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P.L Rangiah Chettiar v. Parthasarathi Iyengar.
Factual and Procedural Background
This opinion arises from a second appeal preferred by the defendant concerning whether a contract to sell goods can be assigned by the seller to enable the assignee to sue for damages for breach of contract upon tender of performance. Both lower courts held that the assignee tendered the goods within the due date, the defendant breached the contract by refusing delivery and payment, and was liable for damages. The legal objection to assignment was overruled by the lower courts.
Legal Issues Presented
- Whether a contract to sell goods can be assigned by the seller so that the assignee may sue for damages for breach of contract upon tender of performance by the assignee.
Arguments of the Parties
Appellant's Arguments
- The appellant relied on the general legal principle that a promisor cannot assign his liabilities under a contract.
- The promisee cannot be compelled by the promisor or a third party to accept anyone other than the promisor as the liable party.
- Several leading English cases were cited to support this position, including British Waggon Co. v. Lea, Tolhurst v. Associated Portland Cement Manufacturers, Nokes v. Doncaster Amalgamated Collieries Ltd., and Davies v. Collins.
- Reference was also made to Indian cases such as J.H Tod v. Latchmidas Purushotamdas and Jaffer Meher Ali v. Budge Budge Jute Mills Co.
Respondent's Arguments
- The respondent referred to Section 40 of the Indian Contract Act, emphasizing that unless the contract specifically requires personal performance by the promisor, the promisor may employ a competent person to perform it.
- The contract in question was not personal in nature, and the seller’s right to deliver goods is analogous to the buyer’s right to receive goods upon payment, both constituting actionable claims capable of assignment.
- It was argued that the assignment does not merely transfer a right to sue for damages but transfers rights under a contract still to be performed on both sides.
- Reference was made to the decision in Dayabhai Dipchand v. Dullabhram Dayaram supporting assignment of contract rights.
- The practice of assigning such contracts is widespread commercially, particularly in Madras, and rejecting the assignment would disrupt this established usage.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| British Waggon Co. v. Lea | General principle that a promisor cannot assign liabilities and promisee must accept promisor only | Used to explain the foundational rule and its exceptions regarding assignment of contract obligations |
| Tolhurst v. Associated Portland Cement Manufacturers (1900, affirmed 1903 A.C 414) | Exceptions to the rule of non-assignability where contract nature permits performance by assignee | Held that the contract could be performed by assigns without violating parties' intentions |
| Nokes v. Doncaster Amalgamated Collieries Ltd. | Explanation of the rule and its exceptions concerning assignment of contract liabilities | Supported the court’s understanding of when assignment is permissible |
| Davies v. Collins | Clarification of the rule restricting assignment of contract liabilities | Considered in the context of the assignment of contracts for sale of goods |
| J.H Tod v. Latchmidas Purushotamdas | Indian authority referenced on contract assignment | Supported the discussion on assignment principles under Indian law |
| Jaffer Meher Ali v. Budge Budge Jute Mills Co. | Recognition of buyer's right under contract as an actionable claim and assignable | Analogized buyer’s assignable rights to seller’s rights to support assignment |
| Hansraj v. Nathoo | Support for assignment of contractual rights as actionable claims | Reinforced the principle that both buyer’s and seller’s rights are assignable |
| Dayabhai Dipchand v. Dullabhram Dayaram | Upheld assignment of shares by seller of rights under contract | Used to support the legitimacy of assignment in the present case |
Court's Reasoning and Analysis
The Court began by acknowledging the general rule that liabilities under contracts are not assignable and that a promisee must accept performance only from the promisor. However, it noted that Section 40 of the Indian Contract Act permits a promisor to employ a competent person to perform a promise unless the contract explicitly requires personal performance. The Court observed that the contract for sale of goods was not personal in nature and that the seller’s obligation to deliver goods is analogous to the buyer’s obligation to pay the price, both constituting actionable claims capable of assignment.
The Court referred to English authorities which allow assignment where the nature of the contract permits performance by a deputy or nominee without violating the parties’ intentions. It emphasized that the assignment in this case was not a mere transfer of a right to sue for damages after breach but a transfer of rights under a contract still to be performed on both sides.
The Court further noted the widespread commercial practice of such assignments, particularly in Madras, and recognized this as a form of established usage. Consequently, it found no legal impediment to the assignment and upheld the lower courts’ rulings that the assignee was entitled to sue for damages.
Holding and Implications
The second appeal is dismissed with costs.
