decision of the Court of Appeal in Stewards & Co. v. The Queen (1900) 17 T.L.R. 111 where on the acceptance by the Admiralty of a tender for the supply of 2,000,000 tons of such quantity of refuse stone for the construction of breakwater, the contract was construed to cover 2,000,000 tons of refuse stone or thereabouts and the contention that there could be no breach of contract if the Admiralty did not require the stones at all was repelled. As to the question that in a case like the Present, the corresponding and correlative obligation on the part of the company must be held to be implied, Mr. Sitarama Rao relied on the observations of Cockburn, C. J., in Churchward v. The Queen (1865) 1 Q.B. 173 which were as follows:

Where the act to be done by the party binding himself can only be done upon something of a corresponding character being done by the opposite party, you would there imply a corresponding obligation to do the things necessary for the completion of the contract.

17. The decision of the House of Lords in Tancred, Arrol & Co. v. The Steel Company of Scotland, Limited (1890) 15 A.C. 125 need not detain us very long. The tender in that case was for the supply of the whole steel required for the Forth Bridge less 12,000 tons of plates and although the estimated quantity of steel was to be '30,000 tons more or less', the contract was, in that case, held to be for the whole of the steel required and not merely for '30,000 tons more or less', as was contended on behalf of the tenderer. The existence of a binding contract was conceded by the parties.

18. The question whether the advertisement, tender and acceptance constituted a complete contract between the Municipal Corporation of Gloucester and Newth came up for consideration in Ford v. Newth (1901) 1 Q.B. 683. The tender was in the following words:

I hereby offer to supply for the twelve months ending 31st December, 1900, the undermentioned goods as required, the best of their respective kinds, and to the entire satisfaction of the city surveyor delivered at the corporation depot, Stroud Road, Gloucester, in guaranteed makers, drums or barrels sealed down.

19. This tender was accepted. When the question arose whether this constituted a binding contract between the parties, it was held by the learned Judges that there was an obligation on the Municipal Council to order from the respondent such of the goods included in his tender as the Council might require in the period of twelve months and that the Council could not be justified in treating this tender as a mere price list and ordering the goods from any one whom they chose.

20. After examining the whole of the contract (which includes the tender, the acceptance, the conditions and other provisions contained in Ex. A), we are clearly of opinion that it was a completed contract between the parties for the construction of such portion or portions of the defendant company's new cement works, proposed to be built by them at Kallakudi, as might have been given to the plaintiff either at about the time when the tender was accepted or afterwards. This did not mean, as learned Counsel for the company would have us understand, that the contractor on his part would remain bound to complete the full and entire works and to render all the services required:

in the execution of the construction of the Cement factory buildings with the subsidiary buildings, etc.,

but the company would be free even after accepting the tender and requiring him to furnish security to the extent of Rs. 5,000, which they seem to have done, to give him a work of the value of either one lakh of rupees or one rupee. The preamble did not only mention that the sum of Rs. 1,0,00 was 'hereby forwarded as earnest money' but that this sum would be forfeited by the contractor if he did not deposit the full amount of security amounting to Rs. 5,000 in accordance with the first condition of the contract. This would clearly show that the sum of Rs. 5,000 must have been demanded on behalf of the defendant company and agreed to be paid by the contractor after the tender was accepted and before the contract was signed on the 2nd June, 1938. How this sum was arrived at would be clear from the first condition of the contract. It might be mentioned here that according to the only witness examined on behalf of the defendant company, the security of Rs. 5,000 was fixed by the works manager obviously after the acceptance of the tender. This would show that the parties understood the value of the contract of construction, that was being given to the plaintiff to be about a lakh of rupees.

21. Whatever might have been said if no drawings and specifications of the proposed building were, as referred to in the third and the fourth clauses of chapter I (Preliminary and General) given to the plaintiff, a reference to the lay out plan (Ex. C and Ex. C-1, both of them being parts of the same plan) in Ex. D shows that the company had clearly placed an order with the plaintiff to construct the Raw Meal Silos on or before the 4th June, 1938, The letter Ex. I written by the works manager on the 7th June, 1938, clearly supports this conclusion. In that letter, there is a clear reference to the plaintiff having been already 'instructed to construct' the Raw Meal Silos. Mr. Rajah Aiyar made an attempt to show that the underlined words referred to the work of the excavation only that had been given to the plaintiff but as excavation could not have been asked to be constructed by a person in the position of the works manager who must be presumed to be fully acquainted with the building terms. We had no difficulty in repelling that contention. But even if this letter were not there or its construction would not have been as clear as it now is, we have no doubt in our minds that the contract Ex. A was a bilateral contract and that the defendant company must be, in any case, held to have impliedly agreed that they would have the work of construction in regard to Raw Meal Silos at least carried out by the plaintiff. The delivery of drawings referred to in Ex. D can lead us to no other conclusion. This is in addition to such other works for which a definite order may be found to have been given subsequently.

