1. This is a claim by a firm of brokers for Rs. 9,715-3-9.
2. The case for the plaintiffs is that they entered into various contracts of sale of jute fabrics on behalf of the defendants between December 1934 and March 1936. The brokerage provided by the contracts is at the rate of one half per cent, on the value of the goods so sold at the sale rates. The plaintiffs state that the brokerage earned in this way amounted to a sum of Rs. 9,088-9. It is also stated that the plaintiffs presented their brokerage bills amounting in all to that sum to the defendants for payment and that the defendants accepted the claim as correct. There is, moreover, a claim for interest.
3. It is not now suggested that there has been any express admission of liability on the part of the defendants, and the question is whether or not the plaintiffs earned the brokerage which they are claiming.
4. On the first day on which the case was heard, it became necessary to amplify the pleadings by written statements filed by the respective parties. The position is that the contracts fall into various groups. They are all in the form prescribed by the Indian Jute Mills Association. With regard to the first group, the plaintiffs have informed the defendants that they have sold by the defendants' order and on their account a certain quantity of jute fabric to a specified buyer. I take as a specimen of such contracts, contract No. 26527 of December 4, 1934, showing a sale made by the plaintiffs on the defendants' account to Messrs. Andrew Yule and Co., Ltd. (Export Department) of 100,000 yards of hessian cloth at a rate specified. With regard to contracts which are in this form, no dispute arises, because the defendants admit that they are liable to pay brokerage calculated in manner provided by the respective contracts. There is a second group of contracts, of which a specimen is contract No. 28835 of July 20, 1935, whereby the plaintiffs sell by the defendants' order and en their account 'to undersigned' 50,000 yards of hessian cloth at a rate specified. There is provision for brokerage at the rate of per cert. The defendants admit that they are liable to pay brokerage in respect of all contracts in this form.
5. With regard to the two groups of contracts which I have described, the defendant's liability can be ascertained by a very simple calculation, and the learned Counsel for the parties have said that they hope to agree on a figure by to-morrow.
6. The remaining contracts constitute a single group and are sub-divided into two classes although the difference between them is immaterial for purpose of this case. An instance of the first class is contract No. 26617 of December 15, 1934. By that contract the plaintiffs sell by the defendants' order and on their account 'to out principals' 300,000 yards of hessian cloth at a rate specified in the contract. An example on the second class is contract No. 27241 of March 5, 1935, The only difference in form between that contract and contract No. 26617 is that in contract No. 27241 the words 'our principals' are followed by the words '(not to be declared).'
7. Learned Counsel for the plaintiffs stated that some of these contracts were contracts entered into by the plaintiffs acting on behalf of existing principals. The defendants admit that in cases where the plaintiffs are in a position to show that there actually was a principal to whom the plaintiffs were selling the goods on the defendants' behalf, the defendants are liable to pay brokerage. I intend to direct an enquiry to ascertain in how many of these contracts there was an independent buyer to whom the plaintiffs sold the goods.
8. There remain, however, a number of contracts in the form to our principals or 'to our principals (not to be declared)' where the plaintiffs admit that there was in fact no principal and where the plaintiffs were in fact the buyers. In the additional written statement filed by the plaintiffs on August 15,193C, are made:
With regard to contracts entered into by the plaintiff firm for 'our principals' or 'our principals (not to be declared.)
9. As regards such of them in which the plaintiff firm were in fact principals, the defendant firm at the time of performance knew that the plaintiff firm were in fact the principal?, and the plaintiff firm submit that as the defendant elected to perform the said contracts with such knowledge as aforesaid, they cannot, after performance, refuse to pay the plaintiff firm the brokerage stipulated.
For all purposes as far as this case is concerned, Counsel for the defendants states that he is prepared to admit the truth of the allegations in the plaintiffs' additional written statement which I have just read.
10. The question therefore as to the defendant's liability with regard to contracts of the last-mentioned class is a question of law. I think it cannot be gainsaid that it is misconduct on an agent's part to deal on his own account in the business of the agency without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his knowledge on the subject. Under English Law it appears that the principal has the absolute right, when he ascertains that the agent has been clandestinely acting as principal in a contract connected with the business of the agency, to repudiate the contract. This right, however, in India is qualified by Section 215 of the Indian Contract Act which provides that:
the principal may repudiate the transaction if the case shows either that any material fact has been dishonestly concealed from him by the agent or that the dealings of the agent have been disadvantageous to him.
11. It is admitted that neither of these conditions was fulfilled in the circumstances of the present case.
12. It therefore follows that the defendants were never in a position to repudiate the contracts although they knew before performance that the plaintiffs were in fact the buyers. In such circumstances the statement in the plaintiffs' written statement that 'the defendants elected to perform the said contracts' deed not perhaps give an entirely accurate picture of the situation.
