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Mill Stores Trading Company Of India, Limited v. Seth Mathuradas
Factual and Procedural Background
The plaintiffs are proprietors of a mill at Hinganghat called Rai Sahib Rekchand Mahota Spinning and Weaving Mill. The first defendant is the Mill Stores Trading Company of India, Limited, and the second set of defendants are their managing agents. In December 1913 the parties entered into a contract for the delivery of 600 bags (1,200 cwts.) of Epsom salts at Rs. 2-11-6 per cwt., to be delivered in 1914 in monthly lots of 50 bags.
The defendants delivered 300 bags up to July 1914. The plaintiffs allege that by a letter dated 10 August 1914 the defendants refused further deliveries and sued for damages (restricted to Rs. 10,000) based on market prices in August. Defendants raised several defences: that they acted as agents (this ground of appeal was abandoned), that the Wardha Court lacked jurisdiction and that performance had become impossible after war broke out (August 1914) because the goods were to be imported from Germany. The defendants admitted offering on 20 August 1914 to obtain Epsom salts from the Bombay market at Rs. 20 per cwt. and denied plaintiffs' claim to Rs. 10,000 in damages.
Procedurally, the question of jurisdiction (Wardha v. Bombay) and the merits were contested. There was an application to produce further evidence (N.R. Dastur) which the appellate court orally disallowed because the evidence had been in defendants' possession and they had chosen not to tender it; the case was then argued on the merits. The appeal and a cross-objection were ultimately dismissed with costs.
Legal Issues Presented
- Where and when was the contract concluded for the purpose of jurisdiction (i.e., whether the contract was concluded at Hinganghat/Wardha or at Bombay)?
- Whether the defendants' letter of 16 December 1913 (Exhibit P-1) constituted a complete offer and whether the plaintiffs' letter of 26 December 1913 (Exhibit D-1) constituted acceptance under the postal rule.
- Whether a subsequent letter (Exhibit D-25 / press copy dated 30 December 1913) could impose an additional condition (the Elbe navigability clause) on the contract after acceptance.
- Whether performance of the contract became impossible by reason of the outbreak of war with Germany and thus discharged under section 56 of the Indian Contract Act.
- Whether the defendants should have been permitted to produce additional evidence (N.R. Dastur) that was in their possession but not tendered in the lower court.
Arguments of the Parties
Plaintiffs' Arguments
- The plaintiffs treated the defendants' letter of 16 December 1913 (Exhibit P-1) as an offer and replied by posting Exhibit D-1 on 26 December 1913 from Hinganghat, which they contended was acceptance under the postal rule; thus the contract was formed in Wardha and that Court had jurisdiction.
- They claimed damages based on the market rate in August 1914 (allegedly Rs. 50 per cwt.) and restricted their claim to Rs. 10,000.
- They objected to allowing the defendants to supplement evidence (application to examine N.R. Dastur) because the defendants had the material in their possession and chose not to tender it earlier.
Defendants' Arguments
- The defendants contended that their letter of 16 December 1913 did not constitute a "pukka" offer; alternatively, that the offer related to both Epsom salts and China clay together and was not finally accepted until their subsequent letter (Exhibit P-2) dated 27 December 1913, which was posted in Bombay — thus making Bombay the place of contract and the only competent forum.
- They argued that after war broke out with Germany performance became impossible since the orders were for goods to be manufactured in Germany and to arrive from Germany, and therefore the contract was discharged (invoking the principle in section 56 of the Contract Act).
- They asserted they had offered on 20 August (admitted offer on 20th/26th August in the record) to obtain Epsom salts from Bombay at Rs. 20 per cwt. to mitigate inconvenience to the plaintiffs, and denied plaintiffs were entitled to Rs. 10,000 damages.
