Muthayamanigaran vs Lakku Reddiar and Others

Arnold White, C.J.—The question raised in 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 May 1909, the plaintiffs and the 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 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 the letter he would be liable for the loss that might

befall the plaintiffs according to the market rate at the date of 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. 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.

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 course it would have been open to the parties

to extend the time by agreement, but there is no evidence of any consent be the defendant to any extension of the time and this is not a case in

which it can be said that silence gives 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 promissor 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 the 12th was a subsisting contract. In support of this

view Mr. Seshagiri Aiyar 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.

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 o f this contract ; you have failed to comply with the stipulation as to time ; I repudiate the contract."" It

does not enable the promisee 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."" Mr Seshagiri Iyer contended that the only way by which a promissor who had broken his stipulation as to time could

protect himself if the promisee did not avoid the contract would be to give notice that the contract was at an end. It seems altogether unreasonable

to place any such obligation on a promisee when ex concess is 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 u/s 55, where a stipulation entered

into by the promissor as to time, which is of the essence of the contract, 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.

The cases to which Mr. Seshagiri Aiyar refers are clearly distinguishable. The case of Ogle v. Earle Vane (1867) 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 (page 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 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 price"" is based on the express or implied consent of

the sellers.

In the case of Ashmere and Co. v. Cog and Co. (1899) 1 Q.B. 43 there was an agreement by the defendant to sell hemp to the plaintiff, the

shipment to be made between certain dates. 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

special dates. They shipped hemp on a later date (in September) and on October 27th 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.

In the case of Nicholl and Knight v. Ashton Edridge and 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 plaintiff 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 risingmarket 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 Roth Co. v.

Tay Sen (1896) 1 Com. Cases 306. 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 us, 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 Snb-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.

The facts of the case out of which this revision petition arises are simple. Defendant 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.

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

Defendant (petitioner) contends that plaintiffs are only entitled to damages on the basis of the difference between the contract price and the price

on 12th July 1909 when the contract was broken by his failure to deliver. This is the only point argued.

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 for the promissor. As stated in Cunningham and Shephard on Cont tracts: "" It is clear, however, that as the act of the

promisee must be in the nature of a concession advantageous to the promissor rather than to the promisee, so the consequence of the act must be

the relieving of the promissor 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.

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 promisee 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 the 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.

As some sort of safe guard against this being pushed to obviously unreasonable lengths, he admits that the promissor may put an end to the

contract on the expiry of the fixed term or afterwards by specifically stating his unwillingness to perform.

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

unauthorized modification to make it reasonable and workable is not the correct one.

It appears to me that Section 55 read with Section 2(1) means nothing more than this; on the promissor''s failure to perform within the contract

time, he (the promissor) loses the power 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 u/s 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 u/s 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.

This appears to be the natural, 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.