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Case Number

Original Suit No. 1456 of 1917

Judges

Marten, J.

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Smart Summary

Summary of the Opinion

Factual and Procedural Background

This is an action for specific performance based on an alleged written agreement dated 28th November 1917 (the document sued on, referred to as Ex. A) for the sale by the defendant to the plaintiff of immovable property described in the document (the text of Ex. A refers to the property as "near Play House at Grant Road"; the notice of suit earlier refers to Giant Road). Ex. A exists in duplicate (Ex. A and Ex. A‑1), both in Gujarati, but the duplicates are drafted in the first person and contain some slight differences in wording.

Key provisions of Ex. A included a recital of the sale price (Rs. 2,15,000), a formal description of the property, and a set of numbered conditions. Clause 1 provided that "The bargain paper for the sale of the said immovable property shall be made through a vakil within two days from this date" and specified the payment of earnest money at the time of making that bargain paper. Clauses 2 and 4 referred to two pending suits in the High Court and prescribed consequences depending on their outcome; other clauses addressed costs, signatures of an adopted son, and brokerage.

After Ex. A was signed on 28th November 1917 by the defendant, the defendant's solicitors prepared a draft contract in English. The parties did not agree on that draft and the plaintiff instituted the present suit for specific performance. The plaintiff's solicitors corresponded (letters dated 30th November and 3rd December 1917) indicating that they were altering the draft without prejudice to the plaintiff's rights under Ex. A, which they maintained was a binding agreement.

The defendant defended on the ground that Ex. A did not constitute a concluded contract but only an agreement to enter into a further formal bargain paper (i.e., an agreement to agree) which is not enforceable. The court heard the matter, considered authorities and the construction of Ex. A, answered the formal issues, and dismissed the suit with costs.

Legal Issues Presented

Whether the document Ex. A (dated 28th November 1917) is a binding and enforceable contract or whether it is merely an agreement to enter into a further formal bargain paper (i.e., an agreement to agree) and thus not enforceable.
Whether the slight differences in wording between the two duplicates (Ex. A and Ex. A‑1) preclude the existence of a concluded agreement or indicate that no bargain was to arise until a formal bargain was executed in a vakil's office.

Arguments of the Parties

Plaintiff's Arguments

The plaintiff maintained that Ex. A was a binding agreement and sought specific performance of that contract.
The plaintiff's solicitors participated in preparing and amending the English draft "without prejudice" to the plaintiff's rights under Ex. A, indicating an insistence that Ex. A itself was binding (letters of 30th November and 3rd December 1917 are referred to).
The plaintiff argued that the requirement of a bargain paper was to obtain a formal English document (because Ex. A was in Gujarati) rather than an indication that the parties were not finally bound by Ex. A.

Defendant's Arguments

The defendant relied principally on Clause 1 of Ex. A, arguing that the express reference to a bargain paper to be prepared "through a vakil" prevented Ex. A from being itself a concluded contract and made completion subject to execution of that bargain paper.
The defendant raised a preliminary point that the two duplicates (Ex. A and Ex. A‑1) differed slightly in wording (for example, "bargain paper" in Ex. A and "bargain" in Ex. A‑1) and that these differences either prevented an agreement or showed an intention that no bargain was to arise until formalised in a vakil's office.
The defendant pointed to the terms fixing the payment of earnest money at the time of execution of the bargain paper (and not on Ex. A) as supporting the contention that the bargain paper was an essential condition precedent to a binding contract.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rossiter v. Miller	When parties reserve the right to withdraw if a later formal contract does not represent what they intended, it is a question of construction whether they intended to be bound before execution of the formal document.	The court cited Rossiter to frame the general principle that the intention of the parties, as gathered from the document, determines whether a prior writing is binding or subject to a later formal contract.
Winn v. Bull (Sir George Jessel)	A written agreement will be a contract if terms agreed are complete; if some terms are left to be submitted to a solicitor (or similar) for approval, then there is no contract because all terms have not been settled.	The court relied on this principle to examine whether Ex. A left material terms to be settled by a vakil and thus was not a concluded contract.
Von Hatzfeldt Wildenburg v. Alexander (Parker, J.)	If documents contemplate execution of a further contract, it is a question of construction whether that further contract is a condition precedent (in which case no enforceable contract exists) or merely expresses desire about how the transaction will be formalised.	The court applied this reasoning and treated the reference to a bargain paper in Ex. A as a condition which, on construction, prevented Ex. A from being an enforceable contract.
Ridgway v. Wharton (Lord Cranworth)	The intention to have a subsequent formal agreement drawn up is strong evidence that the parties did not intend previous negotiations to amount to a binding agreement.	The court quoted this as supportive authority for the proposition that an intention to execute a later formal document can show there was no intention to be finally bound by the earlier writing.
Lloyd v. Nowell (Kekewich, J.)	Authority holding that, where appropriate, the contemplation of a further formal document can mean no binding contract exists.	The court noted this later authority as reaching conclusions similar to those in Von Hatzfeldt—supporting the view that Ex. A was not a binding contract.
Watson v. McAllum (Joyce, J.)	A case fairly near to the present facts, concluding that contemplation of a further formal document indicated no binding contract.	The court treated Watson v. McAllum as analogous authority reinforcing the construction that Ex. A was not a concluded contract.
Koylash Chunder Doss v. Tariney Churn Singhee	Indian authority relying on the same principles as the English authorities about contracts subject to formal documents.	The court acknowledged this Indian authority as consistent with the English line of decisions and supportive of its conclusion.
Whymper & Co. v. Buckle & Co.	Another Indian authority applying similar principles regarding the effect of references to subsequent formal documentation.	The court referred to it as relying on the same principles and as supporting the outcome reached in the present case.

