Bengal Agency And Stores Syndicate v. T.N. Khanna

JUDGMENT

1. (15th March 1944). I am indebted to Mr. B.C Dutt for his spirited and sensible address in a matter which, if my view is correct, was difficult for him and for his client.

2. The suit relates to a sale of 40,000 sets of tea chests made, according to the pleadings and the evidence, on 7th January 1942, the sale being by the defendant to the plaintiff at the price of Rs. 15/3 per hundred square feet. To the conditions for delivery I will refer in a moment.

3. It is common ground that the deliveries stated in the buyer's letter of 7th January 1942, were not made. Indeed, by August 1942, with the exception of one lot of 1000 sets which were taken by the buyer at a slightly increased rate, and which the seller contends should be taken against this contract, it is common ground that only 10,560 were delivered. The buyer's case is that on 8th August the contract was cancelled by mutual agreement, and the principal fact in the buyer's favour is that on that date the deposit of Rs. 2000 made by the buyer by virtue of one of the terms of the contract was returned and a receipt obtained. In further support of the case of cancellation, it is pointed out that from August to November no written claim was made; indeed, if I recollect correctly during this period, no claim at all.

4. As matters stand, the issue of fact as to cancellation is, apart from damages, the only issue in the suit. It so remains, because at the beginning of the hearing Mr. Dutt's application to amend by adding a substantive defence based on the printed clauses of the contract pleaded in para. 1 of the written statement was refused. The reasons for the order were stated by me at the time, and may be appended for convenience to this judgment.

5. The printed clause in question, to be found in red at the bottom of the seller's note-paper reads as follows:

“All goods are offered subject to stocks. Delivery times mentioned are subject to delays due to war, strikes and/or other considerations beyond defendant's control. Prices subject to change without notice.”

6. I seriously recommend to the commercial community avoidance of the lawyer's habit of not numbering’ clauses, and for the purpose of this judgment I number these cls. 1, 2 and 3. For reasons which I hope to explain, they may be affected by very different considerations.

7. Notwithstanding the refusal of the amendment and therefore the absence of a substantive defence based on these clauses, the matter has become relevant and interesting by reason of the argument of Mr. Dutt based on them in connection with the cancellation. Mr. Dutt contends that whatever the legal position, the parties have their own view of these terms, that they are usual at the present time, and that because of them the cancellation was by no means improbable.

8. As however the effect of these terms has come to be discussed before me, although for a secondary purpose, because it seems to me that the effect of terms such as these is a matter of much importance to the commercial community and because it may be that owing to some misconception as to their effect, parties (as I think is possible in this case, speaking of the defendant) put themselves and put others into situations extremely awkward, I propose to express some opinion without having perhaps had sufficient time to consider Mr. Dutt's argument and the case that he has been good enough to put before me.

9. I will first eliminate cl. 2, “Delivery times mentioned, etc.” To this I have no objection in law. In my opinion, it is immaterial to the present case and the present defences. It is unwise for parties to such a contract to disregard any clause referring to times of delivery being excused because they are in print and not in writing, or because they appear at a particular place on a sheet of paper. That is dangerous. Had it been necessary in this case, I should have had to decide whether the printed clause could stand paramount to the typewritten cl. (6) of the buyer's letter of 6th January. It is unnecessary.

10. Mr. Dutt's main argument, however, is based upon the other two clauses. Less turns upon cl. 3, “Price subject to change without notice,” but still something not only relevant to the issue, but also, again, of much interest. One lot of 1000 sets, as I have already stated, was accepted by the buyers at a rate slightly higher than the contract price. Mr. Dutt contends, that this was not a separate delivery, a delivery de hors the contract, but a delivery under the contract, which the buyers were bound to accept at a higher price owing to printed clause 3.

11. (16th March 1944). When I broke off yesterday I was dealing with the printed clauses at the bottom of the seller's letter paper, and I had concluded my remarks with regard to the clause I had marked (2) relating to times for delivery.

12. An observation which applies to all three clauses and which I should have made in the proper place is that having regard to the fact of the offer of 7th January by the buyers, and its acceptance of the same date by the sellers, a question arises how far, if at all, the first letter of 2nd January is a part of the contract. In other words, whether it is not in the nature of a tender.

