01 November 1951
Supreme Court


Case number: Appeal Civil 1146 of 1973






DATE OF JUDGMENT: 01/11/1951


CITATION:  1952 AIR    9            1952 SCR   36  CITATOR INFO :  R          1954 SC  44  (10)  R          1959 SC 135  (20)  R          1968 SC 522  (7)

ACT:     Indian  Contract  Act (1 of 1872), s.  56--Contract  for delivery of goods manufactured by particular Mill as soon as they are supplied --Construction of contract--Non-receipt of goods    from    Mill    within    time--Whether     excuses performance--Doctrine of frustration.

HEADNOTE:     The  respondents agreed to deliver 61 bales of cloth  to the  appellant  by the 17th November,  1941.  The  agreement provided  "we  shall continue sending the goods as  soon  as they  are  prepared  to you up to  Magsar  Badi  15,  Sambat 1998   ......  We shall go on supplying goods to you of  the Victoria  Mills  as soon as they are supplied to us  by  the said  Mills   ......We shall go on delivering the  goods  to you   ......   out of the goods noted above  which  will  be prepared by the Mill." In a suit for damages for  non-deliv- ery  of the goods the respondents pleaded that as  they  had not  received the goods from the Victoria Mills  before  the 17th  of  November, 1941, performance of  the  contract  had become impossible by reason of an event which they could not prevent  and  the contract had therefore become  void  under Sec. 56, Indian Contract Act:     Held,  (i)  that, on a proper construction of  the  con- tract,  delivery  of the goods was not  made  contingent  on their  being  supplied to the respondents  by  the  Victoria Mills.  The  words "prepared by the Mills" were only  a  de- scription  of the goods to be supplied, and the  expressions "as  soon  as they are prepared" and "as soon  as  they  are supplied to us by the said Mill "simply indicated the  proc- ess of delivery.  This was not therefore a case in which the doctrine  of frustration of contract could be invoked.  (ii) Even  apart from the construction of the agreement,  as  the respondents had not shown that they had placed an order  for the  goods  with the Victoria Mills and yet  the  Mills  had failed  to supply, there was a clear breach of  contract  to deliver and the appellant was entitled to recover damages.



   Harnandrai  v.  Pragdas (L. R. 15 I.A.  9)  and  British Movietone News v. London Cinemas [1951] 2 A.E.R. 617) relied on.

JUDGMENT:     CIVIL APPELLATE  JURISDICTION:  Civil  Appeal No. 56  of 1951.     Appeal  from a judgment and decree of the High Court  of Allahabad  (Malik  and Wali Ullah JJ.) dated  14th  February 1946, in Appeal No. 240 of 1943 which 37 arose out of a decree dated 19th January, 1943, of the Court of  the Civil and Sessions.Judge, Kanpur, in  Original  Suit No. 34 of 1942.     Achhru Ram  (P. S. Safeer,  with him) for the appellant.     S.P. Sinha (K. N. Aggarwala, with him) for the  respond- ent.     1951. November 1.  The Judgment of the Court was  deliv- ered by     FAZL ALI J.--This is an appeal by special leave  against a  decision  of the High Court at Allahabad,  reversing  the decision  of  the trial court, in a suit instituted  by  the appellant  to recover damages from the  respondent-firm  for breach of a contract.     It  appears that between the 10th and 18th April,  1941, the parties entered into 5 contracts, by which the  respond- ent-firm  undertook to supply to the appellant 184 bales  of cloth  of  certain specifications manufactured  by  the  New Victoria Mills, Kanpur, and the Raza Textile Mills,  Ramput. Only  99 bales were taken up and there was a  dispute  about the remaining 85 bales. On the 17th October, 1941, a settle- ment  was arrived at between the parties, and it was  agreed that the respondent-firm should deliver to the appellant  61 bales,  and that the goods should be delivered by  the  17th November,  1941.  The actual text of the agreement  (exhibit 4) was as follows:---     " 61 bales as noted below are to be given to you by us.     We  shall  continue sending goods as soon  as  they  are prepared to you upto Magsar Badi 15 Sambat 1998. We shall go on  supplying goods to you of the Victoria Mills as soon  as they are supplied to us by the said Mill. (Specifications of cloth given here). We shall go on  deliv- ering the goods to you upto Magsar Badi 15 out of the  goods noted above which will be prepared by the Mill." 38     As the 61 bales were not supplied, the appellant sent  a telegraphic notice to the respondent-firm on 20th  November, 1941, to the following effect "Give delivery of our 61 bales through Bank. Otherwise  suing within a days."  The appellant did not receive any reply to this notice, and so  he  instituted  the suit which has given  rise  to  this appeal, on the 23rd April, 1942, claiming a sum of Rs. 9,808 and  odd,  which,  according to him,  represented  the  loss sustained  by him on account of the rise in the market  rate of  the  contracted  goods, and he also  claimed  costs  and interest.  The respondent-firm resisted the suit on a number of  grounds,  but their main plea, with which alone  we  are concerned  in this appeal, was that the performance  of  the contract  had been frustrated by circumstances beyond  their control and hence the appellant’s claim must fail. This plea was  negatived by the trial court, but it was upheld by  the High Court, and hence this appeal.



