Supreme Court: In a case wherein the suit was for recovery of damages for breach of contracts and the defendants-appellants alleged that the plaintiff-respondents were bound to pay price of remaining goods before delivery, the 3-Judges Bench of Fazl Ali, S.R. Das* and Chandrasekhara Aiyar, JJ., observed that none of the contracts were for delivery of the goods in instalments and the contracts did not in terms provide for payment of any portion of the price before delivery of the entire lot of goods covered by them. The Supreme Court held that the defendants-appellants could not treat the non-payment of the price for those goods as a ground for non-delivery of the balance of goods, for there was, under the contract or under ordinary law, no obligation casted on the plaintiffs-respondents to pay for or take delivery of goods in instalments.
The present appeal arose out of a suit for recovery of damages for breach of five of several contracts for the supply of diverse quantities of yarn by the defendants-appellants to the plaintiffs-respondents. Of the five contracts, three were in writing and the remaining two were said to have been made orally. Of the three written contracts, in the first one, there was no specific time fixed for delivery of the goods, but it was provided that as soon as the goods were received by the defendants-appellants, the same would be dispatched.
On 1-8-1942, an order was promulgated by the Governor of Madras under Rule 81(2) of the Defence of India Rules, 1939 prohibiting as from 5-8-1942, the sale of yarn by persons other than mills and licensed dealers and therefore, both the plaintiffs-respondents and the defendants-appellants applied for and obtained the necessary licences. According to the plaintiffs-respondents, the due dates of delivery were extended, and both the parties treated the contracts as alive up to 26-10-1942. It was a common case that six bales were delivered under the first contract on 4-9-1942 and five bales were delivered under the second contract on 3-10-1942. The plaintiffs-respondents alleged in the plaint that they were always ready and willing to take delivery and were otherwise able and willing to perform their part of the contract. The suit was contested by the defendants-appellants on various grounds.
The Trial Court decided mostly all the issues against the defendants-appellants and therefore dismissed the suit. The plaintiffs-respondents appealed to the Madras High Court (‘High Court'). The High Court agreed with the Trial Court that the time for performance had been extended but held that such extension went up to 10-10-1942 instead of 28-10-1942, as fixed by the Trial Court. Therefore, the High Court set aside the dismissal of the suit and passed a decree in favour of the plaintiffs-respondents for Rs. 16,262/1 together with interest from the date of the decree of the Trial Court till realization. Thus, the defendants-appellants had appealed before the Supreme Court.
Analysis, Law, and Decision
The Supreme Court noted that the defendants-appellants submitted that the plaintiffs-respondents had failed to pay the price of six bales delivered on 4-9-1942 and for five bales delivered on 3-10-1942, thus, the defendants-appellants were excused from delivering the balance of goods under those contracts. The Supreme Court observed that none of the contracts was for delivery of the goods in instalments and the contracts did not provide payment of any portion of the price before delivery of the entire lot of goods covered by them. The defendants-appellants alleged that those deliveries were made “as a matter of concession” and they had delivered parts of the goods unconditionally and of their own free will as a matter of concession. The Supreme Court held that the defendants-appellants could not treat the non-payment of the price for those goods as a ground for non-delivery of the balance of goods, for there was, under the contract or under ordinary law, no obligation casted on the plaintiffs-respondents to pay for or take delivery of goods in instalments.
The defendants-appellants further submitted that under Section 32 of the Sale of Goods Act, 1930, the plaintiffs-respondents were bound to pay the price of the remaining goods before they were delivered. The Supreme Court observed that there was no provision in the contracts for payment of price before delivery and indeed, the first term printed on the reverse of these contracts provided that the goods would be supplied “in accordance with the conditions subsisting between the Mill people, businesspeople and ourselves ”. The Supreme Court noted that the defendants-appellants themselves claimed that as per the terms of the contract and business of the defendants-appellants, all the goods were payable by cash before delivery. The Trial Court had found that the course of dealings between the parties was not to pay the price in cash on delivery but to debit or credit, the same in the accounts which were to be adjusted later.
The next contention of the defendants-appellants was founded in a letter from the plaintiffs-respondents to the defendants-appellants intimating that the plaintiffs-respondents had purchased 16 bales of yarn against the same quantity under contract, dated 31-7-1942, and asked the defendants-appellants to credit Rs. 1385/3 to the plaintiffs-respondents due to the difference between the contract price and the market price. The Supreme Court noted that Defendant 2' son who was an assistant in the defendants’-appellants' firm, informed the plaintiffs-respondents that the defendants-appellants had not sufficient goods in their hands to fulfil the contract and requested the plaintiffs-respondents to buy whatever they could against that contract and that pursuant to such a request, the plaintiffs-respondents had purchased 16 bales as intimated in their letter.
The defendants'- appellants' submitted that the plaintiffs-respondents, having elected to treat the contract as at an end and purchased 16 bales against that contract, could not turn round and again treat the contract as subsisting. The Supreme Court opined that there was no substance in this argument, as in reply to that letter, the defendants-appellants in their letter repudiated that Defendant 2's son had told the plaintiffs-respondents to make any purchase and categorically stated that they were sending the contract bales. The Supreme Court further opined that this showed that the defendants-appellants themselves treated the contract as subsisting on that date. The subsequent correspondence clearly showed that the plaintiffs-respondents also accepted this position and cancelled their purchase against the defendants-appellants. The Supreme Court thus opined that in these circumstances, it was hard to see how, having rejected the authority of Defendant 2's son, the defendants-appellants could now say that the contract had ended.
The Supreme Court rejected the submission by the defendants-appellants that the contract had become impossible for performance, or, at any rate, its performance had become illegal. The Supreme Court opined that as pointed out by the High Court, condition 1(c) of the licence clearly contemplated dispatch of goods outside the district for it required the licensee to maintain accounts showing the destination to which goods were dispatched.
The defendants-appellants also contended that there was no evidence before the Supreme Court as to the market rate prevailing on 10-10-1942 and although the books of the plaintiffs-respondents had been exhibited, the entries showing the rates had not been specifically proved by any witness. The Supreme Court noted that the books were tendered as evidence by consent of the parties and thus opined that in such a case the parties might well have dispensed with strict proof of the entries. Further, the Supreme Court opined that it was common ground that the parties filed a consent memo as to the rates prevailing on particular dates. The Supreme Court further opined that in these circumstances, it was not prepared to hold that the rates fixed by the High Court were incorrect.
Thus, the Supreme Court dismissed the appeal with costs.
[N. Peddanna, Ogeti Balayya Firm v. Katta V. Srinivasayya Setti Sons, 1951 SCC 267, decided on 25-3-1951]
Note: Breach of Contract
A breach of contract is a violation of a contractual contract's agreed-upon terms and conditions, and a breach might range from a late payment to a more serious offence like failing to deliver a promised item. A contract violation can occur in both written and oral contracts. Section 37 of the Contract Act, 1872 (‘Act') provides that the parties to the contract are under obligation to perform or offer to perform, their respective promises under the contract, unless such performance is dispensed with or excused under the provisions of the Act or of any other law. If the party chooses to put an end to the contract, the contract is said to be broken and amounts to breach of contract by the party not performing or refusing to perform its promise under the contract. Chapter VI (Sections 73 to 75) of the Act deals with the consequences of breach of contract. Moreover, breach of contract can be actual or anticipatory. Further, the remedies for breach of contract can be: (a) recession of contract; (b) suit for damages; (c) suit for specific performance; (d) injunction; and (e) quantum meruit (a reasonable sum of money paid to a person for services rendered when the amount is not specified in a legally enforceable contract).
*Judgment authored by: Justice S.R. Das