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IN THE HIGH COURT OF ALLAHABAD
Raghubar Dayal and A. P. Srivastava, JJ.
RAJA RAM JAISWAL - Appellant
Versus
GANESH PRASAD - Respondents
Letters Patent Appeal 53 Of 1951
Decided On : 08/19/1957
COMMISSION - BROKER - CONTRACT - INTERPRETATION - SALE OF PROPERTY - AGENT'S COMMISSION - WHEN PAYABLE - CONSTRUCTION OF CONTRACT - WHETHER AGENT ENTITLED TO COMMISSION ON FINDING PURCHASER OR ON COMPLETION OF SALE - INDIAN CONTRACT ACT, SECTIONS 230 AND 235.
Fact of the Case:
The plaintiff, a broker, was deputed by the directors of a company to find a purchaser for the company's property. The directors wrote a letter to the plaintiff stating that if he sold the property for Rs. 54,000, they would pay him a commission of Rs. 2,000. The plaintiff found a purchaser who was willing to buy the property for Rs. 55,000. The purchaser gave the plaintiff a cheque for Rs. 1,000 as earnest money. The plaintiff handed over the cheque to two of the directors, who executed a receipt for the amount and agreed to sell the property to the purchaser. However, the sale did not materialize as the directors refused to carry out the sale on the ground that they had no authority to sell the property on behalf of the company.
Finding of the Court:
The court held that the plaintiff was entitled to his commission because he had done what he had contracted to do, which was to find a purchaser for the property. The court found that the contract between the parties fell within the first of three classes of contracts discussed in the judgment, in which the agent is promised a commission if he succeeds in introducing to his principal a person who makes an adequate offer. The court held that the plaintiff had fulfilled his part of the contract by introducing a prospective purchaser who was willing to make the purchase for the stipulated price, and that he was therefore entitled to the remuneration which had been stipulated to be paid to him.
Issues: 1. Whether the plaintiff was entitled to commission on finding a purchaser or on completion of sale? 2. Whether the contract between the parties fell within the first or third class of contracts discussed in the judgment?
Ratio Decidendi: 1. The court held that the plaintiff was entitled to commission on finding a purchaser, not on completion of sale. The court found that the contract between the parties fell within the first of three classes of contracts discussed in the judgment, in which the agent is promised a commission if he succeeds in introducing to his principal a person who makes an adequate offer. The court held that the plaintiff had fulfilled his part of the contract by introducing a prospective purchaser who was willing to make the purchase for the stipulated price, and that he was therefore entitled to the remuneration which had been stipulated to be paid to him. 2. The court found that the contract between the parties fell within the first of three classes of contracts discussed in the judgment, in which the agent is promised a commission if he succeeds in introducing to his principal a person who makes an adequate offer.
Final Decision: The court dismissed the appeal and upheld the decree of the lower court in favor of the plaintiff.
Based on the provided legal document, the key issues, relevant legal provisions, arguments, and conclusions can be summarized as follows:
Material Fact: The case involves a dispute over the entitlement to commission by a broker (plaintiff) who introduced a prospective purchaser to a company (defendant). The core issue is whether the broker is entitled to his commission when he has substantially performed his contractual obligation, even if the sale does not ultimately materialize.
Issue Raised: Whether the broker is entitled to his commission upon introducing a willing purchaser, regardless of whether the sale was completed, and how the contractual terms should be interpreted in this context.
Legal Provision (Sections): - Sections 230 and 235 of the Indian Contract Act, which govern agency relationships and the liability of agents acting beyond their authority. - Section 43 of the Indian Contract Act, which pertains to the effect of an agreement to do a particular act, including the interpretation of contractual obligations. - Principles of contract interpretation, especially regarding express and implied terms, and the classification of contracts involving agents.
Arguments: - The appellant (defendant) argued that the contract was of the third class, where the broker's right to commission depends on the successful completion of the sale, meaning the sale must be effected for the broker to claim his fee (!) (!) . - The respondent (plaintiff) contended that the contract fell within the first class, where the broker’s entitlement arises upon introducing a suitable purchaser, regardless of whether the sale is completed (!) (!) . - The appellant claimed that the language of the contract and the circumstances suggest that the broker’s right to commission was contingent upon the sale’s finalization, and that the appellant acted only as an agent, with the contract not creating personal liability (!) (!) . - The respondent argued that the language of the letter and subsequent conduct demonstrated that the broker had fulfilled his contractual obligation by introducing a purchaser, and thus was entitled to the commission, independent of the sale’s completion (!) (!) .
