The judgment establishes the principle that in cases of breach of contract, damages can be estimated based on loss of profits, and the court may use discretion to determine the percentage of compensation.

Horwill, J.

1. The appellant is a Joint Stock Company havine its office at Calcutta. We know that it had dealings with a merchant in Australia to whom it sold cotton fabrics, described as tapestries, of the kind made by the plaintiffs limited comnanv resident in Calicut, which made silk and cotton piecegoods. In October, 1941, the parties entered into correspondence with regard to the making of tapestries by the plaintiff for the defendant, who made it clear that he intended to sell them in Australia. The defendant company stated its requirements to the plaintiff and asked the plaintiff to send samples. After some correspondence, terms were fixed and contracts entered into between the parties for the supply, to the specification given by the defendant, of certain qualities of goods. We are here concerned with two contracts, one evidenced by Exs. P-l and P-5 for the supply of 600 pieces, and the other for the supplv of 90 pieces, evidenced by Exs. P-3 and P-5 (a). The defendant had taken delivery of many pieces under previous orders and had apparently sold them in Melbourne, but the Australian Government passed an order prohibiting the import of such goods after 1st April, 1942, except under conditions with which we are hot now concerned. The result was that the market on which the defendants had relied for the sale of the goods purchased from the plaintiff under the contract was lost. The defendant wrote to the plaintiffs on 28th April, 1942. informing them of the circumstances and asking them to cancel their order. The plaintiffs replied that they were prepared to do" so provided that the defendants paid compensation. This reply was clarified in a later letter, Ex. P-13 of 29th July, 1942, in which the plaintiffs made it clear that as a result of the cancellation of the contract they had ceased manufacture of the goods ordered, but claimed as damages 15 per cent, of the contract price, which they alleged were the profits they would have made had it not been for the breach of contract committed by the defendants.

2. The two main questions to be considered are (1) whether the defendants can plead that they were unable to fulfil the contract and so escape all liability for damages and (2) if liable for damages, on what basis and to what extent are they liable. The learned Subordinate Judge held that the defendants could not plead the impossibility of re-selling the goods to their agents in Australia as an answer to the plaintiffs claim. He accepted the basis put forward by the plaintiffs for estimating damages, namely, loss of profits. He did not, however, allow the plaintiffs the full extent of their claim, but granted them ten per cent, of the contract price as compensation for loss of profits and not 15 per cent, as claimed. The defendants have appealed, contending that they are not liable for damages at all and even if they are, the lower Courts order was not reasonable in granting 10 per cent, of the contract price as damages. The plaintiffs have filed a memorandum of cross-objections in which they claim the full 15 per cent, of the contract price which they claimed in the trial Court.

3. The contract, Ex. P-l, specifies the quantity required and their description. The acceptance, Ex. P-5, specifies the goods and says that they will be sent F.O.R., Madras; shipment in June-August (which apparently means at some time between June and August) and price less a discount of 20 per cent. The contract evidenced by Exs. P-3 and P-5 (a) is of a similar nature. There, too, the goods were to be sent F.O.R., Madras. It is clear from these contracts that the terms specified the samples, the size of the goods, the prices, the time of delivery, and the destination, i.e., Madras F.O.R. The payment was to be against R.R. (Railway Receipt). There is thus no term of the contract that it should cease to be binding on the parties if for any reason the defendant should be unable to send the goods to their clients in Australia. The learned a