13. Prima facie under Section 220 of the Indian Contract Act, the plaintiffs are not entitled to any remuneration in respect of the contracts in which they were the undisclosed principals although purporting to act as agents. This seems to me to be perfectly clear under the terms of the Indian Contract Act, and it also appears to me beyond argument that under English Law where an agent acts as principal in a contract without the knowledge of the party whose agent he is, he forfeits his right to remuneration from that party under the agency agreement. The leading case on the point is Salomons v. Pender (1865) 3 H. and C. 639 : 34 L.J. Ex. 95 : 11 Jur. (N.S.) 432 : 12 L.T. 267 : 13 W.R. 637. In that case the defendant sold landed property through the plaintiff to a limited company in which the plaintiff was a shareholder. The plaintiff sued to recover knowledge and the Court of Exchequer held that his claim was unenforceable.
14. With regard to the argument that the plaintiff had not repudiated the contract with the purchasing company,--Pollock, C.B. observed: I cannot agree that, because the seller has
chosen to abide by the sale; he is, therefore, to be held as to have acknowledged the claims of the plaintiff both as an agent and purchaser.
Bramwell, B. later observed :
There is another way of putting the case. The plaintiff by offering to sell the property undertook that a third party should be the buyer and not himself whichever way the case is put I think there should be no rule.
Martin, B. said:
Mr. Bovill contended that, as the sale was not rescinded, there is a subsisting contract to pay the commission, but that seems to me a fallacy. The engagement to pay commission to the plaintiff is (JVao day nghe bai nay di ban suite distinct from the acceptance of an offer to buy the land.
15. Observations of a similar character were made in Andrews v. Ramsey (1903) 2 K.B. 835 : 72 L.J.K.B 865 : 89 L.T. 450 : 52 W.R. 126. In that case the agents had deducted their commission from the deposit on account of the purchase-money and we're defendants in the case. Wills, J. observed (p. 638 Page of (1903) 2 K B.--[Ed.):
If the money had all been paid over and the defendants had to sue the plaintiff for commission, it seems to me perfectly clear that they could not recover it. They would have no chance whatever in succeeding in such an action, and I think that they ought not stand in any better position because the plaintiff believing that they acted properly had allowed them to retain the 50. The case ought to be the same whether the commission had already been paid or whether the agent has to sue for it.
16. Both these cases have been recognised as having application in India N. Joachin-son v. Meghjee Vallabhdas 34 B. 292 : 3 Ind. Cas. 801 : 11 Bom. L.R. 779. At p. 307f Mr. Justice Chandavarkar observes:
The rule of law then is this. Where the agent appointed to sell his principals' goods for a fixed price buys them on his own account without the previous consent of the later. It is competent for the principal either to repudiate the transaction under the circumstances mentioned in Section 215 of the Contract Act or to affirm it. If he elects to affirm, the principal will be liable to pay to the agent such charges only as are incidents of the transaction of purchase that is, such as the vendor under the contract would have been liable to pay to the purchaser, because what is affirmed is the relation of vendor and purchaser. But if those charges are annexed by the terms of the contract to the agency so as to regulate the relation of principal and agent as distinguished from the relation of vendor and purchaser, the agent is not entitled to recover them
17. The only matter that has caused me any hesitation is Section 63 of the Indian Contract Act. It appeared to me at first that, having regard to the language of that section which has always been recognised as differentiating Indian Law from English Law, if might reasonably be argued that by going on with the contracts the plaintiffs had accepted a satisfaction other than the performance of the promise. In other words, it might be argued that, although the promise was to obtain a buyer who was not the plaintiff's but a third party yet the defendants by going on with the contract after discovering the position which the plaintiffs occupied with regard to it, elected to treat a contract of sale in which the plaintiffs were the buyers as satisfaction of the promise to obtain a contract in which the buyers were to be a third party. On broad grounds I should be disposed to hold that if there is any conflict between the general provisions as to performance generally contained in Chap. IV of the Contract Act of which Section 63 is a part, and the special provisions as to the contract of agency which are the subject-matter of Chap. X of the same Act, the special provisions of Chap. X should prevail. However, with regard to this particular case, I think that the point can be disposed of more directly. Before a party can be said to accept something other than the performance stipulated for in satisfaction of the contract, it must, I think, be open to him to refuse to accept such satisfaction and to insist on performance of the contract in accordance with its terms. Having regard to the fact that on account of the limitations imposed by Section 215 on the principal's right to repudiate the defendants were never in a position to refuse to accept the plaintiffs as buyers, there could, in my opinion, be no question of their electing the accept a satisfaction other than the performance of the contract according to its terms.
18. For these reasons I hold that the plaintiffs are not entitled to brokerage in respect of contracts of sale to 'our principals' and to 'our principals (not to be declared)' except in cases where there were in fact principals other than the plaintiffs. To ascertain the extent of the defendants' liability in respect of contracts of this class, I direct the Official Referee to enquire and report in how many contracts of sale to 'our principals' and to 'our principals (not to be declared),' there were principals other than the plaintiffs and to what sum the plaintiff are entitled on that basis. Costs will be reserved.