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1932 Supreme(SC) 32
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD WRIGHT, SIR LANCELOT SANDERSON, AND SIR DINSHAH MULLA.
MACKAY - Appellant
Versus
MAHARAJA DHIRAJ KAMESHWAR SINGH (DEFENDANTS) - Respondents
On appeal from the High Court at Patna.
Decided On : June. 16. 1932.
Solicitors for appellant:Douglas Grant & Dold. Solicitor for respondent No.1: H. S. L. Polak.
Damages for breach of a sale contract are measured by the difference between the contract price and the spot market price on the date of breach. The relevant market is the central trading hub for the commodity, not necessarily the specified place of delivery.
Headnote:(A) Indian Contract Act, 1872 - Sections 73 and 186 - Breach of contract for sale of goods - Measure of damages - Where an available market for the goods exists at the date of breach, damages must be based on the difference between the market price and the contract price - The law presumes that the buyer can minimize damages by procuring substituted goods in the market, making a contract of resale immaterial if a market exists - If the market price exceeds the contract price, this difference is the sole general damage recoverable.
(B) Determination of Market Price - The place of delivery does not necessarily fix the locality of the relevant market - Where a central market exists to which buyers and sellers resort for a specific commodity, the price ruling at that central market on the date of breach is the relevant measure, regardless of the specified place of delivery, though the place of delivery may involve some adjustment of price.
(C) Agency - Implied authority - Where concurrent findings of fact by lower courts establish that an agent had authority to enter into a contract based on past conduct and the ordinary course of employment, such findings are binding and the contract is valid.
Facts of the case:
The appellant entered into a contract for the purchase of a specific quantity of seeds at a fixed price per unit, with delivery to be made by a certain date at a specified railway station. Earnest money was paid. The respondent repudiated the contract, claiming the manager lacked authority to enter into the agreement. The respondent failed to deliver the goods. The lower courts disagreed on the date of breach and the appropriate market for determining the price for calculating damages, with the High Court excluding evidence of the central market price in favor of a local price or a previous sub-contract price.
Findings of Court:
The contract was valid as the manager had implied authority. The date of breach was the date by which delivery was required under the contract terms. The relevant market price for calculating damages is the spot price at the central market for the commodity on the date of breach, rather than the price at the place of delivery or the price of a previous contract for future delivery.
Issues: Whether the contract was binding upon the respondent; the correct date of the breach; and the appropriate basis and location for determining the market price to calculate damages.
Ratio Decidendi: The court held that the place of delivery does not restrict the relevant market to that specific locality if a central market exists where the commodity is traded. Damages for breach of contract for sale of goods should be based on the spot market price at the central market on the date of breach, as this reflects the true value of the goods and the buyer's ability to minimize losses.
Result: Appeal allowed.
Legal Category Hierarchy
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contract law
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agency
- authority of agent
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sale of goods
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breach of contract
- damages
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breach of contract
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agency
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practice and procedure
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evidence
- market price evidence
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evidence
Judgement
Appeal (No. 9 of 1931) from a decree of the High Court (May 28, 1929) varying a decree of the. Subordinate Judge of Purnea (March 12, 1924).
The appellant sued for breach of a contract dated November 9, 1919, by which the second defendant, pur porting to act as manager for the first defendant (represented by the first respondent), sold to him 200 maunds of Java indigo seed at Rs.22 per maund f.o.r. Purnea railway station, delivery to be made in April, 1920. No indigo seed had been delivered under the contract, and on June 1, 1920, it was repudiated by the first defendant upon the ground that the second defendant had no authority to enter into the contract.
Both Courts in India held that there was implied authority to make the contract.
Upon the question of damages, the High Court in remanding the suit to the trial judge directed him that unless there was a market for indigo seed at or near Purnea there was no relevant market price, thus excluding evidence which was tendered as to the market price at Cawnpore. Upon the case again coming before the High Court the learned judges (Das and Kulwant Sahai JJ.) held upon the evidence that there was no market at or near Purnea ; accordingly, applying Grebert-Borgnis v. Nugent (( 1885) 15 Q. B. D. 85, 89.), they based the damages upon the difference between the price (Rs.26-4 per maund) at which the appellant had resold upon November 14, 1919, for delivery in April and the price under the contract sued upon. They held the plaintiff was entitled also to the earnest money paid, with interest.
The facts and the effect of the judgments in India appear more fully from the judgment of the Judicial Committee.
1932. May 26, 27. Casswell for the appellant. Dunne K.C. and Wallach for respondent No. 1. [Reference was made to the Indian Contract Act, 1872, ss. 73, 186 ; Benjamin on Sale, 7th ed., p. 999.]
June 16. The judgment of their Lordships was delivered by
LORD WRIGHT. The questions in this appeal are whether the first respondent, who was substituted for his father as defendant on the latters death, is responsible in damages, and if so in what sum, to the appellant, who was plaintiff in the action. The claim was on a contract dated November 9, 1919, for the sale of 200 maunds of new crop Java indigo seed at Rs.22 a maund excluding bags, f.o.r. Purnea railway station, delivery to be made in April, 1920, the plaintiff paying (as in fact he did) on the date of the contract Rs. 1000 as earnest money. The first question is whether that contract was made, as it purported to be made, by one Hervey (who was on the plaint joined as a defendant in the suit, but was dismissed from it on March 12, 1924) as agent for the defendant, who will be hereafter referred to under the description of respondent, which term will be applied equally both to the original and the substituted defendant. Hervey was at the date of the contract manager of the respondents factory at Kajah; it was denied that he had actual or implied authority to make the contract. Their Lordships are of opinion that this contention is not now open to the respondent, since it involves a question of fact which has now been concluded by the con current findings of two Courts that Hervey had authority has been held first by the Subordinate Judge of Purnea and then by the judges of the High Court of Patna. There was ample evidence before the Courts that Hervey had made in the past for the respondent similar contracts, which had been duly carried out, and also that it was in the ordinary course of an employment such as his to make such contracts for his employer. No question of law was involved. Indeed, the argument on behalf of the respondent on this aspect of the case seems to have been that the actual contract, made as it was before the extent of the then next succeeding indigo crop on the Kajah estate could be foreseen (because the crop is not harvested until between February and April), was speculative and improvident from the stan