13. I had begun to observe, subject to this general consideration, on cl. (3) relating to price, a matter of no little general interest, since Mr. Dutt has told me, and it appears to be the case, that many so-called contracts, now, owing to war conditions contain clauses of this nature. I presume the meaning of this clause to be that the seller may at his option change the price, not the buyer. The question is, in this case, material to, first, a limited point that relating to the one delivery of a thousand cases, and secondly, to a general point as indicating, according to Mr. Dutt's argument, the elastic or kutcha nature of the contract rendering an adjustment possible, or probable. The manner in which the parties may have regarded it, I may have to consider hereafter in discussing the issue of fact, adjustment, or no adjustment. As, however, its effect in law has been discussed, I will express tentative opinion, and indicate, at any rate, where the law on this point can be found. As at present, advised, and although it is not essential for the decision of this case, I am of opinion that a contract in which after a price has been mentioned, the seller has it in his own power to vary that price at will with apparently the consequence that the buyer may either accept his price, or not, is no contract at all. I have not looked up the authorities, but the relevant passage will be found in Leake on Contracts at the beginning of chap. V (see Contract of Service) Loftus v. Roberts, (1902) 18 T.L.R 532). I am of opinion that while it is possible to make a contract with an implied term that the prices shall be reasonable, while it is possible to make a contract where the price has to be fixed by a third party, it is not possible to make a contract where the pries' is variable at the option of the seller. So much for the legal effect. On the facts, I am of opinion that the contract was at a fixed price, and that, was the agreement between the parties. I am further of opinion that cl. (3) of the printed clauses since for among other reasons it is proper to adopt a construction consistent with legality that cl. 3 is one appropriate to a document off tender and not to a contract of sale.

14. The same conclusion and the same view is the one I take of cl. 1 upon which Mr. Dutt mainly relies, the one which reads all good (should be “goods”) “are offered subject to stocks.” The first question, (is?) the meaning of this clause or phrase. What are stocks? I am not convinced that the gentleman who made the arrangement, whatever it is, on the part of the sellers is clear on the matter. The letter of 2nd January refers in two places to stocks — “we in form you that we are probably the biggest stock holders for the year 1942,” and again, “we request you to order your quantity immediately as was shall then be in a position to reserve that stock for you.” Either it is a complete exaggeration, for, admittedly, the sellers had at that time no stocks or it must be read, as Mr. Dutt suggested it should be read, as equivalent to goods in respect of which a contract has been made with third parties, and therefore, it should read or he construed as subject to deliveries by the person from whom the sellers themselves bought them, in this case, the Indian Plywood Industries. In my opinion that is not a correct meaning of the word “stocks,” and if used in that sense it is an incorrect use. In my opinion, further the whole clause “offer subject to stocks” is appropriate again to a document of tender, the emphasis being on the word “offer.” Mr. Dutt, however, again, has relied upon the fact that such clauses have become general in contracts at the present time, contracts by which the seller so limits his liability as to make his duty to deliver an illusion. He has contended on an authority to which I shall immediately refer, in the first place, that such contracts are legal, and in the second place, again, that they are accepted in the market, or they are so familiar to the market that the parties treat them as what I have called kutcha contracts; hence again, probability of settlement, or cancellation on 8th August 1942. Again, although it is not essential to decide the legal point, Mr. Dutt has called my attention to a case recently decided by my learned brother Gentle, J., in Radkaleissen Mull v. Sohanlal Mohanlal, 47 C.W.N 86. The contract was held to be a contract of sale, and the clause the subject-matter of construction was that “if the goods were not delivered for any cause whatsoever the contract of sale should be null and void.” The learned Judge who had the benefit of Mr. Butt's argument on the side of the buyers, who sued for damages for non-delivery held that the provision was not unlawful, that the parties could agree to anything and that there was no right of relief in the buyer. I do not by any means differ from the learned Judge with regard to the freedom of the parties to make any bargain or arrangement. In that case it made no difference whether the clause was regarded as good, and therefore, a protection against the buyer, or whether the contract was regarded as wholly void. It was, therefore, not necessary for the learned Judge to observe any distinction between the two things. They are, however, very different in principle, and in other circumstances they may be very different in practical result, for instance, in a suit by the seller. Again I propose to express a tentative opinion that a contract which reserves to the seller a complete liberty or latitude to deliver or not to deliver or to make the contract, void as is resolved in the clause with which Gentle, J., was dealing is no a contract at all: not a contract, but a carrot used for the purpose of attracting that useful animal, the buyer. I refer only to the passage in the text book which formulates the general principle, Leake on Contracts p. 3 which reads as follows:

“An agreement as the source of a legal contract imports that the one party shall be bound to some performance which the latter shall have a legal right to enforce promissory expressions reserving to the promisor an option as to the performance do not create a contract.”

15. A hope is not a contract. To create hopes is not a contract.

16. One last observation as I have taken it upon myself to say something about commercial practice and its effect because from the statement of the defendant in the case, and also from the argument of defendant's counsel Mr. Sinha there appears to be some misconception as to the effect of printed clauses. Fundamentally, as I under-stand the law, there is no difference whether a clause of a contract, and my observations are intended in some sense as a warning, fundamentally, there is no distinction between a clause of a contract which is written, which is typewritten or in manuscript. Prima facie all are of equal effect. Nor can any sure indication be found from the position of the clause in question. On the other hand, where printed and written clauses are inconsistent, no doubt there are authorities which show that greater force must be given to the manuscript. There are also cartain classes of contracts, for instance, contracts of special insurance where it is a matter of re-cognised practice or usage to leave in the contract many printed clauses which the parties, and therefore the Court disregards. So far as I know that does not apply to ordinary contracts of sale. It is therefore dangerous to disregard anything which appears on the face of an ordinary contract of sale.