Court's Reasoning and Analysis

The court proceeded in stages:

Preliminary point—duplicates: The court examined the alleged discrepancy between Ex. A and Ex. A‑1 and concluded there was no substantial difference. In particular the difference between the words "bargain paper" (in Ex. A) and "bargain" (in Ex. A‑1) was held immaterial. The court therefore rejected the preliminary point and proceeded on the basis that either duplicate could be used.
Principle of construction: The court reviewed established authorities (both English and Indian) emphasizing that where documents contemplate the execution of a further or more formal contract, it is a question of construction whether that further contract is a condition precedent or merely a desired formalisation. The court quoted and relied on Rossiter v. Miller, Winn v. Bull, Von Hatzfeldt Wildenburg v. Alexander and others to frame the applicable test.
Application to Ex. A: The court focused on the text of Ex. A, in particular the introductory phrase "the conditions in respect thereof are as follows" and Clause 1 requiring the bargain paper to be made through a vakil. Reading Ex. A in context, the court considered the reference to the "bargain paper" to be a condition rather than a mere description of how a sale would be carried out.
Supportive factual indicia: The court observed additional facts supportive of the view that the bargain paper was intended to be essential: the earnest money was to be taken at the time of the bargain paper (not on execution of Ex. A); the existence of two pending High Court suits created a particular reason for requiring vakil involvement and a formal bargain paper; and the plaintiff's explanation that the bargain paper was merely to obtain an English text (since Ex. A was in Gujarati) did not, in the court's view, suffice to show the parties intended to be finally bound by the Gujarati document alone.
Conclusion on construction: Applying the authorities and the textual and factual indicators, the court concluded that Ex. A contemplated a further formal bargain paper as a condition precedent to a binding contract. Therefore Ex. A was not, on true construction, a binding contract.
Consequential observations: The court added that even if it had found a binding contract it could not have decreed specific performance at that stage because the two High Court suits referred to in Ex. A were not yet tried; their outcome affected whether the defendant had anything to sell. The court said that, at most, it could have declared the existence of a binding contract and adjourned remaining issues until after the High Court suits were decided; counsel for the plaintiff accepted that position.

Holding and Implications

Holding: The suit is dismissed — there is no binding contract between the plaintiff and defendant based on Ex. A.

Immediate consequences for the parties:

The court dismissed the suit for specific performance and awarded costs against the plaintiff.
The court formally answered the issues pleaded as follows: (1) Whether the suit is maintainable given that the writing sued on was conditional upon an agreement being entered into? — Answer: No. (2) Whether there was a concluded contract between the parties and if so, what are the terms thereof? — Answer: No. The court considered the remaining issues unnecessary to decide.
The court noted that even had it found a binding contract it could not at that time have granted specific performance because the pending High Court suits might eliminate the defendant's ability to sell; the most that could have been given was a declaratory finding and further proceedings adjourned until those suits were decided (a position which counsel for the plaintiff accepted).