22. Had these been the only questions with reference to the contract that we were called upon to decide, it would have been unnecessary to refer to the various other conditions which form a part of this contract. But since a great deal of argument has centered round the construction of the 22nd, 23rd and 25th conditions, it would he just as well to refer very briefly to the other relevant conditions. They also support the above conclusion.

23. The first condition of the contract relates to the security deposit which the contractor had to pay. The words ' the security for due performance of the said contract if accepted, shall be the sum not exceeding five per cent. of the total value of the works to be executed by the contractor ' are important. Learned Counsel for the defendant company would however contend that the words ' if accepted ' did not lead to the inference that any definite contract to build any definite portion of the cement factory had come into existence by the company's acceptance of the tender but rather to the conclusion that the offer had to be accepted later when the company asked the contractor to execute any particular work. If we remember, however, that all these contracts along with the conditions were issued long before any tender, was even made by any tenderer and that the security for the due performance of the contract could only have been deposited by the contractor after the lender was accepted and the contractor was asked to make a deposit for any sum not exceeding five per cent. of the total value of the works to be executed by the contractor, it would be clear that by the time that a demand of Rs. 5,000 towards the security deposit was made a definite contract for the purpose of construction of buildings must have come into being and the parties must have very clearly understood that the plaintiff was being called upon to construct buildings of the value of a lakh of rupees or more. Even at five per cent. which was the maximum that could have been demanded, the approximate cost of the building to be constructed would have been a lakh of rupees.

24. The second condition in the contract provided that it was to include all labour, materials (except cement, steel, bricks, etc., specified in schedule A which were to be supplied by the company and chargeable to the contractor at the prices mentioned therein).

25. According to the third condition, one set of drawings of the building that the contractor was called upon to construct was to be supplied by the defendant company to the contractor and this along with the specifications, was to be binding op the parties. This was, as found before, given to the plaintiff in respect of Raw Meal Silos. ...

26. Under the fourth condition of this contract, ' all temporary buildings, stagings, railways, tramways, machinery and plant provided by the contractor for the construction of the works ' were to become the property of the company until the contractor completed the works under this contract. Although not very important by itself, this condition gives a fairly good clue, in our opinion, to the magnitude of the work that the contractor was called upon to execute. A condition like this would not have found a place in the contract if the defendant company were to have the option, as argued by their learned Counsel, of giving a petty contractor, of asking the Plaintiff to construct a very insignificant portion of their cement factory.

27. Under the eighth condition, no foundation was to be laid by the contractor unless excavations had been examined by the works manager and the former had obtained the latter's approval in writing.

28. We may then pass on to the 18th condition which required the contractor to make his own arrangements in regard to temporary sheds for the accommodation of his labour, latrines and sweepers, etc., and under which he could only remove such sheds and staging on completion of the works.

29. Then we may come to one of the most important conditions (condition 22) on which very great emphasis was laid by the learned Counsel for the defendant company. The first sentence of it which is material reads as follows:

The Works Manager shall have the power of deviating either by way of addition or deduction, from the drawings, specifications, bills of quantities, the value of all additions and deductions being ascertained by measurement and added or deducted from the amount of the contract price at the prices mentioned therein.

Learned counsel for the defendant company contends that according to this condition the works manager was authorised to make any deviation from the . drawings, specifications, etc., as he liked and had complete power of addition or deduction. Mr. Sitarama Rao, learned Counsel for the plaintiff, contends on the other hand, that the power to deviate either by way of addition or deduction was to be confined to those works alone whose value could be added or deducted from the amount of the contract price at the prices mentioned therein and that the works manager, or for the matter of that any one else, had no power to add or deduct from the contract in such a way as could have resulted in the extinction of the original contract or of its transformation into one that was to all intents and purposes a new one and the identity of the old one would be changed out of recognition. It might have been possible, according to him, for the defendant company to add to or deduct certain items of work from the contract but it could not be varied under this clause in the manner suggested by the works managers as prices of the substituted work were not mentioned in the tender which had been made and accepted. He also urged that it was not possible for the company under the terms of the contract to alter the materials with which the buildings were to be constructed. Nor could the company, he argued, vary the contract materially. The company might have been entitled to add to or deduct from the contract but they could not, he contends, deduct and add and thus vary the same. Deductions or omissions had, according to him, to be within the limits of the contract. In short, according to Mr. Sitarama Rao, a material or substantial variation of the contract such as suggested by the company was neither provided for nor contemplated and could not have been effected. He relied in this connection on the law as stated in Halsbury (Hailsham), Vol. III, paragraphs 476 and 477, Hudson on Building Contracts, at page 438 (Vol. I, 4th edition) and on the decision in Rex v. Peto (1826) I Y. & J. 38 : 148 E.R. 577. A reference to Richards v. May (1883) 10 Q,. B. D. 400 in Hudson's book is not material on the point that we are just now considering.