The  only point which arises in this appeal  is  whether the  circumstances  of  the case afford any  basis  for  the application  of the doctrine of frustration of. contract,  a doctrine  which is embodied, so far as this country is  con- cerned,  in sections 32 and 56 of the Indian  Contract  Act, 1872.     The  main grounds of attack against the judgment of  the High Court are :--     (1) that it has misread the agreement (exhibit 4)  dated the 17th October, 1941, on which both parties rely; and     (2) that it has paid more attention to an abstract legal doctrine than to the facts of the case. In  our  opinion, both these contentions  are  correct.  The  construction placed by the High Court upon the  agree- ment  and its conclusion based thereon, are set out  in  the following  passage in the leading judgment of Wali Ullah  J. :--     "It  seems to me that the parties clearly intended  that the defendant was to supply the goods to the 39 plaintiff’ if and when--and only in that event--the particu- lar  goods  were  prepared by the Victoria  Mills  and  were supplied to the defendant between the 17th of October, 1941, and 17th of November, 1941. As the fundamental assumption on which the contract was made ceased to exist during the  time of performance and consequently it became impossible for the defendant  to fulfil the contract, it must be held that  the contract was discharged by supervening impossibility."     The construction suggested by the High Court is precise- ly  the  construction  which was attempted to be  put  on  a similar contract by the defendant-respondents in the case of Harnandrai  v. Pragdas (1) but the Privy  Council  negatived it.’ In that case, the provision as to delivery of goods ran as follows :--     "The said goods are to be taken delivery of as and  when the same may be received from the Mills."     The  Mills  failed to perform their  contract  with  the defendants  as they were engaged in fulfilling certain  con- tracts with the Government, and consequently the  defendants could not supply the goods to the plaintiffs. The  questions raised  before the Privy Council were as to the  meaning  of the contract and whether its performance had been  frustrat- ed,  and the Privy Council disposed of them in  these  words :--     "It  was also suggested that the words ’as and when  the same may be received from the Mills’ should be construed, as if they were ’ if and when the same may be received from the Mills.’  This is to convert words, which fix the  quantities and  times  for deliveries by instalments into  a  condition precedent, to the obligation to deliver at all, and virtual- ly  makes a new contract.  The words certainly regulate  the manner  of  performance, but they do not  reduce  the  fixed quantity  sold to a mere maximum, or limit the sale to  such goods,  not exceeding 864 bales, as the Mills might  deliver to the defendants during the remainder of the year." Their Lordships then proceeded to observe:-- (1) (1888) L.R. 15 I.A. 9. 40     "The Mills, from which the goods were to come, no  doubt were  contemplated as continuing to exist, though  it  does’ not  follow  that, in a bargain and sale such as  this,  the closing or even the destruction of the Mills would affect  a contract between third parties, which is in terms  absolute; but  the  Mills did continue to exist and  did  continue  to manufacture  the goods in question, only they were made  for