- They applied to produce further evidence (N.R. Dastur) and relied on a press copy (Exhibit D-25) said to have been sent on 30 December 1913, which they claimed was in their solicitors' possession after the press copy was destroyed; they sought to rely on its postscript condition (Elbe navigable).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kamisethi Subbiah v. Katha Vankataswamy | Under the Indian Contract Act, where proposal and acceptance are by letters, the contract is made at the time and place when the letter of acceptance is posted (postal rule), subject to revocation reaching the proposer before acceptance is known. | The court applied this postal rule to hold that the plaintiffs' acceptance (Exhibit D-1) posted at Hinganghat on 26 December 1913 constituted conclusion of the contract at Hinganghat (Wardha), giving the Wardha Court jurisdiction. |
| Perry v. Suffields, Limited | When a definite offer has been made and accepted without qualification and the offer and acceptance contain all terms agreed at the date of acceptance, the complete contract cannot be affected by subsequent negotiations. | The court relied on this principle to hold that a complete contract was concluded on 26 December 1913 and that subsequent correspondence (including Exhibit D-25) could not impose a new condition unless accepted by the plaintiffs. |
| Karl Ettinger v. Chagandas and Co. (Beaman, J.) | Point made that mere difficulty or the need to pay exorbitant prices does not bring a case within section 56 of the Contract Act (i.e., does not make performance impossible in the legal sense). | The court cited this authority (Beaman, J.'s observation) to reject the defendants' claim that the war made performance impossible under section 56, noting that higher cost or difficulty did not discharge the contract. |
Court's Reasoning and Analysis
The court's analysis proceeded in logical steps tied closely to the documentary correspondence and legal principles:
- Contract formation and jurisdiction: The court read the correspondence as business people would, finding no necessary linkage between the quotations for Epsom salts and China clay; each quotation was a separate offer. Applying the postal rule (as stated in Kamisethi Subbiah v. Katha Vankataswamy), the plaintiffs' letter of acceptance dated 26 December 1913 (Exhibit D-1), posted at Hinganghat, concluded the contract at that place and time. Therefore the Wardha Court had jurisdiction to try the suit.
- Subsequent correspondence and conditions (Exhibit D-25): The court refused to act on the press copy (Exhibit D-25) for two reasons — it was not pleaded that the contract was subject to the Elbe being navigable, and a party cannot impose a new condition by a subsequent letter after a contract has been concluded by offer and acceptance. The court invoked the principle from Perry v. Suffields that once a definite contract is made further negotiations cannot, without consent of both parties, alter the existing contract.
- Admissibility and supplementation of evidence: The court disallowed the defendants' application to call additional evidence (N.R. Dastur) because the material was in defendants' possession and they had deliberately chosen not to tender it in the lower court. The lower court's rejection of Exhibit D-25 and the stated improbabilities in witnesses' testimony did not justify allowing supplementation, especially given the plaintiffs' objection.
- Impossibility under section 56: The court examined whether war with Germany made performance impossible. It noted (as admitted in evidence) that Epsom salt was not manufactured in India before the war and typically came from Germany, but it was not established that it could not be sourced from other countries such as the United States or Japan. The contract left the defendants the option to import from any country; sale of German goods was not unlawful simply because of war. Citing the principle in Karl Ettinger v. Chagandas and Co., the court held that increased difficulty or exorbitant price did not render performance impossible within the meaning of section 56 of the Contract Act. Because the defendants had undertaken to perform unconditionally, they could not rely on section 56 to avoid liability.
- Damages and mitigation: The court accepted the lower court's approach to assessing damages, using a fair average market price. It noted the defendants' offer (on 20/26 August) to procure Epsom salts at Rs. 20 per cwt. and found no basis to disturb the lower court's assessment. The plaintiffs' cross-objection for interest was not supported by authority and was rejected.
Holding and Implications
Holding: The court DISMISSED the appeal and the cross-objection and awarded costs against the appellants. The Wardha Court was held to have had jurisdiction because the contract was concluded at Hinganghat when the plaintiffs posted their acceptance on 26 December 1913.
