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Simon Reuben v. Haji Shaikh Mahomed Shustary
Factual and Procedural Background
The plaintiff sued for specific performance of an alleged agreement with the first and second defendants to let the third (top) floor of a building on the Ballard Estate. The written agreement (Ex. A) provided to rent the top floor for five years with a five-year option at Rs. 1,500 per month from completion, and recorded payment of a three months' rent deposit of Rs. 4,500 on signing. The trial Judge decreed specific performance, directing the defendants to execute a lease on those terms. The defendants appealed.
Legal Issues Presented
- Whether the document Ex. A constituted a concluded, enforceable agreement capable of specific performance.
- Whether the words "subject to the conditions and entering into a regular lease" operate as a condition precedent preventing a definite agreement.
- Whether the Court could order specific performance of the arrangements set out in Ex. A given any uncertainty or conditions.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Govind v. Hirachand. (1) | Authority that the effect of the words "subject to" is to introduce a condition or proviso. | Relied upon to support the conclusion that Ex. A was subject to a condition precedent and not a concluded agreement. |
| Winn v. Bull (2) | Held that the effect of the words "subject to" was to introduce a condition or proviso. | Applied to construe "subject to the conditions and entering into a regular lease" as creating a condition precedent preventing specific performance. |
| Lloyd v. Nowell (3) | Held that the effect of the words "subject to" was to introduce a condition or proviso. | Applied similarly to conclude Ex. A was not a final agreed lease but dependent on a later formal lease. |
| Watson v. McAllun (4) | Held that the effect of the words "subject to" was to introduce a condition or proviso. | Used to reinforce the court's view that the document left essential matters to be settled and depended on execution of a regular lease. |
Court's Reasoning and Analysis
The court concluded Ex. A could not be treated as a concluded contract for specific performance for these reasons:
- Its terms were too uncertain to be reduced to a formal lease; many terms remained to be agreed and could be altered in drafting.
- The phrase "subject to the conditions and entering into a regular lease" made entering into a regular lease a condition precedent to any definite agreement between the parties.
- The learned Judge's view that "subject to conditions" meant merely "usual conditions" was rejected because the word "usual" does not appear in the document and, even if such conditions were identified, the additional phrase "subject to entering into a regular lease" still imported a condition precedent.
- The court relied on precedent (Govind v. Hirachand; Winn v. Bull; Lloyd v. Nowell; Watson v. McAllun) holding that "subject to" introduces a condition or proviso, and applied that principle to hold the agreement was the result of preliminary negotiations rather than a final, enforceable lease.
- As a consequence, the court found it could not direct specific performance of Ex. A because the final agreement depended on execution of a regular lease to be prepared and agreed.
- Regarding the deposit, the court directed that defendants may apply to the Court of first instance under section 144 of the Code of Civil Procedure; the deposit may be retained for a fortnight after this Court's decree is sealed to enable that application, failing which the deposit must be returned.
Holding and Implications
Appeal allowed; the suit is dismissed with costs throughout.
Direct consequences: the trial decree for specific performance was set aside and the plaintiff's suit dismissed. The defendants may apply under section 144 CPC concerning the deposit; the deposit may be retained for a fortnight after sealing to permit that application, otherwise it must be returned. The opinion does not state broader legal innovations; it applies established authorities on the effect of "subject to" and no new precedent is announced.
Macleod, C.J:— The plaintiff filed this suit for specific performance of an alleged agreement with the first and second defendants to let the third floor of a building on the Ballard Estate. The agreement which he asked the Court to specifically perform is at page 1, Part III, and runs as follows.
“We agree to rent to Mr. Haji Shaikh Mahomed Shustary the top floor of our building under construction at Plot No. Ballard Estate for a period of five years and five years' option at a monthly rent Rs. 1,500 only from the date of the completion of the same subject to the conditions and entering into a regular lease. A deposit of three months' rent amounting to Rs. 4,500 only is paid on signing of this contract.”
2. The learned Judge has passed a decree in favour of the plaintiff directing the defendant to specifically perform the agreement and execute in favour of the plaintiff a lease of the third floor of the building situated on the Ballard Estate for a term of five years from the completion of the said building, with an option to the plaintiff for a further period of five years at a monthly rent of Rs. 1,500 such lease to contain the usual covenants.
3. The defendants have appealed.
4. We are of opinion that the document Ex. A could not be considered as a concluded agreement. First it would be impossible for the parties to draw up a formal lease in accordance with this document because its terms are too uncertain to be reduced to a formal document, and secondly, it contains the words “subject to the conditions and entering into a regular lease”, which made the “entering into a regular lease” a condition precedent to the parties coming to a definite agreement.
5. The learned Judge has considered that the words “subject to conditions” means “usual conditions”, namely, conditions which have to be incorporated in a formal document when prepared by a solicitor. But the word “usual” is not in the document, and, even if it were it would only amount to this, that when a formal document came to be prepared, the draftsman could enter in the document the usual covenants which are to be found in leases of office buildings in Bombay, and it would be open to the other side either to alter or add to those conditions, and it would be only when the drift had been finally agreed to, that the terms of the lease could be ascertained.
6. But even if the nature of the conditions has been defined, and no room for further discussion was left, the words “subject to entering into a regular lease” would remain to be construed, and it is difficult to see how one could avoid bringing the case within the authority of Govind v. Hirachand. (1), in Winn v. Bull (2), Lloyd v. Nowell (3), and Watson v. McAllun (4), it was held that the effect of the words “subject to” was to introduce a condition or proviso.
7. It seem obvious to me, therefore, that this is a document which the Court cannot possibly direct to be specifically performed. It was merely the result of preliminary negotiations which defined a portion of the terms to appear in the lease as eventually settled, while it left a great many of the terms to be agreed upon thereafter, so that the final agreement between the parties depended on a regular lease which was to be executed.
8. The appeal, therefore, must be allowed and the suit dismissed with costs throughout.
9. With regard to the deposit the defendants can apply to the Court of first instance under section 144 of the cpc. The deposit can be retained for a fortnight after the decree of this Court is sealed, in order to enable them to make that application. If the application is not made, the deposit will have to be returned.
10. Appeal allowed.
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