and delivered to somebody else."     We agree with the reasoning of the Privy Council, and it seems  to  us that the considerations which  prevailed  with them  must  govern the construction of  the  agreement  with which we are concerned in this case. The agreement does  not seem  to us to convey the meaning that the delivery  of  the goods  was  made contingent on their being supplied  to  the respondent firm by the Victoria Mills. We find it  difficult to  hold that the parties ever contemplated the  possibility of the goods not being supplied at all.  The words "prepared by  the  Mill"  are only a description of the  goods  to  be supplied, and the expressions "as soon as they are prepared" and  "as soon as they are supplied to us by the  said  Mill" simply indicate the process of delivery. It should be remem- bered  that what we have to construe is a commercial  agree- ment entered into in a somewhat common form, and, to use the words of Lord Sumner in the case to which reference has been made,  "there is nothing surprising in a merchant’s  binding himself  to procure certain goods at all events, it being  a matter of price and of market expectations."  Since the true construction of an agreement must depend upon the import  of the  words used and not upon what the parties choose to  say afterwards,  it is unnecessary to refer to what the  parties have said about it.     Even  apart from the construction of the  agreement,  it seems  to us that the plea of the respondents must  fail  on their  own  admissions.   The defendant has  stated  in  his evidence  that he had not sold the 61 bales of cloth to  any other person at the time he received the telegraphic  notice of the 20th November, 1941, (exhibit 1).  On his own  admis- sion, therefore, he was 41 in a position to supply 61 bales of the contracted goods  at the time when the breach of the agreement is alleged to have happened.   That  being so, we are unable to hold  that  the performance  of  the contract had  become  impossible.   The matter  however does not rest there. Guruprasad, a clerk  of the Mills Company, who is the second witness for the defend- ants,  has  made  an important statement  to  the  following effect     "The customers all place  their requirements before  the sales  manager.  If the goods required are ready,  they  are sold  to the customers and if they are not ready and if  the customer wants them to be manufactured they are delivered to the  customers  after manufacture.  An order book  is  main- tained at the Mills."     Such being the practice which prevailed in the  Victoria Mills,  it was for the defendants to show that an order  for the manufacture of the contracted goods was placed with  the Mills and yet the Mills failed to supply the goods.  No such evidence  has however been offered by the  defendants-   The High Court has surmised that it might not have been possible to  supply  the  goods within the period  mentioned  in  the agreement,  but there is no material to support that  state- ment.     In these circumstances, this is obviously not a case  in which  the  doctrine of frustration of contract can  be  in- voked.  That  doctrine  has been explained in  a  number  of cases, some of which are referred to in the judgment of  the High  Court, but the latest pronouncement with regard to  it is  to be found in the speech of Viscount Simon  in  British Movietone  News  v.  London Cinemas(1), in  which  the  Lord Chancellor referred with approval to the following  enuncia- tion  of  the doctrine by Earl Loreburn in a  previous  case F.A.  Tamplin  S.S.  Co. Ltd.  v.   Anglo-Mexican  Petroleum



Products Co., Ltd(2):-     "...a  court can and ought to examine the  contract  and the circumstances in which it was made, not of course  (1)  [1951] A.E.L.R. 617.           (2) [1916] 2 A.C.  403, 404.     6 42 to vary, but only to explain it, in order to see whether  or not  from the nature of it the parties must have made  their bargain  on the footing that a particular thing or state  of things would continue ,to exist.  And if they must have done so, then a term to that effect will be implied, though it be not  expressed  in  the contract  ......  no  court  has  an absolving  power,  but it can infer from the nature  of  the contract and the surrounding circumstances that a  condition which  is  not expressed was a foundation on which the  par- ties contracted,"     It  seems necessary for us to emphasize that so  far  as the  courts  in this country are concerned, they  must  look primarily  to the law as embodied in sections 32 and  56  of the  Indian Contract Act, 1872.  These sections run as  fol- lows :--     "32.   Contingent contracts to do or not to do  anything if  an uncertain future event happens cannot be enforced  by law unless and until that event has happened. If the event becomes impossible such contracts become void." "56.   An  agreement to do an act impossible  in  itself  is void.     A  contract  to do an act which, after the  contract  is made, becomes impossible, or, by reason of some event  which the promisor could not prevent, unlawful, becomes void  when the act becomes impossible or unlawful.........     The enforcement of the agreement in question was, as  we have already pointed out, not contingent on the happening of an  uncertain future event, nor does the present  case  fall within the second paragraph of section 56, which is the only provision  which  may be said to have any relevancy  to  the plea put forward by the respondents.  Clearly, the  doctrine of  frustration cannot avail a defendant, when the  non-per- formance of a contract is attributable to his own default.     We accordingly allow the appeal, set aside the  judgment of  the  High  Court, and restore the decree  of  the  trial court. The appellant will be entitled to his costs  through- out.                        Appeal allowed. Agent for the appellant: R.S. Narula. Agent for the respond- ent: S.S. Sukla. 43