Implications:
- The direct effect is that the lower court's judgment (including its assessment of damages using a fair average market price) stands; the defendants remain liable for breach as adjudged below.
- The defendants' contention that performance was discharged under section 56 due to war was rejected: increased difficulty and higher prices did not render performance legally impossible where the contract had an option to source goods from other countries and the defendants had undertaken unqualified performance.
- The court refused to allow supplementation of evidence that had been in the defendants' possession but deliberately not tendered in the lower court; Exhibit D-25 was excluded from altering the contract since it was a subsequent communication not pleaded nor accepted.
- No broader, novel precedent was announced beyond applying established principles (postal rule; finality of concluded contracts; limits of section 56) to the facts of this case; the decision preserves the binding effect of an unqualified undertaking and limits reliance on subsequent, unaccepted conditions or on section 56 where performance, though onerous, is not legally impossible.
1. The plaintiffs are proprietors of a mil) at Hinganghat which goes by the name of Rai Sahib Rekchand Mahota Spinning and Weaving Mill, The first defendant is the Mill Stores Trading Company of India, Limited, and the second set of defendants are their Managing Agents. In the month of December, 1913 there was a contract between the parties for the delivery of 600 bags, that is, 1,200 cwts. of Epsom salts at the rate of Rs. 2-11-6, delivery to be made every month is the year 1914 in lots of 50 bags each.
2. In pursuance of this contract the defendants delivered 300 bags up to the month of July, 1914. The plaintiffs allege that the defendants by their letter, dated the 10th August, 1914 refused to make any further delivery. The plaintiffs therefore claim damages for a breach of the contract. According to them the market rate in the month of August was Rs. 50 per cwt and on this footing they calcutta damages and interest amounting to over Rs. 10,000, but the claim is resbricted to Rs. 10,000. One of the defences set up was that the defendants were acting only as plaintiffs' agents. The ground of appeal based upon this contention has been abandoned before me, and I need not therefore make any further reference to this part of the pleadings. The defendants deny that the Court at Wardha had jurisdiction to try the suit. The main defence on the merits is contained in paragraph 4 of their written statement. They allege that the plaintiffs' orders were for the supply of 600 bags of Epsom salts-manufactured from Germany and to arrive from Germany under invoices made in the name of the mill. War having broken out between Great Britain and Germany in August 1914, it became impossible for any goods to arrive from Germany thereafter. The defendants have not since the outbreak of war received any consignment of goods in respect of the plaintiffs' order. They therefore say that it became impossible for them to perform the contract so far as it remained unperformed. They admit that on the 20th August 1914 they offered to secure for the plaintiffs Epsom salts to be purchased from the market in Bombay at the rate of Rs. 20 per cwt. and this was an offer made with a view to avoid the plaintiffs being pub to inconvenience. In addition to this the defendants deny that the plaintiffs are entitled to Rs. 10,000 by way of damages.
3. The first question to decide is whether the suit could be filed in Wardha or must be filed in Bombay, as contended for by the defendants. The contract between the parties was by correspondence. On the 3rd December 1913 the plaintiffs wrote a letter, copy of which (Exhibit F-6) has been filed. This was posted at Hinganghat in the Wardha District. The letter runs thus:—
“We shall feel highly obliged if you kindly favour us to quote your lowest price free on rails Bombay for best quality Epsom salt in double bags and an extra superior white quality China day with the samples to make a contract with us for the year 1914 as early as possible. Our consumption of Epsom salt is about 50 bags while that of China clay 10 casks a month which please note and oblige”
4. To this the defendants replied on the 16th December (Exhibit P. 1):—
“We beg to thank you for your favour of the 3rd instant, which has come to band to-day, and have much pleasure to quote, as desired, our lowest contract rates for—
Best quality Epsom salt in double bags at Rs. 2-11-6 per cwt.;
Special white extra superfine China clay at Rs. 70 per ton;
Best white super China clay at Rs. 62 per ton.