17. The views I have expressed are based on authorities which may be found in Benjamin on sale.

18. That is my view as to the effect of the first printed clause in law. Assuming however its validity, it should appear in the contract in most explicit manner possible that such a clause is paramount to anything that is stated, and in my opinion, whatever its effect, the first clause “all goods are offered subject to stocks” does not in any way over-ride or affect the terms of the agreement for purchase and sale of 40,000 chests. In my opinion, such a clause, if I have not said so before, is appropriate rather to tender than to contract, and that is my ruling. There was, therefore, in this case, an ordinary contract of purchase and sale, the question is, was it cancelled, and that is the only question to be considered.

19. Mr. Dutt argued, and with skill that whatever may be the legal effect, or whatever might be my construction of the contract, the parties regarded it as something which is only half a contract and therefore, cancellation was normal. Secondly, in order to show that the parties so regard it, and so dealt with it, Mr. Dutt relies upon the following considerations. First that the actual deliveries contracted for in the months of January to April 1942 were not insisted upon. Secondly, that the buyer knew that his seller, the defendant, had entered into a contract with the Indian Plywood Industries, and indeed, the buyer addressed the Indian Plywood Industries direct with regard to shipments. Thirdly, that in the original offer of 2nd January 1942, or as I consider it, the tender, it appears-that the goods were offered at “cost price”; that this was known to the buyer and that the matter was one of friendship rather than business; be relies of course upon the fact that the deposit or security of Rs. 2000 was returned to the buyer on 8th August 1942 and there appears nothing in writing to show that the contract remained outstanding. Lastly, that after 8th August there is no demand until the attorney's letter of 11th November.

20. Now, the difficulties in the way of such a case are, first of all, that the letters introducing and constituting the contract are redolent of business and of “big business”, not of friendship.

21. As regards the defendant, while it is true that he did not immediately make contracts of re-sale or cover himself in that matter, there was no reason why he should; the buyers are substantial parties, they were quite accurate in their estimate that the market was rising. Again, the defendant as a witness is faced with the difficulty of his letters, private letters no doubt, which admit that he was selling in the market and had committed a fault or wrong. My own view is that—these sales were not so much for the purpose of making improper gains, as to create a name in the market for the concern which be hoped to make famous. It may also be that the seller himself, the defendant, was misled, as I think, or confused himself with the strong terms which, possibly, in his opinion rendered this bargain something less than a contract, a view with which I disagree. According to his statement he made a perfectly good contract with his own sellers. I have found that he made the same kind of a bargain with his buyers.

22. There remains the strongest point in the defendant's favour the return of the deposit. But it may equally, and in my opinion, more strongly be argued that here was a written bargain of an important nature and if it was intended to bring such a contract to an end one would expect that to be done in a equally normal and regular manner.

23. I accept the evidence on the part of the plaintiff that he regarded this as an ordinary business transaction. If he did, and of that I have no doubt, what reason was there for him to cancel the whole benefit of the balance of the contract. I accept his explanation of the transaction of the 8th, and of the delay in demanding delivery thereafter. As regards the defendant, he seemed a pleasing, good-looking young man. Mr. Sinha contended that he was not quite so innocent as he looked. I still think that he has depended mainly upon others, possibly the manager, whom he was not in a position to call, who was, according to him, responsible for the style and mannar of the original offer. That should remain upon the record, in original.

24. I am far from desiring to discourage our young intellectuals from taking to business, but I would reverse the suggestion made by the defendant in one of his letters, not to introduce business into an affair of friendship, I would not let sentiment or imagination, into affairs of business. Simplicity is also desirable. He has made, according to my finding, a contract with the plaintiffs, it has been broken, and the plaintiffs are entitled to the ordinary measure of damages, the difference between the contract and the market price. The defendant seller has apparently been put into this position by the failure to receive supplies under his own contract made in January 1942 or thereabouts with the Indian Plywood Industries; with regard to that, I must; express no opinion since it is the subject of another suit. I am unable, however, to accept Mr. Dutt's argument that breach, if any, by the original supplier or contractor has anything to do with breach of the contract by the defendant to supply to the plaintiff.

25. As regards the measure of damages, it would have been possible, in my opinion for the plaintiffs to claim the difference at a reasonable time from the 8th August. They have, however, asked for the difference at the rate prevailing in that month, based upon certain transaction in Indian Plywood of other manufacture. There is nothing to suggest that such plywood differed in quality or that the price should be different, and I therefore make a decree for Rs. 75,498-0-3. Certified for two counsel.

R.G.D

26. Decree accordingly.