The holding confirms that contracts to sell goods, where the nature of the contract does not require personal performance by the promisor, can be assigned to a third party who may sue for damages upon breach. This decision affirms the permissibility of such assignments under Section 40 of the Indian Contract Act and supports established commercial practices without setting a new precedent beyond the facts of this case.
JUDGMENT
In this second appeal preferred by the defendant, the only question which arises for decision is whether a contract to sell goods could be assigned by the seller so as to enable the assignee to sue for damages for breach of contract on tender of performance by him. Both the Courts held that the goods were tendered within the due date by the assignee and that the defendant committed breach in not accepting delivery and in not paying the price, and that he was therefore liable for damages. They overruled the legal objection.
For the appellant reliance is placed on the general proposition of law that a promisor cannot assign his liabilities under a contract and that a promisee cannot be compelled by the promisor or by a third party to accept anyone but the promisor as the person liable to the promise. Some of the leading English cases on the subject were cited in this connection, viz., British Waggon Co. v. Lea (1), Tolhurst v. Associated Portland Cement Manufacturers 1900, Associated Portland Cement Manufacturers 1900 v. Tolhurst (2), affirmed in 1903 A.C 414. Nokes v. Doncaster Amalgamated Collieries Ltd. (3), Davies v. Collins (4), as explaining the reason for the rule and as specifying the exceptions ingrafted in it. Reference was also made to J.H Tod v. Latchmidas Purushotamdas(5) and to Jaffer Meher Ali v. Budge Budge Jute Mills Co. (6).
Section 40 of the Indian Contract Act is in these terms:
“If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.”
It is obvious that there is nothing personal about such a contract as this. The only objection raised against the assignment is that the seller is under an obligation to deliver the goods and that he cannot compel the purchaser to look to another man for the discharge of his obligation. So is a buyer under an obligation to pay the price. The buyer's right under the contract to get the goods on payment of the price has been held to be capable of assignment because it falls within the definition of an actionable claim. See Jaffer Meher Ali v. Budge-Budge Jute Mills Co. affirmed in 34 Cal. 289; also Hansraj v. Nathoo (7). It is difficult to see any distinction in principle between the buyer's right and the seller's right on the subject of assignment. The buyer is under an obligation to pay the price before he can ask for the delivery of the goods; the seller is under an obligation to deliver the goods before he can ask for payment of the price. The one right is as much an actionable claim as the other and if this is correct, the transfer is permitted. Such difficulty as exists has been got over in some of the English cases by taking the view that the very nature of the contract might show that it was not intended that the party should personally perform their obligations or that it was within their contemplation that what was undertaken by a party could be got done by him by a deputy or nominee. As was done in Tolhurst v. Associated Portland Cement Manufacturers 1900, Associated Portland Cement Manufacturers 1900 v. Tolhurst(8) we can hold, without doing any violence to the intention of the parties, that the suit contract is one which must have been contemplated by them as capable of being performed on both sides by their assigns or representatives. In Leake on Contracts (8th edition) there is this passage at page 905, supported by the authority of British Waggon Co. v. Lea and Tolhurst v. Associated Portland Cement Manufacturers, 1900, Associated Portland Cement Manufacturers 1900 v. Tolhurst .
“But a contract that certain work shall be done or goods supplied, without regard to the persons engaged, is assignable; and upon performance of all the conditions stipulated for, the assignee is entitled to the benefit of the contract.………”
There is this note to be found in Pollock and Mulla's Contract Act (7th edition) at page 249 that it was yet to be decided whether the right of the seller to call for payment of price on delivery of goods is an actionable claim and as such assignable. Mr. Govindarajachari the learned Advocate for the respondent was able to refer to the decision in Dayabhai Dipchand v. Dullabhram Dayaram , of Westcropp, C.J and another Judge as upholding an assignment of his shares by a seller of his rights under a contract.
If there is no objection to the seller getting some one else on his behalf to deliver the goods to the buyer, there is equally no objection to his being authorised to file a suit as the seller's deputy or nominee or agent to enforce his rights. It is not a transfer of a mere right to sue for damages; it is a transfer of the rights under a contract which is still to be performed on both sides—not after it was broken and a claim for damages has arisen.
It is well-known that such contracts are being assigned every day in the market in Madras; to recognise or give effect to the argument for the appellant would be to upset this wide-spread practice which can be said to have grown almost into a commercial usage.
The second appeal is dismissed with costs.
(No leave).
N.R.R
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