Judgment and Ratio Decidendi: The court held that the contract was of the first class, where the broker's right to commission arises upon successfully introducing a purchaser willing to buy at the stipulated price. The interpretation of the contractual language, especially the use of words indicating arrangement rather than final sale, supported this view. The court emphasized that the broker had substantially performed his contractual obligation by procuring a willing purchaser, and that his entitlement to remuneration was not dependent on the sale’s consummation. Additionally, the court found that the appellant had personally undertaken liability, as evidenced by the language of the contract, and was liable to pay the commission.
Conclusion (My Opinion): The legal reasoning aligns with principles that recognize the broker’s right to commission upon fulfilling his contractual obligation to procure a willing purchaser, even if the sale ultimately does not occur. The interpretation of the contractual terms and subsequent conduct confirms that the broker substantially performed his part. Therefore, in my opinion, the court’s decision to uphold the broker’s entitlement to commission is justified, and the appellant’s arguments based on the contingency of sale and agency status do not outweigh the clear contractual obligations and conduct of the parties.
( 1 ) THIS is a defendants appeal. The Jawahar Palace Cinema including its building, furniture and machine belonged to defendant No. 1, a limited Company known as Allahabad Theatres Ltd. The appellant Sri Raja Ram Jaiswal, Sri Radhey Shyam Jaiswal and Sri Nand Kishore Chaudhari were the directors of the Allahabad Theatres Ltd, The plaintiff is a broker. According to him, the abovomention-cd three directors of the Allahabad Theatres Ltd. deputed him to find a purchaser for the property and Sri Raja Ram Taiswal wrote a letter to him on 22-12-1941 in which he said that
"ap Jawahar Palace Cinema building Rs. 54,000/-mai furniture machine ke ko bechainge to ap ko Rs. 2,000/- commission dilavien gay. Kharcha kul ap ka rahega magar Jawab jald ana chahiye. "
Armed with this letter the plaintiff started making efforts to Ret a purchaser for the property and succeeded in persuading one Sri K. S. Gandhi to agree to purchase it for Rs. 55,000/- Sri Gandhi wrote a cheque for Rs. 1,000/- on account of earnest money in favour of Sri Raja Ram Jaiswal and gave it to the plaintiff so that the deal may be settled. The plaintiff handed over the cheque to sri Radhey Shyam Jaiswal and to Sri Nand Kishore Chaudhari as Sri Uaja Ram Jaiswal was not available at the time for some reason. Those two gentlemen accepted the cheque and executed a receipt for the amount in which they mentioned that the property would be sold to Sri Gandhi as agreed and that Rs. 1,000/- was being taken as earnest money. Subsequently the sale did not materialise as the directors refused to carry out the sale on the ground, that they had no authority on behalf of the Allahabad theatres Ltd. to sell the property, Sri K. S. Gandhi subsequently brought a suit lor the specific performance of the contract. The suit was dismissed by the trial court but it is alleged that it was compromised in appeal. The plaintiff served notice on the Company as well as the three directors calling upon them to pay him his agreed commission of Rs. 2,000/- because he had carried out his part of the contract. As the amount was not paid he filed a suit to recover it and impleaded in that suit the Allahabad theatres Ltd. as well as the three directors.
( 2 ) THE suit was contested by the defendants on various grounds the main defence being that the three directors had no authority on behalf of the Company to sell the property, and that the plaintiff was not entitled to any commission as the sale had never been effected.
( 3 ) THE trial court dismissed the suit. The plaintiff went up in appeal and the first appellate court decreed the suit against Raja Ram Jaiswal only. It took the view that Raja Ram Jaiswal having written the letter dated 22. 12-1941 had undertaken personal liability for the payment of the commission. The plaintiff had done everything that he could do in the circumstances and if the sale could not be effected it was no fault of his. The suit was dismissed as against the other defendants. Sri Raja Ram Jaiswal then filed a second appeal in this Court and the appeal was heard by V. Bhargava, J. Before him it was argued that as the sale did not finally take place, on the terms of the agreement between the parties the plaintiff could not claim any commission. It was also urged that Sri Raja Ram Jaiswal could not be made personally liable for the plaintiffs commission as he had all along been acting for and on behalf of the Company. Both these contentions were rejected by the learned Single Judge and the appeal of Sri Raja Ram Jaiswal was dismissed. Permission to file an appeal to a Division Bench was, however, granted and the present appeal has been filed as a result.
( 4 ) BEFORE us, the learned counsel for the appellant Sri Raja Ram Jaiswal has put forward four contentions. They are:
(1) The learned Single Judge has not correctly interpreted the letter written by the appellant on 22-12-1941. According to its true interpretation the plaintiff could claim commission only if t
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