30. In construing two clauses of a contract one of which contained a provision as to ' addition to or omission of the works so contracted to be proposed and executed ' and the other as to the ' drawings that may be provided during the progress of the work,' Alexander, C. B., observed at page 583 in Rex v. Peto (1826) I Y. & J. 38 : 148 E.R. 577 that,

In sound construction, it should be limited to that to which the condition has confined it, namely, to such extra works as may be done, or something which is to be omitted; but it cannot refer to the substitution of one thing for another, more especially anything so important as the making the foundation on which the whole validity and security of the building depends. There is another clause which has been mentioned; that which refers to the detailed and working drawings that may be provided during the progress of the work. Is it not a most violent strain to consider this clause as affording an authority for doing that which is totally subversive of the original scheme?' Similarly Halsbury states the law in paragraphs 476 and 477 (Vol. Ill) in the following words:

476. If additional work is of such a nature as to be entirely outside the contract, it does not come within the clause relating to extras at all, and is not subject to any of the stipulations of the contract.

477. A power to order alterations, additions, or omissions in the contract will not extend to permit the architect or engineer to change the whole scheme of the work and turn it into something entirely different from that contracted for. Where mere additions are made to a building, the contract still exists, but where the work is varied to such an extent that it is impossible to trace the contract at all, the contract must be treated as abandoned, and the work as having been done under an implied contract to pay by measure and value.

31. Bearing the words of the present contract in mind, there appears to be no doubt that this Clause (clause 22) was not intended to provide for such a variation as the defendant company wished to effect and which would reduce the value of the contract to the plaintiff by 50 per cent. or more, if the prices suggested by the defendant company could be taken to give any indication of that fact. The deductions or omissions could only be within the limits of the contract and there could not be such a substantial variation as was proposed by the plaintiff company of substituting the use of limestone jelly in place of granite stone for mass concrete in foundations and as aggregate in reinforced concrete work.

32. The 23rd condition of the contract lays down the limits within which the works manager could supply his own material for any special fittings and workmanship, etc. There is a distinct sub-clause in this condition which reads as follows:

Should any work be ordered which cannot be priced on the basis specified hereinbefore, the prices to be allowed shall be settled previously to the execution of the order. In the event of a price being inserted in the order of the contractor it will be understood that he has accepted it unless he objects in writing to the same previous to the commencement of the work or delivering the articles or within six days from the receipt of the order, in which case he will be entitled to represent his case to the Works Manager.

Mr. Rajah Aiyar contends that this clause has to be read as an independent clause and must be taken to provide for all cases when a particular work ordered ' cannot be priced on the basis specified hereinbefore ', or, in other words, as to which the rates are not to be found in the tender. If this clause were not so construed various complications, he contends, are bound to arise and it may be, as happens to be the case now, that the prices of new or altered works are not to be found in the accepted rates. We do not however feel impressed by that contention. If the parties did not contemplate the introduction of any fresh work which was not provided for in the tender and did not make a contract as to what was to happen if any such contingency arose and a work not included in the tender had to be carried out, they have themselves to thank for. We cannot make out a new contract for them. If such work had been ordered and done, the rates would have to be settled by the Court according to law. But this cannot justify us in tearing a portion of the clause out of its context and in reading the sub-clause independently of Clause 23 of which it forms a part., We must, therefore, hold that this sub-clause could have no application to any work other than what has been mentioned in the first portion of the 23rd clause itself. The last clause in this contract on which emphasis was laid by the learned Counsel for the defendant company was the 25th clause which reads as follows:

If at any time after the commencement of the work, the company shall for any reason not require the whole or a part thereof as specified in the tender to be carried out, the Works Manager shall give notice in writing to the effect to the contractor who shall have no claim to any payment of compensation whatsoever on account of proprietary or other advantage which he might have derived from the execution of the works in full, but which he did not derive in consequence of the full amount of the work not being carried out.