Terms—Nett for Bombay—invoices in the name of your mills for the exemption of duty.
Trusting to be favoured with your order which will have our beet and prompt attention.”
5. The plaintiffs' reply is Exhibit D.1, dated the 26th December:—
“With reference to your letter of the 16th instant about your contract rates of Epsom salt and China clay for the year 1914, we are glad to inform you that we accept your rate of Epsom salt at Rs. 2-116 (Rupees two annas eleven and pies six) only per cwt, in double bagging nett tree on rails, Bombay. Invoice in the name of our Mill for the exemption of duty as usual.”
6. The letter also says that the price quoted for China clay was too high and the plaintiffs would not enter into a contract for it just then, but sent an order for a small quantity of China clay. On the 27th the defendants wrote the letter (P-2):—
“Your much esteemed favour of 26th instant to hand and we are much obliged to you for placing your yearly contract for Epsom Baits for 1914 with us at Rs. 2116 per cwt in double bag nett f.o.r Bombay, you to supply us certificate on Collector of Customs for exemption of duty.
“We note what you state re China clay and are forwarding 8 casks at Rs. 70 per ton nett f.o.r Bombay and await your further orders.
“Please note that our quoted price of Rs. 70 per ton was for a yearly contract on the understanding that we were to get a letter on Customer Collector but now that we are supplying same from stock we wilt charge you Rs. 70 per ton plus Rs. 5 duty and you will find time in order.”
7. Both sides rely upon Kamisethi Subbiah v. Katha Vankataswamy (1), where it was laid down that under the Indian Contract Act, where the proposal and acceptance are made by letters, the contract is made at the time when and at the place where the letter of acceptance is posted, though the contract is voidable at the instance of the acceptor by communication of his revocation before the acceptance has come to the knowledge of the proposer. According to the plaintiffs Exhibit D-1 is the letter of acceptance which was posted at Hingangbat in the Wardha District, the offer being made by the defendants in their letter of the 16th December (Exhibit P-1) where they quote their lowest prices. The defendant-appellants-argue that there was no pukka offer in their letter of the 16th December and the offer was in any case for the supply of both Epsom salts and China clay, that the final acceptance took place when they wrote Exhibit P-2 on the 27th December, and as this was posted in Bombay the contract was concluded there and that, that Court alone has jurisdiction to try the suit. They further say that it was open to them not to comply with the plaintiffs' order as their offer was not accepted with regard to both classes of goods.
8. I am not prepared to uphold the contentions of the defendants-appellants. The letters must be read in the way in which business men would understand them. There is no such connection between China clay and Epsom salts that we must regard the offer contained in Exhibit P-1 as an offer made for two things if both are accepted. In point of fact no objection was taken to the plaintiffs' acceptance of the offer regarding Epsom salts without an acceptance of the offer regarding China clay. Each quotation of price was a separate offer and any one of them may be accepted without Accepting the others, and this is how the letter would be interpreted by commercial men. I hold that the acceptance took place on the 26th December, when the plaintiffs posted their letter at Hingangbat. Hence the lower Court had jurisdiction to try the suit.
9. An application was made to have further evidence taken of one N.R Dastur, who was the manager of the plaintiffs' mill and has now ceased to be in their employment. This evidence was admittedly in the possession of the defendants, but they deliberately decided not to tender it. The fact that the lower Court has upon the evidence tendered rejected Exhibit D-25, a disputed document, does not, in the circumstances stated, justify my allowing the defendants an opportunity of supplementing their evidence, especially as the plaintiffs object to this course. I, therefore, orally disallowed the application and the case was thereupon argued on the merits.
