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1930 Supreme(SC) 6
Privy Council At Bombay
Sir George Lowndes, Rusell of Killowen , Justice Lords Atkin, JJ.
Rustomji Ardeshir Cooper -Appellant
Versus
Dhairyawan Annasaheb Narandas Thakersey Mulji -Resopndent
Privy Council Appeal No. 103 of 1928
Decided On : 21-01-1930
S.R. Upjohn, T.F. Strangman , W.H. Upjohn, S. Hyam, H.Du Parcq
When a written contract is varied orally, terms inapplicable to the new arrangement are excluded. If no time for performance is specified in the varied contract, it must be performed within a reasonable time under Section 46 of the Indian Contract Act.
Headnote:(A) Indian Contract Act, 1872 - Section 46 - Specific performance of contract - Variation of written agreement - Time for completion.
(B) Construction of varied contracts - Where a written agreement is varied by a subsequent oral agreement, terms of the original contract that are inapplicable to the new arrangement are deemed to have been removed - If the nature of the obligation changes fundamentally, such as from specific repairs to complete rebuilding, conditions tied to the original obligation cannot be automatically applied to the new obligation.
(C) Time for performance - Where no time is specified for the performance of a contract, it must be performed within a reasonable time.
(D) Subsequent conduct - In cases of pure construction of a contract, the subsequent conduct of the parties is irrelevant.
Facts of the case:
A vendor agreed to sell an undivided half share of a property to a purchaser. The original written agreement required the vendor to carry out municipal repairs before completion. Subsequently, the parties orally agreed to demolish the building and erect a new one, sharing costs. The vendor built the new structure, but the purchaser refused to complete the purchase, arguing that the original condition requiring the property to be tenanted before completion still applied.
Findings of Court:
The court found that the oral variation fundamentally changed the subject matter of the agreement. The condition in the original contract regarding completion after repairs and occupancy was inapplicable to the construction of a new building of unknown character and cost. Consequently, the contract became one to be performed within a reasonable time.
Issues: Whether the clause in the original agreement specifying the time for completion, which was dependent on repairs and occupancy, remained applicable after the parties orally agreed to substitute repairs with the erection of a new building.
Ratio Decidendi: The court held that the variation from specific repairs to a complete rebuilding was such a different proposition that the original time-completion conditions could not be deduced or assumed to apply. Since the varied contract did not specify a time for completion, it was implied that it should be completed within a reasonable time under the law.
Result: Appellant is entitled to specific performance of the contract of sale and to payment of a half share of the costs of rebuilding.
Legal Category Hierarchy
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property law
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contracts
- specific performance
- variation of contract
- time of performance
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contracts
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practice and procedure
- construction of documents
- limitation
Sir George Lowndes:-
The dispute in this appeal is as to the appellant's right to specific performance of an agreement for the sale of land. The facts are of an unusual character and make the determination of this question a matter of considerable difficulty. The appellant, was, in the year 1920, the owner of plot of land with a four-storeyed building upon it situated opposite the Mulji Jetha Cloth Market in Bombay. Parts of the building were in a dilapidated condition, and in February of that year the municipality served him with notice to pull down certain portions of three of the upper floors which appeared to be dangerous. The appellant was advised to rebuild, and had plans prepared and submitted to the municipal authorities but they were not approved. Meanwhile, he was in negotiation with one Narandas Thakersey Mulji, who was a director of the Cloth Market Co., and interested in the development of the site, which was evidently a valuable one and on 18th December 1920, an agreement was come to between them under which the appellant was to sell and Narandas was to buy an undivided half share in the property which was thereafter to be let out to tenants upon the joint adventure of the two. The terms of this agreement were reduced to writing and it is necessary to set out the more material clauses in extenso:
"1. The vendor shall sell and the purchase shall buy an undivided half share in the said property for the sum of Rs. 1,90,000.
“2. The vendor shall forthwith carry out all the repairs and works specified in the said notice ..... from the municipality and the purchaser shall pay in addition to the said sum of Rs. 1,90,000 half of the expenses incurred in carrying out the requirements of the said notice.
“4. The sale shall be completed within two months from the date of this agreement if the requirements of the said notice are carried out before that period. If the requirements are not carried out within the said period then the sale shall be completed within two weeks after all the said requirements have been carried out and completed and the property is fully occupied by the tenants.
“5. The vendor shall within seven days of the date of this agreement hand over to the purchaser's attorneys all documents of title for investigation of title.
“8. After completion of the purchase the purchaser shall attend to the management of the property and shall collect the rents of the entire property and shall keep regular account thereof."
Then followed detailed provisions for the division of the net rents under which Narandas was to have a preferential 6 per cent on his capital expenditure, any deficit being made good by the appellant and charged on his moiety of the property, for the creation of a reserve fund, for auction between the parties if either wished to sell his share, and for arbitration in case of disputes. The property was described in a schedule to the agreement as a parcel of land containing by admeasurement 101 square yards or thereabouts “with the message tenement or dwelling house standing thereon,” situated at Champa Gully, and bounded, etc.
There is, no doubt, therefore, that the sale was to be of a small but valuable plot with an existing building upon it, and that before the appellant (the vendor) could demand completion and payment of the Rs. 1,90,000, he would have to comply with the terms of the municipal notice above referred to. Their Lordships think that having regard to the reference in Cl. 2 to "repairs and works “the intention was that the appellant should not merely pull down the portions referred to in the notice, but should also make them good again.
Within a few days after the execution of this elaborate document the parties agreed to a variation, which is the cause of all the difficulty. This new agreement was, unfortunately, not put in writing, and its bearing on the other terms of the original document was not considered. The variation was in effect that instead of complying with the terms of the municip