Learned counsel for the defendant company contends that the defendant company was entitled under this clause to stop the execution of the whole or a part 'of the works specified in the tender if it did not require the same to be carried out and the plaintiff was precluded under this clause from claiming compensation on account of any ' advantage which he might have derived from the execution of the works in lull.' Mr. Sitarama Rao, on the other hand, contends that this clause could only have application if the defendant company had ceased to ' require ' the whole or part of the work but would have no application if their requirements continued to subsist and they got the work carried out by some one else. According to him, this clause could only be operative if the company had by any chance decided to drop or abandon the whole or any portion of the works for which the contract had been given to the plaintiff and that they could not take shelter behind this clause and commit a breach of the contract by getting the work given to the plaintiff, carried out through other agencies. It is not disputed that the defendant company had the works, with the modification suggested by them, executed by other contractors.

33. According to what is stated in paragraphs 358, 363 and 373 of Halsbury's Laws of England (Hailsham) ' if a builder or contractor undertakes to erect the whole of a specified building or work in accordance with the specification ',' for a price to be subsequently ascertained on some fixed basis, e.g., by a schedule of prices,' the contract is entire and ' the employer is under an obligation to allow the contractor to do the whole of the work.' The law is then stated as follows:

The contractor, it would seem, is entitled (subject to any special circumstances or stipulations in the contract) to uninterrupted possession of the site for the purpose of carrying out the works in the contract. He can therefore object to a fresh contractor being brought upon the site while he is carrying out the contract works. The employer cannot, it would seem, take advantage of a stipulation authorising him to omit work in order to get parts of the contract work executed by another contractor while the contract is proceeding. It has been decided in America that such a clause does not contemplate or authorise the omitting of work given to another contractor (Gallagher v. Hirish (1899) N. Y. 45

The same case is referred to by Hudson in his work on Building Contract at page 74. If Clause 25 is construed in accordance with what has been stated in the abovementioned authorities and really in spite of them, there is no manner of doubt that the words ' not required ' in it were meant to convey a set of circumstances when the company did not intend to continue the contract on the ground that it did not require the whole or part of the building for which the contract was given to the plaintiff but could have no application to a case like the present one where they wanted those very buildings but built of a different material and at lower rates. This concludes the relevant conditions to which reference was made during the arguments by learned Counsel for the parties.

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35. [After referring to the contract and the correspondence, their Lordships continued :-Our conclusion from the various terms of the contract and the correspondence that we have referred to is that the plaintiff had been asked to construct Raw Meal Silos and to execute certain other minor works in regard to which the letters were given to him and the execution of contracts in regard to other major works were not actually placed with him.

36. From what we have stated to be the terms of the contract between the parties it would follow that the breach was committed by the defendant company.

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37. The only question that now remains to decide is that of damages. We have already come to the decision that having regard to the fact that the sum of Rs. 5,060 demanded from and paid by the plaintiff by way of security deposit, the work given to him was to be of the value of a lakh of rupees approximately. Out of this work, the order for the construction of Raw Meal Silos had been given to the plaintiff and the excavation work in regard to its foundations had been carried out by him. This work could not proceed any further as the breach by the defendant company went to the root of the contract and the contractor elected not to proceed with the work. In such circumstances, the measure of damages would be the amount of profit which the contractor would have made if he had been permitted to do the work in addition to, of course, what was due to him for the work actually done.

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The plaintiff would be therefore entitled to damages for the breach of contract on the basis that the work to be done by him was to be of the approximate value of rupees one lakh out of which a definite order in regard to Raw Meal Silos had been placed by the defendant company. ******

But the difficulty in our way is that out of three major items given to the plaintiff, the only definite contract in regard to major works that was placed with him was of the construction of Raw Meal Silos only. It is true that this work was individually greater in proportion than the other works that were meant to have been given to the plaintiff but unfortunately for him there is no definite evidence on the record as to what proportion this work, i.e., the construction of Raw Meal Silos bore to the other works. In the absence of any evidence that the contract to construct Raw Meal Silos was larger than the other works, we think on the whole that the valuation of that contract might be justly placed at Rs. 50,000. Calculating damages then at 10 per cent. the plaintiff would be entitled to Rs. 5,000 (five thousand) out of which he must have already made Rs. 200 out of the work that he had done. He would thus be entitled to recover a sum of Rs. 4,800 only. We would therefore pass a decree in his favour for this amount. The lower Court had awarded interest on the damages decreed not from the date of the suit but from a prior date. This was wrong. No interest could have been, in the absence of any agreement or perhaps in the absence of commercial usage to that effect, awarded on any damages prior to the date of the suit. We would therefore modify the order of the trial Court in regard to interest and award it on the sum decreed from the date of the institution of the suit at six per cent.

38. The result is that the appeal by the defendant company (Appeal No. 18 of 1941) substantially fails and is, subject to the modification ordered above, dismissed with costs. The appeal by the plaintiff (Appeal No. 199 of 1941) also fails and is dismissed with costs.


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