10. Exhibit D-25 is a copy made from a press copy of a letter alleged to have been sent on the 30th December 1913 by the defendants to the plaintiffs. The plaintiffs deny having received it. The press copy is said to have been destroyed when the defendants removed their office, and Exhibit D-25 together with copies of other letters remained in the possession of their solicitors, Messrs Mulla and Mulla. The lower Court has disbelieved the evidence of Messrs Mehta and Mulla on the ground of its improbability. I am not prepared to endorse the opinion of the lower Court as I find many relevant questions have not been put to the witnesses and also because no one on the plaintiffs' side has deposed to on oath to their not receiving the letter.
11. Exhibit D-25 which bears the date 30th December, contains the following postscript:— “The contract is subject to the river “Elbe” being navigable. “There are two reasons why it is unnecessary to record a finding with regard to the exhibit as regards its authenticity and its meaning. In the first place it was not pleaded that the contract was subject to that condition; in the second place the contract having been concluded by the offer and acceptance on the 26th December 1913 the defendants were not at liberty to impose a new condition by a subsequent letter. There was no acknowledgment of this letter by the plaintiffs nor is there anything to show that the plaintiffs accepted this condition.
12. It is contended before me that we must look to the correspondence as a whole to determine the true nature of the contract. I am prepared to concede that it would have been open to the plaintiffs to have agreed to a modification of the contract by accepting a condition subsequently suggested by the defendants, but there is no trace of this to be found in the correspondence.’
13. In Perry v. Suffields, Limited (2), it is laid down:
“Though when a contract is alleged to be contained in letters the whole correspondence should be looked at, yet if once a definite offer has been made and accepted without qualification, and it appears that the letters of offer and acceptance contain all the terms agreed on between the parties at the date of the acceptance the complete contract then arrived at cannot be affected by subsequent negotiation. When once it is shown that there is a complete contract, further negotiations between the parties cannot without the consent of both get rid of the contract already arrived at.”
14. It is an admitted fact that Epsom salt before the war was not manufactured in India and all Epsom salts came from Germany. It is not however in evidence that it is not produced in other countries such as the United States of Japan. The plaintiff say that they did not know that Epsom salts came from Germany. I am prepared to accept their statement so far, but I think their manager probably knew from what country Epsom salts ab the rate quoted came. Having held that Exhibit D-25 must be excluded from consideration I must now look to the term of the contract. The contract implies that the Epaom salt was to be imported by sea and for the purpose of exemption of duty the plaintiffs are to certify that it was required for purposes of their mill. It is in evidence that best quality Epsom salt means marketable quality. It is true that the defendants made arrangements to fulfil their contract with some firm in Germany, but the contract leaves them the option to import it from any other country they please. The plaintiffs could not have refused delivery if Epsom salts from Japan or America, had been tendered. Can it be said than when war was declared with Germany the performance of the contract between the parties became impossible? Trading with the enemy no doubt became unlawful, but sale of German goods was not unlawful. There is evidence that there was some stook in Bombay available for sale but at a very high price. The delivery was neither impossible nor impracticable in the ordinary sense of the term. The performance of the contract on the part of the defendants no doubt became very onerous, as there was also not sufficient stook in the Bombay market for the requirements of all the mills. Mere difficulty or the need to pay exorbitant prices does not bring the case under section 56 of the Contract Act as pointed out by Beaman, J., in Karl Ettinger v. Chagandas and Co. (3). I cannot agree with the contention that after the war the contract became void by reason of its performance becoming impossible within the meaning of section 56 of the Contract Act. The defendants unconditionally undertook to perform the contract. They did not qualify their liability by using suitable language. As regards the damages there is a cross-objection filed by the plaintiffs in which they ask for interest. I can find no authority for this claim of interest. The lower Court has taken a very fair average price prevailing in the market at the time. The defendants cannot complain when they offered on the 26th August to procure Epsom salts for the plaintiffs at Rs. 20 per cwt. The evidence as regards the price which varied from time to time is not of such a character that I should be justified in differing from the learned Judge in the Court below. The result is that the appeal and the cross-objections are both dismissed with costs.
15. Appeal and cross-objection dismissed.
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