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1970 Supreme(MP) 93

High Court Of Madhya Pradesh
Shiv Dayal and A. P. Sen, JJ.
KULSEKARAPATNAM HAND MATCH WORKERS CO-OPERATIVE COTTAGE - Appellant
Versus
RADHELAL LALLOOLAL - Respondents
First Appeal 38 Of 1967
Decided On : 09/03/1970

Advocates Appeared:
J.S.VERMA, S.L.JAIN

Headnote:(1) Sale of Goods Act, 1930 - S.15 - sale by description - goods supplied not of the description - contract not performed test to be applied.

       (2) Contract Act, 1872 - S.73 - sale of goods by description - failure to perform the contract.

       In the case of sale of goods by description, the rule is that the goods must correspond with the description. Once it is established that a given contract of sale is a sale by description the test applied by the Court to determine whether or not the goods correspond with the description is a strict one. 1933 All. E.R. 646 HL relied on. [Para 3

       (3) Sale of Goods Act, 1930 - S.37 (3) - sale by description - goods supplied not of the description stipulated - option not to take delivery intimated to the agent - agent intimating to principal - due intimation to principal - Contract Act, 1872 - S.229.

       (4) Contract Act, 1872 - S.229 - intimation to agent - when intimation to the principal.

       The stage of goods was by description. The goods supplied were not of the description stipulated. The purchaser intimated him option not to take the delivery of the goods to the agent. The agent intimated this to the principal. The intimation of the fact of rejection to the agent was due intimation to the principal.[Para 4

       (5) Contract Act, 1872 – Ss.188 & 189 - action of commission agent - when binds the principal.

       The seller sold the goods through a commission agent for the region. Part of the goods were not of the description agreed upon. The purchaser refused to accept the goods not of the stipulated description and the agent received the goods back. The contention was that the agent had no authority to take back the rejected goods.

       Held: Under the contract of agency, the agent occupied a dual capacity. He was a "selling agent" on commission basis as well as a "favoured buyer", for the regions specified. By this particular transaction, however, the selling agent acted as an agent in its normal legal meaning, i.e. one who has the authority or capacity to create legal relations between a person occupying the position of a principal and third parties. [Para 6

       (6) Contract Act, 1872 - S.187 - authority of the agent-need not be express - may be implied from the conduct of the parties - holding out of implied authority.

       The absence of the term in the agency agreement giving power to the agent to deal with the goods despatched does not necessarily imply that the agent had no authority to deal with the goods which were not in furtherance of the contract. This can be intend from the conduct of the parties and circumstances of the case. The conduct of the principal may show that there was "holding out" by him of the implied authority of the agent to deal with the goods. Where there is such a "holding out", the principal is clearly liable on the basis of apparent authority. 31 MPLC 293 & ILR 26 Cal. 701 (PC) relied on. [Para 9

       If an agent enters into a contract with a third party, within the scope of his actual authority, the result of which is to create contractual obligation between the principal and the third party, the agent has the power to perform all acts incidental to the performance or breach of such contract. [Para 10

       (7) Civil P.C., 1908 - O.7, Rr.1 & 7 - plaintiff entitled to relief upon cause of action not pleaded - relief flowing from pleadings - issue on such cause framed - of action parties aware of the facts and nature of dispute-relief on alternative cause of action may be given. [Para 11

       (8) Contract Act, 1872 - S.208 - termination of agency - not notified to third party - effect.

       The law is that the termination of a contract of agency takes effect only from the time the third party obtains knowledge of it. 38 MPLC 423 relied on. [Para 12

A. P. SEN, J.

( 1 ) THIS appeal filed by the seller arises out of a suit by the buyer for the refund of the price in a case of breach of contract on the part of the seller.

( 2 ) THE facts are not in controversy and may be shortly stated. The seller, who is the appellant, is a manufacturer of matches. He entered into a contract dated 9th june 1963, through his selling agent, to sell 600 bundles of "jyoti" brand matches. In breach of that contract, the seller despatched by rail 301 bundles of "jyoti" brand matches and included 299 bundles of "light House" brand matches to make up the consignment of 600 bundles. As this was a contract for sale of goods by description, there was an implied condition that the goods must correspond with the description. The buyer accordingly exercised his option under Section 37 (3) of the Sale of Goods Act and refused to take delivery. He was, however, prevailed upon by the agent to retire the Hundi for Rs. 18695. 30 and take delivery of the goods, on the promise that the seller would take back 299 bundles of "light house" brand matches on payment of cash. Thereafter, the agent instructed the purchaser to despatch the goods at his own expense to Jabalpur for delivery to one Lokesh Sahni, the local dealer of the seller and represented that Rs. 11,545/shall be paid by Lokesh Sahni in lieu of the price and the expenses incurred. Neither the agent nor the ultimate purchaser adhered to this arrangement. The buyer was informed that the agent had recovered the entire price. With great difficulty, the buyer was able to recover Rs. 3045/-from the agent and the agent on 16th October 1964, promised to pay to the purchaser Rs. 10,000/- in full and final satisfaction of his claim.

( 3 ) THE learned trial Judge has held that the seller was in breach of the contract. That finding has not been assailed before us. In the case of sale of goods by description, the rule is that the goods must correspond with the description (Section 15 of the Sale of Goods Act ). Once it is established that a given contract of sale is a sale by description, the test applied by the Court to determine whether or not the goods correspond with the description is a strict one (See, Arcos, Ltd. v. E. A. Ronaasen and Son, 1933 All ER 646 (HL) ). In such a contract, a substantial failure by the seller to deliver goods that correspond with the description--for instance, a delivery of peas instead of beans -- means in effect that he has failed to perform his contract (See, Chitty on Contracts, p. 1516 ).

( 4 ) THERE is no warrant for the submission that the seller was absolved of all liability because the purchaser did not intimate him that he had rejected that part of the consignment which did not conform to the contract. There is overwhelming evidence on record to establish the fact that the buyer had duly intimated the agent that he refused to take delivery of 299 bundles of "light House" brand matches, which were goods of a different description not included in the contract. The correspondence shows that the agent had intimated the fact of rejection to the principal. The intimation of the fact of rejection to the agent was due intimation to the principal (Section 229 of the Contract Act ). ( 5 ) EQUALLY futile is the contention that the agent acted without authority in taking back the unwanted goods. The learned Judge in rejecting the contention rightly observes that the act done by the agent was "in every respect in the interest of his principal". He States as follows:-" if the defendant No. 1 had not succeeded in persuading the plaintiff to take delivery of goods and to retire the Hundi, one likely consequence was that the consignment would have remained with the railways. That would have caused a good deal of liability to the defendant No. 2 by way of demurrage etc. The act of the defendant No. 1 had resulted in removing that likelihood and in ensuring an early payment to the defendant No. 2. This act of the defend- ant No. 1, therefore


























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