1. This appeal is on behalf of the defendant and arises out of a suit instituted by the plaintiffs to recover from him a sum of Rs. 475 (with, interest) paid to him on the basis of a contract by which the latter agreed to sell to the plaintiffs a piece of land. The contract was an oral one, entered into on 28th Kartick 1335. By it the price was fixed at Rs. 1,375. It is the plaintiff's case that at the date of contract Rs. 375 were paid by them as earliest money and later on a further; sum of Rs. 100 was paid in part payment of the price. There is nothing to show that the last mentioned sum was paid by way of earnest. The plaintiffs came to Court with the case that the balance of the price was to be paid in the month of Magh 1335 at the time of the conveyance, but before that, that is, at some time in Pous 1335, the defendant refused to, sell. The defence is that the time for completion according to the contract was Aughrahan 1335 and that the conveyance, was not executed by him as the plaintiffs failed to find the money. Both the Courts below have held that the contract could not be completed on account of the refusal by the defendant to convey his land, the breach being on his part. Whether the breach was on the part of the defendant or on the part of the plaintiffs, there is no defence to the plaintiffs' claim for the refund of Rs. 100. That was not earnest money and the plaintiffs are entitled to recover it with interest in any event. The question, therefore, is whether the plaintiffs can recover the other sum, namely Rs. 375, which admittedly was paid by way of earnest. It is well settled on the authorities that earnest money is a guarantee for the performance of the contract.
2. If the transaction goes forward it is a part of the purchase price, but if it falls through on account of the default of or breach by the vendee, it is forfeited, in the absence of a contract either express in its terms or to be inferred from the whole contract. 1926 PC 11, 24 CWN 9672, 1930 Bom 2133, and 41 All 3244.
3. If the purchaser says that the earnest has not been forfeited, though the breach is on his part, he has to show that the agreement prevents the forfeiture. This he can do, if the contract says so in plain terms, or if the same can be inferred from all the terms of contract itself. In 9 A & E 5085 such an agreement was inferred from a clause in the contract that the party in default would pay a penalty of £1000, Lord Deenham, C.J, observing that “the intent of the parties being clear, that there should be no other remedy.” Both the Courts below have held that time was the essence of the contract, but have not decided the question as to whether the date for completion was the month of Magh or the month of Aughrahan. If the finding that time was the essence of the contract is a correct finding based on evidence, the question as to what was the time for completion, whether the month of Aughrahan or Magh 1335 is a material one, as the plaintiffs' case is that the defendant refused to sell when an agent of theirs went to him with a part of the balance of the price in the middle of the month of Pous 1335. On looking into the judgments it seems as if the finding that time was of the essence is not based on evidence. The learned Subordinate Judge in one line says that he agrees with the Munsiff's finding on the point. The Munsiff records his findings on the said point in the following terms:
It is quite clear that time was a very prominent material of the contract. As a matter of fact, in a contract for sale of land like the present usually time must have counted. I, therefore, hold that time was an essence of the contract.
4. If he meant to say that time is of the essence of the contract, simply because a period for completion is mentioned in a contract for sale of land, he is certainly wrong. It is not ordinarily of the essence of the contract, but the parties can make it so by express agreement in the contract itself or subsequently by giving reasonable notice to complete on a certain day or if the nature of the property intended to be sold requires it, as for instance if the contract is for sale of a life interest or a mining lease given for a fixed period of time. For the reasons given above I hold that the plaintiffs are entitled to a decree for Rs. 100 with interest, but their claim to the further sum of Rs. 375 which was paid by way of earnest must be further considered, and for that purpose I remand the case to the lower appellate Court. That Court will consider on the evidence the following points: (i) as to whether time was of the essence of the contract; (ii) if so, whether the time of completion was Augrahayan or Magh 1335. If it finds that time was of the essence of the contract and the time for completion was Augrahayan, it will dismiss the plaintiffs' claim to that sum of money, namely to Rs. 375 and interest claimed thereon. If the Court below finds either that time was not of the essence of the contract or that the time for completion was the month of Magh 1335, it will decree the plaintiffs' claim to that sum, for I maintain the finding of the lower appellate Court, which must be taken along with the plaintiffs' case, that the defendant refused to sell the lands in the middle of Pous 1335. The appeal is accordingly allowed in part and the case remanded to the lower appellate Court with directions to decide the plaintiffs' claim to Rs. 375 and interest thereon in the way indicated above. As the success of the appellant is only partial, the parties will bear their respective costs of this appeal. Future costs will be in the discretion of the lower appellate Court.
R.M/R.K
5. Case remanded.
Comments