HAJEE ISMAIL AND SONS Vs. WILSON AND CO

JUDGEMENT

(1.) The plaintiffs in this case are a well-known firm carrying on business in Mysore and Madras. In 1913 they obtained from the Mysore Government the Abkari contract for Mysore and arranged with the defendants who carry on business in Madras that they should go on importing molasses for them in the same way as they had done for the previous holders of the contract. Admittedly the goods contracted for were intended for use by the plaintiffs in their factories at Bangalore. Owing to the disorganization of shipping consequent on the outbreak of the war at the beginning of August 1914, the defendants were unable to ship 800 tons from Java in the month of October 1914 as they were bound to do under their contract. This was a breach of contract for which admittedly they are bound to compensate the plaintiffs in damages, and the main question argued before the learned Judge and before us is as to the measure of damages. The learned Judge awarded the plaintiffs only nominal damages on the ground that they had failed to put before him the proper materials for estimating the damages, and the plaintiffs have appealed. The law as to this subject is to be found in Section 73 of the Indian Contract Act and the Explanation thereto. Under the body of the section the damages are to be those which naturally arise in the usual course of things from the breach or which the parties knew when they made the contract to be likely to result from the breach. By the Explanation, the means which existed of remedying the inconvenience caused by the non- performance of the contract must be taken into account. The Explanation is in accordance with the decisions in Dunkirk Colliery v. Lever (1878) 9 Ch. D., 20, 25, and the decision of the House of Lords in British Westinghouse Electric and Manufacturing Company, Limited v. Underground Electric Railways Company of London, Limited (1912) A.C., 673, 689. In that case Lord Haldane, L.C., observed: The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps.

(2.) The law was recently laid down to the same effect by the Judicial Committee in Jamal v. Moolla Dawood Sons and Co. (1916) I.L.R., 43 Calc., 493. The rule that, where there is a market at the place of delivery, the damages are the difference between the contract price and the market price at the date of delivery may be regarded as an application of the principle embodied in the Explanation that the buyer must take the necessary steps to minimize the damage. Where there is a market and the seller has no notice of any contract entered into by the buyer, the market price in the case of failure to deliver is the test by which to estimate the value of the goods, independently of any circumstances peculiar to the buyer and so independently of any contract made by him for sale of the goods. This is the rule in Rodocanachi v. Milburn (1886) 18 Q.B.D., 67, 77 approved by the House of Lords in Williams Brothers v. Agius (1914) A.C., 510 and applied by the Judicial Committee under the Indian Contract Act in Jamal v. Moolla Dawood Sons and Co. (1916) I.L.R., 43 Calc., 493. This is the rule in cases of non-delivery. It has recently been stated in the House of Lords that there is a difference where delivery is only delayed, but that is not the case here, and, also, we are bound by the terms of the Indian Contract Act.

(3.) When there is no market for the goods at the place of delivery, the buyer may procure a substitute at a higher cost if it is a reasonable and business like thing to do and calculated to diminish the loss, and may recover the difference in price as damages from the seller. It has not yet been decided that he is bound to do so and apparently he may refrain from doing so and rely on his claim for damages. See the observations of Lord Atkinson in Erie County Natural Gas and Fuel Company v. Carroll (1911) A.C., 105.