The parties to a contract of sale can agree on their own measure of damages in case of breach of contract, and this will exclude the operation of the general rule that the measure of damages is the difference between the contract price and the market price on the date of breach.

1. This appeal arises out of the suit instituted by the plaintiff, a partnership firm, for recovery of damages from the respondents for breach of contract to deliver 790 bales of jarila cotton on 14-9-1948. The undisputed facts are as follows:

2. Several individuals and firms doing the business of forward delivery transactions in cotton formed an association known as the Cotton Dealers Association of Khamgaon. All the members of the Association had subscribed to the Memorandum of Association which, among other things, provided that the parties to a forward delivery transaction will pay and receive clearing money in respect of that transaction. These clearing rates were to be fixed by the Appeal Committee of the Association consisting of five members. On several dates between 3-6-1948 and 27-8-1948 clearing rates were declared by this Committee in pursuance of which mutual adjustments between the parties to the appeal took place on 27-8-1948. As a result of these adjustments, the respondents were liable to sell 790 bales of the agreed variety of jarila cotton to the appellant at Rs. 630 per khandi. The date of the delivery of these goods was 14-9-1948. During the period between 3-6-1948 and 27-8-1948 the appellant had paid to the respondents by way of clearing money a total sum of Rs. 10,428/12/0.

3. The appellants case in the Courts below was as follows: The rules of the Association did not govern the contracts in suit, that they Were merely enabling rules, and that it depended upon the will of the party whether to abide by all or any of the rules or otherwise. Even clearings were effected not in pursuance of the rules but under agreements between the parties. The cotton agreed to be sold was a local variety of a superior type of jarila having 14 annas staple. This, it was said, was superior to the standard jarila of the East India Cotton Association Limited. Bombay, by 25 per cent. This variety was agreed upon between the parties as per Rule 11 (1) of the Association and its sample was kept in the office of the Association.

4. Between 1-9-1948 and 14-9-1948 the rate of the agreed variety of cotton was rising in the Khamgaon market. The majority of the members of the Association were sellers and they would therefore have been adversely affected by reason of this circumstance. The Committee of the Association was. according to the appellant, partial to the sellers and despite the fact that the market was rising, they fixed a rate of Rs. 615 per khandi which was very much lower than the prevailing rate for the 14 annas variety at Khamgaon. That rate, according to the appellant, was Rs. 698 per khandi. The fixation of the rate by the Committee at Rs. 615 was characterised by the appellant as arbitrary and mala fide. Further, it was said that though the rule required that a decision should be of a majority, in the instant case there was no such majority decision. For all these reasons, the appellant contended that it was not bound to accept the rate of Rs. 615 per khandi which the Committee purported to fix on 14-9-1948. The respondents were, according to the appellant, bound to deliver cot-ton to it at the rate of Rs. 698 per khandi, and as they refused to do so, they were liable to pay the difference between this rate and the contract rate, that is. Rs. 68 per khandi. The total amount claimed by the plaintiff on this basis is Rs. 26,860.

5. It may be mentioned that on 1-9-1948 the Government, by a notification, banned forward delivery contracts in cotton which were transferable to a third party. But it is common ground that this notification is not retrospective. The appellant pleaded that if the contracts were said to be governed by the notification, the clearing rate had to be fixed according to that notification. The Local rate for the agreed variety being higher than the Bombay rate by Rs. 120 to Rs. 130 per khandi, the final clearing rate, if it had been fixed bona fide, would, accordingly to the appellant, have com