Broader implications: The opinion applies established principles of contract construction concerning writings that contemplate a later formal agreement. The court did not purport to lay down any new principle of law; rather it applied existing English and Indian authorities to the facts before it.

Disposition: Suit dismissed with costs.

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Govind Laxman Gokhale v. Harichand Mancharam

1. This is an action for specific performance of an alleged contract dated 28th November 1917 for the sale by the defendant to the plaintiff, of a property at Giant Road for Rs. 2,15,000. The defence is that there was no concluded contract, but merely an agreement to enter into a contract, which in law amounts to nothing. The point is that in the document sued on, there is a reference, to a further document being executed, and the question is whether that reference prevents the document sued on being an enforceable contract. The document sued on is in duplicate, but as each duplicate is in the first person, the words of each part are not precisely the same. There are also some other differences in the precise wording of the two duplicates which I will consider liter on. Both duplicates are in Gujarati. Taking the duplicate Ex. A, signed by the defendant, it ran thus:

“To Govind Laxman Gokhale. Given in writing by Harichand Mancharam. To wit. What is written is as follows: I agree to sell you for rupees two lacs and fifteen thousand my immovable property near Play House at Grant Road.”

2. Then follows a formal description of the property. Then the document proceeds:

“The conditions in respect thereof are as follows: (1) The bargain paper for the sale of the said immovable property shall be made through a vakil within two days from this date and at the time of making the bargain paper I am to take from you by way of earnest money in respect thereof Rs. 10,000, that is to say, you are to pay the same to me, and as regards rupees two lacs and five thousand, being the balance, you are to pay the same to me at the time of the execution of the sale deed by me.”

3. Then Cl. 2 refers to certain suits in the High Court pending against the defendant, the vendor, and that if those suits are decided against him, the bargain is to be cancelled and the deposit returned. Then Cl. 3 provides for sharing the costs of the sale equally. Cl. 4 deals with the completion of the sale and fixes it at six months from the date of the bargain paper. Then it proceeds:

“On the decision in the case being given in my favour during the said period, I am to get passed marketable titles for you and to complete the matter of sale. If perchance the suits pending in the High Court are not disposed of within six months, then this agreement shall be in force till the disposal of the said suits and on the said suit being decided in my favour, I am to complete the matter of this sale; and if the High Court suits be decided in my favour within six months, I am to complete and you are to get completed the matter of sale within six months.”

4. Then Cl. 5 provides for the vendor getting the signature of a certain adopted son along with the vendor's signature on the sale deed. Cl. 6 says that the defendant has not to pay brokerage. Then the document concludes:

“I have given and have taken from you the agreement to the above effect of my and your free will and pleasure.”

5. Then follows the date, 28th November 1917, and the signature of the defendant. What happened afterwards was that the defendant's solicitors prepared a draft contract in English, but that eventually the parties did not agree on its terms and consequently this suit was brought. It should be observed that the plaintiff's solicitors, Messrs Khanderao, Laud and Metha, in entertaining and altering this draft contract, were particularly careful to do so without prejudice to their client's Tights under the existing document, Ex. A, which they contended was a binding agreement: see their letters of 30th November and 3rd December 1917. Turning then to the document sued on, Ex. A, the defendant relies on Cl. 1 and he says that the reference to a bargain paper prevents any contract being arrived at until that bargain paper has been executed. He also relies on what is perhaps a preliminary point, namely, that there is a slight difference in the wording between the two duplicates, Ex. A and Ex. A-1, and that difference either prevents an agreement being arrived at, or alternatively shows that there was to be no bargain unless and until it was arrived at in a vakil's office. As regards what I have called the preliminary point, I do not think there is any substantial difference between the two duplicates. In particular, as regards Cl. 1, I think it immaterial that the second sentence speaks in Ex. A of “bargain paper” and in Ex. A-1 of “bargain.” I think therefore that the preliminary point fails and that it is immaterial which duplicate is used. I accordingly come to the main question, viz., whether the document Ex. A is a contract, or is in law nothing. Questions of this description arise very frequently in England and the case on either side of the line depend on rather fine distinctions of wording. Consequently, any particular case may well give rise to difference of opinion. Speaking generally the authorities say that in each case the question is one, of construction of the particular-document as to what was the intention of the parties. These authorities include judgments of such eminent Judges as Lord Blackburn, Sir George Jessel and Lord Parker, and one cannot do better than quote what they say. In Rossiter v. Miller (1) Lord Blackburn at p. 1152 said as follows:

“Parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in the shape, they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement. I think the decisions settle that it is a question of construction whether the parties finally agreed to be bound by the terms though they were subsequently to have a formal agreement drawn up.”

