MUHAMMAD HABID ULLAH vs BIRD AND COMPANY

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1921 Supreme(SC) 14

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD DUNEDIN, LORD PHILLIMORE, AND MR. AMEER ALI.
MUHAMMAD HABID ULLAH - Appellant
Versus
BIRD AND COMPANY - Respondents
On Appeal from the High Court at Allahabad.
Decided On : Feb. 14. 1921.

Important Points

A promisee may extend the time for performance under Section 63 of the Indian Contract Act. Failure to perform by the extended date constitutes a breach. Damages for non-delivery are calculated regardless of any accidental profits the promisee made through intermediate contracts with third parties.

Subject

Contract Law - Breach of Contract

Act Referred

CONTRACT ACT: S.63, S.55

Headnote

(A) Indian Contract Act, 1872 - Sections 55 and 63 - Time as essence of contract - Extension of time - Damages for non-performance - When a party fails to perform a promise at or before a specified time and time is of the essence, the contract becomes voidable at the option of the promisee. The promisee may elect not to avoid the contract and instead extend the time for performance. If a specific substituted date is agreed upon, that date becomes the new deadline for performance. Failure to deliver by the extended date constitutes a breach, entitling the promisee to damages. (Paras 11-13)

(B) Indian Contract Act, 1872 - Section 55, paragraph 3 - Compensation for loss - The provision that a promisee cannot claim compensation for loss occasioned by non-performance at the original agreed time, if performance is accepted at a later time, does not preclude the promisee from claiming damages for non-performance at the extended time. (Para 12)

(C) Damages for non-delivery of goods - Calculation - In estimating damages for non-delivery under a contract of sale, the law does not take into account accidental intermediate contracts entered into with third parties, even if such contracts result in a higher profit for the plaintiff. (Para 15)

Facts of the case:
A contract was entered into for the supply of railway sleepers by a specific date, with a security deposit provided. Only a portion of the goods were delivered by the deadline. At the request of the supplier's agent, the buyer extended the delivery deadline to a later date. The supplier failed to deliver the remaining goods by the extended date. The supplier sought the return of the deposit and damages, while the buyer claimed damages for lost profits.

Findings of Court:
The court found that time was of the essence of the original contract and the supplier was in default. The buyer lawfully extended the time for performance. The supplier's failure to deliver by the extended date constituted a breach of contract. The buyer was entitled to damages based on the profit they would have made.

Issues: Whether the extension of time for performance precluded the buyer from claiming damages for non-delivery by the extended date, and whether profits made from an intermediate contract with a third party should be deducted from the damages.

Ratio Decidendi: Under Section 63 of the Indian Contract Act, a promisee can extend the time for performance. Once a substituted date is fixed, it becomes binding. Section 55(3) only bars compensation for the original delay, not for a subsequent breach of the extended deadline. Furthermore, damages for non-delivery are calculated without considering accidental intermediate contracts that may have benefited the plaintiff.

Result: Appeal dismissed with costs.

Legal Category Hierarchy

Advocates:
Solicitor for appellant :Douglas Grant. Solicitors for respondents: Orr, Dignam & Co.

Judgement

Appeal (No. 126 of 1919) from a judgment and decree of the High Court (June 16, 1917) varying a decree of the Court of Small Causes, exercising the powers of a Subordinate Judge of Azra.

In March, 1913, the appellant entered into a written agreement to sell to the respondents 4000 sal railway sleepers at Rs. 1, a. 15, per cubic foot, to be delivered by May 31, 1913 ; as a term of the contract the appellant deposited Rs. 5000 with the respondents and agreed to a penalty of 8 annas per cubic foot for sleepers not delivered by May 31, 1913. The respondents had previously contracted to supply sleepers to the Bengal-Nagpur Railway. By a letter of May 14, 1913, the appellant informed the respondents that 2000 sleepers were ready for inspection, and of these 1746 were passed by the railway company on June 28, 1913, and were accepted by the respondents. No

Law. Rep. 48 Ind. App. 175 ( 1920- 1921) Muhammad Habid Ullah V. Bird and C ompany

further sleepers were delivered; in December, 1913, the respondents having threatened to exact the penalties, the appellant refused to make any further deliveries, and commenced the present suit.

The appellant by his plaint alleged that the respondents by delay in inspecting and removing the sleepers had caused him loss, and had rendered performance impossible before May 31 ; he further alleged that time was not of the essence of the contract, and that there had been a waiver of delivery in the time agreed. He claimed the return of the Rs. 5000 and damages. The respondents by their written statement denied the alleged delay, and alleged that at the request of the appellants agent the time for delivery had been extended by them to November 30, 1913. They claimed to" deduct from the deposit the profit which they would have made under their contract with the railway upon the undelivered sleepers.

The trial judge held that the appellant was entitled to the return of his deposit of Rs. 5000 and to Rs. 5000 as damages. The High Court, upon an appeal, found that the time for performance of the contract had been extended by the parties to November 30, 1913, and that the appellant, and not the respondents, were to blame for the non-perform ance by that date. They held that the respondents had suffered Rs. 3345 damages and were entitled to deduct that sum from the deposit. Both Courts held that the suit was cognisable by the trial judge as the final acceptance of the contract was at Agra. The effect of the judgments in India appear more fully from the judgment of the Judicial Committee.

1920. Nov. 23, 25, 26. Dunne K.C. and Hyam (Dube with them) for the appellant.

De Gruyther K.C. and du Parcq for the respondents.

The arguments were substantially upon the facts, it being contended on behalf of the appellant that he was not responsible for the failure to deliver by May 30, that his agent had no authority to agree to an extension of time, and that in the absence of any request by them the respondent had not an option under the Indian Contract Act to extend the time for performance.

Feb. 14. The judgment of their Lordships was delivered by

LORD DUNEDIN. The present appeal arises out of a contract made between the appellant and the respondents by which the appellant was to supply 4000 sleepers of a special pattern at any station on the Bengal-Nagpur Railway by May 31, 1913. As a condition of the contract, the appellant had to deposit and did deposit Rs. 5000 with the respondents as security for liquidated damages at a certain rate per foot for all sleepers not delivered on the said May 31. The sleepers had to pass inspection. Only 1746 sleepers were delivered and passed inspection. The time for delivery was extended, but no more deliveries were made, and the parties in December, 1913, broke off negotiations. The appellant then raised action asking for (1.) the return of the deposit; and (2.) damages in respect of his profit on the balance of sleepers not supplied. The respondents counterclaimed for dam