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1922 Supreme(SC) 69
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD ATKINSON, LORD SUMNER, LORD CARSON, AND MR. AMEER ALI.
HARICHAND MANCHARAM - Appellant
Versus
GOVIND LUXMAN GOKHALE - Respondents
On Appeal from the High Court at Bombay.
Decided On : Dec. 20. 1922
Solicitors for appellant:T. L. Wilson & Co. Solicitors for respondent: Lattey & Hart.
A contract is binding if parties agree on all principal terms in writing, even if they intend to later execute a formal document. Such a requirement is generally a matter of form and legal phraseology, not a condition precedent to the contract's existence.
Headnote:(A) Indian Evidence Act, 1872 - Section 92 - Specific Performance of Contract - Immovable Property - Concluded Contract vs. Provisional Arrangement - Whether a requirement for a formal document to be prepared by a legal practitioner constitutes a condition precedent to the formation of a binding contract - If the principal terms of the bargain are agreed upon and embodied in writing, the subsequent preparation of a formal document is merely for legal phraseology and subsidiary terms, and does not prevent the initial agreement from being a binding contract - The use of the word "conditions" in such a context may refer to the "terms" of the contract rather than conditions to which the contract's existence is subject.
(B) Evidence - Admissibility of oral evidence - Section 92 of the Indian Evidence Act - Oral evidence tending to contradict or vary the terms of a written agreement is inadmissible.
Facts of the case:
A suit was filed for specific performance of a contract for the sale of immovable property. Two documents in the vernacular were executed by the parties outlining the price and various terms. One term specified that a formal bargain paper should be prepared by a legal practitioner within two days, at which time earnest money would be paid. The vendor contended that this was a provisional arrangement, while the vendee argued it was a completed contract. The trial court dismissed the suit, but the appellate court reversed the decision, decreeing specific performance.
Findings of Court:
The court found that the documents executed by the parties constituted a binding agreement. The provision regarding the preparation of a formal document by a legal practitioner was not a condition precedent to the contract but was a term for putting the agreement into proper legal shape and inserting subsidiary terms.
Issues: Whether the agreement was a concluded contract or a provisional arrangement conditional upon the execution of a formal bargain paper.
Ratio Decidendi: Whether an agreement is a completed bargain or a provisional arrangement depends on the intention of the parties deducible from the language used. The mere desire to have a formal agreement drawn up does not establish that parties are not bound by a previous agreement if the principal terms are already settled and embodied in writing. The reservation for a formal document only means it should be put into proper legal phraseology.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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civil law
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contract law
- specific performance
- formation of contract
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evidence law
- exclusion of oral evidence
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contract law
Judgement
Appeal (No. 23 of 1921) from a judgment and decree of the High Court in its appellate jurisdiction (July 29, 1919) reversing a decree of Marten J.
The suit was brought in the High Court by the respondent, since deceased, against the appellant for specific performance of a contract dated November 28, 1917, for the sale by the appellant of immovable property in the City of Bombay.
The facts are fully stated in the judgment of the Judicial Committee.
The trial judge, Marten J., dismissed the suit. He was of opinion that the documents relied on did not constitute a binding contract. On appeal Macleod C.J. and Heaton J. reversed that decision, and made a decree for specific performance.
1922. Nov. 7. Upjohn K.C., De Gruyther K.C., Holman Gregory K.C., E. B., Raikes and Parikh for the appellant. There was no concluded contract between parties. The documents in Gujarati expressly make the drawing up of a formal contract by a vakil a condition; further the earnest [@ page LRIA
Law Rep. 50 Ind. App. 25 ( 1922- 1923) Harichand Mancharam V. Govind Luxman Gokhale
218
26] money was not to be paid until that had been done. The vakil introduced further terms upon which the parties failed to agree. The authorities show that there was merely a conditional agreement which the Court could not order to be specifically performed Winn v. Bull (( 1877) 7 Ch. D. 29.); Lloyd v. Nowell ([ 1895] 2 Ch. 744.); Watson v. McAllum (( 1902) 87 L. T. 547,); Von Hatzfeldt-Wildenburg
v. Alexander. ([ 1912] 1 Ch. 284.) The rejected evidence of a separate oral agreement was admissible under the Indian Evidence Act, 1872, s. 92, proviso 3 Roger v. Hadley (( 1863) 2 H. & C. 227.); Pym v. Campbell (( 1856) 6 E. & B. 37.)
Clauson K.C., Tomlin K.C. and R. J. T. Gibson for the respondent. The documents in the Gujarati vernacular amounted to a complete and binding contract. The vakil had merely to draw up in English a contract setting out the Agreed terms; that provision, although described in the translation as a condition, was not a condition to which the agreement was subject but was merely a term. The oral evidence was rightly rejected; no oral agreement was pleaded. [Reference was made to Rossiter v. Miller (( 1878) 3 App. Cas. 1124.); Ridgway v. Wharton (( 1857) 6 H. L. C.238, 263,264.); and Bonnewell v. Jenkins . (( 1878) 8 Ch. D. 70.)
E. B. Raikes replied.
Dec. 20. The judgment of their Lordships was delivered by
MR. AMEER ALI The suit which has given rise to this appeal was brought by the plaintiff in the High Court of Bombay in its original civil jurisdiction for a decree against the defendant for specific performance of a contract entered into on November 28, 1917, for the sale, by the defendant to the plaintiff, of certain immovable property in Bombay.
Two documents in the Gujarati vernacular were prepared on the occasion, one of which was signed by the defendant Harichand Mancharam, the other by the plaintiff, the vendee, Govind Luxman Gokhale. Both bear one and the same date, and are practically in identical terms. The document executed by the defendant is marked in these proceedings as exhibit A; the other, signed by the plaintiff, is marked exhibit Al. Exhibit A, after giving the name and designation of the intending purchaser, the plaintiff, and describing the vendor, Harichand Mancharam, proceeds thus " I agree to give you in sale the said immovable property, together with the messuage building (standing thereon), for the price of rupees two lacs and fifteen thousand." It then gives the " conditions " of the sale in these terms " The conditions thereof are as follows 1. The bargain paper in respect of the sale of the said immovable property shall be made through a vakil within two days from this day and at the time of making the bargain paper I am to take from you by way of earnest money in respect thereof Rs. 10,000 that is you are to pay the same to me and as regards Rs.2 lacs and five thousand being the balance you are to pay the same