6. In Winn v. Bull (2) Sir George Jessel said:

“I take it the principle is clear. If in the case of a proposed sale or lease of an estate two parsons agree to all the terms and say we will have the terms put into form then all the terms being put into writing and agreed to, there is a contract. If two persons agree in writing that up to a certain point the terms shall be the terms of the contract, but that the minor terms shall be submitted to a solicitor, and shall be such as are approved of by him, then there is no contract, because all the terms have not been settled.”

7. Then at p. 32 he said:

“It comes therefore to this: that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail.”

8. In Von Hatzfeldt Wildenburg v. Alexander (3) Parker, J., (as he then was) said at p. 288 as follows:

“It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a farther contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. The act that the reference to the more formal document is in words which according to their natural construction import a condition is generally, if not invariably, conclusive against the reference being treated as the expression of a mere desire.”

9. I do not think it necessary to go through the other English authorities, but I may quote what Lord Cranworth says in Ridgway v. Wharton (4), viz.:

“I again protest against its being supposed, because persons wish to have a formal agreement drawn up, that therefore they cannot be bound by a previous agreement, if it is clear that such an agreement has been made; but the circumstance that the parties do intend a subsequent agreement to be made is strong evidence to show that they did not intend the previous negotiations to amount to an agreement”

10. I may also state that of later authorities Kekewich, J., in Lloyd v. Nowell (5) and Joyce, J., in Watson v. McAllum (6) both arrived at similar conclusions to Parker, J., in Von Hatzfeldt Wildenburg v. Alexander , viz. that there was no contract. The latter case of Watson v. McAlhim is fairly near the present one. Two Indian authorities, Koylash Chunder Doss v. Tariney Churn Singhee (7) and Whymper & Co. v. Buckle & Co. (8), were cited to me and they rely on the same principles as the English authorities. Now applying to Ex. A, the principles laid down in the above judgments, I think the words “the conditions in respect therefore as follows” are important, and that it is also important that the first of the conditions referred to is for a bargain paper through a vakil. The reference to the more formal document (viz., the bargain paper) is therefore a “condition,” and according to Lord Parker, that fact is

“generally, if not invariably, conclusive against the reference being treated as the expression of a mere desire.”

11. Further, I think there was a special reason here for the parties requiring the services of a vakil before they were to be finally bound. That reason was the situation with reference to the two High Court suits which was a peculiar one, and which Cls. 2 and 4 of Ex. A might not entirely meet. Then, too, I think it is in favour of the defendants that the earnest money was to be paid on the execution of the bargain paper and not on the execution of Ex. A. Counsel for the plaintiff argued that the reason for the bargain paper was because Ex. A was in Gujarati and the parties wanted a formal document in English. I do not think this was “the” reason. It may perhaps have been a reason amongst others, and even if so, I am by no means satisfied that it points to the parties being finally bound by the Gujarati document.

12. I have duly considered the other arguments that were addressed to me on the true construction and effect of Ex. A. In the result I am of opinion and so hold that on the true construction of Ex. A, and in the events which have happened, there is no binding contract between the plaintiff and defendant. The suit will therefore be dismissed with costs. I should add that if I had been of opinion that there was a binding contract, I could not at this stage have decreed specific performance. The two High Court suits referred to in Ex. A have not yet been, tried, and it depends on their result whether the defendant has anything to sell. At most therefore I could have made a declaration as to the existence of a binding contract, and adjourned the remaining issues till after the decision of the two suits. In his reply, counsel for plaintiff admitted that this view was correct and expressed his willingness to abide by it. I answer the formal issues as follows:

(1) Whether the suit is maintainable having regard to the fact that the writing sued on was conditional upon an agreement being entered into?—A. No. (2) Whether there was a concluded contract between the parties and if so, what are the terms thereof?—A. No. It is unnecessary to answer the remaining issues.

G.P/R.K

13. Suit dismissed.

Govind Laxman Gokhale v. Harichand Mancharam

Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiff's Arguments

Defendant's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Govind Laxman Gokhale v. Harichand Mancharam

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